Pg 1 of 136 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ) In Re: ) Chapter 11 ) AMBAC FINANCIAL GROUP, INC., ) Case No. 10-15973 (SCC) ) Debtor. ) (Jointly Administered) ) THIRD INTERIM APPLICATION OF BLACKSTONE ADVISORY PARTNERS L.P. AS FINANCIAL ADVISOR TO THE DEBTORS FOR INTERIM ALLOWANCE OF COMPENSATION FOR ACTUAL AND NECESSARY SERVICES RENDERED AND REIMBURSMENT OF ACTUAL AND NECESSARY OUT-OF-POCKET EXPENSES INCURRED FOR THE PERIOD OF JULY 1, 2011 THROUGH OCTOBER 31, 2011 SUMMARY SHEET Name of Applicant: Authorized to Provide Professional Services to: Date of Retention: Blackstone Advisory Partners L.P. Debtor December 21, 2010 nunc pro tunc to November 8, 2010 Period for which Compensation and Reimbursement is Sought: July 1, 2011 through October 31, 2011 Total Amount of Compensation Sought as Actual, Reasonable, and Necessary, During these Cases: $800,000.00 Total Amount of Expenses Sought as Actual, Reasonable, and Necessary, During these Cases: $9,715.72 Cash Payment Sought: $160,000.00 The total time expended for the preparation of this application was 3 hours and the corresponding compensation requested is $0.00. This is a monthly x interim final application
Pg 2 of 136 Summary of Blackstone s Monthly Applications: Period Covered Fees Expenses Status 07/01/11 07/31/11 $200,00000 $2,597.32 Pending. Pursuant to the Interim Compensation Order, Blackstone has received 80% of the fees requested and 100% of the expenses requested. 08/01/11 08/31/11 $200,00000 $1,653.13 Pending. Pursuant to the Interim Compensation Order, Blackstone has received 80% of the fees requested and 100% of the expenses requested. 09/01/11 09/30/11 $200,00000 $1,926.15 Pending. Pursuant to the Interim Compensation Order, Blackstone has received 80% of the fees requested and 100% of the expenses requested. 10/01/11 10/31/11 $200,00000 $3,539.12 Pending. Blackstone has not received payment in connection with the invoiced fees and out-of-pocket expenses as of the date of this application. 2
Pg 3 of 136 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ) In Re: ) Chapter 11 ) AMBAC FINANCIAL GROUP, INC., ) Case No. 10-15973 (SCC) ) Debtor. ) (Jointly Administered) ) THIRD INTERIM APPLICATION OF BLACKSTONE ADVISORY PARTNERS L.P. AS FINANCIAL ADVISOR TO THE DEBTORS FOR INTERIM ALLOWANCE OF COMPENSATION FOR ACTUAL AND NECESSARY SERVICES RENDERED AND REIMBURSMENT OF ACTUAL AND NECESSARY OUT-OF-POCKET EXPENSES INCURRED FOR THE PERIOD OF JULY 1, 2011 THROUGH OCTOBER 31, 2011 Blackstone Advisory Partners L.P. ( Blackstone ), financial advisor to the above captioned debtor and debtor-in-possession (collectively, the Debtor ), respectfully represents: I. Background 1. On November 8, 2010 (the "Petition Date"), the Debtor filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. 101 et seq., as amended (the "Bankruptcy Code"). The Debtor is operating its business and managing its property as debtor-in-possession pursuant to 1107(a) and 1108 of the Bankruptcy Code. 2. On December 6, 2010, the Debtor applied to this Court for an order [Docket No. 55] authorizing the retention and employment of Blackstone nunc pro tunc to the Petition Date pursuant to an engagement agreement dated November 8, 2010 (the "Engagement Agreement"). A copy of the Engagement Agreement is attached hereto as Appendix A. 3. On December 21, 2010, this Court entered an order (the Administrative Order ) [Docket No. 81] establishing procedures for interim compensation and reimbursement of expenses for professionals.
Pg 4 of 136 4. On December 21, 2010, this Court entered an order (the Retention Order ) [Docket No. 85] pursuant to Sections 327(a) and 328(a) of the Bankruptcy Code, Bankruptcy Rule 2014(a), and Local Rule 2014-1 authorizing the employment and retention of Blackstone as financial advisor to the Debtor nunc pro tunc to the Petition Date. A copy of the Retention Order is attached hereto as Appendix B. 5. This is the third interim fee application (the "Third Interim Application") of Blackstone for interim allowance of (i) compensation for services rendered during the period of July 1, 2011 through October 31, 2011 (the "Third Interim Period"); and (ii) the reimbursement of out-ofpocket expenses recognized during the Third Interim Period. II. The Blackstone Engagement 6. Blackstone was retained by the Debtor as financial advisor to provide the following financial advisory services: (a) Assist in the development of financial models, cash flows projections and liquidity needs of the Debtor including its primary subsidiary Ambac Assurance Corporation ( AAC ); (b) Assist in the development of financial data and presentations to the Debtor s Board of Directors, various creditors and other third parties (including, if necessary, new capital providers); (c) Analyze various restructuring scenarios and the potential impact of these scenarios on the recoveries of those stakeholders; (d) Provide strategic advice with regard to restructuring or refinancing the Debtor s Obligations (as defined in the Engagement Agreement); (e) Evaluate the Debtor s debt capacity and alternative capital structures; (f) Participate in negotiations among the Debtor and its creditors and other interested parties; (g) Value securities offered by the Debtor in connection with a Restructuring (as defined in the Engagement Agreement); (h) Provide expert witness testimony concerning any of the financial advisory services provided by Blackstone; 4
