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    UNITED STATES BANKRUPTCY COURT

    SOUTHERN DISTRICT OF NEW YORK

    ---------------------------------------------------------------In re

    Hostess Brands, Inc., et al.,1

    Debtors.

    ---------------------------------------------------------------

    x::

    :::::x

    Chapter 11

    Case No. 12-_____ (___)

    (Jointly Administered)

    MOTION OF THE

    DEBTORS PURSUANT TO

    11 U.S.C. 105(A) AND 363(B)

    TO EMPLOY AND RETAIN FTI CONSULTING, INC.

    TO PROVIDE THE DEBTORS AN INTERIM TREASURER ANDADDITIONAL PERSONNELNUNC PRO TUNCTO THE PETITION DATE

    TO THE HONORABLEUNITED STATES BANKRUPTCY JUDGE:

    Hostess Brands, Inc. and its five domestic direct and indirect subsidiaries, as

    debtors and debtors in possession (collectively, "Hostess" or the "Debtors"), hereby move the

    Court for the entry of an order pursuant to sections 105(a) and 363(b) of title 11 of the United

    States Code (the "Bankruptcy Code") (i) authorizing the Debtors, pursuant to the terms and

    conditions of that certain agreement between FTI Consulting, Inc. and the Debtors dated January

    4, 2012 (as amended, the "Engagement Letter"),2 to retain FTI Consulting, Inc. ("FTI") to

    provide an Interim Treasurer and Additional Personnel (as described below) for the Debtors nunc

    pro tunc to the date hereof (the "Petition Date");3 and (ii) granting certain related relief. In

    1 The Debtors are the following six entities (the last four digits of their respective taxpayer identification numbers follow in parentheses): Hostess Brands, Inc. (0322), IBC Sales Corporation (3634), IBC Services, LLC (3639), IBC Trucking, LLC (8328),Interstate Brands Corporation (6705) and MCF Legacy, Inc. (0599).

    2 A copy of the Engagement Letter is attached hereto as Exhibit A.

    3 Nunc pro tunc retention is appropriate because this Motion was filed on the Petition Date, FTI will continueto provide services to the Debtors from and after the Petition Date and a hearing on this Motion will not beconducted, and an order will not be entered, until after the Petition Date.

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    support of this Motion, the Debtors rely upon the declaration of J. Robert Medlin

    (the "Medlin Declaration") attached hereto as Exhibit C and incorporated herein by reference,

    and in further support thereof, the Debtors respectfully represent as follows;

    Background

    1. On the Petition Date, the Debtors commenced their reorganization cases

    by filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code. By a motion

    filed on the Petition Date, the Debtors have requested that their chapter 11 cases be consolidated

    for procedural purposes only and administered jointly.

    2. The Debtors are authorized to continue to operate their business and

    manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the

    Bankruptcy Code.

    3. Hostess Brands, Inc. is a Delaware corporation. Hostess Brands, Inc. is

    the direct or indirect parent of the other Debtors, each of which is wholly-owned by Hostess

    Brands, Inc. or one of its Debtor subsidiaries. The Debtors maintain their corporate headquarters

    in Irving, Texas. Debtor IBC Sales Corporation owns principal real property assets in Elmsford,

    New York.

    4. Founded in 1930, Hostess is one of the largest wholesale bakers and

    distributors of bread and snack cakes in the United States. Today, Hostess sells an array of

    popular products under new and iconic brands such as Butternut, Ding Dongs, Dolly

    Madison, Drake's, Home Pride, Ho Hos, Hostess, Merita, Nature's Pride,

    Twinkies and Wonder. The Debtors operate 36 bakeries, 565 distribution centers,

    approximately 5,500 delivery routes and 570 bakery outlet stores throughout the United States.

    5. The Debtors operate in a mature industry with high levels of competition

    and related pricing pressures, thin operating margins and competitors with more sophisticated

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    technology and significant cost advantages. Over the past several decades and continuing to the

    present, the industry has experienced significant consolidation. As a result of this consolidation,

    the Debtors' primary national and large regional competitors are, at once, expanding their market

    reach and consolidating operations through acquisitions and other means, thus widening their

    cost advantages. Importantly, the Debtors' competitors employ work forces that are not

    unionized or only partially unionized, which allow them to operate with significantly less

    burdensome operating restrictions and overall cost structures. As a direct result of their

    significant and long-standing unionized workforce, the Debtors have significant legacy costs,

    primarily in the form of pension and medical benefits obligations, that their competitors do not

    share. Whether the Debtors can achieve long-term viability depends directly and substantially on

    the Debtors' ability to achieve dramatic change to their labor agreements, with a corresponding

    material reduction in their cost structure and legacy pension and medical obligations, and a

    restructuring of their capital structure. That is the purpose and the focus of these chapter 11

    cases.

    6.

    The Debtors' production and distribution systems are heavily dependent on

    labor-intensive processes involving, among other things, complicated and extensive local route

    delivery systems that service nearly all of the continental United States and a national footprint

    of 36 bakeries. To staff this labor-intensive network, the Debtors employ approximately 19,000

    people, of which 83% are members of unions who are subject to 372 collective bargaining

    agreements. The Debtors' unionized employees belong to 12 separate unions, but the

    overwhelming majority of the Debtors' unionized workforce are members of either the

    International Brotherhood of Teamsters (the "IBT") or the Bakery, Confectionery, Tobacco

    Workers & Grain Millers International Union (the "BCT").

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    7. Because their workforce is heavily unionized, the Debtors also participate

    in 40 multiemployer pension plans, which, by law, exist only where one or more employers each

    contribute to a pension plan pursuant to one or more collectively-bargained agreements. The

    Debtors' cash contribution obligations to these plans go beyond amounts attributable to the

    retirement benefits for the Debtors' own workforce; they also encompass the contributions

    attributable to the retirement benefits of the workforces of other employers who have ceased to

    exist or have otherwise withdrawn from the plans. By statute, the plans are structured to place

    the financial burdens of all of a plan's retirees upon those remaining companies that have active

    union employees. Over the last several decades, the number of companies and the active

    employee base supporting these pension plans have shrunk significantly, thus increasing the

    burden on the companies, such as Hostess, that remain.

    8. The Debtors' management team, which as currently comprised has only

    been in place for slightly more than a year, has taken a fresh look at, and has spent considerable

    time and energy analyzing, the Debtors' operations and cost structure. As a result of that review,

    management has developed a business plan that it believes will allow the Debtors to regain long-

    term viability. The business plan is premised upon achieving a competitive cost structure,

    including relief from uncompetitive pension and medical benefit legacy costs, re-emphasizing

    and funding the marketing of the Debtors' brands, streamlining and modernizing the distribution

    of product and obtaining relief from other restrictive work rules that limit the Debtors' flexibility

    and competitiveness.

    9. In particular, the Debtors believe that their successful reorganization must

    encompass systemic, dramatic change, including:

    a. withdrawing completely from multiemployer pension plans to achieverelief from the crippling costs of these plans that are, in large part, a result

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    of the required funding of retirees whose former employers no longercontribute to the plans;

    b. addressing the Debtors' legacy health and welfare costs to achieve asubstantial reduction in the cost of providing benefits to bring such costsin line with current competitive market costs;

    c. modifying the Debtors' existing collective bargaining agreements to relaxwork rules and obtain other relief necessary to both bring the Debtors'labor costs in line with that of their competitors and provide the operatingflexibility necessary to respond to changing customer requirements fordelivery and service;

    d. securing new capital investment to modernize and automate the Debtors'production and distribution operations; and

    e. restructuring the Debtors' capital structure to significantly reduce debt and

    related expense.

    10. This company has been down this road before. Hostess (then known as

    Interstate Bakeries Corporation ("IBC")) sought bankruptcy relief in 2004 (the "IBC

    Bankruptcy"). The complex and sometimes highly contentious IBC Bankruptcy lasted more than

    four and a half years and achieved only limited, incremental change to the company's cost

    structure leaving the multiemployer pension benefits and costs untouched, while allowing the

    company to emerge as a highly levered entity. As a result, the Debtors currently have four

    separate tranches of long-term secured debt, under which they have aggregate outstanding

    liabilities of approximately $860 million. The Debtors exited from the IBC Bankruptcy on

    February 3, 2009 as a privately-held company, whose largest equityholders are IBC Investors I,

    LLC, IBC Investors II, LLC and IBC Investors III, LLC (collectively, the "Sponsor Funds") and

    a subset of their then existing lenders.4

    4 The current stockholders of Hostess include, in addition to the Sponsor Funds: Craig D. Jung, SPCP Group, LLC, Monarch DebtRecovery Master Fund Ltd, Monarch Opportunities Master Fund Ltd, Monarch Income Master Fund Ltd, McDonnell Loan

    Opportunity Ltd., Arrow Distressed Securities Fund, Schultze Apex Master Fund, Ltd., Schultze Master Fund, Ltd., Gephardt GroupLabor Advisory Services, Mars & Co. Consulting, LLC and Brian Driscoll.

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    11. Adjusting for one-off receipts, such as tax refunds and the proceeds from

    asset sales, the Debtors have consumed approaching $250 million in cash since exiting the IBC

    Bankruptcy in 2009.

