IN THE UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION In re: COLLINS & AIKMAN CORPORATION,

et al.1 Debtors. ) ) ) ) ) ) ) ) Chapter 11 Case No. 05-55927 (SWR) (Jointly Administered) (Tax Identification #13-3489233) Honorable Steven W. Rhodes

DEBTORS MEMORANDUM OF LAW (A) IN SUPPORT OF CONFIRMATION OF THE FIRST AMENDED JOINT PLAN OF COLLINS & AIKMAN CORPORATION AND ITS DEBTOR SUBSIDIARIES AND (B) IN RESPONSE TO OBJECTIONS THERETO KIRKLAND & ELLIS LLP Richard M. Cieri (NY RC 6062) Citigroup Center 153 East 53rd Street New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 -andCARSON FISCHER, P.L.C. Joseph M. Fischer (P13452) Lawrence A. Lichtman (P35403) 4111 West Andover Road -- Second Floor Bloomfield Hills, Michigan 48302 Telephone: (248) 644-4840 Facsimile: (248) 644-1832 Co-Counsel for the Debtors

The Debtors in the jointly administered cases include: Collins & Aikman Corporation; Amco Convertible Fabrics, Inc., Case No. 05-55949; Becker Group, LLC (d/b/a/ Collins & Aikman Premier Mold), Case No. 05-55977; Brut Plastics, Inc., Case No. 05-55957; Collins & Aikman (Gibraltar) Limited, Case No. 05-55989; Collins & Aikman Accessory Mats, Inc. (f/k/a the Akro Corporation), Case No. 05-55952; Collins & Aikman Asset Services, Inc., Case No. 05-55959; Collins & Aikman Automotive (Argentina), Inc. (f/k/a Textron Automotive (Argentina), Inc.), Case No. 05-55965; Collins & Aikman Automotive (Asia), Inc. (f/k/a Textron Automotive (Asia), Inc.), Case No. 0555991; Collins & Aikman Automotive Exteriors, Inc. (f/k/a Textron Automotive Exteriors, Inc.), Case No. 05-55958; Collins & Aikman Automotive Interiors, Inc. (f/k/a Textron Automotive Interiors, Inc.), Case No. 05-55956; Collins & Aikman Automotive International, Inc., Case No. 05-55980; Collins & Aikman Automotive International Services, Inc. (f/k/a Textron Automotive International Services, Inc.), Case No. 05-55985; Collins & Aikman Automotive Mats, LLC, Case No. 05-55969; Collins & Aikman Automotive Overseas Investment, Inc. (f/k/a Textron Automotive Overseas Investment, Inc.), Case No. 05-55978; Collins & Aikman Automotive Services, LLC, Case No. 05-55981; Collins & Aikman Canada Domestic Holding Company, Case No. 05-55930; Collins & Aikman Carpet & Acoustics (MI), Inc., Case No. 05-55982; Collins & Aikman Carpet & Acoustics (TN), Inc., Case No. 05-55984; Collins & Aikman Development Company, Case No. 05-55943; Collins & Aikman Europe, Inc., Case No. 05-55971; Collins & Aikman Fabrics, Inc. (d/b/a Joan Automotive Industries, Inc.), Case No. 05-55963; Collins & Aikman Intellimold, Inc. (d/b/a M&C Advanced Processes, Inc.), Case No. 05-55976; Collins & Aikman Interiors, Inc., Case No. 05-55970; Collins & Aikman International Corporation, Case No. 05-55951; Collins & Aikman Plastics, Inc., Case No. 05-55960; Collins & Aikman Products Co., Case No. 05-55932; Collins & Aikman Properties, Inc., Case No. 0555964; Comet Acoustics, Inc., Case No. 05-55972; CW Management Corporation, Case No. 05-55979; Dura Convertible Systems, Inc., Case No. 05-55942; Gamble Development Company, Case No. 05-55974; JPS Automotive, Inc. (d/b/a PACJ, Inc.), Case No. 05-55935; New Baltimore Holdings, LLC, Case No. 05-55992; Owosso Thermal Forming, LLC, Case No. 05-55946; Southwest Laminates, Inc. (d/b/a Southwest Fabric Laminators Inc.), Case No. 05-55948; Wickes Asset Management, Inc., Case No. 05-55962; and Wickes Manufacturing Company, Case No. 05-55968.

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0555927070709000000000028

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David L. Eaton (IL 3122303) Ray C. Schrock (IL 6257005) Marc J. Carmel (IL 6272032) Scott R. Zemnick (IL 6276224) 200 East Randolph Drive Chicago, Illinois 60601 Telephone: (312) 861-2000 Facsimile: (312) 861-2200 Co-Counsel for the Debtors Dated: July 9, 2007

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TABLE OF CONTENTS Page(s) INTRODUCTION ...........................................................................................................................1 BACKGROUND .............................................................................................................................1 ARGUMENT...................................................................................................................................2 I. THE PLAN SATISFIES EACH CONFIRMATION REQUIREMENT.................2 A. The Plan Complies With The Applicable Provisions Of The Bankruptcy Code (Section 1129(a)(1))........................................................2 1. 2. B. The Plan Satisfies Section 1122s Classification Requirements ...................................................................................3 The Plan Satisfies The Seven Mandatory Plan Requirements Of Section 1123(a)(1)-(7) .........................................4

The Debtors Have Complied Fully With The Applicable Provisions Of The Bankruptcy Code (Section 1129(a)(2)) .........................5 1. 2. The Plan Complies With The Procedures For Solicitation Under Section 1125 Of The Bankruptcy Code ................................6 The Plan Complies With The Requirements For Acceptance Of A Plan Under Section 1126 Of The Bankruptcy Code .............................................................................6

C. D. E. F. G. H. I.

The Plan Has Been Proposed In Good Faith And Not By Any Means Forbidden By Law (Section 1129(a)(3))..........................................7 The Plan Provides For Bankruptcy Court Approval Of Certain Administrative Payments (Section 1129(a)(4)) ...........................................8 The Identity Of Certain Individuals Who Will Hold Positions Post-Confirmation Has Be Disclosed (Section 1129(a)(5)).......................10 The Plan Does Not Require Governmental Regulatory Approval (Section 1129(a)(6))...................................................................................11 The Plan Is In The Best Interests Of Creditors And Interest Holders (Section 1129(a)(7)) .....................................................................11 Acceptance Of Impaired Classes (Section 1129(a)(8)) .............................13 The Plan Provides For Payment In Full Of All Allowed Priority Claims (Section 1129(a)(9)) ......................................................................14

i
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Page J. K. L. M. N. At Least One Impaired Class Of Claims Has Accepted The Plan, Excluding The Acceptances Of Insiders (Section 1129(a)(10)) ................16 The Plan Is Feasible (Section 1129(a)(11)) ...............................................16 The Plan Provides For The Payment Of All Fees Under 28 U.S.C. 1930 (Section 1129(a)(12)).....................................................................17 The Plan Complies With Section 1129(a)(13) Of The Bankruptcy Code ...........................................................................................................17 The Plan Satisfies The Cramdown Requirements Of Section 1129(b) Of The Bankruptcy Code .............................................................18 1. 2. The Plan Is Fair And Equitable With Respect To Each Of The Rejecting Classes. ...................................................................19 The Plan Does Not Unfairly Discriminate With Respect To Impaired Classes That Have Not Voted To Accept The Plan ................................................................................................20

O. P.

The Principal Purpose Of The Plan Is Not Avoidance Of Taxes (Section 1129(d)) .......................................................................................22 Additional Contents Of The Plan...............................................................22 1. 2. 3. 4. Releases By The Debtors ...............................................................23 Voluntary Third Party Releases .....................................................25 Exculpation ....................................................................................26 Injunction .......................................................................................28

II.

RESPONSES TO OBJECTIONS ..........................................................................29

CONCLUSION..............................................................................................................................40

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INTRODUCTION The above-captioned debtors and debtors-in-possession (collectively, the Debtors) respectfully submit this memorandum of law (this Memorandum) in support of confirmation of the First Amended Joint Plan of Collins & Aikman Corporation and Its Debtor Subsidiaries (the Plan).2 The Plan is the product of approximately two years of diligent exploration of

restructuring alternatives, broad and comprehensive operational changes and substantial discussions and negotiations among the Debtors and their primary creditor constituents. As a result of the Debtors emphasizing a consensual resolution, the Plan is supported by the unofficial steering committee for the Prepetition Lenders, the Creditors Committee and the Debtors major customers. In addition, the Plan complies with all applicable provisions of the Bankruptcy Code and the Bankruptcy Rules necessary for confirmation. Moreover, any objections to the Plan either are without merit or have been resolved by the Debtors. The Debtors, therefore,

respectfully request that the Court overrule any unresolved objections and confirm the Plan. BACKGROUND On May 17, 2005 (the Petition Date), the Debtors filed their voluntary petitions for relief under chapter 11 of the Bankruptcy Code. The Debtors continue to manage their

remaining assets and properties as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. On January 26, 2007, the Court entered an order [Docket No. 3988] (the Solicitation Procedures Order) approving the Debtors amended disclosure statement related to the Plan [Docket No. 3977] (the Disclosure Statement) and authorizing the Debtors to solicit

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

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votes on the Plan.

On or about February 14, 2007, the Debtors, in accordance with the

Solicitation Procedures Order, commenced the solicitation process in connection with the Plan. The Solicitation Procedures Order established April 9, 2007, as the deadline by which all ballots to accept or reject the Plan must be completed and received by the Debtors balloting agent and for creditors and other parties-in-interest to file objections to confirmation of the Plan. The Court subsequently extended both of these deadlines to May 7, 2007 [Docket No. 4400]. Contemporaneously with the filing of this Memorandum and in further support of confirmation of the Plan, the Debtors filed (a) the Affidavit of Kurtzman Carson Consultants LLC Certifying Ballots Accepting and Rejecting the Debtors First Amended Joint Plan of Collins & Aikman Corporation and Its Debtor Subsidiaries (the Voting Affidavit) and (b) the Declaration of John Boken in Support of Confirmation of the First Amended Joint Plan of Collins & Aikman Corporation and Its Debtor Subsidiaries (the Boken Affidavit), each of which is incorporated herein by reference. ARGUMENT I. THE PLAN SATISFIES EACH CONFIRMATION REQUIREMENT The Debtors submit that the Plan complies with all relevant sections of the Bankruptcy Code, the Bankruptcy Rules and applicable non-bankruptcy law. In particular, the Plan fully complies with all of the requirements of sections 1122, 1123 and 1129 of the Bankruptcy Code. This Memorandum addresses each such requirement individually. A. The Plan Complies With The Applicable Provisions Of The Bankruptcy Code (Section 1129(a)(1))

Section 1129(a)(1) of the Bankruptcy Code requires that a chapter 11 plan comply with the applicable provisions of chapter 11 of the Bankruptcy Code. 11 U.S.C. 1129(a)(1). The legislative history of section 1129(a)(1) states that this provision was enacted, in part, to ensure

2
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that a plan contains all necessary provisions and complies with the Bankruptcy Codes prescriptions governing classification of claims and interests. See S. Rep. No. 989, 95th Cong., 2d Sess. 126 (1978); H.R. Rep. No. 595, 95th Cong., lst Sess. 412 (1977); see also Kane v. Johns-Manville Corp., 843 F.2d 636, 648 (2d Cir. 1988); In re S&W Enter., 37 B.R. 153, 158 (Bankr. N.D. Ill. 1984). As explained below, the Plan fully complies with section 1129(a)(1), including sections 1122 and 1123. 1. The Plan Satisfies Section 1122s Classification Requirements

