Case KG Doc 278 Filed 05/14/18 Page 1 of 17 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

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1 Case KG Doc 278 Filed 05/14/18 Page 1 of 17 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) In re: ) Chapter 11 ) VER TECHNOLOGIES HOLDCO LLC, et al., 1 ) Case No (KG) ) Debtors. ) (Jointly Administered) ) ) Re: Docket Nos. 273, 276 DECLARATION OF DOUGLAS J. FRISKE IN SUPPORT OF DEBTORS KEY EMPLOYEE PLANS I, Douglas J. Friske, hereby declare under penalty of perjury pursuant to 28 U.S.C and to the best of my knowledge, information, and belief: 1. I am a Managing Director at Willis Towers Watson PLC ( WTW ). WTW has been engaged by VER Technology HoldCo LLC and certain of its wholly-owned direct and indirect subsidiaries (collectively, the Debtors ) to provide compensation consulting services. I am familiar with the structure of the Debtors prepetition compensation plans as well as the structure of its proposed Key Employee Incentive Program (the KEIP ) and Key Employee Retention Program (the KERP ). Descriptions of the KEIP and KERP (together, Key Employee Plans ) are set forth in the Debtors Motion for Entry of an Order (I) Authorizing and Approving the Debtors Key Employee Incentive Program and (II) Granting Related Relief (the KEIP Motion ) and the Debtors Motion for Entry of an Order (I) Authorizing and Approving the Debtors (A) Key Employee Retention Program for Certain Non-Insider Employees, (B) 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: VER Technologies HoldCo LLC (7239); CPV Europe Investments LLC (2533); FAAST Leasing California, LLC (7857); Full Throttle Films, LLC (0487); Maxwell Bay Holdings LLC (3433); Revolution Display, LLC (6711); VER Finco, LLC (5625); VER Technologies LLC (7501); and VER Technologies MidCo LLC (7482). The location of the Debtors service address is: 757 West California Avenue, Building 4, Glendale, California

2 Case KG Doc 278 Filed 05/14/18 Page 2 of 17 Prepetition Retention Program for Certain Non-Insider Employees, and (C) Prepetition Compensation Program for Certain Non-Insider Employees, and (II) Granting Related Relief (the Non-Insider Compensation Motion ), each filed contemporaneously with this declaration (this Declaration ) Except as otherwise indicated, I have personal knowledge of all facts in this Declaration, based on my review of the Debtors general operations and key financial metrics, my team s and my research into compensation practices for companies of similar size in the general industry as well as those that have recently filed for chapter 11 protection, and information supplied to me by members of the Debtors management team and the Debtors other advisors. For the reasons described below, it is my opinion that the KEIP and KERP are reasonable and generally consistent with market practice for general industry companies of similar size and companies in chapter 11. If called upon to testify, I could and would testify competently to the facts and opinions set forth herein. Background and Qualifications 3. I received my Bachelor s degree in finance from the University of Illinois in After working at Allstate and Chubb Insurance Companies, I returned to school at Northwestern University. I received a Master s degree in Management from Northwestern University s J.L. Kellogg Graduate School of Management in Since that time, I have been employed by WTW or its predecessor firms. 4. WTW is an international professional services firm that offers a wide variety of services to public and private clients, including expert analysis of executive and management compensation. WTW designs and delivers solutions that manage risk, optimize benefits, 2 Capitalized terms used in this Declaration but not defined herein shall have the meanings given to such terms in the KEIP Motion or the Non-Insider Compensation Motion, as applicable. 2

3 Case KG Doc 278 Filed 05/14/18 Page 3 of 17 cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. WTW focuses on four key business segments: corporate risk and broking, human capital and benefits, exchange solutions, and investment, risk, and reinsurance. 5. My responsibilities at WTW have primarily involved consulting to large companies, specifically with regard to executive compensation. I have worked with numerous Fortune 1000 companies, and I have participated in the development and design of hundreds of management and employee incentive plans for companies inside and outside of bankruptcy. I am frequently retained by large companies to advise them on their employee compensation strategies, programs, and pay levels. 6. I am highly experienced in executive, management, and employee compensation matters with more than 27 years of experience in the field. During this time, I have been the lead or supporting employee compensation expert in approximately 50 bankruptcy cases, and have frequently testified as to the reasonableness of a variety of postpetition compensation arrangements. Specifically, I have been involved in the review and design of key employee incentive plans, management incentive plans, and other similar-type plans in the chapter 11 cases of, among others, American Airlines, Breitburn, Bonanza Creek, Calpine, Conexant, Delta Airlines, Energy Future Holdings, EXCO Resources, Frontier Airlines, The Great Atlantic & Pacific Tea Company, Lear, Longview Power, Midstates, Northwest Airlines, Orexigen Therapeutics, RadioShack, Reader s Digest Association, Sabine Oil & Gas, Samson, United Airlines, and Visteon. Willis Towers Watson s Role with the Debtors 7. Prior to the Petition Date, the Debtors retained WTW to provide compensation and consulting services. Upon WTW s retention, my team and I performed the following services: reviewed the structure of the Debtors prepetition incentive programs, paying specific 3

