TUESDAY MORNING CORP/DE (Form: 8-K, Received: 11/05/2020 06:28:33)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 30, 2020

TUESDAY MORNING CORPORATION

(Exact name of registrant as specified in charter)

Delaware	0-19658	75-2398532
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

6250 LBJ Freeway Dallas, Texas		75240
(Address of principal executive offices)		(Zip Code)

(972) 387-3562

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 1.01

Entry into a Material Definitive Agreement.

As previously disclosed, on May 27, 2020 (the “Petition Date”), Tuesday Morning Corporation and certain of its direct and indirect subsidiaries (collectively with the Company, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the “Bankruptcy Court”). The Chapter 11 Cases are being administered jointly under the caption “In re: Tuesday Morning Corporation, et. al., Case No. 20-31476-HDH-11.”

Sale Leaseback

On October 30, 2020, the Company and certain subsidiaries entered into a purchase and sale agreement (the “Purchase and Sale Agreement”) with Rialto Real Estate Fund IV – Property, LP (the “Purchaser”), pursuant to which the Purchaser agreed to purchase the Company’s Dallas headquarters and warehouse facilities for an aggregate purchase price of $60 million. Under the terms of Purchase and Sale Agreement, the Company and certain subsidiaries and the Purchaser will enter into lease agreements under which the Company will lease the headquarters and warehouse facilities following the close of the sale under the Purchase and Sale Agreement. The lease of the headquarters facility will be for a term of 10 years and the lease of the warehouse facilities will be for an initial term of 2.5 years with an option to extend the warehouse facilities lease for one additional year.

The closing under the Purchase and Sale Agreement is subject to the approval of the Bankruptcy Court and other customary closing conditions. Under the terms of the Purchase and Sale Agreement, and subject to the satisfaction of all conditions to closing, the closing of the transactions contemplated under the Purchase and Sale Agreement shall occur the third business day following the issuance of an order by the Bankruptcy Court confirming the Company’s plan of reorganization, but in no event later than December 31, 2020.

The foregoing summary of the Purchase and Sale Agreement is qualified in its entirety by reference to the full text of the Purchase and Sale Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated by reference herein, and the terms of which are subject to Bankruptcy Court approval.

ABL Commitment Letter

On November 2, 2020, the Company and its subsidiaries entered into a commitment letter (the “ABL Commitment Letter”) with JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A. and Bank of America, N.A. (collectively, the “Commitment Parties”), pursuant to which the Commitment Parties agreed to provide, subject to certain conditions, a revolving credit facility in an aggregate amount of $110 million (the “New ABL Facility”). Pursuant to the ABL Commitment Letter, the closing of the New ABL Facility is subject to customary conditions precedent, including execution of definitive agreements, and is subject to entry of Bankruptcy Court approvals in form and substance acceptable to the Commitment Parties, including issuance of a confirmation order approving the Company’s plan of reorganization in form and substance acceptable to the Commitment Parties.

The proposed terms of the New ABL Facility are set forth in the term sheet attached to the ABL Commitment Letter. The New ABL Facility is expected to include conditions precedent, representations and warranties, affirmative and negative covenants, and events of default customary for financings of this type and size. The New ABL Facility will require the Company to maintain a minimum fixed charge coverage ratio if borrowing availability falls below certain minimum levels.

Under the proposed terms of the New ABL Facility, amounts available for advances would be subject to a borrowing base as described in the ABL Commitment Letter. The closing of the New ABL Facility is subject to the Company having a minimum availability of $25 million as determined under the New ABL Facility at the time of closing. Under the ABL Commitment Letter, borrowings under the New ABL Facility initially will bear interest at a rate equal to the adjusted LIBOR rate plus a spread of 2.75% or the CB rate plus a spread of 1.75%.

The New ABL Facility would be secured by a first priority lien on all present and after-acquired tangible and intangible assets of the Company and its subsidiaries other than certain collateral that will secure bonds to be issued to general unsecured creditors under the Amended Plan (as defined below). The commitments of the lenders under the proposed New ABL Facility would terminate and outstanding borrowings under the New ABL Facility would mature on the third anniversary of the closing of the New ABL Facility.

The foregoing summary of the proposed New ABL Facility is qualified in its entirety by reference to the full text of the ABL Commitment Letter, a copy of which is attached hereto as Exhibit 10.2 and incorporated by reference herein, and the terms of which are subject to Bankruptcy Court approval.

Backstop Commitment Letter

On November 3, 2020, the Company entered into a Backstop Commitment Letter (the “Backstop Commitment Letter”) with Osmium Partners, LLC (the “Commitment Party”). Pursuant to the proposed Amended Plan (as defined below), the Company has proposed to conduct a $40 million rights offering (the “Rights Offering”), under which eligible holders of the Company’s common stock would be granted share purchase rights to purchase up to $24 million of shares of the Company’s common stock, and the Commitment Parties would be granted share purchase rights to purchase up to $16 million of shares of the Company’s common stock. Pursuant to the Backstop Commitment Letter, the Commitment Party has agreed to purchase all unsubscribed shares in the Rights Offering (the “Backstop Commitment”). The Backstop Commitment and the related Rights Offering are subject to a number of conditions, including execution of a definitive backstop commitment agreement, approval of the Bankruptcy Court and certain other conditions set forth in the Backstop Commitment Letter.

As consideration for the Backstop Commitment, the Backstop Commitment Letter provides that the Commitment Party would receive a commitment fee equal to 5% of the Backstop Commitment, payable in shares of the Company’s common stock, and 10 million warrants to acquire additional shares of the Company’s common stock at a price equal to 150% of the price in the Rights Offering. In addition, the Backstop Commitment Letter provides that the Commitment Party would be entitled to appoint three members of the Company’s board of directors, with a maximum board size of eight directors.

The foregoing summary of the Backstop Commitment Letter is qualified in its entirety by reference to the full text of the Backstop Commitment Letter, a copy of which is attached hereto as Exhibit 10.3 and incorporated by reference herein, and the terms of which are subject to Bankruptcy Court approval.

Item 7.01.

Regulation FD Disclosure.

As previously disclosed, on September 23, 2020, the Debtors filed with the Bankruptcy Court a proposed Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code and a proposed Disclosure Statement in Support of the Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code.

On November 4, 2020, the Debtors filed with the Bankruptcy Court a proposed Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the “Amended Plan”) and a proposed Amended Disclosure Statement (the “Amended Disclosure Statement”) in support of the Amended Plan describing the Amended Plan and the solicitation of votes to approve the same from certain of the Debtors’ creditors with respect to the Chapter 11 Cases. The Amended Plan and the Amended Disclosure Statement contemplate the proposed financing transactions described above, including the transactions contemplated by the Purchase and Sale Agreement, the proposed New ABL Facility and the proposed Rights Offering. Pursuant to the proposed Amended Plan, in exchange for each existing share of the Company’s common stock, an eligible holder would receive (1) one share of the Company’s common stock and (2) a share purchase right entitling the holder to purchase its pro rata portion of shares available to eligible holders in the Rights Offering.

Information contained in the Amended Plan and the Amended Disclosure Statement, including the proposal to conduct a Rights Offering, is subject to change, whether as a result of amendments or supplements to the Amended Plan or the Amended Disclosure Statement, third-party actions, or otherwise, and should not be relied upon by any party. Copies of the Amended Plan and the Amended Disclosure Statement are attached hereto as Exhibits 99.1 and 99.2, respectively.

This Current Report on Form 8-K is not a solicitation to accept or reject the proposed Amended Plan. Any such solicitation will be made pursuant to and in accordance with a court-approved disclosure statement, as may be amended from time to time, and applicable law, including orders of the Bankruptcy Court.

The Amended Disclosure Statement includes certain financial projections (the “Financial Projections”). The Financial Projections were not prepared with a view toward compliance with the published guidelines of the Securities and Exchange Commission or the guidelines established by the Public Company Accounting Oversight Board and should not be relied upon to make an investment decision with respect to the Company. The Financial Projections do not purport to present the Company’s financial condition in accordance with GAAP, and have not been reviewed by the Company’s independent registered public accounting firm. Any financial projections or forecasts therein or as otherwise presented in the Amended Disclosure Statement and the exhibits thereto are only estimates and reflect numerous assumptions with respect to financial condition, business and industry performance, general economic, market and financial conditions, and other matters, all of which are difficult to predict, and many of which are beyond the Company’s control. Accordingly, there can be no assurance that the assumptions made in preparing the Financial Projections will prove to be accurate. It is expected that there will be differences between actual and projected results, and the differences may be material, including due to the occurrence of unforeseen events occurring subsequent to the preparation of the Financial Projections. The disclosure of the Financial Projections should not be regarded as an indication that the Company or its affiliates or representatives consider the Financial Projections to be a reliable prediction of future events, and the Financial Projections should not be relied upon as such. The statements in the Financial Projections speak only as of the date such statements were made, or any earlier date indicated therein. Except as required by law, the Company disclaims any obligation to publicly update the Financial Projections to reflect circumstances existing after the date when the Financial Projections were filed with the Bankruptcy Court or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the Financial Projections are shown to be in error. The statements provided in the Financial Projections are subject to all of the cautionary statements and limitations described herein, therein and under the caption “Cautionary Notice Regarding Forward-Looking Statements.”

The information furnished in this Item 7.01 of this Current Report on Form 8-K and the documents attached hereto as Exhibits 99.1 and 99.2 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Exchange Act.

Cautionary Statement Regarding Trading in the Company’s Common Stock

The Company cautions that trading in the Company’s common stock during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. Trading prices for the Company’s common stock may bear little or no relationship to the actual recovery, if any, by holders of the Company’s common stock in the Chapter 11 Cases.

Cautionary Notice Regarding Forward-Looking Statements

This Current Report on Form 8-K contains forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995, which are based on management’s current expectations, estimates and projections. Forward looking statements include the Financial Projections, the proposed transactions contemplated by the proposed Purchase and Sale Agreement, the proposed New ABL Commitment Letter, the proposed Backstop Commitment Letter, the proposed Amended Plan and the proposed Amended Disclosure Statement, other statements regarding the Company’s plans with respect to the Chapter 11 Cases, the Company’s plan to continue its operations while it works to complete the Chapter 11 process and other statements regarding the Company’s proposed reorganization, financing, strategy, future operations, performance and prospects. These forward-looking statements are subject to risks and uncertainties that could cause the Company’s actual results to differ materially from the expectations expressed in the Company’s forward-looking statements. These risks, uncertainties and events also include, but are not limited to, the following: the Company’s ability to obtain timely approval of the Bankruptcy Court with respect to motions filed in the Chapter 11 Cases; pleadings filed that could protract the Chapter 11 Cases; the Bankruptcy Court’s rulings in the Chapter 11 Cases, and the outcome of the Chapter 11 Cases generally; the Company’s ability to comply with the restrictions imposed by the terms and conditions of the Company’s debtor-in-possession financing arrangements, including the Company’s ability to maintain certain minimum liquidity requirements and obtain approval of a plan of reorganization or sale of all of its assets by agreed upon deadlines; the Company’s ability to obtain any necessary financing; the length of time that the Company will operate under Chapter 11 protection and the continued availability of operating capital during the pendency of the Chapter 11 Cases; the Company’s ability to continue to operate its business during the pendency of the Chapter 11 Cases; employee attrition and the Company’s ability to retain senior management and other key personnel due to the distractions and uncertainties; the effectiveness of the overall restructuring activities pursuant to the Chapter 11 Cases and any additional strategies the Company may employ to address its liquidity and capital resources; the actions and decisions of creditors and other third parties that have an interest in the Chapter 11 Cases; risks associated with third parties seeking and obtaining authority to terminate or shorten the Company’s exclusivity period to propose and confirm one or more plans of reorganization, for the appointment of a Chapter 11 trustee or to convert the Chapter 11 proceeding to a Chapter 7 proceeding; increased legal and other professional costs necessary to execute the Company’s restructuring; the Company’s ability to maintain relationships with suppliers, customers, employees and other third parties as a result of the Chapter 11 Cases; the trading price and volatility of the Company’s common stock and the effects of the delisting from The Nasdaq Stock Market; litigation and other risks inherent in a bankruptcy process; the effects and length of the novel coronavirus pandemic; and the other factors listed in the Company’s filings with the Securities and Exchange Commission.

Except as may be required by law, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements were made or to reflect the occurrence of unanticipated events. Investors are cautioned not to place undue reliance on any forward-looking statements.

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits.

	10.1	Purchase and Sale Agreement

	10.2	ABL Commitment Letter

	10.3	Backstop Commitment Letter

	99.1	Proposed Plan of Reorganization

	99.2	Proposed Disclosure Statement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TUESDAY MORNING CORPORATION

Date: November 5, 2020	By:	/s/ Bridgett C. Zeterberg
		Bridgett C. Zeterberg
		Executive Vice President Human Resources, General Counsel and Corporate Secretary

Exhibit 10.1

PURCHASE AND SALE AGREEMENT

BETWEEN

TUESDAY MORNING PARTNERS, LTD., Tuesday Morning, inc. and

FRIDAY MORNING, LLC

AS SELLER

AND

RIALTO REAL ESTATE FUND IV – PROPERTY, LP

AS PURCHASER

DATED: October 30, 2020

TABLE OF CONTENTS

Page No.

Article 1 Basic Information
1.1	Certain Basic Terms	1
1.2	Closing Costs	2
1.3	Notice Addresses:	3
Article 2 Property
2.1	Property	3
Article 3 Earnest Money
3.1	Deposit and Investment of Earnest Money	4
3.2	Independent Consideration	5
3.3	Form; Failure to Deposit	5
3.4	Disposition of Earnest Money	5
Article 4 Due Diligence
4.1	Due Diligence Materials Delivered	5
4.2	Physical Due Diligence	6
4.3	Reports	7
4.4	Service Contracts	7
4.5	Proprietary Information; Confidentiality	8
4.6	No Representation or Warranty by Seller	8
4.7	Purchaser’s Responsibilities	8
4.8	Purchaser’s Agreement to Indemnify	9
Article 5 Title and Survey
5.1	Title Commitment	9
5.2	Intentionally Omitted	10
5.3	Delivery of Title Policy at Closing	10
Article 6 Operations and Risk of Loss
6.1	Ongoing Covenants and Operations	10
6.2	Damage	11
6.3	Condemnation	12
6.4	Leaseback	12
Article 7 Closing
7.1	Closing	13
7.2	Conditions to Parties’ Obligation to Close	13
7.3	Seller’s Deliveries in Escrow	14
7.4	Purchaser’s Deliveries in Escrow	15
7.5	Closing Statements	15
7.6	Purchase Price	15
7.7	Possession	15
7.8	Delivery of Books and Records	16

Purchase and Sale Agreement
6250 Lyndon B. Johnson Freeway, Dallas, Texas
4404 South Beltwood Parkway, Farmers Branch, Texas
14621, 14639 and 14601 Inwood Road, Addison, Texas
14303 Inwood Road, Farmers Branch, Texas

Article 8 Prorations, Deposits, Commissions
8.1	Prorations	16
8.2	Closing Costs	16
8.3	Final Adjustment After Closing	16
8.4	Commissions	17
Article 9 Representations and Warranties
9.1	Seller’s Representations and Warranties	17
9.2	Purchaser’s Representations and Warranties	18
9.3	Survival of Representations and Warranties	19
Article 10 Default and Remedies
10.1	Seller’s Remedies	20
10.2	Purchaser’s Remedies	20
10.3	Attorneys’ Fees	20
10.4	Other Expenses	21
Article 11 Disclaimers, Release and Indemnity
11.1	Disclaimers By Seller	21
11.2	Sale “As Is, Where Is.”	22
11.3	Seller Released from Liability	23
11.4	“Hazardous Materials” Defined	24
11.5	Survival	24
Article 12 Miscellaneous
12.1	Parties Bound; Assignment	24
12.2	Headings	25
12.3	Invalidity and Waiver	25
12.4	Governing Law; Jurisdiction; Venue	25
12.5	Survival	25
12.6	Entirety and Amendments	25
12.7	Time	25
12.8	Confidentiality	25
12.9	Notices	26
12.10	Construction	26
12.11	Calculation of Time Periods; Business Day	26
12.12	Execution in Counterparts	26
12.13	No Recordation	26
12.14	Further Assurances	26
12.15	Discharge of Obligations	27
12.16	ERISA	27
12.17	No Third Party Beneficiary	27
12.18	Reporting Person	27
12.19	Texas Real Estate License Act..	27
12.20	DTPA Waiver.	27

LIST OF DEFINED TERMS

Page No.

Agreement	1
Assignment	13
Broker	2
Business Day	24
Casualty Notice	10
CERCLA	21
Closing	11
Closing Date	2
Deed	13
Earnest Money	1
Effective Date	2
Escrow Agent	2
Hazardous Materials	22
Improvements	3
Independent Consideration	5
Intangible Personal Property	4
Land	3
Material Damage	10
Materially Damaged	10
OFAC	16
Permitted Outside Parties	7
Property	3
Property Documents	5
Purchase Price	1
Purchaser	1
Real Property	3
Report	6
Reports	6
Seller	1
Seller's Representative	17
Service Contracts	6
Survival Period	17
Tangible Personal Property	4
Taxes	14
Title Company	1
Title Policy	9

iii

PURCHASE AND SALE AGREEMENT

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

6250 LBJ Freeway, Dallas, Texas

This Purchase and Sale Agreement (this “Agreement”) is made and entered into by and between Purchaser and Seller.

RECITALS

A. Defined terms are indicated by initial capital letters. Defined terms shall have the meaning set forth herein, whether or not such terms are used before or after the definitions are set forth.

B. Purchaser desires to purchase the Property and Seller desires to sell the Property, all upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual terms, provisions, covenants and agreements set forth herein, as well as the sums to be paid by Purchaser to Seller, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Purchaser and Seller agree as follows:

Article 1
Basic Information

1.1 Certain Basic Terms. The following defined terms shall have the meanings set forth below:

1.1.1	Seller:	TUESDAY MORNING PARTNERS, LTD., a Texas limited partnership, TUESDAY MORNING, INC., a Texas corporation, and FRIDAY MORNING, LLC, a Texas limited liability company

1.1.2	Purchaser:	rialto real estate fund iv – property, lp, a Delaware limited partnership

1.1.3	Purchase Price:	$60,000,000.00

1.1.4	Earnest Money:	$4,500,000.00 (the “Earnest Money”), including interest thereon, to be deposited in accordance with Section 3.1 below.

1.1.5	Title Company:	Chicago Title Insurance Company 2828 Routh Street, Suite 800 Dallas, Texas 75201 Attn: Holden Heil E-Mail: Holden.Heil@ctt.com

1.1.6	Escrow Agent:	Chicago Title Insurance Company 2828 Routh Street, Suite 800 Dallas, Texas 75201 Attn: Holden Heil E-Mail: Holden.Heil@ctt.com

1.1.7	Broker:	CBRE, Inc. 2100 McKinney Avenue, Suite 700 Dallas, Texas 75201 Attn: Tim Vogds

1.1.8	Effective Date:	The date on which this Agreement is executed by the latter to sign of Purchaser or Seller, as indicated on the signature page of this Agreement. If the execution date is left blank by either Purchaser or Seller, the Effective Date shall be the execution date inserted by the other party.

1.1.9	Closing Date:	On or before three (3) Business Days following the effective date of a Reorganization Plan (as defined herein) confirmed by a Plan Confirmation Order (as defined herein). Notwithstanding the foregoing, the Closing Date shall not occur later than December 31, 2020.

1.2 Closing Costs. Closing costs shall be allocated and paid as follows:

Cost	Responsible Party
Title Commitment required to be delivered pursuant to Section 5.1	Seller
Premium for standard form Title Policy required to be delivered pursuant to Section 5.3	Seller
Premium for any upgrade of Title Policy for any amendments or endorsements to the Title Policy desired by Purchaser, and the costs and expenses associated with any loan policy	Purchaser
Costs for updates, recertifications or amendments to the Survey	Purchaser
Costs for UCC Searches (if requested by Purchaser)	Purchaser
Costs of recording lien releases with respect to Seller’s existing financing, if any	Seller
Cost of recording the deed and any other documents required to be recorded by Purchaser	Seller
Any escrow fee charged by Escrow Agent for holding the Earnest Money or conducting the Closing	Purchaser ½ Seller ½
Real Estate Sales Commission to Broker	Seller
All other closing costs, expenses, charges and fees	As customary in Dallas County, Texas

1.3 Notice Addresses:

Seller:
6250 LBJ Freeway
Dallas, Texas 75240
Attention: Jim Spisak
Telephone: 972-934-7149
E-Mail: jspisak@tuesdaymorning.com &
legal@tuesdaymorning.com

Copy to:
Haynes and Boone LLP
2323 Victory Avenue, Suite 700
Dallas, Texas 75219
Attention: Brack Bryant
Telephone: 214-651-5335
E-mail: brack.bryant@haynesboone.com

Purchaser:

Rialto Real Estate Fund IV – Property, LP
c/o Rialto Capital Management, LLC
501 Santa Monica Blvd., Suite 501,
Santa Monica, California 90401
Attn: Mike Parker, Aaron Davis and Brady Scott
Email: mike.parker@rialtocapital.com,
aaron.davis@rialtocapital.com &
brady.scott@rialtocapital.com

Copy to:

Bilzin Sumberg Baena Price & Axelrod LLP
1450 Brickell Avenue, 23^rd Floor
Miami, Florida 33131
Attn: Jay M. Sakalo
Email: jsakalo@bilzin.com

Article 2
Property

2.1 Property. Subject to the terms and conditions of this Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, the following property (collectively, the “Property“):

2.1.1 Real Property. The parcels of land described in Exhibit A hereto (individually or collectively, as the context may require, the “Land“), together with (a) all improvements located thereon (“Improvements“), (b) all right, title and interest of Seller, if any, in and to the rights, benefits, privileges, easements, tenements, hereditaments, and appurtenances thereon or in anywise appertaining thereto, and (c) all right, title, and interest of Seller, if any, in and to all strips and gores and any land lying in the bed of any street, road or alley, open or proposed, adjoining the Land, as well as all other rights, privileges and appurtenances owned by Seller and in any way related to such land and other rights and interests of Seller hereunder conveyed (collectively, the “Real Property”). Seller and Purchaser acknowledge and agree that the Real Property consists of six (6) separate tracts, as identified on Exhibit A hereto (each, a “Tract”), and generally described as follows: (i) 4400-4404 South Beltwood Parkway, Farmers Branch, Texas (the “4404 Property”); (ii) 14303 Inwood Road, Farmers Branch, Texas (the “14303 Property”); (iii) 14621 Inwood Road, Addison, Texas (the “14261 Property”); (iv) 14639-14645 Inwood Road, Addison, Texas (the “14639 Property”); (v) 14601-14603 Inwood Road, Addison, Texas (the “14601 Property”); and (vi) 6250 Lyndon B. Johnson Freeway, Dallas, Texas (the “6250 LBJ Property”). The 4404 Property and 14621 Property are owned by Tuesday Morning Partners, Ltd., a Texas limited partnership (the “Tuesday Morning Partners Seller”), and the 14639 Property and 14601 Property are owned by Friday Morning, LLC, a Texas limited liability company (the “Friday Morning Seller”). The 14303 Property and 6250 LBJ Property are owned by Tuesday Morning, Inc., a Texas corporation (the “Tuesday Morning Inc. Seller”). Wherever in this Agreement a representation, warranty, covenant or agreement is made by Seller, such representation, warranty, covenant or agreement shall be deemed to be made by the Tuesday Morning Partners Seller, the Friday Morning Seller or the Tuesday Morning Inc. Seller with respect to the Real Property actually owned by such party, and in no event shall either the Tuesday Morning Seller, Friday Morning Seller or Tuesday Morning Inc. Seller be deemed to make representation or warranties, or undertake any agreement or obligation whatsoever, with respect to any portion of the Real Property not owned by such party.

2.1.2 Tangible Personal Property. Seller and Purchaser acknowledge and agree that at Closing, the equipment, machinery, furniture, furnishings, supplies and other tangible personal property, if any, owned by Seller and now or hereafter located on the Land that (a) are not used in connection with the operation, ownership and maintenance of the Land and Improvements (as opposed to the operation or management of the particular business of Seller on the Land), and (b) are used primarily in connection with the operation or management of the particular business of Seller on the Land (collectively, the “Excluded Tangible Personal Property”) shall not transfer to Purchaser, as all of such Excluded Tangible Personal Property shall be retained by Seller for its continued operations pursuant to the Leases (as hereinafter defined); provided however, that all improvements, structures, building systems (such as heating, air conditioning, and mechanical systems), parking facilities and fixtures now or hereafter placed, constructed, installed or located at or on the Real Property (including any and all apparatuses, equipment and appliances affixed to the Real Property that cannot be removed without material harm to the Real Property) and used in connection with the ownership, operation, management or occupancy of the Real Property (as opposed to the operation or management of Seller’s particular business on the Land), shall be deemed a component of the Improvements (the “Tangible Personal Property”).

2.1.3 Intangible Personal Property. All of Seller’s right, title and interest, if any, in the following intangible personal property related to the Real Property and the Improvements: the plans and specifications and other architectural and engineering drawings for the Improvements, if any, to the extent assignable and in Seller’s possession as of the Effective Date and at no cost to Seller; warranties, to the extent assignable and in Seller’s possession as of the Effective Date and at no cost to Seller; governmental permits, approvals and licenses, if any, to the extent assignable and in Seller’s possession as of the Effective Date and at no cost to Seller; (all of the items described in this Section 2.1.3 collectively referred to as the “Intangible Personal Property”). Tangible Personal Property and Intangible Personal Property shall not, in any event whatsoever, be deemed or constructed to include any trade name, mark or other identifying material that includes the name “Tuesday Morning”, its subsidiaries and affiliates, or any derivatives thereof.

Article 3
Earnest Money

3.1 Deposit and Investment of Earnest Money. No later than Friday, October 30, 2020, Purchaser shall deposit (or cause to be deposited) the Earnest Money with Escrow Agent. Escrow Agent shall invest the Earnest Money in government insured interest-bearing accounts satisfactory to Seller and Purchaser, shall not commingle the Earnest Money with any funds of Escrow Agent or others, and shall promptly provide Purchaser and Seller with confirmation of the investments made. Such account shall have no penalty for early withdrawal, and Purchaser accepts all risks with regard to such account. The Earnest Money shall become non-refundable to Purchaser upon the expiration of the Due Diligence Period (as defined below), except as expressly provided in this Agreement (including, Sections 5.3, 6.2, 6.3 and 10.2), provided, however, the Earnest Money shall be applied to the Purchase Price in the event Closing occurs. For purposes hereof, the “Due Diligence Period” shall be the period commencing on the Effective Date and expiring at 5:00pm Central Time on October 30, 2020.

3.2 Independent Consideration. If this Agreement is terminated for any reason, and Purchaser is entitled to receive a return of the Earnest Money pursuant to the terms hereof, the Escrow Agent shall first disburse to Seller $100 as independent consideration for Seller’s performance under this Agreement (“Independent Consideration”), which shall be retained by Seller in all instances other than in the case of a Seller default existing beyond applicable grace, notice and cure period. Notwithstanding the foregoing, in the event this Agreement is terminated due to an uncured Seller default, Purchaser shall be entitled to a return of the entire Earnest Money, including the Independent Consideration.

3.3 Form; Failure to Deposit. The Earnest Money shall be in the form of a certified or cashier’s check or the wire transfer to Escrow Agent of immediately available U.S. federal funds. If Purchaser fails to timely deposit any portion of the Earnest Money within the time periods required herein, Seller may terminate this Agreement by written notice to Purchaser delivered on or prior to the deposit of such Earnest Money by Purchaser, in which event any Earnest Money that has previously been deposited by Purchaser with Escrow Agent shall be immediately returned to Purchaser, and thereafter the parties hereto shall have no further rights or obligations hereunder, except for rights and obligations which, by their terms, survive the termination hereof.

Article 4
Due Diligence

4.1 Due Diligence Materials Delivered. Seller shall make available to Purchaser the following (the “Property Documents”) for each Property (provided that it is acknowledged and agreed by Purchaser (i) that Seller was and is not obligated to deliver (or create/prepare) the Property Documents to the extent that the same are not currently available in digital format and in Seller’s reasonable possession, custody or control as of the Effective Date, and (ii) that Seller was and is not obligated to deliver any documents or information that is subject to attorney-client privilege:

4.1.1 Environmental, soils, air quality (mold) and hazardous substance reports, including, without limitation, Phase I Reports, Phase II Reports and any additional substance reports, if any;

4.1.2 Property inspection reports, including those covering engineering, structural/seismic, mechanical systems, building plans, and insurance loss run reports;

4.1.3 Agreements, warranties, and guaranties with respect to the Real Property;

4.1.4 Schedule of currently active building Service Contracts and copies of all currently active Service Contracts and any licensing agreements currently affecting the Property;

4.1.5 Leasing listing agreements and property management agreements from the last three (3) calendar years;

4.1.6 List of facility-related expenses incurred at the 6250 LBJ Property during the last twelve (12) months;

4.1.7 Utility bills (electricity, water, sewer, gas, fuel oil, trash and telephone/security lines) for the shorter of the last three (3) calendar years and the period of Seller’s ownership;

4.1.8 Real and personal property tax assessment notices and bills for the Property; including supplementary notices and bills for the shorter of the last three (3) calendar years and the period of Seller’s ownership;

4.1.9 Copies of Seller’s most current title policies for the Property with the insured amount redacted; and

4.1.10 Schedule of capital improvements pertaining to the Property for the preceding twenty-four (24) months.

Seller shall notify Purchaser of any material changes to or errors in the Property Documents to the extent Seller obtains knowledge thereof and Seller shall provide updated materials (if any) in such event.

4.2 Physical Due Diligence. Commencing on the Effective Date and continuing until the Closing, Purchaser and its agents and representatives shall have reasonable access to the Property at all reasonable times during normal business hours, for the purpose of conducting reasonably necessary tests, including surveys and architectural, engineering, geotechnical and environmental inspections and tests, provided that (a) Purchaser must give Seller one (1) full Business Day’s prior telephone or written notice of any such inspection or test, and with respect to any intrusive inspection or test (i.e., core sampling) must obtain Seller’s prior written consent (which consent may not be unreasonably withheld), (b) prior to performing any inspection or test, Purchaser must deliver a certificate of insurance to Seller evidencing that Purchaser and its contractors, agents and representatives have in place (and Purchaser and its contractors, agents and representatives shall maintain during the pendency of this Agreement) (1) commercial general liability insurance with limits of at least $2,000,000 for bodily or personal injury or death, (2) property damage insurance in the amount of at least $1,000,000, and (3) workers’ compensation insurance for its activities on the Property in accordance with applicable law, all covering any accident arising in connection with the presence of Purchaser, its contractors, agents and representatives on the Property, which insurance shall (A) name as additional insureds thereunder Seller and such other parties holding insurable interests as Seller may designate, and (B) be primary non-contributory and be written by a reputable insurance company licensed to issue policies in the State of Texas, and (c) all such tests shall be conducted by Purchaser in compliance with Purchaser’s responsibilities set forth in Sections 4.7 and 4.8 below. Notwithstanding the foregoing, Purchaser shall be permitted to conduct a Phase II Environmental Site Assessment and any other additional testing if recommended by Purchaser’s Phase I Environmental Site Assessment. Purchaser shall bear the cost of all such inspections or tests, which obligation shall survive the termination of this Agreement. Subject to the provisions of Section 4.5 hereof, Purchaser or Purchaser’s representatives may communicate with any governmental authority (aa) for the sole purpose of gathering information in connection with the transaction contemplated by this Agreement; provided, however, Purchaser must contact Seller at least two (2) full Business Days in advance by telephone or in writing to inform Seller of Purchaser’s intended communication with any governmental authority and to allow Seller the opportunity to participate in such communication if Seller desires at a mutually agreeable time between Purchaser and Seller, or (bb) to the extent required by applicable laws. As used in this Section, “communicate” and “communication” shall mean the initiation of, response to, or sharing or exchange of information, knowledge or messages, whether by oral, written or electronic methods or media, or by any other means for the purpose of knowingly subverting the provisions of this Section regarding Purchaser’s obligations to provide Seller with prior notice of such communication and Seller’s ability to participate in such communication.

4.3 Reports. As additional consideration for the transaction contemplated herein, following termination of this Agreement for any reason other than Seller default existing beyond applicable grace, notice and cure periods, Purchaser shall provide to Seller promptly following Seller’s written request, copies of any third party-prepared final environmental site assessments, property condition reports, title reports, surveys, zoning reports and other final studies and reports about the Real Property prepared by or for or otherwise obtained by, Purchaser or Purchaser’s engineers, contractors and environmental consultants in connection with Purchaser’s due diligence (collectively, the “Reports” and, individually, a “Report”). Any such deliveries to Seller shall be made at no cost to Purchaser and without any representation or warranty of any kind, including, without limitation, as to the accuracy or completeness of any such materials, and with no right of Seller to rely thereon without the consent of the applicable third party. Seller acknowledges and agrees that Purchaser has not made any representation or warranty in connection with the delivery of such Reports or other materials and the delivery of such Reports shall not establish a contractual relationship with Seller and no third-party benefits have been or shall be expressly or impliedly established. Notwithstanding anything herein to the contrary, Purchaser shall not be required to provide to Seller any (aa) attorney-client privileged communications, or (bb) proprietary or confidential work product and information (such as drafts, internal valuation studies, internal memoranda, financial projections, budgets and internal appraisals), or (cc) any other information that is not a final report or study obtained by Purchaser from a third party; provided however, that if this Agreement terminates or expires for any reason other than a Seller default beyond applicable notice and cure periods, Purchaser shall, subject to Purchaser’s document retention policies, destroy (and certify to Seller the destruction of) such materials to the extent such materials contain or are based upon confidential information. Purchaser’s obligation to deliver the Property Documents and the Reports to Seller shall survive the termination of this Agreement (not to exceed two (2) years) but shall not survive Closing.

4.4 Service Contracts. Purchaser and Seller acknowledge and agree that as a result of the nature of this transaction as a sale and leaseback to Seller pursuant to the terms of the Leases (as defined below), Seller will retain certain contract rights related to the operation, ownership or management of the Real Property, including maintenance, service, construction, supply, electric utility service, and equipment rental contracts (collectively, the “Service Contracts”), in its capacity as the tenant under the Leases, and such Service Contracts will not be terminated by Seller, or assumed by Purchaser, on the Closing Date. Any Service Contracts shall be held solely in the name of Seller (and not binding upon Purchaser or the Real Property), as tenant under the Leases, during the term of the Leases, and shall be terminated by Seller prior to the expiration of the Leases; provided however, that such Service Contracts shall be assigned, amended or terminated by Seller at Closing pursuant to the terms and conditions of Section 7.9.

4.5 Proprietary Information; Confidentiality. Purchaser acknowledges that the Property Documents are and shall remain proprietary and confidential and will be delivered to Purchaser solely to assist Purchaser in evaluating the Property. The term confidential or proprietary information does not include any information that Purchaser can reasonably establish (i) at the time of disclosure or thereafter is available to the public other than as a result of a disclosure by Purchaser or its representatives, (ii) is already in Purchaser’s possession or becomes available to Purchaser on a non-confidential basis from a source other than Seller or its representatives, provided that, such source is not known to Purchaser after reasonable inquiry to be bound by an obligation of confidentiality to Seller or its affiliates or otherwise prohibited from transmitting the information to Purchaser by a contractual, legal or fiduciary obligation, or (iii) has been independently developed by Purchaser or its representatives without reference to or reliance upon the confidential or proprietary information and without otherwise violating your obligations hereunder. Purchaser shall not disclose the contents to any person other than to those persons who are responsible for evaluating Purchaser’s acquisition or financing of the Property, including Purchaser’s investors, and those who have agreed to preserve the confidentiality of such information as required hereby (collectively, “Permitted Outside Parties”). Notwithstanding the foregoing, Purchaser may disclose such contents as (a) expressly required under applicable laws or (b) expressly required by appropriate written judicial order, subpoena or demand issued by a court of competent jurisdiction (but will first give Seller written notice of the requirement and will cooperate with Seller so that Seller, at its expense, may seek an appropriate protective order and, in the absence of a protective order, Purchaser may disclose only such content as may be necessary to avoid any penalty, sanction, or other material adverse consequence, and Purchaser will use reasonable efforts to secure confidential treatment of any such content so disclosed). Purchaser shall not divulge the contents of the Property Documents and other information except in strict accordance with the standards set forth in this Section 4.5. In permitting Purchaser to review the Property Documents or any other information, Seller has not waived any privilege or claim of confidentiality with respect thereto, and no third-party benefits or relationships of any kind, either express or implied, have been offered, intended or created. Purchaser’s obligations under this Section 4.5 shall survive the termination of this Agreement for a period of one (1) year but shall not survive Closing. Notwithstanding anything in this Agreement to the contrary, any confidentiality obligations or liabilities of Purchaser to Seller, shall automatically terminate (and not survive) upon Closing.

4.6 No Representation or Warranty by Seller. Purchaser acknowledges that, except for the representations and warranties by Seller expressly set forth in this Agreement and any document executed by Seller and delivered to Purchaser at Closing (collectively, the “Seller Undertakings”), Seller has not made and does not make any warranty or representation regarding the truth, accuracy or completeness of the Property Documents or the source(s) thereof. Purchaser further acknowledges that some if not all of the Property Documents were prepared by third parties other than Seller. Subject to the Seller Undertakings, Seller expressly disclaims any and all liability for representations or warranties, express or implied, statements of fact and other matters contained in such information, or for omissions from the Property Documents, or in any other written or oral communications transmitted or made available to Purchaser. Subject to the Seller Undertakings, Purchaser shall rely solely upon its own investigation with respect to the Property, including, without limitation, the Property’s physical, environmental or economic condition, compliance or lack of compliance with any ordinance, order, permit or regulation or any other attribute or matter relating thereto. Subject to the Seller Undertakings, Seller has not undertaken any independent investigation as to the truth, accuracy or completeness of the Property Documents and are providing the Property Documents solely as an accommodation to Purchaser.

4.7 Purchaser’s Responsibilities. In conducting any inspections, investigations or tests of the Property and/or Property Documents, Purchaser and its agents and representatives shall: (a) not interfere with the operation and maintenance of the Property by Seller; (b) not damage any part of the Property or any personal property owned by Seller; (c) not injure or otherwise cause bodily harm to Seller or its agents, guests, tenants, invitees, contractors and employees; (d) comply with all applicable laws; (e) promptly pay when due the costs of all tests, investigations, and examinations done with regard to the Property by Purchaser and its agents and representatives; (f) not permit any liens to attach to the Real Property by reason of the exercise of its rights hereunder; (g) repair any damage to the Real Property resulting directly from any such inspection or tests; and (h) not reveal or disclose prior to Closing any Property Documents to anyone other than the Permitted Outside Parties, in accordance with the confidentiality standards set forth in Section 4.5 above. Notwithstanding anything in this Agreement to the contrary, Purchaser shall have no obligation to repair any damage to the extent caused by Seller’s negligence or willful misconduct, or to remediate, contain, abate or control any materials not placed on or introduced to the Property by Purchaser or its agents and representatives (except to the extent any action of Purchaser or its Representatives disturbs any such existing materials in a manner which causes damage or contamination), or to repair or restore any latent condition discovered by Purchaser or its consultants, except to the extent any action by Purchaser or its Representatives exacerbates such condition. Purchaser’s obligations under this Section 4.7 shall survive the termination of this Agreement but shall not survive Closing, except and only to the extent such damage caused by Purchaser materially and adversely affects Seller’s post-Closing operations at the Property, in which case Purchaser shall perform such work after Closing.

4.8 Purchaser’s Agreement to Indemnify. PURCHASER SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS SELLER FROM ANY AND ALL LOSSES, COSTS, LIENS, CLAIMS, CAUSES OF ACTION, LIABILITY, DAMAGES, EXPENSES AND LIABILITY (INCLUDING, WITHOUT LIMITATION, COURT COSTS AND REASONABLE ATTORNEYS’ FEES) (collectively, “Losses”) INCURRED BY SELLER, THAT ARISE FROM OR OUT of THE ACT OR OMISSION OF PURCHASER OR ITS AGENTS OR REPRESENTATIVES IN CONNECTION WITH PURCHASER’S INSPECTIONS OR TESTS PERMITTED UNDER THIS AGREEMENT OR ANY VIOLATION BY PURCHASER, ITS AGENTS, REPRESENTATIVES, OF THE PROVISIONS OF SECTION 4.2 OR SECTION 4.7; PROVIDED, HOWEVER, THE INDEMNITY SHALL NOT EXTEND TO PROTECT SELLER FROM LOSSES RESULTING FROM (A) ANY PRE-EXISTING CONDITION MERELY DISCOVERED BY PURCHASER (I.E., LATENT ENVIRONMENTAL CONTAMINATION), SO LONG AS PURCHASER’S ACTIONS DO NOT AGGRAVATE or exacerbate ANY SUCH PRE-EXISTING CONDITION, OR (B) THE GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT SELLER OR THEIR RESPECTIVE EMPLOYEES, AGENTS, OR REPRESENTATIVES. THIS INDEMNITY PROVISION SHALL SURVIVE TERMINATION OR EXPIRATION OF THIS AGREEMENT FOR A PERIOD OF TWO (2) YEARS.

Article 5
Title and Survey

5.1 Title Commitment and Survey. Seller will use reasonable diligence to cause to be delivered to Purchaser within ten (10) days after the Effective Date (i) Commitments for Title Insurance with hyperlinked copies of all recorded instruments affecting each Tract and recited as exceptions in the Commitments for Title Insurance (collectively, the “Commitments”) and (ii) a copy of the most recent survey of each Tract in Seller's possession (the “Survey”). If Purchaser or the Title Company requires a new survey of any Tract for any reason, then Purchaser, at Purchaser's cost and within thirty (30) days after the Effective Date, shall obtain a new survey (“New Survey”) of such Tracts made on the ground by a registered professional land surveyor that conforms to the requirements of an ALTA/ACSM minimum standard detail survey. If Purchaser has an objection to items disclosed in any Commitment or Survey, then Purchaser may give Seller written notice of its objections for a period of five (5) days after receipt of the latter of all of the Commitments and Surveys, but in any event prior to the expiration of the Due Diligence Period. If Purchaser gives timely written notice of its objections, then Seller may, but has no obligation to, cure those objections. Seller shall utilize reasonable diligence to cure any errors in the Commitments, provided Seller has no obligation to expend any money, to incur any contractual or other obligations, or to institute any litigation in pursuing its efforts other than to remove at Closing: (a) liens securing a mortgage, deed of trust or trust deed evidencing an indebtedness of Seller; (b) judgment liens against Seller; (c) tax liens; (d) broker’s liens; (e) mechanics liens arising by, through or under Seller; and (f) any other monetary liens arising by, through or under Seller (collectively, “Seller Mandatory Cure Items”). If any objection is not satisfied, then Purchaser may elect on or before expiration of the Due Diligence Period, as its sole and exclusive remedy to either: (i) terminate this Agreement, in which case the Earnest Money shall be returned to Purchaser, and neither party will have any further rights or obligations pursuant to this Agreement, other than as set forth herein with respect to rights or obligations that survive termination; or (ii) waive the unsatisfied objection (which shall thereupon become a Permitted Exception) and proceed to Closing. Any exception to title not objected to by Purchaser in the manner and within the time period specified in this Section 5.1 shall be deemed accepted by Purchaser. The phrase “Permitted Exceptions” means those exceptions to title set forth in the Commitments or Surveys and that have been accepted or deemed accepted by Purchaser, other than Seller Mandatory Cure Items. The failure of Seller to deliver a Commitment or a Survey satisfying the requirements of this Section 5.1 will not under any circumstances extend the period for review of the Commitments or Surveys beyond the Due Diligence Period, and Purchaser's sole and exclusive remedy for Seller's failure, if any, shall be to terminate this Agreement before the expiration of the Due Diligence Period, in which case the Earnest Money shall be returned to Purchaser. Purchaser shall notify Seller in writing of any failure of any Commitment or Survey to satisfy the requirements of this Section 5.1 within five (5) days after the Commitments and Surveys are received by Purchaser, and if Purchaser fails to do so, then they shall be deemed to satisfy these requirements. If Purchaser obtains a New Survey and the New Survey shows exceptions not previously shown on the applicable Survey, or if after the issuance of the Title Commitment, the Title Company updates the Title Commitment to include a new exception (“New Exceptions”), Seller shall be obligated to cure such New Exceptions to the extent any constitute Seller Mandatory Cure Items, otherwise such New Exceptions shall be deemed Permitted Exceptions unless they are a result of a Seller breach under Section 6.1.3 hereof.

5.2 Intentionally Omitted.

5.3 Delivery of Title Policy at Closing. In the event that the Title Company does not unconditionally commit at Closing to issue to Purchaser an owner’s title policy insuring Purchaser’s indefeasible fee simple title to the Real Property in the amount of the Purchase Price, subject only to the Permitted Exceptions (the “Title Policy“), then Purchaser shall have the right, as its sole and exclusive remedy, to terminate this Agreement, in which case the Earnest Money shall be immediately returned to Purchaser and the parties hereto shall have no further rights or obligations, other than those that by their terms survive the termination of this Agreement.

Article 6
Operations and Risk of Loss

6.1 Ongoing Covenants and Operations. From the Effective Date through Closing:

6.1.1 New Contracts. Seller will not amend any existing contract or agreement or enter into any new contract or agreement that will be an obligation of, or binding upon, Purchaser or the Property (as opposed to being binding upon Seller only) subsequent to Closing. Seller may enter into any contracts desired by Seller in the ordinary course of business that will not be binding upon Purchaser or the Property after Closing. On or prior to Closing, Seller shall either terminate or assign all contracts (including any Service Contracts) that would be binding upon Purchaser or the Property pursuant to the terms and conditions of Section 7.9, which terminations or assignments shall be effective no later than Closing. Seller shall pay all termination costs, liquidated damages, fees and/or expenses related thereto, it being understood and agreed that Purchaser shall have no liability or obligations for any Service Contracts.

6.1.2 Maintenance of Improvements; Tangible Personal Property. Subject to Sections 6.2 and 6.3, Seller shall operate and manage the Property in substantially the same manner consistent with the Seller’s maintenance of the Improvements during Seller’s period of ownership, provided, that, Seller shall not be obligated to make any capital repairs or replacements to the extent Seller does not deem such repairs or replacements necessary in its discretion. Seller makes no representation or warranty regarding the condition or state of repair of any or all of the Improvements, the Tangible Personal Property, or the Excluded Tangible Personal Property located at or on the Property and undertakes no obligation regarding the security of the Excluded Tangible Personal Property from and after the date of this Agreement, and Seller expressly disclaims any obligation to repair or replace any of the Excluded Tangible Personal Property following destruction or loss of any nature. Seller shall promptly (and in any event prior to Closing), deliver any Post-Effective Date Citation (as hereinafter defined) obtained by Seller. The parties acknowledge and agree that the terms and conditions of this paragraph shall not modify the post-Closing obligations of the parties as set forth in the Leases. Seller will not remove any Tangible Personal Property except as may be required for necessary repair or replacement (in Seller’s discretion), and replacement shall be of equal or better quality as the removed item of Tangible Personal Property.

6.1.3 No Assignment or Disposition. Seller shall not sell, assign, alienate, lien, encumber or otherwise transfer all or any part of the Property or any interest therein. Without limitation of the foregoing, Seller shall not grant any easement, right of way, restriction, covenant or other comparable right affecting the Land or the Improvements without obtaining Purchaser’s prior written consent (such consent not to be unreasonably withheld, condition or delayed). Except for this Agreement, Seller shall not enter into any agreement, arrangement or understanding for the sale of the Property, whether conditional or otherwise. Seller shall not apply for or consent to any change or modification with respect to the zoning development or use of any portion of the Property without Purchaser’s prior written consent, which consent may be withheld in Purchase’s sole and absolute discretion.

6.2 Damage. If, prior to Closing, the Property is damaged by fire or other casualty, Seller shall, in consultation with its insurance adjuster or other representative, reasonably estimate the cost to repair and the time required to complete repairs and will provide Purchaser written notice of such estimation (the “Casualty Notice”) as soon as reasonably possible after the occurrence of the casualty.

6.2.1 Material. In the event of any Material Damage (as hereinafter defined) to or destruction of the Property or any portion thereof prior to Closing, either Seller or Purchaser may, at its option, terminate this Agreement by delivering written notice to the other on or before the expiration of ten (10) days after the date Seller delivers the Casualty Notice to Purchaser (and if necessary, the Closing Date shall be extended to give the parties the full ten (10) day period to make such election and to obtain insurance settlement agreements with Seller’s insurers and agree upon repair and restoration of the affected Property). Upon any such termination, the Earnest Money shall be returned to Purchaser and the parties hereto shall have no further rights or obligations hereunder, other than those that by their terms survive the termination of this Agreement. If neither Seller nor Purchaser so terminates this Agreement within said ten (10) day period, then the parties shall be deemed to have waived the right to terminate under this Section 6.2.1 and the parties shall proceed under this Agreement and close on schedule (subject to extension of Closing as provided above), and as of Closing, to the extent permitted by the terms of the applicable policies, Seller shall assign to Purchaser, without representation or warranty by or recourse against Seller, all of Seller’s rights in and to any resulting insurance proceeds (including any rent loss insurance applicable to any period on and after the Closing Date) due Seller as a result of such damage or destruction (or if such have not been awarded, all of Seller’s right, title and interest to any claims and proceeds Seller has with respect to any casualty insurance policies relating to the Property in question, to the extent the same are assignable pursuant to the terms of the applicable policies; provided, however, should Seller’s insurance policy prohibit the assignment of such proceeds, Seller shall provide Buyer with a credit to the Purchase Price at Closing in an amount equal to the proceeds.) and Purchaser shall assume full responsibility for all needed repairs, and Purchaser shall receive a credit at Closing for any deductible or self-insured amount under such insurance policies (“Insurance Proceeds Assignment”). For the purposes of this Agreement, “Material Damage” and “Materially Damaged” means damage that, in the opinion of an architect or other third-party contractor selected by Seller and reasonably approved by Purchaser, exceeds (or is estimated to exceed) $1,500,000.00 to repair.

6.2.2 Not Material. If a casualty occurs but the Real Property is not Materially Damaged, then neither Purchaser nor Seller shall have the right to terminate this Agreement pursuant to this Section 6.2 (a “Non-Material Pre-Closing Casualty”), and subject to an Insurance Proceeds Assignment to Purchaser, the parties shall proceed to Closing subject to the terms of this Agreement, and such damage shall be restored by Purchaser post-Closing pursuant to (but only to the extent required by) the terms and conditions of the Leases, and Purchaser shall reasonably cooperate with Seller, in its capacity as tenant under the Leases, regarding such restoration, pursuant to the terms and conditions of the Leases. Notwithstanding the foregoing, if the insurance proceeds to be assigned pursuant to the Insurance Proceeds Assignment are less than the cost to repair the damage, in the opinion of an architect or other third-party contractor selected by Seller and reasonably approved by Purchaser, Purchaser shall receive a credit at Closing in the amount of such difference. The provisions of this Section 6.2.2 shall survive Closing.

6.3 Condemnation. If proceedings in eminent domain are instituted with respect to the Property or any portion thereof that would materially and adversely interfere with the present use of the Real Property as currently utilized by Seller, or if such proceedings are instituted with respect to any portion of the Improvements, Purchaser may, at its option, by written notice to Seller given within ten (10) days after Seller notifies Purchaser in writing of such proceedings (and if necessary the Closing Date shall be automatically extended to give Purchaser the full ten (10) day period to make such election), either: (a) terminate this Agreement, in which case the Earnest Money shall be immediately returned to Purchaser and the parties hereto shall have no further rights or obligations, other than those that by their terms survive the termination of this Agreement, or (b) proceed under this Agreement, in which event Seller shall, at the Closing, assign to Purchaser its entire right, title and interest in and to any condemnation award, and Purchaser shall have the sole right after the Closing to negotiate and otherwise deal with the condemning authority in respect of such matter. If Purchaser does not give Seller written notice of its election within the time required above, then Purchaser shall be deemed to have elected option (b) above.

6.4 Insurance Policies. Seller shall, at its sole cost and expense, use commercially reasonably efforts to maintain Seller’s existing insurance coverage with respect to the Property to the extent such policies remain available at similar rates as of the date hereof.

6.5 Leaseback. Commencing on the Closing Date, Purchaser, as landlord, shall lease to, as applicable, Tuesday Morning Partners, Ltd. and Tuesday Morning, Inc. (collectively, “Tuesday Tenant”), as tenant, all of the Land and Improvements pursuant to leases in substantially the form attached hereto as Exhibits E-1 and E-2 (the “Leases”). In the event of any conflict or inconsistency between the terms of this Agreement and the terms of either of the Leases, the terms of the applicable Lease shall prevail. The parties acknowledge and agree that the Leases attached hereto represent the final material monetary terms of such Leases (including all provisions relating to lease term and rent payable thereunder) but certain non-monetary provisions may be revised prior to Closing to a de minimus extent.

6.6 Notices. Seller covenants and agrees with Purchaser from the date hereof and until the Closing, to promptly notify Purchaser of all written notices received or sent by Seller relating to (i) violations of laws, ordinances, orders, directives, regulations or requirements issued by, filed by or served by, any governmental authority against or affecting any of the Property; or (ii) any default or violation under any of the Permitted Exceptions.

Article 7
Closing

7.1 Closing. The consummation of the transaction contemplated herein (“Closing”) shall occur on the Closing Date by mail at the offices of Escrow Agent (or such other location as may be mutually agreed upon by Seller and Purchaser). Funds shall be deposited into and held by Escrow Agent in a closing escrow account with a bank satisfactory to Purchaser and Seller. Upon satisfaction or completion of all closing conditions and deliveries, the parties shall direct Escrow Agent to immediately record and deliver the closing documents to the appropriate parties and make disbursements according to the closing statements executed by Seller and Purchaser.

7.2 Conditions to Parties’ Obligation to Close. In addition to all other conditions set forth herein, the obligation of Seller, on the one hand, and Purchaser, on the other hand, to consummate the transactions contemplated hereunder are conditioned upon the following:

7.2.1 Representations and Warranties and Covenants. The other party’s representations and warranties contained herein shall be true and correct in all material respects as of the Effective Date and the Closing Date as if specifically remade at Closing.

7.2.2 Covenants and Deliveries. As of the Closing Date, the other party shall have performed its obligations and covenants hereunder in all material respects and tendered all deliveries to be made by such party at Closing.

7.2.3 Actions, Suits, etc. Other than in connection with the Bankruptcy Proceeding, there shall exist no existing, pending or threatened in writing actions, suits, arbitrations, claims, attachments, proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings, against the other party that would materially and adversely affect that party’s ability to perform its obligations under this Agreement.

7.2.4 Title Policy. As a condition benefitting Purchaser only, the Title Company’s shall be unconditionally committed to issuing the Title Policy pursuant to Section 5.3.

7.2.5 Bankruptcy Court Sale Approval. Seller and certain affiliates are currently debtors and debtors-in-possession in Chapter 11 proceedings in The United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”) under the consolidated case styled In re: Tuesday Morning Corporation, et al., Case number 20-31476-HDH-11 (the “Bankruptcy Proceeding”). Seller’s and Buyer’s obligations hereunder are subject to (i) no order or determination being entered or withheld by the Bankruptcy Court that would materially impede the Closing from occurring by the Closing Date (“Court Intervention”); (ii) entry of a final, non-appealable order (a “Plan Confirmation Order”) confirming a plan of reorganization proposed by the Seller (the “Reorganization Plan”) and (iii) the effectiveness of the Reorganization Plan.

If any condition to a party’s obligation to proceed with the Closing hereunder (such party, the “Performing Party”) has not been satisfied as of the Closing Date (or such earlier date as is provided herein, and in the case of a Court Intervention, the date of the occurrence of Court Intervention), subject to any applicable notice and cure periods provided in Sections 10.1 and 10.2, such party may, in its sole discretion, terminate this Agreement by delivering written notice (a “Condition Failure Termination Notice”) to the other party (the “Non-Performing Party”) on or before the Closing Date (or such earlier date as is provided herein), or elect to close (or to permit any such earlier termination deadline to pass) notwithstanding the non-satisfaction of such condition, in which event the Performing Party shall be deemed to have waived any such condition (provided that neither party may waive the condition set forth in Section 7.2.5 hereof). In the event the Performing Party elects to close (or to permit any such earlier termination deadline to pass), notwithstanding the non-satisfaction of such condition, the Performing Party shall be deemed to have waived said condition, and there shall be no liability on the part of the Non-Performing Party for breaches of representations and warranties of which the Performing Party had knowledge prior to Closing. The failure of a condition precedent to Closing that has not been satisfied on or prior to Closing through no act or omission of the Non-Performing Party in violation of this Agreement shall not be a default hereunder but shall not limit the right of the Performing Party to terminate this Agreement as a result thereof. Further, should the Performing Party elect to terminate this Agreement pursuant to this paragraph, the Performing Party shall be entitled to the Earnest Money and Independent Consideration upon termination; provided, however, if the conditions set forth in Section 7.2.5 are not satisfied and the Agreement is terminated, Buyer shall be entitled to the Earnest Money and Independent Consideration.

Notwithstanding the foregoing, in the event that, (a) prior to the Closing, Purchaser obtains actual knowledge of information (from whatever source, including, without limitation, as a result of Purchaser’s due diligence tests, investigations and inspections of the Property, by disclosure from Seller or Seller’s agents and employees or otherwise) that renders any of Seller’s representations and warranties materially untrue or incorrect, and (b) Purchaser promptly delivers a Condition Failure Termination Notice as a result thereof, then Seller shall have seven (7) Business Days following receipt of such Condition Failure Termination Notice (“Seller’s Cure Period”) in which to take all steps necessary in Seller’s reasonable estimation to render such representations and warranties materially true and correct; provided, however, the Seller’s Cure Period shall automatically extend the Closing Date to the extent such Condition Failure Termination Notice is sent less than seven (7) Business Days prior to the scheduled Closing Date. If, prior to the expiration of Seller’s Cure Period, Seller causes such representations to be materially true and correct, then Purchaser’s Condition Failure Termination Notice shall be deemed null and void. However, if, as of the expiration of Seller’s Cure Period, Seller has not rendered such representation and warranty materially true and correct, this Agreement shall terminate as set forth above and Purchaser shall be entitled to the Earnest Money and Independent Consideration.

7.3 Seller’s Deliveries in Escrow. As of or prior to the Closing Date, Seller shall deliver in escrow to Escrow Agent the following:

7.3.1 Deed. A special warranty deed (or, at Purchaser’s request, multiple deeds) in the form of Exhibit B hereto, executed and acknowledged by Seller, conveying to Purchaser Seller’s fee interest in the Real Property (the “Deed”);

7.3.2 Bill of Sale and Assignment Agreement. A Bill of Sale and Assignment Agreement in the form of Exhibit C hereto (the “Assignment”), executed by Seller vesting in Purchaser Seller’s right, title and interest in and to the property described therein free of any claims, except for the Permitted Exceptions to the extent applicable;

7.3.3 FIRPTA. A Foreign Investment in Real Property Tax Act affidavit in the form of Exhibit D hereto executed by Seller;

7.3.4 Authority. Evidence of the existence, organization and authority of Seller and of the authority of the persons executing documents on behalf of Seller reasonably satisfactory to the underwriter for the Title Policy, it being expressly agreed that Seller shall have no obligation to provide evidence of authority to Purchaser;

7.3.5 Leases. The Leases, executed by Tuesday Morning Partners, Ltd. and Tuesday Morning, Inc., as applicable; and

7.3.6 Owner’s Affidavit. An Owner’s Affidavit and a “gap” affidavit, each, executed by Seller and in form and substance reasonably acceptable to the Title Company and Seller, but sufficient to delete the standard exceptions to the Title Policy, including, without limitation, the exceptions related to the parties in possession (other than the Leases) and mechanic’s liens.

7.3.7 Additional Documents. Any additional documents that Escrow Agent or the Title Company may reasonably require for the proper consummation of the transactions contemplated by this Agreement (provided, however, no such additional document shall expand any obligation, covenant, representation or warranty of Seller or result in any new or additional obligation, covenant, representation or warranty of Seller under this Agreement beyond those expressly set forth in this Agreement).

7.4 Purchaser’s Deliveries in Escrow. As of or prior to the Closing Date, Purchaser shall deliver in escrow to Escrow Agent the following:

7.4.1 Bill of Sale, Assignment and Assumption. The Assignment, executed and acknowledged by Purchaser;

7.4.2 Leases. The Leases, each executed by Purchaser; and

7.4.3 Additional Documents. Any additional documents that Seller, Escrow Agent or the Title Company may reasonably require for the proper consummation of the transaction contemplated by this Agreement (provided, however, no such additional document shall expand any obligation, covenant, representation or warranty of Purchaser or result in any new or additional obligation, covenant, representation or warranty of Purchaser under this Agreement beyond those expressly set forth in this Agreement).

7.5 Closing Statements. As of or prior to the Closing Date, Seller and Purchaser shall deposit with Escrow Agent executed closing statements consistent with this Agreement in the form required by Escrow Agent.

7.6 Purchase Price. At or before 2:30 p.m. (local time at the Real Property) on the Closing Date, Purchaser shall deliver to Escrow Agent the Purchase Price, less the Earnest Money that is applied to the Purchase Price, plus or minus applicable prorations, in immediate, same-day U.S. federal funds wired for credit into Escrow Agent’s escrow account, which funds must be delivered in a manner to permit Escrow Agent to deliver good funds to Seller or its designee on the Closing Date (and, if requested by Seller, by wire transfer); in the event that Escrow Agent is unable to deliver good funds to Seller or its designee on the Closing Date, then the closing statements and related prorations will be revised as necessary.

7.7 Possession. Seller shall deliver possession of the Property to Purchaser at the Closing subject only to the Permitted Exceptions and the Leases.

7.8 Delivery of Books and Records. On or prior to Closing, Seller shall deliver to the offices of Purchaser’s property manager or to the Real Property to the extent in Seller’s possession or control: copies of all maintenance records; plans and specifications; licenses, permits and certificates of occupancy; provided, however, the originals of the same shall not be delivered until termination of the applicable Lease.

7.9 Termination or Assignment of Service Contracts. Seller shall deliver to Purchaser termination agreements or other evidence reasonably satisfactory to Purchaser that all Service Contracts that would be binding upon Purchaser or the Property have either been (a) terminated effective upon the Closing Date and at no cost to Purchaser or to the Property, or (b) assigned to Seller in its capacity as tenant of the Property or amended to clarify that Seller is no longer the owner of the Property, without any right of the applicable service provider to make a claim against Purchaser or the Property.

Article 8
Prorations, Deposits, Commissions

8.1 Prorations. At Closing, the following items shall be prorated as of the Closing Date on an accrual basis with all items of income and expense for the Property (a) accruing prior to the Closing Date being borne by Seller, and (b) accruing from and after (and including) the Closing Date being borne by Purchaser: fees and assessments; real and personal ad valorem taxes (“Taxes”); and any assessments by private covenant for the then-current calendar year of Closing. Specifically, the following shall apply to such prorations:

8.1.1 Taxes. If Taxes for the year of Closing are not known or cannot be reasonably estimated, Taxes shall be prorated based on Taxes for the year prior to Closing and shall be promptly reprorated upon the issuance of final bills therefor. Prior to or at Closing, Seller shall pay or have paid all Taxes that are due and payable prior to or on the Closing Date.

8.1.2 Other Costs. As a result of the Leases, utilities, operating expenses, and other such amounts attributable to the Improvements shall not be prorated, and Seller shall remain liable for such amounts to the extent accruing during the term of the Leases (or prior to Closing).

8.2 Closing Costs. Closing costs shall be allocated between Seller and Purchaser in accordance with Section 1.2.

8.3 Final Adjustment After Closing. If final bills are not available or cannot be issued prior to Closing for any item being prorated under Section 8.1, then Purchaser and Seller agree to allocate such items on a fair and equitable basis as soon as such bills are available, final adjustment to be made as soon as reasonably possible after the Closing. Payments in connection with the final adjustment shall be due within thirty (30) days of written notice. All such rights and obligations shall survive the Closing.

8.4 Commissions. Seller shall be responsible to the Broker for a real estate sales commission at Closing (but only in the event of a Closing in strict accordance with this Agreement) pursuant to a separate written agreement (including any real estate sales commission applicable to the Leases, if any). Purchaser shall be responsible to Lee & Associates for a real estate sales commission at Closing pursuant to a separate written agreement. Under no circumstances shall Seller owe a commission or other compensation directly to any other broker, agent or person. Other than as stated above in this Section 8.4, Seller and Purchaser each represent and warrant to the other that no real estate brokerage commission is payable to any person or entity in connection with the transaction contemplated hereby or the Leases, and each agrees to and does hereby indemnify and hold the other harmless against the payment of any commission to any other person or entity claiming by, through or under Seller or Purchaser, as applicable. This indemnification shall extend to any and all claims, liabilities, costs and expenses (including reasonable attorneys’ fees and litigation costs) arising as a result of such claims and shall survive the Closing.

Article 9
Representations and Warranties

9.1 Seller’s Representations and Warranties. Seller represents and warrants to Purchaser as of the Effective Date and as of the Closing Date that:

9.1.1 Organization and Authority. Seller has been duly organized, is validly existing, and is in good standing in the state in which it was formed. Subject to entry of the Plan Confirmation Order and effectiveness of the Reorganization Plan, this Agreement has been, and all of the documents to be delivered by Seller at the Closing will be, authorized and executed and constitute, or will constitute, as appropriate, the valid and binding obligation of Seller, enforceable in accordance with their terms.

9.1.2 Conflicts and Pending Actions. To Seller’s knowledge, there is no agreement to which Seller is a party or that is binding on Seller under which Seller will be in default as a result of entering into or consummating this Agreement. To Seller’s knowledge, other than in connection with the Bankruptcy Proceeding there is no litigation, action or proceeding pending either (a) against Seller, which challenges or impairs Seller’s ability to execute or perform its obligations under this Agreement, or (b) relating to the Property by reason of Seller’s ownership or operation of the Property or any portion thereof. Except for those rights previously disclosed to Purchaser, no rights of first offer or rights of first refusal regarding the Property exist under the organizational documents of Seller or under any agreement by which Seller or the Property is or may be bound or affected.

9.1.3 Condemnation. Except as may be reflected by the Property Documents or otherwise disclosed in writing to Purchaser, Seller has received no written notice from any governmental authority having jurisdiction over the Real Property that it is presently the subject of any condemnation or similar proceeding.

9.1.4 Prohibited Persons and Transactions. Seller represents and warrants to Purchaser that Seller is currently in compliance with and shall at all times during the term of this Agreement (including any extension thereof) remain in compliance with the regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) and any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action relating thereto.

9.1.5 Compliance With Laws. Seller has not received written notice from any governmental or quasi-governmental authority of any violations of any laws affecting or applicable to any or all of the Property which remain uncured.

9.1.6 Employees. There is no bargaining unit or union contract relating to any employees of Seller.

9.1.7 Intentionally Omitted.

9.1.8 ERISA. Neither the execution and delivery of this Agreement nor any of the transactions contemplated thereunder involve any transaction that is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975(c) of the Code.

9.1.9 Property Documents. To Seller’s knowledge, the Property Documents delivered to Purchaser pursuant to Section 4.1 are correct copies, in all material respects, of the Property Documents in Seller’s possession and control.

9.1.10 Tax Appeals. Except as disclosed in the Property Documents, Seller has not (a) submitted an application for the creation of any special taxing district affecting the Property, or annexation thereby, or inclusion therein, or (b) received written notice that any governmental or quasi-governmental agency or authority intends to impose or increase any special or other assessment against the Property, or any part thereof, including assessments attributable to revaluations of the Property. Except as disclosed in the Property Documents, there is no ongoing appeal with respect to taxes or special assessments on the Property for any year, and any consultants engaged to perform work with respect to appeals of taxes or special assessments on the Property have been paid in full.

9.1.11 Leases. Other than the Permitted Exceptions and the Leases, there are no leases, licenses or occupancy agreements binding upon the Property.

9.1.12 Hazardous Substances. Except as disclosed in the Property Documents, to Seller’s knowledge, Seller has not received any written notice from any governmental agency having jurisdiction over the Property advising Seller that the Property is in violation of any Environmental Laws.

9.1.13 No Liens or Encumbrances. Seller's ownership of the Property does not include any tenants-in-common ownership, undivided interest ownership nor fractional ownership interest.

9.1.14 Service Contracts. To Seller’s knowledge, the Service Contracts delivered to Purchaser as a part of the Property Documents are the only Service Contracts currently affecting the Property. Seller has not received nor given any written notice of material default under any Service Contract with respect to a material default that remains uncured as of the date hereof. To Seller’s knowledge, the list of Service Contracts is attached hereto as Exhibit F, is true, correct and complete in all material respects as of the date of this Agreement.

9.2 Purchaser’s Representations and Warranties. Purchaser represents and warrants to Seller that:

9.2.1 Organization and Authority. Purchaser has been duly organized, is validly existing, and is in good standing in jurisdiction in which it was formed. Purchaser has the full right and authority and has obtained any and all consents required to enter into this Agreement and to consummate or cause to be consummated the transactions contemplated hereby. This Agreement has been, and all of the documents to be delivered by Purchaser at the Closing will be, authorized and properly executed and constitute, or will constitute, as appropriate, the valid and binding obligation of Purchaser, enforceable in accordance with their terms.

9.2.2 Conflicts and Pending Action. There is no agreement to which Purchaser is a party or to Purchaser’s knowledge binding on Purchaser which is in conflict with this Agreement. There is no action or proceeding pending or, to Purchaser’s knowledge, threatened against Purchaser which challenges or impairs Purchaser’s ability to execute or perform its obligations under this Agreement.

9.2.3 Prohibited Persons and Transactions. Purchaser represents and warrants to Seller that Purchaser is currently in compliance with and shall at all times during the term of this Agreement (including any extension thereof) remain in compliance with the regulations of OFAC (including those named on OFAC’s Specially Designated and Blocked Persons List) and any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action relating thereto.

9.3 Survival of Representations and Warranties. The representations and warranties set forth in this Article 9 are made as of the Effective Date and are remade as of the Closing Date and shall not be deemed to be merged into or waived by the instruments of Closing, but shall survive the Closing for a period of nine (9) months (the “Survival Period”). Terms such as “to Seller’s knowledge,” “to the best of Seller’s knowledge” or like phrases mean the actual present and conscious awareness or knowledge of Phillip D. Hixon, the Executive Vice President of Store Operations for Seller, with oversight responsibility for all material matters relating hereto (“Seller’s Representative”), without any duty of inquiry or investigation; provided that so qualifying Seller’s knowledge shall in no event give rise to any personal liability on the part of Seller’s Representative, or any officer or employee of Seller, on account of any breach of any representation or warranty made by Seller herein. Terms such as “to Purchaser’s knowledge,” “to the best of Purchaser’s knowledge” or like phrases mean the actual present and conscious awareness or knowledge of Brady Scott (“Purchaser ‘s Representative”), without any duty of inquiry or investigation; provided that so qualifying Purchaser’s knowledge shall in no event give rise to any personal liability on the part of Purchaser’s Representative, or any officer or employee of Purchaser, on account of any breach of any representation or warranty made by Purchaser herein. Said terms do not include constructive knowledge, imputed knowledge, or knowledge Seller or Purchaser, as applicable, or such persons do not have but could have obtained through further investigation or inquiry. Purchaser shall be deemed to have knowledge of all matters contained in the Property Documents or any final third-party reports obtained by Purchaser. No broker, agent, or party other than Seller is authorized to make any representation or warranty for or on behalf of Seller. Each party shall have the right to bring an action against the other on the breach of a representation or warranty or covenant hereunder or in the documents delivered by Seller at the Closing, but only on the following conditions: (1) the party bringing the action for breach first learns of the breach after and gives written notice of such breach to the other party before the end of the Survival Period and files such action on or before the expiration of the Survival Period, and (2) neither party shall have the right to bring a cause of action for a breach of a representation or warranty or covenant unless the damage to such party on account of such breach (individually or when combined with damages from other breaches) equals or exceeds $50,000.00 (the “Floor”), in which event the excess amount of such claims above the Floor shall be actionable, subject to the limitations of Seller’s liability set forth in this Section 9.3. Neither party shall have any liability after Closing for the breach of a representation or warranty or covenant hereunder of which the other party hereto had knowledge prior to Closing. Notwithstanding any other provision of this Agreement, any agreement contemplated by this Agreement, or any rights which Purchaser might otherwise have at law, equity, or by statute, whether based on contract or some other claim, Purchaser agrees that any liability of Seller to Purchaser will be limited to an amount equal to $750,000.00 (the “Cap”). Purchaser agrees that, with respect to any alleged breach of representations and warranties contained in Article 9 of this Agreement that is not timely raised by Purchaser to Seller in a written notice prior to the expiration of the Survival Period (in accordance with the terms of this Section 10.2), the maximum liability of Seller for all such alleged breaches is limited to $100.00. Notwithstanding anything herein to the contrary, in no event shall the Floor or the Cap apply to (i) Seller’s obligations under Article 8, (ii) Seller’s obligations to turn over insurance proceeds, if any, post-Closing, pursuant to Article 6, or (iii) liability of Seller for Seller’s fraud (including fraudulent concealment) as finally determined by a court of competent jurisdiction. Any breach of a representation or warranty or covenant that is discovered prior to Closing shall be governed by Article 10.

Article 10
Default and Remedies

10.1 Seller’s Remedies. If Purchaser fails to consummate the purchase of the Property pursuant to this Agreement for any reason except failure by Seller to perform hereunder, and in each case such default is not cured by the earlier of the fifth (5^th) day after written notice thereof from Seller or the Closing Date (except no notice shall be required if Purchaser fails to close on the Closing Date), then Seller shall be entitled, as its sole and exclusive remedy, to terminate this Agreement and recover the Earnest Money as liquidated damages and not as penalty, in full satisfaction of claims against Purchaser hereunder. Seller and Purchaser agree that Seller’s damages resulting from Purchaser’s default in its obligation to consummate the purchase of the Property pursuant to the terms and conditions of this Agreement are difficult, if not impossible, to determine and the Earnest Money is a fair estimate of those damages which has been agreed to in an effort to cause the amount of such damages to be certain. In all other events Seller’s remedies shall be limited to those described in Sections 4.8, 8.4, 10.3 and 10.4 hereof, and nothing contained herein shall be deemed to limit Purchaser’s indemnity or other obligations which expressly survive termination of this Agreement. Notwithstanding the foregoing, in the event Purchaser defaults in any of its post-closing obligations or any obligations that survive Closing or a termination of this Agreement, Seller shall have all of its remedies at law and in equity on account of such default. IN NO EVENT SHALL PURCHASER'S DIRECT OR INDIRECT PARTNERS, SHAREHOLDERS, MEMBERS, OWNERS OR AFFILIATES, ANY OFFICER, DIRECTOR, MANAGER, EMPLOYEE OR AGENT OF THE FOREGOING, OR ANY AFFILIATE OR CONTROLLING PERSON THEREOF HAVE ANY LIABILITY FOR ANY CLAIM, CAUSE OF ACTION OR OTHER LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PROPERTY, WHETHER BASED ON CONTRACT, COMMON LAW, STATUTE, EQUITY OR OTHERWISE.

10.2 Purchaser’s Remedies. If Seller fails to consummate the sale of the Property pursuant to this Agreement or otherwise defaults on its obligations hereunder at or prior to Closing for any reason except failure by Purchaser to perform hereunder and in each case such default is not cured by the earlier of the fifth (5^th) day after written notice thereof from Purchaser or the Closing Date (except no notice shall be required if Seller fails to close on the Closing Date), Purchaser may elect, as its sole remedies, either to (a) terminate this Agreement by giving Seller timely written notice of such election prior to or at Closing and recover the Earnest Money and the Independent Consideration, in which event Seller shall promptly reimburse Purchaser in an amount not to exceed $100,000.00 for any and all reasonable, third party costs actually paid or incurred by Purchaser to negotiate this Agreement, conduct its due diligence investigations and otherwise pursue the transactions contemplated hereby (including, attorneys’ fees, fees of environmental and other consultants, and accountants’ fees incurred by Purchaser in connection with this Agreement and any action hereunder or the Property), after receipt of invoices for such costs (which obligation shall survive any termination of this Agreement), or (b) waive said failure or breach and proceed to Closing without any reduction in the Purchase Price.

10.3 Attorneys’ Fees. In the event either party hereto employs an attorney in connection with claims by one party against the other arising from the operation of this Agreement, the non-prevailing party shall pay the prevailing party all reasonable fees and expenses, including attorneys’ fees, incurred in connection with such claims.

10.4 Other Expenses. If this Agreement is terminated due to the default of a party, then the defaulting party shall pay any fees or charges due to Escrow Agent for holding the Earnest Money as well as any escrow cancellation fees or charges and any fees or charges due to the Title Company for preparation and/or cancellation of the Title Commitment.

IN NO EVENT SHALL SELLER’S OR PURCHASER’S DIRECT OR INDIRECT PARTNERS, SHAREHOLDERS, OWNERS OR AFFILIATES, OR ANY OFFICER, DIRECTOR, EMPLOYEE OR AGENT OF THE FOREGOING, OR ANY AFFILIATE OR CONTROLLING PERSON THEREOF HAVE ANY LIABILITY FOR ANY CLAIM, CAUSE OF ACTION OR OTHER LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PROPERTY, WHETHER BASED ON CONTRACT, COMMON LAW, STATUTE, EQUITY OR OTHERWISE.

Article 11
Disclaimers, Release and Indemnity

11.1 Disclaimers By Seller. it is understood and agreed that Seller and Seller’s agents or employees have not at any time made and are not now making, and they specifically disclaim, any other warranties, representations or guaranties of any kind or character, express or implied, with respect to the Property, EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS AGREEMENT AND ANY DOCUMENT EXECUTED BY SELLER AND DELIVERED TO PURCHASER AT CLOSING, including, but not limited to, warranties, representations or guaranties as to (a) matters of title (other than Seller’s special warranty of title to be contained in the Deed), (b) environmental matters relating to the Property or any portion thereof, including, without limitation, the presence of Hazardous Materials in, on, under or in the vicinity of the Property, (c) geological conditions, including, without limitation, subsidence, subsurface conditions, water table, underground water reservoirs, limitations regarding the withdrawal of water, and geologic faults and the resulting damage of past and/or future faulting, (d) whether, and to the extent to which the Property or any portion thereof is affected by any stream (surface or underground), body of water, wetlands, flood prone area, flood plain, floodway or special flood hazard, (e) drainage, (f) soil conditions, including the existence of instability, past soil repairs, soil additions or conditions of soil fill, or susceptibility to landslides, or the sufficiency of any undershoring, (g) the presence of endangered species or any environmentally sensitive or protected areas, (h) zoning or building entitlements to which the Property or any portion thereof may be subject, (i) the availability of any utilities to the Property or any portion thereof including, without limitation, water, sewage, gas and electric, (j) usages of adjoining property, (k) access to the Property or any portion thereof, (l) the value, compliance with the plans and specifications, size, location, age, use, design, quality, description, suitability, structural integrity, operation, title to, or physical or financial condition of the Property or any portion thereof, or any income, expenses, charges, liens, encumbrances, rights or claims on or affecting or pertaining to the Property or any part thereof, (m) the condition or use of the Property or compliance of the Property with any or all past, present or future federal, state or local ordinances, rules, regulations or laws, building, fire or zoning ordinances, codes or other similar laws, (n) the existence or non-existence of underground storage tanks, surface impoundments, or landfills, (o) any other matter affecting the stability and integrity of the Property, (p) the potential for further development of the Property, (q) the merchantability of the Property or fitness of the Property for any particular purpose, (r) the truth, accuracy or completeness of the Property Documents, (s) tax consequences, or (t) any other matter or thing with respect to the Property.

Purchaser’s signature and acknowledgement of the terms and provisions of this Section 11.1

11.2 Sale “As Is, Where Is.” Purchaser acknowledges and agrees that upon Closing, Seller shall sell and convey to Purchaser and Purchaser shall accept the Property “AS IS, WHERE IS, WITH ALL FAULTS,” except to the extent expressly provided otherwise in this Agreement and any document executed by Seller and delivered to Purchaser at Closing. Further, Purchaser acknowledges and agrees that Seller shall have no obligation whatsoever to remove, repair or otherwise account for any Tangible Personal Property located on or at the Property. Except as expressly set forth in this Agreement, including, without limitation seller’s representations and warranties set forth herein, and any document executed by Seller and delivered to Purchaser at Closing, Purchaser has not relied and will not rely on, and Seller has not made and is not liable for or bound by, any OTHER express or implied warranties, guarantees, statements, representations or information pertaining to the Property or relating thereto (including specifically, without limitation, Property Documents packages distributed with respect to the Property) made or furnished by Seller, or any property manager, real estate broker, agent or third party representing or purporting to represent Seller, to whomever made or given, directly or indirectly, orally or in writing. Except with respect to any representation or warranty of seller made hereunder, Purchaser ACKNOWLEDGES that it is relying solely on its own expertise and that of Purchaser’s consultants in purchasing the Property and shall make an independent verification of the accuracy of any documents and information provided by Seller. Purchaser will conduct such inspections and investigations of the Property as Purchaser deems necessary, including, but not limited to, the physical and environmental conditions thereof, and shall rely upon same. Purchaser acknowledges that Seller has afforded Purchaser a full opportunity to conduct such investigations of the Property as Purchaser deemed necessary to satisfy itself as to the condition of the Property and the existence or non-existence or curative action to be taken with respect to any Hazardous Materials on or discharged from the Property, and will rely solely upon same and not upon any information provided by or on behalf of Seller or its agents or employees with respect thereto, other than such representations, warranties and covenants of Seller as are expressly set forth in this Agreement and any document executed by Seller and delivered to Purchaser at Closing. Except with respect to any representation or warranties of seller or any fraudulent concealment on seller’s part, Upon Closing, Purchaser shall assume the risk that adverse matters, including, but not limited to, adverse physical or construction defects or adverse environmental, health or safety conditions, may not have been revealed by Purchaser’s inspections and investigations. Purchaser waives any and all rights or remedies it may have or be entitled to, deriving from disparity in size or from any significant disparate bargaining position in relation to Seller.