The Plan satisfies the classification requirements in section 1122. Section 1122 of the Bankruptcy Code provides: (a) Except as provided in subsection (b) of this section, a plan may place a claim or interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class. (b) 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 reasonably necessary for administrative convenience. 11 U.S.C. 1122. Section 1122(a) of the Bankruptcy Code, however, does not require that similar claims be classified together, only that claims grouped together in a class shall be similar. See In re U.S. Truck Co., Inc., 800 F.2d 581, 585 (6th Cir. 1986); see also In re Kovich, 4 B.R. 403, 405 (Bankr. W.D. Mich. 1980) (There is no requirement that all claims which are substantially similar be placed in the same class). The Plan classifies all Claims and Equity Interests, except Administrative Claims and Priority Tax Claims, into the following ten classes:

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Class 1 2 3 4 5 6 7 8 9 10

Claim/ Equity Interest Other Secured Claims Other Priority Claims Prepetition Facility Claims OEM Claims General Unsecured Claims Senior Note Claims and PBGC Claims Senior Subordinated Note Claims Equity Interests Subordinated Securities Claims Intercompany Claims

In short, the Plan properly classifies Claims and Equity Interest as required by the Bankruptcy Code. Unless otherwise agreed to by the Holder, a Claim or Equity Interest is placed in a Class only when that Claim or Equity Interest is substantially similar to other Claims or Equity Interests within the Class. In particular, unsecured creditors have been separately

classified based upon their different rights and the different attributes of their Claims. Accordingly, the classification of Claims and Equity Interests under the Plan satisfies the requirements of section 1122 of the Bankruptcy Code. 2. The Plan Satisfies The Seven Mandatory Plan Requirements Of Section 1123(a)(1)-(7)

The Plan meets the seven mandatory requirements of section 1123(a). First, Articles II and III of the Plan designate Classes of Claims and Equity Interests as required by section 1123(a)(1). See 11 U.S.C. 1123(a)(1). Second, Article II of the Plan specifies each Unimpaired Class (Classes 1 and 2) as required by section 1123(a)(2). See 11 U.S.C. 1123(a)(2). Third, Article III of the Plan specifies the treatment of each Class of Claims and Equity Interests that is impaired in accordance with section 1123(a)(3). See 11 U.S.C. 1123(a)(3). Fourth, as required by section 1123(a)(4), the Plan provides the same treatment for each Claim or Equity Interest, as the case may be, within a given Class. See 11 U.S.C. 1123(a)(4). 4
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Fifth, Article IV and various other provisions of the Plan provide adequate means for the implementation of the Plan, including, among other things: (a) the sale of certain of the Debtors assets; (b) establishment of various trusts; (c) the funding of the expenses of the various trusts; (d) the appointment of a trustee or administrator for each of the various trusts; (e) the cancellation of instruments, securities and other documentation; (f) the preservation of rights and causes of action; and (g) the general authority for all corporate action necessary to effectuate the Plan. See 11 U.S.C. 1123(a)(5). Sixth, section 1123(a)(6), which requires that the Plan provide for the prohibition of nonvoting equity securities and provide an appropriate distribution of voting power among the classes of securities, is inapplicable to these cases because, among other things, the Debtors shall not issue any nonvoting equity securities under or as a result of the Plan. On the Effective Date, all securities will be cancelled. See 11 U.S.C. 1123(a)(6). Finally, section 1123(a)(7) requires that the Plan 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. Here, the Plan provides for the appointment of various trustees and administrators to oversee and administer the various trusts. Pursuant to the Plan, the selection of such trustees and administrators will be accomplished in a fair and reasonable manner and will be consistent with public policy. See 11 U.S.C. 1123(a)(7).

B.

The Debtors Have Complied Fully With The Applicable Provisions Of The Bankruptcy Code (Section 1129(a)(2))

Section 1129(a)(2) of the Bankruptcy Code requires that a plan proponent comply with all applicable provisions of the Bankruptcy Code. The legislative history and cases discussing section 1129(a)(2) indicate that Congress enacted the provision to ensure that a plan proponent complies with the disclosure and solicitation requirements of sections 1125 and 1126 of the Bankruptcy Code. See, e.g., In re PWS Holding Corp., 228 F.3d 224, 248 (3d Cir. 2000); In re Texaco, Inc., 84 B.R. 893 (Bankr. S.D.N.Y. 1988); In re Prudential Energy Co., 58 B.R. 857 (Bankr. S.D.N.Y. 1986); In re Butler, 42 B.R. 777 (Bankr. E.D. Ark. 1984); In re Toy & Sports Warehouse, Inc., 37 B.R. 141, 149 (Bankr. S.D.N.Y. 1984); S. Rep. No. 989, 95th Cong., 2d Sess. 126; H.R. Rep. No. 595, 95th Cong., 1st Sess. 412. The Debtors have complied with the

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applicable provisions of the Bankruptcy Code, including sections 1125 and 1126 of the Bankruptcy Code and Bankruptcy Rules 3017, 3018 and 3019. 1. The Plan Complies With The Procedures For Solicitation Under Section 1125 Of The Bankruptcy Code

On January 26, 2007, the Court entered the Solicitation Procedures Order approving, among other things, the Disclosure Statement and the solicitation procedures and materials related thereto, which procedures and materials the Court previously found to be in compliance with the Bankruptcy Code. As set forth in the Voting Affidavit, the Debtors distributed the Disclosure Statement and solicited acceptance of the Plan in accordance with the Solicitation Procedures Order. Therefore, the Debtors have complied with section 1125 of the Bankruptcy Code. 2. The Plan Complies With The Requirements For Acceptance Of A Plan Under Section 1126 Of The Bankruptcy Code

Section 1126 of the Bankruptcy Code provides that only holders of allowed claims and equity interests in impaired classes that will receive or retain property under a plan on account of such claims or equity interests may vote to accept or reject a plan. As set forth in the Plan, the Disclosure Statement and the Voting Affidavit, in accordance with section 1126 of the Bankruptcy Code, the Debtors solicited acceptances and rejections of the Plan from the Holders of all Allowed Claims in each Impaired Class that are entitled to receive distributions under the Plan (Classes 3, 4, 5, 6 and 7). Classes 1 and 2 are Unimpaired under the Plan. Thus, pursuant to section 1126(f) of the Bankruptcy Code, Holders of Claims in Classes 1 and 2 are conclusively deemed to have accepted the Plan. Classes 8, 9 and 10 are Impaired under the Plan and will not receive any distributions or retain any property under the Plan. Accordingly, pursuant to section 1126(g), Holders of Claims and Equity Interests in Classes 8, 9 and 10 are deemed to have rejected the Plan. 6
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With respect to the Impaired Classes entitled to vote to accept or reject the Plan (Classes 3, 4, 5, 6 and 7), section 1126 of the Bankruptcy Code specifies the requirements for acceptance of a plan: A class of claims has accepted a plan if such plan has been accepted by creditors, other than any entity designated under subsection (e) of [section 1126], that hold at least two-thirds in amount and more than one-half in number of the allowed claims of such class held by creditors, other than any entity designated under subsection (e) of [section 1126], that have accepted or rejected the plan. 11 U.S.C. 1126(c). The Voting Affidavit details the results of the voting process in accordance with section 1126. As set forth in the Voting Affidavit, the Plan has been accepted by creditors holding in excess of two-thirds in amount and one-half in number of the Allowed Claims voted in Classes 3, 4 and 5. Additionally, as further set forth in the Voting Affidavit, the Plan has been rejected by Class 6 and Class 7. As described below, the Debtors believe that despite the rejecting votes in Classes 6 and 7, the Plan satisfies the cramdown requirements of section 1129(b) with respect to Classes 6 and 7 and should be approved by the Court. C. The Plan Has Been Proposed In Good Faith And Not By Any Means Forbidden By Law (Section 1129(a)(3))

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). [F]or purposes of determining good faith under section 1129(a)(3) . . . the important point of inquiry is the plan itself and whether such a plan will fairly achieve a result consistent with the objectives and purposes of the Bankruptcy Code. In re PWS Holding Corp., 228 F.3d 224 (3d Cir. 2000). The requirement of good faith must be viewed in light of the totality of the circumstances surrounding the proposal of a chapter 11 plan. See In re Jasik, 727 F.2d 1379 (5th Cir. 1984). The Debtors proposed the Plan in good faith and not by any means forbidden by law. Consistent with the overriding purpose of chapter 11 of the Bankruptcy Code, the Debtors 7
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believe that the Plan enables Holders of Claims to realize the highest possible recoveries under the circumstances of these cases. In addition, the Plan itself and the process leading to its formulation provide independent evidence of the Debtors good faith. In particular, the Plan (a) arose out of extensive, arms-length negotiations between the Debtors and their major creditor constituencies and (b) is supported by the unofficial steering committee for the Prepetition Lenders, the Creditors Committee and the Debtors major customers. The support of the Plan by each of these key constituencies with divergent interests reflects that the Plan is fundamentally fair to creditors. Moreover, the Debtors are not aware of any other viable alternative that would allow the Debtors to emerge from chapter 11 with the recoveries projected for creditors under the Plan. Rather, all other alternatives would result in lower recoveries for all claimants receiving distributions under the Plan. In fact, the recovery under the Plan provided to Classes 5, 6 and 7 is provided only because the acceptance of the Plan by Class 3 Prepetition Facility Claims permits such recovery. Without the support of the Holders of Class 3 Prepetition Facility Claims, there would be no recovery for unsecured creditors classified in Classes 5, 6 and 7 under the Plan. Accordingly, under the circumstances of these cases, the Plan is consistent with the objectives and purposes of the Bankruptcy Code and was proposed in good faith. D. The Plan Provides For Bankruptcy Court Approval Of Certain Administrative Payments (Section 1129(a)(4))

Section 1129(a)(4) of the Bankruptcy Code requires that certain professional fees and expenses paid by the plan proponent, by the debtor or by a person issuing securities or acquiring property under the Plan, be subject to approval of the Court as reasonable. section 1129(a)(4) requires that: Any payment made or to be made by the proponent, by the debtor, or by a person issuing securities or acquiring property under the plan, for services or for costs 8
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Specifically,

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). Section 1129(a)(4) has been construed to require that all payments of professional fees that are made from estate assets be subject to review and approval by the court for reasonableness. See In re River Village Assocs., 161 B.R. 127, 141 (Bankr. E.D. Pa. 1993). Pursuant to the Administrative Order Establishing Procedures for Monthly Compensation and Reimbursement of Expenses for Professionals and Official Committee Members [Docket No. 290] (the Interim Compensation Order), the Court authorized and approved the procedures for payment of certain fees and expenses of professionals retained in these cases. All such fees and expenses that have not been approved on a final basis, as well as all other accrued fees and expenses of professionals through the Effective Date, remain subject to final review for reasonableness by the Court under section 330 of the Bankruptcy Code. In addition, Article III.A.1(f)(ii)(A) of the Plan titled Professional Compensation provides that professionals retained pursuant to an order of the Court or otherwise requesting compensation in these cases pursuant to sections 330 or 503(b) of the Bankruptcy Code shall be required to file an application for allowance of final compensation and reimbursement of expenses incurred through the Effective Date in these cases. The payment of such amounts is subject to review and approval of the Court. Article XIII of the Plan also provides that the Court will retain jurisdiction after the Effective Date to hear and determine all applications for awards of compensation for services rendered and reimbursement of expenses incurred on or before the Effective Date. The foregoing procedures for the Courts review and ultimate determination of the fees and expenses to be paid by the Debtors satisfy the meaning and the objectives of section 1129(a)(4) of the Bankruptcy Code. See, e.g., In re Elsinore Shore Assocs., 91 B.R. 238, 9
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268 (Bankr. D. N.J. 1988) (requirements of section 1129(a)(4) satisfied where plan provided for payment of only allowed administrative expenses); In re Future Energy Corp., 83 B.R. 470, 488 (Bankr. S.D. Ohio 1988) (Court approval of payments for services and expenses is governed by various Code provisions e.g., 328, 329, 330, 331, and 503(b) and need not be explicitly provided for in a Chapter 11 plan). E. The Identity Of Certain Individuals Who Will Post-Confirmation Has Be Disclosed (Section 1129(a)(5)) Hold Positions

Section 1129(a)(5)(A)(i) of the Bankruptcy Code requires the proponent of a plan to disclose the identity of certain individuals who will hold positions with the debtor or its successor after confirmation of the plan. Section 1129(a)(5)(A)(ii) requires that the service of such individuals be consistent with the interests of creditors and equity security holders and with public policy. In re Apex Oil Co., 118 B.R. 683, 704-05 (Bankr. E.D. Mo. 1990). Here, the Plan provides for the appointment of various trustees and administrators to oversee and administer the various trusts. Pursuant to the Plan, the selection of such trustees and administrators has been accomplished in a fair and reasonable manner and will be consistent with public policy. In particular, as set forth in the Confirmation Order, the Plan Administrator has been designated by the Agent, in consultation with the Prepetition Lenders. Similarly, pursuant to the Plan and as set forth in the Confirmation Order, the Agent, in consultation with the Prepetition Lenders and the Creditors Committee, has designated the Litigation Trust Administrator. This collaborative effort ensures that the Plan Administrator and the

Litigation Trust Administrator will serve the interests of creditors and public policy. Based upon the foregoing, the Debtors have satisfied the requirements of section 1129(a)(5).

