Case: jtg Doc #:589 Filed: 09/07/17 Page 1 of 25 UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF MICHIGAN.

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1 Case: jtg Doc #:589 Filed: 09/07/17 Page 1 of 25 UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF MICHIGAN In re: MICHIGAN SPORTING GOODS DISTRIBUTORS, INC., Debtor. Chapter 11 Bankruptcy Case No.: jtg Hon. John T. Gregg / DEBTOR S BRIEF IN SUPPORT OF CONFIRMATION OF JOINT COMBINED DISCLOSURE STATEMENT AND PLAN OF LIQUIDATION Michigan Sporting Goods Distributors Inc. (the Debtor ) submits this brief (the Confirmation Brief ) in Support of Confirmation of the Joint Combined Disclosure Statement and Plan of Liquidation of Michigan Sporting Goods Distributors, Inc. and the Official Committee of the Unsecured Creditors, dated July 25, 2017 (the Plan ) (attached as Exhibit A) pursuant to section 1129 of title 11 of the United States Code (the Bankruptcy Code ). In support of the Confirmation Brief, Debtor respectfully states as follows: PRELIMINARY STATEMENT 1. Debtor and the Official Committee of Unsecured Creditors (the Committee ) filed the Plan. Under the Plan, Debtor s remaining assets will be liquidated and all sale proceeds are distributed to creditors holding allowed claims in accordance with the relative priorities established by the Bankruptcy Code. 2. The Plan provides for, among other things, payment in full of (i) Allowed Priority Tax Claims, 1 (ii) Allowed Administrative Expense Claims (including Allowed Professional Fees, subject to the Professional Fee Holdback), and (iii) Allowed Priority Non- 1 Unless otherwise defined herein, all capitalized terms contained in this Confirmation Brief have the meanings ascribed to them in the Plan.

2 Case: jtg Doc #:589 Filed: 09/07/17 Page 2 of 25 Tax Claims, such as priority claims for wages and benefits. All remaining liquidation proceeds are distributed on a pro-rata basis to Holders of Allowed General Unsecured Claims. 3. On July 25, 2017, the Bankruptcy Court conditionally approved the disclosure statement as containing adequate information of a kind and in sufficient detail to enable a hypothetical creditor entitled to vote under the Plan to make an informed judgment whether to accept or reject the Plan [Dkt. No. 512] (the Plan Procedures Order ). 4. Debtor solicited votes to accept or reject the Plan pursuant to the procedures authorized in the Plan Procedures Order as evidenced by the Certification of Catherine Nownes- Whitaker with Respect to the Tabulation of Votes on the Joint Chapter 11 Plan of Liquidation of Debtor and Official Committee of Unsecured Creditors [Dkt. No. 587] (the Voting Report ). 5. Most importantly, the Holders of Claims in Class 2, the only Class entitled to vote on the Plan, voted overwhelmingly in favor of the Plan. The Plan has also been approved by Class 1, which was deemed to accept the Plan. 6. In addition to this Confirmation Brief, the Voting Report, and any testimony and evidence to be presented at the September 8, 2017 hearing regarding confirmation of the Plan (the Confirmation Hearing ), Debtor has filed contemporaneously with this Confirmation Brief the Declaration of Bruce Ullery in Support of Confirmation of the Plan (the Ullery Declaration ), which is incorporated herein by reference. 7. For the reasons set forth below, the Plan satisfies all of the confirmation standards of the Bankruptcy Code, including sections 1122, 1123, 1125, 1126, and 1129, and request that this Court confirm the Plan.

3 Case: jtg Doc #:589 Filed: 09/07/17 Page 3 of 25 I. The Plan Solicitation Process 8. On July 17, 2017, Debtor and the Committee filed the Plan (the Plan was later updated to include the dates set in the Plan Procedures Order and to increase the estimated proceeds from the sale of the payment card interchange fee settlement). 9. That same day, Debtor and the Committee also filed Debtor s Motion For Entry of an Order (I) Conditionally Approving Disclosure Statement; (II) Fixing Voting Record Date, (III) Scheduling Disclosure Statement and Plan Confirmation Hearing and Approving Form and Manner of Related Notice and Objection Procedures, (IV) Approving Solicitation Packages and Procedures and Deadlines for Soliciting, Receiving, and Tabulating Votes on the Joint Plan, and (V) Approving the Form of Ballot [Dkt. No. 490] (the Disclosure Statement Approval Motion ). 10. On July 25, 2017, the Bankruptcy Court issued the Plan Procedures Order conditionally approving the disclosure statement and the forms of documents to be distributed in connection with solicitation of the Holders of Claims in Class 2 entitled to vote to accept or reject the Plan. 11. On July 28, 2017, Debtor completed its service of the Plan Procedures Order and the solicitation materials (collectively, the Solicitation Package ) to all parties required to receive the Solicitation Package. See Certificate of Service with respect to the Solicitation Materials and Non-Voting Package filed on August 4, 2017 [Dkt. No. 518] (the Confirmation Hearing and Solicitation Package Certificate of Service ). 12. As set forth in the Voting Report, Class 2 voted to accept the Plan.

