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Full title: Motion to Approve Compromise under Rule 9019 Motion of the Debtor Pursuant to Bankruptcy Rule 9019, Local Rule 9013-1 and 11 U.S.C. Section 105(A) and 363(B), for Entry of an Order Authorizing and Approving that Certain Settlement Agreement By and Between Klausner Lumber Two LLC and Scharpenack GMBH Filed by Klausner Lumber Two LLC. Hearing scheduled for 8/11/2021 at 10:00 AM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 7/28/2021. (Butz, Daniel) (Entered: 07/14/2021)

Document posted on Jul 13, 2021 in the bankruptcy, 11 pages and 0 tables.

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and, in support of this motion (this “Motion”), the Debtor relies on the Declaration of Daniel T. Motulsky in Support of the Motion of the Debtor Pursuant to Bankruptcy Rule 9019, Local Rule 9013-2 and 11 U.S.C. §§ 105(a) and 363(b), for Entry of an Order Authorizing and Approving that Certain Settlement Agreement by and Between Klausner Lumber Two LLC and Scharpenack GMBH attached hereto as Exhibit C and respectfully states as follows: JURISDICTION AND VENUE 1. The statutory and other legal predicates for the relief requested herein are Bankruptcy Code sections 105(a) and 363(b), Rule 9019 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and Rule 9013-1 of this Court’s Local Rules of Bankruptcy Practice and Procedure (the “Local Rules”).(the “Adversary Proceeding”), against Scharpenack by filing a complaint (the “Complaint”) against Scharpenack alleging, among other things, that (a) the Scharpenack Amendment was not supported by any consideration and, thus, was capable of 2 In KL1, Scharpenack filed a claim, Claim No. 63 and then filed an amended claim against KL1, Claim No. 126, seeking, among other things this $2,000,000 Success Fee. 4 being avoided as a fraudulent transfer pursuant to section 548 of the Bankruptcy Code and (b) the Claim was also subject to disallowance pursuant to section 502(d) of the Bankruptcy Code.Scharpenack provided additional information, explanations, and documentation in support of the Claim, including information Scharpenack asserts supports its position regarding its pre-petition communications and interactions with potential purchaser Mayr-Melnhof Holz Group and Binder, whose affiliates were the eventual successful bidders for KL2 and Klausner Lumber One LLC’s assets.For the foregoing reasons, the Debtor respectfully requests that this Court enter an order substantially in the form of the Order attached hereto as Exhibit A approving the Settlement Agreement, attached hereto as Exhibit B and attached as Exhibit 1 to the Order, and granting such other and further relief in favor of the Debtor that the Court may deem just and proper.

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 KLAUSNER LUMBER TWO LLC Case No. 20-11518 (KBO) Debtor.1 KLAUSNER LUMBER TWO LLC, Adv. Proc. No. 21-50429 (KBO) Plaintiff, v. Obj. Deadline: July 28, 2021 at 4:00 p.m. (ET) SCHARPENACK GMBH., Hearing Date: August 11, 2021 at 10:00 a.m. (ET) Defendant. MOTION OF THE DEBTOR PURSUANT TO BANKRUPTCY RULE 9019, LOCAL RULE 9013-1 AND 11 U.S.C. §§ 105(A) AND 363(B), FOR ENTRY OF AN ORDER AUTHORIZING AND APPROVING THAT CERTAIN SETTLEMENT AGREEMENT BY AND BETWEEN KLAUSNER LUMBER TWO LLC AND SCHARPENACK GMBH Klausner Lumber Two LLC, the debtor and debtor-in-possession (the “Debtor,” or “KL2”) in the above-captioned chapter 11 case (the “Chapter 11 Case”), by and through its undersigned counsel, moves this Court for entry of a form of order, substantially in the form attached hereto as Exhibit A, authorizing and approving that certain settlement agreement (the “Settlement Agreement”) by and between the Debtor and Scharpenack GMBH (“Scharpenack” and, together with the Debtor, the “Parties”), a true and correct copy of which is attached hereto as Exhibit B, 1 The last four digits of the Debtor’s federal EIN are 4897. The Debtor’s mailing address is P.O. Box C, Redding Ridge, CT 06876.

