IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11

PERKINS & MARIE CALLENDERS INC.,1 et al., Case No. 11-11795 (KG) Jointly Administered Debtors.

DEBTORS MEMORANDUM OF LAW IN SUPPORT OF SECOND AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

TROUTMAN SANDERS LLP Mitchel H. Perkiel (admitted pro hac vice) Hollace T. Cohen (admitted pro hac vice) Brett D. Goodman (admitted pro hac vice) The Chrysler Building 405 Lexington Avenue, 7th Floor New York, NY 10174 Telephone: (212) 704-6000 Facsimile: (212) 704-6288

YOUNG CONAWAY STARGATT & TAYLOR, LLP Robert S. Brady (DE Bar No. 2847) Robert F. Poppiti, Jr. (DE Bar No. 5052) The Brandywine Building 1000 West Street, 17th Floor Wilmington, DE 19801 Telephone: (302) 571-6600 Facsimile: (302) 571-1253

Dated:

October 27, 2011 Wilmington, Delaware

The Debtors, together with the last four digits of each Debtors federal tax identification number, are: Perkins & Marie Callenders Inc. (4388); Perkins & Marie Callenders Holding Inc. (3999); Perkins & Marie Callenders Realty LLC (N/A); Perkins Finance Corp. (0081); Wilshire Restaurant Group LLC (0938); PMCI Promotions LLC (7308); Marie Callender Pie Shops, Inc. (7414); Marie Callender Wholesalers, Inc. (1978); MACAL Investors, Inc. (4225); MCID, Inc. (2015); Wilshire Beverage, Inc. (5887); and FIV Corp. (3448). The mailing address for the Debtors is 6075 Poplar Avenue, Suite 800, Memphis, TN 38119.

TABLE OF CONTENTS Page No. Table of Authorities ...................................................................................................................... iv I. BACKGROUND ............................................................................................................... 1 A. B. C. D. E. F. G. H. I. II. A. The Chapter 11 Cases ............................................................................................ 1 Overview of the Debtors Businesses and History ................................................ 1 Corporate Structure and Pre-Petition Capitalization.............................................. 2 Events Leading to the Debtors Chapter 11 Cases................................................. 3 Filing of the Plan and the Disclosure Statement .................................................... 6 Solicitation of the Plan ........................................................................................... 6 Plan Supplement .................................................................................................... 7 Ballot Tabulation ................................................................................................... 8 Highlights of the Plan .......................................................................................... 11 The Plan Complies with the Applicable Provisions of the Bankruptcy Code, as Required by Section 1129(a)(1) ............................................................ 15 i. ii. iii. iv. v. vi. vii. B. i. ii. Appropriate Designation of Classes of Claims and Interests (Sections 1122 and 1123(a)(1)) ............................................................... 15 Specification of Unimpaired Classes (Section 1123(a)(2)) ..................... 18 Treatment of Impaired Classes (Section 1123(a)(3))............................... 18 Equal Treatment Within Classes (Section 1123(a)(4)) ............................ 19 Means for Implementation (Section 1123(a)(5)) ..................................... 19 Charter Provisions (Section 1123(a)(6)) .................................................. 21 Selections for Certain Positions (Section 1123(a)(7)) ............................. 22 Treatment of Executory Contracts and Unexpired Leases ...................... 23 Provisions Regarding the Retention, Enforcement and Settlement of Claims Held by the Debtors and the Courts Retention of Jurisdiction ............................................................................................... 24 Provisions Regarding the Modification of the Rights of Holders of Claims ...................................................................................................... 26 The Plans Release, Exculpation and Injunction Provisions are Appropriate and Consistent with Applicable Law ................................... 26

ARGUMENT ................................................................................................................... 14

The Permissive Provisions Contained in the Plan Are Appropriate .................... 23

iii. iv.

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

The Plan Proponents Have Complied with the Applicable Provisions of the Bankruptcy Code (Section 1129(a)(2)) .......................................................... 32 The Plan Has Been Proposed in Good Faith (Section 1129(a)(3)) ...................... 33 Payments for Services or Costs and Expenses (Section 1129(a)(4)) ................... 34 Service of Certain Individuals (Section 1129(a)(5)) ............................................ 35 Rate Changes (Section 1129(a)(6)) ...................................................................... 36 The Plan Satisfies the Best Interests Test (Section 1129(a)(7)) ....................... 36 Acceptance of the Plan by Each Impaired Class (Section 1129(a)(8)) ................ 38 Confirmation of the Plan Over Non-Acceptance of Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI Deemed to Have Rejected the Plan (Section 1129(b)) ....................................................... 39 i. The Plan Complies with Section 1129(b)(1) Because It Does Not Discriminate Unfairly Against Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI............................ 39 The Plan Complies with Section 1129(b)(1) Because It Is Fair and Equitable with Respect to Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI ..................................... 41

ii.

K. L. M. N. O. P. Q. III. IV.

Treatment of Priority Claims (Section 1129(a)(9)) ............................................. 41 Acceptance of at Least One Impaired Class (Section 1129(a)(10)) .................... 41 Feasibility of the Plan (Section 1129(a)(11))....................................................... 42 Payment of Statutory Bankruptcy Fees (Section 1129(a)(12)) ............................ 44 Satisfaction of Retiree Benefits (Section 1129(a)(13)) ........................................ 45 Principal Purpose of the Plan (Section 1129(d)).................................................. 46 Satisfaction of Bankruptcy Rule 3016(a) ............................................................. 46

RESOLUTIONS OF, OR RESPONSES TO, OBJECTIONS TO CONFIRMATION ........................................................................................................... 46 CONCLUSION ................................................................................................................ 47

-ii-

TABLE OF AUTHORITIES Page(s) CASES Aetna Cas. & Sur. Co. v. Clerk, United States Bankruptcy Court (In re Chateaugay Corp.), 89 F.3d 942 (2d Cir. 1996).......................................................................................................16 Bank of Am. Natl Trust & Savs. Assn v. 203 N. LaSalle St. Pship, 526 U.S. 434 (1999) .................................................................................................................41 CoreStates Bank, N.A. v. United Chem. Techs., Inc., 202 B.R. 33 (E.D. Pa. 1996) ....................................................................................................43 Heartland Fed. Savs. & Loan Assn v. Briscoe Enters., Ltd. II (In re Briscoe Enters., Ltd. II), 994 F.2d 1160 (5th Cir. 1993), cert. denied, 510 U.S. 992 (1993) ..............................14, 42, 43 In re 11,111, Inc., 117 B.R. 471 (Bankr. D. Minn. 1990) .....................................................................................40 In re AOV Indus., Inc., 792 F.2d 1140 (D.C. Cir. 1986) ...............................................................................................16 In re Buttonwood Partners, Ltd., 111 B.R. 57 (Bankr. S.D.N.Y. 1990) .......................................................................................40 In re Caldwell, 76 B.R. 643 (Bankr. E.D. Tenn. 1987) ....................................................................................16 In re Century Glove, Inc., Civ. A. Nos. 90-400-SLR, 90-401-SLR, 1993 U.S. Dist. LEXIS 2286 (D. Del. Feb. 10, 1993) ......................................................................................................................15, 34, 36 In re Drexel Burnham Lambert Group Inc., 138 B.R. 723 (Bankr. S.D.N.Y. 1992) .....................................................................................33 In re Eddington Thread Mfg. Co., 181 B.R. 826 (Bankr. E.D. Pa. 1995). .....................................................................................43 In re Greate Bay Hotel & Casino, Inc., 251 B.R. 213 (Bankr. D.N.J. 2000) .........................................................................................43 In re Heritage Org., L.L.C., 375 B.R. 230 (Bankr. N.D. Tex. 2007) ....................................................................................16

