Attorneys for Debtors UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK. : In re: : : FLAG TELECOM HOLDINGS LIMITED, Chapter 11

Transcription

1 GIBSON, DUNN & CRUTCHER LLP Conor D. Reilly (CR-6559) M. Natasha Labovitz (MNL-5153) Craig A. Bruens (CB-2349) 200 Park Avenue New York, New York Telephone (212) Facsimile (212) Presentment Date and Time June 10, 2002, at 1200 noon Attorneys for Debtors UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re FLAG TELECOM HOLDINGS LIMITED, FLAG LIMITED, FLAG ATLANTIC LIMITED, FLAG ATLANTIC HOLDINGS LIMITED, FLAG PACIFIC USA LIMITED, FLAG TELECOM GROUP SERVICES LIMITED, FLAG TELECOM LIMITED, FLAG TELECOM USA LTD., FLAG ASIA LIMITED, and FLAG ATLANTIC USA LIMITED, Debtors x Chapter 11 Case Nos through and through (ALG) (Jointly Administered) NOTICE OF PRESENTMENT OF MOTION OF DEBTORS FOR ADMINISTRATIVE ORDER, UNDER 11 U.S.C. 105(a) AND 331, ESTABLISHING PROCEDURES FOR MONTHLY COMPENSATION AND REIMBURSEMENT OF EXPENSES OF PROFESSIONALS PLEASE TAKE NOTICE that upon the annexed motion of FLAG Telecom Holdings Limited and its direct and indirect subsidiaries listed above, as debtors and debtors in possession, the undersigned will present the attached proposed order to the Honorable Allan L. Gropper, United States Bankruptcy Judge, for signature on June 10, 2002, at 1200 noon. PLEASE TAKE FURTHER NOTICE that objections, if any, to the proposed order must be made in writing and received in the Bankruptcy Judge's chambers and by the

2 undersigned not later than 1130 a.m. on June 10, Unless objections are received by that time, the order may be signed. Dated June 4, 2002 New York, NY GIBSON, DUNN & CRUTCHER LLP By /s/ Conor D. Reilly Conor D. Reilly (CR-6559) M. Natasha Labovitz (MNL-5153) Paul H. Guillotte (PG-7642) 200 Park Avenue New York, New York (212) Attorneys for Debtors To The parties listed on the attached Notice List 2

3 NOTICE LIST (i) the Office of the United States Trustee for the Southern District of New York; (ii) counsel to the official committee of unsecured creditors; (iii) counsel for FLAG Atlantic Limited's prepetition bank lenders; (iv) counsel for FLAG Telecom Holdings Limited's prepetition ad hoc noteholders committee; (v) counsel to the Joint Provisional Liquidators; (vi) all persons or entities that have served and filed notices of appearance in these chapter 11 cases pursuant to Rule 2002 of the Federal Rules of Bankruptcy Procedure; and (vii) each of the professionals already retained in these chapter 11 cases. NY_ _1.DOC

4 GIBSON, DUNN & CRUTCHER LLP HEARING DATE Conor D. Reilly (CR-6559) TBD, if necessary M. Natasha Labovitz (MNL-5153) Craig A. Bruens (CB-2349) OBJECTION DEADLINE 200 Park Avenue JUNE, 2002, AT 1130 A.M. New York, New York Telephone (212) Facsimile (212) Attorneys for Debtors UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re FLAG TELECOM HOLDINGS LIMITED, FLAG LIMITED, FLAG ATLANTIC LIMITED, FLAG ATLANTIC HOLDINGS LIMITED, FLAG PACIFIC USA LIMITED, FLAG TELECOM GROUP SERVICES LIMITED, FLAG TELECOM LIMITED, FLAG TELECOM USA LTD., FLAG ASIA LIMITED, and FLAG ATLANTIC USA LIMITED, Debtors x Chapter 11 Case Nos through and through (ALG) (Jointly Administered) MOTION OF DEBTORS FOR ADMINISTRATIVE ORDER, UNDER 11 U.S.C. 105(a) AND 331, ESTABLISHING PROCEDURES FOR MONTHLY COMPENSATION AND REIMBURSEMENT OF EXPENSES OF PROFESSIONALS FLAG Telecom Holdings Limited ("FTHL"), and its affiliated debtors and debtors in possession (collectively, the "Debtors") hereby request an order pursuant to sections 105(a) and 331 of title 11 of the United States Code (the "Bankruptcy Code") for the entry of an administrative order (the "Order") establishing procedures for monthly compensation and