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and, in support of this motion (this “Motion”), the Debtor relies on the Declaration of Daniel T. Motulsky in Support of the Motion of the Debtor Pursuant to Bankruptcy Rule 9019, Local Rule 9013-2 and 11 U.S.C. §§ 105(a) and 363(b), for Entry of an Order Authorizing and Approving that Certain Settlement Agreement by and Between Klausner Lumber Two LLC and Scharpenack GMBH attached hereto as Exhibit C and respectfully states as follows: JURISDICTION AND VENUE 1. This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. §§ 157 and 1334, and the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated February 29, 2012. 2. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2) and, pursuant to Local Rule 9013-1(f), the Debtor consents to the entry of a final order by the Court in connection with this Motion to the extent that it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments consistent with Article III of the United States Constitution. 3. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. 4. The statutory and other legal predicates for the relief requested herein are Bankruptcy Code sections 105(a) and 363(b), Rule 9019 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and Rule 9013-1 of this Court’s Local Rules of Bankruptcy Practice and Procedure (the “Local Rules”). FACTUAL PREDICATES TO MOTION I. General Background 5. On June 10, 2020 (the “Petition Date”), the Debtor filed a voluntary petition under chapter 11 of the Bankruptcy Code (the “Bankruptcy Case”). 2

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6. The Debtor continues to operate its business and manage its properties as debtor in possession pursuant to §§ 1107(a) and 1108 of the Bankruptcy Code. 7. On June 25, 2020 the United States Trustee (the “U.S. Trustee”) for the District of Delaware appointed an official committee of unsecured creditors (the “Creditors’ Committee”). No party has requested the appointment of a trustee or examiner in the Case. 8. The Debtor was the owner of a substantially complete timber sawmill in Enfield, Halifax County, North Carolina. Additional detail regarding the Debtor, its business, the events leading to the commencement of this case is set forth in the Declaration of Robert Prusak in Support of Debtor’s Bankruptcy Filing [Docket No. 6]. II. Background to Settlement 9. On or about June 28, 2019, Scharpenack entered into a Consulting Contract (the “Scharpenack Contract”) with Klausner Nordamerika Beteiligungs GmbH (“KNB”), an indirect parent of KL2. Scharpenack asserts that the Scharpenack Contract was subsequently amended by the parties to expand the services to be provided by Scharpenack and the parties for whom such services were to be performed and who were obligated to pay Scharpenack (collectively, the “Scharpenack Amendments”). 10. KL2 has asserted that, on or about January 24, 2020, KNB delivered notice to Scharpenack that it was terminating the Scharpenack Contract, effective as of February 29, 2020, and that the Scharpenack Amendment does not include any provision stating that the obligation of any party to pay the “Success Fee” survived termination of the Scharpenack Contract, as amended by the Scharpenack Amendments. Scharpenack disputes these assertions. 3

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11. Klausner Lumber One LLC (“KL1”) and KL2 have also asserted that Scharpenack did not perform any services for KL1 or KL2 at any time following their respective chapter 11 filings. 12. However, during the course of KL1’s chapter 11 case, KL1 was able to complete the sale of its assets to an affiliate of Binder Beteiligungs AG (“Binder”). 13. Likewise, during the course of this Bankruptcy Case, KL2 was able to complete the sale of its assets to a separate affiliate of Binder. 14. Scharpenack filed an initial proof of claim in the Bankruptcy Case on August 18, 2020 designated Claim No. 21, which was subsequently superseded by an amended claim Scharpenack filed on September 23, 2020 designated as Claim No. 24 (the “KL2 Claim”). 15. The KL2 Claim was filed in the amount of $2,000,000 against both KL12 and KL2 and, in the KL2 Claim, Scharpenack asserted that its claims was for “amounts due . . . relating to refinancing of the Debtor’s financial obligations pursuant to an engagement letter.” Both KL1 and KL2 assert that Scharpenack did not identify any actions it took that would warrant the right to a success fee but, rather, asserted that it had a contractual right to the Success Fee pursuant to a contract with the Debtor, among other parties. Scharpenack disputes these assertions. 16. On or about May 3, 2021, the Debtor commenced an adversary proceeding in the Bankruptcy Court, Adv. Proc. No. 21-50429 (the “Adversary Proceeding”), against Scharpenack by filing a complaint (the “Complaint”) against Scharpenack alleging, among other things, that (a) the Scharpenack Amendment was not supported by any consideration and, thus, was capable of 2 In KL1, Scharpenack filed a claim, Claim No. 63 and then filed an amended claim against KL1, Claim No. 126, seeking, among other things this $2,000,000 Success Fee. 4