-iii-

In re Jersey City Med. Ctr., 817 F.2d 1055 (3d Cir. 1987)...................................................................................................16 In re Johns-Manville Corp., 68 B.R 618 (Bankr. S.D.N.Y. 1986) ........................................................................................40 In re Johns-Manville Corp., 97 B.R. 174 (Bankr. S.D.N.Y. 1989) .......................................................................................26 In re Kennedy, 158 B.R. 589 (Bankr. D.N.J. 1993) .........................................................................................40 In re Lakeside Global II, Ltd., 116 B.R. 499 (Bankr. S.D. Tex. 1989) ....................................................................................42 In re Madison Hotel Assocs., 749 F.2d 410 (7th Cir. 1984) ...................................................................................................34 In re Mayer Pollack Steel Corp., 174 B.R. 414 (Bankr. E.D. Pa. 1994) ......................................................................................43 In re New Valley Corp., 168 B.R. 73 (Bankr. D.N.J. 1994) ...........................................................................................34 In re PPI Enters., 228 B.R. 339 (Bankr. D. Del. 1998) ........................................................................................41 In re Prussia Assocs., 322 B.R. 572 (Bankr. E.D. Pa. 2005) ......................................................................................42 In re PWS Holding Corp., 228 F.3d 224 (3d Cir. 2000).....................................................................................................32 In re Resorts Intl Inc., 145 B.R. 412 (Bankr. D.N.J. 1990) ...................................................................................32, 35 In re Revco, 131 B.R. 615 (Bankr. N.D. Ohio 1990) ...................................................................................44 In re Richard Buick, Inc., 126 B.R. 840 (Bankr. E.D. Pa. 1991) ......................................................................................14 In re Rivera Echevarria, 129 B.R. 11 (Bankr. D.P.R. 1991) ...........................................................................................40 In re T-H New Orleans Ltd. Pship, 116 F.3d 790 (5th Cir. 1997) .............................................................................................42, 43

-iv-

In re Texaco, Inc., 85 B.R. 934 (Bankr. S.D.N.Y. 1988) .......................................................................................34 In re Union Meeting Partners, 165 B.R. 553 (Bankr. E.D. Pa. 1994), affd mem., 52 F.3d 317 (3d Cir. 1995)................14, 41 In re WorldCom, Inc., No. 02-13533-AJG, 2003 Bankr. LEXIS 1401 (Bankr. S.D.N.Y. Oct. 31, 2003) ..................43 In re Zenith Elecs. Corp., 241 B.R. 92, 111 (Bankr. D. Del. 1999) ............................................................................26, 31 Kane v. Johns-Mansville Corp., 843 F.2d 636 (2d Cir. 1988).........................................................................................15, 34, 42 Teamsters Natl Freight Indus. Negotiating Comm. v. U.S. Truck Co. Inc. (In re U.S. Truck Co.), 800 F.2d 581 (6th Cir. 1986) ...................................................................................................16 STATUTES Chapter 7 of the Bankruptcy Code.....................................................................................36, 37, 38 Chapter 11 of the Bankruptcy Code....................................................................................... passim 11 U.S.C. 101(31) .......................................................................................................................42 11 U.S.C. 105(a) ........................................................................................................................25 11 U.S.C. 365 ........................................................................................................................23, 24 11 U.S.C. 502 ..............................................................................................................................24 11 U.S.C. 502(g) .........................................................................................................................24 11 U.S.C. 502(h) .........................................................................................................................24 11 U.S.C. 502(i) ..........................................................................................................................24 11 U.S.C. 507(a)(2)-(8) ...............................................................................................................41 11 U.S.C. 1107(a) .........................................................................................................................1 11 U.S.C. 1108 ..............................................................................................................................1 11 U.S.C. 1114 ...........................................................................................................................45 11 U.S.C. 1122 ...............................................................................................................15, 16, 18

-v-

11 U.S.C. 1122(a) ................................................................................................................16, 17 11 U.S.C. 1123 ...........................................................................................................................15 11 U.S.C. 1123(a) ......................................................................................................................23 11 U.S.C. 1123(a)(1) ............................................................................................................15, 18 11 U.S.C. 1123(a)(2) ..................................................................................................................18 11 U.S.C. 1123(a)(3) ..................................................................................................................18 11 U.S.C. 1123(a)(4) ..................................................................................................................19 11 U.S.C. 1123(a)(5) ............................................................................................................19, 21 11 U.S.C. 1123(a)(6) ..................................................................................................................21 11 U.S.C. 1123(a)(7) ..............................................................................................................22, 23 11 U.S.C. 1123(b) ......................................................................................................................23 11 U.S.C. 1123(b)(1) ..................................................................................................................26 11 U.S.C. 1123(b)(2) ..................................................................................................................23 11 U.S.C. 1123(b)(3) .....................................................................................................24, 25, 27 11 U.S.C. 1123(b)(3)(A) ............................................................................................................29 11 U.S.C. 1123(b)(5) ..................................................................................................................26 11 U.S.C. 1123(b)(6) ..................................................................................................................23 11 U.S.C. 1124 ...........................................................................................................................18 11 U.S.C. 1125 .................................................................................................................6, 32, 33 11 U.S.C. 1125(e) ......................................................................................................................34 11 U.S.C. 1126 ..................................................................................................................8, 32, 33 11 U.S.C. 1126(c) .......................................................................................................................38 11 U.S.C. 1126(d) .......................................................................................................................38 11 U.S.C. 1126(g) ..................................................................................................................8, 39 11 U.S.C. 1129 .......................................................................................................................1, 47

-vi-

11 U.S.C. 1129(a) ......................................................................................................................15 11 U.S.C. 1129(a)(1) ..................................................................................................................15 11 U.S.C. 1129(a)(2) ............................................................................................................32, 33 11 U.S.C. 1129(a)(3) ............................................................................................................33, 34 11 U.S.C. 1129(a)(4) ............................................................................................................34, 35 11 U.S.C. 1129(a)(5) ..................................................................................................................35 11 U.S.C. 1129(a)(5)(A)(i)-(ii) ...................................................................................................35 11 U.S.C. 1129(a)(6) ............................................................................................................35, 36 11 U.S.C. 1129(a)(7) ............................................................................................................36, 38 11 U.S.C. 1129(a)(7)(A) .............................................................................................................36 11 U.S.C. 1129(a)(8) ...............................................................................................................8, 38 11 U.S.C. 1129(a)(9) ..................................................................................................................41 11 U.S.C. 1129(a)(10) ..........................................................................................................41, 42 11 U.S.C. 1129(a)(11) ..........................................................................................................42, 44 11 U.S.C. 1129(a)(12) ..........................................................................................................44, 45 11 U.S.C. 1129(a)(13) ..........................................................................................................45, 46 11 U.S.C. 1129(b) ................................................................................................................39, 40 11 U.S.C. 1129(b)(1) .....................................................................................................39, 40, 41 11 U.S.C. 1129(b)(2) .................................................................................................................41 11 U.S.C. 1129(b)(2)(C)(ii) ........................................................................................................41 11 U.S.C. 1129(d) ......................................................................................................................46 11 U.S.C. 1141(d) ......................................................................................................................24 11 U.S.C. 1142 ............................................................................................................................25 28 U.S.C. 157 ..............................................................................................................................26 28 U.S.C. 1334 ............................................................................................................................26