4 Case: jtg Doc #:589 Filed: 09/07/17 Page 4 of 25 II. Acceptance of the Plan by the Voting Class 13. Holders of Claims in Class 1 of the Plan are Unimpaired and are deemed to have accepted the Plan (the Unimpaired Class ), and, therefore, Holders of Claims in the Unimpaired Class are not entitled to vote to accept or reject the Plan. Holders of Interests in Class 3 of the Plan are Impaired, but are deemed to have rejected the Plan because they will not receive or retain any property under the Plan. See Plan, VII. 14. Holders of Claims in Class 2 are Impaired and are entitled to vote on the Plan. Class 2 voted to approve the Plan by an overwhelming majority. Specifically, 93.98% of Holders of Claims in the Voting Class voted in favor of the Plan, representing 95% of the total claim amount held by Class 2 creditors who voted. See Voting Report. 15. As discussed below, the Plan satisfies all of the confirmation requirements of the Bankruptcy Code, including sections 1122, 1123, 1125, 1126, and 1129, and thus Debtor requests that the Court enter an order confirming the Plan. ARGUMENT I. The Plan Complies with Section 1122 of the Bankruptcy Code: Classification of Claims and Interests. 16. The Plan satisfies section 1122 s classification requirements. Section 1122 of the Bankruptcy Code provides: (a) (b) Except as provided in subsection (b) of this section, a plan may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class. A plan may designate a separate class of claims consisting only of every unsecured claim that is less than or reduced to an amount that the court approves as reasonable or necessary for administrative convenience. 17. A debtor in bankruptcy has considerable discretion to classify claims and interests in a chapter 11 reorganization plan. Matter of Wabash Valley Power Ass n, 72 F. 3d

5 Case: jtg Doc #:589 Filed: 09/07/17 Page 5 of , 1321 (7th Cir. 1995). While a debtor may not separately classify claims solely in order to gerrymander an affirmative vote on reorganization, claims may be classified separately if significant disparities exist between the legal rights of the holder[s of the different claims] which render the two claims not substantially similar. Id. Claims may also be separately classified if there are good business reasons to do so or if the claimants have sufficiently different interests in the plan. Id., citing In re U.S. Truck Co., 800 F.2d 581, 583 (6th Cir. 1986). 18. Claims or interests in a class need not be identical but should be substantially similar in nature to each other. In re Dow Corning Corp., 244 B.R. 634, 647 (Bankr. E.D. Mich. 1999) aff d, 255 B.R. 445 (E.D. Mich. 2000) aff d and remanded, 280 F.3d 648 (6th Cir. 2002) ( as a general rule only substantially-similar claims may be classified together ); 19. Section VII of the Plan provides for the classification of Claims and Interests into three individual Classes, in each case based upon the legal basis for, and priority of, such Claims and Interests. 2 The Classes of Claims and Interests are: Class I Class II Class III Priority Non-Tax Claims Unsecured Claims Equity Interests See Plan, VII. 20. The Plan s classification of Claims and Interests into these three Classes satisfies the requirements of section 1122 because the respective Holders of the Claims and Interests hold different rights, including priorities under the Code. Additionally, each of the Claims or Interests in each particular Class is substantially similar to the other Claims or Interests in such Class. Thus, the Plan satisfies section 1122 of the Bankruptcy Code. 2 Priority Tax Claims and Administrative Expense Claims (including Professional Fees) are not classified but are separately treated in Section VI of the Plan.

6 Case: jtg Doc #:589 Filed: 09/07/17 Page 6 of 25 II. The Plan Complies with Section 1123 of the Bankruptcy Code: Contents of the Plan. A. The Plan Meets the Requirements of Section 1123(a) of the Bankruptcy Code. 21. Section 1123(a) of the Bankruptcy Code sets forth eight requirements with which every chapter 11 plan must comply. 11 U.S.C. 1123(a). The Plan fully complies with those requirements. 1. The Plan Designates Classes of Claims and Interests (Section 1123(a)(1)). 22. Section 1123(a)(l) of the Bankruptcy Code requires that a plan designate classes of claims, other than claims of a kind specified in Bankruptcy Code sections 507(a)(l) (administrative expense claims), 507(a)(2) (claims arising during the gap period in an involuntary case), or 507(a)(8) (priority tax claims). 11 U.S.C. 1123(a)(1). As set forth above, section VII of the Plan designates three Classes of Claims and Equity Interests and therefore the Plan complies with section 1123(a)(l) of the Bankruptcy Code. 2. The Plan Specifies Unimpaired Classes (Section 1123(a)(2)). 23. Section 1123(a)(2) of the Bankruptcy Code requires that a plan specify any class of claims or interests that is not impaired under the plan. 11 U.S.C. 1123(a)(2). The Plan specifies that Claims in Class 1 are Unimpaired and thus the Plan complies with section 1123(a)(2) of the Bankruptcy Code. See Plan, VII, A. 3. The Plan Adequately Specifies the Treatment of Impaired Classes (Section 1123(a)(3)). 24. Section 1123(a)(3) of the Bankruptcy Code requires that a plan specify the treatment of any class of claims or interests that is impaired under the plan. 11 U.S.C. 1123(a)(3). The Plan specifies that Claims in Classes 2 and 3 are Impaired, and thus the Plan complies with section 1123(a)(3) of the Bankruptcy Code. See Plan, VII, B, C.

