Allied Systems Holdings, Inc., et al., 1 Debtors. Chapter 11 Case No. 12-11564 (CSS) Rothschild Inc. ("Rothschild") respectfully responds to the limited objection of the Official Committee of Unsecured Creditors. "PC Objection" and together with the UCC Objection, the "Limited Objections" (ECF No. 307).
Allied Systems Holdings, Inc., et al., 1 Debtors. Chapter 11 Case No. 12-11564 (CSS) Rothschild Inc. ("Rothschild") respectfully responds to the limited objection of the Official Committee of Unsecured Creditors. "PC Objection" and together with the UCC Objection, the "Limited Objections" (ECF No. 307).
Allied Systems Holdings, Inc., et al., 1 Debtors. Chapter 11 Case No. 12-11564 (CSS) Rothschild Inc. ("Rothschild") respectfully responds to the limited objection of the Official Committee of Unsecured Creditors. "PC Objection" and together with the UCC Objection, the "Limited Objections" (ECF No. 307).
In re: ALLIED SYSTEMS HOLDINGS, INC., et al., 1 Debtors. Chapter 11 Case No. 12-11564 (CSS) Jointly Administered RESPONSE OF ROTHSCHILD INC. TO THE LIMITED OBJECTIONS TO THE DEBTORS APPLICATION PURSUANT TO 11 U.S.C. 327 AND 328, FED. R. BANKR. P. 2014 AND 2016 AND DEL. BANKR. L.R. 2014-1 AND 2016-1 FOR AN ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF ROTHSCHILD INC. AS FINANCIAL ADVISOR AND INVESTMENT BANKER FOR THE DEBTORS NUNC PRO TUNC TO THE PETITION DATE Rothschild Inc. (Rothschild) hereby respectfully responds to the limited objection of the Official Committee of Unsecured Creditors (the UCC Objection) [ECF No. 258] and the limited objection of the Petitioning Creditors (the PC Objection and together with the UCC Objection, the Limited Objections) [ECF No. 307] to the Debtors Application Pursuant to 11 U.S.C. 327 and 328, Fed. R. Bankr. P. 2014 and 2016 and Del. Bankr. L.R. 2014-1 and 2016-1 for an Order Authorizing the Retention and Employment of Rothschild Inc. as Financial Advisor and Investment Banker for the Debtors Nunc Pro Tunc to the Petition Date (the Application) [ECF No. 173]. 2 1 The Debtors in these cases, along with the federal tax identification number (or Canadian business number where applicable) for each of the Debtors, are: Allied Systems Holdings, Inc. (58-0360550); Allied Automotive Group, Inc. (58-2201081); Allied Freight Broker LLC (59-2876864); Allied Systems (Canada) Company (90- 0169283); Allied Systems, Ltd. (L.P.) (58-1710028); Axis Areta, LLC (45-5215545); Axis Canada Company (87568828); Axis Group, Inc. (58-2204628); Commercial Carriers, Inc. (38-0436930); CT Services, Inc. (38- 2918187); Cordin Transport LLC (38-1985795); F.J. Boutell Driveaway LLC (38-0365100); GACS Incorporated (58-1944786); Logistic Systems, LLC (45-4241751); Logistic Technology, LLC (45-4242057); QAT, Inc. (59-2876863); RMX LLC (31-0961359); Transport Support LLC (38-2349563); and Terminal Services LLC (91-0847582). The location of the Debtors corporate headquarters and the Debtors address for service of process is 2302 Parklake Drive, Bldg. 15, Ste. 600, Atlanta, Georgia 30345. 2 Initially capitalized terms used but not otherwise defined in this Response have the meanings ascribed to them in the Application. 2 PRELIMINARY STATEMENT 1. The Debtors retained Rothschild under the terms of the Engagement Letter attached to the Application. The terms of Rothschilds compensation agreed by the Debtors may be summarized as follows: 3 (a) Monthly Fee: Commencing as of June 3, 2012, whether or not a Transaction is proposed or consummated, a fee of $150,000 per month. (b) Completion Fee: A single fee equal to one of the following: (i) $1,750,000, upon the earlier of the closing or consummation of the sale, transfer or other disposition to a buyer identified in the Engagement Letter or its affiliates of at least a majority of the Debtors equity interests (calculated on a voting or economic basis) or assets pursuant to 363 of the Bankruptcy Code or otherwise pursuant to a Plan; (ii) $2,000,000, upon the earlier of (x) the consummation of a Plan that is confirmed at an uncontested confirmation hearing and (y) the closing of a sale, transfer or other disposition of at least a majority of the Debtors equity interests (calculated on a voting or economic basis) or assets to any of the Debtors first lien lenders pursuant to 363 of the Bankruptcy Code so long as any such transaction under 363 of the Bankruptcy Code is affirmatively supported by more than 50% in principal amount of claims held by the Debtors first lien lenders; or (iii) $2,500,000, if the Completion Fee is not earned pursuant to either clause (i) or (ii) above, upon the earlier of the closing or consummation, as applicable, of a Plan or other Transaction not described in either clause (i) or (ii) above. (c) New Capital Fee: A fee equal to (i) 1.0% of the face amount of any senior secured debt raised, other than any debtor-in-possession financing; (ii) 2.0% of the face amount of any junior secured debt raised other than any debtor-in-possession financing; (iii) 3.0% of the face amount of any senior or subordinated unsecured debt raised; and (iv) 4.0% of any equity capital, or capital convertible into equity, raised, including, without limitation, equity underlying any warrants, purchase rights and similar contingent equity securities (each, a New Capital Raise). For the avoidance of doubt, the term raised will include the amount committed or otherwise made available to the Debtors whether or not such amount (or any portion thereof) is drawn down at closing or is ever drawn down and whether or not such amount (or any portion 3 The Engagement Letter is attached to the Application as Exhibit 1 to Exhibit C. The terms of Rothschilds compensation agreed by the Debtors are set forth in Sections 4 through 6 of the Engagement Letter. The summaries of the Engagement Letter contained herein are provided for purposes of convenience only. In the event of any inconsistency between the summaries contained herein and the Engagement Letter, the Engagement Letter shall control. 3 thereof) is used to refinance existing obligations of the Debtors. A New Capital Fee is payable only to the extent that the New Capital Raise is from a source that is outside of the Debtors current capital structure, including, without limitation, the Debtors current shareholders, creditors or customers. (d) Credit: Half of Monthly Fees paid in excess of $450,000 will be credited against the Completion Fee, up to the amount of the Completion Fee. 2. These fees were heavily negotiated at arms length by the Debtors and Rothschild over several weeks. Negotiations on behalf of the Debtors were led by a team that included an independent member of the board with substantial investment banking and investment advisory experience. The Debtors were represented by sophisticated restructuring counsel throughout. These negotiations resulted in a variety of modifications to the terms of the Rothschild engagement, including substantial reductions to the fees sought by Rothschild. 3. The Debtors and Rothschild have requested approval of the terms of the Engagement Letter pursuant to section 328(a) of the Bankruptcy Code, which provides: The trustee, or a committee appointed under section 1102 of this title, with the courts approval, may employ or authorize the employment of a professional person under section 327 of this title, as the case may be, on any reasonable terms and conditions of employment, including on a retainer, on an hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis. Notwithstanding such terms and conditions, the court may allow compensation different from the compensation provided under such terms and conditions after the conclusion of such employment, if such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions. See 11 U.S.C. 328(a). 4 4. In their Limited Objections, the Official Committee of Unsecured Creditors (the Committee) and the Petitioning Creditors: (a) argue that Rothschild should be retained under section 330 of the Bankruptcy Code rather than section 328; (b) speculate that Rothschild could sit on their hands, do nothing and earn a Completion Fee, PC Obj. 4; and (c) drag in ongoing disputes with Yucaipa. 5. The Limited Objections are mistaken. In fact: (a) Investment bankers and financial advisors are properly retained under section 328 of the Bankruptcy Code. (b) Substantial services are required of Rothschild. The Debtors cannot, as the Petitioning Creditors assert, simply turn over the keys. PC Obj. 3. A comprehensive sale process sufficient for Court approval is required. (c) Disputes over the role of Yucaipa or the possibility of a credit bid by the first lien lenders are properly addressed in due course, not here with the Debtors retention of an investment banker and financial advisor. 6. Both Limited Objections concede that Rothschild is qualified to provide investment banking and financial advisory services to the Debtors. UCC Obj. 5; PC Obj. 1. Both Limited Objections recognize that the Debtors need such services. Id. Neither Limited Objection offers any evidence that the compensation negotiated by the Debtors is unreasonable. 7. In fact, the proposed terms are market-based, both as to amount and structure. The Debtors proposed compensation for Rothschild is solidly in the mainstream of comparable engagements, as the market comparison set forth in Exhibit A demonstrates. Approval of such terms under section 328 of the Bankruptcy Code is the norm, as may be seen in Exhibit B. Rothschild respectfully submits that the terms of the Engagement Letter, including, without limitation, Rothschilds compensation, are reasonable and consistent with the requirements of the Bankruptcy Code. Consequently, Rothschilds retention should be approved pursuant to section 328(a). 5 ARGUMENT I. Rothschilds Fees Are Reasonable 8. Courts have consistently held that the reasonableness of the terms of a professionals retention is to be determined by market practices. See In re UNR Indus., Inc., 986 F.2d 207, 210 (7th Cir. 1993) (the Bankruptcy Code requires lawyers in bankruptcy matters to receive the same compensation as they would earn in performing similar services outside the context of bankruptcy). The Third Circuit Court of Appeals, and every other Court of Appeals that has considered the issue, has reached this same conclusion. See In re United Artists Theatre Co., 315 F.3d 217, 229 (3d Cir. 2003); In re Ames Department Stores, Inc., 76 F.3d 66, 71-72 (2d Cir. 1996), abrogated on other grounds by Lamie v. United States Trustee, 540 U.S. 526 (2004); Zolfo, Cooper & Co. v. Sunbeam-Oster Co., Inc., 50 F.3d 253, 258 (3d Cir. 1995); In re Busy Beaver Bldg. Ctrs., Inc., 19 F.3d 833, 848 (3d Cir. 1994); In re Continental Illinois Security Litigation, 962 F.2d 566, 568 (7th Cir. 1992) (It is not the function of judges in fee litigation to determine the equivalent of the medieval just price. It is to determine what the [professional] would receive if he were selling his services in the market rather than being paid by court order); see also In re Insilco Techs., Inc., 291 B.R. 628, 634 (Bankr. D. Del. 2003) (applying United Artists); In re Joan and David Halpern Inc., 248 B.R. 43, 47 (Bankr. S.D.N.Y. 2000); Collier on Bankruptcy 330.LH(4) (15th rev. ed. 1996). 9. This market-based view of reasonableness is reinforced elsewhere in the Bankruptcy Code, including in section 330(a)(3)(F), which directs courts to consider, among other factors, whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title. 