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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
ARROW AIR, INC. AND
ARROW AIR HOLDINGS CORP.1
Case number 10-28831-AJC
Case number 10-28834-AJC
(Jointly Administered under
Case number 10-28831-AJC)
DEBTORS’ EXPEDITED APPLICATION FOR ORDER
PURSUANT TO 11 U.S.C. §§ 327(a) AND 330 AND FED.
R. BANKR. P. 2014(a) AUTHORIZING EMPLOYMENT AND
RETENTION OF SEABURY ADVISORS, LLC AS FINANCIAL ADVISORS
FOR DEBTORS IN POSSESSION NUNC PRO TUNC TO THE PETITION DATE
(EXPEDITED HEARING REQUESTED FOR JULY 22, 2010 AT 10:30 A.M.2)
Arrow Air, Inc. (“Arrow”) and Arrow Air Holdings Corp. (“Holdings”) (collectively, the
“Debtors”), apply to the Court for the entry of an order authorizing them to retain and employ
Seabury Advisors, LLC (“Seabury”) as their financial advisor in these chapter 11 cases Nunc Pro
Tunc to the Petition Date, pursuant to sections 327(a) and 330 of the Bankruptcy Code
2014 of the Federal Rules of Bankruptcy Procedure
(the “Bankruptcy Rules”) and pursuant to the
terms of the Amended Seabury Engagement Agreement for Providing Restructuring &
Investment Banking Services (the “Engagement Letter”) and Indemnification Agreement (the
“Indemnification Agreement”) dated June 30, 2010 (collectively, the “Seabury Agreement”),3 a
The last four digits of the taxpayer identification number for Arrow Air, Inc. is 9045 and Arrow Air
Holdings Corp. is 0895. The Debtors’ address is 1701 NW 63rd Avenue, Building 712, Miami, FL 33126.
The Court is hearing other matters in the Debtors’ cases on July 22, 2010 at 10:30 a.m. The Debtors
request that the Court also hear this Application on July 22, 2010 so that the Debtors may resolve this
matter quickly and administer their estates efficiently.
Unless otherwise defined, capitalized terms used herein have the meanings ascribed to them in the Seabury
Agreement. Any references to or summaries of the Seabury Agreement herein are qualified by the express
terms of the Seabury Agreement, which shall govern if there is any conflict.
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copy of which is attached hereto as Exhibit A. In support of this Application, the Debtors rely
on the Affidavit of Doug Yakola in Support of First Day Pleadings.
This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. §§ 157
and 1334. This matter is a core proceeding under 28 U.S.C. § 157(b)(2). Venue is proper in this
District under 28 U.S.C. §§ 1408 and 1409.
The Debtors ceased scheduled service on June 29, 2010. After cessation of
scheduled service, the Debtors terminated all of their employees, except for 132 employees
whom the Debtors retained to help wind down their businesses. The Debtors filed for relief
under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) on June 30, 2010
(the “Petition Date”). The Debtors continue to manage their property and assets as debtors-in-
possession under 11 U.S.C. §§ 1107(a) and 1108.
A full description of the Debtors’ business operations, corporate structure, and
reasons for commencing these bankruptcy cases is contained in the Affidavit of Doug Yakola in
Support of First Day Pleadings, which was filed on the Petition Date. The Affidavit was filed on
the Petition Date, and is incorporated herein by reference. Additional facts supporting the relief
requested in this Application are included below and in the Declaration of Michael B. Cox,
Senior Managing Director at Seabury (the “Cox Declaration”), which is attached hereto as
III. Relief Requested
By this application (the “Application”), the Debtors seek entry of an order
pursuant to Bankruptcy Code
sections 327(a) and 330 and Bankruptcy Rules 2014(a) and 2016,
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authorizing the employment and retention of Seabury as financial advisors for the Debtors, for
the purpose of providing financial advisory services during these chapter 11 cases, all in
accordance with the terms of the Seabury Agreement.
