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X Incorporated TF Assoc UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x : In re : Chapter 11 : SILICON GRAPHICS, INC., et al., : Case No. 09-11701 (MG) : Debtors. : (Jointly Administered) : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x DECLARATION OF MARK R. SOMERSTEIN MARK R. SOMERSTEIN hereby declares: 1. I am an attorney at law admitted to practice in the States of New York and New Jersey and in the United States District Court for the Southern District of New York. I am a member of the firm of Ropes & Gray LLP (“Ropes & Gray”), which firm maintains offices at 1211 Avenue of the Americas, New York, New York 10036. 2. I am familiar with the matters set forth herein and make this declaration (the “Declaration”) in support of the Application of the Debtors to Retain and Employ Ropes & Gray as Counsel Pursuant to Section 327(a) of the Bankruptcy Code Nunc Pro Tunc to the Petition Date (the “Application”). 3. On the date hereof (the “Petition Date”), Silicon Graphics, Inc. (“Silicon Graphics”) and its affiliated debtors and debtors in possession in the above-captioned cases (collectively, the “Debtors”) each filed a voluntary petition with this Court under chapter 11 of title 11 of the United States Code, 11 U.S.C. § 101, et seq. (the “Bankruptcy Code”). 4. Neither I nor Ropes & Gray are insiders of the Debtors. Neither I nor Ropes & Gray hold directly any claim, debt, or equity security of the Debtors. 5. No member of Ropes & Gray has been, within two years from the date of the filing of the Debtors’ petitions, a director, officer, or an insider of the Debtors as specified in Bankruptcy Code section 101(14)(B). 6. Ropes & Gray does not have an interest materially adverse to the interests of the Debtors’ estates, or of any class of creditors or equity security holders of the Debtors, by reason of any direct or indirect relationship to, connection with, or interest in the Debtors. 7. To the best of my knowledge and information, Ropes & Gray neither holds nor represents any interest adverse to the Debtors in connection with these chapter 11 cases. Based upon the information available to me, I believe that Ropes & Gray is a “disinterested person” within the meaning of Bankruptcy Code section 101(14). 8. In preparing this Declaration, Ropes & Gray performed a review of a list of parties provided by the Debtors to check for potential conflicts, which included: (i) Silicon Graphics and its affiliates and subsidiaries; (ii) current directors and officers of Silicon Graphics for the two years prior to the Petition Date; (iii) the Debtors’ secured lenders; (iv) counterparties to the Debtors’ significant leases/executory contracts; (v) the Debtors’ significant vendors; (vi) the Debtors’ 50 largest unsecured creditors; and (vii) the Debtors’ proposed professionals. A copy of the list of the parties searched by Ropes & Gray is annexed hereto as Schedule 1 (collectively, the “Searched Parties”). 9. Ropes & Gray maintains and systematically updates its conflict check system in the regular course of its business, and it is the regular practice of Ropes & Gray to make and maintain these records. The conflict check system maintained by Ropes & Gray is designed to include every matter on which the firm is now or has been engaged since 1965, by which entity the firm is now or has been engaged on such matter, and, in each instance, to include and record 2 the identity of related parties and adverse parties and the Ropes & Gray attorney that is knowledgeable about the matter. It is Ropes & Gray’s policy that no new matter may be accepted or opened within the firm without completing and submitting to those charged with maintaining the conflict check system the information necessary to check each such matter for conflicts, including the identity of the prospective client, the matter, and related and adverse parties. Accordingly, the database is regularly updated for every new matter undertaken by Ropes & Gray. The completeness and accuracy of the system is a function of the completeness and accuracy of the information submitted by the attorney opening a new matter. Compensation Received by Ropes & Gray from the Debtors 10. Ropes & Gray was first retained by the Debtors in November 2008 to provide legal services in connection with a restructuring, and, on November 20, 2008, Ropes & Gray received a retainer of $500,000. Ropes & Gray’s retainer was later increased to $1 million. 