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David M. Guess (State Bar No. 238241) KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 Avenue of the Stars, Thirty-Ninth Floor Los Angeles, California 90067 Telephone: 310-407-4000 Facsimile: 310-407-9090 Email: dguess@ktbslaw.com Attorneys for Global Franchise Group, LLC

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

LOS ANGELES DIVISION

In re HDOS ENTERPRISES, a California corporation,

Debtor and Debtor in Possession.

Case No. 2:14-bk-12028-NB Chapter 11 LIMITED OBJECTION OF PROSPECTIVE BIDDER GLOBAL FRANCHISE GROUP, LLC TO MOTION OF HDOS ENTERPRISES FOR ORDER: (1) APPROVING BID PROCEDURES IN CONNECTION WITH SALE OF ALL ASSETS FREE AND CLEAR OF LIENS, CLAIMS, ENCUMBRANCES AND INTERESTS, ETC. [DKT. NO. 338]1 Date: July 10, 2014 Time: 2:30 p.m. Judge: Hon. Neil W. Bason Place: Courtroom 1545 U.S. Bankruptcy Court Roybal Federal Building 255 E. Temple Street Los Angeles, CA 90012

1 This Limited Objection is being publically filed in its redacted form, omitting information that could be confidential under that certain Confidentiality and Non-Disclosure Agreement with the Debtor dated March 20, 2014, a copy of which is attached hereto as Exhibit A. Global Franchise is concurrently separately moving to file an unredacted version under seal.

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Prospective bidder Global Franchise Group, LLC ("Global Franchise") hereby objects, on

the limited grounds set forth herein, to the Motion of HDOS Enterprises for Order: (1) Approving

Bid Procedures in Connection with Sale of All Assets Free and Clear of Liens, Claims,

Encumbrances and Interests; (2) Establishing Notice of Bid Procedures Relating to Such Sale;

(3) Approving Asset Purchase Agreement with Stalking Horse Bidder; and (4) Approving Sale

Schedule [Dkt. No. 338] (the "Motion") and the proposed order granting the Motion.

A. Background

Global Franchise is a strategic brand management company that currently owns and

manages a portfolio of franchised brands in the quick service restaurant industry. These brands

include Great American Cookies, Marble Slab Creamery, MaggieMoo's and Pretzelmaker.

On June 5, 2014, Global Franchise submitted a letter of intent for the purchase of the

Debtor's assets, a copy of which is attached hereto as Exhibit B. As set forth in that letter, Global

Franchise is prepared to pay the estate $11 million in cash at closing, which is more than enough

to pay all creditors in full in this case and provide a substantial distribution to equity holders.

In addition, Global Franchise is prepared to assume substantial liabilities and pay a royalty of no

less than $1 million to the Debtor's equity holders, with additional upside depending on post-sale

performance. Although this was and is the highest and best bid for the Debtor's assets, the Debtor

determined to designate LB Advisors, LLC as the stalking horse bidder for its assets.

Unlike Global Franchise's bid for the Debtor's assets, LB Advisors, LLC seeks to purchase

those assets through a combination of a significantly lower cash amount than Global Franchise is

willing to pay, 15% of the equity in the buyer entity, and a warrant for an additional 10% of the

equity in the buyer entity. The Debtor has erroneously valued the equity component of the bid by

LB Advisors, LLC at $6 million. As discussed below, the Debtor's valuation is fundamentally

flawed and presents material obstacles to all other prospective bidders (including Global

Franchise) to meaningfully participate and bid at the contemplated auction.

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B. Erroneous Valuation of Equity Component of LB Advisors, LLC Bid

The equity component of the bid by LB Advisors, LLC and how it should be valued has

presented challenges to Global Franchise and other prospective bidders. To understand how the

Debtor arrived at a $6 million valuation, Global Franchise requested to see the underlying

financial data supporting the valuation, including but not limited to the financial projection model

and all other assumptions that were used in the discounted cash flow ("DCF") analysis.

Although

Global Franchise requested the Debtor's detailed DCF calculations and all related inputs numerous

times, the Debtor refused at that time to provide Global Franchise with that information, which

was critical to allow Global Franchise to formulate a competitive overbid.

Only this morning, Global Franchise finally had a thorough discussion with the Debtor's

CEO, CFO and financial advisor concerning the valuation of the equity component of the bid by

LB Advisors, LLC.2

2 Global Franchise apologizes for the lateness of this filing. Global Franchise of course would have preferred to file this limited objection sooner, but felt it necessary to first meet with the Debtor to ensure it had a complete understanding of the facts before raising them to the Court.

