Salt House - Chapter 11 Plan Terms

Plan Terms

Overview

• On December 29, 2025 (the "Petition Date"), Salt House, Inc. (f/k/a Food52, Inc.) (the "Debtor") commenced a voluntary case under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware, Case No. 25-12277 (LSS).
• The Debtor proposes a Chapter 11 Plan of Liquidation (the "Plan") under section 1121 of the Bankruptcy Code, the primary objective of which is to maximize the value of recoveries to Holders of Allowed Claims and to distribute all property of the Estate that is or becomes available for distribution.
• The Plan contemplates a liquidation of the Debtor and its Estate and provides for, among other things:
  • Payment of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Class 1 Secured Claims, and Allowed Class 2 Other Priority Claims in full, or otherwise rendering such Claims Unimpaired;
  • Appointment of a Liquidating Trustee; and
  • Establishment of a Liquidating Trust to (i) administer Claims and liquidate and distribute the Liquidating Trust Assets to Holders of Allowed Class 3 General Unsecured Claims and (ii) wind down the Debtor.
• The Debtor's Estate currently holds approximately $5,830,075 in cash, after accounting for accrued and unpaid expenses, and holds various other assets, including Retained Causes of Action.

Debtor Background

• The Company was founded in 2009 by Amanda Hesser, a former New York Times food editor, and Merrill Stubbs, a writer and entrepreneur, as a digital-first food community centered on cooking, recipes, and storytelling. In 2013, the Company launched an e-commerce shop under the Food52.com domain.
• In 2019, TCG Capital Management, LP (the "Sponsor"), a private equity firm, acquired a majority stake in the Company for $83 million. Over the next few years, with over $100 million in additional funding from the Sponsor and over $20 million in debt financing, the Company developed its own private label products and acquired two additional home goods brands -- Schoolhouse and Dansk Designs.
• Prior to the Sales, the Company operated three distinct brands:
  • Food52: a media and commerce platform uniting food, home, and lifestyle through content, community, and curated products, reaching a monthly audience of approximately 37 million;
  • Schoolhouse: an American lighting and specialty retail brand based in Portland, Oregon, selling heirloom-quality home goods; and
  • Dansk Designs: an American cookware and tabletop brand inspired by Danish designs.
• The Company is a privately held Delaware corporation. As of the Petition Date, the Sponsor's affiliates owned approximately 73% of the Company's stock on a fully diluted basis, with approximately 78 other stockholders, none holding 10% or more. The Company has one subsidiary, F52 Flatiron, LLC, a dormant entity with no assets.
• In the months prior to the Petition Date, the Company employed approximately 100 employees; however, due to the cash sweep described below, approximately 80 employees were terminated prior to the Petition Date. The Company has since rejected the leases for both its Brooklyn, New York and Portland, Oregon locations and terminated its remaining employees following the closing of the Sales.

Prepetition Capital Structure

• At the commencement of this Chapter 11 Case, the Debtor's secured funded debt obligations totaled approximately $1,916,000, consisting of:
  • Approximately $411,000 owed to Avidbank ("Avid") pursuant to a Loan and Security Agreement dated April 12, 2021 (the "Avid Loan Agreement"), which provided funding of up to $14 million for general working capital purposes, secured by a first priority lien on substantially all of the Debtor's assets; and
  • Approximately $1,505,000 owed to the Prepetition Noteholders (TCG 2.0 Food52, LLC and TCG 3.0 Food52, LLC) pursuant to a Secured Promissory Note dated December 22, 2025 (the "Prepetition Note"), secured by a second priority lien on substantially all of the Debtor's assets.
• The Avid Loan Agreement was amended various times, pursuant to which Avid consented to the acquisition of Schoolhouse, waived certain events of default, and decreased the aggregate borrowing limit to $12,583,300, among other things. In accordance with the interim order approving the DIP Financing, the Debtor paid Avid's secured Claim in full.
• The Debtor also had unsecured debt, including:
  • A $15 million term loan from Silicon Valley Bank ("SVB"), guaranteed by the Sponsor. The guaranteed claim was paid in full by the Sponsor, which has filed a Proof of Claim reflecting such payment.
  • Additional unsecured debt obligations owed to third-party trade vendors, landlords, contract counterparties, former employees, and other parties in the aggregate amount of approximately $11.57 million.