Pg 5 of 136 (i) Provide general advice on asset sale alternatives, and as requested by the Debtor, conduct a process to seek to identify a third-party investor for the Debtor and assist in advising the Debtor regarding how such new investment could be structured as part of a plan of reorganization; and (j) Provide such other advisory services as are customarily provided in connection with the analysis and negotiation of a Restructuring as requested and mutually agreed. 7. Pursuant to the terms of the Engagement Agreement, as modified and approved by the Retention Order, Blackstone is entitled to be compensated for its services under the Engagement Agreement as follows: (a) A monthly advisory fee (the Monthly Fee ) in the amount of $200,000.00 in cash, with the first Monthly Fee payable upon the execution of the Engagement Agreement by both parties, and additional installments of such Monthly Fee payable in advance on each monthly anniversary of the Effective Date; (b) An additional fee (the Restructuring Fee ) equal to $7,000,000.00 which shall be reduced by 50% of the amount of any Monthly Fees earned, if any, after the eight month anniversary of the Petition Date; and (c) Reimbursement of all reasonable out-of-pocket expenses incurred during this engagement, including, but not limited to, travel and lodging, direct identifiable data processing, document production, publishing services and communication charges, courier services, working meals, reasonable fees and expenses of Blackstone s counsel and other necessary expenditures, payable upon rendition of invoices setting forth in reasonable detail the nature and amount of such expenses. In connection therewith the Debtor shall pay Blackstone on the Effective Date and maintain thereafter a $25,000 expense advance for which Blackstone shall account upon termination of the Engagement Agreement. III. Services Provided by Blackstone during The Third Interim Period 8. During the Third Interim Period, Blackstone provided financial advisory services to the Debtor. The nature of the advisory services provided by Blackstone during the Third Interim Period included the following: Business and Operations (a) Conduct ongoing due diligence regarding the operations and financial condition of the Debtor, including meetings with management and the Debtor s legal advisor; 5
Pg 6 of 136 (b) Update and refine a comprehensive financial model of the Debtor s principal operating subsidiary, Ambac Assurance Corporation ( AAC ); Valuation (c) Conduct ongoing due diligence with respect to valuation considerations; (d) Update preliminary valuation analytics to reflect, among other things, alternative settlement/term sheet proposals including NOL reduction re: IRS settlement; Plan of Reorganization (e) Assist in the development and negotiation of a term sheet/settlement between the Wisconsin Office of the Commissioner of Insurance ( OCI ) and the Unsecured Creditors Committee ( UCC ) including NOL reduction re: IRS settlement; (f) Analyze the financial aspects of alternative term sheets/settlements proposed by the UCC and OCI including, among other things, allocation of NOLs between the Debtor and its operating subsidiary AAC including NOL reduction re: IRS settlement; (g) Conduct ongoing due diligence regarding the monthly cash flows, including assessment of the impact from the chapter 11 filing; General and Other (h) Assist PWC with its analysis re: fresh start accounting; (i) Prepare materials for and participate in meetings with various public stakeholders; (j) Prepare materials for NYC tax claim settlement discussions; (k) Prepare materials for and participate in IRS mediation discussions; (l) Prepare materials for and participate in OCI mediation discussions; (m) Prepare and review model with AAC special committee advisor Macquarie; (n) Participate in follow-up meetings and discussions with Macquarie; (o) Discuss status of AFG restructuring with AAC stakeholders including RMBS and Muni holders; (p) Assist in the preparation and review of bankruptcy-related filings; (q) Respond to various inquiries from the UCCs advisors and other constituents regarding the Debtor s chapter 11 filings; (r) Provide updates and strategic advice to management and the Board of Directors of the Debtor regarding developments in the case; and 6
Pg 7 of 136 (s) Participate in conference calls with the UCC s advisors to provide, among other things, updates on matters such as the status of business operations, rehabilitation proceedings, and outstanding litigation. IV. The Blackstone Team 9. The financial advisory services set forth above were performed primarily by: Stefan Feuerabendt, (1) Senior Managing Director; C.J. Brown, Managing Director; John Wander, Associate; Kelly Alverson, (2) Analyst; Shannon Dwyer, Analyst; and other professionals of Blackstone, as needed. Details of the background and experience of the professionals are provided in Appendix C. V. Blackstone s Request for Compensation and Reimbursement of Expenses A. Blackstone s Request for Allowance of Fees Earned 10. During the Third Interim Period, Blackstone provided professional financial advisory services to the Debtor and earned fees for such services totaling $800,000.00. Blackstone respectfully submits that the compensation sought in this Third Interim Application for services rendered by Blackstone to the Debtor during the Third Interim Period is fully justified and reasonable based upon (a) the time and labor required, (b) the complexity of the issues presented, (c) the skill necessary to perform the financial advisory services properly, (d) the preclusion of other employment, (e) the customary fees charged to clients in non-bankruptcy situations for similar services rendered, (f) time constraints required by the exigencies of the case and (g) the experience, reputation and ability of the professionals rendering services. 11. Blackstone respectfully submits that the services it has rendered to the Debtor have been necessary and in the best interest of the Debtor and have furthered the goals of all parties in (1) Stefan Feuerabendt is currently no longer employed at Blackstone. (2) Kelly Alverson completed the analyst program in Blackstone s Restructuring & Reorganization practice on July 1, 2011. As a result, she is no longer a member of the practice. 7
