FRC Balance - Chapter 11 Bidding Procedures Summary

Bidding Procedures Summary

Overview

• FRC Balance, LLC and its affiliates are asking the court to approve one bidding process that will accept three kinds of bids: a section 363 sale of all or substantially all assets, a sale of those assets under a Chapter 11 plan, or a recapitalization in which the winning bidder sponsors the plan and receives the reorganized equity. The debtors operate the True Food Kitchen restaurants. The motion was filed on Oct. 6, 2026, and the bidding procedures order has not yet been entered. A hearing is set for Oct. 27, 2026, at 1 p.m. (prevailing Central Time).
• No stalking horse has been named yet. The debtors say they are still talking with interested parties about that role, including the DIP lender, HumanCo TFK IV, LLC, and they ask for authority to sign a stalking horse agreement by Nov. 30, 2026.
• The debtors run health-focused restaurants serving organic, seed oil-free food. They filed Chapter 11 on Oct. 4, 2026, operating 34 locations across the U.S., and closed 12 restaurants at the same time as the filing.
• Before filing, the debtors hired a new CEO in July 2026, retained SOLIC Capital as investment banker to market the business and assets, and retained Teneo as financial advisor to review the business plan, liquidity and strategic alternatives; they also reduced corporate headcount and renegotiated vendor contracts. SOLIC began contacting strategic and financial investors before the filing about a sale, a plan sale or recapitalization, or assignment of the debtors' unexpired leases, and it is continuing that work postpetition by contacting more investors, signing NDAs, opening a virtual data room, answering diligence requests and arranging management meetings.

Transaction Structures

• Bidders can propose any of the three structures, and the debtors will compare all bids and pick the highest or otherwise best one, whatever its structure.
  • Sale transaction: a section 363 sale free and clear of liens, claims, interests and encumbrances, for buyers who want speed and certainty.
  • Plan sale transaction: a going-concern sale under a plan. According to the motion, this route may better preserve leases, permits and licenses, including the alcohol and beverage permits held by Debtor True Food Beverages, LLC, which may not transfer easily to a section 363 buyer.
  • Recapitalization transaction: the winning bidder sponsors the plan and, in exchange for its investment, receives the equity in the reorganized debtors, either through transfer of the existing equity or through new equity issued under section 1123(a)(5)(J). The existing corporate structure is preserved.
• Bids should cover all or substantially all assets. Other structures are allowed only with the consent of both the debtors and the DIP lender, and any combination of bids must together meet the minimum cash component. Groups of parties may bid together with the debtors' consent, but each party, other than the DIP lender or its designee, may submit only one bid, whether alone or as part of a group.

DIP Facility and Case Milestones

• Size: up to $20 million in a senior secured, superpriority, multiple-draw DIP term loan from HumanCo TFK IV, LLC, under a DIP term sheet dated Oct. 2, 2026. The motion describes it as the only viable source of funding for the cases.
• Tranche B is funded in six sequential advances, and several of them depend on progress in the sale process:
  • Second advance, $2 million: entry of a bidding procedures order that includes the DIP term sheet's competing-bid requirements.
  • Third advance, $2 million: signing of a binding stalking horse purchase agreement.
  • Fourth advance, $2.5 million: selection or designation of the successful bidder.
  • Fifth advance, $3 million: entry of a sale order or plan confirmation order that approves the transaction and pays the DIP obligations in full at closing or on the effective date, except to the extent they are validly credit bid or the DIP lender agrees otherwise in writing.
• Missing any of the following milestones, as they may be extended under the DIP term sheet, is an event of default:
  • Oct. 15, 2026: interim DIP order entered
  • Oct. 31, 2026: final DIP order entered
  • Nov. 7, 2026: bidding procedures order entered
  • Nov. 30, 2026: stalking horse agreement signed (if applicable)
  • Dec. 10, 2026: bid deadline
  • Dec. 17, 2026: auction completed
  • Dec. 22, 2026: sale order entered (if applicable)
  • Jan. 22, 2027: sale closing (if applicable)
  • March 31, 2027: plan effective date or full repayment of the DIP facility