-vii-

28 U.S.C. 1930 ......................................................................................................................44, 45 OTHER AUTHORITIES Fed. R. Bankr. P. 3016 ...................................................................................................................32 Fed. R. Bankr. P. 3016(a) ..............................................................................................................46 Fed. R. Bankr. P. 3017 ..................................................................................................................33 Fed. R. Bankr. P. 3018 ...................................................................................................................33 H.R. Rep. No. 95-595 (1977).............................................................................................15, 32, 40 S. Rep. No. 95-989 (1978) .............................................................................................................15

-viii-

MEMORANDUM OF LAW Perkins & Marie Callenders Inc. (f/k/a The Restaurant Company) (PMCI) and its affiliated debtor entities (collectively, with PMCI, the Debtors), hereby submit this memorandum of law (this Memorandum of Law) in support of confirmation of the Debtors Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated September 9, 2011 [Docket No. 922] (including all exhibits thereto and as may be amended, modified or supplemented from time to time, the Plan).1 As provided in detail below, the Plan satisfies the requirements for confirmation set forth in section 1129 of the Bankruptcy Code, and has been accepted by the holders of Claims entitled to vote thereon. Accordingly, the Debtors submit that the Plan should be confirmed. I. BACKGROUND A. The Chapter 11 Cases 1. On June 13, 2011 (the Petition Date), each of the Debtors filed a

voluntary petition for relief under chapter 11 of the Bankruptcy Code, and each thereby commenced chapter 11 cases (collectively, the Chapter 11 Cases) in this Bankruptcy Court (the Court). No request has been made for the appointment of a trustee or examiner, and the Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On June 24, 2011, the Office of the United States Trustee appointed the Creditors Committeee. B. Overview of the Debtors Businesses and History 2. The Debtors are one of the leading operators of family-dining and casual-

dining restaurants, under their two (2) highly-recognized brands: (i) their full-service family
1

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Plan. Any summary herein of the terms and conditions of the Plan and any related documents is qualified in its entirety by the actual terms and conditions thereof.

dining restaurants located primarily in the Midwest, Florida and Pennsylvania under the name Perkins Restaurant and Bakery (Perkins), and (ii) their mid-priced, full-service casual-dining restaurants, specializing in the sale of pies and other bakery items, located primarily in the western United States under the name Marie Callenders Restaurant and Bakery (Marie Callenders). 3. Through the Debtors Foxtail Foods bakery goods manufacturing

operations (Foxtail), the Debtors offer pies, muffin batters, cookie doughs, pancake mixes, and other food products for sale to both company-owned and franchised Perkins and Marie Callenders restaurants, and to unaffiliated customers, such as food service distributors and supermarkets, as well as on-line to the public. 4. The Debtors revenues for the year ended December 26, 2010 were

approximately $507 million. C. Corporate Structure and Pre-Petition Capitalization 5. Perkins & Marie Callenders Holding Inc. (f/k/a The Restaurant Holding

Corporation) is a holding company that wholly owns PMCI. PMCI is the Debtors principal operating entity and the primary obligor on the Debtors pre-Petition Date senior secured working capital facility and their secured and unsecured bond debt. PMCI directly or indirectly owns and operates the Debtors restaurant operations, oversees the Debtors franchised restaurant operations, and owns and operates its Foxtail business. 6. On September 24, 2008, PMCI issued $132 million in aggregate principal

amount of 14% Senior Secured Notes, with a maturity date of May 31, 2013 and interest payable semi-annually on May 31 and November 30 of each year. Prior thereto, on September 21, 2005, PMCI issued $190 million of 10% Senior Notes, with a maturity date of October 1, 2013 and interest payable semi-annually on April 1 and October 1 of each year. Concurrently with the -2-

issuance of the Senior Secured Notes, PMCI and PMC Holding entered into a Credit Agreement dated as of September 24, 2008 (as amended, the Credit Agreement) with Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC) as the lender and administrative agent, consisting of a revolving credit facility in favor of PMCI, as borrower, of up to $26,000,000, with a sub-limit of $15,000,000 for the issuance of letters of credit. As of the Petition Date, approximately $103,000,000 in aggregate principal amount of the Senior Secured Notes were outstanding, $190,000,000 in aggregate principal amount of the Senior Notes were outstanding, and approximately $10,060,000 in principal amount was outstanding under the Pre-Petition Secured Credit Facility (comprised solely of outstanding letters of credit). D. Events Leading to the Debtors Chapter 11 Cases 7. Prior to the commencement of these Chapter 11 Cases, the Debtors

operations and financial performance were severely and adversely affected due to excessive leverage and poor sales results. The poor economic climate has been a primary factor in the decline in restaurant sales, particularly in Florida and California where there are large concentrations of Perkins and Marie Callenders restaurants, and where high foreclosure rates and depressed economies have prevailed. With overall unemployment rates at record high levels, discretionary income for many historically-loyal customers and other consumers has been severely constrained, directly correlating to depressed restaurant sales and reduced or eliminated customer traffic. Restaurant sales were also negatively impacted by a lack of restaurant

remodeling expenditures due to the Debtors internal constraints on deploying cash for capital expenditures. As better resourced competitors continued to build new locations and upgrade their existing facilities (and in some cases, through the vehicle of their own chapter 11 proceedings, restructured their financial affairs), many of the Debtors restaurants became

-3-

facially dated and stale, which also negatively impacted the ability of the Debtors to maintain customer traffic at the levels prevailing prior to the economic downturn. 8. On April 1, 2011, the Debtors obligated thereunder were unable and failed

to make a scheduled interest payment of $9,500,000 on the Senior Notes. After the passage of thirty (30) days from April 1, without payment of such interest, such default became an Event of Default under the Senior Notes Indenture governing the Senior Notes, permitting potential acceleration of the Senior Notes by the holders of at least twenty-five percent (25%) in

aggregate principal amount of the Senior Notes. The occurrence of the interest default and subsequent Event of Default (as defined in the Senior Notes Indenture) resulting therefrom also gave rise to various potential collection and enforcement remedies available to the indenture trustee for, and the holders of, the Senior Notes and to the Pre-Petition Administrative Agent under the Pre-Petition Secured Credit Facility. Certain technical defaults also existed under the Pre-Petition Credit Agreement as to which the Pre-Petition Secured Credit Facility Agent had similar potential rights and remedies. Effective April 30, 2011, PMCI and various of the other Debtors entered into two (2) forbearance agreements (collectively, the Forbearance Agreements). On or about May 4, 2011, PMCI, those certain guarantor Subsidiary Debtors and the holders of in excess of eighty percent (80%) in aggregate principal amount of the Senior Notes entered into a forbearance agreement, pursuant to which said holders agreed to forbear from exercising any and all of their rights and remedies with respect to the aforementioned payment default and other existing and anticipated defaults and Events of Default through and including June 30, 2011 (the Senior Note Forbearance Agreement). Additionally, on or about May 9, 2011, the Debtors (other than Promotions) entered into a forbearance agreement with the lender and the Pre-Petition Administrative Agent under the Pre-Petition Secured Credit Facility

-4-

(triggered by certain technical defaults thereunder including the nonpayment of the semi-annual interest payment on the Senior Notes) pursuant to which the lender and Pre-Petition Administrative Agent agreed to forbear from exercising any and all of their rights and remedies to and until June 30, 2011. 9. During the window of opportunity created by the execution and delivery

of the Forbearance Agreements, the Debtors entered into negotiations with the Restructuring Support Parties which negotiations were designed to restructure and recapitalize the Debtors businesses and balance sheet. To that end, in the weeks preceding the Petition Date, the Debtors and the Restructuring Support Parties entered into a Restructuring Support Agreement dated as of June 6, 2011,2 designed to mutually and consensually develop and agree upon the parameters of a reorganization program for the Debtors that will, among other things, delever the Debtors capital structure, and thereby establish a pre-filing blueprint for an efficient and effective chapter 11 reorganization process. 10. In consultation with their professionals and certain of their constituencies,

the Debtors diligently evaluated a number of options to address their current financial and capital issues. These efforts have included sharing information with and engaging in discussions with a variety of the Debtors stakeholders with the goal of restructuring the Debtors balance sheet to bring it into line with the Debtors current debt servicing capabilities. Based on the Debtors evaluation of their options for addressing their current financial and capital issues and discussion with their stakeholders, the Debtors concluded that proceeding with a restructuring on the terms

In order to accommodate ongoing discussions and negotiations, the Debtors and Restructuring Support Parties entered into a certain Amendment No. 1 to the Restructuring Support Agreement, dated as of August 22, 2011 (RSA Amendment No. 1). In conjunction with RSA Amendment No. 1, the Debtors entered into a corresponding amendment to the DIP Credit Agreement.