5 reimbursement of expenses of professionals. In support of this Motion, the Debtors respectfully submit Jurisdiction and Venue 1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(A) and (O). Venue of these cases is proper in this Court pursuant to 28 U.S.C and The statutory basis for the relief requested herein is sections 105(a) and 331 of the Bankruptcy Code. Background 2. On April 12, 2002, FTHL, FLAG Limited, FLAG Pacific USA Limited, FLAG Atlantic Holdings Limited and FLAG Atlantic Limited filed voluntary petitions for relief under the Bankruptcy Code. On April 23, 2002, FLAG Telecom Group Services Limited, FLAG Telecom Limited, FLAG Telecom USA Ltd., FLAG Asia Limited and FLAG Atlantic USA Limited filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. 3. Pursuant to sections 1107(a) and 1108 of the Bankruptcy Code, the Debtors are authorized to operate their business and manage their properties as debtors in possession. Pursuant to the Federal Rules of Bankruptcy Procedure, all of the Debtors' chapter 11 cases are being jointly administered. 4. Four of the Debtors that are incorporated in Bermuda, FTHL, FLAG Limited, FLAG Atlantic Limited and FLAG Asia Limited, have commenced coordinated proceedings in the Supreme Court of Bermuda, and certain principals of KPMG International have been appointed as Joint Provisional Liquidators (the "JPLs") in those cases. The Supreme Court of Bermuda has directed the JPLs to oversee the continuation of FLAG Telecom under the control 2

6 of its Board of Directors and under the supervision of the Supreme Court of Bermuda and this Court in effecting a plan of reorganization under the Bankruptcy Code. 5. The Debtors are part of a multinational corporate organization ("FLAG" or "FLAG Telecom") made up of more than 50 corporate entities. FLAG Telecom operates a global telecommunications network comprised of advanced fiber-optic global cable systems and interfaces that are owned, leased or otherwise available to FLAG. Over the FLAG Telecom global network, FLAG offers a panoply of telecommunications services, including IP transit, IP point-to-point, leased capacity services, managed bandwidth services, and colocation services. FLAG views itself as "a global carrier's carrier" in other words, its target customer base is the international wholesale broadband market consisting of established carriers or major incumbents, rather than retail telecommunications consumers. 6. FLAG Telecom's owned undersea cable is divided into three distinct projects the FLAG Europe-Asia Network ("FEA"), the FLAG Atlantic-1 Network ("FA-1") and the FLAG North Asian Loop Network ("FNAL"). The FEA cable, which was placed into commercial service in November, 1997, stretches from the United Kingdom to Japan with landing sites in thirteen countries. FA-1, which was the world's first multi-terabit transoceanic dual cable system providing service between London, Paris and New York, was placed into commercial service in the third quarter of FNAL is designed to support the strong growth in inter-asia Internet traffic and, when complete, would provide inter-regional, city-to-city connectivity between Hong Kong, Seoul, Tokyo and Taipei. Currently, only the eastern portion of FNAL, from Hong Kong to Japan, is complete and in operation. The remaining portion of the loop is substantially complete, and FLAG Telecom hopes to complete it and begin operations during