Minimum Cash Component

• Every bid, whatever its structure, must include enough cash to cover the sum of:
  • full cash payment of the DIP obligations at closing or on the plan effective date, unless the DIP lender agrees otherwise in writing;
  • the wind-down amount, meaning the cash reasonably needed to complete a liquidating plan and wind down the estates (budgeted administrative expenses, professional fees, U.S. Trustee fees and required reserves), under a wind-down budget prepared by the debtors, reasonably acceptable to the DIP lender and approved by the court; and
  • if a stalking horse has been designated, an amount above the stalking horse bid equal to the bid protections plus $350,000.
• The motion's transaction overview conditions the wind-down funding on a bid being selected over a credit bid by the DIP lender or its designee, while the motion's qualified-bid requirements and the bidding procedures include the wind-down amount in every bid's minimum cash component without that condition.
• Unless the DIP lender gives prior written consent, a bid from anyone other than the DIP lender cannot be a qualified bid or the successful bid without the minimum cash component and the replacement financing commitment. The debtors also cannot choose a bid that falls short of the minimum cash component over a DIP lender credit bid without that consent.

Replacement Financing Commitment

• Each bid must include a binding commitment, backed by evidence of available funds, to provide replacement financing equal to the undrawn Tranche B commitment if the bidder is selected. That financing must be available until closing or the plan effective date, in the same amounts and on the same funding conditions as the remaining Tranche B advances, and cannot be conditioned on the deal closing.
• Picking a competing bidder does not by itself end or reduce the DIP lender's remaining Tranche B obligation. That obligation continues until the replacement financing has any needed court approval and the debtors can draw on it.

Stalking Horse Selection

• The debtors ask for authority, without being required to act, to pick one or more stalking horses by Nov. 30, 2026, in consultation with the DIP lender. A stalking horse may be the DIP lender or its designee, and the agreement may be an asset purchase agreement, a plan sponsor agreement or something similar. Signing one also meets the condition for the third Tranche B advance.
• The DIP lender's right to be named stalking horse is fully preserved. A stalking horse agreement with the DIP lender may give it a right to match any later bid, or termination rights if a case milestone is missed.
• If the DIP lender bids or seeks stalking horse status, it stops being a consultation party on stalking horse selection, bid evaluation and the auction. This does not affect its consent rights under the DIP orders.
• Within one business day after signing, the debtors will file a notice naming the stalking horse, attaching the agreement and describing any bid protections. The stalking horse then automatically becomes a qualified bidder. Its designation is not separately objectionable, and all objections to the transaction itself are preserved for the sale hearing or plan confirmation.

Bid Protections

• Break-Up Fee: up to 3% of total consideration under the stalking horse agreement, including any credit-bid amount and assumed liabilities.
• Expense Reimbursement: up to $250,000 of reasonable, documented out-of-pocket expenses.
• If the DIP lender or its designee is the stalking horse, its bid protections are in addition to the DIP obligations and do not reduce them or get reduced by them.
• Parties have five days after service of the stalking horse notice to object to the bid protections. If no one objects, the debtors may submit an approval order under certification of counsel; if someone does, the court will hold a hearing.
• No other bidder can receive a fee or expense reimbursement, and every bidder waives any claim for one, including under section 503(b). This does not limit the DIP obligations, including the exit fee and expense reimbursement owed under the DIP documents.

Credit Bid

• The DIP lender or its designee may credit bid all or any part of its allowed secured DIP obligations in any transaction, whether a section 363 sale or a plan, subject only to section 363(k). Those obligations include principal, accrued and capitalized interest, the commitment fee, funding fees, the exit fee, premiums, expense reimbursements, indemnification obligations and protective advances. The motion says this right was a material inducement for the DIP facility.
  • Any DIP lender bid is automatically a qualified bid. No deposit is needed for the credit-bid portion, but any cash portion must meet the deposit and other requirements that apply to cash bids.
  • Without the DIP lender's prior written consent, the procedures cannot discriminate against it, limit or condition its ability to bid or credit bid, restrict assignment of its bid to an acquisition vehicle or designee, or impose conditions not imposed on similarly situated bidders.
• Holders of allowed prepetition secured claims, including assignees and purchasers of those claims, may credit bid those claims, alone or together with a DIP credit bid. This is subject to section 363(k) and the challenge period provisions of the DIP orders.
• Credit bids are valued dollar for dollar.