Purchaser’s signature and acknowledgement of the terms and provisions of this Section 11.2

11.3 Seller Released from Liability. Purchaser acknowledges that it will and has had the opportunity to inspect the Property prior to Closing, observe its physical characteristics and existing conditions and the opportunity to conduct such investigation and study on and of the Property and adjacent areas as Purchaser deems necessary, and Purchaser hereby FOREVER RELEASES AND DISCHARGES Seller from all responsibility and liability, whether arising before or after the Effective Date, and liabilities under the Comprehensive Environmental Response, Compensation and Liability Act Of 1980 (42 U.S.C. Sections 9601 et seq.), as amended (“CERCLA”), regarding the condition, valuation, salability or utility of the Property, or its suitability for any purpose whatsoever (including, but not limited to, with respect to the presence in the soil, air, structures and surface and subsurface waters, of Hazardous Materials or other materials or substances that have been or may in the future be determined to be toxic, hazardous, undesirable or subject to regulation and that may need to be specially treated, handled and/or removed from the Property under current or future federal, state and local laws, regulations or guidelines (collectively, “Environmental Laws”), and any structural and geologic conditions, subsurface soil and water conditions and solid and hazardous waste and Hazardous Materials on, under, adjacent to or otherwise affecting the Property); provided however, that the terms of this sentence (and this paragraph) shall not apply to Seller’s duties, liabilities and obligations, solely as tenant under the Leases, accruing from and after Closing pursuant to the Leases. Purchaser further hereby WAIVES (and by Closing this transaction will be deemed to have WAIVED) any and all objections and complaints (including, but not limited to, federal, state and local statutory and common law based actions, and any private right of action under any federal, state or local laws, regulations or guidelines to which the Property is or may be subject, including, but not limited to, CERCLA) concerning the physical characteristics and any existing conditions of the Property, whether arising before or after the Effective Date; provided however, that the terms of this sentence (and this paragraph) shall not apply to Seller’s duties, liabilities and obligations, solely as tenant under the Leases, accruing from and after Closing pursuant to the Leases. Purchaser further hereby assumes the risk of changes in applicable laws and regulations relating to past, present and future environmental conditions on the Property and the risk that adverse physical characteristics and conditions, including, without limitation, the presence of Hazardous Materials or other contaminants, may not have been revealed by its investigation; provided however, that the terms of this sentence (and this paragraph) shall not apply to Seller’s duties, liabilities and obligations, solely as tenant under the Leases, accruing from and after Closing pursuant to the Leases. Notwithstanding anything in this Agreement to the contrary, (a) if Purchaser is named as a party in any litigation or investigation brought by a third party (including a governmental or quasi-governmental entity) unrelated to Purchaser and Seller is not so named, then Purchaser may, to the extent permitted by law, interplead or implead Seller in such action so long as no claim of contribution or monetary relief is made by Purchaser against Seller; provided, however, that prior to the expiration of the Survival Period, Purchaser may bring claims in accordance with Section 9.3 hereof, (b) the release described in this paragraph above applies to Purchaser and its successors and assigns only, and does not bind any third party; and (c) the terms of this paragraph shall not preclude Purchaser from raising in defense of any third party claims made against the Property or Purchaser after Closing which relate to conditions first existing, or actions taken, during the period of Seller’s ownership of the Property, the fact that Purchaser was not the owner of the Property at the time such third party claim arose so long as no claim of contribution or monetary relief is made by Purchaser against Seller; provided however, that in no event shall this sentence (or this paragraph) be construed to waive, modify or limit any of (i) Purchaser’s rights and remedies under the Leases with respect to matters arising from or after Closing, or (ii) Seller’s duties, liabilities and obligations, under the Leases to the extent accruing from and after Closing. Notwithstanding any provision contained in this section to the contrary, this Section 11.3 shall not apply to any representation or warranty of Seller made in this Agreement or any other document executed and delivered by Seller at Closing.

Purchaser’s signature and acknowledgement of the terms and provisions of this Section 11.3

11.4 “Hazardous Materials” Defined. For purposes hereof, “Hazardous Materials” means “Hazardous Material,” “Hazardous Substance,” “Pollutant or Contaminant,” and “Petroleum” and “Natural Gas Liquids,” as those terms are defined or used in Section 101 of CERCLA, and any other substances regulated because of their effect or potential effect on public health and the environment, including, without limitation, PCBs, lead paint, asbestos, urea formaldehyde, radioactive materials, putrescible materials, and infectious materials.

11.5 Survival. The terms and conditions of this Article 11 shall expressly survive the Closing and shall not merge with the provisions of any closing documents.

Purchaser acknowledges and agrees that the disclaimers and other agreements set forth herein are an integral part of this Agreement and that Seller would not have agreed to sell the Property to Purchaser for the Purchase Price without the disclaimers and other agreements set forth above.

Article 12
Miscellaneous

12.1 Parties Bound; Assignment. This Agreement, and the terms, covenants, and conditions herein contained, shall inure to the benefit of and be binding upon the heirs, personal representatives, successors, and assigns of each of the parties hereto. Purchaser may assign its rights under this Agreement without the consent of Seller upon the following conditions: (a) the assignee of Purchaser must be (i) an entity controlling, controlled by, or under common control with Purchaser (a “Purchaser Control Entity”), or (ii) any entity in which one or more Purchaser Controlled Entities directly or indirectly is the general partner (or similar managing partner, member or manager) or owns more than 50% of the economic interests of such entity, (b) all of the Earnest Money must have been delivered in accordance herewith, (c) the assignee of Purchaser shall assume all obligations of Purchaser hereunder, but Purchaser shall remain primarily liable for the performance of Purchaser’s obligations, and (d) a copy of the fully executed written assignment and assumption agreement shall be delivered to Seller at Closing.

12.2 Headings. The article, section, subsection, paragraph and/or other headings of this Agreement are for convenience only and in no way limit or enlarge the scope or meaning of the language hereof.

12.3 Invalidity and Waiver. If any portion of this Agreement is held invalid or inoperative, then so far as is reasonable and possible the remainder of this Agreement shall be deemed valid and operative, and, to the greatest extent legally possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The failure by either party to enforce against the other any term or provision of this Agreement shall not be deemed to be a waiver of such party’s right to enforce against the other party the same or any other such term or provision in the future.

12.4 Governing Law; Jurisdiction; Venue. This Agreement shall, in all respects, be governed, construed, applied, and enforced in accordance with the law of the state in which the Real Property is located. EACH OF PURCHASER AND SELLER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF DALLAS, STATE OF TEXAS, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE DELIVERED BY PURCHASER AND SELLER HEREUNDER SHALL BE LITIGATED EXCLUSIVELY IN SUCH COURTS. EACH OF PURCHASER AND SELLER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS OR ANY OTHER SIMILAR DEFENSE TO THE JURISDICTION OR VENUE OF SAID COURTS.

12.5 Survival. The provisions of this Agreement that contemplate performance after the Closing and the obligations of the parties not fully performed at the Closing (other than any unfulfilled closing conditions which have been waived or deemed waived by the other party) shall survive the Closing and shall not be deemed to be merged into or waived by the instruments of Closing.

12.6 Entirety and Amendments. This Agreement embodies the entire agreement between the parties and supersedes all other prior agreements and understandings relating to the Property. This Agreement may be amended or supplemented only by an instrument in writing executed by the party against whom enforcement is sought. All Exhibits hereto are incorporated herein by this reference for all purposes.

12.7 Time. Time is of the essence in the performance of this Agreement.

12.8 Confidentiality; Press Releases. Purchaser shall make no public announcement or disclosure of any information related to this Agreement to outside brokers or third parties, prior to Closing, without the prior written specific consent of Seller; provided, however, that Purchaser may, subject to the provisions of Section 4.6, make disclosure of this Agreement to its Permitted Outside Parties as necessary to perform its obligations hereunder and as may be required under laws or regulations applicable to Purchaser. It is understood and agreed that money damages may not be a sufficient remedy for any breach of this Section and that the Seller shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach. Purchaser further agrees not to raise, as a defense or objection to the request or granting of such relief, that any breach of this Section is or would be compensable by an award of money damages, and Purchaser agrees to waive any requirement for the security or posting of any bond in connection with such remedy. Such remedy shall not be deemed to be the exclusive remedy for breach of this Section but shall be in addition to all other remedies available at law or equity to Seller. Purchaser also agrees to reimburse Seller and its representatives for all costs incurred by Seller and its representatives in connection with the enforcement of this Section (including, without limitation, legal fees in connection with any such litigation, including any appeals therefrom). The provisions of this Section shall survive Closing for a period of twelve (12) months.

12.9 Notices. All notices required or permitted hereunder shall be in writing and shall be served on the parties at the addresses set forth in Section 1.3. Any such notices shall, unless otherwise provided herein, be given or served (a) by depositing the same in the United States mail, postage paid, certified and addressed to the party to be notified, with return receipt requested, (b) by overnight delivery using a nationally recognized overnight courier, (c) by personal delivery, or (d) by electronic mail. Notices shall be deemed properly delivered and received: (i) the same day when personally delivered; or (ii) one day after deposit with a nationally recognized overnight courier; or (iii) the same day when sent by email. A party’s address may be changed by written notice to the other party. Copies of notices are for informational purposes only, and a failure to give or receive copies of any notice shall not be deemed a failure to give notice. Notices given by counsel to the Purchaser shall be deemed given by Purchaser and notices given by counsel to the Seller shall be deemed given by Seller.

12.10 Construction. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and agree that the normal rule of construction - to the effect that any ambiguities are to be resolved against the drafting party - shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.

12.11 Calculation of Time Periods; Business Day. Unless otherwise specified, in computing any period of time described herein, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is not a Business Day, in which event the period shall run until the end of the next day which is a Business Day. The last day of any period of time described herein shall be deemed to end at 5:00 p.m. local time at the Real Property. As used herein, the term “Business Day“ means any day that is not a Saturday, Sunday or legal holiday for national banks in the city in which the Real Property is located.

12.12 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one Agreement. To facilitate execution of this Agreement, the parties may execute and exchange by email electronic counterparts (i.e., PDF counterparts) of the signature pages.

12.13 No Recordation. Without the prior written consent of Seller, there shall be no recordation of either this Agreement or any memorandum hereof, or any affidavit pertaining hereto, and any such recordation of this Agreement or memorandum or affidavit by Purchaser without the prior written consent of Seller shall constitute a default hereunder by Purchaser, whereupon Seller shall have the remedies set forth in Section 10.1 hereof. In addition to any such remedies, Purchaser shall be obligated to execute an instrument in recordable form releasing this Agreement or memorandum or affidavit, and Purchaser’s obligations pursuant to this Section 12.13 shall survive any termination of this Agreement as a surviving obligation.

12.14 Further Assurances. In addition to the acts and deeds recited herein and contemplated to be performed, executed and/or delivered by either party at Closing, each party agrees to perform, execute and deliver, but without any obligation to incur any additional liability or expense, on or after the Closing any further deliveries and assurances as may be reasonably necessary to consummate the transactions contemplated hereby or to further perfect the conveyance, transfer and assignment of the Property to Purchaser.

12.15 ERISA. Under no circumstances shall Purchaser have the right to assign this Agreement to any person or entity owned or controlled by an employee benefit plan if Seller’s sale of the Property to such person or entity would, in the reasonable opinion of Seller’s ERISA advisors or consultants, create or otherwise cause a “prohibited transaction” under ERISA. In the event Purchaser assigns this Agreement or transfers any ownership interest in Purchaser, and such assignment or transfer would make the consummation of the transaction hereunder a “prohibited transaction” under ERISA and necessitate the termination of this Agreement then, notwithstanding any contrary provision which may be contained herein, Seller shall have the right to terminate this Agreement.

12.16 No Third Party Beneficiary. The provisions of this Agreement and of the documents to be executed and delivered at Closing are and will be for the benefit of Seller and Purchaser only and are not for the benefit of any third party, and accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered at Closing.

12.17 Reporting Person. Purchaser and Seller hereby designate the Title Company as the “reporting person” pursuant to the provisions of Section 6045(e) of the Internal Revenue Code of 1986, as amended.

12.18 Texas Real Estate License Act. The Texas Real Estate License Act requires written notice to Purchaser from any licensed real estate broker or salesman who is to receive a commission that Purchaser should have an attorney of its own selection examine an abstract of title to the property being acquired or that Purchaser should be furnished with or should obtain a title insurance policy. Notice to that effect is, therefore, hereby given to Purchaser on behalf of the broker(s) identified in this Agreement, if any.

12.19 DTPA Waiver. IT IS THE INTENT OF SELLER AND PURCHASER THAT THE RIGHTS AND REMEDIES WITH RESPECT TO THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT SHALL BE GOVERNED BY LEGAL PRINCIPLES OTHER THAN THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT. ACCORDINGLY, TO THE MAXIMUM EXTENT APPLICABLE AND PERMITTED BY LAW (AND WITHOUT ADMITTING SUCH APPLICABILITY), PURCHASER HEREBY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT, CHAPTER 17, SUBCHAPTER 3 (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), TEXAS BUSINESS AND COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. FOR PURPOSES OF THE WAIVERS SET FORTH IN THIS AGREEMENT, PURCHASER HEREBY WARRANTS AND REPRESENTS UNTO SELLER THAT (A) PURCHASER HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF THE TRANSACTION CONTEMPLATED UNDER THIS AGREEMENT, (B) PURCHASER IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH SELLER REGARDING THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT, (C) PURCHASER IS REPRESENTED BY LEGAL COUNSEL THAT IS SEPARATE AND INDEPENDENT OF SELLER AND SELLER’S LEGAL COUNSEL AND (D) PURCHASER HAS CONSULTED WITH PURCHASER’S LEGAL COUNSEL REGARDING THIS AGREEMENT PRIOR TO PURCHASER’S EXECUTION OF THIS AGREEMENT AND VOLUNTARILY CONSENTS TO THIS WAIVER.

[SIGNATURE PAGES AND EXHIBITS TO FOLLOW]

SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
Tuesday Morning Partners, Ltd., Tuesday Morning, Inc., and Friday Morning, LLC.
AND
Rialto Real Estate Fund IV – Property, LP

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year written below.

	SELLER:

	Tuesday morning partners, ltd.,
	a Texas limited partnership

	By:	Days of the Week, Inc.,
		a Delaware corporation
		its General Partner

Date executed by Seller	By:	/s/ Steven R. Becker
	Name:	Steven R. Becker
_____________, 2020	Title:	Chief Executive Officer

	FRIDAY MORNING, LLC,
	a Texas limited liability company

	By: Tuesday Morning, Inc.,
		its Member

Date executed by Seller	By:	/s/ Steven R. Becker
	Name:	Steven R. Becker
_____________, 2020	Title:	Chief Executive Officer

	TUESDAY MORNING, INC.,
	a Texas corporation

Date executed by Seller	By:	/s/ Steven R. Becker
	Name:	Steven R. Becker
_____________, 2020	Title:	Chief Executive Officer

[Signatures Continue on Following Page]

	PURCHASER:

	RIALTO REAL ESTATE FUND IV – PROPERTY, LP,
	a Delaware limited partnership

	By: Rialto Partners GP IV – Property, LLC, a Delaware limited liability company, its General Partner

Date executed by Purchaser	By:	/s/ Sorana Georgescu
	Name:	Sorana Georgescu
_____________, 2020	Title:	Secretary

JOINDER BY ESCROW AGENT

Escrow Agent has executed this Agreement in order to confirm that Escrow Agent has received and shall hold the Earnest Money required to be deposited under this Agreement and the interest earned thereto, in escrow, and shall disburse the Earnest Money, and the interest earned thereon, pursuant to the provisions of this Agreement.

CHICAGO TITLE INSURANCE COMPANY

Date executed by Escrow Agent	By:	/s/ Pamela Medlin
	Name:	Pamela Medlin
___________________	Title:	Escrow Officer

LIST OF EXHIBITS

A	-	Legal Description of Land

B	-	Special Warranty Deed

C	-	Bill of Sale and Assignment Agreement

D	-	FIRPTA Certificate

E-1	-	Distribution Center Lease

E-2	-	Office Lease

F	-	Service Contracts

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

Exhibit A

LEGAL DESCRIPTION OF LAND

4400-4404 South Beltwood Parkway, Farmers Branch, Texas; 14621 Inwood Road, Addison, Texas; 14639-14645 Inwood Road, Addison, TEXAS; AND 14601-14603 Inwood Road, Addison, Texas:

TRACT I: FEE SIMPLE

BEING a 1.556 acre (67,759 square foot) tract of land situated in the Josiah Pancoast Survey, Abstract No. 1146, Dallas County, Texas and being part of Lot 1 and part of Lot 2 of Inwood Park North, an addition to the Town of Addison, Dallas County, Texas, according to the plat recorded in Volume 79234, Page 1 Deed Records, Dallas County, Texas, and being more particularly described as follows:

BEGINNING at a 1/2 inch iron rod with orange plastic cap stamped "P&C 100871" set for corner in the southwesterly line of Inwood Road (a 60 foot public right-of-way), said rod being South 16°49'00" East, a distance of 26.09 feet from the northeast corner of said Lot 1 and the southeast corner of Lot 3 of said Inwood Park North Addition;

THENCE South 16°49'00" East, along said southwesterly line of Inwood Road and the northeasterly line of said Lot 1, for a distance of 319.14 feet to a 1/2 inch iron rod with orange plastic cap stamped "P&C 100871" set for corner, said rod being the southeast corner of said Lot 1 and in the north line of a Texas Utilities Electric Company right-of-way;

THENCE South 89°49'46" West, departing said southwesterly line of Inwood Road and along the south line of said Lot 1 and said north line of Texas Utilities Electric Company right-of-way, passing the southwest corner of said Lot 1 and the southeast corner of aforementioned Lot 2 at a distance of 200.40 feet, continuing for a total distance of 223.15 feet to a 1/2 inch iron rod with orange plastic cap stamped "P&C 100871" set for corner;

THENCE North 16°49'00" West, departing the south line of said Lot 2 and traveling over and across said Lot 2, for a distance of 216.00 feet to an "x" cut in concrete set for corner;

THENCE South 89°49'46" West for a distance of 10.00 feet to an "x" cut in concrete set for corner;

THENCE North 00°10'14" West for a distance of 98.81 feet to a 1/2 inch iron rod found for a corner in the south line of a 50 foot access, utility and drainage easement as shown on aforementioned plat of Inwood Park North Addition;

THENCE North 89°49'46" East, along said south line of 50 foot access, utility and drainage easement, for a distance of 203.61 feet to the POINT OF BEGINNING and containing 1.556 acres, or 67,759 square feet of land, more or less.

TRACT II: FEE SIMPLE

BEING a 1.631 acre (71,041 square foot) tract of land situated in the Josiah Pancoast Survey, Abstract No. 1146, Dallas County, Texas and being part of Lot 3 of Inwood Park North, an addition to the Town of Addison, Dallas County, Texas, according to the plat recorded in Volume 79234, Page 1 Deed Records, Dallas County, Texas, and being more particularly described as follows:

BEGINNING at a 1/2 inch iron rod with orange plastic cap stamped "P&C 100871" set for corner in the southwesterly line of Inwood Road (a 60 foot public right-of-way), said rod being the northeast corner of said Lot 3 and the southeast corner of Lot 2, Block A of Inwood Auto/Beverage Addition, an addition to the Town of Addison, Dallas County, Texas, according to the plat recorded in Instrument No. 200600248924 Official Public Records, Dallas County, Texas;

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

A-1

THENCE South 16°49'00" East, along said southwesterly line of Inwood Road and the northeasterly line of said Lot 3, for a distance of 351.14 feet to an "x" cut in concrete set for corner, said "x" being the northeast corner of a 50 foot access, utility and drainage easement as shown on aforementioned plat of Inwood ParkNorth Addition, said "x" also being North 16°49'00" West, a distance of 26.09 feet from the southeast corner of said Lot 3 and the northeast corner of Lot 1 of said Inwood Park North Addition;

THENCE South 89°49'46" West, departing said southwesterly line of Inwood Road and along the north line of said 50 foot access, utility and drainage easement, over and across said Lot 3 and parallel with the south line of said Lot 3, for a distance of 224.48 feet to a 1/2 inch iron rod found for corner;

THENCE North 16°49'00" West, departing said northerly line of 50 foot access, utility and drainage easement, for a distance of 216.67 feet to a 1/2 inch iron rod found for corner;

THENCE North 09°15'00" West for a distance of 97.87 feet to a 1/2 inch iron rod with yellow plastic cap stamped "KADLECK 3952" found for corner in the northerly line of said Lot 3 and the southerly line of aforementioned Lot 2 of Inwood Auto/Beverage Addition;

THENCE North 80°45'00" East, along said northerly line of Lot 3, and the southerly line of said Lot 2 of Inwood Auto/Beverage Addition, for a distance of 203.96 feet to the POINT OF BEGINNING and containing 1.631 acres, or 71,041 square feet of land, more or less.

NOTE: COMPANY DOES NOT REPRESENT THAT THE ABOVE ACREAGE AND/OR SQUARE FOOTAGE CALCULATIONS ARE CORRECT.

TRACT III: FEE SIMPLE

BEING all of Lot 1, Block A of Tuesday Morning Beltwood Addition, an addition to the City of Farmers Branch, Dallas County, Texas according to the plat recorded in Instrument No. 200600276647 Official Public Records, Dallas County, Texas and being part of Lots 1, 2 and 3 of Inwood Park North, an addition to the City of Addison, according to the plat recorded in Volume 79234, Page 1 Deed Records, Dallas County, Texas (D.R.D.C.T.) and being more particularly described as follows:

BEGINNING at a 1/2 iron rod with orange cap stamped "P&C 100871" set for corner in the East line of said Tuesday Morning Addition at the Northwest corner of said Inwood Addition and the Southwest corner of Lot 1, Miniwood Addition, an addition to the Town of Addison according to the plat recorded in Volume 82194, Page 2965 D.R.D.C.T.;

THENCE North 80°45'00" East, with the common line between said Inwood Addition and Miniwood Addition, a distance of 570.00 feet to 1/2 inch iron rod with yellow plastic cap stamped "KADLECK 3952" found for corner at the Northwest corner of a tract of land described by deed as Tract II to Friday Morning Inc as recorded in Volume 91213, Page 2336 D.R.D.C.T.;

THENCE along said Friday Morning Tract II the following calls:

South 09°15'00" East, a distance of 97.87 feet to a 1/2 inch iron rod found for corner;

South 16°49'00" East, a distance of 216.67 feet to a 1/2 inch iron rod found for corner in the North line of a 50 foot Access, Utility and Drainage Easement;

North 89°49'46" East, with the North line of said Easement, a distance of 224.48 feet to an "x" cut in concrete set for corner in the West line of Inwood Road (a 60-foot public right-of-way);

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

A-2

THENCE South 16°49'00" East, with said West line of Inwood Road, a distance of 52.19 feet to a 1/2 iron rod with orange cap stamped "P&C 100871" set for corner in said West line of Inwood Road, said rod being the Northeast corner of Tract I of said Friday Morning tract;

THENCE along said Friday Morning Tract II the following calls:

South 89°49'46" West, with the South line of said Easement a distance of 203.61 feet to a 1/2 inch iron rod found for corner;

South 00°10'14" East. departing said South line a distance of 98.81 feet to an "x" cut in concrete set for corner;

North 89°49'46" East, a distance of 10.00 feet to an "x" cut in concrete set for corner;

South 16°49'00" East, a distance of 216.00 feet to a 1/2 iron rod with orange cap stamped "P&C 100871" set for corner in the South line of said Inwood Addition and the North line of a Texas Utilities Electric Co tract;

THENCE South 89°49'46" West with the South line of said Inwood Addition and the North line of said Texas Utilities tract, a distance of 748.22 feet to a 1/2 iron rod with orange cap stamped "P&C 100871" set for corner, said corner being the Southwest corner of said Inwood Addition and the Southeast corner of aforementioned Tuesday Morning Addition;

THENCE along said Tuesday Morning Addition the following calls:

North 87°15'17" West, a distance of 800.81 feet to a 1/2 iron rod with orange cap stamped "P&C 100871" set for corner in the East line of Gillis Road (a 60 foot public right-of-way);

North 00°09'17" West, with said East line, a distance of 335.45 feet to a 1/2 iron rod with orange cap stamped "P&C 100871" set for corner;

North 46°17'43" East, a distance of 20.67 feet to a 1/2 iron rod with orange cap stamped "P&C 100871" set for corner in the South line of Beltwood Parkway South (a 60 foot public right-of-way);

South 87°15'17" East, a distance of 380.22 feet to a 1/2 iron rod with orange cap stamped "P&C 100871" set for corner and the beginning of a curve to the left with a radius of 100.00 feet and a chord which bears North 46°17'23" East for 144.97 feet;

Along said curve to the left through a central angle of 92°54'39" and an arc length of 162.16 feet to a 1/2 iron rod with orange cap stamped "P&C 100871" set for corner in the East line of Beltway Parkway East (a 60 foot public right-of-way);

North 00°09'17" West, with said East line, a distance of 394.80 feet to a 1/2 iron rod with orange cap stamped "P&C 100871" set for corner, said rod being the Southwest corner of Lot 2, Block A of Dallas Semiconductor Business Park II an addition to the City of Farmers Branch recorded in Volume 2004084, Page 51 D.R.D.C.T.;

South 89°57'34" East, a distance of 300.00 feet to a 1/2 iron rod with orange cap stamped "P&C 100871" set for corner, said rod being the Southeast corner of said Semiconductor Addition;

South 00°09'17" East, for a distance of 294.59 to the POINT OF BEGINNING and containing 19.512 acres, or 849,826 square feet of land, more or less.

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

A-3

Tuesday Morning Beltwood Addition, Lot 1, Block A, a portion of Block E, Beltwood Business Park, Second Installment, an addition to the City of Farmers Branch, Dallas County, Texas, according to the plat thereof recorded under Clerk's File No. 2006-276647, Plat Records, Dallas County, Texas.

TRACT IV: EASEMENT ESTATE

EASEMENT ESTATE created in Easement and Right of Way filed April 1, 1983, recorded in Volume 83066, Page 3869, Real Property Records, Dallas County, Texas.

BEING a tract of land situated in the Josiah Pancoast Survey, Abstract No. 1146 and said tract also being part of Lots 1 and 2 of Inwood Park North, an addition to the City of Addison, according to the plat thereof filed in Volume 79234 at Page 1, Deed Records, Dallas County, Texas and being more particularly described as follows:

BEGINNING at the Southeast corner of Inwood Park North Addition, said corner also being in the West line of Inwood Road;

THENCE South 89°49'46" West, along the South line of said addition, a distance of 223.15 feet to a point for corner;

THENCE North 16°49'00" West, a distance of 20.87 feet to a point for corner;

THENCE North 89°49'46" East, a distance of 223.15 feet to a point for corner in the West line of Inwood Road;

THENCE South 16°49'00" East, along the West line of Inwood Road, a distance of 20.87 feet to the POINT OF BEGINNING.

TRACT V: EASEMENT ESTATE

EASEMENT ESTATE created in Maintenance Easement filed April 1, 1983, recorded in Volume 83066, Page 3875, Real Property Records, Dallas County, Texas.

BEING a tract of land situated in the Josiah Pancoast Survey, Abstract No. 1146, said tract also being part of Lot 3 of Inwood Park North, an addition to the City of Addison, according to the plat thereof filed in Volume 79234 at Page 1, Deed Records, Dallas County, Texas and being more particularly described as follows:

BEGINNING at a point in the North line of Lot 3, said point being South 80°45'00" West, a distance of 193.96 feet from the Northeast corner of Inwood Park North Addition;

THENCE South 09°15'00" East, a distance of 173.16 feet to a point for corner;

THENCE North 16°49'00" West, a distance of 75.94 feet to a point for corner;

THENCE North 09°15'00" West, a distance of 97.88 feet to a point for corner in the North line of Lot 3;

THENCE North 80°45'00" East, with said North line a distance of 10.00 feet to the POINT OF BEGINNING.

TRACT VI: EASEMENT ESTATE

EASEMENT ESTATE created in Maintenance Easement filed April 1, 1983, recorded in Volume 83066, Page 3881, Real Property Records, Dallas County, Texas.

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

A-4

BEING a tract of land situated in the Josiah Pancoast Survey, Abstract No. 1146, said tract also being part of Lot 2 of Inwood Park North, an addition to the City of Addison, according to the plat thereof filed in Volume 79234, Page 1, Deed Records, Dallas County, Texas and being more particularly described as follows:

BEGINNING at a point in the South line of said Lot 2 said point being South 89°49'46" West, a distance of 212.71 feet from the Southeast corner of Inwood Park North Addition;

THENCE South 89°49'46" West, with the South line of Lot 3, a distance of 10.44 feet to a point for corner;

THENCE North 16°49'00" West, a distance of 216.00 feet to a point for corner;

THENCE North 89°49'46" East, a distance of 10.44 feet to a point for corner;

THENCE South 16°49'00" East, a distance of 216.00 to the POINT OF BEGINNING.

TRACT VII: EASEMENT ESTATE

EASEMENT ESTATE created in Underground Gas Easement filed April 1, 1983, recorded in Volume 83066, Page 3887, Real Property Records, Dallas County, Texas.

BEING a tract of land situated in the Josiah Pancoast Survey, Abstract No. 1146 and being part of Lot 2 of Inwood Park North, an addition to the City of Addison, according to the plat thereof recorded in Volume 79234, Page 1, Deed Records, Dallas County, Texas and being 5 feet right and 5 feet left of the following described centerline:

COMMENCING at the Southeast corner of said Inwood Park North, thence South 89°49'46" West, a distance of 223.15 feet to a point;

THENCE North 16°49'00" West, a distance of 208.00 feet to the POINT OF BEGINNING of the herein described center;

THENCE North 73°11'00" East, a distance of 21.80 feet to a point on the East line of said Lot 2 and the terminus of said centerline.

TRACT VIII: EASEMENT ESTATE

EASEMENT ESTATE created in Sign Easement filed April 1, 1983, recorded in Volume 83066, Page 3893, Real Property Records, Dallas County, Texas.

BEING a tract of land situated in the Josiah Pancoast Survey, Abstract No. 1146, said tract also being part of Lot 1 Inwood Park North, an addition to the City of Addison, according to the plat thereof filed in Volume 79234, Page 1, Deed Records, Dallas County, Texas and being more particularly described as follows:

BEGINNING at a point in the South line of a 50 foot Access, Utility and Drainage Easement said point being South 89°49'46" W, a distance of 17.00 feet from the West line of Inwood Road;

THENCE South 00°10'14" East, a distance of 4.00 feet to a point for corner;

THENCE South 81°05'00" West, a distance of 13.15 feet to a point for corner;

THENCE North 00°10'14" West, a distance of 6.00 feet to a point for corner in the South line of the aforementioned 50 foot easement;

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

A-5

THENCE North 89°49'46" East, along said South line, a distance of 13.00 feet to the POINT OF BEGINNING.

TRACT VIIII: EASEMENT ESTATE

EASEMENT ESTATE created in Sign Easement filed April 1, 1983, recorded in Volume 83066, Page 3900, Real Property Records, Dallas County, Texas.

BEGINNING at a point in the North line of a 50 foot Access, Utility and Drainage Easement said point being S 89°49'46" W, a distance of 13.00 feet from the West line of Inwood Road;

THENCE South 89°49'46" West, along the North line of said easement, a distance of 13.00 feet to a point for corner;

THENCE North 00°10'14" West, a distance of 4.00 feet to a point for corner;

THENCE North 81°05'00" East, a distance of 13.15 feet to a point for corner;

THENCE South 00°10'14" East, a distance of 6.00 feet to the POINT OF BEGINNING.

14303 Inwood Road, Farmers Branch, Texas:

Lot 1 in Block A of Tuesday Morning Addition, an addition to the City of Farmers Branch, Dallas County, Texas, according to the Replat thereof recorded in Volume 2003011, Page 312, Plat Records, Dallas County, Texas.

6250 Lyndon B. Johnson Freeway, Dallas, Texas:

BEING 4.895 acres of land, located in BLOCK 7443 in the City of Dallas, and being a portion of the McKinney & Williams Survey, Abstract No. 1032, and the Thomas Dykes Survey, Abstract No. 405, Dallas County, Texas, and being a portion of the tract of land conveyed to E-Systems, Inc., by the deed recorded in Volume 76062, Page 1507, Deed Records, Dallas County, Texas, said 4.895 acres being more particularly described as follows:

BEGINNING at a cross cut in a Texas Highway Department concrete right-of-way monument, at the intersection of the South right-of-way line of Lyndon B. Johnson Freeway, Interstate Highway No. 635 (a variable width right-of-way) with the West right-of-way line of Hughes Lane (a 60 foot right-of-way);

THENCE along the East boundary line of said E-Systems tract and the West right-of-way line of said Hughes Lane as follows:

South 308.77 feet, to an "X" cut in concrete found;

S 00° 23' 32" W, 174.17 feet to a 1" iron pipe found at the Southeast corner of said E-Systems tract, being the intersection of the North boundary line of a 15 foot wide alley, as dedicated by the plat of Huffines Hill Addition to the City of Dallas, Dallas County, Texas, according to the plat recorded in Volume 20, Page 213, Map Records, Dallas County, Texas;

THENCE S 89° 46' 20"W, 578.75 feet along the South boundary of said E-Systems tract and the North boundary line of said 15 foot wide alley to a 1/2" iron rod found at the most Southerly Southeast corner of Lot 1, Block A/7443, 6200 L. B. J. Office Park, an addition to the City of Dallas, Dallas County, Texas according to the plat recorded in Volume 84234, Page 1926, Plat Records, Dallas County, Texas;

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

A-6

THENCE severing the original said E-Systems tract and running along the East boundary line of said Lot 1, Block A/7443, 6200 L. B. J. Office Park Addition, as follows:

N 00° 19' 49" E, 136.96 feet to a 1/2" iron rod found;

S 89° 53' 46" E, 172.29 feet to a 1 1/2" iron pipe found at the most Easterly Southeast corner of said Lot 1, Block A/7443;

N 00° 02' 11" W, 314.84 feet to a 1/2" iron rod found at the Northeast corner of said Lot 1, Block A/7443, lying in the South right-of-way line of aforesaid Lyndon B. Johnson Freeway;

THENCE along the original North boundary line of said E-Systems tract, being the South right-of-way line of said Lyndon B. Johnson Freeway as follows:

N 88° 06' 13" E, 23.21 feet to a Texas Highway Department concrete right-of-way monument found;

N 85° 05' 23" E, 385.28 feet to the Place of Beginning, containing 4.895 acres (213,210 square feet) of land, more or less.

SAVE AND EXCEPT all that certain land conveyed to the State of Texas by Deed recorded May 2, 2006 as Clerk's File No. 200600159784, Real Property Records, Dallas County, Texas.

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

A-7

Exhibit B

SPECIAL WARRANTY DEED

[exhibit follows on next page]

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

B-1

SPECIAL WARRANTY DEED

Prepared by:

Haynes and Boone LLP

2323 Victory Avenue, Ste. 700

Dallas, Texas 75219

Attn: Brack Bryant

After Recording Return to:

[____________________]

NOTICE OF CONFIDENTIALITY RIGHTS: If you are a natural person, you may remove or strike any or all of the following information from any instrument that transfers an interest in real property before it is filed for record in the public records: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

SPECIAL WARRANTY DEED

THE STATE OF TEXAS	§
	§	KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DALLAS	§

, a (“Grantor”), whose address is _____________________, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, has GRANTED, BARGAINED, SOLD, and CONVEYED and by these presents does GRANT, BARGAIN, SELL, and CONVEY unto RIALTO REAL ESTATE FUND IV – PROPERTY, LP, a Delaware limited partnership (“Grantee”) whose address is c/o Rialto Capital Management, LLC, 501 Santa Monica Blvd., Suite 501, Santa Monica, California 90401, the tract or parcel of land in Tarrant County, Texas, described in Exhibit A, together with all improvements thereon and all rights, titles, and interests appurtenant thereto including, without limitation, Grantor’s interest, if any, in any and all adjacent streets, alleys, rights of way and any adjacent strips and gores, together with all of Grantor’s right, title and interest, if any, in and to any and all minerals and mineral rights, oil, gas, and oil and gas rights, other hydrocarbon substances and rights, development rights, air rights, water and water rights, wells, well rights and well permits, water and sewer taps (or their equivalents), and sanitary or storm sewer capacity appertaining to or otherwise benefiting or used in connection with said real property (such land and interests are hereinafter collectively referred to as the “Property”).

This Special Warranty Deed and the conveyance hereinabove set forth is executed by Grantor and accepted by Grantee subject to the Permitted Exceptions listed on Exhibit B attached hereto (collectively, the “Permitted Exceptions”).

TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereunto in anywise belonging, unto Grantee, its successors and assigns forever, and Grantor does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER DEFEND all and singular the title to the Property unto the said Grantee, its successors and assigns against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through, or under Grantor but not otherwise, subject to the Permitted Exceptions.

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

B-2

[SIGNATURE PAGE FOLLOWS]

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

B-3

EXECUTED as of _____________________, 2020, to be effective as of ________________.

	,
	a

	By:
	Name:
	Title:

THE STATE OF __________	§
	§
COUNTY OF ____________	§

This instrument was acknowledged before me on ____________, 2020, by ________________, ______________ of , a , on behalf of said corporation .


	Notary Public, State of ___________

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

B-4

EXHIBIT A

[Description of the Property]

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

B-5

EXHIBIT B

[Permitted Exceptions]

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

B-6

Exhibit C

BILL OF SALE AND ASSIGNMENT

[EXHIBIT FOLLOWS ON NEXT PAGE]

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

C-1

BILL OF SALE AND ASSIGNMENT

THIS BILL OF SALE AND ASSIGNMENT (this “Bill of Sale”) is made as of the _____ day of __________________, 2020, by and between , a (“Assignor”), and RIALTO REAL ESTATE FUND IV – PROPERTY, LP, a Delaware limited partnership (“Assignee”).

W I T N E S S E T H:

For good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee hereby agree as follows:

1. Assignor hereby sells, transfers and conveys to Assignee all of Assignor’s right, title and interest, if any, in and to the following, in each case to the extent located on that certain land and improvements commonly known as (i) 4400-4404 South Beltwood Parkway, Farmers Branch, Texas, (ii) 14621 Inwood Road, Addison, Texas, (iii) 14639 Inwood Road, Addison, Texas, (iv) 14601 Inwood Road, Addison, Texas, (v) 14303 Inwood Road, Farmers Branch, Texas, and (vi) 6250 Lyndon B. Johnson Freeway, Dallas, Texas (collectively, “Real Property”), as more particularly described in the Purchase Agreement (as hereinafter defined):

(a) all tangible personal property furniture, fixtures and equipment attached to or used in connection with the ownership, maintenance, or operation of the Real Property (the “Personalty”); provided however, that the Personalty does not include the Excluded Tangible Personal Property (as defined in the Purchase Agreement);

(b) the plans and specifications and other architectural and engineering drawings for the improvements located on the Real Property, if any (to the extent in Assignor’s possession and assignable without any cost to Assignor); warranties (to the extent in Assignor’s possession and assignable without any cost to Assignor); governmental permits, approvals and licenses, if any (to the extent in Assignor’s possession and assignable without any cost to Assignor); and

(c) notwithstanding anything contained herein to the contrary, in no event shall any of Assignor’s trade names, marks, signage, branding, and other identifying marks related to “Tuesday Morning” or its subsidiaries or affiliates, be included within the Personalty or otherwise be deemed or construed to have been transferred by this Bill of Sale, all of which are expressly reserved to, and retained by, Assignor.

2. This Bill of Sale is given pursuant to that certain Purchase and Sale Agreement (as amended, the “Purchase Agreement”) dated as of ____________________, between Assignor and Assignee, providing for, among other things, the conveyance of the Personalty.

3. As set forth in Article 11 of the Purchase Agreement, which is hereby incorporated by reference as if herein set out in full and except as set forth herein, except as expressly set forth in the Purchase Agreement, the property conveyed hereunder is conveyed by Assignor and accepted by Assignee AS IS, WHERE IS, AND WITHOUT ANY WARRANTIES OF WHATSOEVER NATURE, EXPRESS OR IMPLIED, IT BEING THE INTENTION OF ASSIGNOR AND ASSIGNEE EXPRESSLY TO NEGATE AND EXCLUDE ALL WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE, WARRANTIES CREATED BY ANY AFFIRMATION OF FACT OR PROMISE OR BY ANY DESCRIPTION OF THE PROPERTY CONVEYED HEREUNDER,

C-2

OR BY ANY SAMPLE OR MODEL THEREOF, AND ALL OTHER WARRANTIES WHATSOEVER CONTAINED IN OR CREATED BY THE TEXAS UNIFORM COMMERCIAL CODE.

4. This Bill of Sale may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

C-3

IN WITNESS WHEREOF, the parties hereto have executed this Bill of Sale as of the date first above written.

		ASSIGNOR:

				,
		a

		By:
		Name:
		Title:

		ASSIGNEE:

		RIALTO REAL ESTATE FUND IV – PROPERTY, LP, a Delaware limited partnership

		By: Rialto Partners GP IV – Property, LLC, a Delaware limited liability company, its General Partner

		By:
		Name:
		Title:

Purchase and Sale Agreement
6250 Lyndon B. Johnson Freeway, Dallas,
Texas 4404 South Beltwood Parkway, Farmers Branch, Texas
14621, 14639 and 14601 Inwood Road, Addison, Texas
14303 Inwood Road, Farmers Branch, Texas

C-4

Exhibit D

FIRPTA CERTIFICATE

Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. For U.S. tax purposes (including Section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform _____________ (“Transferee”) that withholding of tax is not required upon the disposition of a U.S. real property interest by , a (“Transferor”), the undersigned, in his capacity as _____________ of _____________, but not individually, hereby certifies to Transferee the following on behalf of Transferor:

1. Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);

2. Transferor is not a disregarded entity as defined in Section 1.1445-2(b)(2)(iii);

3. Transferor’s U.S. employer identification number is ___________; and

4. Transferor’s office address is ___________________________.

Transferor understands that this certification may be disclosed to the Internal Revenue Service by Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of Transferor.

Dated as of __________, 2020.


		a

		By:
		Name:
		Title:

Purchase and Sale Agreement
6250 Lyndon B. Johnson Freeway, Dallas,
Texas 4404 South Beltwood Parkway, Farmers Branch, Texas
14621, 14639 and 14601 Inwood Road, Addison, Texas
14303 Inwood Road, Farmers Branch, Texas

D-1

EXHIBIT E-1

DISTRIBUTION CENTER LEASE

[EXHIBIT FOLLOWS ON NEXT PAGE]

Purchase and Sale Agreement
6250 Lyndon B. Johnson Freeway, Dallas,
Texas 4404 South Beltwood Parkway, Farmers Branch, Texas
14621, 14639 and 14601 Inwood Road, Addison, Texas
14303 Inwood Road, Farmers Branch, Texas

E-1

LEASE AGREEMENT

This SHORT TERM LEASE (this “Lease”) is entered into as of the ___ day of ______________________, 2020, by and between RIALTO REAL ESTATE FUND IV – PROPERTY, LP, a Delaware limited partnership (“Landlord”) and TUESDAY MORNING PARTNERS, LTD., a Texas limited partnership (“Tenant”).

Lease Grant and Term. Subject to the terms of this Lease, Landlord leases to Tenant, and Tenant leases from Landlord, the real property as described in the legal description attached hereto as Exhibit A (together with any improvements thereon) located at (i) 4400-4404 South Beltwood Parkway, Farmers Branch, Texas; (ii) 14303 Inwood Road, Farmers Branch, Texas; (iii) 14621 Inwood Road, Addison, Texas; (iv) 14639-14645 Inwood Road, Addison, Texas; and (v) 14601-14603 Inwood Road, Addison, Texas (each of the foregoing, individually, a “Property” and, collectively, the “Premises”). The term of this Lease (the “Term”) shall commence on the date first set forth above (the “Commencement Date”) and shall continue until 5:00 p.m. (Central Standard Time) on the date that is thirty (30) months following the Commencement Date (“Termination Date”).

Tenant may also extend the Term on one (1) occasion for a period of twelve (12) months by delivering in writing an extension notice to Landlord not later than six (6) months prior to the then scheduled expiration date of the Term, in which event this Lease shall be so extended as shall the Termination Date.

Permitted Use; Operation. Tenant shall use the Premises as a warehouse and distribution center, together with any incidental purposes thereto, and for no other purpose. Tenant will ensure that Tenant’s use of the Premises complies with all laws, ordinances, rules and regulations of governmental authorities, and all matters of record affecting the Premises, now or hereafter in effect.

Rent Payments. During the Term, Tenant agrees to pay to Landlord a monthly sum equal to $351,207.79 (the “Fixed Rental”). All Fixed Rental payments shall be due and payable, in advance, on or before the first day of each succeeding calendar month during the Term. Fixed Rental for any fractional month during the Term shall be prorated based on the current Fixed Rental for each day of the partial month this Lease is in effect. For the avoidance of doubt, Tenant has no monetary obligations to Landlord under this Lease unless expressly provided otherwise in this Lease. Tenant may (i) send Fixed Rental Payments to the following address c/o Rialto Capital Management, LLC, 501 Santa Monica Blvd., Suite 501, Santa Monica, California 90401, or (ii) elect to wire Fixed Rental Payments (or pay via Automated Clearing House), in which case Landlord shall provide wiring instructions to Tenant. Commencing on the first (1^st) anniversary of the Commencement Date and continuing each anniversary date thereafter during the Term (including any extension thereof), the Fixed Rental amount shall be increased by three percent (3.0%) over the prior year’s Fixed Rental amount. Notwithstanding anything contained in this Lease to the contrary, this Lease is an absolute net lease. It is the intention of Landlord and Tenant that the Fixed Rental and other sums and charges provided herein shall be absolutely net to Landlord and that such amounts shall be paid without setoff, abatement, deduction, reduction, except as otherwise expressly permitted by this Lease.

Late Fees; Interest. In the event that a Fixed Rental payment is not received by Landlord within five (5) days of the date it is due, Tenant may be assessed a late fee by Landlord of 2.5% of the amount due; provided, however, no such late fee shall be owed unless such late payment continues for a period of five (5) days after written notice to Tenant (but Tenant shall only be entitled to one such notice in any calendar year, and thereafter during such calendar year any such payment not paid within five (5) days of its due date shall trigger such late payment without the requirement of additional notice).

Security Deposit. None.

Maintenance, Repair, and Replacement; Surrender. Excluding damage by casualty or condemnation, which are governed elsewhere in this Lease, Tenant, at its sole cost and expense, shall maintain and repair in their current condition, reasonable wear and tear excepted, the Premises (including the roof, foundation, exterior walls and other structural elements) and equipment and systems within the Premises (including generators, lighting, electrical, plumbing, hydraulics, mechanical, heating, ventilating and air conditioning), all driveways, parking areas, landscaping, and other improvements located on the Premises, which maintenance and repair shall be in Tenant’s reasonable discretion, and may include replacement of such equipment, systems, or structural elements of the Property if replacement is required in Tenant’s reasonable discretion. During the Term of this Lease, Landlord shall have no obligations with respect to the maintenance or repair (including replacement) of the Premises, all of such obligations being assumed by Tenant, except as otherwise expressly provided herein. Landlord may make any repairs to the Premises upon thirty (30) days advance written notice to Tenant (or such shorter period of time if Landlord reasonably determines the failure to immediately repair will result in material long-term damage to the Premises (or any part thereof), or would cause injury or harm to human health, in Landlord’s reasonable judgment), so long as Landlord uses commercially reasonable efforts to minimize interference with Tenant’s business operating in exercising its rights hereunder. In the event that Landlord is required to make any repairs to the Premises to correct a condition or state of facts which if not corrected would result in long-term material damage to the Premises (or any material part thereof), or would cause injury or harm to human health, in Landlord’s reasonable judgment and Tenant fails to commence and diligently pursue such repair within ten (10) days’ of receipt of notice thereof (or with respect to an emergency condition, within five (5) days’ of receipt of notice thereof), Tenant shall reimburse Landlord for all of Landlord’s out-of-pocket costs in making such repair within ten (10) days following Landlord’s invoice therefor. Landlord shall indemnify and hold harmless Tenant for any actual, out-of-pocket costs, expenses or losses which Tenant incurs due to Landlord’s, its agents or contractors’ negligence or willful misconduct in connection with any repairs done by Landlord or on behalf of Landlord at the Premises. Notwithstanding anything to the contrary, at the expiration or earlier termination of this Lease, Tenant shall surrender the Premises to Landlord in the then-existing condition of the Premises. Tenant and Landlord shall schedule a walk-through inspection of the Premises at least thirty (30) days in advance of the expiration date of the Premises. Landlord shall have the right to identify which furniture and any other tangible personal property on the Premises that Landlord requires Tenant to remove at the time Tenant vacates the Premises (provided, that, Landlord agrees that Tenant shall in no event be obligated to remove, nor incur any costs or expenses related to removal or disposal of, any shelving, sorting and/or conveyer system(s) located at or in any of the Properties, either prior to or after expiration of the Term, and Landlord shall be entitled to any salvage value attributable to such shelving, sorting and/or conveyer system(s)). In the event that Tenant fails to remove such identified property by the expiration or termination of this Lease, then such property shall be considered abandoned and, at Landlord’s election, be deemed the property of Landlord (except for any tangible personal property utilized by Tenant pursuant to easements, leases, or licenses, provided that if such property is not removed by the expiration of the Lease Term, Landlord shall have the right to remove the same at Tenant’s reasonable expense), and Landlord shall have the option to remove and dispose of the same, and Tenant shall pay the reasonable, out-of-pocket costs of such removal to Landlord upon demand. Tenant shall execute an “as is” Bill of Sale conveying Tenant’s interest in property that Landlord has elected to assume at the expiration of the Term, and any other reasonable documentation necessary to transfer ownership thereof.

Alterations. Tenant shall not make or suffer or allow to be made any alterations, additions or improvements in or to the Premises (collectively, “Alterations”) without first obtaining Landlord’s written consent based on plans and specifications (which may be preliminary) submitted by Tenant, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, without prior consent from Landlord, Tenant shall be permitted to make interior, non-structural Alterations to a Property (but not structural or exterior portions of the improvements) that do not adversely affect the roof, or the heating, ventilating, air-conditioning, mechanical, electrical, plumbing or life safety systems of such Property, provided that the total cost to acquire and install the proposed Alterations at any individual Property is no more than (i) $250,000 in any one instance and (ii) $500,000 in the aggregate with respect to such Property during any calendar year.

Signs.

Tenant shall not affix any signs or other advertising materials to the Premises without the prior written consent of the Landlord, which may be withheld in Landlord’s reasonable discretion. Existing signage is hereby approved.

Landlord shall not affix any signs or other advertising materials to the Premises, except that Landlord shall have the right to place a “For Lease” sign on the Premises during the last (six) 6 months of the Term or a “For Sale” sign on the Premises if Landlord desires to sell the Premises.

Utilities, Telephone, and Generator. Tenant is currently in possession of the Premises and acknowledges that the utilities currently serving the Premises are sufficient for Tenant’s use. Tenant shall pay directly to the utility provider when due for the consumption of all utilities used in the Premises during the Term. Tenant shall at all times have the right to access and utilize any generators that service the Premises. In the event any utility shall become unavailable at the Premises, Landlord shall reasonably cooperate with Tenant to get such utility restored as soon as reasonably practicable.

10.

Insurance. Tenant shall maintain the insurance policies set forth on Exhibit B hereto. Landlord will maintain: (i) commercial general liability insurance with limits of $1,000,000 per occurrence and $2,000,000 in the aggregate, and (ii) causes of loss-special form property insurance on the Premises with customary exclusions in the amount of the full replacement cost thereof, including business interruption insurance or rent loss insurance in amount reasonably determined by Landlord (“Landlord’s Insurance”). Landlord shall add Tenant as named additional insured on the policies Landlord is required to carry hereunder. All liability insurance policies must delete the contractual liability exclusion with respect to personal injury or damage to property. All property insurance policies must waive subrogation against the Tenant and Tenant related parties. Any insurance carried by Landlord may be in the form of one or more blanket insurance policy(ies) covering multiple properties. For each month during the Term, Tenant shall make a payment to Landlord (an “Insurance Payment”) in an amount equal to one-twelfth (1/12) of the Insurance Expenses (as hereinafter defined) for the calendar year in question as reasonably estimated by Landlord. The Insurance Payments are intended to reimburse Landlord for the actual Insurance Expenses accruing during the Term for the Premises. For purposes herein, “Insurance Expenses” shall mean the premiums, commercially reasonable deductibles of not more than $50,000 per occurrence, and other expenses incurred by Landlord for Landlord’s Insurance, but in no event shall Tenant be required to reimburse Landlord, and Insurance Expenses shall exclude, environmental coverage, mold coverage, terrorism coverage, pollution coverage and all other special coverages and/or endorsements that Landlord, in Landlord’s reasonable discretion, may from time to time consider appropriate in connection with Landlord’s ownership, management or operation of the Premises. When the actual amount of Insurance Expenses for an applicable calendar year are determined by Landlord, Landlord or Tenant, as applicable, will pay to the other such amounts as may be appropriate to reconcile Tenant’s payment of estimated Insurance Expenses based on actual Insurance Expenses, within thirty (30) days after written demand together with commercially reasonable evidence of the final amounts demanded. In the event Landlord shall fail to carry any of the policies required by this Lease, or fails to carry such policies in the form required hereunder, Tenant may purchase such policies on behalf of Landlord and Tenant shall not be responsible for payment of any Insurance Expenses related to such policies for so long as Tenant shall maintain such policies on behalf of Landlord.

11.

Taxes. During the Term, Tenant shall pay prior to delinquency all real property taxes and assessments assessed against the Premises; provided, however, (i) upon prior written notice to Landlord, Tenant shall have the right to contest such taxes and assessments as long as in no event shall Tenant permit the commencement of foreclosure proceedings against the Premises, and (ii) Tenant may pay any assessments over the longest period of time allowed by applicable law prior to delinquency. Landlord shall reasonably cooperate with Tenant in connection with any tax contest. Real property taxes and assessments with respect to the Premises for a billing period during which Tenant’s obligations pursuant to this Lease expire or terminate as to the Premises shall be adjusted and prorated on a daily basis between Landlord and Tenant, whether or not such tax or assessment is imposed before or after such expiration or termination of this Lease. Within thirty (30) days after the expiration of the Term, Landlord shall reimburse Tenant for all real property taxes and assessments paid by Tenant for the remainder of that calendar year (it being agreed that Tenant may pay all taxes for such year, subject to the aforesaid reimbursement). This obligation shall survive the expiration of this Lease. Landlord shall have the right, at Landlord’s expense (y) to seek a reduction in the valuation of the Premises and/or any portion or part thereof assessed for tax purposes if, within thirty (30) days after delivery of written notice by Landlord to Tenant, Tenant fails to commence a proceeding to secure such reduction; and/or (z) to participate in any such proceeding commenced by Tenant. Tenant agrees to indemnify and hold Landlord, its OFFICERS, DIRECTORS, PARTNERS, EMPLOYEES, AGENTS and the Landlord Parties harmless from and against any costs or expenses (including reasonable attorneys’ fees) or liabilities in connection with any such tax contest proceeding if such proceeding has been requested or initiated by Tenant. The foregoing indemnity by Tenant shall not be applicable if Landlord voluntarily elects to participate in such proceeding. The foregoing indemnity shall expressly survive the expiration or sooner termination of this Lease. Landlord and Tenant shall use commercially reasonable efforts to have the tax assessor send tax bills directly to Tenant and Tenant shall provide a copy thereof within ten (10) days after receipt. In the event the parties are unable to transfer receipt of the tax bill to Tenant, then within ten (10) days after Landlord’s receipt thereof, Landlord shall deliver to Tenant copies of any tax or assessment statements that it receives with respect to the Premises, and if Landlord fails to provide any such statement and, as a result of such failure, Tenant does not timely pay taxes, then Landlord shall be responsible for any fees, penalties, or similar charges with respect to the associated taxes or assessments. Otherwise, Tenant shall be responsible for any fees, penalties, or similar charges with respect to the associated taxes or assessments.

12.

WAIVER OF SUBROGATION. RELEASE FROM OWN NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT): ANYTHING TO THE CONTRARY IN THIS LEASE NOTWITHSTANDING, NEITHER PARTY, NOR ITS OFFICERS, DIRECTORS, PARTNERS, EMPLOYEES, AGENTS OR INVITEES (EACH, A "RELEASED PARTY") SHALL BE LIABLE TO THE OTHER PARTY OR TO ANY INSURANCE COMPANY (BY WAY OF SUBROGATION OR OTHERWISE) INSURING THE OTHER PARTY FOR ANY LOSS OR DAMAGE TO ANY BUILDING STRUCTURE OR OTHER TANGIBLE PROPERTY (INCLUDING, WITHOUT LIMITATION, EQUIPMENT) ON THE PROPERTY, OR LOSS OF BUSINESS OR RENTAL INCOME IN CONNECTION WITH THE PROPERTY, EVEN THOUGH SUCH LOSS OR DAMAGE MIGHT HAVE BEEN OCCASIONED BY THE NEGLIGENCE OF ANY RELEASED PARTY (THIS CLAUSE SHALL NOT APPLY, HOWEVER, TO ANY DAMAGE CAUSED BY THE GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT OF THE RELEASED PARTY). EACH PARTY REPRESENTS AND COVENANTS THAT IT SHALL OBTAIN APPROPRIATE WAIVERS OF SUBROGATION IN ITS PROPERTY INSURANCE POLICIES THAT IT MAY ELECT TO CARRY. THIS SECTION RELEASES A PARTY FOR THE CONSEQUENCES OF ITS OWN NEGLIGENCE (EXCLUSIVE OF GROSS NEGLIGENCE). PARTIES NAMED HEREIN NOT SIGNING THIS LEASE ARE EXPRESS AND INTENDED THIRD PARTY BENEFICIARIES OF THIS WAIVER OF SUBROGATION.

13.

Assignment & Subletting. Except as provided herein, Tenant shall not assign or in any manner transfer this Lease or any estate or interest hereunder and shall not sublease the Premises or any part thereof without the prior written consent of Landlord, which shall not be unreasonably withheld, conditioned, or delayed. As part of Tenant’s request for, and as a condition to, Landlord’s consent to such assignment or sublease, Tenant shall provide Landlord with financial statements for the proposed transferee and such other information as Landlord may reasonably request. Tenant shall not be entitled to receive monetary damages based upon a claim that Landlord unreasonably withheld its consent to a proposed transfer to a third party and Tenant’s sole remedy shall be an action to enforce any such provision through specific performance or declaratory judgment. Tenant shall reimburse Landlord for its actual reasonable costs and expenses incurred in connection with such assignment or sublease request.

Notwithstanding anything in this Lease to the contrary, so long as Tenant is not in default under this Lease beyond applicable notice and cure periods, the consent of the Landlord need not be obtained if the assignment of the Lease is to a: (i) parent, subsidiary or affiliate of Tenant; (ii) company with which Tenant may merge or consolidate; (iii) corporation that acquires all or substantially all of the shares of stock or assets of Tenant; or (iv) to any corporation which is the successor corporation in the event of a corporate reorganization (a “Related Entity”); provided, however, that (i) such Related Entity does not use the Premises for any other use than the use permitted by this Lease, and (ii) with respect to an assignment to a Related Entity described in subsections (ii) and (iii), such Related Entity has a tangible net worth equal to or greater than $10,000,000.00. Landlord agrees that Tenant shall have the right, without Landlord’s consent, to sublease or license a portion of the Premises to a Related Entity described in subsection (i) above, provided that such Related Entity does not use the Premises for any other use than the use permitted by this Lease. Tenant shall give Landlord written notice at least ten (10) days prior to the effective date of the proposed transfer, along with all applicable documentation and other information necessary for Landlord to determine that the requirements of this Section 13 have been satisfied, including if applicable, the qualification of such proposed transferee as an affiliate of Tenant or a Related Entity.

14.

Events of Default & Remedies. Each of the following occurrences shall constitute an “Event of Default”: (a) Tenant’s failure to pay Fixed Rental, or any other sums due from Tenant to Landlord under this Lease (provided, however, no such Event of Default shall occur under this subparagraph (a) unless Tenant fails to pay any such sum within five (5) Business Days after receipt of a written notice of default from Landlord; provided, however, that such notice shall not be required more than two (2) times in a given calendar year); (b) Tenant’s failure to perform, comply with, or observe any other agreement or obligation of Tenant under this Lease, which failure is not cured within thirty (30) days of written notice from Landlord (provided, however, if Tenant commences such cure within such 30-day period and diligently pursues such cure, Tenant may have such additional time as may be reasonably necessary to effect such cure); (c) Tenant’s failure to perform any of the obligations of Tenant in the manner set forth in Section 10, and such failure continues for more than ten (10) days following Tenant’s receipt of Landlord’s written notice to Tenant of the same; or (d) the admission by Tenant in writing that it cannot meet its obligations as they become due or the making by Tenant of an assignment for the benefit of its creditors. Any Event of Default shall be considered a breach of this Lease by Tenant. In addition to any and all other rights or remedies Landlord may have in connection with this Lease, as provided by law or equity, Landlord shall have the following rights and remedies upon the occurrence of any Event of Default: (a) without terminating this Lease, to change the locks on the doors to the Premises and to exclude Tenant therefrom; (b) terminate this Lease and take possession of the Premises and to re-let the Premises for the Landlord’s account (no termination of this Lease shall relieve the Tenant of the obligation to pay any Fixed Rental or any other amounts due under the terms of this Lease prior to termination) and recover the Landlord’s Liquidated Damages (as defined below); and (c) Landlord may terminate Tenant’s right to possession of the Premises without terminating this Lease, reenter and take possession of the Premises and remove all persons and property therefrom with or without process of law, without being deemed guilty of any manner of trespass and without prejudice to any remedies for arrears of the Fixed Rental or other amounts due hereunder or existing breaches hereof, and lease, manage, and operate the Premises and collect the rents, issues, and profits therefrom all for the account of Tenant, and credit to the satisfaction of Tenant’s obligations under this Lease the net rental received (after deducting therefrom all reasonable costs and expenses of repossessing, leasing, managing, and operating the Premises). The term “Landlord’s Liquidated Damages” for purposes of this Section means the worth at the time of award by the court having jurisdiction thereof of (i) the unpaid Fixed Rental and other charges and adjustments called for under the Lease which had been earned at the time of termination, (ii) the amount by which the unpaid Fixed Rental and other charges and adjustments called for under the Lease which would have been earned after termination until the time of award exceeds the amount of such Fixed Rental loss for the same period which the Tenant proves could have been reasonably avoided, and (iii) the amount by which the unpaid Fixed Rental and other charges and adjustments called for under this Lease for the balance of the term after the time of such award exceeds the amount of such Fixed Rental loss for the same period that Tenant proves could be reasonably avoided. The worth at the time of award of the sums referred to in subsections (i) and (ii) above, is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). In addition to the foregoing remedies, Tenant shall be required to pay all expenses reasonably incurred by Landlord in enforcing its rights and remedies under this Lease, including attorneys’ fees, court costs and interest at the lesser of ten percent (10%) or the maximum rate of interest allowed by applicable law, and shall pay to Landlord the commercially reasonable costs, losses and expenses incurred by Landlord in reletting all or any portion of the Premises, including the cost of removing and storing Tenant’s personal property and other property, repairing the Premises, removing and/or replacing Tenant’s signage, and making the Premises ready for a new tenant, including the cost of leasehold improvements. Upon any re-letting of the Premises by Landlord, all rent received by Landlord shall be applied (i) first to the payment of any indebtedness other than rent or other charges due under this Lease from Tenant, (ii) second to the payment of any reasonable and related costs and expenses of such re-letting (including brokerage fees and attorney’s fees and costs of alterations and repairs), and (iii) third to the payment of all Fixed Rental and other charges due and unpaid under this Lease. In no event shall the Tenant be entitled to receive any surplus of any sums received by Landlord on re-letting the Premises, in excess of the rent and other charges payable under this Lease. In no event shall Tenant be liable for consequential, punitive, exemplary or other damages (other than actual damages only) in connection with this Lease. Landlord shall use commercially reasonable efforts to mitigate damages.

15.

Landlord’s Default. If Landlord defaults under this Lease, Tenant will give Landlord written notice specifying such default with particularity, and Landlord shall thereupon have thirty (30) days in which to cure any such default; provided, however, if Landlord commences such cure within such 30-day period and diligently pursues such cure, Landlord may have such additional time as may be reasonably necessary to effect such cure. Unless and until Landlord fails to so cure any default after such notice, Tenant shall not have any remedy or cause of action by reason thereof; provided, however, in the event of a bona fide emergency to person or property, Tenant may cure such default and receive reimbursement for Tenant’s reasonable third-party costs in affecting such cure within thirty (30) days after invoice. All obligations of Landlord hereunder will be construed as covenants, not conditions. In no event shall Landlord be liable for consequential, punitive, exemplary or other damages (other than actual damages only) in connection with this Lease. Tenant shall use commercially reasonable efforts to mitigate damages. Landlord’s liability for failure to perform any of its obligations hereunder is hereby expressly limited to Landlord’s interest in and to the Premises. Should Landlord fail to pay any sum required to be paid by Landlord hereunder, or fail to perform any obligation required to be performed by Landlord hereunder, any judicial proceedings brought by Tenant against Landlord shall be limited to proceeding against Landlord’s rights and interest in and to the Premises, and no attachment, execution, or other writ or process shall be sought, issued, or levied upon any assets, properties, or funds of Landlord, other than against Landlord’s interest in and to the Premises. Tenant hereby waives its statutory lien under Section 91.004 of the Texas Property Code. Notwithstanding anything contained in this Lease to the contrary, the obligations of Landlord under this Lease (including any actual or alleged breach or default by Landlord) do not constitute personal obligations of Landlord or the individual partners, directors, officers, members or shareholders of Landlord or against Landlord’s partners or any other persons or entities having any interest in Landlord, or any of their personal assets for satisfaction of any liability with respect to this Lease.

16.

Mechanics’ Liens. Tenant shall fully and promptly pay all sums necessary for the costs or repairs, alterations, improvements, charges or other work done by Tenant on the Premises. Tenant shall indemnify and hold Landlord harmless from and against any and all such costs and liabilities incurred by Tenant, and against any and all mechanics’, materialmen’s, or laborers’ liens arising out of or from such work or the cost thereof which may be asserted, claimed or charged against the Premises. This obligation shall survive the termination of this Lease.

17.

Holding Over. If Tenant fails to vacate the Premises at the Termination Date, then Tenant shall be a tenant at sufferance and Tenant shall pay as a daily Fixed Rental an amount equal to 1.2 times the daily Fixed Rental payable during the last month of the Term. In no event shall Tenant be liable for damages in connection with any holdover unless such holdover continues for a period of more than sixty (60) days. If Landlord is unable to deliver possession of the Premises to a new tenant, or to perform improvements for a new tenant, as a result of Tenant’s holdover and Tenant fails to vacate the Premises within sixty (60) days after Landlord notifies Tenant of Landlord’s inability to deliver possession, or perform improvements, Tenant shall be liable to Landlord for all reasonable damages that Landlord suffers from the holdover.

18.

Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and deemed to be delivered, whether actually received or not, (a) if hand delivered or post marked by the U.S. Postal Service, postage prepaid, registered or certified mail, return receipt requested, upon deposit with the carrier, (b) if sent by courier or express mail where evidence of delivery is retained, upon deposit, or (c) sent via electronic mail as long as such notice is also simultaneously sent by one of the other methods approved hereunder. Any notice executed and delivered by either party’s legal counsel (or any other authorized agent of such party) shall be fully effective as if the same had been executed and delivered by such party. Landlord and Tenant may execute this Lease by electronic counterparts or PDF counterparts delivered electronically, each of which shall be deemed an original for all purposes.

19.

Indemnification.

Subject to Section 12 above, Tenant shall indemnify, defend and hold Landlord harmless from any claim for injury to person or damage to property accruing during the Term of this Lease and occurring within, on or about the Premises or arising from the negligence or intentional misconduct of Tenant, its agents, officers, employees, or contractors. For the avoidance of doubt, this Section 19(a) does not cover an environmental claim.

Tenant agrees that Tenant shall not knowingly receive, accept, store, dispose or release any hazardous or toxic substances on or in the Premises in violation of environmental laws, or transport any hazardous or toxic substances to or from the Premises in violation of environmental laws, except materials used in Tenant’s ordinary course of business, and any such materials will be stored, used, and disposed of in compliance with all environmental laws. Tenant shall indemnify, defend and hold Landlord harmless from any claim relating to the environmental condition of the Premises accruing during the Term of this Lease and caused by Tenant or its agents, employees, contractors, or invitees (each, a “Tenant Party”). For the avoidance of doubt, Tenant shall have no liability to Landlord for any environmental condition of the Premises (or a related claim) that (a) was not caused by a Tenant Party, or (b) existed or accrued prior to the Commencement Date, even if caused by a Tenant Party, except to the extent a Tenant Party exacerbates such pre-existing condition.

These indemnity obligations shall survive the termination of this Lease as to claims that accrued during the Term of this Lease. For Landlord’s indemnification rights to remain effective, Landlord must notify Tenant in writing within sixty (60) days of receiving notice of the claim.

20.

Casualty. In the event of a casualty involving the Premises that will take more than ninety (90) days to repair, as reasonably estimated by Landlord (the “Landlord’s Rebuild Estimate”), then Landlord or Tenant may terminate this Lease within thirty (30) days after delivery of Landlord’s Rebuild Estimate. Landlord shall provide Landlord’s Rebuild Estimate within thirty (30) days of the date of the applicable casualty. If neither party elects to terminate this Lease as provided above or if neither party has the right to terminate this Lease as provided above, then Landlord shall promptly commence to restore the Premises to substantially the same condition that existed prior to the fire or other casualty (“Landlord’s Repair Obligation”), exclusive of any Alterations, additions, improvements, fixtures and equipment installed by or on behalf of Tenant (whether before or after the Commencement Date). Notwithstanding the foregoing, Landlord shall not be required to fulfill its Landlord’s Repair Obligations to the extent that any lender requires that Landlord’s insurance proceeds be applied to the payment of the mortgage debt or if the casualty is not a claim covered by insurance or if Landlord’s insurance proceeds are insufficient to satisfy the cost of the repair work, and in such event Landlord shall have the right to terminate this Lease upon notice to Tenant. Notwithstanding the foregoing, if Landlord’s Repair Obligation has not been substantially completed within forty-five (45) days after the estimated restoration date set forth in Landlord’s Rebuild Estimate (the last day of such 45-day period being the “Casualty Termination Date”), Tenant shall have the right to terminate this Lease effective upon thirty (30) days’ prior written notice to Landlord delivered within sixty (60) days after the Casualty Termination Date; provided, however, that such termination shall be null and void if Landlord completes the Landlord’s Repair Obligations prior to the expiration of such sixty (60) day period. In the event that this Lease is terminated as set forth herein, the Fixed Rental shall be apportioned as of the date of the damage and, provided Tenant is not in default, Tenant shall be entitled to a refund from Landlord of amounts for the Fixed Rental or other charges prepaid by Tenant to Landlord for the period arising after the date of the casualty. Tenant will have no claim to insurance proceeds with respect to insurance policies maintained by Landlord, condemnation award or proceeds in lieu of condemnation; provided that in the event of a casualty, Tenant shall be permitted to retain any insurance proceeds payable under any policy carried by Tenant. In the event the Premises are untenantable in whole or in part and neither party terminates as provided herein, then Fixed Rental shall be equitably abated to reflect the portion of the Premises not tenantable.

21.

Condemnation. In the event that Landlord or Tenant receives notice of any pending or threatened condemnation or any public or quasi-public taking, use under law, eminent domain or private purchase in lieu thereof (a “Taking”) of any portion of the industrial building(s) located on the Premises, then such party shall promptly notify the other in writing. If (i) any portion of the industrial building(s) location on the Premises or (ii) ten percent (10%) or more of the Premises will be taken during the Term of this Lease, then Landlord or Tenant shall have the right, exercisable by delivery of written notice to the other, to terminate this Lease (or any portion hereof). All compensation awarded for a Taking shall be the property of Landlord. The right to receive compensation or proceeds is expressly waived by Tenant; provided, however, Tenant may file a separate claim for Tenant’s furniture, fixtures, equipment and other personal property, loss of goodwill and Tenant’s reasonable relocation expenses, to the extent it will not reduce Landlord’s award. Tenant hereby waives any right it may have pursuant to any applicable Laws and agrees that the provisions hereof shall govern the parties’ rights in the event of any Taking.

22.

Miscellaneous.

Nothing herein contained shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between Landlord and Tenant, it being understood and agreed that neither the method of computation of Fixed Rental, nor any other provisions contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of landlord and tenant.

Within thirty (30) days after the request of the other, at any time and from time to time, both Landlord and Tenant agree to execute, acknowledge and deliver an estoppel certificate certifying that (i) this Lease is in full force and effect, (ii) the date through which Fixed Rental and other charges due hereunder have been paid and (iii) to such party’s knowledge, that no default by Landlord or Tenant, as appropriate, has occurred hereunder or specifying the nature of any such default.

Each of the parties represents and warrants that there are no unpaid claims for brokerage commission or finder’s fees in connection with the execution of this Lease, and each agrees to indemnify the other against, and hold it harmless from, all liabilities arising from any such claim (including without limitation, the cost of legal fees in connection therewith). This obligation shall survive the termination of this Lease.

The laws of the state in which the Premises is located shall govern the interpretation, validity, performance and enforcement of this Lease (without reference to choice of law principles).

Each provision of this Lease shall be construed in such manner as to give such provision the fullest legal force and effect possible. To the extent any provision herein (or part of such provision) is held to be unenforceable or invalid when applied to a particular set of facts, or otherwise, the unenforceability or invalidity of such provision (or part thereof) shall not affect the enforceability or validity of the remaining provisions hereof (or of the remaining parts of such provision), which shall remain in full force and effect, nor shall such unenforceability or invalidity render such provision (or part thereof) would be held legally enforceable and/or valid.

Notwithstanding anything to the contrary, in no event shall Landlord or Tenant be liable for consequential, punitive, exemplary or other damages (above and beyond actual damages only) in connection with this Lease.

In the event of litigation hereunder, the prevailing party shall be entitled to an award of its reasonable attorney’s fees. Landlord and Tenant agree that should any suit, action or proceeding arising out of this Lease be instituted by any party hereto, such suit, action or proceeding shall be instituted only in a state or federal court in the county in which the Premises are located or, if no such court is located in that county, then in the state or federal court that is closest to the Premises (the “Approved Jurisdiction”). Landlord and Tenant each consent to the in personam jurisdiction of any state or federal court in the Approved Jurisdiction, and waive any objection to the venue of any such suit, action or proceeding. This Section 22(h) shall survive the expiration or termination of this Lease.

23.

Delivery of the Premises. Tenant acknowledges and agrees the Premises are delivered by Landlord and accepted by Tenant in its present “AS IS, WHERE IS, WITH ALL FAULTS” condition as of the Commencement Date. Tenant acknowledges that it has been provided access and ample opportunity to inspect the Premises and its existing condition, improvements and systems and, except as expressly provided otherwise in this Lease, is not relying upon any warranty or representation of Landlord or its agents regarding the condition, adequacy or suitability of the same for Tenant’s intended purpose, LANDLORD HEREBY EXPRESSLY DISCLAIMING ANY SUCH WARRANTY. Landlord shall have no liability or obligation to any Tenant Party for any pre-existing environmental condition existing as of the Effective Date, except to the extent Landlord, its affiliates, agents or contractors exacerbate such condition.

24.

No Contractual or Statutory Lien. Landlord hereby waives any contractual or statutory lien on the goods, wares, or equipment of Tenant located at the Premises.

25.

Attornment. Tenant shall, in the event any proceedings are brought for the foreclosure of, or in the event of the exercise of the power of sale under any mortgagee made by Landlord covering any part of the Premises, attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as Landlord under this Lease.

26.

Priority of Lease. Upon written request of Landlord or the holder or of a proposed holder of any mortgage now or hereafter covering or to cover any part of the Premises, Tenant will subordinate its rights under this Lease to the lien of such mortgage and to all advances made or to be made upon the security thereof, and Tenant shall, within ten (10) business days after written demand therefor, execute, acknowledge, and deliver an instrument, in the form customarily used by such encumbrance holder, and reasonably satisfactory to Tenant, effecting such subordination; provided, however, as a condition to such subordination, Landlord shall cause such lienholder to sign a commercially reasonable subordination and non-disturbance agreement.

27.

OFAC. Landlord hereby represents and warrants to Tenant that Landlord is not acting, directly or indirectly for, or on behalf of, any person, group, entity or nation named by any Executive Order of the President of the United States of America (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or the United States Treasury Department, as a terrorist, “Specially Designated National and Blocked Person,” or other banned or blocked person, entity, or nation pursuant to any law that is enforced or administered by the United States Office of Foreign Assets Control, and is not engaging in this transaction, directly or indirectly, on behalf of, or instigating or facilitating this transaction, directly or indirectly, on behalf of, any such person, group, entity or nation.

[Remainder of Page Intentionally Blank]

EXECUTED on the dates set forth below to be effective as of the date first above written.

	TENANT:

	TUESDAY MORNING PARTNERS, LTD., a Texas limited partnership

	By:	Days of the Week, Inc., a Delaware corporation, its General Partner

		By:
		Name:
		Title:
		Date signed:

Address:

Tuesday Morning Corporation

6250 Lyndon B. Johnson Freeway

Dallas, Texas 75240
Attn.: General Counsel
Email: bzeterberg@tuesdaymorning.com and legal@tuesdaymorning.com

With a copy to:

Haynes and Boone, LLP	Haynes and Boone, LLP
2323 Victory Avenue	1050 17th Street
Suite 700	Suite 1800
Dallas, TX 75219	Denver, CO 80265
Attn: Tom D. Harris and Ian T. Peck	Attn: Daniel P. Malone, Jr.
Email: Tom.Harris@haynesboone.com	Email: Dan.Malone@haynesboone.com
Ian.Peck@haynesboone.com

Signature Page to
Lease

	LANDLORD:

	RIALTO REAL ESTATE FUND IV – PROPERTY, LP, a Delaware limited partnership

	By:	Rialto Partners GP IV – Property, LLC, a Delaware limited liability company

		By:
		Name:
		Title:
		Date signed:

	Address:

	Rialto Real Estate Fund IV-Property, LP
	c/o Rialto Capital Management, LLC
	501 Santa Monica Blvd., Suite 501,
	Santa Monica, California 90401
	Attn:	Mike Parker
		Aaron Davis
		Brady Scott
	Email:	mike.parker@rialtocapital.com
		aaron.davis@rialtocapital.com
		brady.scott@rialtocapital.com

	With a copy to:

	Bilzin Sumberg Baena Price & Axelrod LLP
	1450 Brickell Avenue, Suite 2300
	Miami, FL 33131
	Attn:	Jay M. Sakalo
	Email:	jsakalo@bilzin.com

Signature Page to
Lease

EXHIBIT A

LEGAL DESCRIPTION

Attached.

Ex. A-1

EXHIBIT B

TENANT INSURANCE REQUIREMENTS

Tenant, at its sole cost and expense, shall procure and maintain throughout the Term of the Lease the following policies of insurance (which may be part of umbrella policies):

(a) property insurance causing Tenant's leasehold improvements and business personal property (sometimes also referred to as "fixtures and contents") at the Premises to be insured under the broadest available special form of property coverage, sometimes referred to as "all-risk" coverage (such as the form identified as CP 10 30, and any successor form, published by Insurance Services Office, Inc.), such insurance coverage (i) to be in the full amount of the replacement cost of all insured property, (ii) to include coverage for the loss of business income, in an amount deemed reasonable by Tenant, (iii) to contain no deductible or self-insured retention in excess of $100,000.00, (iv) to contain no coinsurance penalty clause, and (v) to include a waiver of subrogation in favor of Landlord; and

(b) combination of commercial general liability and umbrella insurance insuring both Landlord and Tenant against all claims, demands or actions for bodily injury, property damage, personal and advertising injury arising out of or in connection with Tenant's use or occupancy of the Premises, or by the condition of the Premises, with a limit of not less than $10,000,000 per occurrence and aggregate (and no offset for occurrences on property other than the Premises), and with coverage for contractual liability naming Landlord as Additional Insured, and to include a waiver subrogation in favor of the Landlord; and

(c) worker's compensation insurance insuring against and satisfying Tenant's obligations and liabilities under the worker's compensation laws of the state where the Premises is located, together with employer's liability insurance in an amount not less than $1,000,000.00 each accident, $1,000,000.00 disease policy limit, and $1,000,000.00 disease each employee; the full limits of insurance are to apply per location, and include a waiver of subrogation in favor of Landlord; and

(d) automobile liability insurance covering all owned, non-owned, and hired vehicles with a $1,000,000 per accident limit for bodily injury and property damage; and

(e) during any period when construction work is being done in or on the Premises, such additional insurance as Landlord may reasonably require; and

(f) business interruption insurance in the unallocated amount of at least $10,000,000; and

(g) All policies must be written by insurance companies whose rating in the most recent Best’s Rating Guide, is not less than A(-): VII; and

(h) Certificates of Insurance evidencing the required coverages must be delivered to the Landlord prior to the commencement of the Lease.

EXHIBIT E-2

OFFICE LEASE

[EXHIBIT FOLLOWS ON NEXT PAGE]

E-2

LEASE AGREEMENT

This SHORT TERM LEASE (this “Lease”) is entered into as of the ___ day of __________, 2020, by and between RIALTO REAL ESTATE FUND IV – PROPERTY, LP, a Delaware limited partnership (“Landlord”) and TUESDAY MORNING, INC., a Texas corporation (“Tenant”).

28.

Lease Grant and Term. Subject to the terms of this Lease, Landlord leases to Tenant, and Tenant leases from Landlord, the real property as described in the legal description attached hereto as Exhibit A (together with any improvements thereon) located at 6250 LBJ Freeway, Dallas, Texas (the “Premises” or the “Property”). The term of this Lease (the “Term”) shall commence on the date first set forth above (the “Commencement Date”) and shall continue until 5:00 p.m. (Central Standard Time) on the date that is one hundred twenty (120) months following the Commencement Date (“Termination Date”).

29.

Permitted Use; Operation. Tenant shall use the Premises for general office use, together with any incidental purposes thereto, and for no other purpose. Tenant will ensure that Tenant’s use of the Premises complies with all laws, ordinances, rules and regulations of governmental authorities and all matters of record affecting the Premises, now or hereafter in effect.

30.

Rent Payments. During the Term, Tenant agrees to pay to Landlord a monthly sum equal to $67,761.67 (the “Fixed Rental”). All Fixed Rental payments shall be due and payable, in advance, on or before the first day of each succeeding calendar month during the Term. Fixed Rental for any fractional month during the Term shall be prorated based on the current Fixed Rental for each day of the partial month this Lease is in effect. For the avoidance of doubt, Tenant has no monetary obligations to Landlord under this Lease unless expressly provided otherwise in this Lease. Tenant may (i) send Fixed Rental Payments to the following address: c/o Rialto Capital Management, LLC, 501 Santa Monica Blvd., Suite 501, Santa Monica, California 90401, or (ii) elect to wire Fixed Rental Payments (or pay via Automated Clearing House), in which case Landlord shall provide wiring instructions to Tenant. Commencing on the first (1^st) anniversary of the Commencement Date and continuing each anniversary date thereafter during the Term, the Fixed Rental amount shall be increased by two percent (2.0%) over the prior year’s Fixed Rental amount. Notwithstanding anything to the contrary contained herein, this Lease is an absolute net lease. It is the intention of Landlord and Tenant that the Fixed Rental and other sums and charges provided herein shall be absolutely net to Landlord and that such amounts shall be paid without setoff, abatement, deduction, reduction, except as otherwise expressly permitted by this Lease.

31.

32.

Intentionally Deleted.

33.

Maintenance, Repair, and Replacement; Surrender. Excluding damage by casualty or condemnation, which are governed elsewhere in this Lease, Tenant, at its sole cost and expense, shall maintain and repair in their current condition, reasonable wear and tear excepted, the Premises (including the roof, foundation, exterior walls and other structural elements) and equipment and systems within the Premises (including generators, lighting, electrical, plumbing, hydraulics, mechanical, heating, ventilating and air conditioning), all driveways, parking areas, landscaping, and other improvements located on the Premises, which maintenance and repair shall be in Tenant’s reasonable discretion, and may include replacement of such equipment, systems, or structural elements of the Property if replacement is required in Tenant’s reasonable discretion. During the Term of this Lease, Landlord shall have no obligations with respect to the maintenance or repair (including replacement) of the Premises, all of such obligations being assumed by Tenant, except as otherwise expressly provided herein. Landlord may make any repairs to the Premises upon thirty (30) days advance written notice to Tenant (or such shorter period of time if Landlord reasonably determines the failure to immediately repair will result in material long-term damage to the Premises (or any part thereof), or would cause injury or harm to human health, in Landlord’s reasonable judgment), so long as Landlord uses commercially reasonable efforts to minimize interference with Tenant’s business operating in exercising its rights hereunder. In the event that Landlord is required to make any repairs to the Premises to correct a condition or state of facts which if not corrected would result in long-term material damage to the Premises (or any material part thereof), or would cause injury or harm to human health, in Landlord’s reasonable judgment and Tenant fails to commence and diligently pursue such repair within ten (10) days’ of receipt of notice thereof (or with respect to an emergency condition, within five (5) days’ of receipt of notice thereof), Tenant shall reimburse Landlord for all of Landlord’s out-of-pocket costs in making such repair within ten (10) days following Landlord’s invoice therefor. Landlord shall indemnify and hold harmless Tenant for any actual, out-of-pocket costs, expenses or losses which Tenant incurs due to Landlord’s, its agents or contractors’ negligence or willful misconduct in connection with any repairs done by Landlord or on behalf of Landlord at the Premises. Notwithstanding anything to the contrary, at the expiration or earlier termination of this Lease, Tenant shall surrender the Premises to Landlord in the then-existing condition of the Premises. Tenant and Landlord shall schedule a walk-through inspection of the Premises at least thirty (30) days in advance of the expiration date of the Premises. Landlord shall have the right to identify which furniture and any other tangible personal property on the Premises that Landlord requires Tenant to remove at the time Tenant vacates the Premises. In the event that Tenant fails to remove such identified property by the expiration or termination of this Lease, then such property shall be considered abandoned and, at Landlord’s election, be deemed the property of Landlord (except for any tangible personal property utilized by Tenant pursuant to easements, leases, or licenses, provided that if such property is not removed by the expiration of the Lease Term, Landlord shall have the right to remove the same at Tenant’s reasonable expense), and Landlord shall have the option to remove and dispose of the same, and Tenant shall pay the reasonable, out-of-pocket costs of such removal to Landlord upon demand. Tenant shall execute an “as is” Bill of Sale conveying Tenant’s interest in property that Landlord has elected to assume at the expiration of the Term, and any other reasonable documentation necessary to transfer ownership thereof.

