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Since the early 1990s, key employment-retention plans (KERPs) have been commonplace in Chapter 11 bankruptcy cases. These plans, which often provide hefty compensation to induce managers to remain with the struggling company, historically have been approved under �363 and �105 of the U.S. Bankruptcy Code. In the absence of a statute directing a specific standard for review of KERPs, courts applied the general �363 standard and looked to whether a sound business purpose justified the plan, and/or whether the debtor properly exercised its business judgment. See, e.g., In re Montgomery Ward Holding Corp., 242 B.R. 147 (D. Del. 1999). Various courts have approved KERPs when they were fair and reasonable under the circumstances. See In re Georgetown Steel Co., 306 B.R. 549, 555-56 (Bankr. D.S.C. 2004) (collecting cases).

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