Good Faith Deposit

• Deposit: 10% of the bid's total cash and non-cash consideration, excluding assumed liabilities, held in escrow. No deposit is required for the valid credit-bid portion of a bid by the DIP lender or any other holder of an allowed secured claim.
• Within one business day after the auction closes, the successful bidder must top up its deposit, if needed, to 10% of the successful bid's cash purchase price, and within two business days after the auction it must deliver fully executed transaction documents. The bidding procedures separately require the successful bidder to fund an incremental deposit amount, a term they do not define, within two business days after the auction, against the one-business-day deadline for the 10% top-up.
• Deposits from bidders that do not qualify are returned within five business days after the bid qualification deadline. Other deposits, except those of the successful and back-up bidders, are returned within five business days after the auction.
• A bidder forfeits its deposit if it tries to withdraw its bid while the bid is irrevocable, or, for the successful bidder, if it fails to close because of a breach. The successful bidder's deposit is credited against the price at closing.

Participation and Bid Requirements

• To get data room access and submit a bid, a prospective bidder must sign a confidentiality agreement acceptable to the debtors, identify its principals, equity holders and financing sources, and provide whatever financial information the debtors reasonably request. The DIP lender, its designee and any stalking horse automatically qualify for access, and the DIP lender and stalking horse get data room access on terms no less favorable than any other bidder's.
• To be a qualified bid, a bid must, among other things:
  • be an irrevocable, good-faith offer that states its structure and comes with a bid letter identifying the bidder;
  • stay binding until closing if it wins or, if it is the back-up bid with the bidder's consent, until the earlier of the successful bid's closing or Jan. 22, 2027;
  • for a sale or plan sale, include a signed asset purchase agreement, redlined against the stalking horse agreement or the form in the data room, that lists the assets acquired, liabilities assumed and contracts and leases (including restaurant leases) to be assigned;
  • for a recapitalization, include a signed plan sponsor agreement and plan term sheet that cover treatment of administrative and priority claims, DIP obligations, prepetition secured claims, general unsecured claims, existing equity, and contracts and leases, as well as the amount and form of the sponsor's investment and the governance of the reorganized debtors;
  • include the minimum cash component, the replacement financing commitment and adequate assurance information (tax returns, financial statements, bank statements, and equity and financing commitment letters), and allow the debtors to share that information with contract and lease counterparties;
  • show available cash or committed financing that is not subject to internal approvals, syndication, diligence or credit committee approval, and include board or equivalent authorization;
  • contain no financing, diligence or internal-approval contingencies; give up any break-up fee, expense reimbursement or section 503(b) substantial contribution claim; commit to close within the case milestones; and include a covenant to cooperate on regulatory, licensing (including alcohol and beverage permits), landlord and court approvals and a certification of no collusion;
  • meet the DIP term sheet's competing-bid requirements; and
  • if a stalking horse exists, carry terms and closing conditions no less favorable to the debtors than the stalking horse agreement.

Bid Evaluation

• The debtors will judge bids on total consideration; the form of the deal and how certain and quick closing is, including regulatory, licensing and landlord approvals; net economic benefit to the estates; for plan deals, whether the plan can be confirmed and how creditors are treated; the restaurant locations, leases and contracts being assumed; and the effect on employees and employee claims.
• Bidders will be told whether they qualified by Dec. 12, 2026. Within two calendar days after the bid deadline, the debtors will tell the DIP lender and any stalking horse which bid is the baseline bid. The debtors may negotiate with any bidder to fix deficiencies or improve its terms.

