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Tuesday, September 18, 2007 Paul M. Singer, Esquire, L.L.M. Joel M. Helmrich, Esquire, MBA Mark M. Gleason, CPA, MBA Salene M. Kraemer, Esquire, MBA, CTP-D Marriott City Center 112 Washington Place Pittsburgh, PA 飥� 飥�

Introduction to Liquidating Plans CASE STUDY- In re Le-Nature鈥檚, Inc., et. al. ,Chapter 11, Case No. 06-25454 (MBM), U.S. Bankr. W.D. Pa. Discussion Questions Questions from Audience

Historically, did bankruptcy statutes provide for the liquidation of debtors鈥� estate? Yes. Section 1112(b) Motions to Dismiss or Convert a Case v. Section 1123(b)(4)-Contents of a Plan

substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation; gross mismanagement of the estate; failure to maintain appropriate insurance that poses a risk to the estate or to the public; unauthorized use of cash collateral substantially harmful to 1 or more creditors; failure to comply with an order of the court; unexcused failure to satisfy timely any filing or reporting requirement established by this title or by any rule applicable to a case under this Chapter . . . 11 U.S.C. 搂1112(b)(4)

Inability to propose a feasible plan or carry it out. Purpose: 鈥減revent the debtor in possession from gambling on the enterprise at the creditors鈥� expense where there is no hope of rehabilitation.鈥� Lead to per se rule in favor of dismissing all liquidating Chapter 11 plans?

A plan may 鈥減rovide for the sale of all or substantially all of the property of the estate, and the distribution of the proceeds of such sale among holders of claims or interests.鈥� 11 U.S.C. 搂1123(b)(4) Expressly condones liquidating Chapter听11 cases

Events Leading Up to Bankruptcy Pre-Petition Capital and Equity Structure of the Debtors Bankruptcy Filing Financial Snapshot as of Petition Date Operating Provisions of Proposed Plan Proposed Claims Treatment

Approximate amount of proofs of claims filed against Debtors鈥� Estates: Administrative: $2.4 million Secured: $286 million Priority: $23 million General Unsecured: $508 million TOTAL: Over $800 million

飥狅偡听听听听听听听听 Unclassified: Administrative Claims (paid in full in cash) 听飩� 听听听听听听听听听 Unclassified: Priority Tax Claims (paid in full in cash or in equal annual installments over 5 years) 听飩� 听听听听听听听听听 Unclassified : Fee Claims (paid in full) (estimated at $14.7 million) 听飩� 听听听听听听听听听 Class 1 : Lender鈥檚 Secured Claims (Tier 1- Trust Beneficial Interests in a % ratable to other holders of Class 1 Claims) 听飩� 听听听听听听听听听 Class 2 : Other Secured Claims (payment in cash from proceeds of sale of collateral to the extent of the lien or surrender of collateral) 听飩� 听听听听听听听听听 Class 3: Priority Non-Tax Claims (paid in full in cash) 听飩� 听听听听听听听听听 Class 4A: Lender鈥檚 Unsecured Claims, Class 4B : General Unsecured Claims, and Class 4C : Unsecured Senior Subordinated Notes Claims ( Tier 2- Trust Beneficial Interests in % ratable to other holders of Class 4A, 4B and 4C Claims)听飩� 听听听听听听听听听 Class 5: Subordinated Litigation Claims (Tier 3- Trust Beneficial Interests in % ratable to other holders of Class 5 Claims)听飩� 听听听听听听听听 Class 6: Interests ( Tier 4- Trust Beneficial Interests in % ratable to other holders of Class 6 Claims) 听

Hallmarks of feasible Ch. 11 liquidating plan/general structure Passing the Section 1129(a)(7) Best Interests Test (liquidation in hypo Ch. 7) Advantages to Ch. 11 v. Ch. 7 Disadvantages to Ch. 11 process Valuation of Distressed Assets by Financial Analyst Ways to Liquidate the Assets? Who would conduct? Funding litigation of Estate Causes of Action Alternative avenues for liquidating assets Current Status of Le Nature鈥檚

Alternative Ch. 11 Plan Conversion to Ch. 7 liquidation Section 363 Sale and then conversion to Ch. 7 liquidation Dismissal of Ch. 11 case and liquidation in non-bankruptcy forum

What is the status of the case now?

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