Events Leading to Chapter 11

• The Company grew exponentially between 2013 and 2022 and benefitted from the COVID boom, seeing an immense increase in consumer demand. Like other companies in the home and retail space, the Company was not immune to the post-COVID downturn, and the pivot from growth-at-all-costs to a model of responsible, profitable growth proved elusive to achieve. The Company also faced ongoing executive changes, strategy changes, and staff turnover across its brands.
• In April 2024, the Company appointed Erika Badan as Chief Executive Officer. Notwithstanding progress under her leadership, the Company continued to be burdened by high fixed operational costs, unfavorable legacy contracts, outdated technology, and lack of scalable systems.
• On December 15, 2025, Avid sent the Debtor a letter informing it of purported defaults under the Avid Loan Agreement and, within hours, swept substantially all of the Company's cash from its bank accounts at Avid -- with no forewarning to the Company.
  • This included the reversal of employee payroll and benefits, as well as sweeping funds held in trust to be remitted to the federal government.
  • Over the following days, Avid continued to credit and debit the Debtor's accounts, reversing then reinstating wires previously initiated, resulting in a chaotic scramble and confusion regarding the cash available to the Debtor.
  • These actions reduced the balance of the Avid Secured Loans to approximately $411,000 as of the Petition Date from approximately $6.3 million on December 12, 2025.
• Avid's actions had significant and far-reaching consequences, necessitating the immediate termination of the majority of the Company's employees during the holidays with no notice. The Company went from operating in the ordinary course with six IOIs in hand and a capital commitment from the Sponsor on December 12, 2025, to a $0 account balance at Avid and lack of clarity on the remaining committed capital by December 15, 2025.
• The Estate may have claims against Avid with respect to its pre-petition conduct, including the cash sweep.

Prepetition Sale Process

• In the summer of 2025, at the direction of its board of directors (the "Board"), the Company began to consider strategic alternatives. In August 2025, the Sponsor committed to an incremental equity investment in the Company to bridge a sale process.
• In September 2025, the Company engaged Core Advisors LLC ("Core Advisors") as its investment banker to solicit interest from potential strategic purchasers, and Buchbinder & Co. LLC ("Buchbinder") was engaged to solicit interest from special situations investors.
  • Core Advisors solicited interest from 135 prospective strategic and financial buyers, and Buchbinder contacted approximately 76 credit funds, special situations groups, and private equity funds, resulting in total outreach to 211 parties.
  • Ultimately, 35 parties signed nondisclosure agreements and were provided access to the data room.
  • On December 11, 2025, the Company received six IOIs from prospective purchasers, with a seventh IOI submitted on December 15, 2025.
• After the cash sweep by Avid, the Company and its advisors immediately pivoted, working around the clock to identify any solution that could preserve the Company as a going concern. Core Advisors reached out to five of the parties who submitted IOIs, informing them that any actionable bid would need to include financing to fund operations through the closing of a sale transaction on an expedited timeline. Ultimately, only one party -- F52, LLC -- submitted an actionable bid.
• With no other options, the Board determined it was in the Company's best interest to execute an asset purchase agreement (the "Stalking Horse Agreement") and DIP term sheet (the "DIP Term Sheet") with F52, LLC and commence a sale process pursuant to section 363 of the Bankruptcy Code. With F52, LLC's offer in hand, on December 22, 2025, the Company obtained the $1.505 million bridge loan from the Prepetition Noteholders to engage restructuring professionals, negotiate the Stalking Horse Agreement and DIP Term Sheet, and prepare the Chapter 11 Case.
• The Company retained MERU, LLC as its financial advisor on December 18, 2025, and retained Young Conaway Stargatt & Taylor, LLP ("Young Conaway") as its restructuring counsel on December 22, 2025.