Auction

• If more than one qualified bid is received (counting any stalking horse bid), the auction will be held on Dec. 15, 2026, at 10 a.m. (prevailing Central Time), at Reed Smith LLP's Houston offices or by videoconference. The motion allows a later time, but no later than the Dec. 17, 2026 milestone. If the debtors do not hold an auction, they will file a notice cancelling it and naming the successful bidder.
• Bidding starts at the baseline bid and runs in open rounds.
  • Minimum Overbid Increment: $350,000 over the baseline or leading bid; for a bid over a stalking horse bid, the increment is the amount of the bid protections plus $350,000.
  • Each stalking horse bid is credited with the amount of its bid protections.
  • The DIP lender may make any later bid as a credit bid. Cash bidders must commit to fund any incremental deposit within two business days.
  • When comparing bids of different structures, the debtors will weigh additional liabilities assumed, additional costs to the estates, treatment of the DIP obligations and the wind-down amount.
• The debtors will name the successful bid and, if the bidder consents, may name the next-best qualified bid as the back-up. A successful bid is accepted only once the court approves it at the sale hearing or, for a plan deal, at confirmation. The auction will be transcribed or video recorded.

DIP Lender Consent and Fiduciary Out

• The debtors may change the procedures, but not without the DIP lender's prior written consent if the change would:
  • alter the DIP payoff requirement, the wind-down amount or the replacement financing commitment;
  • discriminate against the DIP lender or impair its credit bid right;
  • change the minimum bidding increments or structure;
  • adjourn, postpone or cancel the auction; or
  • extend any deadline past the applicable case milestone.
• Extending the bid deadline also requires the DIP lender's consent.
• Under the proposed order, if the debtors decide in good faith, on advice of outside counsel, that following a DIP lender consent right would breach their fiduciary duties, they may act without consent, but only to the extent the action does not violate the DIP documents or orders. This fiduciary out does not reach the DIP lender's credit bid rights, the minimum cash component, the replacement financing commitment, the case milestones or any DIP lender bid protections. It also does not waive or cure any event of default.
• Where they conflict, the DIP orders and DIP documents override the bidding procedures order.

Approval Path

• If any qualified bid proposes a section 363 sale, the debtors will file a sale motion by Dec. 12, 2026. If a sale wins, the sale hearing is requested for Dec. 21, 2026, subject to the court's availability; the proposed order leaves the hearing time blank. Sale objections are due Dec. 18, 2026, at 5 p.m. (prevailing Central Time), but objections only to how the auction was run or who won may be raised at or before the hearing.
• If a plan sale or recapitalization wins, it will be carried out through the plan. The debtors will seek approval of a disclosure statement and plan confirmation on a schedule consistent with the milestones, which require the plan to go effective by March 31, 2027.

Assumption and Assignment

• Assumption and assignment of contracts and leases, including cure amounts and adequate assurance, will be handled under separate procedures. The debtors will file a motion for those procedures by Nov. 6, 2026, seeking authority to send counterparties notices with proposed cure amounts by Nov. 20, 2026, and in any case before the bid deadline, and to give counterparties the successful bidder's adequate assurance information.

Key Dates

• Objection Deadline for the Motion: Oct. 23, 2026, at 12 p.m. (prevailing Central Time)
• Bidding Procedures Hearing: Oct. 27, 2026, at 1 p.m. (prevailing Central Time)
• Assumption and Assignment Procedures Motion: by Nov. 6, 2026
• Bidding Procedures Order Milestone: Nov. 7, 2026
• Cure Notices Served: by Nov. 20, 2026
• Stalking Horse Designation Deadline: Nov. 30, 2026
• Bid Protections Objection Deadline: five days after service of the stalking horse notice
• Bid Deadline: Dec. 10, 2026, at 5 p.m. (prevailing Central Time)
• Bid Qualification Deadline and Sale Motion Deadline: Dec. 12, 2026
• Auction: Dec. 15, 2026, at 10 a.m. (prevailing Central Time)
• Auction Completion Milestone: Dec. 17, 2026
• Sale Objection Deadline: Dec. 18, 2026, at 5 p.m. (prevailing Central Time)
• Sale Hearing: Dec. 21, 2026, subject to the court's availability
• Sale Order Milestone: Dec. 22, 2026
• Outside Date for Sale Closing: Jan. 22, 2027
• Outside Date for Plan Effective Date: March 31, 2027