    12. Accordingly, after developing their business plan, the Debtors initiated

    negotiations with their lenders and unions to effect the transformational changes required for

    their business. At the same time, the Debtors required additional liquidity to allow these

    discussions and negotiations to occur. Accordingly, the Debtors began active discussions with

    their lenders regarding additional financing. As a result of those discussions, in March 2011,

    Hostess issued $30 million of 10% Secured Convertible PIK-Election Series C Notes, due 2019

    which were purchased by two of the Sponsor Funds. Additionally, in June 2011, two of the

    Sponsor Funds invested an additional $10 million in the form of equity. Finally, in late August,

    the Debtors were able to obtain an additional $20 million of financing from certain of their first

    lien term lenders. The purpose of these additional financings was to permit the Debtors time to

    negotiate with the unions outside of a chapter 11 filing.

    13.

    After allowing the IBT and BCT to commence extensive due diligence in

    July and August of 2011 (which diligence continued thereafter), the Debtors initiated discussions

    with the IBT and the BCT in September and provided both unions with proposals for

    modification of their respective collective bargaining agreements. The Debtors provided the IBT

    and the BCT with access to a data room containing over 625 documents to enable them to

    evaluate the proposals. Additionally, the Debtors responded to over160 diligence requests from

    the professionals representing the IBT and the BCT.

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    14. After months of bargaining, the Debtors were unable to reach agreement

    with their unions regarding pensions, health and welfare benefits and work rule changes before

    insufficient liquidity necessitated this filing.

    15. Accordingly, the Debtors have filed these chapter 11 cases to conserve

    their remaining cash and access the additional debtor-in-possession funding required to continue

    to operate while seeking to finalize negotiations regarding the terms of their labor agreements

    and capital structure.

    16. Additional information regarding the background of the Debtors, the need

    for the filing of these cases and the goals for the Debtors within chapter 11 are set forth in the

    Affidavit ofBrian J. Driscoll, which is filed contemporaneously herewith.

    Jurisdiction

    17. This Court has subject matter jurisdiction to consider this matter pursuant

    to 28 U.S.C. 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper

    before this Court pursuant to 28 U.S.C. 1408 and 1409.

    The FTI Consulting Engagement

    18. On or about June 10, 2011, the Debtors appointed Mr. David Rush

    Interim Treasurer, as set forth in the Engagement Letter. The Engagement Letter further states

    that FTI will provide FTI employees to serve as temporary employees of the Debtors necessary

    to support the treasury activities ("Additional Treasury Personnel") and other business

    ("Additional Financial Personnel") of the Debtors (collectively, "Additional Personnel," and

    together with the Interim Treasurer, the "Retention Personnel") as set forth more fully herein and

    in the Engagement Letter.

    19. The Debtors are familiar with the professional standing and reputation of

    FTI and Mr. Rush, as well as the other Additional Personnel, who the Debtors understand and

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    recognize have a wealth of experience in providing consulting services in restructurings and

    reorganizations and enjoy an excellent national reputation for turnaround services they have

    rendered in bankruptcy cases on behalf of debtors and creditors throughout the United States.

    The Debtors have been advised by FTI that it will endeavor to coordinate with the other

    professionals retained in these bankruptcy cases to eliminate unnecessary duplication or overlap

    of work.

    Terms of Engagement

    20. Pursuant to the terms of the Engagement Letter,5 the Retention

    Personnel's activities would include, but not be limited to:

    Interim Treasury Management Function

    a. Provide comprehensive treasury services and coordinate and directCompany employees as necessary. David Rush, Senior ManagingDirector, will serve in the capacity of Interim Treasurer for a fixedmonthly fee as described below;

    b. Work with management and employees to refine the Company's existingcash flow forecasts, related analyses and reporting. Provide anyrecommendations to existing practices and methodologies; and

    c. Provide additional FTI professionals to serve as Additional TreasuryPersonnel of the Company and provide support as required.

    Provide FTI professionals to serve as Additional Financial Personnel of the

    Company to provide services as follows and as may be requested by theCompany from time to time:

    d. Assist with the Company's execution of planned liquidity enhancementinitiatives, including working capital management and cost savingsprograms;

    e. Develop the Company's integrated multi-year financial projection model by brand, business unit and region through coordination and discussionwith management and Company employees;

    5 Capitalized terms used but not defined herein are ascribed the meanings given such terms in theEngagement Letter.

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    f. Perform a detailed assessment of the Company's operations, identify performance improvement opportunities and assist management andCompany employees in implementing and executing the identifiedinitiatives;

    g. Prepare other financial analysis and reporting as needed to assistmanagement in negotiations and discussions with the Company'sstakeholders;

    h. Participate in meetings and negotiations/interface with stakeholders and/ortheir advisors as necessary.

    i. Prepare a comprehensive winddown plan and related liquidation analysiswith supporting schedules, and assist the Company in implementation ofsuch plan, as necessary;

    j. Develop with management detailed contingency planning related to

    potential liquidity shortfalls or planned restructuring programs;

    k. Prepare Schedules of Assets & Liabilities and Statements of FinancialAffairs, claims reconciliations and settlements, appropriate financial andoperational cut-off periods, development of a creditor matrix, and first daymotions support;

    l. Provide testimony as required; and

    m. Perform any other interim management services as mutually agreed upon.

    Fees and Expenses

    21.Fees in connection with this Engagement (other than the treasury advisory

    function described below) will be based upon time incurred by the Additional Financial

    Personnel providing the Services, multiplied by our standard hourly rates, illustrated below:

    Senior Managing Directors $780-895Directors / Managing Directors $560-745Consultants / Senior Consultants $280-530Administrative / Paraprofessionals $115-230

    The Debtors understand that FTI revises its rates for services periodically, and the Debtors will

    pay such rates as reasonably adjusted without altering or limiting the Debtors' obligation to

    compensate FTI in accordance with the Engagement Letter. The Debtors further understand that

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    FTI does not provide any assurance regarding the outcome of its work and that its fees will not

    be contingent on the results of such work.

    22. Prior to any increases in rates as set forth in paragraph 21of the Motion,

    FTI shall file a supplemental affidavit with the Court and give ten business days' notice to the

    Debtors, the Office of the United States Trustee for the Southern District of New York (the "U.S.

    Trustee") and any official committee, which supplemental affidavit shall explain the basis for the

    requested rate increases in accordance with section 330(a)(3)(F) of the Bankruptcy Code and

    indicate whether the Debtors have received notice of and approved the proposed rate increase.

    Treasury Advisory Function Fixed Monthly Rate

    23. For services rendered in connection with the treasury advisory function of

    the scope of services, the Debtors agree to pay FTI a monthly, non-refundable advisory fee of

    $65,000 for an Interim Treasurer (David Rush) and $55,000 per month each for two additional

    temporary employees serving as Additional Treasury Personnel (Larry Manning and Robert

    Molina). Payment of such fees is due and payable on the first business day of each month.

    24.

    In addition to the fees outlined above, FTI will bill reasonable direct

    expenses which are likely to be incurred on the Debtors' behalf during this Engagement. Direct

    expenses include reasonable and customary out-of-pocket expenses which are billed directly to

    the engagement such as certain telephone, overnight mail, messenger, travel, meals,

    accommodations and other expenses specifically related to the engagement. Further, if FTI

    and/or any of its employees are required to testify or provide evidence at or in connection with

    any judicial or administrative proceeding relating to this matter, FTI will be compensated by the

    Debtors at its regular hourly rates and reimbursed for reasonable direct expenses with respect

    thereto.

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    Completion Fee

    25. In addition to the fixed monthly rate and hourly fees and expenses, and as

    more fully described in the Engagement Letter, subject to this Court's approval the Debtors have

    agreed to pay FTI a completion fee of $1,250,000 (the "Completion Fee"), upon the earliest

    occurrence of the following:

    a. Confirmation of a Chapter 11 plan of reorganization or liquidation;or

    b. The sale of substantially all of the Debtors' assets.

    26. For the avoidance of any doubt, FTI acknowledges that the Completion

    Fee is subject to this Court's approval based on a reasonableness standard as provided in the Jay

    Alix Protocol.

    Retainer Cash on Account

    27. Prior to the Petition Date, the Debtors provided FTI with a retainer of

    $350,000 (the "Retainer"). The Retainer shall be credited against any amounts due at the

    termination of the Engagement Letter and returned to the Debtors upon the satisfaction of all

    obligations owed to thereunder.

    Indemnification Provisions

    28. The Engagement Letter contains standard indemnification language with

    respect to FTI's services. Notwithstanding such language, the Debtors and FTI have agreed that

    the Debtors shall only indemnify those FTI employees serving as executive officers of the

    Debtors on the same terms as provided to the Debtors' other officers and directors under the

    Debtors' by-laws and applicable state law, along with insurance coverage under the Debtors'

    directors' and officers' insurance policies, and the indemnification provisions of the Engagement

    Letter shall not apply to FTI.