DIP Financing

• The Debtor negotiated DIP Financing to be provided by F52, LLC (in its capacity as lender, the "DIP Lender"), consisting of a non-amortizing, priming, secured term loan facility in an aggregate principal amount not to exceed $3,420,000.
  • $1.92 million of the DIP Commitments was made available following the Bankruptcy Court's entry of the interim DIP order, and the remaining balance was made available following the entry of a final order approving the DIP Financing on January 22, 2026.
  • The DIP Financing was secured by a priming first lien security interest on all property and assets of the Debtor's Estate.
• F52, LLC's purchase price of the Food52 assets consisted of a credit bid of all amounts owed under the DIP Facility along with additional cash. Accordingly, the DIP Commitments were satisfied in full as of the closing of the Food52 Sale. The proceeds from the sales were applied in full satisfaction of the outstanding obligations under the DIP Credit Agreement, in the amount of $3,420,000 plus accrued and unpaid interest and fees.

Sale Transaction

• On January 12, 2026, the Bankruptcy Court entered the Bid Procedures Order approving certain bidding procedures to govern the sale process, including the solicitation of competing bidders to participate in an auction (the "Auction").
• Post-petition, Core Advisors engaged with 48 parties, including 20 from its pre-petition process and 28 new potential bidders. Core Advisors provided data room access to 33 potential bidders, processed diligence requests from 18 potential bidders, facilitated 16 management meetings, and coordinated meetings between potential bidders and Young Conaway.
• In addition to the Stalking Horse Bidder, the Debtor received seven qualified bids from: (i) Static Media Inc.; (ii) Jonathan Y Designs, Inc.; (iii) Studio Tigress LLC; (iv) Form Portfolios LLC; (v) Troy-CSL Lighting, Inc.; (vi) SH Operations, LLC; and (vii) Morning Bell, LLC. Jonathan Y Designs, Inc. later withdrew its qualified bid following pricing discussions with the Debtor's consent.
• After multiple rounds of bidding at the Auction, the Debtor selected:
  • F52, LLC as the successful bidder for the Food52 assets pursuant to the Amended and Restated Asset Purchase Agreement dated February 6, 2026, as amended on February 13, 2026;
  • Troy-CSL Lighting, Inc. as the successful bidder for the Schoolhouse assets pursuant to the Asset Purchase Agreement dated February 6, 2026; and
  • Form Portfolios LLC as the successful bidder for the Dansk assets pursuant to the Asset Purchase Agreement dated February 6, 2026.
• The total combined closing consideration provided by the three successful bids was $12.35 million plus the assumption of certain liabilities, reflecting more than a 90% increase in value over the Stalking Horse Bid. Including the 2025 media accounts receivable, the Debtor's three businesses were sold for an aggregate purchase price of $13,375,000.
• On February 11, 2026, the Bankruptcy Court entered orders approving and authorizing the Debtor's entry into all three purchase agreements, and the Debtor closed on the Sales on February 13, 2026.