4 Case KG Doc 278 Filed 05/14/18 Page 4 of 17 attention to the plans performance metrics, participating employees, payout frequency, and target payout opportunities; conducted a preliminary review of a straw model KEIP and KERP, including an assessment of how the proposed terms compared to market practice, and proposed potential modifications to the proposed terms; performed a market analysis of proposed KEIP participants total direct compensation with and without the KEIP; and determined the aggregate cost of the Key Employee Plans. For purposes of performing the market analysis, WTW gathered relevant market compensation data, including salary, short-term compensation, and long-term compensation offered by similarly situated companies in the general industry. I have also familiarized myself with the Debtors operational history, financial performance, restructuring process, and various issues regarding the Debtors workforce and existing employee programs. 8. WTW worked with the Debtors and their outside advisors to assess and refine the Key Employee Plans to align with the Debtors restructuring objectives. My staff and I worked closely with the Debtors executive management team and outside advisors in finalizing the Key Employee Plans. My primary goal has been to provide independent advice concerning compensation designs that drew directly upon relevant market data as well as my experience in designing such programs for similarly situated companies. Key Employee Plan Background 9. During my work with the Debtors, I learned that, prior to the Petition Date, they maintained annual and long-term incentive programs that were designed to provide, in a highly competitive environment, reasonable market-based incentive compensation for their key employees to incentivize the creation of long-term value for stakeholders. The Debtors prepetition compensation arrangements consisted of four plans tied to performance with a total target value of approximately $5.4 million, including: (i) minimum contractual bonus obligations 4

5 Case KG Doc 278 Filed 05/14/18 Page 5 of 17 to three employees totaling approximately $0.8 million in target value; (ii) plans with specific target objectives covering 38 employees totaling approximately $0.9 million in target value; (iii) discretionary obligations covering five insiders and 472 non-insiders totaling approximately $2.6 million in target value; and (iv) commission plans based on sales targets for nine employees totaling approximately $1.1 million in target value (collectively, the Legacy Incentive Plans ). Since the Debtors filed for chapter 11 relief, it is my understanding that no payments have been made on account of the Legacy Incentive Plans. Further, any outstanding equity grants owed pursuant to the Legacy Incentive Plans would have no material incentivizing effect. 10. Prior to the Petition Date, the Debtors, through their advisors, approached WTW to review proposed designs for postpetition retention and incentive plans i.e., plans that would ultimately become the proposed KEIP and KERP. Based upon the diligence and comprehensive market analysis I undertook with my team, I concluded that the general design of the proposed KEIP was consistent with typical market practice in similar situations and total direct compensation levels for the Debtors executive leadership team. Further, absent implementation of a reasonable incentive plan, the KEIP Participants total compensation would fall well below the market s 25th percentile. In addition, based upon the diligence and comprehensive market analysis I undertook with my team, I concluded that the general design and cost of the proposed KERP was also reasonable and generally consistent with typical market practice in similar situations. The Key Employee Plans 11. The Debtors are seeking approval of two Key Employee Plans: (a) the KEIP, which provides the KEIP Participants with the opportunity to earn incentive-based cash awards, payable in two installments, in the event the Debtors or the KEIP Participants achieve specified 5