Seabury has one of
investment banking, restructuring, and
management consulting practices in the world dedicated to the transportation sector, with its
principal focus on the aviation and aerospace industries. Seabury has extensive experience
working with financially troubled companies in complex financial restructurings both out-of-
court and during chapter 11 cases. Seabury served as advisors with respect to financial
restructurings, new capital raisings, aircraft advisory services and/or other advisory assignments
to some of the world’s largest and most sophisticated airlines, including Air Canada, Northwest
Airlines, Avianca, Continental Airlines, Gemini Air Cargo, and US Airways Group, among
The Debtors seek to retain Seabury as their financial advisors because, among
other things, Seabury and its senior professionals have an excellent reputation for providing high
quality financial advisory services to airlines in bankruptcy. Additionally, as a result of the
prepetition services provided to the Debtors, Seabury has developed knowledge of the Debtors’
financial and business operations.
Prepetition, the Debtors originally retained Seabury as financial advisor on April
15, 2010. During this prepetition period, Seabury developed knowledge of the Debtors’ financial
and business operations and worked with the Debtors on numerous matters, including:
(a) Meeting with the Debtors’ management team on numerous occasions and
conducting due diligence to better understand the Debtors’ business,
operations, assets, debt structure, properties, financial condition and
Assisting the Debtors to develop and evaluate potential restructuring
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alternatives for the Debtors, including meetings with a variety of potential
(c) Advising and meeting with management with respect to various financial
Assisting the Debtors in evaluating their businesses, assets and operations;
(e) Meeting with the other professionals retained by the Debtors in connection
with the restructuring process.
As a result of representing the Debtors on such matters, Seabury has acquired
extensive knowledge of the Debtors and their businesses and is uniquely familiar with the
Debtors’ financial affairs, debt structure, operations and related matters. In providing prepetition
services to the Debtors in connection with these matters, Seabury’s professionals have worked
closely with the Debtors’ management and other professionals. Seabury played an integral role
prepetition in assisting the Debtors in preparing for the commencement of these cases.
Accordingly, Seabury has developed significant relevant experience and expertise regarding the
Debtors that will assist it in providing effective and efficient services in these cases. Should the
Court approve the Debtors’ retention of Seabury as financial advisors, Seabury will continue,
without interruption, to perform the services for the Debtors as described herein.
Seabury will provide certain financial advisory services with respect to
developing and implementing programs, negotiations and/or transactions to liquidate certain
assets and obligations of the Debtors. Seabury’s resources, capabilities and experience in
advising financially distressed airlines will be crucial to the Debtors’ winding down their
businesses in an effective and efficient manner. The experienced financial advisors and
consultants at Seabury will fulfill a critical service that complements the services provided by the
Debtors’ other bankruptcy professionals. For these reasons, the Debtors require the advisory and
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consulting services of Seabury.
Because of the various creditor constituencies as well as the Debtors’ financial
condition, the Debtors determined the need to hire a capable financial advisory firm to assist in
the bankruptcy cases. Prior to retaining Seabury, the Debtors’ senior management considered
proposals from other financial advisory firms. The Debtors evaluated each firm on a number of
criteria, including: the overall bankruptcy experience of each firm and their professionals; the
overall financial advisory capabilities of such firm; the firm’s experience in advising similar
companies in chapter 11; the likely attention of the senior personnel of the firm; and the
compensation to be charged. After due consideration of the above and as an exercise of their
business judgment, the Debtors concluded that Seabury was best qualified to provide financial
advisory services to the Debtors at a reasonable level of compensation. The terms of Seabury’s
retention were negotiated in good faith and on an arms-length basis in light of, among other
things, proposals by other prospective financial advisors.
If this Application is approved, Seabury will provide such financial advisory
services (the “Financial Advisory Services”), as described in greater detail in the Engagement
Letter, as Seabury and the Debtors shall deem appropriate and feasible in order to advise the
Debtors in the course of the chapter 11 cases, including, but not limited to, the following:4
Assist in the evaluation of the Debtors’ businesses and prospects;
Evaluate and respond as needed regarding the sale process and related
capital raising efforts to date;
Evaluate and/or prepare liquidation analyses;
Assist the Debtors in liquidation efforts, as needed;
4 Any description of the Seabury Agreement herein is a summary. To the extent that this Application and the terms
of the Seabury Agreement are inconsistent, the terms of the Seabury Agreement shall control. Capitalized terms
used in this Application without definition shall have the meanings assigned to them in the Seabury Agreement.
