Case KG Doc 3807 Filed 08/24/18 Page 1 of 16 IN UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

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1 Case KG Doc 3807 Filed 08/24/18 Page 1 of 16 IN UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) In re: ) Chapter 11 ) HH Liquidation, LLC, et al., 1 ) Case No (KG) ) Debtors. ) Jointly Administered ) ) Hearing Date: November 14, 2018 at 10:00 a.m. (ET) ) Objection Deadline: September 25, 2018 at 4:00 p.m. (ET) DEBTORS MOTION FOR ENTRY OF AN ORDER, PURSUANT TO SECTION 105(a) OF THE BANKRUPTCY CODE AND BANKRUPTCY RULE 9019, APPROVING THE GLOBAL SETTLEMENT AGREEMENT BETWEEN HOLDCO, THE OPCO DEBTORS, THE COMMITTEE, THE COMVEST ENTITIES, THE PROPCO ENTITIES, SLB, THE INDIVIDUAL DEFENDANTS AND THE CONSENTING 503(b)(9) CLAIMANTS HH Liquidation, LLC (the Holdco ) and its above-captioned affiliated debtors and debtors in possession (collectively, the Opco Debtors and, with Holdco, the Debtors ) hereby submit this motion (this Motion ) for the entry of an order, attached hereto as Exhibit A (the Proposed Order ), pursuant to section 105(a) of title 11 of the United States Code, 11 U.S.C. 101 et seq. (the Bankruptcy Code ), and Rule 9019 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), authorizing and approving the Global Settlement Agreement attached to the Proposed Order as Exhibit 1 (together with all exhibits thereto, the Global Settlement Agreement ) between (i) Holdco, (ii) the Opco Debtors, (iii) the Official Committee of Unsecured Creditors appointed in the Bankruptcy Cases (as defined below) (the Committee ), (iv) Comvest Group Holdings, LP, Comvest Advisors, LLC, 01: The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are: HH Liquidation, LLC (f/k/a Haggen Holdings, LLC) (7558), HH Operations, LLC (f/k/a Haggen Operations Holdings, LLC) (6341), HH Opco South, LLC (f/k/a Haggen Opco South, LLC) (7257), HH Opco North, LLC (f/k/a Haggen Opco North, LLC) (5028), HH Acquisition, LLC (f/k/a Haggen Acquisition, LLC) (7687), and HH Legacy, Inc. (f/k/a Haggen, Inc.) (4583). The mailing address for each of the Debtors is Aliso Creek Road, Suite B-1003, Aliso Viejo, California

2 Case KG Doc 3807 Filed 08/24/18 Page 2 of 16 Comvest Investment Partners III, LP, Comvest Investment Partners IV, LP, Comvest Investment Partners IV-A, LP, Comvest Haggen Holdings III, LLC, and Comvest Haggen Holdings IV, LLC (collectively, the Comvest Entities ), (v) HH Property Holdings, LLC (f/k/a Haggen Property Holdings, LLC), HH Property Holdings II, LLC (f/k/a Haggen Property Holdings II, LLC), HH Property South, LLC (f/k/a Haggen Property South, LLC), and HH Property North, LLC (f/k/a Haggen Property North, LLC (collectively, the Propco Entities ), (vi) HH SLB, LLC (f/k/a Haggen SLB, LLC) ( SLB ), (vii) John Caple, Cecilio Rodriguez, Michael Niegsch, John Clougher, Blake Barnett, and Derrick Anderson (collectively, the Individual Defendants), and (viii) certain holders of the largest claims under section 503(b)(9) of the Bankruptcy Code (each, a 503(b)(9) Claim ) asserted against the Opco Debtors (such holders, the Consenting 503(b)(9) Claimants and, together with Holdco, the Opco Debtors, the Committee, the Comvest Entities, the Propco Entities, SLB and the Individual Defendants, the Settlement Parties ). In support of this Motion, the Debtors submit the accompanying Declaration of Marc Beilinson in Support of the Debtors Motion for Entry of an Order, Pursuant to Section 105(a) of the Bankruptcy Code and Bankruptcy Rule 9019, Approving the Global Settlement Agreement Between Holdco, the Opco Debtors, the Committee, the Comvest Entities, the Propco Entities, SLB, the Individual Defendants and the Consenting 503(b)(9) Claimants, dated August 24, 2018 (the Beilinson Declaration ), and respectfully state as follows: Preliminary Statement 2 1. At this stage in the Bankruptcy Cases, the Opco Debtors lack sufficient assets to satisfy all valid and undisputed secured, administrative, and priority claims against their bankruptcy estates. Thus, the Opco Debtors estates are currently administratively insolvent. In 2 01: Capitalized terms used in this preliminary statement that are not yet defined have the meanings given to them below. 2

3 Case KG Doc 3807 Filed 08/24/18 Page 3 of 16 addition, the Bankruptcy Cases and the Debtors efforts to wind them down to an orderly conclusion are currently deadlocked while the Committee pursues an appeal of the Court s ruling with respect to the adversary proceeding that the Committee had brought against certain of the Comvest Entities, the Propco Entities, SLB and the Individual Defendants. In light of the Opco Debtors administrative insolvency and the status of the Committee Litigation, the Debtors, in an exercise of their sound business judgment, entered into an agreement in principle that is reflected in the Global Settlement Agreement in order to facilitate the consensual resolution of the Bankruptcy Cases in a timely and efficient manner. 2. The Settlement Parties agreed to implement the Global Settlement Agreement through (i) with respect to Holdco, the confirmation and consummation of a chapter 11 plan of liquidation, and (ii) with respect to the Opco Debtors, the dismissal of their Bankruptcy Cases along with the payment of all valid and undisputed secured, administrative, and priority claims against the Opco Debtors estates (i.e., the Opco Debtor SAP Claims and the Propco Secured Claim). To that end, concurrently with the filing of this Motion, the Debtors have filed a chapter 11 plan for Holdco (which has sufficient assets to pay substantially all allowed claims in full), a corresponding disclosure statement, a motion to approve the disclosure statement and authorize Holdco to solicit acceptances for the plan, and a motion requesting, among other things, (i) the structured dismissal of the Opco Debtors Bankruptcy Cases, (ii) approval of the amount of the Propco Secured Claim and the Opco Debtor SAP Claims, 3 and (iii) authority to make distributions on account of the Propco Secured Claim and the Opco Debtor SAP Claims, 01: For the avoidance of doubt, the 503(b)(9) Claims of the Consenting 503(b)(9) Claimants are being approved in the Reduced 503(b)(9) Claim Amounts pursuant to this Motion and the Proposed Order. Approval of the payment and amount of all other Opco Debtor SAP Claims is being sought pursuant to the Structured Dismissal Motion (as defined below) filed contemporaneously herewith. 3

4 Case KG Doc 3807 Filed 08/24/18 Page 4 of 16 including the 503(b)(9) Claims of the Consenting 503(b)(9) Claimants in the Reduced 503(b)(9) Claim Amounts. 3. This Motion seeks approval of a significant milestone in the Bankruptcy Cases: one that resolves all disputes between the Settlement Parties and paves the way for an efficient and consensual resolution of these Bankruptcy Cases. Absent the Global Settlement Agreement, no viable path exists for the Debtors to wind-down the Bankruptcy Cases and, at the same time, maximize recoveries to holders of claims and equity interests. Further, the Global Settlement Agreement is the result of extensive arm s length negotiations among the Settlement Parties, and represents a valid exercise of the Debtors business judgment and a more than reasonable outcome for the various disputes and issues addressed thereby. As such, for these reasons and those set forth in detail below, the Global Settlement Agreement should be approved. Jurisdiction and Venue 4. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334, and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated as of February 29, 2012 (the Amended Standing Order ). This is a core proceeding pursuant to 28 U.S.C. 157(b)(2), and, pursuant to Rule (f) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware, the Debtors consent to the entry of a final order by the Court in connection with this Motion to the extent that it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments consistent with Article III of the United States Constitution. Venue is proper in this Court pursuant to 28 U.S.C and The statutory and legal predicates for the relief requested herein are section 105(a) of the Bankruptcy Code and Bankruptcy Rule :

