UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT of NEW YORK ------X : in Re : Chapter 11 : Hostess Brands, Inc., Et Al.,1 : Case No

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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------x : In re : Chapter 11 : Hostess Brands, Inc., et al.,1 : Case No. 12-_____ (___) : Debtors. : (Jointly Administered) : ------x

APPLICATION OF DEBTORS AND DEBTORS IN POSSESSION, PURSUANT TO SECTIONS 327(a) AND 329(a) OF THE BANKRUPTCY CODE, BANKRUPTCY RULES 2014(a) AND 2016(b) AND LOCAL BANKRUPTCY RULES 2014-1 AND 2016-1, FOR AN ORDER AUTHORIZING THEM TO RETAIN AND EMPLOY JONES DAY AS COUNSEL, NUNC PRO TUNC AS OF THE PETITION DATE

TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE:

Hostess Brands, Inc. and its five domestic direct and indirect subsidiaries, as debtors and debtors in possession (collectively, "Hostess" or the "Debtors"), respectfully represent as follows:

Background

1. On the date hereof (the "Petition Date"), the Debtors commenced their

reorganization cases by filing voluntary petitions for relief under chapter 11 of title 11 of the

United States Code (the "Bankruptcy Code"). By a motion filed on the Petition Date, the

Debtors have requested that their chapter 11 cases be consolidated for procedural purposes only and administered jointly.

1 The Debtors are the following six entities (the last four digits of their respective taxpayer identification numbers follow in parentheses): Hostess Brands, Inc. (0322), IBC Sales Corporation (3634), IBC Services, LLC (3639), IBC Trucking, LLC (8328), Interstate Brands Corporation (6705) and MCF Legacy, Inc. (0599).

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2. The Debtors are authorized to continue to operate their business and

manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the

Bankruptcy Code.

3. Hostess Brands, Inc. is a Delaware corporation. Hostess Brands, Inc. is

the direct or indirect parent of the other Debtors, each of which is wholly-owned by Hostess

Brands, Inc. or one of its Debtor subsidiaries. The Debtors maintain their corporate headquarters

in Irving, Texas. Debtor IBC Sales Corporation owns principal real property assets in Elmsford,

New York.

4. Founded in 1930, Hostess is one of the largest wholesale bakers and

distributors of bread and snack cakes in the United States. Today, Hostess sells an array of

popular products under new and iconic brands such as Butternut®, Ding Dongs®, Dolly

Madison®, Drake's®, Home Pride®, Ho Hos®, Hostess®, Merita®, Nature's Pride®,

Twinkies® and Wonder®. The Debtors operate 36 bakeries, 565 distribution centers,

approximately 5,500 delivery routes and 570 bakery outlet stores throughout the United States.

5. The Debtors operate in a mature industry with high levels of competition

and related pricing pressures, thin operating margins and competitors with more sophisticated

technology and significant cost advantages. Over the past several decades and continuing to the

present, the industry has experienced significant consolidation. As a result of this consolidation,

the Debtors' primary national and large regional competitors are, at once, expanding their market

reach and consolidating operations through acquisitions and other means, thus widening their

cost advantages. Importantly, the Debtors' competitors employ work forces that are not

unionized or only partially unionized, which allow them to operate with significantly less burdensome operating restrictions and overall cost structures. As a direct result of their

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significant and long-standing unionized workforce, the Debtors have significant legacy costs,

primarily in the form of pension and medical benefits obligations, that their competitors do not

share. Whether the Debtors can achieve long-term viability depends directly and substantially on

the Debtors' ability to achieve dramatic change to their labor agreements, with a corresponding

material reduction in their cost structure and legacy pension and medical obligations, and a

restructuring of their capital structure. That is the purpose and the focus of these chapter 11

cases.

6. The Debtors' production and distribution systems are heavily dependent on

labor-intensive processes involving, among other things, complicated and extensive local route

delivery systems that service nearly all of the continental United States and a national footprint

of 36 bakeries. To staff this labor-intensive network, the Debtors employ approximately 19,000

people, of which 83% are members of unions who are subject to 372 collective bargaining

agreements. The Debtors' unionized employees belong to 12 separate unions, but the

overwhelming majority of the Debtors' unionized workforce are members of either the

International Brotherhood of Teamsters (the "IBT") or the Bakery, Confectionery, Tobacco

Workers & Grain Millers International Union (the "BCT").