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Assist in the development of the Debtors’ long-term business plans (if
any) and related financial projections;
Assist in the development of financial data and presentations to the
Debtors’ Boards of Directors, various creditors, lenders, lessors and other
Analyze the Debtors’ financial liquidity and evaluate alternatives to
improve such liquidity;
Analyze various restructuring scenarios on the value of the Debtors and
the recovery of those stakeholders impacted by the restructuring;
Provide strategic advice with respect to restructuring or refinancing the
Participate in negotiations among the Debtors, their creditors, suppliers,
lenders, lessors and other interested parties;
Provide court testimony as required relating to all aspects of the Debtors’
restructuring plans, business plan and expert witness testimony as needed;
If requested by the Debtors, assist the Debtors in developing various
strategies and options for negotiating with their pilot union;
Provide additional consulting services as requested by the Debtors from
time to time.
The Financial Advisory Services set forth in the Engagement Letter and
summarized above do not encompass other financial advisory services or transactions that may
be undertaken by Seabury at the request of the Debtors not set forth in the Engagement Letter.
The terms and conditions of any such financial advisory services, including compensation
arrangements, would be set forth in a separate written agreement between the Debtors and
Seabury and would be subject to any necessary Court approval.
The Debtors submit that Seabury is well qualified and able to provide the
Financial Advisory Services. Seabury has indicated a willingness to act on behalf of the
Debtors, on the terms described above and subject itself to the jurisdiction of the Court. The
Debtors have been advised by Seabury that it will endeavor to coordinate with the other retained
professionals in these bankruptcy cases to eliminate unnecessary duplication or overlap of work.
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Disinterestedness of Professionals
In connection with this retention, Seabury obtained from counsel to the Debtors
the names of individuals and entities, including the Debtors’ top 20 unsecured creditors, equity
security holders and secured creditors, which may be parties-in-interest in these chapter 11 cases
(collectively, the “Potential Parties-in-Interest”), and Seabury researched its “active deal list”
that lists all of the active engagements that Seabury currently represents, and questioned its
partners, to ascertain its relationships with the Potential Parties-in-Interest.
To the best of the Debtors’ knowledge, information and belief, neither Seabury
nor any principal of Seabury has any connection with the Debtors or any Potential Party-in-
Interest or the Office of the United States Trustee in the matters for which Seabury is proposed to
be retained except as disclosed in the Cox Declaration.
Prior to the Petition Date and since their retention on April 15, 2010, Seabury
performed certain professional services for the Debtors. Seabury received payments prior to the
Petition Date totaling $362,500 for fees and $26,314.82 for expenses representing payment in
full for prepetition services. Seabury also received a prepetition retainer in the amount of
$73,685.18 for services to be rendered in connection with these casse (the “Retainer”). Seabury
requests that any allowed interim fees and expenses will be paid pursuant to the terms of any
order entered by the Court authorizing the payment of interim compensation in these cases.
Seabury has not been an underwriter for any offering of any security of the
To the best of the Debtors’ knowledge, Seabury is a “disinterested person,” as
such term is defined in Bankruptcy Code section 101(14) and as required under Bankruptcy
Code section 327(a). The Cox Declaration, executed on behalf of Seabury in accordance with
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Bankruptcy Code section 327(a) and Bankruptcy Rule 2014, is filed contemporaneously
herewith. The Debtors’ knowledge, information, and belief regarding certain of the matters set
forth in this Application are based on, and are made in reliance on, the Cox Declaration.
The Debtors submit that the retention of Seabury on the terms and conditions set
forth herein is in the best interests of the Debtors, their creditors and all parties-in-interest.