7 7. In addition to its owned undersea cable projects, FLAG Telecom offers over-land transit services to its customers in the form of metro rings in New York, London and Paris and a terrestrial network in Europe. To complete its global network, FLAG Telecom has acquired rights to terrestrial backbone capacity between New York and San Francisco and trans-pacific undersea capacity, and provides services to inland locations using backhaul rights acquired from other carriers. In addition to the raw transport of data, FLAG Telecom offers its customers value-added telecommunications services such as co-location, managed bandwidth and point-topoint IP services. 8. FLAG Telecom's services are offered, in varying scope and combinations, in more than 30 points of presence ("POPs") or virtual points of presence ("VPOPs") located in more than 15 countries and spanning four continents. FLAG Telecom employs 345 people in more than 23 offices world-wide. At March 31, 2002, FLAG Telecom's unaudited consolidated assets were $3,335,017,000, and its unaudited consolidated liabilities were $2,598,040, The filing of these chapter 11 cases results from a dramatic change in the economic climate generally, and an even more dramatic shift in the environment for telecommunications companies. This shift has imposed severe financial challenges on the telecommunications industry in general and, in particular, FLAG's competitors, customers and potential customers, and, due to dramatically lower capital expenditure budgets, FLAG itself. Overcapacity for bandwidth in some regions and lower than anticipated demand have led to dramatic declines in bandwidth prices, the unavailability of new capital, and chapter 11 filings by companies in virtually every sector of the telecommunications industry. 10. In light of the current economic climate, FLAG Telecom has focused its business strategy to preserve capital and reduce costs, by serving the core backbone needs of large 4

8 telecom and Internet companies, focusing on regions where FLAG has a competitive advantage, and increasing the revenue generating capacity of the FLAG Telecom global network by expanding the number and scope of bundled services available to its customers. Along with this new business plan, the Debtors began negotiations with their principal creditors to restructure their bank, bond and trade debt. 11. In connection with these negotiations, the Debtors concluded that the commencement of these chapter 11 cases was in the best interests of all stakeholders because it would be difficult, outside of reorganization proceedings, to effect the contemplated restructuring. The Debtors continue to believe that FLAG Telecom's core businesses, taken as a whole, are viable, and believe that continued operation of activated networks, completion and lighting of additional near-term revenue producing segments, and continued development of FLAG Telecom's servicing abilities are each capable of producing significant future revenue streams. Meanwhile, the Debtors believe that the current unsettled telecommunications market is not a favorable environment for liquidation. Consequently, the Debtors believe that reorganization of their core businesses will generate substantially more value than other business options. Relief Requested 12. The Debtors have filed applications to retain (a) Gibson, Dunn & Crutcher LLP as counsel on a general retainer, (b) The Blackstone Group L.P. as financial advisors and restructuring consultants, (c) Appleby, Spurling & Kempe as general Bermuda counsel, (d) Friedman, Wang & Bleiberg, P.C. as special litigation counsel, and (e) Poorman-Douglas Corporation as notice and claims agent. The Debtors intend to file applications to retain (a) Innisfree M&A Incorporated as balloting agent, (b) Arthur Andersen as accountants and auditors, 5

9 and (c) Elizabeth Gloster Q.C. as special Bermuda counsel. The Debtors anticipate that, as these cases progress, they may need to retain other professionals in connection with their reorganization efforts. 13. In addition, an official committee of unsecured creditors (the "Creditors' Committee") has been appointed in these cases by the United States Trustee. It is anticipated that the Creditors' Committee will seek to retain professionals to assist it in fulfilling its obligations in these cases. For the purpose of this Motion, the Debtors will refer to all professionals retained by the Debtors and the Creditors' Committee, other than professionals whose retention is approved pursuant to this Court's Order Employing Professionals Utilized in the Ordinary Course of Business, as the "Professionals." 14. By this Motion, the Debtors request the entry of an administrative order authorizing and establishing procedures for the compensation and reimbursement of Professionals on a monthly basis, comparable to those established in other large chapter 11 cases in this Court, see, e.g., In re Teligent, Inc., Case No (Bankr. S.D.N.Y. 2001); In re The Singer Company N.V., Case No (Bankr. S.D.N.Y. 1999); In re Livent (U.S.), Inc., Case No (Bankr. S.D.N.Y. 1998); In re Factory Card Outlet Corp., Case No (Bankr. S.D.N.Y. 1999), and in a manner consistent with this Court's General Order No. M-219 establishing procedures for interim compensation of professionals. Such an order will streamline the professional compensation process and enable this Court and all other parties to monitor the professional fees incurred in these chapter 11 cases more effectively. 15. Specifically, the Debtors propose that, except as otherwise provided in an order of the Court authorizing the retention of a particular professional, Professionals be permitted to seek 6