7. Because their workforce is heavily unionized, the Debtors also participate

in 40 multiemployer pension plans, which, by law, exist only where one or more employers each

contribute to a pension plan pursuant to one or more collectively-bargained agreements. The

Debtors' cash contribution obligations to these plans go beyond amounts attributable to the

retirement benefits for the Debtors' own workforce; they also encompass the contributions

attributable to the retirement benefits of the workforces of other employers who have ceased to

exist or have otherwise withdrawn from the plans. By statute, the plans are structured to place

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the financial burdens of all of a plan's retirees upon those remaining companies that have active

union employees. Over the last several decades, the number of companies and the active

employee base supporting these pension plans have shrunk significantly, thus increasing the

burden on the companies, such as Hostess, that remain.

8. The Debtors' management team, which as currently comprised has only

been in place for slightly more than a year, has taken a fresh look at, and has spent considerable

time and energy analyzing, the Debtors' operations and cost structure. As a result of that review,

management has developed a business plan that it believes will allow the Debtors to regain long-

term viability. The business plan is premised upon achieving a competitive cost structure,

including relief from uncompetitive pension and medical benefit legacy costs, re-emphasizing

and funding the marketing of the Debtors' brands, streamlining and modernizing the distribution of product and obtaining relief from other restrictive work rules that limit the Debtors' flexibility and competitiveness.

9. In particular, the Debtors believe that their successful reorganization must encompass systemic, dramatic change, including:

a. withdrawing completely from multiemployer pension plans to achieve relief from the crippling costs of these plans that are, in large part, a result of the required funding of retirees whose former employers no longer contribute to the plans;

b. addressing the Debtors' legacy health and welfare costs to achieve a substantial reduction in the cost of providing benefits to bring such costs in line with current competitive market costs;

c. modifying the Debtors' existing collective bargaining agreements to relax work rules and obtain other relief necessary to both bring the Debtors' labor costs in line with that of their competitors and provide the operating flexibility necessary to respond to changing customer requirements for delivery and service;

d. securing new capital investment to modernize and automate the Debtors' production and distribution operations; and

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e. restructuring the Debtors' capital structure to significantly reduce debt and related expense.

10. This company has been down this road before. Hostess (then known as

Interstate Bakeries Corporation ("IBC")) sought bankruptcy relief in 2004 (the "IBC

Bankruptcy"). The complex and sometimes highly contentious IBC Bankruptcy lasted more than

four and a half years and achieved only limited, incremental change to the company's cost structure leaving the multiemployer pension benefits and costs untouched, while allowing the company to emerge as a highly levered entity. As a result, the Debtors currently have four separate tranches of long-term secured debt, under which they have aggregate outstanding liabilities of approximately $860 million. The Debtors exited from the IBC Bankruptcy on

February 3, 2009 as a privately-held company, whose largest equityholders are IBC Investors I,

LLC, IBC Investors II, LLC and IBC Investors III, LLC (collectively, the "Sponsor Funds") and a subset of their then existing lenders.2

11. Adjusting for one-off receipts, such as tax refunds and the proceeds from asset sales, the Debtors have consumed approaching $250 million in cash since exiting the IBC

Bankruptcy in 2009.

12. Accordingly, after developing their business plan, the Debtors initiated

negotiations with their lenders and unions to effect the transformational changes required for

their business. At the same time, the Debtors required additional liquidity to allow these

discussions and negotiations to occur. Accordingly, the Debtors began active discussions with

2 The current stockholders of Hostess include, in addition to the Sponsor Funds: Craig D. Jung, SPCP Group, LLC, Monarch Debt Recovery Master Fund Ltd, Monarch Opportunities Master Fund Ltd, Monarch Income Master Fund Ltd, McDonnell Loan Opportunity Ltd., Arrow Distressed Securities Fund, Schultze Apex Master Fund, Ltd., Schultze Master Fund, Ltd., Gephardt Group Labor Advisory Services, Mars & Co. Consulting, LLC and Brian Driscoll.

