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September 7, 1993

IRWIN MAUTNER, individually and as Trustee u/t/a dated October 25, 1984, WIN-TER MANAGEMENT CO., SHARI and JAY STACK, individually and as Trustees u/t/a dated April 30, 1981, June 28, 1983 and January 30, 1985, JONATHAN N. TANNER, and TANNER & GILBERT P.C. RETIREMENT PLAN TRUST, all of the fore-going individually and on behalf of the shareholders of TRANSPORTATION CAPITAL CORP., Plaintiffs,

The opinion of the court was delivered by: WILLIAM C. CONNER

 Conner, D.J.:

 Irvin Mautner ("Mautner") and several individuals and entities associated with Lester J. Tanner ("Original Plaintiffs") brought this shareholder derivative action to recover for Transportation Capital Corp. ("TCC") and, where applicable, for the shareholders of TCC, damages due to injuries caused by the alleged fraudulent actions, breach of fiduciary duties and waste of defendants Melvin L. Hirsch, Dorothy T. Hirsch and Jonathan H. Hirsch (the "Hirsch defendants") in managing, operating and directing the management of TCC. *fn1" The Original Plaintiffs alleged claims under Sections 10(b) and 13(d) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78m(d), under the Investment company Act of 1940, 15 U.S.C. § 80a-1 et seq., under the Small Business Investment Act of 1958, 15 U.S.C. § 661 et seq., under the Racketeer Influenced and Corrupt organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and under New York Business Corporation Law of 1961 ("BCL") Sections 626 and 706.

 This action is currently before the Court on the application of Lester J. Tanner, John R. Fernbach, and Eisenberg Honig Fogler Dimas & Johnson ("Eisenberg") for an order and judgment directing TCC to pay them legal fees and disbursements in the aggregate amount of $ 667,382. Applicants also seek an additional award of $ 87,907 for time devoted to this application, as well as prejudgment interest on the award of legal fees.


 The factual record relating to the instant application as established in pleadings, affidavits, documents, depositions and testimony given before this Court is far too elaborate to recount here. The Court thus presumes familiarity with the facts presented in previous Opinions relating to this matter, and recites here only the essential facts relevant to this application.

 TCC was formed in 1979 for the purpose of operating as a Minority Enterprise Small Business Investment Company and is licensed under the Small Business Investment Act of 1958. TCC is regulated and financed in part by the United States Small Business Administration ("SBA").

 The events leading to the commencement of suit by Original Plaintiffs were initially triggered by an audit report and subsequent letter of January 3, 1991, issued by the SBA, charging TCC with serious violations of SBA regulations. The violations included findings of excessive compensation and impermissible legal fees paid to Melvin Hirsch and members of his family. At the time of the SBA letter, Melvin Hirsch was Chief Executive Officer, President and a director of TCC. His wife Dorothy Hirsch was Chief Financial Officer, Secretary, Treasurer and a director of TCC. Their son Jonathan Hirsch was Vice-President and a director of TCC. The SBA letter suggested that the violations might be remedied by direct reimbursement or by a reduction in TCC's private capital. *fn2"

 In response to the SBA letter, Irvin Mautner, a director and stockholder of TCC, and Lester Tanner, corporate counsel to TCC, attempted various actions within the corporate structure to address the problems highlighted by the SBA. These efforts, for the most part, were unsuccessful. Rather than reimbursing the excess compensation, Melvin Hirsch unilaterally opted to reduce private capital as suggested by the SBA; TCC's Board of Directors could not muster the majority needed to overturn this position, despite the persistence of Tanner and Mautner in arguing for return of the excess payments. *fn3" While a three-member audit committee was appointed by the Board, *fn4" the committee was apparently denied access to records sought in relation to the Melvin L. Hirsch Special Account (the "Special Account"). *fn5" On June 18, 1991, five of the eight directors voted to adjourn summarily the Board meeting scheduled to receive the audit committee's report; *fn6" at the following meeting on June 26, four directors voted to add all the directors as members of the audit committee, *fn7" thereby eliminating, according to applicants, the "majority of independent directors" on the audit committee. See Ex. GGG; App. Post-Hearing Reply Memo. at 6.

 Applicants claim that, as result of these obstacles, by June 20, 1991, plaintiffs became convinced that only independent action could achieve the relief desired for TCC and maintain that it was on that date that independent counsel was engaged for this purpose. App. Post-Hearing Memo. at 3. On June 20, Tanner invited each TCC director to attend a meeting arranged with the SEC in Washington, D.C. for June 24, 1991, to discuss, among other things, TCC's financial statements and the directors' obligation of disclosure. On that same day, Melvin Hirsch dismissed Tanner as corporate counsel to TCC and counsel to its audit committee *fn8" and, on June 24, 1991, replaced Tanner's firm with Butler, Fitzgerald & Potter ("BFP"). Tr. 11/10/92 at 29.

 On June 26, 1991, Melvin and Dorothy Hirsch resigned as officers of TCC, but remained as directors and shareholders. On July 17, 1991, TCC's Board elected two additional directors, James Jordan and Paul Borden, both representatives of Leucadia, to fill vacancies created in February of that year. *fn9" On July 19, 1991, Original Plaintiffs commenced this action, seeking to recover, on behalf of TCC, funds improperly appropriated by the Hirsches, to remove the Hirsches as directors and Jonathan Hirsch as an officer of TCC, and to invalidate the election of Borden and Jordan. The derivative claims alleged, inter alia, that the Hirsches were liable to TCC because they allegedly received excessive compensation and unauthorized payments from TCC, and caused TCC to make wrongful payments to third parties and to incur losses due to improper loans.

 On July 19, 1991, Original Plaintiffs moved for a preliminary injunction enjoining the Hirsch defendants, Borden and Jordan from acting as directors of TCC, and also enjoining Jonathan Hirsch from acting as an officer of TCC, until trial on the merits. After a two-day hearing held September 3 and 4, 1991, the Court denied Original Plaintiffs' motion for a preliminary injunction in an opinion and order dated November 15, 1991.

 On October 4, 1991, plaintiff Tanner & Gilbert P.C. Retirement Plan Trust ("Tanner Firm Trust") moved for a partial summary judgment. In an opinion and order dated November 22, 1991, the Court denied Tanner Firm Trust's motion for partial summary judgment with one exception: the Court determined that Melvin Hirsch must pay pre-judgment interest at 9% per-annum on his borrowings from the Special Account.

 On or about October 10, 1991, TCC and the Hirsches entered into a written settlement agreement (the "Superseded Settlement Agreement") in which they compromised the derivative claims against the Hirsches. Pursuant to the Superseded Settlement Agreement, the Hirsches agreed to deliver to TCC 333,333 shares of TCC common stock in full settlement of all derivative claims. The Hirsches also agreed to give limited releases to TCC. In addition, it was agreed that Jonathan Hirsch would enter into an ...

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