-5-

set forth in the Restructuring Support Agreement provided the best available means of achieving their goals. E. Filing of the Plan and the Disclosure Statement 11. In accordance with the Restructuring Support Agreement, after months of

working closely with the Restructuring Support Parties and certain key creditor constituencies in the Chapter 11 Cases, including the Committee, on September 9, 2011, the Debtors filed the Second Amended Disclosure Statement for Debtors Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated September 9, 2011 [Docket No. 923] (including all exhibits thereto and as may be amended, modified or supplemented from time to time, the Disclosure Statement) . 12. On September 9, 2011, the Court entered an order [Docket No. 935] (the

Disclosure Statement Order) approving the Disclosure Statement pursuant to section 1125 of the Bankruptcy Code. Pursuant to the Disclosure Statement Order, the Court (i) established certain procedures for the solicitation and tabulation of votes to accept or reject the Plan, (ii) established October 14, 2011 at 4:00 p.m. (prevailing Eastern Time) as the deadline for

submitting Ballots or Master Ballots accepting or rejecting the Plan (the Voting Deadline) and for filing objections to confirmation of the Plan (the Objection Deadline), and (iii) scheduled a hearing (the Confirmation Hearing) commencing on October 31, 2011 at 10:00 a.m. (prevailing Eastern Time) to consider confirmation of the Plan. F. Solicitation of the Plan 13. To obtain the requisite acceptance of the Plan, on or about September 14,

2011, as required by the Disclosure Statement Order, the Debtors completed solicitation of acceptances and rejections of the Plan by distributing the Disclosure Statement and related materials to the holders of Claims, as of the Record Date, in the classes of Claims that, under the -6-

Plan, are entitled to vote to accept or reject the Plan. As required by the Disclosure Statement Order, and as evidenced by the Affidavits of Service filed with the Court on September 27, 2011 [Docket Nos. 1043 and 1045] (the Solicitation Package Affidavits of Service), the Debtors, through their noticing and voting agent in these Chapter 11 Cases, Omni Management Group, LLC (Omni), timely mailed to all holders of Claims entitled to vote on the Plan a solicitation package (each, a Solicitation Package) containing copies of (a) the Confirmation Hearing Notice (as defined in the Disclosure Statement Order), which provided written notice of (i) the Courts approval of the Disclosure Statement, (ii) the Voting Deadline, (iii) the Objection Deadline; and (iv) the date of the Confirmation Hearing; (b) a copy of the Disclosure Statement, including the Plan; (c) a copy of the Disclosure Statement Order; (d) a Ballot or Master Ballot (with instructions); and (e) a return envelope (postage prepaid) for mailing the Ballot or Master Ballot. 14. As further required by the Disclosure Statement Order, the Debtors,

through Omni, timely transmitted the Notice of Non-Voting Status (as defined in the Disclosure Statement Order) to the Non-Voting Parties (as defined in the Disclosure Statement Order) and the Confirmation Hearing Notice to the known counterparties to executory contracts and unexpired leases. Affidavits of Service evidencing such actual notice were filed with the Court on September 27, 2011 [Docket Nos. 1044 and 1046]. G. Plan Supplement 15. On October 21, 2011, the Debtors filed the Plan Supplement for Debtors

Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1204] (the Plan Supplement), which included the following: (i) the First Lien Exit Facility Credit Agreement in its then-most current form; (ii) the form of New Secured Term Loan Agreement in its then-most current form; (iii) reference to the fact that the New -7-

Intercreditor Agreement will be filed in advance of the Confirmation Hearing; (iv) the New Certificate of Formation; (v) the PMC Holding LLC Agreement; (vi) the form of Subsidiary LLC Agreements; (vii) a list of the initial post-Effective Date managers and officers of the Reorganized Debtors; (viii) a list of the Litigation Rights retained by the Reorganized Debtors; (ix) the Schedule of Rejected Contracts and Leases; (x) the schedule of Assigned Avoidance Actions; and (xi) the schedule of Specified General Unsecured Claims. H. Ballot Tabulation 16. As described more fully in the Declaration of Paul Deutch Regarding

Analysis of Ballots for Accepting or Rejecting Second Amended Joint Plan of Reorganization of Perkins & Marie Callenders, Inc., et al., Pursuant to Chapter 11 of the Bankruptcy Code (the Voting Declaration), Class 3 Senior Secured Notes Claims, the Class 4 Senior Notes Claims, and Class 5 General Unsecured Claims voted to accept the Plan. Pursuant to sections 1126 and 1129(a)(8) of the Bankruptcy Code: (a) Class 1 Other Priority Claims, Class 2 Other Secured Claims, Class 6 Convenience Claims, Class 7 Intercompany Claims and 9B Equity Interests in Other Subsidiary Debtors are Unimpaired under the Plan and are deemed to have accepted the Plan. Because the Plan provides that holders of Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI will not receive or retain any property on account of such Interests, such Classes are deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code.
17.

On October 3, 2011, the Debtors filed their Objection to Certain Claims

Solely for Purposes of Voting to Accept or Reject the Debtors Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1071] (the Debtors Determination Objection) seeking an order of the Court temporarily allowing the Modified Voting Claims (as defined in the Debtors Determination Objection) identified on the exhibits -8-

attached thereto, solely for purposes of voting to accept or reject the Plan, in the amounts and classifications provided for on the exhibits, as opposed to the amounts and classifications asserted in the Modified Voting Claims. Subsequent to the filing of the Debtors Determination Objection, the Debtors received responses from certain creditors identified on the exhibits to the Debtors Determination Objection and the Debtors thereafter withdrew certain of their objections and resolved all of the other responses received. On October 25, 2011, the Court entered an order [Docket No. 1218] with respect to the Debtors Determination Motion. 18. On October 3, 2011, the Creditors Committee filed their Motion of the

Official Committee of Unsecured Creditors to Disallow Certain Proofs of Claim Solely for Purposes of Voting on the Debtors Second Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1067] (the Creditors Committees Determination Motion) to disallow, solely for purposes of voting to accept or reject the Plan, claims asserted against the Debtors pursuant to: (i) proofs of claim nos. 1485, 1487, 1489, 1493 filed by Castle Harlan, Inc. (Castle Harlan); (ii) proof of claim no. 1495 filed by P&MC's Holding LLC (Castle Harlan Holding); and (iii) proof of claim no. 1754 filed by Omega Trust (collectively, (i), (ii), and (iii) are the Disputed Claims). Omega Trust filed an objection to the Creditors Committees Determination Motion on October 18, 2011 [Docket No. 1167]. Solely for

purposes of voting to accept or reject the Plan, the Creditors Committee resolved the Creditors Committees Determination Motion as it pertained to the Disputed Claims as follows: (i) on October 17, 2011, the Court entered an Order [Docket No. 1145] approving the stipulation between the Creditors Committee, Castle Harlan, and Castle Harlan Holding whereby Castle Harlan and Castle Harlan Holding agreed to forego voting on the Plan and the Creditors Committee agreed to withdraw the Creditors Committees Determination Motion as it pertained