Claims Classification and Treatment

• Claims against the Debtor and Interests in the Debtor are classified in five separate Classes:
  • Class 1 (Secured Claims): Unimpaired. Consists of all Secured Claims, including the Prepetition Note Claim (estimated at approximately $1,505,000). Holders will receive payment in full in Cash. Presumed to accept the Plan; not entitled to vote. Estimated recovery: 100%.
  • Class 2 (Other Priority Claims): Unimpaired. Estimated Allowed Claims of $0. Holders will receive payment in full in Cash or other treatment rendering such Claims Unimpaired. Presumed to accept the Plan; not entitled to vote. Estimated recovery: 100%.
  • Class 3 (General Unsecured Claims): Impaired. Estimated Allowed Claims of approximately $28,370,000. Each Holder will receive its pro rata share of Beneficial Trust Interests, entitling the holder to receive its pro rata share of the distributable proceeds from the Liquidating Trust Assets. Entitled to vote. Estimated recovery: 2.6%.
  • Class 4 (Subordinated Claims): Impaired. On the Effective Date, all Subordinated Claims shall be canceled, released, and extinguished. Holders shall not receive any distributions. Deemed to reject the Plan; not entitled to vote. Estimated recovery: 0%.
  • Class 5 (Interests): Impaired. On the Effective Date, all Interests shall be canceled, released, and extinguished. Holders shall not receive any distributions. Deemed to reject the Plan; not entitled to vote. Estimated recovery: 0%.
• Only Holders of Claims in Class 3 (General Unsecured Claims) are entitled to vote to accept or reject the Plan. Projected recoveries for Class 3 will be impacted by, among other things, the amount of General Unsecured Claims ultimately Allowed following the claims reconciliation process and the Liquidating Trust's expenses.
• Postpetition interest, penalties, or other fees will not accrue or be payable on account of any Claim, except as required by applicable bankruptcy law or as otherwise expressly provided in the Plan or the Confirmation Order.

Liquidating Trust

• On the Effective Date, the Liquidating Trust will be established pursuant to the Liquidating Trust Agreement, and the Liquidating Trust Assets will vest in and be transferred to the Liquidating Trust free and clear of all Claims, Liens, and other interests. The Liquidating Trust Assets include:
  • The Effective Date Cash Amount; and
  • All other assets of the Debtor, including all tangible and intangible assets, Insurance Policies, Retained Causes of Action, and the Debtor's books and records (including documents and communications protected by the attorney-client privilege, work-product privilege, and other applicable evidentiary privileges).
• The Liquidating Trust shall be established for, among other purposes: (a) receiving and holding the Liquidating Trust Assets; (b) administering, disputing, objecting to, compromising, or otherwise resolving all Claims and Interests; (c) making distributions to the Liquidating Trust Beneficiaries; (d) maximizing recoveries for the benefit of the Liquidating Trust Beneficiaries; and (e) commencing and pursuing the Retained Causes of Action.
• The Liquidating Trustee shall be selected by the Committee in consultation with the Debtor. From and after the Effective Date, the Liquidating Trustee shall act as the exclusive representative of the Estate for all purposes and as the sole officer and director of the post-Effective Date Debtor.
  • The Liquidating Trustee (and any professionals retained by the Liquidating Trustee) shall not be required to file a fee application to receive compensation.
  • The Liquidating Trustee shall have the right, without Bankruptcy Court approval, to retain the services of attorneys, accountants, and other professionals, and may retain any professionals currently retained by the Committee or the Debtor.
• The Liquidating Trust shall be dissolved upon the earlier of (a) the distribution of all Liquidating Trust Assets to the Liquidating Trust Beneficiaries or (b) the fifth anniversary of the creation of the Liquidating Trust, subject to extension by the Bankruptcy Court if necessary for resolving or monetizing Liquidating Trust Assets.

Retained Causes of Action

• All Retained Causes of Action are preserved and shall vest in and be transferred to the Liquidating Trust on the Effective Date, in accordance with section 1123(b) of the Bankruptcy Code. No Claims or Causes of Action that are released under the Plan or the DIP Order shall be a Retained Cause of Action.
• The Retained Causes of Action include any claims or causes of action against Avid, including with respect to the cash sweep and any actions and/or omissions leading thereto. All Retained Causes of Action are preserved for the benefit of general unsecured creditors and, if actionable, may be pursued by the Liquidating Trust.