5 Case KG Doc 3807 Filed 08/24/18 Page 5 of 16 Background A. General Background 5. On September 8, 2015 (the Petition Date ), the Debtors filed voluntary petitions with the United States Bankruptcy Court for the District of Delaware (this Court ) for relief under chapter 11 of the Bankruptcy Code (collectively, the Bankruptcy Cases ). The Debtors are debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee or examiner has been appointed in these Bankruptcy Cases. The Bankruptcy Cases are being jointly administered for procedural purposes only pursuant to Bankruptcy Rule 1015(b). 6. On September 21, 2015, the United States Trustee for the District of Delaware (the U.S. Trustee ) appointed the Committee pursuant to section 1102 of the Bankruptcy Code. 7. Information about the Debtors business, capital structure and the events leading up to the Petition Date are set forth in the Declaration of Blake Barnett in Support of Debtors Chapter 11 Petitions and First-Day Motions [Docket No. 15] and the disclosure statement filed contemporaneously herewith, which information is incorporated herein by reference. B. The Committee Litigation 8. Following the consummation of the Court-approved sales of substantially all of the Debtors assets, the Committee elected to commence litigation under Adv. No (KG) (together with the Appeal, as defined below, and any subsequent appeal related thereto, the Committee Litigation ) against certain of the non-debtor Settlement Parties. Pursuant to the Committee Litigation, the Committee alleged, among other things, that the defendants had committed actual fraud, made fraudulent transfers, and breached their fiduciary duties and that the secured claim arising under the prepetition credit facility provided under that certain Term Loan and Security Agreement, dated as of August 21, 2015 (as may have been amended, 01:

6 Case KG Doc 3807 Filed 08/24/18 Page 6 of 16 supplemented, amended and restated, or otherwise modified from time to time, the Propco Credit Agreement ), by and among Haggen, Inc., Haggen Opco South, LLC and Haggen Opco North, LLC, as borrowers, Haggen Property North, LLC and Haggen Property South, LLC, as lenders, and Haggen Property North, LLC, as agent (such claim, the Propco Secured Claim ) should be equitably subordinated or otherwise recharacterized. The Committee also sought to substantively consolidate the Debtors with certain of their non-debtor affiliates. 9. On January 22, 2018, this Court issued an opinion finding for the defendants with respect to each count, and denying all of the relief requested by the Committee in its complaint in the Committee Litigation, including the Committee s request to substantively consolidate the Debtors with certain of their non-debtor affiliates [Adv. Pro. Docket Nos. 191, 194] (the Bankruptcy Court Litigation Ruling ). 10. On February 5, 2018, the Committee filed an appeal (the Appeal ) of the Bankruptcy Court Litigation Ruling in the United States District Court for the District of Delaware, Case No RGA, which is currently pending. C. The Global Settlement Agreement 11. Given the current posture of the Bankruptcy Cases and the Committee Litigation, to facilitate a path for the Debtors to wind-down the Bankruptcy Cases in a timely and efficient manner, and to provide certain distributions to their respective creditors, the Settlement Parties negotiated in good faith and at arm s length to reach a full and final settlement of all of the claims, disputes, and matters in controversy between them, including, without limitation: (i) the claims asserted in the Committee Litigation; (ii) certain of the largest 503(b)(9) Claims asserted against the Opco Debtors; and (iii) the Propco Secured Claim, as set forth in further detail in the Global Settlement Agreement. 01:

7 Case KG Doc 3807 Filed 08/24/18 Page 7 of Among other key terms, the Global Settlement Agreement provides 4 : (a) (b) Holdco s Plan. No later than ten (10) days following the execution of the Global Settlement Agreement, Holdco shall file a chapter 11 plan of liquidation (as may be amended, supplemented, amended and restated or otherwise modified from time to time, the Plan ) and a related disclosure statement that shall provide for distributions to the holders of allowed claims against and equity interests in Holdco, including the Minimum Equity Distribution Amount to the holders of Class A Equity Interests (as defined in the Plan), and include such other provisions as are reasonable and necessary to obtain confirmation of the Plan by the Bankruptcy Court and to implement the Plan. Compromise of the Propco Secured Claim. On the Plan Effective Date or as soon thereafter as reasonably practicable, the Opco Debtors shall pay (such payment, the Propco Payment ) the holders of the Propco Secured Claim an amount equal to the difference between: (a) the aggregate amount of all cash on hand in the Opco Debtors estates as of the Plan Effective Date, less (b) the aggregate amount of cash necessary to satisfy in full all valid and undisputed administrative, priority and secured claims against the Opco Debtors (which claims shall be set forth on Schedule 1 attached to the Structured Dismissal Order (as defined below) and which claims may have been modified pursuant to the terms of the Global Settlement Agreement and the Elections), other than the Propco Secured Claim (such claims, the Opco Debtor SAP Claims ). 5 On the Plan 01: The following summary of the primary terms of the Global Settlement Agreement is provided for the benefit of the Court and other parties in interest. Nothing herein is intended to modify the Global Settlement Agreement. To the extent there is any inconsistency between this summary and the Global Settlement Agreement, the Global Settlement Agreement controls. Capitalized terms used in this summary and not otherwise defined in this Motion shall have the meanings given to them in the Global Settlement Agreement. 5 A list of the known Opco Debtor SAP Claims is attached as Schedule 1 to the Structured Dismissal Order (the Opco Debtor SAP Claims Schedule ). Given that the Opco Debtors have sold substantially all of their assets and ceased operations, they believe that they have a substantially complete picture of the Opco Debtor SAP Claims as of the date hereof. However, in order to determine, with certainty, what administrative expense claims are asserted against them and address such claims in a manner that will further the wind down of the Bankruptcy Cases in a timely and efficient manner, on August 8, 2018, the Debtors filed a motion [Docket No. 3771] seeking entry of an order establishing 5:00 p.m. (ET) on October 3, 2018 (the Initial Administrative Claims Bar Date ) as the deadline for persons to assert administrative expense claims pursuant to section 503(b) of the Bankruptcy Code that accrued from the Petition Date through and including August 31, 2018, other than claims arising under section 503(b)(9) of the Bankruptcy Code, against the Debtors estates. Accordingly, the Debtors reserve the right to modify the Opco Debtor SAP Claims Schedule from time to time, through the date of entry of the Proposed Order and the Structured Dismissal Order, to the extent additional valid and undisputed administrative expense claims are filed on or before the Initial Administrative Claims Bar Date. As noted above, with the exception of the Reduced 503(b)(9) Claim Amounts for the Consenting 503(b)(9) Claimants set forth on the 503(b)(9) Schedule (as defined below), for which approval is sought pursuant to this Motion and the Proposed Order, approval of the amount and treatment of all other Opco Debtor SAP Claims is sought pursuant to the Structured Dismissal Motion filed contemporaneously herewith. Further, the Opco Debtors seek authority to make the disbursements on account of the Opco Debtor SAP Claims, including the Reduced 503(b)(9) Claim Amounts for the Consenting 503(b)(9) Claimants, and the Propco Secured Claim through the Structured Dismissal Motion. 7