10 monthly payment of compensation and reimbursement of expenses in accordance with the following procedures (collectively, the "Compensation Procedures") (a) (b) (c) On or before the twentieth (20th) day of each month following the month for which compensation is sought, each Professional will serve a monthly statement, by hand or overnight delivery, on (i) FLAG Telecom Holdings Limited, 9 South Street, London W1K2XA, United Kingdom (Attn Kees van Ophem), (ii) Gibson, Dunn & Crutcher, LLP, 200 Park Avenue, New York, New York, (Attn Conor D. Reilly, Esq.), (iii) the Office of the United States Trustee for the Southern District of New York, 33 Whitehall Street, 21st floor, New York, New York (Attn Tracy Hope Davis, Esq.), (iv) Akin Gump Strauss Hauer & Feld LLP, counsel for the Creditors' Committee, 590 Madison Avenue, New York, NY (Attn Michael S. Stamer, Esq.), and (v) Milbank, Tweed, Hadley & McCloy, LLP, attorneys for the Joint Provisional Liquidators appointed by the Supreme Court of Bermuda in respect of certain of the Debtors herein, One Chase Manhattan Plaza, New York, NY (Attn Susheel Kirpalani, Esq.) (collectively, the "Notice Parties"); 1 The monthly statement need not be filed with the Court and a courtesy copy need not be delivered to chambers because this Order is not intended to alter the fee application requirements outlined in Bankruptcy Code sections 330 and 331 and because Professionals are still required to serve and file interim and final applications for approval of fees and expenses in accordance with the relevant provisions of the Bankruptcy Code, the Federal Rules of the Bankruptcy Procedure and the Local Rules of this Court; Each monthly fee statement must contain a list of the individuals and their respective titles (e.g., attorney, accountant, or paralegal) who provided services during the statement period, their respective billing rates, the aggregate hours spent by each individual, a reasonably detailed breakdown of the disbursements incurred (no professional should seek reimbursement of an expense which would otherwise not be allowed pursuant to the Court's Administrative Orders dated June 24, 1991 and April 21, 1995 or the United States Trustee Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed under 11 U.S.C. 330 dated January 30, 1996), and contemporaneously maintained time entries for each individual in increments of tenths (1/10) of an hour; 1 The Debtors also request that this Court authorize that each Professional, in its first request for compensation and reimbursement of expenses, may include a request for compensation for work performed and reimbursement of expenses incurred during the period beginning on the date of such Professional's retention and ending May 31,

