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Full title: Objection to confirmation of plan (RE: related document(s)700 Chapter 11 plan) filed by Creditor Regency Enterprises, Inc. d/b/a Regency Lighting. (Attachments: # 1 Exhibits 1 - 3) (Hayward, Melissa)

Document posted on Mar 8, 2021 in the bankruptcy, 17 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

The Plan fundamentally violates Section 1129(b) by contemplating that Regency Lighting’s lien may be removed without Regency Lighting actually receiving any consideration therefor, which is contrary to the mandate of Section 1129(b)(2)(A) that cramdown of a secured claim requires that such claims actually receive one of three alternative types of treatment, none of which is realized if the Effective Date occurs but the Distribution Date never occurs.7 3. There is no apparent mechanism under the Plan for treating any unsecured portion of the Regency Claim in the event such determination is made after the Effective Date, or for Regency Lighting to have a reasonable opportunity to file an administrative claim for the amount by which the value of Regency Lighting’s collateral may have been diminished from the Petition Date to the Distribution Date, as such determination may be after the bar date (see Plan, at I.A.4.The Plan constitutes substantive consolidation, by, without limitation, cancelling all intercompany claims (stated in the amount of $518 million (see Disclosure Statement, at p. 39)), and thereby denying the various Debtors any recovery thereon despite a potential net positive account receivable, which recovery could otherwise provide the means of paying Regency’s Claim for the one or more Debtors who received the benefit of Regency Lighting’s goods, and by treating Regency Lighting’s claims against multiple Debtors as a singular claim that is counted only once for purposes of distribution from a common fund, denying Regency Lighting the benefit of having multiple claims to the extent multiple Debtors have liability therefor, and treating all general unsecured claims as participating in the same common fund despite that the Debtors who received Regency Lighting’s goods may have more of an ability than others to satisfy claims absent substantive consolidation (see Disclosure Statement, at p. 23 (treating any general unsecured claim filed against any of the debtors as “deemed to be a single obligation of the GUC Trust.”)).This “de facto” substantive consolidation is against Regency Lighting’s best interests, including, without limitation, by cancelling more than a half a billion dollars of intercompany claims which possibly deprives one or more of the Debtors, that may have received Regency Lighting’s goods, the means to make the payments to Regency Lighting that the Plan allows as one of the forms of consideration. Substantive consolidation also harms Regency Lighting, in the event it holds any unsecured claim, by providing that unsecured claims are to share in a common “pot” despite that the Debtors who received Regency Lighting’s goods may have more of an ability than others to satisfy claims absent substantive consolidation.

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Melissa S. Hayward Texas Bar No. 24044908 MHayward@HaywardFirm.com HAYWARD & ASSOCIATES PLLC 10501 North Central Expy., Suite 106 Dallas, Texas 75231 (972) 755-7100 (tel.) (972) 755-7110 (facsimile) Jerrold L. Bregman Colorado Bar No. No. 54531 (Pro hac vice application pending) jbregman@bg.law BRUTZKUS GUBNER 5445 DTC Parkway, Suite 800 Denver, CO 80111 (303) 835-1299 (tel.) (818) 827-9405 (facsimile) ATTORNEYS FOR REGENCY LIGHTING IN THE UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION IN RE: § CASE NO. 20-32633-SGJ-11 § STUDIO MOVIE GRILL HOLDINGS, § Chapter 11 LLC, et al.,1 § § Jointly Administered DEBTORS. § § Hearing: Via WebEx § Date: Mach 16, 2021, at 9:30 a.m. § Place: 1100 Commerce Street, Room 1254 § Dallas, Texas REGENCY LIGHTING’S OBJECTION TO CONFIRMATION OF DEBTORS’ SECOND AMENDED JOINT PLAN OF REORGANIZATION FOR STUDIO MOVIE GRILL HOLDINGS, LLC AND JOINTLY ADMINISTERED DEBTORS TO THE HONORABLE COURT, THE DEBTORS AND ALL PARTIES IN INTEREST: Regency Enterprises, Inc., doing business as Regency Lighting (“Regency Lighting”), files this objection (the “Objection”) to confirmation of the Second Amended Joint Plan of 1 The debtors in these chapter 11 cases (collectively, the “Debtors”) are each identified in the Plan (as defined below).