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their lenders regarding additional financing. As a result of those discussions, in March 2011,

Hostess issued $30 million of 10% Secured Convertible PIK-Election Series C Notes, due 2019

which were purchased by two of the Sponsor Funds. Additionally, in June 2011, two of the

Sponsor Funds invested an additional $10 million in the form of equity. Finally, in late August, the Debtors were able to obtain an additional $20 million of financing from certain of their first lien term lenders. The purpose of these additional financings was to permit the Debtors time to negotiate with the unions outside of a chapter 11 filing.

13. After allowing the IBT and BCT to commence extensive due diligence in

July and August of 2011 (which diligence continued thereafter), the Debtors initiated discussions with the IBT and the BCT in September and provided both unions with proposals for modification of their respective collective bargaining agreements. The Debtors provided the IBT and the BCT with access to a data room containing over 625 documents to enable them to evaluate the proposals. Additionally, the Debtors responded to over 160 diligence requests from the professionals representing the IBT and the BCT.

14. After months of bargaining, the Debtors were unable to reach agreement with their unions regarding pensions, health and welfare benefits and work rule changes before insufficient liquidity necessitated this filing.

15. Accordingly, the Debtors have filed these chapter 11 cases to conserve their remaining cash and access the additional debtor-in-possession funding required to continue to operate while seeking to finalize negotiations regarding the terms of their labor agreements and capital structure.

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16. Additional information regarding the background of the Debtors, the need

for the filing of these cases and the goals for the Debtors within chapter 11 are set forth in the

Affidavit of Brian J. Driscoll, which is filed contemporaneously herewith.

Jurisdiction

17. This Court has subject matter jurisdiction to consider this matter pursuant

to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue is proper

before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

Relief Requested

18. Pursuant to sections 327(a) and 329(a) of title 11 of the United States

Code (the "Bankruptcy Code"), Rules 2014(a) and 2016(b) of the Federal Rules of Bankruptcy

Procedure (the "Bankruptcy Rules") and Local Bankruptcy Rules 2014-1 and 2016-1 of the

Local Bankruptcy Rules for the Southern District of New York (the "Local Bankruptcy Rules"),

the Debtors hereby seek the entry an order authorizing them to retain and employ Jones Day as

counsel in these chapter 11 cases, nunc pro tunc as of the Petition Date.3 In support of this

Application, the Debtors submit (a) the Declaration of Corinne Ball, a partner of Jones Day

(the "Ball Declaration"), a copy of which is incorporated herein by reference and attached hereto as Exhibit A, and (b) Jones Day's Disclosure of Compensation (the "Disclosure of

Compensation"), a copy of which is incorporated herein by reference and attached hereto as

Exhibit B.

3 Nunc pro tunc retention is appropriate because this Application was filed on the Petition Date, Jones Day will continue to provide services to the Debtors from and after the Petition Date and a hearing on this Application will not be conducted, and an order will not be entered, until after the Petition Date.

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Argument

Jones Day's Qualifications

19. Jones Day is particularly well qualified to serve as the Debtors' counsel in these chapter 11 cases. Jones Day is one of the largest law firms in the world, with a national and international practice, and has substantial experience in virtually all aspects of the law that may potentially arise in these chapter 11 cases, including bankruptcy, corporate, employee benefits, environmental, finance, intellectual property, labor and employment, litigation, mergers and acquisitions, real estate, securities and tax expertise.

20. Jones Day's restructuring practice group consists of approximately

80 attorneys practicing in offices throughout the United States and overseas. Jones Day's restructuring lawyers have played significant roles in a wide array of chapter 11 cases, including those of Chrysler LLC; Dana Corporation; Allegheny Health, Education and Research

Foundation; Borden Chemicals and Plastics Operating Limited Partnership; Boscov's, Inc.;

Burlington Industries, Inc.; Calpine Corporation; Cone Mills Corporation; The Elder-Beerman

Stores Corp.; Enron Corporation; Fairfield Communities Inc.; Federated Department Stores, Inc.;