6 10. The reasonableness standard in section 328(a) is thus not an invitation for the Committee or Petitioning Creditors to superimpose their preferences on terms that prevail in the market, or to substitute their own judgment in place of the business judgment exercised by the Debtors. The Bankruptcy Code is clear: so long as the terms of retention are reasonable in the market, and so long as the Debtors have exercised reasonable business judgment in their desire to retain Rothschild on such terms, it is proper to approve them. 11. Neither Limited Objection presents any evidence as to the fees prevailing in the market for the services the Debtors seek from Rothschild. In fact, Rothschilds proposed fees are both typical in the market and reasonable, as set out in the comparables analysis attached as Exhibit A. 4 12. This analysis indicates that even the maximum Completion Fee is well within the mainstream of comparable fees. When a professional seeks a flat transaction-based fee or a percentage fee, the Court should focus on evidence as to the reasonableness of the proposed fee in light of fees charged in similar cases. In re UDC Homes, Inc., 203 B.R. 218, 222 (Bankr. D. Del. 1996) (approving restructuring fee of $3.75 million in light of evidence that such fees were consistent with those charged in other cases and that advisors commonly charged such fees in cases outside of bankruptcy); In re Joan and David Halpern Inc., 248 B.R. 43, 44 (Bankr. S.D.N.Y. 2000) (approving as reasonable terms the debtors payment of a monthly advisory 4 Exhibit A sets out the approved fee structures of investment bankers retained in all cases Rothschild has been able to locate, from July 1, 2010 through June 30, 2012, in which pre-petition debt was between $150 million and $550 million and the fee structure included a restructuring fee, a total of twenty-nine comparable retentions. Exhibit B sets out the statutory basis (section 328 or 330 of the Bankruptcy Code) pursuant to which these fee structures were approved, noting also whether the U.S. Trustee or any other party retained section 330 review rights. Rothschild maintains the information from which Exhibits A and B were produced in the regular course of its business. Rothschild will offer Todd Snyder, Executive Vice Chairman of North American GFA / Co- Chair of the North American Debt Advisory and Restructuring Group, Rothschild Inc., as a witness regarding relevant market practices to the extent the Committee or Petitioning Creditors continue to challenge that aspect of the proposed retention. 7 fee, a success fee based upon a percentage of the refinancing of existing debt and an indemnity agreement on behalf of investment advisor); affd 2000 WL 1800690 (S.D.N.Y. 2000). That is the practice that the Courts in this district have followed for many years. 13. This analysis is even more telling because the Limited Objections focus not on the maximum Completion Fee, but on two scenarios for which the Debtors have already negotiated reductions to the Completion Fee: (a) sale to a specified (non-insider) buyer or (b) sale pursuant to a credit bid by the senior lenders. Contrary to the Committees and Petitioning Creditors insinuations, consummation of a sale under either such scenario will require substantial services by Rothschild. Some of these services are already being provided. Potential buyers must be identified, marketing materials prepared, information regarding the Debtors business assembled, and due diligence facilitated not only for potential buyers but also parties in interest, including the Petitioning Creditors and the Committee. Bids received will have to be evaluated with respect to valuation and execution risk. A credit bid additionally requires resolution of the disputes among the senior creditors, likely facilitated by Rothschild and the Debtors. And any bid will entail significant negotiations among the Debtors, the potential buyers and their respective advisors. 14. Moreover, no sale will be consummated (and therefore no fee would be due Rothschild) unless the Debtors and this Court determine that it represents the best outcome for the estate. In the event a sale is proposed, either pursuant to section 363 or a plan, the Committee or Petitioning Creditors will have opportunity to object. If this Court determines the sale is not appropriate, then it will not be consummated and will not give rise to a fee. On the other hand, if a particular sale is the best outcome for the estate, and is therefore approved and consummated, then Rothschild should receive its fee as due. 8 15. The Committee and Petitioning Creditors appear to prefer a sale to an as-yet unidentified buyer. UCC Obj. 11; PC Obj. 5. In fact, the fee structure is already aligned to that preference: consummation of a third-party sale would lead to the maximum Completion Fee. Despite this obvious alignment, the Committee and Petitioning Creditors want more. Apparently the Committee and Petitioning Creditors would have Rothschild earn no fee in the event of a sale they dislike, despite the fact that such a sale would be neither pursued nor approved unless it were found to be in the best interest of the estate. The preferences of particular creditors should not be permitted to wrest Rothschilds compensation structure out of alignment with the interests of the whole estate, nor below what is reasonable in the market. 16. More particularly, the Petitioning Creditors object to compensating Rothschild in the event of an approved sale involving a credit bid by the senior lenders. PC Obj. 3-5. But a credit bid scenario says nothing about the extent or value of Rothschilds services to the Debtors. Nor could a credit bid be consummated unless the Debtors have the services of a financial advisor and investment banker to drive a comprehensive sale process and obtain the highest and best terms of sale, including by attempting to attract other buyers. In the bankruptcy context, and particularly given the major disputes and litigation among the first lien lenders in this case, it is not true that the Debtors could simply agree to turn over the keys to Yucaipa in the context of a 363 sale. PC Obj. 3. At any rate, the Debtors application to retain Rothschild is not an appropriate context for the Petitioning Creditors ongoing fight with Yucaipa. Credit bids involve payment of valuable consideration into the estate and acceptance of credit bids is often required by court order and the Bankruptcy Code. See RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065, 2073 (May 29, 2012). Compensation of investment bankers in connection with credit-bid based transactions is thus typical and appropriate. 9 17. The Committee, in turn, objects especially to compensating Rothschild in the event of a sale to a specified buyer that had expressed interest in the business of the Debtors before the commencement of these cases. UCC Obj. 9. But much as with a credit bid such a sale cannot be consummated unless the Debtors have the services of a financial advisor and investment banker to drive a comprehensive sale process and obtain the highest and best terms of sale, including by attempting to attract other buyers. And again, such a sale would require this courts approval as the highest and best use of the Debtors assets pursuant to section 363 or pursuant to a plan. There is no reason for Rothschild to be deprived of compensation upon consummation of such a sale. 18. Rothschilds fees were agreed as an exercise of the Debtors reasonable business judgment after arms length negotiations, and are between or lower than the mean and median of comparable fees, expressed as a percentage of prepetition debt. Thus, Rothschild and the Debtors submit that the Rothschild Fees are typical, reasonable and fully consistent with the letter and spirit of the Bankruptcy Code and are in the best interests of the Debtors and their estates. II. Rothschilds Fees Should Be Approved Pursuant to Section 328(a) 19. Prior to the passage of the Bankruptcy Reform Act of 1978, bankruptcy professionals were paid according to notions of economy of estate, under which professional compensation lagged behind that of professionals in non-bankruptcy contexts. The legislative history accompanying the 1978 enactments clearly expressed Congresss intent that bankruptcy professionals be retained on terms similar to those that apply outside of bankruptcy. See House Debate on Compromise Bill, 124 Cong. Rec. H11047, 11091 (Sept. 28, 1978) (remarks of Rep. Edwards); Collier on Bankruptcy 330.LH(4) (15th rev. ed. 1996) (If the policy of strict 10 economy were to continue as a consideration in determining compensation, professionals capable of earning more substantial compensation in other fields might leave the bankruptcy arena.). 20. Sections 327 and 328(a) of the Bankruptcy Code implemented the change in retention policy by permitting debtors to retain professionals so long as the proposed terms and conditions of employment are reasonable. In sharp contrast to the old Bankruptcy Act, [this section] now authorizes the court to preapprove a wide variety of employment arrangements between [professionals] and the trustee [or debtor in possession]. In re Benassi, 72 B.R. 44, 47 (Bankr. D. Minn. 1987). In fact, section 328(a) was modified as recently as 2005 to clarify that the section governs both fixed fee and percentage fee arrangements, such as Rothschilds fees, as well as other forms of compensation. See H. Rep. No. 109-31, Pt. 1, 109th Cong., 1st Sess. 142 (2005) (explaining the technical modification to section 328(a) to make explicit the fact that the section includes compensation on a fixed or percentage fee basis). 21. Section 328(a) also provides that, once a professionals compensation terms have been approved, those terms cannot subsequently be altered unless such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions. 11 U.S.C. 328(a). The narrowness of this statutory exception reflects the Congressional judgment that professionals are entitled to reasonable certainty that they will be paid the fees that they have negotiated in advance for their services. See In re National Gypsum Co., 123 F.3d 861, 862-63 (5th Cir. 1997) (if the most competent professionals are to be available for complicated capital restructuring and the development of successful corporate reorganization, they must know what they will receive for their expertise and commitment); In re Barron, 225 F.3d 583 (5th Cir. 2000); In re Reimers, 972 F.2d 1127 (9th Cir. 1992); In re Tundra Corp., 243 B.R. 575 (Bankr. D. Mass. 2000). 11 22. There is nothing in the language or history of section 328(a) that suggests that its terms are discretionary, or that the statute should be applied grudgingly, or that special circumstances must be demonstrated in order to invoke them. Section 328(a) requires only that the proposed terms and conditions of employment be reasonable. 23. There are scores of cases in this District in which Rothschilds and other investment bankers monthly fees and transaction-based fees have been approved pursuant to section 328(a), subject to the usual section 330 carveout for the U.S. Trustee. 5 Indeed, the Committees own financial advisor is retained under section 328. [ECF Nos. 346, 351] Rothschilds engagement should not be treated differently. 24. The Limited Objections struggle to find even a few examples to the contrary. The Petitioning Creditors incorrectly assert that this Court has routinely modified proposed orders approving the retention of financial advisors and investment bankers to provide for review by 5 See, e.g., In re Trident Microsystems, Inc., Case No. 12-10069 (CSS) (Apr. 25, 2012); In re Filenes Basement, LLC, Case No. 11-13511 (KJC) (Feb. 8, 2012); In re SP Newsprint Holdings LLC, Case No. 11-13649 (CSS) (Feb. 8, 2012); In re Coach Am Group Holdings Corp., Case No. 12-10010 (KG) (Jan. 27, 2012); In re Nassau Broadcasting Partners, L.P., Case No. 11-12934 (KG) (Nov. 21, 2011); In re Nebraska Book Company, Inc., Case No. 11-12005 (PJW) (Aug. 10, 2011); In re DSI Holdings, Inc., Case No. 11-11941 (KJC) (July 19, 2011); In re Satlites Mexicanos, S.A. de C.V., Case No. 11-11035 (CSS) (Apr. 29, 2011); In re Harry & David Holdings, Inc., Case No. 11-10884 (MFW) (Apr. 27, 2011); In re Constar Intl Inc., Case No. 11-10109 (CSS) (Feb. 1, 2011); In re Trico Marine Services, Inc., Case No. 10-12653 (Aug. 5, 2010) (BLS); In re Affiliated Media Inc., Case No. 10-10202 (KJC) (Mar. 3, 2010); In re Trident Resources Corp., Case No. 09-13150 (MFW) (Jan. 28, 2010); In re MIG, Inc., Case No. 09-12118 (KG) (Sept. 4, 2009); In re Sea Launch Co., LLC, Case No. 09-12153 (BLS) (Aug. 20, 2009); In re Visteon Corp., Case No. 09-11786 (CSS) (July 1, 2009); In re Sun-Times Media Group, Inc., Case No. 09-11092 (CSS) (May 12, 2009); In re Magna Entertainment Corp., No. 09-10720 (MFW) (Apr. 27, 2009); In re Masonite Corp., No. 09-10844 (PJW) (Apr. 14, 2009); In re Pliant Corp., No. 09-10433 (MFW) (Mar. 31, 2009); In re Merisant Worldwide, Inc., No. 09-10059 (Feb. 25, 2009); In re Smurfit-Stone Container Corporation, No. 09-10235 (BLS) (Feb. 23, 2009); In re PPI Holdings, Inc., No 08-13289 (KG) (Feb. 4, 2009); In re GWLS Holdings, Inc., No. 08-12430 (PJW) (Dec. 5, 2008); In re Archway Cookies, LLC, No. 08-12323 (CSS) (Nov. 13, 2008); In re Mervyns Holdings, LLC, No. 08-11568 (KJC) (July 29, 2008); In re Portola Packaging, Inc., No. 08-12001 (CSS) (Sept. 19, 2008); In re ACG Holdings, Inc., No. 08-11467 (CSS) (Aug. 11, 2008); In re Hines Horticulture, Inc., No. 08-11922 (KJC) (Aug. 20, 2008); In re Dura Automotive Systems, Inc., No. 06-11202 (KJC) (Oct. 30, 2006); In re J. L. French Automotive Castings, No. 06-10119 (MJW) (Mar. 22, 2006); In re Birch Telecom, Inc., No. 05-12237 (PJW) (Jan. 17, 2006); In re FLYi, Inc., No. 05-20011 (MJW) (Jan. 17, 2006); In re Foamex International, Inc., No. 05-12685 (PJW) (Oct. 17, 2005). (Because of the voluminous nature of these orders and the orders and court filings underlying the analyses attached as Exhibit A and B, they are not attached to this Response. Copies of these orders are available on request to Rothschilds counsel.) 