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    Reporting Requirements

    29. To maintain transparency, FTI would file with the Court and serve on the

    Debtors, the U.S. Trustee, and any statutory committee(s) appointed in these cases (collectively,

    the "Committees," and together with the Debtors and the U.S. Trustee, the "Notice Parties") a

    report on staffing (the "Staffing Report") by the 20th of each month for the previous month,

    which report would include the names and tasks filled by all FTI personnel involved in this

    engagement. The Staffing Report (and FTI's staffing for this matter) would be subject to review

    by the Court in the event so requested by any of the Notice Parties.

    30.

    Moreover, FTI would file with this Court, and serve upon the Notice

    Parties, reports of compensation earned and expenses (the "Compensation Reports") incurred on

    at least a quarterly basis. The Compensation Reports would summarize the service provided,

    identify the compensation earned, itemize expenses incurred and provide for an objection period.

    All such compensation would be subject to review by this Court if an objection is filed.

    Dispute Resolution Provisions

    31.

    The Debtors and FTI have agreed, subject to the Court's approval of this

    Motion, that: (a) any controversy or claim with respect to, in connection with, arising out of, or

    in any way related to this Motion or the services provided by FTI to the Debtors as outlined in

    this Motion, including any matter involving a successor in interest or agent of any of the Debtors

    or of FTI, shall be brought in the Bankruptcy Court or the District Court for the Southern District

    of New York (if the reference is withdrawn); (b) FTI and the Debtors and any and all successors

    and assigns thereof, consent to the jurisdiction and venue of such court as the sole and exclusive

    forum (unless such court does not have or retain jurisdiction over such claims or controversies)

    for the resolution of such claims, causes of actions or lawsuits; (c) FTI and the Debtors, and any

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    and all successors and assigns thereof, waive trial by jury, such waiver being informed and freely

    made; (d) if the Bankruptcy Court, or the District Court (if the reference is withdrawn), does not

    have or retain jurisdiction over the foregoing claims and controversies, FTI and the Debtors, and

    any and all successors and assigns thereof, will submit first to non-binding mediation; and, if

    mediation is not successful, then to binding arbitration, in accordance with the dispute resolution

    procedures set forth in Exhibit B to this Motion; and (e) judgment on any arbitration award may

    be entered in any court having proper jurisdiction. By this Motion, the Debtors seek approval of

    this agreement by the Court. Further, FTI has agreed not to raise or assert any defense based

    upon jurisdiction, venue, abstention or otherwise to the jurisdiction and venue of the Bankruptcy

    Court or the District Court for the Southern District of New York (if the reference is withdrawn)

    to hear or determine any controversy or claims with respect to, in connection with, arising out of,

    or in any way related to this Motion or the services provided hereunder.

    Legal Basis for Relief Requested

    The Debtors Have Exercised Their Sound and Prudent Business Judgment

    32.

    Section 363 of the Bankruptcy Code provides that, after notice and a

    hearing, a Debtor may use property of the estate other than in the ordinary course of business. A

    Debtor's decision to use, sell or lease assets outside the ordinary course of business must be

    based upon the sound business judgment of the debtor. See In re Chateaugay Corp., 973 F.2d

    141, 143 (2d Cir. 1992) (holding that a judge determining a section 363(b) application must find

    from the evidence presented before him a good business reason to grant such application); see

    also In re Ionosphere Clubs, Inc., 100 B.R. 670, 674 (Bankr. S.D.N.Y. 1989) (noting that the

    standard for determining a section 363(b) motion is a "good business reason"); Committee of

    Asbestos-Related Litigants v. Johns-Manville Corp. (In re Johns Manville Corp.), 60 B.R. 612,

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    616 (Bankr. S.D.N.Y. 1986) ("Where the debtor articulates a reasonable basis for its business

    decisions (as distinct from a decision made arbitrarily or capriciously), courts will generally not

    entertain objections to debtor's conduct").

    33. The retention of corporate officers is proper under section 363 of the

    Bankruptcy Code, and courts in this district and elsewhere have determined that such retention is

    an appropriate exercise of a debtor's business judgment. See, e.g., In re Archbrook Laguna

    Holdings LLC, No. 11-13292 (SCC) (Bankr. S.D.N.Y. Aug. 3, 2011) (order authorizing

    retention of chief restructuring officer pursuant to sections 363(b) and 105(a) of the Bankruptcy

    Code); In re Calpine Corp., No.05-60200 (BRL) (Bankr. S.D.N.Y. Jan. 17, 2007) (order

    authorizing employment of interim chief financial officer pursuant to section 363 of the

    Bankruptcy Code); In re Dana Corp., Case No. 06-10354 (BRL) (Bankr. S.D.N.Y. Mar. 29,

    2006) (order designating chief restructuring officer and chief financial officer pursuant to section

    363 of the Bankruptcy Code); In re Worldcom, et al., Case No. 02-13533 (AJG) (Bankr.

    S.D.N.Y., Sept. 17, 2002) (order approving retention of crisis managers to provide chief financial

    officer, chief restructuring officer and additional temporary staff as needed pursuant to section

    363 of the Bankruptcy Code); see also In re Harry & David Holdings, Inc., Case No. 11-10884

    (MFW) (Bankr. D. Del. Apr. 27, 2011) (order authorizing retention of Alvarez & Marsal to

    provide an interim chief executive officer and chief restructuring officer and certain additional

    officers and personnel).

    34. Entry into the Engagement Letter and retaining the Interim Treasurer and

    Additional Personnel upon the terms set forth in the Engagement Letter, this Motion, and any

    order approving this Motion would enable the Debtors most efficiently to maximize value for

    their estates. Thus, the Debtors believe that it would be in their best interests and in the best

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    interests of their respective estates, their creditors, and other parties-in-interest for the Court to

    approve the Engagement Letter and the retention of Mr. Rush as Interim Treasurer and the

    Additional Personnel in accordance with the Engagement Letter, with such retention being

    deemed effective as of the Petition Date.

    35. The Debtors believe that FTI's fee structure is fair and reasonable in light

    of the type of services being provided and is comparable to those generally charged by firms of

    similar stature to FTI for comparable engagements. In addition, given the numerous issues FTI

    may be required to address in these cases, FTI's commitment to the variable level of time and

    effort necessary to address all such related issues as they arise, and the market prices for FTI's

    services for engagements of this nature in an out-of-court context, the Debtors believe that the

    FTI fee arrangement is fair and reasonable.

    The Proposed Retention Comports with the Bankruptcy Code

    36. FTI will provide the Notice Parties with the Staffing Reports and the

    Compensation Reports. Because the Debtors are seeking to retain FTI and the Retention

    Personnel pursuant to section 363 of the Bankruptcy Code and not under section 327 of the

    Bankruptcy Code, FTI is not subject to the compensation requirements of sections 328, 330, and

    331 of the Bankruptcy Code, and therefore, the Debtors request that fees and expenses of FTI

    incurred in the performance of the above-described services be treated as an administrative

    expense of the Debtors' chapter 11 estates and be paid by the Debtors in the ordinary course of

    business, without the need for FTI to file fee applications or otherwise seek Court approval for

    the compensation of its services and reimbursement of its expenses, other than those described

    above.

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    37. In addition, the Debtors are not seeking to retain FTI as a professional

    under section 327 of the Bankruptcy Code. Accordingly, there is no requirement that FTI or any

    of the Retention Personnel be disinterested. However, to the best of the Debtors' knowledge,

    information, and belief, FTI does not have any interest materially adverse to the Debtors' estates

    or any class of creditor or equity security holders, by reason of any direct or indirect relationship

    to, connection with, or interest in, the Debtors, or for any other reason. With that said, FTI

    believes it is disinterested because, to the best of FTI's knowledge, information, and belief, FTI

    has no connection with the Debtors, their creditors, or any other party-in-interest, except as

    disclosed in the Medlin Declaration.

    38. Additionally, the Court's general equitable powers codified in section

    105(a) of the Bankruptcy Code provide ample authority for the relief requested herein. Section

    105(a) of the Bankruptcy Code empowers the Court to "issue any order, process, or judgment

    that is necessary to carry out the provisions of this title." See 11 U.S.C. 105(a); see also

    United States v. Energy Resources Co., 495 U.S. 545, 549 (1990); Adelphia Communications

    Corp. v. The American Channel (In re Adelphia Communications Corp.), 345 B.R. 69, 85

    (Bankr. S.D.N.Y. 2006) ("Section 105(a) provides broad equitable power for a Bankruptcy Court

    to maintain its own jurisdiction and to facilitate the reorganization process."); In re Continental

    Airlines, 203 F.3d 203, 211 (3d Cir. 2000) ("Section 105(a) of the Bankruptcy Code supplements

    courts' specifically enumerated bankruptcy powers by authorizing orders necessary or

    appropriate to carry out provisions of the Bankruptcy Code.")