FLYi, Inc.; Fruehauf Trailer Corporation; Globalstar L.P.; Great American Communications

Company; GWI, Inc.; Harry & David Holdings, Inc.; HomePlace Stores, Inc.; HQ Global

Holdings, Inc.; The Imperial Home Decor Group Inc.; Interep National Radio Sales, Inc.; Kaiser

Aluminum Corporation; Kmart Corporation; Laidlaw Inc.; Lehman Brothers Holdings Inc.;

Levitz Home Furnishings, Inc.; Loewen Group International, Inc.; LTV Steel Company, Inc.;

Meridian Automotive Systems, Inc.; Metaldyne Corp.; Montgomery Ward & Co.; Morrison

Knudsen Corporation; National Century Financial Enterprises, Inc.; Napster, Inc.; NationsRent,

Inc.; NexPak Corporation; Oglebay Norton Company; Olympia & York Developments Limited;

Orbital Imaging Corporation; Penton Business Media Holdings; Performance Transportation

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Services, Inc.; Phar-Mor, Inc.; Pillowtex, Inc.; Plant Insulation Co.; PLVTZ, Inc.; Purina Mills,

Inc.; Resorts International, Inc.; R.H. Macy & Co., Inc.; Slater Steel U.S., Inc.; Snyder's Drug

Stores, Inc.; Specialty Foods Corporation; Specialty Products Holding Corp.; Tower Automotive,

Inc.; USG Corporation; WHX Corporation; Wiltel Communications; Woodward & Lothrop,

Inc.; and World Kitchen, Inc.

21. Jones Day is also familiar with the Debtors' business. Jones Day has

provided services to the Debtors in connection with various prepetition matters, including

(a) assisting the Debtors with certain labor issues, (b) providing advice regarding the Debtors'

postpetition financing and (c) the preparation of these chapter 11 cases. In these and other

matters, Jones Day's professionals have worked closely with the Debtors' management and other

professionals and, as a result, have become well acquainted with the Debtors' history, business

operations, capital structure and related matters. Accordingly, Jones Day has developed

substantial knowledge regarding the Debtors that will result in effective and efficient services in

these chapter 11 cases.

Services to Be Provided by Jones Day

22. The employment of Jones Day as the Debtors' restructuring counsel,

pursuant to the terms of this Application and the parties' engagement letter, dated March 29,

2011, incorporated herein by reference and attached hereto as Exhibit C (the "Engagement

Letter"),4 is appropriate and necessary to enable the Debtors to execute their duties as debtors

and debtors in possession and to preserve and maximize the value of the Debtors' estates for all

stakeholders. The Engagement Letter describes, among other things (a) the services that Jones

4 Any references to, or descriptions of, the Engagement Letter herein are qualified by the express terms of the Engagement Letter, which shall govern if there is any conflict between the Engagement Letter and the descriptions provided herein.

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Day anticipates performing for the Debtors in these chapter 11 cases, (b) the terms and conditions of Jones Day's proposed engagement by the Debtors and (c) the means by which

conflicts of interest will be identified, disclosed and avoided. The Debtors anticipate that Jones

Day will render general legal services to the Debtors as needed throughout the course of these

chapter 11 cases, including, without limitation, bankruptcy, employee benefits, environmental,

finance, general corporate, intellectual property, labor and employment, litigation, mergers and

acquisitions, real estate and securities and tax advice. In particular, the Debtors anticipate that

Jones Day will perform, among others, the following legal services:

(a) advising the Debtors of their rights, powers and duties as debtors and debtors in possession continuing to operate and manage their respective businesses and properties under chapter 11 of the Bankruptcy Code;

(b) preparing on behalf of the Debtors all necessary and appropriate applications, motions, proposed orders, other pleadings, notices, schedules and other documents, and reviewing all financial and other reports to be filed in these chapter 11 cases;

(c) advising the Debtors concerning, and preparing responses to, applications, motions, other pleadings, notices and other papers that may be filed by other parties in these chapter 11 cases;

(d) advising the Debtors with respect to, and assisting in the negotiation and documentation of, financing agreements and related transactions;

(e) reviewing the nature and validity of any liens asserted against the Debtors' property and advising the Debtors concerning the enforceability of such liens;