-9-

to Castle Harlan and Castle Harlan Holding; and (ii) on or about October 25, 2011, the Creditors Committee, the Restructuring Support Parties, the Debtors, and Omega Trust entered into a preliminary settlement agreement resolving, among other things, the Creditors Committees Determination Motion as it pertained to Omega Trust (the Omega Settlement). The final terms of the Omega Settlement will be embodied in the Confirmation Order. 19. As of the filing of this Memorandum, the Debtors received the following

objections to confirmation of the Plan: (i) Objection of City of Waco and Waco Independent School District to Confirmation of Debtors Joint Plan of Reorganization [Docket No. 652], (ii) Travis Countys Objection to Debtors Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1082], (iii) Objection of Tri-State House of Pancakes, Inc. to Debtors Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1131] (the Tri-State Objection), (iv) Objection by the Internal Revenue Service to the Debtors Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1132], (v) Limited Objection of the Macerich Company and Watt Management Company to the (I) Debtors Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code; and (II) Proposed Cure Amounts [Docket No. 1133], (vi) Objection of Inland Pacific Property Services LLC to the Debtors Second Amended Joint Plan or Reorganization Under Chapter 11 of the Bankruptcy Code [Docket No. 1134], (vii) Objection of Missouri Department of Revenue to Confirmation of Debtors Second Amended Joint Plan of Reorganization [Docket No. 1136], (viii) Objection of Omega Trust to Confirmation of the Debtors Second Amended Joint Plan of Reorganization [Docket No. 1140], and (ix) Local Texas Tax Authorities Objection to Confirmation of Debtors

-10-

Second Amended Joint Plan of Reorganization [Docket No. 1141] (collectively, the Plan Objections). 20. Each of the Plan Objections, with the exception of the Tri-State Objection,

have been resolved, or are anticipated to be resolved, through the insertion of certain agreed upon language in the Confirmation Order addressing such Plan Objection. The Debtors presently anticipate that the only remaining Plan Objection will be the Tri-State Objection which, for the reasons set forth herein, on the record of the Chapter 11 Cases, in the Joint Response of the Debtors, the Official Committee of Unsecured Creditors and the Restructuring Support Parties to the Objections of Tri-State House of Pancakes, Inc. to Confirmation of the Debtors Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, and on the record anticipated to be established at the Confirmation Hearing, should be overruled. I. Highlights of the Plan 21. The Plan, which is the product of extensive negotiations among the

Debtors and certain of their major creditors constituencies, including, without limitation, the Creditors Committee and the Restructuring Support Parties, constitutes a plan of reorganization under chapter 11 of the Bankruptcy Code for the Debtors, under which their Estates will be limitedly consolidated for purposes of the Plan, confirmation thereof, and Distributions to be made thereunder. The Plan provides for full payment of Allowed Administrative Claims,

Professional Fee Claims, Priority Tax Claims and DIP Financing Claims, and renders Unimpaired Class 1 Other Priority Claims, Class 2 Other Secured Claims, Class 6 Convenience Claims, Class 7 Intercompany Claims and Class 9B Equity Interests in the Other Subsidiary Debtors. 22. Meanwhile, the Senior Secured Notes Claims shall be Allowed and

deemed to be Allowed in the amount of (i) $103,063,000 on account of the aggregate -11-

outstanding principal amount of the Senior Secured Notes plus (ii) accrued and unpaid interest thereon at the applicable contract rate, if any, as of the Effective Date. On or as soon as reasonably practicable after the Effective Date, the Senior Secured Notes shall be cancelled and, in full and final satisfaction of and in exchange for all Allowed Senior Secured Notes Claims, each holder of Senior Secured Notes shall receive (a) rights and obligations in respect of the New Secured Term Loans in a principal amount equal to the principal amount of such holders Senior Secured Notes Claim and (b) Cash equal to the amount of any accrued and unpaid interest owed on account of its Senior Secured Notes Claim, if any, due as of the Effective Date. The vote by the holders of the Senior Secured Notes to accept the Plan shall constitute such holders consent to the Prepayment Premium Waiver; provided, however, that the Prepayment Premium Waiver shall be deemed null and void if the Effective Date of the Plan does not occur. 23. The Senior Notes Claims shall be Allowed and deemed to be Allowed in

the amount of (i) $190,000,000 on account of the aggregate outstanding principal amount of the Senior Notes plus (ii) accrued and unpaid interest thereon at the applicable contract rate from October 1, 2010 to the Petition Date. On or as soon as reasonably practicable after the Effective Date, the Senior Notes shall be cancelled, and, in full and final satisfaction of and in exchange for all Allowed Senior Notes Claims, each holder of an Allowed Senior Notes Claim shall receive its Pro Rata percentage of the Reorganized PMC Holding Membership Interests (subject to dilution on account of Reorganized PMC Holding Membership Interests or other similar Interests, if any, that may be issued from time to time pursuant to the Management Incentive Plan), with such Pro Rata percentage determined by dividing the Allowed amount of such holders Senior Notes Claim by the total aggregate amount of all Allowed Senior Notes Claims and Allowed General Unsecured Claims that receive Reorganized PMC Holding Membership

-12-

Interests under the Plan; provided, however, that any Cash Eligible Claimant holding an Allowed Senior Notes Claims may, in lieu of such Pro Rata percentage of Reorganized PMC Holding Membership Interests, make the Cash Election and receive Cash in an amount equal to (a) the lesser of (i) 14% of such holders Allowed Senior Notes Claim or (ii) such holders Pro Rata share of the Cash Cap Amount; plus (b) such holders Pro Rata share of the Avoidance Action Recovery Pool. 24. With respect to the holders of Allowed General Unsecured Claims, on or

as soon as reasonably practicable after the Effective Date, in full and final satisfaction of and in exchange for all Allowed General Unsecured Claims: (A) each holder of an Allowed General Unsecured Claim that is a Cash Eligible Claimant shall receive Cash in an amount equal to (a) the lesser of (i) 14% of the holders Allowed General Unsecured Claim or (ii) such holders Pro Rata share of the Cash Cap Amount; plus (b) such holders Pro Rata share of the Avoidance Action Recovery Pool; provided, however, that such Cash Eligible Claimant may, in lieu of receiving Cash, make the Class 5 Equity Election and receive its Pro Rata share of Reorganized PMC Holding Membership Interests (subject to dilution on account of Reorganized PMC Holding Membership Interests or other similar Interests, if any, that may be issued from time to time pursuant to the Management Incentive Plan), with such Pro Rata percentage determined by dividing the Allowed amount of such holders General Unsecured Claim by the total aggregate amount of all Allowed Senior Notes Claims and Allowed General Unsecured Claims that receive Reorganized PMC Holding Membership Interests under the Plan; and (B) each holder of an Allowed General Unsecured Claim that is not a Cash Eligible Claimant shall receive its Pro Rata percentage of the Reorganized PMC Holding Membership Interests (subject to dilution on account of Reorganized PMC Holding Membership Interests or other similar Interests, if any,

-13-

that may be issued from time to time pursuant to the Management Incentive Plan), with such Pro Rata percentage determined by dividing the Allowed amount of such holders General Unsecured Claim by the total aggregate amount of all Allowed Senior Notes Claims and Allowed General Unsecured Claims that receive Reorganized PMC Holding Membership Interests under the Plan. 25. Finally, Class 8 Subordinated Claims and Class 9A Equity Interests in