    Notice

    39. No trustee or examiner has been appointed in these chapter 11 cases.

    Notice of this Motion has been provided to: (a) the U.S. Trustee; (b) counsel to the Debtors'

    postpetition lenders; (c) counsel to General Electric Capital Corporation, as agent under the

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    Debtors' first lien asset-backed revolving credit facility; (d) counsel to Silver Point Finance,

    LLC, as agent under the Debtors' first lien term loan facility and third lien credit facility; (e)

    counsel to The Bank of New York Mellon Trust Company, as indenture trustee for the Debtors'

    fourth lien 5% secured convertible notes; (f) counsel to the Sponsor Funds; (g) counsel to the

    IBT; (h) counsel to the BCT; and (i) those creditors holding the 40 largest unsecured claims

    against the Debtors' estates. The Debtors submit that no other or further notice need be provided.

    No Prior Request

    40. No prior request for the relief sought in this Motion has been made to this

    or any other Court in connection with these chapter 11 cases.

    WHEREFORE, for the reasons set forth herein, the Debtors respectfully request

    that the Court enter an order, substantially in the form attached hereto as Exhibit D, granting the

    relief requested herein and such other and further relief as may be just and proper under the

    circumstances.

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    NYI-4357899v7 18

    Dated: January 11, 2012New York, New York

    Filed by:

    /s/ Corinne Ball

    Corinne BallHeather LennoxLisa LaukitisVeerle RooversJONES DAY222 East 41st StreetNew York, New York 10017Telephone: (212) 326-3939Facsimile: (212) 755-7306

    - and -

    Ryan T. RouthJONES DAYNorth Point901 Lakeside AvenueCleveland, Ohio 44114Telephone: (216) 586-3939Facsimile: (216) 579-0212

    PROPOSED ATTORNEYS FOR DEBTORSAND DEBTORS IN POSSESSION

    Respectfully submitted,

    Hostess Brands, Inc., et al.Debtors and Debtors in Possession

    /s/ John StewartJohn StewartChief Financial Officer of Hostess Brands, Inc.

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    EXHIBIT A

    [Engagement Letter]

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    EXHIBIT B

    [Dispute Resolution Procedures]

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    DISPUTE RESOLUTION PROCEDURES

    The following procedures shall be used to resolve any controversy or claim ("dispute") as

    provided in this Agreement. If any of these provisions are determined to be invalid or

    unenforceable, the remaining provisions shall remain in effect and binding on the parties to the

    fullest extent permitted by law.

    Mediation

    A dispute shall be submitted to mediation by written notice to the other party or parties.

    In the mediation process, the parties will try to resolve their differences voluntarily with the aid

    of an impartial mediator, who will attempt to facilitate negotiations. The mediator will be

    selected by agreement of the parties. If the parties cannot agree on a mediator, a mediator will be

    designated by the American Arbitration Association ("AAA") or JAMS/Endispute at the request

    of a party. Any mediator so designated must be acceptable to all parties.

    The mediation will be conducted as specified by the mediator and agreed upon by the

    parties. The parties agree to discuss their differences in good faith and to attempt, with the

    assistance of the mediator, to reach an amicable resolution of the dispute.

    The mediation will be treated as a settlement discussion and therefore will be

    confidential. The mediator may not testify for either party in any later proceeding relating to the

    dispute. No recording or transcript shall be made of the mediation proceedings.

    Each party will bear its own costs in the mediation. The fees and expenses of the

    mediator will be shared equally by the parties.

    Arbitration

    If a dispute has not been resolved within 90 days after the written notice beginning the

    mediation process (or a longer period, if the parties agree to extend the mediation), the mediation

    shall terminate and the dispute will be settled by arbitration and judgment on the award rendered

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    by the arbitration may be entered in any Court having jurisdiction thereof. The arbitration will

    be conducted in accordance with the procedures in this document and the Arbitration Rules for

    Professional Accounting and Related Services Disputes of the AAA ("AAA Rules").

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    EXHIBIT C

    [Declaration of J. Robert Medlin]

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    UNITED STATES BANKRUPTCY COURT

    SOUTHERN DISTRICT OF NEW YORK

    ---------------------------------------------------------------In re

    Hostess Brands, Inc., et al.,1

    Debtors.

    ---------------------------------------------------------------

    x::

    :::::x

    Chapter 11

    Case No. 12-_____ (___)

    (Jointly Administered)

    DECLARATION OF

    J. ROBERT MEDLIN

    IN SUPPORT OF THE MOTION OF

    THE DEBTORS PURSUANT TO 11 U.S.C. 105(A)

    AND 363(B) TO EMPLOY AND RETAIN FTI CONSULTING,INC. TO PROVIDE THE DEBTORS AN INTERIM TREASURER

    AND ADDITIONAL PERSONNEL NUNC PRO TUNCTO THE PETITION DATE

    I, J. Robert Medlin, make this declaration pursuant to 28 U.S.C. 1746 and state

    as follows:

    1. I am a Senior Managing Directorwith FTI Consulting, Inc. ("FTI")2 a

    financial advisory services and interim management firm with numerous offices throughout the

    country. I am duly authorized to make this declaration (the "Declaration") on behalf of FTI and

    submit this Declaration in support of the motion (the "Motion"), dated January 11, 2012, of the

    above captioned debtors and debtors in possession (collectively, the "Debtors") for entry of an

    order (the "Order") authorizing the Debtors to employ and retain FTI to provide the Debtors an

    Interim Treasurer and Additional Personnel nunc pro tunc to the Petition Date, pursuant to 11

    U.S.C. 105(a) and 363(b)and under the terms and conditions set forth in the Motion.

    1 The Debtors are the following six entities (the last four digits of their respective taxpayer identification numbers follow in parentheses): Hostess Brands, Inc. (0322), IBC Sales Corporation (3634), IBC Services, LLC (3639), IBC Trucking, LLC (8328),

    Interstate Brands Corporation (6705) and MCF Legacy, Inc. (0599).

    2 Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Motion.

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    2. Except as otherwise stated in this Declaration, I have personal knowledge

    of the facts set forth herein and, if called as a witness, I would testify thereto. Certain of the

    disclosures set forth herein related to matters within the knowledge of other employees of FTI

    and are based on information provided by them.

    FTI's Qualifications

    3. FTI has a wealth of experience in providing financial advisory services in

    restructurings and reorganizations and enjoys an excellent reputation for services it has rendered

    in large and complex chapter 11 cases on behalf of debtors and creditors throughout the United

    States.

    4. Furthermore, as a result of the prepetition work performed on behalf of the

    Debtors over the past 6months, FTI has acquired significant knowledge of the Debtors and their

    businesses and is intimately familiar with the Debtors' financial affairs and systems, capital

    structure, operations and related matters. Such experience and knowledge will be valuable to the

    Debtors in their efforts to reorganize. Accordingly, the Debtors wish to retain FTI to provide

    assistance during this case.

    5. Prior to becoming a Senior Managing Director and Southwest Region

    Leader of FTI, I was a Partner and Southwest Region Leader of the U.S. division of

    PricewaterhouseCoopers' Business Recovery Services Practice. I have previously represented

    borrowers, debtors, lenders, creditors and equity holders in formal bankruptcies and out-of-court

    restructurings. Some of my engagements include: Enron; Capmark; Baylor College of

    Medicine; Pillowtex; Zale Corporation; Eljer Industries; Lomas Financial; Big West Oil; TXCO;

    Age Refining; Reliant Channelview; Sunrise Energy; Global Power Equipment; Bag n baggage;

    Braun's Fashions; CompuAdd; Encompass; General Wireless; Rubus Realty; Sun Healthcare; El

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    Paso Electric Company; Greyhound; Harvest Foods; Minorplanet; Promedco; TWA; U.S. One

    Communications; and SageCrest.

    Services To Be Provided

    6. Subject to this Court's approval, FTI has agreed to provide the Debtors

    with an Interim Treasurer, Additional Treasury Personnel and certain Additional Financial

    Personnel (collectively, the "Retention Personnel"). Among other things, the Retention

    Personnel will provide assistance to the Debtors with respect to the management of the overall

    restructuring process, including the development of ongoing business/financial plans and

    conducting restructuring negotiations with creditors with respect to an overall strategy for their

    chapter 11 cases.

    7. Pursuant to the Engagement Letter,3 FTI will provide such services as FTI

    and the Debtors shall deem appropriate and feasible in order to manage and advise the Debtors in

    the course of the chapter 11 cases, including, but not limited to;

    Interim Treasury Management Function

    a.

    Provide comprehensive treasury services and coordinate and directCompany employees as necessary. David Rush, Senior ManagingDirector, will serve in the capacity of Interim Treasurer for a fixedmonthly fee as described below;

    b. Work with management and employees to refine the Company's existingcash flow forecasts, related analyses and reporting. Provide anyrecommendations to existing practices and methodologies; and

    c. Provide additional FTI professionals to serve as Additional TreasuryPersonnel of the Company and provide support as required.

    Provide FTI professionals to serve as Additional Financial Personnel of theCompany to provide services as follows, and may be requested by the

    Company from time to time:

    3 A copy of the Engagement Letter is attached as Exhibit A to the Motion.

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    d. Assist with the Company's execution of planned liquidity enhancementinitiatives, including working capital management and cost savingsprograms;

    e. Develop the Company's integrated multi-year financial projection model by brand, business unit and region through coordination and discussionwith management and Company employees;

    f. Perform a detailed assessment of the Company's operations, identify performance improvement opportunities and assist management andCompany employees in implementing and executing the identifiedinitiatives;

    g. Prepare other financial analysis and reporting as needed to assistmanagement in negotiations and discussions with the Company'sstakeholders;

    h.