12 any party-in-interest under section 330 of the Bankruptcy Code. PC Obj. 24. Not one of the Petitioning Creditors three citations support this assertion. In fact, they are directly contrary to it: First, this Courts order in In re Barzel Industries, Inc. 6 approved retention of Houlihan Lokey on ordinary section 328 terms, with the usual section 330 carveout for the U.S. Trustee alone. Second, this Courts order in In re Visteon Corp. 7 approved retention of Rothschild on ordinary section 328 terms, again with the U.S. Trustee carveout. Third, this Courts order in In re Vertis Holdings, Inc. 8 approved retention of Lazard on ordinary section 328 terms, once again with the U.S. Trustee carveout. The Committee, in turn, in its Limited Objection, reaches back over six years to cite only three examples of investment banking or financial advisory retentions in which any party other than the U.S. Trustee was accorded section 330 review rights in this district. UCC Obj. 13. Rothschild respectfully submits that those three instances are atypical. Debtors could seldom obtain investment banking services at market rates if bankers fixed and percentage fees remained vulnerable to attack through the course of bankruptcy proceedings. Across dozens of orders and many years, the ordinary practice in this and other districts is to approve retention of investment bankers and financial advisors under section 328(a) of the Bankruptcy Code, as seen above, 23 & n.5, and in Exhibit B. There is no justification for departing from the norm and leaving Rothschilds fees under a cloud of uncertainty. 25. In fact, the Limited Objections illustrate why Rothschild and other investment bankers seek approval of their fees pursuant to section 328(a), and exemplify the need Congress addressed by providing professionals with the protections set forth in section 328(a). Rothschild and other investment bankers customarily seek retention and approval of their fees under section 6 Case No. 09-13204 (CSS) (Oct. 22, 2009) [ECF No. 190], attached hereto as Exhibit C. 7 Case No. 09-11786 (CSS) (July 1, 2009) [ECF No. 474], attached hereto as Exhibit D. 8 Case No. 08-11460 (CSS) (Aug. 8, 2008) [ECF No. 160], attached hereto as Exhibit E. 13 328(a) of the Bankruptcy Code in order to prevent the retrading of fees that become due only after their work has been done, and in order to provide them with reasonable assurance that they will receive the fees that they have negotiated at the outset. Section 328(a) recognizes that Rothschild is entitled to this reasonable assurance. See In re XO Commcns, Inc., 398 B.R. 106, 112 (Bankr. S.D.N.Y. 2008) (noting that a section 328 retention is similar to the prepetition prospective approach and both the professional and the debtor agree to assume the attendant risks involved as to the potential for underpayment or overpayment for the services rendered); In re Dividend Dev. Corp., 145 B.R. 651 (Bankr. C.D. Cal. 1992) (noting that section 328 clearly anticipates that the court will make a determination as to the reasonableness of a fee arrangement at the beginning of a case). III. Revisions to the Proposed Form of Order 26. Following discussions with the U.S. Trustee, the Debtors and Rothschild agreed to certain modifications to the proposed order. The Debtors and Rothschild also have no objection to the modification requested in paragraph 25(a) of the PC Objection, which clarifies that an existing fee carveout for new capital raised from certain incumbent parties applies to their affiliates as well. These modifications are reflected in the revised proposed form of order and comparison attached hereto as Exhibits F and G. 14 27. The remaining changes proposed by the Petitioning Creditors are not acceptable to the Debtors or Rothschild. The concern described in paragraph 25(b) of the PC Objection is already addressed in the standard language of section 4(c) of the Engagement Letter. 9 The Petitioning Creditors proposed language, by contrast, is atypical and leaves unclear, among other things, how New Capital Fees would become due on letters of credit or committed capital that is to be accessed over time. The Petitioning Creditors remaining proposed change, PC Obj. 26, is merely an effort to alter the economic terms agreed between the Debtors and Rothschild. The Petitioning Creditors should not be permitted to disturb the Debtors exercise of reasonable business judgment in negotiating the terms on which the estate will compensate Rothschild for necessary investment banking and financial advisory services. [The remainder of this page is intentionally blank.] 9 ...The New Capital Fee shall be payable upon the closing of the transaction by which the new capital is committed. For the avoidance of doubt, the term raised shall include the amount committed or otherwise made available to the Company whether or not such amount (or any portion thereof) is drawn down at closing or is ever drawn down and whether or not such amount (or any portion thereof) is used to refinance existing obligations of the Company. For the avoidance of doubt, the New Capital Fee relating to any warrants, purchase rights and similar contingent equity securities under clause (iv) shall be due and payable upon the exercise of such warrants, purchase rights or similar contingent equity securities (except to the extent of any cash issuance price paid therefor, for which the New Capital Fee shall be paid upon issuance). Engagement Letter, 4(c). 15 WHEREFORE, Rothschild respectfully requests that the Court overrule the Limited Objections and enter an Order approving the Application, and grant such other relief as the Court deems just and proper under the circumstances. Dated: August 23, 2012 BENESCH, FRIEDLANDER, COPLAN & ARONOFF LLP By: __________________________________ Raymond H. Lemisch, Esquire (No. 4204) Jennifer E. Smith, Esquire (No. 5278) 222 Delaware Avenue, Suite 801 Wilmington, DE 19801 Telephone: 302-442-7010 Telephone: 302-442-7012 rlemisch@beneschlaw.com jsmith@beneschlaw.com - and - DEBEVOISE & PLIMPTON LLP Richard F. Hahn (admitted pro hac vice) Wendy B. Reilly (admitted pro hac vice) Derek P. Alexander (admitted pro hac vice) 919 Third Avenue New York, New York 10022 Telephone: 212-909-6235 Facsimile: 212-521-7292 rfhahn@debevoise.com wbreilly@debevoise.com dalexand@debevoise.com Counsel for Rothschild Inc. /s/ Raymond H. Lemisch Exhibit A to Rothschilds Response: Relevant Economic Terms of Retention in Comparable Cases Debtor Fee Study: 7/1/2010 - 6/30/2012; Pre-Petition Debt of $150 million - $550 million Restructuring Fees Summary 29 transactions E in thousands Restructuring Fees Total Fof Fof Bankruptcy Pre-Petition Pre-Petition Pre-Pet. Debt Monthly Restr. Pre-Pet. Debt Pre-Pet. Debt Restructuring Fee oO Client Advisor Filing Date Principal Acc. Int. (incl. acc int.) Fees Fees (incl. acc int.) (excl. acc int.) Credits R American Safety Razor R Lazard Middle Market 7/28/2010 $482,500 NA $482,500 $150 $3,500 0.73% 0.73% 50% of Minority Sale Transaction Fee, 50% of Financing Fees and 50% of Monthly Fees after third month plus 100% of Amendment Fee S Bicent Holdings Moelis & Company 4/23/2012 $361,800 $700 $362,500 $100 $3,250 0.90% 0.90% None T Borders Group S Jefferies & Co 2/16/2011 $244,650 NA $244,650 $200 $5,500 2.25% 2.25% 50% of Monthly Fees in excess of $600K credited against Restructuring Fee U Buffets T Moelis & Company 1/18/2012 $260,900 NA $260,900 $150 $3,000 1.15% 1.15% 100% of Monthly Fees V Caribe Media U Lazard Freres & d 5/3/2011 $183,450 NA $183,450 $75 $1,000 0.55% 0.55% 100% of December 2010 Monthly Fee and 50% of Monthly Fees thereafter W Circus and El Dorado Joint Venture Evercore 5/17/2012 $143,212 $10,282 $153,494 $75 $1,000 0.65% 0.70% None X Coach America V Rothschild 1/3/2012 $382,753 NA $382,753 $150 $2,000 0.52% 0.52% 100% of Monthly Fees from October 2011 through March 2012 and 50% of New Capital Fees Y Constar nternational W Greenhill & Co. 1/11/2011 $249,400 $1,400 $250,800 $140 see notes 1.49% 1.50% 50% of Monthly Fees Z Contract Research Solutions X Jefferies & Co 3/26/2012 $184,800 NA $184,800 $125 $2,250 1.22% 1.22% 50% of Monthly Fees over $375K and 75% of Monthly Fees over $1.125 million plus 100% of M&A Fee RQ Deb Shops Y Rothschild 6/26/2011 $222,200 $7,300 $229,500 $150 $1,900 0.83% 0.86% 25% of Monthly Fees and 50% of New Capital Fees paid RR Delta Petroleum Z Evercore 12/16/2011 $303,500 $2,715 $306,215 $100 $2,400 0.78% 0.79% 50% of Monthly Fees RS Evergreen Solar RQ UBS Securities 8/15/2011 $373,300 $4,167 $377,467 $150 $1,500 0.40% 0.40% 100% of Monthly Fees credited against restructuring fee Debtor Fee Study: 7/1/2010 - 6/30/2012; Pre-Petition Debt of $150 million - $550 million Restructuring Fees Summary 29 transactions E in thousands Restructuring Fees Total Fof Fof Bankruptcy Pre-Petition Pre-Petition Pre-Pet. Debt Monthly Restr. Pre-Pet. Debt Pre-Pet. Debt Restructuring Fee oO Client Advisor Filing Date Principal Acc. Int. (incl. acc int.) Fees Fees (incl. acc int.) (excl. acc int.) Credits RT Friendly ce Cream Corporation RR Duff & Phelps Securities 10/5/2011 $297,000 NA $297,000 $100 $1,200 0.40% 0.40% 100% of first three Monthly Fees if stalking horse bid succeeds; 100% of Monthly Fees otherwise RU Global Aviation Rothschild 2/5/2012 $239,715 $15,006 $254,721 $200 $2,250 0.88% 0.94% 50% of Monthly Fees over $1.2 million, 50% of M&A Fee and 50% of New Capital Fees RV Harry & David Rothschild 3/28/2011 $198,400 $8,100 $206,500 $150 $2,000 0.97% 1.01% 100% of Monthly Fees after May 17, 2011 and 50% of New Capital Fees RW nner City Media RS Rothschild 11/17/2011 $206,837 $44,000 $250,837 $150 $750 0.30% 0.36% 100% of Monthly Fees after the fourth month, plus all Monthly Fees over $450K earned while awaiting FCC approval as the sole remaining closing condition RX nsight Health Services Holdings Jefferies & Co 12/10/2010 $294,760 $4,200 $298,960 $150 $2,750 0.92% 0.93% 50% of Monthly Fees over EUVQl RY Jackson Hewitt Tax Service Moelis & Company 5/24/2011 $357,300 $200 $357,500 $150 $2,000 0.56% 0.56% 50% of Monthly Fees after the sixth month RZ Molecular nsight Pharmaceuticals RT M.M. Dillon & Co (f/k/a CRT nvestment Banking) 12/9/2010 $202,000 NA $202,000 $125 $1,500 0.74% 0.74% 100% of Monthly Fees SQ Nassau Broadcasting RU Rothschild 10/12/2011 $166,482 $120,000 $286,482 $125 $1,500 0.52% 0.90% 100% of Monthly Fees up to $750K, then 20% of Monthly Fees, plus all Monthly Fees earned while awaiting FCC approval as the sole remaining closing condition SR Nebraska Book RV Rothschild 6/27/2011 $477,100 $8,100 $485,200 $175 $3,750 0.77% 0.79% 50% of Monthly Fees in excess of $525K and 50% of New Capital Fees SS Omega Navigation (Baytown Navigation) RW Jefferies & Co 7/6/2011 $284,170 NA $284,170 $125 $2,800 0.99% 0.99% None Debtor Fee Study: 7/1/2010 - 6/30/2012; Pre-Petition Debt of $150 million - $550 million Restructuring Fees Summary 29 transactions E in thousands Restructuring Fees Total Fof Fof Bankruptcy Pre-Petition Pre-Petition Pre-Pet. Debt Monthly Restr. Pre-Pet. Debt Pre-Pet. Debt