7 Case: jtg Doc #:589 Filed: 09/07/17 Page 7 of The Plan Provides for the Same Treatment for Claims or Interests Within the Same Class (Section 1123(a)(4)). 25. Section 1123(a)(4) of the Bankruptcy Code requires that a plan provide the same treatment for each claim or interest of a particular class, unless the holder of a particular claim or interest agrees to a less favorable treatment of such particular claim or interest. 11 U.S.C. 1123(a)(4). The Plan treats each Claim or Interest within a particular Class the same and thus the Plan complies with section 1123(a)(4) of the Bankruptcy Code. See Plan, VII. 5. The Plan Provides Adequate Means for its Implementation (Section 1123(a)(5)). 26. Section 1123(a)(5) of the Bankruptcy Code requires a plan provide adequate means for its implementation. 11 U.S.C. 1123(a)(5). The Plan provides adequate means for implementing the Plan by providing for, among other things: (i) retention of Mr. Ullery and post-confirmation professionals; (ii) retention of the post-confirmation Distribution Agent; and (iii) procedures for distributions under the Plan. Debtor is confident that it will have sufficient Cash to make all required payments due under the Plan, including payment in full of all Administrative Expense Claims. Thus, the Plan complies with section 1123(a)(5) of the Bankruptcy Code. 6. The Plan Does Not Call for the Issuance of Non-voting Equity Securities (Section 1123(a)(6)). 27. Section 1123(a)(6) of the Bankruptcy Code requires a plan to provide for the inclusion in a Debtor s corporate charter of provisions prohibiting the issuance of non-voting equity securities and arranging an appropriate distribution of power among the classes of securities possessing voting power. 11 U.S.C. 1123(a)(6). 28. Section 1123(a)(6), which is generally made applicable by section 1129(a)(1), does not apply here because the Plan does not call for the issuance of any equity securities. See

8 Case: jtg Doc #:589 Filed: 09/07/17 Page 8 of 25 Ullery Decl., 5. Instead, the Plan calls for all Equitable Interests to be cancelled. See Plan, VII, C. Thus, the Plan complies with section 1123(a)(6) of the Bankruptcy Code. 7. The Plan Contains Appropriate Provisions with Respect to the Selection of Post-Confirmation Directors and Officers (Section 1123(a)(7)). 29. Section 1123(a)(7) of the Bankruptcy Code provides that a plan may contain only provisions that are consistent with the interests of creditors and equity security holders and with public policy with respect to the manner of selection of any officer, director, or trustee under the plan and any successor to such officer, director, or trustee. 11 U.S.C. 1123(a)(7). Debtor will not be selecting new officers, directors, or a trustee. See Ullery Decl., 6. As set forth in Section IX, A of the Plan, Debtor will retain Mr. Bruce Ullery post-confirmation to continue to assist Debtor in liquidating and monetizing the remaining Estate Assets and to manage the final wind down of Debtor s affairs and administer the terms of this the Plan. See Ullery Decl., Under the Plan, Debtor is further authorized to retain individuals on an hourly basis, including former employees of Debtor, to assist Debtor in completing certain tasks (such as completing tax documents, trustee reports, etc.), and to employ such professionals, including BRG and Warner Norcross & Judd LLP, on a post-confirmation basis to assist Debtor in carrying out the terms of the Plan and to prepare any reports, projections, or other information required under the Plan or to close this Estate. See Ullery Decl., 8-9. These Plan provisions serve the best interests of creditors and equity security holders and are fully consistent with public policy. Therefore, the Plan satisfies the requirements of section 1123(a)(7) of the Bankruptcy Code.

9 Case: jtg Doc #:589 Filed: 09/07/17 Page 9 of Section 1123(a)(8) Is Not Implicated by the Plan. 31. Section 1123(a)(8) provides that a plan must: in a case in which Debtor is an individual, provide for the payment to creditors under the plan of all or such portion of earnings from personal services performed by Debtor after the commencement of the case or other future income of Debtor as is necessary for the execution of the plan. 11 U.S.C. 1123(a)(8). As Debtor is not an individual, section 1123(a)(8) of the Bankruptcy Code is not implicated by the Plan. III. The Plan Satisfies the Requirements of Section 1129(a) of the Bankruptcy Code. 32. In addition to the mandatory provisions set forth in Section 1123(a), a Plan must comply with the provisions of section 1129 of the Bankruptcy Code. See In re Combustion Engineering, Inc., 391 F.3d 190, 243 n.59 (3d Cir. 2004) ( [a] Chapter 11 plan of reorganization must satisfy all of the requirements of 1129(a) ); In re Waterford Hotel, Inc., 497 B.R. 255, 261 (Bankr. E.D. Mich. 2013) ( [a]s the proponent of the Plan, Debtor has the burden of proving, by a preponderance of the evidence, that all of the requirements under 11 U.S.C. 1129(a) have been satisfied ). 33. The Plan complies with all relevant sections of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), and applicable non-bankruptcy law. In particular, through the declaration of Bruce Ullery and and/or other evidence Debtor will introduce at the Confirmation Hearing, Debtor will demonstrate, by a preponderance of the evidence, that the Plan fully complies with the requirements of section 1129 of the Bankruptcy Code.