11. The billing and payment information for services rendered by Ropes & Gray pursuant to the Engagement Letter since November 20, 2008 is detailed below: Retainer Period of Invoice/Receipt Billed Amount Cash Received Service Date Balance Forward 11/20/2008 $500,000.00 $500,000.00 10/20/2008 – 11/26/2008 $265,962.96 $234,037.04 11/21/2008 11/14/2008 – 12/08/2008 $64,538.65 $169,498.39 12/05/2008 12/03/2008 – 12/30/2008 $69,632.19 $99,866.20 12/26/2008 01/06/2009 $329,434.11 $429,300.31 12/28/2008 – 01/15/2009 $9,118.65 $420,181.66 01/09/2009 11/20/2008 – 01/26/2009 $24,386.06 $395,795.60 01/23/2009 3 Retainer Period of Invoice/Receipt Billed Amount Cash Received Service Date Balance Forward 01/12/2009 – 02/09/2009 $10,566.08 $385,229.52 02/06/2009 01/28/2009 – 02/23/2009 $26,923.65 $358,305.87 02/20/2009 02/18/2009 – 03/12/2009 $122,838.62 $235,467.25 02/28/2009 03/16/2009 $641,694.13 $877,161.38 02/25/09 – 03/19/2009 $283,456.09 $593,705.29 03/13/09 3/24/2009 $406,294.71 $1,000,000.00 03/04/09 – 03/25/2009 $358,520.49 $406,294.71 $641,479.51 03/24/09 3/26/2009 $358,520.49 $1,000,000.00 3/30/2009 $234,520.32 $1,234,520.32 03/16/09 – 3/30/2009 $434,520.32 $800,000.00 03/29/09 03/26/09 – 3/31/2009 $225,000.00 $575,000.00 03/31/09 12. As of the Petition Date, Ropes & Gray holds a retainer of $575,000.00 and the Debtors do not owe Ropes & Gray any amounts for legal services rendered prior to the Petition Date. Representation of Parties in Interest 13. Set forth in Schedule 2 annexed hereto is a listing of those Searched Parties or their affiliates that Ropes & Gray either (i) currently represents (the “Current Clients”) in matters wholly unrelated to the Debtors’ chapter 11 cases or (ii) has in the past represented in matters wholly unrelated to the Debtors’ chapter 11 cases. In connection with the services to be rendered to the Debtors, Ropes & Gray will not commence a cause of action against any Current Client with respect to the Debtors’ chapter 11 cases unless Ropes & Gray receives a waiver from the Current Client allowing Ropes & Gray to commence such an action and disclosure is first made to the parties in interest and the U.S. Trustee. To the extent such a waiver has not been 4 obtained and any actions are commenced by or against any Current Client, the Debtors will use conflicts counsel. Connections with Parties Representing 1% or More of Ropes & Gray’s Revenues for 2008 14. At the inception of any engagement for which a declaration is required pursuant to Bankruptcy Rule 2014, Ropes & Gray reviews information related to the parties involved in the bankruptcy case to determine whether any such party, together with its known related entities, were clients of Ropes & Gray and made payments to Ropes & Gray on account of such representation in the calendar year prior to the date of review that in the aggregate for each such party exceeds 1% of Ropes & Gray’s total revenues for such calendar year. 15. Ropes & Gray’s revenues for services rendered on behalf of the parties in interest identified in Schedule 2 aggregate, with respect to each such party in interest, less than 1% of Ropes & Gray’s annual revenues for the fiscal year 2008. Other Connections and General Disclosures 16. Ropes & Gray solicited information by firmwide email from its partners, associates, and staff to determine if any person employed by Ropes & Gray holds any of the Debtors’ common equity or securities. This email identified one Ropes & Gray employee, a litigation paralegal manager, who owns 300 shares of Silicon Graphics common stock. To the best of my knowledge and information based on the responses received to the foregoing information request, no other member or employee of Ropes & Gray holds any of the Debtors’ common equity or securities. It is possible that a professionally managed retirement plan on behalf of Ropes & Gray employees or members of a 401(k) type plan may hold equity interests or other securities of the Debtors, but it is unknown to me at this time. If further information in this regard becomes known to me, I will promptly supplement this declaration. 5 17. The conflicts search of the parties in interest listed on Schedule 1 attached hereto reveals that, although certain Ropes & Gray attorneys and paraprofessionals previously worked at other law firms that represented certain potential parties in interest in these chapter 11 cases, to the best of my knowledge and information, such people have not worked on matters relating to the Debtors while at Ropes & Gray. 18. On occasion, Ropes & Gray has referred work to other professionals to be retained in these chapter 11 cases. Likewise, certain professionals to be retained in these chapter 11 cases have referred work to Ropes & Gray.
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