Pg 8 of 136 interest. The effort expended by Blackstone in representing the Debtor, the complexity of the issues and the difficulty in negotiating these cases have been substantial. 12. Blackstone respectfully submits that under all of the criteria normally examined in chapter 11 reorganization cases, the compensation requested by Blackstone is reasonable in light of the work performed by Blackstone in these cases. B. Blackstone s Request for Reimbursement of Out-Of-Pocket Expenses Recognized 13. In connection with the services rendered during the Third Interim Period, Blackstone has recognized actual and necessary out-of-pocket expenses in the amount of $9,715.72. Additional out-of-pocket expenses that Blackstone has incurred but not yet processed due to timing will be submitted at a later date. 14. Out-of-pocket expenses incurred by Blackstone are charged to a client if the expenses are incurred for the client or are otherwise necessary in connection with services rendered for such particular client. Blackstone does not factor general overhead expenses into disbursements charged to its clients in connection with chapter 11 cases. Blackstone has followed its general internal policies with respect to out-of-pocket expenses billed to the Debtor as set forth below, with any exceptions specifically explained: (a) (b) (c) All airfare charges billed to the Debtor are based on coach rates. With respect to local travel, Blackstone's general policy enables employees to travel by taxi or, in certain circumstances private car service, to and from meetings while rendering services to a client on a client related matter, for which the client is charged. Further, and primarily for safety reasons, employees are permitted to charge to a client the cost of transportation home if an employee is required to work past 9:00 p.m. on client specific matters. Blackstone's general policy permits its professionals to charge in-office dinner meals to a client who have worked 3 hours beyond their regularly scheduled workday if the employee is required to provide services to the client during such dinnertime. 8
Pg 9 of 136 (d) (e) (f) (g) The Document Production category of expenses includes charges from outside service companies that provide, for a fee, high volume photocopying services on an expedited basis to Blackstone, and charges for internal photocopying services provided by Blackstone. Blackstone bills internal Document Production charges at the rate of $0.14 per page for black and white photocopies, and $0.36 per page for color photocopies. The Publishing Services category of expenses includes charges for the production of text-based publications such as memoranda and presentations, and printing and binding services. The External Research category of expenses includes charges from outside computer/electronic service companies that supply, for a fee, research and/or financial documents to Blackstone. The services provided by these companies primarily consist of the retrieval of financial documents from regulatory agencies and/or the retrieval of research that would not otherwise be available to Blackstone. The Internal Research category of expenses are the charges for time spent by Blackstone research staff in operating the computer/electronic terminals related to these computer/electronic service companies. Blackstone bills outgoing long-distance facsimile charges at a rate of $1.25 per page. Blackstone does not bill local or incoming facsimile charges to clients. 15. Blackstone respectfully submits that the out-of-pocket expenses recognized during the Third Interim Period for which Blackstone seeks reimbursement were necessary and reasonable both in scope and amount. Invoices detailing the out-of-pocket expenses recognized during the Third Interim Period are provided in Appendix D. 16. A summary of all fees earned and out-of-pocket expenses recognized during the Third Interim Period is outlined in the chart below: Third Interim Period Fees Holdbacks @ 20% Fees, Less Holdbacks Out-Of-Pocket Expenses Payment(s) Received Amount(s) Due July 1 31, 2011 $200,000.00 ($40,000.00) $160,000.00 $2,597.32 ($162,597.32) $40,000.00 August 1 31, 2011 200,000.00 (40,000.00) 160,000.00 1,653.13 (161,653.13) 40,000.00 September 1 30, 2011 200,000.00 (40,000.00) 160,000.00 1,926.15 (161,926.15) 40,000.00 October 1 31, 2011 (3) 200,000.00 (40,000.00) 160,000.00 3,539.12 (163,539.12) 40,000.00 Total $800,000.00 ($160,000.00) $640,000.00 $9,715.72 ($649,715.72) $160,000.00 (3) As of the date of this Third Interim Application, no payment has been received in connection with Blackstone s Monthly Fee and out-of-pocket expenses for the month of October 2011. Blackstone anticipates receiving payment by the hearing date concerning this Third Interim Application, and is therefore requesting the allowance of the full amount of Blackstone s Monthly Fee and out-ofpocket expenses requested in this Third Interim Application for October 2011, and payment of the 20% holdback only. 9
Pg 10 of 136 17. The amount of the fees and out-of-pocket expenses sought in this Third Interim Application and Blackstone s billing processes are consistent with market practices both in and out of a bankruptcy context. Blackstone has never billed its clients based on the number of hours expended by its professionals. Blackstone has, however, maintained contemporaneous time records in the Debtor s case in one-half hour increments. Time records of the 1,206.5 hours expended by Blackstone professionals in providing financial advisory services to the Debtor during the Third Compensation Period are provided in Appendix E by professional. 18. A summary of the hours expended by Blackstone professional s during the Third Interim Period in providing financial advisory services to the Debtor is outlined below: Summary of Hours Expended during The Third Interim Period Professional July 2011 August 2011 September 2011 October 2011 Total Hours Stefan Feuerabendt 25.5 0.0 0.0 0.0 25.5 C.J. Brown 53.5 107.0 82.0 50.5 293.0 John Wander 80.5 149.0 102.0 89.0 420.5 Shannon Dwyer 93.5 171.5 94.5 108.0 467.5 Total(s) 253.0 427.5 278.5 247.5 1,206.5 19. All services provided by Blackstone for which compensation is requested were performed for and on behalf of the Debtor after the filing of these cases and were not rendered on behalf of any other person. 20. There is currently no agreement or understanding between Blackstone and any other person for the sharing of compensation received or to be received for services rendered in connection with these proceedings. 10