Investigation

• In early December 2025, the Board appointed Ms. Jill Frizzley to serve as an independent director. Effective February 5, 2026, the Board consented to the formation of a special committee (the "Special Committee"), consisting solely of Ms. Frizzley, to conduct an investigation (the "Investigation") of potential Claims and Causes of Action against (i) the Debtor's directors and officers who served on or after the Petition Date and (ii) the Sponsor, including the Debtor's former director appointed by the Sponsor.
• The Investigation broadly assessed whether any potential Causes of Action, including breach of fiduciary duty claims and claims for avoidance actions, could be asserted by the Debtor against any Insider. The Investigation analyzed, among other things:
  • Negotiations around various amendments to the Avid Loan Agreement;
  • Events leading up to Avid sweeping the Debtor's accounts;
  • Concerns surrounding the performance of certain former officers who are not proposed released parties;
  • A potential financing with SG Stonegate Asset Company I, LLC; and
  • Authorization and execution of the Debtor's contracts with Form Portfolios LLC.
• On March 23, 2026, Young Conaway presented its findings to the Special Committee. Through its independent decision-making process, the Special Committee did not identify any plausible or colorable potential Causes of Action against any Insider that, if pursued by the Debtor, is likely to provide value to the Estate. The Special Committee will continue to seek feedback from the Committee and conduct further review as necessary.
• The Committee has commenced its own investigation (the "Committee Investigation") into colorable claims the Debtor's Estate may possess, including against the Debtor's directors and officers, insiders, and other third parties. Any releases granted to any of these parties under the Plan remain subject to the completion of the Committee's investigation, and the Committee reserves all rights to any resolution of such claims, including challenging any releases provided for in the Plan.

Official Committee of Unsecured Creditors

• On January 8, 2026, the U.S. Trustee appointed the following members to the Committee: (a) Target Lighting/Thrive Value; (b) Janel Group; (c) Bradshaw International Holdings Hong Kong Ltd.; (d) Pendleton Woolen Mills, Inc.; (e) Raj Overseas; (f) Obeetee Inc.; and (g) VistaVu Solutions Ltd. Thereafter, each of Target Lighting/Thrive Value and Raj Overseas resigned from the Committee, and the U.S. Trustee reconstituted the Committee on February 4, 2026.
• On January 9, 2026, the Committee retained Robinson & Cole LLP as its counsel and on January 16, 2026, retained Dundon Advisers as its financial advisor.
• On the Effective Date, the Committee will dissolve and the members thereof will be released and discharged from all duties arising from the Chapter 11 Case, except that the Committee will continue to exist solely with respect to (1) applications for Professional Fee Claims or expense reimbursements; (2) motions or actions seeking enforcement or implementation of the Plan or Confirmation Order; and (3) any appeal that could reasonably be expected to materially affect the treatment of Holders of General Unsecured Claims.