6 Case KG Doc 278 Filed 05/14/18 Page 6 of 17 financial targets and expeditiously conclude the chapter 11 process; and (b) the KERP, which provides cash bonus payments to 87 non-insider key employees and represents the only additional compensation for the KERP Participants beyond their base salaries. I. The KEIP. 12. The KEIP is designed to incentivize approximately 12 key insider employees to achieve key financial and operational targets, with the goal of maximizing value for the Debtors estates. The KEIP provides the KEIP Participants with the opportunity to earn incentive-based cash awards if the Debtors or the KEIP Participants achieve specified financial targets and expeditiously conclude the chapter 11 process. The KEIP Participants are 12 of the Debtors senior employees the President and Chief Financial Officer, the General Counsel, the Controller, one Outside Sales Product, seven Executive Directors, and one Managing Director. It is my understanding that these insiders are essential for the Debtors successful operation and financial stability and restructuring process. It is also my understanding that the KEIP will not be increased to include anyone other than the 12 KEIP Participants, and that Debtors may remove a KEIP Participant at any time. 13. The KEIP is a cash incentive plan. For all Participants, the KEIP design comprises two components: a. Plan Confirmation Incentive - this component provides 50% of the total target cash incentive under the KEIP. Plan Confirmation Incentive awards may only be earned if a chapter 11 plan confirmation, merger, or sale occurs within six months of the Petition Date. The awards attributable to this component are scaled, and reward the KEIP Participants if they can secure a chapter 11 plan confirmation, merger, or sale quickly, as detailed below: i. Four and a half months or less after the Petition Date: 100% of target ii. Four and a half months to six months after the Petition Date: 50% of target 6

7 Case KG Doc 278 Filed 05/14/18 Page 7 of 17 iii. Six months or more after the Petition Date: 0% If earned, payout will be provided, in two cash payments (net of any applicable taxes or withholdings). The first award is payable one month following the effective date of the Debtors chapter 11 plan ( Effective Date ) and is equal to one-third of the earned Plan Confirmation Incentive award. The second award is payable on January 31, 2019 and is equal to two-third of the Plan Confirmation Incentive award. No payout will occur if a chapter 11 plan confirmation, merger, or sale occurs after six months of filing. b. EBITDA CapEx Spread Incentive - this component provides 50% of the total target cash incentive. EBITDA CapEx Spread Incentive awards are based upon EBITDA CapEx Spread set forth in management s business plan for April to June of $3,960,000. Incentive scales based on over achievement or under achievement of plan as follows: 3 Apr-Jun - EBITDA-Capex EBITDA-Capex Adjusted Adj To Target Adjusted Target Scale Adjustment Target Payout <($9,366,152) - ($962,500) $962,500 $0 ($9,366,152) ($5,406,152) 5.00% ($468,308) $962,500 $494,192 ($9,000,000) ($5,040,000) 5.00% ($450,000) $962,500 $512,500 ($6,000,000) ($2,040,000) 5.00% ($300,000) $962,500 $662,500 ($3,000,000) $960, % ($150,000) $962,500 $812,500 $0 $3,960, % $0 $962,500 $962,500 $3,000,000 $6,960, % $150,000 $962,500 $1,112,500 $6,000,000 $9,960, % $300,000 $962,500 $1,262,500 $9,000,000 $12,960, % $450,000 $962,500 $1,412,500 $9,366,152 $13,326, % $468,308 $962,500 $1,430,808 >$9,366, % $468,308 $962,500 $1,430,808 The EBITDA CapEx Spread Incentive is earned if the spread between EBITDA and CapEx is at the target level. It is measured from April 1, 2018 through a chapter 11 plan confirmation, merger, or sale. Under this EBITDA CapEx Spread Incentive, awards scale such that (a) 100 percent of the target is paid upon achievement of 100 percent of the targeted EBITDA-CapEx spread, (b) every $1 increase in EBIDTA-CapEx spread over 100 percent of the targeted EBITDA-CapEx spread adds $0.05 to the earned amount, up to an aggregate cap of $1,430,808, and (c) every $1 decrease in EBIDTA-CapEx spread below 100 percent of the targeted 3 For purposes of the calculations, EBITDA does not include severance and one-time restructuring costs and CAPEX is gross CAPEX. 7

8 Case KG Doc 278 Filed 05/14/18 Page 8 of 17 EBITDA-CapEx spread subtracts $0.05 from the earned amount, with the potential for the EBITDA portion of the KEIP to have no value. Accordingly, the amount that can be earned through the EBITDA-CapEx component ranges from $0 to $1.431 million. If earned, one-third of the EBITDA-CapEx award will be paid one month after the Effective Date, and the balance will be paid on January 31, For all KEIP Participants, target of each component of the KEIP must be earned to receive the full award. 15. If a KEIP Participant is terminated without cause prior to a chapter 11 plan confirmation, merger, or sale and has not had the opportunity to fully earn their KEIP awards, the KEIP Participant would receive any KEIP awards already earned as well as the target value of any future KEIP payments that could have been earned. If, however, a KEIP Participant leaves the Debtors employment or is terminated with cause, the KEIP Participant forfeits any unpaid portions of his or her KEIP award. Any unpaid awards will not be reallocated to any other KEIP Participants nor will the Debtors designate a replacement KEIP Participant without Product Resource Group, Inc. s ( PRG s ) consent. 16. The estimated target cost of the KEIP for 2018 is approximately $1.9 million; maximum cost is approximately $2.4 million. The individual award opportunities for each KEIP Participant under the KEIP are as follows: 8