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F.

The Plan Does Not (Section 1129(a)(6))

Require

Governmental

Regulatory

Approval

Section 1129(a)(6) of the Bankruptcy Code permits confirmation only if any regulatory commission that will have jurisdiction over the debtor after confirmation has approved any rate change provided for in the plan. See 11 U.S.C. 1129(a)(6). The foregoing provision is inapplicable in these cases. No regulatory commission has any jurisdiction over rate changes by the Debtors. Further, the Plan does not provide for rate changes by the Debtors. Therefore, the Plan satisfies the requirements of section 1129(a)(6) of the Bankruptcy Code. G. The Plan Is In The Best Interests Of Creditors And Interest Holders (Section 1129(a)(7))

Section 1129(a)(7) of the Bankruptcy Code the best interests of creditors test requires that, with respect to each impaired class of claims or interests, each holder of a claim or interest of such class: (a) has accepted the plan; or

(b) will receive or retain under the plan on account of such claim or interest property of a value, as of the effective date of the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under chapter 7 of this title on such date. 11 U.S.C. 1129(a)(7)(A). The best interests test applies only to individual dissenting creditors rather than classes of claims and is generally satisfied through a liquidation/recovery analysis. See, e.g., Bank of Am. Natl Trust & Sav. Assn v. 203 N. LaSalle St. Pship, 526 U.S. 434 (1999); In re A.G. Consultants Grain Div., Inc., 77 B.R. 665 (Bankr. N.D. Ind. 1987); In re Jartran, Inc., 44 B.R. 331, 389-93 (Bankr. N.D. Ill. 1984) (best interests test satisfied by showing that, upon liquidation, the cash received would be insufficient to pay priority claims and secured creditors and that unsecured creditors and shareholders would receive nothing). As

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section 1129(a)(7) makes clear, the best interests test applies only to non-accepting impaired claims or equity interests. Here, the Plan satisfies the best interests test. First, the best interests test is satisfied with respect to Classes 1 and 2, as these Classes are Unimpaired under the Plan and are conclusively deemed to have accepted the Plan. Similarly, the best interests test is satisfied with respect to Class 4, as this Class unanimously accepted the Plan. With respect to each creditor who either (a) abstained from voting on the Plan in Class 3 or (b) has voted to reject the Plan in Classes 5, 6 and 7, the best interests test is satisfied because such rejecting parties will receive under the Plan an amount equal to or greater than the amount that such rejecting parties would receive under a hypothetical chapter 7 liquidation. To assist the Court in making the findings required under section 1129(a)(7), the Debtors management, together with KZC Services, LLC, the Debtors restructuring consultants, prepared (a) the analysis of estimated distributions to creditors under the Plan, which analysis is set forth in Article VI.D.1 of the Disclosure Statement (the Plan Distribution Analysis) and (b) the liquidation analysis attached to the Disclosure Statement as Appendix C (the

Liquidation Analysis). As made clear by the Liquidation Analysis and as shall be set forth by the Debtors Chief Restructuring Officer at the Confirmation Hearing, the proceeds of a chapter 7 liquidation would not be sufficient to pay the Class 3 Prepetition Facility Claims in full. Additionally, as is clear from the Plan Distribution Analysis and the Liquidation Analysis, the Holders of Class 3 Prepetition Facility Claims will receive a greater recovery pursuant to the Plan than such Holders would receive on account of a chapter 7 liquidation. Moreover, because all proceeds of any chapter 7 liquidation would be subject to the liens and security interests of the Holders of the Prepetition Facility Claims, there would be no value

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to distribute to unsecured creditors. Conversely, pursuant to the Plan, Holders of Claims in Classes 5, 6 and 7 are entitled to a recovery, despite the fact that Holders of Class 3 Prepetition Facility Claims will not be paid in full. Inasmuch as creditors in Classes 8, 9 and 10 will receive no distributions under the Plan, they will receive not less than the amount they would receive in chapter 7; in both scenarios (the Plan and chapter 7) these creditors are entitled to, and would receive, no distribution. Accordingly, the Plan satisfies the requirements of section 1129(a)(7). H. Acceptance Of Impaired Classes (Section 1129(a)(8))

Section 1129(a)(8) of the Bankruptcy Code requires that each class of claims or interests must either accept the plan or be unimpaired under the plan. Pursuant to section 1126(c), a class of impaired claims accepts a plan if holders of at least two-thirds in dollar amount and more than one-half in number of the claims in that class vote to accept the plan. See 11 U.S.C. 1126(c). Pursuant to section 1126(d), a class of interests accepts a plan if holders of at least two-thirds in amount of the allowed interests that have been voted in that class vote to accept the plan. See 11 U.S.C. 1126(d). A class that is not impaired under a plan, and each holder of a claim or interest of such class, is conclusively presumed to have accepted the plan. See

11 U.S.C. 1126(f); see also S. Rep. No. 989, 95th Cong. 2d Sess. 123 (1978) (section 1126(f) provides that no acceptances are required from any class whose claims or interests are unimpaired under the [p]lan or in the order confirming the [p]lan.); In re Ruti-Sweetwater, 836 F.2d 1263, 1267 (10th Cir. 1988) (an unimpaired class is conclusively presumed to have accepted the plan). On the other hand, a class is deemed to have rejected a plan if the plan provides that the claims or interests of that class do not receive or retain any property under the plan on account of such claims or interests. See 11 U.S.C. 1126(g). Class 1 (Other Secured Claims) and Class 2 (Other Priority Claims) are Unimpaired under the Plan and deemed to have accepted the Plan pursuant to section 1126(f) of the 13
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Bankruptcy Code.

Class 3 (Prepetition Facility Claims), Class 4 (OEM Claims), Class 5

(General Unsecured Claims), Class 6 (Senior Note Claims and PBGC Claims) and Class 7 (Senior Subordinated Note Claims) were entitled to vote on the Plan. As stated herein and as set forth in the Voting Affidavit, Classes 3, 4 and 5 overwhelmingly voted to accept the Plan. Classes 6 and 7, however, voted to reject the Plan, and Class 8 (Equity Interests), Class 9 (Subordinated Securities Claims) and Class 10 (Intercompany Claims) will receive no distributions and retain no property under the Plan and are conclusively deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code. Notwithstanding the rejection of the Plan by Classes 6, 7, 8, 9 and 10, the Plan is confirmable because, as more fully set forth in Section N below, the Plan satisfies section 1129(b)(1) of the Bankruptcy Code with respect to such classes. I. The Plan Provides For Payment In Full Of All Allowed Priority Claims (Section 1129(a)(9))

Unless the Holder of a claim entitled to priority under section 507(a) of the Bankruptcy Code agrees to a different treatment with respect to such claim, section 1129(a)(9) of the Bankruptcy Code requires a plan to provide as follows: (A) with respect to a claim of a kind specified in section 507(a)(2) or 507(a)(3) of the Bankruptcy Code, on the effective date of the plan, the holder of such claim will receive on account of such claim cash equal to the allowed amount of such claim; (B) with respect to a class of claims of a kind specified in section 507(a)(4), 507(a)(5), 507(a)(6) or 507(a)(7) of the Bankruptcy Code, each holder of a claim of such class will receive: (i) if such class has accepted the plan, deferred cash payments of a value, as of the effective date of the plan, equal to the allowed amount of such claim; (ii) if such class has not accepted the plan, cash on the effective date of the plan equal to the allowed amount of such claim; and

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(C) with respect to a claim of a kind specified in section 507(a)(8) of this title, the holder of such claim will receive on account of such claim deferred cash payments, over a period not exceeding six years after the date of assessment of such claim, of a value, as of the effective date of the plan, equal to the allowed amount of such claim. 11 U.S.C. 1129(a)(9). As required by section 1129(a)(9), Article III of the Plan provides that each Holder of an Allowed Administrative Claim will receive payment in full in cash on the Effective Date or within 30 days after the date its Administrative Claim becomes an Allowed Administrative Claim. In addition, Article III of the Plan provides that each Holder of an Allowed Priority Tax Claim will receive (a) payment in full in cash on or as soon as practicable after the Effective Date, (b) deferred cash payments in an aggregate amount equal to such Allowed Priority Tax Claim, together with interest at the Tax Rate, paid in equal semi-annual installments, commencing six months after the Effective Date and concluding six years after the date of assessment of such Allowed Priority Tax Claim or (c) such other treatment as to which the Holder of such Allowed Priority Tax Claim and the Debtors or the Post-Consummation Trust, as applicable, have agreed upon in writing. Therefore, the Debtors submit that such treatment is in full compliance with the requirements of section 1129(a)(9). Furthermore, the Plan provides that the legal, equitable and contractual rights of the Holders of Allowed Other Priority Claims are unaltered by the Plan. Unless otherwise agreed to by the Holders of Allowed Other Priority Claims (Class 2) and the Debtors or the Plan Administrator, each Holder of an Allowed Other Priority Claim will receive, in full and final satisfaction of such Allowed Other Priority Claim, one of the following treatments, in the sole discretion of the Plan Administrator: (a) the Debtors or the Plan Administrator will pay the Allowed Other Priority Claim in full in Cash on the Effective Date or as soon thereafter as is 15
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practicable, provided that Other Priority Claims representing obligations incurred in the ordinary course of business will be paid in full in Cash when such Other Priority Claims become due and owing in the ordinary course of business; or (b) the Debtors or the Plan Administrator, as applicable, will otherwise treat the Allowed Other Priority Claim in any other manner such that the Claim will be rendered Unimpaired. J. At Least One Impaired Class Of Claims Has Accepted The Plan, Excluding The Acceptances Of Insiders (Section 1129(a)(10))

Section 1129(a)(10) of the Bankruptcy Code provides that at least one impaired class of claims must accept the plan, excluding acceptance by any insider. As described above and as set forth in the Voting Affidavit, three of the five Impaired Classes entitled to vote have voted to accept the Plan even when the votes of insiders are excluded from the vote tally. Therefore, the Plan satisfies the requirements of section 1129(a)(10). K. The Plan Is Feasible (Section 1129(a)(11))

Section 1129(a)(11) of the Bankruptcy Code requires the Court, as a condition precedent to confirmation, to find that the Plan is feasible. Specifically, the Court must determine that: [c]onfirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor or any successor to the debtor under the plan, unless such liquidation or reorganization is proposed in the plan. 11 U.S.C. 1129(a)(11). A debtor must prove a chapter 11 plans feasibility by the

preponderance of the evidence. See In re Briscoe Enters., Ltd. II, 994 F.2d 1160, 1165 (5th Cir. 1993) (rejecting clear and convincing as the applicable standard). The threshold of proof necessary to satisfy the requirement is relatively low. See In re Sea Garden Motel and