Seabury has agreed to represent the Debtors for compensation at the rates agreed
on between the parties pursuant to the Engagement Letter. As more fully described in the
Engagement Letter, in consideration of the Financial Advisory Services provided by Seabury, the
Debtors have agreed to pay Seabury fees based on actual hours worked multiplied by Seabury’s
standard hourly rates. Seabury’s standard hourly rates are as follows:
Chief Executive Officer
Senior Managing Director
Senior Vice President
Seabury will seek compensation and reimbursement of expenses, as specified in
the Engagement Letter. With respect to the out-of-pocket expenses for which Seabury will seek
reimbursement: (i) in connection with the incurrence of out-of-pocket expenses, Seabury will
not make a profit on those out-of-pocket expenses, (ii) in charging for out-of-pocket expenses,
Seabury will not include in the amount for which reimbursement is sought the amortization of
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any investment, equipment or capital outlay (except to the extent that such amortization is
included within the permitted allowable amounts for photocopies and facsimile transmission)
and (iii) in seeking reimbursement for out-of-pocket expenses which Seabury reasonably
incurred (including amounts for travel and lodging, data processing and communication charges,
courier services and other appropriate expenditures purchased or contracted for from a third
party), Seabury will request reimbursement only for the amount billed to Seabury by the third
party vendor and paid by Seabury to such vendor.
The fees described above are at rates and in accordance with practices customarily
employed by Seabury and are generally accepted by Seabury’s clients. The rates described
above are comparable to rates generally charged by financial advisory firms of similar stature to
Seabury and for comparable engagements, both in chapter 11 and out-of-court.
As part of the overall compensation payable to Seabury under the terms of the
Engagement Letter, the Debtors have agreed to certain indemnification obligations as described
in the Indemnification Agreement5. Seabury and the Debtors believe that such provisions are
customary and reasonable for financial advisory and investment banking engagements, both out-
of-court and in chapter 11. See, e.g., In re Comdisco, Inc., No 02-C-1 174 (N.D. Ill. Sept. 23,
2002) (affirming order authorizing indemnification of Lazard Freres & Co. LLC and Rothschild,
Inc. by debtors and official committee of unsecured creditors); In re United Artists Theatre Co.,
No. 00-3514-SLR (Bankr. D. Del. Dec. 1, 2000) (order authorizing the indemnification of
Houlihan Lokey Howard & Zukin Capital by the debtors); In re Joan & David Halpern, Inc.,
248 B.R. 43 (Bankr. S.D.N.Y. 2000), aff’d, 2000 WL 1800690 (S.D.N.Y. Dec. 6, 2000); In re
The Indemnification Agreement provides that the Debtors will indemnify Seabury, except “to the extent
that it is finally judicially determined, or expressly stated in an arbitration award, that such Liabilities
resulted primarily from the willful misconduct or gross negligence (which in all cases hereunder will be
deemed to include any violation of applicable law) of the Indemnified Person seeking indemnification.”
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CTC Communications Group Inc., No. 02-12873 (PJW) (Bankr. D. Del. Nov. 15, 2002) (order
authorizing retention of Miller Buckfire Lewis & Co. on similar terms); In re PC Landing Corp.,
No. 02-12086 (PJW) (Bankr. D. Del. Oct. 10, 2002) (same); In re Metrocall Inc., No. 02-11579
(RB) (Bankr. D. Del. July 8, 2002) (order authorizing retention of Lazard Freres & Co. under
similar terms); In re Kaiser Aluminum Corp., No. 02-10429 (JKF) (Bankr. D. Del. Mar. 19,
2002) (same); In re W.R. Grace & Co., No. 01-01139 (JJF) (Bankr. D. Del. June 22, 2001) (order
authorizing retention of Blackstone Group under similar terms); In re Ameriserve Food
Distribution, Inc., Case No. 00-0358 (PJW) (Bankr. D. Del. May 9, 2000) (order authorizing
retention of Houlihan Lokey Howard & Zukin Capital); In re National Steel Corporation, No.
02-08699 (JHS) (Bankr. N.D. Ill. Mar. 20, 2002); In re Conseco Inc., 02-49672 (CAD) (Bankr.
N.D. Ill. Jan. 14, 2003) (order authorizing retention of Lazard Freres & Co.); In re Oxford
Automotive, Inc., No. 02-41400-R (SWR) (Bankr. D. Mich. Apr. 30, 2002) (same).
As set forth in the Cox Declaration, Seabury has not shared or agreed to share any
of its compensation from the Debtors with any other person, other than a managing director,
professional or employee of Seabury, as permitted by Bankruptcy Code
VII. Fee Applications
During the course of these cases, Seabury will apply to the Court for allowance of
compensation for professional services rendered and reimbursement of expenses incurred in
these chapter 11 cases in accordance with the applicable provisions of the Bankruptcy Code
Bankruptcy Rules, the Local Rules of the United States Bankruptcy Court for this district (the
“Local Bankruptcy Rules”), and any orders entered in these cases governing professional
compensation and reimbursement for services rendered and charges and disbursements incurred.