34.

Alterations. Tenant shall not make or suffer or allow to be made any alterations, additions or improvements in or to the Premises (collectively, “Alterations”) without first obtaining Landlord’s written consent based on plans and specifications (which may be preliminary) submitted by Tenant, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, without prior consent from Landlord, Tenant shall be permitted to make interior, non-structural Alterations to the Premises (but not structural or exterior portions of the improvements) that do not adversely affect the roof, or the heating, ventilating, air-conditioning, mechanical, electrical, plumbing or life safety systems of the Premises, provided that the total cost to acquire and install the proposed Alterations is no more than (i) $100,000 in any one instance and (ii) $250,000 in the aggregate during any calendar year.

35.

Signs.

36.

37.

38.

39.

WAIVER OF SUBROGATION. RELEASE FROM OWN NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT): ANYTHING TO THE CONTRARY IN THIS LEASE NOTWITHSTANDING, NEITHER PARTY, NOR ITS OFFICERS, DIRECTORS, PARTNERS, EMPLOYEES, AGENTS OR INVITEES (EACH, A "RELEASED PARTY") SHALL BE LIABLE TO THE OTHER PARTY OR TO ANY INSURANCE COMPANY (BY WAY OF SUBROGATION OR OTHERWISE) INSURING THE OTHER PARTY FOR ANY LOSS OR DAMAGE TO ANY BUILDING STRUCTURE OR OTHER TANGIBLE PROPERTY (INCLUDING, WITHOUT LIMITATION, EQUIPMENT) ON THE PROPERTY, OR LOSS OF BUSINESS OR RENTAL INCOME IN CONNECTION WITH THE PROPERTY, EVEN THOUGH SUCH LOSS OR DAMAGE MIGHT HAVE BEEN OCCASIONED BY THE NEGLIGENCE OF ANY RELEASED PARTY (THIS CLAUSE SHALL NOT APPLY, HOWEVER, TO ANY DAMAGE CAUSED BY THE GROSS NEGLIGENCE OR THE INTENTIONAL MISCONDUCT OF THE RELEASED PARTY). EACH PARTY REPRESENTS AND COVENANTS THAT IT SHALL OBTAIN APPROPRIATE WAIVERS OF SUBROGATION IN ITS PROPERTY INSURANCE POLICIES THAT IT MAY ELECT TO CARRY. THIS SECTION RELEASES A PARTY FOR THE CONSEQUENCES OF ITS OWN NEGLIGENCE (EXCLUSIVE OF GROSS NEGLIGENCE). PARTIES NAMED HEREIN NOT SIGNING THIS LEASE ARE EXPRESS AND INTENDED THIRD PARTY BENEFICIARIES OF THIS WAIVER OF SUBROGATION.

40.

41.

42.

43.

44.

45.

46.

Indemnification.

47.

Casualty and Condemnation. If (a) (i) more than fifty percent (50%) of the square footage of the Premises cannot be used for the purposes contemplated by this Lease because of casualty, or (ii) more than fifty percent (50%) of the square footage of the building located on the Premises cannot be used for the purposes contemplated by this Lease because of condemnation or purchase in lieu of condemnation, and (b) Landlord reasonably estimates (“Landlord’s Rebuild Estimate”) that such damage cannot be restored within two hundred seventy (270) days from the occurrence of such event, then Landlord or Tenant may elect to terminate this Lease by providing written notification to the other on or before sixty (60) days after delivery of Landlord’s Rebuild Estimate. Landlord shall deliver Landlord’s Rebuild Estimate no later than thirty (30) days following the date of such casualty. Notwithstanding the foregoing, either party may terminate this Lease (effective as of the date of the applicable event) if the Premises are damaged by casualty during the last twelve (12) months of the Term and Landlord’s Rebuild Estimate indicates that it will require more than one hundred fifty (150) days from the occurrence of such event to restore the Premises. If neither party elects to terminate this Lease as provided above or if neither party has the right to terminate this Lease as provided above, then Landlord shall promptly commence to restore the Premises to substantially the same condition that existed prior to the fire or other casualty (“Landlord’s Repair Obligation”), exclusive of any Alterations, additions, improvements, fixtures and equipment installed by or on behalf of Tenant (whether before or after the Commencement Date). Notwithstanding the foregoing, Landlord shall not be required to fulfill its Landlord’s Repair Obligations to the extent that any lender requires that Landlord’s insurance proceeds be applied to the payment of the mortgage debt or if the casualty is not a claim covered by insurance. Notwithstanding anything to the contrary contained herein, if Landlord’s Repair Obligation has not been substantially completed within forty-five (45) days after the estimated restoration date set forth in Landlord’s Rebuild Estimate (the last day of such 45-day period being the “Casualty Termination Date”), Tenant shall have the right to terminate this Lease effective upon thirty (30) days’ prior written notice to Landlord delivered within sixty (60) days after the Casualty Termination Date; provided, however, that such termination shall be null and void if Landlord completes the Landlord’s Repair Obligations prior to the expiration of such sixty (60) day period. If a casualty renders all or part of the Premises untenantable, Rent shall proportionately abate commencing on the date of the casualty and ending when the Premises are delivered to Tenant with Landlord’s Repair Obligation substantially complete. The extent of the abatement shall be based upon the portion of the Premises rendered untenantable, inaccessible or unfit for use in a reasonable business manner for the purposes stated in this Lease. Tenant shall not be entitled to such abatement if the fire or other casualty was caused by the intentional wrongful action of Tenant, its employees, agents, or contractors. In the event that this Lease is terminated as set forth herein, the Fixed Rental shall be apportioned as of the date of the damage and, provided Tenant is not in default, Tenant shall be entitled to a refund from Landlord of amounts for the Fixed Rental or other charges prepaid by Tenant to Landlord for the period arising after the date of the casualty. Tenant will have no claim to insurance proceeds with respect to insurance policies maintained by Landlord, condemnation award or proceeds in lieu of condemnation; provided that in the event of a casualty, Tenant shall be permitted to retain any insurance proceeds payable under any policy carried by Tenant. Tenant may separately pursue a claim (to the extent it will not reduce Landlord’s award or prohibit Landlord from claiming any award otherwise available to Landlord, including loss of lease value) against the condemnor for the value of Tenant’s personal property taken, loss of leasehold interest, moving costs and loss of business.

48.

Miscellaneous.

The laws of the state in which the Premises is located shall govern the interpretation, validity, performance and enforcement of this Lease (without reference to choice of law principles).

49.

50.

No Contractual or Statutory Lien. Landlord hereby waives any contractual or statutory lien on the goods, wares, or equipment of Tenant located at the Premises.

51.

52.

53.

[Remainder of Page Intentionally Blank]

EXECUTED on the dates set forth below to be effective as of the date first above written.

	TENANT:

	TUESDAY MORNING, INC., a Texas corporation

	By:
	Name:
	Title:
	Date signed:

	Address:

	Tuesday Morning Corporation
	6250 Lyndon B. Johnson Freeway
	Dallas, Texas 75240 Attn.: General Counsel Email: bzeterberg@tuesdaymorning.com and legal@tuesdaymorning.com

	With a copy to:

	Haynes and Boone, LLP 2323 Victory Avenue Suite 700 Dallas, TX 75219 Attn: Tom D. Harris and Ian T. Peck
	Email: Tom.Harris@haynesboone.com
	Ian.Peck@haynesboone.com

	Haynes and Boone, LLP 1050 17th Street Suite 1800 Denver, CO 80265 Attn: Daniel P. Malone, Jr.
	Email: Dan.Malone@haynesboone.com

Signature Page to
Lease

LANDLORD:

RIALTO REAL ESTATE FUND IV – PROPERTY, LP, a Delaware limited partnership

By:

Rialto Partners GP IV – Property, LLC,
a Delaware limited liability company

		By:
		Name:
		Title:
		Date signed:

	Address:

	Rialto Real Estate Fund IV-Property, LP
	c/o Rialto Capital Management, LLC
	501 Santa Monica Blvd., Suite 501,
	Santa Monica, California 90401
	Attn:	Mike Parker
		Aaron Davis
		Brady Scott
	Email:	mike.parker@rialtocapital.com
		aaron.davis@rialtocapital.com
		brady.scott@rialtocapital.com

	With a copy to:

	Bilzin Sumberg Baena Price & Axelrod LLP
	1450 Brickell Avenue, Suite 2300
	Miami, FL 33131
	Attn:	Jay M. Sakalo
	Email:	jsakalo@bilzin.com

Signature Page to
Lease

EXHIBIT A

LEGAL DESCRIPTION

Attached.

Ex. A-1

EXHIBIT B

TENANT INSURANCE REQUIREMENTS

Tenant, at its sole cost and expense, shall procure and maintain throughout the Term of the Lease the following policies of insurance (which may be part of umbrella policies):

(i) property insurance causing Tenant's leasehold improvements and business personal property (sometimes also referred to as "fixtures and contents") at the Premises to be insured under the broadest available special form of property coverage, sometimes referred to as "all-risk" coverage (such as the form identified as CP 10 30, and any successor form, published by Insurance Services Office, Inc.), such insurance coverage (i) to be in the full amount of the replacement cost of all insured property, (ii) to include coverage for the loss of business income, in an amount deemed reasonable by Tenant, (iii) to contain no deductible or self-insured retention in excess of $100,000.00, (iv) to contain no coinsurance penalty clause, and (v) to include a waiver or subrogation in favor of Landlord; and

(j) combination of commercial general liability and umbrella insurance insuring both Landlord and Tenant against all claims, demands or actions for bodily injury, property damage, personal and advertising injury arising out of or in connection with Tenant's use or occupancy of the Premises, or by the condition of the Premises, with a limit of not less than $10,000,000 per occurrence and aggregate (and no offset for occurrences on property other than the Premises), and with coverage for contractual liability naming Landlord as Additional Insured and to include a waiver of subrogation in favor of the Landlord; and

(k) worker's compensation insurance insuring against and satisfying Tenant's obligations and liabilities under the worker's compensation laws of the state where the Premises is located, together with employer's liability insurance in an amount not less than $1,000,000.00 each accident, $1,000,000.00 disease policy limit, and $1,000,000.00 disease each employee; the full limits of insurance are to apply per location, and include a waiver of subrogation in favor of Landlord; and

(l) automobile liability insurance covering all owned, non-owned, and hired vehicles with a $1,000,000 per accident limit for bodily injury and property damage;

(m) during any period when construction work is being done in or on the Premises, such additional insurance as Landlord may reasonably require; and

(n) business interruption insurance in the unallocated amount of at least $10,000,000; and

(o) All policies must be written by insurance companies whose rating in the most recent Best’s Rating Guide, is not less than A(-): VII; and

(p) Certificates of Insurance evidencing the required coverages must be delivered to the Landlord prior to the commencement of the Lease.

Ex. B-1

Exhibit F

SERVICE CONTRACTS

[To be attached.]

Purchase and Sale Agreement

6250 Lyndon B. Johnson Freeway, Dallas, Texas

4404 South Beltwood Parkway, Farmers Branch, Texas

14621, 14639 and 14601 Inwood Road, Addison, Texas

14303 Inwood Road, Farmers Branch, Texas

F-1

Exhibit 10.2

Execution Version

JPMorgan Chase Bank, N.A.
2200 Ross Avenue
9^th Floor
Dallas, TX 75201

Bank of America, N.A.
100 Federal St.
Boston, MA 02110

Wells Fargo Bank,
National Association
125 High Street
11^th Floor
Boston, MA 02110

November 2, 2020

Tuesday Morning, Inc.

6250 LBJ Freeway

Dallas, Texas 75240

Attention: Steven R. Becker

Email: sbecker@tuesdaymorning.com

Re: Commitment Letter

Ladies and Gentlemen:

Reference is made to (a) that certain Credit Agreement dated as of August 18, 2015 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Prepetition Credit Agreement”), among Tuesday Morning, Inc., a Delaware corporation (the “Borrower” or “you”), Tuesday Morning Corporation, a Delaware corporation (“Parent”), TMI Holdings, Inc., a Delaware corporation (“Intermediate Holdings” and together with Parent, “Holdings”), the other Guarantors, the lenders party thereto and JPMorgan Chase Bank, N.A. (“JPM”), as administrative agent and collateral agent for itself and the lenders (in such capacities, the “Agent”), and (b) that certain Senior Secured Super Priority Debtor-In-Possession Credit Agreement dated as of May 29, 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “DIP Credit Agreement”), among the Borrower, Holdings, the other Guarantors, the lenders party thereto, and JPM, as administrative agent and collateral agent for itself and the lenders. Unless specifically defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Prepetition Credit Agreement or the DIP Credit Agreement, as context requires.

Commitments

You have requested that each of JPM, Bank of America, N.A and Wells Fargo Bank, N.A. (collectively, the “Lenders” or “we”) commit to provide a portion of a senior secured revolving credit facility in an aggregate amount of $110,000,000 (the “Facility”). The Lenders are pleased to advise you of their respective several commitments to each provide a portion of the Facility upon the terms and subject to the conditions set forth or referred to in this commitment letter (this “Commitment Letter”) and in the Term Sheet attached hereto as Annex A (the “Term Sheet”). The commitment of each Lender is set forth next to such Lender’s name on Annex B attached hereto.

Titles and Roles.

It is agreed that JPM will act as the sole and exclusive administrative agent, and as the sole and exclusive lead arranger and bookrunner for the Facility; provided that the Borrower acknowledges and agrees that the commitments of JPM to act as administrative agent and to provide a portion of the Facility may be assumed by an affiliated bank and JPM may assign some or all of its rights and delegate some or all of its responsibilities hereunder to J.P. Morgan Securities LLC or another affiliate. You agree that no other agents, co-agents or arrangers will be appointed, no other titles will be awarded and no compensation (other than as expressly contemplated by the Term Sheet and the Fee Letter referred to below) will be paid in connection with the Facility unless you and JPM shall so agree.

Conditions to Commitments

The Lender’s respective commitments hereunder are subject to:

the Agent’s receipt of counterparts of this Commitment Letter duly executed by the Agent, the Borrower and the Lenders;

the satisfaction of each condition precedent set forth in the Term Sheet in the section titled “Initial Conditions”; and

your compliance with the terms of this Commitment Letter.

The terms and conditions of the Lenders’ commitment hereunder are limited to those set forth herein and in the Term Sheet. Those matters that are not covered by the provisions hereof and of the Term Sheet are subject to the approval and agreement of the Agent, the Lenders and the Borrower.

Information

You agree to promptly prepare and provide to the Lenders all information with respect to the Borrower and the transactions contemplated hereby (the “Transactions”), including all financial information and projections (the “Projections”). You hereby represent and covenant that (a) all information other than the Projections (the “Information”) that has been or will be made available to the Lenders by you or any of your representatives is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to the Lenders by you or any of your representatives have been or will be prepared in good faith based upon reasonable assumptions. If, at any time prior to the termination of this Commitment Letter, any of the representations and warranties in the preceding sentence would not be accurate and complete in any material respect if the Information or Projections were being furnished, and such representations and warranties were being made, at such time, then you agree to promptly supplement the Information and/or Projections so that the representations and warranties contained in this paragraph remain accurate and complete in all material respects under those circumstances. You understand that the Lenders may use and rely on the Information and Projections without independent verification thereof.

Indemnity

You agree (a) to indemnify and hold harmless the Lenders and their respective affiliates and their respective officers, directors, employees, advisors, and agents (each, an “indemnified person”) from and against any and all losses, claims, damages, liabilities and related expenses to which any such indemnified person may become subject arising out of or in connection with this Commitment Letter, the Facility, the use of the proceeds thereof, or any related transaction or any actual or prospective claim, litigation, investigation, arbitration or proceeding relating to any of the foregoing (including in relation to enforcing the terms of this paragraph) (each, a “Proceeding”), regardless of whether any indemnified person is a party thereto or whether such Proceedings are brought by you, your equity holders, affiliates, creditors or any other person, and to reimburse each indemnified person upon demand for any legal or other expenses incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any indemnified person, apply to losses, claims, damages, liabilities or related expenses to the extent they are found by a final, non-appealable judgment of a court of competent jurisdiction to arise or result from the willful misconduct or gross negligence of such indemnified person and (b) to reimburse the Lenders and their affiliates on demand for all out-of-pocket expenses (including due diligence expenses, consultant's fees and expenses (if any), travel expenses, and reasonable fees, charges and disbursements of counsel) incurred in connection with the Facility and any related documentation (including this Commitment Letter, the Term Sheet, the Fee Letter, and the definitive documentation relating to the Facility) or the administration, amendment, modification or waiver thereof. You also agree that no indemnified person shall have any liability to you for any special, indirect, consequential or punitive damages. No indemnified person shall be liable for any damages arising from the use by others of Information or other materials obtained through electronic, telecommunications or other information transmission systems, including an electronic platform or otherwise via the internet, or for any special, indirect, consequential or punitive damages in connection with the Facility or in connection with its activities related to the Facility, and you agree, to the extent permitted by applicable law, to not assert any claims against any indemnified person with respect to the foregoing.

You shall not, without the prior written consent of an indemnified person (which consent shall not be unreasonably withheld, conditioned or delayed), effect any settlement of any pending or threatened Proceedings in respect of which indemnity could have been sought hereunder by such indemnified person unless (a) such settlement includes an unconditional release of such indemnified person in form and substance reasonably satisfactory to such indemnified person from all liability on claims that are the subject matter of such Proceedings and (b) does not include any statement as to, or any admission of, fault, culpability or a failure to act by or on behalf of any indemnified person or any injunctive relief or other non-monetary remedy. You acknowledge that any failure to comply with your obligations under the preceding sentence may cause irreparable harm to the Lenders and the other indemnified persons.

Affiliate Activities, Sharing of Information, Absence of Fiduciary Relationships

The Lenders may employ the services of their respective affiliates in providing certain services hereunder and, in connection with the provision of such services, may exchange with such affiliates information concerning you and the other companies that may be the subject of the transactions contemplated by this Commitment Letter, and, to the extent so employed, such affiliates shall be entitled to the benefits, and be subject to the obligations, of the Lenders hereunder. The Lenders shall be responsible for their respective affiliates’ failure to comply with such obligations under this Commitment Letter.

You acknowledge that the Lenders and any of their respective affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the Transactions and otherwise. Neither the Lenders nor any of their respective affiliates will use confidential information obtained from you by virtue of the Transactions or their other relationships with you in connection with the performance by the Lenders or any of their respective affiliates of services for other companies, and neither the Lenders nor any of their respective affiliates will furnish any such information to other companies. You also acknowledge that the Lenders and their respective affiliates have no obligation to use in connection with the Transactions, or to furnish to you, confidential information obtained from other companies.

You agree that the Lenders and their respective affiliates will act under this Commitment Letter as independent contractors and that nothing in this Commitment Letter will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between the Lenders and their respective affiliates and you and your respective equity holders or your and their respective affiliates. You acknowledge and agree that (i) the transactions contemplated by this Commitment Letter are arm’s-length commercial transactions between the Lenders and, if applicable, their respective affiliates, on the one hand, and you, on the other, (ii) in connection therewith and with the process leading to such transaction the Lenders and, if applicable, their respective affiliates, are acting solely as a principal and have not been, are not and will not be acting as advisors, agents or fiduciaries of you, your management, equity holders, creditors, affiliates or any other person and (iii) the Lenders and, if applicable, their respective affiliates, have not assumed an advisory or fiduciary responsibility or any other obligation in favor of you or your affiliates with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether the Lenders or any of their respective affiliates has advised or is currently advising you or your affiliates on other matters) except the obligations expressly set forth in this Commitment Letter. You further acknowledge and agree that (i) you are responsible for making your own independent judgment with respect to such transactions and the process leading thereto, (ii) you are capable of evaluating and understand and accept the terms, risks and conditions of the transactions contemplated hereby, and the Lenders shall have no responsibility or liability to you with respect thereto, and (iii) the Lenders are not advising the Borrower as to any legal, tax, investment, accounting, regulatory or any other matters in any jurisdiction, and you shall consult with your own advisors concerning such matters and you shall be responsible for making your own independent investigation and appraisal of the transactions contemplated hereby. Any review by the Lenders of the Borrower, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of the Lenders and shall not be on behalf of the Borrower. The Borrower agrees that it will not assert any claim against the Lenders based on an alleged breach of fiduciary duty by the applicable Lender in connection with this Commitment Letter and the transactions contemplated hereby.

You further acknowledge that the Lenders and their respective affiliates are full service securities or banking firms engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, the Lenders and their respective affiliates may provide investment banking and other financial services to, and/or acquire, hold or sell, for their own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of, you and other companies with which you may have commercial or other relationships. With respect to any securities and/or financial instruments so held by the Lenders, any of their respective affiliates or any of their respective customers, all rights in respect of such securities and financial instruments, including any voting rights, will be exercised by the holder of the rights, in its sole discretion.

Confidentiality

This Commitment Letter is delivered to you on the understanding that neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of their terms or substance shall be disclosed, directly or indirectly, to any other person except (a) to your officers, agents and advisors (other than commercial lenders) who are directly involved in the consideration of this matter and for whom you shall be responsible for any breach by any one of them of this confidentiality undertaking, (b) as may be compelled in a judicial or administrative proceeding or as otherwise required by law (in which case you agree to inform us promptly thereof), (c) pursuant to your or your subsidiaries’ bankruptcy cases (in which case, you agree, to the extent not prohibited by law, to inform the Administrative Agent promptly thereof and to request to file the Fee Letter under seal), and (d) to the office of the U.S. Trustee, the bankruptcy court (subject to the preceding clause (c)), and on a confidential and “professional eyes only” basis to advisors to any statutory committee appointed in your or your subsidiaries’ bankruptcy cases, provided that, the foregoing restrictions shall cease to apply (except in respect of Section 8 hereof and the Fee Letter and its terms and substance) after this Commitment Letter has been accepted by you. Officers, directors, employees and agents of the Lenders and their respective affiliates shall at all times have the right to share amongst themselves information received from you and your affiliates and your officers, directors, employees and agents. Notwithstanding the foregoing, it is agreed and understood that you and your subsidiaries shall be permitted to disclose this Commitment Letter and the Fee Letter and the contents thereof to the bankruptcy court (in the case of the Fee Letter, pursuant to a request to file under seal) to the extent disclosure thereof is necessary or advisable to consummate the transactions contemplated herein.

8. Fees. As consideration for the agreements of the Lenders hereunder, you agree to pay to JPM, for the ratable benefit of each of the Lenders (including JPM in its capacity as a Lender), upfront fees in an amount equal to 0.75% of the commitment under the Facility held by such Lender on the closing date of the Facility (such date, the “Closing Date” and such fees, the “Upfront Fees”). The Upfront Fees shall be due and payable in full on the Closing Date.

In addition, as consideration for the agreements of JPM hereunder, you agree to pay the fees set forth in the fee letter dated the date hereof and delivered in connection herewith (the “Fee Letter”).

You agree that, once paid, the fees or any part thereof payable hereunder and under the Fee Letter shall not be refundable under any circumstances and shall be paid in U.S. dollars in immediately available funds.

Miscellaneous

This Commitment Letter shall not be assignable by you without the prior written consent of the Lenders (and any purported assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter may not be amended or waived except by an instrument in writing signed by each of the parties hereto. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile or other electronic transmission (e.g., “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter, the Term Sheet and the Fee Letter set forth the entire understanding of the parties with respect thereto. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York. The Borrower consents to the exclusive jurisdiction and venue of the state or federal courts located in the City of New York. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (A) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING BROUGHT BY OR ON BEHALF OF ANY PARTY ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER, THE TERM SHEET, THE FEE LETTER OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY) AND (B) ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LEGAL PROCEEDING IN THE STATE OR FEDERAL COURTS LOCATED IN THE CITY OF NEW YORK.

The reimbursement, indemnification and confidentiality provisions contained herein, in the Fee Letter and in the Term Sheet shall remain in full force and effect regardless of whether definitive documentation relating to the Facility shall be executed and delivered and notwithstanding the termination of this Commitment Letter or the Lenders’ respective commitments hereunder; provided that your obligations under this Commitment Letter shall automatically terminate and be superseded by the provisions of the definitive documentation relating to the Facility upon the effectiveness thereof, and thereafter such provisions in this Commitment Letter shall have no further force and effect.

Section headings used herein are for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Commitment Letter.

You hereby authorize the Lenders, at their own expense, but without any prior approval by you, to publish such tombstones and give such other publicity to the Facility as it may from time to time determine in their respective discretion. The foregoing authorization shall remain in effect unless the Borrower notifies the Lenders in writing that such authorization is revoked.

If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms hereof and of the Term Sheet by returning to us executed counterparts hereof and of the Fee Letter not later than 5:00 p.m., Central time, on November 6, 2020. The Lenders’ respective commitments and agreements herein will expire at such time in the event the Agent has not received such executed counterparts in accordance with the immediately preceding sentence. This Commitment Letter and the Term Sheet supersede any and all prior versions hereof and thereof.

The Lenders’ respective commitments hereunder (a) may be terminated at any time by the Borrower, with or without cause, effective upon receipt by Agent of notice to that effect from the Borrower, and (b) will otherwise terminate on December 31, 2020, in each case, unless the closing of the Facility on the terms and subject to the conditions contained herein and in the applicable definitive documentation relating to the Facility has been consummated on or before such date.

The Lenders are pleased to have been given the opportunity to assist you in connection with this important financing.

[Signature Pages Follow]

	Very truly yours,

	JPMORGAN CHASE BANK, N.A., as the Agent and Lender

	By:	/s/ Jon Eckhouse
		Name: Jon Eckhouse
		Title: Authorized Officer

[Signature Page to ABL Commitment Letter – Tuesday Morning]

	WELLS FARGO BANK, N.A., as Lender

	By:	/s/ Jai Alexander
		Name: Jai Alexander
		Title: Director

[Signature Page to ABL Commitment Letter – Tuesday Morning]

	BANK OF AMERICA, N.A., as Lender

	By:	/s/ Andrew Cerussi
		Name: Andrew Cerussi
		Title: Senior Vice President

[Signature Page to ABL Commitment Letter – Tuesday Morning]

Accepted and agreed to as of the date first written above by:

BORROWER:

TUESDAY MORNING, INC.

By:	/s/ Steven R. Becker
Name:	Steven R. Becker
Title:	Chief Executive Officer and President

[Signature Page to ABL Commitment Letter – Tuesday Morning]

ANNEX A

TERM SHEET

[See Attached]

SENIOR SECURED CREDIT FACILITY

Term Sheet

November 2, 2020

This Term Sheet is delivered with a commitment letter of even date herewith (the “Commitment Letter”) from the Lenders party thereto to the Borrower in connection with the Revolving Facility (as defined below). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to such terms in the Commitment Letter.

I.	Parties

Borrower:

Tuesday Morning, Inc., a Texas corporation (the “Borrower”).

	Lead Arranger and Bookrunner:	JPMorgan Chase Bank, N.A. (“JPMCB” and in such capacity, the “Lead Arranger”).

	Administrative Agent:	JPMCB (in such capacity, the “Administrative Agent”).

	Co-Syndication Agents:	Wells Fargo Bank, N.A. (“WFB”) and Bank of America, N.A. (“BofA”).

Lenders:

A syndicate of banks, financial institutions and other entities, including JPMCB, BofA, and WFB (collectively, the “Lenders”).

II. Revolving Credit Facility

Type and Amount of Facility:

Three - year revolving asset-based credit facility (the “Revolving Facility”) in the amount of $110,000,000 (the “Revolving Commitment” and the loans thereunder, the “Revolving Loans”).

Increase in Revolving Commitment:

On or subsequent to the Closing Date, the Borrower will be able to, at its option, and subject to customary conditions, request an increase in the Revolving Commitment by up to $40,000,000 (not to exceed a total of $150,000,000) by obtaining additional commitments from one or more Lenders or, with the consent of the Administrative Agent, but without the consent of any other Lenders, from other entities.

Availability:

The Revolving Facility shall be available on a revolving basis during the period commencing on the Closing Date and ending on the third anniversary thereof (the “Revolving Credit Termination Date”).

Availability under the Revolving Facility will be subject to the Borrowing Base referred to below. “Availability” means, at any time, an amount equal to (i) the amount by which the Line Cap (as defined below) at such time exceeds the aggregate amount of Revolving Loans and LC Obligations on such date, minus (ii) solely during the period commencing on the Closing Date to and including the first anniversary of the Closing Date, an availability block in an amount equal to the greater of (A) $10,000,000 and (B) 10% of the Line Cap (the “Availability Block”). By way of example and illustration, Annex II attached hereto sets forth a sample calculation of Availability for the Closing Date (which example would also apply to the calculation of Availability for the period commencing on the Closing Date to and including the first anniversary of the Closing Date). “Line Cap” means an amount equal to the lesser of (a) the aggregate amount of all Revolving Commitments and (b) the then applicable Borrowing Base. For the avoidance of doubt, bank products shall not count as Revolver Loans or LC Obligations, including for purposes of calculating Availability; provided that bank products shall be taken into account for purposes of determining the bank products reserve.

	Letters of Credit:	A portion of the Revolving Facility not in excess of $15,000,000 shall be available for the issuance of letters of credit (the “Letters of Credit”) by JPMCB, BofA and WFB (in such capacity, each an “Issuing Lender”) with individual sublimits for each Issuing Lender. No Letter of Credit shall have an expiration date after the earlier of (a) one year after the date of issuance and (b) five business days prior to the Revolving Credit Termination Date, provided that any Letter of Credit with a one-year tenor may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (b) above). The Letter of Credit sublimit may be increased pursuant to a Letter of Credit Increase Event, on terms and conditions similar to the prepetition credit agreement.

		Drawings under any Letter of Credit shall be reimbursed by the Borrower (whether with its own funds or with the proceeds of Revolving Loans) by 1:00 p.m. (Dallas, Texas time) (or such later time as the Administrative Agent may agree) within one business day following receipt by the Borrower of notice from the relevant Issuing Lender. To the extent that the Borrower does not so reimburse the applicable Issuing Lender, the Lenders under the Revolving Facility shall be irrevocably and unconditionally obligated to reimburse the Issuing Lender on a pro rata basis.

		Letters of credit issued under the Prepetition Credit Agreement shall be deemed issued and outstanding under the Credit Agreement and shall constitute “Letters of Credit” under the Credit Agreement.

	Swing Line Loans:	The Credit Agreement shall not include a subfacility for swingline loans.

	Overadvances and Protective Advances:	The Credit Agreement shall include provisions regarding overadvances and protective advances substantially consistent with those contained in the Prepetition Credit Agreement.

	Borrowing Base:	The “Borrowing Base” will equal, at any time of calculation, the sum of:

		(a) 90% of the face amount of Eligible Credit Card Receivables; plus

(b) (i) during the period from January 1 through September 30 of each year, 90% of the NOLV of Eligible Inventory and (ii) during the period from October 1 through December 31 of each year, 92.5% of the NOLV of Eligible Inventory; plus

(c) with respect to Eligible Letters of Credit, (i) during the period from January 1 through September 30 of each year, 90% of the NOLV of the Inventory supported by Eligible Letters of Credit and (ii) during the period from October 1 through December 31 of each year, 92.5% of the NOLV of the Inventory supported by Eligible Letters of Credit; minus

(d) availability reserves.

The eligibility criteria and the Administrative Agent’s discretionary rights to establish and change reserves shall be substantially consistent with the Prepetition Credit Agreement; provided that, notwithstanding anything in the Prepetition Credit Agreement to the contrary, the Administrative Agent shall have the ability to establish or change reserves upon not less than 3 calendar days’ prior notice to the Borrower or immediately if an event of default exists; provided that the Borrower shall not be permitted to request Revolving Loans or Letters of Credit during such 3 calendar day notice period to the extent the borrowing of such Revolving Loans or the issuance of such Letters of Credit would cause Availability to be less than $0 (determined as if such new or changed reserve were in effect as of the time of such borrowing or issuance, as applicable).

Maturity:

The Revolving Credit Termination Date.

V. Purpose; Certain Payment Provisions

Purpose:

The proceeds of borrowings under the Revolving Facility may be used by the Borrower (i) for payments of certain fees, costs and expenses in connection with the Borrower’s exit from chapter 11 and refinancing certain debt in connection therewith (including, without limitation, the DIP Credit Agreement), (ii) to provide for the working capital needs of the Borrower and its subsidiaries, (iii) to pay the fees and expenses related to the Revolving Facility, and (iv) for other general corporate purposes.

	Fees and Interest Rates:	As set forth on Annex I.

	Mandatory Prepayments:	The Credit Agreement will contain a mandatory prepayment provision that, subject to exceptions to be agreed, will require a prepayment of amounts outstanding under the Revolving Facility, including:

(i) the amount necessary to eliminate any Borrowing Base deficiency; and

(ii) in the event the aggregate amount of unrestricted cash and cash equivalents of the Loan Parties and their subsidiaries (the “Consolidated Cash Balance”) exceeds $20,000,000 (as reflected in any Consolidated Cash Balance Report (as defined below); it being understood that credit card receivables shall be excluded from the calculation of the Consolidated Cash Balance) at any time Revolving Loans are outstanding, an amount equal to the lesser of (A) the amount of such excess and (B) the amount necessary to repay all outstanding Revolving Loans.

Voluntary Prepayments/ Commitment Reductions:

Permitted in whole or in part, with prior written notice but without premium or penalty, subject to limitations as to minimum amounts of prepayments or commitment reductions, as applicable, and customary indemnification for breakage costs in the case of prepayment of Eurodollar Loans other than on the last day of a related interest period.

VI.

Collateral and Other Credit Support

Collateral:

Subject to customary exceptions regarding excluded assets to be agreed (“Excluded Assets”), the Revolving Facility will be secured by (a) a first priority perfected security interest in all of the Revolving Facility Priority Collateral (as defined below) of the Loan Parties, and (b) a second priority perfected security interest in all of the GUC Note Priority Collateral (as defined below) (collectively, the “Collateral”). The Collateral will also secure bank products (including ACH transactions, credit card transactions, cash management services and the items listed on Schedule 1.01(a) to the DIP Credit Agreement) owing to the Administrative Agent and swap agreements owing to any Lender or its affiliates. For the avoidance of doubt, the Collateral shall not include any Excluded Assets.

“Revolving Facility Priority Collateral” means all present and after-acquired tangible and intangible assets of the Loan Parties other than GUC Note Priority Collateral and Excluded Assets. Without limiting the foregoing, Revolving Facility Priority Collateral shall include all accounts, payment intangibles, inventory, tax refunds, cash, deposit accounts and securities accounts (other than any deposit account or securities account (or amounts on deposit therein) established solely to hold identified proceeds of GUC Note Priority Collateral, which for the avoidance of doubt, shall not be required to be subject to account control agreements), commodities accounts, insurance proceeds related to assets included in the Borrowing Base, insurance policies covering the Revolving Facility Priority Collateral and the proceeds thereof, business interruption insurance proceeds, investment property (excluding the Pledged Equity (as defined below)), general intangibles, chattel paper, documents, supporting obligations, certain other assets (including certain equipment and intellectual property) and books and records related to the foregoing and, in each case, proceeds thereof.

“GUC Note Priority Collateral” means all tangible and intangible assets of the Loan Parties consisting of real property, fixtures, equipment, intellectual property (excluding equipment and intellectual property constituting Revolving Facility Priority Collateral), all equity interests in the Borrower and its subsidiaries (the “Pledged Equity”), all books and records relating to the foregoing and all proceeds of the foregoing, but excluding Excluded Assets.

Intercreditor Agreement:

The lien priority, relative rights and other creditors’ rights issues in respect of the GUC Note Priority Collateral and the Revolving Facility Priority Collateral will be subject to an intercreditor agreement which (a) shall contain subordination provisions with respect to payments under the GUC Note consistent with the terms set forth herein and (b) shall be in form and substance satisfactory to the Administrative Agent, the administrative agent and/or collateral agent under the GUC Note and the Borrower (the “Intercreditor Agreement”).

Guaranties:

Parent, Intermediate Holdings and each direct or indirect Subsidiary of the Borrower shall unconditionally guarantee all of the indebtedness, obligations and liabilities of the Borrower arising under or in connection with the Loan Documents as well as obligations in respect of secured bank products (including ACH transactions, credit card transactions and cash management services) owing to the Administrative Agent and swap agreements owing to any Lender or its affiliates. The Borrower and the Guarantors are referred to herein collectively as the “Loan Parties”.

VII. Certain Conditions

Initial Conditions:

The availability of the Revolving Facility shall be conditioned upon satisfaction of, among other things, the following conditions precedent (the date upon which all such conditions precedent shall be satisfied, the “Closing Date”) on or before [_______], 2020:

(a) The Borrower shall have executed and delivered satisfactory definitive financing documentation with respect to the Revolving Facility, including a credit agreement (the “Credit Agreement”), security documents and other legal documentation (collectively, together with the Credit Agreement, the “Loan Documents”) mutually satisfactory to the Borrower and the Lenders.

(b) The Lenders, the Lead Arranger and the Administrative Agent shall have received all fees required to be paid and all expenses for which invoices have been presented, on or before the Closing Date.

(c) All governmental and third party approvals necessary in connection with the financing contemplated hereby and the continuing operations of the Borrower and its subsidiaries (including shareholder approvals, if any) shall have been obtained on satisfactory terms and shall be in full force and effect.

(d) The terms of (i) the Borrower’s chapter 11 plan of reorganization (the “Plan of Reorganization”) and (ii) all orders of the Court (as defined in the DIP Credit Agreement) approving the Plan of Reorganization, the Revolving Facility, the Commitment Letter and the Fee Letter, or affecting the rights, remedies and obligations of the Administrative Agent and the Lenders hereunder and thereunder, shall be in form and substance acceptable to the Lenders in all material respects.

(e) The Plan of Reorganization shall have been confirmed by a final order entered by the Court (the “Confirmation Order”) in form and substance acceptable to the Lenders in all material respects, and which has not been stayed by the Court or by any other court having jurisdiction to issue any such stay. The Confirmation Order shall have been entered upon proper notice to all parties to be bound by the Plan of Reorganization, all as may be required by the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, order of the Court, and any applicable local bankruptcy rules. Moreover, (i) the time to appeal the Confirmation Order or to seek review, rehearing or certiorari with respect to the Confirmation Order must have expired, (ii) unless otherwise waived by the Lenders, no appeal or petition for review, rehearing or certiorari with respect to the Confirmation Order may be pending and (iii) the Confirmation Order must otherwise be in full force and effect. The effective date of the Plan of Reorganization shall have occurred or shall occur concurrently with the closing of the Revolving Facility.

(f) The Court shall have entered an order, in form and substance acceptable to the Administrative Agent, approving the Commitment Letter and the Fee Letter.

(g) The representations and warranties set forth in the Credit Agreement shall be true and correct in all material respects (without duplication of any materiality qualification applicable thereto) as of the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects as of such earlier date).

(h) The Administrative Agent shall have received such closing documents as are customary for transactions of this type or as it may reasonably request, including but not limited to resolutions, good standing certificates, incumbency certificates, insurance certificates, a solvency certificate from the chief financial officer, lender’s loss payable and additional insured endorsements, opinions of counsel, organizational documents, collateral releases from prior lenders, consents, financing statements and similar filings, all in form and substance reasonably acceptable to the Administrative Agent and its counsel.

(i) The Administrative Agent or its designee shall have conducted a satisfactory review of the Borrower’s insurance coverage and all documentation related thereto.

(j) The Administrative Agent shall have received a Borrowing Base Certificate as of a date specified by the Administrative Agent with customary supporting documentation and supplemental reporting to be agreed upon between the Administrative Agent and the Borrower.

(k) The corporate structure, capital structure, other debt instruments, material accounts and governing documents of the Loan Parties shall be acceptable to the Administrative Agent.

(l) No event, development or circumstance shall have occurred since the petition date (excluding the pendency of the bankruptcy cases) that has or could reasonably be expected to have a material adverse effect on the business, operations, property, condition (financial or otherwise) or prospects of the Borrower and its subsidiaries, taken as a whole.

(m) Repayment in full of all obligations under existing loan facilities (including the Prepetition Credit Agreement, the DIP Credit Agreement and that certain Senior Secured Super Priority Debtor-In-Possession Delayed Draw Term Loan Agreement dated as of July 10, 2020, among the Borrower, the lenders party thereto and Franchise Group, Inc., as administrative agent), termination of the commitments thereunder and release of all liens, if any, granted thereunder.

(n) All legal (including tax implications) and regulatory matters shall be satisfactory to the Administrative Agent and Lenders, including but not limited to compliance with all applicable requirements of Regulations U, T and X of the Board of Governors of the Federal Reserve System. The Administrative Agent’s counsel shall have completed all legal due diligence.

(o) The Administrative Agent shall have received, at least five days prior to the Closing Date, all documentation and other information regarding the Borrower requested in connection with applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.

(p) The Administrative Agent and each requesting Lender shall have received at least five days prior to the Closing Date, in connection with applicable “beneficial ownership” rules and regulations, a customary certification regarding beneficial ownership or control of the Borrower in a form reasonably satisfactory to the Administrative Agent and each requesting Lender.

(q) Liens in favor of the Administrative Agent creating (i) a first priority security interest in the Revolving Facility Priority Collateral and (ii) a second priority security interest in the GUC Note Priority Collateral, in each case shall have been perfected.

(r) Minimum Availability (which for the avoidance of doubt will be calculated after giving effect to the Availability Block) for the Borrower at closing of $25,000,000.

(s) The Administrative Agent shall have received executed copies of the promissory note issued to the general unsecured creditors of the Borrower and its subsidiaries pursuant to the Plan of Reorganization (the “GUC Note”) and all material agreements executed in connection therewith, which shall contain terms and conditions reasonably satisfactory to the Administrative Agent and the Lenders.

(t) The Administrative Agent shall have entered into the Intercreditor Agreement with the administrative agent and/or collateral agent under the GUC Note, containing terms and conditions satisfactory in all respects to the Administrative Agent, the Lenders and the Borrower.

On-Going Conditions:

The making of each extension of credit shall be conditioned upon (a) the accuracy in all material respects of all representations and warranties in the Loan Documents; (b) there being no default or event of default in existence at the time of, or after giving effect to the making of, such extension of credit, (c) after giving effect to the requested extension of credit, Availability shall not be less than $0, (d) after giving effect to the requested extension of credit (net of any substantially concurrent use of the proceeds of such extension of credit), the Consolidated Cash Balance shall not exceed $20,000,000 and (e) in the case of any request for a Letter of Credit, the LC Conditions (to be defined substantially consistent with the definition thereof in the Prepetition Credit Agreement) shall be satisfied.

VIII. Certain Documentation Matters

Documentation Principles:

The Credit Agreement and the other Loan Documents shall be customary for transactions of this type and substantially consistent with the Prepetition Credit Agreement and the other loan documents executed in connection therewith as modified (a) to reflect the consummation of the transactions to occur on or prior to the Closing Date, including the Loan Parties’ emergence from chapter 11 in accordance with the Plan of Reorganization and (b) to reflect this Term Sheet, and subject to the terms hereof and other adjustments as agreed to by the Administrative Agent and the Borrower. The Credit Agreement shall include appropriate market updates for syndicated credit facilities, including with respect to successor LIBOR provisions, FinCEN Beneficial Ownership provisions and QFC provisions. The foregoing provisions shall be referred to herein, collectively, as the “Documentation Principles”.

Representations and Warranties:

The Credit Agreement shall contain representations and warranties that are usual and customary for a facility of this type and consistent with the Documentation Principles.

Affirmative Covenants:

The Credit Agreement shall contain affirmative covenants that are usual and customary for a facility of this type and consistent with the Documentation Principles, including the following:

(a) the Borrower shall deliver monthly financial statements; provided that, after the one year anniversary of the Closing Date, if (i) a Spring-out Event (as defined below) has occurred and (ii) no Cash Dominion Trigger Period exists, the Borrower may deliver quarterly financial statements;

(b) the Borrower shall deliver Borrowing Base Certificates on a monthly basis, or if a Liquidity Event exists, on a weekly basis;

(c) the Borrower shall deliver information with respect to the Consolidated Cash Balance (a “Consolidated Cash Balance Report”) concurrently with the delivery of Borrowing Base Certificates in form and substance to be agreed to by the Borrower and the Administrative Agent; and

(d) the Borrower will furnish to the Administrative Agent prompt written notice of any material casualty or condemnation event.

The term “Liquidity Event” shall be defined in the Credit Agreement to mean the occurrence of a date when (a) Availability on such date shall have been less than the greater of (i) 17.5% of the Line Cap and (ii) $20,000,000, in either case for five consecutive Business Days, until such date as (b) Availability on such date shall have been at least equal to the greater of (i) 17.5% of the Line Cap and (ii) $20,000,000 for 30 consecutive calendar days. For the avoidance of doubt, the “Liquidity Event” concept shall only be used with respect to triggering the weekly Borrowing Base reporting obligation referenced in subsection (b) above.

Financial Covenants:

Minimum fixed charge coverage ratio of at least 1.0 to 1.0 to be triggered in the event that Availability is less than the greater of (a) $10,000,000 and (b) 15% of the Line Cap (the “FCCR Test Amount”), and to remain effective at all times thereafter until Availability exceeds the FCCR Test Amount for 30 consecutive days.

Negative Covenants:

The Credit Agreement shall contain negative covenants that are usual and customary for a facility of this type and consistent with the Documentation Principles, including the following:

(a) limitations on debt and liens; provided that the debt and liens negative covenants shall permit the incurrence of the obligations under the GUC Note and, subject to the Intercreditor Agreement, the liens securing the obligations under the GUC Note;

(b) limitations on payments of principal and cash payments of interest on the GUC Note; provided that such payments shall be permitted subject to satisfaction of the Payment Conditions (as defined below); and

(c) limitations on restricted payments (including dividends and distributions); provided that cash restricted payments shall be permitted subject to satisfaction of the Payment Conditions.

“Payment Conditions” shall mean, as to any action, (i) the absence of any event of default, (ii) minimum pro forma Availability of not less than the greater of (A) $25,000,000 and (B) 25% of the Line Cap, and (iii) a pro forma fixed charge coverage ratio of not less than 1.1 to 1.0.

Cash Dominion:

The Borrower and its subsidiaries will be subject to cash dominion for the life of the Revolving Facility. Funds deposited into any depository account (other than an amount up to $5,000 that can be kept in each account for overdraft protection) will be swept on a daily basis into a blocked account with the Administrative Agent (the “Concentration Account”). Other than during a Cash Dominion Trigger Period (defined below), collections which are received into the Concentration Account shall be deposited into the Borrower’s operating account. During a Cash Dominion Trigger Period, collections which are received into the Concentration Account shall be used to reduce amounts owing under the Revolving Facility. A “Cash Dominion Trigger Period” shall commence when either (i) an event of default has occurred and is continuing or (ii) Availability is less than the greater of (a) $20,000,000 and (b) 20% of the Line Cap and shall continue until (x) Availability remains in excess of the greater of (a) $20,000,000 and (b) 20% of the Line Cap for 60 consecutive days and (ii) no default is continuing. Notwithstanding the foregoing or any amount of Availability, a Cash Dominion Trigger Period shall be deemed to be in effect at all times prior to the first anniversary of the Closing Date (the “Initial Cash Dominion Trigger Period”). The Initial Cash Dominion Trigger Period shall continue beyond the first anniversary of the Closing Date until Availability remains in excess of the greater of (a) $25,000,000 and (b) 25% of the Line Cap for 60 consecutive days and (ii) no default is continuing (a “Spring-out Event”). A Cash Dominion Trigger Period may be discontinued no more than 2 times during the life of the Revolving Facility. The appropriate documentation, including blocked account and/or lockbox agreements acceptable to the Administrative Agent, will be required for all depository accounts of the Borrower and the other Loan Parties and the provisions of the Credit Agreement related thereto shall be substantially similar to Section 5.12(d) of the DIP Credit Agreement.

	Events of Default:	The Credit Agreement shall contain events of default that are usual and customary for a facility of this type and consistent with the Documentation Principles.

	Defaulting Lenders:	Documentation will include customary provisions regarding defaulting Lenders.

Field Examinations:

Field examinations will be conducted once in each twelve (12) month period at the Borrower’s expense to ensure the adequacy of Borrowing Base collateral and related reporting and control systems; provided that a second field examination may be performed at the Borrower’s expense in such twelve month period if Availability falls below the greater of (a) $25,000,000 and (b) 25% of the Line Cap during such twelve month period; provided further, that there shall be no limitation on the number or frequency of field examinations that may be performed at the Borrower’s expense if a Specified Event of Default (as defined in the Prepetition Credit Agreement, but also to include events of default related to the failure to timely deliver financial statements and breaches of the financial covenant) shall have occurred and be continuing. The foregoing shall not limit the number of field examinations that can be performed by the Administrative Agent at its own expense.

Appraisals:

Inventory appraisals will be conducted once in each twelve (12) month period at the Borrower’s expense; provided that, a second inventory appraisal may be performed at the Borrower’s expense in such twelve month period if Availability falls below the greater of (a) $25,000,000 and (b) 25% of the Line Cap during such twelve month period; provided further, that there shall be no limitation on the number or frequency of inventory appraisals that may be performed at the Borrower’s expense if a Specified Event of Default shall have occurred and be continuing. The foregoing shall not limit the number of appraisals that can be performed by the Administrative Agent at its own expense.

Expenses and Indemnification:

The Credit Agreement shall contain indemnification and expense reimbursement provisions substantially similar to those contained in the Prepetition Credit Agreement, subject to modifications to be agreed to by the Administrative Agent and the Borrower.

Governing Law:

This Term Sheet, the Commitment Letter and the Fee Letter are, and the Loan Documents will be, governed by the internal laws of the State of New York.

Counsel to the Administrative Agent and the Lead Arranger:

Vinson & Elkins LLP.

Annex I

Interest and Certain Fees

Interest Rate Options:	The Borrower may elect that the loans comprising each borrowing bear interest at a rate per annum equal to (a) the CB Floating Rate (such loans herein referred to as “CBFR Loans”) plus the Applicable Margin or (b) the Adjusted LIBO Rate (such loans herein referred to as “Eurodollar Loans”) plus the Applicable Margin; provided, that all Swing Line Loans shall bear interest at a rate per annum equal to the CBFR plus the Applicable Margin.

	The Applicable Margins shall initially be (a) 2.75% in the case of Eurodollar Rate Loans and (b) 1.75% in the case of CBFR Loans, in each case during the twelve (12) month period commencing on the Closing Date. The Adjusted LIBO Rate shall have a floor of 0.50% at all times.

LIBOR Discontinuation:	The Credit Agreement will contain provisions to be mutually agreed with respect to a replacement of the Adjusted LIBO Rate.

Performance Pricing:	Commencing twelve (12) months after the Closing Date, the Applicable Margins will be subject to performance pricing adjustments as set forth in the pricing grid attached hereto.

Interest Payment Dates:	In the case of CBFR Loans, interest shall be payable on the first calendar day following the end of each fiscal quarter (but in any event, not less frequently than cash interest payments are required to be paid under the GUC Note), upon any prepayment due to acceleration and at final maturity.

	In the case of Eurodollar Loans, interest shall be payable in arrears on the last day of each interest period and, in the case of an interest period longer than three months, quarterly, upon any prepayment and at final maturity.

Commitment Fee:	A commitment fee equal to 0.50% per annum on the average daily unused portion of the Revolving Commitment, payable quarterly in arrears to the Administrative Agent for the ratable benefit of the Lenders from the Closing Date until termination of the Revolving Commitment.

Letter of Credit Fees:	Letter of Credit: A letter of credit fee, equal to (i) for “standby” Letters of Credit, the Applicable Margin for Eurodollar Loans multiplied by the average daily Stated Amount of outstanding Letters of Credit, and (ii) for “commercial” Letters of Credit, 50% of the Applicable Margin for Eurodollar Loans multiplied by the average daily Stated Amount of outstanding “commercial” Letters of Credit, in each case, payable quarterly in arrears to the Administrative Agent for the ratable benefit of the Lenders (including the Issuing Lenders).

	“Stated Amount” means at any time the maximum amount for which a Letter of Credit may be honored.

	Fronting Fee: A fronting fee of 0.125% per annum of the face amount of each Letter of Credit issued shall be payable to the applicable Issuing Lender, together with any documentary and processing charges in accordance with such Issuing Lender's standard schedule for such charges with respect to the issuance, amendment, cancellation, negotiation, transfer, presentment, renewal or extension of each letter of credit and each drawing made thereunder.

Upfront Fees:	As described in Section 8 of the Commitment Letter.

Agent and Arranger Fees:	Such additional fees payable to the Administrative Agent and the Lead Arranger as are specified in the Fee Letter.

Default Rate:	During the continuance of an event of default, the applicable interest rate and Letter of Credit Fee will be increased by 2% per annum (and new Eurodollar Loans may be suspended). Overdue interest, fees and other amounts shall bear interest at 2% above the rate applicable to CBFR Loans.

Rate and Fee Basis:	All per annum rates shall be calculated on the basis of a year of 360 days (or 365/366 days, in the case of CBFR Loans) for actual days elapsed.

PRICING GRID

Excess Availability	Revolver Eurodollar Applicable Margin			Revolver CBFR Applicable Margin
≥ $50,000,000		2.25	%		1.25	%
< $50,000,000 but ≥ $30,000,000		2.50	%		1.50	%
< $30,000,000		2.75	%		1.75	%

From and after the first anniversary of the Closing Date, the applicable margins and fees shall be determined in accordance with the foregoing table based on the Borrower’s average quarterly Availability, as determined by the Administrative Agent’s system of records. Adjustments, if any, to the applicable margins shall be made on a quarterly basis and shall be effective on the first day of each fiscal quarter of the Borrower. If the Borrower fails to deliver any Borrowing Base Certificate to the Lender at the time required pursuant to the Credit Agreement, then the applicable margins and fees shall be the highest applicable margins and fees set forth in the foregoing table until five days after such Borrowing Base Certificate is so delivered.

Annex II

ILLUSTRATIVE EXAMPLE OF MINIMUM OPENING AVAILABILITY

			Prior to $10 million Liquidity block			Net of $10 million Liquidity block
Exit ABL Facility

Inventory Balance				100,000			100,000
Borrowing Base %	90.0	%
NOLV %	82.4	%
Gross Advance Rate	74.2	%
Net Advance Rate (net of shrink, damages other reserves)	71.5	%

Gross Projected Availability				71,481			71,481
Liquidity Event Reserve				-			(10,000	)
Letters of Credit Outstanding				(10,823	)		(10,823	)

Gross Availability (net of Advances, Reserves)				60,658			50,658

Projected Borrowings at Exit				25,000			25,000

Net Projected Availability at Exit			$	35,658		$	25,658

ANNEX B

COMMITMENTS

Lender	Commitment Amount
JPMorgan Chase Bank, N.A.	$	40,000,000.00
Bank of America, N.A.	$	40,000,000.00
Wells Fargo Bank, N.A.	$	30,000,000.00
Total:	$	110,000,000.00

Exhibit 10.3

Privileged & Confidential – Attorney Work Product

November 3, 2020

Tuesday Morning Corporation

6250 LBJ Freeway

Dallas, Texas 75240

BACKSTOP COMMITMENT LETTER

Ladies and Gentlemen:

Tuesday Morning Corporation (the “Company”), and certain of its subsidiaries (collectively, the “Debtors”)¹ filed on May 27, 2020, voluntary cases under title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (as now in effect or hereinafter amended, and the rules and regulations promulgated hereunder, the “Bankruptcy Code”), in the United States Bankruptcy Court for the Northern District of Texas (together with any court with jurisdiction over such cases, the “Bankruptcy Court”), which cases are being jointly administered under the case number 20-31476 (HDH) (the “Chapter 11 Cases”). Each of the Debtors has continued to operate its business as a debtor and debtor in possession during its Chapter 11 Cases. The Debtors have requested that Osmium Partners, LLC (“Osmium”, and with “Commitment Party”)) “backstop” an equity rights offering upon the terms and conditions set forth on Exhibit A hereto (the “Term Sheet”). Capitalized terms used in this Commitment Letter (this “Commitment Letter”) that are not otherwise defined shall have the meanings ascribed to such terms in the Term Sheet. The term “Business Day” as used herein shall mean any day, other than a Saturday, Sunday, or legal holiday, as defined in Bankruptcy Rule 9006(a).

1. Backstop Commitment.

(a) Osmium will directly or indirectly (i) fully exercise its minimum allocation of subscription rights pursuant to the Equity Rights Offering, and duly purchase all shares issuable to it (the “Rights Offering Shares”) pursuant to such exercise at the Offering Price (the “Subscription Rights Commitment”) and (ii) purchase any remaining Rights Offering Shares at the Offering Price (the “Backstop Commitment”) that are offered and not otherwise purchased as part of the Equity Rights Offering. The Subscription Rights Commitment together with the Backstop Commitment of the Commitment Party are referred to herein as the “Commitment” of the Commitment Party.

(b) The Commitment Party and, by countersigning this Commitment Letter, the Debtors, hereby agree to cooperate, negotiate in good faith and seek to execute promptly following the date hereof a long-form “backstop commitment agreement” (including any exhibits and schedules thereto, hereinafter collectively referred to as the “Backstop Commitment Agreement”) on terms consistent with the Term Sheet, containing such other terms as are customary for transactions of this type and mutually acceptable and otherwise in form and substance acceptable to the Commitment Party and the Debtors, provided that the parties hereto acknowledge that the only conditions precedent or termination provisions to be included in the Backstop Commitment Agreement shall be as reflected in the Term Sheet and otherwise as are customary for transactions of this nature. Upon its execution and approval by an order entered by the Bankruptcy Court, the Backstop Commitment Agreement shall supersede this Commitment Letter.

¹	The Debtors are Tuesday Morning Corporation, TMI Holdings, Inc., Tuesday Morning, Inc., Friday Morning, LLC, Days of the Week, Inc., Nights of the Week, Inc., and Tuesday Morning Partners, Ltd.

2. Certain Conditions. The obligations of the Debtors to issue the Rights Offering Shares and the Commitment Party to purchase its Commitment hereunder shall be subject to the execution and delivery by the Commitment Party and the Debtors of the Backstop Commitment Agreement, which shall be on terms consistent with the Term Sheet, containing such other terms as are customary for transactions of this type and mutually acceptable, and otherwise in form and substance acceptable to the Commitment Party and the Debtors, provided that the parties hereto acknowledge that the only conditions precedent or termination provisions to be included in the Backstop Commitment Agreement shall be as reflected in the Term Sheet and otherwise as are customary for transactions of this nature.

3. Termination. This Commitment Letter shall terminate (a) automatically, without further action or notice by any person, upon the execution and delivery of the Backstop Commitment Agreement by the Company and the Commitment Party, (b) upon written notice by the Company or the Commitment Party if the Backstop Commitment Agreement is not executed and delivered by the Company and each Commitment Party within ten (10) Business Days following the date hereof, provided that such date may be extended by an additional ten (10) Business Days with the prior written consent of the Commitment Party and the Company (such date, as may be extended as provided in this clause (b), the “Outside Date”), (c) upon written notice by the Company if the board of directors of the Company determines that continued performance under this Commitment Letter (including taking any action or refraining from taking any action) would be inconsistent with the exercise of its fiduciary duties under applicable law (as reasonably determined by the board of directors of the Company in good faith after consultation with outside legal counsel and based on the advice of such counsel), or (d) upon written notice by the Company, on the one hand, or the Commitment Party, on the other hand, as applicable, of such termination, if the other party shall have materially breached its or their representations, warranties or covenants contained herein, and such breach is not otherwise cured by the breaching party within (five) 5 Business Days of receipt of written notice of such breach from the non-breaching party. Additionally, this Commitment Letter may be terminated and the transactions contemplated hereby may be abandoned at any time by mutual written consent of the Company and the Commitment Party. Upon any termination pursuant to the terms herein, this Commitment Letter shall become void and there shall be no further obligations or liabilities on the part of the Debtors or the Commitment Party; provided that the Debtors’ reimbursement obligations pursuant to Section 4 of this Commitment Letter and the indemnification obligations pursuant to Section 5 of this Commitment Letter shall survive the termination of this Commitment Letter indefinitely, and shall remain in full force and effect, in each case so long as the Backstop Approval Order has been entered by the Bankruptcy Court prior to the date of termination.

4. Fees. The Debtors shall reimburse the out-of-pocket fees and expenses of the Commitment Party as set forth in the Term Sheet, in accordance with the terms and conditions specified in the Term Sheet, so long as the Backstop Approval Order has been entered by the Bankruptcy Court prior to the date of any valid termination of this Commitment Letter, provided that such fees and expenses shall not exceed $600,000 without the prior written consent of the Company. If this Commitment Letter is validly terminated and the Backstop Approval Order has not been entered prior to the date of such termination, nothing contained herein shall limit or restrict (a) the Commitment Party from seeking allowance and payment of such fees and expenses of the Commitment Party as administrative expenses of the Debtors’ estates under the Bankruptcy Code, including under Sections 503(b) and 507 thereof or (b) the Debtors’ right to object thereto. For the avoidance of doubt, the limitation on reimbursement contained in this Section 4 has been agreed to amongst the parties hereto on their mutual acknowledgment and agreement that Debtors’ counsel will have primary drafting responsibility for the Backstop Commitment Agreement and any and all other documentation regarding the Equity Rights Offering.

5. Indemnification.

(a) If following the date hereof any action, suit or proceeding (related to or arising from this Commitment Letter or the transactions contemplated hereby or any claim, challenge, litigation, investigation or proceeding relating to any of the foregoing) shall be commenced against, or any claim or demand (related to or arising from this Commitment Letter or the transactions contemplated hereby) shall be asserted against the Commitment Party by a third party, then the Debtors together with their successors, on a joint and several basis, (each, an “Indemnifying Party”) shall indemnify, defend and hold harmless the Commitment Party and each of the Commitment Party’s affiliates and each of their respective officers, directors, managers, direct and indirect general and limited partners, equityholders, employees, advisors, agents and other representatives and any affiliate of any of the foregoing, and each of the respective successors and permitted assigns of any of the foregoing (each, an “Indemnified Party”) from and against, and shall promptly reimburse each Indemnified Party for, all losses, damages, liabilities, costs, and expenses, including, without limitation, interest, court costs and reasonable attorneys’ fees and expenses arising from, relating to or in connection with any such action, suit or proceeding by a third-party (collectively, “Indemnified Liabilities”); provided that Indemnified Liabilities shall exclude any portion of such losses, damages, liabilities, costs or expenses found by a final, non-appealable judgment of a court of competent jurisdiction to arise from an Indemnified Party’s gross negligence, willful misconduct or fraud.

(b) Each Indemnified Party entitled to indemnification hereunder shall (i) give prompt written notice to the Indemnifying Party of any claim with respect to which it seeks indemnification or contribution pursuant to this Commitment Letter and (ii) permit such Indemnifying Party to assume the defense of such claim with counsel selected by the Indemnified Party and reasonably satisfactory to the Indemnifying Party; provided that any Indemnified Party entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (x) the Indemnifying Party has agreed in writing to pay such fees and expenses, (y) the Indemnifying Party shall have failed to assume the defense of such claim within 20 days of delivery of the written notice of the Indemnified Party with respect to such claim or failed to employ counsel selected by such Indemnifying Party and reasonably satisfactory to such Indemnified Party or (z) in the reasonable judgment of such Indemnified Party, based upon advice of its counsel, a conflict of interest may exist between such Indemnified Party and the Indemnifying Party with respect to such claims (in which case, if the Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of such claim on behalf of such Indemnified Party). In connection with any settlement negotiated by an Indemnifying Party, no Indemnifying Party shall, and no Indemnified Party shall be required by an Indemnifying Party to, (i) enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the Indemnified Party of a release from all liability in respect to such claim or litigation, (ii) enter into any settlement that attributes, by its terms, liability to the Indemnified Party or (iii) consent to the entry of any judgment that does not include as a term thereof a full dismissal of the litigation or proceeding with prejudice. In addition, without the consent of the Indemnified Party (which consent shall not be unreasonably withheld), no Indemnifying Party shall be permitted to consent to entry of any judgment or enter into any settlement providing for any action on the part of the Indemnified Party other than the payment of money damages which are to be paid in full by the Indemnifying Party. If an Indemnifying Party fails or elects not to assume the defense of a claim pursuant to clause (y) above, or is not entitled to assume or continue the defense of such claim pursuant to clause (z) above, the Indemnified Party shall have the right without prejudice to its right of indemnification hereunder to, in its discretion, exercise in good faith and upon advice of counsel its rights to contest, defend and litigate such claim and may settle such claim, either before or after the initiation of litigation, at such time and upon such terms as the Indemnified Party deems fair and reasonable; provided that at least 10 days prior to any settlement, written notice of its intention to settle is given to the Indemnifying Party. If requested by the Indemnifying Party, the Indemnified Party agrees (at no expense to the Indemnified Party) to cooperate with the Indemnifying Party and its counsel in contesting any claim that the Indemnifying Party elects to contest.

6. Representations and Warranties.

(a) The Commitment Party represents and warrants to the Debtors as follows: The Commitment Party has been duly organized or formed, as applicable, and is validly existing in good standing under the applicable laws of its jurisdiction of organization or formation. The Commitment Party has the requisite power and authority to enter into, execute and deliver this Commitment Letter, and to perform its obligations hereunder, and has taken all necessary action required for the due authorization, execution, delivery and performance by it of this Commitment Letter. This Commitment Letter has been duly and validly executed and delivered by the Commitment Party, and, assuming due and valid execution hereof by the Company, constitutes its valid and binding obligation, enforceable against the Commitment Party in accordance with its terms. The Commitment Party will have on the date(s) its Commitment hereunder is required to be performed, sufficient funds available to purchase its Commitment hereunder on the terms contemplated by this Commitment Letter and the Term Sheet, and to consummate the other transactions contemplated by this Commitment Letter and the Term Sheet.

(b) The Company represents and warrants to the Commitment Party as follows: The Company has been duly formed and is validly existing in good standing under the applicable laws of the State of Delaware. The Company has the requisite power and authority to enter into, execute and deliver this Commitment Letter, and to perform its obligations hereunder, and has taken all necessary action required for the due authorization, execution, delivery and performance by it of this Commitment Letter. This Commitment Letter has been duly and validly executed and delivered by the Company, and, subject to entry of any required orders of the Bankruptcy Court, and assuming valid execution hereof by the Commitment Party, constitutes its valid and binding obligation, enforceable against the Company in accordance with its terms.

7. Confidentiality. Except as may be required by law or the Bankruptcy Court, the Company agrees to keep confidential and not provide or disclose the existence or any of the terms of this Commitment Letter or the Term Sheet, except in each case as provided herein.

8. Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Commitment Letter were not performed in accordance with the terms hereof and that the parties hereto shall be entitled to an injunction or injunctions without the necessity of posting a bond or proving the inadequacy of money damages to prevent breaches of this Commitment Letter or to enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Unless otherwise expressly stated in this Commitment Letter, no right or remedy described or provided in this Commitment Letter is intended to be exclusive or to preclude a party hereto from pursuing other rights and remedies to the extent available under this Commitment Letter, at law or in equity.

9. Governing Law; Jurisdiction. This Commitment Letter shall be governed and construed in accordance with the laws of the State of New York without application of any choice of law provisions that would require the application of the laws of another jurisdiction. The parties hereto consent and agree that any action to enforce this Commitment Letter or any dispute, whether such dispute arises in law or equity, arising out of or relating to this Commitment Letter and the agreements, instruments, and documents contemplated hereby shall be brought exclusively in the Bankruptcy Court. The parties consent to and agree to the exclusive jurisdiction of the Bankruptcy Court. Each of the parties hereby waives and agrees not to assert in any such dispute, to the fullest extent permitted by applicable law, any claim that (a) such party is not personally subject to the jurisdiction of the Bankruptcy Court, (b) such party and such party’s property is immune from any legal process issued by the Bankruptcy Court, or (c) any litigation or other proceeding commenced in the Bankruptcy Court is brought in an inconvenient forum.

10. Amendments. This Commitment Letter represents the final agreement and the entire understanding among the parties hereto with respect to the subject matter hereof, and may not be contradicted by evidence of prior or contemporaneous agreements and understandings of the parties hereto. There are no unwritten oral agreements or understandings between the parties hereto relating to the subject matter hereof. This Commitment Letter may only be modified, amended, or supplemented as provided by the Term Sheet or by an agreement signed by the Company and the Commitment Party.

11. Counterparts. This Commitment Letter may be executed in any number of counterparts, all of which will be considered one and the same agreement and will become effective when counterparts have been signed by each of the parties hereto and delivered to each other party (including via electronic transmission), it being understood that each party need not sign the same counterpart.

12. No Fiduciary Duties. Notwithstanding anything to the contrary herein, the entry into this Commitment Letter and the transactions contemplated hereby shall not create any fiduciary duties between or among the Commitment Party, the Debtors or any of Debtors’ creditors or other stakeholders.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have duly executed this Commitment Letter as of the date first above written.

	OSMIUM PARTNERS, LLC

	By:	/s/ John H. Lewis
	Name: John H. Lewis
	Title: Authorized Signatory

TUESDAY MORNING, INC.

By:	/s/Steven R. Becker
Name: Steven R. Becker
Title: Chief Executive Officer and President

Exhibit A

Term Sheet

Privileged & Confidential – Attorney Work Product

TUESDAY MORNING CORPORATION

BACKSTOP TERM SHEET

NOVEMBER 3, 2020

This term sheet (this “Backstop Term Sheet”) summarizes certain material terms and conditions of certain transactions to take place in connection with the proposed restructuring of the capital structure and financial obligations of Tuesday Morning Corporation and certain of its subsidiaries (collectively, the “Debtors”)² pursuant and subject to, among other things, the terms and conditions described in this Backstop Term Sheet. This Backstop Term Sheet is intended solely as a basis for further discussion and is not intended to be and does not constitute a commitment, offer to purchase, or any legally binding obligation. This Backstop Term Sheet does not include all of the conditions, covenants, closing conditions, representations, warranties, or other terms that would be contained in a definitive backstop commitment letter or agreement.

This Backstop Term Sheet is a settlement proposal in furtherance of settlement discussions, and is subject to all existing confidentiality agreements. This Backstop Term Sheet is not a commitment to lend or to agree to the terms of any restructuring. Accordingly, this term sheet is protected by rule 408 of the Federal Rules of Evidence and any other applicable statutes or doctrines protecting the use or disclosure of confidential settlement discussions. This Backstop Term Sheet is subject to ongoing review and approval by all parties and is not binding, is subject to material change, and is being distributed for discussion purposes only. Furthermore, this Backstop Term Sheet is subject to definitive documentation acceptable to the Backstop Parties (as defined below) in its sole discretion.

OVERVIEW
Backstop Commitments		Osmium Partners (the “Backstop Party”) shall backstop the Equity Rights Offering (the “Backstop Commitment”) in accordance with a backstop commitment letter to be negotiated between the Debtors and the Backstop Party (the “Backstop Commitment Letter”) that includes the terms and conditions set forth herein and such other terms that are acceptable to the Backstop Party and to the Debtors in their respective sole discretions. Specifically, in the Backstop Commitment Letter, the Backstop Party will commit to provide cash up to $40 million in order to backstop a $40 million rights offering (the “Equity Rights Offering”) with a minimum allocation of $16 million.

Commitment Fees		The commitment fee (collectively, the “Commitment Fee”) for the Backstop Commitment shall be 5.0% of the Backstop Commitment, payable in common stock of the Reorganized Debtors (the “New Common Equity”) offered at $1.10 (the “Offering Price”). The Commitment Fee shall be earned once the Bankruptcy Court has entered an order approving the Backstop Commitment Letter (the “Backstop Approval Order”), and such order becomes a Final Order.

²	The Debtors are Tuesday Morning Corporation, TMI Holdings, Inc., Tuesday Morning, Inc., Friday Morning, LLC, Days of the Week, Inc., Nights of the Week, Inc., and Tuesday Morning Partners, Ltd.

Warrants		The Backstop Parties shall receive one-fourth of a warrant for every $1.00 of Backstop Commitment (10,000,000 warrants), and such warrants will have a term of five years and a strike price of 150% of the Offering Price. Proceeds of the warrants shall be used to reduce the Debtors’ total debt.

Governance		The Backstop Party may elect a minimum of three directors to the board of directors of the Reorganized Debtors, which board shall be limited to a maximum of eight directors.

Conditions to Backstop Commitment		The Backstop Commitments will be subject to the following conditions precedent: · the Backstop Approval Order becomes a Final Order; · the Commitment Fee shall be earned and payable; and · all other conditions as set forth in the Backstop Commitment Letter.

Termination		The Backstop Party may terminate its obligations or commitments contemplated by the Backstop Commitment Letter by written notice to the Debtors’ counsel upon the earliest occurrence of any of the following termination events: · the Debtors do not file a motion seeking approval of the Backstop Commitment Letter (the “Backstop Approval Motion”) on or before November 9, 2020; · the Bankruptcy Court does not enter the Backstop Approval Order on or before November 13, 2020; or · the occurrence of a materially adverse event, including store closings due to COVID-19 (70% of the stores do not remain open measured in two-week rolling periods).

Representations, Warranties, Conditions, and Covenants		The Backstop Commitment Letter shall contain customary representations, warranties, conditions and covenants for transactions of this type, which are mutually acceptable to the Backstop Party and the Debtors.

New Common Equity		The New Common Equity may be issued by the Reorganized Debtors on the Effective Date. All terms of the New Common Equity, including the issuance thereof, shall be subject in all respects to a New Common Equity term sheet to be agreed upon by the Backstop Parties and the Debtors.

Other Terms		A reserve of 10.3% of Reorganized Debtors’ common stock at emergence for awards in connection with the Reorganized Debtors’ long-term employee incentive program is acceptable to Backstop Party, with administration and allocation of awards to be reasonably acceptable to the Backstop Party GUC Note terms to be reasonably acceptable to the Backstop Party. Sale/leaseback completed on terms reasonably acceptable to the Backstop Party, it being agreed that the terms of the sale/leaseback shared with the Backstop Party on November 3, 2020 are reasonably acceptable. Company organizational documents to be amended to restrict the ability to acquire or dispose of company stock if such transactions would cause a change of ownership within the meaning of Section 382 of the Code in a manner reasonably acceptable to the Backstop Party. Reimbursement of out-of-pocket expenses of the Backstop Party (with a cap of $600,000 (assuming all drafting is done by company counsel)).

Exhibit 99.1

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

In re:

Tuesday Morning Corporation, et al.,¹

Debtors.

Chapter 11

Case No. 20-31476-HDH-11

Jointly Administered

FIRST AMENDED JOINT PLAN OF REORGANIZATION OF TUESDAY
MORNING CORPORATION, ET AL., PURSUANT TO CHAPTER 11
OF THE BANKRUPTCY CODE

Ian T. Peck

State Bar No. 24013306

Jarom J. Yates

State Bar No. 24071134

Jordan E. Chavez

State Bar No. 24109883

HAYNES AND BOONE, LLP

2323 Victory Avenue, Suite 700

Dallas, TX 75219

Telephone: 214.651.5000

Facsimile: 214.651.5940

Email: ian.peck@haynesboone.com

Email: jarom.yates@haynesboone.com

Email: jordan.chavez@haynesboone.com

ATTORNEYS FOR DEBTORS

Dated: November 4, 2020

¹ The Debtors in these Chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: Tuesday Morning Corporation (8532) (“TM Corp.”); TMI Holdings, Inc. (6658) (“TMI Holdings”); Tuesday Morning, Inc. (2994) (“TMI”); Friday Morning, LLC (3440) (“FM LLC”); Days of the Week, Inc. (4231) (“DOTW”); Nights of the Week, Inc. (7141) (“NOTW”); and Tuesday Morning Partners, Ltd. (4232) (“TMP”). The location of the Debtors’ service address is 6250 LBJ Freeway, Dallas, TX 75240.

TABLE OF CONTENTS

Article I. DEFINED TERMS, RULES OF INTERPRETATION, Construction of terms, COMPUTATION OF TIME, AND GOVERNING LAW		1
A.	Defined Terms.	1
B.	Rules of Interpretation and Construction of Terms.	1
C.	Computation of Time.	1
D.	Governing Law.	2
E.	Reference to Monetary Figures.	2
F.	Reference to the Debtors or the Reorganized Debtors.	2

Article II. ADMINISTRATIVE CLAIMS AND PRIORITY CLAIMS		2
A.	Administrative Claims.	2
B.	DIP Revolving Facility Claims.	3
C.	DIP Real Estate Facility Claims.	3
D.	Professional Compensation Claims.	3
E.	Priority Unsecured Tax Claims.	4

Article III. CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS		4
A.	Classification in General.	4
B.	Grouping of Debtors for Convenience Only.	5
C.	Summary of Classification of Claims and Interests.	5
D.	Treatment of Claims and Interests.	5
E.	Special Provision Governing Unimpaired Claims.	9
F.	Elimination of Vacant Classes.	9
G.	Voting Classes, Presumed Acceptance by Non-Voting Classes.	9
H.	Intercompany Interests.	9
I.	Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code.	9
J.	Controversy Concerning Impairment.	10
K.	Subordinated Claims.	10
L.	No Waiver.	10

Article IV. MEANS FOR IMPLEMENTATION OF THE PLAN		10
A.	Corporate Existence.	10
B.	Reorganized Debtors.	10
C.	Restructuring Transactions.	11
D.	Authorization of New Common Stock	11
E.	Sources of Plan Distributions.	11
F.	Vesting of Assets in the Reorganized Debtors.	14
G.	Cancellation of Existing Securities and Agreements.	14
H.	Corporate Action.	15
I.	New Organizational Documents.	15
J.	Directors and Officers of the Reorganized Debtors.	16
K.	Effectuating Documents; Further Transactions.	16
L.	Section 1146 Exemption.	17
M.	Director and Officer Liability Insurance.	17
N.	Management Incentive Plan.	17
O.	Employee and Retiree Benefits.	18
P.	Retained Causes of Action.	18

Article V. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES		18
A.	Assumption and Rejection of Executory Contracts and Unexpired Leases.	18
B.	Indemnification Obligations.	19
C.	Claims Based on Rejection of Executory Contracts or Unexpired Leases.	20
D.	Cure of Defaults for Executory Contracts and Unexpired Leases Assumed.	20
E.	Preexisting Obligations to the Debtors under Executory Contracts and Unexpired Leases.	20
F.	Insurance Policies.	21
G.	Modifications, Amendments, Supplements, Restatements, or Other Agreements.	21
H.	Reservation of Rights.	21
I.	Nonoccurrence of Effective Date.	21
J.	Contracts and Leases Entered into After the Petition Date.	21

Article VI. PROVISIONS GOVERNING DISTRIBUTIONS		22
A.	Timing and Calculation of Amounts to Be Distributed.	22
B.	Disbursing Agent.	22
C.	Rights and Powers of Disbursing Agent.	22
D.	Delivery of Distributions and Undeliverable or Unclaimed Distributions.	23
E.	Manner of Payment.	24
F.	Distributions to Holders of Class 5 General Unsecured Claims.	24
G.	Securities Act Exemption	25
H.	Compliance with Tax Requirements.	25
I.	Allocations.	25
J.	No Postpetition Interest on Claims.	26
K.	Foreign Currency Exchange Rate.	26
L.	Setoffs and Recoupment.	26
M.	Claims Paid or Payable by Third Parties.	26

Article VII. PROCEDURES FOR RESOLVING CONTINGENT, UNLIQUIDATED, AND DISPUTED CLAIMS		27
A.	Claims Administration Responsibilities.	27
B.	Estimation of Claims and Interests.	28
C.	Adjustment to Claims or Interests without Objection.	28
D.	Time to File Objections to Claims.	28
E.	Disallowance of Claims or Interests.	28
F.	Amendments to Claims or Interests.	29
G.	No Distributions Pending Allowance.	29
H.	Distributions After Allowance.	29

Article VIII. SETTLEMENT, RELEASE, INJUNCTION, AND RELATED PROVISIONS		30
A.	Discharge of Debtors.	30
B.	Release of Liens.	30
C.	Releases by the Debtors.	31
D.	Releases by Holders of Claims and Interests.	31
E.	Exculpation.	32
F.	Injunction.	32
G.	Protections Against Discriminatory Treatment.	33
H.	Reimbursement or Contribution.	33

Article IX. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN		33
A.	Conditions Precedent to Confirmation.	33
B.	Conditions Precedent to Effectiveness.	34
C.	Waiver of Conditions.	34
D.	Effect of Failure of Conditions.	34

Article X. MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE PLAN		35
A.	Modification and Amendments.	35
B.	Effect of Confirmation on Modifications.	35
C.	Revocation or Withdrawal of Plan.	35

Article XI. RETENTION OF JURISDICTION		36

Article XII. MISCELLANEOUS PROVISIONS		38
A.	Immediate Binding Effect.	38
B.	Additional Documents.	38
C.	Payment of Statutory Fees.	38
D.	Statutory Committee and Cessation of Fee and Expense Payment.	38
E.	Reservation of Rights.	38
F.	Successors and Assigns.	39
G.	Notices.	39
H.	Term of Injunctions or Stays.	40
I.	Entire Agreement.	40
J.	Exhibits.	40
K.	Nonseverability of Plan Provisions.	41
L.	Votes Solicited in Good Faith.	41
M.	Closing of Chapter 11 Cases.	41
N.	Waiver or Estoppel.	41
O.	Controlling Document.	41

iii

INTRODUCTION

The Debtors hereby propose this Chapter 11 Plan under Bankruptcy Code section 1121 for the resolution of outstanding Claims against, and Interests in, the Debtors. Holders of Claims or Interests may refer to the Disclosure Statement, filed contemporaneously with the Plan, for a summary and description of the Plan and certain related matters.

Article I.
DEFINED TERMS, RULES OF INTERPRETATION,
Construction of terms, COMPUTATION OF TIME, AND GOVERNING LAW

A. Defined Terms.

All capitalized terms not defined elsewhere in the Plan shall have the meaning assigned to them in the Glossary of Defined Terms attached hereto as Exhibit A. Any capitalized term used in the Plan and not defined herein, but that is defined in the Bankruptcy Code, has the meaning assigned to that term in the Bankruptcy Code. Any capitalized term used in the Plan and not defined herein or in the Bankruptcy Code, but that is defined in the Bankruptcy Rules, has the meaning assigned to that term in the Bankruptcy Rules.