PMC Holding and PMCI shall be discharged, cancelled, released, and extinguished as of the Effective Date and holders of Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI shall neither receive any Distributions nor retain any property under the Plan for or on account of such Claims and Equity Interests. II. ARGUMENT 26. As the proponents of the Plan, the Debtors bear the burden of proof on all

elements necessary for confirmation of the Plan. In re Richard Buick, Inc., 126 B.R. 840, 851 (Bankr. E.D. Pa. 1991). To satisfy this burden, the Debtors will show by a preponderance of the evidence that the Plan complies with the applicable provisions of the Bankruptcy Code. Heartland Fed. Savs. & Loan Assn v. Briscoe Enters., Ltd. II (In re Briscoe Enters., Ltd. II), 994 F.2d 1160, 1165 (5th Cir.) (concluding that preponderance of the evidence is the debtors appropriate standard of proof both under 1129(a) and in a cramdown), cert. denied, 510 U.S. 992 (1993); In re Union Meeting Partners, 165 B.R. 553, 574 n.17 (Bankr. E.D. Pa. 1994) (adopting preponderance standard with respect to requirements of Bankruptcy Code section 1129), affd mem., 52 F.3d 317 (3d Cir. 1995). 27. In connection with doing so, contemporaneously with the filing of this

Memorandum of Law, the Debtors filed the Declaration of Joseph F. Trungale In Support of the Debtors Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy -14-

Code (the Trungale Declaration) and the Declaration of Joseph H. Santarlasci, Jr. In Support of the Debtors Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the Santarlasci Declaration). 28. Section 1129(a) of the Bankruptcy Code provides that a court shall

confirm a chapter 11 plan if all of the requirements of sections 1129(a)(1) through (a)(15) of the Bankruptcy Code are satisfied. 11 U.S.C. 1129(a). Here, the Plan should be confirmed because the Debtors have satisfied (or will satisfy at the Confirmation Hearing) each of the applicable requirements of section 1129(a) of the Bankruptcy Code. A. The Plan Complies with the Applicable Provisions of the Bankruptcy Code, as Required by Section 1129(a)(1) 29. Section 1129(a)(1) of the Bankruptcy Code provides that a court may

confirm a plan of reorganization only if [t]he plan complies with the applicable provisions of this title. The phrase applicable provisions has been interpreted to include sections 1122 and 1123 of the Bankruptcy Code, which govern the classification of claims and interests and the contents of a plan of reorganization. Kane v. Johns-Mansville Corp., 843 F.2d 636, 648-49 (2d Cir. 1988); In re Century Glove, Inc., Civ. A. Nos. 90-400-SLR, 90-401-SLR, 1993 U.S. Dist. LEXIS 2286, at *6 (D. Del. Feb. 10, 1993); H.R. Rep. No. 95-595, at 412 (1977); S. Rep. No. 95-989, at 126 (1978). i. 30. Appropriate Designation of Classes of Claims and Interests (Sections 1122 and 1123(a)(1)) Section 1123(a)(1) of the Bankruptcy Code requires that a chapter 11 plan

classify all claims (with the exception of certain administrative and priority claims) and all interests, and that such classification comply with section 1122 of the Bankruptcy Code. 11 U.S.C. 1123(a)(1). With the exception of Administrative Claims, Professional Fee Claims,

-15-

Priority Tax Claims and DIP Financing Claims, which are not required to be classified under the Plan, Article IV of the Plan designates various Classes of Claims and Interests. 31. Section 1122(a) of the Bankruptcy Code provides that a plan may place a

claim or interest in a particular class only if it is substantially similar to other claims or interests in the class. See In re Caldwell, 76 B.R. 643, 644 (Bankr. E.D. Tenn. 1987). Claims or interests in a class need not be identical, but should be similar in legal character or effect with respect to the debtor. See In re AOV Indus., Inc., 792 F.2d 1140, 1150-51 (D.C. Cir. 1986) (affirming plan confirmation where claims guaranteed by third party were grouped with non-guaranteed claims). 32. Section 1122(a) does not require placement of all claims that are

substantially similar in the same class just because they may share some attributes. See, e.g., In re Jersey City Med. Ctr., 817 F.2d 1055, 1060 (3d Cir. 1987) ([t]he express language of this statute explicitly forbids a plan from placing dissimilar claims in the same class; it does not, though, address the presence of similar claims in different classes.). The debtor must simply advance a legitimate reason supported by credible proof for the separate classification. See Teamsters Natl Freight Indus. Negotiating Comm. v. U.S. Truck Co. Inc. (In re U.S. Truck Co.), 800 F.2d 581, 585 (6th Cir. 1986) (affirming plan confirmation over objection by collective bargaining unit, finding that section 1122(a) does not require that similar claims be grouped together, but merely that any group created must be homogenous); Aetna Cas. & Sur. Co. v. Clerk, United States Bankr. Ct. (In re Chateaugay Corp.), 89 F.3d 942, 949 (2d Cir. 1996) (affirming plan confirmation where debtor offered business justification for dividing workers compensation claims into two classes); In re Heritage Org., L.L.C., 375 B.R. 230, 298 n. 86 (Bankr. N.D. Tex. 2007) (finding that if creditors had different legal rights under principles of equitable subordination, then separate classification would be appropriate). Thus, section 1122

-16-

of the Bankruptcy Code provides debtors with a large amount of flexibility to create classification schemes that will facilitate reorganization. 33. Here, the Plans classification structure meets the applicable classification

standards. The Plan provides for the separation of Claims and Interests into the following Classes based upon differences in the contractual and legal nature and/or priority of such Claims and Interests: Class 1 provides for the separate classification of all Other Priority Claims; Class 2 provides for the separate classification of all Other Secured Claims; Class 3 provides for the separate classification of all Senior Secured Notes Claims; 34. Class 4 provides for the separate classification of all Senior Notes Claims; Class 5 provides for the separate classification of all General Unsecured Claims; Class 6 - provides for the separate classification of all Convenience Claims; Class 7 provides for the separate classification of all Intercompany Claims; Class 8 provides for the separate classification of all Subordinated Claims; Class 9A - provides for the separate classification of all Equity Interests in PMC Holding and PMCI; and Class 9B provides for the separate classification of all Equity Interests in the Other Subsidiary Debtors As required by section 1122(a) of the Bankruptcy Code, each Class of

Claims and Interests contains only Claims or Interests that are substantially similar to the other Claims or Interests within that Class. Valid business, factual and legal reasons exist for

separately classifying the various Classes of Claims and Interests under the Plan, and the Plans treatment thereof does not unfairly discriminate between holders of Claims or Interests. Pursuant

-17-

to section 1123(a)(1) of the Bankruptcy Code, Administrative Claims, Professional Fee Claims, Priority Tax Claims and DIP Financing Claims are not required to be classified under the Plan and as such have not been classified thereunder. 35. Accordingly, the Debtors submit that the Plan satisfies the requirements of

section 1122 of the Bankruptcy Code. ii. 36. Specification of Unimpaired Classes (Section 1123(a)(2))

Section 1123(a)(2) of the Bankruptcy Code requires that a chapter 11 plan 11 U.S.C.

specify any class of claims or interests that is not impaired under the plan.

