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Full title: Reply Debtor's Reply in Support of Motions 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 (A) That Certain Settlement Agreement By and Between Klausner Lumber Two LLC and Scharpenack GMBH and (B) That Certain Settlement Agreement By and Between Klausner Lumber Two LLC and Deloitte Financial Advisory GMBH (related document(s)851, 853, 855) Filed by Klausner Lumber Two LLC (Butz, Daniel) (Entered: 08/06/2021)

Document posted on Aug 5, 2021 in the bankruptcy, 5 pages and 0 tables.

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851] (the “Deloitte Motion”) and the 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 Deloitte Financial Advisory GMBHIndeed, on at least two occasions in the Objection, Carolina Sawmills states that the Debtor’s settlements with Scharpenack and Deloitte “may be excellent.”If Carolina Sawmills is ultimately correct that it has a lien on the Debtor’s sale proceeds, then it will have no reason to prosecute its own objection to Scharpenack’s or Deloitte’s claim.If Carolina Sawmills is wrong (as the Debtor contends), and Carolina Sawmills does not have a lien on the sale proceeds, then by Carolina Sawmills’ own admission, it will withdraw its objection to Scharpenack’s and Deloitte’s claims.For the foregoing reasons, the Debtor respectfully requests that this Court overrule the Objection, grant the Settlement Motions, and approve the Debtor’s proposed settlements with Scharpenack and Deloitte.

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE Chapter 11 In re Case No. 20-11518-KBO Klausner Lumber Two LLC, Hearing Date: August 11, 2021 at 10:00 a.m. Debtor.1 RE: D.I. 851, 853, 885 DEBTOR’S REPLY IN SUPPORT OF MOTIONS 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 (A) THAT CERTAIN SETTLEMENT AGREEMENT BY AND BETWEEN KLAUSNER LUMBER TWO LLC AND SCHARPENACK GMBH AND (B) THAT CERTAIN SETTLEMENT AGREEMENT BY AND BETWEEN KLAUSNER LUMBER TWO LLC AND DELOITTE FINANCIAL ADVISORY GMBH Klausner Lumber Two LLC, the debtor and debtor-in-possession (the “Debtor,” or “KL2”) in the above-captioned chapter 11 case, by and through its undersigned counsel, hereby submits this reply in support of the 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 Deloitte Financial Advisory GMBH [Docket No. 851] (the “Deloitte Motion”) and the 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 Deloitte Financial Advisory GMBH [Docket No. 853] (the “Scharpenack Motion” and together with the Deloitte Motion, the “Settlement Motions”)2 and in response to 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. 2 Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Settlement Motions.

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Carolina Sawmills, L.P.’s Limited Objection and Response to the Debtor’s Motions to Approve Settlement Agreements with: (I) Scharpenack GMBH [Docket No. 853]; and (II) Deloitte Financial Advisory GMBH [Docket No. 851] [Docket No. 885] (the “Objection”): Reply 1. The settlements proposed through the Settlement Motions are reasonable and satisfy the applicable standards under Bankruptcy Rule 9019 and sections 105 and 363 of the Bankruptcy Code. No party has suggested otherwise. The only response that has been filed is Carolina Sawmills, L.P.’s (“Carolina Sawmills”), which, despite being captioned as an “objection” to the Settlement Motions, offers no specific objection to the reasonableness of the proposed settlements. Indeed, on at least two occasions in the Objection, Carolina Sawmills states that the Debtor’s settlements with Scharpenack and Deloitte “may be excellent.” (Obj. at p. 1, 9). Carolina Sawmills provides no critique of the terms of the settlements, and in fact, does not even ask the Court to overrule the Settlement Motions, but instead to delay ruling on them until its alleged claims to the net proceeds of the sale of the Debtor’s assets have been resolved. Such delay is unnecessary. If the settlements are appropriate, as Carolina Sawmills appears to concede, then the Court can and should approve them now. 2. The Debtor is not surprised that Carolina Sawmills has not articulated any substantive issues with the proposed settlements. The relief requested in the Settlement Motions will eliminate approximately $2.4 million in asserted claims and is the product of good-faith, arm’s-length negotiations, including a full-day mediation approved by this Court. See Agreed Order (I) Appointing Mediator, (II) Referring Certain Matters to Mediation, (III) Scheduling Certain Matters, and (IV) Granting Related Relief. [Docket No. 823]. 2