B. Rules of Interpretation and Construction of Terms.

For purposes of the Plan: (1) any reference in the Plan to an existing document or exhibit Filed or to be Filed means that document or exhibit as it may have been or may be amended, supplemented, or otherwise modified; (2) unless otherwise specified, all references in the Plan to sections, articles, and exhibits are references to sections, articles, or exhibits of the Plan; (3) the words “herein,” “hereof,” “hereto,” “hereunder,” and other words of similar import refer to the Plan in its entirety and not to any particular portion of the Plan; (4) captions and headings contained in the Plan are inserted for convenience and reference only, and are not intended to be part of or to affect the interpretation of the Plan; (5) wherever appropriate from the context, each term stated in either the singular or the plural includes the singular and the plural, and pronouns stated in the masculine, feminine, or neuter gender shall include the masculine, feminine, and neuter gender; (6) unless otherwise specified, all references herein to exhibits are references to the exhibits in the Plan Supplement; (7) any reference to an Entity as a Holder of a Claim or Interest includes the Entity’s successors and assigns; (8) any reference to docket numbers of documents Filed in the Chapter 11 Cases are references to docket numbers under the Bankruptcy Court’s CM/ECF system; and (9) the rules of construction outlined in Bankruptcy Code § 102 and in the Bankruptcy Rules apply to the Plan.

C. Computation of Time.

In computing any period, date, or deadline prescribed or allowed in the Plan, the provisions of Bankruptcy Rule 9006(a) shall apply. If the date on which a transaction may or must occur pursuant to the Plan shall occur on a day that is not a Business Day, then such transaction shall instead occur on the next succeeding Business Day.

D. Governing Law.

Subject to the provisions of any contract, certificate of incorporation, by-law, instrument, release, or other agreement or document entered into in connection with the Plan, the rights and obligations arising pursuant to the Plan shall be governed by, and construed and enforced in accordance with, applicable federal law, including the Bankruptcy Code and the Bankruptcy Rules.

E. Reference to Monetary Figures.

All references in the Plan to monetary figures shall refer to currency of the United States of America, unless otherwise expressly provided.

F. Reference to the Debtors or the Reorganized Debtors.

Except as otherwise specifically provided in the Plan to the contrary, references in the Plan to the Debtors or the Reorganized Debtors shall mean the Debtors and the Reorganized Debtors, as applicable, to the extent the context requires.

Article II.
ADMINISTRATIVE CLAIMS AND PRIORITY CLAIMS

In accordance with Bankruptcy Code section 1123(a)(1), Administrative Claims, Professional Compensation Claims, DIP Revolving Facility Claims, DIP Real Estate Facility Claims and Priority Unsecured Tax Claims have not been classified and, thus, are excluded from the Classes of Claims and Interests set forth in Article III hereof.

A. Administrative Claims.

Unless otherwise agreed to by the holder of an Allowed Administrative Claim and the Debtors or the Reorganized Debtors, as applicable, each holder of an Allowed Administrative Claim (other than holders of Professional Compensation Claims and Claims for fees and expenses pursuant to section 1930 of chapter 123 of title 28 of the United States Code) will receive in full and final satisfaction of its Administrative Claim an amount of Cash equal to the amount of such Allowed Administrative Claim in accordance with the following: (1) if an Administrative Claim is Allowed on or prior to the Effective Date, on the Effective Date or as soon as reasonably practicable thereafter (or, if not then due, when such Allowed Administrative Claim is due or as soon as reasonably practicable thereafter); or (2) if such Administrative Claim is not Allowed as of the Effective Date, no later than 10 days after the date on which an order allowing such Administrative Claim becomes a Final Order, or as soon as reasonably practicable thereafter.

Except for Professional Compensation Claims, DIP Revolving Facility Claims, DIP Real Estate Facility Claims, and unless previously Filed, requests for payment of Administrative Claims must be Filed and served on the Reorganized Debtors no later than the Administrative Claim Bar Date. Objections to such requests must be Filed and served on the Reorganized Debtors and the requesting party by the later of (1) 30 days after the Effective Date and (2) 30 days after the Filing of the applicable request for payment of the Administrative Claims, if applicable. After notice and a hearing in accordance with the procedures established by the Bankruptcy Code and prior Bankruptcy Court orders, the Allowed amounts, if any, of Administrative Claims shall be determined by, and satisfied in accordance with an order of, the Bankruptcy Court.

Holders of Administrative Claims that are required to File and serve a request for such payment of such Administrative Claims that do not File and serve such a request by the Administrative Claim Bar Date shall be forever barred, estopped, and enjoined from asserting such Administrative Claims against the Debtors, the Reorganized Debtors or their property, and such Administrative Claims shall be deemed discharged as of the Effective Date without the need for any objection from the Reorganized Debtors or any action by the Bankruptcy Court.

B. DIP Revolving Facility Claims.

The DIP Revolving Facility Claims shall be Allowed in an amount equal to the amount of such DIP Revolving Facility Claims accrued or incurred as of the Effective Date, subject to the provisions of the DIP Financing Order. Except to the extent that a holder of an Allowed DIP Revolving Facility Claim agrees to a less favorable treatment, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, each Allowed DIP Revolving Facility Claim, each such Allowed DIP Revolving Facility Claim shall be Paid in Full in Cash by the Debtors on the Effective Date, without setoff, deduction or counterclaim, in accordance with the terms of the Payoff Letter. Upon the indefeasible Payment in Full of the DIP Revolving Facility Claims, on the Effective Date, all liens and security interests granted to secure such Allowed DIP Revolving Facility Claims shall be terminated and of no further force and effect.

C. DIP Real Estate Facility Claims.

The DIP Real Estate Facility Claims shall be Allowed in the amount of such DIP Real Estate Facility Claims accrued or incurred as of the Effective Date. Except to the extent that a holder of an Allowed DIP Real Estate Facility Claim agrees to a less favorable treatment, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, each Allowed DIP Real Estate Facility Claim, each holder of an Allowed DIP Real Estate Facility Claim shall be Paid in Full in Cash by the Debtors on the Effective Date without setoff, deduction or counterclaim, in accordance with the terms of the Payoff Letter. Upon the indefeasible Payment in Full of the DIP Real Estate Claims in accordance with the terms of the Plan, on the Effective Date, all liens and security interests granted to secure such Allowed DIP Real Estate Facility Claims shall be terminated and of no further force and effect.

D. Professional Compensation Claims.

1. Final Fee Applications and Payment of Professional Compensation Claims.

All requests for payment of Professional Compensation Claims for services rendered and reimbursement of expenses incurred prior to the Effective Date must be Filed no later than the Professional Compensation Claim Bar Date; provided, however, that Ordinary Course Professionals shall be compensated in accordance with the terms of the Ordinary Course Professionals Order. Objections to Professional Compensation Claims must be Filed and served on the Reorganized Debtors and the Professional to whose application the objections are addressed no later than the Professional Compensation Claim Objection Deadline. The Bankruptcy Court shall determine the Allowed amounts of such Professional Compensation Claims after notice and a hearing in accordance with the procedures established by the Bankruptcy Court. On the Effective Date, the Reorganized Debtors shall establish the Professional Compensation Claim Reserve for payment of Allowed Professional Compensation Claims and shall pay such Professional Compensation Claims in Cash in the amount the Bankruptcy Court allows from such reserve and from the Reorganized Debtors’ Cash.

2. Post-Effective Date Fees and Expenses.

Except as otherwise specifically provided in the Plan, from and after the Effective Date, the Debtors shall, in the ordinary course of business and without any further notice to or action, order, or approval of the Bankruptcy Court, pay in Cash the reasonable and documented legal, professional, or other fees and expenses related to implementation of the Plan and Consummation incurred by the Reorganized Debtors. Upon the Effective Date, any requirement that Professionals comply with sections 327 through 331, 363, and 1103 of the Bankruptcy Code in seeking retention or compensation for services rendered after such date shall terminate, and the Reorganized Debtors may employ and pay any Professional in the ordinary course of business without any further notice to or action, order, or approval of the Bankruptcy Court.

E. Priority Unsecured Tax Claims.

Except to the extent that a holder of an Allowed Priority Unsecured Tax Claim agrees to a less favorable treatment, in full and final satisfaction, settlement, release, and discharge of and in exchange for each Allowed Priority Unsecured Tax Claim, each holder of such Allowed Priority Unsecured Tax Claim shall be treated in accordance with the terms set forth in section 1129(a)(9)(C) of the Bankruptcy Code; provided, however, that the Reorganized Debtors, with the consent of the Required Investor Parties, shall have the right to pay any Allowed Priority Unsecured Tax Claim, or the remaining balance of any such Claim, in full in Cash at any time on or after the Effective Date, without premium or penalty.

Article III.
CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS

A. Classification in General.

The Plan constitutes a separate Plan proposed by each Debtor. Except for the Claims addressed in Article II of the Plan, all Claims and Interests are classified in the Classes set forth below in accordance with section 1122 and 1123(a)(1) of the Bankruptcy Code. A Claim or an Interest is classified in a particular Class only to the extent that the Claim or Interest qualifies within the description of that Class and is classified in other Classes to the extent that any portion of the Claim or Interest qualifies within the description of such other Classes. A Claim or an Interest also is classified in a particular Class for the purpose of receiving distributions under the Plan only to the extent that such Claim or Interest is an Allowed Claim or Allowed Interest in that Class and has not been paid, released, or otherwise satisfied prior to the Effective Date.

B. Grouping of Debtors for Convenience Only.

The Plan groups the Debtors together solely for the purpose of describing treatment of Claims and Interests under the Plan and confirmation of the Plan. Although the Plan applies to all of the Debtors, the Plan constitutes seven (7) distinct Plans, one for each Debtor, and for voting and distribution purposes, each Class of Claims will be deemed to contain sub-classes for each of the Debtors, to the extent applicable. To the extent there are no Allowed Claims or Interests with respect to a particular Debtor, such Class is deemed to be omitted with respect to such Debtor. Except as otherwise provided herein, to the extent a holder has a Claim that may be asserted against more than one Debtor, the vote of such holder in connection with such Claims shall be counted as a vote of such Claim against each Debtor against which such holder has a Claim. The grouping of the Debtors in this manner shall not affect any Debtor’s status as a separate legal Entity, change the organizational structure of the Debtors’ business enterprise, constitute a change of control of any Debtor for any purpose, cause a merger of consolidation of any legal Entities, or cause the transfer of any Assets, and, except as otherwise provided by or permitted under the Plan, all Debtors shall continue to exist as separate legal Entities.

C. Summary of Classification of Claims and Interests.

The classification of Claims and Interests against the Debtors pursuant to the Plan is as follows:

Class	Claims and Interests	Status	Voting Rights
Class 1	Other Priority Unsecured Claims	Impaired	Entitled to Vote
Class 2	Other Secured Claims	Impaired	Entitled to Vote
Class 3	Secured Tax Claims	Impaired	Entitled to Vote
Class 4	Existing First Lien Credit Facility Claims	Impaired	Entitled to Vote
Class 5	General Unsecured Claims	Impaired	Entitled to Vote
Class 6	Convenience Claims	Impaired	Entitled to Vote
Class 7	Intercompany Claims	Unimpaired/Impaired	Not Entitled to Vote (Deemed to Accept or Reject depending on treatment)
Class 8	Tuesday Morning Interests	Impaired	Entitled to Vote
Class 9	Intercompany Interests	Unimpaired	Not Entitled to Vote (Deemed to Accept)

D. Treatment of Claims and Interests.

1. Class 1 – Other Priority Unsecured Claims

(a) Classification: Class 1 consists of any Other Priority Unsecured Claims against any Debtor.

(b) Treatment: At the option of the applicable Debtor, each holder of an Allowed Other Priority Unsecured Claim shall receive, on or after the Effective Date, except to the extent that a holder of an Allowed Other Priority Unsecured Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Other Priority Unsecured Claim, the following:

(i) Payment in full in Cash of its Allowed Class 1 Claim; or

(ii) Such other treatment as is consistent with the requirements of Bankruptcy Code section 1129(a)(9).

(c) Voting: Class 1 is Impaired under the Plan. Holders of Allowed Claims in Class 1 are entitled to vote to accept or reject the Plan.

2. Class 2 - Other Secured Claims

(a) Classification: Class 2 consists of any Other Secured Claims against any Debtor.

(b) Treatment: At the option of the applicable Debtor, each holder of an Allowed Other Secured Claim shall receive, on or after the Effective Date, except to the extent that a holder of an Allowed Other Secured Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Other Secured Claim, the following:

(i) Payment in full in Cash of its Allowed Class 2 Claim;

(ii) The collateral securing its Allowed Class 2 Claim; provided, however, any collateral remaining after satisfaction of such Allowed Class 2 Claim shall revest in the applicable Reorganized Debtor pursuant to the Plan; or

(iii) Reinstatement of its Allowed Class 2 Claim.

(c) Voting: Class 2 is Impaired under the Plan. Holders of Allowed Claims in Class 2 are entitled to vote to accept or reject the Plan.

3. Class 3 – Secured Tax Claims

(a) Classification: Class 3 consists of any Secured Tax Claims against any Debtor.

(b) Treatment: At the option of the applicable Debtor, each holder of an Allowed Secured Tax Claim shall receive, on or after the Effective Date, except to the extent that a holder of an Allowed Secured Tax Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Secured Tax Claim, the following:

(i) Payment in full in Cash of its Allowed Class 3 Claim;

(ii) The collateral securing its Allowed Class 3 Claim; provided, however, any collateral remaining after satisfaction of such Allowed Class 3 Claim shall revest in the applicable Reorganized Debtor pursuant to the Plan; or

(iii) Such other treatment consistent with the requirements of Bankruptcy Code section 1129(a)(9).

(c) Voting: Class 3 is Impaired under the Plan. Holders of Allowed Claims in Class 3 are entitled to vote to accept or reject the Plan.

4. Class 4 – Existing First Lien Credit Facility Claims

(a) Classification: Class 4 consists of all Existing First Lien Credit Facility Claims.

(b) Allowance: The Existing First Lien Credit Facility Claims shall be Allowed in an amount equal to the amount of the Existing First Lien Credit Facility Claims accrued or incurred as of the Effective Date, without setoff, deduction or counterclaim, and subject to the provisions of the DIP Financing Order.

(c) Treatment: Each holder of an Allowed Existing First Lien Credit Facility Claim shall receive, except to the extent that a holder of an Allowed Existing First Lien Credit Facility Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Allowed Existing First Lien Credit Facility Claim, Payment in Full, in Cash, of its Allowed Class 4 Claim plus any and all fees, interest (both pre and post-Petition Date), and reimbursement of expenses, and any other amounts owed or arising under the Existing First Lien Credit Documents through the time of Payment in Full, in three equal installments to be paid on the 30th, 60th, and 90th days after the Effective Date (each a “Payment Date”). If a Payment Date does not fall on a Business Day, such Payment Date shall be extended to the next Business Day. All liens and security interests granted to secure such Allowed Existing First Lien Credit Facility Claims shall be retained until such payments shall have been made. Further, in the event that the Existing First Lien Agent is the agent for the New ABL Credit Facility, it shall retain the liens and security interests securing the Existing First Lien Credit Facility Claims after such payments are made and have such liens and security interests secure the New ABL Credit Facility.

(d) Voting: Class 4 is Impaired under the Plan. Holders of Allowed Claims in Class 4 are entitled to vote to accept or reject the Plan.

5. Class 5 – General Unsecured Claims

(a) Classification: Class 5 consists of all General Unsecured Claims, excluding Convenience Claims.

(b) Treatment: Except to the extent that a holder of an Allowed General Unsecured Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Existing General Unsecured Claim, each holder of an Allowed Class 5 Claim shall receive its Pro Rata share of (i) the General Unsecured Cash Fund, (ii) the General Unsecured Notes, and (iii) the proceeds of the Rights Offering.

(c) Voting: Class 5 is Impaired under the Plan. Holders of Allowed Claims in Class 5 are entitled to vote to accept or reject the Plan.

6. Class 6 – Convenience Claims

(a) Classification: Class 6 consists of all Convenience Claims.

(b) Treatment: Except to the extent that a holder of an Allowed Convenience Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Convenience Claim, each holder of an Allowed Class 6 Claim shall receive the Convenience Claim Distribution.

(c) Voting: Class 6 is Impaired under the Plan. Holders of Allowed Claims in Class 6 are entitled to vote to accept or reject the Plan.

7. Class 7 – Intercompany Claims

(a) Classification: Class 7 consists of all Intercompany Claims.

(b) Treatment: On the Effective Date, Class 7 Claims shall be, at the option of the Debtors, either Reinstated or cancelled and released without any distribution

(c) Voting: Class 7 is Unimpaired if the Class 7 Claims are Reinstated or Impaired if the Class 7 Claims are cancelled. Holders of Class 7 Claims are conclusively deemed to have accepted or rejected the Plan pursuant to section 1126(f) or 1126(g) of the Bankruptcy Code. Holders of Class 7 Claims are not entitled to vote to accept or reject the Plan

8. Class 8 – Tuesday Morning Corporation Interests

(a) Classification: Class 8 consists of all Tuesday Morning Corporation Interests.

(b) Treatment: On the Rights Offering Distribution Date, each share of the Existing Common Stock outstanding on the Effective Date shall be exchanged for (1) one share of the New Common Stock and (2) a Share Purchase Right entitling the holder to purchase its Pro Rata portion of the Eligible Offeree Rights Offering Common Stock. On the Effective Date, all Class 8 Interests consisting of options, warrants, or other rights, contractual or otherwise, to acquire shares of the Existing Common Stock shall be Reinstated subject to dilution as a result of the issuance of the Rights Offering Common Stock and the issuance of equity securities on and after the Effective Date pursuant to the Management Incentive Plan.

(c) Voting: Class 8 is Impaired under the Plan. Holders of Class 8 Claims are entitled to vote to accept or reject the Plan.

9. Class 9 – Intercompany Interests

(a) Classification: Class 9 consists of all Intercompany Interests.

(b) Treatment: Intercompany Interests shall receive no distribution and shall be Reinstated for administrative purposes only at the election of the Reorganized Debtors.

E. Special Provision Governing Unimpaired Claims.

Except as otherwise provided in the Plan, nothing under the Plan shall affect the Debtors’ rights in respect of any Unimpaired Claims, including, all rights in respect of legal and equitable defenses to, or setoffs or recoupments against, any such Unimpaired Claims.

F. Elimination of Vacant Classes.

Any Class of Claims or Interests that does not have a holder of an Allowed Claim or Allowed Interest or a Claim or Interest temporarily Allowed by the Bankruptcy Court as of the date of the Confirmation Hearing shall be deemed eliminated from the Plan for purposes of voting to accept or reject the Plan and for purposes of determining acceptance or rejection of the Plan by such Class pursuant to section 1129(a)(8) of the Bankruptcy Code.

G. Voting Classes, Presumed Acceptance by Non-Voting Classes.

Only holders of Allowed Claims in Classes 1, 2, 3, 4, 5, 6 and 8 are entitled to vote to accept or reject the Plan. Holders of Claims in Classes 1, 2, 3, 4, 5, 6 and 8 will receive Ballots containing detailed voting instructions.

If a Class contains Claims or Interests eligible to vote and no holders of Claims or Interests eligible to vote in such Class vote to accept or reject the Plan, the holders of such Claims or Interests in such Class shall be deemed to have accepted the Plan.

H. Intercompany Interests.

To the extent Reinstated under the Plan, distributions on account of Intercompany Interests are not being received by holders of such Intercompany Interests on account of their Intercompany Interests but for the purposes of administrative convenience, for the ultimate benefit of the holders of Common Stock, and in exchange for the Debtors’ and Reorganized Debtors’ agreement under the Plan to make certain distributions to the holders of Allowed Claims. Any Interest in non-Debtor subsidiaries owned by a Debtor shall continue to be owned by the applicable Reorganized Debtor.

I. Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code.

If any Class of Claims entitled to vote on the Plan does not vote to accept the Plan, the Debtors may (i) seek confirmation of the Plan under Bankruptcy Code section 1129(b) or (ii) amend or modify the Plan in accordance with Article X of the Plan and the Bankruptcy Code.

J. Controversy Concerning Impairment.

If a controversy arises as to whether any Claims or Interests, or any Class of Claims or Interests, are Impaired, the Bankruptcy Court shall, after notice and a hearing, determine such controversy on or before the Confirmation Date.

K. Subordinated Claims.

The allowance, classification, and treatment of all Allowed Claims and Allowed Interests and the respective distributions and treatments under the Plan take into account and conform to the relative priority and rights of the Claims and Interests in each Class in connection with any contractual, legal, and equitable subordination rights relating thereto, whether arising under general principles of equitable subordination, section 510(b) of the Bankruptcy Code, or otherwise. Pursuant to section 510 of the Bankruptcy Code, the Reorganized Debtors reserve the right to re-classify any Allowed Claim or Interest in accordance with any contractual, legal, or equitable subordination relating thereto.

L. No Waiver.

Nothing contained in the Plan shall be construed to waive a Debtor’s or other Person’s right to object on any basis to any Claim or Interest.

Article IV.
MEANS FOR IMPLEMENTATION OF THE PLAN

A. Corporate Existence.

Except as otherwise provided in the Plan, each Debtor shall continue to exist after the Effective Date as a separate corporate entity, limited liability company, partnership, or other form, as the case may be, with all the powers of a corporation, limited liability company, partnership, or other form, as the case may be, pursuant to the applicable law in the jurisdiction in which each applicable Debtor is currently incorporated or formed and pursuant to the respective certificate of incorporation and by-laws (or other formation documents) in effect prior to the Effective Date, except to the extent such certificate of incorporation and by-laws (or other formation documents) are amended under the Plan or otherwise, and to the extent such documents are amended, such documents are deemed to be amended pursuant to the Plan and require no further action or approval (other than any requisite filings required under applicable state, provincial, or federal law).

B. Reorganized Debtors.

On the Effective Date, the New Board shall be established, and the Reorganized Debtors shall adopt its New Organizational Documents and the Management Incentive Plan. The Reorganized Debtors shall have the authority to adopt any other agreements, documents, and instruments and to take any other actions contemplated under the Plan as necessary to consummate the Plan.

C. Restructuring Transactions.

On the Effective Date, the applicable Debtors or the Reorganized Debtors shall enter into any transaction and shall take any actions as may be necessary or appropriate to effect any transaction described in, approved by, contemplated by, or necessary to effectuate the Plan, including the issuance of all securities, notes, instruments, certificates, and other documents required to be issued pursuant to the Plan, and one or more transactions consisting of inter-company mergers, consolidations, amalgamations, arrangements, continuances, restructurings, conversions, dissolutions, transfers, liquidations, or other corporate transactions, which transactions shall be described in the Plan Supplement. The actions to implement the Restructuring Transactions may include: (1) the execution and delivery of appropriate agreements or other documents of merger, amalgamation, consolidation, restructuring, conversion, disposition, transfer, arrangement, continuance, dissolution, sale, purchase, or liquidation containing terms that are consistent with the terms of the Plan and that satisfy the applicable requirements of applicable law and any other terms to which the applicable Entities may agree; (2) the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any asset, property, right, liability, debt, or obligation on terms consistent with the terms of the Plan and having other terms for which the applicable parties agree; (3) the filing of appropriate certificates or articles of incorporation, reincorporation, merger, consolidation, conversion, amalgamation, arrangement, continuance, or dissolution pursuant to applicable state or provincial law; and (4) all other actions that the applicable Entities determine to be necessary, including making filings or recordings that may be required by applicable law in connection with the Plan.

D. Authorization of New Common Stock

The issuance and/or authorization of the New Common Stock, by Reorganized Tuesday Morning is authorized without the need for any further corporate action or without any further action by the holders of Claims or Interests.

All of the shares of New Common Stock issued or authorized in connection with the Plan shall be duly authorized, validly issued, fully paid, and non-assessable.

On the Effective Date, the Debtors shall issue all securities, notes, instruments, certificates, and other documents required to be issued on the Effective Date pursuant to the Plan.

E. Sources of Plan Distributions.

Distributions under the Plan shall be made with: (1) Cash on hand, including Cash from operations and (2) proceeds of the Exit Financing.

1. Issuance of New Common Stock.

The issuance of the New Common Stock, including options, or other equity awards, if any, reserved for the Management Incentive Plan, by the Reorganized Debtors is authorized without the need for any further corporate action or without any further action by the holders of Claims or Interests. On the Effective Date, the Debtors or Reorganized Debtors, as applicable, shall issue all securities, notes, instruments, certificates, and other documents required to be issued on the Effective Date pursuant to the Plan.

All of the shares of New Common Stock issued pursuant to the Plan shall be duly authorized, validly issued, fully paid, and non-assessable. Each distribution and issuance referred to in Article VI hereof shall be governed by the terms and conditions set forth in the Plan applicable to such distribution or issuance and by the terms and conditions of the instruments evidencing or relating to such distribution or issuance, which terms and conditions shall bind each Entity receiving such distribution or issuance.

2. New ABL Credit Facility.

On the Effective Date, the Reorganized Debtors shall be authorized to enter into the New ABL Credit Facility and execute the New ABL Credit Facility Documents substantially in the form contained in the Plan Supplement, and any related agreements or filing without the need for any further corporate or organizational action and without further action by or approval of the Bankruptcy Court.

Confirmation shall be deemed approval of the New ABL Credit Facility (including the transactions contemplated thereby, and all actions to be taken, undertakings to be made, and obligations to be incurred and fees paid by the Debtors or the Reorganized Debtors in connection therewith), to the extent not approved by the Bankruptcy Court previously, and the Reorganized Debtors are authorized to execute and deliver those documents necessary or appropriate to obtain the New ABL Credit Facility, including any and all documents required to enter into the New ABL Credit Facility, without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or vote, consent, authorization, or approval of any Person, subject to such modifications as the Reorganized Debtors may deem to be necessary to consummate entry into the New ABL Credit Facility.

On the Effective Date, (a) upon the granting of Liens in accordance with the New ABL Credit Facility, the agent thereunder shall have valid, binding and enforceable Liens on the collateral specified in the New ABL Credit Facility Documents; and (b) upon the granting of guarantees, mortgages, pledges, Liens and other security interests in accordance with the New ABL Credit Facility Documents, the guarantees, mortgages, pledges, Liens and other security interests granted to secure the obligations arising under the New ABL Credit Facility shall be granted in good faith and shall be deemed not to constitute a fraudulent conveyance or fraudulent transfer, shall not otherwise be subject to avoidance, and the priorities of such Liens and security interests shall be as set forth in the New ABL Credit Facility Documents.

3. Sale Leaseback.

On the Effective Date, the Reorganized Debtors shall be authorized to enter into the Sale Leaseback and execute the Sale Leaseback Documents substantially in the form contained in the Plan Supplement, and any related agreements or filing without the need for any further corporate or organizational action and without further action by or approval of the Bankruptcy Court.

Confirmation shall be deemed approval of the Sale Leaseback (including the transactions contemplated thereby, and all actions to be taken, undertakings to be made, and obligations to be incurred and fees and expenses paid by the Debtors or the Reorganized Debtors in connection therewith), to the extent not approved by the Bankruptcy Court previously, and the Reorganized Debtors are authorized to execute and deliver those documents necessary or appropriate to effectuate the Sale Leaseback, including any and all documents required to be filed or executed in connection with the purchase agreement or the new leases, without further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order, or rule or vote, consent, authorization, or approval of any Person, subject to such modifications as the Reorganized Debtors may deem to be necessary to consummate entry into the Sale Leaseback and that are in form and substance acceptable to the New ABL Credit Facility Agent.

4. Rights Offering.

In connection with the consummation of the Plan, the Reorganized Debtors shall consummate the Rights Offering, which shall consist of (1) the Eligible Offeree Rights Offering through which holders of Common Stock that are Eligible Offerees shall be offered Share Purchase Rights to acquire the Eligible Offeree Rights Offering Common Stock in accordance with the Rights Offering Procedures and the Backstop Agreement and (2) the Section 4(a)(2) Rights Offering through which the Backstop Parties shall be offered Share Purchase Rights to acquire the Section 4(a)(2) Rights Offering Common Stock. The Backstop Parties will backstop the Rights Offering in accordance with the terms and conditions of the Backstop Agreement. The payment of the Backstop Fee and issuance of the Backstop Warrants to the Backstop Parties shall be approved by the Bankruptcy Court pursuant to the Approval Order.

The Share Purchase Rights will be exercisable for a purchase price of $1.10 per share of the New Common Stock. The Eligible Offeree Share Purchase Rights will be exercisable (1) if the “Aggregate Market Value” of the Tuesday Morning Common Stock equals or exceeds $32 million (the “Minimum Value”), from the Rights Offering Distribution Date through the 30^th day following the Effective Date, and (2) otherwise, for a period of 30 days commencing on the first day following the Reorganized Debtors’ public announcement that a Registration Statement covering the issuance of the shares issuable upon exercise of the Eligible Offeree Share Purchase Rights has been declared effective by the Securities and Exchange Commission. For the purposes, the Aggregate Market Value equals the number of shares of the Tuesday Morning Common Stock outstanding on the Effective Date multiplied by the Effective Time Closing Price. For these purposes, the “Effective Time Closing Price” shall be the volume weighted average sale price for shares of the Existing Common Stock for the five trading days ending prior to the date of determination as reported on Bloomberg, and if such price is not so reported, the price determined in the sole discretion of the Rights Agent as being a reasonable equivalent thereof.

In the event that condition (2) applies, the Reorganized Debtors shall use reasonable efforts to file a Registration Statement with the Securities and Exchange Commission as soon as practicable following the Effective Date covering the offering and sale of the shares of the Eligible Offeree Rights Offering Common Stock in connection with the Eligible Offeree Share Purchase Rights and to take all reasonable actions to have such Registration Statement declared effective as soon as possible.

5. General Unsecured Notes.

On the Effective Date, the General Unsecured Notes shall be authorized and the Reorganized Debtors shall be authorized to execute the applicable bond indenture and related documents and the Indenture Trustee shall be authorized to distribute the General Unsecured Notes accordance with the procedures more fully described in the Plan and the Plan Supplement.

F. Vesting of Assets in the Reorganized Debtors.

Except with respect to the Liens granted under the New ABL Credit Facility Documents, the General Unsecured Notes, or any agreement, instrument, or other document incorporated in the Plan, or as otherwise provided in the Plan, on the Effective Date and, in the case of a Secured Claim, satisfaction in full of the portion of the Secured Claim that is Allowed as of the Effective Date, all property in each Estate, all Retained Causes of Action, and any property acquired by any of the Debtors pursuant to the Plan shall vest in each respective Reorganized Debtor, free and clear of all Liens, Claims, charges, or other encumbrances. On and after the Effective Date and, in the case of a Secured Claim, satisfaction in full of the portion of the Secured Claim that is Allowed as of the Effective Date, except as otherwise provided in the Plan, each Reorganized Debtor may operate its business and may use, acquire, or dispose of property and compromise or settle any Claims, Interests, or Retained Causes of Action without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules. Failure to include a Cause of Action on the Schedule of Retained Causes of Action shall not constitute a waiver or release of such Cause of Action.

G. Cancellation of Existing Securities and Agreements.

On the Effective Date, except to the extent otherwise provided in the Plan (including the Plan Supplement), all notes, instruments, certificates, and other documents evidencing Claims or Interests, including credit agreements and indentures, shall be cancelled and the obligations of the Debtors and any non-Debtor Affiliate thereunder or in any way related thereto shall be deemed satisfied in full, cancelled, discharged, and of no force or effect. Holders of or parties to such cancelled instruments, securities, and other documentation will have no rights arising from or relating to such instruments, securities, and other documentation, or the cancellation thereof, except the rights provided for pursuant to the Plan.

Notwithstanding the foregoing, the DIP Revolving Facility Credit Agreement and Existing First Lien Credit Agreement shall continue in effect to the extent necessary to (i) allow the DIP Revolving Facility Agent and Existing First Lien Agent, in accordance with Article III of the Plan, to make distributions to the holders of DIP Revolving Facility Claims and Existing First Lien Credit Facility Claims; (ii) permit the DIP Revolving Facility Agent and Existing First Lien Agent to appear before the Bankruptcy Court or any other court of competent jurisdiction after the Effective Date; (iii) permit the DIP Revolving Facility Agent and Existing First Lien Agent to perform any functions that are necessary to effectuate the foregoing; and (v) to exercise rights and obligations relating to the DIP Revolving Facility Parties or interests of the Existing First Lien Lenders or both.

Notwithstanding the foregoing, the Tuesday Morning Corporation Interests consisting of options, warrants, or other rights, contractual or otherwise, to acquire shares of the Existing Common Stock and Class 9 Interests will be reinstated on the Effective Date as set forth in Article III.D, and each outstanding share of the Existing Common Stock shall be exchanged for (1) one share of the New Common Stock and (2) a Share Purchase Right entitling the holder to purchase is Pro Rata portion of the Eligible Offeree Rights Offering Common Stock.

H. Corporate Action.

On the Effective Date, all actions contemplated under the Plan shall be deemed authorized and approved in all respects, including: (1) adoption or assumption, as applicable, of the Employment Obligations; (2) selection of the directors and officers for the Reorganized Debtors as named in the Plan Supplement; (3) authorization and issuance of the General Unsecured Notes; (4) implementation of the Rights Offering and payment of the Backstop Fee in accordance with the Plan, the Rights Offering Procedures, and the Backstop Agreement; (5) the exchange on the Rights Offering Distribution Date of each share of the Existing Common Stock for (a) one share of the New Common Stock and (b) a Share Purchase Right entitling the holder to purchase its Pro Rata portion of the Eligible Offeree Rights Offering Common Stock; (6) reinstatement of the Tuesday Morning Corporation Interests consisting of options, warrants, or other rights, contractual or otherwise, to acquire shares of the Existing Common Stock; (7) the authorization and/or issuance of the New Common Stock; (8) implementation of the Restructuring Transactions; (9) entry into the New ABL Credit Facility Documents, and the Sale Leaseback Documents, as applicable; (10) adoption of the New Organizational Documents; (11) the rejection, assumption, or assumption and assignment, as applicable, of Executory Contracts and Unexpired Leases; and (12) all other acts or actions contemplated or reasonably necessary or appropriate to promptly consummate the Restructuring Transactions contemplated by the Plan (whether to occur before, on, or after the Effective Date).

All matters provided for in the Plan involving the corporate structure of the Debtors or the Reorganized Debtors, and any corporate action required by the Debtors or the Reorganized Debtors, as applicable, in connection with the Plan shall be deemed to have occurred and shall be in effect, without any requirement of further action by the security holders, directors, or officers of the Debtors or the Reorganized Debtors, as applicable. On or (as applicable) prior to the Effective Date, the appropriate officers of the Debtors or the Reorganized Debtors (as applicable) shall be authorized and (as applicable) directed to issue, execute, and deliver the agreements, documents, securities, and instruments contemplated under the Plan (or necessary or desirable to effect the transactions contemplated under the Plan) in the name of and on behalf of the Reorganized Debtors, including the New Organizational Documents, the New ABL Credit Facility Documents, the Sale Leaseback Documents, the General Unsecured Notes, the Rights Offering Common Stock, and any and all other agreements, documents, securities, and instruments relating to the foregoing. The authorizations and approvals contemplated by Article IV of the Plan shall be effective notwithstanding any requirements under applicable non-bankruptcy law.

I. New Organizational Documents.

On or immediately prior to the Effective Date, the New Organizational Documents shall be adopted as may be necessary to effectuate the transactions contemplated by the Plan. Each of the Reorganized Debtors will file its New Organizational Documents with the applicable Secretaries of State and/or other applicable authorities in its respective state, province, or country of incorporation in accordance with the corporate laws of the respective state, province, or country of incorporation. The New Organizational Documents will prohibit the issuance of non-voting equity securities, to the extent required under Bankruptcy Code section 1123(a)(6). The New Organizational Documents will include provisions to restrict the ability of parties to acquire or dispose of shares in Reorganized Tuesday Morning if such acquisition or disposition would cause a change of ownership within the meaning of Section 382 of the Tax Code. After the Effective Date, the Reorganized Debtors may amend and restate their respective New Organizational Documents and other constituent documents as permitted by the terms thereof and applicable law. The New Organizational Documents shall be included in the Plan Supplement.

J. Directors and Officers of the Reorganized Debtors.

As of the Effective Date, the terms of the current members of the board of directors of the Debtors shall expire, and the initial boards of directors, including the New Board, and the officers of each of the Reorganized Debtors shall be appointed in accordance with the respective New Organizational Documents. The New Board shall initially consist of 8 members, three of which will be appointed by the Backstop Parties with the remaining five members to be designated by the board of directors of Tuesday Morning Corporation. The members of the New Board will be identified in the Plan Supplement, to the extent known at the time of filing, and the Reorganized Debtors’ chief executive officer may be a member of the New Board. In accordance with section 1129(a)(5) of the Bankruptcy Code, the identities and affiliations of the members of the New Board and any Person proposed to serve as an officer of the Reorganized Debtors shall be disclosed at or before the Confirmation Hearing, in each case to the extent the identity of such proposed director or officer is known at such time. To the extent any such director or officer of the Reorganized Debtors is an Insider, the Debtors also will disclose the nature of any compensation to be paid to such director or officer. Each such director and officer shall serve from and after the Effective Date pursuant to the terms of the New Organizational Documents and other constituent documents of the Reorganized Debtors.

If Class 5 votes to accept the Plan, an individual selected by the Creditors Committee, with approval of the Reorganized Debtors, not to be unreasonably withheld, will serve in an observer role to the New Board, including all subcommittees, special committees, or other sub-groups established by the New Board, and shall receive all information provided to the members of the New Board.

K. Effectuating Documents; Further Transactions.

On and after the Effective Date, the Reorganized Debtors, and the officers and members of the boards of directors thereof, are authorized to and may issue, execute, deliver, file, or record such contracts, securities, instruments, releases, and other agreements or documents and take such actions as may be necessary to effectuate, implement, and further evidence the terms and conditions of the Plan and the securities issued pursuant to the Plan in the name of and on behalf of the Reorganized Debtors, without the need for any approvals, authorization, or consents except for those expressly required pursuant to the Plan.

On and after the Effective Date, the Reorganized Debtors shall use commercially reasonable efforts to cause the Tuesday Morning Corporation Interests to be registered on The NASDAQ Stock Market LLC or other national securities exchange.

L. Section 1146 Exemption.

To the fullest extent permitted by section 1146(a) of the Bankruptcy Code, any transfers (whether from a Debtor to a Reorganized Debtor or to any other Person) of property under the Plan or pursuant to: (1) the issuance, distribution, transfer, or exchange of any debt, equity security, or other interest in the Debtors or the Reorganized Debtors; (2) the Restructuring Transactions; (3) the creation, modification, consolidation, termination, refinancing, and/or recording of any mortgage, deed of trust, or other security interest, or the securing of additional indebtedness by such or other means; (4) the making, assignment, or recording of any lease or sublease; (5) the grant of collateral as security for the New ABL Credit Facility or the General Unsecured Notes, as applicable; or (6) the making, delivery, or recording of any deed or other instrument of transfer under, in furtherance of, or in connection with, the Plan, including any deeds, bills of sale, assignments, or other instrument of transfer executed in connection with any transaction arising out of, contemplated by, or in any way related to the Plan, shall not be subject to any document recording tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, real estate transfer tax, mortgage recording tax, Uniform Commercial Code filing or recording fee, regulatory filing or recording fee, or other similar tax or governmental assessment, and upon entry of the Confirmation Order, the appropriate state or local governmental officials or agents shall forego the collection of any such tax or governmental assessment and accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax, recordation fee, or governmental assessment. All filing or recording officers (or any other Person with authority over any of the foregoing), wherever located and by whomever appointed, shall comply with the requirements of section 1146(c) of the Bankruptcy Code, shall forego the collection of any such tax or governmental assessment, and shall accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax or governmental assessment.

M. Director and Officer Liability Insurance.

On or before the Effective Date, the Debtors shall purchase and maintain directors and officers liability insurance coverage for the period following the Effective Date. The Debtors shall use their best efforts to obtain directors and officers liability insurance coverage on terms no less favorable to the insureds than the Debtors’ existing director and officer coverage and with an aggregate limit of liability upon the Effective Date of no less than the aggregate limit of liability under the existing director and officer coverage upon placement.

N. Management Incentive Plan.

On the Effective Date, the New Board shall adopt the Management Incentive Plan for the Reorganized Debtors.

O. Employee and Retiree Benefits.

Unless otherwise provided herein, all employee wages, compensation, and benefit programs in place for the Debtors’ current employees, as of the Effective Date, shall be assumed by the Reorganized Debtors and shall remain in place as of the Effective Date, and the Reorganized Debtors will continue to honor such agreements, arrangements, programs, and plans consistent with past practice and subject to further modification and amendment as may be deemed appropriate by the Reorganized Debtors in their business judgment. Notwithstanding the foregoing, pursuant to Bankruptcy Code section 1129(a)(13), from and after the Effective Date, all retiree benefits (as such term is defined in Bankruptcy Code section 1114), if any, shall continue to be paid in accordance with applicable law. Nothing herein shall be deemed an assumption of any disputed Claims by the Debtors’ former employees alleging a right to recover severance awards, benefits, or any other form of compensation not explicitly awarded by the Debtors.

P. Retained Causes of Action.

Except as otherwise provided in the Plan, or in any contract, instrument, release, or other agreement entered into in connection with the Plan, in accordance with Bankruptcy Code section 1123(b)(3), the Reorganized Debtors shall retain and shall have the exclusive right, authority, and discretion to (without further order of the Bankruptcy Court) determine and to initiate, file, prosecute, enforce, abandon, settle, compromise, release, or withdraw, or litigate to judgment any and all Retained Causes of Action that the Debtors or the Estates may hold against any Entity, whether arising before or after the Petition Date. The Debtors reserve and shall retain the foregoing Retained Causes of Action notwithstanding the rejection of any Executory Contract or Unexpired Lease during the Chapter 11 Cases. Because the Debtors are proposing to pay all of their unsecured creditors in full, the Debtors will not pursue avoidance and recovery of preferential transfers under Bankruptcy Code § 547 and waive all rights to pursue preference actions under Bankruptcy Code § 547.

Unless a Retained Cause of Action is expressly waived, relinquished, released, compromised or settled in the Plan or any Final Order of the Bankruptcy Court, the Debtors expressly reserve such Retained Cause of Action (including any counterclaims) for later adjudication by the Reorganized Debtors. Therefore, no preclusion doctrine, including the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, waiver, estoppel (judicial, equitable or otherwise) or laches shall apply to such Retained Causes of Action (including counterclaims) on or after the Confirmation of the Plan.

Article V.
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

A. Assumption and Rejection of Executory Contracts and Unexpired Leases.

On the Effective Date, except as otherwise provided herein, all Executory Contracts or Unexpired Leases, not previously assumed or rejected pursuant to an order of the Bankruptcy Court, will be deemed assumed, in accordance with the provisions and requirements of sections 365 and 1123 of the Bankruptcy Code, other than those Executory Contracts or Unexpired Leases that: (1) previously were assumed or rejected by the Debtors; (2) are specifically designated on the Schedule of Assumed Contracts and Leases Filed and served prior to commencement of the Confirmation Hearing; (3) are subject to a motion to reject Executory Contracts or Unexpired Leases that is pending on the Confirmation Date; (4) are specifically designated on the Schedule of Rejected Contracts and Leases served prior to the commencement of the Confirmation Hearing; or (5) are the subject of Article IV.O of the Plan.

Entry of the Confirmation Order by the Bankruptcy Court shall constitute an order approving the assumptions or rejections of the Executory Contracts and Unexpired Leases set forth in the Plan, the Schedule of Assumed Contracts and Leases, the Schedule of Rejected Contracts and Leases, pursuant to sections 365(a) and 1123 of the Bankruptcy Code. Throughout the Chapter 11 Cases, the Debtors have been engaged in negotiations with landlords of the Debtors’ Leases. In connection with those negotiations, the Debtors and certain landlords agreed to the terms of amendments for certain applicable Leases. The Schedule of Assumed Contracts and Leases will identify the Leases to be assumed, as modified by such negotiations.

Any motions to reject Executory Contracts or Unexpired Leases pending on the Effective Date shall be subject to approval by the Bankruptcy Court on or after the Effective Date by a Final Order. Each Executory Contract and Unexpired Lease assumed pursuant to Article V.A of the Plan or by any order of the Bankruptcy Court, which has not been assigned to a third party prior to the Confirmation Date, shall revest in and be fully enforceable by the Reorganized Debtors in accordance with its terms, except as such terms are modified by the provisions of the Plan or any order of the Bankruptcy Court authorizing and providing for its assumption under applicable federal law. Notwithstanding anything to the contrary in the Plan, the Debtors or the Reorganized Debtors, as applicable, reserve the right to alter, amend, modify, or supplement the Schedules identified in Article V of the Plan and in the Plan Supplement at any time through and including the Effective Date.

In the event that an Executory Contract with a Governmental Unit is subject to an assignment by the Debtors, such assignment shall require the consent of the United States to the extent required by applicable non-bankruptcy law.

B. Indemnification Obligations.

All indemnification provisions, consistent with applicable law, currently in place (whether in the by-laws, certificates of incorporation or formation, limited liability company agreements, other organizational documents, board resolutions, indemnification agreements, employment contracts, or otherwise) for the current directors, officers, managers, employees, attorneys, accountants, investment bankers, and other professionals of the Debtors, as applicable, shall be reinstated and remain intact, irrevocable, and shall survive the Effective Date on terms no less favorable to such current directors, officers, managers, employees, attorneys, accountants, investment bankers, and other professionals of the Debtors than the indemnification provisions in place prior to the Effective Date.

C. Claims Based on Rejection of Executory Contracts or Unexpired Leases.

For holders of Claims for rejection damages relating to the rejection of Executory Contracts or Unexpired Leases, the Bar Date is the later to occur of (i) August 28, 2020 or (ii) thirty (30) days after the date on which an Order approving the rejection of such Executory Contract or Unexpired Lease has been entered. Unless otherwise provided by a Final Order of the Bankruptcy Court, all Proofs of Claim with respect to Claims arising from the rejection of Executory Contracts or Unexpired Leases that are rejected pursuant to the Plan or the Confirmation Order, if any, must be Filed with the Bankruptcy Court within 30 days after the later of (1) the date of entry of an order of the Bankruptcy Court (including the Confirmation Order) approving such rejection, (2) the effective date of such rejection, (3) the Effective Date, or (4) the date after the Effective Date that the applicable Schedules are altered, amended, modified, or supplemented, but only with respect to any Executory Contract or Unexpired Lease thereby affected. Any Claims arising from the rejection of an Executory Contract or Unexpired Lease not timely Filed with the Bankruptcy Court within the time period described in this Section V.C of the Plan will be automatically disallowed, forever barred from assertion, and shall not be enforceable against the Debtors or the Reorganized Debtors, the Estates, or their property without the need for any objection by the Reorganized Debtors or further notice to, or action, order, or approval of the Bankruptcy Court or any other Entity, and any Claim arising out of the rejection of the Executory Contract or Unexpired Lease shall be deemed fully satisfied, released, and discharged, notwithstanding anything in the Schedules or a Proof of Claim to the contrary. All Allowed Claims arising from the rejection of the Debtors’ Executory Contracts or Unexpired Leases shall be classified as General Unsecured Claims and shall be treated in accordance with Article III.D.5 hereof.

D. Cure of Defaults for Executory Contracts and Unexpired Leases Assumed.

Any monetary defaults under each Executory Contract and Unexpired Lease to be assumed pursuant to the Plan shall be satisfied, pursuant to section 365(b)(1) of the Bankruptcy Code, by payment of the default amount in Cash on the Effective Date, subject to the limitation described below, or on such other terms as the parties to such Executory Contracts or Unexpired Leases may otherwise agree. In the event of a dispute regarding (1) the amount of any payments to cure such a default, (2) the ability of the Reorganized Debtors or any assignee to provide “adequate assurance of future performance” (within the meaning of section 365 of the Bankruptcy Code) under the Executory Contract or Unexpired Lease to be assumed, or (3) any other matter pertaining to assumption, the cure payments required by section 365(b)(1) of the Bankruptcy Code shall be made following the entry of a Final Order or orders resolving the dispute and approving the assumption. Pursuant to the Approval Order, the Debtors shall provide for notices of proposed assumption and proposed cure amounts and for procedures for objecting thereto and resolution of disputes by the Bankruptcy Court.

Assumption of any Executory Contract or Unexpired Lease pursuant to the Plan or otherwise shall result in the full release and satisfaction of any Claims or defaults, whether monetary or nonmonetary, including defaults of provisions restricting the change in control or ownership interest composition or other bankruptcy-related defaults, arising under any assumed Executory Contract or Unexpired Lease at any time prior to the effective date of assumption. Upon satisfaction of any applicable Allowed Cure Claims, Proofs of Claim Filed with respect to an Executory Contract or Unexpired Lease that has been assumed shall be deemed disallowed and expunged, without further notice to or action, order, or approval of the Bankruptcy Court.

E. Preexisting Obligations to the Debtors under Executory Contracts and Unexpired Leases.

Rejection of any Executory Contract or Unexpired Lease pursuant to the Plan or otherwise shall not constitute a termination of preexisting obligations owed to the Debtors or the Reorganized Debtors, as applicable, under such Executory Contracts or Unexpired Leases. In particular, notwithstanding any non-bankruptcy law to the contrary, the Reorganized Debtors expressly reserve and do not waive any right to receive, or any continuing obligation of a counterparty to provide, warranties or continued maintenance obligations on goods previously purchased by the Debtors contracting from non-Debtor counterparties to rejected Executory Contracts or Unexpired Leases.

F. Insurance Policies.

Each of the Debtors’ insurance policies and any agreements, documents, or instruments relating thereto, are treated as Executory Contracts under the Plan. Unless otherwise provided in the Plan, on the Effective Date, (1) the Debtors shall be deemed to have assumed all insurance policies and any agreements, documents, and instruments relating to coverage of all insured Claims and (2) such insurance policies and any agreements, documents, or instruments relating thereto shall revest in the Reorganized Debtors.

G. Modifications, Amendments, Supplements, Restatements, or Other Agreements.

Unless otherwise provided in the Plan, each Executory Contract or Unexpired Lease that is assumed shall include all modifications, amendments, supplements, restatements, or other agreements that in any manner affect such Executory Contract or Unexpired Lease, and all Executory Contracts and Unexpired Leases related thereto, if any, including all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, and any other interests, unless any of the foregoing agreements has been previously rejected or repudiated or is rejected or repudiated under the Plan.

Modifications, amendments, supplements, and restatements to prepetition Executory Contracts and Unexpired Leases that have been executed by the Debtors during the Chapter 11 Cases shall not be deemed to alter the prepetition nature of the Executory Contract or Unexpired Lease, or the validity, priority, or amount of any Claims that may arise in connection therewith.

H. Reservation of Rights.

Neither the exclusion nor inclusion of any Executory Contract or Unexpired Lease on the Schedule of Assumed Contracts and Leases or Schedule of Rejected Contracts and Leases, nor anything contained in the Plan, shall constitute an admission by the Debtors that any such contract or lease is in fact an Executory Contract or Unexpired Lease or that any of the Reorganized Debtors has any liability thereunder. If there is a dispute regarding whether a contract or lease is or was executory or unexpired at the time of assumption or rejection, the Debtors or the Reorganized Debtors, as applicable, shall have 30 days following entry of a Final Order resolving such dispute to alter its treatment of such contract or lease under the Plan.

I. Nonoccurrence of Effective Date.

In the event that the Effective Date does not occur, the Bankruptcy Court shall retain jurisdiction with respect to any request to extend the deadline for assuming or rejecting Executory Contracts and Unexpired Leases pursuant to section 365(d)(4) of the Bankruptcy Code.

J. Contracts and Leases Entered into After the Petition Date.

Contracts and leases entered into after the Petition Date by any Debtor, including any Executory Contracts and Unexpired Leases assumed by such Debtor, will be performed by the applicable Debtor or the Reorganized Debtors liable thereunder in the ordinary course of their business. Accordingly, such contracts and leases (including any assumed Executory Contracts and Unexpired Leases) will survive and remain unaffected by entry of the Confirmation Order.

Article VI.
PROVISIONS GOVERNING DISTRIBUTIONS

A. Timing and Calculation of Amounts to Be Distributed.

Unless otherwise provided in the Plan, on the Effective Date or as soon as reasonably practicable thereafter (or if a Claim is not an Allowed Claim or Allowed Interest on the Effective Date, on the date that such Claim or Interest becomes an Allowed Claim or Allowed Interest, or as soon as reasonably practicable thereafter), each holder of an Allowed Claim or Allowed Interests (as applicable) shall receive the full amount of the distributions that the Plan provides for Allowed Claims or Allowed Interests (as applicable) in the applicable Class. In the event that any payment or act under the Plan is required to be made or performed on a date that is not a Business Day, then the making of such payment or the performance of such act may be completed on the next succeeding Business Day but shall be deemed to have been completed as of the required date. If and to the extent that there are Disputed Claims or Disputed Interests, distributions on account of any such Disputed Claims or Disputed Interests shall be made pursuant to the provisions set forth in Article VII of the Plan. Except as to the Existing First Lien Credit Facility Claims and as otherwise provided in the Plan, holders of Claims or Interests shall not be entitled to interest, dividends, or accruals on the distributions provided for in the Plan, regardless of whether such distributions are delivered on or at any time after the Effective Date.

B. Disbursing Agent.

Except with respect to distributions of the General Unsecured Notes, all distributions under the Plan shall be made by the Disbursing Agent. The Disbursing Agent shall not be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Bankruptcy Court. Additionally, in the event that the Disbursing Agent is so otherwise ordered, all costs and expenses of procuring any such bond or surety shall be borne by the Reorganized Debtors.

All distributions in connection with the General Unsecured Notes shall be made by the Indenture Trustee.

C. Rights and Powers of Disbursing Agent.

1. Powers of the Disbursing Agent.

The Disbursing Agent shall be empowered to: (a) effect all actions and execute all agreements, instruments, and other documents necessary to perform its duties under the Plan; (b) make all distributions contemplated hereby; and (c) exercise such other powers as may be vested in the Disbursing Agent by order of the Bankruptcy Court, pursuant to the Plan, or as deemed by the Disbursing Agent to be necessary and proper to implement the provisions hereof.

2. Expenses Incurred on or After the Effective Date.

Except as otherwise ordered by the Bankruptcy Court, the amount of any reasonable fees and expenses incurred by the Disbursing Agent on or after the Effective Date (including taxes), and any reasonable compensation and expense reimbursement claims (including reasonable attorney fees and expenses), made by the Disbursing Agent shall be paid in Cash by the Reorganized Debtors.

D. Delivery of Distributions and Undeliverable or Unclaimed Distributions.

1. Record Date for Distribution.

As of the close of business on the Distribution Record Date, the various transfer registers for each of the Classes of Claims or Interests as maintained by the Debtors, or its respective agents, shall be closed, and the Debtors, or its respective agents shall not be required to make any further changes in the record holders of any of the Claims or Interests. The Debtors or the Disbursing Agent shall have no obligation to recognize any transfer of the Claims or Interests occurring on or after the Distribution Record Date. The Disbursing Agent and Debtors shall be entitled to recognize and deal for all purposes hereunder only with those record holders stated on the transfer ledgers as of the close of business on the Distribution Record Date, to the extent applicable. For the avoidance of doubt, the Distribution Record Date shall not apply to publicly held securities or the Existing First Lien Credit Facility Claims.

2. Delivery of Distributions in General.

Except as otherwise provided herein, the Disbursing Agent shall make distributions to holders of Allowed Claims and Allowed Interests (as applicable) as of the Distribution Record Date at the address for each such holder as indicated on the Debtors’ records as of the date of any such distribution; provided, however, that the manner of such distributions shall be determined at the discretion of the Reorganized Debtors; provided further, however, that the address for each holder of an Allowed Claim shall be deemed to be the address set forth in any Proof of Claim Filed by that holder.

3. Minimum Distributions.

To the extent Cash is distributed under the Plan, no Cash payment of less than $50.00 shall be made to a holder of an Allowed Claim on account of such Allowed Claim, and such amounts shall be retained by Reorganized Debtors.

4. Undeliverable Distributions and Unclaimed Property.

In the event that any distribution to any holder of Allowed Claims or Allowed Interests (as applicable) is returned as undeliverable, no distribution to such holder shall be made unless and until the Disbursing Agent has determined the then-current address of such holder, at which time such distribution shall be made to such holder without interest; provided, however, that such distributions shall be deemed unclaimed property under section 347(b) of the Bankruptcy Code at the expiration of one year from the Effective Date. After such date, all unclaimed property or interests in property shall revert to the Reorganized Debtors automatically and without need for a further order by the Bankruptcy Court (notwithstanding any applicable federal, provincial or state escheat, abandoned, or unclaimed property laws to the contrary), and the Claim of any holder of Claims and Interests to such property or Interest in property shall be discharged and forever barred.

E. Manner of Payment.

1. All distributions to the holders of Allowed Claims under the Plan shall be made by the Disbursing Agent on behalf of the Reorganized Debtors except for distributions of the General Unsecured Notes, which shall be distributed in accordance with the process and procedures described in the Plan Supplement.

2. All distributions of the Share Purchase Rights and the Rights Offering Common Stock under the Plan, as well as the Backstop Fee to the Backstop Parties, shall be made by the Disbursing Agent on behalf of the Reorganized Debtors.

3. At the option of the Disbursing Agent, any Cash payment to be made hereunder may be made by check or wire transfer or as otherwise required or provided in applicable agreements.

4. All distributions pursuant to Article II.B, Article II.C., and Article III.D.4 shall be made by the Disbursing Agent in accordance with the terms of the Payoff Letter(s).

F. Distributions to Holders of Class 5 General Unsecured Claims.

1. Distributions on account of Disputed Class 5 General Unsecured Claims shall be held in the Class 5 Disputed Claims Reserve until such Claims have been either Allowed or Disallowed.

2. To the extent a Disputed Class 5 General Unsecured Claim becomes Allowed, the Disbursing Agent shall distribute to the holder of the Allowed Class 5 General Unsecured Claim its Pro Rata share of (i) the General Unsecured Cash Fund, (ii) the General Unsecured Notes, and (iii) the proceeds of the Rights Offering. More details regarding the process for the distribution of the General Unsecured Notes will be set forth in the Plan Supplement.

3. To the extent a Disputed Class 5 General Unsecured Claim becomes Disallowed, the distribution reserved for such Claim shall be distributed Pro Rata to holders of Allowed Class 5 General Unsecured Claims, provided that in no event shall holders of Class 5 General Unsecured Claims be entitled to payment in excess of the amount of their Allowed General Unsecured Claims.

4. For purposes of Article III.D.B and Article VI.F, “Pro Rata” means, as to a particular holder of a Claim in Class 5, the ratio that the amount of such Claim held by such Class 5 Claim holder bears to the aggregate amount of all Class 5 General Unsecured Claims, and such ratio shall be calculated as if all Disputed Class 5 General Unsecured Claims are Allowed Claims as of the Effective Date and/or such other later date as may be appropriate as determined by the Reorganized Debtors in their reasonable discretion.

G. Securities Act Exemption

Pursuant to section 1145 of the Bankruptcy Code, (1) the issuance of the General Unsecured Notes, (2) the issuance of the New Common Stock and the Eligible Offeree Share Purchase Rights to Eligible Offerees in exchange for shares of the Existing Common Stock, and (3) the issuance of the Eligible Offeree Rights Offering Common Stock shall be exempt from, among other things, the registration requirements of section 5 of the Securities Act and any other applicable law requiring registration prior to the offering, issuance, distribution, or sale of securities. In addition, such New Common Stock Eligible Offeree Rights Offering Common Stock, and General Unsecured Notes will be freely tradable in the U.S. by the recipients thereof under section 1145 of the Bankruptcy Code and other provisions of applicable securities laws, subject in the case of section 1145 of the Bankruptcy Code to the provisions of section 1145(b)(1) of the Bankruptcy Code relating to the definition of an underwriter in section 2(a)(11) of the Securities Act, and subject to any restrictions in the Reorganized Debtors’ New Organizational Documents.

Notwithstanding the foregoing, if the Aggregate Market Value on the Effective Date is less than Minimum Value, the Eligible Offeree Rights Offering will not be conducted as an offering exempt from registration under Section 1145 and instead the Company will conduct the Eligible Offeree Rights Offering as a registered offering as described above under Section IV.E.4.

Pursuant to Section 4(a)(2) of the Securities Act, the issuance of the Section 4(a)(2) Share Purchase Rights, the Section 4(a)(2) Rights Offering Common Stock, the Backstop Warrants and the shares of the New Common Stock issuable pursuant to the Backstop Warrants shall be exempt from the registration requirements of Section 5 of the Securities Act. As a result, such securities will be “restricted securities”. Pursuant to the Backstop Agreement, Tuesday Morning will agree to file a Registration Statement with the Securities and Exchange Commission covering the resale of the securities acquired by the Backstop Parties pursuant to the Backstop Agreement.

H. Compliance with Tax Requirements.

In connection with the Plan, to the extent applicable, the Reorganized Debtors shall comply with all tax withholding and reporting requirements imposed on them by any Governmental Unit, and all distributions made pursuant to the Plan shall be subject to such withholding and reporting requirements. Notwithstanding any provision in the Plan to the contrary, the Reorganized Debtors and the Disbursing Agent shall be authorized to take all actions necessary to comply with such withholding and reporting requirements, including liquidating a portion of the distribution to be made under the Plan to generate sufficient funds to pay applicable withholding taxes, withholding distributions pending receipt of information necessary to facilitate such distributions, or establishing any other mechanisms they believe are reasonable and appropriate. The Reorganized Debtors reserve the right to allocate all distributions made under the Plan in compliance with all applicable wage garnishments, alimony, child support, and other spousal awards, liens, and encumbrances.

I. Allocations.

Except as to the Existing First Lien Credit Facility Claims, distributions in respect of Allowed Claims shall be allocated first to the principal amount of such Claims (as determined for federal income tax purposes) and then, to the extent the consideration exceeds the principal amount of the Claims, to any portion of such Claims for accrued but unpaid interest.

J. No Postpetition Interest on Claims.

Unless otherwise specifically provided for in the Plan or the Confirmation Order and excluding the Existing First Lien Credit Facility Claims, or as otherwise required by applicable bankruptcy and non-bankruptcy law, postpetition interest shall not accrue or be paid on any prepetition Claims against the Debtors, and no holder of a prepetition Claim against the Debtors shall be entitled to interest accruing on or after the Petition Date on any such prepetition Claim.

K. Foreign Currency Exchange Rate.

Except as otherwise provided in a Bankruptcy Court order, as of the Effective Date, any Claim asserted in currency other than U.S. dollars shall be automatically deemed converted to the equivalent U.S. dollar value using the exchange rate for the applicable currency as published in The Wall Street Journal, National Edition, on the Petition Date.

L. Setoffs and Recoupment.

Except as expressly provided in the Plan, each Reorganized Debtor may, pursuant to section 553 of the Bankruptcy Code, set off and/or recoup against any Plan Distributions to be made on account of any Allowed Claim, any and all claims, rights, and Causes of Action that such Reorganized Debtor may hold against the holder of such Allowed Claim to the extent such setoff or recoupment is either (1) agreed in amount among the relevant Reorganized Debtor(s) and holder of Allowed Claim or (2) otherwise adjudicated by the Bankruptcy Court or another court of competent jurisdiction; provided, however, that neither the failure to effectuate a setoff or recoupment nor the allowance of any Claim hereunder shall constitute a waiver or release by a Reorganized Debtor or its successor of any and all claims, rights, and Causes of Action that such Reorganized Debtor or its successor may possess against the applicable holder. In no event shall any holder of Claims against, or Interests in, the Debtors be entitled to recoup any such Claim or Interest against any claim, right, or Cause of Action of the Debtors or the Reorganized Debtors, as applicable, unless such holder actually has performed such recoupment and provided notice thereof in writing to the Debtors in accordance with Article XII.G of the Plan on or before the Effective Date, notwithstanding any indication in any Proof of Claim or otherwise that such holder asserts, has, or intends to preserve any right of recoupment.

M. Claims Paid or Payable by Third Parties.

1. Claims Paid by Third Parties.

The Debtors or the Reorganized Debtors, as applicable, shall reduce in full a Claim, and such Claim shall be disallowed without a Claims objection having to be Filed and without any further action, order, or approval of the Bankruptcy Court, other than the filing of a notice with the Bankruptcy Court, to the extent that the holder of such Claim receives payment in full on account of such Claim from a party that is not a Debtor or a Reorganized Debtor. Subject to the last sentence of this paragraph, to the extent a holder of a Claim receives a distribution on account of such Claim and receives payment from a party that is not a Debtor or a Reorganized Debtor on account of such Claim, such holder shall, within 14 days of receipt thereof, repay or return the distribution to the applicable Reorganized Debtor, to the extent the holder’s total recovery on account of such Claim from the third party and under the Plan exceeds the amount of such Claim as of the date of any such distribution under the Plan. The failure of such holder to timely repay or return such distribution shall result in the holder owing the applicable Reorganized Debtor annualized interest at the Federal Judgment Rate on such amount owed for each Business Day after the 14–day grace period specified above until the amount is repaid.

2. Claims Payable by Third Parties.

No distributions under the Plan shall be made on account of an Allowed Claim that is payable pursuant to one of the Debtors’ insurance policies until the holder of such Allowed Claim has exhausted all remedies with respect to such insurance policy. To the extent that one or more of the Debtors’ insurers agrees to satisfy in full or in part a Claim (if and to the extent adjudicated by a court of competent jurisdiction), then immediately upon such insurers’ agreement, the applicable portion of such Claim may be expunged without a Claims objection having to be Filed and without any further notice to or action, order, or approval of the Bankruptcy Court.

3. Applicability of Insurance Policies.

Except as otherwise provided in the Plan, distributions to holders of Allowed Claims shall be in accordance with the provisions of any applicable insurance policy. Nothing contained in the Plan shall constitute or be deemed a waiver of any Cause of Action that the Debtors or any Entity may hold against any other Entity, including insurers under any policies of insurance, nor shall anything contained herein constitute or be deemed a waiver by such insurers of any defenses, including coverage defenses, held by such insurers.

Article VII.
PROCEDURES FOR RESOLVING CONTINGENT,
UNLIQUIDATED, AND DISPUTED CLAIMS

A. Claims Administration Responsibilities.

If Class 5 votes to accept the Plan, an individual selected by the Creditors Committee, with approval of the Reorganized Debtors, not to be unreasonably withheld, shall have the primary, but not exclusive, obligation to reconcile General Unsecured Claims. If Class 5 does not vote in favor of the Plan and Class 8 votes in favor of the Plan, the Reorganized Debtors and an individual selected by the Equity Committee, with approval of the Reorganized Debtors, not to be unreasonably withheld, shall share primary, but not exclusive, responsibility for reconciling General Unsecured Claims and Interests. If neither Class 5 nor Class 8 votes in favor of the Plan, the Reorganized Debtors shall be responsible for reconciling General Unsecured Claims and Interests. After the Effective Date, the Reorganized Debtors, together with the applicable representative selected by the Creditors Committee or the Equity Committee, if applicable, shall have the primary authority to: (1) File, withdraw, or litigate to judgment, objections to Claims or Interests; (2) settle or compromise any Disputed Claim by filing a notice of such settlement or compromise with the Bankruptcy Court without any further notice to or action, order, or approval by the Bankruptcy Court; and (3) administer and adjust the Claims Register to reflect any such settlements or compromises by filing a notice of such adjustment to the Claims Register with the Bankruptcy Court without any further notice to or action, order, or approval by the Bankruptcy Court. After the Effective Date, each of the Reorganized Debtors shall have and retain any and all rights and defenses such Debtor had with respect to any Interests or Claims immediately prior to the Effective Date.

B. Estimation of Claims and Interests.

Before or after the Effective Date, the Debtors or the Reorganized Debtors, as applicable, may (but are not required to) at any time request that the Bankruptcy Court estimate any Disputed Claim or Disputed Interest that is contingent or unliquidated pursuant to section 502(c) of the Bankruptcy Code for any reason, regardless of whether any party previously has objected to such Claim or Interest or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court shall retain jurisdiction to estimate any such Claim or Interest, including during the litigation of any objection to any Claim or Interest or during the appeal relating to such objection. Notwithstanding any provision otherwise in the Plan, a Claim or Interest that has been expunged from the Claims Register, but that either is subject to appeal or has not been the subject of a Final Order, shall be deemed to be estimated at zero dollars unless otherwise ordered by the Bankruptcy Court. In the event that the Bankruptcy Court estimates any contingent or unliquidated Claim or Interest, that estimated amount shall constitute a maximum limitation on such Claim or Interest for all purposes under the Plan (including for purposes of distributions), and the relevant Reorganized Debtor may elect to pursue any supplemental proceedings to object to any ultimate distribution on such Claim or Interest.

C. Adjustment to Claims or Interests without Objection.

Any Claim or Interest that has been paid or satisfied, or any Claim or Interest that has been amended or superseded, may be adjusted or expunged on the Claims Register by the Reorganized Debtors by filing a notice of such adjustment or expungement with the Bankruptcy Court without any further notice to or action, order, or approval of the Bankruptcy Court.

D. Time to File Objections to Claims.

Except as otherwise specifically provided in the Plan, any objections to Claims shall be Filed on or before the later of (1) 180 days after the Effective Date and (2) such other period of limitation as may be specifically fixed by a Final Order of the Bankruptcy Court for objecting to such claims.

E. Disallowance of Claims or Interests.

Except as otherwise specifically provided in the Plan, any Claims or Interests held by Entities from which property is recoverable under sections 542, 543, 550, or 553 of the Bankruptcy Code, or that is a transferee of a transfer avoidable under sections 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a) of the Bankruptcy Code, shall be deemed disallowed pursuant to section 502(d) of the Bankruptcy Code, and holders of such Claims or Interests may not receive any distributions on account of such Claims until such time as any objection to those Claims or Interests have been settled or a Bankruptcy Court order with respect thereto has been entered.

All Claims Filed on account of an indemnification obligation to a director, officer, or employee shall be deemed satisfied and expunged from the Claims Register as of the Effective Date to the extent such indemnification obligation is assumed (or honored or reaffirmed, as the case may be) pursuant to the Plan, without any further notice to or action, order, or approval of the Bankruptcy Court.

Except as provided herein or otherwise agreed, any and all Proofs of Claim Filed after the Bar Date shall be deemed disallowed and expunged as of the Effective Date without any further notice to or action, order, or approval of the Bankruptcy Court, and holders of such Claims may not receive any distributions on account of such Claims, unless on or before the Confirmation Hearing such late Claim has been deemed timely Filed by a Final Order.

F. Amendments to Claims or Interests.

On or after the Effective Date, a Claim or Interest may not be Filed or amended without the prior authorization of the Bankruptcy Court or the Reorganized Debtors and any such new or amended Claim or Interest Filed shall be deemed disallowed in full and expunged without any further action; provided, however, that Governmental Units shall not be required to obtain authorization of the Bankruptcy Court or the Reorganized Debtors to File or amend a Proof of Claim prior to November 23, 2020, which is the bar date applicable to Governmental Units pursuant to section 502(b)(9) of the Bankruptcy Code.

G. No Distributions Pending Allowance.

If an objection to a Claim or Interest or portion thereof is Filed as set forth in Article VII.D hereof, no payment or distribution provided under the Plan shall be made on account of such Claim or Interest or portion thereof unless and until such Disputed Claim or Interest becomes an Allowed Claim or Interest.

H. Distributions After Allowance.

To the extent that a Disputed Claim ultimately becomes an Allowed Claim or Allowed Interest, distributions (if any) shall be made to the holder of such Allowed Claim or Allowed Interest (as applicable) in accordance with the provisions of the Plan. As soon as practicable after the date that the order or judgment of the Bankruptcy Court allowing any Disputed Claim or Disputed Interest becomes a Final Order, the Disbursing Agent shall provide to the holder of such Claim or Interest the distribution (if any) to which such holder is entitled under the Plan as of the Effective Date, without any interest, dividends, or accruals to be paid on account of such Claim or Interest unless otherwise required under the Plan or applicable bankruptcy law.

Article VIII.
SETTLEMENT, RELEASE, INJUNCTION, AND RELATED PROVISIONS

A. Discharge of Debtors.

Pursuant to Bankruptcy Code section 1141(d), and except as otherwise specifically provided in the Plan or in any contract, instrument, or other agreement or document created pursuant to the Plan, the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Effective Date, of Claims (including any Intercompany Claims resolved or compromised after the Effective Date by the Reorganized Debtors), Interests, and Causes of Action of any nature whatsoever, including any interest accrued on Claims or Interests from and after the Petition Date, whether known or unknown, against, liabilities of, liens on, obligations of, rights against, and Interests in, the Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Effective Date, any liability (including withdrawal liability) to the extent such Claims or Interests relate to services performed by employees of the Debtors prior to the Effective Date and that arise from a termination of employment, any contingent or non-contingent liability on account of representations or warranties issued on or before the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not: (1) a Proof of Claim based upon such debt or right is Filed or deemed Filed pursuant to section 501 of the Bankruptcy Code; (2) a Claim or Interest based upon such debt, right, or Interest is Allowed pursuant to section 502 of the Bankruptcy Code; or (3) the holder of such a Claim or Interest has accepted the Plan. The Confirmation Order shall be a judicial determination of the discharge of all Claims and Interests subject to the occurrence of the Effective Date. Notwithstanding anything contained herein, the foregoing discharge and release shall not effect a discharge or release with respect to the Debtors’ obligation to pay interest payments on the Existing First Lien Credit Facility Claims or the treatment of Claims and Interests pursuant to and consistent with the terms of the Plan.

B. Release of Liens.

Except as otherwise provided in the Plan, or any contract, instrument, release, or other agreement or document created pursuant to the Plan, on the Effective Date and concurrently with the applicable distributions made pursuant to the Plan and, in the case of a Secured Claim, satisfaction in full of the portion of the Secured Claim that is Allowed as of the Effective Date, except for Other Secured Claims that the Debtors elect to reinstate in accordance with Article III.D.2 hereof, all mortgages, deeds of trust, Liens, pledges, or other security interests against any property of the Estates shall be fully released and discharged, and all of the right, title, and interest of any holder of such mortgages, deeds of trust, Liens, pledges, or other security interests shall revert to the Reorganized Debtors and their successors and assigns. On and after the Effective Date, any holder of such Secured Claim (and the applicable agents for such holder), at the expense of the Reorganized Debtors, shall be authorized and directed to release any collateral or other property of any Debtor (including any Cash collateral and possessory collateral) held by such holder (and the applicable agents for such holder), and to take such actions as may be reasonably requested by the Reorganized Debtors to evidence the release of such Lien, including the execution, delivery, and filing or recording of such releases. The presentation or filing of the Confirmation Order to or with any federal, state, provincial, or local agency or department shall constitute good and sufficient evidence of, but shall not be required to effect, the termination of such Liens.

Without limiting the automatic release provisions of the immediately preceding paragraph: (i) except for distributions required under Article II.B, Article II.C, and Article III.D.4, no other distribution hereunder shall be made to or on behalf of any Claim holder unless and until such holder executes and delivers to the Debtors or Reorganized Debtors such release of liens or otherwise turns over and releases such Cash, pledge or other possessory liens; and (ii) any such holder that fails to execute and deliver such release of liens within 180 days of the Effective Date shall be deemed to have no Claim against the Debtors or their assets or property in respect of such Claim and shall not participate in any distribution hereunder.

C. Releases by the Debtors.

Pursuant to section 1123(b) of the Bankruptcy Code, for good and valuable consideration, on and after the Effective Date, each Released Party is deemed released and discharged by the Debtors, the Reorganized Debtors, and their Estates, in each case on behalf of themselves and their respective successors, assigns, and representatives, and any and all other entities who may purport to assert any Cause of Action, directly or derivatively, by, through, for, or because of the foregoing entities, from any and all Causes of Action, including any derivative claims, asserted on behalf of the Debtors, that the Debtors, the Reorganized Debtors, or their Estates would have been legally entitled to assert in their own right (whether individually or collectively) or on behalf of the holder of any Claim against, or Interest in, a Debtor or other Entity, based on or relating to, or in any manner arising from, in whole or in part, the Debtors, the Debtors’ in- or out-of- court restructuring efforts, intercompany transactions, the Chapter 11 Cases, the Disclosure Statement, the DIP Real Estate Facility, the DIP Revolving Facility, the Plan (including the Plan Supplement), or any Restructuring Transactions, contract, instrument, release, or other agreement or document created or entered into in connection with the Disclosure Statement, the DIP Real Estate Facility, the DIP Revolving Facility, the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance or distribution of securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement, or upon any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date. Notwithstanding anything contained herein to the contrary, the foregoing release does not release (i) any obligations of any party under the Plan or any document, instrument, or agreement executed to implement the Plan and (ii) claims and causes of action for actual fraud or willful misconduct.

D. Releases by Holders of Claims and Interests.

As of the Effective Date, each Releasing Party is deemed to have released and discharged each Debtor, Reorganized Debtor, and Released Party from any and all Causes of Action, whether known or unknown, including any derivative claims, asserted on behalf of the Debtors, that such Entity would have been legally entitled to assert (whether individually or collectively), based on or relating to, or in any manner arising from, in whole or in part, the Debtors, the Debtors’ in- or out-of-court restructuring efforts, intercompany transactions, the Chapter 11 Cases, the formulation, preparation, dissemination, negotiation, or filing of the Disclosure Statement, the DIP Real Estate Facility, the DIP Revolving Facility, the Plan (including the Plan Supplement), or any Restructuring Transactions, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance or distribution of securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement, or upon any other related act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date. Notwithstanding anything contained herein to the contrary, the foregoing release does not release (i) any obligations of any party under the Plan or any document, instrument, or agreement executed to implement the Plan and (ii) claims and causes of action for actual fraud or willful misconduct.

E. Exculpation.

The Exculpated Parties shall not have or incur any liability to any holder of a Claim or Interest, for any act, event, or omission from the Petition Date to the Effective Date in connection with or arising out of the Chapter 11 Cases, the confirmation of the Plan, the Consummation of the Plan, the administration of the Plan or the assets and property to be distributed pursuant to the Plan (including unclaimed property under the Plan), unless such Entity’s action is determined as (i) bad faith; (ii) actual fraud; (iii) willful misconduct; or (iv) gross negligence, in each case by a Final Order of a court of competent jurisdiction. Each Entity may reasonably rely upon the opinions of its counsel, certified public accountants, and other experts or professionals.

F. Injunction.

Except as otherwise expressly provided in the Plan or for obligations issued or required to be paid pursuant to the Plan or the Confirmation Order, all Entities who have held, hold, or may hold Claims or Interests that have been released, discharged, or are subject to exculpation are permanently enjoined, from and after the Effective Date, from taking any of the following actions against, as applicable, the Debtors, the Reorganized Debtors, the Exculpated Parties, or the Released Parties: (1) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such Claims or Interests; (2) enforcing, attaching, collecting, or recovering by any manner or means any judgment, award, decree, or order against such Entities on account of or in connection with or with respect to any such Claims or Interests; (3) creating, perfecting, or enforcing any encumbrance of any kind against such Entities or the property or the estates of such Entities on account of or in connection with or with respect to any such Claims or Interests; (4) asserting any right of setoff, subrogation, or recoupment of any kind against any obligation due from such Entities or against the property of such Entities on account of or in connection with or with respect to any such Claims or Interests unless such holder has Filed a motion requesting the right to perform such setoff on or before the Effective Date, and notwithstanding an indication of a Claim or Interest or otherwise that such holder asserts, has, or intends to preserve any right of setoff pursuant to applicable law or otherwise; and (5) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such Claims or Interests released or settled pursuant to the Plan.

Upon entry of the Confirmation Order, all holders of Claims and Interests and their respective current and former employees, agents, officers, directors, principals, and direct and indirect Affiliates shall be enjoined from taking any actions to interfere with the implementation or Consummation of the Plan. Each holder of an Allowed Claim or Allowed Interest, as applicable, by accepting, or being eligible to accept, distributions under or Reinstatement of such Claim or Interest, as applicable, pursuant to the Plan, shall be deemed to have consented to the injunction provisions set forth in this Article VIII.F of the Plan.

G. Protections Against Discriminatory Treatment.

Consistent with section 525 of the Bankruptcy Code and the Supremacy Clause of the U.S. Constitution, all Entities, including Governmental Units, shall not discriminate against the Reorganized Debtors or deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, the Reorganized Debtors, or another Entity with whom the Reorganized Debtors have been associated, solely because each Debtor has been a debtor under chapter 11 of the Bankruptcy Code, has been insolvent before the commencement of the Chapter 11 Cases (or during the Chapter 11 Cases but before the Debtors are granted or denied a discharge), or has not paid a debt that is dischargeable in the Chapter 11 Cases.

H. Reimbursement or Contribution.

If the Bankruptcy Court disallows a Claim for reimbursement or contribution of an Entity pursuant to section 502(e)(1)(B) of the Bankruptcy Code, then to the extent that such Claim is contingent as of the time of allowance or disallowance, such Claim shall be forever disallowed and expunged notwithstanding section 502(j) of the Bankruptcy Code, unless prior to the Confirmation Date: (1) such Claim has been adjudicated as non-contingent or (2) the relevant holder of a Claim has Filed a non-contingent Proof of Claim on account of such Claim and a Final Order has been entered prior to the Confirmation Date determining such Claim as no longer contingent.

Article IX.
CONDITIONS PRECEDENT TO CONFIRMATION
AND CONSUMMATION OF THE PLAN

A. Conditions Precedent to Confirmation.

The following are conditions precedent to confirmation of the Plan that shall be satisfied or waived in writing in accordance with Article IX.C of the Plan:

1. The Bankruptcy Court shall have approved a Disclosure Statement with respect to the Plan in form and substance acceptable to the Debtors and the DIP Revolving Facility Agent, and the DIP Real Estate Facility Agent, to the extent required under the DIP Real Estate Facility Credit Agreement;

2. The Bankruptcy Court shall have approved the Rights Offering Procedures; and

3. The Confirmation Order, the Plan, and the Plan Documents shall be in form and substance acceptable to the Debtors, the DIP Revolving Facility Agent, and the DIP Real Estate Facility Agent, to the extent required under the DIP Real Estate Facility Credit Agreement.

B. Conditions Precedent to Effectiveness.

The following are conditions precedent to the occurrence of the Effective Date, each of which shall be satisfied or waived in writing in accordance with Article IX.C of the Plan:

1. The Bankruptcy Court shall have entered the Confirmation Order in form and substance acceptable to the Debtors, the DIP Revolving Facility Agent, and the DIP Real Estate Facility Agent, to the extent required under the DIP Real Estate Facility Credit Agreement; and the Confirmation Order shall be a Final Order and shall not (a) have been reversed or vacated, (b) be subject to a then-effective stay, or (c) without the consent of the DIP Revolving Facility Agent, have been modified or amended;

2. The Plan and the Plan Supplement, including any exhibits, schedules, documents, amendments, modifications, or supplements thereto, and inclusive of any amendments, modifications, or supplements made after the Confirmation Date but before the Effective Date, shall be in form and substance acceptable to the DIP Revolving Facility Agent, and the DIP Real Estate Facility Agent, to the extent required under the DIP Real Estate Facility Credit Agreement;

3. The New Organizational Documents shall have been in place, effective and filed where required;

4. The Debtors shall have obtained all authorizations, consents, regulatory approvals, rulings, or documents that are necessary to implement and effectuate the Plan; and

5. The Debtors shall have Paid in Full all accrued and unpaid reasonable and documented fees and expenses, through the Effective Date of (i) the DIP Revolving Facility Agent and (ii) the DIP Real Estate Facility Agent.

C. Waiver of Conditions.

The conditions to Confirmation and the Effective Date set forth in this Article IX may be waived only with the prior written consent of (i) the Debtors, (ii) the DIP Revolving Facility Agent, and (iii) the DIP Real Estate Facility Agent as to Article IX.B.5(ii), without notice, leave, or order of the Bankruptcy Court or any formal action other than proceedings to confirm or consummate the Plan.