    Participate in meetings and negotiations/interface with stakeholders and/ortheir advisors as necessary.

    i. Prepare a comprehensive winddown plan and related liquidation analysiswith supporting schedules, and assist the Company in implementation ofsuch plan, as necessary;

    j. Develop with management detailed contingency planning related topotential liquidity shortfalls or planned restructuring programs;

    k. Prepare Schedules of Assets & Liabilities and Statements of Financial

    Affairs, claims reconciliations and settlements, appropriate financial andoperational cut-off periods, development of a creditor matrix, and first daymotions support;

    l. Provide testimony as required; and

    m. Perform any other interim management services as mutually agreed upon.

    FTI's Disinterestedness

    8. In connection with the preparation of this Declaration, FTI conducted a

    review of its contacts with the Debtors, their affiliates and certain entities holding large claims

    against or interests in the Debtors that were made reasonably known to FTI. A listing of the parties

    reviewed is reflected on Schedule 1 to this Declaration. FTI's review, completed under my

    supervision, consisted of a query of the Schedule 1 parties within an internal computer database

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    containing names of individuals and entities that are present or recent former clients of FTI. While

    this review remains underway, a summary of such relationships that FTI has identified thus far

    during this process is set forth on Schedule 2 to this Declaration. Upon completion of our review,

    FTI will supplement this Declaration for any additional relationships identified.

    9. Except as discussed below, based on the results of its review thus far, FTI

    does not have a relationship with any of the parties on Schedule 1 in matters related to these

    proceedings. FTI has provided and could reasonably be expected to continue to provide services

    unrelated to the Debtors' chapter 11 cases for the various entities shown on Schedule 2. FTI's

    assistance to these parties has been related to providing various financial restructuring, litigation

    support and/or engineering and scientific investigation consulting services. To the best of my

    knowledge, no services have been provided to these parties in interest which involve their rights

    in the Debtors' Chapter 11 Cases, nor does FTI's involvement in these chapter 11 cases

    compromise its ability to continue such consulting services.

    10. FTI provided financial advisory services to the Official Unsecured

    Creditors' Committee to Interstate Bakeries Corporation, the predecessor to Hostess Brands, Inc.

    FTI's services related to that engagement ended July 2, 2009.

    11. Judge Gropper is related to an FTI employee who serves as a senior

    consultant in our forensic and litigation consulting segment. He is not part of the engagement

    team and FTI will institute ethical wall procedures with respect to this FTI employee.

    12. FTI provides litigation consulting services to Flowers Foods, Inc., which

    is adverse to the Debtors, in Flowers Bakeries Brands, Inc. v. Interstate Bakeries Corporation

    (No. 1.08-CV-02376-TWT), filed in the Northern District of Georgia. The FTI engagement

    team for that assignment is separate from the engagement team for this engagement. Since June

    10, 2011, the Retention Personnel have been under an engagement confidentiality agreement.

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    Additionally, by a date not later than August 11, 2011, FTI established an ethical wall agreement

    ("Ethical Wall") in order to faithfully uphold its fiduciary duties. FTI required each member of

    the respective engagement teams to execute and return to FTI's Conflicts Manager an ethical wall

    agreement indicating:

    a. There will be no discussions or communications (orally, electronically orotherwise) regarding the substances of the respective engagements between anypersons who are or have been involved in the Engagement and the litigationmatter described above;

    b. Only the persons working on matters involving the Engagement shall be providedaccess to non-public documents or information relating to the Engagement; and

    c. Further, FTI established electronic internal security walls to ensure that onlyFTI employees directly involved with or working on the Engagement mayhave access to the information, databases, e-mails, schedules or any otherinformation of or relating to the Engagement. The FTI Security Administratorwill monitor these software walls and related security periodically forcompliance with the Ethical Wall procedures described in this agreement, andany attempted or actual breaches will be reported immediately to theapplicable engagement Senior Managing Director; Eric Miller, GeneralCounsel; and Kim Cornell, Conflicts Manager.

    13. As part of its diverse practice, FTI appears in numerous cases, proceedings

    and transactions that involve many different professionals, including attorneys, accountants and

    financial consultants, who may represent claimants and parties-in-interest in the Debtors' chapter

    11 cases. Also, FTI has performed in the past, and may perform in the future, advisory

    consulting services for various attorneys and law firms, and has been represented by several

    attorneys and law firms, some of whom may be involved in these proceedings. In addition, FTI

    has in the past, may currently and will likely in the future be working with or against other

    professionals involved in these cases in matters unrelated to the Debtors and these cases. Based

    on our current knowledge of the professionals involved, and to the best of my knowledge, none

    of these relationships create interests materially adverse to the Debtors in matters upon which

    FTI is to be employed, and none are in connection with these cases.

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    14. It is FTI's policy and intent to update and expand its ongoing relationship

    search for additional parties in interest in an expedient manner. If any new material relevant facts

    or relationships are discovered or arise, FTI will promptly file a supplemental affidavit under

    Bankruptcy Rule 2014(a).

    Professional Compensation

    15. As set forth in the Engagement Letter, fees in connection with this

    Engagement (other than the treasury advisory function described below) will be based upon time

    incurred by the Additional Financial Personnel providing the Services, multiplied by our

    standard hourly rates, illustrated below:

    Senior Managing Directors $780-895Directors / Managing Directors $560-745Consultants / Senior Consultants $280-530Administrative / Paraprofessionals $115-230

    The Debtors understand that FTI revises its rates for services periodically, and the Debtors will

    pay such rates as reasonably adjusted without altering or limiting the Debtors' obligation to

    compensate FTI in accordance with the Engagement Letter. FTI does not provide any assurance

    regarding the outcome of its work and that its fees will not be contingent on the results of such

    work.

    16. Prior to any increases in rates as set forth in paragraph 15 of this

    Declaration, FTI shall file a supplemental affidavit with the Court and give ten business days'

    notice to the Debtors, the Office of the United States Trustee for the Southern District of New

    York (the "U.S. Trustee") and any official committee, which supplemental affidavit shall explain

    the basis for the requested rate increases in accordance with section 330(a)(3)(F) of the

    Bankruptcy Code and indicate whether the Debtors have received notice of and approved the

    proposed rate increase.

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    17. For services rendered in connection with the treasury advisor function of

    the scope of services, the Debtors agree to pay FTI a monthly, non-refundable advisory fee of

    $65,000 for an Interim Treasurer (David Rush) and $55,000 per month each for two additional

    temporary employees serving as Additional Treasury Personnel (Larry Manning and Robert

    Molina). Payment of such fees is due and payable on the first business day of each month.

    18. In addition to the fees outlined above, FTI will bill reasonable direct

    expenses which are likely to be incurred on the Debtors' behalf during this Engagement. Direct

    expenses include reasonable and customary out-of-pocket expenses which are billed directly to

    the engagement such as certain telephone, overnight mail, messenger, travel, meals,

    accommodations and other expenses specifically related to the engagement. Further, if FTI

    and/or any of its employees are required to testify or provide evidence at or in connection with

    any judicial or administrative proceeding relating to this matter, FTI will be compensated by the

    Debtors at its regular hourly rates and reimbursed for reasonable direct expenses with respect

    thereto.

    19.

    In addition to the fixed monthly rate and hourly fees and expenses, and as

    more fully described in the engagement letter, subject to this Court's approval the Debtors have

    agreed to pay FTI a completion fee of $1,250,000 (the "Completion Fee"), upon the earliest

    occurrence of the following:

    a. Confirmation of a Chapter 11 plan of reorganization or liquidation;or

    b.

    The sale of substantially all of the Debtors' assets.

    20. For the avoidance of any doubt, FTI acknowledges that the Completion

    Fee is subject to this Court's approval based on a reasonableness standard as provided in the Jay

    Alix Protocol.

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    21. Prior to the Petition Date, the Debtors provided FTI with a retainer of

    $350,000 (the "Retainer"). The Retainer will be credited against any amounts due at the

    termination of the Engagement Letter and returned to the Debtors upon the satisfaction of all

    obligations owed to thereunder.

    22. According to FTI's books and records, during the 90 days prior to the

    petition date, FTI received $1,520,040.48 in fees and expenses. As of the petition date FTI

    estimates they held Cash on Account of $350,000. The Debtors and FTI have agreed that any

    portion of the advance payments not used to compensate FTI for its prepetition services and

    expenses will be held and applied against its final post-petition billing and will not be placed in a

    separate account.

    23. To the best of my knowledge, (a) no commitments have been made or

    received by FTI with respect to compensation or payment in connection with these cases other

    than in accordance with the provisions of the Bankruptcy Code, and (b) FTI has no agreement

    with any other entity to share with such entity any compensation received by FTI in connection

    with these chapter 11 cases.

    24. I have read the motion of the Debtors for an order approving the

    employment and retention of FTIthat accompanies this Declaration and, to the best of my

    knowledge, information and belief, the contents of such motion are true and correct.

