Objection Deadline: August 5, 2004 at 5:00 pm Hearing Date: August 10, 2004 at 10:00 am

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1 Bonnie Steingart (BS-8004) FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP Attorneys for Och-Ziff One New York Plaza New York, New York (212) Objection Deadline: August 5, 2004 at 5:00 pm Hearing Date: August 10, 2004 at 10:00 am UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re WORLDCOM, INC., et al., Chapter 11 Case No (AJG) Debtors x APPLICATION OF OZ MANAGEMENT, L.L.C. AND OZF MANAGEMENT L.P. FOR REIMBURSEMENT OF CERTAIN FEES AND EXPENSES OF ITS PROFESSIONALS PURSUANT TO BANKRUPTCY CODE 503(b) OZ Management, L.L.C. and OZF Management L.P. (collectively, Och- Ziff ), hereby submit this application (the Application ) pursuant to section 503(b) of title 11 of the United States Code (the Bankruptcy Code ), seeking reimbursement of certain actual, necessary and reasonable fees and expenses of its counsel, Fried, Frank, Harris, Shriver, & Jacobson LLP ( Fried Frank ) and Boies, Schiller & Flexner LLP ( Boies Schiller ), and its financial advisor, Saybrook Capital, LLC ( Saybrook Capital, and together with Fried Frank and Boies Schiller, the Professionals ). In support of the Application, Och-Ziff respectfully states as follows: PRELIMINARY STATEMENT 1. Och-Ziff is entitled to reimbursement of certain fees and expenses it incurred in connection with its objections to the Debtors Disclosure Statement (the

2 Disclosure Statement ) and to confirmation of the Debtors Joint Plan of Reorganization (the Plan ). Specifically, Och-Ziff objected to that aspect of the Disclosure Statement and Plan dealing with the compromise and settlement (the Intermedia Settlement ) pursuant to Bankruptcy Rule 9019 relating to an intercompany note, dated July 1, 2001, from WorldCom to one of its subsidiaries, Intermedia Communications Inc. ( Intermedia ), one of the above captioned Debtors. In particular, Och-Ziff objected to the Intermedia Settlement set forth in the Plan on the grounds that it was unreasonable and it would have deprived the holders (the Preferred Stock Holders ) of shares of the 13.5% series B redeemable exchangeable preferred stock of Intermedia (the Preferred Stock ) of any recovery on account of their Preferred Stock. 2. On April 14, 2003, the Debtors filed their initial plan of reorganization. This plan of reorganization, and all subsequent and revised plans filed by the Debtors up to and including the Second Amended Plan of Reorganization dated September 12, 2003, provided no recovery to the Preferred Stock Holders. Och-Ziff believed, however, that the Preferred Stock Holders were entitled to a substantial recovery based on the value of Intermedia s assets and, therefore, it was Och-Ziff s position that the Plan was not confirmable over Och-Ziff s objection. 3. As a result of Och-Ziff s substantial efforts, Och-Ziff was able to negotiate a settlement that benefited all Preferred Stock Holders, which led to a consensual confirmation of the Plan with respect to Class 14 - Intermedia Preferred Stock. Prior to this settlement, the Plan proposed to give no distribution to the Preferred Stock Holders. However, pursuant to this settlement, the Preferred Stock Holders obtained a recovery of $29 million, approximately five cents ($0.05) a share, when those holders otherwise would have had no recovery. As a result of the settlement of Och-Ziff s objection, Och-Ziff withdrew its objection to the Plan, and thereby removed an impediment to the Debtors emergence from bankruptcy. Och- Ziff s efforts benefited all Preferred Stock Holders. As such, Och-Ziff made a 2