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Reorganization for Studio Movie Grill Holdings, LLC and Jointly Administered Debtors, dated March 5, 2021 [ECF No. 701] (the “Plan”) as explained in that certain Amended Joint Disclosure Statement for Amended Joint Plan of Reorganization for Studio Movie Grill Holdings, LLC and Jointly Administered Debtors, filed February 11, 2021 [ECF No. 606] (the “Disclosure Statement”). This Objection is based on the following points and authorities as well as any and all objections to the Plan that may be filed by others in the Debtors’ cases, without limitation. Regency Lighting’s right to assert any and all such objections, as though such objections were made herein and set forth herein in full, is expressly reserved without limitation. In support of the Objection and the requested modifications to the Plan to be implemented through the Confirmation Order as identified below, Regency Lighting represents and alleges as follows: I. INTRODUCTION A. Regency Lighting’s Claim Is Acknowledged, Timely Filed, and No Objection Has Been Filed Thereto Regency Lighting holds a secured claim in the amount of $202,296.74 pursuant to both V.T.C.A. Property Code Section 53.001 et seq. and Section 37 of Article 16 of the Texas Constitution, and the lien securing such claim is a “Prior Permitted Lien,” as confirmed in that certain Final Order (I) Authorizing Debtors to (A) Use Cash Collateral on a Limited Basis and (B) Obtain Postpetition Financing, on a Secured, Superpriority Basis, (II) Granting Adequate Protection, and (III) Granting Related Relief, entered December 1, 2020 [ECF No. 280] (see ¶ 50 (acknowledging Regency Lighting’s claim)). Reference is made to Regency Lighting’s Limited Objection and Reservation of Rights of Mechanics Lien Holder as Senior Secured Creditor, filed in the Debtors’ cases on November 13, 2020 [ECF No. 160] (the “Regency Secured Claim Reservation”). The Regency Secured Claim Reservation, which is incorporated hereby by this reference as though set forth in full, sets forth and describes certain facts and documentation in support of Regency Lighting’s claim.

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Because Regency Lighting’s investigation is continuing and it does not know which of the Debtors received the benefit of its goods, Regency Lighting filed identical proofs of claim, each in the amount of $202,296.74, in each of the Debtors’ cases (jointly and severally, the “Regency Claim”). Neither the purchase order nor the invoices annexed to the Regency Claim indicate which of the Debtors actually received the goods provided by Regency Lighting (the purchase order and invoices use the name, “Studio Movie Grill,” which is not the name of any of the Debtors). Each of the electronically filed claims included a legend stating the “same claim [is]asserted against each of the Debtors; investigation continuing; entitlement to only one payment.” As stated therein, the Regency Claim “applies equally to each of the [] [D]ebtors … who received any benefit from the goods giving rise to the foregoing Claim ….” Id. at n. 1.2 For the avoidance of doubt, Regency Lighting is entitled to receive no more than the total amount of its claim; however, the Regency Claim is entitled to a distribution from each of the Debtors that received the benefit of its goods. Regency Lighting alleges on information and belief that each of the Debtors, in procuring goods from Regency Lighting, was the principal, servant, agent or representative of each of the other Debtors who received the goods sold by Regency Lighting giving rise to the Regency Claim. It appears the Debtors have not provided any analysis of the value of the collateral that secures the Regency Claim and Regency Lighting’s investigation is continuing. Accordingly, it is possible, with all rights reserved without limitation, that the Regency Claim contains three distinct claims, including: (a) an over-secured claim (the “Regency Secured Claim”) that is entitled to post-petition interest until paid in full; (b) an unsecured claim reflecting any amount by which the 2 The Regency Claim against “Studio Movie Grill Holdings, LLC, et al.,” was delivered to Donlin Recano & Co. Inc. (the “Noticing Agent”) and stamped “RECEIVED” on February 11, 2021. Attached as “Exhibit 1” hereto is a true and correct copy of the as-filed Regency Claim (without exhibit tabs). The Regency Claim was filed in each of the other Debtors’ cases online before the occurrence of the Bar Date (as defined in the Plan) and each received a unique filing confirmation number. Attached hereto as “Exhibit 2” is chart completed by counsel which shows the filing confirmation number issued by the Noticing Agent for each Regency Claim filed in each of the other Debtors’ cases.