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being avoided as a fraudulent transfer pursuant to section 548 of the Bankruptcy Code and (b) the Claim was also subject to disallowance pursuant to section 502(d) of the Bankruptcy Code. 17. Scharpenack filed an answer (the “Answer”) to the Complaint on or about June 9, 2021, denying these assertions and asserting various affirmative defenses including that additional consideration and additional work to be performed by Scharpenack. 18. Scharpenack provided additional information, explanations, and documentation in support of the Claim, including information Scharpenack asserts supports its position regarding its pre-petition communications and interactions with potential purchaser Mayr-Melnhof Holz Group and Binder, whose affiliates were the eventual successful bidders for KL2 and Klausner Lumber One LLC’s assets. 19. On June 22, 2021, the Court entered the Agreed Order (I) Appointing Mediator, (II) Referring Certain Matters to Mediation, (III) Scheduling Certain Matters, and (IV) Granting Related Relief [Docket No. 11] (the “Mediation and Scheduling Order”) referring the KL2 Claim, Complaint, and Answer to the Honorable Kevin J. Gross (Ret.) for mediation (the “Mediation”).. 20. On June 25, 2021, the Parties appeared before the Honorable Kevin J. Gross (Ret.) to mediate the Claim (the “Mediation”) and, at the conclusion of the Mediation, the parties reached an amicable resolution of their issues that is embodied in the Settlement Agreement and described in more detail below. RELIEF REQUESTED 21. Pursuant to sections 105(a) and 363(b) of the Bankruptcy Code, Bankruptcy Rule 9019, and Local Rule 9013-1, the Debtor seeks entry of an order substantially in the form attached hereto as Exhibit A (the “Order”) approving the Settlement Agreement. 5

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SUMMARY OF SETTLEMENT AGREEMENT TERMS 22. The Settlement Agreement provides for the following:3 (a) Allowed Claim: In full and complete settlement of the KL2 Claim, the Adversary Proceeding and the Answer, the Parties, upon entry of the Order, agree and acknowledge that: (i) as of the Petition Date, Scharpenack shall have a general unsecured claim in the amount Two Hundred Thousand Dollars ($200,000.00) (the “Allowed Claim”); (ii) the Allowed Claim shall be paid in accordance with the terms and conditions of the Debtor’s chapter 11 plan (the “Plan”); (iii) Scharpenack shall not be required to file any additional proof of claim in the Bankruptcy Case to memorialize or document the Allowed Claim; and (iv) the Debtor shall be entitled to adjust the claims register in the Bankruptcy Case to reflect the terms of the Settlement Agreement and the Allowed Claim. (b) Mutual General Release: Upon entry of the Order, the Debtor Parties and the Scharpenack Parties (as those terms are defined in the Settlement Agreement), will absolutely release, forever discharge and acquit each other of and from any and all claims, demands, causes of action, damages, choses in action and all other claims, counterclaims, defenses, objections, setoff rights, subordination rights, recharacterization rights, deductions, challenges and other liabilities whatsoever, including, without limitation, those claims, counterclaims and defenses relating to or set forth in the Claim, the Complaint, the Adversary Proceeding and the Answer, of every kind, name, nature and description, whether known or unknown, at law or equity, that they may now or hereafter own, hold, have or claim against each other arising at any time prior to the entry of the Order (for the avoidance of doubt, the Parties do not waive, release or discharge any rights, claims or causes of action that arise under the terms and provisions of the Settlement Agreement, including without limitation with respect to enforcement thereof). 3 Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Settlement Agreement. The following summary is qualified in its entirety by the terms of the Settlement Agreement. Any discrepancy between the Settlement Agreement and this motion, including the summary of the relevant settlement terms stated herein, shall be controlled by the Settlement Agreement. 6