3 substantial contribution to the Debtors estate and is entitled to be reimbursed for the fees it incurred. 4. As set forth herein, Och-Ziff, through Fried Frank, one of its legal advisors, reviewed and analyzed various factual and legal materials, objected to the Plan and Disclosure Statement, actively participated in numerous in-person and telephonic meetings, participated in negotiations, engaged in document and deposition discovery, and began to try its objection to confirmation of the Plan. As also set forth, Boies Schiller, Och-Ziff s other legal advisor, reviewed and analyzed various factual and legal materials, actively participated in numerous in-person and telephonic meetings, participated in negotiations, engaged in discovery, and began to try the objection to confirmation of the Plan. As further set forth, Saybrook Capital reviewed various factual and legal materials, actively participated in numerous in-person and telephonic meetings, and provided analyses with respect to the claims of Preferred Stock Holders. Fried Frank, Boies Schiller and Saybrook Capital coordinated with one another, and did not perform duplicative services. ARGUMENT 5. A creditor or equity security holder that incurs fees and expenses in providing a substantial contribution to a debtor s reorganization is entitled to be paid those fees and expenses by the debtor s bankruptcy estate. By this Application, Och- Ziff seeks the entry of an order pursuant to 11 U.S.C. 503(b)(3) and (4), granting the allowance of the actual, necessary and reasonable fees and expenses incurred by its Professionals as administrative expenses. Specifically, Och-Ziff seeks payment of the fees and expenses of Fried Frank, as counsel to Och-Ziff, in the aggregate amount of $551,974.58, payment of the fees and expenses of Boies Schiller, as counsel to Och- Ziff, in the aggregate amount of $358, and payment of the fees and expenses of Saybrook Capital, as financial advisor to Och-Ziff, in the aggregate amount of 3

4 $77, The aforementioned amounts were incurred by Och-Ziff in connection with efforts resulting in the Plan being modified to provide a 5% recovery to the Preferred Stock Holders. A. Applicable Authority 6. The Bankruptcy Code allows a creditor, whose efforts make a substantial contribution to a bankruptcy case, to apply for administrative priority of fees and expenses incurred for certain professional services: (b) After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under section 502(f) of this title, including U.S.C. 503(b)(3)(D), (b)(4). (3) the actual, necessary expenses, other than compensation and reimbursement specified in paragraph (4) of this subsection, incurred by... (D) a creditor... in making a substantial contribution in a case under chapter 9 or 11 of this title... (4) reasonable compensation for professional services rendered by an attorney or an accountant of an entity whose expense is allowed under paragraph (3) of this subsection, based on the time, the nature, the extent, and the value of such services, and costs of comparable services other than in a case under this title, and reimbursement for actual, necessary expenses incurred by such attorney or accountant 7. Substantial contribution is not specifically defined in the Bankruptcy Code. In attempting to define the term, courts have found that an applicant satisfies the substantial contribution test when it has provided actual and demonstrable benefit to the debtor s estate, its creditors, and to the extent relevant, the debtor s shareholders. In re Best Products Co., Inc., 173 B.R. 862 (Bankr. S.D.N.Y. 1994) (citations omitted); see also In re Lebron, 27 F.3d 937, 944 (3d Cir. 1994) ( [T]he applicable test [to determine whether a party has made a substantial 4

5 contribution entitling him to administrative expense priority pursuant to Section 503(b)(3)(D),] is whether the efforts of the applicant resulted in an actual and demonstrable benefit to the debtor s estate and the creditors.) (citations omitted). 8. In determining whether a party has made a substantial contribution, courts have considered the following factors: (1) whether the services were rendered solely to benefit the client or to benefit all parties in the case; (2) whether the services conferred a direct, significant and demonstrable benefit to the estate; (3) whether the services rendered were duplicative of services rendered by others. In re Hooker Invs., Inc., 188 B.R. 117, (S.D.N.Y. 1995) (citing In re Buckhead America Corp., 161 B.R. 11, 15 (Bankr. D.Del. 1993). 9. Once a party has demonstrated that it has made a substantial contribution to the case, as Och-Ziff has here, the party is entitled to be reimbursed by the bankruptcy estate for the reasonable expenses of the professional services that it incurred in doing so. See In Re Buckhead, 161 B.R. at 15 ( Read in conjunction, [sections 503(b)(3) and (b)(4)] provide for payment as an administrative expense of the reasonable and necessary attorney fees of a creditor whose participation in a chapter 11 reorganization makes a substantial contribution to the case. ). 10. Och-Ziff s fees and expenses for Saybrook Capital should also be reimbursed. The list of examples of administrative expenses in section 503(b) is not an exhaustive list, and therefore the allowance of the fees and expenses of Saybrook Capital as administrative expenses should not be denied. See 4 Lawrence P. King, Collier on Bankruptcy (15th ed. Revised 2003) ( [t]he only professional services mentioned in section 503(b)(4) are those of an attorney or an accountant.... This should not, however, preclude compensation for other professional services, since the administrative expense examples set forth in 503(b) are not exhaustive. ). The 5