D. Effect of Failure of Conditions.

If Consummation does not occur, the Plan shall be null and void in all respects and nothing contained in the Plan or the Disclosure Statement shall: (1) constitute a waiver or release of any Claims by the Debtors, Claims, or Interests; (2) prejudice in any manner the rights of the Debtors, any holders of Claims or Interests, or any other Entity; or (3) constitute an admission, acknowledgment, offer, or undertaking by the Debtors, any holders of Claims or Interests, or any other Entity.

Article X.
MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE PLAN

A. Modification and Amendments.

Except as otherwise specifically provided in the Plan, the Debtors reserve the right, with the consent of the DIP Revolving Facility Agent, to modify the Plan, whether such modification is material or immaterial, and seek Confirmation consistent with the Bankruptcy Code and, as appropriate, not resolicit votes on such modified Plan. Subject to those restrictions on modifications set forth in the Plan and the requirements of section 1127 of the Bankruptcy Code, Rule 3019 of the Federal Rules of Bankruptcy Procedure, and, to the extent applicable, sections 1122, 1123, and 1125 of the Bankruptcy Code, each of the Debtors expressly reserves its respective rights, with the consent of the DIP Revolving Facility Agent, to revoke or withdraw, or, to alter, amend, or modify the Plan with respect to such Debtor, one or more times, after Confirmation, and, to the extent necessary may initiate proceedings in the Bankruptcy Court to so alter, amend, or modify the Plan, or remedy any defect or omission, or reconcile any inconsistencies in the Plan, the Disclosure Statement, or the Confirmation Order, in such matters as may be necessary to carry out the purposes and intent of the Plan.

B. Effect of Confirmation on Modifications.

Entry of a Confirmation Order shall mean that all modifications or amendments to the Plan since the Solicitation thereof are approved pursuant to Bankruptcy Code section 1127(a) and do not require additional disclosure or resolicitation under Bankruptcy Rule 3019.

C. Revocation or Withdrawal of Plan.

The Debtors reserve the right, with the consent of the DIP Revolving Facility Agent, to revoke or withdraw the Plan prior to the Confirmation Date and to File subsequent plans of reorganization. If the Debtors revoke or withdraw the Plan, or if Confirmation or Consummation does not occur, then: (1) the Plan shall be null and void in all respects; (2) any settlement or compromise embodied in the Plan (including the fixing or limiting to an amount certain of any Claim or Interest or Class of Claims or Interests), assumption or rejection of Executory Contracts or Unexpired Leases effected under the Plan, and any document or agreement executed pursuant to the Plan, shall be deemed null and void; and (3) nothing contained in the Plan shall: (a) constitute a waiver or release of any Claims or Interests; (b) prejudice in any manner the rights of such Debtor or any other Entity; or (c) constitute an admission, acknowledgement, offer, or undertaking of any sort by such Debtor or any other Entity.

Article XI.
RETENTION OF JURISDICTION

To the fullest extent permitted by applicable law, and notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, on and after the Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters arising out of, or relating to, the Chapter 11 Cases and the Plan pursuant to sections 105(a) and 1142 of the Bankruptcy Code, including jurisdiction to:

1. allow, disallow, determine, liquidate, classify, estimate, or establish the priority, secured or unsecured status, or amount of any Claim or Interest, including the resolution of any request for payment of any Administrative Claim and the resolution of any and all objections to the secured or unsecured status, priority, amount, or allowance of Claims or Interests;

2. decide and resolve all matters related to the granting and denying, in whole or in part, any applications for allowance of compensation or reimbursement of expenses to Professionals authorized pursuant to the Bankruptcy Code or the Plan;

3. resolve any matters related to: (a) the assumption, assumption and assignment, or rejection of any Executory Contract or Unexpired Lease to which a Debtor is party or with respect to which a Debtor may be liable and to hear, determine, and, if necessary, liquidate, any Claims arising therefrom, including Cure Claims pursuant to section 365 of the Bankruptcy Code; (b) any potential contractual obligation under any Executory Contract or Unexpired Lease that is assumed; and (c) any dispute regarding whether a contract or lease is or was executory or expired;

4. ensure that distributions to holders of Allowed Claims and Allowed Interests (as applicable) are accomplished pursuant to the provisions of the Plan;

5. adjudicate, decide, or resolve any motions, adversary proceedings, contested or litigated matters, and any other matters, and grant or deny any applications involving a Debtor that may be pending on the Effective Date;

6. adjudicate, decide, or resolve any and all matters related to section 1141 of the Bankruptcy Code;

7. enter and implement such orders as may be necessary to execute, implement, or consummate the provisions of the Plan and all contracts, instruments, releases, indentures, and other agreements or documents created in connection with the Plan or the Disclosure Statement;

8. enter and enforce any order for the sale of property pursuant to sections 363, 1123, or 1146(a) of the Bankruptcy Code;

9. resolve any cases, controversies, suits, disputes, or Causes of Action that may arise in connection with the Consummation, interpretation, or enforcement of the Plan or any Entity’s obligations incurred in connection with the Plan;

10. issue injunctions, enter and implement other orders, or take such other actions as may be necessary to restrain interference by any Entity with Consummation or enforcement of the Plan;

11. resolve any cases, controversies, suits, disputes, or Causes of Action with respect to the releases, injunctions, and other provisions contained in Article VIII hereof and enter such orders as may be necessary to implement such releases, injunctions, and other provisions;

12. resolve any cases, controversies, suits, disputes, or Causes of Action with respect to the repayment or return of distributions and the recovery of additional amounts owed by the holder of a Claim or Interest for amounts not timely repaid pursuant to Article VI.M hereof;

13. enter and implement such orders as are necessary if the Confirmation Order is for any reason modified, stayed, reversed, revoked, or vacated;

14. determine any other matters that may arise in connection with or relate to the Plan, the Disclosure Statement, the Confirmation Order, or any contract, instrument, release, indenture, or other agreement or document created in connection with the Plan or the Disclosure Statement;

15. enter an order concluding or closing the Chapter 11 Cases;

16. adjudicate any and all disputes arising from or relating to distributions under the Plan;

17. consider any modifications of the Plan, to cure any defect or omission, or to reconcile any inconsistency in any Bankruptcy Court order, including the Confirmation Order;

18. determine requests for the payment of Claims and Interests entitled to priority pursuant to section 507 of the Bankruptcy Code;

19. hear and determine disputes arising in connection with the interpretation, implementation, or enforcement of the Plan or the Confirmation Order, including disputes arising under agreements, documents, or instruments executed in connection with the Plan;

20. hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code;

21. hear and determine all disputes involving the existence, nature, scope, or enforcement of any exculpations, discharges, injunctions and released granted in the Plan, including under Article VIII hereof, regardless of whether such termination occurred prior to or after the Effective Date;

22. enforce all orders previously entered by the Bankruptcy Court; and

23. hear any other matter not inconsistent with the Bankruptcy Code.

Notwithstanding the foregoing, the Bankruptcy Court shall not retain jurisdiction over the Exit Financing and its related definitive documents.

Article XII.
MISCELLANEOUS PROVISIONS

A. Immediate Binding Effect.

Subject to Article IX.A hereof and notwithstanding Bankruptcy Rules 3020(e), 6004(h), or 7062 or otherwise, upon the occurrence of the Effective Date, the terms of the Plan (including, for the avoidance of doubt, the Plan Supplement) shall be immediately effective and enforceable and deemed binding upon the Debtors, the Reorganized Debtors, and any and all holders of Claims or Interests (irrespective of whether such Claims or Interests are deemed to have accepted the Plan), all Entities that are parties to or are subject to the settlements, compromises, releases, discharges, and injunctions described in the Plan, each Entity acquiring property under the Plan, and any and all non-Debtor parties to Executory Contracts and Unexpired Leases with the Debtors.

B. Additional Documents.

On or before the Effective Date, the Debtors may file with the Bankruptcy Court such agreements and other documents as may be necessary to effectuate and further evidence the terms and conditions of the Plan. The Debtors or the Reorganized Debtors, as applicable, and all holders of Claims or Interests receiving distributions pursuant to the Plan and all other parties in interest shall, from time to time, prepare, execute, and deliver any agreements or documents and take any other actions as may be necessary or advisable to effectuate the provisions and intent of the Plan.

C. Payment of Statutory Fees.

All fees payable pursuant to section 1930(a) of the Judicial Code, as determined by the Bankruptcy Court at a hearing pursuant to section 1128 of the Bankruptcy Code, shall be paid by each of the Reorganized Debtors (or the Disbursing Agent on behalf of each of the Reorganized Debtors) for each quarter (including any fraction thereof) until the Chapter 11 Cases are converted, dismissed, or closed, whichever occurs first.

D. Statutory Committee and Cessation of Fee and Expense Payment.

On the Effective Date, any statutory committee appointed in the Chapter 11 Cases shall (other than for purposes of filing final fee applications and obtaining Bankruptcy Court approval of same) dissolve and members thereof shall be released and discharged from all rights and duties from or related to the Chapter 11 Cases. The Reorganized Debtors shall no longer be responsible for paying any fees or expenses incurred by the members of or advisors to any statutory committees after the Effective Date except for fees and/or expenses incurred preparing and filing final fee applications and obtaining Bankruptcy Court approval of the same.

E. Reservation of Rights.

Except as expressly set forth in the Plan, the Plan shall have no force or effect unless the Bankruptcy Court shall enter the Confirmation Order, and the Confirmation Order shall have no force or effect if the Effective Date does not occur. None of the Filing of the Plan, any statement or provision contained in the Plan, or the taking of any action by any Debtor with respect to the Plan, the Disclosure Statement, or the Plan Supplement shall be or shall be deemed to be an admission or waiver of any rights of any Debtor with respect to the holders of Claims or Interests prior to the Effective Date.

F. Successors and Assigns.

The rights, benefits, and obligations of any Entity named or referred to in the Plan shall be binding on, and shall inure to the benefit of any heir, executor, administrator, successor or assign, Affiliate, officer, director, agent, representative, attorney, beneficiaries, or guardian, if any, of each Entity.

G. Notices.

All notices, requests, and demands to or upon the Debtors to be effective shall be in writing and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when actually delivered or, in the case of notice by facsimile transmission, when received and telephonically confirmed, addressed as follows:

1. Counsel to Debtors:

Haynes and Boone, LLP

2323 Victory Ave, Suite 700

Dallas, Texas 75219

Attn: Ian T. Peck, Jarom J. Yates, and Jordan E. Chavez

2. Counsel to DIP Revolving Facility Agent:

Vinson & Elkins, LLP

2001 Ross Avenue, Suite 3900

Dallas, Texas 75201

Attn: William L. Wallander and Bradley R. Foxman

3. Counsel to the DIP Real Estate Facility Agent

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, New York 10019

Attn: John C. Longmire and Andrew S. Mordkoff

4. Counsel to the Creditors Committee:

Montgomery McCracken Walker & Rhoads LLP

437 Madison Avenue, 24th Floor

New York, New York 10022

Attn: David M. Banker, Gilbert R. Saydah, and Edward L. Schnitzer

and

Munsch Hardt Kopf & Harr, P.C.

500 N. Akard Street, Suite 3800

Dallas, Texas 75201

Attn: Kevin M. Lippman and Deborah M. Perry

5. Counsel to the Equity Committee:

Pachulski Stang Ziehl & Jones LLP

780 Third Avenue, 34th Floor

New York, New York 10017

Attn: Robert J. Feinstein, Bradford J. Sandler, and Shirley S. Cho

After the Effective Date, the Reorganized Debtors have authority to send a notice to Entities that request to continue to receive documents pursuant to Bankruptcy Rule 2002, such Entity must file a renewed request to receive documents pursuant to Bankruptcy Rule 2002. After the Effective Date, the Reorganized Debtors are authorized to limit the list of Entities receiving documents pursuant to Bankruptcy Rule 2002 to those Entities who have Filed such renewed requests.

H. Term of Injunctions or Stays.

Unless otherwise provided in the Plan or in the Confirmation Order, all injunctions or stays in effect in the Chapter 11 Cases pursuant to sections 105 or 362 of the Bankruptcy Code or any order of the Bankruptcy Court, and extant on the Confirmation Date (excluding any injunctions or stays contained in the Plan or the Confirmation Order) shall remain in full force and effect until the Effective Date. All injunctions or stays contained in the Plan or the Confirmation Order shall remain in full force and effect in accordance with their terms.

I. Entire Agreement.

Except as otherwise indicated, the Plan (including, for the avoidance of doubt, the Plan Supplement) supersedes all previous and contemporaneous negotiations, promises, covenants, agreements, understandings, and representations on such subjects, all of which have become merged and integrated into the Plan.

J. Exhibits.

All exhibits and documents included in the Plan Supplement are incorporated into and are a part of the Plan as if set forth in full in the Plan. After the exhibits and documents are Filed, copies of such exhibits and documents shall be available upon written request to the Debtors’ counsel at the address above or by downloading such exhibits and documents from the Debtors’ restructuring website at https://dm.epiq11.com/case/tuesdaymorning/. To the extent any exhibit or document is inconsistent with the terms of the Plan, unless otherwise ordered by the Bankruptcy Court, the non-exhibit or non-document portion of the Plan shall control.

K. Nonseverability of Plan Provisions.

If, prior to Confirmation, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void, or unenforceable, the Bankruptcy Court shall have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void, or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration, or interpretation, the remainder of the terms and provisions of the Plan will remain in full force and effect and will in no way be affected, impaired, or invalidated by such holding, alteration, or interpretation. The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is: (1) valid and enforceable pursuant to its terms; (2) integral to the Plan and may not be deleted or modified without the Debtors’ consent; and (3) nonseverable and mutually dependent.

L. Votes Solicited in Good Faith.

Upon entry of the Confirmation Order, the Debtors will be deemed to have solicited votes on the Plan in good faith and in compliance with the Bankruptcy Code, and pursuant to section 1125(e) of the Bankruptcy Code, the Debtors and each of their respective Affiliates, agents, representatives, members, principals, shareholders, officers, directors, employees, advisors, and attorneys will be deemed to have participated in good faith and in compliance with the Bankruptcy Code in the offer, issuance, sale, and purchase of securities offered and sold under the Plan and any previous plan, and, therefore, neither any of such parties or individuals or the Reorganized Debtors will have any liability for the violation of any applicable law, rule, or regulation governing the solicitation of votes on the Plan or the offer, issuance, sale, or purchase of the Securities offered and sold under the Plan and any previous plan.

M. Closing of Chapter 11 Cases.

The Reorganized Debtors shall, promptly after the full administration of the Chapter 11 Cases, File with the Bankruptcy Court all documents required by Bankruptcy Rule 3022 and any applicable order of the Bankruptcy Court to close the Chapter 11 Cases.

N. Waiver or Estoppel.

Each holder of a Claim or an Interest shall be deemed to have waived any right to assert any argument, including the right to argue that its Claim or Interest should be Allowed in a certain amount, in a certain priority, secured or not subordinated by virtue of an agreement made with the Debtors or their counsel, or any other Entity, if such agreement was not disclosed in the Plan, the Disclosure Statement, or papers Filed with the Bankruptcy Court prior to the Confirmation Date.

O. Controlling Document.

In the event of an inconsistency between the Plan and the Disclosure Statement, the terms of the Plan shall control in all respects. In the event of an inconsistency between the Plan and the Plan Supplement, the terms of the relevant provision in the Plan shall control (unless stated otherwise in such Plan document or in the Confirmation Order). In the event of an inconsistency between the Confirmation Order and the Plan, the Confirmation Order shall control.

Dated: November 4, 2020	Tuesday Morning Corporation on behalf of itself and all other Debtors

	By:	/s/ Steven R. Becker
	Steven R. Becker
	Chief Executive Officer
	Tuesday Morning Corporation

EXHIBIT A

GLOSSARY OF DEFINED TERMS

Administrative Claim means a Claim, Cause of Action, right, or other liability, or the portion thereof, that is entitled to priority under Bankruptcy Code sections 503(b), 507(a)(2), and 507(b), including (i) the actual and necessary costs and expenses incurred after the Petition Date of preserving the Estates and/or in connection with operating the Debtors' businesses (such as wages, salaries, or payments for goods and services); (ii) Professional Compensation Claims; and (iii) all fees and charges assessed against the Estates under 28 U.S.C. § 1930. The term Administrative Claim specifically excludes all Intercompany Claims.

Administrative Claim Bar Date means the first Business Day that is thirty (30) days after the Effective Date or such earlier deadline established by an order of the Bankruptcy Court.

Affiliate has the meaning prescribed in Bankruptcy Code section 101(2).

Allowed […] Claim means an Allowed Claim in the particular Class or category specified.

Allowed […] Interest means an Allowed Interest in the particular Class or category specified.

Allowed means, with respect to any Claim or Interest, except as otherwise provided in the Plan, a Claim or Interest allowable under Bankruptcy Code section 502: (a) for which a Proof of Claim or proof of interest was timely Filed, and as to which the deadline for objecting to Claims has passed as provided in the Plan or any other Final Order of the Bankruptcy Court and no objection or other challenge to allowance thereof has been Filed, or if an objection or challenge has been timely Filed, such Claim or Interest is allowed by Final Order; (b) for which a Proof of Claim or proof of interest is not Filed and that has been listed in a Debtors’ Schedules of Assets and Liabilities or Schedule of Equity Security Holders and is not listed as disputed, contingent, or unliquidated and as to which the deadline for objecting to Claims has passed as provided in the Plan or any other Final Order of the Bankruptcy Court and; or (c) that is deemed allowed under the Plan. For purposes of determining the amount of an Allowed Claim or Allowed Interest, there shall be deducted therefrom the amount of any claim that the Debtors may hold against the Creditor or equity security holder under Bankruptcy Code section 553 or under the doctrines of setoff or recoupment.

Allowed Claim means any Claim that is Allowed.

Approval Order means Final Order or Final Orders approving the Disclosure Statement and Rights Offering Procedures.

Avoidance Actions means any and all actual or potential Claims and Causes of Action to avoid a transfer of property or an obligation incurred by any of the Debtors pursuant to any applicable section of the Bankruptcy Code, including sections 544, 545, 547, 548, 549, 550, 551, 553(b), and 724(a) of the Bankruptcy Code, or under similar or related state or federal statutes and common law.

Backstop Agreement means the agreement to be entered into by the Debtors and the Backstop Parties in accordance with the terms of the Backstop Commitment Letter, as may be amended, supplemented, or modified from time to time in accordance with the terms thereof, setting forth, among other things, the terms and conditions of the Rights Offering and the Backstop Commitments.

Backstop Commitment Letter means the commitment letter entered into by and among the Debtors and the Backstop Parties, and attached to the Disclosure Statement as Exhibit 5, pursuant to which the Backstop Parties have agreed to certain key terms of the Backstop Agreement pursuant to which the Backstop Parties will provide the Backstop Commitment and backstop the Rights Offering.

Backstop Fee means 5% of the Backstop Commitment to be paid to the Backstop Parties in Section 4(a)(2) Rights Offering Common Stock in accordance with the terms of the Backstop Agreement.

Backstop Parties means, at any time and from time to time, the parties that have committed to backstop the Rights Offering and are signatories to the Backstop Agreement, solely in their capacities as such, to the extent provided in the Backstop Agreement.

Backstop Commitment means $40 million in proceeds to be raised through the Rights Offering and backstopped by the Backstop Parties.

Backstop Warrants mean the warrants to purchase shares of the New Common Stock issuable to the Backstop Parties in accordance with the terms of the Backstop Commitment Letter and Backstop Agreement.

Ballot means the applicable form or forms of ballot(s) to be distributed to holders of Claims entitled to vote on the Plan and on which the acceptance or rejection of the Plan is to be indicated.

Bankruptcy Code means title 11 of the United States Code, 11 U.S.C. §§ 101–1532.

Bankruptcy Court means the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.

Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure and the local bankruptcy rules prescribed by the Bankruptcy Court.

Bar Date means August 28, 2020, the date established by the Bankruptcy Court by which Proofs of Claim must be Filed with respect to such Claims, other than Administrative Claims, Claims held by Governmental Units, holders of Claims for rejection damages relating to the rejection of Executory Contracts or Unexpired Leases, or other Claims or Interests for which the Bankruptcy Court entered an order excluding the holders of such Claims or Interests from the requirement of Filing Proofs of Claim. For holders of Claims for rejection damages relating to the rejection of Executory Contracts or Unexpired Leases, the Bar Date is the later to occur of (i) August 28, 2020 or (ii) thirty (30) days after the date on which an Order approving the rejection of such Executory Contract or Unexpired Lease has been entered.

Beneficial Holder Ballot means the Ballot applicable to a beneficial holder of Tuesday Morning Corporation Interests.

Business Day means any day other than a Saturday, Sunday, or a “legal holiday” (as defined in Bankruptcy Rule 9006(a)).

Cash means cash and cash equivalents, including bank deposits, checks, and other similar items in legal tender of the United States of America.

Causes of Action means any claims, interests, damages, remedies, causes of action, demands, rights, actions, suits, obligations, liabilities, accounts, defenses, offsets, powers, privileges, licenses, liens, indemnities, guaranties, and franchises of any kind or character whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, contingent or non-contingent, liquidated or unliquidated, secured or unsecured, assertable, directly or derivatively, matured or unmatured, suspected or unsuspected, in contract, tort, law, equity, or otherwise. Causes of Action also include: (a) all rights of setoff, counterclaim, or recoupment and claims under contracts or for breaches of duties imposed by law; (b) the right to object to or otherwise contest Claims or Interests; (c) Avoidance Actions; and (d) such claims and defenses as fraud, mistake, duress, and usury, and any other defenses set forth in section 558 of the Bankruptcy Code.

Chapter 11 Cases means the bankruptcy cases commenced by the Debtors on May 27, 2020, by the filing of voluntary Chapter 11 petitions in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, Case Numbers 20-31476, 20-31477, 20-31478, 20-31479, 20-31480, 20-31481, 20-31482, jointly administered under Case Number 20-31476.

Claim means a “claim,” as defined in Bankruptcy Code section 101(5), Filed against any of the Debtors.

Claims and Balloting Agent means Epiq Corporate Restructuring, LLC.

Claims Register means the official register of Claims maintained by the Claims and Balloting Agent.

Class means a category of Claims or Interests as described in the Plan pursuant to Bankruptcy Code section 1122(a).

Class 5 Disputed Claims Reserve means a reserve for a portion of the General Unsecured Cash Fund, General Unsecured Notes, and the proceeds of the Rights Offering to be held by the Disbursing Agent or Indenture Trustee, as appropriate, for the benefit of the holders of Disputed Claims in Class 5 pending allowance, in an amount equal to their estimated Pro Rata share of the General Unsecured Cash Fund, the General Unsecured Notes, and the proceeds of the Rights Offering (as determined in accordance with Article VI.F.3 of the Plan).

CM/ECF means the Bankruptcy Court's Case Management and Electronic Case Filing system.

Common Stock means the Existing Common Stock, the Rights Offering Common Stock, and the New Common Stock.

Confirmation means the Bankruptcy Court's entry of the Confirmation Order on the docket of the Chapter 11 Cases, subject to all conditions specified in Article IX.A of the Plan having been (a) satisfied or (b) waived pursuant to Article IX.C of the Plan.

Confirmation Date means the date upon which the Bankruptcy Court enters the Confirmation Order on the docket maintained for the Chapter 11 Cases.

Confirmation Hearing means the hearing held by the Bankruptcy Court to consider confirmation of the Plan.

Confirmation Order means the order of the Bankruptcy Court confirming the Plan pursuant to Bankruptcy Code section 1129.

Consummation means the occurrence of the Effective Date.

Convenience Claim means (a) an Allowed General Unsecured Claim with a Face Amount equal to or less than $25,000 except to the extent the holder of an Allowed General Unsecured Claim with a Face Amount equal to or less than $25,000, has delivered a qualifying Convenience Claim Opt Out Notice and opted to have such holder’s claim treated as a Class 5 General Unsecured Claim or (b) an Allowed General Unsecured Claim with a Face Amount greater than $25,000 but less than $35,000, to the extent the holder of an Allowed General Unsecured Claim with a Face Amount greater than $25,000 but less than $35,000 has exercised the Convenience Claim Opt In Right and opted to have such holder’s claim reduced to $25,000 and treated as a Class 6 Convenience Claim.

Convenience Claim Distribution means, with respect to each Convenience Claim, an amount in Cash equal to 90% of such Convenience Claim.

Convenience Claim Opt Out Notice means the selection of the opt out option on a validly and timely submitted Ballot by an authorized holder of an Allowed General Unsecured Claim with a Face Amount equal to or less than $25,000 opting to have its Claim treated as a Class 5 General Unsecured Claim.

Convenience Claim Opt In Notice means the selection of the opt in option on a validly and timely submitted Ballot by an authorized holder of an Allowed General Unsecured Claim with a Face Amount greater than $25,000 but less than $35,000 opting to have its Claim reduced to $25,000 and treated as a Class 6 Convenience Claim.

Creditor has the meaning prescribed in Bankruptcy Code section 101(10).

Creditors Committee means the official committee of unsecured creditors appointed in the Chapter 11 Cases on June 9, 2020 and its respective members (but solely in their capacity as such).

Cure Claim means a Claim based upon the Debtors’ defaults on an Executory Contract or Unexpired Lease at the time such contract or lease is assumed by the Debtors pursuant to Bankruptcy Code section 365.

Debtor means one of the Debtors.

Debtors means, collectively, Tuesday Morning Corporation; TMI Holdings, Inc.; Tuesday Morning, Inc.; Friday Morning, LLC; Days of the Week, Inc.; Nights of the Week, Inc.; and Tuesday Morning Partners, Ltd., whose Chapter 11 Cases are being jointly administered by the Bankruptcy Court under case number 20-31476-HDH-11.

DIP Credit Agreements means, collectively, the DIP Real Estate Facility Credit Agreement and the DIP Revolving Facility Credit Agreement.

DIP Facilities means, collectively, the DIP Revolving Facility and the DIP Real Estate Facility.

DIP Revolving Facility Financing Order means the Final Order (i) Authorizing Debtors to (a) Use Cash Collateral on a Limited Basis and (b) Obtain Postpetition Financing on a Secured, Superpriority Basis, (ii) Granting Adequate Protection, and (iii) Granting Related Relief, dated June 26, 2020 [Docket No. 331] entered in the Chapter 11 Cases.

DIP Parties means, collectively, the DIP Term Facility Parties and the DIP Revolving Facility Parties.

DIP Revolving Facility means the first lien super-priority revolving credit facility, provided by the DIP Revolving Facility Lenders in connection with the DIP Revolving Facility Credit Agreement and approved by the Bankruptcy Court on a final basis pursuant to the DIP Revolving Facility Financing Order.

DIP Revolving Facility Agent means JPMorgan Chase Bank, N.A., in its capacity as administrative agent under the DIP Revolving Facility Credit Agreement.

DIP Revolving Facility Claim means a Claim held by any of the DIP Revolving Facility Parties arising under or relating to the DIP Revolving Facility Credit Agreement or the DIP Revolving Facility Financing Order, including any and all fees, interest, and accrued but unpaid interest and fees arising under the DIP Revolving Facility Credit Agreement, and all obligations thereunder.

DIP Revolving Facility Credit Agreement means the Senior Secured Super Priority Debtor-in-Possession Credit Agreement dated as of May 29, 2020, as amended, restated, amended and restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof, by and among Tuesday Morning Corporation, as holdings, Tuesday Morning Inc., as borrower, the other Debtors as guarantors, the DIP Revolving Facility Agent, and the DIP Revolving Facility Lenders.

DIP Revolving Facility Lenders means the lenders party to the DIP Revolving Facility Credit Agreement.

DIP Revolving Facility Parties means, collectively, the DIP Revolving Facility Agent, the DIP Revolving Facility Lenders, the Issuing Bank (as defined under the DIP Revolving Facility Credit Agreement) and the Secured Bank Product Providers (as defined under the DIP Revolving Facility Credit Agreement).

DIP Real Estate Facility means the senior term loan facility in an aggregate principal amount of $25 million, plus accrued but unpaid interest, provided by the DIP Real Estate Facility Lenders in connection with the DIP Real Estate Facility Credit Agreement and approved by the Bankruptcy Court on a final basis pursuant to the DIP Real Estate Facility Financing Order.

DIP Real Estate Facility Agent means Franchise Group, Inc., in its capacities as administrative agent and collateral agent under the DIP Real Estate Facility Credit Agreement.

DIP Real Estate Facility Claim means a Claim held by any of the DIP Real Estate Facility Parties arising under or relating to the DIP Real Estate Facility Credit Agreement or the DIP Real Estate Facility Financing Order, including any and all fees, interests paid in kind, and accrued but unpaid interest and fees arising under the DIP Real Estate Facility Credit Agreement.

DIP Real Estate Facility Credit Agreement means the Senior Secured Super Priority Debtor-in-Possession Delayed Draw Term Loan Agreement dated as of July 10, 2020, as hereafter amended, restated, amended and restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof, by and among Tuesday Morning Corporation, as holdings, Tuesday Morning, Inc., as borrower, the other Debtors as guarantors, the DIP Real Estate Facility Agent, and the DIP Real Estate Facility Lenders.

DIP Real Estate Facility Lenders means the lenders party to the DIP Real Estate Facility Agreement.

DIP Real Estate Facility Parties means, collectively, the DIP Real Estate Real Facility Lenders and the DIP Real Estate Facility Agent.

Disbursing Agent means the Reorganized Debtors, or the Entity or Entities selected by the Debtors or the Reorganized Debtors, as applicable, to make or facilitate distributions pursuant to the Plan.

Disclosure Statement means the disclosure statement (including all exhibits and schedules thereto or referenced therein) regarding the Plan, as may be amended, modified, or supplemented in a manner acceptable to the DIP Revolving Facility Agent.

Disputed Claim means a Claim that is not an Allowed Claim and for which the Court has not entered an order resolving and/or liquidating such Claim.

Distribution Record Date means the Confirmation Date; provided, however, that the Distribution Record Date shall not apply to publicly held securities.

Effective Date means the date that is the first Business Day after the Confirmation Date, on which (a) no stay of the Confirmation Order is in effect, and (b) all conditions to the effectiveness of the Plan have been satisfied or waived as provided in the Plan.

Eligible Offeree means any holder of Existing Common Stock as of the Rights Offering Record Date.

Eligible Offeree Rights Offering means the offering of Share Purchase Rights to Eligible Offerees to purchase shares of the Eligible Offeree Rights Offering Common Stock to be issued by Reorganized Tuesday Morning pursuant to the Plan.

Eligible Offeree Rights Offering Common Stock means shares of the New Common Stock issuable pursuant to the Eligible Offeree Rights Offering in accordance with the Plan and the Rights Offering Procedures for an aggregate purchase price of up to $24,000,000.

Eligible Offeree Share Purchase Rights means the rights to be distributed to each Eligible Offeree which will enable each Eligible Offeree to purchase its Pro Rata share of the Eligible Offeree Rights Offering Common Stock issuable in the Eligible Offeree Rights Offering, on the terms and conditions set forth in the Rights Offering Documents.

Employment Obligations means any existing obligations to employees to be assumed, reinstated, or honored, as applicable, in accordance with Article IV.O of the Plan and the Management Incentive Plan in accordance with Article IV.N of the Plan.

Entity means any Person, estate, trust, Governmental Unit, or United States trustee, as set forth in Bankruptcy Code section 101(15).

Equity Committee means the Official Committee of Equity Security Holders appointed by the Office of the United States Trustee in these Chapter 11 Cases as reflected in Docket No. 1151, as may be amended from time to time , and its respective members (but solely in their capacity as such).

Estate Property means all right, title, and interest in and to any and all property of every kind or nature, owned by the Debtors or their Estates on the Petition Date as defined by Bankruptcy Code section 541.

Estates means the bankruptcy estates of the Debtors and all Estate Property comprising the Debtors' bankruptcy estates within the meaning of Bankruptcy Code section 541.

Exculpated Parties means, collectively, the Debtors, the DIP Parties, the Creditors Committee, the Equity Committee, and the Existing First Lien Parties, and with respect to each of the foregoing Entities, any of their respective current officers, directors, members, professionals, advisors, accountants, attorneys, investment bankers, consultants, employees, agents and other representatives (but solely in their capacity as such).

Executory Contract means an executory contract or unexpired lease as such terms are used in Bankruptcy Code section 365, including all operating leases, capital leases, and contracts to which any Debtor is a party or beneficiary.

Existing Common Stock means the existing and outstanding shares of Tuesday Morning Corporation and any unexpired options, units or other rights to acquire shares of Tuesday Morning Corporation.

Existing First Lien Agent means JPMorgan Chase Bank, N.A., in its capacity as administrative agent under the Existing First Lien Credit Agreement.

Existing First Lien Credit Agreement means the Credit Agreement originally dated as of August 18, 2015, as amended by that certain Corrective Amendment dated October 17, 2015 and as further amended by that certain Second Amendment dated as of January 29, 2019, by and among Tuesday Morning, Inc., as borrower, the Existing First Lien Agent and the Existing First Lien Lenders.

Existing First Lien Credit Documents means, collectively, the Existing First Lien Credit Agreement and all loan and security documents, guaranties, mortgages, pledges, instruments, and other agreements related thereto and/or executed in connection therewith.

Existing First Lien Credit Facility means the credit made available for borrowing under the Existing First Lien Credit Documents.

Existing First Lien Credit Facility Claims means the Claims held by any of the Existing First Lien Lenders arising under or relating to the Existing First Lien Credit Documents, including any and all fees, interest (both pre and post-Petition Date), and reimbursement of expenses, and any other amounts owed or arising under the Existing First Lien Credit Documents, but excluding any portion of the Existing First Lien Credit Facility Claims that have been repaid or rolled into the Administrative Expense Claims pursuant to the DIP Orders or otherwise paid during the case.

Existing First Lien Lenders means, collectively, the banks and other financial institutions that are lenders under the Existing First Lien Credit Agreement.

Existing First Lien Parties means, collectively, the Existing First Lien Agent and the Existing First Lien Lenders.

Exit Financing means, collectively, the New ABL Credit Facility, the Sale Leaseback, the General Unsecured Notes, and the Rights Offering.

File, Filed, or Filing means, as to any document or pleading, properly and timely file, filed or filing with the Bankruptcy Court or its authorized designee in the Chapter 11 Cases.

Final Order means an order or judgment (a) as to which the time to appeal, petition for certiorari, or move for reargument or rehearing has expired; or (b) in the event an appeal, writ of certiorari, or motion for reargument or rehearing has been Filed, such judgment or order has not been reversed, modified, stayed, or amended.

GAAP means generally accepted accounting principles as in effect from time to time in the United States.

General Unsecured Notes means the unsecured notes issued for the partial satisfaction of Allowed General Unsecured Claims. The terms of the General Unsecured Notes are described on Appendix A to the Plan. The amount of the General Unsecured Notes shall be $25 million. Notwithstanding the foregoing, the amount of the General Unsecured Notes will be increased or decreased as necessary to ensure that the total amount of the General Unsecured Cash Fund, the proceeds of the Rights Offering, and the General Unsecured Notes are sufficient to satisfy all Allowed General Unsecured Claims in full with interest from the Petition Date through the Effective Date at the federal judgement rate in effect as of the Petition Date.

General Unsecured Cash Fund means a cash fund to be established no later than thirty days after the Effective Date for the full or partial satisfaction of Allowed General Unsecured Claims. The amount of the General Unsecured Cash Fund shall be $61.3 million.

General Unsecured Claim means an Unsecured Claim that is not: (a) an Administrative Claim; (b) a Professional Compensation Claim; (c) a Priority Unsecured Tax Claim; (d) an Other Priority Unsecured Claim; or (e) an Intercompany Claim.

Governmental Unit means any governmental unit, as defined in Bankruptcy Code section 101(27).

Indenture Trustee means the Indenture Trustee under the bond indenture governing the General Unsecured Notes to be included in the Plan Supplement who shall meet the requirements of the Trust Indenture Act. If Class 5 votes in favor of the Plan, the Creditors Committee shall select the Indenture Trustee with approval of the Reorganized Debtors, not to be unreasonably withheld. If Class 5 does not vote in favor of the Plan, the Debtors or Reorganized Debtors, as applicable, shall select the Indenture Trustee.

Impaired or Impairment means, with respect to a Class of Claims or Interests, a Class of Claims or Interests that is impaired within the meaning of Bankruptcy Code section 1124.

Insider has the meaning set forth in Bankruptcy Code section 101(31).

Intercompany Claim means any Claim held by a Debtor or an Affiliate against a Debtor.

Intercompany Interest means an Interest in a Debtor other than Tuesday Morning Corporation held by another Debtor or by a non-debtor Affiliate of a Debtor.

Interest means any equity security (as defined in section 101(16) of the Bankruptcy Code) of a Debtor, including all ordinary shares, common stock, preferred stock, or other instrument evidencing any fixed or contingent ownership interest in any Debtor, whether or not transferable, including any option, warrant, or other right, contractual or otherwise, to acquire any such interest in a Debtor, that existed immediately before the Effective Date.

Judicial Code means title 28 of the United States Code, 28 U.S.C. §§ 1–4001.

Lien means a lien, security interest, or other interest or encumbrance as defined in Bankruptcy Code section 101(37) asserted against any Estate Property.

Management Incentive Plan means the management incentive plan that shall authorize the board of directors or a committee thereof to make future grants to officers and directors of the Reorganized Debtors of New Common Stock or rights to acquire New Common Stock, which may take the form of an amendment to the Tuesday Morning Corporation 2014 Long-Term Incentive Plan.

Master Ballot means the Ballot to be completed by a Nominee by compiling the votes and other information from the Beneficial Holder Ballots.

New ABL Credit Facility means a senior secured revolving asset-based lending facility in the amount of $110 million on the terms set forth in the New ABL Credit Facility Documents.

New ABL Credit Facility Agent means the administrative agent and collateral agent under the New ABL Credit Facility.

New ABL Credit Facility Documents means all agreements, documents, and instruments delivered or entered into in connection with the New ABL Credit Facility.

New Board means the board of directors of the Reorganized Debtors selected in accordance with Article IV.I of the Plan. The identities and affiliations of the members of the New Board shall be identified in the Plan Supplement on or before the date of the Confirmation Hearing, to the extent known at such time.

New Common Stock means the new shares of common stock of Reorganized Tuesday Morning Corporation to be authorized and/or issued on the Effective Date, including the Rights Offering Common Stock and any shares of common stock authorized and/or issued on the Effective Date in connection with the Management Incentive Plan.

New Organizational Documents means the documents providing for corporate governance of the Reorganized Debtors, including charters, bylaws, operating agreements, or other organizational documents, as applicable, which shall be included in the Plan Supplement.

Nominee means an Entity through which a beneficial holder who holds Tuesday Morning Corporation Interests in “streetname” may vote on the Plan.

Ordinary Course Professional means a Professional employed and retained pursuant to the Ordinary Course Professionals Order.

Ordinary Course Professionals Order means the Order Authorizing Employment and Payment of Professionals Utilized in the Ordinary Course of Business [Docket No. 452] entered in the Chapter 11 Cases.

Other Priority Unsecured Claim means any Claim entitled to priority status pursuant to section 507(a) of the Bankruptcy Code that is not (a) an Administrative Claim, (b) a Professional Compensation Claim, or (c) a Priority Unsecured Tax Claim.

Other Secured Claim means any Secured Claim that is not a DIP Revolving Facility Claim, DIP Real Estate Facility Claim, Secured Tax Claim, Existing First Lien Credit Facility Claim, or an Existing Second Lien Claim. Other Secured Claims shall not include any such Claims secured by Liens that are avoidable, unperfected, subject to subordination, or otherwise unenforceable.

Paid in Full or Payment in Full means, with respect to the DIP Revolving Facility claims, “Full Payment” of such Claim within the meaning of such phrase as defined in Section 1.01 of the DIP Revolving Facility Credit Agreement.

Payoff Letter means the payoff letters to be entered into by the Debtors, the DIP Revolving Facility Agent, and the DIP Real Estate Facility Agent, pursuant to which, among other things, (a) the DIP Revolving Facility Claims are to be Paid in Full and (b) the Existing First Lien Credit Facility Claim (excluding the Refinancing Accommodation Fee to the extent not payable pursuant to the terms of the Creditor Support Agreement) are to be Paid in Full.

Person means and includes natural persons, corporations, limited partnerships, general partnerships, joint ventures, trusts, land trusts, business trusts, unincorporated organizations, or other legal entities, regardless of whether they are governments, agencies, or political subdivisions thereof.

Petition Date means May 27, 2020, the date on which the Debtors commenced the Chapter 11 Cases.

Plan means the Chapter 11 plan Filed by the Debtors, as such document may be amended or modified.

Plan Distribution means a payment or distribution to holders of Allowed Claims, Allowed Interests, or other eligible Entities under the Plan.

Plan Documents means, collectively those documents in furtherance of Consummation of the Plan and/or to be executed in order to consummate the transactions contemplated under the Plan, which may be Filed by the Debtors with the Bankruptcy Court.

Plan Supplement means the compilation of documents and forms of documents, agreements, schedules, and exhibits to the Plan (in each case, (a) in form and substance satisfactory to the Debtors and DIP Revolving Facility Agent and (b) as may be altered, amended, modified, or supplemented from time to time in accordance with the terms of the Plan and in accordance with the Bankruptcy Code and Bankruptcy Rules) to be Filed by the Debtors no later than five days before the Voting Deadline or such later date as may be approved by the Bankruptcy Court, including the following, as applicable (1) New Organizational Documents; (2) the New ABL Credit Facility Documents (3) the Sale Leaseback Documents ; (4) the Schedule of Assumed Contracts and Leases; (5) the Schedule of Rejected Contracts and Leases; (6) the Schedule of Retained Causes of Action; (7) the Payoff Letter; (8) the Backstop Agreement; (9) the bond indenture and related transaction documents for the General Unsecured Notes; and (10) a summary of the Management Incentive Plan and related documents and information.

Priority Unsecured Tax Claim means an Unsecured Claim, or the portion thereof, that is entitled to priority in payment under Bankruptcy Code section 507(a)(8).

Professional means an Entity: (a) employed pursuant to a Bankruptcy Court order in accordance with sections 327, 363, or 1103 of the Bankruptcy Code and to be compensated for services rendered prior to or on the Confirmation Date, pursuant to sections 327, 328, 329, 330, 331, and 363 of the Bankruptcy Code; or (b) awarded compensation and reimbursement by the Bankruptcy Court pursuant to section 503(b)(4) of the Bankruptcy Code.

Professional Compensation Claim means a Claim for compensation or reimbursement of expenses of a Professional incurred on and after the Petition Date and prior to the Effective Date, including fees and expenses incurred in preparing final fee applications and participating in hearings on such applications, and requested in accordance with the provisions of Bankruptcy Code sections 326, 327, 328, 330, 331, 503(b) or 1103.

Professional Compensation Claim Bar Date means forty-five (45) days after the Effective Date.

Professional Compensation Claim Objection Deadline means twenty-four (24) days after the Professional Compensation Claim Bar Date.

Professional Compensation Claim Reserve means an amount of Cash to be estimated by the Debtors prior to the Effective Date and sufficient to satisfy Professional Compensation Claims, and together with any remaining Carve-Out (as defined in DIP Revolving Facility Financing Order), shall be deposited into a segregated interest bearing account in the name of the Reorganized Debtors and shall only be used for payment and satisfaction of such Claims.

Proof of Claim means a proof of Claim Filed against any of the Debtors in the Chapter 11 Cases by the applicable Bar Date.

Pro Rata means the proportion that an Allowed Claim or an Allowed Interest in a particular Class bears to the aggregate amount of Allowed Claims or Allowed Interests in that Class.

Reinstate, Reinstated, or Reinstatement means with respect to Claims and Interests, that the Claim or Interest shall be rendered Unimpaired in accordance with Bankruptcy Code section 1124.

Released Party means, collectively, and in each case solely in their capacities as such: (a) the Debtors; (b)the Reorganized Debtors, (c) the DIP Parties; (d) the Existing First Lien Parties; (e) the Creditors Committee, (f) the Equity Committee, (g) the Backstop Parties, and (h) with respect to each of the foregoing Entities, such Entity’s predecessors, professionals, successors, assigns, subsidiaries, Affiliates, managed accounts and funds, current and former officers and directors, principals, shareholders, members, partners, managers, employees, subcontractors, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, management companies, fund advisors, and other professionals, and such Entities’ respective heirs, executors, estates, servants, and nominees.

Releasing Party means (i) the holders of all Claims or Interests who (a) vote to accept the Plan or (b) either (1) abstain from voting or (2) vote to reject the Plan and, in the case of either (b)(1) or (2), does not opt out of the voluntary release contained in Article VIII of the Plan by checking the opt out box on the Ballot and returning it in accordance with the instructions set forth thereon, indicating that they opt not to grant the releases provided in the Plan; and (ii) the holders of Claims or Interests that are Unimpaired under the Plan.

Reorganized Debtors means, collectively, a Debtor, or any successor or assign thereto, by merger, consolidation, or otherwise, on and after the Effective Date.

Reorganized Tuesday Morning means Tuesday Morning Corporation, or Tuesday Morning Corporation’s successor or assign by merger, consolidation, or otherwise, on and after the Effective Date.

Restructuring Transactions means the transactions described in Article IV.C of the Plan.

Retained Causes of Action means all Causes of Action that belong to the Debtors.

Rights Offering means the Eligible Offeree Rights Offering and the Section 4(a)(2) Rights Offering.

Rights Offering Common Stock means the Eligible Offeree Rights Offering Common Stock and the Section 4(a)(2) Rights Offering Common Stock.

Rights Offering Distribution Date shall be the date of issuance of the Share Purchase Rights, which shall occur as soon as reasonably practicable following the Rights Offering Record Date.

Rights Offering Documents means, collectively, the Backstop Commitment Letter, the Backstop Agreement, and any and all other agreements, documents, and instruments delivered or entered into in connection with the Rights Offering, including the Rights Offering Procedures.

Rights Offering Procedures means the procedures governing the Rights Offering attached as an exhibit to the Backstop Agreement, and which shall be in form and substance acceptable to the Backstop Parties.

Rights Offering Record Date means the date established in the Rights Offering Procedures as the record date for determining the holders of Allowed Tuesday Morning Corporation Interests entitled to receive the Rights in the Eligible Offeree Rights Offering.

Sale Leaseback means the sale-leaseback transaction pursuant to which the Debtors will consummate a sale of the Debtors’ owned real estate to the Sale Leaseback Counterparty for a $60,000,000 purchase price and a related lease-back of the owned real property to the Reorganized Debtors.

Sale Leaseback Documents means all agreements, documents, and instruments delivered or entered into in connection with the Sale Leaseback.

Sale Leaseback Counterparty means Rialto Real Estate Fund IV – Property, LP.

Schedules means, collectively, the Schedule of Assumed Contracts and Leases, Schedule of Rejected Contracts and Leases, and Schedule of Retained Causes of Action.

Schedules of Assets and Liabilities means the schedules of assets and liabilities Filed by the Debtors in the Chapter 11 Cases, as may be amended, modified, or supplemented.

Schedule of Assumed Contracts and Leases means the schedule of Executory Contracts and Unexpired Leases to be assumed, and, if applicable, assigned, by the Debtors, to be Filed as part of the Plan Supplement.

Schedule of Equity Security Holders means the schedule of Interests required to be Filed pursuant to Bankruptcy Rule 1007(a)(3).

Schedule of Rejected Contracts and Leases means the schedule of Executory Contracts and Unexpired Leases to be rejected by the Debtors, to be Filed as part of the Plan Supplement.

Schedule of Retained Causes of Action means the Retained Causes of Action set forth on the schedule to be Filed as part of the Plan Supplement.

Section 4(a)(2) Rights Offering means the offering of Share Purchase Rights to the Backstop Parties to purchase shares of the Section 4(a)(2) Rights Offering Common Stock to be issued by Reorganized Tuesday Morning pursuant to the Plan.

Section 4(a)(2) Rights Offering Common Stock means (1) shares of the New Common Stock issuable pursuant to the Eligible Offeree Rights Offering in accordance with the Plan and the Rights Offering Procedures for an aggregate purchase price of up to $16,000,000, and (2) any additional shares of New Common Stock the Backstop Parties are required to purchase pursuant to the Backstop Commitment and the additional shares of New Common Stock issued to the Backstop Parties in payment of the Backstop Fee.

Section 4(a)(2) Share Purchase Rights means the rights to be distributed to the Backstop Parties to purchase the Section 4(a)(2) Rights Offering Common Stock described in clause (1) of the definition of Section 4(a)(2) Rights Offering Common Stock, on the terms and conditions set forth in the Rights Offering Documents.

Secured Claim means a Claim: (a) secured by a Lien on collateral to the extent of the value of such collateral, as determined in accordance with section 506(a) of the Bankruptcy Code or (b) subject to a valid right of setoff pursuant to section 553 of the Bankruptcy Code.

Secured Tax Claim means a Secured Claim for taxes held by a Governmental Unit, including cities, counties, school districts, and hospital districts, (a) entitled by statute to assess taxes based on the value or use of real and personal property and to obtain an encumbrance against such property to secure payment of such taxes or (b) entitled to obtain an encumbrance on property to secure payment of any tax claim specified in Bankruptcy Code section 507(a)(8). Secured Tax Claims shall not include any such Claims secured by liens/security interests that are avoidable, unperfected, subject to subordination, or otherwise unenforceable.

Securities Act means the Securities Act of 1933, as amended, 15 U.S.C. §§ 77a–77aa, or any similar federal, state, or local law.

Share Purchase Rights means the Eligible Offeree Share Purchase Rights and the Section 4(a)(2) Share Purchase Rights.

Solicitation means solicitation in accordance with the Approval Order of (a) votes under the Plan and (b) the Share Purchase Rights.

Solicitation Materials means the Disclosure Statement (including all exhibits and appendices), Ballot, and any other materials to be used in the Solicitation of votes on the Plan.

Subordinated Claim means a Claim that is subordinated to General Unsecured Claims pursuant to (a) a contract or agreement, (b) a Final Order declaring that such Claim is subordinated in right or payment, or (c) any applicable provision of the Bankruptcy Code, including Bankruptcy Code section 510, or other applicable law. Subordinated Claims specifically include any Claim for punitive damages provided for under applicable law.

Tuesday Morning Corporation Interests means any Interest in Tuesday Morning Corporation that existed immediately before the Effective Date.

Tuesday Morning means Debtor Tuesday Morning Corporation.

Unexpired Lease means a lease to which one or more of the Debtors is a party that is subject to assumption or rejection under Bankruptcy Code section 365.

Unimpaired means, with respect to a Class of Claims or Interests, a Class of Claims or Interests that is not impaired within the meaning of Bankruptcy Code section 1124.

United States means the United States of America and all agencies thereof.

Unsecured Claim means a Claim that is not a Secured Claim. The term specifically includes any tort Claims or contractual Claims or Claims arising from damage or harm to the environment and, pursuant to Bankruptcy Code section 506(a), any Claim of a Creditor against the Debtors to the extent that such Creditor’s Claim is greater than the value of the Lien securing such Claim (including, without limitation, any Existing Second Lien Deficiency Claim), any Claim for damages resulting from rejection of any Executory Contract or Unexpired Lease under Bankruptcy Code section 365, and any Claim not otherwise classified under the Plan.

Voting Deadline means December 15, 2020 at 5:00 p.m., prevailing Central Time, which is the deadline established by the Bankruptcy Court pursuant to the Approval Order for submitting a Ballot to accept or reject the Plan.

Voting Record Date means November 9, 2020.

Appendix A

Terms of General Unsecured Notes

Issuer:	Reorganized Tuesday Morning Corporation (“Reorganized Tuesday Morning”)
Holders:	Holders of Allowed General Unsecured Claims
Notes:	$25 million tradeable Notes to be issued under an Indenture qualified under Trust Indenture Act.
Maturity	42 months (exact maturity date adjusted to the next 15th or 1st day of the month, to match bond market convention)
Interest Rate:	Interest to accrue as follows: ▪ 10%, per annum, for the first-year period; ▪ 12%, per annum, for the second-year period; § 14% per annum for the final eighteen-month period. Interest to be payable semi-annually in arrears. For the first two semi-annual periods, interest may be paid in-kind at Issuer’s election (election to be made on a semi-annual basis), and if such election is made, the interest rate for the election period will increase by 2% per annum.
Collateral:	Junior lien on collateral pledged in connection with the Exit First Lien Credit Facility, and a first lien on all other assets.
Subordination Agreement:	Notes to be subordinated to the security interests, rights and remedies of the respective Exit First Lien Lenders to be memorialized in a subordination agreement which: ▪ Shall provide that, until the Exit First Lien Lenders are indefeasibly paid in full, the Noteholders will not contest, interfere or delay lender enforcement of their liens or repayment; ▪ Shall contain subordination provisions with respect to payments under the Note, including that if Indenture Trustee receives notice from the Exit First Lien Lenders attesting to Reorganized Tuesday Morning’s default under the Exit First Lien Credit Facility or the other “Payment Conditions” set forth in such facility have not been satisfied, Indenture Trustee will not accept payments from Issuer until such default is cured or as may otherwise be ordered by a court of competent jurisdiction; ▪ Shall set forth the lien priority, relative rights and other creditors’ rights issues in respect of the collateral securing the Notes and the collateral securing the Exit First Lien Credit Facility; and ▪ Shall be in form and substance satisfactory to the administrative agent under the Exit First Lien Credit Facility, Official Committee of Unsecured Creditors, the Official Committee of Equity Holders, the Backstop Parties, and Borrower.

Indenture Trustee:

If Class 5 votes in favor of the Plan, the Indenture Trustee meeting the requirements of the Trust Indenture Act shall be selected by the Official Committee of Unsecured Creditors with approval of Issuer, not to be unreasonably withheld, otherwise the Debtors shall select the Indenture Trustee. All reasonable Indenture Trustee fees and costs, including but not limited to professional fees, expenses, and distribution costs, shall be paid for by the Reorganized Debtors. The Indenture Trustee shall have board observation rights, be entitled to attend all board meetings and calls, and be entitled to receive copies of all documents that any other board or committee members receive. The Indenture Trustee shall be compensated for his/her board observation by Reorganized Tuesday Morning.

Voluntary Prepayment:

Subject to the Subordination Agreement, notes may be prepaid by Issuer, in whole or in part, in its sole discretion, at any time or from time to time, at a redemption price equal to principal amount being redeemed plus accrued interest thereon, if any, to the date of the prepayment. There will be no pre-payment penalty or make whole premium owed for prepayment of the Notes.

Mandatory Prepayment:

Acquisition Transaction: Upon a Sale Transaction, the Indenture will require Reorganized Tuesday Morning to (subject to the Subordination Agreement) prepay the Notes at a price of 100% of principal plus accrued interest, if any, to the date of prepayment. A “Sale Transaction” shall mean (i) a sale of all or substantially all of the assets of Reorganized Tuesday Morning or (ii) any merger, consolidation or similar transaction upon which the outstanding common stock of Reorganized Tuesday Morning shall no longer be registered pursuant to the Securities Exchange Act of 1934, as amended.

Excess cash flow: Commencing with fiscal year 2022, the Indenture will require Reorganized Tuesday Morning to prepay the Notes in an amount equal to 50% of the Reorganized Debtors’ excess cash flow calculated on a semi-annual basis and paid within sixty days of the conclusion of the relevant measurement period. To clarify timing, the first measurement period for determining excess cash flow will be July 1, 2021 through December 31, 2021 and payment (if any required) will be made on or before March 1, 2022. Subsequent periods would be treated in the same manner. Reorganized Tuesday Morning will provide its calculation of excess cash flow to the Indenture Trustee on a quarterly basis.

Any voluntary prepayment during the relevant measurement period shall reduce the obligation to remit excess cash flow on a dollar-for-dollar basis.

Any obligations to use excess cash flow for mandatory prepayment of the Notes shall be subject to (i) any and all terms and restrictions contained in the Exit First Lien Credit Facility and the Subordination Agreement and (ii) a minimum liquidity threshold (i.e., availability under the Exit First Lien Credit Facility plus cash) of $45 million (the “Minimum Liquidity Threshold”).

Reporting Requirements:

Reorganized Tuesday Morning will maintain compliance with SEC reporting requirements and provide reports to the Indenture Trustee.

All borrowing base certificates shall be provided to the Indenture Trustee contemporaneously with such certificates being provided to the lender/lender agent.

Issuer shall have 30 days from the actual receipt of any notice of default to cure any default in payment on the Notes.

Events of Default:

Usual and customary for transactions of this type, including without limitation:

▪ Failure to make interest payments when due unless cured within 30 days;

▪ Failure to repay in full upon maturity or pursuant to a mandatory prepayment requirement (subject to such payment being permitted under the Subordination Agreement);

▪ Breach of covenant, subject to cure period set forth in Indenture;

▪ Sale or disposition of all or substantially all of the Reorganized Tuesday Morning’s assets, unless the proceeds of the sale are sufficient and applied to the prepayment in full of the Notes; and

▪ Bankruptcy or insolvency of the Company.

Additional Terms:

Reorganized Tuesday Morning cannot issue cash dividends or buyback stock during pendency of Notes.

Reorganized Debtors cannot make cash distributions to senior executives under their annual incentive plan during any time period in which Reorganized Tuesday Morning is in default under the Notes.

Exhibit 99.2

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

In re:

Tuesday Morning Corporation, et al.,¹

Debtors.

Chapter 11

Case No. 20-31476-HDH-11

Jointly Administered

DISCLOSURE STATEMENT IN SUPPORT OF THE FIRST AMENDED JOINT PLAN OF REORGANIZATION OF TUESDAY MORNING CORPORATION, ET AL. PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE

Ian T. Peck

State Bar No. 24013306

Jarom J. Yates

State Bar No. 24071134

Jordan E. Chavez

State Bar No. 24109883

HAYNES AND BOONE, LLP

2323 Victory Avenue, Suite 700

Dallas, TX 75219

Telephone: 214.651.5000

Facsimile: 214.651.5940

Email: ian.peck@haynesboone.com

Email: jarom.yates@haynesboone.com

Email: jordan.chavez@haynesboone.com

ATTORNEYS FOR DEBTORS

Dated: November 4, 2020

¹The Debtors in these Chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: Tuesday Morning Corporation (8532) (“TM Corp.”); TMI Holdings, Inc. (6658) (“TMI Holdings”); Tuesday Morning, Inc. (2994) (“TMI”); Friday Morning, LLC (3440) (“FM LLC”); Days of the Week, Inc. (4231) (“DOTW”); Nights of the Week, Inc. (7141) (“NOTW”); and Tuesday Morning Partners, Ltd. (4232) (“TMP”). The location of the Debtors’ service address is 6250 LBJ Freeway, Dallas, TX 75240.

TABLE OF CONTENTS

ARTICLE I. INTRODUCTION		1
A.	Summary of Plan	1
B.	Filing of the Debtors’ Chapter 11 Cases	4
C.	Purpose of Disclosure Statement	5
D.	Hearing on Approval of the Disclosure Statement	5
E.	Hearing on Confirmation of the Plan	5
F.	Disclaimers	5

ARTICLE II. EXPLANATION OF CHAPTER 11		7
A.	Overview of Chapter 11	7
B.	Chapter 11 Plan	7

ARTICLE III. VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS		9
A.	Ballots and Voting Deadline	9
B.	Voting Procedures for Tuesday Morning Corporation Interests	9
C.	Holders of Claims Entitled to Vote	11
D.	Definition of Impairment	11
E.	Classes Impaired or Unimpaired Under the Plan	12
F.	Information on Voting and Vote Tabulations	12
G.	Confirmation of Plan	16

ARTICLE IV. BACKGROUND OF THE DEBTORS		19
A.	Description of Debtors’ Businesses	19
B.	Corporate Information	23
C.	Events Leading to the Chapter 11 Cases	25
D.	The Debtors’ Prepetition Restructuring Initiatives	27

ARTICLE V. DEBTORS’ ASSETS AND LIABILITIES		28
A.	Prepetition Secured Debt	28
B.	Unsecured Debt	29
C.	Equity Interests	29
D.	Debtors’ Scheduled Amount of Claims	29

ARTICLE VI. BANKRUPTCY CASE ADMINISTRATION		30
A.	First and Second Day Motions	30
B.	Bar Date for Filing Proofs of Claim	31
C.	Meeting of Creditors	31
D.	Official Committee of Unsecured Creditors	31
E.	Debtor-In-Possession Financing and Use of Cash Collateral	32
F.	Professionals Employed by the Debtors	37
G.	Store Closing Sales and Lease Rejections	37
H.	Lease Negotiations	39
I.	Contingent Liquidation Motion	39
J.	Motion to Appoint an Equity Committee	40
K.	Motion to Sell Phoenix Distribution Center Equipment	41
L.	Sale Process, Bidding Procedures, and Dual Sale/Plan Process	42

ARTICLE VII. DESCRIPTION OF THE PLAN		43
A.	Introduction	43
B.	Classification in General	43
C.	Grouping of Debtors for Convenience Only	44
D.	Designation of Claims and Interests/Impairment	44
E.	Allowance and Treatment of Administrative Claims and Priority Claims	45
F.	Allowance and Treatment of Classified Claims and Interests	47
G.	Procedures for Resolving Contingent, Unliquidated, and Disputed Claims	50
H.	Treatment of Executory Contracts and Unexpired Leases	53
I.	Plan Supplement	56

ARTICLE VIII. MEANS FOR EXECUTION AND IMPLEMENTATION OF THE PLAN		57
A.	Corporate Existence	57
B.	Reorganized Debtors	57
C.	Restructuring Transactions	57
D.	Tuesday Morning Corporation Interests	58
E.	Sources of Plan Distributions	58
F.	Cancellation of Certain Existing Agreements	62
G.	Corporate Action	62
H.	New Organizational Documents	63
I.	Directors and Officers of the Reorganized Debtors	63
J.	Effectuating Documents; Further Transactions	64
K.	Bankruptcy Code § 1146 Exemption	64
L.	Director and Officer Liability Insurance	65
M.	Management Incentive Plan	65
N.	Employee and Retiree Benefits	65
O.	Retained Causes of Action	65
P.	Releases, Exculpation, Injunctions, and Related Provisions	66
Q.	Retention of Jurisdiction	70
R.	Modifications and Amendments, Revocation, or Withdrawal of the Plan	70

ARTICLE IX. LEGAL PROCEEDINGS		71
A.	Recovery on Preference Actions and Other Avoidance Actions	71
B.	Retained Causes of Action	71

ARTICLE X. DISTRIBUTIONS TO CREDITORS		72
A.	Allowed Administrative Claims	72
B.	Allowed Priority Unsecured Tax Claims and Allowed Secured Tax Claims	72
C.	Allowed Other Priority Unsecured Claims	72
D.	Allowed Other Secured Claims	73
E.	Allowed Existing First Lien Credit Facility Claims	73
F.	Allowed General Unsecured Claims	73

ARTICLE XI. PROVISIONS GOVERNING DISTRIBUTIONS		73
A.	Timing and Calculation of Amounts to Be Distributed	73
B.	Disbursing Agent	74
C.	Rights and Powers of Disbursing Agent	74
D.	Delivery of Distributions and Undeliverable or Unclaimed Distributions	74
E.	Manner of Payment	75

F.	Distributions to Holders of Class 5 General Unsecured Claims	75
G.	Securities Act Exemption	76
H.	Compliance with Tax Requirements	77
I.	Allocations	77
J.	No Postpetition Interest on Claims	77
K.	Foreign Currency Exchange Rate	77
L.	Setoffs and Recoupment	77
M.	Claims Paid or Payable by Third Parties	78

ARTICLE XII. ALTERNATIVES TO THE PLAN		79
A.	Chapter 7 Liquidation	79
B.	Liquidation Pursuant to the Contingent Liquidation Order	80
C.	Dismissal	80
D.	Exclusivity and Alternative Plan Potential	80
E.	Going-Concern Sale	80

ARTICLE XIII. FINANCIAL PROJECTIONS AND FEASIBILITY		81
A.	Financial Projections and Feasibility	81

ARTICLE XIV. CERTAIN RISK FACTORS TO BE CONSIDERED		81
A.	Bankruptcy Related Risk Factors	81
B.	Failure to Confirm or Consummate the Plan	84
C.	Claim Estimates May Be Incorrect	84
D.	Risks Related to Debtors’ Business and Industry Conditions	85
E.	Risks Relating to the New Common Stock	87
F.	Inability to Obtain Exit Financing	88
G.	The Debtors May Not Be Able to Generate Sufficient Cash to Service All of Their Indebtedness	88
H.	Certain Tax Implications of the Plan	89

ARTICLE XV. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN		89
A.	U.S. Federal Income Tax Consequences Under the Plan	90
B.	Federal Income Tax Consequences to Holders of Claims	94
C.	Other Considerations for U.S. Holders – Accrued Interest	94
D.	Information Reporting and Back-Up Withholding	95
E.	Consequences of Ownership and Disposition of the Reinstated Tuesday Morning Corporation Interests	95
F.	U.S. Federal Income Tax Consequences for Non-U.S. Holders	96

ARTICLE XVI. SECURITIES LAW CONSIDERATIONS		96
A.	Transfer Restrictions and Consequences under Federal Securities Law	96
B.	Listing; SEC Filings	98

ARTICLE XVII. CONCLUSION		98

iii

EXHIBITS TO THE DISCLOSURE STATEMENT

Chapter 11 Plan	Exhibit 1
Liquidation Analysis	Exhibit 2
Financial Projections	Exhibit 3
Terms of the New ABL Credit Facility	Exhibit 4
Backstop Commitment Letter	Exhibit 5

ARTICLE I.

INTRODUCTION

The Debtors² hereby submit this Disclosure Statement for use in the solicitation of votes on the Plan of Reorganization of Tuesday Morning Corporation, et al., Pursuant to Chapter 11 of the Bankruptcy Code (i.e., the Plan). The Plan is annexed as Exhibit 1 to this Disclosure Statement.

This Disclosure Statement sets forth certain relevant information regarding the Debtors’ prepetition operations and financial history, the need to seek chapter 11 protection, significant events that have occurred during the Chapter 11 Cases, and the resultant analysis of the expected treatment of the Debtors’ Creditors and Interest holders. This Disclosure Statement also describes terms and provisions of the Plan, including certain alternatives to the Plan, certain effects of confirmation of the Plan, certain risk factors associated with the Plan, and the manner in which distributions will be made under the Plan. Additionally, this Disclosure Statement discusses the confirmation process and the voting procedures that holders of Claims and Interests must follow for their votes to be counted.

All descriptions of the Plan set forth in this Disclosure Statement are for summary purposes only. To the extent of any inconsistency between this Disclosure Statement and the Plan, the Plan shall control. You are encouraged to review the Plan in full.

YOU ARE BEING SENT THIS DISCLOSURE STATEMENT BECAUSE YOU ARE A CREDITOR, SHAREHOLDER OR OTHER PARTY IN INTEREST OF THE DEBTORS. THIS DOCUMENT DESCRIBES A CHAPTER 11 PLAN WHICH, WHEN CONFIRMED BY THE BANKRUPTCY COURT, WILL GOVERN HOW YOUR CLAIM OR INTEREST WILL BE TREATED. THE DEBTORS URGE YOU TO REVIEW THE DISCLOSURE STATEMENT AND THE PLAN CAREFULLY. THE DEBTORS BELIEVE THAT ALL CREDITORS SHOULD VOTE IN FAVOR OF THE PLAN.

A. Summary of Plan

The Plan provides for the resolution of Claims against and Interests in the Debtors and implements a distribution scheme pursuant to the Bankruptcy Code. Distributions under the Plan shall be made with: (1) Cash on hand, including Cash from operations; (2) the New ABL Credit Facility; (3) the New Real Estate Credit Facility; (4) the issuance of the General Unsecured Notes; and (5) the exchange of each share of the Existing Common Stock for (a) one share of the New Common Stock and (b) an Eligible Offeree Share Purchase Right as described herein, as applicable.

² Except as otherwise provided in this Disclosure Statement, capitalized terms herein have the meaning ascribed to them in the Plan. Any capitalized term used herein that is not defined in the Plan shall have the meaning ascribed to that term in the Bankruptcy Code or Bankruptcy Rules, whichever is applicable.

Under the Plan, Claims and Interests are classified, and each class has its own treatment. The table below describes each class of Claims and Interests, which holders of Claims and Interests belong in each class, the treatment of each class of Claims or Interests, and the expected recovery of each holder of Claims or Interests in the respective class.³

Summary of Plan Treatment

Class Description

Voting and Treatment

Class 1 - Other Priority Unsecured Claims

Class 1 is Impaired under the Plan. Holders of Allowed Claims in Class 1 are entitled to vote to accept or reject the Plan.

At the option of the applicable Debtor, each holder of an Allowed Other Priority Unsecured Claim shall receive, on or after the Effective Date, except to the extent that a holder of an Allowed Other Priority Unsecured Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Other Priority Unsecured Claim, the following: (i) Payment in full in Cash of its Allowed Class 1 Claim; or (ii) Such other treatment as is consistent with the requirements of Bankruptcy Code section 1129(a)(9).

Estimated total Allowed Class 1 Claims: $0

Projected recovery: 100%

Class 2 – Other Secured Claims

Class 2 is Impaired under the Plan. Holders of Allowed Claims in Class 2 are entitled to vote to accept or reject the Plan.

At the option of the applicable Debtor, each holder of an Allowed Other Secured Claim shall receive, on or after the Effective Date, except to the extent that a holder of an Allowed Other Secured Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Other Secured Claim, the following: (i) Payment in full in Cash of its Allowed Class 2 Claim; (ii) The collateral securing its Allowed Class 2 Claim; provided, however, any collateral remaining after satisfaction of such Allowed Class 2 Claim shall revest in the applicable Reorganized Debtor pursuant to the Plan; or (iii) Reinstatement of its Allowed Class 2 Claim.

Estimated total Allowed Class 2 Claims: $200,000

Projected recovery: 100%

³ The estimated totals contained in the Summary of Plan Treatment are based upon the Debtors’ Schedules of Assets and Liabilities, unless otherwise provided.

Class Description	Voting and Treatment
Class 3 – Secured Tax Claims	Class 3 is Impaired under the Plan. Holders of Allowed Claims in Class 3 are entitled to vote to accept or reject the Plan. At the option of the applicable Debtor, each holder of an Allowed Secured Tax Claim shall receive, on or after the Effective Date, except to the extent that a holder of an Allowed Secured Tax Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Secured Tax Claim, the following: (i) Payment in full in Cash of its Allowed Class 3 Claim; (ii) The collateral securing its Allowed Class 3 Claim; provided, however, any collateral remaining after satisfaction of such Allowed Class 3 Claim shall revest in the applicable Reorganized Debtor pursuant to the Plan; or (iii) Such other treatment consistent with the requirements of Bankruptcy Code § 1129(a)(9). Estimated total Allowed Class 3 Claims: $0 (Tax claims are generally being paid in the ordinary course of business) Projected recovery: 100%
Class 4 – Existing First Lien Credit Facility Claims	Class 4 is Impaired under the Plan. Holders of Allowed Claims in Class 4 are entitled to vote to accept or reject the Plan. Each holder of an Allowed Existing First Lien Credit Facility Claim shall receive, except to the extent that a holder of an Allowed Existing First Lien Credit Facility Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Allowed Existing First Lien Credit Facility Claim, Payment in Full, in Cash, of its Allowed Class 4 Claim plus any and all fees, interest (both pre and post-Petition Date), and reimbursement of expenses, and any other amounts owed or arising under the Existing First Lien Credit Documents through the time of Payment in Full, in three equal installments to be paid on the 30th, 60th, and 90th days after the Effective Date (each a “Payment Date”). If a Payment Date does not fall on a Business Day, such Payment Date shall be extended to the next Business Day. All liens and security interests granted to secure such Allowed Existing First Lien Credit Facility Claims shall be retained until such payments shall have been made. Further, in the event that the Existing First Lien Agent is the agent for the New ABL Credit Facility, it shall retain the lines and security interests securing the Existing First Lien Credit Facility Claims after such payments are made and have such liens and security interests secure the New ABL Credit Facility. The estimated total amount of Allowed Class 4 Claims is $100,000. Estimated total Allowed Class 4 Claims: $100,000 Projected recovery: 100%
Class 5 - General Unsecured Claims	Class 5 is Impaired under the Plan. Holders of Allowed Claims in Class 5 are entitled to vote to accept or reject the Plan. Except to the extent that a holder of an Allowed General Unsecured Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Existing General Unsecured Claim, each holder of an Allowed Class 5 Claim shall receive its Pro Rata share of (i) the General Unsecured Cash Fund, (ii) the General Unsecured Notes, and (iii) the proceeds of the Rights Offering. Estimated total Allowed Class 5 Claims: $116,700,000 Projected recovery: 100%

Class Description	Voting and Treatment
Class 6 – Convenience Claims	Class 6 is Impaired under the Plan. Holders of Allowed Claims in Class 6 are entitled to vote to accept or reject the Plan. Except to the extent that a holder of an Allowed Convenience Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Convenience Claim, each holder of an Allowed Class 6 Claim shall receive the Convenience Claim Distribution. Estimated total Allowed Class 6 Claims: $8,300,000 Projected recovery: 100%
Class 7 - Intercompany Claims	Class 7 is Unimpaired if the Class 7 Claims are Reinstated or Impaired if the Class 7 Claims are cancelled. Holders of Class 7 Claims are conclusively deemed to have accepted or rejected the Plan pursuant to Bankruptcy Code §§ 1126(f) or 1126(g). Holders of Class 7 Claims are not entitled to vote to accept or reject the Plan On the Effective Date, Class 7 Claims shall be, at the option of the Debtors, either Reinstated or cancelled and released without any distribution
Class 8 - Tuesday Morning Corporation Interests	Class 8 is Impaired under the Plan. Holders of Allowed Interests in Class 8 are entitled to vote to accept or reject the Plan. On the Distribution Date, each Class 8 Interests shall be exchanged for (1) one share of the New Common Stock and (2) a Share Purchase Right entitling the holder to purchase a Pro Rata portion of the Eligible Holders Rights Offering Common Stock. On the Effective Date, Tuesday Morning Corporation Interests consisting of options, warrants, or other rights, contractual or otherwise, to acquire shares of the Existing Common Stock shall be Reinstated, subject to dilution as a result of the issuance of the Rights Offering Common Stock and the issuance of equity securities on and after the Effective Date pursuant to the Management Incentive Plan.
Class 9 - Intercompany Interests	Class 9 is Unimpaired under the Plan. Holders of Class 9 Interests are deemed to accept the Plan. Intercompany Interests shall receive no distribution and shall be Reinstated for administrative purposes only at the election of the Reorganized Debtors.

B. Filing of the Debtors’ Chapter 11 Cases

On May 27, 2020 (i.e., the Petition Date), the Debtors Filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The Debtors Filed the Chapter 11 Cases to preserve the value of their estates and to restructure their financial affairs. To such end, the Debtors have continued to manage their properties and are operating and managing their businesses as debtors in possession in accordance with Bankruptcy Code §§ 1107 and 1108. No trustee or examiner has been appointed in the Chapter 11 Cases.

C. Purpose of Disclosure Statement

Bankruptcy Code § 1125 requires the Debtors to prepare and obtain court approval of the Disclosure Statement as a prerequisite to soliciting votes on the Plan. The purpose of the Disclosure Statement is to provide information to holders of Claims and Interests that will assist them in deciding how to vote on the Plan.

Approval of this Disclosure Statement does not constitute a judgment by the Bankruptcy Court as to the desirability of the Plan or as to the value or suitability of any consideration offered thereunder. The Bankruptcy Court’s approval does indicate, however, that the Bankruptcy Court has determined that the Disclosure Statement contains adequate information to permit a Creditor to make an informed judgment regarding acceptance or rejection of the Plan.

D. Hearing on Approval of the Disclosure Statement

The Bankruptcy Court has set November 12, 2020 at 9:00 a.m. (prevailing Central Time) (the “Disclosure Statement Hearing”), as the time and date for the hearing to consider approval of this Disclosure Statement. Once commenced, the Disclosure Statement Hearing may be adjourned or continued by announcement in open court with no further notice.

E. Hearing on Confirmation of the Plan

The Bankruptcy Court has set December 18, 2020 at 9:00 a.m. (prevailing Central Time) (the “Confirmation Hearing”), as the date and time for a hearing to determine whether the Plan has been accepted by the requisite number of holders of Claims, and whether the other standards for confirmation of the Plan have been satisfied. Once commenced, the Confirmation Hearing may be adjourned or continued by announcement in open court with no further notice.

F. Disclaimers

THIS DISCLOSURE STATEMENT IS PROVIDED FOR USE SOLELY BY HOLDERS OF CLAIMS AND INTERESTS AND THEIR ADVISERS IN CONNECTION WITH THEIR DETERMINATION TO ACCEPT OR REJECT THE PLAN. NOTHING IN THIS DISCLOSURE STATEMENT MAY BE RELIED UPON OR USED BY ANY OTHER ENTITY FOR ANY OTHER PURPOSE.

THIS DISCLOSURE STATEMENT CONTAINS IMPORTANT INFORMATION THAT MAY BEAR ON YOUR DECISION REGARDING ACCEPTING THE PLAN. PLEASE READ THIS DOCUMENT WITH CARE.

FACTUAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS THE REPRESENTATION OF THE DEBTORS ONLY AND NOT OF THEIR ATTORNEYS, ACCOUNTANTS OR OTHER PROFESSIONALS. FINANCIAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS NOT BEEN SUBJECTED TO AN AUDIT BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT. THE FINANCIAL PROJECTIONS AND OTHER FINANCIAL INFORMATION, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, NECESSARILY WERE BASED ON A VARIETY OF ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY UNCERTAIN AND MAY BE BEYOND THE CONTROL OF THE DEBTORS’ MANAGEMENT.

THE DEBTORS ARE NOT ABLE TO CONFIRM THAT THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT DOES NOT INCLUDE ANY INACCURACIES. HOWEVER, THE DEBTORS HAVE MADE THEIR BEST EFFORT TO PROVIDE ACCURATE INFORMATION AND ARE NOT AWARE OF ANY INACCURACY IN THIS DISCLOSURE STATEMENT.

THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS NOT BEEN INDEPENDENTLY INVESTIGATED BY THE BANKRUPTCY COURT AND HAS NOT YET BEEN APPROVED BY THE BANKRUPTCY COURT. IN THE EVENT THIS DISCLOSURE STATEMENT IS APPROVED, SUCH APPROVAL DOES NOT CONSTITUTE A DETERMINATION BY THE BANKRUPTCY COURT OF THE FAIRNESS OR MERITS OF THE PLAN OR OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT.

THE ONLY REPRESENTATIONS THAT ARE AUTHORIZED BY THE DEBTORS CONCERNING THE DEBTORS, THE VALUE OF THEIR ASSETS, THE EXTENT OF THEIR LIABILITIES, OR ANY OTHER FACTS MATERIAL TO THE PLAN ARE THE REPRESENTATIONS MADE IN THIS DISCLOSURE STATEMENT. REPRESENTATIONS CONCERNING THE PLAN OR THE DEBTORS OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT ARE NOT AUTHORIZED BY THE DEBTORS.

HOLDERS OF CLAIMS AND INTERESTS SHOULD NOT CONSTRUE THE CONTENTS OF THIS DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, BUSINESS, FINANCIAL, OR TAX ADVICE AND ALL SUCH HOLDERS OF CLAIMS AND INTERESTS SHOULD CONSULT WITH THEIR OWN ADVISERS.

THE DEBTORS HAVE NO ARRANGEMENT OR UNDERSTANDING WITH ANY BROKER, SALESMAN, OR OTHER PERSON TO SOLICIT VOTES FOR THE PLAN. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE PLAN OTHER THAN THOSE CONTAINED IN THIS DISCLOSURE STATEMENT AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DEBTORS. THE DELIVERY OF THIS DISCLOSURE STATEMENT SHALL NOT UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME AFTER THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE DEBTORS SINCE THE DATE HEREOF. ANY ESTIMATES OF CLAIMS AND INTERESTS SET FORTH IN THIS DISCLOSURE STATEMENT MAY VARY FROM THE FINAL AMOUNTS OF CLAIMS OR INTERESTS ALLOWED BY THE BANKRUPTCY COURT. SIMILARLY, THE ANALYSIS OF ASSETS AND THE AMOUNT ULTIMATELY REALIZED FROM THEM MAY DIFFER MATERIALLY.

THE DESCRIPTION OF THE PLAN CONTAINED HEREIN IS INTENDED TO BRIEFLY SUMMARIZE THE MATERIAL PROVISIONS OF THE PLAN AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PROVISIONS OF THE PLAN.

THE DEBTORS ARE MAKING THE STATEMENTS AND PROVIDING THE FINANCIAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT AS OF THE DATE HEREOF, UNLESS OTHERWISE SPECIFICALLY NOTED. ALTHOUGH THE DEBTORS MAY SUBSEQUENTLY UPDATE THE INFORMATION IN THIS DISCLOSURE STATEMENT, THE DEBTORS HAVE NO AFFIRMATIVE DUTY TO DO SO, AND EXPRESSLY DISCLAIM ANY DUTY TO PUBLICLY UPDATE ANY FORWARD LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE. HOLDERS OF CLAIMS OR INTERESTS REVIEWING THIS DISCLOSURE STATEMENT SHOULD NOT INFER THAT, AT THE TIME OF THEIR REVIEW, THE FACTS SET FORTH HEREIN HAVE NOT CHANGED SINCE THIS DISCLOSURE STATEMENT WAS FILED. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION, MODIFICATION, OR AMENDMENT. THE DEBTORS RESERVE THE RIGHT TO FILE AN AMENDED OR MODIFIED PLAN AND RELATED DISCLOSURE STATEMENT FROM TIME TO TIME, SUBJECT TO THE TERMS OF THE PLAN.

ARTICLE II.
EXPLANATION OF CHAPTER 11

A. Overview of Chapter 11

Chapter 11 is the principal reorganization chapter of the Bankruptcy Code. Under chapter 11, a debtor in possession may seek to reorganize its business or to sell the business for the benefit of the debtor’s Creditors and other interested parties.

The commencement of a chapter 11 case creates an estate comprising all of the debtor’s legal and equitable interests in property as of the date the petition is filed. Unless the bankruptcy court orders the appointment of a trustee, a chapter 11 debtor may continue to manage and control the assets of its estate as a “debtor in possession,” as the Debtors have done in the Chapter 11 Cases since the Petition Date.

Formulation of a chapter 11 plan is the principal purpose of a chapter 11 case. Such plan sets forth the means for satisfying the Claims of Creditors against, and interests of equity security holders in, the debtor.

B. Chapter 11 Plan

After a plan has been filed, the holders of claims against, or equity interests in, a debtor are permitted to vote on whether to accept or reject the plan. Chapter 11 does not require that each holder of a claim against, or equity interest in, a debtor vote in favor of a plan in order for the plan to be confirmed. At a minimum, however, a plan must be accepted by a majority in number and two-thirds in dollar amount of those claims actually voting from at least one class of claims impaired under the plan. The Bankruptcy Code also defines acceptance of a plan by a class of equity interests as acceptance by holders of two-thirds of the number of shares actually voted.

Classes of claims or equity interests that are not “impaired” under a chapter 11 plan are conclusively presumed to have accepted the plan, and therefore are not entitled to vote. A class is “impaired” if the plan modifies the legal, equitable, or contractual rights attaching to the claims or equity interests of that class. Modification for purposes of impairment does not include curing defaults and reinstating maturity or payment in full in cash. Conversely, classes of claims or equity interests that receive or retain no property under a plan of reorganization are conclusively presumed to have rejected the plan, and therefore are not entitled to vote.

Even if all classes of claims and equity interests accept a chapter 11 plan, the bankruptcy court may nonetheless deny confirmation. Bankruptcy Code § 1129 sets forth the requirements for confirmation and, among other things, requires that a plan be in the “best interests” of impaired and dissenting Creditors and interest holders and that the plan be feasible. To comply with the “best interests” requirement, the value of the consideration to be distributed to impaired and dissenting Creditors and interest holders under a plan may not be less than those parties would receive if the debtor were liquidated under a hypothetical liquidation occurring under chapter 7 of the Bankruptcy Code. A plan must also be determined to be “feasible,” which generally requires a finding that there is a reasonable probability that the debtor will be able to perform the obligations incurred under the plan and that the debtor will be able to continue operations without the need for further financial reorganization or liquidation.