8 Case KG Doc 3807 Filed 08/24/18 Page 8 of 16 Effective Date, the Propco Secured Claim shall irrevocably and unconditionally be transferred by the Propco Entities (including all voting and distribution rights with respect thereto) to Holdco. The Propco Entities and the Comvest Entities, certain of which are the controlling interest holders of the Propco Entities, hereby irrevocably and unconditionally waive, generally release and forever discharge the Opco Debtors from any amounts due or arising under the Propco Secured Claim, the Propco Credit Agreement or any other documents relating thereto, other than the Propco Payment. (c) (d) Minimum Equity Distribution Amount. As consideration for the waiver, release and discharge of the Opco Debtors from any amounts due or arising under the Propco Secured Claim, the Propco Credit Agreement or any other documents relating thereto, other than the Propco Payment, as set forth in Section 1 thereof, unless the holders of the Class A Equity Interests (as defined in the Plan), in their sole and absolute discretion, agree in writing to a lower amount, the initial distribution that such holders will receive under the Plan on or as soon as reasonably practicable after the Plan Effective Date on account of their equity interests in the Debtor shall be no less than $21.0 million in the aggregate (the Minimum Equity Distribution Amount ). Compromise of Certain 503(b)(9) Claims. In an effort to satisfy the Minimum Equity Distribution Amount, each Consenting 503(b)(9) Claimant stipulates and agrees that its 503(b)(9) Claim shall be allowed in the reduced amount (each, a Reduced 503(b)(9) Claim Amount ) set forth in the 503(b)(9) Schedule (as defined below). Each Consenting 503(b)(9) Claimant hereby irrevocably and unconditionally waives, generally releases and forever discharges the Opco Debtors from any amounts due or arising under its 503(b)(9) Claim, other than the distribution to be made to the Consenting 503(b)(9) Claimant in the applicable Reduced 503(b)(9) Claim Amount. In conjunction with obtaining the Approval Order, Holdco shall file a schedule (the 503(b)(9) Schedule ) of all Consenting 503(b)(9) Claimants and their respective Reduced 503(b)(9) Claim Amounts and such other reduced claim amounts specifically identified in their Elections (as attached to the Proposed order as Schedule 1 thereto); provided, however, that the filing of the 503(b)(9) Schedule and the entry of the Approval Order shall not prevent: (a) other holders of claims against the Opco Debtors from subsequently electing to become Consenting 503(b)(9) Claimants and agreeing to Reduced 503(b)(9) Claim Amounts on account of their 503(b)(9) Claims or such other reduced amounts on account of their other claims; or (b) any Consenting 503(b)(9) Claimant from either (x) acquiring additional 503(b)(9) Claims or other claims and agreeing to Reduced 503(b)(9) Claim Amounts on account of such subsequently acquired 503(b)(9) Claims or such other reduced amounts on account of their other 01:

9 Case KG Doc 3807 Filed 08/24/18 Page 9 of 16 subsequently acquired claims; or (y) agreeing, in writing and in their sole and absolute discretion, to accept a distribution of less than the applicable Reduced 503(b)(9) Claim Amount or such other reduced claim amount. (e) (f) (g) Structured Dismissal of Opco Debtors Bankruptcy Cases. In order to conclude the Bankruptcy Cases of the Opco Debtors as efficiently and expeditiously as possible, no later than ten (10) days following the execution of the Global Settlement Agreement, the Opco Debtors shall file a motion seeking entry of an order substantially in the form attached to the Global Settlement Agreement as Exhibit B (the Structured Dismissal Order ) that (1) shall approve the amount of the Opco Debtor SAP Claims, which claims shall be set forth on Schedule 1 attached to the Structured Dismissal Order, and the Propco Secured Claim, and (2) shall authorize and permit, among other things, the (x) distributions on the Plan Effective Date, or as soon thereafter as reasonably practicable, on account of (i) the Opco Debtor SAP Claims (including the 503(b)(9) Claims of the Consenting 503(b)(9) Claimants in the Reduced 503(b)(9) Claim Amounts) and (ii) the Propco Secured Claim in the amount of the Propco Payment, and (y) wind down and dissolution of the Opco Debtors estates. The Structured Dismissal Order shall provide that the Plan Administrator as defined in and appointed under the Plan shall have the power and authority to take any action necessary to implement the terms of Section 4 of the Global Settlement Agreement. Standstill; Dismissal of Committee Litigation. Upon execution of the Global Settlement Agreement by all of the Parties, the parties to the Committee Litigation shall inform the District Court of the Parties entry into the Global Settlement Agreement and jointly request a stay or adjournment of the Appeal to allow the Parties to effectuate the terms of the Global Settlement Agreement. During the period from the date on which the Global Settlement Agreement is executed until the earlier of the Plan Effective Date and the termination of the Global Settlement Agreement in accordance with Section 9 thereof, the parties to the Committee Litigation shall forbear the continuation of the Committee Litigation. No later than five (5) business days after the Plan Effective Date, the Committee shall file a stipulation dismissing, with prejudice, the Committee Litigation, which stipulation shall be in form and substance reasonably acceptable to the Parties. Mutual Release and Waiver. Upon the Plan Effective Date, and except as limited by the last sentence of this provision, each Party, and each of its current, former or future subsidiaries, parents, representatives, affiliates, predecessors, agents, attorneys, financial advisors, successors, assigns, shareholders, members, officers, directors, and employees, and its heirs, administrators, personal representatives and trustees, and any person claiming by, through or under any of them (collectively, the Releasing 01:

10 Case KG Doc 3807 Filed 08/24/18 Page 10 of 16 Parties ), do hereby forever RELEASE, WAIVE AND DISCHARGE each of the other Parties, and each of their respective current, former or future subsidiaries, parents, representatives, affiliates, predecessors, agents, attorneys, financial advisors, successors, assigns, shareholders, members, officers, directors, and employees, and its heirs, administrators, personal representatives and trustees, and any person claiming by, through or under any of them (collectively, the Released Parties ), from any and all legal and equitable claims, counterclaims, demands, damages, debts, agreements, covenants, suits, contracts, obligations, liabilities, accounts, offsets, rights, actions and causes of action against the Released Parties, of any kind or nature, whether known, unknown or hereafter becoming known, liquidated or unliquidated, asserted or unasserted, direct or indirect, contingent or fixed, which the Releasing Parties now have, ever had or may have against any or all of the Released Parties whatsoever arising from or related to the Bankruptcy Cases or the Committee Litigation, including, without limitation, (i) any claims and causes of action that are the subject of the Committee Litigation and (ii) any 503(b)(9) Claims of the Consenting 503(b)(9) Claimants (collectively, the Released Claims ). The Released Claims released pursuant to the Global Settlement Agreement shall include, but not be limited to, any Released Claims that the Releasing Parties have asserted, or could have asserted, against the Released Parties. Notwithstanding any of the foregoing, nothing in the Global Settlement Agreement shall be construed or deemed as a release of (a) the Released Parties obligations arising under the Global Settlement Agreement or (b) any valid and undisputed claim that any Individual Defendant has or may have against Holdco or the Opco Debtors, nor shall this provision be construed or deemed to be a release of any claims of whatever nature that the Releasing Parties have or may have against persons or entities other than the Released Parties and/or concerning matters other than the Released Claims. 13. As described above, the Plan, the Disclosure Statement, a motion to approve the Disclosure Statement and authorize Holdco to solicit acceptances for the Plan, and a motion seeking entry of the Structured Dismissal Order (which order would, among other things, approve the amount of the Propco Secured Claim and the Opco Debtor SAP Claims and authorize distributions to be made on account of the Propco Secured Claim and the Opco Debtor SAP Claims, including the 503(b)(9) Claims of the Consenting 503(b)(9) Claimants in the Reduced 503(b)(9) Claim Amounts) (the Structured Dismissal Motion ) have been filed contemporaneously herewith. Each of the foregoing is a necessary and integral component of 01:

11 Case KG Doc 3807 Filed 08/24/18 Page 11 of 16 the Global Settlement Agreement, which will only be consummated if the Proposed Order is entered, the Plan is confirmed and becomes effective, and the Opco Debtors Bankruptcy Cases are dismissed in the manner requested by the Structured Dismissal Motion. Relief Requested 14. By this Motion, the Debtors request that the Court enter the Proposed Order, pursuant to section 105(a) of the Bankruptcy Code and Bankruptcy Rule 9019, authorizing and approving the Global Settlement Agreement and authorizing the Settlement Parties to take the steps necessary to effectuate such agreement. As set forth more fully below, the Global Settlement Agreement falls well within the range of reasonableness and is in the best interests of the Debtors and their estates. Accordingly, the Debtors respectfully submit that the Global Settlement Agreement should be approved. Basis for Relief 15. Section 105(a) of the Bankruptcy Code provides, in pertinent part, that [t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of the Bankruptcy Code. 11 U.S.C. 105(a). Bankruptcy Rule 9019 authorizes bankruptcy courts to approve a compromise following the filing of a motion and a hearing. Fed. R. Bankr. P Under section 105(a) and Bankruptcy Rule 9019, the approval of a proposed compromise and settlement is committed to the sound discretion of the Court. In re Louise s, Inc., 211 B.R. 798, 801 (D. Del. 1997). 16. A starting point in analyzing any proposed settlement is the general policy of encouraging settlements and favoring compromises. See Myers v. Martin (In re Martin), 91 F. 3d 389, 393 (3d Cir. 1996). To approve a settlement, a bankruptcy court must determine that such settlement is in the best interest of a debtor s estate. Law Debenture Trust Co. of New York 01:

12 Case KG Doc 3807 Filed 08/24/18 Page 12 of 16 v. Kaiser Aluminum Corp. (In re Kaiser Aluminum Corp.), 339 B.R. 91, (D. Del. 2006). In addition, courts in the Third Circuit examine four factors in determining whether to approve a proposed settlement: (1) the probability of success in the litigation, (2) the likely difficulties in collection, (3) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it, and (4) the paramount interests of the creditors. Id. at 96 (quoting Martin, 91 F.3d at 393). The United States District Court for the District of Delaware has explained that a court s ultimate inquiry is whether a settlement is fair, reasonable, and in the best interest of a [debtor s] estate. In re Marvel Entm t Grp., Inc., 222 B.R. 243, 249 (D. Del. 1998) (quoting In re Louise s, Inc., 211 B.R. 798, 801 (D. Del. 1997)). 17. The decision to approve a particular settlement lies within the sound discretion of the bankruptcy court. In re World Health Alts., Inc., 344 B.R. 291, 296 (Bankr. D. Del. 2006) (internal citations omitted). A court need not decide the numerous issues of law and fact raised by the settlement and it need not be convinced that the proposed settlement is the best possible, rather [t]he court need only conclude that the settlement falls within the reasonable range of litigation possibilities somewhere above the lowest point in the range of reasonableness. In re Nutritional Sourcing Corp., 398 B.R. 816, 833 (Bankr. D. Del. 2008) (quoting In re Sea Containers Ltd., 2008 WL , at *5, 2008 Bankr. LEXIS 2363, at *15 (Bankr. D. Del. Sept. 19, 2008) (internal citations omitted)). 18. In the Debtors business judgment, the resolution embodied in the Global Settlement Agreement is in the best interest of the Debtors, their estates, their creditors, and other parties in interest and falls well within the range of reasonableness. First, as the Court is well aware, the Bankruptcy Cases are at an impasse. Although the Debtors had sold substantially all of their assets and ceased operations by the end of 2016, their efforts to bring the Bankruptcy 01:

13 Case KG Doc 3807 Filed 08/24/18 Page 13 of 16 Cases to a close have been significantly impeded by the continuation of the Committee Litigation. Absent the Global Settlement Agreement, a full resolution of the Committee Litigation will take considerable time, in addition to the time that has already been expended, and further consume a significant amount of the Debtors resources to the detriment of the Debtors creditors and parties in interest. As a result, the Debtors would be unable to advance the Bankruptcy Cases because many of the parties whose cooperation is essential to concluding the Bankruptcy Cases, including the Committee, the Comvest Entities and the Propco Entities, are also parties to the Committee Litigation and are unwilling and/or unable to move forward until the appeal process has run its course. 19. Second, as described above, the Opco Debtors do not have sufficient assets to satisfy all of the Opco Debtor SAP Claims and the Propco Secured Claim. Thus, the Opco Debtors are currently administratively insolvent, and their Bankruptcy Cases cannot be effectively wound-down without significant concessions from not only the Comvest Entities and the Propco Entities, but also other stakeholders, including the Consenting 503(b)(9) Claimants. 20. For all of these reasons, the Global Settlement Agreement is the only way to avoid what could be years of protracted litigation with respect to the Committee Litigation, and represents the only realistic means by which the Debtors may conclude these Bankruptcy Cases in a manner that maximizes the recoveries to the Debtors creditors and minimizes the amount of time it takes distribute those recoveries. 21. The Global Settlement Agreement is the result of substantial good faith and arm s-length negotiations between the Settlement Parties and represents a coordinated effort by parties with exceedingly divergent interests to compromise their individual interests to conclude the Bankruptcy Cases. It fully and finally compromises and settles all of the claims, disputes, 01:

14 Case KG Doc 3807 Filed 08/24/18 Page 14 of 16 and matters in controversy between the Settlement Parties, provides the framework for the ultimate resolution of the Bankruptcy Cases, and represents, in the Debtors judgment, the only viable way to successfully conclude the Bankruptcy Cases under the present circumstances. For all of these reasons, the Global Settlement Agreement is clearly above the lowest point in the range of reasonableness. In re Nutritional Sourcing Corp., 398 B.R. at Moreover, there is a strong policy favoring settlements in chapter 11 cases, and a failure to resolve all of the matters addressed by the Global Settlement Agreement at this time would further delay and likely diminish distributions to creditors. Engaging in additional negotiations in an attempt to craft an alternative settlement or further litigating the Committee Litigation and the various other disputes among the Settlement Parties would be time consuming, expensive, and uncertain, and force the Bankruptcy Cases to continue to remain at a standstill while such litigation and negotiations play-out, at a substantial cost to the Debtors estates and creditors. The Global Settlement Agreement, in contrast, facilitates confirmation of the Plan and the structured dismissal of the Opco Debtors Bankruptcy Cases, which will allow for distributions to certain creditors (including all valid secured, administrative and priority claims) in a timely manner. Given (a) the complexity underlying the issues raised in the Committee Litigation, (b) the expense, inconvenience, and delay attendant thereto, and (c) the interests of the Debtors and their creditors in seeing these Bankruptcy Cases resolved in the near term, the Global Settlement Agreement represents not only a fair compromise but also a successful resolution of the outstanding issues and, under the circumstances, the best possible way to bring the Bankruptcy Cases to a conclusion. 23. Accordingly, the Debtors submit that the Global Settlement Agreement should be approved by this Court as a review of the Martin factors, to the extent they are applicable, clearly 01:

15 Case KG Doc 3807 Filed 08/24/18 Page 15 of 16 demonstrates that approval of the Global Settlement Agreement is in the best interests of the Debtors, their estates and creditors, as well as other parties in interest in these Bankruptcy Cases. Notice 24. Notice of this Motion has been provided to the following parties: (i) the U.S. Trustee; (ii) the Committee; (iii) counsel to the Debtors post-petition secured lenders; (iv) counsel to the Comvest Entities; (v) counsel to the Propco Entities; (vi) counsel to SLB; (vii) counsel to the Individual Defendants; (viii) counsel to the Consenting 503(b)(9) Claimants; and (ix) all parties that, as of the filing of the Motion, have requested notice in these Bankruptcy Cases pursuant to Bankruptcy Rule The Debtors submit that, in light of the nature of the relief requested, no other or further notice need be given. Remainder of page intentionally left blank 01:

16 Case KG Doc 3807 Filed 08/24/18 Page 16 of 16 Conclusion WHEREFORE, the Debtors request entry of the Proposed Order, granting the relief requested herein and such other and further relief as is just and proper. Dated: August 24, 2018 Wilmington, Delaware YOUNG CONAWAY STARGATT & TAYLOR, LLP /s/ Ian J. Bambrick Matthew B. Lunn (No. 4119) Robert F. Poppiti, Jr. (No. 5052) Ian J. Bambrick (No. 5455) Ashley E. Jacobs (No. 5635) Rodney Square 1000 North King Street Wilmington, Delaware Telephone: (302) Facsimile: (302) and- STROOCK & STROOCK & LAVAN LLP Frank A. Merola Sayan Bhattacharyya Elizabeth Taveras 180 Maiden Lane New York, New York Telephone: (212) Facsimile: (212) COUNSEL TO THE DEBTORS AND DEBTORS-IN-POSSESSION 01:

17 Case KG Doc Filed 08/24/18 Page 1 of 2 IN UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) In re: ) Chapter 11 ) HH Liquidation, LLC, et al., 1 ) Case No (KG) ) Debtors. ) Jointly Administered ) ) Hearing Date: November 14, 2018 at 10:00 a.m. (ET) ) Objection Deadline: September 25, 2018 at 4:00 p.m. (ET) NOTICE OF MOTION TO: (I) THE U.S. TRUSTEE; (II) THE COMMITTEE; (III) COUNSEL TO THE DEBTORS POST-PETITION SECURED LENDERS; (IV) THE OTHER SETTLEMENT PARTIES; AND (V) ALL PARTIES THAT, AS OF THE FILING OF THE MOTION, HAVE REQUESTED NOTICE IN THESE CHAPTER 11 CASES PURSUANT TO BANKRUPTCY RULE 2002 PLEASE TAKE NOTICE that HH Liquidation, LLC (the Holdco ) and its above-captioned affiliated debtors and debtors in possession (collectively, the Opco Debtors and, with Holdco, the Debtors ) have filed the attached Debtors Motion for Entry of an Order, Pursuant to Section 105(a) of the Bankruptcy Code and Bankruptcy Rule 9019, Approving the Global Settlement Agreement Between Holdco, the Opco Debtors, the Committee, the Comvest Entities, the Propco Entities, SLB, the Individual Defendants and the Consenting 503(b)(9) Claimants (the Motion ). PLEASE TAKE FURTHER NOTICE that any objections to the Motion must be filed on or before September 25, 2018 at 4:00 p.m. (ET) (the Objection Deadline ) with the United States Bankruptcy Court for the District of Delaware, 3rd Floor, 824 N. Market Street, Wilmington, Delaware At the same time, you must serve a copy of any objection upon the undersigned counsel to the Debtors so as to be received on or before the Objection Deadline. PLEASE TAKE FURTHER NOTICE THAT A HEARING ON THE MOTION WILL BE HELD ON NOVEMBER 14, 2018 AT 10:00 A.M. (ET) BEFORE THE HONORABLE KEVIN GROSS, IN THE UNITED STATES BANKRUPTCY COURT FOR 01: The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are: HH Liquidation, LLC (f/k/a Haggen Holdings, LLC) (7558), HH Operations, LLC (f/k/a Haggen Operations Holdings, LLC) (6341), HH Opco South, LLC (f/k/a Haggen Opco South, LLC) (7257), HH Opco North, LLC (f/k/a Haggen Opco North, LLC) (5028), HH Acquisition, LLC (f/k/a Haggen Acquisition, LLC) (7687), and HH Legacy, Inc. (f/k/a Haggen, Inc.) (4583). The mailing address for each of the Debtors is Aliso Creek Road, Suite B-1003, Aliso Viejo, California

18 Case KG Doc Filed 08/24/18 Page 2 of 2 THE DISTRICT OF DELAWARE, 824 N. MARKET STREET, 6 TH FLOOR, COURTROOM NO. 3, WILMINGTON, DELAWARE PLEASE TAKE FURTHER NOTICE THAT, IF YOU FAIL TO RESPOND IN ACCORDANCE WITH THIS NOTICE, THEN THE COURT MAY GRANT THE RELIEF REQUESTED IN THE MOTION WITHOUT FURTHER NOTICE OR A HEARING. Dated: August 24, 2018 Wilmington, Delaware YOUNG CONAWAY STARGATT & TAYLOR, LLP /s/ Ian J. Bambrick Matthew B. Lunn (No. 4119) Robert F. Poppiti, Jr. (No. 5052) Ian J. Bambrick (No. 5455) Ashley E. Jacobs (No. 5635) Rodney Square 1000 North King Street Wilmington, Delaware Telephone: (302) Facsimile: (302) and- STROOCK & STROOCK & LAVAN LLP Frank A. Merola Sayan Bhattacharyya 180 Maiden Lane New York, New York Telephone: (212) Facsimile: (212) COUNSEL TO THE DEBTORS AND DEBTORS-IN-POSSESSION 01:

19 Case KG Doc Filed 08/24/18 Page 1 of 55 EXHIBIT A Proposed Order 01:

20 Case KG Doc Filed 08/24/18 Page 2 of 55 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) Chapter 11 In re: ) ) Case No (KG) HH LIQUIDATION, LLC, et al., 1 ) ) (Jointly Administered) Debtors. ) ) Ref. Docket No. ) ORDER, PURSUANT TO SECTION 105(a) OF THE BANKRUPTCY CODE AND BANKRUPTCY RULE 9019, APPROVING THE GLOBAL SETTLEMENT AGREEMENT BETWEEN HOLDCO, THE OPCO DEBTORS, THE COMMITTEE, THE COMVEST ENTITIES, THE PROPCO ENTITIES, SLB, THE INDIVIDUAL DEFENDANTS AND THE CONSENTING 503(b)(9) CLAIMANTS Upon consideration of the motion (the Motion ) 2 of the Debtors for the entry of an order, pursuant to section 105(a) of the Bankruptcy Code and Bankruptcy Rule 9019, authorizing and approving the Global Settlement Agreement between Holdco, the Opco Debtors, the Committee, the Comvest Entities, the Propco Entities, SLB, the Individual Defendants, and the Consenting 503(b)(9) Claimants; and upon consideration of all pleadings related thereto including the Beilinson Declaration; and it appearing that the Court has jurisdiction to consider the Motion in accordance with 28 U.S.C. 157 and 1334 and the Amended Standing Order; and it appearing that this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); and it appearing that venue of this proceeding and the Motion is proper pursuant to 28 U.S.C and 1409; 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are: HH Liquidation, LLC (f/k/a Haggen Holdings, LLC) (7558), HH Operations, LLC (f/k/a Haggen Operations Holdings, LLC) (6341), HH Opco South, LLC (f/k/a Haggen Opco South, LLC) (7257), HH Opco North, LLC (f/k/a Haggen Opco North, LLC) (5028), HH Acquisition, LLC (f/k/a Haggen Acquisition, LLC) (7687), and HH Legacy, Inc. (f/k/a Haggen, Inc.) (4583). The mailing address for each of the Debtors is Aliso Creek Road, Suite B-1003, Aliso Viejo, CA Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Motion. 01:

21 Case KG Doc Filed 08/24/18 Page 3 of 55 and due and proper notice of the Motion having been given, and it appearing that no other or further notice of the Motion is required; and the Court having found and determined that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and the Court having found and determined that the Global Settlement Agreement was negotiated in good faith and at arm s length between the Settlement Parties; and the settlement and compromises and releases set forth in the Global Settlement Agreement being fair and reasonable to, and in the best interests of, the Debtors estates; and it appearing that the relief requested in the Motion and provided for herein is in the best interest of the Debtors, their estates, and their creditors and is an appropriate exercise of the Debtors business judgment; and after due deliberation and sufficient cause appearing therefor, IT IS HEREBY ORDERED THAT: 1. The Motion is GRANTED as set forth herein. 2. Any objections to the Motion or the Global Settlement Agreement not previously withdrawn, waived, or settled and all reservations of rights included therein, are hereby overruled with prejudice. 3. Pursuant to section 105(a) of the Bankruptcy Code and Bankruptcy Rule 9019, the Global Settlement Agreement (including any exhibits included therewith), attached hereto as Exhibit 1, is hereby APPROVED in its entirety, and all of its terms are incorporated herein by reference as if fully set forth herein. 4. The amounts of the 503(b)(9) Claims and such other claims identified on the 503(b)(9) Schedule, attached hereto as Schedule 1 and deemed to be fully incorporated into the Global Settlement Agreement, are hereby MODIFIED to the amounts indicated in the column titled Reduced 503(b)(9) Claim Amount in the 503(b)(9) Schedule. The entry of this 01:

22 Case KG Doc Filed 08/24/18 Page 4 of 55 Order shall not prevent: (a) other holders of 503(b)(9) Claims (or other claims against the Opco Debtors) from subsequently electing to become Consenting 503(b)(9) Claimants and agreeing to Reduced 503(b)(9) Claim Amounts on account of their 503(b)(9) Claims (or to such other reduced amounts on account of their other claims); or (b) any Consenting 503(b)(9) Claimant from either (i) acquiring additional 503(b)(9) Claims (or other claims) and agreeing to Reduced 503(b)(9) Claim Amounts on account of such subsequently acquired 503(b)(9) Claims (or to such other reduced amounts on account of their other subsequently acquired claims); or (ii) agreeing, in writing and in their sole and absolute discretion, to accept a distribution of less than the applicable Reduced 503(b)(9) Claim Amount (or such other reduced claim amount). Distributions on account of the Reduced 503(b)(9) Claim Amounts (and such other reduced claim amounts) set forth on the 503(b)(9) Schedule shall be subject to entry of the Structured Dismissal Order. 5. The Settlement Parties are authorized and directed to execute, deliver, implement, and fully perform any and all obligations, instruments, documents, and papers and to take any and all actions reasonably necessary or appropriate to consummate, complete, execute and implement the Global Settlement Agreement in accordance with the terms and conditions thereof. 6. The releases set forth in Section 10 of the Global Settlement Agreement are hereby approved in all respects, and section 1542 of the California Civil Code and any similarly worded statute of any other state, to the extent applicable, is waived for each and every Settlement Party granting a release set forth in Section 10 of the of the Global Settlement Agreement. 01:

23 Case KG Doc Filed 08/24/18 Page 5 of This Order shall constitute findings of fact and conclusions of law and, notwithstanding the possible applicability of any provision of the Bankruptcy Rules, the terms and conditions of this Order shall be immediately effective and enforceable upon its entry. 8. This Court shall retain jurisdiction to hear and determine all matters arising from or related to Global Settlement Agreement, this Order, and the implementation thereof. Dated:, 2018 Wilmington, Delaware The Honorable Kevin Gross United States Bankruptcy Judge 01:

24 Case KG Doc Filed 08/24/18 Page 6 of 55 EXHIBIT 1 Global Settlement Agreement 01:

25 Case KG Doc Filed 08/24/18 Page 7 of 55 Execution Version GLOBAL SETTLEMENT AGREEMENT This GLOBAL SETTLEMENT AGREEMENT, dated as of August 23, 2018 (as amended, supplemented, amended and restated or otherwise modified from time to time, this Agreement ), is entered into by and between (i) HH Liquidation, LLC (f/k/a Haggen Holdings, LLC) (the Debtor ); (ii) HH Operations, LLC (f/k/a Haggen Operations Holdings, LLC), HH Opco South, LLC (f/k/a Haggen Opco South, LLC), HH Opco North, LLC (f/k/a Haggen Opco North, LLC), HH Acquisition, LLC (f/k/a Haggen Acquisition, LLC), and HH Legacy, Inc. (f/k/a Haggen, Inc.) (collectively, the Opco Debtors ); (iii) the official committee of unsecured creditors appointed in the Bankruptcy Cases (as defined below) (the Committee ); (iv) Comvest Group Holdings, LP, Comvest Advisors, LLC, Comvest Investment Partners III, LP, Comvest Investment Partners IV, LP, Comvest Investment Partners IV-A, LP, Comvest Haggen Holdings III, LLC, and Comvest Haggen Holdings IV, LLC (collectively, the Comvest Entities ); (v) HH Property Holdings, LLC (f/k/a Haggen Property Holdings, LLC), HH Property Holdings II, LLC (f/k/a Haggen Property Holdings II, LLC), HH Property Holdings III, LLC (f/k/a Haggen Property Holdings III, LLC), HH Property South, LLC (f/k/a Haggen Property South, LLC), and HH Property North, LLC (f/k/a Haggen Property North, LLC (collectively, the Propco Entities ); (vi) HH SLB, LLC (f/k/a Haggen SLB, LLC) ( SLB ); (vii) John Caple, Cecilio Rodriguez, Michael Niegsch, John Clougher, Blake Barnett, William Shaner and Derrick Anderson (collectively, the Individual Defendants); and (viii) each of the Consenting 503(b)(9) Claimants (as defined below, and together with the Debtor, the Opco Debtors, the Committee, the Comvest Entities, the Propco Entities, SLB and the Individual Defendants, the Parties ). RECITALS A. On September 8, 2015, the Debtor and the Opco Debtors filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code, which chapter 11 cases are being jointly administered under the caption In re: HH Liquidation, LLC, et al., Case No (KG) (the Bankruptcy Cases ) in the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court ). B. On September 21, 2015, the United States Trustee for the District of Delaware appointed the Committee in the Bankruptcy Cases [Docket No. 126]. C. One or more of the Comvest Entities is the equity sponsor and ultimate owner of the Debtors, the Propco Entities and SLB. D. The Propco Entities are non-debtor affiliates of the Debtor and its direct and indirect subsidiaries. The Propco Entities assert a secured claim against certain of the Opco Debtors arising under the prepetition credit facility provided under that certain Term Loan and Security Agreement, dated as of August 21, 2015 (as may have been amended, supplemented, amended and restated or otherwise modified from time to time, the Propco Credit Agreement ), by and among Haggen, Inc., Haggen Opco South, LLC and Haggen Opco North, as borrowers, Haggen Property North, LLC and Haggen Property South, LLC, as lenders, and Haggen Property North, LLC, as agent (such claim, the Propco Secured Claim ). LA

26 Case KG Doc Filed 08/24/18 Page 8 of 55 E. Certain holders of claims against the Opco Debtors, including claims under section 503(b)(9) of the Bankruptcy Code (collectively, the 503(b)(9) Claims ), each filed proofs of claim against one or more of the Opco Debtors (or notices of transfer/assignment of such proofs of claim). Such holders have executed an Election to Participate in Global Settlement Agreement substantially in the form attached hereto as Exhibit A (each, an Election ) pursuant to which they have agreed to reduce their respective 503(b)(9) Claims and such other claims as specified therein (such holders, collectively, the Consenting 503(b)(9) Claimants ). F. The Bankruptcy Cases were commenced for the purpose of allowing the Opco Debtors to preserve as much of their business as possible as a going concern and to maximize the value of their assets through either one or more sale transactions and/or a chapter 11 plan. The Opco Debtors successfully consummated sales constituting substantially all of their assets, which resulted in the payment in full of their prepetition and postpetition credit facilities. G. Following the consummation of such asset sales, the Committee was granted standing to pursue certain alleged claims and elected to commence litigation against certain of the Comvest Entities, the Propco Entities, SLB and the Individual Defendants (collectively, the Defendants ), alleging, among other things, that the Defendants made actual and constructive fraudulent transfers and breached their fiduciary duties, and that the Propco Secured Claims should be equitably subordinated or otherwise recharacterized, Adv. No (KG) (together with the Appeal (as defined below) and any subsequent appeal related to the claims asserted in the Appeal, the Committee Litigation ). After a five (5)-day evidentiary trial, the submission of post-trial briefs and closing arguments, on January 22, 2018, the Bankruptcy Court issued an opinion finding for the Defendants with respect to each count and denying all of the relief requested by the Committee [Adv. Pro. Docket Nos. 191, 194]. On February 5, 2018, the Committee filed an appeal to the Bankruptcy Court s ruling on the Committee Litigation in the United States District Court for the District of Delaware (the District Court ), Case No RGA (the Appeal ). H. The Opco Debtors do not have sufficient assets to satisfy all valid and undisputed administrative, priority and secured claims (including the Propco Secured Claim) against the Opco Debtors. Thus, the Opco Debtors are currently administratively insolvent. I. In light of the Opco Debtors administrative insolvency and the status of the Committee Litigation, the Debtor and Opco Debtors (through their independent director) and the other Parties desire to fully and finally compromise and settle all of the claims, disputes and matters in controversy between them, including, without limitation, relating to (i) the claims asserted in the Committee Litigation, (ii) the 503(b)(9) Claims and other specified claims asserted by the Consenting 503(b)(9) Claimants, and (iii) the Propco Secured Claim, in order to facilitate a path for the Debtor and the Opco Debtors to exit chapter 11 and provide a distribution to certain of their respective creditors, as set forth in this Agreement. In consideration of the foregoing and the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows: 2 LA