Restructuring Fee oO Client Advisor Filing Date Principal Acc. Int. (incl. acc int.) Fees Fees (incl. acc int.) (excl. acc int.) Credits ST Pacific Monarch Resorts RX Houlihan Lokey Howard & Zukin 10/24/2011 $279,900 NA $279,900 $150 $4,250 1.52% 1.52% 50% of New Capital Fees credited against Restructuring Fee. Amendment Fees related to RFA debt credited 50% against Restructuring Fee; other Amendment Fees credited 100% against Restructuring Fee SU Perkins & Marie Callender's Whitby, Santarlasci & Co. 6/13/2011 $293,000 $19,375 $312,375 $65 $1,500 0.48% 0.51% 50% of Monthly Fees SV Real Mex Restaurants RY mperial Capital 10/4/2011 $219,500 $7,700 $227,200 $125 see notes 0.77% 0.80% Up to $825K in Monthly Fees creditable against Restructuring Fee SW Reddy ce Holdings RZ Jefferies & Co 4/12/2012 $501,143 $10,029 $511,172 $100 $2,950 0.58% 0.59% 50% of Monthly Fees (but crediting does not apply in all conditions) SX Satelites Mexicanos SQ Lazard Freres & d 4/6/2011 $440,129 NA $440,129 $150 $8,000 1.82% 1.82% Monthly Fees after the sixth month, up to $2 million SY Sbarro Rothschild 4/4/2011 $356,900 $7,800 $364,700 $150 $2,500 0.69% 0.70% 100% of Credit Facility Fee and Monthly Fees after five months SZ TBS Shipping Services SR Lazard Freres & d 2/6/2012 $190,600 NA $190,600 $150 $2,600 1.36% 1.36% 100% of first seven Monthly Fees, then 50% High ESQQ SOSVF SOSVF Median RVQ QOXXF QOYQF Mean 135 0.89% 0.91% Low WV QOTQF QOTWF AIIied SS Sale to Select Buyer ESXTMZQQ EXRMWQQ ETUVMVQQ ERVQ ERMXVQ QOVRF QOWUF Uncontested POR / Sale to 1st Lien Lenders w/ > 50% Support ESXTMZQQ EXRMWQQ ETUVMVQQ ERVQ ESMQQQ QOVYF QOXTF Other ESXTMZQQ EXRMWQQ ETUVMVQQ ERVQ ESMVQQ QOXSF QOZRF Debtor Fee Study: 7/1/2010 - 6/30/2012; Pre-Petition Debt of $150 million - $550 million Restructuring Fees Summary ^otes 1 Principal balance does not include accrued interest (accrued interest is not disclosed) 2 Liquidation Fee of $1.5 million instead of Restructuring Fee in the event of liquidation. Principal balance does not include accrued interest (accrued interest is not disclosed) 3 Pre-petition principal includes accrued interest (full breakdown of accrued interest not disclosed) 4 Principal balance does not include accrued interest (accrued interest is not disclosed) 5 Pre-petition accrued interest was 6 Restructuring Fee approved was a percentage of debt restructured 7 Restructuring fee equal to greater of $2.25 million and 1% of restructured liabilities, capped at $4 million. Principal balance does not include accrued interest (accrued interest is not disclosed) 8 Restructuring fee is $1 million if transaction does not permit business to continue as a going concern 9 f restructuring does not include certain senior debt, then Restructuring Fee is 0.80% of debt restructured 10 Transaction Fee composed of two parts: $1.5 million restructuring fee plus ncentive Fee of between $500K and $1.5 million upon completion of a Sale Transaction 11 Fee is $1.2 million if stalking horse bid succeeds; otherwise 2% of consideration. Principal balance does not include accrued interest (accrued interest is not disclosed) 12 f sold to third party, fee is greater of $750K and 1% of consideration; if particular asset sold to third party, fee increases by 1% of consideration. Bankruptcy filing date reflects relief consent date 13 Pre-petition accrued interest not disclosed (unclear if included in principal balance) 14 Bankruptcy filing date reflects relief consent date 15 Aggregate Completion and New Capital Fees after credits capped at $6.75 million 16 Principal balance does not include accrued interest (accrued interest is not disclosed) 17 Pre-petition accrued interest not disclosed (unclear if included in principal balance) 18 Monthly fee of $150K for first three months. Restructuring Fee approved was a percentage of debt restructured 19 Restructuring fee consists of (i) a $2.05 million 2nd lien restructuring fee and (ii) a senior secured notes restructuring fee of 0.3% ($900K) 20 Monthly Fee of $175K for first two months. Restructuring fee is greater of $8 million and 1.125% of aggregate consideration. Debt balances exclude accrued interest (accrued interest not disclosed) 21 Debt balances include substantially all of the pre-petition accrued interest (full breakdown of accrued interest not disclosed) 22 Debt balances as of May 31, 2011 Exhibit B to Rothschilds Response: Retention Standard in Comparable Cases Debtor Fee Study: 7/1/2010 - 6/30/2012; Pre-Petition Debt of $150 million - $550 million 1erms of Retention 29 transactions Basis of Retention TTQ Review Retained oO Client TSY TTQ vt Trustee Other Parties Comments R American Safety Razor o S Bicent Holdings
o T Borders Group
o U Buffets, nc.
o V Caribe Media, nc
o W Circus and El Dorado Joint Venture o o X Coach America
o Y Constar nternational, nc o Z Contract Research Solutions o Retention subject to terms of any ejq RQ Deb Shops
o RR Delta Petroleum
o RS Evergreen Solar, nc
o RT Friendly ce Cream Corporation o Monthlies not subject to 330 by vtu RU Global Aviation
o RV Harry & David
o RW nner City Media Corp
o RX nsight Health Services Holdings o RY Jackson Hewitt Tax Service, nc o RZ Molecular nsight Pharmaceutals, nc o SQ Nassau Broadcasting
o SR Nebraska Book
o SS Omega Navigation (Baytown Navigation) o ST Pacific Monarch Resorts o o SU Perkins & Marie Callender's o SV Real Mex Restaurants
o SW Reddy ce Holdings
o SX Satelites Mexicanos S.A. de C.V. o SY Sbarro, nc.
o SZ TBS Shipping Services o Exhibit C to Rothschilds Response: Order Approving Retention, In re Barzel Industries, Inc., Case No. 09-13204 (CSS) (Oct. 22, 2009) [ECF No. 190] IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 Barzel Industries Inc., et al., Case No. 09Ml3204 (CSS) Debtors. 1 (Jointly Administered) Related Docket Number: 70 ORDER AUTHORIZING THE DEBTORS TO RETAIN AND EMPLOY HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL, INC. AS FINANCIAL ADVISORS This matter coming before the Court on the Application of the Debtors to Retain and Employ Houlihan Lokey Howard & Zukin Capital, Inc. as Financial Advisors (the "Application''), 2 filed by the aboveMcaptioned debtors (the "Debtors"); the Court having reviewed the Application, the Turnbull Declaration and the Engagement Letter and having found that (i) the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334, (ii) venue is proper in this district pursuant to 28 U.S.C. 1409, (iii) this is a core proceeding pursuant to 28 U.S.C. 157(b) and (iv) notice of the Application and the Hearing was sufficient under the circumstances; and after due deliberation the Court having determined that the relief requested in the Application is necessary and essential for the Debtors' reorganization and such relief is in the best interests of the Debtors, their estates and their creditors; and good and sufficient cause having been shown; 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor's federal tax identification number are: Barzel Industries Inc. (0836), Barzel Holdings Inc. (1107), Barzel Finco Inc. (1010), Barzel Industries U.S. Inc. (6382}, American Steel and Aluminum Corporation (2435), Nova Tube and Steel, Inc. (1790), Novamerican Tube Holdings, Inc. (3740) and Nova Tube Indiana, LLC (8275). 2 Capitalized terms not otherwise defined herein shall have the meanings given to them in the Application. 4 7658/000 1-5952203v3 LEGAL_US_E# 85435405.2 IT IS HEREBY ORDERED THAT: 1. The Application is granted. 2. The Debtors are authorized, effective as of the Petition Date, to employ and retain Houlihan Lokey as their financial advisors, on the terms set forth in the Engagement Letter and the Application, pursuant to sections 327(a) and 328 of the Bankruptcy Code, and subject to the terms and conditions imposed below. 3. Houlihan Lokey shall be compensated for its services and reimbursed for any related expenses in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Bankruptcy Ru1es and any other applicable orders or procedures of this Court. Subject to the foregoing, Houlihan Lokey will file applications for interim and final allowance of compensation and reimbursement of expenses. 4. Houlihan Lokey's compensation shall be subject to the standard of review provided in section 328(a) ofthe Bankruptcy Code and not subject to any other standard of review under section 330 of the Bankruptcy Code, except as specifically provided in the following paragraph. 5. Notwithstanding the approval of Houlihan Lokey's retention pursuant to section 327 of the Bankruptcy Code and approval of the terms of the engagement under section 328(a) of the Bankruptcy Code, the United States Trustee (the "U.S. Trustee") shall be pennitted to review a Restructuring Fee, Sale Fee or Financing Fee (collectively, the "Transaction Fees") (but not the Monthly Fees in the event such fees are credited against the Transaction Fees) pursuant to the reasonableness standards set forth in section 330 of the Bankruptcy Code; provided, however, that in determining the reasonableness of the Transaction Fees under section 330, a factor to be considered is whether the Transaction Fees are comparable to the range of fees 4 7658/000 I-5952203v3 LEGAL_US_E # 85435405.2 -2- paid to investment bankers in comparable transactions both in and outside of court in this and other Districts as provided in section 330(a)(3)(F) of the Bankruptcy Code; and provided, further, that the number of hours spent by Houlihan Lokey's personnel during its engagement or during any given monthly period thereof shall not be the sole factor in and of itself as to the reasonableness of the Transaction Fees or the Monthly Fee. Neither the U.S. Trustee nor Houlihan Lokey shall rely upon this provision as binding precedent in any other chapter 11 proceedings. 6. The Retainer shall constitute a general security retainer for postpetition services and expenses until the conclusion of these chapter 11 cases, at which point Houlihan Lokey will apply the Retainer against its then-unpaid fees and expenses with respect to Houlihan Lokey's fee applications filed and approved in accordance with the applicable provisions of the Bankruptcy Code. 7. The indemnification provisions ofthe Engagement Letter are approved, and the Debtors shall indemnify and hold hannless Houlihan Lokey and its affiliates, and their past, present, and future directors, officers, shareholders, partners, members, employees, agents, representatives, advisors, subcontractors and controlling persons, pursuant to and in accordance with the Engagement Letter. 8. The Estate shall have no obligations to indemnify Houlihan Lokey or provide contribution or reimbursement to Houlihan Lokey for any claim or expense that is either (i) judicially determined (the determination having become final) to have arisen solely from the gross negligence or willful misconduct of Houlihan Lokey, (ii) for a contractual dispute in which the Debtors and/or Committee allege the breach of Houlihan Lokey's contractual obligations unless the Court determines the indemnification, contribution or reimbursement would be 47658/000 l-5952203v3 LEOAL_US_E# 85435405.2 -3- permissible pursuant to In reUnited Artists Theatre Company, et al., 315 F.3d 217 (3d Cir. 2003), or (iii) for any claim or expense that is settled prior to a judicial determination as to the exclusions set forth in clauses (i) and (ii) above, but determined by the Court, after notice and a hearing to be a claim or expense for which Houlihan Lokey should not receive indemnity, contribution or reimbursement under the terms of Houlihan Lokey's retention, as modified by this Order. 9. If, before the earlier of (i) the entry of an order confirming a chapter 11 plan in these cases (that order having become a final order no longer subject to appeal), and (ii) the entry of an order closing these chapter 11 cases, Houlihan Lokey believes that it is entitled to the payment of any amounts by the Debtors on account of the Debtors' indemnification, contribution and/or reimbursement obligations under the terms of Houlihan Lokey's Engagement Letter (as modified by this Order), including without limitation the advancement of defense costs, Houlihan Lokey must file an application therefore in this Court, and the Debtors may not pay any such amounts to Houlihan Lokey before the entry of an order by this Court approving the payment. This paragraph is intended only to specify the period of time during which the Court shall have jurisdiction over any request for fees and expenses by Houlihan Lokey for indemnification, contribution or reimbursement and is not a provision limiting the duration of the Debtors' obligation to indemnify Houlihan Lokey. All parties in interest shall retain the right to object to any demand by Houlihan Lokey for indemnification, contribution and/or reimbursement. 