10 Case: jtg Doc #:589 Filed: 09/07/17 Page 10 of 25 A. The Plan Complies with the Applicable Provisions of the Bankruptcy Code (Section 1129(a)(1)). 34. Section 1129(a)(1) of the Bankruptcy Code requires a plan to comply with the applicable provisions of the Bankruptcy Code. 11 U.S.C. 1129(a)(1). A principal objective of section 1129(a)(1) is to assure compliance with the sections of the Bankruptcy Code governing classification of claims and interests and the contents of a plan, and so the determination of whether the Plan complies with section 1129(a)(1) requires an analysis of sections 1122 and 1123 of the Bankruptcy Code. See In re Trenton Ridge Investors, LLC, 461 B.R. 440, 463 (the legislative history of subsection 1129(a)(1) suggests that Congress intended the phrase applicable provisions in this subsection to mean provisions of Chapter 11 that concern the form and content of reorganization plans... such as section 1122 and 1123, governing classification [of claims] and contents of plan[s] ). As explained in Sections I and II above, the Plan complies with sections 1122 and 1123 in all respects and section 1129(a)(1) is satisfied. B. Debtor Complied with the Applicable Provisions of the Bankruptcy Code (Section 1129(a)(2)). 35. The principal purpose of section 1129(a)(2) of the Bankruptcy Code is to assure that the plan proponents have complied with the disclosure requirements of section 1125 of the Bankruptcy Code in connection with the solicitation of acceptances of the plan. In re City of Detroit, 524 B.R. 147, 251 (Bankr. E.D. Mich. 2014). 36. Here, Debtor satisfied section 1125 of the Bankruptcy Code. Pursuant to the Plan Procedures Order, entered after notice and a hearing, this Bankruptcy Court conditionally approved the disclosure statement pursuant to section 1125(b) of the Bankruptcy Code as containing adequate information to enable a hypothetical reasonable creditor typical of the Holders of Claims and Interests to make an informed judgment regarding whether to accept or

11 Case: jtg Doc #:589 Filed: 09/07/17 Page 11 of 25 reject the Plan. See Plan Procedures Order. Each Holder of a Claim or Equity Interest directed to receive materials under the Plan Procedures Order and entitled to vote on the Plan received a Solicitation Package. See Confirmation Hearing and Solicitation Package Certificate of Service [Dkt. No. 518]. The Solicitation Package complies with section 1125 of the Bankruptcy Code and the Plan Procedures Order. 11 U.S.C. 1125(b). 37. Debtor did not solicit votes on the Plan before the Court s entry of the Disclosure Statement Order conditionally approving the Disclosure Statement. See Ullery Decl. at Based upon the foregoing, Debtor submits that the requirements of section 1129(a)(2) of the Bankruptcy Code have been satisfied. C. The Plan Has Been Proposed in Good Faith and Not by any Means Forbidden by Law Section 1129(a)(3). 39. Section 1129(a)(3) of the Bankruptcy Code requires that a plan be proposed in good faith and not by any means forbidden by law. 11 U.S.C. 1129(a)(3). This section requires that a plan be proposed with honesty, good intentions, and a basis for expecting that the plan can achieve results consistent with the objectives and purposes of the Bankruptcy Code. See In re Trenton Ridge Investors, LLC, 461 B.R. at 468 (good faith, for 1129(a)(3) purposes is generally interpreted to mean that there exists a reasonable likelihood that the plan will achieve a result consistent with the objectives and purposes of the Bankruptcy Code ); Greate Bay Hotel & Casino, 251 B.R. 237, (Bankr. D. N.J. 2000). 40. Courts generally view the good faith requirement in light of the totality of the circumstances surrounding the establishment of the chapter 11 plan. Id.; see also In re Trenton Ridge Investors, LLC, 461 B.R. at 468.; In assessing good faith, courts should look to a chapter 11 plan itself to determine whether it seeks relief in good faith and is otherwise consistent with the Bankruptcy Code. In re Madison Hotel Assocs., 749 F.2d 410, 425 (7th Cir. 1984).

12 Case: jtg Doc #:589 Filed: 09/07/17 Page 12 of Here, the Plan was negotiated in good faith and is the result of arm s-length negotiations among Debtor and the Committee, with input from the US Trustee, and other parties in interest. Ullery Decl., 11. Over the course of this case, Debtor liquidated all of its assets, paid its primary secured creditor in full, paid its lease and other operating expenses, and other otherwise managed its operations in good faith. See Ullery Decl., The Plan allows Holders of Allowed Claims to realize the highest possible recovery under the circumstances. See Ullery Decl., 13. As such, the Plan was proposed with the legitimate and honest purpose of providing the greatest possible distribution to Debtor s creditors. Additionally, the Plan has been proposed in compliance with all applicable laws, rules, and regulations. Because the Plan was conceived and proposed with the honest purpose and reasonable hopes of success by which good faith is measured, section 1129(a)(3) has been satisfied. See Brite v. Sun Country Dev., Inc. (In re Sun County Dev., Inc.), 764 F.2d 406, 408 (5th Cir. 1985). D. The Plan Provides for Court Approval of Certain Administrative Expense Payments (Section 1129(a)(4)). 43. Section 1129(a)(4) of the Bankruptcy Code requires bankruptcy court approval of certain professional fees and expenses paid by the plan proponent, by Debtor, or by a person issuing securities or acquiring property under the plan. 11 U.S.C. 1129(a)(4). Specifically, section 1129(a)(4) provides that: Any payment made or to be made by the proponent, by Debtor, or by a person issuing securities or acquiring property under the plan, for services or for costs and expenses in or in connection with the case, or in connection with the plan and incident to the case, has been approved by, or is subject to approval of, the court as reasonable. 11 U.S.C. 1129(a)(4).