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The $6 million valuation of the equity component of the bid by LB Advisors, LLC is based

on numerous flawed DCF assumptions and calculations, including the following:

1)

2)

3)

4)

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5)

6)

7)

After all of these considerations, the value of the equity component of the bid by LB

Advisors, LLC may have zero value, in which case that bid is by far inferior to Global Franchise's

bid. Only Global Franchise's bid ensures that the Debtor's equity holders will receive meaningful

cash distributions based on future performance in the form of the royalty payment.

C. Bid Procedures Improperly Pre-Approve Erroneous Equity Valuation

Global Franchise is of course not seeking an adjudication at this point of the value of the

equity component of the bid by LB Advisors, LLC. The same cannot be said for the Debtor,

however. The Debtor's request in the Motion that the Initial Overbid be set at $17,000,000 is

premised on its faulty valuation of the equity component of the bid by LB Advisors, LLC. By

asking this Court to fix the Initial Overbid at $17,000,000, the Debtor is seeking a pre-adjudication

of the superiority of the part-cash, part-equity bid by LB Advisors, LLC over competing bids that

offer more cash to the estate. The only evidentiary support offered by the Debtor for this are the

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conclusory declarations of the Debtor's CEO and financial advisor, which provide none of the

pertinent facts needed to make such a determination. That is improper, and may throw the

Debtor's assets to LB Advisors, LLC even though it is not presently the highest and best bidder.

It will also seriously discourage other prospective bidders from engaging in the auction because by

all appearances the process appears to have been established to increase the likelihood that there

will be no overbids, no auction, and LB Advisors, LLC will be the successful bidder.

This is particularly troublesome as the Debtor's active and former employees who

collectively hold beneficial interests in the Debtor's employee stock ownership plan and who

would directly benefit from the Debtor receiving a higher and better all-cash bid for its assets were

not noticed with the Motion and given an opportunity to be heard.

None of those employees are separately represented in this case.

Given the serious issues with respect to the Debtor's valuation of the equity component of

the bid by LB Advisors, LLC, the Court should modify the proposed bid procedures to eliminate

any Initial Overbid and to provide that the Court will independently adjudicate at the sale hearing

which of the competing bids for the Debtor's assets is the highest and best bid. This could be

accomplished, for instance, by the Court approving no stalking horse bidder at this time, and

allowing LB Advisors, LLC and other prospective bidders to bid against one another at an open

auction where the field is not advantaged from the outset in favor of any of them.

DATED: July 8, 2014 Respectfully submitted, /s/ David M. Guess

David M. Guess KLEE, TUCHIN, BOGDANOFF & STERN LLP Attorneys for Global Franchise Group, LLC

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Exhibit A

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[Filed Under Seal]

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Exhibit B

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151403.2

PROOF OF SERVICE OF DOCUMENT I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: 1999 Avenue of the Stars, 39th Floor, Los Angeles, California 90067 A true and correct copy of the foregoing document entitled: LIMITED OBJECTION OF PROSPECTIVE BIDDER GLOBAL FRANCHISE GROUP, LLC TO MOTION OF HDOS ENTERPRISES FOR ORDER: (1) APPROVING BID PROCEDURES IN CONNECTION WITH SALE OF ALL ASSETS FREE AND CLEAR OF LIENS, CLAIMS, ENCUMBRANCES AND INTERESTS, ETC. [DKT. NO. 338] was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below: 1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On July 8, 2014, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below: SEE ATTACHED SERVICE LIST Service information continued on attached page 2. SERVED BY UNITED STATES MAIL: On , I served the following persons and/or entities at the last known addresses in this bankruptcy case by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed. Service information continued on attached page 3. SERVED BY PERSONAL DELIVERY: Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on July 8, 2014, I arranged for service on the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 1 business day after the document is filed. TO BE SERVED BY PERSONAL DELIVERY: The Honorable Neil W. Bason U.S. Bankruptcy Court Roybal Federal Building Bin outside of Suite 1552 255 E. Temple Street Los Angeles, CA 90012-3332

SERVED BY EMAIL: Counsel to Debtor J. Bennett Friedman Friedman Law Group, P.C. 1900 Ave. of the Stars, 11th Floor Los Angeles, CA 90067-4301 Email: jfriedman@flg-law.com