11 (d) (e) (f) (g) (h) (i) (j) (k) Each person receiving a statement will have fifteen (15) days after its receipt to review it and, in the event that he or she has an objection to the compensation or reimbursement sought in a particular statement, he or she shall, by no later than the thirty-fifth (35th) day following the month for which compensation is sought, serve upon the Professional whose statement is objected to, and the other persons designated to receive statements in paragraph (a), a written "Notice of Objection to Fee Statement", setting forth the nature of the objection and the amount of fees of expenses at issue; At the expiration of the thirty-five (35) day period, the Debtors shall promptly pay eighty percent (80%) of the fees and one hundred percent (100%) of the expenses identified in each monthly statement to which no objection has been served in accordance with paragraph (d); If the Debtors receive an objection to a particular statement, they shall withhold payment of that portion of the fee statement to which the objection is directed and promptly pay the remainder of the fees and disbursements in the percentages set forth in paragraph (e); Similarly, if the parties to an objection are able to resolve their dispute following the service of Notice of Objection to Fee Statement and if the party whose statement was objected to serves on all persons designated to receive statements in paragraph (a) a statement indicating that the objection is withdrawn and describing in detail the terms of the resolution, then the Debtors shall promptly pay, in accordance with paragraph (e), that portion of the fee statement which is no longer subject to an objection; All objections that are not resolved by the parties, shall be preserved and presented to the Court at the next interim or final fee application hearing to be held by the Court (see paragraph (j) below); The service of an objection in accordance with paragraph (d) shall not prejudice the objecting party's right to object to any fee application made to the Court in accordance with the Bankruptcy Code on any ground whether raised in the objection or not. Furthermore, the decision by any party not to object to a fee statement shall not be a waiver of any kind or prejudice that party's right to object to any fee application subsequently made to the Court in accordance with the Bankruptcy Code; Approximately every 120 days, but no more than every 150 days, each of the Professionals shall serve and file with the Court an application for interim or final Court approval and allowance, pursuant to sections 330 and 331 of the Bankruptcy Code (as the case may be), of the compensation and reimbursement of expenses requested; Any Professional who fails to file an application seeking approval of compensation and expenses previously paid under this Order when due shall (1) 8

12 be ineligible to receive further monthly payments of fees or expenses as provided herein until further order of this Court and (2) may be required to disgorge any fees paid since retention or the last fee application, whichever is later; (l) (m) (n) The pendency of an application, or a Court order that payment of compensation or reimbursement of expenses was improper as to a particular statement, shall not disqualify a Professional from the future payment of compensation or reimbursement of expenses as set forth above, unless otherwise ordered by the Court; Neither the payment of, nor the failure to pay, in whole or in part, monthly compensation and reimbursement as provided herein, shall have any effect on the Court's interim and final allowance of compensation and reimbursement of any Professional; and Counsel for the Creditors' Committee may, in accordance with the foregoing procedure for monthly compensation and reimbursement of Professionals, collect and submit statements of expenses, with supporting vouchers, from members of the Creditors' Committee; provided, however, that such committee counsel ensures that these reimbursement requests comply with this Court's Administrative Orders dated June 24, 1991 and April 21, The Debtors further request that the Court limit notice of hearings to consider fee applications filed pursuant to paragraph 15(h) to the Persons designated to receive statements in paragraph 15(a) and all parties who have filed a notice of appearance with the Clerk of the Court and requested such notice. Such notice should reach the parties most active in these cases and will save the expense of undue duplication and mailing. 17. To further protect the interests of all parties in interest, the Debtors request that the Court also order that any party may object to requests for payment made pursuant to this order on the grounds that (i) the Debtors have not timely filed monthly operating reports or remained current with their administrative expenses and 28 U.S.C fees, or (ii) a manifest exigency exists by seeking a further order of this Court; and that, unless the Court enters an order in response to any such objection terminating or modifying the order, the order shall continue and shall remain in effect during the pendency of these cases. 9