13 Case: jtg Doc #:589 Filed: 09/07/17 Page 13 of This section of the Bankruptcy Code requires that payment of professional fees made from estate assets be subject to review and approval by the Court as to their reasonableness. See, e.g., In re Trenton Ridge Investors, LLC, 461 B.R. at 473 ( [t]his subsection mandates full disclosure of all payments or promises of payment for services, costs, and expenses in connection with the case, and subjects the reasonableness of such payments to the scrutiny and approval of the court ). 45. Section VI, C of the Plan provides that Professional Fees will be paid, subject to the Professional Fee Holdback, after the fees are allowed by order of the Bankruptcy Court. Based upon the foregoing, the Plan complies with the requirements of section 1129(a)(4) of the Bankruptcy Code. See 11 U.S.C. 1129(a)(4). E. All Necessary Information Regarding the Directors and Officers of the Debtors Under the Plan Has Been Disclosed Section 1129(a)(5). 46. Section 1129(a)(5) of the Bankruptcy Code requires that the Plan disclose the identity and affiliations of any individual proposed to serve, after confirmation of the plan, as a director, officer, or voting trustee of Debtor... or successor to Debtor under the plan, and require a finding that the appointment to, or continuance in, such office of such individual, is consistent with the interests of creditors and equity security holders and with public policy. 11 U.S.C. 1129(a)(5)(A)(i)-(ii). 47. As noted above, Debtor disclosed in the Plan that Debtor will retain Bruce Ullery post-confirmation to continue to assist Debtor in liquidating and monetizing the remaining Estate Assets, to manage the final wind down of Debtor s affairs, and to administer the Plan. See Plan, IX, A; Ullery Decl., 7.

14 Case: jtg Doc #:589 Filed: 09/07/17 Page 14 of 25 F. The Plan Does Not Require Governmental Regulatory Agency Approval (Section 1129(a)(6)). 48. Section 1129(a)(6) of the Bankruptcy Code requires that any regulatory commission having jurisdiction over the rates charged by a debtor in the operation of its business approve any rate change provided for in a plan. 11 U.S.C. 1129(a)(6). This section is inapplicable to this case because Debtor ceased operating and thus has no rates subject to section See Ullery Decl., 14. G. The Plan Is in the Best Interests of Creditors and Interest Holders (Section 1129(a)(7)). 49. The Bankruptcy Code requires that with respect to each impaired class or interest, each holder of such a claim or an equity interest either: (i) has accepted the plan; or will receive or retain under the plan property of a value, as of the effective date of the plan, that is not less than the amount that such holder would receive or retain if the debtor were liquidated under chapter 7 of the Bankruptcy Code. 11 U.S.C. 1129(a)(7). 50. As section 1129(a)(7) makes clear, this section is applicable only to non-accepting Claim holders of impaired claims and interests. See 11 U.S.C. 1129(a)(7). 51. Under the Plan, only Classes 2 and 3 are impaired; consequently, the best interests test is applicable only to non-accepting Holders of Claims and Interests in these Classes. See Bank of Am. Nat. Trust & Sav. Ass n v. 203 N. LaSalle St. P ship, 526 U.S. 434, 441 n. 13 (1999) ( best interests test applies to individual creditors holding impaired claims, even if the class as a whole votes to accept the plan ). 52. The best interests test requires that each holder of a claim or interest must either accept the plan or receive or retain under the plan property having a present value, as of the effective date of the plan, not less than the amount that such holder would receive or retain if

15 Case: jtg Doc #:589 Filed: 09/07/17 Page 15 of 25 Debtor was liquidated under chapter 7. Lisanti Foods, 329 B.R. 491, 500 (Bankr. D. N.J. 2005) (section 1129(a)(7) is met by showing that creditors will receive at least as much under the Plan as they would receive in a liquidation of Debtor s assets under chapter 7 ). 53. To estimate the value that impaired creditors would receive if Debtor were liquidated under chapter 7 of the Bankruptcy Code, the Court must first determine the aggregate dollar amount that would be available if each of this case was converted to a case under chapter 7 of the Bankruptcy Code and Debtor s assets were liquidated by a chapter 7 trustee (the Liquidation Value ). See In re Dow Corning Corp., 237 B.R. 380, 384 (Bankr. E.D. Mich. 1999). The Liquidation Value of Debtor would consist of the net proceeds from the disposition of Debtor s assets, augmented by any cash held by Debtor at the commencement of its chapter 7 case. 54. In this case, the Liquidation Value available to holders of Claims would be reduced by, among other things, the significant costs associated with liquidation under chapter 7 of the Bankruptcy Code, including compensation of a trustee and new professionals retained by the trustee who are unfamiliar with the complexities of Debtor, and operating and other business expenses paid by the Chapter 7 trustee during the pendency of the Chapter 7 case. Additionally, a Chapter 7 trustee would be entitled to statutory fees relating to distributions of the already monetized Estate Assets made to creditors. See Ullery Decl., 18. Further, Creditors would lose the benefit of the Professional Fee Holdback which is conditioned on confirmation of the Plan. These costs would be paid from the proceeds of the liquidation, along with all other Chapter 7 administrative expenses, as well as unpaid expenses incurred by Debtor that are allowed in the chapter 7 case. In re Am. Family Enterprises, 256 B.R. 377, 403 (D.N.J. 2000) (for 1129(a)(7) hypothetical liquidation analysis, the liquidation value of the debtor s assets