(f) advising the Debtors regarding their ability to initiate actions to collect and recover property for the benefit of their estates;

(g) advising and assisting the Debtors in connection with any asset dispositions;

(h) advising, and representing, the Debtors with respect to their labor and collective bargaining agreements;

(i) advising, and representing, the Debtors with respect to their pension and retiree benefit obligations;

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(j) advising and assisting the Debtors in negotiations with the Debtors' suppliers, certain customers, debt holders and other stakeholders;

(k) advising the Debtors concerning executory contract and unexpired lease assumptions, assignments and rejections and lease restructurings and recharacterizations;

(l) advising the Debtors in connection with the formulation, negotiation and promulgation of a plan or plans of reorganization, and related transactional documents;

(m) assisting the Debtors in reviewing, estimating and resolving claims asserted against the Debtors' estates;

(n) commencing and conducting litigation that is necessary and appropriate to assert rights held by the Debtors, protect assets of the Debtors' chapter 11 estates or otherwise further the goal of completing the Debtors' successful reorganization;

(o) providing non-bankruptcy services for the Debtors to the extent requested by the Debtors; and

(p) performing all other necessary and appropriate legal services in connection with these chapter 11 cases for or on behalf of the Debtors.

23. The Debtors require knowledgeable counsel to render these essential

professional services. Jones Day has substantial expertise in all of these areas. Moreover, as

indicated above, Jones Day has obtained valuable institutional knowledge of the Debtors'

business and financial affairs as a result of its representation of the Debtors prior to the Petition

Date. Accordingly, the Debtors respectfully submit that Jones Day is uniquely well qualified to

perform these services and represent the Debtors' interests in these chapter 11 cases.

24. The Debtors are also filing an application to retain Stinson Morrison

Hecker LLP ("Stinson") as general corporate and conflicts counsel in these chapter 11 cases and

Venable LLP ("Venable") as special employee benefits counsel and further anticipate utilizing

certain other counsel in the ordinary course of their business (the "Ordinary Course

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Professionals").5 Because such counsel have been given well-defined roles by the Debtors'

management, Jones Day, Stinson, Venable and the Ordinary Course Professionals will not

duplicate the services they provide to the Debtors. Jones Day, Stinson, Venable and the

Ordinary Course Professionals will function cohesively to ensure that legal services provided to

the Debtors by each firm are not duplicative. Moreover, at all stages of these chapter 11 cases,

the Debtors' in-house legal department will supervise the various legal professionals retained by

the Debtors to further ensure that no firm duplicates the services provided by another.

Compensation and Fee Applications

25. Pursuant to the terms of the Engagement Letter, and subject to the Court's

approval of this Application, Jones Day intends to: (a) charge for its legal services on an hourly

basis in accordance with the ordinary and customary hourly rates in effect on the date services

are rendered; and (b) seek reimbursement of actual and necessary out-of-pocket expenses.6

26. The names, positions, resident offices and current hourly rates of those

Jones Day lawyers currently expected to spend significant time on these chapter 11 cases are attached to the Ball Declaration as Schedule 3. Jones Day's hourly fees are comparable to those

charged by attorneys of similar experience and expertise for engagements of scope and

complexity similar to these chapter 11 cases. For all of these reasons, Jones Day's rates are

reasonable and favorable to the Debtors' estates.

5 Contemporaneously herewith, the Debtors also have filed a motion (the "Ordinary Course Professionals Motion") seeking authority to continue to employ, retain and pay certain legal professionals (which comprise the "Ordinary Course Professionals") in the ordinary course of business on terms substantially similar to those in effect prior to the Petition Date, without the need to file individual retention applications for each of these professionals.

6 The hourly rates charged by Jones Day professionals differ based on, among other things, the professional's level of experience and the rates normally charged in the specific office in which the professional is resident. Any attorneys that have joined Jones Day after January 31, 2011 or join in the future that perform services for the Debtors will be billed at the rate at which they were billed after they first joined Jones Day.