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    I declare under penalty of perjury that the foregoing is true and correct.

    Executed on January 11, 2012

    FTI CONSULTING, INC.

    By: /s/ J. Robert Medlin

    Name: J. Robert MedlinTitle: Senior Managing Director

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    NYI-4357899v7

    Schedule 1 to the Declaration

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    SCHEDULE 1 OF DECLARATION

    Listing of Parties-In-Interest Reviewed for Current Relationships

    The Debtors

    Hostess Brands, Inc.

    IBC Sales CorporationIBC Services, LLC

    IBC Trucking, LLC

    Interstate Brands Corporation

    MCF Legacy, Inc.

    Names of Debtors Filing Petitions in the Debtors' Previous Chapter 11 Cases (And Not Identified Above)

    Armour and Main Redevelopment Corporation

    Baker's Inn Quality Baked Goods, LLC

    Interstate Bakeries Corporation

    Mrs. Cubbison's Foods, Inc.

    New England Bakery Distributors, L.L.C.

    All Other Names Used by the Debtors in the Previous Eight Years (Including Trade Names)

    Baker's Inn

    Beefsteak

    Bread du Jour

    Brown's Bakery

    Butter-Nut

    Butter-Nut Bakeries

    Colombo Bakery

    Continental Baking Company

    Cotton's Holsum

    Cotton's Holsum Bakeries

    Di Carlo BakeryDolly Madison

    Dolly Madison Bakery

    Drake's

    Drake's Bakery

    Eddy's

    Eddy's Bakery

    Grandma Emilie's

    Grandma Emilie Brown's Bakery

    Holsum Bakery

    Home Pride

    Hostess

    Hostess Bakeries

    IBC Hostess Services, LLC

    Interstate Brands West Corporation

    Interstate Brands Companies

    J.J. Nissen Bakery

    Merita

    Merita Bakeries

    Millbrook Bakeries

    My Bread Bakery

    SCHEDULE 1

    Page 1 of 14

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    Nature's Pride

    Pantry Pride

    Parisian Bakery

    San Francisco French Bread Company

    Sunbeam

    Sunbeam Bakery

    SweetheartSweetheart Bakery

    Standish Farms

    Weber's Bread

    Wonder

    Wonder Bakeries

    Wonder/Hostess Bakeries

    Current Directors and Officers of Hostess Brands, Inc.

    Altizer, Jeffrey

    Birgfeld, Steven D.

    Cahill, John T.

    Driscoll, Brian J.Duran, Michael

    Herenstein, Andrew J.

    Hobbs, Richard L.

    Kissick, Jr., Robert M.

    Knipp, Christopher J.

    Lavine, Lawrence N.

    Loeser, David A.

    Magill, Kent B.

    Minnetian, Christopher

    Murphy, Gregory B.

    Reganato, David

    Ross, MarthaSeban, Richard C.

    Singer, Leonard

    Stewart, John O.

    Wandschneider, Gary K.

    Former Directors and Officers of Hostess Brands, Inc.

    Adams, Randall

    Flowers, Daniel R.

    Akeson, John C.

    Jung, Craig

    Lavelle, Timothy

    Lewis, Frank

    Mathews, Suresh

    Schneider, Bill

    Spielvogel, Scott

    Swanston, William

    Vance, J. Randall

    Verstraete, Stephany

    Current Directors and Officers of Debtors Other Than Hostess Brands, Inc. (And Not Identified Above)

    SCHEDULE 1

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    Angst, Daniel G.

    Bilello, Lawrence R.

    Cooper, Steven P.

    Dibble, James W.

    Walsh, Mark A.

    Hostess Brands, Inc. Equity OwnershipArrow Distressed Securities Fund

    Driscoll, Brian

    Gephardt Group Labor Advisory Services

    IBC Investors I, LLC

    IBC Investors II, LLC

    IBC Investors III, LLC

    Jung, Craig D.

    Mars & Co. Consulting LLC

    Monarch Debt Recovery Master Fund Ltd

    Monarch Opportunities Master Fund Ltd

    Monarch Income Master Fund Ltd

    McDonnell Loan Opportunity Ltd.Schultze Apex Master Fund, Ltd.

    Schultze Master Fund, Ltd.

    SPCP Group, LLC

    Ultimate Owners of the Debtors

    McDonnell Investment Management LLC

    Monarch Alternative Capital L.P.

    Ripplewood Holdings L.L.C.

    Silver Point Finance, LLC

    Certain Competitors of the Debtors

    Flowers Foods, Inc.George Weston Limited

    Grupo Bimbo, S.A.

    McKee Foods Corporation

    Sara Lee Corporation

    Debtors' Professionals and Service Providers

    Accenture LLP

    Arent Fox LLP

    Ernst & Young LLP

    ESIS Inc.

    Fisher & Phillips LLP

    FTI Consulting

    Houlihan Lokey Capital Inc.

    Jefferson Wells International Inc.

    Jones Day

    KPMG

    Lockton Companies LLC

    Kurtzman Carson Consultants LLC

    Mars & Co. Consulting LLC

    Marsh USA Inc.

    SCHEDULE 1

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    Perella Weinberg Partners LP

    Sitrick and Company

    Skadden Arps Slate Meagher & Flom

    Stinson Morrison Hecker

    Venable LLP

    Known Professionals for Certain Significant Nondebtor Parties in InterestConway Del Genio Gries & Co., LLC

    Cravath, Swaine & Moore LLP

    Debevoise & Plimpton LLP

    Fulbright & Jaworski LLP

    Lazard Ltd.

    Locker Associates Inc.

    Glanzer & Co. LLC

    MAEVA Advisors, LLC

    Paul, Hastings, Janofsky & Walker LLP

    Paul, Weiss, Rifkind, Wharton & Garrison LLP

    Richards Kibbe & Orbe LLP

    Willkie, Farr & Gallagher LLP

    Major Secured Lenders Under The Debtors' Senior Secured Revolving Credit Facility And The Agents Thereunder

    GE Capital Markets, Inc.

    General Electric Capital Corporation (as Administrative Agent)

    Wells Fargo Bank, N.A.

    Major Secured Lenders Under The Debtors' First Lien Term Loan Facility And The Agents Thereunder

    Altai Capital Master Fund Ltd.

    Archer Capital Master Fund L.P.

    Archer SIF II LP

    Arizona State Retirement System

    BA/CSCredit 1 LLCCandlewood Credit Value Master Fund

    Cerberus Series Four Holdings, LLC

    Credit Suisse Loan Funding LLC

    Field Point III, Ltd.

    Field Point IV, Ltd.

    Gannett Peak CLO I, Ltd.

    Goldman Sachs Lending Partners LLC

    H Senior Income Fund LLC

    Hastings Master Fund LP

    HSBC Distressed Opportunities Master Fund Ltd.

    JPMorgan Chase Bank, N.A.

    McDonnell Loan Opportunity Ltd.

    Monarch Master Funding Ltd.

    Morgan Stanley Senior Funding, Inc.

    NB Distressed Debt Investment Fund Ltd.

    Schultze Apex Master Fund, Ltd.

    Silver Point Finance, LLC (as Administrative Agent)

    SPF CDO I, Ltd.

    Talamod Capital Partners, LP

    UBS AG, Stamford Branch

    SCHEDULE 1

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    VR Global Partners LP

    Major Secured Lenders Under The Debtors' Third Lien Term Loan Facility And The Agents Thereunder

    Arizona State Retirement System

    Arrow Distressed Securities Fund

    BA/CSCREDIT 1 LLC

    Bank of America, N.A.Candlewood Credit Value Master Fund II, L.P.

    Courage Special Situations Master Fund, LP

    CVP Distressed Fund LP

    Deutsche Bank Trust Company Americas

    Deutsche Bank, AG New York Branch

    H Senior Income Fund LLC

    HFR ED Courage Special Situations Master Trust

    Indonesian Shrimp Co.

    Lehman Commercial Paper Inc

    McDonnell Loan Opportunity Ltd.

    McDonnell Loan Opportunity Ltd.

    Monarch Master Funding Ltd.Morgan Stanley Senior Funding, Inc.

    Promethean Managers, LLC

    Rockview Trading Ltd.

    Schultze Apex Master Fund, Ltd.

    Schultze Master Fund, Ltd.

    Silver Point Finance, LLC (as Administrative Agent)

    SPCP Group, LLC

    The Bank of Nova Scotia

    Yucaipa American Alliance (Parallel) Fund I, LP

    Yucaipa American Alliance Fund I, LP

    Holders of 5% Secured Convertible PIK-Election Series A and B Notes and 10% Secured Convertible PIK-ElectionSeries C Notes and the Indenture Trustee Thereunder

    Arrow Distressed Securities Fund

    Deutsche Bank AG New York Branch

    Deutsche Bank Trust Company Americas

    Hare & Co.

    IBC Investors I, LLC

    IBC Investors II, LLC

    IBC Investors III, LLC

    Indonesian Shrimp Co.

    J.P. Morgan Securities LLC (formerly Inc.)

    Lehman Commercial Paper Inc.

    McDonnell Loan Opportunity Ltd.