The bankruptcy court may confirm a chapter 11 plan even though fewer than all of the classes of impaired Claims and equity interests accept it. The bankruptcy court may do so under the “cramdown” provisions of Bankruptcy Code § 1129(b). In order for a plan to be confirmed under the cramdown provisions, despite the rejection of a class of impaired claims or interests, the proponent of the plan must show, among other things, that the plan does not discriminate unfairly and that it is fair and equitable with respect to each impaired class of claims or equity interests that has not accepted the plan.

The bankruptcy court must further find that the economic terms of the particular plan meet the specific requirements of Bankruptcy Code § 1129(b) with respect to the subject objecting class. If the proponent of the plan proposes to seek confirmation of the plan under the provisions of Bankruptcy Code § 1129(b), the proponent must also meet all applicable requirements of § 1129(a) (except § 1129(a)(8)). Those requirements include the requirements that (i) the plan comply with applicable Bankruptcy Code provisions and other applicable law, (ii) that the plan be proposed in good faith, and (iii) that at least one impaired class of Creditors or interest holders has voted to accept the plan.

ARTICLE III.
VOTING PROCEDURES AND CONFIRMATION REQUIREMENTS

A. Ballots and Voting Deadline

Holders of Claims and Interests entitled to vote on the Plan will receive instructions for submitting a Ballot to vote to accept or reject the Plan. After carefully reviewing the Disclosure Statement, including all exhibits, each holder of a Claim or Interest (or its authorized representative) entitled to vote should follow the instructions to indicate its vote on the Ballot. All holders of Claims or Interests (or their authorized representatives) entitled to vote must (i) carefully review the Ballot and the instructions for completing it, (ii) complete all parts of the Ballot, and (iii) submit the Ballot by the deadline (i.e., the Voting Deadline) for the Ballot to be considered. Holders of Claims or Interests entitled to vote must mail the Ballot(s) to Epiq (i.e., the Claims and Balloting Agent) at the following address: if by First Class Mail: Tuesday Morning – Ballot Processing Center c/o Epiq Corporate Restructuring, LLC, P.O. Box 4422, Beaverton, OR 97076-4422; if by Overnight Courier or Overnight Mail: Tuesday Morning – Ballot Processing Center, c/o Epiq Corporate Restructuring, LLC, 10300 SW Allen Boulevard, Beaverton, OR 97005. Holders of Claims or Interests may contact the Claims and Balloting Agent by telephone at (855) 917-3492, or by email at Tuesdaymorninginfo@epiqglobal.com. Alternatively, the Holders of Claims or Interests entitled to vote may elect to use Epiq’s E-Balloting Portal, instructions for which are included on the ballot.

The Bankruptcy Court has directed that, in order to be counted for voting purposes, Ballots for the acceptance or rejection of the Plan must be received by the Claims and Balloting Agent by no later than December 15, 2020 at 4:00 p.m. prevailing Central Time.

BALLOTS SUBMITTED IN PAPER FORM MUST BE SUBMITTED SO AS TO BE ACTUALLY RECEIVED BY THE CLAIMS AND BALLOTING AGENT NO LATER THAN DECEMBER 15, 2020 AT 4:00 P.M. PREVAILING CENTRAL TIME. ANY BALLOTS SUBMITTED AFTER THE VOTING DEADLINE WILL NOT BE COUNTED.

B. Voting Procedures for Tuesday Morning Corporation Interests

The Debtors are providing a notice (which contains a link to the Plan, Disclosure Statement, and Disclosure Statement Approval Order, including any amendment, attachment, exhibit, or supplement related thereto) and related materials and a Ballot (i.e., the Solicitation Materials) to record holders (as of the Voting Record Date) of the Claims in Classes 1 through 6.

Record holders of Tuesday Morning Corporation Interests may include Nominees. Nominees may hold such claims as beneficial holders or may be record holders holding such Claims for their beneficial holder in “street name.” The Debtors propose the procedures below regarding Nominees and beneficial holders of the Tuesday Morning Interests. Such holders shall have Tuesday Morning Corporation Interests in Class 8.

Any holder of Tuesday Morning Corporation Interests will receive a Ballot allowing such holder to vote its Allowed Tuesday Morning Corporation Interests. Each beneficial holder of Tuesday Morning Corporation Interests must submit its own Ballot as described below.

Beneficial Holder who is also a Record Holder

A beneficial holder who holds Tuesday Morning Corporation Interests as a record holder in its own name should vote on the Plan by completing and signing the Beneficial Holder Ballot and returning it directly to the Claims and Balloting Agent on or before the Voting Deadline using the enclosed self-addressed, postage-paid envelope. Alternatively, the beneficial holders entitled to vote may elect to use Epiq’s E-Balloting Portal, instructions for which are included on the ballot.

Nominees

A Nominee that, on the Voting Record Date, is the record holder of Tuesday Morning Corporation Interests for one or more beneficial holders shall obtain the votes of the beneficial holders, consistent with customary practices for obtaining the votes of securities held in “street name.” The Nominee shall forward to the beneficial holder of Tuesday Morning Corporation Interests Beneficial Holder Ballots, together with the Solicitation Materials, a pre-addressed, postage-paid return envelope provided by, and addressed to, the Nominee, and other materials requested to be forwarded by the Debtors. Each such beneficial holder must then indicate its vote on the Beneficial Holder Ballot, complete the information requested on the Beneficial Holder Ballot, review the certifications contained on the Beneficial Holder Ballot, execute the Beneficial Holder Ballot, and return the Beneficial Holder Ballot to the Nominee. After collecting the Beneficial Holder Ballots, the Nominee should, in turn, complete a Master Ballot compiling the votes and other information from the Beneficial Holder Ballots, execute the Master Ballot, and deliver the Master Ballot to the Claims and Balloting Agent so that it is received by the Claims and Balloting Agent on or before the Voting Deadline. All copies of Beneficial Holder Ballots returned by beneficial holders should be kept by the Nominee for one year after the Voting Deadline. Nominees may transmit all documents to record holders electronically in accordance with their customary practice.

Beneficial Holder who holds in “Street Name” through a Nominee

A beneficial holder who holds Tuesday Morning Corporation Interests in “street name” through a Nominee may indicate its vote on the Beneficial Holder Ballot, complete the information requested on the Beneficial Holder Ballot, review the certifications contained on the Beneficial Holder Ballot, execute the Beneficial Holder Ballot, and return the Beneficial Holder Ballot to the Nominee as promptly as possible and in sufficient time to allow the Nominee to process and return a completed Master Ballot to the Claims and Balloting Agent by the Voting Deadline. The beneficial holder must comply with the Nominee’s deadline by which to return the Beneficial Holder Ballot to the Nominee.

Any Beneficial Holder Ballot returned to a Nominee by a beneficial holder will not be counted for purposes of acceptance or rejection of the Plan until such Nominee properly and timely completes and delivers to the Claims and Balloting Agent a Master Ballot casting the vote of such beneficial holder.

Beneficial Holder who holds in “Street Name” through multiple Nominees

If any beneficial holder holds Tuesday Morning Corporation Interests through more than one Nominee, such beneficial holder may receive multiple mailings containing the Beneficial Holder Ballots. The beneficial holder shall execute a separate Beneficial Holder Ballot for each block of the Tuesday Morning Corporation Interests that it holds through any particular Nominee and return each Beneficial Holder Ballot to the respective Nominee in the return envelope provided therewith (or otherwise follow each Nominee’s instructions). Beneficial holders who execute multiple Beneficial Holder Ballots with respect to Tuesday Morning Corporation Interests held through more than one Nominee must indicate on each Beneficial Holder Ballot the names of all such other Nominees and the additional amounts of such Tuesday Morning Corporation Interests so held and voted. A beneficial holder who executes multiple Beneficial Holder Ballots must vote the same on each Beneficial Holder Ballot for the votes to be counted.

C. Holders of Claims Entitled to Vote

Any holder of a Claim of the Debtors whose Claim is Impaired under the Plan is entitled to vote if either (i) the Claim has been listed in the Schedules of Assets and Liabilities in an amount greater than zero (and the Claim is not scheduled as disputed, contingent, or unliquidated) or (ii) the holder of a Claim has Filed a Proof of Claim (that is not contingent or in an unknown amount) on or before the Voting Record Date.

Any holder of a Claim as to which an objection has been Filed (and such objection is still pending) is not entitled to vote, unless the Bankruptcy Court (on motion by a party whose Claim is subject to an objection) temporarily allows the Claim in an amount that it deems proper for the purpose of accepting or rejecting the Plan. Such motion must be heard and determined by the Bankruptcy Court on or before the Voting Deadline.

In addition, a vote may be disregarded if the Bankruptcy Court determines that the acceptance or rejection was not solicited or procured in good faith or in accordance with the applicable provisions of the Bankruptcy Code.

D. Definition of Impairment

Under Bankruptcy Code § 1124, a class of Claims or equity interests is impaired under a chapter 11 plan unless, with respect to each Claim or equity interest of such class, the plan:

(1)

leaves unaltered the legal, equitable, and contractual rights to which such Claim or interest entitles the holder of such Claim or interest; or

(2)

notwithstanding any contractual provision or applicable law that entitles the holder of such Claim or interest to demand or receive accelerated payment of such Claim or interest after the occurrence of a default:

(a)

cures any such default that occurred before or after the commencement of the case under this title, other than a default of a kind specified in Bankruptcy Code § 365(b)(2) or of a kind that § 365(b)(2) expressly does not require to be cured;

(b)

reinstates the maturity of such Claim or interest as such maturity existed before such default;

(c)

compensates the holder of such Claim or interest for any damages incurred as a result of any reasonable reliance by such holder on such contractual provision or such applicable law;

(d)

if such Claim or such interest arises from any failure to perform a nonmonetary obligation, other than a default arising from failure to operate a nonresidential real property lease subject to Bankruptcy Code § 365(b)(1)(A), compensates the holder of such Claim or such interest (other than the debtor or an insider) for any actual pecuniary loss incurred by such holder as a result of such failure; and

(e)

does not otherwise alter the legal, equitable, or contractual rights to which such Claim or interest entitles the holder of such Claim or interest.

E. Classes Impaired or Unimpaired Under the Plan

Classes 1, 2, 3, 4, 5, 6, and 8 are Impaired under the Plan. Therefore, holders of Claims in Classes 1, 2, 3, 4, 5, 6, and 8 are eligible, subject to the voting requirements described above, to vote to accept or reject the Plan.

Classes 1, 2, 3, 4, 5, 6, and 8 are Impaired because one or more of the proposed potential alternative treatments of Classes 1, 2, 3, 4, 5, 6, and 8 alters the legal, equitable, or contractual rights of holders of Allowed Claims in such Classes.

Class 7 may be Impaired or Unimpaired, based on the treatment provided to such holders at the option of the Debtors. To the extent that such holders of Claims are Impaired, such holders will not receive a distribution under the Plan and, therefore, will be conclusively presumed to reject the Plan pursuant to Bankruptcy Code § 1126(g). To the extent that such holders of Claims are Unimpaired, such holders will have their Claims Reinstated, and, therefore, will be conclusively presumed to accept the Plan pursuant to Bankruptcy Code § 1126(f).

Interests in Class 9 are Unimpaired because holders of Interests in Class 9 will have their Interests Reinstated, and, therefore, will be conclusively presumed to accept the Plan and will not be entitled to vote on the Plan pursuant to Bankruptcy Code § 1126(f).

F. Information on Voting and Vote Tabulations

Transmission of Ballots to Holders of Claims and Interests

Instructions for completing and submitting Ballots are being provided to all holders of Claims entitled to vote on the Plan in accordance with the Bankruptcy Rules. Those holders of Claims or Interests whose Claims or Interests are Unimpaired under the Plan are conclusively presumed to have accepted the Plan under Bankruptcy Code § 1126(f), and therefore need not vote with regard to the Plan. Under Bankruptcy Code § 1126(g), holders of Claims or Interests who do not either receive or retain any property under the Plan are deemed to have rejected the Plan. In the event a holder of a Claim or Interest does not vote, the Bankruptcy Court may deem such holder of a Claim or Interest to have accepted the Plan.

Ballot Tabulation Procedures

The Claims and Balloting Agent shall count all Ballots filed on account of (1) Claims in the Schedules of Assets and Liabilities, that are not listed as contingent, unliquidated or disputed, and are listed in an amount in excess of $0.00; and (2) Proofs of Claim Filed by the Bar Date that are not asserted as contingent or unliquidated, and are asserted in an amount in excess of $0.00. If no Claim is listed in the Schedules of Assets or Liabilities, and no Proof of Claim was Filed by the Bar Date, such Creditor shall not be entitled to vote on the Plan on account of such Claim, subject to the procedures below. Further, the Claims and Balloting Agent shall not count any votes on account of Claims that are subject to an objection which has been Filed (and such objection is still pending), unless and to the extent the Court has overruled such objection by the Voting Record Date. The foregoing general procedures will be subject to the following exceptions and clarifications:

(a)

if a Claim is Allowed under the Plan or by order of the Court, such Claim is Allowed for voting purposes in the Allowed amount set forth in the Plan or the order;

(b)

if a Claim is listed in the Debtors’ Schedules of Assets and Liabilities or a Proof of Claim was timely Filed by the Bar Date, and such Claim is not listed or asserted as contingent, unliquidated, or disputed, and is listed or asserted in an amount in excess of $0.00, such Claim is temporarily Allowed for voting purposes in the amount set forth in the Debtors’ Schedules of Assets and Liabilities or as asserted in the Proof of Claim;

(c)

if a Claim is listed in the Debtors’ Schedules of Assets and Liabilities or a Proof of Claim was timely Filed by the Bar Date, and such Claim is only partially listed or asserted as contingent, unliquidated, or disputed, such Claim is temporarily Allowed for voting purposes only in the amount not listed or asserted as contingent, unliquidated or disputed in the Debtors’ Schedules of Assets and Liabilities or in the Proof of Claim;

(d)

if a Claim is listed in the Debtors’ Schedules of Assets and Liabilities and no Proof of Claim was timely Filed by the Bar Date, and such Claim is listed or asserted as contingent, unliquidated, or disputed, or is listed or asserted for $0.00 or an undetermined amount, such Claim shall not be counted for voting purposes;

(e)

If a Claim is listed in the Debtors’ Schedules of Assets and Liabilities as contingent, unliquidated, or disputed, and a Proof of Claim was timely Filed by the claims bar date, such Claim shall be counted as $1.00 for voting purposes;

(f)

if a Claim is not listed in the Debtors’ Schedules of Assets and Liabilities and a Proof of Claim was Filed after the Bar Date, such Claim is temporarily Allowed for voting purposes only if such Creditor obtains an order of the Court temporarily allowing the Claim for voting purposes prior to the Voting Deadline;

(g)

any Claim to which there remains a pending objection as of the Voting Deadline, or an order has been entered granting such objection, such Claim shall not be counted for voting purposes;

(h)

if a Creditor has Filed duplicate Proofs of Claim by the Bar Date against one or more Debtors, such Creditor’s Claim shall only be counted once for the Debtor at which the Creditor’s Claim is pending for voting purposes unless the Debtors determine there is a Claim pending against multiple Debtors; and

(i)

if a Proof of Claim has been amended by a later-Filed Proof of Claim, the earlier-Filed Claim will not be entitled to vote, and to the extent the later-Filed Proof of Claim is filed after the Voting Record Date, such later-Filed Proof of Claim must have been temporarily allowed for voting purposes by the Voting Record Date to be counted.

The following procedures shall apply for tabulating votes:

(a)

any Ballot that is otherwise timely completed, executed, and properly cast to the Claims and Balloting Agent but does not indicate an acceptance or rejection of the Plan, or that indicates both an acceptance and rejection of the Plan, shall not be counted; if no votes to accept or reject the Plan are received with respect to a particular Class that is entitled to vote on the Plan, such Class shall be deemed to have voted to accept the Plan;

(b)

a Creditor who holds Claims in Classes 5 or 6 against more than one Debtor, shall cast a single Ballot, which shall be counted separately with respect to each such Debtor;

(c)

if a Creditor casts more than one (1) Ballot voting the same Claim before the Voting Deadline, the last properly cast Ballot received before the Voting Deadline shall be deemed to reflect the voter’s intent and thus supersede any prior Ballots;

(d)

Creditors must vote all of their Claims within a particular Class to either accept or reject the Plan, and may not split their votes within a particular Class and thus a Ballot (or group of Ballots) within a particular Class that partially accepts and partially rejects the Plan shall not be counted;

(e)

a Creditor who votes an amount related to a Claim that has been paid or otherwise satisfied in full or in part shall only be counted for the amount that remains unpaid or not satisfied, and if such Claim has been fully paid or otherwise satisfied, such vote will not be counted for purposes of amount or number; and

(f)

for purposes of determining whether the numerosity and amount requirements of Bankruptcy Code §§ 1126(c) and 1126(d) have been satisfied, the Debtors will tabulate only those Ballots received by the Voting Deadline. For purposes of the numerosity requirement of Bankruptcy Code § 1126(c), separate Claims held by a single Creditor in a particular Class shall be aggregated as if such Creditor held one (1) Claim against the Debtors in such Class, and the votes related to such Claims shall be treated as a single vote to accept or reject the Plan.

The following Ballots shall not be counted or considered for any purpose in determining whether the Plan has been accepted or rejected:

(a)

any Ballot received after the Voting Deadline, unless the Debtors, in their discretion, grant an extension of the Voting Deadline with respect to such Ballot;

(b)

any Ballot that is illegible or contains insufficient information to permit identification of the voter;

(c)

any Ballot cast by a Person that does not hold a Claim or Interest in a Class that is entitled to vote to accept or reject the Plan;

(d)

any duplicate Ballot will only be counted once;

(e)

any unsigned Ballot or paper Ballot that does not contain an original signature; and

(f)

any Ballot transmitted to the Claims and Balloting Agent by facsimile or electronic mail, unless the Debtors, in their discretion, consent to such delivery method.

Execution of Ballots by Representatives

To the extent applicable, if a Ballot is submitted by trustees, executors, Nominees, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such Persons must indicate their capacity when submitting the Ballot and, at the Debtors’ request, must submit proper evidence satisfactory to the Debtors of their authority to so act. For purposes of voting tabulation, a Ballot submitted by a representative shall account for the total number of represented parties with respect to the numerosity requirement set forth in this Article.

Waivers of Defects and Other Irregularities Regarding Ballots

Unless otherwise directed by the Bankruptcy Court, all questions concerning the validity, form, eligibility (including time of receipt), acceptance, and revocation or withdrawal of Ballots will be determined by the Debtors in their sole discretion, whose determination will be final and binding. The Debtors reserve the right to reject any and all Ballots not in proper form, the acceptance of which would, in the opinion of the Debtors or their counsel, be unlawful. The Debtors further reserve the right to waive any defects or irregularities or conditions of delivery as to any particular Ballot. Unless waived, any defects or irregularities in connection with deliveries of Ballots must be cured within such time as the Debtors (or the Bankruptcy Court) determine. Neither the Debtors nor any other Person will be under any duty to provide notification of defects or irregularities with respect to deliveries of Ballots, nor will any of them incur any liability for failure to provide such notification; provided, however, that the Debtors will indicate on the ballot summary the Ballots, if any, that were not counted, and will provide copies of such Ballots with the ballot summary to be submitted at the Confirmation Hearing. Unless otherwise directed by the Bankruptcy Court, delivery of such Ballots will not be deemed to have been made until any irregularities have been cured or waived. Unless otherwise directed by the Bankruptcy Court, Ballots previously furnished, and as to which any irregularities have not subsequently been cured or waived, will be invalidated.

Withdrawal of Ballots and Revocation

The Debtors may allow any claimant who submits a properly completed Ballot to supersede or withdraw such Ballot on or before the Voting Deadline. In the event the Debtors do permit such supersession or withdrawal, the claimant, for cause, may change or withdraw its acceptance or rejection of the Plan in accordance with Bankruptcy Rule 3018(a).

G. Confirmation of Plan

Solicitation of Acceptances

The Debtors are soliciting your vote.

NO REPRESENTATIONS OR ASSURANCES, IF ANY, CONCERNING THE DEBTORS OR THE PLAN ARE AUTHORIZED BY THE DEBTORS, OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT. ANY REPRESENTATIONS OR INDUCEMENTS MADE BY ANY PERSON TO SECURE YOUR VOTE, OTHER THAN THOSE CONTAINED IN THIS DISCLOSURE STATEMENT, SHOULD NOT BE RELIED ON BY YOU IN ARRIVING AT YOUR DECISION, AND SUCH ADDITIONAL REPRESENTATIONS OR INDUCEMENTS SHOULD BE REPORTED TO DEBTORS’ COUNSEL FOR APPROPRIATE ACTION.

THIS IS A SOLICITATION SOLELY BY THE DEBTORS, AND IS NOT A SOLICITATION BY ANY SHAREHOLDER, ATTORNEY, ACCOUNTANT, OR OTHER PROFESSIONAL FOR THE DEBTORS. THE REPRESENTATIONS, IF ANY, MADE IN THIS DISCLOSURE STATEMENT ARE THOSE OF THE DEBTORS AND NOT OF SUCH SHAREHOLDERS, ATTORNEYS, ACCOUNTANTS, OR OTHER PROFESSIONALS, EXCEPT AS MAY BE OTHERWISE SPECIFICALLY AND EXPRESSLY INDICATED.

Requirements for Confirmation of the Plan

At the Confirmation Hearing, the Bankruptcy Court shall determine whether the requirements of Bankruptcy Code § 1129 have been satisfied, in which event the Bankruptcy Court shall enter an order confirming the Plan. The Debtors believe that the Plan satisfies all the statutory requirements of the Bankruptcy Code for confirmation because, among other things:

(a)

The Plan complies with the applicable provisions of the Bankruptcy Code;

(b)

The Debtors have complied with the applicable provisions of the Bankruptcy Code;

(c)

The Plan has been proposed in good faith and not by any means forbidden by law;

(d)

Any payment or distribution made or promised by the Debtors or by a Person issuing securities or acquiring property under the Plan for services or for costs and expenses in connection with the Plan has been disclosed to the Bankruptcy Court, and any such payment made before the confirmation of the Plan is reasonable, or if such payment is to be fixed after confirmation of the Plan, such payment is subject to the approval of the Bankruptcy Court as reasonable;

(e)

The Debtors will have disclosed the identity and affiliation of any individual proposed to serve, after confirmation of the Plan, as a director, officer or voting trustee of the Debtors, an affiliate of the Debtors participating in a joint plan with the Debtors, or a successor to the Debtors under the Plan; the appointment to, or continuance in, such office of such individual is consistent with the interests of holders of Claims and Interests and with public policy;

(f)

Any government regulatory commission with jurisdiction (after confirmation of the Plan) over the rates of the Debtors has approved any rate change provided for in the Plan, or such rate change is expressly conditioned on such approval;

(g)

With respect to each Impaired Class of Claims or Interests, either each holder of a Claim or Interest of the Class will have accepted the Plan, or will receive or retain under the Plan on account of that Claim or Interest, property of a value, as of the Effective Date, that is not less than the amount that such holder would so receive or retain if the Debtors were liquidated on such date under chapter 7 of the Bankruptcy Code. If Bankruptcy Code § 1111(b)(2) applies to the Claims of a Class, each holder of a Claim of that Class will receive or retain under the Plan on account of that Claim property of a value, as of the Effective Date, that is not less than the value of that holder’s interest in the Debtors’ interest in the property that secures that Claim;

(h)

Each Class of Claims or Interests will have accepted the Plan or is not Impaired under the Plan, subject to the Debtors’ right to seek cramdown of the Plan under Bankruptcy Code § 1129(b);

(i)

Except to the extent that the holder of a particular Claim has agreed to a different treatment of such Claim, the Plan provides that administrative expenses and priority Claims, other than Priority Unsecured Tax Claims, will be paid in full on the Effective Date or as soon as reasonably practicable thereafter (or if a Claim is not an Allowed Claim on the Effective Date, on the date that such Claim becomes an Allowed Claim, or as soon as reasonably practicable thereafter), and that Priority Unsecured Tax Claims will receive either payment in full on the Effective Date or as soon as reasonably practical thereafter, or deferred cash payments over a period not exceeding five years after the Petition Date, of a value, as of the Effective Date of the Plan, equal to the Allowed amount of such Claims;

(j)

With respect to an Other Secured Claim, the holder of that Claim will receive on account of such Claim either (i) a payment equal to 100% of its Allowed Class 2 Claim in Cash on the Effective Date; (ii) the collateral securing its Allowed Class 2 Claim; provided, however, any collateral remaining after satisfaction of such Allowed Class 2 Claim shall re-vest in the applicable Reorganized Debtor pursuant to the Plan, or (iii) Reinstatement of its Allowed Class 2 Claim;

(k)

If a Class of Claims or Interests is Impaired under the Plan, at least one such Class of Claims or Interests will have accepted the Plan, determined without including any acceptance of the Plan by any insider holding a Claim or Interest of that Class;

(l)

Confirmation of the Plan is not likely to be followed by the liquidation or the need for further financial reorganization of the Debtors or any successor to the Debtors under the Plan, unless such liquidation or reorganization is proposed in the Plan;

(m)

All court fees, as determined by the Bankruptcy Court at the Confirmation Hearing, will have been paid or the Plan provides for the payment of such fees on the Effective Date; and

(n)

The Plan provides that all transfers of property shall be made in accordance with applicable provisions of nonbankruptcy law that govern the transfer of property by a corporation or trust that is not a moneyed, business, or commercial corporation or trust.

The Debtors assert that they have proposed the Plan in good faith and they believe that they have complied, or will have complied, with all the requirements of the Bankruptcy Code governing confirmation of the Plan.

Acceptances Necessary to Confirm the Plan

Voting on the Plan by each holder of an Impaired Claim or Interest (or its authorized representative) is important. Chapter 11 of the Bankruptcy Code does not require that each holder of a Claim or Interest vote in favor of the Plan in order for the Bankruptcy Court to confirm the Plan. Generally, under the acceptance provisions of Bankruptcy Code § 1126(a), each Class of Claims or Interests has accepted the Plan if holders of at least two-thirds in dollar amount and more than one-half in number of the Allowed Claims of such Class actually voting in connection with the Plan vote to accept the Plan. With regard to a Class of Interests, more than two-thirds of the shares actually voted must accept to bind that Class. Even if all Classes of Claims and Interests accept the Plan, the Bankruptcy Court may refuse to confirm the Plan.

Cramdown

In the event that any Impaired Class of Claims or Interests does not accept the Plan, the Bankruptcy Court may still confirm the Plan at the request of the Debtors if, as to each Impaired Class that has not accepted the Plan, the Plan “does not discriminate unfairly” and is “fair and equitable.” A chapter 11 plan does not discriminate unfairly within the meaning of the Bankruptcy Code if no Class receives more than it is legally entitled to receive for its Claims or Interests. “Fair and equitable” has different meanings for holders of secured and unsecured Claims and Interests.

With respect to a Secured Claim, “fair and equitable” means either (i) the Impaired secured Creditor retains its Liens to the extent of its Allowed Claim and receives deferred Cash payments at least equal to the allowed amount of its Claims with a present value as of the effective date of the plan at least equal to the value of such Creditor’s interest in the property securing its Liens; (ii) property subject to the Lien of the Impaired secured Creditor is sold free and clear of that Lien, with that Lien attaching to the proceeds of sale, and such Lien proceeds must be treated in accordance with clauses (i) and (iii) hereof; or (iii) the Impaired secured Creditor realizes the “indubitable equivalent” of its Claim under the plan.

With respect to an Unsecured Claim, “fair and equitable” means either (i) each Impaired Creditor receives or retains property of a value equal to the amount of its Allowed Claim or (ii) the holders of Claims and Interests that are junior to the Claims of the dissenting class will not receive any property under the Plan.

With respect to Interests, “fair and equitable” means either (i) each Impaired Interest receives or retains, on account of that Interest, property of a value equal to the greater of the allowed amount of any fixed liquidation preference to which the holder is entitled, any fixed redemption price to which the holder is entitled, or the value of the Interest, or (ii) the holder of any Interest that is junior to the Interest of that Class will not receive or retain under the Plan, on account of that junior equity interest, any property.

The Debtors believe that the Plan does not discriminate unfairly and is fair and equitable with respect to each impaired Class of Claims and Interests. In the event at least one Class of Impaired Claims or Interests rejects or is deemed to have rejected the Plan, the Bankruptcy Court will determine at the Confirmation Hearing whether the Plan is fair and equitable and does not discriminate unfairly against any rejecting Impaired Class of Claims or Interests.

Conditions Precedent to Confirmation and Effectiveness of the Plan

In addition to the requirements of the Bankruptcy Code, Article IX of the Plan contains certain conditions to confirmation and effectiveness of the Plan.

ARTICLE IV.
BACKGROUND OF THE DEBTORS

A. Description of Debtors’ Businesses

History

The Debtors operate under the trade name “Tuesday Morning” and are one of the original “off-price” retailers specializing in providing unique home and lifestyle goods at bargain values. Tuesday Morning was founded in Dallas, Texas in 1974 by Lloyd Ross. Under the original business model, Mr. Ross purchased leftover inventory from name-brand manufacturers and retailers and then sold it from a single warehouse in Dallas in a “garage-sale” format. The first such sale was conducted on a Tuesday morning, because Mr. Lloyd considered that to be the first positive part of the week, and the name stuck even as the business grew beyond its original warehouse format. The business quickly expanded from the Tuesday morning “garage sale” format to a “pop-up shop” format with four six-week sales a year, to the establishment of the first permanent Tuesday Morning store location in 1979.

By 1984 the company had grown to 57 stores and was taken public for the first time. In 1997, the company had expanded to 315 locations and was acquired in a private acquisition by Madison Dearborn. Two years later in 1999, with 354 stores, Tuesday Morning again went public and has been publicly-traded ever since. As of the Petition Date, the common stock of Tuesday Morning Corporation traded on the NASDAQ under the trading symbol “TUES”.⁴ The Debtors also operate a primary distribution facility in Dallas, Texas. The Debtors’ corporate offices are located in Dallas, Texas.

The Debtors’ Business Operations

The Debtors operate one of the premier off-price retailers in the U.S. and specialize in selling high-quality products at prices generally below the prices in department stores, specialty shops, and online retailers. The Debtors’ in-store inventory generally falls within the following key categories: upscale home textiles, home furnishings, housewares, gourmet food, toys, and seasonal décor. The Debtors’ revenues come from direct in-store sales.

(a)

The Debtors’ Business Model and Geographic Footprint

The Debtors’ business model is focused on making opportunistic inventory purchases from various sources including manufacturers, closeout sellers, and other retailers, and re-selling the inventory at discount prices. The Debtors are known in the industry as a reliable outlet for manufacturers, distributors, and other retailers who need to sell excess inventory resulting from manufacturing overruns, bankruptcies, order cancellations, or other unanticipated circumstances. The Debtors also direct-order certain of their products from manufacturers or secondary distributors.

Through creative sourcing, the Debtors are able to offer high-quality goods to their own customers at discounted prices. The Debtors’ ability to consistently provide their customers with high quality at bargain prices has allowed the Debtors’ to establish a loyal customer base. In recent years, the Debtors have worked to improve the in-store experience for customers by offering a clean, simple, no-frills environment. As part of their improvement strategy, the Debtors have also focused on closing less productive locations and seeking opportunities in more desirable locations with increased square footage, improved lighting, and more appealing fixtures.

On the Petition Date the Debtors operated 687 stores in 40 states and distribution centers in Phoenix and Dallas. The Debtors’ largest store concentrations are in Texas, Florida, California, Virginia, Georgia, and North Carolina. Since filing, the Debtors have commenced store closing sales at approximately 200 store locations and have closed their Phoenix distribution facility.

⁴ As discussed more fully in Section V.C of the Disclosure Statement, Tuesday Morning Corporation’s common stock has been suspended from trading and delisted from the NASDAQ and currently trades over the counter in the OTC Pink Market under the symbol “TUESQ”.

(b)

The Debtors Supply and Distribution Chain

The Debtors have historically sourced approximately 80% of their inventory from U.S. vendors and the remaining 20% from foreign vendors. As an off-price retailer, the majority of the Debtors’ inventory acquisitions are opportunistic. However, the Debtors have cultivated long-standing relationships with many key vendors and are at the top of their vendors’ list for buyers in off-price transactions. The Debtors also direct-source a smaller percentage of their inventory from certain vendors and/or manufacturers. The Debtors’ expert merchant team is responsible for keeping and maintaining relationships with the Debtors’ broad vendor base. The Debtors’ relationships with their vendors, as well as the Tuesday Morning reputation in the market as a preferred off-price inventory buyer, is crucial to the Debtors’ ongoing success.

Once inventory has been purchased, the Debtors rely on their distribution chain to facilitate inventory deliveries in a timely and cost-effective manner. In addition to the Debtors’ owned distribution center in Dallas, the Debtors also contract with various third-party logistics providers that provide transportation and warehousing services. One of the Debtors’ key initiatives in recent years has been improving supply-chain efficiency. Improving efficiency allows the Debtors to reduce costs and the time between inventory purchases and in-store placement. The Debtors’ prepetition improvements in this area have further strengthened relationships with suppliers by simplifying the purchase and acquisition process and incentivizing the Debtors’ suppliers to come to the Debtors first to liquidate excess inventory. The Debtors anticipate that the planned reduction in store count will create further supply-chain efficiencies.

(c)

The Debtors’ Peak Sales and Distribution Season

Like many retailers, the Debtors’ peak sales season generally occurs in the quarter ending in December. During the peak selling season, the Debtors experience strong revenues that substantially exceed the Debtors’ fixed and variable costs. The Debtors also have a peak distribution season which typically spans from June through November. During the peak distribution season, the Debtors are focused on sourcing, shipping, and warehousing key inventory to supply the increased customer demand during the peak selling season.

(d)

The Debtors’ Cost Structure

Like most businesses, the Debtors’ cost structure is comprised of certain fixed and variable costs. The Debtors’ largest expense categories are employee-related costs, inventory costs, the costs of shipping and delivering inventory, and costs associated with the Debtors’ real estate leases and similar arrangements. Other key expense categories include taxes, advertising, insurance, and other miscellaneous items. Due to the seasonal nature of the retail industry, the Debtors’ costs fluctuate in certain key categories depending on the time of year.

On the Petition Date, the Debtors employed approximately 1,858 individuals on a full-time basis and 7,151 individuals on a part time basis. Since the Petition Date the Debtors have conducting liquidating sales at, and closed, approximately 200 stores. The Debtors have also closed their Phoenix distribution center, which, combined with the store closures, has resulted in a significant reduction in the number of the Debtors’ employees. Most of the Debtors’ employees work at the Debtors’ stores and the Debtors’ remaining employees primarily work at the Dallas distribution center or the Debtors’ corporate office. During the Debtors’ peak sales season in November and December, the Debtors typically increase their employee headcount in their stores. Similarly, during the peak distribution season the Debtors typically increase their employee headcount in their Dallas distribution center. The Debtors satisfy these seasonal needs by hiring a combination of part-time employees and temporary staff that are typically sourced through a staffing agency. In addition to paying employee wages and salaries, the Debtors also contribute to a number of employee benefit plans providing medical, pharmacy, and other ancillary benefits to qualifying employees. The Debtors’ payroll and other benefit obligations for their employees constitute one of the Debtors’ largest expense categories.

The Debtors own the real property associated with the Dallas distribution center and their corporate offices but lease all of their store locations (other than Store 3 at the Dallas distribution center). One of the Debtors’ largest expense categories is the cost of leasing and otherwise renting space at the stores. Prior to the Petition Date, the Debtors’ average monthly lease obligations were approximately $10 million per month. The Debtors have negotiated with many of their landlords and through those negotiations have obtained a reduction in the monthly rent obligations in connection with many of their leases, subject to assumption of leases. Those negotiated reductions, plus the closure of approximately 200 stores will result in considerable cost savings for the Debtors’ business on a go-forward basis.

B. Corporate Information

The Debtors’ Corporate Structure

The chart below depicts the Debtors’ current corporate structure.

Relationship of Debtors and Description of Operations

Tuesday Morning Corporation (“TM Corp.”) is the parent corporation of TMI Holdings. All other Tuesday Morning legal entities operate below TMI Holdings. TM Corp. is otherwise inactive in all taxing jurisdictions. The common stock in Debtor Tuesday Morning Corporation was traded on the NASDAQ under the symbol “TUES” until June 8, 2020 when trading was suspended. The Tuesday Morning Corporation common stock has since been delisted from the NASDAQ and currently trades over the counter in the OTC Pink Market under the symbol “TUESQ”.

TMI Holdings, Inc. (“TMI Holdings”) is an intermediate holding company and is the parent corporation of TMI. TMI Holdings is otherwise inactive in all taxing jurisdictions.

Tuesday Morning, Inc. (“TMI”) is a wholly-owned subsidiary of TMI Holdings. TMI indirectly owns a combined 100 percent interest in TMP (defined below) through its subsidiaries DOTW and NOTW (defined below). TMI functions as an operator of the Tuesday Morning stores and also performs certain strategic functions such as site selection, lease management, advertising, and senior management guidance.

Days of the Week, Inc. (“DOTW”) is a wholly owned subsidiary of TMI and is the general partner of TMP.

Nights of the Week, Inc. (“NOTW”) is a wholly owned subsidiary of TMI and is the limited partner of TMP.

Tuesday Morning Partners, Ltd. (“TMP”) is a limited partnership. TMP is 1-percent owned by DOTW (its general partner) and 99-percent owned by NOTW (its limited partner). TMP provides operational and strategic services to TMI, including merchandising, store design and lay-out, sales planning and allocation, warehousing, and logistics.

Friday Morning, LLC (“FM LLC”) owns the real property associated with the Dallas Distribution Center and the Tuesday Morning corporate offices. Additionally, FM LLC (i) issues and sells prepaid and stored value cards and similar items (in paper, plastic, electronic or other format) that can be redeemed by owners of such cards for the purchase of merchandise and/or services at Tuesday Morning stores and (ii) provides services related to the management and operation of prepaid and stored value card programs, including card processing, manufacturing and regulatory compliance services.

Debtors’ Board of Directors and Management

As of the Petition Date, the following individuals were officers and directors of Tuesday Morning Corporation:

Officers

Name	Title
Steven Becker	Chief Executive Officer
Stacie Shirley	Chief Financial Officer
Phillip Hixon	Executive Vice President, Store Operations
Bridgett Zeterberg	General Counsel
Catherine Davis	Senior Vice President, Marketing

Directors

Name	Title
Terry Burman	Chairman of the Board
Steven Becker	Director
James Corcoran	Director
Barry Gluck	Director
Frank Hamlin	Director
Reuben Slone	Director
Sherry Smith	Director
Richard Willis	Director

C. Events Leading to the Chapter 11 Cases

COVID-19 Related Disruptions and Store Closures

The key driver for the filing of the Debtors’ Chapter 11 Cases is the COVID-19 pandemic and its related fallout. In March 2020, all of the Debtors’ stores, along with the Debtors’ distribution centers, corporate headquarters, and critical components of the Debtors’ distribution chain, including certain facilities operated by the Debtors’ third party logistics providers, were forced to close due to a combination of health and safety concerns for employees and customers, supply chain disruptions, and government rules and regulations intended to stop or otherwise slow the spread of COVID-19.

The impact of COVID-19 on the Debtors’, their employees, their customers, and many of their vendors and other service providers has imposed unprecedented operational and financial strains on the Debtors and their business. The Debtors do not have an online presence and rely exclusively on in-store sales, and the fallout from COVID-19 resulted in a total cessation of new revenue beginning in March 2020. To address this precipitous decline in revenue, the Debtors immediately began to implement cost-saving measures and to seek alternative sources of liquidity.

Despite the Debtors’ best efforts to control costs, conserve cash, and obtain additional funding, the impact of the pandemic was devastating to the Debtors’ financial status by cutting off the Debtors’ revenues, diminishing the Debtors’ assets, and significantly increasing the Debtors’ liabilities.

Employee Furloughs

The near-cessation of business operations resulting from COVID-19 substantially decreased the Debtors’ labor demands, and the Debtors furloughed most of their store employees, distribution center employees, and many employees working in the Debtors’ corporate headquarters. By furloughing over 95% of their employees, the Debtors were able to materially reduce their operating costs. However, the Debtors still incurred significant COVID-19 related employee costs without the benefit of offsetting sales revenues. For example, even though the Debtors ceased operations during the month of March, the Debtors determined that it was critical to pay benefits for their employees through the end of May or until the Furlough ended. The Debtors also continued to incur costs and obligations in connection with various employee benefit plans, including insurance premiums, claims administration, and other administrative expenses, in order to keep the infrastructure in place to allow the Debtors’ to quickly recommence operations, when appropriate.

Negotiations with Landlords

Rent on the majority of the Debtors’ leases comes due on the first day of each month and is applied to the month in which the rent is paid – i.e. a March 1 rent payment covers the Debtors’ rent obligation for the month of March. The Debtors were current on their March lease obligations when the March closures occurred. By April 1, 2020, when the Debtors’ April rent obligations generally became due, the Debtors had closed all of their leased locations. Moreover, by April 1, 2020, the Debtors, like many other retail businesses, were in a severe liquidity crisis due to the store closings and associated cessation of revenues.

In an effort to maintain lines of communication with their landlords while reserving their rights under the leases and other applicable law, in early April 2020, the Debtors reached out to their landlords and proposed the entry into consensual agreements that would allow the Debtors to defer payment of rent until some period after the Debtors were able to re-open and re-commence normal business operations. Upon receipt of negative feedback from several landlords regarding the proposed abatement, the Debtors offered to pay 50% of April rent in full satisfaction of April rent obligations to the landlords of 460 locations. The Debtors were able to reach agreements with 54 of their landlords regarding rent abatement. The Debtors were unable to reach a formal agreement with the remaining landlords and many of the landlords sent notices of default and/or took more aggressive measures such as filing lawsuits, attempting to lock the Debtors’ out, or taking steps to terminate leases. The mounting pressure from landlords became more intense leading up to the Petition Date. The Debtors did not make the majority of their April and May rent payments, although the Debtors did make full or partial payments of April and/or May rent to over 90 landlords.

Vendor Outreach

To conserve liquidity, the Debtors cancelled a majority of new orders and ceased new inventory acquisitions. The Debtors also substantially ceased payments to vendors on outstanding unpaid invoices. To preserve their relationships with key vendors the Debtors continued to maintain lines of communication to the extent possible to keep their vendors informed of the Debtors’ circumstances and to advise them that the Debtors would not be making scheduled payments in order to preserve liquidity.

Consideration of Emergency Funding Sources

In an effort to blunt the economic effects of the COVID-19 pandemic and the efforts to contain it, the U.S. Congress passed, and the President signed, the Coronavirus Aid, Relief, and Economic Security Act in late March 2020 (the “CARES Act”). Subsequently, the U.S. Federal Reserve announced the establishment of the Main Street Lending Program (the “MSLP”) to support lending to small and medium-sized businesses.⁵ The Debtors analyzed the requirements for borrowing under the MSLP and determined that they would not be able to satisfy certain of the requirements, and the limited available funding under the MSLP based on the Debtors’ financials would be insufficient to satisfy the liquidity shortfall confronting the Debtors.

⁵ The size of the Debtors’ operations excluded them from participating in the Paycheck Protection Program administered by the Small Business Administration under the CARES Act.

Rolling Store Re-Openings

On April 24, 2020, the Debtors reopened 140 locations with reduced operating hours. The Debtors continued re-opening stores on a rolling basis with modified operating hours as appropriate. As of the Petition Date, the Debtors had re-opened 563 of their stores, although with modified operating procedures in place to address COVID-19 related concerns and to comply with applicable laws, government instructions, and best practices to promote the safety of customers and employees. By June 15, 2020, the Debtors had reopened all but one of their 687 store locations.

D. The Debtors’ Prepetition Restructuring Initiatives

During March 2020, when it became apparent that the Debtors would likely need to close all of their operations and suffer the resultant cessation of revenue, the Debtors retained AlixPartners, LLP (“Alix”) and Haynes and Boone, LLP (“Haynes and Boone”) to advise them regarding the available options to preserve the value of their business and to weather the unprecedented challenges posed by the COVID-19 crisis. Shortly after retaining Alix and Haynes and Boone, the Debtors engaged with the Existing First Lien Agent in discussions regarding the Debtors’ financial circumstances and to explore additional financing options. In late March, the Debtors also engaged Miller Buckfire & Co., LLC and Stifel, Nicolaus & Co., Inc. (collectively, “Miller Buckfire”) to provide investment banking services. Specifically, Miller Buckfire was engaged to provide services related to various strategic alternatives for the Debtors, including financing transactions and potential restructurings.

The Debtors’ store closures potentially resulted in a default under a provision of the Existing First Lien Credit Agreement prohibiting the Company from “suspend[ing] the operation of its business in the ordinary course of business.” The Debtors, with the aid of their professionals, engaged with the Existing First Lien Agent and entered into a forbearance agreement in May 2020 (the “Forbearance Agreement”). Pursuant to the Forbearance Agreement, the Existing First Lien Lenders permanently reduced the commitment from $180 million to $130 million and required certain additional prepetition payments, among other terms.

When it became evident that the Debtors required additional sources of financing, the Debtors instructed Miller Buckfire to identify, assess and explore options to address the Debtors’ liquidity concerns. Miller Buckfire was tasked with evaluating and pursuing options to refinance the Existing First Lien Credit Facility, as well as seeking additional financing alternatives, including financings that could be secured by the Debtors’ owned and unencumbered real property (the “Owned Real Property”). As part of its marketing process, Miller Buckfire prepared a “teaser” and contacted over 90 prospective providers of financing. Miller Buckfire solicited interest from potential lenders with respect to a wide spectrum of debtor-in-possession financing arrangements ranging from loans that would pay down the outstanding Existing First Lien Credit Facility obligations in full, subordinated DIP financing, and loans secured by senior liens in the Debtors’ unencumbered assets. Leading up to the Petition Date, 42 parties signed non-disclosures agreements and received an investor presentation and data room access. Of those parties, 19 made follow up diligence requests. Prior to the Petition Date, the Debtors received two proposals for ABL DIP financing and nine proposals related to DIP financing secured by the Owned Real Property. None of the prospective lenders made a proposal to provide subordinated ABL DIP financing.

The first proposal for ABL DIP financing came from the Existing First Lien Lenders. The Debtors and their advisors discussed a variety of different structures with the Existing First Lien Agent and their discussions ultimately focused on a structure where the Existing First Lien Lenders would roll up the obligations under the Existing First Lien Credit Facility into a revolving DIP Facility and extend up to $100,000,000 in postpetition DIP financing. The Debtors and their advisors also discussed the possibility that the Existing First Lien Lenders would provide additional liquidity secured by senior liens in the Owned Real Property, but the Existing First Lien Lenders did not submit a proposal consistent with those discussions. The second proposal for ABL DIP financing was a preliminary proposal and was not received until the evening of May 26, 2020, after the Debtors and the Existing First Lien Agent had reached agreement on a term sheet and a form of DIP order. Notably, the second proposal did not specify an interest rate but stated that the interest rate would be “materially higher than a commercial bank”. The proposal also contemplated that the financing would be secured by the Owned Real Property in addition to the ABL collateral. In light of the lack of detail, the non-binding nature of the proposal, the less favorable interest rate, and the uncertainty associated with re-commencing negotiations when the Debtors’ negotiations with the DIP Agent had already progressed to a near-final stage, the Debtors opted to not pursue entry into an ABL DIP credit agreement with the second prospective lender.

One of the milestones required by the DIP ABL Agent was that the Debtors seek approval of a second DIP loan secured by the Owned Real Property within 30 days of the Petition Date and consummate the second DIP loan within 40 days of the Petition Date. Before the Petition Date, the Debtors had received nine proposals to provide DIP financing secured by senior liens in the Debtors’ Owned Real Property. As of the Petition Date, the Debtors were near terms on an agreement to receive DIP financing secured by senior liens in the Owned Real Property.

ARTICLE V.
DEBTORS’ ASSETS AND LIABILITIES

A. Prepetition Secured Debt

TMI as lead borrower, and each of the remaining Debtors, as guarantors, the Existing First Lien Agent, and the Existing First Lien Lenders entered into the Existing First Lien Credit Agreement dated as of August 18, 2015 and amended as of January 29, 2019, which provided for the Existing First Lien Credit Facility, a prepetition revolving credit facility in an amount up to $180,000,000.

The Debtors’ obligations under the Existing First Lien Credit Facility are secured by a first priority lien on, inter alia, the Debtors’ accounts receivable, cash, inventory, insurance, and general intangibles. The Debtors’ obligations under the Existing First Lien Credit Agreement and the related guarantees are not secured by the Owned Real Property.

On May 14, 2020, the Debtors entered into the Forbearance Agreement with the Existing First Lien Lenders to address a potential of default resulting from the Debtors suspending their business operations. The Existing First Lien Lenders agreed to not exercise remedies under the Existing First Lien Credit Agreement and applicable law through May 26, 2020. Pursuant to the Forbearance Agreement, the Existing First Lien Lenders permanently reduced the commitment from $180 million to $130 million and required certain additional prepetition payments, among other terms.

Prior to entering into the Forbearance Agreement, the Debtors owed approximately $80,000,000 million in connection with the Existing First Lien Credit Facility, including $8,823,449 in letters of credit. As part of the Forbearance Agreement, the Existing First Lien Agent required the Debtors to pay down approximately $25,000,000 million from the Debtors cash reserves. As of the Petition Date, total funded obligations under the Prepetition Revolving Credit Facility totaled $47,947,700, including $8,823,449 in letters of credit.

B. Unsecured Debt

In addition to the Debtors’ secured debt obligations under the Prepetition Revolving Credit Facility, the Debtors also owe significant prepetition unsecured debt obligations to many of their vendors and landlords, including unpaid rent obligations during the months leading up to the Petition Date and rejection damages claims in connection with the approximately 200 leases that the Debtors have rejected.

C. Equity Interests

Tuesday Morning Corporation is a public company whose common stock, prior to the Petition Date, traded on The NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “TUES.” Tuesday Morning Corporation files annual reports and other information with the United States Securities and Exchange Commission (the “SEC”). Copies of any document filed with the SEC may be obtained by visiting the SEC website at http://www.sec.gov.

As of June 30, 2020, 47,346,735 shares of the Tuesday Morning Corporation $0.01 par value stock were issued and outstanding. The Tuesday Morning Corporation Interests also include all outstanding options and other rights to acquire shares of common stock issued under the Company’s long-term incentive plans.

Trading of Tuesday Morning Corporation’s common stock on the NASDAQ was suspended on June 8, 2020 and has not traded on the NASDAQ since that time. On July 1, 2020, the NASDAQ filed a Form 25 to delist the Tuesday Morning Corporation common stock. Since June 8, 2020, the Tuesday Morning Corporation common stock has been trading over the counter in the OTC Pink Market under the symbol “TUESQ”.

As of the Petition Date, no holder held more than 50% of Tuesday Morning Corporation’s outstanding common stock and there were only 4 other holders of the common stock of Tuesday Morning Corporation and any beneficial interest therein who held more than 5% of the Tuesday Morning Corporation outstanding common stock.

D. Debtors’ Scheduled Amount of Claims

On June 30, 2020, each of the Debtors Filed their Schedules of Assets and Liabilities (i.e., the Schedules of Assets and Liabilities). Pursuant to the Schedules of Assets and Liabilities and based on stipulations in the Interim DIP Financing Order and the DIP Revolving Facility Financing Order, the Debtors have scheduled the following types and amounts of Claims in the Chapter 11 Cases:

Type of Claim	Approximate Total Amount
Administrative Claims		Unknown
Priority Unsecured Tax Claims	$	0
Other Priority Unsecured Claims	$	0
Secured Tax Claims	$	0
Existing First Lien Credit Facility Claims	$	100,000
General Unsecured Claims	$	116,700,000
Convenience Claims	$	8,300,000

The Bar Date was August 28, 2020.

ARTICLE VI.
BANKRUPTCY CASE ADMINISTRATION

A. First and Second Day Motions

On the Petition Date or soon thereafter, the Debtors Filed a number of motions and pleadings to administer the Chapter 11 Cases in a timely and efficient manner. Pursuant to those motions and pleadings, the Bankruptcy Court entered orders that, among other things:

•

Permitted the joint administration of the Chapter 11 Cases [Docket No. 66];

•

Authorized maintenance of existing corporate bank accounts and cash management system [Docket No. 68];

•

Authorized the Debtors to continue their insurance policies and bond obligations [Docket No. 108];

•

Authorized the Debtors to pay certain prepetition tax obligations [Docket No. 97];

•

Authorized the Debtors to pay certain prepetition obligations owed to foreign creditors, trade claimants and miscellaneous lien holders [Docket Nos. 106 and 330];

•

Designated the Chapter 11 Cases as complex chapter 11 cases [Docket No. 96];

•

Established procedures for payment of estate professionals [Docket No. 453];

•

Authorized the Debtors to employ professionals used in the ordinary course of business [Docket No. 452];

•

Authorized the Debtors to employ Haynes and Boone (bankruptcy counsel) [Docket No. 417], Alix (financial advisor) [Docket No. 418], Miller Buckfire (investment banker) [Docket No. 420]; A&G Realty Partners, LLC (“A&G”) (real estate consultant) [Docket No. 419]; Ernst & Young LLP (“EY”) (audit services) [Docket No. 422]; and Epiq Corporate Restructuring, LLC (“Epiq”) (Claims and balloting agent) [Docket No. 100];

•

Authorized the payment of certain prepetition accrued wages, salaries, medical benefits, and reimbursable employee expenses [Docket No. 69];

•

Authorized the Debtors to maintain and honor prepetition gift cards and customer loyalty programs [Docket No. 107];

•

Preserved value for the Debtors estates by prohibiting utility companies from altering or discontinuing service on account of prepetition invoices [Docket Nos. 198 and 450];

•

Preserved the Debtors’ use of their NOLs by establishing certain procedures for trading in the Debtors’ equity securities [Docket Nos. 98 and 259]; and

•

Extended the time within which the Debtors were required to File the Schedules of Assets and Liabilities and Statements of Financial Affairs [Docket No. 91].

B. Bar Date for Filing Proofs of Claim

Pursuant to the Court’s order shortening the original bar date [Docket No. 504] (the “Bar Date Order”), the general deadline for filing Proofs of Claim in the Chapter 11 Cases is August 28, 2020 (i.e., the Bar Date) and the deadline for Governmental Units to file a Proof of Claim is November 23, 2020 (the “Governmental Bar Date”). The Bar Date Order shortened the initial bar date and the initial governmental bar date identified in the notices of bankruptcy filing filed at Docket Nos. 63 and 101, which had initially established September 30, 2020 as the general claims bar date and December 29, 2020 as the bar date for governmental units.

In the event that the Debtors amend their Schedules of Assets and Liabilities, the Debtors must give notice of such amendment to the holder of a Claim affected thereby, and the affected Claim holder shall have until the later of the Bar Date or thirty (30) days from the date on which notice of such amendment to the Schedules of Assets and Liabilities is provided. Further, except as otherwise set forth in any order authorizing the rejection of an Executory Contract or Unexpired Lease, in the event that a Claim arises with respect to a Debtor’s rejection of an Executory Contract or Unexpired Lease, the Claim holder shall have until the later of the Bar Date or thirty (30) days after the date any order is entered authorizing the rejection of such Executory Contract or Unexpired Lease to file a Proof of Claim asserting a rejection damages claim.

C. Meeting of Creditors

The meeting of Creditors required under Bankruptcy Code § 341 was held and concluded on July 2, 2020.

D. Official Committee of Unsecured Creditors

The U.S. Trustee formed an official committee of unsecured creditors (the “Creditors Committee”) on June 9, 2020 [Docket Nos. 203 and 206]. The Creditors Committee is comprised of five of the Debtors’ general unsecured creditors. The Creditors Committee retained Montgomery McCracken Walker & Rhoads LLP (“Montgomery McCracken”) and Munsch Hardt Kopf & Harr, P.C. (“Munsch Hardt”) as legal counsel and BDO Consulting Group, LLC (“BDO”) as its financial advisor.

Debtor-In-Possession Financing and Use of Cash Collateral

As more fully discussed in Article IV.D, prior to the Petition Date, Miller Buckfire conducted an extensive marketing process to solicit interest from potential lenders with respect to a wide spectrum of financing including debtor-in-possession financing arrangements. Through that marketing process, the Debtors received proposals to provide (i) revolving asset-based DIP financing primarily secured by accounts receivable, cash, inventory, insurance, and general intangibles and (ii) DIP financing primarily secured by the Debtors’ Owned Real Property.

The ABL DIP Facility and Use of Cash Collateral

As more fully discussed in Article IV.D, other than a non-binding preliminary proposal received the day before the Petition Date, the only proposal to provide DIP financing secured by accounts receivable, cash, inventory, insurance, and general intangibles was received from JPMorgan Chase Bank, N.A., the Existing First Lien Agent. The parties’ discussions ultimately focused on a structure where the Existing First Lien Lenders would roll up the obligations under the Existing First Lien Facility into a revolving DIP facility and extend up to $100,000,000 in postpetition DIP financing.

On the Petition Date the Debtors filed their Debtors’ Emergency Motion for Entry of Interim and Final Orders Pursuant to 11 U.S.C. §§ 105, 361, 362, 363 and 364 (I) Authorizing Debtors to (A) Use Cash Collateral on a Limited Basis and (B) Obtain Postpetition Financing on a Secured, Superpriority Basis, (II) Granting Adequate Protection, (III) Scheduling a Final Hearing, (IV) Modifying the Automatic Stay, and (V) Granting Related Relief [Docket No. 19] (the “DIP Revolving Facility Motion”) and on May 28, 2020, the Court entered the Interim DIP Financing Order [Docket No. 67] approving the DIP Revolving Facility Motion on an interim basis and authorizing the Debtors to enter into the DIP Revolving Facility Credit Agreement, obtain financing under the DIP Revolving Facility, and to continue using cash and cash collateral generated by sales of collateral securing the Existing First Lien Credit Facility and the DIP Revolving Facility. On June 26, 2020, the Court entered the DIP Revolving Facility Financing Order [Docket No. 331] approving the DIP Revolving Facility Motion on a final basis.

The DIP Revolving Facility is a first-lien super-priority revolving credit facility designed to provide the Debtors with the necessary liquidity to continue operating their business and fund their operations, including the expenses of their Chapter 11 Cases, through a revolving credit facility of up to $100,000,000. The DIP Revolving Facility incorporated a gradual “roll-up” feature pursuant to which outstanding obligations under the Existing First Lien Credit Facility would be paid down by sweeping the Debtors’ collections and applying them against prepetition debt under the Existing First Lien Credit Facility while financing the Debtors with DIP advances. All but $100,000 of the prepetition obligations under the Existing First Lien Credit Facility have been paid down.

Paragraph 88 of the DIP Revolving Facility Financing Order incorporates the following milestones (the “DIP Revolving Facility Milestones”) that the Debtors are obligated to achieve (except to the extent extended from time to time with the written consent of the DIP Revolving Facility Agent) in order to remain in compliance under the terms of the DIP Revolving Facility Financing Order and the DIP Revolving Facility Credit Agreement:

(i)

Not later than thirty (30) days after the Petition Date, the Debtors shall have obtained entry of an order by the Court, in form and substance acceptable to the DIP Revolving Facility Agent, granting the DIP Revolving Facility Motion on a final basis;

(ii) Not later than forty-two (42) days after the Petition Date, the Debtors shall have obtained entry of an order by the Court, in form and substance acceptable to the DIP Revolving Facility Agent, authorizing, upon the occurrence of certain contingencies set forth below, the sale of and approving procedures for a sale of all or substantially all of the Debtors’ assets via an orderly liquidation of the Debtors’ entire chain of stores and all assets relating thereto pursuant to an agreement with a nationally-recognized liquidator acceptable to the DIP Revolving Facility Agent and engaged by the Debtors’ estates (a “Full-Chain Liquidation”), in each case under Bankruptcy Code § 363; and the Full Chain Liquidation shall occur if (a) the Debtors’ Total Liquidity (defined as Availability in the DIP Revolving Facility Credit Agreement) drops below $20,000,000 at any time; (b) the Debtors fail to satisfy the Plan/APA Milestone Date (as defined below); or (c) the Debtors fail to (i) obtain timely the DIP RE Commitment Letter (as defined below) for, and file a motion seeking approval of, a Qualifying DIP RE Facility (as defined in the DIP Revolving Facility Credit Agreement), or (ii) consummate timely any RE Funding (as defined below);

(iii)

Not later than thirty (30) days after the Petition Date, the Debtors shall (a) deliver to the DIP Revolving Facility Agent a fully underwritten commitment letter with commitments thereunder not less than $20,000,000 from an entity other than the DIP Revolving Facility Agent or the DIP Revolving Facility Lenders (the “DIP RE Commitment Letter”) and (b) file a motion seeking approval of the proposed Qualifying DIP RE Facility, in each case acceptable to the DIP Revolving Facility Agent;

(iv)

Not later than forty-four (44) days after the Petition Date, the Qualifying DIP RE Facility shall have been approved and consummated with an entity other than the DIP Revolving Facility Agent or the DIP Revolving Facility Lenders with funding and payment to the DIP Revolving Facility Agent for application to obligations under the Existing First Lien Credit Facility Claims or the DIP Revolving Facility per the formula set forth in the following subsection (v);

(v)

So long as any portion of the Qualifying DIP RE Facility remains unfunded, upon the outstanding balance of the Loans (as such term is defined in the DIP Revolving Facility Credit Agreement) exceeding 35% or more of the Ending Post-Petition DIP Availability (the “RE Draw Trigger”) at any time, there shall be a funding within four (4) business days thereafter under the Qualifying DIP RE Facility and payment to the DIP Revolving Facility Agent for application to obligations under the DIP Revolving Facility an amount equal to the lesser of (x) an amount that would result in the outstanding balance of the Loans being $5,000,000 less than the RE Draw Trigger, or (y) all unfunded amounts available under the Qualifying DIP RE Facility (the “RE Funding”);

(vi)

Assuming a Qualifying DIP RE Facility from an entity other than the DIP Revolving Facility Agent or the DIP Revolving Facility Lenders shall have been consummated timely and any RE Funding (if required) shall have been made, on or before ninety-five (95) days after the Petition Date (the “Plan/APA Milestone Date”), the Debtors shall pursue a plan or sale process in form and substance acceptable to the Agent or which provides Full Satisfaction (as defined in the DIP Revolving Facility Financing Order); provided that the Full-Chain Liquidation shall occur if (a) the Debtors’ Total Liquidity drops below $20,000,000 at any time, (b) the Debtors fail to satisfy timely the Plan/APA Milestone Date, or (c) the Debtors fail to consummate timely any RE Funding (if required);

(vii)

Not later than the Plan/APA Milestone Date, the Debtors shall file with the Court either a (a) qualifying chapter 11 plan, a corresponding qualifying disclosure statement, and a motion seeking approval of the disclosure statement or (b) motion to approve the sale of substantially all of the assets of the Debtors, which shall include the request for entry of an order approving the procedures for such sale and of the proposed sale per the procedures for such sale, in each case, in form and substance acceptable to the Agent;

(viii)

Not later than twenty (20) days after the filing of a qualifying sale motion, the Debtors shall have obtained entry by the Court of a qualifying sale procedures order;

(ix)

Not later than thirty-five (35) days after the filing of a qualifying plan and disclosure statement, the Debtors shall have obtained entry by the Court of an order, in form and substance acceptable to the DIP Revolving Facility Agent, approving the disclosure statement;

(x)

Not later than forty-five (45) days after the filing of a qualifying sale motion, the Debtors shall have obtained entry by the Court of a qualifying sale order;

(xi)

Not later than seventy (70) days after the filing of a qualifying plan and disclosure statement, the Debtors shall have obtained entry by the Court of an order, in form and substance acceptable to the DIP Revolving Facility Agent, confirming the plan; and

(xii)

Contemporaneously with the closing of any sale transaction, the Debtors shall pay to the DIP Revolving Facility Agent the net proceeds of such sale transaction to the full extent of the claims of the Existing First Lien Agent, Existing First Lien Lenders, DIP Revolving Facility Agent, and DIP Revolving Facility Lenders, including, without limitation, principal, interest, fees (including counsel and advisors fees), and costs, except for the Retained Amount (as defined in the DIP Revolving Facility Financing Order) as determined by the DIP Revolving Facility Agent.

The Debtors entered into a stipulation with the DIP Revolving Facility Agent extending the Plan/APA Milestone Date on August 28, 2020 [Docket No. 706] pursuant to which the Plan/APA Milestone Date was extended through September 9, 2020. The Debtors entered into a second stipulation with the DIP Revolving Facility Agent further extending the Plan/APA Milestone Date through September 17, 2020 [Docket No. 796] (the “Second Plan/APA Milestone Extension”). The Creditors Committee filed an objection to the Second Plan/APA Milestone Extension [Docket No. 797] to which the Debtors filed a response [Docket No. 805]. On September 16, 2020, the Debtors filed a third stipulation further extending the Plan/APA Milestone Date through September 24, 2020 [Docket No. 875]. The Debtors filed a fourth stipulation on October 27, 2020 [Docket No. 1446] pursuant to which the Debtors and the DIP Revolving Facility Agent agreed to extend the deadline for the Debtors to file a disclosure statement through November 10, 2020 and the deadline for obtaining confirmation of a plan through December 28, 2020.

The Debtors are currently in compliance with the DIP Revolving Facility Milestones and are seeking approval of the Disclosure Statement and Confirmation of the Plan on a schedule that complies with the DIP Revolving Facility Milestones to date. The Debtors may extend or otherwise amend future Facility Milestones by agreement of the DIP Revolving Facility Agent.

The DIP Real Estate Facility

One of the DIP Revolving Facility Milestones required the Debtors to seek approval of a Qualifying DIP RE Facility secured by the Debtors’ Owned Real Property within 30 days of the Petition Date and consummate the Qualifying DIP RE Facility within 44 days of the Petition Date. Before the Petition Date, the Debtors received nine proposals to provide DIP financing secured by senior liens in the Debtors’ Owned Real Property. As of the Petition Date, the Debtors had not reached an agreement with any of the prospective lenders but were in the process of negotiating the terms of an agreement to obtain a Qualifying DIP RE Facility secured by the Owned Real Property. After the Petition Date the Debtors received proposals from two additional prospective lenders seeking to provide financing secured by the Owned Real Property, bringing the total number of proposed Owned Real Property lenders to eleven.

On June 16, 2020, the Debtors filed the Debtors’ Emergency Motion Pursuant to 11 U.S.C. §§ 105, 361, 362, 363 and 364 for Entry of Final Order (I) Authorizing Debtors to Obtain Postpetition Term Financing on a Secured, Superpriority Basis, (II) Scheduling a Final Hearing and (III) Granting Related Relief [Docket No. 267] (the “DIP Real Estate Motion”) seeking authorization to enter into a Qualifying DIP RE Facility with BRF Finance Co., LLC (“BRF”) as agent. A hearing on the Initial DIP Real Estate Motion was set for June 26, 2020.

On June 16, 2020, Miller Buckfire received a term sheet from Stabilis Capital Management, LP (and together with certain of its affiliates, “Stabilis”) pursuant to which Stabilis proposed to provide a Qualifying DIP RE Facility at an overall lower cost to the Debtors. In order to obtain the best possible terms, the Debtors removed the DIP Real Estate Motion from the June 26, 2020 agenda, invited BRF and Stabilis to provide best and final offers by July 2, 2020 and filed the Debtors’ Amended Motion Pursuant to 11 U.S.C. §§ 105, 361, 362, 363 and 364 for Entry of Final Order (I) Authorizing Debtors to Obtain Postpetition Term Financing on a Secured, Superpriority Basis and (II) Granting Related Relief [Docket No. 307] (the “Amended DIP Real Estate Motion”) on June 23, 2020, pursuant to which the Debtors: (a) requested a final hearing on the Amended DIP Real Estate Motion for July 8, 2020; (b) advised the Court and parties-in-interest of the new potentially superior proposal from Stabilis; (c) advised the Court and parties-in-interest of the Debtors’ request to Stabilis and BRF to provide final and best offers by July 2, 2020, and (d) requested that at the July 8, 2020 hearing the Court approve the credit facility proposed by BRF or such better offer as might be subsequently received.

On July 2, 2020, the Debtors received proposals from Stabilis and Franchise Group, Inc. (“FGI”). BRF did not provide an updated proposal. After reviewing the proposals from Stabilis and FGI, the Debtors, with the aid of their professionals, determined that the proposal from Stabilis constituted a “Superior Proposal” (as defined in the Amended DIP Real Estate Motion).

On July 6, 2020, the Debtors filed the Supplement to Debtors’ Amended Motion Pursuant to 11 U.S.C. §§ 105, 361, 362, 363 and 364 for Entry of Final Order (I) Authorizing Debtors to Obtain Postpetition Term Financing on a Secured, Superpriority Basis and (II) Granting Related Relief [Docket No. 396] (the “Stabilis Supplement”) identifying the new proposal from Stabilis as a Superior Proposal and requesting approval of the Stabilis proposal at the July 8, 2020 hearing.

On July 7, 2020, the Debtors received a subsequent binding competing proposal from FGI to provide a Qualifying DIP RE Facility. After careful review and consideration, the Debtors, with the help of their professionals, determined that the terms of the new proposal from FGI were materially better than the terms of the Stabilis proposal described in the Stabilis Supplement. Although the new FGI proposal was received after the July 2, 2020 date described in the Amended DIP Real Estate Motion, the Debtors determined that, in furtherance of their fiduciary duties, because the new FGI proposal constituted a binding proposal with materially better terms than the terms of the Stabilis proposal, the Debtors should accept the new FGI proposal. Prior to accepting the new FGI proposal, the Debtors contacted Stabilis to inform them of the FGI DIP Proposal and to extend Stabilis the opportunity to provide the Debtors with an updated proposal matching or improving the terms of the new FGI proposal. Stabilis declined to either match or improve the terms of the new FGI proposal.

Prior to the hearing on July 8, 2020, the Debtors filed the Second Supplement to Debtors’ Amended Motion Pursuant to 11 U.S.C. §§ 105, 361, 362, 363 and 364 for Entry of Final Order (I) Authorizing Debtors to Obtain Postpetition Term Financing on a Secured, Superpriority Basis and (II) Granting Related Relief [Docket No. 406] (the “FGI Supplement”) identifying the new proposal from FGI as a Superior Proposal and requesting approval of the new FGI proposal at the July 8, 2020 hearing.

On July 10, 2020, the Court entered the Final Order (I) Authorizing Debtors to Obtain Postpetition Term Financing on a Secured, Superpriority Basis and (II) Granting Related Relief [Docket No. 429] (the “DIP Real Estate Facility Order”) approving the Debtors entry into the DIP Real Estate Credit Agreement with FGI and the financing under the DIP Real Estate Facility.

The DIP Real Estate Facility is a senior term loan facility in an aggregate principal amount of $25 million secured by the Owned Real Estate and the superpriority liens and claims described in the DIP Real Estate Facility Order. Pursuant to the terms of the DIP Revolving Facility, upon consummation of the DIP Real Estate Facility, the DIP Revolving Agent and DIP Revolving Lenders received junior liens in the Owned Real Estate. The current maturity date for the DIP Real Estate Facility is April 8, 2021, which may be extended, at the Debtors’ option, to July 8, 2021. The Debtors are currently in compliance with the terms of the DIP Real Estate Facility and believe that they will continue to be in compliance through the Effective Date.

F. Professionals Employed by the Debtors

Pursuant to orders entered by the Bankruptcy Court, the Debtors have retained the following Professionals to represent the Debtors in the Chapter 11 Cases: Haynes and Boone (bankruptcy counsel) [Docket No. 417], Alix Partners (financial advisor) [Docket No. 418], Miller Buckfire (investment banker) [Docket No. 420]; A&G (real estate consultant) [Docket No. 419]; EY (audit services) [Docket No. 422]; Epiq (Claims and balloting agent) [Docket No. 100], CBRE, Inc. (real estate broker) [Docket No. 1042]; and Piper Sandler & Co. (placement agent) [Docket No. 1287].

The Court has approved interim procedures pursuant to which the Debtors’ Professionals may be compensated (except as otherwise addressed in a Professional’s applicable retention order) [Docket No. 453].

The Court has also entered an order authorizing the Debtors to employ and compensate professionals retained by the Debtors to provide professional services in the ordinary course of the Debtors’ business [Docket No. 452].

G. Store Closing Sales and Lease Rejections

Through these Chapter 11 Cases, the Debtors have liquidated the existing inventory and other assets at approximately 200 less productive locations through store closing sales (“Store Closing Sales”). As part of their analysis, leading up to the Petition Date, the Debtors and their advisors conducted a company-wide review of operational and sales performance of each store and identified an initial list of 132 locations that were less productive and that should be closed. In addition to generating additional cash flow through the Store Closing Sales, the closures have resulted in additional cost savings in the form of reduced rent, labor, and other administrative costs and have improved the efficiency of the Debtors’ distribution chain.

Prior to the Petition Date, the Debtors engaged Great American Group, LLC (“Great American”) as their liquidation consultant to assist the Debtors in overseeing Store Closing Sales.

The Store Closing Procedures Motion

On the Petition Date, the Debtors filed the Debtors’ Emergency Motion for Entry of Interim and Final Orders (I) Authorizing the Debtors to Assume the Consulting Agreement; (II) Approving Procedures for Store Closing Sales; (III) Approving the Sale of Store Closure Assets Free and Clear of All Liens, Claims and Encumbrances; (IV) Waiving Compliance with Applicable State Laws and Approving Dispute Resolution Procedures; (V) Approving Procedures to Conduct Sales in Additional Closing Stores; and (VI) Granting Related Relief [Docket No. 18] (the “Store Closing Procedures Motion”) pursuant to which the Debtors’ requested (i) approval of liquidating and store closing procedures to allow the Debtors to conduct liquidating sales at, and to close, those stores that the Debtors decide to close during the Chapter 11 Cases, (ii) authorization to assume the Debtors’ consulting agreement with Great American and to pay the amounts owed under the consulting agreement without further approvals or orders from the Court, (iii) authorization to commence liquidating procedures for the initial list of 133 store locations (the “Wave 1 Stores”), and (iv) approval of notice procedures for designating additional stores to be closed.

On May 29, 2020, the Court entered the Interim Order Granting Debtors’ Emergency Motion for Entry of Interim and Final Orders (I) Authorizing the Debtors to Assume the Consulting Agreement; (II) Approving Procedures for Store Closing Sales; (III) Approving the Sale of Store Closure Assets Free and Clear of All Liens, Claims and Encumbrances; (IV) Waiving Compliance with Applicable State Laws and Approving Dispute Resolution Procedures; (V) Approving Procedures to Conduct Sales in Additional Closing Stores; and (VI) Granting Related Relief [Docket No. 109] (the “Interim Store Closing Procedures Order”) approving the Store Closing Procedures Motion on an Interim Basis. The Store Closing Procedures Motion was approved on a final basis on June 9, 2020 through the Court’s entry of the Final Order Granting Debtors’ Emergency Motion for Entry of Interim and Final Orders (I) Authorizing the Debtors to Assume the Consulting Agreement; (II) Approving Procedures for Store Closing Sales; (III) Approving the Sale of Store Closure Assets Free and Clear of All Liens, Claims and Encumbrances; (IV) Waiving Compliance with Applicable State Laws and Approving Dispute Resolution Procedures; (V) Approving Procedures to Conduct Sales in Additional Closing Stores; and (VI) Granting Related Relief [Docket No. 197] (the “Final Store Closing Procedures Order”).

Store Closing Sales commenced during the first week of June 2020. Store Closing Sales at the Wave 1 Stores were completed on or prior to July 31, 2020. On July 16, 2020, the Debtors filed the Debtors’ Notice of Additional Closing Stores (Wave 2) [Docket No. 462] (the “Wave 2 Notice”) notifying parties-in-interest that the Debtors would commence Store Closing Sales at an additional sixty-six (66) stores (the “Wave 2 Stores”). Store Closing Sales at Wave 2 Stores commenced during the week of July 20, 2020. The Store Closing Sales at the Wave 2 Stores have all been completed. The Debtors filed the Debtors Notice of Additional Closing Stores (Wave 3) [Docket No. 598] and a related notice of rejection to reject the leases associated with the affected stores [Docket No. 599] but subsequently opted to withdraw both notices [Docket Nos. 934 and 935] and do not currently intend to pursue a third wave of store closures.

Lease Rejections

After completing the Store Closing Sales, the Debtors rejected each of the leases associated with the Wave 1 Stores and the Wave 2 Stores. On July 8, 2020, the Debtors filed the Debtors’ Motion for Entry of an Order (I) Authorizing and Approving Procedures to Reject or Assume Executory Contracts and Unexpired Leases, (II) Abandoning Property at Rejected Premises, and (III) Granting Related Relief [Docket No. 415] (the “Lease Procedures Motion”) requesting, inter alia, approval of certain procedures for assuming and rejecting unexpired leases and executory contracts. On August 5, 2020, the Court entered the Order (I) Authorizing and Approving Procedures to Reject or Assume Executory Contracts and Unexpired Leases, (II) Abandoning Property at Rejected Premises, and (III) Granting Related Relief [Docket No. 558] (the “Rejection Procedures Order”).

The Debtors have filed three omnibus lease rejection motions [Docket Nos. 352, 477, 480] requesting authority to reject the leases associated with all of the Wave 1 Stores. The Debtors have also filed eight lease and/or contract rejection notices pursuant to the Rejection Procedures Order, with respect to all of the Wave 2 Stores and other miscellaneous unexpired leases and executory contracts. While the Debtors may identify additional leases to be rejected, the Debtors anticipate that the majority of the leases for their remaining stores will be assumed through the Plan.

H. Lease Negotiations

Prior to the Petition Date, the Debtors retained A&G as their real estate consultant and advisor to, among other things, consult with the Debtors regarding the Debtors’ goals and objectives with respect to their leases and to negotiate with the Debtors’ landlords in obtaining lease modifications and related relief.

On June 2, 2029, the Debtors filed an application to retain A&G as its real estate consultant and advisor [Docket No. 139] which was approved by the Court’s order entered on July 9, 2020 [Docket No. 419] (the “A&G Retention Order”). Pursuant to the terms of the A&G Retention Order, A&G has been assisting the Debtors in their negotiations with landlords. Since the Petition Date, the Debtors have entered into numerous lease amendments to address, among other things, modifications to the length of existing lease terms, rent reductions, rent abatement, including with respect to the COVID-related store closings during the prepetition period. Through their lease negotiations, the Debtors were able to achieve relief in many instances which resulted in the Debtors’ decision to keep certain stores that would have otherwise been included as part of the Store Closing Sales.

The Plan Supplement will contain a Schedule of Assumed Contracts and Leases (as may be subsequently amended or supplemented) which will include the unexpired leases and executory contracts that the Debtors will seek to assume, including any leases that have been amended or modified since the Petition Date.

I. Contingent Liquidation Motion

The DIP Revolving Facility Financing Order provided that upon the occurrence of any of the following circumstances the Debtors would be required to commence a Full-Chain Liquidation to liquidate the inventory in all of their stores (each a “Full-Chain Liquidation Trigger” and collectively, the “Full-Chain Liquidation Triggers”): (a) the Debtors’ Total Liquidity drops below $20,000,000 at any time, (b) the Debtors fail to satisfy timely the Plan/APA Milestone Date (including the requirement that the Debtors obtain confirmation of a plan not later than 70 days after the plan is filed), or (c) the Debtors fail to consummate timely any RE Funding (if required). Certain of the DIP Revolving Facility Milestones required that within 42 days of the Petition Date the Debtors must seek and obtain approval of an order authorizing procedures that would be followed upon the occurrence of one or more of the Full-Chain Liquidation Triggers (the “Contingent Sale Motion Milestones”).

To comply with the Contingent Sale Motion Milestones, on June 3, 2020, the Debtors filed the Debtors’ Motion for Entry of an Order Authorizing Contingent Sale Procedures in Adherence to the DIP Financing Milestones [Docket No. 152] (the “Contingent Liquidation Motion”). As more fully described in the Contingent Liquidation Motion, through the motion the Debtors requested authority to apply the same general procedures approved in the Final Store Closing Sales Order to conduct a Full-Chain Liquidation upon the occurrence of a Full-Chain Liquidation Trigger. On July 8, 2020, the Court entered its order approving the relief requested in the Contingent Liquidation Motion [Docket No. 413] (the “Contingent Liquidation Order”).

To date, the Debtors remain in compliance with the terms of the DIP Revolving Facility, including the Contingent Sale Motion Milestones. The Debtors anticipate that they will continue to remain in compliance with the Contingent Sale Milestones as long as the Plan is Confirmed. The Debtors’ failure to obtain confirmation of the Plan within 70 days of the Plan filing date, however, would constitute a Full-Chain Liquidation Trigger. Absent an agreement by the DIP Revolving Facility Agent to waive such a Full-Chain Liquidation Trigger, the Debtors would be required to commence the Full-Chain Liquidation of all of their stores within seven days of the occurrence of a Full-Chain Liquidation Trigger.

J. Motion to Appoint an Equity Committee

On June 12, 2020, Kevin Barnes (“Mr. Barnes”), acting pro se in his capacity as a holder of common stock in Tuesday Morning Corporation, filed a motion seeking the appointment of an official committee of equity security holders under Bankruptcy Code § 1102 [Docket No. 229] (the “Barnes Equity Committee Motion”). Joinders to the Barnes Equity Committee Motion were filed by Delta Value Group Investment Partnership, LP [Docket No. 289] (“DVG”) and Daniel Bretthauer [Docket No. 360] (collectively, the “Joinders”). On June 23, 2020, Jeremy Blum (“Mr. Blum”), acting pro se in his capacity as a holder of common stock in Tuesday Morning Corporation, also filed a letter requesting the appointment of an equity committee [Docket No. 373] (the “Blum Equity Committee Motion” and together with the Barnes Equity Committee Motion, the “Equity Committee Motions”). A hearing on the Equity Committee Motions and the Joinders was set for July 8, 2020.

On July 6, 2020, the Debtors [Docket No. 389] and the Creditors Committee [398] each filed an objection to the Equity Committee Motions. The DIP Revolving Facility Agent filed a joinder to the Debtors’ objection [Docket No. 400].

After hearing arguments and evidence at the July 8, 2020 hearing on the Equity Committee Motions, the Court denied the Equity Committee Motions [Docket No. 455] without prejudice.

On July 10, 2020, Mr. Blum filed a letter with the court requesting the appointment of an ad hoc equity committee with a budget of $300,000 for payment of the ad hoc committee’s attorneys’ fees ostensibly to be funded by the Debtors estates [Docket No. 433] (the “Ad Hoc Equity Committee Motion”). A hearing on the Ad Hoc Committee Motion was initially set for August 19, 2020. On August 17, 2020, Mr. Blum filed an amended motion modifying his request to approve the appointment of an ad hoc committee to make it a request to appoint an official equity committee [Docket No. 616] (the “Second Equity Committee Motion”). Because the relief requested in the Second Equity Committee Motion was substantively different than the relief requested in the Ad Hoc Equity Committee Motion, the Court set the hearing on the Second Equity Committee Motion to September 8, 2020. Several additional joinders to the Second Equity Committee Motion were filed. The Debtors [Docket No. 784] and the DIP Revolving Facility Agent [Docket No. 788] each filed an objection to the Second Equity Committee Motion. After hearing evidence and argument in connection with the Second Equity Committee Motion at the September 8, 2020 hearing, the Court took the matter under advisement. The Court issued an oral ruling on the Second Equity Committee Motion on September 14, 2020 denying the Second Equity Committee Motion. However, on September 18, 2020, the Court entered a sua sponte order directing the appointment of a committee of equity security holders [Docket No. 892].