1123(a)(2). In compliance with section 1123(a)(2), Article IV of the Plan specifies that Class 1 Other Priority Claims and Class 2 Other Secured Claims are Unimpaired under the Plan within the meaning of section 1124 of the Bankruptcy Code. 37. the Bankruptcy Code. iii. 38. Treatment of Impaired Classes (Section 1123(a)(3)) Accordingly, the Plan satisfies the requirements of section 1123(a)(2) of

Section 1123(a)(3) of the Bankruptcy Code requires that a chapter 11 plan

specify the treatment of any class of claims or interests that is impaired under the plan. 11 U.S.C. 1123(a)(3). In compliance with section 1123(a)(3) of the Bankruptcy Code, Article IV of the Plan specifies the treatment of each Impaired Class of Claims and Interests under the Plan. Class 3 Senior Secured Notes Claims, Class 4 Senior Notes Claims, Class 5 General Unsecured Claims, Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI are designated as Impaired under the Plan within the meaning of section 1124 of the Bankruptcy Code. 39. Bankruptcy Code. -18The Plan therefore satisfies the requirements of section 1123(a)(3) of the

iv. 40.

Equal Treatment Within Classes (Section 1123(a)(4))

Section 1123(a)(4) of the Bankruptcy Code requires that a chapter 11 plan

provide the same treatment for each claim or interest of a particular class, unless the holder of a particular claim or interest agrees to a less favorable treatment of such particular claim or interest. 11 U.S.C. 1123(a)(4). Article IV of the Plan satisfies this requirement in that all holders of Claims and Interests within a particular Class are receiving identical treatment under the Plan, unless any such holder has agreed to accept less favorable treatment. 41. Thus, the Plan complies with this section of the Bankruptcy Code. v. 42. Means for Implementation (Section 1123(a)(5))

Section 1123(a)(5) of the Bankruptcy Code requires that a chapter 11 plan

provide adequate means for its implementation. 11 U.S.C. 1123(a)(5). In compliance with section 1123(a)(5) of the Bankruptcy Code, Article VII of the Plan sets forth the means for implementation of the Plan, which means are adequate and proper. The Debtors or Reorganized Debtors, through the Disbursing Agent or such other entity, will be able to make all of the Distributions under, and comply with all other provisions of, the Plan, as the Debtors estimate that they will have sufficient Cash to ensure that the holders of Allowed Administrative Claims, Professional Fee Claims, Priority Tax Claims and DIP Financing Claims and Allowed Claims in Classes 1 and 2 are satisfied in full, and holders of Allowed Claims in Classes 3, 4, 5 and 6 will receive the Distributions required under the Plan. 43. Additionally, Article VII and various other provisions of the Plan provide

adequate and proper means for the Plans implementation, including, without limitation: (i) the execution, delivery and implementation of the Exit Financing, consisting of the First Lien Exit Facility and the New Secured Term Loans; (ii) the issuance of Reorganized PMC Holding Membership Interests; (iii) the adoption, execution, delivery and implementation of the New -19-

Intercreditor Agreement; (iv) the appointment of the Claims Administrator; (v) the authorization that, on and after the Effective Date, the Reorganized Debtors and the officers and members of the boards of managers or the board of directors thereof, are authorized to and may issue, execute, deliver, file or record such contracts, securities, instruments, releases, and other agreements or documents and take such actions as may be necessary or appropriate to effectuate, implement, and further evidence the terms and conditions of the Plan and the securities issued pursuant to the Plan in the name of and on behalf of the Reorganized Debtors, without need for any approvals, authorization, or consents except for those expressly required pursuant to the Plan and applicable non-bankruptcy law; (vi) the authorization that upon the Effective Date, all corporate actions contemplated by the Plan shall be deemed authorized and approved in all respects; (vii) the cancellation, on the Effective Date, of, among other obligations of the Debtors, the obligations of the Debtors under the Pre-Petition Secured Credit Facility, the Senior Secured Notes Indenture, the Senior Notes Indenture and any other certificate, share, note, bond, indenture, purchase right, option, warrant, or other instrument or document directly or indirectly evidencing or creating any indebtedness or obligation of or ownership interest in the Debtors giving rise to any Claim or Equity Interest (except such certificates, notes, or other instruments or documents evidencing indebtedness or obligations of the Debtors that are specifically reinstated pursuant to the Plan); and (ix) provisions governing Distributions on account of Allowed Claims and the resolution of Disputed Claims. Additionally, Article IX of the Plan provides adequate and proper means for (i) the continued corporate existence of each of the Debtors as Reorganized Debtors and (ii) the vesting of assets in each respective Reorganized Debtor, free and clear of Liens, Claims, charges or other encumbrances (except for Liens, if any,

-20-

granted to secure the First Lien Exit Facility, the New Secured Term Loans and any liens applicable to any capitalized leases existing on the Effective Date). 44. the Bankruptcy Code. vi. 45. Charter Provisions (Section 1123(a)(6)) Accordingly, the Plan satisfies the requirements of section 1123(a)(5) of

Section 1123(a)(6) of the Bankruptcy Code requires that a chapter 11 plan

provide for the inclusion in a debtors charter of specific provisions (i) prohibiting the issuance of nonvoting equity securities and (ii) providing for an appropriate distribution of voting power among the securities possessing voting power. 11 U.S.C. 1123(a)(6). 46. As previously set forth herein, the Plan constitutes a plan of reorganization

under chapter 11 of the Bankruptcy Code for the Debtors. Pursuant to the Plan, on the Effective Date, PMC Holding shall convert to a Delaware limited liability company which shall be governed by the New Charter Document of Reorganized PMC Holding, and by the PMC Holding LLC Agreement, which PMC Holding LLC Agreement shall, among other things, (i) authorize the issuance of Reorganized PMC Holding Membership Interests and (ii) prohibit the issuance of nonvoting equity interests, only so long as, and to the extent that, the issuance of nonvoting securities is prohibited. On the Effective Date, each of the Reorganized Subsidiary Debtors that was not a limited liability company prior thereto (other than MCID and Wilshire Beverage) shall convert to a limited liability company in its respective state of incorporation, and thereupon shall be governed by its respective New Charter Documents and by its respective Subsidiary LLC Agreement. In addition, on the Effective Date, each other Reorganized

Subsidiary Debtor shall be governed by its respective New Charter Document and by its respective Subsidiary LLC Agreement. Each of such Subsidiary LLC Agreements shall, among other things, (i) authorize the issuance of corporate stock or Subsidiary Membership Interests, as -21-

applicable, and (ii) prohibit the issuance of nonvoting equity interests, only so long as, and to the extent that, the issuance of nonvoting securities is prohibited. Lastly, on the Effective Date, (i) Reorganized PMCI shall issue the Reorganized PMCI Membership Interests to Reorganized PMC Holding, and (ii) Reorganized PMC Holding shall issue the Reorganized PMC Holding Membership Interests to holders of Allowed Senior Notes Claims and Allowed General Unsecured Claims (to the extent that the holders of such Allowed Senior Notes Claims and Allowed General Unsecured Claims are receiving Reorganized PMC Holding Membership Interests pursuant to this Confirmation Order and the Plan), the principal terms of which are described in the PMC Holding LLC Agreement. vii. 47. Selections for Certain Positions (Section 1123(a)(7))