    Monarch Master Funding Ltd.

    Rockview Trading, Ltd.

    Schultze Apex Master Fund, Ltd.

    Schultze Master Fund, Ltd.

    SPCP Group, LLC

    Swiss Re Financial Products Corporation

    The Bank of Nova Scotia

    Yucaipa American Alliance (Parallel) Fund I, LP

    SCHEDULE 1

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    Yucaipa American Alliance Fund I, LP

    The Bank of New York Mellon Trust Company, N.A. (as Indenture Trustee)

    Additional Material Lienholders

    7-11 Corporation

    APEX Cold Storage

    Baker Transfer & StorageDiversified Transfer and Storage #1423392

    Glacier Cold Storage

    Groves Faison

    Hunter Creek Warehouse (Park Creek Venture)

    International Transit & Storage

    MBM Corp

    Merchandise Warehouse

    Millard Refrigerated Services

    Ress Properties (Kent Lindemuth Warehouse)

    Parties to Recent Material Transactions with the Debtors

    Lee & Associates Inc.Sugar Foods Corp.

    Debtors' Current and Former Depository and Disbursement Banks and Financial Institutions With Which the

    Debtors Maintain Accounts

    ADM Investor Services, Inc.

    Bank of America

    Bank of Oklahoma

    Bank of the West

    Banknorth MA

    Banknorth, N.A.

    Banknorth Vermont

    Columbus Bank & TrustComerica

    Fifth Third Bank

    First National Bank of Alaska

    First Tennessee Bank

    Franklin Savings Bank

    Franklin Bank

    Harris Trust

    JP Morgan Chase

    National City Bank

    Penson GHCO

    PNC Bank

    RBC Bank

    Regions Bank

    Sovereign Bank

    United Missouri Bank

    Union Bank

    Wachovia Securities

    Wells Fargo Bank, N.A.

    Zions Bank

    SCHEDULE 1

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    Major Vendors of the Debtors

    ADM Inc.

    Ag Processing

    Amalgamated Sugars

    American Pan/Pan Glo

    American Yeast

    BagcraftBarry Callebaut

    Bay State Milling Co.

    Blommer Chocolate Co.

    Bunge North America

    Calise & Sons Bakery Inc.

    Caravan Ingredients

    Cargill Inc.

    Cereal Food Processors

    Comdata Corporation

    Conagra Foods

    Dakota Specialty

    DaniscoDelavau LLC

    Domino Sugar

    Flavor Solutions

    Fleischmann Yeast

    General Mills

    Glopak

    Groeb Farms

    HC Brill

    Hoogwegt

    International Molasses

    International Paper

    LeSaffre YeastLoders Croklaan

    Main Street Ingredients

    Mallet

    Malnove Inc. of Nebraska

    Manildra Milling

    Manpower Inc.

    Michael's Foods

    Milner Milling

    National Starch

    Perfect Commerce

    Pliant Corp.

    Prestige Pak Inc.

    Roquette

    Siemer Milling

    Sonstegard Foods

    South Chicago Packing Co.

    Speedway

    Speedway SuperAmerica

    St. Johns Packaging Ltd.

    Tate and Lyle Public Limited Company

    SCHEDULE 1

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    TJ Harkings

    United Sugars Corp.

    UPS

    Debtors' 40 Largest Unsecured Creditors as Identified in the Debtors' Chapter 11 Petitions

    Accenture LLP

    ADM, Inc.Bakery & Confectionery Union & Industry International Pension Fund

    Bakery Drivers and Salesman Industry Pension Fund

    Berry Plastics Corp.

    Blommer Chocolate Co.

    Bunge North America

    Calise & Sons Bakery Inc.

    Caravan Ingredients

    Cargill Inc.

    Central Pension Fund of the IUOE

    Central States, Southeast and Southwest Areas Pension Plan

    Cereal Food Processors

    Chicago Display Marketing Corp.Cleveland Bakers and Teamsters Pension Fund

    Cloverhill Pastry Vending Corp.

    Comdata Corporation

    CSM Bakery Products

    Dakota Specialty Milling

    Delavau LLC

    General Mills

    I.A.M. National Pension Plan

    Independence Blue Cross

    Local 734 Pension Fund

    Lockton Companies LLC

    Malnove Inc. of NebraskaManildra Milling

    Manpower Inc.

    MSC Industrial

    New England, Teamsters & Trucking Industry Pension Fund

    Northern New England Benefit Trust

    Ortran Inc.

    Philadelphia Bakery Employers & Food Driver Salesmens Union Local 463 & Teamsters Local 676 Pension Plan

    Retail, Wholesale & Department Store International Union and Industry Pension Fund

    Service Warehouse Corp.

    Southern California Bakery Security Fund

    Speedway Superamerica LLC

    The Goodyear Tire & Rubber Co.

    United Sugars Corp.

    Western Conference of Teamsters Pension Plan

    Significant Utility Providers

    Access Point

    Alabama Power

    Amerada Corporation

    Ameren Illinois

    SCHEDULE 1

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    AT&T

    City of Emporia

    City of Seattle

    ComEd

    Matrix Telecom Inc.

    Nicor Gas

    Northwestern EnergyPassaic Valley Sewerage

    Southwest Gas Corp.

    The Gas Company

    Township of Wayne

    Verizon

    Water Revenue Bureau (Philadelphia, PA)

    Xcel Energy

    Beneficiaries and Issuers of Letters of Credit

    ACE American Insurance Company

    Comerica Bank

    Director of Rhode Island Workers CompensationFlorida Power & Light Company

    Florida Self-Insurers Guaranty Association, Inc.

    Hartford Fire Insurance Company

    Kansas Dept. of Human Resources

    Louisiana Department of Labor

    Ohio Bureau of Workers Compensation

    Oklahoma Workers' Compensation Court

    Peoples Gas System

    Self-Insurance Division, Bureau of Workers' Compensation (Harrisburg, PA)

    State of Connecticut

    State Of Michigan

    Tampa Electric CompanyTravelers Casulty & Surety Company of America

    Travelers Indemnity Company

    United States Fidelity and Guaranty Company

    Counterparties to Hedging Arrangements

    AG Processing Inc.

    Archer-Daniels-Midland Company

    Bartlett Milling

    Bay State Milling Co.

    Blommer Chocolate Co.

    Bunge North America

    Cereal Food Processors

    Conagra Foods

    Horizon Milling, LLC

    Mennel Milling Co.

    Milner Milling Co.

    Roquette America Inc.

    Siemer Milling Co.

    Major Lessors and Related Entities

    SCHEDULE 1

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    17201 Figueroa LLC

    Aircraft Bolt Corp.

    APC Capital Partners

    Boise Capital Partners

    Bristol Properties Inc.

    Brookdale Properties LLC

    Carson Madrona Co. LLCCentury Warehousing Inc.

    CRP Institutional Investors LP

    Darwin C. Parrish

    Sonja G. Parr

    Donald J. Bruzzone

    Donna J. Bruzzon

    Eastgroup Properties LP

    Future Home Inc.

    JSLB LLC

    MBWCA VII Associates Inc.

    Park Creek Venture

    Piedmont Operating Partnership LPPrologis TLF (Las Vegas) LLC

    Russo Development LLC

    S&D Wells Investments LLC

    Seminary Road LLC

    Severson Ranch Partnership

    Thompson Road Associates LLC

    VT One LLC

    National Unions Representing Significant Number of Debtor Employees

    Bakery, Confectionery, Tobacco Workers & Grain Millers International Union.

    International Brotherhood of Teamsters

    Parties to Other Significant Contracts with the Debtors

    Banc of America Merchant Services, LLC

    Oce Imagistics, Inc.

    Oce North America

    Common Carriers, Customs Brokers and Warehousemen to the Debtors

    ABF Freight Services

    CR England Inc.

    CH Robinson Worldwide

    Fleet Global Services Inc.

    Greatwide Dedicated Transport

    HLN Services

    International Transit & Storage

    Interstate Distributor Co.

    Kansas Continental Express

    Ortran Inc.

    RDG Truckin LCC

    Redline

    Select Space

    Strive Logistics

    SCHEDULE 1

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    The Custom Companies

    Totem Ocean Trailer Express

    Universal Am-Cam Ltd.

    YRC Inc.

    Parties to Litigation with the Debtors

    Baker, KaraBernhard, Kimberly

    Blackshear, Venus

    Blood, Curtis

    Boyle, George

    Brooks, Anthony

    Browder's Maximum Security ATS

    Connecticut Dep't of Labor Investigation

    Dewitt, Donna

    Flowers Bakeries Brands Inc.

    Gallion, Ola

    Hall, Derek

    Halvorson, CoraHedback, John A.

    Henderson, Tyrone

    Johnson, Adam

    Jones, Bryan

    Kaye, William S.

    Lorenz (Kuhn), Lizette

    Loy, Timothy

    Lucchesi, Richard

    Madera, Ana

    Matter, Marc

    Mazim's Nutricare (d/b/a Papa Pita Bakery)

    McKinzy, Michael, Sr.Northwest Administrators

    OneBeacon Insurance Company

    Pigford, Michael

    Rutherford, Lewis, Sr.