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Regency Claim exceeds the value of the collateral securing such claim (the “Regency Unsecured Claim”); and (c) an administrative priority claim pursuant to Section 503(b)(9)3 in the amount of $541.25 (the “Regency Priority Claim”).4 The Regency Secured Claim is senior in priority to the Prepetition Lender’s Claims which are in Class 2 under the Plan on account of the fact that the Regency Secured Claim is secured by a perfected security interest in the form of a mechanics’ lien and is a “permitted lien” under the Prepetition Lender’s loan documents. See Regency Secured Claim Reservation, at ¶ 6. The docket in the Debtors’ cases reflects that no objection to the Regency Claim has been filed in any of the Debtors’ cases. The Debtors sent Regency Lighting ballots for each of the Debtors, only one of which had the correct amount of the Regency Claim.5 Counsel for Regency Lighting has notified Debtors’ counsel and the Noticing Agent of this balloting error.6 This error violates Section 502(a) which provides that, absent an objection thereto, each filed claim is “deemed allowed.” Regency Lighting has completed and returned (or will contemporaneously return) all of the ballots it received for Class 4, namely, the Regency Secured Claim as asserted against each of the Debtors in the amount of $202,296.74. Regency Lighting’s ballots vote to reject the Plan and opt out of the Third Party Release (as defined in the Plan). B. The Plan Discriminates Unfairly Against the Regency Claim and Is Not Fair and Equitable Within the Meaning of Section 1129(b) 3 All statutory references herein are to title 11, United States Code (the “Bankruptcy Code”). Other terms not defined herein have the meanings the Plan ascribes to them. 4 The Regency Claim therefore may be classified in each of Class 4 and Class 5. 5 Regency Lighting received a ballot for Studio Movie Grill Holdings, LLC, Class 4A, stating the Regency Claim in the correct amount of $202,296.74; however, the respective ballots for each of other Debtors state the claim in the incorrect amount of $1.00 rather than $202,296.74. 6 Attached hereto as “Exhibit 3” is a true and correct copy of the correspondence by which Regency Lighting’s counsel gave notice to Debtors’ counsel and the Noticing Agent of the error of the amounts on the ballots; however, no response has been received as of the drafting hereof.

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The Plan is not confirmable and its confirmation should be denied because it violates the Bankruptcy Code in that it “discriminates unfairly” and is not “fair and equitable” with respect to the Regency Claim, as those phrases are used in Section 1129(b), in the following ways, each of which should be remedied to provide Regency Lighting with fair and equitable treatment: 1. Premature Lien Stripping from the Regency Secured Claim But Not from Other Prepetition Secured Claims: The Plan provides for stripping the lien from Regency Lighting’s collateral on the Effective Date (see Disclosure Statement at p. 60 (“… on the Effective Date … all … Liens, pledges, or other security interests against nay property of the Estates shall be fully released and discharged ….”) despite that no payment therefor may ever be received (see Disclosure Statement at p. 53 (“Confirmation of the Plan does not guarantee that you will receive the distribution indicated under the Plan.”)), and Disclosure Statement, at p. 82 (discussing “Continued Risk Upon Confirmation” and acknowledging that new debt may be raised based on assets, whose liens will have been stripped)), while preserving the lien for other secured claims, such as the Prepetition Lenders’ Claims, until such claims receive payment in full (see Disclosure Statement at p. 25 (“notwithstanding anything to the contrary … (a) all Liens of the … Prepetition Lenders, on any property of any Debtors shall remain valid, binding, and in full effect on and after the Effective Date … until [these creditors] are indefeasibly paid in full in Cash.”); and Disclosure Statement at pp. 26-27 (“… the Agent Trust Assets shall remain subject to the Liens and claims of the … the Prepetition Agent … until such [claims] … are indefeasibly paid in full in Cash.”)). 2. Possibility of Lien Stripping ith No Consideration Violates Section 1129(b)(2)(A). The Plan fundamentally violates Section 1129(b) by contemplating that Regency Lighting’s lien may be removed without Regency Lighting actually receiving any consideration therefor, which is contrary to the mandate of Section 1129(b)(2)(A) that cramdown of a secured claim requires that such claims actually receive one of three