On October 5, 2020, the Office of the United States Trustee filed a notice of Appointment of the Official Committee of Equity Security Holders [Docket No. 1151]. The Equity Committee has retained Pachulski Stang Ziehl & Jones LLP and Winstead PC as its legal counsel in connection with the Chapter 11 Cases.

K. Motion to Sell Phoenix Distribution Center Equipment

On August 26, 2020, the Debtors filed a motion to sell substantially all of the equipment at the Phoenix distribution center [Docket No. 664] (the “Phoenix Equipment Sale Motion”). Prior to filing the Phoenix Equipment Sale Motion, the Debtors solicited bids from a number of potentially interested parties and determined that the bid from DC Liquidators, LLC (“DC”) was the highest and best bid. Through the Phoenix Equipment Sale Motion, the Debtors disclosed that they intended to reject the Phoenix distribution center lease as of October 31, 2020 unless DC had failed to complete the disassembly and removal of the Phoenix distribution center equipment by October 31, 2020. The monthly rent obligation is $235,000. The agreement between the Debtors’ and DC provided for a penalty of $2,500 per day for each day after October 31, 2020 that DC failed to complete the disassembly and removal work. The Creditors Committee [Docket No. 702] and the Debtors’ landlord for the Phoenix distribution center lease [Docket No. 707] each filed limited objections to the Phoenix Equipment Sale Motion. The key objection raised by each party related to DC’s deadline for completing the removal work and each party requested that the agreement with DC include an October 31, 2020 “drop dead” date for completing the disassembly and removal work. The Debtors advocated for approval of the Phoenix Equipment Sale Motion without the drop-dead date on the basis that no other prospective buyer had offered a higher purchase price and each of the other prospective buyers would require more time to disassemble and remove the equipment beyond October 31, 2020. The Court held a hearing on the Phoenix Equipment Sale Motion on August 28, 2020 and at the request of the Debtors and the landlord continued the hearing to August 31, 2020 to allow the Debtors and the landlord to negotiate a resolution of various issues surrounding rejection of the Phoenix distribution center lease. The parties were unable to reach an agreement prior to August 31, 2020. The Court approved the Phoenix Equipment Sale Motion at the August 31, 2020 hearing over the objection of the Creditors Committee and the landlord [Docket No. 740]. The Debtors filed a notice of their intent to reject the Phoenix distribution center lease on October 12, 2020 [Docket No. 1252] with a proposed effective date of October 31, 2020. No objection to the rejection notice was filed and on October 30, 2020, the Court entered an order approving the rejection of the Phoenix Distribution Center Lease effective as of October 31, 2020 [Docket No. 1466].

L. Sale Process, Bidding Procedures, and Dual Sale/Plan Process

The Debtors and their professionals, including Miller Buckfire, engaged in an extensive marketing process to solicit offers from prospective buyers interested in purchasing substantially all of the Debtors’ assets, providing exit financing to the Debtors, or otherwise providing financial support for the Debtors’ emergence from Chapter 11. As part of the marketing process, the Debtors entered into non-disclosure agreements with, and circulated a confidential information memorandum to, 40 prospective buyers who have been granted access to a data room, provided substantial follow-up information to facilitate due diligence requests, and held management presentations with certain of the potential acquirers. Due to these efforts, the Debtors received certain indications of interest and non-binding letters of intent from a number of parties.

The Debtors, in consultation with their professionals, ultimately concluded that filing a plan of reorganization and disclosure statement while at the same time conducting an open marketing and sale process was the best way to maximize value for the Debtors and their estates under the circumstances. To that end, on September 23, 2020, contemporaneously with the filing of their initial plan and disclosure statement, the Debtors filed the Debtors’ Expedited Motion Pursuant to Bankruptcy Code §§ 105(a), 363, and 365, and Bankruptcy Rules 2002, 6004, and 6006, for Entry of an Order (A) Approving Sale and Bidding Procedures in Connection with a Potential Sale of Assets of the Debtors, (B) Authorizing the Sale of Assets Free and Clear of All Liens, Claims, Encumbrances, and Other Interests, and (C) Granting Related Relief [Docket No. 948] (the “Bidding Procedures Motion”). The Debtors opted to pursue the concurrent prosecution of a plan and a court-approved process for bidding and potential sale of substantially all of their assets to allow the Debtors to assess the relative benefits of a plan of reorganization or a sale.

The Creditors Committee and certain of the Debtors’ landlords filed objections to the Bidding Procedures Motion. Although the Debtors were able to consensually resolve most of the objections raised by the Creditors Committee and the landlords, the Debtors were not able to resolve all objections. On September 29, 2020, the Court conducted a contested hearing on the Bidding Procedures Motion and entered an order approving the bidding procedures [Docket No. 1090] (the “Bidding Procedures Order”).

The Bidding Procedures Order established the following deadlines: (1) October 1, 2020 was the deadline for the Debtors to file cure notices for executory contracts and unexpired leases, which the Debtors filed at Docket Nos. 1107, 1108, 1201 (the “Cure Notices”); (2) October 14, 2020, was the deadline for lessors and contract counterparties to file objections to the proposed cure amounts in the Cure Notices; (3) October 19, 2020, was the deadline for qualified bidders to submit bids to acquire some or all of the Debtors assets; (4) October 21, 2020, was the date for holding an auction; (5) October 26, 2020 at 12 p.m. (Central Time) was the deadline for the Debtors to file a notice with the Court disclosing whether the Debtors intended to pursue a sale of substantially all of their assets or to pursue confirmation of a plan; (6) October 28, 2020 at 12 p.m. (Central Time) was the deadline for the Consultation Parties (as defined in the Bidding Procedures Order) to file objections to the sale or disclosure statement and for landlords to file objections to adequate assurance (if the Debtors pursued a sale); and (7) October 29, 2020 was the hearing date to consider either a sale pursuant to the Bidding Procedures Motion or approval of the Debtors’ disclosure statement.

In furtherance of the Debtors’ dual-track sale and plan process, on October 1, 2020, the Debtors filed the Debtors Emergency Application to Approve the Employment and Retention of Piper Sandler & Co. (“Piper Sandler”) as Debtors’ Placement Agent Effective as of the Application Date [Docket No. 1104] (the “Piper Application”). Concurrently with the sale process, the Debtors, working with Piper Sandler and Miller Buckfire, have engaged in discussions with various parties regarding the possibility of raising additional capital through a sale of debt and/or equity securities to fund payments to holders of General Unsecured Claims.

On October 26, 2020, the Debtors filed their Notice of Intention to Pursue Plan Confirmation and Notice of Rescheduled Hearing Date to Consider Approval of the Debtors’ Disclosure Statement and Related Deadlines [Docket No. 1436] (the “Pivot Notice”) and a Notice of Rescheduled Hearing [Docket No. 1439]. In addition to informing parties in interest that the Debtors would be pursuing a plan instead of a sale of substantially all of their assets, the Pivot Notice and Notice of Rescheduled Hearing continued the October 29, 2020 hearing to consider approval of a disclosure statement to November 9, 2020 and included a number of updated deadlines relating to the November 9, 2020 hearing. Prior to filing the Pivot Notice, the Debtors filed a motion seeking approval of the Disclosure Statement and solicitation procedures for soliciting acceptances of the Plan [Docket No. 1413] (the “Solicitation Procedures Motion”). The Solicitation Procedures Motion was set for hearing on November 9, 2020. The foregoing hearing deadlines have been moved to November 12, 2020.

ARTICLE VII.
DESCRIPTION OF THE PLAN

A. Introduction

A summary of the principal provisions of the Plan and the treatment of Classes of Allowed Claims and Allowed Interests is outlined below. The summary is entirely qualified by the Plan. This Disclosure Statement is only a summary of the terms of the Plan.

B. Classification in General

The Plan constitutes a separate Plan proposed by each Debtor. Except for the Claims addressed in Article II of the Plan, all Claims and Interests are classified in the Classes set forth below and in Article III of the Plan in accordance with Bankruptcy Code §§ 1122 and 1123(a)(1). A Claim or an Interest is classified in a particular Class only to the extent that the Claim or Interest qualifies within the description of that Class and is classified in other Classes to the extent that any portion of the Claim or Interest qualifies within the description of such other Classes. A Claim or an Interest also is classified in a particular Class for the purpose of receiving distributions under the Plan only to the extent that such Claim or Interest is an Allowed Claim or Allowed Interest in that Class and has not been paid, released, or otherwise satisfied prior to the Effective Date.

C. Grouping of Debtors for Convenience Only

D. Designation of Claims and Interests/Impairment

The following are the Classes of Claims and Interests designated under the Plan. In accordance with Bankruptcy Code § 1123(a)(1) of the Bankruptcy Code, Administrative Claims, Professional Compensation Claims, and Priority Unsecured Tax Claims are not classified. No distribution shall be made on account of any Claim that is not Allowed.

Classes of Claims against and Interests in the Debtors are designated as follows:

Class – 1 Other Priority Unsecured Claims

Class - 2 Other Secured Claims

Class - 3 Secured Tax Claims

Class - 4 Existing First Lien Credit Facility Claims

Class - 5 General Unsecured Claims

Class - 6 Convenience Claims

Class - 7 Intercompany Claims

Class - 8 Tuesday Morning Corporation Interests

Class - 9 Intercompany Interests

Claims in Classes 1, 2, 3, 4, 5, 6, and 8 are Impaired and will be entitled to vote on the Plan.

Claims in Class 7 may be (i) Unimpaired, in which case the Holders of Claims in Class 7 will not be entitled to vote, or (ii) Impaired and deemed to reject the Plan, in which case the Holders of Claims in Class 7 will also not be entitled to vote.

Interests in Class 9 are Unimpaired under the Plan and will be reinstated. Pursuant to Bankruptcy Code § 1126(f), holders of Claims in Class 9 are conclusively presumed to have accepted the Plan and are therefore not entitled to vote to accept or reject the Plan.

E. Allowance and Treatment of Administrative Claims and Priority Claims

Administrative Claims

DIP Revolving Facility Claims

DIP Real Estate Facility Claims

Professional Compensation Claims

(a)

Final Fee Applications and Payment of Professional Compensation Claims

(b)

Post-Effective Date Fees and Expenses

Except as otherwise specifically provided in the Plan, from and after the Effective Date, the Debtors shall, in the ordinary course of business and without any further notice to or action, order, or approval of the Bankruptcy Court, pay in Cash the reasonable and documented legal, professional, or other fees and expenses related to implementation of the Plan and Consummation incurred by the Reorganized Debtors. Upon the Effective Date, any requirement that Professionals comply with Bankruptcy Code §§ 327 through 331, 363, and 1103 in seeking retention or compensation for services rendered after such date shall terminate, and the Reorganized Debtors may employ and pay any Professional in the ordinary course of business without any further notice to or action, order, or approval of the Bankruptcy Court.

Priority Unsecured Tax Claims

Except to the extent that a holder of an Allowed Priority Unsecured Tax Claim agrees to a less favorable treatment, in full and final satisfaction, settlement, release, and discharge of and in exchange for each Allowed Priority Unsecured Tax Claim, each holder of such Allowed Priority Unsecured Tax Claim shall be treated in accordance with the terms set forth in Bankruptcy Code § 1129(a)(9)(C); provided, however, that the Reorganized Debtors shall have the right to pay any Allowed Priority Unsecured Tax Claim, or the remaining balance of any such Claim, in full in Cash at any time on or after the Effective Date, without premium or penalty.

F. Allowance and Treatment of Classified Claims and Interests

It is not possible to predict precisely the total amount of Claims in a particular Class or the distributions that will ultimately be paid to holders of Claims in the different Classes because of the variables involved in the calculations (including the results of the Claims objection process).

Allowance and Treatment of Other Priority Unsecured Claims (Class-1)

This Class includes any Allowed Unsecured Claim entitled to priority status pursuant to Bankruptcy Code § 507(a) of the Bankruptcy Code that is not (a) an Administrative Claim, (b) a Professional Compensation Claim, or (c) a Priority Unsecured Tax Claim. For example, certain obligations owed to the Debtors’ employees for wages, salaries, benefits, and reimbursable expenses that accrued during the 180 days prior to the Petition Date may be entitled to priority treatment under Bankruptcy Code § 507(a)(4) or (5) and if so would be treated as Claims in Class 1.

Allowance and Treatment of Other Secured Claims (Class - 2)

This Class includes any Allowed Secured Claim that is not a DIP Revolving Facility Claim, DIP Real Estate Facility Claim, Secured Tax Claim, Existing First Lien Credit Facility Claim, or an Existing Second Lien Claim. Other Secured Claims shall not include any such Claims secured by Liens that are avoidable, unperfected, subject to subordination, or otherwise unenforceable.

Allowance and Treatment of Secured Tax Claims (Class - 3)

This Class includes any Allowed Secured Claim for taxes held by a Governmental Unit, including cities, counties, school districts, and hospital districts, (a) entitled by statute to assess taxes based on the value or use of real and personal property and to obtain an encumbrance against such property to secure payment of such taxes or (b) entitled to obtain an encumbrance on property to secure payment of any tax claim specified in Bankruptcy Code § 507(a)(8). Secured Tax Claims shall not include any such Claims secured by liens/security interests that are avoidable, unperfected, subject to subordination, or otherwise unenforceable.

At the option of the applicable Debtor, each holder of an Allowed Secured Tax Claim shall receive, on or after the Effective Date, except to the extent that a holder of an Allowed Secured Tax Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Secured Tax Claim, the following: (i) Payment in full in Cash of its Allowed Class 3 Claim; (ii) The collateral securing its Allowed Class 3 Claim; provided, however, any collateral remaining after satisfaction of such Allowed Class 3 Claim shall revest in the applicable Reorganized Debtor pursuant to the Plan; or (iii) Such other treatment consistent with the requirements of Bankruptcy Code § 1129(a)(9). The estimated total amount of Allowed Class 3 Claims is $0 as the Debtors have generally been paying Tax Claims as they come due in the ordinary course of business.

Allowance and Treatment of Existing First Lien Credit Facility Claims (Class - 4)

This Class includes any Allowed Claim held by any of the Existing First Lien Lenders arising under or relating to the Existing First Lien Credit Documents, including any and all fees, interest paid in kind, and accrued but unpaid interest and fees arising under the Existing First Lien Credit Documents, minus any portion of the Existing First Lien Credit Facility Claims that have been repaid or rolled into the Administrative Expense Claims pursuant to the DIP Orders or otherwise paid during the case.

Each holder of an Allowed Existing First Lien Credit Facility Claim shall receive, except to the extent that a holder of an Allowed Existing First Lien Credit Facility Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Allowed Existing First Lien Credit Facility Claim, Payment in Full, in Cash, of its Allowed Class 4 Claim plus any and all fees, interest (both pre and post-Petition Date), and reimbursement of expenses, and any other amounts owed or arising under the Existing First Lien Credit Documents through the time of Payment in Full, in three equal installments to be paid on the 30th, 60th, and 90th days after the Effective Date (each a “Payment Date”). If a Payment Date does not fall on a Business Day, such Payment Date shall be extended to the next Business Day. All liens and security interests granted to secure such Allowed Existing First Lien Credit Facility Claims shall be retained until such payments shall have been made. Further, in the event that the Existing First Lien Agent is the agent for the New ABL Credit Facility, it shall retain the lines and security interests securing the Existing First Lien Credit Facility Claims after such payments are made and have such liens and security interests secure the New ABL Credit Facility. The estimated total amount of Allowed Class 4 Claims is $100,000.

Allowance and Treatment of General Unsecured Claims (Class - 5)

This Class includes any Allowed Unsecured Claim that is not: (a) an Administrative Claim; (b) a Professional Compensation Claim; (c) a Priority Unsecured Tax Claim; (d) an Other Priority Unsecured Claim; or (e) an Intercompany Claim.

On the Effective Date, each holder of a General Unsecured Claim shall receive, except to the extent that a holder of an Allowed General Unsecured Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Existing General Unsecured Claim, its Pro Rata share of (i) the General Unsecured Cash Fund, (ii) the General Unsecured Notes, and (iii) the proceeds of the Rights Offering. The estimated total amount of Allowed Class 5 Claims is $116,700,000.

If Class 5 votes in favor of the Plan, the Plan provides for the following additional treatment of Allowed General Unsecured Claims: (i) the Creditors Committee will appoint the Indenture Trustee; (ii) an individual selected by the Creditors Committee, with approval of the Reorganized Debtors, not to be unreasonably withheld, will serve in an observer role to the New Board, including all subcommittees, special committees, or other sub-groups established by the New Board, and shall receive all information provided to the members of the New Board; and (iii) an individual selected by the Creditors Committee, with approval of the Reorganized Debtors, not to be unreasonably withheld, shall have the primary, but not exclusive, obligation to reconcile General Unsecured Claims.

If Class 5 does not vote in favor of the Plan, the Plan provides for the following treatment of Allowed General Unsecured Claims: (i) the Debtors, or Reorganized Debtors, as applicable, will appoint the Indenture Trustee; (ii) the Creditors Committee will not be authorized to appoint an individual to serve in an observer role to the New Board; and (iii) the Reorganized Debtors, or in the event Class 8 votes in favor of the Plan, the Reorganized Debtors and an individual selected by the Equity Committee, with approval of the Reorganized Debtors, not to be unreasonably withheld, shall share primary, but not exclusive, responsibility for reconciling General Unsecured Claims and Interests.

Allowance and Treatment of Convenience Claims (Class – 6)

This Class includes (a) Allowed General Unsecured Claims with a Face Amount equal to or less than $25,000 except to the extent the holder of an Allowed General Unsecured Claim with a Face Amount equal to or less than $25,000, has delivered a qualifying Convenience Claim Opt Out Notice and opted to have such holder’s claim treated as a Class 5 General Unsecured Claim or (b) an Allowed General Unsecured Claim with a Face Amount greater than $25,000 but less than $35,000, to the extent the holder of an Allowed General Unsecured Claim with a Face Amount greater than $25,000 but less than $35,000 has exercised the Convenience Claim Opt In Right and opted to have such holder’s claim reduced to $25,000 and treated as a Class 6 Convenience Claim.

Except to the extent that a holder of an Allowed Convenience Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Convenience Claim, each holder of an Allowed Class 6 Claim shall receive the Convenience Claim Distribution, which shall be an amount in Cash equal to 90% of such Convenience Claim. The estimated total amount of Allowed Class 6 Claims is $8,300,000, although the amount will vary depending on the number of Claim holders that exercise their rights to opt in or out of Class 6.

Allowance and Treatment of Intercompany Claims (Class - 7)

This Class includes any Claim held by a Debtor or an Affiliate against a Debtor.

On the Effective Date, Class 7 Claims shall be, at the option of the Debtors, with the consent of the Required Investor Parties, either Reinstated or cancelled and released without any distribution.

Allowance and Treatment of Tuesday Morning Corporation Interests (Class - 8)

This Class includes any Interest in Tuesday Morning Corporation that existed immediately before the Effective Date.

On the Rights Offering Distribution Date, each Class 8 Interests shall be exchanged for (1) one share of the New Common Stock and (2) a Share Purchase Right entitling the holder to purchase a Pro Rata portion of the Eligible Holders Rights Offering Common Stock. On the Effective Date, Tuesday Morning Corporation Interests consisting of options, warrants, or other rights, contractual or otherwise, to acquire shares of the Existing Common Stock shall be Reinstated subject to dilution as a result of the issuance of the Rights Offering Common Stock and the issuance of equity securities on and after the Effective Date pursuant to the Management Incentive Plan.

Allowance and Treatment of Intercompany Interests (Class - 9)

This Class includes any Interest in a Debtor, other than Tuesday Morning Corporation, held by another Debtor or by a non-debtor Affiliate of a Debtor.

Intercompany Interests shall receive no distribution and shall be Reinstated for administrative purposes only at the election of the Reorganized Debtors.

G. Procedures for Resolving Contingent, Unliquidated, and Disputed Claims

Claims Administration Responsibilities

After the Effective Date, the Reorganized Debtors, together with the applicable representative selected by the Creditors Committee or the Equity Committee, if applicable, shall have the primary authority to: (1) File, withdraw, or litigate to judgment, objections to Claims or Interests; (2) settle or compromise any Disputed Claim by filing a notice of such settlement or compromise with the Bankruptcy Court without any further notice to or action, order, or approval by the Bankruptcy Court; and (3) administer and adjust the Claims Register to reflect any such settlements or compromises by filing a notice of such adjustment to the Claims Register with the Bankruptcy Court without any further notice to or action, order, or approval by the Bankruptcy Court. After the Effective Date, each of the Reorganized Debtors shall have and retain any and all rights and defenses such Debtor had with respect to any Interests or Claims immediately prior to the Effective Date.

Estimation of Claims and Interests

Before or after the Effective Date, the Debtors or the Reorganized Debtors, as applicable, may (but are not required to) at any time request that the Bankruptcy Court estimate any Disputed Claim or Disputed Interest that is contingent or unliquidated pursuant to Bankruptcy Code § 502(c) for any reason, regardless of whether any party previously has objected to such Claim or Interest or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court shall retain jurisdiction to estimate any such Claim or Interest, including during the litigation of any objection to any Claim or Interest or during the appeal relating to such objection. Notwithstanding any provision otherwise in the Plan, a Claim or Interest that has been expunged from the Claims Register, but that either is subject to appeal or has not been the subject of a Final Order, shall be deemed to be estimated at zero dollars unless otherwise ordered by the Bankruptcy Court. In the event that the Bankruptcy Court estimates any contingent or unliquidated Claim or Interest, that estimated amount shall constitute a maximum limitation on such Claim or Interest for all purposes under the Plan (including for purposes of distributions), and the relevant Reorganized Debtor may elect to pursue any supplemental proceedings to object to any ultimate distribution on such Claim or Interest.

Adjustment to Claims or Interests without Objection

Time to File Objections to Claims

Disallowance of Claims or Interests

Except as otherwise specifically provided in the Plan, any Claims or Interests held by Entities from which property is recoverable under Bankruptcy Code §§ 542, 543, 550, or 553, or that is a transferee of a transfer avoidable under Bankruptcy Code §§ 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a), shall be deemed disallowed pursuant to Bankruptcy Code § 502(d), and holders of such Claims or Interests may not receive any distributions on account of such Claims until such time as any objection to those Claims or Interests have been settled or a Bankruptcy Court order with respect thereto has been entered.

Amendment to Claims or Interests

No Distributions Pending Allowance

If an objection to a Claim or Interest or portion thereof is Filed as set forth in Article VII.D of the Plan, no payment or distribution provided under the Plan shall be made on account of such Claim or Interest or portion thereof unless and until such Disputed Claim or Interest becomes an Allowed Claim or Interest.

Distributions After Allowance

To the extent that a Disputed Claim or Interest ultimately becomes an Allowed Claim or Allowed Interest, distributions (if any) shall be made to the holder of such Allowed Claim or Allowed Interest (as applicable) in accordance with the provisions of the Plan. As soon as practicable after the date that the order or judgment of the Bankruptcy Court allowing any Disputed Claim or Disputed Interest becomes a Final Order, the Disbursing Agent, or the Indenture Trustee, as applicable, shall provide to the holder of such Claim or Interest the distribution (if any) to which such holder is entitled under the Plan as of the Effective Date, without any interest, dividends, or accruals to be paid on account of such Claim or Interest unless otherwise required under the Plan or applicable bankruptcy law.

H. Treatment of Executory Contracts and Unexpired Leases

Assumption and Rejection of Executory Contracts Under the Plan

On the Effective Date, except as otherwise provided herein, all Executory Contracts or Unexpired Leases, not previously assumed or rejected pursuant to an order of the Bankruptcy Court, will be deemed assumed, in accordance with the provisions and requirements of Bankruptcy Code §§ 365 and 1123, other than those Executory Contracts or Unexpired Leases that: (1) previously were assumed or rejected by the Debtors; (2) are specifically designated on the Schedule of Assumed Contracts and Leases Filed and served prior to commencement of the Confirmation Hearing; (3) are subject to a motion to reject Executory Contracts or Unexpired Leases that is pending on the Confirmation Date; (4) are specifically designated on the Schedule of Rejected Contracts and Leases served prior to the commencement of the Confirmation Hearing; or (5) are the subject of Article IV.O of the Plan.

Entry of the Confirmation Order by the Bankruptcy Court shall constitute an order approving the assumptions or rejections of the Executory Contracts and Unexpired Leases set forth in the Plan, the Schedule of Assumed Contracts and Leases, the Schedule of Rejected Contracts and Leases, pursuant to Bankruptcy Code §§ 365(a) and 1123. Throughout the Chapter 11 Cases, the Debtors have been engaged in negotiations with their landlords. In connection with those negotiations, the Debtors and certain landlords agreed to the terms of amendments for certain applicable Leases. The Schedule of Assumed Contracts and Leases will identify the Leases to be assumed, as modified by such negotiations.

In the event that an Executory Contract with a Governmental Unit is subject to an assignment by the Debtors, such assignment shall require the consent of the United States, or other applicable governmental entity, to the extent required by applicable non-bankruptcy law.

Indemnification Obligations

All indemnification provisions, consistent with applicable law, currently in place (whether in the by-laws, certificates of incorporation or formation, limited liability company agreements, partnership agreements, other organizational documents, board resolutions, indemnification agreements, employment contracts, or otherwise) for the current directors, officers, managers, employees, attorneys, accountants, investment bankers, and other professionals of the Debtors, as applicable, shall be reinstated and remain intact, irrevocable, and shall survive the Effective Date on terms no less favorable to such current directors, officers, managers, employees, attorneys, accountants, investment bankers, and other professionals of the Debtors than the indemnification provisions in place prior to the Effective Date.

Claims Based on Rejection of Executory Contracts or Unexpired Leases

For holders of Claims for rejection damages relating to the rejection of Executory Contracts or Unexpired Leases, the Bar Date is the later to occur of (i) August 28, 2020 or (ii) thirty (30) days after the date on which an Order approving the rejection of such Executory Contract or Unexpired Lease has been entered. Unless otherwise provided by a Final Order of the Bankruptcy Court, all Proofs of Claim with respect to Claims arising from the rejection of Executory Contracts or Unexpired Leases, pursuant to the Plan or the Confirmation Order, if any, must be Filed with the Bankruptcy Court within 30 days after the later of (1) the date of entry of an order of the Bankruptcy Court (including the Confirmation Order) approving such rejection, (2) the effective date of such rejection, (3) the Effective Date, or (4) the date after the Effective Date that the applicable Schedules are altered, amended, modified, or supplemented, but only with respect to any Executory Contract or Unexpired Lease thereby affected. Any Claims arising from the rejection of an Executory Contract or Unexpired Lease not Filed with the Bankruptcy Court within such time will be automatically disallowed, forever barred from assertion, and shall not be enforceable against the Debtors or the Reorganized Debtors, the Estates, or their property without the need for any objection by the Reorganized Debtors or further notice to, or action, order, or approval of the Bankruptcy Court or any other Entity, and any Claim arising out of the rejection of the Executory Contract or Unexpired Lease shall be deemed fully satisfied, released, and discharged, notwithstanding anything in the Schedules or a Proof of Claim to the contrary. All Allowed Claims arising from the rejection of the Debtors’ Executory Contracts or Unexpired Leases shall be classified as General Unsecured Claims and shall be treated in accordance with Article III.D.5 hereof.

Cure of Defaults for Assumed Executory Contracts and Unexpired Leases

Any monetary defaults under each Executory Contract and Unexpired Lease to be assumed pursuant to the Plan shall be satisfied, pursuant to Bankruptcy Code § 365(b)(1), by payment of the default amount in Cash on the Effective Date, subject to the limitation described below, or on such other terms as the parties to such Executory Contracts or Unexpired Leases may otherwise agree. In the event of a dispute regarding (1) the amount of any payments to cure such a default, (2) the ability of the Reorganized Debtors or any assignee to provide “adequate assurance of future performance” (within the meaning of Bankruptcy Code § 365) under the Executory Contract or Unexpired Lease to be assumed, or (3) any other matter pertaining to assumption, the cure payments required by Bankruptcy Code § 365(b)(1) shall be made following the entry of a Final Order or orders resolving the dispute and approving the assumption. Pursuant to the Approval Order, the Debtors shall provide for notices of proposed assumption and proposed cure amounts and for procedures for objecting thereto and resolution of disputes by the Bankruptcy Court.

Preexisting Obligations to the Debtors under Executory Contracts and Unexpired Leases

Insurance Policies

Modifications, Amendments, Supplements, Restatements, or Other Agreements

Reservation of Rights

Neither the exclusion nor inclusion of any Executory Contract or Unexpired Lease on the Schedule of Assumed Contracts and Leases or Schedule of Rejected Contracts and Leases, nor anything contained in the Plan, shall constitute an admission by the Debtors that any such contract or lease is in fact an Executory Contract or Unexpired Lease or that any of the Reorganized Debtors has any liability thereunder. If there is a dispute regarding whether a contract or lease is or was executory or unexpired at the time of assumption or rejection, the Debtors or the Reorganized Debtors, as applicable, shall have 30 days following entry of a Final Order resolving such dispute to alter the treatment of such contract or lease under the Plan.

Non-occurrence of Effective Date

10.

Contracts and Leases Entered into after the Petition Date

I. Plan Supplement

In addition to considering the Plan and Disclosure Statement, Creditors and Interest holders entitled to vote on the Plan should also carefully consider the Plan Supplement and the documents contained therein which will be filed with the Court no later than five days before the Voting Deadline or such later date as may be approved by the Bankruptcy Court. The Plan Supplement will include, without limitation, the following documents, as applicable (1) New Organizational Documents; (2) the New ABL Credit Facility Documents (3) the Sale Leaseback Documents ; (4) the Schedule of Assumed Contracts and Leases; (5) the Schedule of Rejected Contracts and Leases; (6) the Schedule of Retained Causes of Action; (7) the Payoff Letter; (8) the Backstop Agreement; (9) the bond indenture and related transaction documents for the General Unsecured Notes; and (10) a summary of the Management Incentive Plan and related documents and information. (each as may be altered, amended, modified, or supplemented from time to time in accordance with the terms of the Plan and in accordance with the Bankruptcy Code and Bankruptcy Rules).

ARTICLE VIII.
MEANS FOR EXECUTION AND IMPLEMENTATION OF THE PLAN

A. Corporate Existence

B. Reorganized Debtors

On the Effective Date, the New Board shall be established, and the Reorganized Debtors shall adopt the New Organizational Documents and the Management Incentive Plan, which may take the form of an amendment to the Tuesday Morning Corporation 2014 Long-Term Incentive Plan. For the avoidance of doubt, whether the Management Incentive Plan takes the form of an amendment to the Tuesday Morning Corporation 2014 Long-Term Incentive Plan or constitutes a free-standing plan, all of the Debtors’ obligations under the Tuesday Morning Corporation 2014 Long-Term Incentive Plan shall be assumed by the Reorganized Debtors on the Effective Date. The Reorganized Debtors shall have the authority to adopt any other agreements, documents, and instruments and to take any other actions contemplated under the Plan as necessary to consummate the Plan.

C. Restructuring Transactions

On the Effective Date, the applicable Debtors or the Reorganized Debtors shall enter into any transaction and shall take any actions as may be necessary or appropriate to effect any transaction described in, approved by, contemplated by, or necessary to effectuate the Plan, including the issuance of all securities, notes, instruments, certificates, and other documents required to be issued pursuant to the Plan, and one or more transactions consisting of inter-company mergers, consolidations, amalgamations, arrangements, continuances, restructurings, conversions, dissolutions, transfers, liquidations, or other corporate transactions, which transactions shall be described in the Plan Supplement. The actions to implement the Restructuring Transactions may include: (1) the execution and delivery of appropriate agreements or other documents of merger, amalgamation, consolidation, restructuring, conversion, disposition, transfer, arrangement, continuance, dissolution, sale, purchase, or liquidation containing terms that are consistent with the terms of the Plan and that satisfy the applicable requirements of applicable law and any other terms to which the applicable Entities may agree; (2) the execution and delivery of appropriate instruments of transfer, assignment, assumption, or delegation of any asset, property, right, liability, debt, or obligation on terms consistent with the terms of the Plan and having other terms for which the applicable parties agree; (3) the filing of appropriate certificates or articles of incorporation, reincorporation, merger, consolidation, conversion, amalgamation, arrangement, continuance, or dissolution pursuant to applicable state law; and (4) all other actions that the applicable Entities determine to be necessary, including making filings or recordings that may be required by applicable law in connection with the Plan.

D. Tuesday Morning Corporation Interests

E. Sources of Plan Distributions

Distributions under the Plan shall be made with: (1) Cash on hand, including Cash from operations; and (2) proceeds of the Exit Financing.

Issuance of New Common Stock

The issuance of the New Common Stock, including the New Common Stock issuable to Eligible Offerees, the Rights Offering Common Stock and options, or other equity awards, if any, reserved for the Management Incentive Plan, by the Reorganized Debtors is authorized without the need for any further corporate action or without any further action by the holders of Claims or Interests. On the Effective Date, the Debtors or Reorganized Debtors, as applicable, shall issue all securities, notes, instruments, certificates, and other documents required to be issued on the Effective Date pursuant to the Plan.

New ABL Credit Facility

After conducting a fulsome marketing process with the help of their professionals, the Debtors have reached an agreement with the DIP Revolving Credit Facility Lenders with respect to the terms under which the DIP Revolving Credit Facility Lenders will provide the New ABL Credit Facility, which shall consist of a senior secured revolving asset-based lending facility in the amount of $110 million on the terms set forth in Exhibit 4 of the Disclosure Statement.

Sale Leaseback

After conducting an extensive marketing process, the Debtors, with the assistance of CBRE and their legal professionals, have entered into a purchase agreement with Rialto Real Estate Fund IV – Property LP, the Sale Leaseback Counterparty, pursuant to which the Debtors will sell their owned real estate for a $60,000,000 purchase price. Concurrently with the consummation of the sale, the Reorganized Debtors will enter into lease agreements under which certain of the Reorganized Debtors will lease the headquarters and warehouse facilities. The lease of the headquarters facility will be for a term of 10 years and the lease of the warehouse facilities will be for an initial term of 2.5 years with an option to extend the warehouse facilities lease for one additional year.

Rights Offering

In connection with the consummation of the Plan, the Debtors, or Reorganized Debtors, as applicable, shall commence the Rights Offering, which shall consist of (1) the Eligible Offeree Rights Offering pursuant to which Eligible Offerees will receive Share Purchase Rights to acquire shares of the Rights Offering Common Stock for an aggregate purchase price of $24 million in accordance with the Rights Offering Procedures and the Backstop Agreement and (2) the Section 4(a)(2) Rights Offering pursuant to which the Backstop Parties will receive Share Purchase Rights to acquire shares of the Rights Offering Common Stock for an aggregate purchase price of $16 million in accordance with the Rights Offering Procedures and the Backstop Agreement. The Backstop Parties will backstop the Rights Offering in accordance with the terms and conditions of the Backstop Agreement.

(a)

Exercise of Share Purchase Rights

Each Eligible Offeree will receive Share Purchase Rights entitling the holder to purchase its Pro Rata share of the Eligible Offeree Rights Offering Common Stock issuable in the Eligible Offeree Rights Offering. The exercise price per share of the Eligible Offeree Rights Offering Common Stock acquired pursuant to an Eligible Offeree Share Purchase Right shall be $1.10 per share (“Exercise Price”). If all Eligible Offeree Share Purchase Rights are exercised, this will result in aggregate proceeds to Reorganized Tuesday Morning of $24 million through the Eligible Offeree Rights Offering. The procedures for exercising the Eligible Offeree Share Purchase Rights are more fully described in the Rights Offering Procedures.

The Eligible Offeree Share Purchase Rights will be exercisable (1) if the “Aggregate Market Value” of the Tuesday Morning Common Stock equals or exceeds $32 million (the “Minimum Value”), from the Rights Offering Distribution Date through the 30^th day following the Effective Date, and (2) otherwise, for a period of 30 days commencing on the first day following the Reorganized Debtors’ public announcement that a Registration Statement covering the issuance of the shares issuable upon exercise of the Eligible Offeree Share Purchase Rights has been declared effective by the Securities and Exchange Commission. For the purposes, the Aggregate Market Value equals the number of shares of the Tuesday Morning Common Stock outstanding on the Effective Date multiplied by the Effective Time Closing Price. For these purposes, the “Effective Time Closing Price” shall be the volume weighted average sale price for shares of the Existing Common Stock for the [five] trading days ending prior to the date of determination as reported on Bloomberg, and if such price is not so reported, the price determined in the sole discretion of the Rights Agent as being a reasonable equivalent thereof.

(b)

Certain Limitations

The Share Purchase Rights shall not be transferable, assignable, or detachable other than in connection with the transfer of the corresponding Rights Offering Common Stock and other than in accordance with the Rights Offering Procedures.

(c)

Backstop Commitment

The Debtors have entered into the Backstop Commitment Letter with the Backstop Parties pursuant to which the Backstop Parties have agreed to certain key terms of the Backstop Agreement pursuant to which the Backstop Parties will provide the Backstop Commitment and backstop the Rights Offering. A copy of the Backstop Commitment Letter is attached as Exhibit 5 to the Disclosure Statement. Through the Backstop Agreement, the Backstop Parties will agree to exercise in full their Section 4(a)(2) Share Purchase Rights to acquire Section 4(a)(2) Rights Offering Common Stock for an aggregate purchase price of $16 million and for a per share price equal to the Exercise Price (the “Base Section 4(a)(2) Rights Offering Shares”). To the extent that holders of the Eligible Offeree Share Purchase Rights do not exercise all of the Eligible Offeree Share Purchase Rights on or prior to the expiration of the Eligible Offeree Rights Offering, the Backstop Parties have agreed, pursuant to the Backstop Commitment, as may be subsequently amended in the Backstop Agreement, to purchase all of the shares of the Rights Offering Common Stock underlying the unpurchased shares (the “Backstop Shares”) at a price per share equal to the Exercise Price. Pursuant to the Backstop Agreement, Tuesday Morning will agree to file a Registration Statement with the Securities and Exchange Commission covering the resale of all shares acquired by the Backstop Parties pursuant to the Backstop Agreement, which shall include the Base Section 4(a)(2) Rights Offering Shares, the Backstop Shares, the shares issuable as payment of the Backstop Fee, and the Backstop Warrants and the shares of New Common Stock underlying the Backstop Warrants. The Backstop Agreement, including the Exercise Price, the Backstop Fee, the Backstop Warrants and other compensation to be paid by the Debtors in connection with the Backstop Agreement shall be approved by the Bankruptcy Court pursuant to the Approval Order.

General Unsecured Notes

On the Effective Date, the General Unsecured Notes shall be authorized and the Reorganized Debtors shall be authorized to execute the applicable bond indenture and related documents and the Indenture Trustee shall be authorized to distribute the General Unsecured Notes in accordance with the procedures more fully described in the Plan and the Plan Supplement.

Vesting of Assets in the Reorganized Debtors

F. Cancellation of Certain Existing Agreements

Notwithstanding the foregoing, the Tuesday Morning Corporation Interests and Class 9 Interests will be reinstated on the Effective Date as set forth in Article III.D of the Plan.

G. Corporate Action

H. New Organizational Documents

On or immediately prior to the Effective Date, the New Organizational Documents shall be adopted as may be necessary to effectuate the transactions contemplated by the Plan. Each of the Reorganized Debtors will file its New Organizational Documents with the applicable Secretaries of State and/or other applicable authorities in its respective state of incorporation in accordance with the corporate laws of the respective state. The New Organizational Documents will prohibit the issuance of non-voting equity securities, to the extent required under Bankruptcy Code § 1123(a)(6). The New Organizational Documents will include provisions to restrict the ability of parties to acquire or dispose of shares in Reorganized Tuesday Morning if such acquisition or disposition would cause a change of ownership within the meaning of Section 382 of the Tax Code. After the Effective Date, the Reorganized Debtors may amend and restate their respective New Organizational Documents and other constituent documents as permitted by the terms thereof and applicable law. The New Organizational Documents shall be included in the Plan Supplement.

I. Directors and Officers of the Reorganized Debtors

As of the Effective Date, the terms of the current members of the board of directors of the Debtors shall expire, and the initial boards of directors, including the New Board, and the officers of each of the Reorganized Debtors shall be appointed in accordance with the respective New Organizational Documents. The New Board shall initially consist of 8 members, three of which will be appointed by the Backstop Parties with the remaining five members to be designated by the board of directors of Tuesday Morning Corporation. The members of the New Board will be identified in the Plan Supplement, to the extent known at the time of filing, and the Reorganized Debtors’ chief executive officer may be a member of the New Board. In accordance with Bankruptcy Code § 1129(a)(5), the identities and affiliations of the members of the New Board and any Person proposed to serve as an officer of the Reorganized Debtors shall be disclosed at or before the Confirmation Hearing, in each case to the extent the identity of such proposed director or officer is known at such time. To the extent any such director or officer of the Reorganized Debtors is an Insider, the Debtors also will disclose the nature of any compensation to be paid to such director or officer. Each such director and officer shall serve from and after the Effective Date pursuant to the terms of the New Organizational Documents and other constituent documents of the Reorganized Debtors.

J. Effectuating Documents; Further Transactions

On and after the Effective Date, the Reorganized Debtors, and the officers, managers, general partners, and/or members of the boards of directors thereof, are authorized to and may issue, execute, deliver, file, or record such contracts, securities, instruments, releases, and other agreements or documents and take such actions as may be necessary to effectuate, implement, and further evidence the terms and conditions of the Plan and the securities issued pursuant to the Plan in the name of and on behalf of the Reorganized Debtors, without the need for any approvals, authorization, or consents except for those expressly required pursuant to the Plan.

K. Bankruptcy Code § 1146 Exemption

To the fullest extent permitted by Bankruptcy Code § 1146(a), any transfers (whether from a Debtor to a Reorganized Debtor or to any other Person) of property under the Plan or pursuant to: (1) the issuance, distribution, transfer, or exchange of any debt, equity security, or other interest in the Debtors or the Reorganized Debtors; (2) the Restructuring Transactions; (3) the creation, modification, consolidation, termination, refinancing, and/or recording of any mortgage, deed of trust, or other security interest, or the securing of additional indebtedness by such or other means; (4) the making, assignment, or recording of any lease or sublease; (5) the grant of collateral as security for the New ABL Credit Facility or the General Unsecured Notes, as applicable; or (6) the making, delivery, or recording of any deed or other instrument of transfer under, in furtherance of, or in connection with, the Plan, including any deeds, bills of sale, assignments, or other instrument of transfer executed in connection with any transaction arising out of, contemplated by, or in any way related to the Plan, shall not be subject to any document recording tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, real estate transfer tax, mortgage recording tax, Uniform Commercial Code filing or recording fee, regulatory filing or recording fee, or other similar tax or governmental assessment, and upon entry of the Confirmation Order, the appropriate state or local governmental officials or agents shall forego the collection of any such tax or governmental assessment and accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax, recordation fee, or governmental assessment. All filing or recording officers (or any other Person with authority over any of the foregoing), wherever located and by whomever appointed, shall comply with the requirements of Bankruptcy Code § 1146(c), shall forego the collection of any such tax or governmental assessment, and shall accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax or governmental assessment.

L. Director and Officer Liability Insurance

On or before the Effective Date, the Debtors shall purchase and maintain directors’ and officers’ liability insurance coverage for the period following the Effective Date. The Debtors shall use their best efforts to obtain directors and officers liability insurance coverage on terms no less favorable to the insureds than the Debtors’ existing director and officer coverage and with an aggregate limit of liability upon the Effective Date of no less than the aggregate limit of liability under the existing director and officer coverage upon placement.

M. Management Incentive Plan

On the Effective Date, the New Board shall adopt the Management Incentive Plan for the Reorganized Debtors.

N. Employee and Retiree Benefits

Unless otherwise provided herein, all employee wages, compensation, and benefit programs in place for the Debtors’ current employees, as of the Effective Date, shall be assumed by the Reorganized Debtors and shall remain in place as of the Effective Date, and the Reorganized Debtors will continue to honor such agreements, arrangements, programs, and plans consistent with past practice and subject to further modification and amendment as may be deemed appropriate by the Reorganized Debtors in their business judgment. Notwithstanding the foregoing, pursuant to Bankruptcy Code § 1129(a)(13), from and after the Effective Date, all retiree benefits (as such term is defined in Bankruptcy Code § 1114), if any, shall continue to be paid in accordance with applicable law. Nothing herein shall be deemed an assumption of any disputed Claims by the Debtors’ former employees alleging a right to recover severance awards, benefits, or any other form of compensation not explicitly awarded by the Debtors.

O. Retained Causes of Action

Except as otherwise provided in the Plan, or in any contract, instrument, release, or other agreement entered into in connection with the Plan, in accordance with Bankruptcy Code § 1123(b)(3), the Reorganized Debtors shall retain and shall have the exclusive right, authority, and discretion to (without further order of the Bankruptcy Court) determine and to initiate, file, prosecute, enforce, abandon, settle, compromise, release, or withdraw, or litigate to judgment any and all Retained Causes of Action that the Debtors or the Estates may hold against any Entity, whether arising before or after the Petition Date. The Debtors reserve and shall retain the foregoing Retained Causes of Action notwithstanding the rejection of any Executory Contract or Unexpired Lease during the Chapter 11 Cases.

P. Releases, Exculpation, Injunctions, and Related Provisions

Discharge of Debtors

Pursuant to Bankruptcy Code § 1141(d), and except as otherwise specifically provided in the Plan or in any contract, instrument, or other agreement or document created pursuant to the Plan, the distributions, rights, and treatment that are provided in the Plan shall be in complete satisfaction, discharge, and release, effective as of the Effective Date, of Claims (including any Intercompany Claims resolved or compromised after the Effective Date by the Reorganized Debtors), Interests, and Causes of Action of any nature whatsoever, including any interest accrued on Claims or Interests from and after the Petition Date, whether known or unknown, against, liabilities of, liens on, obligations of, rights against, and Interests in, the Debtors or any of their assets or properties, regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims and Interests, including demands, liabilities, and Causes of Action that arose before the Effective Date, any liability (including withdrawal liability) to the extent such Claims or Interests relate to services performed by employees of the Debtors prior to the Effective Date and that arise from a termination of employment, any contingent or non-contingent liability on account of representations or warranties issued on or before the Effective Date, and all debts of the kind specified in Bankruptcy Code §§ 502(g), 502(h), or 502(i), in each case whether or not: (1) a Proof of Claim based upon such debt or right is Filed or deemed Filed pursuant to Bankruptcy Code § 501; (2) a Claim or Interest based upon such debt, right, or Interest is Allowed pursuant to Bankruptcy Code § 502; or (3) the holder of such a Claim or Interest has accepted the Plan. The Confirmation Order shall be a judicial determination of the discharge of all Claims and Interests subject to the occurrence of the Effective Date. Notwithstanding anything contained herein, the foregoing discharge and release shall not effect a discharge or release with respect to the Debtors’ obligation to pay interest payments on the Existing First Lien Credit Facility Claims or the treatment of Claims and Interests pursuant to and consistent with the terms of the Plan.

Release of Liens

Except as otherwise provided in the Plan, or any contract, instrument, release, or other agreement or document created pursuant to the Plan, on the Effective Date and concurrently with the applicable distributions made pursuant to the Plan and, in the case of a Secured Claim, satisfaction in full of the portion of the Secured Claim that is Allowed as of the Effective Date, except for Other Secured Claims that the Debtors elect to reinstate in accordance with Article III.D.2 of the Plan, all mortgages, deeds of trust, Liens, pledges, or other security interests against any property of the Estates shall be fully released and discharged, and all of the right, title, and interest of any holder of such mortgages, deeds of trust, Liens, pledges, or other security interests shall revert to the Reorganized Debtors and their successors and assigns. On and after the Effective Date, any holder of such Secured Claim (and the applicable agents for such holder), at the expense of the Reorganized Debtors, shall be authorized and directed to release any collateral or other property of any Debtor (including any Cash collateral and possessory collateral) held by such holder (and the applicable agents for such holder), and to take such actions as may be reasonably requested by the Reorganized Debtors to evidence the release of such Lien, including the execution, delivery, and filing or recording of such releases. The presentation or filing of the Confirmation Order to or with any federal, state, provincial, or local agency or department shall constitute good and sufficient evidence of, but shall not be required to effect, the termination of such Liens.

Without limiting the automatic release provisions of the immediately preceding paragraph: (i) except for distributions required under Article II.B, Article II.C, and Article III.D.4 of the Plan, no other distribution hereunder shall be made to or on behalf of any Claim holder unless and until such holder executes and delivers to the Debtors or Reorganized Debtors such release of liens or otherwise turns over and releases such Cash, pledge or other possessory liens; and (ii) any such holder that fails to execute and deliver such release of liens within 180 days of the Effective Date shall be deemed to have no Claim against the Debtors or their assets or property in respect of such Claim and shall not participate in any distribution hereunder.

Releases by Debtors

Pursuant to Bankruptcy Code § 1123(b), for good and valuable consideration, on and after the Effective Date, each Released Party is deemed released and discharged by the Debtors, the Reorganized Debtors, and their Estates, in each case on behalf of themselves and their respective successors, assigns, and representatives, and any and all other entities who may purport to assert any Cause of Action, directly or derivatively, by, through, for, or because of the foregoing entities, from any and all Causes of Action, including any derivative claims, asserted on behalf of the Debtors, that the Debtors, the Reorganized Debtors, or their Estates would have been legally entitled to assert in their own right (whether individually or collectively) or on behalf of the holder of any Claim against, or Interest in, a Debtor or other Entity, based on or relating to, or in any manner arising from, in whole or in part, the Debtors, the Debtors’ in- or out-of- court restructuring efforts, intercompany transactions, the Chapter 11 Cases, the Disclosure Statement, the DIP Real Estate Facility, the DIP Revolving Facility, the Plan (including the Plan Supplement), or any Restructuring Transactions, contract, instrument, release, or other agreement or document created or entered into in connection with the Disclosure Statement, the DIP Real Estate Facility, the DIP Revolving Facility, the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the administration and implementation of the Plan, including the issuance or distribution of securities pursuant to the Plan, or the distribution of property under the Plan or any other related agreement, or upon any other act or omission, transaction, agreement, event, or other occurrence taking place on or before the Effective Date. Notwithstanding anything contained herein to the contrary, the foregoing release does not release (i) any obligations of any party under the Plan or any document, instrument, or agreement executed to implement the Plan and (ii) claims and causes of action for actual fraud or willful misconduct.

Releases by Holders of Claims and Interests

Exculpation

The Exculpated Parties shall not have or incur any liability to any holder of a Claim or Interest, for any act, event, or omission from the Petition Date to the Effective Date in connection with or arising out of the Chapter 11 Cases, the Confirmation of the Plan, the Consummation of the Plan, the administration of the Plan or the assets and property to be distributed pursuant to the Plan (including unclaimed property under the Plan), unless such Entity’s action is determined as (i) bad faith; (ii) actual fraud; (iii) willful misconduct; or (iv) gross negligence, in each case by a Final Order of a court of competent jurisdiction. Each Entity may reasonably rely upon the opinions of counsel, certified public accountants, and other experts or professionals.

Injunction

Protections against Discriminatory Treatment

Consistent with Bankruptcy Code § 525 and the Supremacy Clause of the U.S. Constitution, all Entities, including Governmental Units, shall not discriminate against the Reorganized Debtors or deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, the Reorganized Debtors, or another Entity with whom the Reorganized Debtors have been associated, solely because each Debtor has been a debtor under chapter 11 of the Bankruptcy Code, has been insolvent before the commencement of the Chapter 11 Cases (or during the Chapter 11 Cases but before the Debtors are granted or denied a discharge), or has not paid a debt that is dischargeable in the Chapter 11 Cases.

Reimbursement or Contribution

If the Bankruptcy Court disallows a Claim for reimbursement or contribution of an Entity pursuant to Bankruptcy Code § 502(e)(1)(B), then to the extent that such Claim is contingent as of the time of allowance or disallowance, such Claim shall be forever disallowed and expunged notwithstanding Bankruptcy Code § 502(j), unless prior to the Confirmation Date: (1) such Claim has been adjudicated as non-contingent or (2) the relevant holder of a Claim has Filed a non-contingent Proof of Claim on account of such Claim and a Final Order has been entered prior to the Confirmation Date determining such Claim as no longer contingent.

Q. Retention of Jurisdiction

To the fullest extent permitted by applicable law, and notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, on and after the Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters arising out of, or relating to, the Chapter 11 Cases and the Plan pursuant to Bankruptcy Code § 105(a) and 1142 of the Bankruptcy Code, including jurisdiction with respect to the matters more fully described in Article XI of the Plan.

R. Modifications and Amendments, Revocation, or Withdrawal of the Plan

Modification and Amendments

Except as otherwise specifically provided in the Plan, the Debtors reserve the right, with the consent of the DIP Revolving Facility Agent, to modify the Plan, whether such modification is material or immaterial, and seek Confirmation consistent with the Bankruptcy Code and, as appropriate, not resolicit votes on such modified Plan. Subject to those restrictions on modifications set forth in the Plan and the requirements of Bankruptcy Code § 1127, Bankruptcy Rule 3019, and, to the extent applicable, Bankruptcy Code §§ 1122, 1123, and 1125, each of the Debtors expressly reserves its respective rights, with the consent of the DIP Revolving Facility Agent, to revoke or withdraw, or, to alter, amend, or modify the Plan with respect to such Debtor, one or more times, after Confirmation, and, to the extent necessary may initiate proceedings in the Bankruptcy Court to so alter, amend, or modify the Plan, or remedy any defect or omission, or reconcile any inconsistencies in the Plan, the Disclosure Statement, or the Confirmation Order, in such matters as may be necessary to carry out the purposes and intent of the Plan.

Effect of Confirmation on Modifications

Entry of a Confirmation Order shall mean that all modifications or amendments to the Plan since the Solicitation thereof are approved pursuant to Bankruptcy Code § 1127(a) and do not require additional disclosure or resolicitation under Bankruptcy Rule 3019.

Revocation or Withdrawal of Plan

ARTICLE IX.

LEGAL PROCEEDINGS

The following is a summary of material litigation involving the Debtors that existed as of the Petition Date, including potential Claims and Causes of Action that arose as a result of the filing of the Chapter 11 Cases.

A. Recovery on Preference Actions and Other Avoidance Actions

During the ninety (90) days immediately preceding the Petition Date (the “Preference Period”), while presumed insolvent, the Debtors made various payments and other transfers to Creditors on account of antecedent debts. Some of those payments may be subject to avoidance and recovery as preferential and/or fraudulent transfers pursuant to Bankruptcy Code §§ 329, 544, 545, 547, 548, 549, 550, and 553(b). Because the Debtors are proposing to pay all of their unsecured creditors in full, the Debtors will not pursue avoidance and recovery of preferential transfers under Bankruptcy Code § 547 and waive all rights to pursue preference actions under Bankruptcy Code § 547.

The Debtors continue to investigate Causes of Action they may have against third parties. The Debtors have not completed their investigation of potential objections to Claims and recoveries on Causes of Action and there may be additional Claims and Causes of Action possessed by the Debtors.

OTHER THAN AS EXPRESSLY SET FORTH IN ARTICLE VIII OF THE PLAN, THE PLAN DOES NOT, AND IS NOT INTENDED TO, RELEASE ANY CAUSES OF ACTION, AVOIDANCE ACTIONS, OR OBJECTIONS TO PROOFS OF CLAIM. ALL SUCH RIGHTS ARE SPECIFICALLY PRESERVED, UNLESS SPECIFICALLY RELEASED UNDER THE PLAN.

B. Retained Causes of Action

Creditors and other parties in interest should understand that certain legal rights, Claims and causes of action the Debtors may have against them, if any exist, are retained under the Plan for prosecution by the Reorganized Debtors, unless expressly released under the Plan. As such, Creditors and other parties in interest are cautioned not to rely on (i) the absence of the listing of any legal right, Claim or cause of action against a particular Creditor or other party in interest in the Disclosure Statement, Plan, Schedules of Assets and Liabilities, or Statement of Financial Affairs; or (ii) the absence of litigation or demand prior to the Effective Date as any indication that the Debtors or the Reorganized Debtors do not possess or do not intend to prosecute a particular legal right, Claim or Cause of Action if a particular Creditor or other party in interest votes to accept the Plan. It is the expressed intention of the Debtors, through the Plan, to preserve Retained Causes of Action whether now known or unknown.

ARTICLE X.

DISTRIBUTIONS TO CREDITORS

The Debtors, in consultation with their advisors, have reviewed all Claims and undertaken a preliminary reconciliation of Filed Proofs of Claim and scheduled Claims in order to estimate potentially Allowed Claims.

A. Allowed Administrative Claims

The Debtors have satisfied undisputed Administrative Claims in the ordinary course of business, including any amounts necessary under Bankruptcy Code § 1110 or amounts agreed to in related stipulations. There are Professional Compensation Claims that have not yet been asserted.

Bankruptcy Code § 503(b)(9) grants administrative priority for the value of any goods received by a debtor within twenty (20) days before the commencement of the case in which the goods have been sold to a debtor in the ordinary course of the debtor’s business (“503(b)(9) Claims”). The Debtors are not aware of any 503(b)(9) Claims. Other than Professional Compensation Claims and ordinary course expenses covered by the budget for the DIP Revolving Facility, the Debtors have not received any demands for Administrative Claims.

B. Allowed Priority Unsecured Tax Claims and Allowed Secured Tax Claims

Bankruptcy Code § 507(a)(8) provides priority treatment for allowed unsecured Claims of Governmental Units for certain types of taxes. Certain applicable state law also grants ad valorem taxing authorities a statutory lien in certain property that is the subject of the ad valorem taxes. Pursuant to the Order Granting Debtors’ Emergency Motion for Entry of an Order (I) Authorizing Debtors to Pay Certain Prepetition Taxes and Assessments and (II) Authorizing Financial Institutions to Honor and Process Related Checks and Transfers Pursuant to Bankruptcy Code §§ 105(a), 363(b), 507(a)(8) and 541(d) [Docket No. 97] (the “Tax Order”), the Debtors paid certain outstanding tax obligations owed to taxing authorities with statutory liens or that would otherwise have been entitled to priority treatment under Bankruptcy Code § 507(a)(8). The Debtors therefore estimate that there will be minimal Allowed Priority Unsecured Tax Claims and Allowed Secured Tax Claims.

C. Allowed Other Priority Unsecured Claims

Pursuant to the Order Granting Debtors’ Emergency Motion for an Order (I) Authorizing Debtors to (A) Pay Certain Prepetition Employee Wages, Other Compensation and Reimbursable Employee Expenses, (B) Pay Certain Prepetition Independent Contractor and Temporary Staff Obligations; and (C) Continuing Employee Benefits Programs and (II) Granting Related Relief [Docket No. 69] (the “Employee Wage Order”), the Debtors paid certain outstanding obligations owed to their employees for wages, salaries, benefits, and reimbursable expenses that would have otherwise been entitled to priority treatment under Bankruptcy Code § 507(a)(4) or (5). The Debtors therefore estimate that there will be minimal Allowed Other Priority Unsecured Claims.

D. Allowed Other Secured Claims

Pursuant to the Final Order Granting Debtors’ Emergency Motion for Entry of an Order (I) Authorizing the Debtors to Pay or Honor Prepetition Obligations to Certain Trade Claimants and (II) Granting Related Relief [Docket No. 330] (the “Trade and Lien Claimants Order”), the Debtors were authorized to pay, and have paid, certain outstanding obligations owed to lienholders or potential lienholders asserting miscellaneous lien claims, including warehouse liens, mechanics and materialman liens, or other similar liens. The Debtors are therefore not aware of any Other Secured Claims and estimate that there will be no, or minimal, Allowed Other Secured Claims.

E. Allowed Existing First Lien Credit Facility Claims

Pursuant to the DIP Revolving Facility Financing Order, all of the Existing First Lien Credit Facility Claims, except for $100,000 have been paid down through the roll-up feature of the DIP Revolving Facility. Therefore, the Debtors estimate that the Allowed Existing First Lien Credit Facility Claims total $100,000. All Allowed Existing First Lien Credit Facility Claims will be paid within ninety (90) days of the Effective Date, except as otherwise agreed by the Reorganized Debtors and the DIP Revolving Facility Agent.

F. Allowed General Unsecured Claims

Except to the extent that a holder of an Allowed General Unsecured Claim agrees to a less favorable treatment, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for each Existing General Unsecured Claim, each holder of an Allowed Class 5 Claim shall receive its Pro Rata share of (i) the General Unsecured Cash Fund, (ii) the General Unsecured Notes and (iii) the proceeds of the Rights Offering.

ARTICLE XI.
PROVISIONS GOVERNING DISTRIBUTIONS

A. Timing and Calculation of Amounts to Be Distributed

B. Disbursing Agent

All distributions under the Plan shall be made by the Disbursing Agent or, in the case of the General Unsecured Notes, by the Indenture Trustee. The Disbursing Agent shall not be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Bankruptcy Court. Additionally, in the event that the Disbursing Agent is so otherwise ordered, all costs and expenses of procuring any such bond or surety shall be borne by the Reorganized Debtors. Anything herein to the contrary notwithstanding, all distributions in connection with the General Unsecured Notes shall be made by the Indenture Trustee.

C. Rights and Powers of Disbursing Agent

Powers of Disbursing Agent

Expenses Incurred on or After the Effective Date

D. Delivery of Distributions and Undeliverable or Unclaimed Distributions

Record Date for Distributions

Delivery of Distributions in General

Minimum Distributions

Undeliverable Distributions and Unclaimed Property

In the event that any distribution to any holder of Allowed Claims or Allowed Interests (as applicable) is returned as undeliverable, no distribution to such holder shall be made unless and until the Disbursing Agent has determined the then-current address of such holder, at which time such distribution shall be made to such holder without interest; provided, however, that such distributions shall be deemed unclaimed property under Bankruptcy Code § 347(b) at the expiration of one year from the Effective Date. After such date, all unclaimed property or interests in property shall revert to the Reorganized Debtors automatically and without need for a further order by the Bankruptcy Court (notwithstanding any applicable federal, provincial or state escheat, abandoned, or unclaimed property laws to the contrary), and the Claim of any holder of Claims and Interests to such property or Interest in property shall be discharged and forever barred.

E. Manner of Payment

3. At the option of the Disbursing Agent, any Cash payment to be made hereunder may be made by check or wire transfer or as otherwise required or provided in applicable agreements.

4. All distributions pursuant to Article II.B, Article II.C., and Article III.D.4 of the Plan shall be made by the Disbursing Agent in accordance with the terms of the Payoff Letter(s).

F. Distributions to Holders of Class 5 General Unsecured Claims

1. Distributions on account of Disputed Class 5 General Unsecured Claims shall be held in the Class 5 Disputed Claims Reserve until such Claims have been either Allowed or Disallowed.

2. To the extent a Disputed Class 5 General Unsecured Claim becomes Allowed the Disbursing Agent shall distribute to the holder of the Allowed Class 5 General Unsecured Claim its Pro Rata share of (i) the General Unsecured Cash Fund, (ii) the General Unsecured Notes and (iii) the proceeds of the Rights Offering. More details regarding the process for the distribution of the General Unsecured Notes will be set forth in the Plan Supplement.

3. To the extent a Disputed Class 5 General Unsecured Claim becomes Disallowed. the distribution reserved for such Claim shall be distributed Pro Rata to holders of Allowed Class 5 General Unsecured Claims, provided that in no event shall holders of Class 5 General Unsecured Claims be entitled to payment in excess of the amount of their Allowed General Unsecured Claims.

4. For purposes of Article III.D.B and Article VI.F of the Plan, “Pro Rata” means, as to a particular holder of a Claim in Class 5, the ratio that the amount of such Claim held by such Class 5 Claim holder bears to the aggregate amount of all Class 5 General Unsecured Claims, and such ratio shall be calculated as if all Disputed Class 5 General Unsecured Claims are Allowed Claims as of the Effective Date and/or such other later date as may be appropriate as determined by the Reorganized Debtors in their reasonable discretion.

G. Securities Act Exemption

Pursuant to section 1145 of the Bankruptcy Code, the (1) issuance of the General Unsecured Notes, (2) the issuance of the New Common Stock and the Eligible Offeree Share Purchase Rights to Eligible Offerees in exchange for shares of the Existing Common Stock, and the issuance of the Eligible Offeree Rights Offering Common Stock shall be exempt from, among other things, the registration requirements of section 5 of the Securities Act and any other applicable law requiring registration prior to the offering, issuance, distribution, or sale of securities. In addition, such New Common Stock, the Eligible Offeree Rights Offering Common Stock, and General Unsecured Notes will be freely tradable in the U.S. by the recipients thereof under section 1145 of the Bankruptcy Code and other provisions of applicable securities laws, subject in the case of section 1145 of the Bankruptcy Code to the provisions of section 1145(b)(1) of the Bankruptcy Code relating to the definition of an underwriter in section 2(a)(11) of the Securities Act, and subject to any restrictions in the Reorganized Debtors’ New Organizational Documents.

H. Compliance with Tax Requirements

I. Allocations

J. No Postpetition Interest on Claims

Unless otherwise specifically provided for in the Plan or the Confirmation Order and excluding the Existing First Lien Credit Facility Claims, or required by applicable bankruptcy and non-bankruptcy law, postpetition interest shall not accrue or be paid on any prepetition Claims against the Debtors, and no holder of a prepetition Claim against the Debtors shall be entitled to interest accruing on or after the Petition Date on any such prepetition Claim.

K. Foreign Currency Exchange Rate

L. Setoffs and Recoupment

Except as expressly provided in the Plan, each Reorganized Debtor may, pursuant to Bankruptcy Code § 553, set off and/or recoup against any Plan Distributions to be made on account of any Allowed Claim, any and all claims, rights, and Causes of Action that such Reorganized Debtor may hold against the holder of such Allowed Claim to the extent such setoff or recoupment is either (1) agreed in amount among the relevant Reorganized Debtor(s) and holder of Allowed Claim or (2) otherwise adjudicated by the Bankruptcy Court or another court of competent jurisdiction; provided, however, that neither the failure to effectuate a setoff or recoupment nor the allowance of any Claim hereunder shall constitute a waiver or release by a Reorganized Debtor or its successor of any and all claims, rights, and Causes of Action that such Reorganized Debtor or its successor may possess against the applicable holder. In no event shall any holder of Claims against, or Interests in, the Debtors be entitled to recoup any such Claim or Interest against any claim, right, or Cause of Action of the Debtors or the Reorganized Debtors, as applicable, unless such holder actually has performed such recoupment and provided notice thereof in writing to the Debtors in accordance with Article XII.G of the Plan on or before the Effective Date, notwithstanding any indication in any Proof of Claim or otherwise that such holder asserts, has, or intends to preserve any right of recoupment.

M. Claims Paid or Payable by Third Parties

Claims Paid by Third Parties

The Debtors or the Reorganized Debtors, as applicable, shall reduce in full a Claim, and such Claim shall be disallowed without a Claims objection having to be Filed and without any further notice to or action, order, or approval of the Bankruptcy Court, other than the filing of a notice with the Bankruptcy Court, to the extent that the holder of such Claim receives payment in full on account of such Claim from a party that is not a Debtor or a Reorganized Debtor. Subject to the last sentence of this paragraph, to the extent a holder of a Claim receives a distribution on account of such Claim and receives payment from a party that is not a Debtor or a Reorganized Debtor on account of such Claim, such holder shall, within 14 days of receipt thereof, repay or return the distribution to the applicable Reorganized Debtor, to the extent the holder’s total recovery on account of such Claim from the third party and under the Plan exceeds the amount of such Claim as of the date of any such distribution under the Plan. The failure of such holder to timely repay or return such distribution shall result in the holder owing the applicable Reorganized Debtor annualized interest at the Federal Judgment Rate on such amount owed for each Business Day after the 14-day grace period specified above until the amount is repaid.

Claims Payable by Third Parties

Applicability of Insurance Policies

ARTICLE XII.
ALTERNATIVES TO THE PLAN

A. Chapter 7 Liquidation

A straight liquidation bankruptcy or “chapter 7 case” requires liquidation of the Debtors’ assets by an impartial trustee. In a chapter 7 case, the amount holders of General Unsecured Claims would receive depends upon the net estate available after all of the Debtors’ assets have been reduced to cash. The cash realized from liquidation of each of the Debtors’ assets would be distributed in accordance with the order of distribution prescribed in Bankruptcy Code § 507. Whether a bankruptcy case is one under chapter 7 or chapter 11, Secured Claims, Administrative Claims and Priority Claims are entitled to be paid in cash and in full before holders of General Unsecured Claims receive any funds.

If the Chapter 11 Cases were converted to cases under chapter 7 of the Bankruptcy Code, the present Claims with priority status under the Bankruptcy Code may have a priority lower than priority Claims generated by the chapter 7 case, such as the chapter 7 trustee’s fee or the fees of attorneys, accountants and other professionals the trustee may engage. Conversion to chapter 7 then would create an additional layer of Claims with priority status.

In a chapter 7 liquidation case, a fully secured Creditor would be entitled to full payment, including interest, from the proceeds of sale of the secured Creditor’s collateral, provided the realized value of the collateral is sufficient to pay both the principal and interest. A secured Creditor whose collateral is insufficient to pay its Secured Claim in full would be entitled to assert a General Unsecured Claim for its deficiency and share with holders of General Unsecured Claims.

If the Chapter 11 Cases were converted to cases under chapter 7, the Bankruptcy Court would appoint a trustee to liquidate the Debtors’ assets and to distribute the proceeds as described immediately above. The chapter 7 trustee would be entitled to receive compensation under Bankruptcy Code § 326. The trustee’s fee on all monies disbursed or turned over in the case by the trustee to parties in interest, excluding the Debtors, but including holders of Secured Claims would not exceed (i) 25% on the first $5,000 or less, (ii) 10% on any amount in excess of $5,000 but not in excess of $50,000, (iii) 5% on any amount in excess of $50,000 but not in excess of $1,000,000, and (iv) reasonable compensation not to exceed 3% on any amount in excess of $1,000,000. The trustee’s fees would be paid as a cost of administration and may be paid in full prior to the costs and expenses incurred in the Chapter 11 Cases and prior to any payment to holders of General Unsecured Claims.

The chapter 7 trustee would also retain his or her own attorneys and accountants, and perhaps other professionals such as appraisers, whose fees would also constitute Claims entitled to priority status in a chapter 7 case, with a priority that may be higher than Claims arising in the Chapter 11 Cases.

Liquidation under chapter 7 of the Bankruptcy Code would also likely entail the appointment of a trustee having no experience or knowledge of the Debtors’ businesses, their records or assets. A substantial period of education would be required in order for any chapter 7 trustee to wind up the case effectively. Also, in the event litigation were to prove necessary, the chapter 7 trustee would likely be in an inferior position to prosecute such actions without prior knowledge regarding the Debtors’ businesses and particularly if there were a lack of funding to support such efforts.

Readers are urged to review the notes and assumptions contained in the Liquidation Analysis attached as Exhibit 2 (the “Liquidation Analysis”). The Liquidation Analysis demonstrates that Creditors will receive a greater distribution under the Plan than a hypothetical liquidation under chapter 7 of the Bankruptcy Code. The analysis provided is believed to be reasonable and conservative.

B. Liquidation Pursuant to the Contingent Liquidation Order

As more fully described in Article VI.I of the Disclosure Statement, the Court has entered the Contingent Liquidation Order which provides that upon the occurrence of one or more Full-Chain Liquidation Triggers, the Debtors must commence a Full-Chain Liquidation of all of their stores within seven days of the occurrence of such Full-Chain Liquidation Trigger. The Contingent Liquidation Order provides that the same general procedures approved in the Final Store Closing Sales Order will apply in the context of a Full-Chain Liquidation.

C. Dismissal

If dismissal of the Chapter 11 Cases were to occur, the Debtors would no longer benefit from the protections of the Bankruptcy Court and the applicable provisions of the Bankruptcy Code. In the event of dismissal, it is likely that many holders of General Unsecured Claims would not receive any payment on their Claims. Dismissal would force a race among Creditors to take over and dispose of the Debtors’ available assets. Even the most diligent holders of General Unsecured Claims would be unlikely to obtain a recovery on their Claims similar to the recovery proposed under the Plan, and many holders of General Unsecured Claims would likely not obtain any recovery on their Claims.

D. Exclusivity and Alternative Plan Potential

Pursuant to Bankruptcy Code § 1121, the Debtors have the exclusive right to file a plan of reorganization for 120 days after the petition date (September 24, 2020), and, if a plan is filed by such date, the exclusive right to solicit the plan of reorganization for 180 days after the Petition Date (November 23, 2020) (as may be subsequently modified by the Court, the “Exclusive Periods”). Because the Debtors have Filed the Plan and seek its confirmation during the Exclusive Periods, no other alternative plans can be proposed or solicited at this time. Moreover, the Debtors believe that any alternative plan would not be viable and would not provide the same recovery to Creditors as that proposed under the current Plan. The Debtors therefore believe that the Plan is in the best interest of Creditors.

E. Going-Concern Sale

Pursuant to Bankruptcy Code § 363, the Debtors may pursue a sale of substantially all of their assets and distribute the proceeds of such a sale pursuant to a plan.

ARTICLE XIII.
FINANCIAL PROJECTIONS AND FEASIBILITY

A. Financial Projections and Feasibility

The Bankruptcy Code requires the Debtors to demonstrate that confirmation of the Plan is not likely to be followed by liquidation or the need for further financial reorganization of the Debtors. For purposes of determining whether the Plan meets this requirement, the Debtors have analyzed their ability to meet their obligations under the Plan. The initial distributions under the Plan are based upon (1) Cash on hand, including Cash from operations, (2) the proceeds of the New ABL Credit Facility, (3) the proceeds of the Sale Leaseback, (4) the General Unsecured Notes, and (5) the proceeds of the Rights Offering. The Debtors believe and have evidence that the proceeds from (1) Cash on hand, (2) the New ABL Credit Facility, (3) the Sale Leaseback, and (4) the Rights Offering together with the issuance of the General Unsecured Notes will be sufficient to satisfy the distributions under the Plan. The Debtors moreover believe that they will have sufficient liquidity to pay the amounts owed in connection with the General Unsecured Notes at maturity.

Attached as Exhibit 3 are the Debtors’ Financial Projections with respect to the Reorganized Debtors (the “Financial Projections”). The Financial Projections show that the Reorganized Debtors will have adequate liquidity and funding to meet their obligations. Further, the Financial Projections evidence that the Reorganized Debtors are not likely to need financial reorganization or liquidation.

Therefore, the Debtors believe the Plan is feasible and is not likely to be followed by subsequent liquidation or the need for further financial reorganization of the Debtors.

ARTICLE XIV.
CERTAIN RISK FACTORS TO BE CONSIDERED

Creditors should carefully consider the following factors, as well as the other information contained in this Disclosure Statement (as well as the documents delivered herewith or incorporated by reference herein) before deciding whether to vote to accept or to reject the Plan.

The principal purpose of the Chapter 11 Cases is the formulation of the Plan, which establishes how Claims against and Interests in the Debtors will be satisfied. Under the Plan, except as otherwise agreed by the applicable Creditor, Allowed Claims will be paid in full in cash, will be Reinstated, or, in the case of holders of General Unsecured Claim, will receive their Pro Rata Share of the General Unsecured Notes. Holders of Tuesday Morning Corporation Interests consisting of outstanding shares of the Existing Common Stock will have those securities exchanged for (1) one share of the New Common Stock and (2) a Share Purchase Right entitling the holder to purchase its Pro Rata portion of the Eligible Offeree Rights Offering Common Stock. Holders of Tuesday Morning Corporation Interests consisting of options, warrants, or other rights, contractual or otherwise, to acquire shares of the Existing Common Stock shall be Reinstated subject to dilution as a result of the issuance of the Rights Offering Common Stock and the issuance of equity securities on and after the Effective Date pursuant to the Management Incentive Plan.

Documents filed with the SEC may contain important risk factors that differ from those discussed below, and such risk factors are incorporated as if fully set forth herein. In particular, the information set forth in Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 is incorporated by reference herein. Copies of any document filed with the SEC may be obtained by visiting the SEC website at http://www.sec.gov.

A. Bankruptcy Related Risk Factors

The occurrence or non-occurrence of any or all of the following contingencies, and any others, could affect distributions available to holders of Allowed Claims under the Plan but will not necessarily affect the validity of the vote of the Impaired Classes to accept or reject the Plan or necessarily require a re-solicitation of the votes of holders of Claims in such Impaired Classes.

Parties in Interest May Object to the Plan’s Classification of Claims and Interests

Bankruptcy Code § 1122 provides that a plan may place a claim or an equity interest in a particular class only if such claim or equity interest is substantially similar to the other claims or equity interests in such class. The Debtors believe that the classification of the Claims and Interests under the Plan complies with the requirements set forth in the Bankruptcy Code because the Debtors created Classes of Claims and Interests each encompassing Claims or Interests, as applicable, that are substantially similar to the other Claims or Interests, as applicable, in each such Class. Nevertheless, there can be no assurance that the Bankruptcy Court will reach the same conclusion.

The Conditions Precedent to the Effective Date of the Plan May Not Occur

As more fully set forth in Article IX of the Plan, the Effective Date is subject to a number of conditions precedent. If such conditions precedent are not met or waived, the Effective Date will not take place.

The Debtors May Fail to Satisfy Vote Requirements

If votes are received in number and amount sufficient to enable the Bankruptcy Court to confirm the Plan, the Debtors intend to seek, as promptly as practicable thereafter, Confirmation of the Plan. In the event that sufficient votes are not received, the Debtors may seek to confirm an alternative chapter 11 plan. There can be no assurance that the terms of any such alternative chapter 11 plan would be similar or as favorable to the Holders of Allowed Claims as those proposed in the Plan.

To the extent a Class of Claims rejects the Plan, the Debtors may still seek confirmation of the Plan pursuant to Bankruptcy Code § 1129(b).

The Debtors May Not Be Able to Secure Confirmation of the Plan

Bankruptcy Code § 1129 of the Bankruptcy Code sets forth the requirements for confirmation of a chapter 11 plan, and requires, among other things, a finding by the Bankruptcy Court that: (a) such plan “does not unfairly discriminate” and is “fair and equitable” with respect to any non-accepting classes; (b) confirmation of such plan is not likely to be followed by a liquidation or a need for further financial reorganization unless such liquidation or reorganization is contemplated by the plan; and (c) the value of distributions to non-accepting Holders of claims and equity interests within a particular class under such plan will not be less than the value of distributions such Holders would receive if the debtors were liquidated under chapter 7 of the Bankruptcy Code.

There can be no assurance that the requisite acceptances to confirm the Plan will be received. Even if the requisite acceptances are received, there can be no assurance that the Bankruptcy Court will confirm the Plan. A non-accepting holder of an Allowed Claim might challenge either the adequacy of this Disclosure Statement or whether the balloting procedures and voting results satisfy the requirements of the Bankruptcy Code or Bankruptcy Rules. Even if the Bankruptcy Court determines that this Disclosure Statement, the balloting procedures, and voting results are appropriate, the Bankruptcy Court could still decline to confirm the Plan if it finds that any of the statutory requirements for Confirmation are not met. If a chapter 11 plan of reorganization is not confirmed by the Bankruptcy Court, it is unclear whether the Debtors will be able to reorganize their business and what, if anything, holders of Allowed Claims against them would ultimately receive on account of such Allowed Claims.

Confirmation of the Plan is also subject to certain conditions as described in Article IX of the Plan. If the Plan is not confirmed, it is unclear what distributions, if any, Holders of Allowed Claims will receive on account of such Allowed Claims.

The Debtors reserve the right to modify the terms and conditions of the Plan as necessary for Confirmation. Any such modifications could result in less favorable treatment of any non-accepting Class, as well as any Class junior to such non-accepting Class, than the treatment currently provided in the Plan. Such a less favorable treatment could include a distribution of property with a lesser value than currently provided in the Plan or no distribution whatsoever under the Plan. There is no assurance that an alternative plan will be confirmed or that the Chapter 11 Cases will not be converted to a liquidation. Holders of Interests will receive no recovery under the Plan or in a liquidation. If a liquidation or protracted reorganization were to occur, there is a risk that there would be little, if any, value available for distribution to the holders of Claims.

The Debtors May Object to the Amount or Classification of a Claim

Except as otherwise provided in the Plan, the Debtors reserve the right to object to the amount or classification of any Claim under the Plan. The estimates set forth in this Disclosure Statement cannot be relied upon by any holder of a Claim where such Claim is subject to an objection. Any holder of a Claim that is subject to an objection thus may not receive its expected share of the estimated distributions described in this Disclosure Statement.

Risk of Non-Occurrence of the Effective Date

Although the Debtors believe that the Effective Date may occur quickly after the Confirmation Date, there can be no assurance as to such timing or as to whether the Effective Date will, in fact, occur.

Contingencies Could Affect Votes of Impaired Classes to Accept or Reject

The distributions available to holders of Allowed Claims under the Plan can be affected by a variety of contingencies, including, without limitation, whether the Bankruptcy Court orders certain Allowed Claims to be subordinated to other Allowed Claims. The occurrence of any and all such contingencies, which could affect distributions available to Holders of Allowed Claims under the Plan, will not affect the validity of the vote taken by the Impaired Classes to accept or reject the Plan or require any sort of revote by the Impaired Classes.

The estimated Claims and creditor recoveries set forth in this Disclosure Statement are based on various assumptions, and the actual Allowed amounts of Claims may significantly differ from the estimates. Should one or more of the underlying assumptions ultimately prove to be incorrect, the actual Allowed amounts of Claims may vary from the estimated Claims contained in this Disclosure Statement. Moreover, the Debtors cannot determine with any certainty at this time, the number or amount of Claims that will ultimately be Allowed. Such differences may materially and adversely affect, among other things, the percentage recoveries to holders of Allowed Claims under the Plan.

Releases, Injunctions, and Exculpation Provisions May not be Approved

Article VIII of the Plan provides for certain releases, injunctions, and exculpations, including a release of liens and third-party releases that may otherwise be asserted against the Debtors, Reorganized Debtors, or Released Parties, as applicable. As set forth on the ballot attached to the Debtors’ Motion to Approve the Disclosure Statement, Parties voting to accept the Plan are deemed to be a Releasing Party and to consent to providing the releases in the Plan. The releases, injunctions, and exculpations provided in the Plan are subject to objection by parties in interest and may not be approved. If the releases are not approved, certain Released Parties may withdraw their support for the Plan.

B. Failure to Confirm or Consummate the Plan

If the Plan is not confirmed and consummated, it is possible that an alternative plan can be negotiated and presented to the Bankruptcy Court for approval; however, there is no assurance that the alternative plan will be confirmed, that the Chapter 11 Cases will not be converted to a liquidation, that a Full-Chain Liquidation Trigger would occur requiring a Full-Chain Liquidation, or that any alternative chapter 11 plan could or would be formulated on terms as favorable to the Creditors as the terms of the Plan. If a liquidation or protracted reorganization were to occur, there is a risk that there would be little, if any, value available for distribution to the holders of Claims and it is unlikely that holders of Tuesday Morning Corporation Interests would receive any recovery in a liquidation and may not receive any recovery in an alternative chapter 11 plan.

C. Claim Estimates May Be Incorrect

There can be no assurance that the estimated Allowed Claim amounts set forth herein are correct. The actual Allowed amounts of Claims may differ from the estimates. The estimated amounts are subject to certain risks. If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, the actual Allowed amounts of Claims may vary from those estimated herein.

D. Risks Related to Debtors’ Business and Industry Conditions

The risks associated with the Debtors’ business and industry are more fully described in the Debtors’ SEC filings, including:

the Company’s Annual Report on Form 10-K for the year ended June 30, 2020; and

the Company’s Current Report on Form 8-K filed on July 13, 2020.