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27. Jones Day's hourly billing rates are subject to periodic review and

adjustments. Prior to any increases in the rates as set forth in Schedule 3 of the Ball Declaration,

Jones Day will file a supplemental affidavit with the Court and give ten business days' notice to

the Office of the United States Trustee for the Southern District of New York (the "U.S.

Trustee") and any official committee, which supplemental affidavit shall explain the basis for the

requested rate increases in accordance with section 330(a)(3)(F) of the Bankruptcy Code and

indicate whether the Debtors have received notice of and approved the proposed rate increase.

28. Jones Day intends to maintain detailed, contemporaneous time records in

six minute intervals and apply to the Court for payment of compensation and reimbursement of

expenses in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy

Rules, the Local Bankruptcy Rules and any additional procedures that may be established by the

Court in these chapter 11 cases. In addition, Jones Day understands that interim and final fee

awards are subject to approval by this Court.

Disclosure Concerning Disinterestedness

29. The Ball Declaration discloses Jones Day's connections to the Debtors and parties in interest in these cases and is incorporated herein by reference. In reliance on the Ball

Declaration, and except as set forth therein, the Debtors believe that: (a) Jones Day has no

connection with the Debtors, their affiliates, their creditors, the United States Trustee for the

Southern District of New York (the "U.S. Trustee"), any person employed in the office of the

U.S. Trustee or any other party with an actual or potential interest in these chapter 11 cases or

their respective attorneys or accountants; (b) Jones Day is not a creditor, equity security holder or insider of the Debtors; (c) none of Jones Day's partners or associates is, or was within two years of the Petition Date, a director, officer or employee of the Debtors; and (d) Jones Day neither

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holds nor represents an interest materially adverse to the Debtors or their respective estates.

Accordingly, the Debtors believe that Jones Day is a "disinterested person," as defined in

section 101(14) of the Bankruptcy Code and as required by section 327(a) of the Bankruptcy

Code.

Professional Compensation

Professional Compensation for Debt Restructuring and Prepetition Services

30. On or about March 31, 2011 the Debtors provided Jones Day with an

advance payment of $250,000 (the "Initial Deposit") to pay for legal services rendered by Jones

Day in connection with the Debtors' out-of-court debt restructuring efforts. The Debtors

replenished and maintained the Initial Deposit through the provision of subsequent deposits

(collectively, the "Replenishing Deposits" and, collectively with the Initial Deposit, the

"Retainer"):

Date of Replenishing Deposit(s) Amount of Replenishing Deposit(s)

May 25, 2011 $100,000 June 7, 2011 $200,000 July 21, 2011 $200,000 August 4, 2011 $375,000 August 11, 2011 $400,000 August 19, 2011 $400,000 August 31, 2011 $300,000 September 8, 2011 $150,000 September 12, 2011 $250,000 September 23, 2011 $100,000 September 30, 2011 $100,000 October 7, 2011 $175,000 October 14, 2011 $100,000 October 20, 2011 $100,000 November 4, 2011 $150,000 November 7, 2011 $100,000 November 10, 2011 $300,000 November 10, 2011 $250,000 December 7, 2011 $200,000 December 9, 2011 $350,000 December 15, 2011 $300,000

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December 22, 2011 $750,000 January 10, 2012 $500,000

The sources of the Initial Deposit and the Replenishing Deposits were the Debtors' operating

cash or borrowings under their prepetition credit facilities.

31. From time to time, Jones Day applied the Retainer proceeds to actual fees

and expenses (collectively, the "Prepetition Draws"), including a draw immediately prior to the

Petition Date of $625,471.22 for estimated fees and expenses. These Prepetition Draws totaled

$5,865,299.94.

32. As set forth in the Disclosure of Compensation, as of the Petition Date,

$812,750.36 of the Retainer remains unapplied.7 Accordingly, Jones Day believes that it will be

fully paid for its prepetition services. To the extent Jones Day is not fully compensated for such services, it will waive any outstanding amounts for prepetition services rendered. Other than through these applications of the retainer and the payments described in paragraph 35 below,

Jones Day has not been paid any amounts by the Debtors in the year preceding the Petition Date.