16 Case: jtg Doc #:589 Filed: 09/07/17 Page 16 of 25 is controlling. Moreover, the costs of a chapter 7 case must also be taken into account ) (citing In re Montgomery Court Apartments, 141 B.R. 324 (Bankr. S.D. Ohio 1992)); Lisanti Foods, 329 B.R. at Significantly, Debtor does not believe there are any other assets a chapter 7 trustee could recover for the estate s benefit. Debtor has, or shortly will have, monetized all of its assets. Further, Debtor, in consultation with its financial advisor and the Committee, analyzed potential avoidance actions. Debtor concluded that there are no fraudulent transfers to pursue and no significant likelihood that net preference recoveries would result in any material improvement in the distribution to Creditors in Class 2. See Ullery Decl., Consequently, the Debtor believes that Holders of Impaired Claims in Class 2 would receive a smaller distribution under a chapter 7 liquidation than through the orderly liquidation process set forth under the Plan. See Ullery Decl., 20. Debtor submits that the overwhelming approval of the Plan among Class 2 creditors confirms this conclusion. 57. The best interests test is also satisfied with respect to Holders of Interests in Class 3. While Class 3 receives nothing under the Plan, this treatment is not less than the amount Class 3 would receive or retain under a hypothetical chapter 7 liquidation. See Ullery Decl., 22. Consequently, each Holder of an Interest in Class 3 will receive no less than they would under a hypothetical chapter 7 liquidation. 58. Thus, the Plan satisfies the best interests test as to each Impaired Class because each holder of a claim or interest in each Impaired Class will receive a distribution under the Plan that is not less than such holder would receive in a chapter 7 liquidation of Debtor s Estates. See Ullery Decl., 23.

17 Case: jtg Doc #:589 Filed: 09/07/17 Page 17 of 25 H. The Acceptance of the Plan by All Impaired Classes (Section 1129(a)(8)). 59. Section 1129(a)(8) of the Bankruptcy Code requires that each class of impaired claims or interests accept the plan: With respect to each class of claims or interests - (A) such class has accepted the plan; or (B) such class is not impaired under the plan. 11 U.S.C. 1129(a)(8). The Holders of Claims in Class 2 voted to accept the Plan. See Voting Report. Thus, as to Class 2, the Plan satisfies section 1129(a)(8) of the Bankruptcy Code. 60. Because the Holders of Interests in Class 3 neither receive nor retain any property under the Plan, they are deemed to have rejected the Plan and the requirements of section 1129(a)(8) of the Bankruptcy Code are not been satisfied, thereby requiring the application of Section 1129(b) of the Bankruptcy Code, as discussed below. I. The Plan Complies with Statutorily Mandated Treatment of Administrative and Priority Tax Claims (Section 1129(a)(9)). 61. Section 1129(a)(9) of the Bankruptcy Code requires that persons holding claims entitled to priority under section 507(a) receive payment in full in cash unless the holder of a particular claim agrees to a different treatment with respect to such claim. 11 U.S.C. 1129(a)(9). 62. As required by section 1129(a)(9) of the Bankruptcy Code, the Plan provides that, each Holder of an Administrative Expense Claim (other than Professional Fees) will be paid the full unpaid amount of such Allowed Administrative Expense Claim in Cash on the later of the Effective Date and the date such Administrative Expense Claim becomes an Allowed Administrative Expense Claim if such claims were Disputed, or any other date specified in an order or the Plan. See the Plan, VI, A. 63. The Plan also satisfies the requirements of section 1129(a)(9)(C) of the Bankruptcy Code with respect to the treatment of Priority Tax Claims. Pursuant to the Plan,

18 Case: jtg Doc #:589 Filed: 09/07/17 Page 18 of 25 Holders of Allowed Priority Tax Claims are being paid in full as of the Effective Date or as soon as practically possible thereafter. See Plan, VI, D. 64. Based on the foregoing, the Plan satisfies the requirements of section 1129(a)(9) of the Bankruptcy Code. J. At Least One Impaired Class of Claims Has Accepted the Plan, Excluding the Acceptances of Insiders (Section 1129(a)(10)). 65. Section 1129(a)(10) provides that to the extent there is an impaired class of claims, at least one impaired class of claims must accept the Plan, excluding acceptance by any insider. 11 U.S.C. 1129(a)(10). See also In re Trenton Ridge Investors, LLC, 461 B.R. at 476 ( Section 1129(a)(10) operates as a statutory gatekeeper barring access to cramdown where there is absent even one impaired class accepting the plan.... The policy underlying Section 1129(a)(10) is that before embarking upon the tortuous path of cramdown and compelling the target of cramdown to shoulder the risks of error necessarily associated with a forced confirmation, there must be some other properly classified group that is also hurt and nonetheless favors the plan ); In re Combustion Eng g, Inc., 391 F.3d 190, (3d Cir. 2004) ( The purpose of [section 1129(a)(10)] is to provide some indicia of support [for a plan of reorganization] by affected creditors and prevent confirmation where such support is lacking. ) (internal quotation marks and citation omitted). 66. Section 1129(a)(10) is satisfied because the overwhelming majority of Holders of Class 2 Claims who submitted a balloted voted to accept the Plan. See the Voting Report. K. The Plan Is Feasible (Section 1129(a)(11)). 67. Section 1129(a)(11) of the Bankruptcy Code requires that the Bankruptcy Court find that a plan is feasible as a condition precedent to confirmation. 11 U.S.C. 1129(a)(11). Specifically, the bankruptcy court must determine that: Confirmation of the plan is not likely