Releases

• The releases by the Debtor and its Estate are subject to the completion of the Investigation, and the Debtor intends to disclose the findings of the Investigation with the Committee upon its completion and present a record at the Combined Confirmation Hearing regarding the same. The releases do not release any Claims or Causes of Action against Avid related to the Avid Loan.
• The "Debtor Released Parties" include, solely in their capacities as such: (a) each of the Debtor's officers and directors who served on or after the Petition Date; (b) the Debtor's former director appointed by the Sponsor; (c) the Sponsor; (d) the Prepetition Noteholders; (e) the Committee and its members; (f) each current and former Affiliate of each Entity in clauses (a) through (e); and (g) the respective Related Parties for each of the foregoing, provided that any Debtor Released Party that elects to opt out of the third-party releases shall not be a Debtor Released Party.
• The "Released Parties" include, solely in their capacities as such: (a) the Debtor; (b) the post-Effective Date Debtor; (c) each of the Debtor's officers and directors who served on or after the Petition Date; (d) the Debtor's former director appointed by the Sponsor; (e) the Sponsor; (f) the Prepetition Noteholders; (g) the Committee and its members; (h) each current and former Affiliate of each Entity in clauses (a) through (g); and (i) the respective Related Parties for each of the foregoing, provided that any Released Party that elects to opt out shall not be a Released Party.
• The "Releasing Parties" include: (a) all Holders of Claims who are sent a Ballot (Class 3) or Non-Voting Opt-Out Form (Classes 1 and 2) and do not timely elect to opt out of, or object to, the releases; (b) each Released Party who has voluntarily agreed to be a releasing party by electing not to opt out; and (c) Related Parties of any Person or Entity in clauses (a) and (b), solely in their capacity as such and to the extent the Releasing Party can legally bind the Related Party under applicable non-bankruptcy law.
• The "Exculpated Parties" include, in each case in its capacity as such: (a) the Debtor; (b) each of the Debtor's officers and directors who served on or after the Petition Date, and any other person serving as a fiduciary of the Debtor's Estate between the Petition Date and the Effective Date; (c) the Committee and its members; and (d) each of the Debtor's and the Committee's Retained Professionals.
• Because the Debtor is liquidating, it is not entitled to a discharge of obligations pursuant to section 1141 of the Bankruptcy Code.
• Upon entry of the Confirmation Order, the challenge period under the DIP Order shall be deemed to expire against (x) the Committee and (y) all other parties in the Chapter 11 Case. No claims or causes of action that are stipulated, waived, or released under the DIP Order shall be Retained Causes of Action or otherwise transferred to the Liquidating Trust.

Sponsor Guaranty

• Nothing in the Plan shall release, discharge, or otherwise affect the Sponsor's guarantee of the SVB Loan, and any claim filed by the Sponsor on behalf of such guarantee shall be treated as a Class 3 General Unsecured Claim, to the extent such claim is Allowed.

Executory Contracts and Unexpired Leases

• On the Effective Date, except as otherwise provided in the Plan (which exclusion includes Insurance Policies), all Executory Contracts or Unexpired Leases not previously assumed, assumed and assigned, or rejected will be deemed rejected, other than those that are the subject of a pending motion to assume or listed as assumed in the Plan Supplement.
• Claims arising from the rejection of Executory Contracts or Unexpired Leases shall be classified as General Unsecured Claims, and Proofs of Claim must be filed within 30 days of receiving notice of such rejection.
• The Plan does not alter the rights and obligations of the Debtor and its insurers under the Insurance Policies or diminish or impair their enforceability. All of the Debtor's rights under any Insurance Policy shall vest with the Liquidating Trust for the benefit of the Liquidating Trust Beneficiaries.

Professional Fees and Administrative Claims

• All requests for payment of Professional Fee Claims by Retained Professionals for services rendered prior to the Effective Date must be filed no later than 30 days after the Effective Date. Objections must be filed no later than 21 days after the filing of the Professional Fee Claim.
• On or before the Effective Date, the Debtor shall fund the Professional Fee Reserve Account with Cash equal to the Professional Fee Reserve Amount, to be maintained in trust solely for the benefit of each Retained Professional. The Liquidating Trust shall have a reversionary interest in any Cash remaining after payment of all Allowed Professional Fee Claims.
• From and after the Effective Date, the Liquidating Trustee shall pay in Cash, in the ordinary course and without further Bankruptcy Court approval, reasonable and documented fees and expenses incurred after the Effective Date.
• Holders of Administrative Claims that do not file an application for payment no later than the Administrative Claims Bar Date (30 days after the Effective Date) shall be forever barred from asserting Administrative Claims against the Debtor, the Estate, the Liquidating Trust, or the Liquidating Trustee.