Apartments, 195 B.R. 294, 304 (Bankr. D. N.J. 1996) (quotations omitted). In circumstances such as those set forth in the Plan, where a debtor contemplates the sale or liquidation of all its assets in connection with its chapter 11 plan, under section 1129(a)(11), courts are merely 16
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required to determine whether a plan offers a reasonable probability of success and is workable. See, e.g., In re Haas, 162 F.3d 1087, 1090 (11th Cir. 1998) (liquidating chapter 11 plan meets feasibility standard if the plan offers a reasonable prospect of success and is workable); In re Holmes, 301 B.R. 911, 915 (Bankr. M.D. Ga. 2003) (same); In re Patrician St. Joseph Partners, 169 B.R. 669, 674 (Bankr. D. Ariz. 1994); In re Louden, 69 B.R. 723, 725 (Bankr. E.D. Mo. 1987). The Plan contemplates that all assets of the Debtors ultimately will be disposed of and all proceeds of the assets will be distributed to the creditors pursuant to the terms of the Plan. Additionally, as more fully set forth in the Boken Affidavit, the Debtors fully expect, and there is a high probability that, the Debtors will have sufficient funds available to meet their obligations under the Plan. Accordingly, the Plan is feasible and satisfies the standards of section

1129(a)(11) of the Bankruptcy Code. L. The Plan Provides For The Payment Of All Fees Under 28 U.S.C. 1930 (Section 1129(a)(12))

Section 1129(a)(12) of the Bankruptcy Code requires the payment of all fees payable under 28 U.S.C. 1930. Article III.A.1(b) of the Plan provides that (a) prior to the

Effective Date, fees payable under 28 U.S.C. 1930 will be paid by the Debtors in cash equal to the amount of such fees and (b) after the Effective Date, all fees payable pursuant to 28 U.S.C. 1930 will be paid by the Post-Consummation Trust in accordance therewith until the closing of these cases pursuant to section 350(a) of the Bankruptcy Code. The Plan, therefore, complies with section 1129(a)(12). M. The Plan Complies With Section 1129(a)(13) Of The Bankruptcy Code

Section 1129(a)(13) of the Bankruptcy Code provides that a court may confirm a plan only if [t]he plan provides for the continuation after its effective date of payment of all retiree 17
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benefits . . . at the level established pursuant to subsection (e)(1)(B) or (g) of section 1114. 11 U.S.C. 1129(a)(13). Section 1114(e)(1)(B) provides that a debtor and the authorized representative of the recipients of the [retiree] benefits may agree to modification of such payments, after which such benefits as modified shall continue to be paid by the [debtor]. 11 U.S.C. 1114(e)(1)(B). On June 1, 2007, the Debtors and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, which represents all hourly retirees who were previously employed by the Debtors and receive Retiree Benefits (defined below), entered into an agreement (the UAW Agreement) modifying all of the Debtors retiree benefits pursuant to section 1114 of the Bankruptcy Code (the Retiree Benefits). Pursuant to the UAW Agreement, the Debtors will terminate the Retiree Benefits effective August 1, 2007, and will cease providing all Retiree Benefits for periods on and after that date. Payment of the Retiree Benefits will be governed by, and the Debtors will comply with, the terms of the UAW Agreement. The Plan therefore satisfies the requirements of section 1129(a)(13) of the Bankruptcy Code. N. The Plan Satisfies The Cramdown Requirements Of Section 1129(b) Of The Bankruptcy Code

As previously discussed, Classes 6, 7, 8, 9 and 10 (collectively, the Rejecting Classes) either voted to reject the Plan or are deemed to reject the Plan pursuant to 1126(g) of the Bankruptcy Code. Nevertheless, the Court may still confirm the Plan because the Plan satisfies the cram-down requirements of section 1129(b) of the Bankruptcy Code. Specifically, section 1129(b) provides: Notwithstanding section 510(a) of this title, if all of the applicable requirements of subsection (a) of this section other than paragraph (8) 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. 18
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11 U.S.C. 1129(b). Therefore, in the event that any impaired class of claims or equity interests does not accept the plan, the Court may still confirm the plan at the request of the debtors if, as to each impaired class of claims or equity interests that has not accepted the plan, the plan (a) is fair and equitable and (b) does not discriminate unfairly. 11 U.S.C. 1129(b)(1). Here, the Plan satisfies these requirements with respect to each of the Rejecting Classes.3 1. The Plan Is Fair And Equitable With Respect To Each Of The Rejecting Classes.

The condition that a plan be fair and equitable with respect to a non-accepting class of unsecured claims includes the requirement that either: (a) the plan provides that each holder of a claim of such class receive or retain on account of such claim property of a value as of the Effective Date equal to the allowed amount of such claim; or (b) the holder of any claim or equity interest that is junior to the claims of such class will not receive or retain any property under the plan on account of such junior claim or equity interest. Here, Classes 6 and 7 include Holders of unsecured claims. Although Holders in Classes 6 and 7 will not receive a distribution equal to the Allowed amount of their Claims, no junior Claim or Equity Interest will receive any distribution under the Plan. Similarly, Classes 9 and 10 include Holders of unsecured claims. Although Holders in Classes 9 and 10 will receive no distribution under the Plan, no junior Claim or Equity Interest will receive any distribution under the Plan. The condition that a plan be fair and equitable with respect to a non-accepting class of equity interests includes the requirements that either: (a) the plan provide that each holder of an equity interest in such class receive or retain under the plan, on account of such equity interest,

Section 1129(b) is not applicable to Class 1 (Other Secured Claims), Class 2 (Other Priority Claims), Class 3 (Prepetition Facility Claims), Class 4 (OEM Claims) or Class 5 (General Unsecured Claims), as such Classes either are Unimpaired under the Plan or voted to accept the Plan.

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property of a value, as of the Effective Date, equal to the greater of (i) the allowed amount of any fixed liquidation preference to which such holder is entitled, (ii) any fixed redemption price to which such holder is entitled or (iii) the value of such interest; or (b) if the class does not receive such an amount as required under (a), no class of equity interests junior to the non-accepting class receives a distribution under the plan. Here, Class 8 includes Holders of Equity Interests. Although Holders in Class 8 will receive no distribution under the Plan, no junior Claim or Equity Interest will receive any distribution under the Plan. Therefore, the Plan satisfies the cram-down requirements of section 1129(b) of the Bankruptcy Code with respect to each of the Rejecting Classes. 2. The Plan Does Not Unfairly Discriminate With Respect To Impaired Classes That Have Not Voted To Accept The Plan

A chapter 11 plan does not discriminate unfairly, within the meaning of the Bankruptcy Code, if the legal rights of a dissenting class are treated in a manner consistent with the treatment of other classes whose legal rights are substantially similar to those of the dissenting class and if no class of claims or interests receives more than it legally is entitled to receive for its claims or equity interests. See, e.g., In re Buttonwood Partners, Ltd., 111 B.R. 57, 62 (Bankr. S.D.N.Y. 1990); In re Johns-Manville Corp., 68 B.R. 618, 636-38 (Bankr. S.D.N.Y. 1986), affd in part, revd in part on other grounds, 78 B.R. 407 (S.D.N.Y. 1987), affd sub nom., Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988). The Bankruptcy Code does not provide a standard for determining when unfair discrimination exists. See In re 203 N. LaSalle St. L.P., 190 B.R. 567, 585 (Bankr. N.D. Ill. 1995), affd, 195 B.R. 692 (N.D. Ill. 1996), affd, 126 F.3d 955 (7th Cir. 1997), revd on other grounds, 526 U.S. 434 (1999) (noting the lack of any clear standard for determining the fairness of a discrimination in the treatment of classes under a Chapter 11 plan and that the limits of 20
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fairness in this context have not been established). Rather, courts typically examine the facts and circumstances of the particular case to determine whether unfair discrimination exists. See, e.g., In re Freymiller Trucking, Inc., 190 B.R. 913, 916 (Bankr. W.D. Okla. 1996) (holding that a determination of unfair discrimination requires a court to consider all aspects of the case and the totality of all the circumstances); In re Aztec Co., 107 B.R. 585, 589 (Bankr. M.D. Tenn. 1989) (noting that courts have recognized the need to consider the facts and circumstances of each case to give meaning to the proscription against unfair discrimination). The Debtors submit that the Plan does not discriminate unfairly with respect to creditors, including those with claims classified in Classes 6, 7, 8, 9 and 10. No Class under the Plan has Claims against (or Equity Interests in) the Debtors that is similar to the Claims (or Equity Interests) in the other Classes. Further, members within each Class are treated similarly. In particular, Class 6 (Senior Note Claims and PBGC Claims) are treated differently from Class 5 (General Unsecured Claims) because the Holders of Senior Note Claims and the Holder of PBGC Claims have joint and several liability against all of the Debtors, whereas Holders of Class 5 General Unsecured Claims have no such joint and several rights. The

Creditors Committee, however, negotiated a compromise among its members as part of a settlement.4 In addition, no Holders of Claims or Equity Interests are receiving more than they are legally entitled to receive for their respective Claims or Equity Interests. In fact, the Holders of Class 3 Prepetition Facility Claims are not being paid in full. Therefore, as set forth above, the Holders of Claims and Equity Interests in Classes 6, 7, 8, 9 and 10 are not entitled to any distribution under the Bankruptcy Code.

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Having satisfied the requirements of section 1129(b) of the Bankruptcy Code, the Debtors respectfully request that the Plan be confirmed notwithstanding the rejection of Classes 6, 7, 8, 9 and 10. O. The Principal Purpose Of The Plan Is Not Avoidance Of Taxes (Section 1129(d))

No party that is a governmental unit, or any other entity, has requested that the Court not confirm the Plan on the grounds that the principal purpose of the Plan is the avoidance of taxes or the avoidance of the application of section 5 of the Securities Act of 1933. The purpose of the Plan is not to avoid taxes or the application of section 5 of the Securities Act of 1933. Accordingly, the Plan satisfies the requirements of section 1129(d) of the Bankruptcy Code. P. Additional Contents Of The Plan

Section 1123(b) of the Bankruptcy Code identifies various additional provisions that may be included in a chapter 11 plan. For example, a plan may either impair or leave unimpaired any class of claims or interests and provide for the assumption or rejection of executory contracts and unexpired leases. See 11 U.S.C. 1123(b). A plan may also include any other appropriate provision not inconsistent with the applicable provisions of the Bankruptcy Code. 11 U.S.C. 1123(b)(6). The Plan includes certain additional provisions. In particular, the Plan provides for the release of certain causes of action of the Debtors and their estates and voluntary releases by third parties, injunction precluding Holders of Claims from asserting their prepetition claims against the Debtors and the exculpation of claims for certain parties. These provisions are proper because, among other things, they are the product of arms-length negotiations and have been

Consistent with the Plan, the Creditors Committee will address issues associated with the reasonableness of the settlement reached among (Continued)

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critical to obtaining the support of various constituencies for the Plan. Such release, exculpation and injunction provisions are fair and equitable and are in the best interests of the Debtors and these Chapter 11 Cases. The release, injunction and exculpation provisions as described herein and further in the Disclosure Statement and the Plan are appropriate and, therefore, the requirements of section 1123(b) of the Bankruptcy Code are satisfied. 1. Releases By The Debtors

As set forth in Article XII.B of the Plan, the release by the Debtors provides that the Debtors shall release all claims and causes of action for anything occurring prior to the Effective Date against the Debtor Releasees, which include the Debtors officers, directors and employees employed by the Debtors on or after November 1, 2006, the Debtors professionals, the Creditors Committee, the DIP Lenders, the DIP Agent, the Prepetition Lenders, the Agent, the Steering Committee and each of their respective officers, directors, employees and professionals, and the OEMs. The releases set forth in Article XII.B of the Plan do not operate to release or waive any causes of action expressly preserved by the Plan. Section 1123(b)(3)(A) of the Bankruptcy Code specifically provides that a chapter 11 plan may provide for the settlement or adjustment of any claim or interest belonging to the debtor or the estate. 11 U.S.C. 1123(b)(3)(A). A plan that proposes to release a claim or action that belongs to the debtor is considered a settlement for purposes of satisfying section 1123(b)(3)(A) of the Bankruptcy Code. See In re WCI Cable, Inc., 282 B.R. 457, 469 (Bankr. D. Or. 2002). In reviewing the release by the Debtors proposed in the Plan, courts are

the Creditors Committees constituents.