13 18. The Debtors will include all payments to Professionals on their monthly operating reports, detailed so as to state the amount paid to each of the Professionals. Argument 19. Bankruptcy Code section 105(a) allows this Court to "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code]." 11 U.S.C. 105(a). 20. Bankruptcy Code section 331 provides that A trustee, an examiner, a debtor's attorney, or any professional person employed under section 327 or 1103 of this title may apply to the court not more than once every 120 days after an order for relief in a case under this title, or more often if the court permits, for such compensation for services rendered before the date of such an application or reimbursement for expenses incurred before such date as is provided under section 330 of this title. After notice and a hearing, the court may allow and disburse to such applicant such compensation or reimbursement. 11 U.S.C Absent an order of this Court, section 331 limits Professionals rendering services in these chapter 11 cases to payment of fees and expenses only three times per year. 21. The Compensation Procedures are comparable to the procedures established in other large chapter 11 cases in this Court. The Debtors' chapter 11 cases are large, involving ten (10) separate, but jointly administered, entities with approximately $3.3 billion in total assets, as of unaudited financial statements at March 31, It should be noted that the Compensation Procedures allow each Professional to receive only eighty percent of its requested fees if no Notice Party has objected. Thus, any fee request that subsequently may be reduced or denied should be recoverable by the Debtors' estates. Furthermore, the Compensation Procedures, when considered by the Court, will have been subject to notice to parties in interest and an opportunity for a hearing prior to their approval. 10

14 22. The Compensation Procedures requested in this Motion will substantially reduce the burden that would otherwise be imposed on this Court by a monthly review of fee applications, enable parties in interest to monitor more closely the costs of administration, and diminish undue financial burdens on the Professionals. 23. The relief requested herein is without prejudice to any party in interest objecting to the allocation of fees and expenses among the Debtors. Notice 24. No trustee or examiner has been appointed in these chapter 11 cases. Notice of this motion will be given to (i) the Office of the United States Trustee for the Southern District of New York, (ii) counsel to the Creditors' Committee; (iii) counsel for FLAG Atlantic Limited's prepetition bank lenders, (iv) counsel for FTHL's prepetition ad hoc noteholders committee, (v) the JPLs in the Bermuda proceedings, (vi) all persons or entities that have served and filed notices of appearance in these chapter 11 cases pursuant to Rule 2002 of the Federal Rules of Bankruptcy Procedure, and (vii) each of the Professionals already retained in these chapter 11 cases. The Debtors submit that the notice provided is appropriate and that no other notice need be given. No Prior Request 25. No prior application for the relief requested herein has been made by the Debtors to this Court or any other court. Waiver of Memorandum of Law 26. The Debtors request that this Court waive and dispense with the requirement set forth in rule (b) of the Local Rules that any motion or other request for relief be 11

15 accompanied by a memorandum of law. No novel issue of law is raised by this motion, and the authorities relied upon by the Debtors are cited herein. Accordingly, the Debtors submit that a waiver of the requirement is appropriate in these circumstances. WHEREFORE, for all of the reasons set forth herein, the Debtors respectfully request (i) entry of an order, substantially in the form annexed hereto, granting the relief requested herein and establishing procedures for monthly compensation and reimbursement of expenses of professionals, and (ii) that this Court grant such other relief as is just and proper. Dated June 4, 2002 New York, New York GIBSON, DUNN & CRUTCHER LLP By /s/ Conor D. Reilly Conor D. Reilly (CR-6559) M. Natasha Labovitz (MNL-5153) Craig A. Bruens (CB-2349) 200 Park Avenue New York, New York (212) Attorneys for Debtors 12

16 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re FLAG TELECOM HOLDINGS LIMITED, FLAG LIMITED, FLAG ATLANTIC LIMITED, FLAG ATLANTIC HOLDINGS LIMITED, FLAG PACIFIC USA LIMITED, FLAG TELECOM GROUP SERVICES LIMITED, FLAG TELECOM LIMITED, FLAG TELECOM USA LTD., FLAG ASIA LIMITED, and FLAG ATLANTIC USA LIMITED, Debtors x Chapter 11 Case Nos through and through (ALG) (Jointly Administered) ORDER PURSUANT TO 11 U.S.C. 105(a) AND 331, ESTABLISHING PROCEDURES FOR MONTHLY COMPENSATION AND REIMBURSEMENT OF EXPENSES OF PROFESSIONALS Upon the Motion of the Debtors for an order pursuant to sections 105(a) and 331 of the Bankruptcy Code, establishing procedures for monthly compensation and reimbursement of expenses of professionals retained by order of this Court (the "Motion"), 1 filed by FLAG Telecom Holdings Limited and the other above-referenced debtors, as debtors and debtors in possession (the "Debtors"); and it appearing that the Court has jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 157 and 1334; and this Court having determined that the relief requested in the Motion is in the best interests of the Debtors, their estates and their creditors; and it appearing that due and proper notice of the Motion has 1 Capitalized terms not otherwise defined in this Order have the meanings ascribed in the Motion.