10. To the extent requested in the Application, Houlihan Lokey is excused from complying with the information requirements contained in Local Rule 2016-2(d). 11. To the extent this Order is inconsistent with the Engagement Letter, this Order shall govern. 47658/000 l-5952203v3 LEGAL_US_E # 85435405.2 -4- 12. This Court shall retain jurisdiction over any matters arising from or related to the implementation of this Order. Dated: October 1Dfrb2009 Wilmingto'n,15elaware 47658/000 1-5952203v3 LEGAL_US_E # 85435405.2 ~ ~ ONORABLE CHRISTOPHER S. SONTCHI UNITED STATES BANKRUPTCY JUDGE -5- Exhibit D to Rothschilds Response: Order Approving Retention, In re Visteon Corp., Case No. 09-11786 (CSS) (July 1, 2009) [ECF No. 474] In re: IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) ) Chapter II ) VISTEON CORPORATION, et al., 1 ) Case No. 09-11786 (CSS) ) ) Joint Administration Requested Debtors. ) RE: DOCKET NOS. 17, Ill, lSI, 336 ORDER AUTHORIZING THE EMPLOYMENT AND RETENTION OF ROTHSCIDLD INC. AS INVESTMENT BANKER AND FINANCIAL ADVISOR FOR THE DEBTORS AND DEBTORS IN POSSESSION Upon the application (the "Application") of the above-captioned debtors and debtors in possession (collectively, "Visteon" or the "Debtors") for entry of an order (this "Order") authorizing the Debtors to employ and retain Rothschild Inc. ("Rothschild") as their investment banker and financial advisor effective as of the date the Debtors filed their chapter II petitions; ; and upon the Declaration of William G. Quigley, Ill, Chief Financial Officer and Executive Vice President of Visteon Corporation in Support of First Day Pleadings; and upon the Declaration of Todd R Snyder in support of the Application; and the Court having found that the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; and the Court having found The Debtors in these chapter II cases, along with the last four digits of each Debtor's federal tax identification number, are: Visteon Corporation (9512); ARS, Inc. (3590); Fairlane Holdings, Inc. (8091); GCM/Visteon Automotive Leasing Systems, LLC (4060); GCM/Visteon Automotive Systems, LLC (7103); Halla Climate Systems Alabama Corp. (9188); Infinitive Speech Systems Corp. (7099); MIG-Visteon Automotive Systems, LLC (5828); SunGlas, LLC (0711); The Visteon Fund (6029); Tyler Road Investments, LLC (9284); VC Aviation Services, LLC (2712); VC Regional Assembly & Manufacturing, LLC (3058); Visteon AC Holdings Corp. (9371); Visteon Asia Holdings, Inc. (0050); Visteon Automotive Holdings, LLC (8898); Visteon Caribbean, Inc. (7397); Visteon Climate Control Systems Limited (1946); Visteon Domestic Holdings, LLC (5664); Visteon Electronics Corporation (9060); Visteon European Holdings Corporation (5152); Visteon Financial Corporation (9834); Visteon Global Technologies, Inc. (9322); Visteon Global Treasury, Inc. (5591); Visteon Holdings, LLC (8897); Visteon International Business Development, Inc. (I 875); Visteon International Holdings, Inc. (4928); Visteon LA Holdings Corp. (9369); Visteon Remanufacturing Incorporated (3237); Visteon Systems, LLC (1903); Visteon Technologies, LLC (5291). The location of the Debtors' corporate headquarters and the service address for all the Debtors is: One Village Center Drive, Van Buren Township, Michigan 48111. 22998441v3 that this is a core proceeding pursuant to 28 U.S.C. 157(b )(2); and the Court having found that venue of this proceeding and the Application in this District is proper pursuant to 28 U.S.C. 1408 and 1409; and the Court having found that the relief requested in the Application is in the best interests of the Debtors' estates, their creditors, and other parties in interest; and the Debtors having provided appropriate notice of the Application and the opportunity for a hearing on this Application under the circumstances and no other or further notice need be provided; and the Court having reviewed the Application and having heard the statements in support of the relief requested therein at a hearing before the Court (the "Hearing"); and upon the Official Committee of Unsecured Creditors (the "Committee") having filed an objection to the Application; and upon the Debtors, Rothschild and the Committee having negotiated a resolution of the Committee's objections and the Committee having withdrawn its objection; and the Court having determined that the legal and factual bases set forth in the Application and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before the Court; after due deliberation and sufficient cause appearing therefor; and the Court having determined that Rothschild does not hold or represent any interest adverse to the Debtors' estates and is a "disinterested person," as defined in section 101(14) of the Bankruptcy Code and as required by section 327(a) of the Bankruptcy Code;2 and the Court having determined that that the terms and conditions of Rothschild's employment, including the compensation structure set forth in the Engagement Agreement (as modified hereby), are reasonable as required by section 328(a) ofthe Bankruptcy Code, it is HEREBY ORDERED THAT: I. Except as specifically modified hereby, the Application is granted nunc pro tunc to the Petition Date. 2 All capitalized tenns used but otherwise not defmed herein shall have the meaning set forth in the Motion. 2 22998441v3 2. All objections and responses concerning the Application or the relief requested therein are resolved in accordance with the terms of this Order. 3. The Debtors are authorized pursuant to sections 327 and 328(a) of the Bankruptcy Code to employ and retain Rothschild as their investment banker and financial advisor in accordance with the terms and conditions set forth in the Application and the engagement letter attached hereto as Exhibit I (including the exhibits thereto and the indemnification provisions included therein, the "Engagement Letter"), as modified, in each case, by this Order. 4. The terms of Rothschild's Engagement Letter (as modified hereby) are approved and Rothschild shall be compensated and reimbursed pursuant to section 328(a) of the Bankruptcy Code in accordance with the terms of the Engagement Letter (as modified hereby), subject to the procedures set forth in the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy Rules, and any other applicable orders of this court. 5. Notwithstanding the preceding paragraph of this Order and any provision to the contrary in the Application or the Engagement Letter, the United States Trustee (the "U.S. Trustee") shall have the right to object to Rothschild's request(s) for interim and fmal compensation and reimbursement based on the reasonableness standard provided in section 330 of the Bankruptcy Code, not section 328(a) of the Bankruptcy Code. This Order and the record relating to the Court's consideration of the Application shall not prejudice or otherwise affect the rights of the United States Trustee to challenge the reasonableness of Rothschild's compensation under Sections 330 and 331 of the Bankruptcy Code. Accordingly, nothing in this Order or the record shall not constitute a finding of fact or conclusion of law binding the United States Trustee, on appeal or otherwise, with respect to the reasonableness of Rothschild's compensation. 3 22998441v3 6. Section 5 of the Engagement Letter is hereby modified by deleting clauses (a), (b) and (c) thereof and inserting the following in their place: W 50% of the Monthly Fees earned from July 2009 through December 2009 and paid to Rothschild and 30% of the Monthly Fees earned from January 2010 through June 2010 and paid to Rothschild (the Monthly Fee Credit"), (Q) (i) 40% of any New Capital Fee earned and paid on account of debtor-in-possession financing, (ill 50% of the portion, if any, of a New Capital Fee earned and paid on account of any other New Capital Raise raised only to refinance existing borrowed-money indebtedness of the Company and (ill) 30% of any other New Capital Fees (or portion thereof) paid (collectively, the "New Capital Fee Credit"), () 50% of the first $3.5 million of M&A Fees paid to Rothschild and 75% of any further M&A Fees paid to Rothschild (the "M&A Fee Credit") and 7. The indemnification provisions included in the Engagement Letter, including Exhibit A thereto, are approved, subject to the following: a. Rothschild shall not be entitled to indemnification, contribution or reimbursement pursuant to the Engagement Letter for services, unless such services and the indemnification, contribution or reimbursement therefore are approved by the Court; b. The Debtors shall have no obligation to indemnifY Rothschild, or provide contribution or reimbursement to Rothschild, for any claim or expense that is either: (i) judicially determined (the determination having become final) to have arisen from Rothschild's gross negligence, willful misconduct, breach of fiduciary duty, if any, bad faith, or self-dealing; (ii) for a contractual dispute in which the Debtors allege the breach of Rothschild's contractual obligations unless the Court determines that indemnification, contribution, or reimbursement would be permissible pursuant to In re United Artists Theatre Company, et al., 315 F .3d 217 (3d Cir. 2003); or (iii) settled prior to a judicial determination as to Rothschild's gross negligence, willful misconduct, breach of fiduciary duty, or bad faith or self-dealing but determined by this Court, after notice and a hearing to be a claim or expense for which Rothschild should not receive indemnity, contribution or reimbursement under the terms of the Engagement Letter as modified by this Order; c. If, before the earlier of (i) the entry of an order confmning a chapter 11 plan in these cases (that order having become a final order no longer subject to appeal), and (ii) the entry of an order closing these chapter 11 cases, Rothschild believes that it is entitled to the payment of any amounts by the Debtors on account of the Debtors' indemnification, contribution and/or reimbursement obligations under the Engagement Letter (as modified by this Order), including without limitation the advancement of defense costs, Rothschild must file an application therefore in this Court, and the Debtors may not pay any such amounts to Rothschild before 4 22998441v3 the entry of an order by this Court approving the payment. This subparagraph (c) is intended only to specify the period of time under which the Court shall have jurisdiction over any request for fees and expenses by Rothschild for indemnification, contribution, or reimbursement, and not a provision limiting the duration of the Debtors' obligation to indemnify Rothschild. All parties in interest shall retain the right to object to any demand by Rothschild for indemnification, contribution or reimbursement; and d. Exhibit A to the Engagement Letter is hereby modified by deleting "provided, that, in no event shall the aggregate contribution of all such Indemnified Parties exceed the amount of fees received by Rothschild under this Agreement" from the first sentence of the fourth paragraph thereof. 8. The Engagement Letter is hereby modified by deleting "or fiduciary" from the last sentence of section 9( d) thereof. 9. To the extent requested in the Application, Rothschild is granted a waiver of the information requirements relating to compensation requests set forth in Local Rule 2016-(d). 10. In addition to compensation for professional services rendered by Rothschild, pursuant to the terms of the Engagement Letter, Rothschild is entitled to reimbursement by the Debtors for reasonable expenses incurred in connection with the performance of its engagement under the Engagement Letter, including, without limitation, the fees, disbursements and other charges of Rothschild's counsel (which counsel shall not be required to be retained pursuant to section 327 of the Bankruptcy Code or otherwise). 