The risks associated with the Debtors’ business and industry include, but are not limited to:

the COVID-19 pandemic has had, and will continue to have, an adverse effect on the Debtors’ business operations, store traffic, employee availability, financial conditions, results of operations, liquidity and cash flow;

risks associated with changes in economic and political conditions that may adversely affect consumer spending, which could significantly harm the Debtors’ business, results of operations, cash flows and financial condition;

because the merchandise sold in the Debtors stores generally consists of discretionary items, there is a risk that a reduction in consumer confidence and spending cut backs could result in reduced demand for the Debtors’ merchandise, including discretionary items, and could force the Debtors to take significant inventory markdowns and/or to incur increased selling and promotional expenses;

because the retail home furnishings and housewares industry is subject to sudden shifts in consumer trends and consumer spending, there is a risk that any sustained failure to anticipate, identify and respond to emerging trends in consumer preferences could negatively affect the Debtors’ business and results of operations;

because most of the Debtors’ stores are located in shopping center that benefit from varied and complementary tenants the Debtors, there is a risk that any decline in the volume of consumer traffic at shopping centers, whether due to COVID-19, because of consumer preferences to shop on the internet or at large warehouse stores, an economic slowdown, a decline in the popularity of shopping centers, the closing of anchor stores or other destination retailers or otherwise, could result in reduced sales at the Debtors’ stores and leave the Debtors with excess inventory, which could have a material adverse effect on the Debtors’ financial results or business;

because the Debtors specialize in selling off-price merchandise, the Debtors cannot assure that manufacturers or vendors will continue to make off-price merchandise available to the Debtors in quantities acceptable to the Debtors, or that the Debtors will accurately predict the types of off-price merchandise desired by their customers, and therefore there is a risk that the Debtors will be unable to acquire suitable off-price merchandise in the future or to accurately anticipate consumer demand for such merchandise, which would have an adverse effect on the Debtors’ business, results of operations, cash flows and financial condition;

because inventory is the largest asset on the Debtors’ balance sheet, efficient inventory management is a key component of the Debtors’ business success and profitability and there is a risk that the Debtors’ will be unable to maintain sufficient inventory levels to meet customers’ demands which could have an adverse effect on the Debtors’ business, results of operations, cash flows and financial condition;

because the Debtors depend in large part on the orderly operation of their supply chain operations, including their owned distribution center as well as third party receiving and distribution facilities, there is a risk that any disruptions to the Debtors’ supply chain could negatively impact the Debtors’ business, results of operations, cash flows and financial condition;

because the Debtors’ business is intensely competitive, a number of different competitive factors, including increased operational efficiencies of competitors, competitive pricing strategies or continued and prolonged promotional activity by competitors, expansion of existing competitors or entry of new competitors into the market, or adoption of innovative store formats or retail sales methods by competitors, could have a material adverse effect on the Debtors’ business, results of operations, cash flows and financial condition;

because the Debtors rely on information and technology systems and technologies, there is a risk that damage to, failure of, or other disruptions in computer networks and information systems, including the point-of-sale systems in the Debtors’ stores, data centers that process transactions, and various software applications used in the Debtors’ operations, could result in data loss, misstatements in financial statements, business disruptions, or loss of customer confidence, which could have a material adverse effect on the Debtors’ business, results of operations, cash flows and financial condition;

because the inventory sold in the Debtors’ stores must be transported from distant locations, the Debtors’ business is sensitive to increases in fuel prices and changes in the transportation industry, including driver shortages and government regulations; as a result, there is a risk that increases in fuel costs or changes in the transportation industry could increase freight costs and thereby increase the Debtors’ cost of sales;

because most of the Debtors’ merchandise (whether acquired by the Debtors’ domestically or internationally) is manufactured and imported from overseas, there is a risk that political, social, economic, regulatory, or other changes in overseas markets, or other disruptions, including disruptions caused by war, foreign currency exchange rates, natural disasters, raw materials shortages, disputes, tariffs, or any number of causes, could increase prices, reduce availability of merchandise, or otherwise negatively affect the Debtors’ ability to obtain merchandise in the amount and quality necessary for the Debtors’ to profitably operate their business;

because the Debtors’ have hundreds of leases, there is a risk that if the Debtors are not able to obtain new leases upon the expiration of existing leases, comply with existing lease obligations, obtain appropriately priced leases in more favorable locations, or obtain certain modifications to leases, that the Debtors’ business, results of operations, cash flows and financial condition could be negatively impacted;

because the Debtors rely on quality employees to effectively run their business, there is a risk that the Debtors will be unable to attract and retain qualified employees which could occur if the Debtors’ cost of retaining labor increase due to government regulations (including, without limitation, minimum wage laws, overtime laws, laws relating to the provision of employee benefits etc.), if the Debtors’ suffer reputational damage, if prospective employees are fearful to work during the COVID-19 pandemic, if employee morale decreases due to concerns relating to the Debtors’ Chapter 11 Cases etc.;

risks associated with changes to government regulations, tax laws, litigation risks from customers, employees, and vendors;

risks associated with theft and inventory shrinkage.

E. Risks Relating to the New Common Stock

Implied Valuation of the New Common Stock Not Intended to Represent the Trading Value of the New Common Stock

Nothing contained in the Plan or the Disclosure Statement is intended to establish the trading value of the New Common Stock issuable pursuant to the Plan, including the New Common Stock issuable through the Rights Offering, and the value of such Interests is subject to additional uncertainties and contingencies, all of which are difficult to predict. Actual market prices of such securities on the Effective Date, and thereafter, will depend upon, among other things: (i) prevailing interest rates; (ii) conditions in the financial markets; (iii) the anticipated initial securities holdings of prepetition creditors, some of whom may prefer to liquidate their investment rather than hold it on a long-term basis; and (iv) other factors that generally influence the prices of securities. The actual market price of the New Common Stock is likely to be volatile. Many factors, including factors unrelated to the Reorganized Debtors’ actual operating performance and other factors not possible to predict, could cause the market price of the New Common Stock to rise and fall.

Dividends

Reorganized Tuesday Morning Corporation may not pay any dividends on the New Common Stock in order to retain any future cash flows for debt reduction and to support its operations. As a result, the value of the New Common Stock may depend entirely upon any future appreciation in the value of the New Common Stock. There is, however, no guarantee that the New Common Stock will appreciate in value or even maintain their initial post-Effective Date value.

The New Common Stock Is Subject to Dilution

The ownership percentage of the New Common Stock represented by the Tuesday Morning Corporation Interests on the Effective Date under the Plan will be subject to dilution by New Common Stock issued pursuant to the Plan, including the New Common Stock to be issued in the Rights Offering, the New Common Stock to be issued pursuant to the Management Incentive Plan, New Common Stock to be issued pursuant to existing obligations under the Tuesday Morning Corporation 2014 Long-Term Incentive Plan, or other securities that may be issued post-emergence.

A Liquid Trading Market for the New Common Stock May Not Develop

The Tuesday Morning Corporation Interests currently trade on the OTC Pink marketplace under the symbol “TUESQ”. The Company can provide no assurance that the New Common Stock will continue to trade on this market, whether broker-dealers will continue to provide public quotes of the New Common Stock on this market, whether the trading volume of the New Common Stock will be sufficient to provide for an efficient trading market or whether quotes for the New Common Stock will continue on this market in the future. While the Company intends to apply to relist the New Common Stock on a national securities exchange in the future, the Company makes no assurance that it will be able to obtain this listing or, even if the Company does obtain this listing, that liquid trading markets for shares of the New Common Stock will develop.

F. Inability to Obtain Exit Financing

There can be no certainty that the Debtors will be able to obtain the New Exit Financing in the form of the New ABL Credit Facility, the New Real Estate Credit Facility, and the Rights Offering. The New Exit Financing is subject to certain closing risks, and to the extent that the Debtors are unable to obtain New Exit Financing on suitable terms, the Debtors may be unable to consummate the Plan.

The Debtors May Not Be Able to Generate Sufficient Cash to Service All of Their Indebtedness

The Debtors’ ability to make scheduled payments on, or refinance their debt obligations, depends on the Reorganized Debtors’ financial condition and operating performance, which are subject to prevailing economic, industry, and competitive conditions and to certain financial, business, legislative, regulatory, and other factors beyond the Debtors’ control. The Debtors’ indebtedness will include the New ABL Credit Facility, the New Real Estate Credit Facility and the General Unsecured Notes. The Debtors may be unable to maintain a level of cash flow from operating activities sufficient to permit the Debtors to pay the principal, premium, if any, and interest on their indebtedness.

H. Certain Tax Implications of the Plan

Holders of Claims should carefully review Article XV “Certain United States Federal Income Tax Consequences of the Plan” to determine how the tax implications of the Plan may affect such holders.

ARTICLE XV.
CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE PLAN

The following is a summary of certain U.S. federal income tax consequences of the Plan to us and certain Holders of Claims. This summary is based on the Internal Revenue Code of 1986, as amended (the “Tax Code”), Treasury regulations promulgated thereunder, and administrative and judicial interpretations and practice, all as in effect on the date of this Disclosure Statement and all of which are subject to change, with possible retroactive effect. Due to the lack of definitive judicial and administrative authority in a number of federal income taxation areas, substantial uncertainty may exist with respect to some of the tax consequences described below. No opinion of counsel has been obtained, and we do not intend to seek a ruling from the Internal Revenue Service (the “IRS”) as to any of the tax consequences of the Plan discussed below. Events occurring after the date of this Disclosure Statement, including changes in law and changes in administrative positions, could affect the U.S. federal income tax consequences of the Plan. No representations are being made regarding the particular tax consequences of the confirmation and consummation of the Plan to us or any Holder of a Claim. There can be no assurance that the IRS will not challenge one or more of the tax consequences of the Plan described below.

This summary does not apply to Holders of Claims that are otherwise subject to special treatment under U.S. federal income tax law (including, for example, banks, governmental authorities or agencies, financial institutions, insurance companies, entities classified as partnerships for U.S. federal income tax purposes, tax-exempt organizations, brokers and dealers in securities, regulated investment companies, real estate investment trusts, small business investment companies, employees, persons who receive their Claims pursuant to the exercise of an employee stock option or otherwise as compensation, persons holding Claims that are a hedge against, or that are hedged against, currency risk or that are part of a straddle, constructive sale, or conversion transaction and regulated investment companies). For purposes of this tax disclosure, it is assumed U.S. Holders’ Claims arose and are held in the ordinary course of the Holder’s trade or business, and such Claims are not held as capital assets. This summary does not purport to cover all aspects of U.S. federal income taxation that may apply to us and Holders of Claims based upon their particular circumstances. Further, this summary does not address Holders that hold multiple Claims. Additionally, this summary does not discuss any tax consequences that may arise under any laws other than U.S. federal income tax law, including under state, local, estate, gift, non-U.S. or any other applicable tax law.

For purposes of this summary, a “U.S. Holder” means a Holder of a Claim that is, for U.S. federal income tax purposes: (i) an individual who is a citizen or resident of the United States; (ii) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust, if (a) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of the substantial decisions of such trust, or (b) it has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person. A “Non-U.S. Holder” means a Holder of a Claim that is not a U.S. Holder and is, for U.S. federal income tax purposes, an individual, corporation (or other entity treated as a corporation for U.S. federal income tax purposes), estate or trust.

If an entity classified as a partnership for U.S. federal income tax purposes holds a Claim, the U.S. federal income tax treatment of a partner (or other owner) of the entity generally will depend on the status of the partner (or other owner) and the activities of the entity. Such partner (or other owner) should consult its tax advisor as to the tax consequences of the Plan.

The U.S. federal income tax consequences of the Plan are complex. The following summary is for informational purposes only and is not a substitute for careful tax planning and advice based on the individual circumstances pertaining to a Holder of a Claim. All Holders of Claims are urged to consult their own tax advisors as to the consequences of the restructuring described in the Plan under federal, state, local, non-U.S. and any other applicable tax laws.

A. U.S. Federal Income Tax Consequences Under the Plan

Tuesday Morning Corporation and its corporate subsidiaries (the “Tuesday Morning Consolidated Group”) estimate that they have incurred significant net operating losses (“NOLs”), amounting to approximately $139.6 million as of the end of the Debtors’ fiscal year 2020; however, the Tuesday Morning Consolidated Group’s NOLs are subject to audit and possible challenge by the IRS. Accordingly, the amount of the Tuesday Morning Consolidated Group’s NOLs ultimately may vary from the amount set forth above.

Cancellation of Indebtedness Income

Generally, a corporation will recognize cancellation of debt (“COD”) income upon satisfaction of its outstanding indebtedness for total consideration less than the amount of such indebtedness. The amount of COD income, in general, is the excess of (a) the adjusted issue price of the indebtedness satisfied, over (b) the sum of (x) the amount of cash paid, and (y) the issue price of any new indebtedness of the taxpayer issued and (z) the fair market value of any other new consideration (including stock of the debtor) given in satisfaction of such indebtedness at the time of the exchange.

A corporation will not, however, be required to include any amount of COD income in gross income if the corporation is a debtor under the jurisdiction of a court in a case under chapter 11 of the Bankruptcy Code and the discharge of debt occurs pursuant to that proceeding (the “Section 108(a) Exception”). Under Tax Code section 108(b), a debtor that excludes COD income from gross income under the Section 108(a) Exception generally must reduce certain tax attributes by the amount of the excluded COD income. In general, tax attributes are reduced in the following order: (a) NOLs and NOL carryforwards, (b) general business and minimum tax credit carryforwards, (c) capital loss carryforwards, (d) basis of the debtor’s assets, and (e) foreign tax credit carryforwards. A debtor’s tax basis in its assets generally may not be reduced below the amount of liabilities remaining immediately after the discharge of indebtedness. NOLs for the taxable year of the discharge and NOL carryovers to such year generally are the first attributes subject to reduction. However, a debtor may elect under Tax Code section 108(b)(5) (the “Section 108(b)(5) Election”) to reduce its basis in its depreciable property first. If a debtor makes a Section 108(b)(5) Election, the limitation on reducing the debtor’s basis in its assets below the amount of its remaining liabilities does not apply.

COD income is determined on a company-by-company basis. If a debtor with excluded COD income is a member of a consolidated group, Treasury regulations address the application of the rules for the reduction of tax attributes (the “Consolidated Attribute Reduction Rules”). If the debtor is a member of a consolidated group and is required to reduce its basis in the stock of another group member, a “look-through rule” generally requires a corresponding reduction in the tax attributes of the lower-tier member. If the amount of a debtor’s excluded COD income exceeds the amount of attribute reduction resulting from the application of the foregoing rules, certain other tax attributes of the consolidated group may also be subject to reduction. Finally, if the attribute reduction is less than the amount of COD income recognized by a member and there is an excess loss account (an “ELA”) (i.e., negative basis in stock) in the stock of the member that recognizes such COD income, the Tuesday Morning Consolidated Group will recognize taxable income to the extent of the lesser of such ELA or the amount of the COD income that was not offset by tax attribute reduction.

The Debtors may realize some COD income as a result of the Plan or other transactions engaged in during the previous year. Pursuant to the Section 108(a) Exception, the Debtors do not expect to include any COD income in gross income. Instead, the Debtors will be required to reduce our tax attributes in accordance with the Consolidated Attribute Reduction Rules after determining the taxable income (or loss) of the Tuesday Morning Consolidated Group for the taxable year of discharge.

Under the Consolidated Attribute Reduction Rules, excluded COD income will be applied to reduce NOLs, and other tax attributes, including tax basis in assets.

Limitations on NOLs and Other Tax Attributes

Under Tax Code section 382, if a “loss corporation” (generally, a corporation with NOLs and/or built-in losses) undergoes an “ownership change” (which generally is a more than 50 percentage point shift in the ownership of the Debtors’ stock held by certain shareholders within a three-year testing period) the amount of its NOLs (including losses in the current year and certain losses or deductions which are “built-in,” i.e., economically accrued but unrecognized as of the date of the ownership change) that may be utilized to offset its future taxable income generally are subject to an annual limitation as to their use (the “Section 382 Limitation”). Similar rules apply to a corporation’s capital loss carryforwards and tax credits.

Currently, it is unclear if the issuance of the New Common Stock, including shares issuable pursuant to the Rights Offering, in exchange for the Existing Common Stock will result in an ownership change for purposes of Tax Code section 382. However, if the Debtors’ NOLs were subject to a Section 382 Limitation, the rules set forth immediately below under subsections (a) – (c) would then apply. Any such Section 382 Limitation would apply in addition to, and not in lieu of, any other Section 382 Limitation that may already be in effect and the attribute reduction that may result from the Debtors’ recognition of COD.

(a)

General Section 382 Limitation

In general, the amount of the Section 382 Limitation to which a corporation that undergoes an ownership change will be subject is equal to the product of (i) the fair market value of the stock of the loss corporation (or, in the case of a consolidated group, generally the stock of the common parent) immediately before the ownership change (with certain adjustments) and (ii) the “long term tax exempt rate” in effect for the month in which the ownership change occurs. If a corporation (or a consolidated group) in bankruptcy undergoes an ownership change pursuant to a confirmed bankruptcy plan, the fair market value of the stock of the corporation is determined immediately after (rather than before) the ownership change, after giving effect to the discharge of creditors’ claims but subject to certain adjustments. In no event, however, can the stock value for this purpose exceed the pre-change gross value of the corporation’s assets. If a loss corporation has a net unrealized built-in gain (“NUBIG”) immediately prior to the ownership change, the annual limitation may be increased as certain gains are recognized during the five-year period beginning on the date of the ownership change (the “Recognition Period”). If a loss corporation has a net unrealized built-in loss (“NUBIL”) immediately prior to the ownership change, certain losses recognized during the Recognition Period also would be subject to the annual limitation and thus may reduce the amount of pre-change NOLs that could be used by the loss corporation during the Recognition Period.

Any portion of the Section 382 Limitation that is not used in a given year may be carried forward, thereby adding to the annual limitation for the subsequent taxable year. However, if the corporation (or the consolidated group) does not continue its historic business or use a significant portion of its historic assets in a new business for at least two years after the ownership change, unless the corporation qualifies for a certain bankruptcy exception discussed below, the annual limitation resulting from the ownership change is reduced to zero, thereby precluding any utilization of the corporation’s pre-change losses, absent any increases due to recognized built-in gains (“RBIGs”). In addition, if a redemption or other corporate contraction occurs in connection with the ownership change of the loss corporation (or the consolidated group), or if the loss corporation (or the consolidated group) has substantial nonbusiness assets, the annual limitation is reduced to take the redemption, other corporate contraction or nonbusiness assets into account. Furthermore, if the corporation (or the consolidated group) undergoes a second ownership change, the second ownership change may result in a lesser (but never a greater) annual limitation with respect to any losses that existed at the time of the first ownership change.

(b)

Built-in Gains and Losses

A NUBIG or NUBIL is generally the difference between the fair market value of a loss corporation’s assets and its tax basis in the assets, subject to a statutorily defined threshold amount. The amount of a loss corporation’s NUBIG or NUBIL must be adjusted for built-in items of income or deduction that would be attributable to a pre-change period if recognized during the Recognition Period. The NUBIG or NUBIL of a consolidated group generally is calculated on a consolidated basis, subject to special rules.

If a loss corporation has a NUBIG immediately prior to an ownership change, any RBIGs will increase the annual limitation in the taxable year the RBIG is recognized. An RBIG generally is any gain (and certain income) with respect to an asset held immediately before the date of the ownership change that is recognized during the Recognition Period to the extent of the fair market value of the asset over its tax basis immediately prior to the ownership change. However, the aggregate amount of all RBIGs that are recognized during the Recognition Period may not exceed the NUBIG. On the other hand, if a loss corporation has a NUBIL immediately prior to an ownership change, any recognized built-in losses (“RBILs”) will be subject to the annual limitation in the same manner as pre-change NOLs. An RBIL generally is any loss (and certain deductions) with respect to an asset held immediately before the date of the ownership change that is recognized during the Recognition Period to the extent of the excess of the tax basis of the asset over its fair market value immediately prior to the ownership change. However, the aggregate amount of all RBILs that are recognized during the Recognition Period may not exceed the NUBIL. RBIGs and RBILs may be recognized during the Recognition Period for depreciable and amortizable assets that are not actually disposed.

(c)

Special Bankruptcy Exception

An exception to the foregoing Section 382 Limitation rules generally applies when existing shareholders and “qualified creditors” of a debtor corporation under the jurisdiction of a court in a chapter 11 case receive, in respect of their claims or interests, at least 50% of the vote and value of the stock of the reorganized debtor (or a controlling corporation if also in chapter 11) pursuant to a confirmed plan (the “Section 382(l)(5) Exception”). Under the Section 382(l)(5) Exception, a debtor’s pre-change losses are not limited on an annual basis, but instead NOL carryforwards will be reduced by the amount of any interest deductions claimed during the three taxable years preceding the effective date of the plan of reorganization, and during the part of the taxable year prior to and including the effective date of the plan of reorganization, in respect of all debt converted into stock in the reorganization. Also, if a debtor utilizes the Section 382(l)(5) Exception, then the debtor may not undergo another change of ownership within two years of the ownership change to which the Section 382(l)(5) Exception applies, otherwise, its NOL carryforward will be effectively eliminated.

The Debtors’ believe that even if the issuance of the New Common Stock, including shares issuable pursuant to the Rights Offering, in exchange for the Existing Common Stock does result in an ownership change for purposes of Tax Code section 382, based on the Debtors circumstances, (i) the Section 382(l)(5) Exception will apply to them, (ii) under the Section 382(l)(5) Exception the Debtors’ NOL carryforwards will not subject to any reduction in the reorganization, and (iii) the Debtors would immediately implement a plan that prevents the occurrence of another ownership change within two years of the Effective Date which is necessary to protect the Debtors’ NOL carryforwards.

B. Federal Income Tax Consequences to Holders of Claims

The U.S. federal income tax consequences of the Plan to U.S. Holders of Claims and Interests (including the character, amount and timing of income, gain or loss recognized) generally will depend upon, among other factors: (i) the manner in which the U.S. Holder acquired a Claim or Interest; (ii) the length of time a Claim or Interest has been held; (iii) whether a Claim or Interest was acquired at a discount; (iv) whether the U.S. Holder has taken a bad debt deduction in the current or prior years; (v) whether the U.S. Holder has previously included accrued but unpaid interest with respect to a Claim or Interest; (vi) the U.S. Holder’s method of tax accounting; and (vii) whether the Debtors’ reorganize as is expected. For purposes of this tax disclosure, it is assumed U.S. Holders’ Claims arose and are held in the ordinary course of the Holder’s trade or business, and such Claims are not held as capital assets. In any event, U.S. Holders of Claims are urged to consult their tax advisors for information that may be relevant to their specific situation and circumstances and the particular tax consequences to such Holders as a result thereof.

Treatment of U.S. Holders of General Unsecured Claims

Under the terms of the Plan, each U.S. Holder of a General Unsecured Claim will receive on the Effective Date in satisfaction of its General Unsecured Claim its Pro Rata share of cash from the General Unsecured Cash Fund and, if applicable, its Pro Rata share of the General Unsecured Notes. The U.S. Holder should recognize ordinary income (or loss) equal to the difference between, if any, the cash received over seventy percent (70%) or (100% if such Holder does not receive any General Unsecured Notes) of the Holder’s adjusted tax basis in its Claim (provided the U.S. Holder also receives its Pro Rata share of the General Unsecured Notes). With respect to the receipt by the U.S. Holder of General Unsecured Notes, if any, the Holder likely would not recognize income or loss until the General Unsecured Notes ultimately are paid, although that is not free from doubt, particularly if the General Unsecured Notes are readily tradeable. A U.S. Holder’s tax basis in the General Unsecured Bond would equal thirty percent (30%) of the Holder’s adjusted tax basis in its Claim.

Treatment of U.S. Holders of Tuesday Morning Corporation Interests

Under the Plan, each Holder of Tuesday Morning Corporation Interests will have its Tuesday Morning Corporation Interests Reinstated. There will be no tax effect to U.S. Holders of retaining their Tuesday Morning Corporation Interests.

C. Other Considerations for U.S. Holders – Accrued Interest

A portion of the consideration received by U.S. Holders of Allowed Claims may be attributable to accrued but untaxed interest on such Claims. Any such amount should be taxable to that U.S. Holder as interest income if such accrued interest has not been previously included in the U.S. Holder’s gross income for U.S. federal income tax purposes.

If the fair value of the consideration is not sufficient to fully satisfy all principal and interest on the Claims, the extent to which such consideration will be attributable to accrued but untaxed interest is uncertain. Under the Plan, the aggregate consideration to be distributed to U.S. Holders of Allowed Claims in each Class will be allocated first to the principal amount of Allowed Claims, with any excess allocated to untaxed interest that accrued on such Claims, if any. Certain legislative history indicates that an allocation of consideration as between principal and interest provided in a chapter 11 plan of reorganization is binding for U.S. federal income tax purposes, while certain Treasury regulations treat payments as allocated first to any accrued but untaxed interest. The IRS could take the position that the consideration received by U.S. Holders should be allocated in some way other than as provided in the Plan. U.S. Holders of Allowed Claims should consult their own tax advisors regarding the proper allocation of the consideration received by them under the Plan between principal and accrued but untaxed interest.

D. Information Reporting and Back-Up Withholding

The Debtors will withhold all amounts required by law to be withheld from payments under the Plan. The Debtors will comply with all applicable reporting requirements of the Tax Code. In general, information reporting requirements may apply to distributions or payments made to a holder of a Claim under the Plan. In addition, backup withholding of taxes will generally apply to payments in respect of an Allowed Claim under the Plan unless, in the case of a U.S. holder, such U.S. Holder provides a properly executed IRS Form W-9 or, in the case of Non-U.S. Holder, such Non-U.S. Holder provides a properly executed applicable IRS Form W-8BEN or W-8BEN-E (or otherwise establishes such Non-U.S. holder’s eligibility for an exemption.

Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a holder’s U.S. federal income tax liability, and a holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing an appropriate claim for refund with the IRS (generally, a federal income tax return).

In addition, from an information reporting perspective, the Treasury Regulations generally require disclosure by a taxpayer on its U.S. federal income tax return of certain types of transactions in which the taxpayer participated, including, among other types of transactions, certain transactions that result in the taxpayer’s claiming a loss in excess of specified thresholds. Holders are urged to consult their tax advisors regarding these regulations and whether the transactions contemplated by the Plan would be subject to these regulations and require disclosure on the holders’ tax returns.

Consequences of Ownership and Disposition of the Reinstated Tuesday Morning Corporation Interests

Cash distributions made by the Reorganized Debtors in respect of Reinstated Tuesday Morning Corporation Interests will constitute a taxable dividend, when such distribution is actually or constructively received, to the extent such distribution is paid out of the current or accumulated earnings and profits of the Reorganized Debtors (as determined under U.S. federal income tax principles). To the extent the amount of any distribution received by a U.S. Holder in respect of Reinstated Tuesday Morning Corporation Interests exceeds the current or accumulated earnings and profits of the Reorganized Debtors, the distribution (1) will be treated as a non-taxable return of the U.S. Holder’s adjusted tax basis in the Reinstated Tuesday Morning Corporation Interests and (2) thereafter will be treated as capital gain.

Sales or other taxable dispositions by U.S. Holders of Reinstated Tuesday Morning Corporation Interests generally will give rise to gain or loss equal to the difference between the amount realized on the disposition and the U.S. Holder’s tax basis in such Reinstated Tuesday Morning Corporation Interests. In general, gain or loss recognized on the sale or exchange of Reinstated Tuesday Morning Corporation Interests will be capital gain or loss and, if the U.S. Holder’s holding period for such Reinstated Tuesday Morning Corporation Interests exceeds one year, will be long-term capital gain or loss. Certain U.S. Holders, including individuals, are eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains realized. The deduction of capital losses against ordinary income is subject to limitations under the Tax Code.

F. U.S. Federal Income Tax Consequences for Non-U.S. Holders

The rules governing U.S. federal income taxation of a Non-U.S. Holder are complex. Non-U.S. Holders should consult with their own tax advisors to determine the effect of U.S. federal, state, and local tax laws, as well as any other applicable non-U.S. tax laws and/or treaties, with regard to their participation in the transactions contemplated by the Plan and their ownership of Claims or Interests.

NO STATEMENT IN THIS DISCLOSURE STATEMENT SHOULD BE CONSTRUED AS LEGAL OR TAX ADVICE. THE DEBTORS AND THEIR PROFESSIONALS DO NOT ASSUME ANY RESPONSIBILITY OR LIABILITY FOR THE TAX CONSEQUENCES THE HOLDER OF A CLAIM MAY INCUR AS A RESULT OF THE TREATMENT AFFORDED ITS CLAIM UNDER THE PLAN AND DO NOT REPRESENT WHETHER THERE COULD BE ADDITIONAL TAX EXPOSURE TO THEMSELVES OR THEIR NON-DEBTOR AFFILIATES AS A RESULT OF THE PLAN.

ARTICLE XVI.
SECURITIES LAW CONSIDERATIONS

A. Transfer Restrictions and Consequences under Federal Securities Law

The General Unsecured Notes, the New Common Stock and Share Purchase Rights to be issued in exchange for the Existing Common Stock, and the Rights Offering Common Stock will not have been the subject of a registration statement filed with the SEC under the Securities Act or any securities regulatory authority of any state under any state securities law. New Common Stock issued pursuant to the Management Incentive Plan will be issued pursuant to a registration statement or an exemption from registration under the Securities Act and applicable state securities laws. The Plan has not been approved or disapproved by the SEC or any state regulatory authority and neither the SEC nor any state regulatory authority has passed upon the accuracy or adequacy of the information contained in this Disclosure Statement or the Plan. Any representation to the contrary is a criminal offense. Neither this Disclosure Statement nor the Plan was required to be prepared in accordance with federal or state securities laws or other applicable nonbankruptcy law. Neither this Disclosure Statement nor the solicitation contemplated herein constitutes an offer to sell or the solicitation of an offer to buy securities in any state or jurisdiction in which such offer or solicitation is not authorized. Making investment decisions based on the information contained in this Disclosure Statement or the Plan is therefore highly speculative

Bankruptcy Code § 1145 generally exempts from registration under the Securities Act the offer or sale under a chapter 11 plan of a security of the debtor, of an affiliate participating in a joint plan with the debtor, or of a successor to the debtor under a plan, if such securities are offered or sold in exchange for a Claim against, or equity interest in, such debtor or affiliate. In reliance upon this exemption, (1) the New Common Stock and Eligible Offeree Share Purchase Rights issued to Eligible Offerees in exchange for their Existing Common Stock, (2) the Eligible Offeree Rights Offering Common Stock issuable in the Eligible Offeree Rights Offering, and (3) the General Unsecured Notes issued under the Plan generally will be exempt from the registration requirements of the Securities Act, and state and local securities laws.

The New Common Stock, Eligible Offeree Rights Offering Common Stock, and the General Unsecured Notes issued pursuant to the § 1145 exemption may be resold without registration under the Securities Act or other federal securities laws pursuant to the exemption provided by section 4(a)(1) of the Securities Act, unless the holder is an “underwriter” with respect to such securities, as that term is defined in Bankruptcy Code § 1145(b), subject to any restrictions set forth in the Reorganized Debtors’ New Organizational Documents. In addition, such § 1145 exempt securities generally may be resold without registration under state securities laws pursuant to various exemptions provided by the respective laws of the several states.

In any case, recipients of new securities issued under the Plan are advised to consult with their own legal advisors as to the securities laws governing the transferability of any such securities and the availability of any such exemption from registration under state law in any given instance and as to any applicable requirements or conditions to such availability.

Bankruptcy Code § 1145(b) defines “underwriter” for purposes of the Securities Act as one who (i) purchases a Claim with a view to distribution of any security to be received in exchange for the Claim other than in ordinary trading transactions, (ii) offers to sell securities issued under a plan for the holders of such securities, (iii) offers to buy securities issued under a plan from persons receiving such securities, if the offer to buy is made with a view to distribution, or (iv) is an issuer, as used in section 2(a)(11) of the Securities Act, with respect to such issuer of the securities, which includes control persons of the issuer.

“Control,” as defined in Rule 405 of the Securities Act, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

Notwithstanding the foregoing, persons deemed to be “underwriters” may be able to resell securities without registration pursuant to Rule 144 under the Securities Act. Generally, Rule 144 would permit the public sale of securities if the required holding period has been met and, under certain circumstances, current information regarding the issuer is publicly available and volume limitations, manner of sale requirements and certain other conditions are met.

In view of the complex nature of the question of whether a particular Person may be an “underwriter,” the Debtors make no representations concerning the right of any Person to freely resell securities issued under the Plan. Accordingly, the Debtors recommend that potential recipients of such securities consult their own counsel concerning their ability to freely trade such securities.

Should the Reorganized Debtors elect, on or after the Effective Date, to reflect all or any portion of the ownership of the General Unsecured Notes, the New Common Stock and Eligible Offeree Share Purchase Rights issuable in exchange for the Existing Common Stock, or the Eligible Offeree Rights Offering Common Stock through the facilities of DTC, the Reorganized Debtors shall not be required to provide any further evidence other than the Plan or Final Order with respect to the treatment of such applicable portion of such securities and such Plan or Final Order shall be deemed to be legal and binding obligations of the Reorganized Debtors in all respects.

B. Listing; SEC Filings

The Reorganized Tuesday Morning Corporation does not intend to withdraw the Section 12(g) Exchange Act registration of the Tuesday Morning Corporation Interests following the Effective Date of the Plan and intends to continue filing periodic reports with the SEC. The Tuesday Morning Corporation Interests currently trade on the OTC Pink marketplace under the symbol “TUESQ”. While the Company may apply to relist the Tuesday Morning Corporation Interests on a national securities exchange in the future, the Company makes no assurance that it will be able to obtain this listing or, even if the Company does obtain this listing, that liquid trading markets for shares of Tuesday Morning Corporation Interests will develop.

ARTICLE XVII.
CONCLUSION

This Disclosure Statement provides information regarding the Debtors’ bankruptcy and the potential benefits that might accrue to holders of Claims against and Interests in the Debtors under the Plan as proposed. The Plan is the result of extensive efforts by the Debtors and their advisors to provide the holders of Allowed Claims with a meaningful dividend and to preserve the Tuesday Morning Corporation Interests. The Debtors believe that the Plan is feasible and will provide each holder of a Claim or Interest against the Debtors with an opportunity to receive greater benefits than those that would be received by any other alternative. The Debtors, therefore, urge interested parties to vote in favor of the Plan.

Dated: November 4, 2020	TUESDAY MORNING CORPORATION
	on behalf of itself and its affiliated Debtors

	By:	/s/ Steven R. Becker
	Steven R. Becker
	Chief Executive Officer
	Tuesday Morning Corporation

[Signature Page to Disclosure Statement]

EXHIBIT 1 TO THE DISCLOSURE STATEMENT

CHAPTER 11 PLAN

EXHIBIT 2 TO THE DISCLOSURE STATEMENT

LIQUIDATION ANALYSIS

TUESDAY MORNING CORPORATION, et al.

LIQUIDATION ANALYSIS ¹

INTRODUCTION

Section 1129(a)(7) of the Bankruptcy Code (often called the "Best Interests Test"), requires that a Bankruptcy Court find, as a condition of confirmation, that the Chapter 11 plan provides, with respect to each class, that each holder of an Allowed Claim either (i) has accepted the plan of reorganization, or (ii) will receive or retain under the plan property of a value, as of the plan’s assumed effective date, that is not less than the value such non-accepting holders would receive or retain if the debtors were to be liquidated under chapter 7 of the Bankruptcy Code.

In determining whether the Best Interests Test has been met, the first step is to determine the dollar amount that would be generated from a hypothetical liquidation of the Debtors' assets under Chapter 7. The Debtors, with assistance of their restructuring advisor, have prepared this hypothetical Liquidation Analysis (the "Liquidation Analysis") in connection with the Disclosure Statement. The Liquidation Analysis reflects the estimated cash proceeds net of liquidation related costs that would be available to the Debtors' creditors if the Debtors were to be liquidated under Chapter 7 as an alternative to continued operation of the Debtors' businesses under the Plan. Accordingly, asset values discussed herein may be different than amounts referred to in the Plan. The Liquidation Analysis is based upon the assumptions discussed herein and in the Disclosure Statement.

UNDERLYING THE LIQUIDATION ANALYSIS ARE NUMEROUS ESTIMATES AND ASSUMPTIONS REGARDING LIQUIDATION THAT, ALTHOUGH DEVELOPED AND CONSIDERED REASONABLE BY DEBTORS' MANAGEMENT AND ITS ADVISORS, ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, REGULATORY AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES BEYOND THE CONTROL OF THE DEBTORS AND ITS MANAGEMENT. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE VALUES REFLECTED IN THIS LIQUIDATION ANALYSIS WOULD BE REALIZED IF THE DEBTORS WERE, IN FACT, LIQUIDATED, AND ACTUAL RESULTS COULD MATERIALLY DIFFER FROM THE RESULTS SET FORTH HEREIN.

GENERAL ASSUMPTIONS

Overview of the Liquidation Process

The Debtors prepared this Liquidation Analysis in connection with their solicitation of votes to accept or reject their Plan, which contemplates a reorganization of Tuesday Morning Corporation ("Tuesday Morning"), along with 6 of its direct and indirect subsidiaries (the "Debtor Subsidiaries") on a combined basis. Under the hypothetical Chapter 7 scenario in this Liquidation Analysis. Tuesday Morning and its Debtor Subsidiaries are collectively referred to as the "Chapter 7 Debtors".

In a hypothetical Chapter 7, a trustee (the "Chapter 7 Trustee") would be appointed to manage the Chapter 7 Debtors' affairs and to conduct a liquidation of the Chapter 7 Debtors' assets. The Chapter 7 Debtors' assets would be liquidated, rather than liquidating Tuesday Morning's equity interests in the Debtor Subsidiaries, in order to provide for a sale "free and clear" to purchasers. The Liquidation Analysis assumes that the Chapter 7 Debtors would be forced to cease substantially all operations in an orderly manner and use their cash position to liquidate their assets and pay claims in accordance with the priority of claims set forth in the Bankruptcy Code.

The basis of the Liquidation Analysis is the Debtors’ projected cash balance and assets as of October 31, 2020 (the “Conversion Date”) and the net costs to execute the administration of the wind down of the Debtors' estates. The Liquidation Analysis assumes that the Debtors would commence a Chapter 7 liquidation on or about the Conversion Date under the supervision of a single court appointed Chapter 7 trustee. The Chapter 7 trustee would oversee the Debtors’ inventory liquidation in addition to attempting to sell or otherwise monetize other assets owned by the Debtors to one or multiple buyers. During the first three months, the Debtors would complete going-out-of-business sales for all remaining store inventory, furniture, fixtures, and equipment (“FF&E”). After closing store sales are completed, the Debtors would primarily focus on monetizing and collecting other assets. Throughout the three month period following the Conversion Date, the Debtors would also be working on administrative activities, such as final creditor distributions needed to complete the wind down of the Estates. The Liquidation Analysis reflects the wind down and liquidation of substantially all of the Debtors’ assets and the distribution of available proceeds to holders of Allowed Claims during the period after the Conversion Date.

Dependence on Assumptions

The Liquidation Analysis depends on a number of estimates and assumptions. Although developed and considered reasonable by the management and the restructuring advisor of the Debtors, the assumptions are inherently subject to significant economic, business, regulatory and competitive uncertainties and contingencies beyond the control of the Debtors or their management. The Liquidation Analysis is also based on the Debtors’ best judgment of how numerous decisions in the liquidation process would be resolved. Accordingly, there can be no assurance that the values reflected in the Liquidation Analysis would be realized if the Debtors were, in fact, to undergo such a liquidation and actual results could vary materially and adversely from those contained herein.

PAGE 1 OF 6

Dependence on Balance Sheet Forecast

This Liquidation Analysis contains numerous estimates that are under review and remains subject to further legal and accounting analysis.

Hypothetical Liquidation Period

The Liquidation Analysis assumes an expedited, but orderly, wind-down of the Debtors' operations to maximize recovery values. The Chapter 7 Debtors assume the majority of the wind-down to be accomplished and the liquidation to take up to three months to be fully completed. The estimated length of the liquidation is based generally on the observed timeline for the first and second wave of store closing sales conducted at the onset of the Debtors' Chapter 11 cases. Both waves of the Debtors' store closing sales executed between the months of June and August 2020 were completed in approximately ten weeks. The timeline for closing sales in the hypothetical liquidation period of this analysis have been adjusted to account for the substantial increase in the number of stores to be liquidated relative to both waves of initial store closings and the potential for unforeseen risks and uncertainties related to the COVID-19 pandemic.

Estimate of Net Proceeds

The estimated cash proceeds that could be realized in a liquidation are approximated by evaluating the Chapter 7 Debtors' assets and the likely ranges of recoverability under an expedited hypothetical liquidation by the Chapter 7 Trustee. The Chapter 7 Debtors' assets primarily consist of (i) cash and cash equivalents, (ii) inventory, (iii) property and equipment assets, and (iv) additional operating assets such as prepaid expenses and other current assets. The bases for net proceeds estimated in the Liquidation Analysis are discussed more fully in the specific Footnotes accompanying this analysis.

For the purposes of the Liquidation Analysis, the real estate property assets included in the analysis are based on independent third-party appraisals of the Debtors' owned real estate properties completed in August 2020 and considering market conditions at this time, including the economic impacts of the Covid-19 pandemic.

Estimate of Costs

The estimated costs that would be incurred by the Chapter 7 Trustee to execute the hypothetical liquidation plan consist primarily of (i) the statutory fee of 3% of distributable assets paid for the services of the Chapter 7 Trustee, (ii) estimated commissions of 1.5% of realized closing store sales amounts owed to liquidating agents, (iii) super-priority claims arising from unpaid fees owed to Restructuring Professionals incurred during the Debtors' Chapter 11 cases and prior to the Chapter 7 conversion, and (iv) the fees and expenses of the Chapter 7 Trustee's legal and financial restructuring professionals retained during the pendency of the Chapter 7 liquidation. As applicable, these costs are offset by any interim free cash flows generated during the course of the liquidation. In a Chapter 7 case, the wind-down expenses may be greater or less than the estimated amounts presented. Such expenses are dependent on, among other things, the length of time required to conduct the liquidation and related wind-down.

Distribution of Net Proceeds

The proceeds available represent the sum of the disposition of the Chapter 7 Debtors' estimated assets and cash at the commencement of the hypothetical Chapter 7 liquidation.

Available proceeds from the liquidation of assets and cash would first be applied to the payment of post petition Administrative Claims (first claims arising from the wind-down of the Chapter 7 Debtors' business during the Chapter 7 liquidation process and thereafter to any post petition expenses associated with the Chapter 11 reorganization process). Following the payment of Administrative Claims, net proceeds attributable to the liquidation of the Chapter 7 Debtors' assets would first be applied to any claims secured by the Chapter 7 Debtors' various assets. Remaining liquidated proceeds and cash, if any, after full satisfaction of secured claims and administrative and priority claims would be applied to satisfaction the specific Debtor's unsecured claims ("Unsecured Claims"), which consist of General Unsecured Claims and any additional unsecured claims that arise in a Chapter 7 liquidation.

To the extent that the Debtors have sufficient liquidated proceeds and cash to satisfy all Administrative, Secured and Unsecured claims against it, net remaining unencumbered cash is assumed to be utilized to satisfy obligations of Equity Interests in accordance with the priority code set forth in the Bankruptcy Code and as described above.

Any secured claims that are not satisfied by the liquidation of the underlying collateral securing the claims would represent an unsecured deficiency claim.

The following table summarizes the estimated proceeds that would be available for distribution to the Chapter 7 Debtors' creditors and equity interest holders in a hypothetical liquidation of the estates under Chapter 7 of the Bankruptcy Code. The estimated recoveries do not reflect any potential negative impact on the distributable value available to the Chapter 7 Debtors' creditors on account of any potential unknown and contingent liabilities. Additional assumptions with respect to the Liquidation Analysis are provided in the accompanying footnotes to this table.

Notes

1 - Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Plan.

PAGE 2 OF 6

TUESDAY MORNING CORPORATION, et al.

HYPOTHETICAL LIQUIDATION ANALYSIS

(Amounts in $US Millions)

				% Recovery						Liquidation Proceeds
	Balance			Low			High			Low			High			NOTE
ASSET LIQUIDATION PROCEEDS
Cash and Cash Equivalents	$	16.7			100	%		100	%	$	16.7		$	16.7			1
Cash in Store Tills		0.4			80	%		100	%		0.3			0.4			2
Credit Card Receivables		4.0			90	%		100	%		3.6			4.0			3
Inventory / Going Out of Business Sales Proceeds		83.1			120	%		140	%		99.7			116.3			4
Dallas Real Estate		53.2			75	%		100	%		39.9			53.2			5
Property, Plant and Equipment Assets		45.1			6	%		10	%		2.7			4.5			6
Prepaid Expenses		4.1			10	%		30	%		0.4			1.2			7
Other Assets		7.5			10	%		30	%		0.8			2.3			8
Preference Recoveries		36.0			2	%		10	%		0.7			3.6			9
Proceeds Available for Post-Petition Administrative Claims	$	250.0								$	164.8		$	202.2

LESS: WIND-DOWN COSTS:

Operating Expenses: Merchandise	$	(34.5	)								(34.5	)		(34.5	)		10
Operating Expenses: Payroll and Benefits											(27.3	)		(20.9	)		11
Operating Expenses: Rent											(18.5	)		(12.3	)		12
Operating Expenses: Occupancy Costs, Freight and Other											(13.1	)		(11.8	)		13
Other Costs of Going Out of Business Sales											(10.5	)		(6.3	)		14
Unpaid Pre-Conversion and Wind-Down Professional Fees		(10.5	)								(12.6	)		(8.4	)		15
Chapter 7 Trustee Fees											(6.1	)		(4.9	)		16
Wind-down Professionals Costs		(0.8	)								(0.8	)		(0.8	)		17
Sales Taxes											(8.4	)		(7.2	)		18
Gift Card Realization		(1.1	)								(1.1	)		0.0			19
Proceeds Available for Allocation After Post-Petition Administrative Claims										$	31.9		$	95.0

DISTRIBUTION OF NET LIQUIDATION PROCEEDS TO CREDITORS

			Recovery Estimate
	Balance		Low			High			NOTE
LIQUIDATION CLAIMS

Secured Claims									20
Existing First Lien Credit Facility Claim		0.1		(0.1	)		(0.1	)
Other Secured Claims		0.2		(0.2	)		(0.2	)
Total Secured Claims		0.3		(0.3	)		(0.3	)
Estimated Recovery %				100	%		100	%

Net Proceeds Available for Administrative/Priority Claims			$	31.6		$	94.7

Administrative and Priority Claims									21
Administrative Claims		6.5		(7.5	)		(5.5	)
Priority Claims		0.5		(0.5	)		(0.5	)
WARN Act Claims		9.3		(9.3	)		(6.7	)	22
Total Administrative and Priority Claims		16.3		(17.3	)		(12.7	)
Estimated Recovery %				100	%		100	%

Cash Available for Unsecured Claims Distribution			$	14.4		$	82.0

General Unsecured Claims									23
Trade Claims		90.7		(90.7	)		(90.7	)
Lease Rejection Claims		119.3		(119.3	)		(119.3	)
Preference Action Claims		36.0		(5.4	)		(1.1	)	9
Severance Claims		8.0		(8.0	)		(8.0	)	24
Total GUC Claims		253.9		(223.3	)		(219.0	)
Estimated Recovery %				6	%		37	%

Cash Available for Distribution to Equity Holders			$	-		$	-		25

PAGE 3 OF 6

TUESDAY MORNING CORPORATION, et al.

FOOTNOTES TO THE HYPOTHETICAL LIQUIDATION ANALYSIS

PROCEEDS AVAILABLE FOR DISTRIBUTION

1 Cash and Cash Equivalents

Cash balance presented herein represents the projected balance as of the Conversion Date. The Liquidation analysis assumes 100% of recovery for cash in company bank accounts.

2 Cash in Store Tills

Amounts based on the Debtors' 9/30/2020 Balance Sheets. The Liquidation analysis assumes 100% recovery for cash in store tills for the High Case and 80% in the Low Case to reflect risks related to in-store cash control in an accelerated store closing scenario.

3 Credit Card Receivables

Credit Card Receivables include amounts due from customers for in-store sales. Estimated proceeds realized from credit card receivables under a liquidation are based on management's estimate of collectability.

4 Inventory / Going Out of Business Sales Proceeds

The Liquidation Analysis includes estimated inventory at cost as of the Conversion Date of $83.1 million across all debtor entities. Inventory is assumed to be sold "as is, where is" through orderly liquidations with recovery values and timelines based on third-party inventory appraisals, which were further adjusted, as appropriate, to reflect the potential adverse impact of the COVID-19 pandemic as well as the accelerated, simultaneous liquidation of all store inventories. Liquidation timelines herein range from eight to twelve weeks based on multiple characteristics, including brand, inventory mix, location of inventory, and expected sales penetration. Estimated recovery reflects the net orderly liquidation value ("NOLV") of the inventory, and accounts for costs related to selling through the inventory such as occupancy, payroll, liquidation fees, freight, and other general selling expenses (all of which are presented below as "Wind-down Costs"). The estimated recovery range on inventory is 120% to 140% of cost, or implied discounts of approximately 30% to 80% from blended average retail prices.

5 Dallas Real Estate

The Liquidation Analysis assumes that the Trustee would attempt to sell or otherwise monetize the remaining owned real property by the Debtors to one or multiple buyers. Debtor-owned real properties to be monetized in a hypothetical liquidation include the Dallas Headquarters and the Dallas Distribution Center. Other than the DIP Term Loan, there are no secured claims or mortgages against the owned properties. The assumed recovery range on owned property is based on third-party appraisals conducted in August 2020, which reflect “fair value” of the owned properties and are adjusted to reflect the forced sale in a compressed timeframe that would likely occur during a Chapter 7 liquidation.

6 Property, Plant and Equipment Assets

Amounts based on the Debtors' 9/30/2020 Balance Sheets. Property and equipment assets consist of buildings, land, distribution center equipment and machinery, leasehold improvements, store fixtures, FF&E, and information technology (“IT”). Leasehold improvements and IT assets are assumed to yield minimal recoveries in the range of 6-10% of net book value due to the accelerated wind-down, impacts of the Covid-19 pandemic and abundance of similar items that may be available in the market from other impaired retailers.

7 Prepaid Expenses

Amounts based on the Debtors' 9/30/2020 Balance Sheets. Prepaid expenses include prepayments for rent, supplies, insurance, payroll, taxes among other miscellaneous expenses. The Liquidation Analysis assumes no recovery on prepaid payroll. Prepaid rent and taxes assume no recovery as there are outstanding amounts owed to both landlords and governmental agencies. Prepaid supplies, insurance and other current assets assume 10% to 30% recovery based on the low likelihood of any return of cash from vendors and or on insurance policies. The blended recovery range on prepaid expenses is 10% to 30% of estimated book value.

8 Other Assets

Amounts based on the Debtors' 9/30/2020 Balance Sheets. Other Assets consist primarily of the Debtors' estimated Federal Income Tax receivable.

PAGE 4 OF 6

TUESDAY MORNING CORPORATION, et al.

FOOTNOTES TO THE HYPOTHETICAL LIQUIDATION ANALYSIS

	9	Preference Recoveries / Preference Action Claims
		Debtors have estimated Preference Recoveries based on analysis of the 90-Day Payments included in their Statements of Financial Affairs. Recovery ranges are based on estimated net amounts recovered, after related costs of collection which are assumed to be 33% of proceeds. Preference Recoveries would generate related General Unsecured Claims (at gross amounts recovered) and are presented as corresponding General Unsecured Claims below. Other Avoidance Actions, if any exist, have not been considered in this analysis. Any recoveries related to Other Avoidance Actions would increase the proceeds available for distribution presented herein.

	WIND-DOWN COSTS

	10	Operating Expenses: Merchandise
		Liquidating operating expenses related to merchandise consist of unpaid in-store, in-warehouse or in-transit inventory receipts. The merchandise operating expense in this analysis is based primarily on merchandise accounts payable as of the Conversion Date and includes an estimated balance for goods which have been received but not yet invoiced that may not be cancellable on a timely basis in a liquidation scenario..

	11	Operating Expenses: Payroll and Benefits
		Accrued payroll and benefits are assumed to be paid in the ordinary course as part of the wind-down process. Non-payment of these expenses would likely have an immediate and significant destabilizing effect on the orderly wind-down of the Debtors' estates and otherwise represent Administrative Claims Accrued Payroll and Benefits expenses include corporate and store salaries, wages and benefits, and are based on weekly projections of related expenses for the entirety of the hypothetical liquidation period.

	12	Operating Expenses: Rent
		Rent is generally paid to landlords at the beginning of each month. The Liquidation Analysis herein assumes ranges of two to three months of rent expenses for all leased properties (to support the hypothetical eight to twelve week store liquidation sales). Delays to the proposed timeline of closing store sales beyond twelve weeks would materially increase rent expenses.

	13	Operating Expenses: Occupancy Costs, Freight and Other
		Occupancy, freight and Other expenses reflect operating costs over an eight to twelve week period corresponding to the hypothetical store liquidation sales. These costs primarily consist of utilities, freight, store supplies and other store operation items.

	14	Other Costs of Going Out of Business Sales
		Liquidation costs of $9.2 million consist of (i) promotion and advertising expenses, (ii) liquidation fees (assumed to be 1.5% of gross closing store sales proceeds), (iii) liquidator supervisory fees to manage closing store sales and (iv) other expenses required to monetize the Debtors' inventory assets and complete the store closing process. These assumptions are consistent with the Debtors' previous store closings during the pendency of their Chapter 11 cases.

	15	Unpaid Pre-Conversion and Wind-Down Professional Fees
		Professional costs assume approximately $10.5 million, representing approximately 60 days of professional fees at anticipated Chapter 11 run-rates could remain outstanding and unpaid at the conversion to Chapter 7. Further, the Debtors have included the 20% holdback for professional fees to legal and financial advisors pending in the Chapter 11 cases prior to the conversion.

	16	Chapter 7 Trustee Fees
		The Chapter 7 Debtors estimate that they would incur Chapter 7 Trustee fees of approximately $5.0 million to $6.8 million based on 3% of the gross proceeds available for distribution. The Liquidation Analysis assumes that one Chapter 7 Trustee is appointed for all of the Chapter 7 Debtors. To the extent additional Trustees are appointed, the Debtors would incur additional costs to what is presented herein.

	17	Wind-down Professionals Costs
		Cost estimate is based on estimated Professional Fees incurred by the Chapter 7 Trustee after the conversion from Chapter 11 cases.

	18	Sales Tax
		Sales taxes to be remitted are calculated as 7.3% of Going out of Business sales proceeds presented above.

	19	Gift Card Realization
		Low Case is based on amounts included on the Debtors' 9/30/2020 Balance Sheets. High Case assumes Debtors terminate the Gift Card program. This analysis excludes any potential claims that could arise from the hypothetical termination of the Gift Card program which would decrease the recoveries presented herein.

PAGE 5 OF 6

TUESDAY MORNING CORPORATION, et al.

FOOTNOTES TO THE HYPOTHETICAL LIQUIDATION ANALYSIS

	DISTRIBUTION OF PROCEEDS TO CLAIMS AND INTERESTS

	20	Secured Claims

		Pre-Petition ABL Facility and DIP ABL Facility Borrowings
		This Liquidation Analysis assumes there are no borrowings outstanding under the DIP ABL Facility or the DIP Term Loan as of the Conversion Date. The Debtors do not anticipate any additional borrowings on the DIP ABL Facility or the DIP Term Loan prior to the Conversion Date. Borrowings under Pre-Petition ABL Facility were paid down to a balance of $100,000.00 as of June 2020.

		Other Secured Claims
		Estimated exposure based on on-going review of asserted filed claims as of the August 28, 2020 General Bar Date and Liabilities Included on the Debtors; Schedules of Assets and Liabilities.

	21	Administrative and Priority Claims
		Administrative claims include from $5.0MM and $7.0MM of post-petition rents related to negotiated lease amendments that provide that any post-petition lease savings during lease re-negotiations be retroactively considered as post-petition rent. Administrative claims also include $0.5MM for estimated exposure based on on-going review of asserted filed claims as of the August 28, 2020 General Bar Date and Liabilities Included on the Debtors' Schedules of Assets and Liabilities. Priority claims reflect estimated exposure based on on-going review of asserted filed claims as of the August 28, 2020 General Bar Date and Liabilities Included on the Debtors' Schedules of Assets and Liabilities.

	22	WARN Act Claims
		Potential WARN Act claims are estimated based on an analysis of the Debtors’ potential Federal WARN Act liability using the Debtors’ September 2020 employee roster.

	23	Estimated General Unsecured Claims
		General Unsecured Claims consist primarily of pre-petition trade claims and rent rejection damages for all leased properties. Trade claims represents the estimated accounts payable balance as of the Petition Date and consider initial analysis of asserted claims as of the August 28, 2020 General Bar Date. Rent rejection claims were estimated pursuant to the rejection damages calculation consistent with the Bankruptcy Code. Annual rents were used to calculate the greater of (a) one year’s rent; and (b) 15% of the remaining lease term, not to exceed 3-years rent.

	24	Severance Claims
		Potential exposure based on eligible employees, assuming no change in control. For the purposes of this analysis, severance claims are assumed to be general unsecured liabilities. Any claims that may be eligible for Priority recoveries, if any, are not considered in this analysis. Reclassification of any of these amounts to Priority status would decrease recoveries to General Unsecured Claims as presented.

	25	Equity Interests
		All excess proceeds available after the satisfaction of Secured Claims, Administrative and Priority Claims, and General Unsecured Claims are assumed to be distributed in accordance with Chapter 7 requirements in satisfaction of remaining claims and interests. Proceeds in this analysis do not fully satisfy General Secured claim liabilities; consequently, no proceeds would be available for distribution to Equity Holders.

PAGE 6 OF 6

EXHIBIT 3 TO THE DISCLOSURE STATEMENT

FINANCIAL PROJECTIONS

The prospective financial information included in this Disclosure Statement has been prepared by, and is the responsibility of, the Debtors’ management team (“Management”). No independent auditors have examined, compiled or performed any procedures with respect to the accompanying prospective financial information.

Other than as required by applicable securities law, the Debtors do not, as a matter of course, publish their business plans, budgets or strategies or disclose projections or forecasts of their anticipated financial positions, results of operations or cash flows. Accordingly, the Debtors do not anticipate that they will, and disclaim any obligation to, furnish updated business plans, budgets, strategies, projections or forecasts of their anticipated financial positions, results of operations or cash flows to holders of Claims or Interests prior to the Effective Date or to include such information in documents required to be filed with the SEC or otherwise make such information publicly available.

The assumptions, projections and other financial information contained in this section contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

The Debtors’ Management, with the assistance of their advisors, has prepared the Financial Projections to assist the Bankruptcy Court in determining whether the Plan⁶ meets the “feasibility” requirements of section 1129(a)(11) of title 11 of the United States Code (the “Bankruptcy Code”). The Debtors believe that the Plan meets such requirements. In connection with the negotiation and development of the Plan, and for the purpose of determining whether the Plan meets the feasibility standard outlined in the Bankruptcy Code, the Debtors analyzed their ability to satisfy their financial obligations while maintaining sufficient liquidity and capital resources during the Projection Period (as defined below). With this consideration in mind, the Debtors’ Management and advisors prepared consolidated financial projections (the “Projections” or “Financial Projections”) for the six-month period ending June 30, 2021 and for the fiscal years ending June 30, 2021 through June 30, 2023 (the “Projection Period”). The Financial Projections are based on a number of assumptions made by Management and their advisors with respect to the potential future performance of the Reorganized Debtors’ operations assuming the consummation of the Plan. The Financial Projections are presented on a consolidated basis, including estimates of operating results for Debtor entities combined. The Financial Projections will assist each holder of a Claim or Interest in the Debtors to determine whether to vote to accept or to reject the Plan.

Importantly, in the event that the Debtors opt to pursue a going concern sale of the Debtors’ business to a third party, whether pursuant to a plan or pursuant to a sale under Bankruptcy Code § 363, the third party may have materially different views on future performance and strategy. These Projections are not meant to, nor should they be construed as, influencing or establishing a business plan of any such third party. In the event of such a sale, the Financial Projections will not be a relevant component of any plan relating to such sale or such subsequent plan as may be proposed in these Chapter 11 Cases.

The Projections present, to the best of the Debtors’ knowledge and belief, the Reorganized Debtors’ projected balance sheet, results of operations, and cash flows for the Projection Period and reflect the Debtors’ assumptions and judgments of the projections based on a Plan Effective Date (the “Emergence Date”) of December 22, 2020. The impact of the restructuring transactions and the recapitalization of the Company’s capital structure is shown on the predecessor company balance sheet, using a date of December 22, 2020.

⁶ Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Plan.

In general, as illustrated by the Financial Projections, the Debtors are projected to have sufficient cash flow to pay and service their post-restructuring debt obligations, including the General Unsecured Notes or “GUC Notes” and to operate their business. The Debtors believe that the Confirmation Date and Effective Date are not likely to be followed by either the liquidation or the further reorganization of the Reorganized Debtors. Accordingly, the Debtors believe that the Plan satisfies the feasibility requirements of section 1129(a)(11) of the Bankruptcy Code.

The Company’s board of directors was not asked to and did not approve the Financial Projections or evaluate or endorse the projections or the assumptions underlying the Financial Projections. Moreover, THESE FINANCIAL PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARD COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC OR GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS FOR PREPARATION AND PRESENTATION OF PROSPECTIVE FINANCIAL INFORMATION. THE PROJECTED BALANCE SHEETS DO NOT REFLECT THE IMPACT OF FRESH START ACCOUNTING, WHICH COULD RESULT IN A MATERIAL CHANGE TO ANY OF THE PROJECTED VALUES. THE INDEPENDENT AUDITOR FOR THE COMPANY HAS NOT EXAMINED, COMPILED, OR OTHERWISE PERFORMED ANY PROCEDURES ON THE FOLLOWING PROSPECTIVE FINANCIAL INFORMATION AND, CONSEQUENTLY, DOES NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT TO THE PROSPECTIVE FINANCIAL INFORMATION.

ALTHOUGH MANAGEMENT HAS PREPARED THE FINANCIAL PROJECTIONS IN GOOD FAITH AND BELIEVES THE ASSUMPTIONS TO BE REASONABLE, IT IS IMPORTANT TO NOTE THAT THE DEBTORS AND THE REORGANIZED DEBTORS CAN PROVIDE NO ASSURANCE THAT SUCH ASSUMPTIONS WILL BE REALIZED. AS DESCRIBED IN ARTICLE XIV OF THE DISCLOSURE STATEMENT, A VARIETY OF RISK FACTORS COULD AFFECT THE REORGANIZED DEBTORS’ FINANCIAL RESULTS AND MUST BE CONSIDERED. ACCORDINGLY, THE FINANCIAL PROJECTIONS SHOULD BE REVIEWED IN CONJUNCTION WITH A REVIEW OF THE RISK FACTORS SET FORTH IN ARTICLE XIV OF THE DISCLOSURE STATEMENT AND THE ASSUMPTIONS DESCRIBED HEREIN, INCLUDING ALL RELEVANT QUALIFICATIONS AND FOOTNOTES, AND ANY RESULTING CHANGES TO THE FINANCIAL PROJECTIONS COULD BE MATERIAL.

1. General Assumptions

Presentation: The Financial Projections are presented on a consolidated basis, including estimates of operating results for Debtor entities combined.

Accounting Policies: The Financial Projections may not reflect all of the adjustments necessary to implement fresh-start accounting pursuant to Accounting Standards Certification 852-10, as issued by the Financial Accounting Standards Board.

Methodology: Key personnel from all of the Debtors’ various business functions provided input in the development of the Financial Projections. The Financial Projections were developed based upon the projected activity levels for the 490 stores the Debtors intend to continue operating (the “Go Forward Footprint Stores”) (i.e., four-wall profitability).⁷Four-wall profitability was estimated based on historical gross margin trends applied to projected levels of revenue with estimates for store-level SG&A costs. Four-wall profitability was then reduced by estimates for distribution center expenses and corporate expenses. In addition, capital expenditures were projected based on maintenance capital expenditure requirements for stores, the corporate office, and the Dallas distribution center.

Plan Consummation: The Financial Projections assume that the Plan will be confirmed or go effective on or about December 22, 2020.

Projection Period: The Financial Projections contained herein cover the period beginning January 1, 2020 through June 30, 2023. The period of July through June represents the Company’s fiscal calendar.

Operations: The Financial Projections incorporate the Company’s planned sales and cost initiatives, as well as operational restructuring activities. The Financial Projections reflect four main operational restructuring activities undertaken while in bankruptcy:

	1.	Store Closings: The Debtors’ Management and advisors undertook an extensive analysis of the Debtors’ existing store footprint to determine whether the Debtors should close any stores in connection with their broader financial and operational restructuring initiatives. In formulating the list of stores, the Debtors considered, among other factors, historical store profitability, recent sales trends, the geographic market in which the store is located, the potential to realize negotiated rent reductions with applicable landlords, and specific circumstances related to a store’s performance. The projections herein reflect 197 stores that have been selected for closure, with a total of 490 stores comprising the Go Forward Footprint Stores.

	2.	Lease Renegotiations: In connection with the restructuring, the Debtors’ Management and advisors renegotiated their store leases. The Financial Projections reflect a significant amount of lease savings achieved on the Go Forward Footprint Stores.⁸

	3.	Supply Chain Rationalization: A comprehensive assessment of current and projected inbound, outbound, and facility volumes reveal the opportunity to rationalize the Debtors’ current distribution network. In conjunction with the store closures, the Debtors have closed the Phoenix distribution center and will operate solely out of the Dallas distribution center. The Financial Projections reflect the result of the distribution center closure primarily through the DC Network expenses in SG&A costs and reflect a significant amount of savings.

⁷ No additional store openings or closings are contemplated within the Projections.

⁸ 12 amendments are still in the process of being executed out of 386 total.

Corporate and Field Personnel Rationalization: In connection with the store closures, a realignment of regions and districts (field operations) was undertaken which resulted in a reduction to region and district personnel. An assessment of corporate personnel was also undertaken which resulted in a reduction to the corporate headcount. The reduction to field level employees is primarily found in store expenses and the reduction to the corporate headcount is primarily found in corporate expenses in SG&A costs and reflect a significant amount of savings.

2. Summary of Significant Assumptions With Respect to the Projected Income Statement

The Projections were developed using detailed assumptions for revenues and costs. The Debtors considered the following factors in developing the Projections:

The overall economic environment;

ii.

Current and projected market conditions for the off-price retail segment;

iii.

No material changes to the composition of the Go Forward Footprint Stores;

iv.

The Debtors’ emergence from chapter 11 on the Emergence Date; and

Various other economic, industry, and company specific factors.

Net Sales: Net Sales in the Financial Projections are generated based on consumer purchases at the Go Forward Footprint Stores. Net sales were projected based on estimates of same store sales growth applied to FY 2019 sales for January 2021 through June 2022. FY 2023 (July 2022 – June 2023) net sales were based on same stores sales growth estimates applied to FY 2022 projected net sales. Please see the table below for growth estimates.

	FY21Q3			FY21Q4			FY22			FY23
Net Sales Growth		0	%		0	%		2	%		3	%
Base		FY19Q3			FY19Q4			FY19			FY22

The above growth estimates were based primarily on third party market research focused on the off-price retail segment, GDP/inflationary growth forecasts, historical growth trends, and various other factors including the rationalizing of the store footprint.

Cost of sales: Cost of sales comprises costs contributing to gross margin including acquisition (product cost) markdowns, damages, employee discounts, shrink, freight in, and other cost of sales.⁹ IMU (initial markup over product cost) is projected to decrease 20 basis points in each successive fiscal year for FY22 and FY23. Cost of sales were projected based on historical margins with freight being adjusted for the shipment weeks and projected increases in average unit retail metrics over the forecast period. Freight is discussed further with the DC expenses below.

⁹ UNICAP re-allocations have been ignored. UNICAP is an accounting re-allocation of a portion of SG&A costs into gross margin. For presentation and clarity purposes, the Projections do not reallocate this SG&A into gross margin.

Selling, General, and Administrative Expenses: SG&A costs consist of store expenses, DC expenses, and corporate expenses. Each category is discussed further below.

	1.	Store Expenses: Store expenses primarily consist of store employee costs, rent and other occupancy costs, advertising, credit card fees, and various other store costs. Rent is presented as gross cash rent and is forecasted based on the composite of the individual lease terms incorporating lease amendments negotiated during bankruptcy.¹⁰ Store employee costs are projected to increase 2.0% in FY23.

	2.	Distribution Center Expenses: Distribution center expenses consist of freight out costs as well as labor, occupancy, and other costs incurred at the Dallas distribution center. Average unit retail is projected to increase from $9.90 in FY21 to $10.10 in FY23. Twelve non-ship weeks are assumed each year over the forecast period. Operating lease expense of $4.2 million per year from an anticipated sale-leaseback transaction on the owned real estate has also been factored.

	3.	Corporate Expenses: Corporate expenses include back-office function costs including management, accounting personnel, IT, legal, etc. in addition to insurance costs, audit fees, etc. Operating lease expense of $0.8 million per year from an anticipated sale-leaseback transaction on the owned real estate has also been factored.

Other income/(expense): Other income/(expense) primarily consists of interest expense and other income.

	1.	Interest expense: Interest expense is forecasted based on the projected capital structure at emergence and incorporates interest based on assumed terms for the projected debt obligations outlined in the Plan in addition to the post-exit ABL.

	2.	Other income: Other income is primarily the discount earned on sales tax for paying current month in advance.

Income tax expense: Any income tax expense has not been factored in the Projection Period. The Debtors have a NOL balance of approximately $140 million as of FYE 2020.

3. Assumptions with Respect to the Projected Balance Sheet and Projected Statement of Cash Flows

Assets

Cash and Cash Equivalents: The Projections contain anticipated minimum cash balances required to provide liquidity for the Company’s operations.

Inventories: The Projections contain projected monthly ending inventory balances over the Projection Period. Inventory balances for FY23 are projected at 10% less than FY22.

Prepaid Expenses and Other Current Assets: Prepaid expenses primarily include prepaid insurance and supplies. Other current assets primarily include miscellaneous receivables.

¹⁰ 12 amendments are still in the process of being executed out of 386 total.

Property, Plant, and Equipment: Changes in PP&E are primarily driven by capital spending plans and related depreciation. The Projections assume capital expenditures of approximately $5 million per year over the Projection Period.¹¹

Right of Use Asset (and related operating lease liability): Right of use asset is the operating lease asset on the balance sheet and has been assumed fixed during the Projection Period.¹²

Other Non-Current Assets: Other non-current assets primarily include intellectual property and deposits.

Liabilities

Accounts Payable: Accounts payable is projected based on historical days payable outstanding reduced to align terms with terms experienced in bankruptcy.

Accrued Expenses and Other Current Liabilities: Accrued expenses primarily include accrued payroll, interest, taxes, and other miscellaneous accrued items.

Current Portion of Lease Liability: This is the operating lease liability (current) on the balance sheet and has been assumed fixed during the Projection Period.¹³

Long term portion of Lease Liability: This is the operating lease liability (long term) on the balance sheet and has been assumed fixed during the Projection Period.¹⁴

Debt:

Upon consummation of the Plan, the Debtors are assumed to have the following debt obligations:

(i)

$110 million New ABL Credit Facility to provide liquidity for general operating purposes at an estimated rate of LIBOR + 2.75% during the Projection Period and an unused line fee of 0.50% per annum;

(ii)

GUC Notes of $25 million

¹¹ Capital expenditures are projected to be approximately $8 million in calendar year 2021, and $5 million in fiscal years 2022 and 2023.

¹² Lease balances will depend upon fresh start accounting assessments. Gross cash rent is projected throughout the Projection Period. An assumed amount for the anticipated sale-leaseback transaction has been added illustratively to the emergence balance sheet shown further below.

¹³ Lease balances will depend upon fresh start accounting assessments. Gross cash rent is projected throughout the Projection Period. An assumed amount for the assumed sale-leaseback transaction has been added illustratively to the emergence balance sheet shown further below.

¹⁴ Lease balances will depend upon fresh start accounting assessments. Gross cash rent is projected throughout the Projection Period. An assumed amount for the assumed sale-leaseback transaction has been added illustratively to the emergence balance sheet shown further below.

Cash Flow Assumptions

Cash Flow from Operations:

During the Projection Period, it is expected that net working capital will be a $11.3 million source of cash. During the six-month period from January through June 2021 it is expected that net working capital will be a use of cash of approximately $2.5 million as the Company begins to build inventory off of projected depressed sales related to COVID.¹⁵ From July 2021 to June 2023, net working capital is projected to be a source of cash of approximately $13.7 million primarily driven by reduced inventory balances over the Projection Period partially offset by reductions in accounts payable balances.

Cash Flow from Investing:

Cash usage is primarily driven by investments in capital expenditures over the Projection Period.

Cash Flow from Financing:

Usage of cash in FY22 primarily relates to the paydown of the New ABL Credit Facility during calendar year 2021 and an excess cash flow payment on the GUC Notes. Projected amounts drawn on the New ABL Credit Facility early into 2021 are assumed to be repaid through free cash flows in CY2021. The GUC Notes are projected to require a payment of the Debtors’ excess cash flow in the third quarter of FY22 based on free cash flows from July 2021 to December 2021 (first half of FY22). Additional excess cash flow payments on the GUC Notes during the Forecast Period occur in the first quarter of FY23 (based on free cash flows from January 2022 to June 2022, the second half of FY22) and the third quarter of FY23 (based on free cash flows from July 2022 to December 2022, the first half of FY23).

Sources and Uses, Emergence Balance Sheet, and Projected Financials

The ‘‘Sources and Uses’’ set forth below presents the estimated sources and uses of funds for the consummation of the restructuring transactions contemplated in the Plan (the “Restructuring Transactions”). The actual amounts are subject to adjustment and may differ at the time of the consummation of the Restructuring Transactions, depending on several factors, including differences in estimated transaction fees and expenses, differences between actual and projected operating results and any differences in the contemplated real estate transaction financing when consummated.

¹⁵ Additionally, other current assets contain a $7.4 million source of cash mainly from prepaid rent at December 31, 2020 (forecast from January 2021 – June 2023 assumes cash rent is paid in current period).

Sources	Notes		Amount (000's)
Real Estate Transaction		(a)	$	58,950
Borrowings under New ABL Credit Facility				3,500
Refund of Utilities Adequate Assurance Deposit				2,059
Cash on Balance Sheet				13,108
New Equity				39,400
Total Sources				117,017

Uses
Repayment of DIP ABL Facilitiy	(b)		100
Payment of Post-Petition Interest and Fees			50
Payment of Stub Rent			800
Payment of Lease Cure Costs			3,300
Payment of GUC	(c)		100,565
Other Claims Resolution	(d)		2,202
Cash to Balance Sheet			10,000
Total Uses		$	117,017

(a)

Reflects the value received from a sale-leaseback transaction.

(b)

Repayment of pre-petition ABL balance.

(c)

Payment of GUC claims at the Emergence Date will depend on several factors, including the cash balance at the Emergence Date.

(d)

Payment of other claims including assumed other administrative and priority claims.

The “Projected Pro Forma Consolidated Balance Sheet as of the Emergence Date” presents: (a) the projected consolidated financial position of the Debtors as of December 22, 2020,¹⁶ prior to the consummation of the transactions contemplated in the Plan; (b) the pro forma adjustments to such projected consolidated financial position required to reflect the Restructuring Transactions; and (c) the pro forma projected consolidated financial position of Debtors as of the Assumed Emergence Date, after giving effect to the Restructuring Transactions. The Restructuring Transactions set forth in the columns captioned ‘‘Plan Settlement,’’ “New Debt”, ‘‘Sale-Leaseback”, and “New Equity” reflect the anticipated effects of the Restructuring Transactions. Any fresh start accounting adjustments have not been considered below.

¹⁶ The December 19, 2020 balances have been used a proxy for December 22, 2020.

	Pre-Emergence(i)			Plan			New			Sale-			New		Pro Forma
	12/22/2020			Settlement(ii)			Debt(iii)			Leaseback (iv)			Equity (v)		12/22/2020
($ in thousands)
Assets
Cash & Cash Equivalents	$	13,108		$	(104,958	)	$	3,500		$	58,950		$	39,400	$	10,000
Inventories		95,492														95,492
Other Current Assets		3,386			(2,059	)										1,327
Total Current Assets		111,986			(107,017	)		3,500			58,950			39,400		106,819

Owned Real Estate, net book value (DC + HQ)		19,400									(19,400	)				-
Other PP&E, net book value		41,312														41,312
Operating Lease Right of Use Asset		200,000									15,000					215,000
Other Long-Term Assets		3,064														3,064
Total Assets		375,763			(107,017	)		3,500			54,550			39,400		366,196

Liabilities & Equity
Trade Payables		25,000														25,000
Accrued Liabilities		45,443			(3,052	)										42,391
Operating Lease Liabilities		70,000									4,000					74,000
Total Current Liabilities		140,443			(3,052	)		-			4,000			-		141,391

Pre-Petition ABL Credit Facility		100			(100	)										-
DIP ABL Facility		-														-
New ABL Credit Facility		-						3,500								3,500
GUC Notes		-						25,000								25,000
Operating Lease Liabilities - non-current		130,000									11,000					141,000
Other Long-Term Liabilities		333														333

Liabilities Subject to Compromise
GUC Claims		125,700			(100,565	)		(25,135	)							-
Lease Cures		3,300			(3,300	)										-

Total Liabilities		399,876			(107,017	)		3,365			15,000			-		311,224

Total Shareholder's Equity		(24,113	)		-			135			39,550			39,400		54,972

Total Liabilities & Shareholder's Equity	$	375,763		$	(107,017	)	$	3,500		$	54,550		$	39,400	$	366,196

	(i)	The pre-emergence balance sheet reflects forecasted results as of December 22, 2020 prior to the execution of the transactions contemplated in the Plan.
	(ii)	Plan settlement reflects the cash payments required pursuant to the Plan including the payment of administrative claims and secured claims. The Plan also assumes a cash payment to GUC claims.
	(iii)	Reflects the issuance of the GUC Notes totaling $25 million as well as the New ABL Facility.
	(iv)	Reflects the proceeds from the sale-leaseback transaction of $59 million. Proceeds from the sale-leaseback transaction will be used to partially fund the cash payment to the GUCs and to resolve other claims. The associated lease accounting assets and liabilities are adjusted for the projected transaction.¹⁷

¹⁷ The operating lease asset (ROU asset) and operating lease liability are shown illustratively. Lease accounting treatment for the sale-leaseback may differ from what is projected. These non-cash accounting items will not equate to the cash to be received from the transaction.

(v)

Reflects the proceeds received from the Rights Offering. Proceeds from the Rights Offering will be used to partially fund the cash payment to the GUC and to resolve other claims.

The ‘‘Projected Pro Forma Consolidated Statement of Operations’’ presents the projected consolidated results of operations of the Company for the period commencing January 2021 through June 2023, after giving effect to the Restructuring Transactions to occur on the Emergence Date.

	Partial Year
	Jan - Jun			CY21			FY22			FY23
Period Ending	2021			12/31/2021			6/30/2022			6/30/2023
($ in thousands)
Net Sales	$	335,471		$	769,544		$	772,836		$	796,021
Cost of Sales		180,906			416,478			419,925			433,586
Gross Profit¹		154,566			353,066			352,911			362,435

SG&A Expense²		167,452			330,531			318,261			322,174
Operating Profit		(12,886	)		22,535			34,650			40,262

Other Income / (Expense)
Interest Expense		(1,894	)		(3,723	)		(3,208	)		(1,377	)
Other Income / (Expense)		327			552			552			552
Earnings Before Taxes		(14,453	)		19,364			31,994			39,437

Income Tax Expense³		-			-			-			-
Net Income		(14,453	)		19,364			31,994			39,437

Memo:
Adjusted EBITDA⁴	$	(2,066	)	$	39,988		$	47,853		$	52,460

1) Presented without UNICAP re-allocations.

2) CY21 includes nonrecurring restructuring fees of $3.5 million in January.

3) No income tax has been factored. The NOL balance as of June 30, 2020 was approximately $140 million.

4) Adjusted EBITDA is calculated as Operating Profit plus depreciation & amortization, other income/(expense), restructuring fees, and stock compensation.

The ‘‘Projected Pro Forma Consolidated Balance Sheets’’ presents the projected consolidated financial position of the Company, after giving effect to the consummation of the Restructuring Transactions, as of June 30, 2021, 2022, and 2023 in addition to December 31, 2021.

	Projected		Projected		Projected		Projected
Period Ending	6/30/2021		12/31/2021		6/30/2022		6/30/2023
($ in thousands)
Assets
Cash & Cash Equivalents	$	4,794	$	41,989	$	30,819	$	74,191
Inventories¹		113,459		104,528		101,269		91,119
Prepaid Expenses		5,588		4,751		5,413		5,239
Other Current Assets		2,327		2,327		2,327		2,327
Total Current Assets		126,168		153,594		139,829		172,876

PP&E, net		40,623		38,141		35,659		31,698
Operating Lease Right of Use Asset		215,000		215,000		215,000		215,000
Other Long-Term Assets		3,064		3,064		3,064		3,064
Total Assets		384,856		409,799		393,552		422,639

Liabilities & Equity
Accounts Payable		50,018		40,275		44,942		42,279
Accrued Liabilities		37,197		38,450		35,923		35,989
Operating Lease Liabilities		74,000		74,000		74,000		74,000
Total Current Liabilities		161,214		152,725		154,865		152,267

Operating Lease Liabilities - non-current		141,000		141,000		141,000		141,000
ABL Credit Facility		3,342		-		-		-
GUC Notes		26,500		28,090		10,322		-
Other Long-Term Liabilities		333		333		333		333
Total Liabilities		332,389		322,148		306,520		293,600

Shareholder's Equity²		52,467		87,652		87,032		129,039

Total Liabilities & Shareholder's Equity	$	384,856	$	409,799	$	393,552	$	422,639

1) Presented without UNICAP re-allocations.

2) Does not incorporate any fresh start accounting adjustments.

The ‘‘Projected Pro Forma Consolidated Statement of Cash Flows’’ presents the projected cash flows of the Company commencing January 1 through June 30, 2021, after the consummation of the Restructuring Transactions, and for the fiscal years ending June 30, 2022 and 2023 in addition to calendar year 2021.

	Partial Year
	Jan - Jun			CY21			FY22			FY23
Period Ending	2021			12/31/2021			6/30/2022			6/30/2023
($ in thousands)
Cash Flow from Operations
Net Income	$	(14,453	)	$	19,364		$	31,994		$	39,437
Add: Depreciation & Amortization		5,790			10,830			10,080			9,076
Add: Other Non-Cash Charges¹		2,703			5,661			4,161			2,571
Changes in Working Capital		(2,487	)		(1,207	)		6,015			7,726
Net Cash Flow from Operating Activities		(8,446	)		34,647			52,250			58,810

Cash Flow from Investments
Capital Expenditures		(5,101	)		(7,659	)		(5,116	)		(5,116	)
Net Cash Flow from Investing Activities		(5,101	)		(7,659	)		(5,116	)		(5,116	)

Cash Flow from Financing Activities
Debt Borrowing / (Repayment)²		3,342			-			(21,110	)		(10,322	)
Other		-			-			-			-
Net Cash Flow from Financing Activities		3,342			-			(21,110	)		(10,322	)

Net Increase/(Decrease) in Cash & Cash Equivalents		(10,206	)		26,989			26,025			43,372

Beginning Cash Balance		15,000			15,000			4,794			30,819
Net Increase/(Decrease) in Cash & Cash Equivalents
Ending Cash Balance	$	4,794		$	41,989		$	30,819		$	74,191

1) Other Non-Cash Charges include stock compensation and differences between interest accrued and paid.

2) Includes Excess Cash Flow payments on the GUC Notes in FY22 and FY23.

EXHIBIT 4 TO THE DISCLOSURE STATEMENT

Terms of the New ABL Credit Facility

EXHIBIT 5 TO THE DISCLOSURE STATEMENT

backstop commitment letter