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alternative types of treatment, none of which is realized if the Effective Date occurs but the Distribution Date never occurs.7 3. No Certainty of When or How Regency Lighting Will Learn Which Consideration It Is to Receive Under the Plan. Neither the Plan nor Disclosure Statement indicate when or how Regency Lighting will learn which of the alternative treatments for the Regency Secured Claim it is to receive. While the Prepetition Lenders play a role under the Plan in determining whether they will primarily receive equity in the Reorganized Debtors or the proceeds from an asset sale, no such control, or means of ascertaining the consideration, is provided to Regency Lighting.8 4. Denial of Post Effective Date Interest for Regency Lighting But Not For Other Prepetition Secured Claims Holders: The Plan provides for the Prepetition Lenders’ Claims to receive interest after the Effective Date while denying the Regency Secured Claim any post-Effective Date interest (see Disclosure Statement, at p. 53 (“other than with respect to the … Prepetition Lenders’ Claims … no interest shall accrue on any Claims from and after the Effective Date.”)). 5. Improper Prohibition On Regency Lighting’s Right, But Not the Right of Other Prepetition Secured Lenders, to Recover from Non-Reorganized Debtors: The Plan prohibits Regency Lighting from pursuing any claims against any Non-Reorganized Debtor – even if any of those Debtors actually received the benefit of Regency Lighting’s goods – while preserving that right for Prepetition Lenders to pursue their claims against these Debtors (see Disclosure Statement at p. 10 (“Holders of Prepetition Lenders’ Claims 7 The Distribution Date (the consideration receipt date) may occur AFTER the Effective Date (the lien stripping date) for the Regency Secured Claim but not for the Prepetition Lenders’ Claims. See Plan, Art. I.A.76 (“Distribution Date” means the date … on or as soon as reasonable practicable following the Effective Date, and, in the case of the … Prepetition Lenders’ Claims, on the Effective Date.”) (emphasis added). 8 Moreover, neither the Plan nor Disclosure Statement state, in the event payment is made over five years, whether “Plan Rate” interest will compound monthly or annually.

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expressly reserve the right to seek recovery against any Non-Reorganized Debtors on any grounds, including, without limitation, the entire unpaid cash amount of the Prepetition Lenders’ Claims”)). 6. Inadequate Protection for the Regency Unsecured Claim and Regency Administrative Claim: There is no apparent mechanism under the Plan for treating any unsecured portion of the Regency Claim in the event such determination is made after the Effective Date, or for Regency Lighting to have a reasonable opportunity to file an administrative claim for the amount by which the value of Regency Lighting’s collateral may have been diminished from the Petition Date to the Distribution Date, as such determination may be after the bar date (see Plan, at I.A.4. (the “other” bar date for filing Administrative Claims “shall be 30 days after the Effective Date ….”)). 7. Prohibition on Claims Transfer for Regency Lighting But Not for Other Creditors: The Plan denies Regency Lighting the right to transfer any unsecured claim to which it may be entitled to the same extent as the Prepetition Lenders are permitted to transfer their claims (compare Disclosure Statement, at p. 16 (“Non-Transferability of GUC Trust Interests”) with Disclosure Statement, at p. 19 (“Agent may elect for any Interest in any Debtor that will become a Reorganized Debtor to be issued and assigned to any Entity on the Effective Date, including without limitation any third party by filing a notice on the docket of the Bankruptcy Court.”)). C. De Facto Substantive Consolidation and Other Plan Defects Deny Regency Lighting “Fair and Equitable” Protections The Plan also constitutes substantive consolidation under the guise of “procedural consolidation,” despite that the Debtors’ cases have not been substantively consolidated, and also contains other objectionable terms and conditions to the detriment of Regency Lighting which should be remedied to provide Regency Lighting with fair and equitable treatment:

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1. De Facto Substantive Consolidation: The Plan denies Regency Lighting the right to pursue payment from whichever of the Debtors actually received the benefit of Regency Lighting’s goods by providing, in effect, for substantive consolidation notwithstanding that the Debtors’ cases have not been substantively consolidated and without satisfying the requirements for substantive consolidation. The Plan constitutes substantive consolidation, by, without limitation, cancelling all intercompany claims (stated in the amount of $518 million (see Disclosure Statement, at p. 39)), and thereby denying the various Debtors any recovery thereon despite a potential net positive account receivable, which recovery could otherwise provide the means of paying Regency’s Claim for the one or more Debtors who received the benefit of Regency Lighting’s goods, and by treating Regency Lighting’s claims against multiple Debtors as a singular claim that is counted only once for purposes of distribution from a common fund, denying Regency Lighting the benefit of having multiple claims to the extent multiple Debtors have liability therefor, and treating all general unsecured claims as participating in the same common fund despite that the Debtors who received Regency Lighting’s goods may have more of an ability than others to satisfy claims absent substantive consolidation (see Disclosure Statement, at p. 23 (treating any general unsecured claim filed against any of the debtors as “deemed to be a single obligation of the GUC Trust.”)). 2. No Oversight of Post-Effective Date Compensation: The Plan enables the GUC Trustee to compensate himself/herself and the GUC Trust’s professionals without any oversight by the Court or creditors and without any opportunity for Regency Lighting to monitor, review or object to any such fees and costs (see Disclosure Statement, at p. 17). 3. No Requirement of Reserve to Protect Regency’s Claim: The Plan fails to protect Regency Lighting in the event any portion of the Regency Claim is later determined to be unsecured, because it does not require the creation of a reserve. Nevertheless, it is possible if not likely that, in the event an objection to the Regency Claim is filed after the

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Effective Date, all of the funds may be dissipated before any distribution to Regency Lighting is made in respect of any Regency Unsecured Claim (see Disclosure Statement, at p. 54, providing that “the Reorganized Debtors, and the GUC Trustee, as applicable, may establish [but are not required to do so] one or more reserves for Claims that … have not … been Allowed ….”) (emphasis added)). II. ARGUMENT Notwithstanding that the Regency Claim is not a large dollar amount relative to the total claims at issue in the Debtors’ cases, Regency Lighting’s rights and claims are nevertheless fully entitled to the protections of the Bankruptcy Code, including without limitation, to be protected from “unfair discrimination” and to have its claim treated in a manner that is “fair and equitable.” The Bankruptcy Code has no provision allowing debtors to disregard the rights of claims holders just because the dollar value of the claims is not large relative to other claims in the debtors’ case, other than for purposes of counting of votes for class acceptance. The Supreme Court has decreed that a creditor’s standing to protect its rights in a bankruptcy case exits even for small dollar claims. See, generally, Czyzewski v. Jevic Holding Corp. (“Jevic”), 137 S.Ct. 973, 983 (2017) (stating in the context of considering a “structured dismissal” of a Chapter 11 case: “For standing purposes, a loss of even a small amount of money is ordinarily an ‘injury.’ See, e.g., McGowan v. Maryland, 366 U.S. 420, 430-431 (1961) (finding that appellants fined $5 plus costs had standing to assert an Establishment Clause Challenge).”). The standards for confirmation of a plan of reorganization are governed by section 1129 of the Bankruptcy Code. “The [d]ebtor bears the burden of proving confirmation by a preponderance of the evidence.” In re 8315 Fourth Ave. Corp., 172 B.R. 725, 735 (Bankr. E.D.N.Y. 1994). Moreover, the court has a mandatory duty to determine whether a plan has met all of the requirements for confirmation, whether specifically raised by dissenting creditors or not. Williams v. Hibernia Nat’l Bank, 850 F.2d 250, 253 (5th Cir. 1988); 7 Collier on Bankruptcy (15th ed. rev. 2004) ¶ 1129.02[5]. Thus, where a plan violates provisions required by title 11, courts will deny