11. Notwithstanding the possible applicability of Bankruptcy Rules 6004(g), 7062, or 9014, the terms and conditions of this Order shall be immediately effective and enforceable upon its entry. 12. The relief granted herein shall be binding upon any chapter 11 trustee appointed in these chapter 11 cases, or upon any chapter 7 trustee appointed in the event of a subsequent conversion of these chapter 11 cases to cases under chapter 7. 5 22998441v3 13. The Court shall retain jurisdiction with respect to all matters arising from or related to the implementation of this Order. 14. The Debtors are authorized to take all actions necessary to effectuate the relief granted pursuant to this Order m accordance with the Application. Wilmingtof Delaware Date: ~ I , 2009 United States Bankruptcy Judge 6 2299B441v3 Exhibit E to Rothschilds Response: Order Approving Retention, In re Vertis Holdings, Case No. 08-11460 (CSS) (Aug. 8, 2008) [ECF No. 160] .----------------- ... , ... _, ____ --------------------- -- --- IN THE UNITED STAT S BANKRUPTCY COURT DISTRICT F DELAWARE -------------------------------------------------------- ------x In re VERTIS HOLDINGS, INC., eta/., Debtors. --------------------------------------------------------------x Chapter 11 Case No. 08-11460 (CSS) (Jointly Administered) Re: Docket No. 93 ORDER PURSUANT TO SECTIONS 327(a) AND 328(a) OF THE BANKRUPTCY CODE AND RULE 2014 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE AUTHORiZING THE EMPLOYMENT AND RETENTION OF LAZARD FRERES &. CO. LLC AS FINANCIAL ADVISOR FOR THE DEBTORS NUNC PRO TUNC TO THE COMMENCEMENT DATE Upon the application filed on July 23,2008 (the "Application"), 1 ofVertis Holdings, Inc. and certain of its direct and indirect subsidiaries, as above-captioned debtors and debtors in possession (collectively, the "Debtors"), 2 pursuant to sections 327(a) and 328(a) of title 11 of the United States Code (the "Bankruptcy Code") and rule 2014 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules'') for authorization to employ and retain Lazard Freres & Co. LLC ("Lazard") as financial advisor to the Debtors nunc pro tunc to the Commencement Date; and upon the a111davit of DavidS. Kurtz (the "Kurtz Affidavit"), a managing director at Lazard, in support thereof and in support of the Engagement Agreement including the Indemnification Letter, a copy of which is attached to the Application; and the Court being satisfied based on the representations made in the Application and in the Kurtz 1 Capitalized terms not defined herein shall have the meanings ascribed to them in the Application. ' The Debtors in these cases, along with the last fonr ( 4) digits of each Debtor's federal tax identification number, are Vertis Holdings, Inc. (1556), Vertis, Inc. (8322), Webcraft, LLC (6725), Webcraft Chemicals, LLC (6726), Enteron Group, LLC (3909), Vertis Mailing, LLC (4084), and USA Direct, LLC (5311). N'V2:\190111l2\02\14RG .-----------------------,---------------------- - matters upon which they are to be engaged, th t they are disinterested persons as that term is defined under section 101(14) of the Bankrupt y Code, as modified by section 1107(b) of the Bankruptcy Code, and that their employment i necessary and in the best interests of the Debtors' estates; the terms of the Engagement Agreement, including the Indemnification Letter, arc reasonable terms lor the purposes of section 328(a) of the Bankruptcy Code; and consideration of the Application and the relief requested therein being a core proceeding pursuant to 28 U.S.C. l57(b); and venue being proper belore this Court pursuant to 28 U.S.C. 1408 and 1409; and due and proper notice of the Application having been provided to the Notice Parties, and it appearing that no other or further notice need be provided; after due deliberation and sufficient cause appearing therctore, it is hereby ORDERED, that the Application is granted as set forth herein; and il is further ORDERED, that in accordance with sections 327(a) and 328(a) of the Bankruptcy Code, Bankruptcy Rule 2014, and rule 2014-1 of the Local Rules for The United States 13ankruplcy Court District of Delaware ("Local Rules"), the Debtors arc authorized to employ and retain Lazard as their financial advisor on the terms set forth in the Engagement Agreement, including the Indemnification Letter, and this Order, effective nunc pro tunc to the Commencement Date in the above captioned cases; and it is further ORDERED, that the terms of Lazard's employment, including the Fee and Expense Structure and the provisions of the Indemnification Letter, are approved; and it is furth"'r ORDERED, that Lazard shall be compensated in accordance with the terms of the Engagement Agreement, subject to the procedures set forth in the Bankruptcy Code, the NY2; \1901832\02\ 14RG_021.DOC\ 79081,0004 2 Bankruptcy Rules, the Local Rules, this order, and any other applicable orders of this Court; and it is further I ORDERED, that all of Lazard's fees and expenses in these cases, including without limitation the Monthly Fee, Restructuring Fee, Sale Transaction Fee, Minority Sale Transaction Fee, Testimony Fee, and DIP Financing Fee (as such terms are defined in the Engagement Agreement) are approved pursuant to section 328(a) of the Bankruptcy Code; provided, however, that all such fees and expenses shall be subject to approval by the Court in accordance with the standard set forth in section 328(a) of the Bankruptcy Code and upon proper application by Lazard in accordance with all rules and orders applicable in this Court; and it is further ORDERED, that to the extent Lazard performs services for the Debtors beyond those set forth in the Engagement Agreement, the Debtors shall seek the approval of the Court for the additional services and relevant fees; and it is further ORDERED, that Lazard shall file interim and final fcc applications for allowance of its compensation and expenses with respect to its services wilh the Court in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules and orders of the Court; provided, however, that Lazard may submit time records in a summary formal which shall set forth a description of the services rendered by each restructuring professional and the amount of time spent on each date by each such individual in rendering services on behalf or the Debtors and, therefore, the information requirements of Local Rule 2016-2 are hereby modified and waived, to the extent necessary, with respect to Lazard; and it is further NY2:\1901832\02\14RG_021.DOC\79081,0004 3 ORDERED, that the Debtors ar authorized to pay Lazard's fees and to reimburse Lazard for its costs and expenses as provided i the Engagement Agreement and Indemnification I Letter, upon approval by the Court of interim and tina! applications; and it is further ORDERED, that the U.S. Trustee retains all rights to object to the Restructuring Fee, Sale Transaction Fee, Minority Sale Transaction Fee, Testimony Fee, and DIP Financing Fee (as $UCh terms are defined in the Engagement Agreement) based on the reasonableness standard provided for in Bankruptcy Code section 330; and it is further ORDERED, that the provisions set forth in the Indemnification Letter are approved, subject during the pendency of the Debtors' bankruptcy cases to the following: (a) subject to the provisions of subparagraph (d), infra, the Debtors are to indemnify, and to provide contribution and reimbursement to, and shall indemnify, and provide contribution and reimbursement to, the Indemnified Persons (as defined in the Indemnification Letter) in accordance with the Indemnification Letter for any claim arising from, related to or in connection with the services provided for in the Engagement Agreement, but not for any claim arising from, related to, or in connection with Lazard's postpetition performance of any other services unless such postpetition services and indemnification therefor are approved by the Court; (b) notwithstanding any provisions of the Engagement Agreement to the contrary, the Debtors shall have no obligation to indemnify Lazard or provide contribution or reimbursement to Lazard (i) for any claim or expense that is judicially determined (the determination having become final) to have arisen from Lazard's bad faith, self-dealing, breach of fiduciary duty (if any), gross negligence or wiJlful misconduct, (ii) for a contractual dispute in which the Debtors allege the breach of Lazard's contractual obligations, unless the Court determines that indemnification, contribution or reimbursement would not be prohibited by United Artists Theatre Co. eta/. v. Walton (in re United Artists Theatre Co. eta/.), 315 F .3d 217 (3d Cir. 2003), or (iii) for any claim or expense that is settled prior to a judicial determination as to the exclusions set forth in clause (i) and (ii) above but determined by the Court, after notice and a hearing pursuant to subparagraph (d), infra, to be a claim or expense for which Lazard should not receive indemnity, contribution or reimbursement under the terms of the Engagement Agreement, as modified by this Order; 4 (c) if during the pendency o the Debtors' cases the indemnification is held unenforceable by reaso of the exclusions set forth in subparagraph (b) above and Lazard make a claim for the payment of any amounts by the Debtors on account oft e Debtors' contribution obligations, then the proviso set forth in the s cond sentence of the contribution provisions in the Indemnification Letter shall not apply, 3 (d) if, before the earlier of (i) the entry of an order confirming a chapter II plan in these cases (that order having become a final order no longer subject to appeal), and (ii) the entry of an order closing these chapter II cases, Lazard believes that it is entitled to the payment of any amounts by the Debtors on account of the Debtors' indemnification, contribution and/or reimbursement obligations under the Engagement Agreement, including the Indemnification Letter (as modified by this Order), including without limitation the advancement of defense costs, Lazard must tile an application therefor in this Court, and the Debtors may not pay any such amounts to Lazard before the entry of an order by this Court approving the payment. This subparagraph (d) is intended only to specify the period of time during which the Court shall have jurisdiction over any request for compensation and expenses by Lazard lor indemnification, contribution or reimbursement and is not a provision limiting the duration of the Debtors' obligation to indemnify Lazard, (e) in addition to Vertis, Inc. and its controlled subsidiaries, the detlncd term "you" in the Indemnification Letter shall also be deemed to include Vertis Holdings, Inc. and it is further; 3 The proviso is italicized below: "You agree that for the purposes hereof the relative benefits received, or sought to be received, by you and your security holders and creditors and the Indemnified PerS<mS shall be deemed to be in the same proportion as (i) the total value paid or proposed to be paid by or to you and your securityholdcr> and creditors, as the case may be, pursuant to any transaction (whether or not consummated) for which we have been engaged to perform investment banking services bears to (ii) the fees paid or proposed to be paid to us in connection with such engagement; provided, however, that, to the extent permitted hy applicable law, in no ~ < V e n t shall we or any other Indemnified Person be required to contribute an aggregate amount In excess of/he aggregate fees actually paid to us for such investment banking services. " NY2: \ 1901832\02\ 14RG_021,DOC:\79081.0004 5 ORDERED, that during the pe ency of any of the Debtors' chapter II cases, this Court shall retain jurisdiction with respect to y matters, claims, rights or disputes arising from or related to the implementation of this Order. i NY2:\ l901832\02\14RG_021.DOC\79081.0004 6 Exhibit F to Rothschilds Response: Revised Proposed Form of Order IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ALLIED SYSTEMS HOLDINGS, INC., et al., 1 