9 Case KG Doc 278 Filed 05/14/18 Page 9 of 17 A. Analysis of Compensation for KEIP Participants. 17. In assessing the reasonableness of the KEIP, I worked with my team to analyze each KEIP Participant s competitive target total direct compensation, which is a compensation-industry term that means the sum of base salary, target annual incentives, and long-term incentive grant values. General industry data was the primary reference point for each of the 12 participants. My team and I gathered data from WTW s General Industry Executive Compensation Survey and Mercer s Benchmark Database Survey. As the Debtors operate in a niche market without many direct competitors, I deemed general industry data to represent a reasonable reference point. Furthermore, WTW s General Industry Executive Compensation Survey includes robust data and large sample size sources to appropriately reflect the size of the Debtors operations (e.g., approximately $419 million in revenue). My team and I surveyed standard market compensation benchmarks and discussed the results with the Debtors management. I believe this methodology of comparing the KEIP Participants compensation components to market data is consistent with my chapter 11 and ordinary course experience in evaluating compensation programs. 9

10 Case KG Doc 278 Filed 05/14/18 Page 10 of I compared the target total direct compensation under the KEIP (reflecting base salary and the annualized value of the plan opportunities at each performance level) for each KEIP Participant to target total direct compensation data for comparable roles from the abovereferenced market data. Absent Court approval of the KEIP, total direct compensation for the KEIP Participants will comprise base salary only, and thus total direct compensation will be 32 percent below the 25th percentile of the market, on average. In my opinion, this could significantly undermine the Debtors ability to continue to motivate the KEIP Participants to achieve desired business objectives. If, however, the KEIP is approved, the aggregate annualized target total direct compensation for the KEIP Participants (reflecting the sum of current base salaries and target annualized KEIP opportunities) will be approximately 11 percent above the 25th percentile and 20 percent below the 50th percentile, on average. 19. The KEIP Participants total direct compensation without the KEIP and at the KEIP target levels are summarized as follows: Total Direct Compensation ( TDC ) for KEIP Participants TDC Outcome Relation to 25th Percentile of Market TDC Relation to 50th Percentile of Market TDC Base Salaries Only (No KEIP) 32 percent below 51 percent below Base Salaries Plus Target Payout 11 percent above 20 percent below 20. Based on the results of these benchmarking analyses, and my experience with incentive compensation plans adopted by other companies, both inside and outside the chapter 11 context, I believe the KEIP is reasonable in light of competitive market practice. Critically, the absence of an incentive opportunity for the participants would, in my opinion, significantly 10

11 Case KG Doc 278 Filed 05/14/18 Page 11 of 17 undermine the current competitiveness of the Debtors compensation structure (as it would be comprised of only base salary, which is significantly below market). B. Analysis of the KEIP Structure. 21. I believe the overall design and structure of the KEIP is consistent with market practice, and appropriate in light of the Debtors particular business and circumstances. I advised that any individual metrics should be objectively measured, performance-based stretch metrics. To that end, the KEIP emphasizes specific performance metrics for each participant that the Debtors have determined to be stretch performance metrics. 22. To assess the reasonableness of the design of the KEIP, my team and I analyzed the publicly disclosed KEIPs from 16 general industry companies we identified. The companies are publicly traded, have reasonably comparable financial characteristics (defined as having annual revenues approximately between $210 million and $838 million, i.e., approximately 0.5 to 2.0 times the Debtors annual revenues) and have filed chapter 11 within the last three years. The companies are: American Apparel, Inc., Appvion, Inc., BPS US Holdings, Inc. (Performance Sports Group), Breitburn Energy Partners LP, Ciber, Inc., LiveStyle, Inc., Midstates Petroleum Company, Inc., Molycorp Inc., Noranda Aluminum, Inc., Pacific Sunwear of California, LLC, RadioShack (General Wireless Operations), Roadhouse Holding Inc., Sabine Oil & Gas Corporation, Stone Energy Corp., True Religion Apparel, Inc., and Ultra Petroleum Corp (collectively, the Peer Companies ). In conducting this analysis, I also relied upon my significant consulting experience in the analysis and design of incentive plans generally for similarly-situated companies in chapter Based upon my review, the structure of the KEIP comports with the structure of annual incentive plans of the Peer Companies, which have the following key design features: 11