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guided by the reasonable judgment standard of Bankruptcy Rule 9019. See In re WorldCom, Inc., 2003 Bankr. Lexis 1401, at *17. The Debtors submit that Article XII.B of the Plan represents a valid settlement of whatever claims the Debtors may have against the Debtor Releasees and the OEMs pursuant to section 1123(b)(3)(A) of the Bankruptcy Code. The Debtors believe that pursuing any such claims against the Debtor Releasees and the OEMs would not be in the best interest of the Debtors various constituencies. In particular, the Debtors believe that as the Department of Justice and the Securities and Exchange Commission, in the course of their investigations of the Debtors, have not found any impropriety on the part of the officers and directors that are released from liability under Article XII.B of the Plan, the significant expense of time and money involved in pursuing litigation against such parties would outweigh the potential benefits from such litigation. Moreover, the OEMs as the Debtors major customers have provided significant benefits to the Debtors throughout these Chapter 11 Cases. Indeed, as a result of the

Customer Agreement and prior customer agreements, the Debtors shall be able to effectively wind-down and liquidate all of their operations in a manner that maximizes value for the Debtors estates and their creditors. In addition, as part of the Customer Agreement, the OEMs agreed to support the Plan and waive hundreds of millions of dollars in claims against the Debtors estates, thereby allowing the Debtors to emerge from chapter 11. The releases by the Debtors are limited solely to claims or causes of action that belong to the Debtors. See In re Oneida Ltd., 351 B.R. 79, 94 (Bankr. S.D.N.Y. 2005) (noting that a debtors release of its own claims is permissible). Debtors are authorized to settle claims in a chapter 11 plan, and no third-party rights are impacted by Article XII.B of the Plan. Therefore,

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the releases provided by the Debtors are consistent with applicable law. Indeed, courts in this district have approved similar debtor-release provisions in other chapter 11 cases. See, e.g., In re Intermet Corp., Case No. 04-67597 (MBM) (Bankr. E.D. Mich. Sept. 29, 2005); In re Oxford Automotive, Case No. 04-74377 (SWR) (Bankr. E.D. Mich. Mar. 9, 2005). Additionally, the Debtors submit that their release of claims is a component of a consensual Plan process. The Debtors do not believe that a sufficiently constructive purpose would be furthered by preserving or seeking to prosecute claims against the Debtor Releasees or the OEMs. In conclusion, as set forth above, the Debtors release of claims is well-considered, represents a valid exercise of the Debtors business judgment and should be approved. 2. Voluntary Third Party Releases

Pursuant to Article XII.C of the Plan, each Releasing Party, including the Creditors Committee, the DIP Lenders, the DIP Agent, the Prepetition Lenders, the Agent, the Steering Committee and Holders of Claims who vote to accept the Plan, shall release all claims and causes of action for anything occurring prior to the Effective Date against all Third Party Releasees. The third party release provision set forth in Article XII.C of the Plan does not operate to waive or release any Third Party Releasee from claims or causes of action (a) expressly set forth in the Plan or (b) against the Non-Released Parties set forth on Exhibit A to the Plan. Courts in this and other districts have deemed voluntary third party releases, similar to the releases set forth in Article XII.C of the Plan, permissible under the Bankruptcy Code. See, e.g., In re Intermet Corp., Case No. 04-67597 (MBM) (Bankr. E.D. Mich. Sept. 29, 2005) (approving voluntary release provisions of chapter 11 plan); In re Dow Corning Corp., 244 B.R. 721, 741 (Bankr. E.D. Mich. 1999) (approving voluntary release contained in a debtors chapter 11 plan); see also In re Specialty Equip. Cos., 3 F.3d 1043, 1047 (7th Cir. 1993) (holding 25
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voluntary releases to be in accord with the Bankruptcy Code); In re Winn-Dixie Stores, Inc., 356 B.R. 239, 260 (Bankr. M.D. Fla. 2006) (same); In re Zenith Elecs. Corp., 241 B.R. 92, 111 (Bankr. D. Del. 1999). The existence of the third party releases was expressly set forth in the Disclosure Statement, the Plan and the ballots for the Plan, thereby making it clear that acceptance of the Plan included acceptance of the third party releases set forth in Article XII.C of the Plan. The third party releases are designed to bring as much closure and finality as possible to these Chapter 11 Cases. Accordingly, the Debtors respectfully submit that the third party releases in Article XII.C of the Plan are an important aspect of the Plan and should be approved. 3. Exculpation

Under Article XII.D of the Plan, the Debtors seek protection for the Exculpated Parties, including the Debtors, the Trusts, the Releasing Parties, the OEMs and each of their respective officers, directors, employees and professionals, from lawsuits from dissatisfied creditors or any other parties in interest with respect to the Exculpated Parties participation in these Chapter 11 Cases. The scope of the exculpation contained in Article XII.D of the Plan is limited, has no effect on liability that results from gross negligence or willful misconduct and does not apply to any acts or omissions expressly set forth in and preserved by the Plan. An exculpation provision is fundamentally different from a mandatory release provision. See In re PWS Holding Corp., 228 F.3d 224, 246-47 (3d Cir. 2000) (reasoning that the exculpation provision does not affect the liability of third parties, but rather sets forth the appropriate standard of liability); see also In re Enron Corp., 326 B.R. 497, 501 (S.D.N.Y. 2005) (exculpation provision was appropriate where such provision excluded gross negligence and willful misconduct). Likewise, the Debtors request that the Court approve the exculpation provision and similarly adopt an appropriate standard of liability for the Exculpated Parties with 26
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respect to the Debtors Chapter 11 Cases. The exculpation provision in Article XII.D of the Plan does not amount to a release provision, but rather represents a conclusion of law that flows inevitably from several different findings of fact that the Court must reach in confirming the Plan. First, this Court must find, under section 1129(a)(2) of the Bankruptcy Code, that the proponents of the plan complies with the applicable provisions of the Bankruptcy Code. Further, the Court must find, under section 1129(a)(3) of the Bankruptcy Code, that the plan has been proposed in good faith and not by any means forbidden by law. These findings apply necessarily to the Debtors, and by extension, to the Debtors officers, directors, employees and professionals. Further, these findings imply that the Plan was negotiated in good faith. Insofar as the Debtors negotiated the terms of the Plan with the Prepetition Lenders, the OEMs, the Creditors Committee and the other Exculpated Parties, the Courts good faith findings with respect to these Chapter 11 Cases should extend to them. Second, it is well established that the liability of statutory committees and their professionals, under section 1103 of the Bankruptcy Code, is limited to acts of gross negligence and willful misconduct. See PWS Holding, 228 F.3d at 246-47 (holding that the appropriate standard of liability under section 1103 of the Bankruptcy Code is willful misconduct or ultra vires acts, and approving an exculpation of the creditors committee and its professionals subject only to liability for willful misconduct or gross negligence). Finally, exculpation for participating in the plan process is appropriate where plan negotiation could not have occurred without protection from liability. See Enron Corp.,

326 B.R. at 503 (excising similar exculpation provisions would tend to unravel the entire fabric of the Plan, and would be inequitable to all those who participated in good faith to bring it into

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fruition); see also Winn-Dixie Stores, 356 B.R. at 261 (holding exculpation provision was appropriate where beneficiaries expected such provision to be included in chapter 11 plan in exchange for participation in the chapter 11 cases). As the Exculpated Parties are entitled to a finding that they participated in good faith in these Chapter 11 Cases, the Court may properly conclude, as a matter of law, that the standard of liability applying to the Exculpated Parties for all actions or omissions to act related to these Chapter 11 Cases should be limited to gross negligence or willful misconduct. This conclusion is consistent with public policy governing such provisions, is entirely supported by the facts of these Chapter 11 Cases and has been approved by courts, including the Court, in this district. See, e.g., In re Intermet Corp., Case No. 04-67597 (MBM) (Bankr. E.D. Mich. Sept. 29, 2005) (approving exculpation provision similar to Article XII.D of the Plan); In re Oxford Automotive, Case No. 04-74377 (SWR) (Bankr. E.D. Mich. Mar. 9, 2005) (same). Therefore, the Debtors respectfully request that the Court approve the exculpation provision set forth in Article XII.D of the Plan. 4. Injunction

Article XII.E of the Plan provides that all parties are permanently enjoined from commencing or continuing in any matter against the Debtors, the Trusts or any released Person, any action for a recovery for any claim or interest released pursuant to the Plan. The injunction is necessary to protect the Trusts and other entities or persons that shall implement the provisions of the Plan after the Effective Date from any potential litigation from disgruntled prepetition creditors. Such litigation would hinder the efforts of such persons and entities to fulfill Moreover, the injunction is

effectively their responsibilities as contemplated in the Plan.

narrowly tailored to achieve that purpose and has been approved by courts in other liquidating chapter 11 cases. See, e.g., In re DESA Holdings Corp., Case No. 02-11672 (WS) (Bankr. D. 28
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Del. Apr. 1, 2005); In re Jillians Entertainment Holdings, Inc., Case No. 04-33192 (DTS) (Bankr. W.D. Ky. Dec. 2, 2004); In re Conseco, Inc., Case No. 02-B49672 (CAD) (Bankr. N.D. Ill. Sept. 9, 2003). To allow, in part, such trusts to effectively comply with their obligations under the Plan and any applicable related agreements, the Debtors request that the Court approve the injunction provision contained in Article XII.E of the Plan. II. RESPONSES TO OBJECTIONS The Debtors received various informal objections to confirmation of the Plan, all of which were resolved without the necessity of filing a written objection. In addition, the Debtors received several formal objections to confirmation of the Plan. Many of these objections have been consensually resolved by the parties as summarized in Exhibit A attached hereto. Additionally and notably, the Debtors have resolved the objection of the United States trustee to the Plan. However, despite the Debtors best efforts, certain of the formal objections remain outstanding. The Debtors, however, believe that for the reasons set forth herein certain of the objections that remain outstanding are without merit and should be overruled. Outstanding Objection of TTERTT Associates, L.L.C. (TTERT) On May 4, 2007, TTERTT filed its objection to the Plan [Docket No. 4608] pursuant to which TTERTT asserted that the Debtors had not informed TTERTT of when the Debtors would terminate the lease (the Lease) for their corporate headquarters that the Debtors maintain with TTERTT. Additionally, TTERTT requested that to the extent the Debtors terminate the Lease prior to the expiration of such Lease, the Debtors should establish a reserve to fund any payments owed to TTERTT as a result of termination of the Lease.