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confirmation. 7 Collier on Bankruptcy (15th ed. rev. 2004) ¶ 1129.03[1]; see In re Silver Falls Petroleum, 55 B.R. 495, 498 (Bankr. S.D. Ohio 1985). Section 1129(a)(1) permits confirmation only if “[t]he plan complies with the applicable provisions of this title.” As stated in Protective Comm. for Independent Stockholders of TMT Trailer Ferry, Inc v. Anderson, 390 U.S. 414, 424 (1968), the bankruptcy court bears the responsibility of making an “informed and independent judgment as to whether a proposed compromise is fair and equitable.” The Plan does not satisfy the requirements of section 1129(b) and therefore should not be confirmed over Regency Lighting’s vote to reject the Plan. A. Regency Lighting’s Claim, Filed and Not Disputed, Is Deemed Allowed in the Full Amount in Each of the Debtors’ Cases In light of the fact that the Regency Claim was timely filed before the Bar Date in each of the Debtors’ cases, and no objection to the Claim has been filed in any of the Debtors’ cases, the Regency Claim should be treated for all purposes as an allowed claim in the Debtors’ cases. Section 502(a) of the Bankruptcy Code provides in relevant part, as follows: “(a) A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest … objects.” Accordingly, the Regency Claim should be allowed as a secured claim in the amount of $202,296.74 in each of the Debtors’ cases. This result is reasonable and necessary in light of the fact that as of the date hereof, it is unknown which of the Debtors actually received the benefit of Regency Lighting’s goods. B. The Plan Unfairly Discriminates Against the Regency Claim in Favor of Other Secured Claims in Violation of Section 1129(b) Pursuant to Section 1129(b), if – and only if – all of the requirements of Title 11 are satisfied other than the requirement that all impaired classes have accepted the plan, the proponent may seek to “cramdown” the plan on the non-accepting class(es) so long as at least one impaired class has accepted the plan. “[S]ection 1129(b) allows a plan proponent to cram down a plan over

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the dissenting class so long as 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.” In re the Leslie Fay Companies, Inc., 207 B.R. 764, 788 (Bankr. S.D.N.Y. 1997). This “test boils down to whether the proposed discrimination between classes has a reasonable basis and is necessary for the reorganization.” Id. at 791 (citation omitted). In determining whether discrimination under a chapter 11 plan is unfair, courts have applied the following four-part test: “(1) whether the discrimination is supported by a reasonable basis; (2) whether the debtor can confirm and consummate a plan without the discrimination; (3) whether the discrimination is proposed in good faith; and (4) how the class that is being discriminated against is treated.” In re Snyders Drug Stores, Inc., 307 B.R. 889, 894-5 (Bankr. N.D. Ohio 2004) (citations omitted). Each of these factors weighs in favor of not confirming the Plan for each of the bases upon which Regency Lighting objects, including, most particularly, with respect to the premature removal of the Regency Lighting lien relative to the liens of the Prepetition Lenders. The Debtors offer no reason or necessity for the removal of Regency Lighting’s lien either before the Effective Date or before the Regency Claim is paid in full, or for the other distinctions in treatment discussed above for the benefit of the Prepetition Lenders that is denied to Regency Lighting. The Regency Claim also arose prepetition and is secured by the Debtors’ property. Courts have rejected confirmation on the basis of disparate treatment of similarly situated creditors. In re Tucson Self-Storage, Inc., 166 B.R. 892 (Bankr. 9th Cir. 1994); In re Barney & Carey Co., 170 B.R. 17 (Bankr. D. Mass. 1994); In re Caldwell, 76 B.R. 643, 646 (Bankr E.D. Tenn. 1987). Furthermore, even if the Plan proponent could show technical compliance with the unfair discrimination test, the Plan is not “fair and equitable.” Section 1129(b)(2) requires actual compliance with the fair and equitable test, including, for example, that secured creditors actually receive one of the alternative forms of consideration as a condition to cramdown. See, generally,