Service information continued on attached page I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. July 8, 2014 David M. Guess /s/ David M. Guess Date Printed Name Signature

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151403.2

SERVED BY NOTICE OF ELECTRONIC FILING: Michael Avanesian on behalf of Interested Party Courtesy NEF michaelavanesian@tilemlaw.com, michaelavanesian@ecf.inforuptcy.com;malissamurguia@tilemlaw.com;dianachau@tilemlaw.com;joanfidelson@tilemlaw.com;JoanFidelson@ecf.inforuptcy.com Allison R Axenrod on behalf of Creditor Claims Recovery Group LLC allison@claimsrecoveryllc.com Lindsey F Baker on behalf of Creditor Glimcher Properties Limited Partnership lbaker@fbtlaw.com Dustin P Branch on behalf of Creditor Plaza West Covina LP dustin.branch@kattenlaw.com, jessica.mickelsen@kattenlaw.com;brian.huben@kattenlaw.com;adelle.shafer@kattenlaw.com;donna.carolo@kattenlaw.com Dustin P Branch on behalf of Creditor Starwood Retail Partners LLC dustin.branch@kattenlaw.com, jessica.mickelsen@kattenlaw.com;brian.huben@kattenlaw.com;adelle.shafer@kattenlaw.com;donna.carolo@kattenlaw.com Dustin P Branch on behalf of Creditor Starwood Retail Partners, LLC dustin.branch@kattenlaw.com, jessica.mickelsen@kattenlaw.com;brian.huben@kattenlaw.com;adelle.shafer@kattenlaw.com;donna.carolo@kattenlaw.com Dustin P Branch on behalf of Creditor The Macerich Company dustin.branch@kattenlaw.com, jessica.mickelsen@kattenlaw.com;brian.huben@kattenlaw.com;adelle.shafer@kattenlaw.com;donna.carolo@kattenlaw.com Dustin P Branch on behalf of Creditor Westfield, LLC dustin.branch@kattenlaw.com, jessica.mickelsen@kattenlaw.com;brian.huben@kattenlaw.com;adelle.shafer@kattenlaw.com;donna.carolo@kattenlaw.com Dustin P Branch on behalf of Interested Party Courtesy NEF dustin.branch@kattenlaw.com, jessica.mickelsen@kattenlaw.com;brian.huben@kattenlaw.com;adelle.shafer@kattenlaw.com;donna.carolo@kattenlaw.com Jeffrey W Broker on behalf of Interested Party Jeffrey W. Broker jbroker@brokerlaw.biz John P Byrne on behalf of Creditor Burbank Mall Associates, LLC John.Byrne@byrnelaw.biz Jeffrey W Dulberg on behalf of Attorney Pachulski Stang Ziehl & Jones LLP jdulberg@pszjlaw.com Jeffrey W Dulberg on behalf of Creditor Committee Offical Committee of Unsecured Creditors jdulberg@pszjlaw.com

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151403.2

Peter L Duncan on behalf of Creditor Torrey Pines Bank peterd@psdslaw.com, theresam@psdslaw.com Jerome Bennett Friedman on behalf of Debtor HDOS Enterprises jfriedman@flg-law.com, msobkowiak@flg-law.com;jmartinez@flg-law.com;sbiegenzahn@flg-law.com;rfranzoia@flg-law.com Todd R Gabriel on behalf of Creditor Terramar Retail Centers, LLC tgabriel@sparberlaw.com Matthew A Gold on behalf of Creditor Argo Partners courts@argopartners.net Ronald E Gold on behalf of Creditor Glimcher Properties Limited Partnership rgold@fbtlaw.com David Guess on behalf of Interested Party Global Franchise Group, LLC dguess@ktbslaw.com Christopher V Hawkins on behalf of Creditor Christopher J. Witczak Hawkins@sullivanhill.com, bkstaff@sullivanhill.com;vidovich@ecf.inforuptcy.com;hawkins@ecf.inforuptcy.com Christopher V Hawkins on behalf of Creditor Larry R. Yoachum Hawkins@sullivanhill.com, bkstaff@sullivanhill.com;vidovich@ecf.inforuptcy.com;hawkins@ecf.inforuptcy.com Christopher V Hawkins on behalf of Creditor Linda A. Witczak Hawkins@sullivanhill.com, bkstaff@sullivanhill.com;vidovich@ecf.inforuptcy.com;hawkins@ecf.inforuptcy.com Christopher V Hawkins on behalf of Creditor Rosa Yoachum Hawkins@sullivanhill.com, bkstaff@sullivanhill.com;vidovich@ecf.inforuptcy.com;hawkins@ecf.inforuptcy.com Christopher V Hawkins on behalf of Interested Party Courtesy NEF Hawkins@sullivanhill.com, bkstaff@sullivanhill.com;vidovich@ecf.inforuptcy.com;hawkins@ecf.inforuptcy.com Joan Huh on behalf of Interested Party Courtesy NEF joan.huh@boe.ca.gov Dare Law on behalf of U.S. Trustee United States Trustee (LA) dare.law@usdoj.gov Lori A Lewis on behalf of Creditor Maricopa County Treasurer lewisl004@mail.maricopa.gov Michael Y Lo on behalf of Creditor SAS Investment Co. michaellolaw@yahoo.com, bklolaw@gmail.com Scotta E McFarland on behalf of Interested Party Courtesy NEF smcfarland@pszjlaw.com, smcfarland@pszjlaw.com