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Since the filing of TTERTTs objection, the Debtors have informed TTERTT of when the Debtors shall exit their corporate headquarters and terminate the Lease, which notification was provided by the Debtors pursuant to the terms of the Lease. The Debtors have proposed to TTERTT that the confirmation order would include a provision that the Debtors would be deemed to segregate a portion of their available funds in an amount sufficient to cover obligations owed to TTERTT by the Debtors under the Lease. The Debtors believe that the segregation of such funds effectively resolves TTERTTs objection to the Plan and respectfully request that, to the extent the Debtors are unable to resolve TTERTTs objection consensually, that the Court approve the Debtors proposed resolution and overrule such objection. Outstanding Objection of California Department of Toxic Substances Control and the Central Valley Regional Water Quality Control Board (collectively, the California Environmental Entities) On May 4, 2007, the California Environmental Entities filed its objection to the Plan [Docket No. 4611] under which the California Environmental Entities allege that the Plan unfairly enjoins and precludes the California Environmental Entities with respect to any actions of the California Environmental Entities related to the former Wickes Forest Industries Site located in Elmira, California. As the Debtors were not owners or operators of any such property postpetition, any obligations of the Debtors to the California Environmental Entities are prepetition claims. The Debtors have proposed that they would agree to the California Environmental Entities being granted relief from (a) the automatic stay imposed pursuant to section 362 of the Bankruptcy Code and (b) the injunction imposed under Article XII.E. of the Plan with respect to any actions taken by the California Environmental Entities that relate to the former Wickes Forest Industries Site located in Elmira, California so long as the California Environmental Entities waive their rights to collect on any claims they have or may have against the Debtors 30
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and agree to seek recovery to satisfy such claims solely from any non-Debtor that may be liable for such obligations. The Debtors believe that the terms of such proposed agreement effectively resolves the California Environmental Entities objection to the Plan and respectfully request that, to the extent the Debtors are unable to resolve the California Environmental Entities objection consensually, that the Court approve the Debtors proposed resolution and overrule such objection. Outstanding Objections of MainStay High Yield Corporate Bond Fund (MainStay) and K.J. Egleston, et al. (collectively, K.J. Egleston) On May 7, 2007, (a) MainStay filed its objection to the Plan [Docket No. 4628] and (b) K.J. Egleston filed its objection to the Plan [Docket No. 4655]. The Debtors believe that they will have resolved many of the issues raised by MainStay and K.J. Egleston in each of their objections prior to the Confirmation Hearing. Each of MainStay and K.J. Egleston has alleged in its objection, however, that the Debtors improperly classified the Subordinated Securities Claims (Class 9). MainStay and K.J. Egleston assert that the claims of the Senior Note holders that are subordinated under section 510(b) of the Bankruptcy Code should be classified separately and are entitled to a distribution before any distribution is received by a Holder of a Class 7 (Senior Subordinated Notes) Claim. The objection of MainStay and K.J. Egleston to the Debtors classification of the Subordinated Securities Claims is misguided as (a) the Debtors are not obligated to classify claims that are not scheduled and for which no proof of claim was filed, (b) the Debtors have not been named (nor has a request been made to the Court to lift the automatic stay to name the Debtors) as defendants in the underlying litigation that forms the basis of the alleged subordinated claims, (c) even if the Debtors created a separate class as requested by MainStay and K.J. Egleston, such class would not be entitled to any distribution under the 31
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Bankruptcy Code and (d) the settlement regarding the allocation of any recovery obtained by the Litigation Trust that may be transferred to unsecured creditors complies with the applicable legal standard and does not require that any allocation of such recovery be provided to any Senior Note holders subordinated under section 510(b) of the Bankruptcy Code. Pursuant to Bankruptcy Rule 3003(c)(2), if an unscheduled creditor fails to file a proof of claim within the time fixed by the court, such creditor is not entitled to vote on or receive a distribution on account of a debtors plan. See FED. R. BANKR. P. 3003(c)(2). Classification and treatment of claims and confirmation of a plan requires that there be a known body of claims. See In re Nutri*Bevco, Inc., 117 B.R. 771, 781 (Bankr. S.D.N.Y. 1990). Neither MainStay nor K.J. Egleston filed a proof of claim in these Chapter 11 Cases against the Debtors prior to, or even after, January 11, 2006, the claims bar date established in the Bar Date Order. As such, the Debtors are not obligated to classify such claims under the Plan. Additionally, pursuant to Bankruptcy Rule 3003(c)(2), MainStay and K.J. Egleston are not entitled to vote on or receive any distribution from the Debtors, their estates or the Post-Consummation Trust on account of the Plan or otherwise. Further, the Debtors have not been named as defendants nor has MainStay or K.J. Egleston sought relief from the Court to name the Debtors as defendants in the litigation upon which MainStays and K.J. Eglestons subordinated claims are based. After the

Petition Date, each of MainStay and K.J. Egleston commenced certain securities litigation against certain entities and persons formerly affiliated with the Debtors. Notably, the Debtors have not been named as defendants in such litigation. Moreover, neither MainStay nor K.J.

32
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Egleston has requested relief from the automatic stay in these Chapter 11 Cases so as to include the Debtors as defendants in such litigation.5 Furthermore, under the express terms of section 510(b) of the Bankruptcy Code, at the very least, the claims of the Senior Note holders on account of the litigation commenced by MainStay and K.J. Egleston that are subordinated under section 510(b) of the Bankruptcy Code would be subordinated and junior to the Holders of Senior Note Claims. As described herein, the Debtors are cramming down the Holders of Senior Notes Claims pursuant to section 1129(b)(2)(B) of the Bankruptcy Code and, therefore, no claims that are junior to the Senior Notes Claims are entitled to a distribution as a matter of law. See 11 U.S.C. 1129(b)(2)(B)(ii). Accordingly, even if the Debtors were to create a new class on account of the claims of the Senior Note holders that are subordinated under section 510(b) of the Bankruptcy Code, such class would be junior to the Holders of the Senior Note Claims and would be entitled to no distribution. To the extent the Holders of the Senior Note Claims or any class junior to the Senior Note Claims may receive a distribution as described in the Plan, such distribution does not stem, nor is being provided, from property of the Debtors estates. As set forth in the Plan, the Prepetition Lenders are not being paid in full and, therefore, are entitled to all of the proceeds recovered by, among other sources, the Litigation Trust. To the extent a portion of the proceeds recovered by the Litigation Trust shall be transferred to claim holders other than the Prepetition Lenders, such transfer is an allocation of assets to which the Prepetition Lenders otherwise are entitled and is not property of the Debtors estates subject to the absolute priority rule. See, e.g.,

MacKay Shields LLC, a plaintiff to the litigation commenced by MainStay, did file a motion for relief from the automatic stay to allow it to (Continued)

33
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In re SPM Mfg. Corp., 984 F.2d 1305, 1313 (1st Cir. 1993) (approving allocation by secured creditor of distribution to which it was entitled to unsecured creditors as such distribution being property of the secured lenders and not property of the estate and, therefore, not subject to the absolute priority rule); In re MCorp Financial, Inc., 160 B.R. 941, 960 (S.D. Tex. 1993) (approving allocation in chapter 11 plan by senior lenders of portion of such lenders otherwiseentitled distribution to junior creditors); see also In re World Health Alternatives, Inc., 344 B.R. 291, 297 (Bankr. D. Del. 2006) (same); In re Genesis Health Ventures, Inc., 266 B.R. 591, 612 (Bankr. D. Del. 2001). Additionally, as contemplated in the Plan and as shall be addressed by the Creditors Committee prior to or at the Confirmation Hearing, the settlement reached among the Creditors Committees constituents with respect to the allocation of any litigation recovery proceeds transferred to the unsecured creditors by the Prepetition Lenders is reasonable and complies with applicable legal standard set forth in Bankruptcy Rule 9019. Under Bankruptcy Rule 9019, a settlement should be approved if it is determined to be fair and equitable and does not fall below the lowest level of reasonableness. See, e.g. Bauer v. Commerce Union Bank, 859 F.2d 438, 441 (6th Cir. 1988); In re Haven, Inc. 2005 WL 927666, at *3 (6th Cir. B.A.P. 2005). As the Creditors Committee shall describe more fully, after several weeks of extensive discussions among the Creditors Committees constituents, such constituents agreed to the allocation of litigation recovery proceeds set forth in Exhibit J to the Plan. The Creditors Committee and the Debtors believe that such settlement and the allocation contained therein was determined upon a fair basis and reasonably addresses the concerns of the Creditors

proceed with discovery [Docket No. 1566]. However, MacKay Shields withdrew such motion prior to any hearing on the relief it requested (Continued)

34
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Committees constituents.

MainStay and K.J. Egleston should not now be permitted to Accordingly, the Debtors respectfully submit that the

collaterally attack such settlement.

objections of MainStay and K.J. Egleston to the classification of the Subordinated Securities Claims are misguided and should be overruled. Outstanding Objection of The Dow Chemical Company and Its Subsidiaries and Affiliates (collectively, Dow) On May 14, 2007, Dow filed its objection to the Plan [Docket No. 6779] under which it asserts, among other things, that it is unable to determine whether Dows contracts with the Debtors will be assumed in connection with the Plan. The Debtors have informed Dow that the Debtors will not assume any of their contracts with Dow in connection with the Plan. As the Debtors believe they have resolved the other issues raised in Dows objection and have informed Dow that none of Dows contracts with the Debtors shall be assumed in connection with the Plan, the Debtors respectfully submit that they have effectively resolved Dows objection, which the Debtors respectfully submit shall be overruled. Outstanding Objections of Certain of the Debtors Tooling Vendors Each of Noble International, Ltd. and Valiant Tool & Mold, Inc., certain of the Debtors tooling vendors (collectively, the Tooling Vendors), filed objections to the Plan. The Tooling Vendors assert in their objections that, among other things, the injunction provisions of the Plan preclude the Tooling Vendors from enforcing their lien rights on account of their tooling. The Debtors propose to allow the Tooling Vendors to retain their rights, if any, to enforce their liens on account of their tooling. Accordingly, the Debtors respectfully submit that such proposed

[Docket No. 1581].

35
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resolution effectively resolves the Tooling Vendors objection to the Debtors injunction provisions under the Plan and, therefore, such objection should be overruled. Outstanding Objection of Firemans Fund Insurance Company, National Surety Company (collectively, Firemans Fund) On May 7, 2007, Firemans Fund filed its objection to the Plan [Docket No. 4627] pursuant to which Firemans Fund alleges that the Plan improperly affects Firemans Funds rights under certain insurance policies it provides the Debtors. The Debtors have provided unequivocal language to Firemans Fund to be inserted into the Confirmation Order that the Debtors believe resolves Firemans Funds objection to the Plan. Accordingly, the Debtors respectfully submit that they have effectively resolved Firemans Funds objection and, therefore, such objection should be overruled. Outstanding Objection of Heartland Industrial Partners, L.P. (Heartland) and David A. Stockman On May 7, 2007, Heartland filed its objection to the Plan [Docket No. 4644] under which Heartland asserts that the Plan improperly affects its right, if any, to setoff and its rights with respect to certain future litigation. On May 10, 2007, David A. Stockman filed a joinder to Heartlands objection [Docket No. 5273]. The Debtors have provided unequivocal language to Heartland and David Stockman to be inserted into the Confirmation Order that the Debtors believe resolves their objections to the Plan. Accordingly, the Debtors respectfully submit that they have effectively resolved such objections and, therefore, such objections should be overruled. Outstanding Objection of The Haartz Corporation (Haartz) On May 22, 2007, Haartz filed its objection to the Plan [Docket No. 7308] in which it alleges that certain provisions of the Plan negatively affect certain of Haartzs potential rights. The Debtors have proposed language to Haartz to be inserted into the Confirmation Order that 36
K&E 11748441.11

the Debtors believe effectively resolves Haartzs objection, which the Debtors respectfully submit shall be overruled. Outstanding Objection of Third Avenue Trust On May 7, 2007, Third Avenue Trust filed its objection to the Plan [Docket No. 4636] under which it asserts that certain provisions of the Plan are ambiguous. The Debtors have provided unequivocal language to the Third Avenue Trust to be inserted into the Confirmation Order that the Debtors believe resolves Third Avenue Trusts objection to the Plan. Accordingly, the Debtors respectfully submit that they have effectively resolved Third Avenue Trusts objection, which the Debtors respectfully submit shall be overruled. Outstanding Objection of Textron Financial Corporation (Textron) On May 16, 2007, Textron filed its objection to the Plan [Docket No. 7157] pursuant to which Textron asserts that the Plan does not explicitly set forth the treatment to be accorded to Textron on account of its equipment agreement with the Debtors. The Debtors believe that such agreement is part of a financing transaction and that Textrons rights with respect to the equipment that is the subject of such agreement will be determined through the claims reconciliation process. If such equipment is an executory contract or unexpired lease as Textron asserts, which the Debtors contest, such agreement will be rejected as of the Effective Date. In such a situation, any outstanding issues will be determined through the claims reconciliation. Accordingly, the Debtors believe that the resolution of this matter is not a confirmation issue, therefore, Textrons objection should be overruled. Outstanding Objection of Infocrossing, Inc. and Alicomp (collectively, Infocrossing) On July 9, 2007, Infocrossing filed its objection to the Plan [Docket No. 7719] under which Infocrossing objects to the Debtors proposed rejection of the services agreement the Debtors maintain with Infocrossing. Before the Confirmation Hearing, the Debtors shall file an 37
K&E 11748441.11

