PWP’s proposed labor-related services include the following:
(a) Familiarize itself with the business, operations, properties, financial condition and prospects of the Debtors;
(b) Undertake a financial review the Debtors’ labor agreements, costs and negotiations;
(c) Undertake a financial review of the Debtors’ pension and other post-retirement plans;
(d) Analyze strategic alternatives available to the Debtors regarding resolution of pension-related claims and issues in the United States;
(e) Advise the Debtors on tactics and strategies for negotiating with various stakeholders and pension regulators on pension-related issues;
(f) Assist in the development of financial data and presentations to the Debtors’ Board of Directors, various creditors, and other parties with respect to labor-related considerations;
(g) Represent or assist the Debtors in negotiations with third parties with respect to any of the foregoing;
(h) Advise the Debtors on its negotiations with the Pension Benefit Guaranty Corporation in its review of the Debtors’ potential disposition of AMR Eagle Holding Corporation (“Eagle”); and
(i) Provide other labor-related advisory services as may be agreed upon by PWP and the Debtors.
In exchange for its services, the Debtors will compensate PWP in accordance with the terms of the engagement letter, which provides a compensation structure (the “Fee Structure”) in relevant part as follows:
(a) Monthly Fees: Eagle will pay PWP a monthly advisory fee equal to $225,000 per month (the “Monthly Fee”).
(b) Restructuring Fee: The Debtors will pay PWP a restructuring fee in the amount of $6,500,000 (the “Restructuring Fee”), payable on the occurrence of (i) confirmation of a plan of reorganization or liquidation of the Debtors, (ii) a conversion to a liquidation under chapter 7 of the Bankruptcy Code, or (iii) the closing of a sale of substantially all of the Debtors’ assets under section 363 of the Bankruptcy Code; provided, however, that the amount of the Restructuring Fee will be reduced by 50 percent of the Monthly Fees previously paid to PWP by the Debtors.
(c) Expenses: The Debtors will reimburse PWP for expenses reasonably incurred in connection with and directly related to the provision of PWP’s services as described in the engagement letter (including, but not limited to, professional and legal fees, charges and disbursements). Such expenses may include, but are not limited to, travel and hotel expenses, printing costs, data processing and communication charges, research expenses, and courier and postage service.
PWP intends to file interim and final fee applications with the Court for the allowance of compensation for services rendered and reimbursement of expenses.
The engagement letter also provides for certain indemnification provisions. In short, the Debtors will indemnify and hold harmless PWP (including its affiliates) and the officers, directors, partners, members, employees, consultants and agents and each other person, if any, controlling PWP or any of its affiliates (collectively, the “Indemnified Parties”) against liabilities arising out of or in connection with the engagement letter, except for any liabilities finally judicially determined by a court of competent jurisdiction to have resulted primarily resulted from the gross negligence or willful misconduct of any of PWP or the other Indemnified Parties. In addition, if any court holds that the indemnification or reimbursement obligations are unavailable (other than circumstances where a court determines that liability is primarily from the gross negligence or willful misconduct of the indemnified party), the engagement letter allocates contribution obligations based on the relative benefits and faults of PWP and the Debtors, subject to a limitation on PWP’s aggregate liability in the amount of its fees received under the engagement letter.
According to the engagement letter, the Debtors or PWP may terminate PWP’s engagement with or without cause at any time upon thirty (30) days written notice. In the event the Debtors terminate PWP’s engagement, PWP will remain entitled to full payment of any fees if any Restructuring occurs within two years following such termination or expiration.
In the six months before the petition date, pursuant to a separate engagement letter, the Debtors paid PWP $142,500.00 in advisory fees. As of the petition date, PWP does not hold a prepetition claim against the Debtors for services rendered.
The hearing on the application is scheduled for January 27, 2012 at 10:00 a.m. (Eastern). Objections are due by January 20, 2012 at 4:00 p.m. (Eastern).
Lowenstein Sandler PC
Sharon Levine, Esq.
S. Jason Teele, Esq.
Nicole Stefanelli, Esq.