Pg 11 of 136 VI. Requested Relief WHEREFORE, Blackstone requests the Court to: (a) Approve the allowance of Blackstone s (i) Monthly Fees in the amount of $800,000.00; and (ii) the reimbursement of out-of-pocket expenses recognized by Blackstone in the amount of $9,715.72 during the Third Interim Period; (b) Authorize and direct the Debtor to pay Blackstone's monthly advisory fees and out-ofpocket expenses for the Third Interim Period as follows: Total Monthly Fees $800,000.00 Total Out-Of-Pocket Expenses 9,715.72 Less: Payments Received (4) (649,715.72) Amount Due Blackstone $160,000.00 (c) Grant such other and further relief as this Court deems just and proper. (4) Amount reflects post-petition payments Blackstone has either received as of the date of this Third Interim Application (i.e., $486,176.60) and anticipates receiving $163,539.12 by the hearing date representing 80% of Blackstone s Monthly Fee for and 100% of out-of-pocket expenses recognized during the month of October 2011. 11
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Pg 13 of 136 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ) In Re: ) Chapter 11 ) AMBAC FINANCIAL GROUP, INC., ) Case No. 10-15973 (SCC) ) Debtor. ) (Jointly Administered) ) CERTIFICATION UNDER GUIDELINES FOR FEES AND OUT-OF-POCKET EXPENSES FOR PROFESSIONALS IN RESPECT OF THIRD APPLICATION OF BLACKSTONE ADVISORY PARTNERS L.P. FOR INTERIM COMPENSATION AND REIMBURSEMENT OF OUT-OF POCKET EXPENSES I, C.J. Brown, hereby certify that: 1. I am a Managing Director with the applicant firm, Blackstone Advisory Partners L.P. ( Blackstone ), with responsibility for the chapter 11 cases of the above captioned debtor and debtor-in-possession in these chapter 11 cases (collectively, the Debtor ). 2. In accordance with the guidelines established by the Office of the United States Trustee (the UST Guidelines ), the Guidelines for Fees and Disbursements for Professionals in Southern District of New York Bankruptcy Cases adopted by the Court on June 20, 1991 (the Fee and Disbursement Guidelines ), the Amended Guidelines for Fees and Disbursements for Professionals in Southern District of New York Bankruptcy Cases, adopted by the Court on November 25, 2009 (together with the Fee and Disbursement Guidelines, the Local Guidelines ), and the Order Pursuant to Sections 105(a) and 331 of the Bankruptcy Code and Bankruptcy Rule 2016(a) Establishing Procedures for Interim Monthly Compensation and Reimbursement of Expenses of Professionals [Docket No. 81] (the Administrative Order, and together with the UST Guidelines, the Fee and Disbursement Guidelines and the Local Guidelines, the Guidelines ), this certification is made with respect to Blackstone s third interim application, dated November 29, 2011 (the Third Interim Application ), for interim
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Pg 15 of 136 APPENDIX A
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Pg 23 of 136 Schedule 2 Indemnification Letter
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Pg 28 of 136 APPENDIX B
Pg 29 of 136 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------------x : In re : : AMBAC FINANCIAL GROUP, INC., : : Debtor. : : ---------------------------------------------------------------x Chapter 11 Case No. 10-15973 (SCC) ORDER PURSUANT TO SECTIONS 327(a) AND 328(a) OF THE BANKRUPTCY CODE, BANKRUPTCY RULE 2014(a), AND LOCAL RULE 2014-1, AUTHORIZING THE EMPLOYMENT AND RETENTION OF BLACKSTONE ADVISORY PARTNERS, L.P. AS FINANCIAL ADVISOR TO THE DEBTOR NUNC PRO TUNC TO THE COMMENCEMENT DATE Upon the application (the Application ) 1 of Ambac Financial Group, Inc., as debtor and debtor in possession (the Debtor ), pursuant to sections 327(a) and 328(a) of title 11 of the United States Code (the Bankruptcy Code ), Rule 2014(a) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), and Rule 2014-1 of the Local Bankruptcy Rules for the Southern District of New York (the Local Rules ), for authorization to employ and retain Blackstone Advisory Partners L.P. ( Blackstone Advisory Partners ) as its financial advisor nunc pro tunc to the date on which the Debtor commenced its chapter 11 case (the Commencement Date ) on the terms set forth in the engagement letter between the Debtor and Blackstone Advisory Partners, dated as of November 8, 2010 (the Retention Letter ), and the related indemnification agreement, dated as of November 8, 2010 (the Indemnification Letter and together with the Retention Letter, the Blackstone Agreement ), all as more fully described in the Application; and upon consideration of the Declaration of Stefan Feuerabendt Pursuant to Sections 327(a) and 328(a) of the Bankruptcy Code, Bankruptcy Rule 2014(a) and Local Rule
Pg 30 of 136 2014-1 for Authorization to Employ and Retain Blackstone Advisory Partners L.P. as Financial Advisor Nunc Pro Tunc to the Commencement Date (the Feuerabendt Declaration ) and the Declaration of Robert J. Gentile Pursuant to Sections 327(a) and 328(a) of the Bankruptcy Code, Bankruptcy Rule 2014(a) and Local Rule 2014-1 for Authorization to Employ and Retain Blackstone Advisory Partners L.P. as Financial Advisor Nunc Pro Tunc to the Commencement Date (the Gentile Declaration ); and the Court having subject matter jurisdiction to consider the Application and the relief requested therein in accordance with 28 U.S.C. 1334 and the Standing Order M-61 Referring to Bankruptcy Judges for the Southern District of New York Any and All Proceedings Under Title 11, dated July 10, 1984 (Ward, Acting C.J.); and consideration of the Application and the relief requested therein being a core proceeding pursuant to 28 U.S.C. 157(b); and venue being proper before this Court pursuant to 28 U.S.C. 1408 and 1409; and due and proper notice of the Application having been provided, and it appearing that no other or further notice need be provided; and a hearing having been held to consider the relief requested in the Application (the Hearing ); and upon the record of the Hearing, and all of the proceedings had before the Court; and the Court being satisfied that Blackstone Advisory Partners represents or holds no interest adverse to the Debtor or its estate and is disinterested under section 101(14) of the Bankruptcy Code, as modified by section 1107(b) of the Bankruptcy Code; and the Court being satisfied that the terms of the Blackstone Agreement are reasonable terms for purposes of section 328(a) of the Bankruptcy Code; and the Court having determined that the relief sought in the Application is in the best interests of the Debtor, its estate, its creditors and all parties in interest; and that the legal and factual bases set 1 Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Application.