6 services performed by Saybrook Capital were essential to the efforts of Och-Ziff and further supported the efforts of Och-Ziff s counsel. Although one court in this district has held that the expenses of financial advisors may not be reimbursed on a substantial contribution basis because section 503(b)(4), by its terms, applies only to attorneys and accountants, see In re Granite Partners, L.P., 213 B.R. 440, 454 (Bankr. S.D.N.Y. 1997), other courts - consistent with a proper statutory interpretation and a proper view toward the policy of the statute - have permitted payment for the services of financial advisors under section 503(b). See In re AM Int l, Inc., 203 B.R. 898 (D.Del. 1996) (reimbursing an unofficial committee of equity holders for the fees and expenses incurred for its financial advisor); In re Trans World Airlines, Inc., 1993 WL (D.Del. June 22, 1993). While section 503(b)(4) only expressly mentions lawyers and accountants, these mentions are just examples, as is evidenced by the use of the term including in the statute. The word including is not limiting under the bankruptcy code, see 11 U.S.C. 102(3), and, therefore, Congress made clear that the list in section 503(b) is not exhaustive. Therefore, Och-Ziff is entitled to reimbursement under section 503(b) for Saybrook Capital s fees and expenses. B. Och-Ziff Made a Substantial Contribution to this Case 11. Och-Ziff in preparing for and participating in negotiations and discovery, reviewing and analyzing the factual and legal materials which formed the basis for the Plan, objecting to the Plan and Disclosure Statement, preparing for the confirmation hearing and, ultimately, negotiating the settlement and recovery to Preferred Stock Holders which led to the consent of the Preferred Stock Holders to confirmation of the Plan more than satisfies the substantial contribution requirement under 11 U.S.C. 503(b)(3) and (b)(4). Therefore Och-Ziff is entitled to reimbursement under section 503(b) of the fees and expenses incurred by the Professionals. 6

7 12. The efforts of Och-Ziff, on its own and through its Professionals, benefited not only, or even primarily, Och-Ziff. Rather, those efforts benefited the entire class of Preferred Stock Holders. Prior to Och-Ziff s involvement in the Debtors bankruptcy case, the Preferred Stock Holders were receiving no distribution under the Debtors plan of reorganization. The significant effort, however, of Och-Ziff and the Professionals resulted in a recovery for all Preferred Stock Holders when they otherwise would not have obtained any recovery on account of their holdings. This recovery to the Preferred Stock Holders did not disadvantage other creditors, as indicated in the Notice of Modifications of the Debtors Second Amended Plan of Reorganization dated September 19, 2003, which states that the distribution to Preferred Stock Holders did not have an adverse effect upon the recovery of any class of creditors under the Second Amended Plan. 13. The efforts of Och-Ziff, the services performed by the Professionals and the resulting settlement in turn benefited the Debtors estate by causing the Plan to be consensual with respect to Class 14 - Intermedia Preferred Stock. The consent of Class 14 removed a significant impediment to confirmation of the Plan. 14. The services rendered by Och-Ziff, through its Professionals, were not duplicative of services rendered by others, as Och-Ziff was the only true representative of the Preferred Stock Holders during the Debtors reorganization process. As such, Och-Ziff performed a necessary function by taking actions that furthered the interests of all Preferred Stock Holders. 15. Fried Frank initiated discussions with the Debtors counsel and financial advisors by letter dated April 29, Subsequent to that letter, Fried Frank arranged and participated in numerous negotiations and discussions with the Debtors, the Official Committee of Unsecured Creditors, and the financial advisors of both groups. Fried Frank examined documents and deposed witnesses in its efforts to obtain 7