Seabury’s professionals shall file time records in accordance with the Guidelines
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for Fee Applications for Professionals in the Southern District of Florida in Bankruptcy Cases.
Seabury also will maintain detailed records of any actual and necessary costs and expenses
incurred in connection with the aforementioned services.
Seabury’s applications for
compensation and expenses will be paid by the Debtors, pursuant to the terms of the Engagement
Letter, subject to approval by the Court.
WHEREFORE, the Debtors respectfully request that the Court enter an order (i)
authorizing the Debtors to retain Seabury as their financial advisor pursuant to the terms of the
Engagement Letter, Indemnification Agreement, and 11 U.S.C. §§ 327(a) and 330 and (ii)
granting such other and further relief as is just and proper.
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Dated July 13, 2010.
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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
ARROW AIR, INC. AND
ARROW AIR HOLDINGS CORP.
Case number 10-28831-AJC
Case number 10-28834-AJC
(Jointly Administered under
Case number 10-28831-AJC)
UNSWORN DECLARATION OF MICHAEL B. COX IN SUPPORT OF
DEBTORS’ APPLICATION FOR ORDER AUTHORIZING EMPLOYMENT
AND RETENTION OF SEABURY ADVISORS, LLC AS FINANCIAL ADVISORS
FOR DEBTORS IN POSSESSION
Michael B. Cox states and declares:
I am a Senior Managing Director of the firm Seabury Advisors, LLC (and its
broker-dealer affiliate Seabury Securities LLC) (collectively “Seabury” or the “Firm”), which is
a financial advisory and consultancy firm that maintains offices at 1350 Avenue of the Americas,
25th Floor, New York, New York 10019. I am authorized to execute this declaration on behalf
of Seabury. Unless otherwise stated in this declaration, I have personal knowledge of the facts
set forth herein.1
This declaration is being submitted in connection with the proposed retention of
Seabury as Financial Advisor to Arrow Air, Inc. (“Arrow”) and Arrow Air Holdings Corp.
(“Holdings”) (collectively, the “Debtors”), pursuant to the terms and conditions set forth in the
Seabury Engagement Agreement for Providing Restructuring & Investment Banking Services
dated as of June 30, 2010(the “Engagement Letter”) and the indemnification agreement between
1 Certain of the disclosures herein relate to matters within the knowledge of other professionals at Seabury and are
based on information provided by them.
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Seabury and the Debtors attached to the Engagement Letter (the “Indemnification Agreement”)
(collectively, the “Seabury Agreement”).2
Seabury is recognized for its expertise in providing financial advisory services to
airlines and their shareholders, in financially distressed situations, including advising debtors,
creditors and other constituents in Chapter 11 proceedings and serving as investment bankers in
Based on the results of the conflict search conducted to date and described more
fully below, to the best of my knowledge, neither I, Seabury nor any member or employee
thereof, insofar as I have been able to ascertain, has any connection with the Debtors, their
creditors, other parties-in-interest (as reasonably known to us), their respective attorneys, or the
U.S. Trustee or any person employed in the Office of the U.S. Trustee, expected as disclosed or
otherwise described herein.
To the best of my knowledge, Seabury is a “disinterested person” as the term is
defined in section 101(14) of title 11 of the United States Code (as amended, the “Bankruptcy
Code”), as modified by section 1107(b) of the Bankruptcy Code. Neither Seabury nor its
members or employees:
are creditors, equity security holders or insiders of the Debtors;
are or were, within 2 years before the date of the filing of the petition, a director,
officer or employee of the Debtors; or
have an interest materially adverse to the interest of the estate or any class of
creditors or equity security holders, by reason of any direct or indirect relationship
to, connection with, or interest in, the Debtors, or for any other reason.
2 Unless otherwise stated, capitalized terms used herein shall have the meanings ascribed to them in the Application.
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As part of its diverse practice, Seabury appears in numerous cases, proceedings
and transactions involving attorneys, accountants, investment bankers and financial consultants,
some of which may represent claimants and parties-in-interest in the Debtors’ chapter 11 cases.