amended Exhibit F to the Plan that sets forth that the Debtors shall reject their services agreement with Infocrossing as of the Effective Date. The Debtors have authority under the Bankruptcy Code to assume or reject executory contracts and unexpired leases. Additionally, in circumstances such as those contained in these cases, where a debtor has made the determination to reject an executory contract prior to confirmation of its chapter 11 plan, the effective date of the rejection can be set at the effective date of the chapter 11 plan, even if such effective date of rejection occurs after confirmation, and during the time between the confirmation and the plan and the effective date of the plan, such debtor may continue to obtain the benefits under such executory contract or unexpired lease. See, e.g., In re Kroh Bros. Dev. Co., 100 B.R. 480, 48687 (W.D. Mo. 1989) (holding that rejection of executory contract may occur after confirmation of a debtors plan if determination to reject was made prior to confirmation); In re Gunter Hotel Assocs., 96 B.R. 696, 699-700 (Bankr. W.D. Tex. 1988) (same); see also In re Maiden Mills, Inc., 35 B.R. 71, 73 (Bankr. D. Mass. 1983); In re J.M. Fields, Inc., 26 B.R. 852, 857 (Bankr. S.D.N.Y. 1983). Moreover, in other chapter 11 cases, courts have allowed debtors to reject contracts even after the effective date of such debtors chapter 11 plans. See, e.g., In re Delta Air Lines, Inc., Case No. 05-17923 (ASH) (Bankr. S.D.N.Y. Jan. 18, 2007) (debtors may reject any executory contract or unexpired lease related to aircraft equipment until 180 days after plan-effective date); In re Mirant Corp., Case No. 03-46590 (DML) (Bankr. N.D. Tex. Sept. 30, 2005) (debtors may reject executory contracts or unexpired leases related to certain facilities until the earlier of (a) the date the sale of such facilities closes and (b) one year after the plan-effective date). Accordingly, as the Debtors determination to reject their services agreement with Infocrossing as set forth in amended Exhibit F to the Plan will be made prior to entry of the

38
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Confirmation Order and, therefore, represents a reasonable exercise of the Debtors rights under applicable legal authority, Infocrossings objection should be overruled.

39
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CONCLUSION For the reasons set forth herein, and as will be further demonstrated as necessary at the Confirmation Hearing, the Debtors submit that the Plan satisfies all of the applicable requirements of the Bankruptcy Code and the Bankruptcy Rules. Accordingly, the Debtors respectfully request that this Court overrule any unresolved objections and enter an order confirming the Plan. Dated: July 9, 2007 KIRKLAND & ELLIS LLP /s/ Ray C. Schrock Richard M. Cieri (NY RC 6062) Citigroup Center 153 East 53rd Street New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 -andDavid L. Eaton (IL 3122303) Ray C. Schrock (IL 6257005) Marc J. Carmel (IL 6272032) Scott R. Zemnick (IL 6276224) 200 East Randolph Drive Chicago, Illinois 60601 Telephone: (312) 861-2000 Facsimile: (312) 861-2200 -andCARSON FISCHER, P.L.C. Joseph M. Fischer (P13452) Lawrence A. Lichtman (P35403) 4111 West Andover Road West - Second Floor Bloomfield Hills, Michigan 48302 Telephone: (248) 644-4840 Facsimile: (248) 644-1832 Co-Counsel for the Debtors

40
K&E 11748441.11

EXHIBIT A

K&E 11748441.11

OBJECTIONS TO THE PLAN THAT HAVE BEEN RESOLVED OR WITHDRAWN BASIS FOR OBJECTION Clarion should not be listed in Exhibit A to the Plan Withdrawn by notice [Docket No. 4327]. STATUS

OBJECTING PARTY

Clarion Corporation of America (Clarion) [Docket No. 4310]

2 Plan does not outline how JSP Molds alleged liens will be affected Plan does not outline a specific class for tooling claims Plan has ambiguous and vague language in Article XII

JSP Mold, LLC (JSP Mold) [Docket No. 4442]

Withdrawn by notice [Docket No. 7373].

Ohio Department of Taxation (ODT) [Docket No. 4453]

Resolved by including the following language in the Confirmation Order: Notwithstanding anything to the contrary in the Plan or this Order, the Ohio Department of Taxation shall not be a Releasing Party and shall not be subject to Article XII.C of the Plan or Paragraph 9 of this Order. Resolved by counsel for the Debtors explaining that confirmation of the Plan did not de facto result in disallowance of creditors proof of claim. Resolved by including the following language in the Confirmation Order: Notwithstanding anything contained in the Plan or elsewhere in this Order, the provisions of Article XII.E of the Plan shall not

E. Ray Mayfield, Jr [Docket No. 4526]

Plan denies creditors proof of claim

Shawmut Corp. (Shawmut) [Docket No. 4558]

Plan fails to satisfy the requirements of section 1129(a)(1) of the Bankruptcy Code because the plan is at odds with section 553 of the Bankruptcy Code, which preserves setoff rights

K&E 11948023.3

preclude the assertion at any time of a right of setoff or a right of recoupment by Shawmut Corporation for which a proof of claim asserting such right was timely Filed. Any objection to such right of setoff or right of recoupment shall be determined in accordance with the procedures set forth in the Plan. Plan does not satisfy the statutory requirement of section 1129(a)(1), (2), (3), (7) and (8) of the Bankruptcy Code The injunction provision in Article XII of the Plan effectively eliminate rights of H.P. Pelzer Plan exhibits are not available at the time the objection was filed Resolved by including the following language in the Confirmation Order:

H.P. Pelzer Automotive System, Inc. (H.P. Pelzer) [Docket No. 4620]

Neither the provisions of Article XII.E of the Plan nor any other provision of the Plan shall enjoin or otherwise preclude the assertion at any time of a right of setoff, recoupment or any defense (affirmative or otherwise) by H.P. Pelzer Automotive System, Inc. and/or Cimatron Technologies, Inc. to an objection to claim, other contested matter or adversary proceeding. Such rights and/or defenses are preserved and are not reduced or impacted by the Plan. Resolved by including the following language in the Confirmation Order:

State of Michigan Department of Treasury [Docket No. 4624]

Article XII of the Plan limits or enjoins the collection of tax debts due to Michigan from non-Debtors Plan does not satisfy the requirements of section 1129(a)(5)(G) of the Bankruptcy Code because it fails to specify the remedies available to priority and general unsecured tax creditors in the event of

Notwithstanding anything to the contrary in the Plan or this Order, the State of Michigan, Treasury Department (the Treasury) shall not be a Releasing Party and shall not be subject to Article XII.C of the Plan or Paragraph 9 of this 2

K&E 11948023.3

default in payment of such obligations Plan fails to include an interest rate

Order. Notwithstanding anything to the contrary in the Plan or this Order, to the extent the Treasury has a right to a distribution under the Plan on account of its Allowed Other Secured Claim or Allowed Priority Tax Claim and such distribution is not timely made to the Treasury in accordance with the Plan, the Treasury may seek to enforce any right to such distribution, but only after providing the Debtors or, if applicable, the PostConsummation Trust with 30 days from the Debtors receipt of written notice by the Treasury of such untimely distribution to make such distribution.

H.S. Die & Engineering, Inc. (H.S. Die) [Docket No. 4626]

Plan is not clear whether the H.S. Die Deemed Segregated Proceeds (from the Customer Agreement) are being segregated Plan does not reaffirm the Debtors obligation to H.S. Die under the Customer Agreement

Resolved by including the following language in the Confirmation Order: Notwithstanding anything to the contrary in the Plan or this Order, the Debtors and, to the extent applicable, the PostConsummation Trust, shall continue to fulfill all of the duties and obligations of the Debtors set forth in paragraph 11 of the Final Order Approving Customer Agreement Among the Debtors, Their Principal Customers and JPMorgan Chase Bank, N.A. and Related Relief [Docket No. 3890] (the Final Customer Agreement Order) in favor of H.S. Die & Engineering, Inc. and its affiliates

K&E 11948023.3

and subsidiaries, including, but not limited to, the maintenance of the H.S. Die Deemed Segregated Proceeds, subject to all rights, claims and defenses of the Debtors, to the extent applicable, the Post-Consummation Trust, the Customers (as such term is defined in the Customer Agreement), the Debtors prepetition and postpetition senior, secured lenders and other parties in interest, other than contesting the finality of the Final Customer Agreement Order.

Becker Properties, LLC and Anchor Court, LLC [Docket No. 4629]

Status of counterparty leases is unknown Article XII.E of the Plan eliminates setoff rights of creditors without compensation

Resolved by including the following language in the Confirmation Order:

- and -

Townhall 4, LLC [Docket No. 4631]

- and -

Lear Corporation [Docket No. 4632]

- and -

Cooper Standard Automotive, Inc. [Docket No. 4633]

- and -

TR Associates, LLC [Docket No. 4635] 4

Neither the provisions of Article XII.C or Article XII.E of the Plan, nor any other provision of the Plan, shall enjoin or otherwise preclude the assertion at any time of a right of setoff, recoupment or any defense (affirmative or otherwise) by Becker Properties, LLC; Becker Ventures; Anchor Court, LLC; Townhall 4, LLC; Lear Corporation; Cooper-Standard Automotive Inc.; TR Associates, LLC; Pentastar Aviation, LLC; Freudenberg NOK, Inc.; Freudenberg; Freudenberg Spinweb Company; Freudenberg Nonwovens, L.P.; Freudenberg Spunweb Company;

K&E 11948023.3

Freudenberg Nonwoven Group; North America Tuft Division; and/or Comerica Bank in any context (whether as an affirmative defense, an affirmative right or otherwise). Such rights and/or defenses are preserved and are not reduced or impacted by the Plan. Notwithstanding anything to the contrary in the Plan or this Order, Becker Properties, LLC; Becker Ventures; Anchor Court, LLC; Townhall 4, LLC; Lear Corporation; Cooper-Standard Automotive Inc.; TR Associates, LLC; Pentastar Aviation, LLC; Freudenberg NOK, Inc.; Freudenberg; Freudenberg Spinweb Company; Freudenberg Nonwovens, L.P.; Freudenberg Spunweb Company; Freudenberg Nonwoven Group; North America Tuft Division; and/or Comerica Bank shall not be a Releasing Party and shall not be subject to Article XII.C of the Plan or Paragraph 9 of this Order. Notwithstanding anything to the contrary in the Plan or this Order, the rejection dates for all of the Unexpired Leases to which Becker Properties, LLC is a counterparty as listed on Exhibit F to the Plan shall be governed by the various orders entered by the Court approving the rejection of such Unexpired Leases, and the 5

K&E 11948023.3

Estimated Dates of Rejection for such Unexpired Leases as listed on Exhibit F to the Plan are inapplicable. Plan improperly provides for a release and satisfaction of claims Plan improperly eliminates right to offset or assert counterclaims Plan improperly provides for a discharge of claims against non-Debtor parties Plan unfairly discriminates between parties who vote for the plan and parties who do not vote for the plan Article XII.C of the Plan improperly discharges post-confirmation claims Plan exhibits are not available at the time the objection was filed Resolved by including the following language in the Confirmation Order:

10

Inmet Division of Multimatic [Docket No. 4630]