Debtors. Chapter 11 Case No. 12-11564 (CSS) (Jointly Administered) ORDER PURSUANT TO 11 U.S.C. 327 AND 328, FED. R. BANKR. P. 2014 AND 2016 AND DEL. BANKR. L.R. 2014-1 AND 2016-1 FOR AN ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF ROTHSCHILD INC. AS FINANCIAL ADVISOR AND INVESTMENT BANKER FOR THE DEBTORS NUNC PRO TUNC TO THE PETITION DATE This matter coming before the Court on the Debtors Application Pursuant to 11 U.S.C. 327 and 328, Fed. R. Bankr. P. 2014 and 2016 and Del. Bankr. L.R. 2014-1 and 2016-1 for an Order Authorizing the Retention and Employment of Rothschild (the Application) 2 filed by the above- captioned debtors (the Debtors); the Court having reviewed the Application, the Snyder Declaration and having considered the statements of counsel and the evidence adduced with respect to the Application at a hearing before the Court (the Hearing); the Court having found that (i) the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334, (ii) 1 The Debtors in these cases, along with the federal tax identification number (or Canadian business number where applicable) for each of the Debtors, are: Allied Systems Holdings, Inc. (58-0360550); Allied Automotive Group, Inc. (58-2201081); Allied Freight Broker LLC (59-2876864); Allied Systems (Canada) Company (90-0169283); Allied Systems, Ltd. (L.P.) (58-1710028); Axis Areta, LLC (45-5215545); Axis Canada Company (87568828); Axis Group, Inc. (58-2204628); Commercial Carriers, Inc. (38-0436930); CT Services, Inc. (38-2918187); Cordin Transport LLC (38-1985795); F.J. Boutell Driveaway LLC (38-0365100); GACS Incorporated (58-1944786); Logistic Systems, LLC (45-4241751); Logistic Technology, LLC (45-4242057); QAT, Inc. (59-2876863); RMX LLC (31- 0961359); Transport Support LLC (38-2349563); and Terminal Services LLC (91-0847582). The location of the Debtors corporate headquarters and the Debtors address for service of process is 2302 Parklake Drive, Bldg. 15, Ste. 600, Atlanta, Georgia 30345. 2 Initially capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Application. 2 venue is proper in this district pursuant to 28 U.S.C. 1409, (iii) this is a core proceeding pursuant to 28 U.S.C. 157(b), (iv) the terms and conditions of Rothschilds employment, including but not limited to the Fee and Expense Structure set forth in the Engagement Letter and summarized herein, are reasonable as required by section 328(a) of the Bankruptcy Code and (v) notice of the Application and the Hearing was sufficient under the circumstances; after due deliberation, the Court having determined that the relief requested in the Application is necessary and essential for the Debtors reorganization and such relief is in the best interests of the Debtors, their estates and their creditors; and good and sufficient cause having been shown, it is HEREBY ORDERED THAT: 1. The Application is GRANTED as set forth herein, nunc pro tunc to the Petition Date. 2. The Debtors are authorized, pursuant to sections 327 and 328(a) of the Bankruptcy Code, Bankruptcy Rule 2014, and Local Rule 2014-1, to employ and retain Rothschild as their financial advisor and investment banker in accordance with the terms and conditions set forth in the Engagement Letter, effective nunc pro tunc to the Petition Date, and to pay fees and reimburse expenses to Rothschild on the terms and times specified in the Engagement Letter. 3. The terms of the Engagement Letter, attached hereto as Exhibit 1, are approved in all respects except as limited or modified herein. 4. The last sentence of Section 4(c) of the Engagement Letter shall be amended by adding the words or affiliates of any of the foregoing to the end thereof. 5. All of Rothschilds compensation set forth in the Engagement Letter, including, without limitation, the Fee and Expense Structure set forth in the Engagement Letter, is approved 3 pursuant to section 328(a) of the Bankruptcy Code and Rothschild shall be compensated and reimbursed pursuant to section 328(a) of the Bankruptcy Code in accordance with the terms of the Engagement Letter, subject to the procedures set forth in the Bankruptcy Code, the Bankruptcy Rules, the Local Rules and any other applicable orders of this Court. 6. Notwithstanding anything to the contrary contained herein, Rothschild shall be paid, during the pendency of these chapter 11 cases, only upon appropriate application in accordance with the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and any interim compensation procedures order entered in these chapter 11 cases. 7. None of the fees payable to Rothschild shall constitute a bonus or fee enhancement under applicable law. 8. Notwithstanding anything to the contrary herein, the United States Trustee retains all rights to object to Rothschilds interim and final fee applications (including expense reimbursement and any request for counsel fees) based on the reasonableness standard in section 330 of the Bankruptcy Code, not section 328(a) of the Bankruptcy Code, provided, however, that reasonableness shall be evaluated by comparing (among other things) the fees payable in these chapter 11 cases to fees paid to comparable investment banking firms with similar experience and reputation offering comparable services in other chapter 11 cases and shall not be evaluated primarily on an hourly or lengthofcase criterion. 9. Rothschild shall include in its fee applications, among other things, time records setting forth, in a summary format, a description of the services rendered by each professional, and the amount of time spent on each date by each such individual in rendering services on behalf of 4 the Debtors in half-hour increments, but Rothschild shall be excused from keeping time in tenth- hour increments. 10. Rothschild shall file fee applications for interim and final allowance of compensation and reimbursement of expenses pursuant to the procedures set forth in sections 330 and 331 of the Bankruptcy Code; provided, however, the fee applications filed by Rothschild shall be subject to review only pursuant to the standard of review set forth in section 328 of the Bankruptcy Code and not subject to the standard of review set forth in section 330 of the Bankruptcy Code, except as otherwise expressly set forth herein. 11. The Debtors shall be bound by the indemnification, contribution, reimbursement, exculpation and other provisions of the Engagement Letter and will indemnify and hold harmless Rothschild and the other Indemnified Parties, pursuant to the Engagement Letter, subject, during the pendency of these chapter 11 cases, to the following: (a) Rothschild shall not be entitled to indemnification, contribution or reimbursement pursuant to the Engagement Letter for services, unless such services and the indemnification, contribution or reimbursement therefor are approved by the Court; (b) The Debtors shall have no obligation to indemnify Rothschild, or provide contribution or reimbursement to Rothschild, for any claim or expense that is either: (i) judicially determined (the determination having become final) to have arisen from Rothschilds gross negligence, fraud, willful misconduct, breach of fiduciary duty, if any, bad faith or self-dealing; (ii) for a contractual dispute in which the Debtors allege the breach of Rothschilds contractual obligations, unless the Court determines that indemnification, contribution or reimbursement would be permissible pursuant to In re United Artists Theatre Co., 315 F.3d 217 (3d Cir. 2003); or (iii) settled prior to a judicial determination as to the exclusions set forth in clauses (i) and (ii) above, but determined by this Court, after notice and a hearing, to be a claim or expense for which Rothschild should not receive indemnity, contribution or reimbursement under the terms of the Engagement Letter as modified by this Order; and 5 (c) If, before the earlier of (i) the entry of an order confirming a chapter 11 plan in these cases (that order having become a final order no longer subject to appeal) and (ii) the entry of an order closing these chapter 11 cases, Rothschild believes that it is entitled to the payment of any amounts by the Debtors on account of the Debtors indemnification, contribution and/or reimbursement obligations under the Engagement Letter (as modified by this Order), including, without limitation, the advancement of defense costs, Rothschild must file an application therefor in this Court, and the Debtors may not pay any such amounts to Rothschild before the entry of an order by this Court approving the payment. This subparagraph (c) is intended only to specify the period of time under which the Court shall have jurisdiction over any request for fees and expenses by Rothschild for indemnification, contribution or reimbursement, and not a provision limiting the duration of the Debtors obligation to indemnify Rothschild. All parties in interest shall retain the right to object to any demand by Rothschild for indemnification, contribution or reimbursement. 12. Exhibit A of the Engagement Letter is modified (i) by deleting the last sentence from the first paragraph, (ii) by deleting the last two sentences of the fourth paragraph and (iii) by deleting the following clause from the fourth paragraph: provided that, in no event shall the aggregate contribution of all such Indemnified Parties exceed the amount of fees received by Rothschild under this Agreement. 13. The Debtors are authorized to take all actions necessary to effectuate the relief granted pursuant to this Order. 14. The terms and conditions of this Order shall be immediately effective and enforceable upon its entry, notwithstanding the possible applicability of Bankruptcy Rule 6004, 7062 or 9014. 15. The relief granted herein shall be binding upon any chapter 11 trustee appointed in these chapter 11 cases, or upon any chapter 7 trustee appointed in the event of a subsequent conversion of these chapter 11 cases to cases under chapter 7. 16. To the extent that this Order is inconsistent with the Engagement Letter, the terms of this Order shall govern. 6 17. The Court shall (i) retain jurisdiction to hear and determine all matters arising from or related to the implementation of this Order and (ii) have exclusive jurisdiction, during the pendency of these chapter 11 cases, to hear and determine all matters arising from or related to the implementation of this Order. Dated: _____________, 2012 Wilmington, Delaware THE HONORABLE CHRISTOPHER S. SONTCHI UNITED STATES BANKRUPTCY JUDGE Exhibit G to Rothschilds Response: Comparison of Revised Proposed Form of Order IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ALLIED SYSTEMS HOLDINGS, INC., et al., 1 Debtors. Chapter 11 Case No. 12-11564 (CSS) (Jointly Administered) ORDER PURSUANT TO 11 U.S.C. 327 AND 328, FED. R. BANKR. P. 2014 AND 2016 AND DEL. BANKR. L.R. 2014-1 AND 2016-1 FOR AN ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF ROTHSCHILD INC. AS FINANCIAL ADVISOR AND INVESTMENT BANKER FOR THE DEBTORS NUNC PRO TUNC TO THE PETITION DATE This matter coming before the Court on the Debtors Application Pursuant to 11 U.S.C. 327 and 328, Fed. R. Bankr. P. 2014 and 2016 and Del. Bankr. L.R. 2014-1 and 2016-1 for an Order Authorizing the Retention and Employment of Rothschild (the Application) 2 filed by the above-captioned debtors (the Debtors); the Court having reviewed the Application, the Snyder Declaration and having considered the statements of counsel and the evidence adduced with respect to the Application at a hearing before the Court (the Hearing); the Court having found 1 The Debtors in these cases, along with the federal tax identification number (or Canadian business number where applicable) for each of the Debtors, are: Allied Systems Holdings, Inc. (58-0360550); Allied Automotive Group, Inc. (58-2201081); Allied Freight Broker LLC (59-2876864); Allied Systems (Canada) Company (90-0169283); Allied Systems, Ltd. (L.P.) (58-1710028); Axis Areta, LLC (45-5215545); Axis Canada Company (87568828); Axis Group, Inc. (58-2204628); Commercial Carriers, Inc. (38-0436930); CT Services, Inc. (38-2918187); Cordin Transport LLC (38-1985795); F.J. Boutell Driveaway LLC (38-0365100); GACS Incorporated (58-1944786); Logistic Systems, LLC (45-4241751); Logistic Technology, LLC (45-4242057); QAT, Inc. (59-2876863); RMX LLC (31-0961359); Transport Support LLC (38-2349563); and Terminal Services LLC (91-0847582). The location of the Debtors corporate headquarters and the Debtors address for service of process is 2302 Parklake Drive, Bldg. 15, Ste. 600, Atlanta, Georgia 30345. 