Pg 31 of 136 forth in the Application establish just cause for the relief granted herein; and after due deliberation and sufficient cause appearing therefor, it is hereby ORDERED that the Application is granted to the extent provided herein, and it is further ORDERED that, in accordance with Bankruptcy Code sections 327(a) and 328(a), Bankruptcy Rule 2014 and Local Rule 2014-1, the Debtor is authorized to employ and retain Blackstone Advisory Partners as its financial advisor in accordance with the terms and conditions set forth in the Application and the Blackstone Agreement, as modified by this Order, effective nunc pro tunc to the Commencement Date; and it is further ORDERED that paragraph (i) of the financial advisory services to be rendered by Blackstone Advisory Partners on page 2 of the Retention Letter is hereby amended to read (i) Provide general advice on asset sale alternatives, and as requested by the Company, conduct a process to seek to identify a third-party investor for the Company and assist in advising the Company regarding how such new investment could be structured as part of a Plan of Reorganization; and it is further ORDERED that the Monthly Fee described in the Retention Letter shall be $200,000 per month and the Restructuring Fee described in the Retention Letter shall be $7,000,000, which shall be reduced by 50% of the amount of any Monthly Fees earned, if any, after the eight month anniversary of the Commencement Date; and it is further ORDERED that Blackstone Advisory Partners shall be compensated and reimbursed in accordance with the terms of the Blackstone Agreement, as modified by this Order, and all compensation and reimbursement of expenses to be paid to Blackstone Advisory Partners, including, without limitation, the Monthly Fee and the Restructuring Fee (each as defined in the
Pg 32 of 136 Retention Letter), shall be subject to section 328(a) of the Bankruptcy Code, except as set forth herein; and it is further ORDERED that Blackstone Advisory Partners shall file fee applications for interim and final allowance of compensation and reimbursement of expenses pursuant to Bankruptcy Code sections 330 and 331, the Bankruptcy Rules, the Local Bankruptcy Rules, the Monthly Compensation Order, if any, the Amended Guidelines for Fees and Disbursements for Professionals in the Southern District of New York, dated November 25, 2009, the guidelines established by the Office of the United States Trustee (the U.S. Trustee Guidelines ), and any other orders of the Court; and it is further; ORDERED that the U.S. Trustee retains all rights to respond or object to Blackstone s interim and final applications for compensation and reimbursement of expenses on all grounds including, but not limited to, reasonableness pursuant to section 330 of the Bankruptcy Code; provided that in the event the U.S. Trustee objects, the Court retains the right to review the interim and final applications pursuant to section 330 of the Bankruptcy Code; and it is further ORDERED that none of the fees payable to Blackstone Advisory Partners shall constitute a bonus or fee enhancement under applicable law; and it is further ORDERED that Blackstone Advisory Partners shall apply any remaining amounts of its prepetition retainer as a credit toward postpetition fees and expenses, after such postpetition fees and expenses are approved pursuant to the first Order of the Court awarding fees and expenses to Blackstone Advisory Partners; and it is further ORDERED that ten business days notice must be provided by Blackstone Advisory Partners to the Debtor, the U.S. Trustee and any official committee(s) prior to any increases in
Pg 33 of 136 the rates set forth in the Application and/or Retention Agreement, and such notice must be filed with the Court; and it is further ORDERED that all of Blackstone Advisory Partners personnel who provide services to or on behalf of the Debtor, with the exception of clerical staff, shall keep contemporaneous records of the services they have performed in one-half hour increments; and it is further ORDERED that Blackstone Advisory Partners shall not be entitled to the reimbursement of attorney fees and expenses other than in connection with indemnification, as set forth herein; and it is further ORDERED that all requests by Blackstone Advisory Partners for the payment of indemnification as set forth in the Retention Agreement shall be made by means of an application to the Court and shall be subject to review by the Court to ensure that payment of such indemnity conforms to the terms of the Retention Agreement and is reasonable under the circumstances of the litigation or settlement in respect of which indemnity is sought, provided however, that in no event shall Blackstone Advisory Partners be indemnified in the case of its own bad-faith, self-dealing, breach of fiduciary duty (if any), gross negligence or willful misconduct; and it is further ORDERED that in no event shall Blackstone Advisory Partners be indemnified if the Debtor or a representative of the Debtor s estate, asserts a claim for, and a court determines by final order that such claim arose out of, Blackstone Advisory Partners own bad- faith, selfdealing, breach of fiduciary duty (if any), gross negligence, or willful misconduct; and it is further ORDERED that in the event Blackstone Advisory Partners seeks reimbursement from the Debtor for attorneys fees and expenses in connection with the payment of an indemnity claim
Pg 34 of 136 pursuant to the Retention Agreement, the invoices and supporting time records from such attorneys shall be included in Blackstone Advisory Partners own applications, both interim and final, and such invoices and time records shall be subject to the U.S. Trustee Guidelines without regard to whether such attorneys have been retained under section 327 of the Bankruptcy Code and without regard to whether such attorneys services satisfy Section 330(a)(3)(C) of the Bankruptcy Code; and it is further ORDERED that the Debtor is authorized, empowered and directed to take all actions necessary to implement the relief granted pursuant to this Order; and it is further ORDERED that to the extent there may be any inconsistency between the terms of the Application, the Blackstone Agreement, and this Order, the terms of this Order shall govern; and it is further ORDERED that this Court shall retain jurisdiction with respect to all matters arising from or related to the interpretation or implementation of this Order. Dated: December 21, 2010 New York, New York /s/shelley C. Chapman _ UNITED STATES BANKRUPTCY JUDGE NYA 636685.12
Pg 35 of 136 APPENDIX C
Pg 36 of 136 Biographies of Blackstone Professionals C. J. Brown. C. J. Brown is a Managing Director in the Restructuring & Reorganization Group. Since joining Blackstone in 2005, Mr. Brown has assisted in advising on a variety of restructuring transactions involving companies such as Allied Capital Corporation, Ambac Financial Group, Inc., Bally Total Fitness, Buffets Holding Inc., Countryside Power, D. Sokolin Co, EuroTunnel, Ford Motor Co., Granite Broadcasting, Horsehead Holdings Corp., MBIA Inc., Merisant Worldwide, Inc., Movie Gallery Inc. and Young Broadcasting. Before joining Blackstone, Mr. Brown was an Associate in the Global Industries Group at Bear, Stearns & Co. Inc., where he worked on several capital-raising and merger and acquisition advisory transactions. Mr. Brown received a BA in Accounting from Moravian College and an MBA with Distinction from New York University's Stern School of Business. John Wander. John Wander is an Associate in the Restructuring & Reorganization Advisory Group. Since joining Blackstone in 2008, Mr. Wander has assisted in advising on a variety of restructuring transactions. Before joining Blackstone, Mr. Wander was a research analyst at Merrill Lynch, where he covered healthcare services companies. Prior to Merrill Lynch, Mr. Wander was an Associate, and formerly a Financial Analyst, at CIBC World Markets, where he executed numerous advisory and financing assignments. Mr. Wander received a BBA in Finance, summa cum laude, from the University of Notre Dame and an MBA from The Wharton School, University of Pennsylvania. Shannon Dwyer. Shannon Dwyer is an Analyst in the Restructuring & Reorganization Group. Since joining Blackstone, Ms. Dwyer has worked on several transactions in various industries. Ms. Dwyer received a BS in Economics with a concentration in Finance from The Wharton School of the University of Pennsylvania, where she graduated summa cum laude.