Notwithstanding anything to the contrary in the Plan or this Order, (a) the Inmet Division of Multimatic shall not be a Releasing Party and shall not be subject to Article XII.C of the Plan or Paragraph 9 of this Order, (b) the provisions of Article XII.E of the Plan shall not preclude the assertion at any time of a right of setoff or a right of recoupment by the Inmet Division of Multimatic (i) for which a proof of claim asserting such right was timely Filed, subject to any rights, claims and defenses of any party with respect thereto or (ii) for a postpetition, pre-Confirmation Allowed Administrative Claim maintained by the Inmet Division of Multimatic against the Debtors, if any, subject to any rights, claims and defenses of any party with respect thereto and (c) the provisions of Article X.II.E of the Plan shall not preclude the Inmet Division of Multimatics ability to enforce any right to a distribution on account of a postpetition pre-Confirmation Allowed Administrative Claim, if any, subject to any rights, claims 6

K&E 11948023.3

and defense of any party with respect thereto. Any objection to the Inmet Division of Multimatic's right of setoff or right of recoupment shall be determined in accordance with the procedures set forth in the Plan. Plan anticipates coverage provided by ACE, but does not provide for the performance of the insureds obligations Plan restricts and interferes with ACEs performance under the policies Plan limits ACEs rights under policies and applicable law Plan releases and injunctions prejudice ACE Resolved by including the following language in the Confirmation Order:

11

ACE American Insurance Company (ACE) [Docket No. 4634]

ACE Insurers means ACE American Insurance Company, Westchester Fire Insurance Company and other members of the ACE group of companies who issued policies of real property insurance, directors & officers liability insurance, international coverage insurance and other insurance to the Debtors. For purposes of this definition, ACE Insurers does not include Century Indemnity Company (successor to both (a) CCI Insurance Company, successor to Insurance Company of North America (INA), and (b) CIGNA Specialty Insurance Company, f/k/a California Union Insurance Company (Cal Union)) or Central National Insurance Company of Omaha with respect to policies issued to The Wickes Corporation or The Wickes Companies under which any of the Debtors claims rights to insurance coverage for liability

K&E 11948023.3

claims asserted against it. Notwithstanding anything to the contrary in this Plan, the Confirmation Order, any exhibit to the Plan or any other Plan document, nothing in this Plan, the Confirmation Order, any exhibit to the Plan or any other Plan document (including any provision that purports to be preemptory or supervening), shall in any way operate to, or have the effect of, impairing ACE Insurers legal, equitable or contractual rights and defenses, if any, in any respect, including without limitation, the ACE Insurers rights of recoupment, setoff, rescission, contribution and subrogation. The rights of ACE Insurers shall be determined under their respective insurance policies and applicable law. The Residual Claims Trust, the Post-Consummation Trust, the Litigation Trust and any other trust created by the Plan are bound by the policies issued by the ACE Insurers. Article V.B of the Plan violates section 365(b)(1) of the Bankruptcy Code by failing to cure defaults under insurers contracts/agreements Resolved by including the following language in the Confirmation Order: The Debtors shall serve the Effective Date Notice upon counsel for Connecticut General Life Insurance Company (CGLIC) in accordance with paragraph 43 of this Order. 8

12

Connecticut General Life Insurance Company and Life Insurance Company of North America (CGLIC) [Docket No. 4637]

K&E 11948023.3

Notwithstanding anything to the contrary in the Plan or this Order, each of the Group Contracts/ Policies between the Debtors and CGLIC, pursuant to which CGLIC provides, among other things, claims processing services in connection with the Debtors self-insured medical benefits plan and other insurance benefits to the Debtors and their employees, (collectively, the CGLIC Agreements) shall be deemed rejected as of the earlier of (a) ten (10) days after the date of service of the Effective Date Notice and (b) ten (10) days after the date of service of a rejection notice served in accordance with the procedures approved by the Court in the Order Approving Expedited Rejection Procedures for Executory Contracts and Unexpired Leases [Docket No. 3151]; provided that, in the event the Debtors elect to (x) amend Exhibit E to the Plan to add any or all of the CGLIC Agreements or (y) otherwise assume and assign any or all of the CGLIC Agreements prior to the Effective Date, the Debtors shall serve notice of such assumption and assignment upon counsel for CGLIC, and CGLIC shall have until ten (10) days after the date of service of such notice to file an objection to such proposed assumption and assignment.

K&E 11948023.3

13 GLM should not be listed in Exhibit A to the Plan Plan is ambiguous with respect to treatment of construction lien claims Injunction and release provisions in Article XII of the Plan are unlawful Plan is vague and ambiguous with respect to the treatment of the rights and claims of Dove Street Injunctions and release provisions in Article XII of the Plan are overly broad Joinder to Inmet Division of Multimatic Plan objection Resolved by including the following language in the Confirmation Order: Counsel for Dove Street has agreed to withdraw the objection by filing a notice of such withdrawal prior to the Confirmation Hearing. Withdrawn by notice [Docket No. 7705]. Withdrawn by notice [Docket No. 7437].

Garan Lucow Miller, P.C. (GLM) [Docket No. 4638]

14

Maryland Electric Co., Inc. (Maryland Electric) [Docket No. 4639]

15

Dove Street Industrial L.L.C. (Dove Street) [Docket No. 4642]

16

DOTT Industries, Inc. [Docket No. 4651]

Notwithstanding anything to the contrary in the Plan or this Order, DOTT Industries, Inc. shall not be a Releasing Party and shall not be subject to the Third Party Releases set forth herein or in Article XII.C of the Plan, nor shall any provision in the Plan or this Order compromise or diminish DOTT Industries, Inc.s right, if any, to exercise setoff against any Third Party Releasee or other non-Debtor entity, subject to any rights, claims or defenses of any party with respect thereto. Plan does not provide that post-petition taxes will paid when due without filing of Resolved by including the following language in the Confirmation Order:

17

Texas Comptroller of Public Accounts [Docket No. 4662]

10

K&E 11948023.3

administrative expense claims Plan improperly defines Allowed Claims, including Administrative Claims, to exclude interest that may accrue after the petition date Plan does not provide interest rate for tax creditors Plan improperly restricts setoff rights

Notwithstanding anything contained in the Plan or elsewhere in this Order, the provisions of Article XII.E of the Plan shall not preclude the assertion at any time of a right of setoff or a right of recoupment by Texas Comptroller of Public Accounts for which a proof of claim preserving such right was timely Filed. Any objection to such right of setoff or right of recoupment shall be determined in accordance with the procedures set forth in the Plan. Notwithstanding anything to the contrary in the Plan or this Order, to the extent the Allowed Priority Tax Claims, if any, of the Texas Comptroller of Public Accounts are not paid within 30 days after the Effective Date, such claims are subject to Article III.A.2 of the Plan except that such claims shall be satisfied in Cash in an aggregate amount equal to such Allowed Priority Tax Claim, together with interest of nine percent (9.0%) per annum from the Effective Date on the unpaid portion of such Allowed Priority Tax Claim. Resolved by including the following language in the Confirmation Order: Notwithstanding anything to the contrary in the Plan or this Order, the case of Wanda Patterson et al. v. Heartland Industrial Partners, LLP et al. (the Patterson 11

18

Wanda Patterson, Arie Schlegel, Dixie Akers, Edna Dawson, Paul Phillabaum, and Shelly Cornwell [Docket No. 5247]

Release provisions in Article XII of the Plan are improper

K&E 11948023.3

Action) currently pending in the Court of Appeals for the Sixth Circuit (the Court of Appeals) shall be permitted to proceed in the Court of Appeals for the limited purpose of allowing (a) the parties in the Patterson Action to present oral argument before the Court of Appeals in connection with their crossappeals of the summary judgment order previously issued by the United States District Court for the Northern District of Ohio, (b) the Court of Appeals to rule on such appeals and (c) the parties in the Patterson Action to further appeal said ruling(s) to an en banc panel of the Court of Appeals or to the United States Supreme Court. Nothing in this paragraph is intended or shall be construed to permit any other or further proceeding in the Patterson Action, or any other judicial, administrative or other action or proceeding, including the reopening of discovery or any advancement to trial in the Patterson Action. Reservation of rights if proposed plan language is not incorporated Assignment of insurance contracts through sale is improper Resolved with certain language included in Article VII.D of the Plan and Article XIV.K of the Plan.

19

Mt. McKinley Insurance Company [Docket No. 7345]

12

K&E 11948023.3

CERTIFICATE OF SERVICE I, Marc Carmel, an attorney, certify that on the 9th day of July, 2007, I caused to be served, by e-mail, facsimile and by overnight delivery, in the manner and to the parties set forth on the attached service lists, a true and correct copy of the foregoing Debtors Memorandum of Law (A) In Support of Confirmation of the First Amended Joint Plan of Collins & Aikman Corporation and Its Debtor Subsidiaries and (B) In Response to Objections Thereto. Dated: July 9, 2007 /s/ Marc J. Carmel Marc J. Carmel

K&E 11950933.1

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CREDITOR NAME A Freeman Acord Inc Adrian City Hall Alice B Eaton Allard & Fish PC Amalgamated Life Andrews Kurth LLP Askounis & Borst PC Assistant Attorney General of Texas ATC Nymold Corporation Athens City Tax Collector Attorney for MDEQ Attorneys for Michigan DLEG UIA Autoliv ASP Inc Bailey & Cavalieri LLC Baker & Hostetler LLP Balch & Bingham LLP Barnes & Thornburg LLP Barnes & Thornburg LLP Barris Sott Denn & Driker PLLC Bartlett Hackett Feinberg Basell USA Inc Beadle Burket Sweet & Savage PLC

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Kellie M Blair Esq Robert Vozza Esq Val Venable Elias T Majoros Stuart A Gold & Donna J Lehl Jeffrey M Kerscher Anne Marie Kennelly Ken Higman Lisa Gretchko John D Burns Brian D Okeefe Mark Chesnes Niraj R Ganatra Robert K Siegel Alicia S Schehr Louis P Rochkind

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James S Carr Denver Edwards

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Patricia A Borenstein Esq Timothy A Fusco Esq Bruce A Miller Thomas P Sarb & Robert D Wolford Thomas P Sarb R Wolford Timothy Dunn 15663507 Jeffrey Morganroth Lacolle Randall A Rios James R Bruinsma Karen Schneider

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State Of Michigan State Of Michigan Steinberg Shapiro & Clark Stephen E Spence Stephen S LaPlante Stephen Tetro Steven A Siman PC Stevens & Lee PC Stevens & Lee PC

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Leonard Goldberger John Kilgannon Leonard P Goldberger Esq & John C Kilgannon Esq jck@stevenslee.com ppatterson@stradley.com mdorval@stradley.com Paul Patterson Esq jtrotter@stradley.com Jim Cambio jcambio@tax.ri.gov afriedman@textron.com Gary S Bush gbush@bankofny.com radom@butzel.com seratner@teamtogut.com neilberger@teamtogut.com dgeoghan@teamtogut.com frankoswald@teamtogut.com jlee@teamtogut.com scurrie@teamtogut.com abrogan@teamtogut.com dcahir@teamtogut.com N Berger S Ratner tsherick@honigman.com Troy Taylor troytaylor@comcast.net Frank.Chaffiotte@cit.com e-rental@ur.com David R Jury djury@usw.org Mary Kay Shaver Service de la Tresorerie John E West Randall Crocker & Rebecca Simoni

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Michael S Etkin Ira M Levee Esq William H Horton Esq & Sean M Walsh Esq Jeffrey K Helder Lisa A Wurster Esq

In re: Collins & Aikman Corp., et al. Case No. 05-55927 (SWR)

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In re: Collins & Aikman Corp., et al. Case No. 05-55927 (SWR)

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In re: Collins & Aikman Corp., et al. Case No. 05-55927 (SWR)

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In re: Collins & Aikman Corp., et al. Case No. 05-55927 (SWR)

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