Conditions Precedent to the Effective Date

• The occurrence of the Effective Date is subject to the following conditions precedent, among others:
  • The Bankruptcy Court shall have approved the Disclosure Statement as containing adequate information;
  • The Confirmation Order shall have been entered and in full force and effect;
  • There shall have been no modification or stay of the Confirmation Order;
  • The Professional Fee Reserve Account shall have been fully funded;
  • The Liquidating Trust Agreement shall have been executed;
  • The Liquidating Trustee shall have been appointed and assumed its responsibilities; and
  • The Debtor shall have received all necessary authorizations, consents, and regulatory approvals.
• Except as provided in the Plan, the conditions to the Effective Date may be waived in whole or in part by the Debtor, in consultation with the Committee, without notice to any parties in interest or the Bankruptcy Court.
• If the Confirmation Order is vacated, the Plan will be null and void in all respects, including with respect to the release of Claims and distributions for Allowed Claims.

Key Dates and Deadlines

• March 20, 2026: Voting record date for determining which Holders in Class 3 are entitled to receive a Solicitation Package.
• May 6, 2026, at 4:00 p.m. (ET): Voting Deadline and Objection Deadline for Confirmation Objections.
• May 19, 2026, at 11:00 a.m. (ET): Combined Confirmation Hearing before the Honorable Laurie Selber Silverstein at the United States Court for the District of Delaware.
• June 29, 2026, at 5:00 p.m. (ET): Deadline for Governmental Units to file Proofs of Claim.
• Claims Objection Deadline: the later of (a) 180 days after the Effective Date or (b) such other deadline as may be fixed by an order of the Bankruptcy Court, subject to extensions.

Liquidation Analysis

• The Debtor has prepared a hypothetical Liquidation Analysis assuming the Chapter 11 Case is converted to a chapter 7 case on or about May 19, 2026. Key estimates include:
  • Secured Claims (Prepetition Note Claim): approximately $1,505,000;
  • Other Priority Claims (primarily pre-petition employee claims): approximately $170,000;
  • Priority Tax Claims (primarily franchise, excise, and personal property taxes): approximately $14,000;
  • General Unsecured Claims (primarily pre-petition trade payables, estimated lease liabilities, employee-related wages and benefits, and other unsecured debt): approximately $28.4 million.
• Chapter 7 Trustee liquidation expenses are estimated at approximately $675,000 for counsel and advisors, plus $225,000 for wind-down related expenses. Chapter 7 Trustee fees are estimated at approximately $92,000. Post-Effective Date wind-down expenses under the Plan are estimated to be $600,000, including approximately $375,000 in professional fees and $225,000 for wind-down related expenses.
• The Debtor has determined that a chapter 7 liquidation would result in diminution in the recoveries to be realized by Holders of Allowed Claims as compared to the proposed distributions under the Plan. Under the hypothetical chapter 7 analysis, General Unsecured Claims in Class 3 would receive an estimated recovery of approximately 1.3%, compared to the estimated 2.6% recovery under the Plan, due in part to increased Chapter 7 Trustee fees (approximately $92,000) and higher liquidation expenses. Consequently, the Debtor has determined that the Plan will provide a greater ultimate return to Holders of Allowed Claims than would a chapter 7 liquidation.

Risk Factors

• There is no guarantee that the Plan will be confirmed. If not confirmed, the terms and timing of any alternative plan and the treatment of Claims and Interests will be unknown. A significant risk exists that the Chapter 11 Case may be converted to a case under chapter 7, in which event creditor recoveries would be substantially diminished.
• There is no guarantee as to the timing of the Effective Date, and if the conditions precedent are not satisfied or waived, the Bankruptcy Court may vacate the Confirmation Order.
• The actual amount of Allowed Claims may materially differ from the Debtor's current estimates. Distributions available to Holders of Allowed General Unsecured Claims in Class 3 can be affected by the amount of Allowed Professional Fee Claims, Administrative Claims, Priority Tax Claims, and other senior Claims, thereby reducing the amount of distributions available.
• The expenses of the Liquidating Trustee will be given priority over distributions to Holders of Allowed General Unsecured Claims in Class 3. If the Liquidating Trustee incurs professional or other expenses in excess of current expectations, the amount of distributable assets remaining will decrease.