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3. Carolina Sawmills’ Objection appears to hinge not on the terms of the settlements, but on its contention that the Settlement Motions are premature because it disputes the Debtor’s ownership free and clear of the proceeds of the sale of the Debtor’s assets. Carolina Sawmills’ position on this issue is contradictory, however, given that it has filed its own objection to Scharpenack’s unsecured claim. [Docket No. 829]. Carolina Sawmills cannot be heard to complain about expenses incurred in resolving unsecured claims objections, and then turn around and file its own objection. Moreover, Carolina Sawmills’ position, if taken at face value, would result in the complete shutdown of the administration of this case until its claim to ownership of the Debtor’s sale proceeds is resolved. There is no basis for such heavy-handed relief, and even Carolina Sawmills has not requested it. 4. But putting that aside, it should be sufficient for present purposes to state simply that Carolina Sawmills’ Objection is inapposite. The issue before the Court is whether the Debtor’s proposed settlements with Deloitte and Scharpenack fall within the lowest range of reasonableness and are valid exercises of the Debtor’s business judgment. In re Capmark Fin. Grp. Inc., 438 B.R. 471, 475-76 (Bankr. D. Del. 2010); Dai-Ichi Kangyo Bank, Ltd. v. Montgomery Ward Holding Corp. (In re Montgomery Ward Holding Corp.), 242 B.R. 147, 153 (D. Del. 1999). Carolina Sawmills at least appears to concede that they are. As such, the Settlement Motions are essentially unopposed and should be sustained. Carolina Sawmills should not be permitted to hold up resolution of a favorable and heavily-negotiated settlement based on concerns regarding the expenses incurred in the administration of the estate.3 3 Carolina Sawmills’ concerns about administrative expenses in the Objection are also ironic since, by objecting to the Settlement Motions, Carolina Sawmills has ensured that there will need to be a contested hearing on those motions, which of course will require the Debtor to incur additional expenses in preparation. 3

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5. Carolina Sawmills further objects to the provision of the proposed settlements that would bind creditors to the terms of the settlements. Carolina Sawmills asserts that this provision would interfere with its ability to prosecute its own objections to Scharpenack’s or Deloitte’s claims. Again, Carolina Sawmills’ position here is contradictory. If Carolina Sawmills is ultimately correct that it has a lien on the Debtor’s sale proceeds, then it will have no reason to prosecute its own objection to Scharpenack’s or Deloitte’s claim. If Carolina Sawmills is wrong (as the Debtor contends), and Carolina Sawmills does not have a lien on the sale proceeds, then by Carolina Sawmills’ own admission, it will withdraw its objection to Scharpenack’s and Deloitte’s claims. (Obj. at p. 13). Thus, in either case, Carolina Sawmills will have no basis to assert an objection to Scharpenack’s or Deloitte’s claims. In any event, if this Court approves the Settlement Motions, Carolina Sawmills will be bound by this Court’s determination. See In re Medomak Canning, 922 F.2d 895 (1st Cir. 1990) (“A trustee in bankruptcy is a fiduciary representing the estate and creditors. . . . In order efficiently to administer the estate, a trustee’s court-approved settlement must have finality, and settling parties must be assured that those the trustee represents will not relitigate settled claims. Such a result is implicitly recognized in Bankruptcy Rule 9019, which requires notice to interested parties prior to approval of such a settlement.”); Morris v. Zimmer (In re Zimmer), 623 B.R. 151 (Bankr. W.D. Pa. 2020). 6. For the foregoing reasons, the Debtor respectfully requests that this Court overrule the Objection, grant the Settlement Motions, and approve the Debtor’s proposed settlements with Scharpenack and Deloitte. [Remainder of Page Left Intentionally Blank] 4

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Dated: August 6, 2021 Respectfully submitted, MORRIS, NICHOLS, ARSHT & TUNNELL LLP /s/ Daniel B. Butz Robert J. Dehney (No. 3578) Eric D. Schwartz (No. 3134) Daniel B. Butz (Bar No. 4227) 1201 North Market Street, 16th Floor P.O. Box 1347 Wilmington, Delaware 19899-1347 Telephone: (302) 658-9200 Facsimile: (302) 658-3989 Email: dbutz@morrisnichols.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 5

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