Pg 37 of 136 APPENDIX D
Pg 38 of 136 Mr. Stephen Ksenak General Counsel Ambac Financial Group, Inc. One State Street Plaza New York, NY 10004 Blackstone Advisory Partners L.P. November 29, 2011 Monthly Fee for the period of July 1, 2011 through July 31, 2011: $ 200,000.00 Out-of-pocket expenses processed for the period through July 31, 2011: (1) Ground Transportation $ 510.01 Communications 943.79 Meals 709.95 Document Production 358.90 Publishing Services 74.67 2,597.32 Subtotal 202,597.32 Less: Payment Received (162,597.32) Total Amount Due $ 40,000.00 JP Morgan Chase One Chase Manhattan Plaza New York, NY 10017 ABA# 021 000 021 Credit Account: Blackstone Advisory Partners L.P. Accounts Receivable Dept. 16th Floor Account # 066-287472 Invoice Number: 60443 (1) Expenses incurred, but not yet processed due to timing differences will be billed at a later date. Blackstone Advisory Partners L.P. 345 Park Avenue New York, NY 10154 212 583-5000
Pg 39 of 136 Ambac Financial Group, Inc. Summary of Expenses Processed Through July 31, 2011 Invoice No. 60443 GL Detail Total Jul-2011 Expenses Ground Transportation - Local Travel $ 510.01 $ 510.01 Communications - Teleconferencing 943.79 943.79 Employee Meals 709.95 709.95 Document Production 358.90 358.90 Publishing Services 74.67 74.67 Total Expenses $ 2,597.32 $ 2,597.32 Ground Transportation $ 510.01 Communications 943.79 Meals 709.95 Document Production 358.90 Publishing Services 74.67 Total Expenses $ 2,597.32
Pg 40 of 136 Ambac Financial Group, Inc. Detail of Expenses Processed Through July 31, 2011 Invoice No. 60443 Ground Transportation - Local Travel Alverson (weeknight taxi home from Blackstone after working late) 05/23/11 21.12 Alverson (weeknight taxi home from Blackstone after working late) 06/01/11 8.55 Alverson (weeknight taxi home from Blackstone after working late) 06/02/11 19.35 Alverson (weekend taxi home from Blackstone) 06/05/11 9.20 Alverson (weeknight taxi home from Blackstone after working late) 06/06/11 10.30 Alverson (weeknight taxi home from Blackstone after working late) 06/21/11 8.40 Alverson (weeknight taxi home from Blackstone after working late) 06/22/11 8.90 Brown (taxi to client meeting in New York, NY from home) 06/02/11 18.00 Brown (taxi to Blackstone from client meeting in New York, NY) 06/02/11 22.70 Brown (taxi to client meeting in New York, NY from home) 06/06/11 19.92 Brown (taxi to Blackstone from client meeting in New York, NY) 06/06/11 22.22 Brown (weeknight taxi to New York Penn Station from Blackstone after working late) 06/06/11 10.80 Dwyer (weeknight taxi home from Blackstone after working late) 05/04/11 18.19 Dwyer (weeknight taxi home from Blackstone after working late) 05/05/11 11.70 Dwyer (weeknight taxi home from Blackstone after working late) 05/11/11 11.30 Dwyer (weeknight taxi home from Blackstone after working late) 05/12/11 11.60 Dwyer (weeknight taxi home from Blackstone after working late) 05/13/11 12.00 Dwyer (weeknight taxi home from Blackstone after working late) 05/16/11 12.10 Dwyer (weeknight taxi home from Blackstone after working late) 05/17/11 12.10 Dwyer (weeknight taxi home from Blackstone after working late) 05/18/11 11.30 Dwyer (weeknight taxi home from Blackstone after working late) 05/19/11 9.70 Dwyer (weeknight taxi home from Blackstone after working late) 05/20/11 12.80 Dwyer (weekend taxi to Blackstone from home) 05/21/11 16.00 Dwyer (weekend taxi home from Blackstone) 05/21/11 12.60 Dwyer (weeknight taxi home from Blackstone after working late) 05/23/11 13.30 Dwyer (taxi to client meeting in New York, NY from Blackstone) 05/25/11 12.50 Dwyer (weeknight taxi home from Blackstone after working late) 05/25/11 14.80 Dwyer (weeknight taxi home from Blackstone after working late) 05/31/11 11.70 Dwyer (weeknight taxi home from Blackstone after working late) 06/01/11 12.80 Dwyer (weeknight taxi home from Blackstone after working late) 06/02/11 16.20 Dwyer (weekend taxi home from Blackstone) 06/04/11 13.20 Dwyer (weekend taxi home from Blackstone) 06/05/11 10.80 Dwyer (taxi to client meeting in New York, NY from Blackstone) 06/06/11 19.56 Dwyer (weeknight taxi home from Blackstone after working late) 06/06/11 14.00 Dwyer (weeknight taxi home from Blackstone after working late) 06/07/11 24.60 Dwyer (weeknight taxi home from Blackstone after working late) 06/08/11 15.70 Subtotal - Ground Transportation - Local Travel $ 510.01 Communications - Teleconferencing Alverson 03/24/11 6.62 Alverson 05/24/11 36.22 Alverson 06/24/11 21.14 Brown 03/24/11 37.60 Brown 05/24/11 80.60 Brown 06/24/11 28.74 Wander 03/24/11 143.88 Wander 05/24/11 287.37 Wander 06/24/11 301.62 Subtotal - Communications - Teleconferencing 943.79 Employee Meals Alverson (weeknight working dinner meal @ Blackstone while working late) 05/04/11 20.00 Alverson (weeknight working dinner meal @ Blackstone while working late) 05/06/11 20.00 Alverson (weekend working dinner meal @ Blackstone) 05/08/11 20.00 Alverson (weeknight working dinner meal @ Blackstone while working late) 05/11/11 20.00 Alverson (weeknight working dinner meal @ Blackstone while working late) 05/17/11 20.00 Alverson (weeknight working dinner meal @ Blackstone while working late) 05/18/11 20.00 Alverson (weeknight working dinner meal @ Blackstone while working late) 05/23/11 20.00 Alverson (weeknight working dinner meal @ Blackstone while working late) 05/24/11 20.00 Alverson (weeknight working dinner meal @ Blackstone while working late) 06/01/11 20.00 Alverson (weekend working lunch meal @ Blackstone) 06/05/11 10.92 Alverson (weekend working dinner meal @ Blackstone) 06/05/11 18.48 Alverson (weeknight working dinner meal @ Blackstone while working late) 06/07/11 15.82 Alverson (weeknight working dinner meal @ Blackstone while working late) 06/09/11 20.00 Page 3 of 4