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23. For the reasons set forth herein, the Debtor believes that the Settlement Agreement is in the best interest of the Debtors’ respective estates, and should be approved by this Court. THE SETTLEMENT AGREEMENT SHOULD BE APPROVED PURSUANT TO BANKRUPTCY RULE 9019 AND THE MARTIN FACTORS 24. Bankruptcy Rule 9019(a) provides, in pertinent part, that “[o]n motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement.” Fed. R. Bankr. P. 9019(a). 25. Bankruptcy Rule 9019 empowers bankruptcy courts to approve settlements that are “fair and equitable” and in the best interest of a debtor’s estate. In re Energy Future Holdings Corp., 648 F. App’x 277, 281 (3d Cir. 2016) (citing In re Nutraquest, Inc., 434 F.3d 639, 644 (3d Cir. 2006)); Vaughn v. Drexel Burnham Lambert Grp., Inc. (In re Drexel Burnham Lambert Grp., Inc.), 134 B.R. 499, 505 (Bankr. S.D.N.Y. 1991) (finding that Bankruptcy Rule 9019 “empowers bankruptcy courts to authorize settlements if they are in the best interests of the estate”) (citation omitted). 26. To meet this standard, a settlement agreement need not be the best possible outcome, but must fall above the “lowest point in the range of reasonableness.” In re Capmark Fin. Grp. Inc., 438 B.R. 471, 475-76 (Bankr. D. Del. 2010); In re Sea Containers Ltd., No. 06-11156 (KJC), 2008 WL 4296562, at *5 (Bankr. D. Del. Sept. 19, 2008). 27. In the Third Circuit, courts consider the Martin factors in determining whether a settlement falls above the lowest point in the range of reasonableness, which consist of: “(1) the probability of success in litigation; (2) the likely difficulties in collection; (3) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and (4) the paramount interest of the creditors.” Capmark, 438 B.R. at 476 (citing Myers v. Martin (In re Martin), 91 F.3d 389, 393 (3d Cir. 1996)). 7

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28. By its terms, the Settlement Agreement will maximize value for the Debtor’s estate by (a) reducing the asserted $2,000,000 KL2 Claim to an allowed $200,000 general unsecured claim (a reduction of 90 percent (90%)) and (b) avoiding the unnecessary delays, uncertainty, and expense associated with negotiating and/or litigating any further and/or piecemeal resolution of the KL2 Claim. 29. Resolution of the KL2 Claim through traditional litigation likely would have involved significant discovery, the interpretation of Austrian law (and the necessary retention of Austrian law experts), substantial translation fees (and possibly the retention of an expert translation witness), and the determination of necessary contributions from third parties. 30. Indeed, pursuant to the Mediation and Scheduling Order, the Debtor and Scharpenack had agreed to a lengthy litigation schedule, with dispositive deadlines set more than 200 days in the future. 31. The Settlement Agreement will provide for full finality of the KL2 Claim without the otherwise attendant and expensive litigation costs, in an amount that the Debtor believes is reasonable under the circumstances and maximizes the value of its estate for all stakeholders. 32. The Settlement Agreement is the product of months of negotiations, briefing, and ultimately a successful Mediation (a mediation which lasted nearly nine hours), and represents an arm’s-length settlement that avoids delays and uncertainty and maximizes value for all parties, including the Debtor’s estate. 33. As such, the Debtor believes that the Settlement Agreement certainly falls within the range of reasonableness, is in the best interest of creditors, and satisfies all of the applicable Rule 9019 or Martin factors. 8