17 been given as described in the Motion; and that no other or further notice is necessary; and upon the record of the hearing herein; and upon the representation of the Debtors that this estate is administratively solvent; and after due deliberation thereon; and good and sufficient cause appearing therefor, it is hereby ORDERED, that except as may otherwise be provided in Court orders authorizing the retention of specific professionals, all professionals in these cases may seek monthly compensation in accordance with the following procedure (a) (b) (c) On or before the twentieth (20th) day of each month following the month for which compensation is sought, each professional seeking compensation under this Order will serve a monthly statement, by hand or overnight delivery, on (i) FLAG Telecom Holdings Limited, 9 South Street, London W1K2XA, United Kingdom (Attn Kees van Ophem), (ii) Gibson, Dunn & Crutcher, LLP, 200 Park Avenue, New York, New York, (Attn Conor D. Reilly, Esq.), (iii) the Office of the United States Trustee for the Southern District of New York, 33 Whitehall Street, 21st floor, New York, New York (Attn Tracy Hope Davis, Esq.), (iv) Akin Gump Strauss Hauer & Feld LLP, counsel for the Creditors' Committee, 590 Madison Avenue, New York, NY (Attn Michael S. Stamer, Esq.), and (v) Milbank, Tweed, Hadley & McCloy, LLP, attorneys for the Joint Provisional Liquidators appointed by the Supreme Court of Bermuda in respect of certain of the Debtors herein, One Chase Manhattan Plaza, New York, NY (Attn Susheel Kirpalani, Esq.) (collectively, the "Notice Parties"); The monthly statement need not be filed with the Court and a courtesy copy need not be delivered to chambers since this Order is not intended to alter the fee application requirements outlined in Bankruptcy Code sections 330 and 331 and since professionals are still required to serve and file interim and final applications for approval of fees and expenses in accordance with the relevant provisions of the Bankruptcy Code, the Federal Rules of the Bankruptcy Procedure and the Local Rules of this Court; Each monthly fee statement must contain a list of the individuals and their respective titles (e.g., attorney, accountant, or paralegal) who provided services during the statement period, their respective billing rates, the aggregate hours spent by each individual, a reasonably detailed breakdown of the disbursements incurred (no professional should seek reimbursement of an expense which would otherwise not be allowed pursuant to the Court's Administrative Orders dated June 24, 1991 and April 21, 1995 or the United States Trustee Guidelines for Reviewing Applications for Compensation and Reimbursement of Expenses Filed 2