Pg 41 of 136 Ambac Financial Group, Inc. Detail of Expenses Processed Through July 31, 2011 Invoice No. 60443 Alverson (weeknight working dinner meal @ Blackstone while working late) 06/20/11 20.00 Alverson (weeknight working dinner meal @ Blackstone while working late) 06/27/11 20.00 Brown (weeknight working dinner meal @ Blackstone while working late) 04/20/11 20.00 Brown (weeknight working dinner meal @ Blackstone while working late) 05/04/11 20.00 Brown (weeknight working dinner meal @ Blackstone while working late) 05/17/11 20.00 Brown (weeknight working dinner meal @ Blackstone while working late) 06/06/11 10.32 Brown (weeknight working dinner meal @ Blackstone while working late) 06/14/11 14.41 Dwyer (weeknight working dinner meal @ Blackstone while working late) 05/12/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 05/13/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 05/16/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 05/18/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 05/19/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 05/20/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 05/23/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 05/24/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 06/01/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 06/02/11 20.00 Dwyer (weekend working lunch meal @ Blackstone) 06/05/11 20.00 Dwyer (weekend working dinner meal @ Blackstone) 06/05/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 06/06/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 06/07/11 20.00 Wander (weeknight working dinner meal @ Blackstone while working late) 05/04/11 20.00 Wander (weeknight working dinner meal @ Blackstone while working late) 05/23/11 20.00 Wander (weeknight working dinner meal @ Blackstone while working late) 05/24/11 20.00 Subtotal - Employee Meals 709.95 Document Production Dwyer (2,250 black & white photocopies calculated @ a rate of $0.14 per page) 07/14/11-07/15/11 315.00 Dwyer (439 black & white photocopies calculated @ a rate of $0.10 per page) 07/18/11-07/21/11 43.90 Subtotal - Document Production 358.90 Publishing Services Dwyer (preparation of presentation materials for meetings) 07/11/11 74.67 Subtotal - Publishing Services 74.67 Total Expenses $ 2,597.32 Page 4 of 4
Pg 42 of 136 Blackstone Advisory Partners L.P. November 29, 2011 Mr. Stephen Ksenak General Counsel Ambac Financial Group, Inc. One State Street Plaza New York, NY 10004 Monthly Fee for the period of August 1, 2011 through August 31, 2011: $ 200,000.00 Out-of-pocket expenses processed for the period through August 31, 2011: (1) Ground Transportation 450.39 Communications 375.84 Meals 550.95 Document Production 19.70 Research 256.25 1,653.13 Subtotal 201,653.13 Less: Payment Received (161,653.13) Total Amount Due $ 40,000.00 JP Morgan Chase One Chase Manhattan Plaza New York, NY 10017 ABA# 021 000 021 Credit Account: Blackstone Advisory Partners L.P. Accounts Receivable Dept. 16th Floor Account # 066-287472 Invoice Number: 60953 (1) Expenses incurred, but not yet processed due to timing differences will be billed at a later date. Blackstone Advisory Partners L.P. 345 Park Avenue New York, NY 10154 212 583-5000
Pg 43 of 136 Ambac Financial Group, Inc. Summary of Expenses Processed Through August 31, 2011 Invoice No. 60953 GL Detail Total Aug-2011 Expenses Ground Transportation - Local Travel $ 434.14 $ 434.14 Ground Transportation - Railroad 16.25 16.25 Communications - Teleconferencing 358.28 358.28 Communications - Federal Express 17.56 17.56 Meals with Clients 220.00 220.00 Employee Meals 330.95 330.95 Document Production 19.70 19.70 Internal Research 256.25 256.25 Total Expenses $ 1,653.13 $ 1,653.13 Ground Transportation $ 450.39 Communications 375.84 Meals 550.95 Document Production 19.70 Research 256.25 Total Expenses $ 1,653.13
Pg 44 of 136 Ambac Financial Group, Inc. Detail of Expenses Processed Through August 31, 2011 Invoice No. 60953 Ground Transportation - Local Travel Brown (taxi to client meeting in New York, NY from Blackstone) 06/21/11 7.08 Brown (taxi to Blackstone from client meeting in New York, NY) 06/21/11 18.38 Brown (taxi to Blackstone from client meeting in New York, NY) 06/29/11 16.60 Brown (weeknight taxi to New York Penn Station from Blackstone after working late) 06/29/11 7.56 Brown (weeknight taxi to New York Penn Station from Blackstone after working late) 07/05/11 10.30 Brown (taxi to client meeting in New York, NY from Blackstone) 07/08/11 7.67 Brown (taxi to client meeting in New York, NY from Blackstone) 07/15/11 20.16 Dwyer (weeknight taxi home from Blackstone after working late) 06/21/11 12.50 Dwyer (weeknight taxi home from Blackstone after working late) 06/22/11 11.30 Dwyer (weeknight taxi