2 Initially capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Application. 23699198v13 that (i) the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334, (ii) venue is proper in this district pursuant to 28 U.S.C. 1409, (iii) this is a core proceeding pursuant to 28 U.S.C. 157(b), (iv) the terms and conditions of Rothschilds employment, including but not limited to the Fee and Expense Structure set forth in the Engagement Letter and summarized herein, are reasonable as required by section 328(a) of the Bankruptcy Code and (v) notice of the Application and the Hearing was sufficient under the circumstances; after due deliberation, the Court having determined that the relief requested in the Application is necessary and essential for the Debtors reorganization and such relief is in the best interests of the Debtors, their estates and their creditors; and good and sufficient cause having been shown, it is HEREBY ORDERED THAT: The Application is GRANTED as set forth herein, nunc pro tunc to the Petition 1. Date. The Debtors are authorized, pursuant to sections 327 and 328(a) of the Bankruptcy 2. Code, Bankruptcy Rule 2014, and Local Rule 2014-1, to employ and retain Rothschild as their financial advisor and investment banker in accordance with the terms and conditions set forth in the Engagement Letter, effective nunc pro tunc to the Petition Date, and to pay fees and reimburse expenses to Rothschild on the terms and times specified in the Engagement Letter. The terms of the Engagement Letter, attached hereto as Exhibit 1, are approved in 3. all respects except as limited or modified herein. The last sentence of Section 4(c) of the Engagement Letter shall be amended by 4. adding the words or affiliates of any of the foregoing to the end thereof. 2 23699198v13 4. All of Rothschilds compensation set forth in the Engagement Letter, including, 5. without limitation, the Fee and Expense Structure set forth in the Engagement Letter, is approved pursuant to section 328(a) of the Bankruptcy Code and Rothschild shall be compensated and reimbursed pursuant to section 328(a) of the Bankruptcy Code in accordance with the terms of the Engagement Letter, subject to the procedures set forth in the Bankruptcy Code, the Bankruptcy Rules, the Local Rules and any other applicable orders of this Court. Notwithstanding anything to the contrary contained herein, Rothschild shall be 6. paid, during the pendency of these chapter 11 cases, only upon appropriate application in accordance with the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and any interim compensation procedures order entered in these chapter 11 cases. 5. None of the fees payable to Rothschild shall constitute a bonus or fee 7. enhancement under applicable law. 6. Notwithstanding anything to the contrary herein, the United States Trustee 8. retains all rights to object to Rothschilds interim and final fee applications (including expense reimbursement and any request for counsel fees) based on the reasonableness standard in section 330 of the Bankruptcy Code, not section 328(a) of the Bankruptcy Code, provided, however, that reasonableness shall be evaluated by comparing (among other things) the fees payable in these chapter 11 cases to fees paid to comparable investment banking firms with similar experience and reputation offering comparable services in other chapter 11 cases and shall not be evaluated primarily on an hourly or lengthofcase criterion. 7. Rothschild shall include in its fee applications, among other things, time records 9. setting forth, in a summary format, a description of the services rendered by each professional, 3 23699198v13 and the amount of time spent on each date by each such individual in rendering services on behalf of the Debtors in half-hour increments, but Rothschild shall be excused from keeping time in tenth-hour increments. 8. Rothschild is granted a waiver of the information requirements relating to compensation requests set forth in Local Rule 2016-2(d) to the extent requested in the Application. 9. Rothschild shall file fee applications for interim and final allowance of 10. compensation and reimbursement of expenses pursuant to the procedures set forth in sections 330 and 331 of the Bankruptcy Code; provided, however, the fee applications filed by Rothschild shall be subject to review only pursuant to the standard of review set forth in section 328 of the Bankruptcy Code and not subject to the standard of review set forth in section 330 of the Bankruptcy Code, except as otherwise expressly set forth herein. 10. The Debtors shall be bound by the indemnification, contribution, 11. reimbursement, exculpation and other provisions of the Engagement Letter and will indemnify and hold harmless Rothschild and the other Indemnified Parties, pursuant to the Engagement Letter, subject, during the pendency of these chapter 11 cases, to the following: Rothschild shall not be entitled to indemnification, contribution or (a) reimbursement pursuant to the Engagement Letter for services, unless such services and the indemnification, contribution or reimbursement therefor are approved by the Court; The Debtors shall have no obligation to indemnify Rothschild, or provide (b) contribution or reimbursement to Rothschild, for any claim or expense that is either: (i) judicially determined (the determination having become final) to have arisen from Rothschilds gross negligence, fraud, willful misconduct, breach of fiduciary duty, if any, bad faith or self-dealing; (ii) for a contractual dispute in which the Debtors allege the breach of Rothschilds contractual 4 23699198v13 obligations, unless the Court determines that indemnification, contribution or reimbursement would be permissible pursuant to In re United Artists Theatre Co., 315 F.3d 217 (3d Cir. 2003); or (iii) settled prior to a judicial determination as to the exclusions set forth in clauses (i) and (ii) above, but determined by this Court, after notice and a hearing, to be a claim or expense for which Rothschild should not receive indemnity, contribution or reimbursement under the terms of the Engagement Letter as modified by this Order; and If, before the earlier of (i) the entry of an order confirming a chapter 11 plan in (c) these cases (that order having become a final order no longer subject to appeal) and (ii) the entry of an order closing these chapter 11 cases, Rothschild believes that it is entitled to the payment of any amounts by the Debtors on account of the Debtors indemnification, contribution and/or reimbursement obligations under the Engagement Letter (as modified by this Order), including, without limitation, the advancement of defense costs, Rothschild must file an application therefor in this Court, and the Debtors may not pay any such amounts to Rothschild before the entry of an order by this Court approving the payment. This subparagraph (c) is intended only to specify the period of time under which the Court shall have jurisdiction over any request for fees and expenses by Rothschild for indemnification, contribution or reimbursement, and not a provision limiting the duration of the Debtors obligation to indemnify Rothschild. All parties in interest shall retain the right to object to any demand by Rothschild for indemnification, contribution or reimbursement. 11. Exhibit A of the Engagement Letter is modified (i) by deleting the last sentence 12. from the first paragraph, (ii) by deleting the last two sentences of the fourth paragraph and (iii) by deleting the following clause from the fourth paragraph: provided that, in no event shall the aggregate contribution of all such Indemnified Parties exceed the amount of fees received by Rothschild under this Agreement. 12. The Debtors are authorized to take all actions necessary to effectuate the relief 13. granted pursuant to this Order. 5 23699198v13 13. The terms and conditions of this Order shall be immediately effective and 14. enforceable upon its entry, notwithstanding the possible applicability of Bankruptcy Rule 6004, 7062 or 9014. 14. The relief granted herein shall be binding upon any chapter 11 trustee appointed 15. in these chapter 11 cases, or upon any chapter 7 trustee appointed in the event of a subsequent conversion of these chapter 11 cases to cases under chapter 7. 15. To the extent that this Order is inconsistent with the Engagement Letter, the 16. terms of this Order shall govern. 16. The Court shall (i) retain jurisdiction to hear and determine all matters arising 17. from or related to the implementation of this Order and (ii) have exclusive jurisdiction, during the pendency of these chapter 11 cases, to hear and determine all matters arising from or related to the implementation of this Order. Dated: June _____________, 2012 Wilmington, Delaware THE HONORABLE CHRISTOPHER S. SONTCHI UNITED STATES BANKRUPTCY JUDGE 6 23699198v13 7289385 v1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re:
ALLIED SYSTEMS HOLDINGS, INC., et al. 1 ,
Debtors.
: : : : : : Chapter 11
Case No. 12-11564 (CSS) Jointly Administered
CERTIFICATE OF SERVICE
I, Raymond H. Lemisch, Esquire, hereby certify that on August 23, 2012, true and correct copies of the foregoing document were served on all parties registered to receive service on the electronic notification list as maintained by the Court, and via Regular Mail to the following: Mark D. Collins, Esquire Christopher M. Samis, Esquire Andrew C. Irgens, Esquire Marisa A. Terranova, Esquire RICHARDS, LAYTON & FINGER, P.A. One Rodney Square 920 North King Street Wilmington, DE 19801
Jeffrey W. Kelley, Esquire Ezra H. Cohen, Esquire Carolyn P. Richter, Esquire Matthew R. Brooks, Esquire Benjamin R. Carlsen, Esquire TROUTMAN SANDERS LLP 600 Peachtree Street, Suite 5200 Bank of America Plaza 600 Peachtree Street, Suite 5200 Atlanta, GA 30308-2216
William D. Sullivan, Esquire William A. Hazeltine, Esquire SULLIVAN HAZELTINE ALLINSON LLC 901 N. Market St., Suite 1300 Wilmington, DE 19801
Michael G. Burke, Esquire Brian J. Lohan, Esquire Dennis Kao, Esquire SIDLEY AUSTIN LLP 787 Seventh Avenue New York, NY 10019
1 The Debtors in these cases, along with the federal tax identification number (or Canadian business number where applicable) for each of the Debtors, are: Allied Systems Holdings, Inc. (58-0360550); Allied Automotive Group, Inc. (58- 2201081); Allied Freight Broker LLC (59-2876864); Allied Systems (Canada) Company (90-0169283); Allied Systems, Ltd. (L.P.) (58-1710028); Axis Areta, LLC (45-5215545); Axis Canada Company (87568828); Axis Group, Inc. (58- 2204628); Commercial Carriers, Inc. (38-0436930); CT Services, Inc. (38-2918187); Cordin Transport LLC (38-1985795); F.J. Boutell Driveaway LLC (38-0356100); GACS Incorporated (58-1944786); Logistic Systems, LLC (45-4241751); Logistic Technology, LLC (45-4242057); QAT, Inc. (59-2876863); RMX LLC (31-0961359); Transport Support LLC (38- 2349563); and Terminal Services LLC (91-0847582). The location of the Debtors corporate headquarters and the Debtors address for service of process is 2302 Parklake Drive, Bldg. 15, Ste. 600, Atlanta, Georgia 30345. 2 7289385 v1
Matthew A. Clemente, Esquire SIDLEY AUSTIN LLP One South Dearborn Street Chicago, IL 60603
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Dated: August 23, 2012 BENESCH, FRIEDLANDER, COPLAN & ARONOFF LLP By: /s/ Raymond H. Lemisch Raymond H. Lemisch, Esquire (No. 4204) Jennifer E. Smith, Esquire (No. 5278) 222 Delaware Ave., Suite 801 Wilmington, DE 19801 302-442-7010 (telephone) 302-442-7012 (facsimile) rlemisch@beneschlaw.com jsmith@beneschlaw.com - and - Richard F. Hahn, Esquire (admitted pro hac vice) Wendy B. Reilly, Esquire (admitted pro hac vice) Derek P. Alexander, Esquire (admitted pro hac vice) DEBEVOISE & PLIMPTON LLP 919 Third Avenue New York, NY 10022 212-909-6235 (telephone) 212-521-7292 (facsimile) rfhahn@debevoise.com wbreilly@debevoise.com dalexand@debevoise.com Attorneys for Rothschild Inc.