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THE SETTLEMENT AGREEMENT SHOULD BE AUTHORIZED UNDER BANKRUPTCY CODE SECTION 363(B) AS THE PRODUCT OF THE DEBTOR’S VALID EXERCISE OF SOUND BUSINESS JUDGMENT 34. Authorization of the Settlement Agreement is justified as a valid exercise of the Debtor’s business judgment pursuant to section 363(b) of the Bankruptcy Code. 35. Section 363(b)(1) of the Bankruptcy Code provides, in pertinent part, that “[t]he [debtor], after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate.” 11 U.S.C. § 363(b). 36. Under section 363(b), courts only require that a debtor “show that a sound business purpose justifies such actions.” Dai-Ichi Kangyo Bank, Ltd. v. Montgomery Ward Holding Corp. (In re Montgomery Ward Holding Corp.), 242 B.R. 147, 153 (D. Del. 1999) (“In determining whether to authorize the use, sale or lease of property of the estate under [section 363(b)], courts require the debtor to show that a sound business purpose justifies such actions . . . [under the] ‘business judgment test.’”) (citations omitted); In re Ionosphere Clubs, 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1989) (noting section 363(b) provides “broad flexibility” to authorize a debtor to honor prepetition claims where supported by an appropriate business justification). 37. Once a debtor has articulated a valid business justification, there “is a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.” Official Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated Res., Inc.), 147 B.R. 650, 656 (S.D.N.Y. 1992) (quoting Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985)). 38. The Debtor submits that the Settlement Agreement satisfies the requirements of section 363(b) of the Bankruptcy Code. The terms of the Settlement Agreement were negotiated by the Debtor and Scharpenack in good faith and at arm’s length, with the assistance of a mediator. 9

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39. As described above, the Debtor believes that the Settlement Agreement will avoid unnecessary delays and uncertainty associated with protracted litigation, and provides a fair and reasonable resolution of the KL2 Claim. 40. The Debtor has thus determined in its sound business judgment and after consulting with its professionals that the proposed settlement is in the best interest of its estate. REQUEST FOR WAIVER OF STAY 41. To implement the Settlement Agreement, the Debtor seeks a waiver of any stay of the effectiveness of the order approving this Motion. Pursuant to Bankruptcy Rule 6004(h), any “order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 14 days after entry of the order, unless the court orders otherwise.” 42. The Debtor submits that ample cause exists to justify a waiver of the 14-day stay imposed by Bankruptcy Rule 6004(h) to allow the Settlement Agreement to take effect immediately to enable this case to proceed expeditiously towards a successful conclusion. Accordingly, the Debtor respectfully requests a waiver of Bankruptcy Rule 6004(h) to the extent it is deemed applicable. NOTICE 43. Notice of the Motion has been given via electronic mail, to: (a) the U.S. Trustee; (b) counsel to the Debtor’s prepetition lender; (c) counsel to the Creditors’ Committee; (d) counsel to Scharpenack; and (e) all parties who have requested notice in this Chapter 11 Case pursuant to Local Rule 2002-1(b). The Debtor respectfully submits that no other or further notice of this Motion is required under the circumstances. 10

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CONCLUSION For the foregoing reasons, the Debtor respectfully requests that this Court enter an order substantially in the form of the Order attached hereto as Exhibit A approving the Settlement Agreement, attached hereto as Exhibit B and attached as Exhibit 1 to the Order, and granting such other and further relief in favor of the Debtor that the Court may deem just and proper. Dated: July 14, 2020 Respectfully submitted, /sDaniel B. Butz Robert J. Dehney (No. 3578) Eric D. Schwartz (No. 3134) Daniel B. Butz (Bar No. 4227) Nader A. Amer (Bar No. 6635) 1201 North Market Street, 16th Floor P.O. Box 1347 Wilmington, Delaware 19899-1347 Telephone: (302) 658-9200 Facsimile: (302) 658-3989 Email: dbutz@mnat.com namer@mnat.com -and- Kim Martin Lewis, Esq. (admitted pro hac vice) Travis Bayer, Esq. (admitted pro hac vice) Dinsmore & Shohl LLP 255 East Fifth Street, Suite 1900 Cincinnati, Ohio 45202 Phone: (513) 977-8200 Facsimile: (513) 977-8141 Email: kim.lewis@dinsmore.com travis.bayer@dinsmore.com Bankruptcy conflicts counsel for Klausner Lumber Two LLC 11

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