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151403.2

Thor D Mclaughlin on behalf of Creditor General Growth Landlords tmclaughlin@allenmatkins.com, igold@allenmatkins.com Jessica Mickelsen on behalf of Creditor Starwood Retail Partners LLC jessica.mickelsen@kattenlaw.com, adelle.shafer@kattenlaw.com;ecf.lax.docket@kattenlaw.com Jessica Mickelsen on behalf of Creditor The Macerich Company jessica.mickelsen@kattenlaw.com, adelle.shafer@kattenlaw.com;ecf.lax.docket@kattenlaw.com Jessica Mickelsen on behalf of Creditor Vintage Capital Group jessica.mickelsen@kattenlaw.com, adelle.shafer@kattenlaw.com;ecf.lax.docket@kattenlaw.com Jessica Mickelsen on behalf of Creditor Westfield, LLC jessica.mickelsen@kattenlaw.com, adelle.shafer@kattenlaw.com;ecf.lax.docket@kattenlaw.com Jessica Mickelsen on behalf of Interested Party Courtesy NEF jessica.mickelsen@kattenlaw.com, adelle.shafer@kattenlaw.com;ecf.lax.docket@kattenlaw.com Kevin M Newman on behalf of Creditor Inland Western Salt Lake City Gateway, L.L.C. knewman@menterlaw.com, kmnbk@menterlaw.com Kevin M Newman on behalf of Interested Party Courtesy NEF knewman@menterlaw.com, kmnbk@menterlaw.com Randy P Orlik on behalf of Interested Party Courtesy NEF rorlik@coxcastle.com Ernie Zachary Park on behalf of Creditor Daly City Serramonte, LLC ernie.park@bewleylaw.com Ernie Zachary Park on behalf of Creditor Inland Western Salt Lake City Gateway, L.L.C. ernie.park@bewleylaw.com Kristen N Pate on behalf of Creditor GGP Limited Partnership As Agent ggpbk@ggp.com Jeffrey N Pomerantz on behalf of Creditor Committee Offical Committee of Unsecured Creditors jpomerantz@pszjlaw.com Peter J Rudinskas on behalf of Interested Party Courtesy NEF pjr.legal@gmail.com Aaron M Silver on behalf of Interested Party Courtesy NEF asilver@honigman.com Howard Steinberg on behalf of Debtor HDOS Enterprises steinbergh@gtlaw.com, laik@gtlaw.com;LALitDock@GTLAW.com Howard Steinberg on behalf of Special Counsel Greenberg Traurig LLP steinbergh@gtlaw.com, laik@gtlaw.com;LALitDock@GTLAW.com Ronald M Tucker, Esq on behalf of Creditor Simon Property Group, Inc. rtucker@simon.com, cmartin@simon.com;psummers@simon.com;Bankruptcy@simon.com

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United States Trustee (LA) ustpregion16.la.ecf@usdoj.gov Eric R Wilson on behalf of Creditor Rouse Properties Inc. kdwbankruptcydepartment@kelleydrye.com Rebecca J Winthrop on behalf of Creditor CAPREF Lloyd Center LLC rebecca.winthrop@nortonrosefulbright.com, darla.rodrigo@nortonrosefulbright.com

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