12 Case KG Doc 278 Filed 05/14/18 Page 12 of 17 Market Statistics The Debtors Proposed KEIP For the companies included in the KEIP analysis, the median total participant count is 9 and the 75th percentile count is percent of KEIPs use three metrics, while 27 per cent of the KEIPs use two metrics (inclusive of circuit breakers and modifier metrics) 63 percent of KEIPs use operating expense, profit- based metrics (e.g., operating income, EBITDA, or earnings per share) or cash flow 50 percent of KEIPs include an emergence goal or restructuring milestone goal (e.g., chapter 11 exit timing, plan of reorganization confirmation, etc.) The median range of payouts relative to target was 50 percent for minimum performance and 150 percent for maximum performance 100 percent of the 15 companies that disclosed measurement period lengths used non-annual performance metrics 12 participants 2 metrics EBITDA metric included Plan Confirmation Incentive earned upon a chapter 11 plan confirmation, merger, or sale Payout ranges from approx. 51% of target to approx. 124% of target Metrics measured for non-annual periods 24. For these reasons, and based on my experience with incentive-based compensation programs employed by companies in chapter 11, I believe the structure of the KEIP is reasonable and consistent with market practice. C. Analysis of the KEIP Total Cost. 25. I also compared the target cost of the KEIP on both an absolute basis and as a percentage of revenue to the target cost of the comparable key employee incentive program. My analysis showed that the target cost of the KEIP, or approximately $1.925 million, reflected as a percentage of revenue, or approximately 0.46 percent, approximates median practice. Maximum cost of the KEIP, or approximately $2.4 million, reflected as a percentage of revenue, or approximately 0.57 percent, is above the 75th percentile of the market but within the range of observed market practice. 12

13 Case KG Doc 278 Filed 05/14/18 Page 13 of 17 KEIP Cost Market Statistics The Debtors Proposed KEIP 50th Percentile 75th Percentile Maximum Target Maximum Absolute Dollar Cost $2.078 million $2.324 million $ million $1.925 million $2.393 million Percent of Revenue 0.43% 0.53% 2.37% 0.46% 0.57% 26. For these reasons, and based on my experience with incentive-based compensation programs employed by companies in chapter 11, I believe the cost of the KEIP is reasonable and consistent with market practice. II. The KERP. 27. The proposed KERP will include certain key, non-insider employees who I understand are central to the successful completion of the Debtors restructuring, and therefore, critical to retain. I understand that KERP Participants represent a cross-section of various functions, including human resources, accounting, payroll, business intelligence, information technology, sales, project management and equipment management. I understand that absent approval of the KERP, the Debtors ability to retain their key talent will be challenged given the general uncertainties attendant to chapter 11. Specifically, I understand that since January 1, 2018, over 110 employees voluntarily left the Debtors employment. I also understand that since the Petition Date through May 1, 2018, approximately 21 non-insider employees voluntarily left the Debtors employment. A. Analysis of KERP Design. 28. In evaluating the reasonableness of the KERP, my team and I reviewed retention opportunities and design features in key employee retention plans filed in other chapter 11 cases. With respect to this analysis, my team and I analyzed 12 companies that implemented a KERP 13