    Scheinfeld, Craig

    Scott, Alice

    Turner, LeJuan

    Werwinski, Charlene

    Whitfield, Charles

    Zielinski, Todd

    Parties to Material License Agreements with the Debtors

    Alaska Pride Baking Company

    American Bakers Cooperative

    Delavau, LLC

    Evrilholder Products, LLC

    Gonzales Enterprises, Inc. d/b/a Fifth Sun Graphics

    International Foods Company

    Rasta Imposta, Inc.

    Sara Lee Corp. (successor to Heilman Baking Company)

    SCHEDULE 1

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    SBC Services

    Sun-Maid Growers of California

    The Federated Group

    The Long Company

    Major Insurers and Insurance Brokers

    ACE American Ins. Co.Allied World Assurance Co.

    American International Specialty Lines Ins. Co.

    Arch Insurance Co.

    Darwin Select Ins. Co.

    Fireman's Fund Ins. Co.

    Illinois Union Ins. Co.

    Lexington Ins. Co.

    Liberty Mutual Fire Ins. Co.

    Lloyd's of London

    Lockton Companies LLC

    Marsh USA Inc.

    Princeton Excess & Surplus Lines Ins. Co.RSUI Indemnity Co.

    Safety National Casualty Corp.

    St. Paul Fire & Marine Ins. Co.

    Travelers Property Casualty Co. of America

    XL Insurance America, Inc.

    Major Benefits Administrators

    Blue Cross Blue Shield

    Broadspire Services Inc.

    Cigna Behavioral Health

    Delta Dental Insurance Co.

    Eyemed Vision Care (ECPA)Employer Self Insurance Service (ESIS)

    John Eastern Company

    M&I Trust Co.

    Principle Life Insurance Co.

    Vision Service Plan - IC

    Additional Third Party Administrators

    ADP, Inc.

    Harland Technology Services

    Significant Multi Employer Pension Plans

    Alaska Teamster-Employer Pension Plan

    Automobile Mechanics Local No. 701 Union and Industry Pension Fund

    Automotive Industries Pension Plan

    Automotive Machinist Pension Plan

    Bakers Local No. 433 Pension Plan

    Bakery & Confectionery Union & Industry International Pension Fund

    Bakery and Sales Drivers Local Union 33 Industry Pension Fund

    Bakery Drivers and Salesman Local 550 and Industry Pension Fund

    Bakery Drivers and Salesmen Local 194 and Industry Pension Fund

    SCHEDULE 1

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    Central Ohio UFCW Unions and Retail Employers Pension Plan

    Central Pension Fund of the IUOE & Participating Employers

    Central States, Southeast and Southwest Areas Pension Plan

    Cleveland Bakers and Teamsters Pension Fund

    District No. 9, International Association of Machinists and Aerospace Workers Pension Plan

    Employer-Teamsters Local Nos. 175 & 505 Pension Plan

    I.A.M. National Pension PlanIndiana Teamsters Pension Fund Pension Plan

    IUOE Stationary Engineers Local 39 Pension

    Local 734 Pension Fund

    Milwaukee Drivers Pension Plan

    New England Teamsters & Trucking Industry Pension Fund

    New York State Teamsters Conference Pension & Retirement Fund

    Oregon Retail Employees Pension Plan

    Philadelphia Bakery Employers & Food Driver Salesmens Union Local 463 & Teamsters Local 676 Pension Plan

    Retail, Wholesale & Department Store International Union and Industry Pension Fund

    Richmond Teamsters & Industry Pension Plan

    Sound Retirement Trust (f/k/a Retail Clerks Pension Plan)

    Teamsters Local 639 Employers Pension TrustTeamsters Negotiated Pension Plan

    Teamsters Union Local 142 Pension Trust Fund

    Teamsters Union Local No. 52 Pension Fund

    The National Conference of Firemen and Oilers National Pension Fund

    Twin Cities Bakery Drivers Pension Fund

    UFCW - Northern California Employers Joint Pension

    UFCW District Union Local Two and Employers Pension Plan (f/k/a Kansas City Area Retail Food Store Employees

    Pension Plan)

    United Food & Commercial Workers Unions & Employers Midwest Pension Fund

    United Food and Commercial Workers Unions and Employers Pension Plan

    Upstate New York Bakery Drivers and Industry Pension Fund

    Western Conference of Teamsters Pension PlanWestern Pennsylvania Teamsters and Employers Pension Plan

    Bankruptcy Judges for the Southern District of New York

    Chief Judge Arthur J. Gonzalez

    Judge Stuart M. Bernstein

    Judge Shelley C. Chapman

    Judge Robert D. Drain

    Judge Robert E. Gerber

    Judge Martin Glenn

    Judge Allan J. Gropper

    Judge Sean H. Lane

    Judge Burton R. Lifland

    Judge Cecelia G. Morris

    Judge James M. Peck

    The Attorneys for the United States Trustee's Office for the Southern District of New York

    Davis, Tracy Hope

    Gasparini, Elisabetta

    Golden, Susan

    Khodorovsky, Nazar

    SCHEDULE 1

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    Masumoto, Brian S.

    Morrissey, Richard C.

    Nakano, Serene

    Schwartz, Andrea B.

    Schwartzberg, Paul K.

    Riffkin, Linda A.

    Velez-Rivera, AndyZipes, Greg M.

    SCHEDULE 1

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    NYI-4357899v7

    Schedule 2 to the Declaration

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    SCHEDULE 2 OF DECLARATION

    Parties-In-Interest Noted for Court Disclosure

    The Debtors

    Hostess Brands, Inc.

    IBC Sales CorporationIBC Services, LLC

    IBC Trucking, LLC

    Interstate Brands Corporation

    Names of Debtors Filing Petitions in the Debtors' Previous Chapter 11 Cases (And Not Identified Above)

    Armour and Main Redevelopment Corporation

    Baker's Inn Quality Baked Goods, LLC

    Interstate Bakeries Corporation

    Mrs. Cubbison's Foods, Inc.

    New England Bakery Distributors, L.L.C.

    All Other Names Used by the Debtors in the Previous Eight Years (Including Trade Names)Holsum Bakery

    IBC Hostess Services, LLC

    Sunbeam

    Wonder

    Current Directors and Officers of Hostess Brands, Inc.

    Hobbs, Richard L.

    Magill, Kent B.

    Former Directors and Officers of Hostess Brands, Inc.

    Lewis, Frank

    Schneider, Bill

    Current Directors and Officers of Debtors Other Than Hostess Brands, Inc. (And Not Identified Above)

    Angst, Daniel G.

    Hostess Brands, Inc. Equity Ownership

    Arrow Distressed Securities Fund

    Gephardt Group Labor Advisory Services

    IBC Investors I, LLC

    IBC Investors II, LLC

    IBC Investors III, LLC

    Monarch Debt Recovery Master Fund Ltd

    Monarch Opportunities Master Fund Ltd

    McDonnell Loan Opportunity Ltd.

    Schultze Master Fund, Ltd.

    SPCP Group, LLC

    Ultimate Owners of the Debtors

    McDonnell Investment Management LLC

    Monarch Alternative Capital L.P.

    Ripplewood Holdings L.L.C.

    SCHEDULE 2

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    Silver Point Finance, LLC

    Certain Competitors of the Debtors

    Flowers Foods, Inc.

    George Weston Limited

    Grupo Bimbo, S.A.

    McKee Foods CorporationSara Lee Corporation

    Debtors' Professionals and Service Providers

    Accenture LLP

    Arent Fox LLP

    Ernst & Young LLP

    ESIS Inc.

    Fisher & Phillips LLP

    FTI Consulting

    Jefferson Wells International Inc.

    Jones Day

    KPMGLockton Companies LLC

    Kurtzman Carson Consultants LLC

    Marsh USA Inc.

    Perella Weinberg Partners LP

    Sitrick and Company

    Skadden Arps Slate Meagher & Flom

    Stinson Morrison Hecker

    Venable LLP

    Known Professionals for Certain Significant Nondebtor Parties in Interest

    Conway Del Genio Gries & Co., LLC

    Cravath, Swaine & Moore LLPDebevoise & Plimpton LLP

    Fulbright & Jaworski LLP

    Paul, Hastings, Janofsky & Walker LLP

    Paul, Weiss, Rifkind, Wharton & Garrison LLP

    Willkie, Farr & Gallagher LLP

    Major Secured Lenders Under The Debtors' Senior Secured Revolving Credit Facility And The Agents Thereunder

    GE Capital Markets, Inc.

    General Electric Capital Corporation (as Administrative Agent)

    Wells Fargo Bank, N.A.

    Major Secured Lenders Under The Debtors' First Lien Term Loan Facility And The Agents Thereunder

    Archer Capital Master Fund L.P.

    Arizona State Retirement System

    BA/CSCredit 1 LLC

    Cerberus Series Four Holdings, LLC

    Credit Suisse Loan Funding LLC

    Field Point III, Ltd.

    Field Point IV, Ltd.

    Gannett Peak CLO I, Ltd.

    SCHEDULE 2

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    Goldman Sachs Lending Partners LLC

    HSBC Di