Further, Seabury has in the past, and may in the future, be represented by attorneys and law firms
in the legal community, some of whom may be involved in these proceedings. In addition,
Seabury has in the past and will likely in the future be working with or against other
professionals involved in these cases in matters unrelated to these cases. In connection with this
retention, Seabury obtained from counsel to the Debtors the names of individuals and entities,
including the Debtors’ top 20 unsecured creditors, equity security holders and secured creditors,
which may be parties-in-interest in these chapter 11 cases (collectively, the “Potential Parties-in-
Interest”), and Seabury researched its “active deal list” that lists all of the active engagements
that Seabury currently represents, and questioned its partners, to ascertain its relationships with
the Potential Parties-in-Interest. To the best of my knowledge, information and belief, neither
Seabury nor any principal of Seabury has any connection with the Debtors or any Potential
Party-in-Interest or the Office of the United States Trustee in the matters for which Seabury is
proposed to be retained, except as set forth in paragraph 7 below, and, based on our current
knowledge of the professionals involved, and to the best of my knowledge, none of our current
business relations constitute interests materially adverse to the Debtors herein in matters upon
which Seabury is employed.
Seabury has in the past represented, may currently represent, and likely in the
future will represent parties-in-interest of the Debtors in connection with matters unrelated to the
Debtors and their chapter 11 cases (except as described below). This process is conducted by
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Seabury’s compliance department, and in connection therewith, the following specific
disclosures are made:
The Debtors may supply services to and be a creditor of one or more companies
that Seabury is advising. The Debtors may also (i) purchase goods or services
from, (ii) be an obligor to, and/or (iii) have a commercial alliance with one or
more companies that Seabury is advising. Seabury does not believe that any
relationship is related to the Debtors’ chapter 11 cases nor will interfere with or
impair Seabury’s representation of the Debtors in these chapter 11 cases.
Seabury is engaged to provide advisory services to various undisclosed airlines.
Seabury is currently unable to disclose the identity of these clients due to
confidentiality clauses in its engagement letters. These clients may or may not be
direct or indirect competitors of the Debtors. Seabury believes it would adversely
affect the interests of these clients if Seabury were to publicly disclose their
names at this time. Seabury does not believe that its work for these clients will
adversely affect the Debtors. None of the persons involved in this assignment are
involved in the assignments for the aforementioned undisclosed clients.
Seabury has not been retained to assist any entity or person other than the Debtors
on matters relating to, or in connection with, their chapter 11 cases. If this Court approves the
proposed employment of Seabury by the Debtors, Seabury will not accept any engagement or
perform any services for any entity or person other than the Debtors in this situation. Seabury
will, however, continue to provide professional services to entities or persons that may be
creditors of the Debtors or parties in interest in the Debtors’ chapter 11 cases; provided,
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however, that such services do not relate to, or have any direct connection with, the Debtors’
chapter 11 cases.
The Debtors initially retained Seabury on April 15, 2010, and on June 30, 2010
executed an amended and restated engagement letter. Pursuant to this retention, as amended, and
during the prepetition period, the Debtors paid Seabury in full for all prepetition fees and
expenses. Accordingly, Seabury is not a creditor of the Debtors.
Seabury has not shared or agreed to share any of its compensation from the
Debtors with any other person, other than a principal, professional or employee of Seabury, as
permitted by section 504 of the Bankruptcy Code
. The proposed engagement of Seabury is not
prohibited by Fed. R. Bankr. P. 5002.
Based upon the foregoing, I believe Seabury is disinterested as defined in section
101(14) of the Bankruptcy Code
as modified by section 1107(b) of the Bankruptcy Code
represents no interest adverse to the Debtors.
Seabury has provided and agrees to continue to provide assistance to the Debtors
in accordance with the terms and conditions set forth in the Application and the Engagement
Letter, which is annexed to the Application as Exhibit A. Accordingly, I make this declaration
in support of an order authorizing such retention.
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I declare under the penalty of perjury under the laws of the United States, that the
foregoing statements are true and correct.
SEABURY ADVISORS LLC
Michael B. Cox
Senior Managing Director
All parties served with application for employment.
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