27 Case KG Doc Filed 08/24/18 Page 9 of 55 AGREEMENT 1. Compromise of the Propco Secured Claim. On the Plan Effective Date (as defined below) or as soon thereafter as reasonably practicable, the Opco Debtors shall pay (such payment, the Propco Payment ) the holders of the Propco Secured Claim an amount equal to the difference between: (a) the aggregate amount of all cash on hand in the Opco Debtors estates as of the Plan Effective Date, less (b) the aggregate amount of cash necessary to satisfy in full all valid and undisputed administrative, priority and secured claims against the Opco Debtors (which valid and undisputed claims shall be set forth on Schedule 1 attached to the Structured Dismissal Order (as defined below) and which claims may have been modified pursuant to the terms of this Agreement and the Elections), other than the Propco Secured Claim (such claims, the Opco Debtor SAP Claims ). On the Plan Effective Date, the Propco Secured Claim shall irrevocably and unconditionally be transferred by the Propco Entities (including all voting and distribution rights with respect thereto) to the Debtor. The Propco Entities and the Comvest Entities, certain of which are the controlling interest holders of the Propco Entities, hereby irrevocably and unconditionally waive, generally release and forever discharge the Opco Debtors from any amounts due or arising under the Propco Secured Claim, the Propco Credit Agreement or any other documents relating thereto, other than the Propco Payment. 2. Minimum Equity Distribution Amount. As consideration for the waiver, release and discharge of the Opco Debtors from any amounts due or arising under the Propco Secured Claim, the Propco Credit Agreement or any other documents relating thereto, other than the Propco Payment, as set forth in Section 1 hereof, unless the holders of the Class A Equity Interests (as defined in the Plan), in their sole and absolute discretion, agree in writing to a lower amount, the initial distribution that such holders will receive under the Plan (as defined below) on or as soon as reasonably practicable after the Plan Effective Date on account of their equity interests in the Debtor shall be no less than $21.0 million in the aggregate (the Minimum Equity Distribution Amount ). 3. Compromise of Certain 503(b)(9) Claims. In an effort to satisfy the Minimum Equity Distribution Amount, each Consenting 503(b)(9) Claimant stipulates and agrees that its 503(b)(9) Claim shall be allowed in the reduced amount (each, a Reduced 503(b)(9) Claim Amount ) set forth in the 503(b)(9) Schedule (as defined below). Each Consenting 503(b)(9) Claimant hereby irrevocably and unconditionally waives, generally releases and forever discharges the Opco Debtors from any amounts due or arising under its 503(b)(9) Claim, other than the distribution to be made to the Consenting 503(b)(9) Claimant in the applicable Reduced 503(b)(9) Claim Amount. In conjunction with obtaining the Approval Order, the Debtor shall file a schedule (the 503(b)(9) Schedule ) of all Consenting 503(b)(9) Claimants and their respective Reduced 503(b)(9) Claim Amounts and such other reduced claim amounts specifically identified in their Elections; provided, however, that the filing of the 503(b)(9) Schedule and the entry of the Approval Order shall not prevent: (a) other holders of claims against the Opco Debtors from subsequently electing to become Consenting 503(b)(9) Claimants and agreeing to Reduced 503(b)(9) Claim Amounts on account 3 LA

28 Case KG Doc Filed 08/24/18 Page 10 of 55 of their 503(b)(9) Claims or such other reduced amounts on account of their other claims; or (b) any Consenting 503(b)(9) Claimant from either (x) acquiring additional 503(b)(9) Claims or other claims and agreeing to Reduced 503(b)(9) Claim Amounts on account of such subsequently acquired 503(b)(9) Claims or such other reduced amounts on account of their other subsequently acquired claims; or (y) agreeing, in writing and in their sole and absolute discretion, to accept a distribution of less than the applicable Reduced 503(b)(9) Claim Amount or such other reduced claim amount. 4. Structured Dismissal of Opco Debtors Bankruptcy Cases. In order to conclude the Bankruptcy Cases of the Opco Debtors as efficiently and expeditiously as possible, no later than ten (10) days following the execution of this Agreement by all of the Parties, the Opco Debtors shall file a motion seeking entry of an order substantially in the form attached hereto as Exhibit B (the Structured Dismissal Order ) that (a) shall approve the amount of the Opco Debtor SAP Claims, which claims shall be set forth on Schedule 1 attached to the Structured Dismissal Order, and the Propco Secured Claim, and (b) shall authorize and permit, among other things, the (x) distributions on the Plan Effective Date, or as soon thereafter as reasonably practicable, on account of (i) the Opco Debtor SAP Claims (including the 503(b)(9) Claims of the Consenting 503(b)(9) Claimants in the Reduced 503(b)(9) Claim Amounts) and (ii) the Propco Secured Claim in the amount of the Propco Payment, and (y) wind down and dissolution of the Opco Debtors estates. The Structured Dismissal Order shall provide that the Plan Administrator as defined in, and appointed under, the Plan shall have the power and authority to take any action necessary to implement the terms of this Section Standstill; Dismissal of Committee Litigation. (a) Upon execution of this Agreement by all of the Parties, the parties to the Committee Litigation shall inform the District Court of the Parties entry into this Agreement and jointly request a stay or adjournment of the Appeal to allow the Parties to effectuate the terms of this Agreement. During the period from the date on which this Agreement is executed until the earlier of the Plan Effective Date and the termination of this Agreement in accordance with Section 9 hereof, the parties to the Committee Litigation shall forbear the continuation of the Committee Litigation. (b) No later than five (5) business days after the Plan Effective Date, the Committee shall file a stipulation dismissing, with prejudice, the Committee Litigation, which stipulation shall be in form and substance reasonably acceptable to the Parties. 6. Debtor s Plan. No later than ten (10) days following the execution of this Agreement by all of the Parties, the Debtor shall file a chapter 11 plan of liquidation (as may be amended, supplemented, amended and restated or otherwise modified from time to time, the Plan ) and a related disclosure statement that shall provide for distributions to the holders of allowed claims against and equity interests in the Debtor, including the Minimum Equity Distribution Amount to the 4 LA

29 Case KG Doc Filed 08/24/18 Page 11 of 55 holders of Class A Equity Interests, and include such other provisions as are reasonable and necessary to obtain confirmation of the Plan by the Bankruptcy Court and to implement the Plan. 7. Approval Order. No later than ten (10) days following the execution of this Agreement by all of the Parties, the Debtor and the Opco Debtors shall file a motion with the Bankruptcy Court pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure seeking entry of an order that, among other things, approves the terms of this Agreement, including, but not limited to, the Reduced 503(b)(9) Claim Amounts, the Minimum Equity Distribution Amount and the Propco Payment, and authorizes the Debtor s and the Opco Debtors entry into this Agreement (such order, the Approval Order ). 8. Effectiveness. Except as otherwise provided in this Section 8, this Agreement shall become immediately effective and binding upon the Parties and their respective successors, endorsees, transferees, heirs, beneficiaries and assigns on the date (the Agreement Effective Date ) on which the Approval Order becomes a final, non-appealable order; provided, that the Debtors shall seek a waiver of the 14-day stay provided under Rule 6004(h) of the Bankruptcy Rules and shall otherwise oppose any motion for a stay pending appeal. Notwithstanding anything to the contrary contained herein, Section 5(a) of this Agreement shall be immediately binding upon execution of this Agreement by all of the Parties without a need for any further action on the part of (or notice provided to) any person. 9. Termination; Effect of Termination. (a) Parties. This Agreement may be terminated by mutual written agreement among the (b) Unless earlier terminated in accordance with the terms of this Agreement, this Agreement shall terminate automatically and immediately, without a need for any further action on the part of (or notice provided to) any person, to the extent each of the following shall not have occurred on or prior to December 31, 2018: (i) the entry of the Approval Order, and such order shall have become a final order that has not been stayed or modified or vacated on appeal; (ii) the entry of the Structured Dismissal Order, and such order shall have become a final order that has not been stayed or modified or vacated on appeal; (iii) the payment by the Opco Debtors of the Propco Payment; (iv) the payment by the Opco Debtors of the Opco Debtor SAP Claims in the amounts set forth in Schedule 1 of the Structured Dismissal Order; 5 LA