33. The Retainer has not been fully exhausted since the Initial Deposit was made. Upon the conclusion of Jones Day's representation of the Debtors (or as otherwise directed by the Court), Jones Day will apply the Retainer against any unpaid fees or

7 Jones Day has not yet reconciled its actual fees and expenses through the Petition Date against estimated fees and expenses through the Petition Date. Any Prepetition Draws in excess of Jones Day's actual fees and expenses for the applicable invoice period will be added to, and treated as part of, the Retainer. Any shortfall in the Prepetition Draws compared to Jones Day's actual fees and expenses will result in an application, and corresponding reduction in the amount, of the Retainer. Accordingly, the amount of the Retainer remaining after the reconciliation and application process may differ from the amount stated above. Jones Day expects to: (a) complete its reconciliation of prepetition fees and expenses actually incurred through the Petition Date no later than the filing of its first interim fee application in these cases; (b) make a corresponding adjustment to the amount and application of the Retainer described in the text above on or about that date; and (c) disclose such adjustment in its first interim fee application.

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unreimbursed disbursements, with any unapplied portion of the Retainer to be promptly returned

to the Debtors or as directed by the Debtors or the Court.

Professional Compensation for Non-Bankruptcy Services

34. Prior to the Petition Date, Jones Day has been paid for litigation and other

non-bankruptcy advice and services (the "Non-Bankruptcy Services"). For the period beginning

January 1, 2011 through the Petition Date, Jones Day has received payments from the Retainer

aggregating $171,949.70 for Non-Bankruptcy Services.

35. As described in paragraph 32 above, the Retainer has not been fully

exhausted since the Initial Deposit was made. Upon the conclusion of Jones Day's representation

of the Debtors (or as otherwise directed by the Court), Jones Day will apply the Retainer against

any unpaid fees or unreimbursed disbursements relating to the Non-Bankruptcy Services, with

any unapplied portion of the Retainer to be promptly returned to the Debtors or as directed by the

Debtors or the Court.

Basis for Relief Requested

36. Under section 327(a) of the Bankruptcy Code, a debtor in possession is

authorized to employ professional persons "that do not hold or represent an interest adverse to

the estate, and that are disinterested persons, to represent or assist the [debtor in possession] in

carrying out [its] duties under this title." 11 U.S.C. § 327(a). 8 Section 1107(b) of the

8 Section 101(14) of the Bankruptcy Code defines the phrase "disinterested person" as:

a person that —

(A) is not a creditor, an equity security holder, or an insider; (B) is not and was not, within 2 years before the date of the filing of the petition, a director, officer, or employee of the debtor; and (C) does not have an interest materially adverse to the interest of the estate or of any class of creditors or equity security holders, by reason of any (continued. . .)

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Bankruptcy Code elaborates upon sections 101(14) and 327(a) of the Bankruptcy Code in cases

under chapter 11 of the Bankruptcy Code and provides that "a person is not disqualified for

employment under section 327 of [the Bankruptcy Code] by a debtor in possession solely

because of such person's employment by or representation of the debtor before the

commencement of the case." 11 U.S.C. § 1107(b).

37. As required by Bankruptcy Rule 2014(a) and Local Bankruptcy

Rule 2014-1,9 the above-described facts set forth in the Application and the information in the

Exhibits attached hereto set forth: (a) the specific facts showing the necessity for Jones Day's

employment; (b) the reasons for the Debtors' selection of Jones Day as their restructuring

counsel in connection with their chapter 11 cases; (c) the professional services proposed to be

provided by Jones Day; (d) the arrangement between the Debtors and Jones Day with respect to

(. . . continued) direct or indirect relationship to, connection with, or interest in, the debtor, or for any other reason. 11 U.S.C. § 101(14).

9 Bankruptcy Rule 2014(a) provides that an application seeking the employment of professional persons pursuant to section 327 of the Bankruptcy Code:

shall state the specific facts showing the necessity for the employment, the name of the person to be employed, the reasons for the selection, the professional services to be rendered, any proposed arrangement for compensation, and, to the best of the applicant's knowledge, all of the person's connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the United States trustee, or any person employed in the office of the United States trustee. The application shall be accompanied by a verified statement of the person to be employed setting forth the person's connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the United States trustee, or any person employed in the office of the United States trustee.