19 Case: jtg Doc #:589 Filed: 09/07/17 Page 19 of 25 to be followed by the liquidation, or the need for further financial reorganization, of Debtor or any successor to Debtor under the plan, unless such liquidation or reorganization is proposed in the plan. 11 U.S.C. 1129(a)(11). 68. Debtor ceased doing business and therefore is not intending to reorganize. However, the liquidation of Debtor s remaining assets is proposed in the Plan. Thus, as described below, as established by the Ullery Declaration and as will be demonstrated at the Confirmation Hearing, the Plan is feasible within the meaning of this provision. See Ullery Decl., For purposes of determining whether the Plan is feasible, Debtor analyzed its ability to fulfill its obligations under the Plan. Debtor will have sufficient resources to pay all Allowed Administrative Expense Claims, Priority Tax Claims, and Priority Non-Tax Claims. In addition, Holders of Allowed Class 2 claims will receive a pro-rata distribution of the Cash in the Unsecured Creditors Fund. Accordingly, the Plan satisfies the feasibility standard of section 1129(a)(11) of the Bankruptcy Code. L. The Plan Provides for the Payment of All Fees Under 28 U.S.C (Section 1129(a)(12)). 70. Section 1129(a)(12) requires the payment of [a]ll fees payable under section 1930 [title 28, the United States Code], as determined by the court at the hearing on confirmation of the plan U.S.C (a)(12). Section 507 of the Bankruptcy Code provides that any fees and charges assessed against the estate under [section 1930,] chapter 123 of title 28 are afforded priority as administrative expenses. 11 U.S.C. 507(a)(2). In accordance with sections 507 and 1129(a)(12) of the Bankruptcy Code, the Plan provides that all U.S. Trustee Fees will be paid timely by Debtor for each quarter that the case remains open.

20 Case: jtg Doc #:589 Filed: 09/07/17 Page 20 of 25 See Ullery Decl., 26; Plan, XVI, I. Thus, the Plan satisfies the requirements of section 1129(a)(12) of the Bankruptcy Code. M. The Plan Does Not Modify Retiree Benefits (Section 1129(a)(13)). 71. Section 1129(a)(13) of the Bankruptcy Code provides that a plan must provide for continued, post-confirmation payments of all retiree benefits at the levels established in accordance with section 1114 of the Bankruptcy Code. Debtor does not have any obligations on account of retiree benefits (as such term is used in section 1114 of the Bankruptcy Code) and, therefore, section 1129(a)(13) of the Bankruptcy Code is inapplicable to this case. See Ullery Decl., 27. N. The Plan Does Not Implicate Sections 1129(a)(14), (15) and (16). 72. As sections 1129(a)(14) and (15) of the Bankruptcy Code apply only to individuals, these sections are not applicable. 73. Under section 1129(a)(16) of the Bankruptcy Code, all transfers under the Plan must be made in accordance with any 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. 11 U.S.C (a)(16). Congress was clear in the legislative history that this provision was meant to restrict the authority of a trustee to use, sell, or lease property by a nonprofit corporation or trust. H.R. Rep. No , 109th Cong., 1 st Sess. 145 (2005). Because Debtor is a moneyed, business, or commercial corporation, section 1129(a)(16) of the Bankruptcy Code is not implicated by the Plan. See Ullery Decl., 28. O. The Plan Satisfies the Cram Down Requirements with Respect to the Non- Accepting Classes (Section 1129(b)). 74. Bankruptcy Code 1129(b) provides the mechanism for the confirmation of a plan even if the plan is not accepted by all impaired classes of claims and interests. This

21 Case: jtg Doc #:589 Filed: 09/07/17 Page 21 of 25 mechanism, known colloquially as cram down, provides in pertinent part: [I]f all of the applicable requirements of [Bankruptcy Code 1129(a)] other than [the requirement contained in 1129(a)(8) of acceptance of a plan by all impaired classes] are met with respect to a plan, the court, on request of the proponent of the plan, shall confirm the plan notwithstanding the requirements of such paragraph if the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under and has not accepted, the plan. 11 U.S.C. 1129(b). 75. Thus, under Bankruptcy Code 1129(b), the Court may cram down a plan over the dissenting vote or deemed rejection of an impaired class or classes of claims or interests so long as the plan does not discriminate unfairly and is fair and equitable with respect to the dissenting class or classes. See In re Christian Faith Assembly, 402 B.R. 794, 798 (Bankr. N.D. Ohio 2009). 76. In the instant case, the Holders of Class 3 Allowed Interests are Impaired and are deemed to have rejected the Plan under Bankruptcy Code 1126(g). See Plan, VII, C. Notwithstanding this deemed rejection, the Plan does not discriminate unfairly and is fair and equitable with respect to Class The Plan Does Not Discriminate Unfairly Against Class 3 (Section 1129(b)(1)). 77. Section 1129(b)(1) of the Bankruptcy Code does not prohibit discrimination among classes, but only discrimination that is unfair. In re Dow Corning Corp., 244 B.R. 705, 710 (Bankr. E.D. Mich. 1999) ( Section 1129(b)(1) prohibits discrimination against a non- accepting class only when that discrimination is unfair. (citations omitted)). The overwhelming weight of judicial authority holds that a plan unfairly discriminates only if there is: (1) a dissenting class; (2) another class of the same priority; and (3) a difference in the