8 a reasonable and just recovery for Preferred Stock Holders. Fried Frank also filed and litigated objections to the Disclosure Statement and to confirmation of the Plan. 16. Boies Schiller examined documents and participated in numerous negotiations and discussions with the Debtors and the Official Committee of Unsecured Creditors. Boies Schiller also assisted Fried Frank in the litigation of Och-Ziff s objection to the Debtors plan of reorganization, and examined documents and formulated legal arguments in connection therewith. 17. Saybrook Capital examined documents and performed analyses in preparation for the confirmation hearing, and bolstered the efforts of Fried Frank, Boies Schiller and Och-Ziff in obtaining recovery for the Preferred Stock Holders. The findings of Saybrook Capital resulted in crucial information that enabled Och-Ziff to engage in the negotiations that led to the recovery of value for the Preferred Stock Holders. 18. Without the aforementioned services and settlement, Och-Ziff s objection to confirmation would have continued in open court, and could have resulted in a finding by the Court that the Plan was unconfirmable because the Intermedia Settlement was not reasonable. If the Plan was found to be unconfirmable, a reworking, renegotiation, and resolicitation of the Plan would have been necessary. The resulting costs to creditors and the Debtors bankruptcy estate would have been significant, as would the likely delay in moving the Debtors to confirmation of the Plan. Instead, the efforts of the Professionals resulted in an agreed upon, necessary distribution to the Preferred Stock Holders that enabled the Debtors to proceed with implementation of their Plan. SERVICES FOR WHICH OCH-ZIFF SEEKS COMPENSATION 19. Och-Ziff respectfully submits that the fees and expenses of its Professionals were reasonable and necessary to the role Och-Ziff played in the Debtors 8

9 bankruptcy case. Moreover, the Professionals efforts resulted in the recovery allocated to the entire class of Preferred Stock Holders and this recovery did not result in a detriment to other creditors or to the Debtors, but in fact benefited the Debtors estate as described above. Furthermore, Och-Ziff s efforts were not duplicated with respect to each other or any other parties in the Debtors case, as Och-Ziff sought recovery not just for itself, but for the entire class of Preferred Stock Holders. A. Fried Frank s Reasonable Fees and Expenses 20. During the period from April 2003 through November 2003, Fried Frank provided services for which reasonable compensation would total $492,751.50, and incurred expenses totaling $59,223.08, in connection with its efforts that resulted in the consent of the Preferred Stock Holders to confirmation of the Plan and a recovery to all Preferred Stock Holders. 1 Stephanie Goldstein and Vivek Melwani were the Fried Frank partners in charge of the firm s activities in the representation of Och-Ziff in connection with the Debtors bankruptcy case. At all times, Ms. Goldstein and Mr. Melwani sought to avoid duplication of efforts among themselves and all other Fried Frank professionals, and also sought to avoid duplication of the efforts of Fried Frank with respect to Boies Schiller and Saybrook Capital. The time records of Fried Frank for which reimbursement is being requested are annexed as Exhibit A to this Application. The reasonable compensation requested is based on hourly rates customarily charged for engagements of this size and scope. Set forth below are the names of the Fried Frank attorneys and legal assistants who performed the bulk of the services on this matter, and the current hourly rates that Fried Frank has charged for their services: Stephanie Goldstein (Partner since 2000; $620 Law School Class of 1992) 1 Och-Ziff is not seeking reimbursement for the fees incurred in connection with (a) preparing and pursuing this Application or (b) monitoring the cases from and after November

10 Vivek Melwani (Partner since 2003; $595 Law School Class of 1995) Laura Sulem (Associate; Class of 1999) $430 Jennifer Rodburg (Associate; Class of 2000) $405 Richard Slivinski (Associate; Class of 2001) $385 Talia Poleski (Associate; Class of 2002) $335 Sabine Ahel (Paralegal) $165 Jin Kim (Paralegal) $ Generally, the fees and expenses of Fried Frank for which Och-Ziff seeks reimbursement include the time spent by Fried Frank participating on telephonic conferences with individuals from Och-Ziff, Saybrook Capital, Boies Schiller and the Debtors advisors. Additionally, Och-Ziff seeks reimbursement for the time Fried Frank spent in reviewing materials in preparation for various meetings and conference calls. Moreover, Och-Ziff seeks reimbursement for the fees and expenses Fried Frank incurred in preparation for and while participating in or attending depositions or hearings in the Debtors bankruptcy case and in preparing to try Och-Ziff s objection to the Intermedia Settlement. Likewise, Och-Ziff seeks reimbursement for the fees and expenses Fried Frank incurred in the preparation of letters, objections, and other documents for and on behalf of Och-Ziff. B. Boies Schiller s Reasonable Fees and Expenses 22. During the period from August 2003 through November 2003, Boies Schiller provided services for which reasonable compensation would total $341,486.00, and incurred expenses totaling $16,922.00, in connection with its efforts that resulted in the consent of the Preferred Stock Holders to confirmation of the Plan and a recovery to all Preferred Stock Holders. John E. Tober was the Boies Schiller partner in charge of the firm s activities in the representation of Och-Ziff in connection with the Debtors bankruptcy case. At all times, Mr. Tober sought to avoid duplication of efforts among all Boies Schiller professionals, and also sought to avoid duplication 10