30 Case KG Doc Filed 08/24/18 Page 12 of 55 (v) the entry of an order by the Bankruptcy Court confirming the Debtor s Plan, and such order shall have become a final order that has not been stayed or modified or vacated on appeal; and (vi) the effective date the Plan (as specified therein) (such date, the Plan Effective Date ). (c) In the event of a termination of this Agreement in accordance with this Section 9, the provisions of this Agreement shall immediately become void and of no further force or effect (other than in respect of any liability of any Party for any breach of this Agreement prior to such termination, which shall in each case expressly survive any such termination), and each of the Parties shall be returned to their respective rights and remedies as they existed prior to execution of this Agreement. 10. Mutual Release and Waiver. (a) Upon the Plan Effective Date, and except as limited by the last sentence of this Section 10(a), each Party, and each of its current, former or future subsidiaries, parents, representatives, affiliates, predecessors, agents, attorneys, financial advisors, successors, assigns, shareholders, members, officers, directors, and employees, and its heirs, administrators, personal representatives and trustees, and any person claiming by, through or under any of them (collectively, the Releasing Parties ), do hereby forever RELEASE, WAIVE AND DISCHARGE each of the other Parties, and each of their respective current, former or future subsidiaries, parents, representatives, affiliates, predecessors, agents, attorneys, financial advisors, successors, assigns, shareholders, members, officers, directors, and employees, and its heirs, administrators, personal representatives and trustees, and any person claiming by, through or under any of them (collectively, the Released Parties ), from any and all legal and equitable claims, counterclaims, demands, damages, debts, agreements, covenants, suits, contracts, obligations, liabilities, accounts, offsets, rights, redemption rights, actions and causes of action against the Released Parties, of any kind or nature, whether known, unknown or hereafter becoming known, liquidated or unliquidated, asserted or unasserted, direct or indirect, contingent or fixed, which the Releasing Parties now have, ever had or may have against any or all of the Released Parties whatsoever arising from or related to the Bankruptcy Cases or the Committee Litigation, including, without limitation, (i) any claims and causes of action that are the subject of the Committee Litigation, (ii) any 503(b)(9) Claims of the Consenting 503(b)(9) Claimants and (iii) any claims arising out of or related to prepetition contracts, agreements or arrangements between the Debtor and/or Opco Debtors and the Consenting 503(b)(9) Claimants (collectively, the Released Claims ). The Released Claims released herein shall include, but not be limited to, any Released Claims that the Releasing Parties have asserted, or could have asserted, against the Released Parties. Notwithstanding any of the foregoing, nothing herein shall be construed or deemed as a release of (a) the Released Parties obligations arising under this Agreement or (b) any valid and undisputed claim that any Individual Defendant has or may have against the Debtor or the Opco Debtors, nor shall this Section 10(a) be construed or deemed to be a release of any claims of whatever nature that the Releasing Parties have or may have against persons or 6 LA

31 Case KG Doc Filed 08/24/18 Page 13 of 55 entities other than the Released Parties and/or concerning matters other than the Released Claims. (b) Each Party hereby expressly waives any rights it may have under California Civil Code Section 1542, which provides that: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. 11. Notices. All notices, requests and demands to or upon the respective Parties shall be in writing and shall be (a) sent by certified mail, return receipt requested, postage prepaid or (b) by , addressed as follows, or to such other address as may hereafter be designated in writing by the applicable Party, and shall be deemed received when delivered to the designated address: If to the Debtor or the Opco Debtors: Marc Beilinson 2315 Ocean Front Walk Venice, CA mbeilinson@beilinsonpartners.com Telephone: (310) with a copy, which shall not constitute notice, to: Stroock & Stroock & Lavan LLP 2029 Century Park East Los Angeles, CA Attention: Frank Merola, Esq. fmerola@stroock.com Telephone: (310) with a copy, which shall not constitute notice, to: Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, NY Attention: Odelia Yott, Esq. oyott@stroock.com Telephone: (212) LA

32 Case KG Doc Filed 08/24/18 Page 14 of 55 If to the Propco Entities or SLB: If to the Committee: Comvest Partners 525 Okeechobee Blvd. Suite 1050 West Palm Beach, FL Attention: Cecilio Rodriguez Telephone: (561) with a copy, which shall not constitute notice, to: Womble Bond Dickinson (US) LLP 222 Delaware Avenue Suite 1501 Wilmington, DE Attention: Kevin J. Mangan, Esq. Kevin.Mangan@wbd-us.com Telephone: (302) with a copy, which shall not constitute notice, to: Womble Bond Dickinson (US) LLP 300 North Greene Street Suite 1900 Greensboro, NC Attention: Philip J. Mohr, Esq. philip.mohr@wbd-us.com Telephone: (336) Pachulski Stang Ziehl & Jones LLP 919 North Market Street 17th Floor Wilmington, DE Attention: Bradford J. Sandler, Esq. bsandler@pszjlaw.com Telephone: (302) Pachulski Stang Ziehl & Jones LLP 780 Third Avenue 34th Floor New York, NY Attention: Robert J. Feinstein, Esq. rfeinstein@pszjlaw.com 8 LA

33 Case KG Doc Filed 08/24/18 Page 15 of 55 If to the Comvest Entities: Telephone: (212) Comvest Partners 525 Okeechobee Blvd. Suite 1050 West Palm Beach, FL Attention: Michael Altschuler Telephone: (561) with a copy, which shall not constitute notice, to: Kirkland & Ellis LLP 300 North LaSalle Chicago, IL Attention: Richard U. S. Howell, Esq. richard.howell@kirkland.com Telephone: (312) If to an Individual Defendant, to the address(es) or address(es) for such Individual Defendant set forth on its signature page hereto. If to a Consenting 503(b)(9) Claimant, to the address(es) or address(es) for such Consenting 503(b)(9) Claimant set forth on its signature page to its Election. 12. Modification and Waiver. No modification or waiver of any of the provisions of this Agreement shall be valid and enforceable unless such modification or waiver is in writing and signed by the affected Party and, unless otherwise stated therein, no such modification or waiver shall constitute a modification or waiver of any other provision hereof (whether or not similar) or constitute a continuing waiver. 13. Authority; Binding Effect. Subject to Bankruptcy Court approval, each Party has the full power, right, and authority to enter into this Agreement, to perform, observe and comply with all of such Party s agreements and obligations hereunder, and to consummate the transactions contemplated hereby. Such Party has taken all action required to be taken by it with respect to the execution and delivery of this Agreement. Upon the Agreement Effective Date, the terms, provisions, covenants, and agreements contained in this Agreement shall bind each of the Parties and the respective successors, assigns, and heirs, as applicable, of each of the Parties. 9 LA

34 Case KG Doc Filed 08/24/18 Page 16 of Assignment; No Third Party Beneficiaries. Neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by any Party (whether by operation of law or otherwise) without the prior written consent of the other Party. This Agreement is for the sole benefit of the Parties to this Agreement and their successors and assigns and, nothing in this Agreement, express or implied, is intended to or shall confer upon any other person or entity any legal or equitable right, benefit, or remedy of any nature whatsoever under or by reason of this Agreement. 15. Complete Agreement. THIS AGREEMENT CONTAINS THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG THE PARTIES CONCERNING THE SETTLEMENT OF THE SUBJECT MATTER DESCRIBED HEREIN AND SUPERSEDES AND REPLACES ALL PRIOR NEGOTIATIONS, REPRESENTATIONS, UNDERSTANDINGS, PROPOSED AGREEMENTS AND AGREEMENTS, WRITTEN OR ORAL, CONCERNING THE SETTLEMENT OF THE SUBJECT MATTER DESCRIBED HEREIN. 16. Construction of Agreement. This Agreement was the result of voluntary negotiations and preparation by and among the Parties and their respective attorneys. This Agreement and the consideration given herein are the result of a compromise between the Parties and shall not be considered an admission of wrongdoing, liability, fault or responsibility by any Party to another, and any such liability is expressly denied and disclaimed. The Parties expressly acknowledge and agree that this Agreement shall not be deemed prepared or drafted by one party or another, or their attorneys, and will be construed accordingly. 17. Headings. The headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 18. Governing Law and Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PROVISIONS THEREIN. EXCLUSIVE JURISDICTION OF ALL DISPUTES REGARDING THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE IN THE BANKRUPTCY COURT. EACH PARTY EXPRESSLY SUBMITS TO THE JURISDICTION OF AND VENUE IN THE BANKRUPTCY COURT FOR ANY AND ALL CLAIMS, DISPUTES, OR LITIGATION RELATING TO, AND ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND CONSENTS TO THE BANKRUPTCY COURT S ENTRY OF FINAL JUDGMENT REGARDING ALL SUCH CLAIMS, DISPUTES, AND LITIGATION. 10 LA

35 Case KG Doc Filed 08/24/18 Page 17 of Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL RELEASES CONTAINED IN SECTION 10 HEREOF. 20. Further Assurances. The Parties agree to execute, acknowledge and deliver to the other Parties such other documents, instruments and certificates, and will take such other actions, as any other Party may reasonably request in order to consummate the transactions contemplated by this Agreement. 21. Counterparts, Electronic Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original, and which together shall constitute a single agreement. Signature pages transmitted electronically (including electronic mail) may be used with the same force and effect as the original, manually signed documents. [Signature Pages Follow] 11 LA

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