22 Case: jtg Doc #:589 Filed: 09/07/17 Page 22 of 25 plan s treatment of the two classes that results in either (a) a materially lower percentage recovery for the dissenting class (measured in terms of the net present value of all payments), or (b) regardless of percentage recovery, an allocation under the plan of materially greater risk to the dissenting class in connection with its proposed distribution. Id. at Based upon the foregoing standards, the Plan does not discriminate unfairly with respect to Class 3. The Interests in Class 3 are the only equity interests in this case and are all treated equally within the Class, since all such Interests will not receive any distribution under the Plan. See Ullery Decl., 29. See also Plan, VII, C. Accordingly, the Plan does not discriminate unfairly with respect to the only non-accepting Classes and thus satisfies section 1129(b)(1) of the Bankruptcy Code. 2. The Plan is Fair and Equitable with Respect to Class 3 (Section 1129(b)(2)(C)). 79. With respect to a class of interests, Section 1129(b)(2)(C) of the Bankruptcy Code defines the phrase fair and equitable as follows: (i) (ii) the plan provides that each holder of an interest of such class receive or retain on account of such interest property of a value, as of the effective date of the plan, equal to the greatest of the allowed amount of any fixed liquidation preference to which such holder is entitled, any fixed redemption price to which such holder is entitled, or the value of such interest; or the holder of any interest that is junior to the interests of such class will not receive or retain under the plan on account of such junior interest any property. 11 U.S.C. 1129(b)(2)(C). 80. Under the Plan, there are no classes of claims or interests junior to Class 3. See Ullery Decl., 30. Because there are no junior classes that would receive value greater than Class 3, the Plan fair and equitable with respect to each Holder of a Class 3 Equity Interest and satisfies the absolute priority rule of Section 1129(b)(2) of the Bankruptcy Code.

23 Case: jtg Doc #:589 Filed: 09/07/17 Page 23 of Based on the foregoing, the Plan satisfies the cram down requirements of Section 1129(b) of the Bankruptcy Code. IV. The Exculpation, Release, and Injunction Provisions Are Integral Components of the Plan and Should Be Approved. A. Exculpation. 82. The inclusion of the exculpation provision contained in section XVI, A of the Plan (the Exculpation ) is an integral part of the Plan and is limited in scope. Specifically, the Exculpation is limited to those parties that were instrumental in the formulation and implementation of the Plan, and Exculpation is limited solely to acts in connection with, related to, or arising out of the case. Thus, the Exculpation provision is sufficiently narrow to be unexceptionable. In re Oneida Ltd., 351 B.R. 79, 94 n.22 (Bankr. S.D.N.Y. 2006). 83. Further, the Exculpation is appropriately limited to a qualified immunity for acts of negligence, but does not relieve any party of gross negligence or willful misconduct. See also In re PWS Holding Corp., 228 F.3d 224, (3d Cir. 2000) (similar exculpation provision reflecting Bankruptcy Code s limitation of liability did not violate third party release prohibition of section 524(e)); In re Michael Day Enterprises, Inc., 2010 WL , at *13 (Bankr. N.D. Ohio 2010) (approving similar exculpation clause). 84. Given the relatively limited scope of the Exculpation and that it is an integral part of the Plan, the Exculpation provision is integral and should be approved. B. Releases. 85. Section 11 of the Plan provides certain releases of claims against Debtor s Officers and Directors, the Consultant, Warner Norcross & Judd LLP, Berkeley Research Group, the Committee, and their related parties in-interest. Debtor does not believe there are any cognizable claims against any of the released parties. Further, the Debtor s Professionals

24 Case: jtg Doc #:589 Filed: 09/07/17 Page 24 of 25 and the Committee s Professionals have agreed to rebate for the benefit of the Unsecured Creditors Fund the Professional Fee Holdback as set forth in Section VI, C of the Plan. In consideration of the holdback agreement, a release is appropriate. The release provisions are integral to the Plan as the professionals would not have agreed to the Professional Fee Holdback without the guarantee of the releases set forth in the Plan. See Ullery Decl., 31. C. Injunction. 86. The injunction contained in Section V, M of the Plan is necessary to preserve and enforce the releases and discharges granted by the Plan. The Injunction is tailored to enjoin any Person from commencing or continuing any action, employment of process, or act to collect, offset, or recover any Claim or Causes of Action satisfied, released, or discharged under the Joint Plan to the fullest extent authorized or provided by the Bankruptcy Code. The Injunction is an integral part of the Plan and should be approved. See In re Lofino Properties, LLC, 2014 WL (Bankr. S.D. Ohio 2014) (approving substantially similar injunction language). V. The Purpose of the Plan Is Not the Avoidance of Taxes or the Avoidance of the Securities Laws (Section 1129(d)). 87. [O]n request of a party in interest that is a governmental unit, the court may not confirm a plan if the principle purpose of the plan is the avoidance of taxes or the avoidance of section 5 of the Securities Act of U.S.C. 1129(d). The avoidance of taxes or the avoidance of the application of the securities laws is not the purpose of the Plan. See Ullery Decl., 32. Further, no governmental unit has requested that the Court not confirm the Plan Accordingly, section 1129(d) offers no bar to the confirmation of the Plan. 11 U.S.C. 1129(d). OBJECTIONS 88. Debtor has not received any objection to confirmation of the Plan.

25 Case: jtg Doc #:589 Filed: 09/07/17 Page 25 of 25 CONCLUSION For the reasons set forth herein, the Plan fully satisfies all applicable requirements of the Bankruptcy Code and respectfully requests that the Bankruptcy Court confirm the Plan. WHEREFORE, for the reasons set forth herein, Debtor respectfully requests that the Bankruptcy Court (a) enter the Confirmation Order approving and confirming the Plan and the relief related thereto, and (b) grant such other and further relief as is just and proper. Dated: September 7, WARNER NORCROSS & JUDD LLP By: /s/ Elisabeth M. Von Eitzen Stephen B. Grow (P39622) Elisabeth M. Von Eitzen (P70183) R. Michael Azzi (P74508) 111 Lyon St. NW Suite 900 Grand Rapids, MI (616)

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