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Federal Savings & Loan Ins. Corp. v. D & F Cont., Inc. (In re D & F Constr., Inc.), 865 F.2d 673, 675 (5th Cir. 1989). See also In re Cellular Info. Systems, Inc., 171 B.R. 926, 937 (Bankr. S.D.N.Y. 1994) (Lifland, J.) (“technical compliance with all the requirements in § 1129(b)(2) does not assure that a plan is ‘fair and equitable.’”) (quoting 5 COLLIER ON BANKRUPTCY P. 1129.03 at 1129-52 (15h Ed. 1988)); and In re Kennedy, 158 B.R. 589, 599 (Bankr. D.N.J. 1993). In this case, the Plan does not satisfy the “fair and equitable” requirement because it allows for the possibility that the lien securing the Regency Secured Claim may be removed without Regency Lighting ever receiving any consideration therefor. The Plan also provides benefits to protect the interests of the Prepetition Lenders that it denies to similarly situated Regency Lighting, as discussed above, which also violates the Bankruptcy Code’s prohibition against unfair discrimination and mandate to provide fair and equitable treatment. C. The Plan Provides for A “De Facto” Substantive Consolidation That Denies Regency Lighting the Benefit of its Claim Despite that the Debtors have not been substantively consolidated, and the Debtors have made no effort to satisfy the requirements for substantive consolidation, the Plan nevertheless achieves substantive consolidation. This “de facto” substantive consolidation is against Regency Lighting’s best interests, including, without limitation, by cancelling more than a half a billion dollars of intercompany claims which possibly deprives one or more of the Debtors, that may have received Regency Lighting’s goods, the means to make the payments to Regency Lighting that the Plan allows as one of the forms of consideration. Substantive consolidation also harms Regency Lighting, in the event it holds any unsecured claim, by providing that unsecured claims are to share in a common “pot” despite that the Debtors who received Regency Lighting’s goods may have more of an ability than others to satisfy claims absent substantive consolidation. There is no dispute that the Debtors’ cases have not been substantively consolidated. Nor is there any dispute but that the Debtors have not purported to demonstrate that they could satisfy the “heightened judicial scrutiny” required to obtain substantive consolidation. See In the Matter

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of Babcock and Wilcox Co., 250 F.3d 955, n. 6 (5th Cir. 2001) (“substantive consolidation affects the substantive rights of the parties and therefore is subject to heightened judicial scrutiny.”) (citation omitted). The appropriateness of judicial caution before permitting substantive consolidation was summarized in In re AHF Development, Ltd., 462 B.R. 186 (Bankr. N.D. Tex. 2011) as follows: [C]ourts, particularly in the Fifth Circuit, warn that the power to consolidate is a drastic remedy to be used sparingly. See In re Pacific Lumber, Co., 584 F.3d 229, 249 (5th Cir. 2009) (“Substantive consolidation is an ‘extreme and unusual remedy.’”) [citations omitted]. … In any jurisdiction, substantive consolidation is a highly fact-specific analysis made on a case-by-case basis. See In re Permian Producers, 263 B.R. at 517. Id. at 195. Among the most common methods for determining whether to apply substantive consolidation, is application of a “balancing test” which asks, in essence among other things, “‘whether consolidation is necessary to avoid some harm or realize some benefit.’” (Citation omitted). In re AHF Development, Ltd., 462 B.R. at t 196. The Debtors have not sought to satisfy any such showing. Moreover, the plan proponent must carry “the burden” of establishing substantive consolidation. See In re Introgen Therapeutics, 429 B.R. 570 582 (Bankr. W.D. Tex. 2010) (cited in In re AHF Development, Ltd., 462 B.R. at 198). Regency Lighting is entitled to have the Regency Claim allowed and applied against each of the Debtors that has actual liability therefor – because such Debtor(s) actually received Regency Lighting’s goods – until the Regency Claim is paid in full. D. Requested Changes to Conform the Plan to the Bankruptcy Code To correct the deficiencies described herein, Regency Lighting respectfully requests that the Confirmation Order provide that “notwithstanding anything to the contrary in the Plan, the Plan shall be deemed for all purposes to be modified to implement the following changes”: 1. The Regency Claim shall be allowed as a secured claim in each of the Reorganized Debtors’ cases, each in the amount of $202,296.74, unless and until there is a Final Order determining any other disposition of such claim.