18 under 11 U.S.C. 330 dated January 30, 1996), and contemporaneously maintained time entries for each individual in increments of tenths (1/10) of an hour; (d) (e) (f) (g) (h) (i) (j) Each person receiving a statement will have fifteen (15) days after its receipt to review it and, in the event that he or she has an objection to the compensation or reimbursement sought in a particular statement, he or she shall, by no later than the thirty-fifth (35th) day following the month for which compensation is sought, serve upon the professional whose statement is objected to, and the other persons designated to receive statements in paragraph (a), a written "Notice of Objection to Fee Statement", setting forth the nature of the objection and the amount of fees of expenses at issue; At the expiration of the thirty-five (35) day period, the Debtors shall promptly pay eighty percent (80%) of the fees and one hundred percent (100%) of the expenses identified in each monthly statement to which no objection has been served in accordance with paragraph (d); If the Debtors receive an objection to a particular statement, they shall withhold payment of that portion of the fee statement to which the objection is directed and promptly pay the remainder of the fees and disbursements in the percentages set forth in paragraph (e); Similarly, if the parties to an objection are able to resolve their dispute following the service of Notice of Objection to Fee Statement and if the party whose statement was objected to serves on all persons designated to receive statements in paragraph (a) a statement indicating that the objection is withdrawn and describing in detail the terms of the resolution, then the Debtors shall promptly pay, in accordance with paragraph (e), that portion of the fee statement which is no longer subject to an objection; All objections that are not resolved by the parties, shall be preserved and presented to the Court at the next interim or final fee application hearing to be held by the Court (see paragraph (j) below); The service of an objection in accordance with paragraph (d) shall not prejudice the objecting party's right to object to any fee application made to the Court in accordance with the Bankruptcy Code on any ground whether raised in the objection or not. Furthermore, the decision by any party not to object to a fee statement shall not be a waiver of any kind or prejudice that party's right to object to any fee application subsequently made to the Court in accordance with the Bankruptcy Code; Approximately every 120 days, but no more than every 150 days, each of the professionals shall serve and file with the Court an application for interim or final Court approval and allowance, pursuant to sections 330 and 331 of the 3

19 Bankruptcy Code (as the case may be), of the compensation and reimbursement of expenses requested; (k) (l) (m) (n) Any professional who fails to file an application seeking approval of compensation and expenses previously paid under this Order when due shall (1) be ineligible to receive further monthly payments of fees or expenses as provided herein until further order of this Court and (2) may be required to disgorge any fees paid since retention or the last fee application, whichever is later; The pendency of an application, or a Court order that payment of compensation or reimbursement of expenses was improper as to a particular statement, shall not disqualify a professional from the future payment of compensation or reimbursement of expenses as set forth above, unless otherwise ordered by the Court; Neither the payment of, nor the failure to pay, in whole or in part, monthly compensation and reimbursement as provided herein, shall have any effect on the Court's interim and final allowance of compensation and reimbursement of any professional; and Counsel for the Creditors' Committee may, in accordance with the foregoing procedure for monthly compensation and reimbursement of professionals, collect and submit statements of expenses, with supporting vouchers, from members of the Creditors' Committee; provided, however, that such committee counsel ensures that these reimbursement requests comply with this Court's Administrative Orders dated June 24, 1991 and April 21, and it is further ORDERED, that each professional may seek, in its first request for compensation and reimbursement of expenses pursuant to this order, compensation for work performed and reimbursement of expenses incurred during the period beginning on the date of the professional's retention and ending on May 31, 2002; and it is further ORDERED, that the Debtors shall include all payments to professionals on their monthly operating reports, detailed so as to state the amount paid to each of the professionals; and it is further ORDERED, that any party may object to requests for payment made pursuant to this Order on the grounds that the Debtors have not timely filed monthly operating reports or 4

20 remained current with their administrative expenses and 28 U.S.C fees, or a manifest exigency exists by seeking a further order of this Court, otherwise, this Order shall continue and shall remain in effect during the pendency of these cases; and it is further ORDERED, that all time periods referenced in this Order shall be calculated in accordance with Bankruptcy Rule 9006(a); and it is further; and it is further ORDERED, that this interim order is without prejudice to any party in interest objecting to the allocation of fees and expenses permitted hereunder among the Debtors; and it is further ORDERED, that any and all other and further notice of the relief requested in the Motion shall be, and hereby is, dispensed with and waived; provided, however, that the Debtors must serve a copy of this Order on all entities specified in subparagraph (a) of the first decretal paragraph hereof. Dated New York, New York, 2002 NY_ _5.DOC ALLAN L. GROPPER UNITED STATES BANKRUPTCY JUDGE 5