11 of the efforts of Boies Schiller with respect to Fried Frank and Saybrook Capital. The time records of Boies Schiller for which reimbursement is being requested are annexed as Exhibit B to this Application. The reasonable compensation requested is based on hourly rates customarily charged for engagements of this size and scope. Set forth below are the names of the Boise Schiller attorneys who performed the bulk of the services on this matter, and the current hourly rates that Boies Schiller has charged for their services: David Boies (Partner; Class of 1966) $750 John Tober (Partner; Class of 1986) $550 Steven Davis (Partner; Class of 1982) $410 Lawrence Ashe (Partner; Class of 1991) $390 Sean Eskovitz (Associate; Class of 1995) $ Generally, the fees and expenses of Boies Schiller for which Och- Ziff seeks reimbursement include the time spent by Boies Schiller participating on telephonic conferences with individuals from Och-Ziff, Fried Frank, Saybrook Capital, and the Debtors advisors. Additionally, Och-Ziff seeks reimbursement for the time Boies Schiller spent in reviewing materials in preparation for various meetings and conference calls. Moreover, Och-Ziff seeks reimbursement for the fees and expenses Boies Schiller incurred in preparation for and while participating in or attending depositions or hearings in the Debtors bankruptcy case. Likewise, Och-Ziff seeks reimbursement for the fees and expenses Boies Schiller incurred in the preparation of documents for and on behalf of Och-Ziff, and in preparing to try Och-Ziff s objection to the Plan. 11

12 C. Saybrook Capital s Reasonable Fees and Expenses 24. During the period from August 2003 through September 2003, Och- Ziff s financial advisors provided services for which reasonable compensation would total $75,000.00, and incurred expenses totaling $2,895.99, in connection with its efforts that resulted in the consent of the Preferred Stock Holders to confirmation of the Plan and a recovery to all Preferred Stock Holders. The reasonable compensation requested is based on a monthly advisory fee customarily charged for engagements of this size and scope. The invoice of Saybrook Capital is annexed as Exhibit C to this Application. 25. Generally, the fees and expenses of Saybrook Capital for which Och-Ziff seeks reimbursement include the time spent by Saybrook Capital in reviewing and analyzing documents with respect to the Intermedia Settlement and the resulting distribution to Preferred Stock Holders. Additionally, Och-Ziff seeks reimbursement for the fees and expenses Saybrook Capital incurred while preparing for and participating in conference calls with individuals from Och-Ziff, Fried Frank, Boies Schiller and the Debtors advisors. WAIVER OF MEMORANDUM OF LAW 26. Pursuant to Local Bankruptcy Rule (b), Och-Ziff respectfully requests that the Court waive the requirement that Och-Ziff file a memorandum of law in support of this Application, since the Application raises no novel issues of law. NOTICE 27. In accordance with Federal Rule of Bankruptcy Procedure 2002(a)(6) and the First Amended Case Management Order dated December 23, 2002, notice of this Application has been given to the Debtors, the Creditors Committee, the United States Trustee, the Examiner and all parties identified in the First Amended Case 12

13 Management Order or requesting notice in these cases. Och-Ziff submits that no other or further notice is required. CONCLUSION WHEREFORE, Och-Ziff respectfully requests that it be awarded the sum of $988, This amount is comprised of compensation for legal services rendered and expenses incurred by Fried Frank of $551,974.58, compensation for legal services rendered and expenses incurred by Boies Schiller of $358,408.00, and compensation for professional services rendered and expenses incurred by Saybrook Capital of $77, Dated: July 15, 2004 FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP Attorneys for Och-Ziff One New York Plaza New York, NY Telephone: (212) Facsimile: (212) By: /S/ Bonnie Steingart Bonnie Steingart (BS-8004) 13