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2. The Distribution Date for the Regency Claim shall occur on the Effective Date. 3. Regency Lighting’s lien on its collateral shall remain, and shall not be stripped, until the Regency Claim has been indefeasibly paid in full in Cash. 4. The Regency Claim shall receive interest at the Plan Rate, compounded monthly, from the Effective Date until indefeasibly paid in full in Cash. 5. Regency Lighting shall be notified on or before the Effective Date of which of the alternative treatments for the Regency Secured Claim it will receive. 6. Regency Lighting’s right to seek recovery in respect of its claim against any Non-Reorganized Debtor on any grounds, including, without limitation, the entire unpaid cash amount of the Regency Claim, is reserved. 7. The GUC Trustee shall, before making any distributions from the GUC Trust, reserve a sufficient amount from any distributions therefrom to provide for the full pro rata distribution to which the Regency Claim would be entitled in the event any portion of such claim is determined by a Final Order to be a General Unsecured Claim in Class 5, and, for the avoidance of doubt, the Regency Claim shall not be consolidated and treated as a single claim but each as a separate and distinct claim; provided, however, that Regency Lighting shall not be entitled to receive distributions which in the aggregate exceed $202,296.74. 8. In the event the Regency Claim is the subject of any objection, Regency Lighting shall be permitted to file a new or amended claim in respect thereof within 30 days after the entry of a Final Order resolving any such objection. 9. Regency Lighting shall be permitted to transfer the Regency Claim to any third party by filing a notice thereof on the docket of the Bankruptcy Court. 10. In the event any portion of the Regency Claim is determined by a Final Order to be a General Unsecured Claim, then (a) upon its written request to the GUC

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Trustee, Regency Lighting shall be entitled to receive all billing statements for the GUC Trustee and any of his/her professionals for services provided to or for the benefit of the GUC Trust and, (b) no fees or costs of the GUC Trust shall be paid without first providing 10 days written notice of same to Regency Lighting and, in the event Regency Lighting provides a written notice of objection within such 10 day period, then the objected-to amount shall not be paid except with Regency Lighting’s prior written consent or pursuant to an order of the Bankruptcy Court providing for such payment. E. Reservation of Right to Respond to Confirmation Memorandum As of the date this Objection was prepared for filing, the Debtors have not filed their memorandum in support of confirmation of the Plan. To the extent any such memorandum is filed before the confirmation hearing on the Plan, Regency Lighting reserves the right to respond to any such memorandum at or prior to the hearing thereon. F. Reservation of Right to Incorporate Other Objections Regency Lighting reserves the right to join in any other objection to confirmation of the Plan that has been, or may be, filed by any party in interest, to the same extent as if any such objection had been set forth herein in full. WHEREFORE, for the foregoing reasons, Regency Lighting respectfully requests that the Debtors’ request to confirm their Plan be denied and that the Plan not be confirmed unless the identified modifications to the Plan are implemented through the Confirmation Order. DATED: March 9, 2021 Respectfully submitted, /s/ Melissa S. Hayward Melissa S. Hayward Texas Bar No. 24044908 MHayward@HaywardFirm.com HAYWARD & ASSOCIATES PLLC 10501 North Central Expy., Suite 106 Dallas, Texas 75231 (972) 755-7100 (tel.) (972) 755-7110 (facsimile)

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Jerrold L. Bregman Colorado Bar No. 54531 (Pro hac vice application pending) jbregman@bg.law BRUTZKUS GUBNER 5445 DTC Parkway, Suite 800 Denver, CO 80111 (303) 835-1299 (tel.) (818) 827-9405 (facsimile) COUNSEL FOR REGENCY LIGHTING

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CERTIFICATE OF SERVICE I hereby certify that on March 9, 2021, a true and correct copy of the foregoing document was served electronically by the Clerk of Court upon the Debtor’s counsel and all parties requesting electronic service in the above-captioned case. /s/ Melissa S. Hayward Melissa S. Hayward