Local Bankruptcy Rule 2014-1 further provides that "[a]n application for the employment of a professional person pursuant to §§ 327 and 328 of the Bankruptcy Code shall state the specific facts showing the reasonableness of the terms and conditions of the employment, including the terms of any retainer, hourly fee, or contingent fee arrangement."

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Jones Day's compensation, including information on retainers and hourly fees and the

reasonableness thereof; and (e) to the best of the Debtors' knowledge, the extent of Jones Day's

connections, if any, to certain parties in interest in these matters. Accordingly, Jones Day's

retention by the Debtors should be approved.

Notice

38. No trustee or examiner has been appointed in these chapter 11 cases.

Notice of this Application has been provided to: (a) the U.S. Trustee; (b) counsel to the Debtors'

postpetition lenders; (c) counsel to General Electric Capital Corporation, as agent under the

Debtors' first lien asset-backed revolving credit facility; (d) counsel to Silver Point Finance,

LLC, as agent under the Debtors' first lien term loan facility and third lien credit facility; (e)

counsel to The Bank of New York Mellon Trust Company, as indenture trustee for the Debtors'

fourth lien 5% secured convertible notes; (f) counsel to the Sponsor Funds; (g) counsel to the

IBT; (h) counsel to the BCT; and (i) those creditors holding the 40 largest unsecured claims

against the Debtors' estates. The Debtors submit that no other or further notice need be provided.

No Prior Request

39. No prior request for the relief sought in this Application has been made to

this or any other Court in connection with these chapter 11 cases.

WHEREFORE, the Debtors respectfully request that the Court: (i) enter an order

substantially in the form attached hereto as Exhibit D, granting the relief requested herein; and

(ii) grant such other and further relief to the Debtors as the Court may deem proper.

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Dated: January 11, 2012 Respectfully submitted, New York, New York

Hostess Brands, Inc., et al. Debtors and Debtors in Possession

/s/ John Stewart John Stewart Chief Financial Officer of Hostess Brands, Inc. Filed by:

/s/ Corinne Ball Corinne Ball Heather Lennox Lisa Laukitis Veerle Roovers JONES DAY 222 East 41st Street New York, New York 10017 Telephone: (212) 326-3939 Facsimile: (212) 755-7306

- and -

Ryan T. Routh JONES DAY North Point 901 Lakeside Avenue Cleveland, Ohio 44114 Telephone: (216) 586-3939 Facsimile: (216) 579-0212

PROPOSED ATTORNEYS FOR DEBTORS AND DEBTORS IN POSSESSION

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EXHIBIT A

[Ball Declaration]

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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------x : In re : Chapter 11 : Hostess Brands, Inc., et al.,1 : Case No. 12-_____ (___) : Debtors. : (Jointly Administered) : ------x

DECLARATION OF CORINNE BALL

STATE OF NEW YORK ) ) ss: COUNTY OF NEW YORK )

Pursuant to Rule 2014(a) of the Federal Rules of Bankruptcy Procedure

(the "Bankruptcy Rules") and Local Bankruptcy Rule 2014-1 of the Local Bankruptcy Rules for

the Southern District of New York (the "Local Bankruptcy Rules"), I, Corinne Ball, declare:

1. I am an attorney at law admitted and in good standing to practice in the

State of New York and before (a) the United States Court of Appeals for the Second Circuit, (b)

the United States District Court for the Southern District of New York and (c) the United States

District Court for the Eastern District of New York.

2. I am a partner in the law firm of Jones Day and am duly authorized to

make this Declaration on behalf of Jones Day. I make this Declaration in support of the

Application of Debtors and Debtors In Possession Pursuant to Sections 327(a) and 329(a) of the

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Bankruptcy Code, Bankruptcy Rules 2014(a) and 2016(b) and Local Bankruptcy Rules 2014-1

and 2016-1 for an Order Authorizing Them to Retain and Employ Jones Day as Counsel, Nunc

Pro Tunc as of the Petition Date (the "Application").2 The facts set forth in this Declaration are

personally known to me and, if called as a witness, I could and would testify thereto.

3. Jones Day's restructuring practice group consists of approximately