14 Case KG Doc 278 Filed 05/14/18 Page 14 of 17 with revenues between approximately $216 million and approximately $625 million and submitted chapter 11 petitions within the past three years. The companies are: American Apparel, Inc., Basic Energy Services, BPS US Holdings Inc. (Performance Sports Group), Breitburn Energy Partners LP, Draw Another Circle, LLC, EXCO Resources, Inc., Golfsmith International Holdings Inc., Ignite Restaurant Group, La Paloma Generating Company, LLC, RadioShack (General Wireless Operations), Roadhouse Holding Inc., and Tidewater Inc. In conducting this analysis, I also relied upon my significant consulting experience in the analysis and design of retention plans generally for other companies in chapter The KERP has the following primary design features: a. cash retention plan, with payments based on continued employment. Thirty-three percent of the KERP Participant s award would be payable one month following the Effective Date, and the balance will be paid on January 31, 2019; b. participants comprise up to approximately 87 non-insiders, divided among two tiers. I understand that selection as a Tier 1 KERP Participant is based on breadth and depth of responsibility, and either (i) the effectiveness and need for the individual s leadership through the chapter 11 process or wind-down, as applicable, or (ii) belief that there will likely be a continuing role for this individual post-emergence including approximately. Based on information provided to me by the Debtors, approximately 15 individuals have been identified as Tier 1 KERP Participants. I also understand that selection as a Tier 2 KERP Participant is based on a critical skill set that would be difficult to replace during the bankruptcy process, or during a wind-down process, as applicable, their ability to provide departmental leadership during the Chapter 11 process, as well as the increased workload/responsibility expected to be imposed on such individuals as a result of staff reductions. Based on information provided to me by the Debtors, approximately 72 individuals have been identified as Tier 2 KERP Participants. The Debtors have the ability to add individuals to the KERP, remove individuals from the KERP, or change which tier individuals have been placed into, so long as the overall cost of the KERP does not increase and PRG agrees to such change; c. estimated cost of the proposed KERP is approximately $1.550 million, but may go up to $1.6 million; 14

15 Case KG Doc 278 Filed 05/14/18 Page 15 of 17 d. average retention payment is approximately $17,820; e. a KERP Participant who is terminated without Cause (as defined by Debtors) before the end of the retention period will receive the full award; and f. a KERP Participant who voluntarily leaves the Debtors employment or is terminated with cause forfeits any unpaid amounts. The Debtors can designate a replacement KERP Participant if PRG agrees. Otherwise, if a KERP Participant voluntarily leaves and forfeits his or her award, the aggregate cost of the KERP shall decrease by that Participant s allocable amount. 30. Based on my review of other key employee retention plans, my team and I observed the following components in the key employee retention plans: a. payments are typically cash-based; b. payments are generally provided in one lump-sum (58% prevalence) versus installments (42% prevalence); c. payments are typically earned based on continued employment through specified dates (i.e., performance conditions do not typically apply); d. participation ranges from 7 to 580 employees. The Debtors KERP participation of approximately 87 participants falls between the market median of 53 participants and the 75th percentile of 130 participants; e. award opportunities typically vary by employee level or tier; and f. award opportunities as a percentage of salary ranged from 5 percent to 61 percent. 31. I found the KERP award opportunities across tiers and in aggregate to be reasonable as (a) they fell well within the range of other approved KERP opportunities and (b) represent the only element of additional compensation for these employees beyond base salaries. B. Analysis of KERP Cost. 32. The total cost of the KERP is approximately $1.550 million, but can cost up to $1.6 million. The maximum aggregate cost of the KERP as a percentage of revenue is

16 Case KG Doc 278 Filed 05/14/18 Page 16 of 17 percent. In evaluating the reasonableness of the KERP opportunities, my team and I reviewed the KERP cost on an absolute dollar basis and as a percentage of revenue compared to other filed KERPs. Based on my analysis, the absolute dollar cost of the KERP and the cost a percentage of revenue is positioned between the 50th and 75th percentiles of the market. KERP Cost Market Statistics The Debtors Proposed KERP 50th Percentile 75th Percentile Maximum Target Maximum Absolute Dollar Cost $1.010 million $1.952 million $ million $1.550 million $1.600 Percent of Revenue 0.21% 0.47% 3.137% 0.37% 0.38% 33. Under the proposed KERP, the average retention payment and cost per participant would be approximately $17,820. Based on my analysis, the KERP cost per participant is positioned between the 25th and 50th percentiles of the market of other KERPs. 34. For these reasons, and based on my experience with retention-based compensation programs employed by companies in chapter 11, I believe the design and cost of the KERP is reasonable and generally consistent with market practice. Conclusion 35. Based on my education, experience, and the work I have done in this case and in similar cases, I believe that the design, structure, cost, and award opportunities available under the KEIP and KERP are reasonable given the facts and circumstances of these chapter 11 cases. [Remainder of page intentionally left blank.] 16

17 Case KG Doc 278 Filed 05/14/18 Page 17 of 17 I declare under penalty of perjury that the foregoing statements are true and correct to the best of my knowledge, information, and belief. Dated: May 14, 2018 /s/ Douglas J. Friske Douglas J. Friske Managing Director Willis Towers Watson PLC