home from Blackstone after working late) 06/23/11 10.40 Dwyer (weekend taxi to Blackstone from home) 06/26/11 37.42 Dwyer (weekend taxi home from Blackstone) 06/26/11 12.50 Dwyer (weeknight taxi home from Blackstone after working late) 06/27/11 10.90 Dwyer (weeknight taxi home from Blackstone after working late) 06/28/11 8.50 Dwyer (weeknight taxi home from Blackstone after working late) 06/29/11 12.90 Dwyer (weeknight taxi home from Blackstone after working late) 07/11/11 10.90 Dwyer (weeknight taxi home from Blackstone after working late) 07/12/11 11.70 Dwyer (weeknight taxi home from Blackstone after working late) 07/13/11 15.40 Dwyer (weeknight taxi home from Blackstone after working late) 07/14/11 11.80 Feuerabendt (taxi to client meeting in New York, NY from home) 05/24/11 11.40 Feuerabendt (taxi to Blackstone from client meeting in New York, NY) 05/24/11 19.92 Feuerabendt (taxi to client meeting in New York, NY from home) 06/02/11 11.00 Feuerabendt (taxi to client meeting in New York, NY from Blackstone) 06/15/11 13.40 Feuerabendt (taxi to Blackstone from client meeting in New York, NY) 06/21/11 18.86 Feuerabendt (taxi to client meeting in New York, NY from home) 06/21/11 12.24 Feuerabendt (taxi home from client meeting in New York, NY) 07/14/11 11.60 Wander (weekend taxi to Blackstone from ferry station in New York, NY) 05/21/11 12.25 Wander (taxi to Blackstone from client meeting in New York, NY) 05/24/11 20.50 Wander (round trip ferry service from/to New Jersey to/from New York, NY) 06/02/11 21.50 Wander (taxi to client meeting in New York, NY from ferry station in New York, NY) 06/02/11 6.75 Wander (taxi to Blackstone from client meeting in New York, NY) 06/02/11 20.75 Subtotal - Ground Transportation - Local Travel 434.14 Ground Transportation - Railroad Brown (one-way train travel to New York, NY from New Jersey for client meeting) 06/29/11 9.75 Brown (one-way train travel to New Jersey from New York, NY after client meeting) 06/29/11 6.50 Subtotal - Ground Transportation - Railroad 16.25 Communications - Teleconferencing Brown 07/24/11 55.96 Wander 07/24/11 302.32 Subtotal - Communications - Teleconferencing 358.28 Communications - Federal Express de Almeida 07/28/11 17.56 Subtotal - Communications - Federal Express 17.56 Meals with Clients Feuerabendt (working dinner meal with D. Wallis of Ambac in New York, NY) 06/22/11 40.00 Feuerabendt (catered working lunch meal for 9 people during client meeting held @ Blackstone) 07/18/11 180.00 Subtotal - Meals with Clients 220.00 Employee Meals Alverson (weeknight working dinner meal @ Blackstone while working late) 05/17/11 20.00 Alverson (working lunch meal during client meeting in New York, NY) 05/25/11 14.50 Brown (weeknight working dinner meal @ Blackstone while working late) 06/15/11 20.00 Dwyer (working lunch meal during client meeting in New York, NY) 05/25/11 14.50 Dwyer (weeknight working dinner meal @ Blackstone while working late) 06/23/11 20.00 Dwyer (weekend working dinner meal @ Blackstone) 06/25/11 20.00 Dwyer (weekend working lunch meal @ Blackstone) 06/26/11 7.45 Dwyer (weeknight working dinner meal @ Blackstone while working late) 06/30/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 07/11/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 07/12/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 07/14/11 20.00 Dwyer (weeknight working dinner meal @ Blackstone while working late) 07/15/11 20.00 Feuerabendt (working lunch meal during client meeting in New York, NY) 05/25/11 14.50 Wander (weeknight working dinner meal @ Blackstone while working late) 05/17/11 20.00 Wander (weeknight working dinner meal @ Blackstone while working late) 05/20/11 20.00 Wander (weeknight working dinner meal @ Blackstone while working late) 06/01/11 20.00 Wander (weeknight working dinner meal @ Blackstone while working late) 06/02/11 20.00 Wander (weeknight working dinner meal @ Blackstone while working late) 06/03/11 20.00 Subtotal - Employee Meals 330.95 Page 3 of 4
Pg 45 of 136 Ambac Financial Group, Inc. Detail of Expenses Processed Through August 31, 2011 Invoice No. 60953 Document Production Dwyer (197 black & white photocopies calculated @ a rate of $0.10 per page) 08/15/11 19.70 Subtotal - Document Production 19.70 Internal Research Dwyer (online data research) 07/29/11 256.25 Subtotal - Internal Research 256.25 Total Expenses $ 1,653.13 Page 4 of 4
Pg 46 of 136 Mr. Stephen Ksenak General Counsel Ambac Financial Group, Inc. One State Street Plaza New York, NY 10004 Blackstone Advisory Partners L.P. November 29, 2011 Monthly Fee for the period of September 1, 2011 through September 30, 2011: $ 200,000.00 Out-of-pocket expenses processed for the period through September 30, 2011: (1) Ground Transportation $ 742.41 Communications 298.12 Meals 885.62 1,926.15 Subtotal 201,926.15 Less: Payment Received (161,926.15) Total Amount Due $ 40,000.00 JP Morgan Chase One Chase Manhattan Plaza New York, NY 10017 ABA# 021 000 021 Credit Account: Blackstone Advisory Partners L.P. Accounts Receivable Dept. 16th Floor Account # 066-287472 Invoice Number: 62391 (1) Expenses incurred, but not yet processed due to timing differences will be billed at a later date. Blackstone Advisory Partners L.P. 345 Park Avenue New York, NY 10154 212 583-5000