Section 1123(a)(7) states that a plan shall 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 and any successor to such officer, director, or trustee. 11 U.S.C. 1123(a)(7). Articles V.C and V.E of the Plan sets forth the means by which the Reorganized Debtors managers and officers shall be selected. The Plan Supplement provides the identifies and certain other information relating to the initial board of managers of Reorganized PMC Holding, and further provides that the initial officers of the Reorganized Debtors will be substantially the same as the officers of the Debtors on the Effective Date. Also, the Plan Supplement identifies the officers of the Reorganized Debtors, together with their applicable employment titles and their annual salaries for employment. 48. Additionally, on the Effective Date, the Claims Administrator will be

appointed by the Debtors, at the direction of the Creditors Committee, which Person shall be acceptable to the Restructuring Support Parties. The manner in which the Claims Administrator -22-

will be appointed and serve will be in accordance with the Plan and consistent with the best interests of holders of Claims and Interests and with public policy, and no party in interest in these Chapter 11 Cases has suggested anything to the contrary. 49. Bankruptcy Code. B. 50. The Permissive Provisions Contained in the Plan Are Appropriate Section 1123(b)(6) provides that a chapter 11 plan may include any other As such, the Plan satisfies the requirements of section 1123(a)(7) of the

appropriate provision not inconsistent with the applicable provisions of [the Bankruptcy Code]. 11 U.S.C. 1123(b)(6). Among other things, this subsection provides the authority to include in a chapter 11 plan provisions beyond the list of examples of mandatory and permissive provisions set forth in sections 1123(a) and 1123(b) of the Bankruptcy Code. The Plan contains a number of these provisions, each of which is consistent with the applicable provisions of the Bankruptcy Code. i. 51. Treatment of Executory Contracts and Unexpired Leases Consistent with section 1123(b)(2) of the Bankruptcy Code, Article VIII

of the Plan provides that, except as otherwise provided in the Plan or in any contract, instrument, release, indenture or other agreement or document entered into in connection with the Plan, as of the Effective Date, all executory contracts and unexpired leases governed by section 365 of the Bankruptcy Code to which any of the Debtors are parties shall be assumed except for any executory contract or unexpired lease that (i) previously has been assumed or rejected by the Debtors in the Chapter 11 Cases, (ii) previously expired or terminated pursuant to its own terms, (iii) is specifically identified on the Schedule of Rejected Contracts and Leases, or (iv) is the subject of a separate motion to assume or reject such executory contract or unexpired lease filed

-23-

by the Debtors under section 365 of the Bankruptcy Code prior to the Effective Date. Such treatment of executory contracts and unexpired leases is typical in reorganization chapter 11 cases and is appropriate and consistent with the applicable provisions of the Bankruptcy Code. ii. Provisions Regarding the Retention, Enforcement and Settlement of Claims Held by the Debtors and the Courts Retention of Jurisdiction

52.

Consistent with section 1123(b)(3) of the Bankruptcy Code, Article IX.D.

of the Plan provides that, pursuant to section 1141(d) of the Bankruptcy Code, except as otherwise specifically provided in the Plan or in the Confirmation Order, the Distributions and rights that are provided in the Plan shall be in complete satisfaction, discharge and release, effective as of the Effective Date, of any and all Claims and Causes of Action (whether known or unknown) against, liabilities of, liens on, obligations of, rights against, and Interests in, the Debtors or any of their assets or properties, regardless of whether any property or assets shall have been distributed or retained pursuant to the Plan on account of such Claims, rights, and Interests, including Claims and Interests that arose before the Effective Date, any liability (including withdrawal liability to the extent such Claims relate to services performed by employees of the Debtors prior to the Petition Date and that arise from a termination of employment or a termination of any employee or retiree benefit program which occurred prior to the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, in each case whether or not (a) a Proof of Claim or Interest based upon such Claim, debt, right, or Interest was filed, is filed, or deemed filed under section 501 of the Bankruptcy Code, (b) a Claim or Interests based upon such Claim, debt, right, or Interest is allowed under section 502 of the Bankruptcy Code, or (c) the holder of such a Claim, right, or Interest accepted the Plan. Article IX.D. of the Plan further provides that the Confirmation Order

-24-

shall be a judicial determination of the discharge of all Claims against and Interests in the Debtors, subject to the terms thereof and the occurrence of the Effective Date. 53. Additionally, Article IX.C. of the Plan provides that, in accordance with

section 1123(b)(3) of the Bankruptcy Code and except as otherwise provided in the Plan, including Articles VII.D and VII.L.1 thereof, the Debtors (with the consent of the Restructuring Support Parties) and the Reorganized Debtors shall retain all Litigation Rights, and nothing contained in the Plan or the Confirmation Order shall be deemed to be a waiver or relinquishment of any such Litigation Rights. Article IX.C. of the Plan further provides that the Debtors may (but are not required to) enforce all Litigation Rights and all other similar claims arising under applicable state laws, including fraudulent transfer claims, if any, and all other Causes of Action of a trustee and debtor-in-possession under the Bankruptcy Code, and that except as otherwise set forth in Articles VII.D and VII.L.1 of the Plan, the Reorganized Debtors, as applicable, in their sole and absolute discretion, shall determine whether to bring, settle, release, compromise, or enforce any such Litigation Rights (or decline to do any of the foregoing), and shall not be required to seek further approval of the Bankruptcy Court for such action. Finally, Article IX.C. of the Plan provides that except as otherwise set forth in Articles VII.D and VII.L.1 of the Plan, the Debtors (with the consent of the Restructuring Support Parties), the Reorganized Debtors, or any successors thereof may pursue such Litigation Rights in accordance with the best interests of the Reorganized Debtors or any successors holding such rights of action. 54. Finally, pursuant to Article XI of the Plan, the Court shall retain exclusive

jurisdiction over all matters arising out of, and related to, the Chapter 11 Cases and the Plan pursuant to, and for the purposes of, section 105(a) and section 1142 of the Bankruptcy Code and

-25-

for, among other things, those purposes specifically identified in Article XI of the Plan. Significantly, the matters set forth in Article XI of the Plan are matters that the Court would otherwise have jurisdiction over during the pendency of the Chapter 11 Cases. See 28 U.S.C. 157 and 1334. This retention of jurisdiction by the Court post-confirmation is permitted by the Bankruptcy Code. In re Johns-Manville Corp., 97 B.R. 174, 180 (Bankr. S.D.N.Y. 1989). iii. 55. Provisions Regarding the Modification of the Rights of Holders of Claims

Consistent with sections 1123(b)(1) and 1123(b)(5) of the Bankruptcy

Code, Article IV of the Plan modifies or leaves unaffected, as the case may be, the rights of holders of Claims and Interests within each Class. iv. The Plans Release, Exculpation and Injunction Provisions are Appropriate and Consistent with Applicable Law As set forth more fully therein, Article IX.E of the Plan provides that, as

56.

of the Effective Date, the Debtors shall release certain claims and Causes of Action existing as of the Effective Date that the Debtors may have against certain Persons that commonly are released in chapter 11 plans. The Plan does not include non-consensual, third-party releases of Claims. Rather, the Plan provides for third-party releases only by those Persons who (i) directly or indirectly have held or may hold any Claim, (ii) voted to accept the Plan in their capacity as holders of any Claim or Interest and (iii) did not mark their Ballots to indicate their refusal to grant the releases provided for in Article IX.F of the Plan. See Article IX.F of the Plan; see also, In re Zenith Elecs. Corp., 241 B.R. 92, 111 (Bankr. D. Del. 1999). 57. The Plans release, exculpation and injunction provisions will eliminate

the costs and risks of litigation and allow the principals of the Reorganized Debtors to focus on operations after emergence, as opposed to being distracted by litigation (either as a party to such

-26-

litigation themselves or the stakeholders who will bear the burdens of the Debtors investigation, prosecution or participation in such litigation), are necessary and appropriate for the implementation of the Plan and are otherwise consistent with the Bankruptcy Code and Third Circuit precedent. Accordingly, the release, exculpation and injunctive provisions should be approved. a. 58. Releases by the Debtors of Certain Parties

Article IX.E. of the Plan provides that, pursuant to section 1123(b)(3) of

the Bankruptcy Code, effective as of the Effective Date, each Debtor, in its individual capacity and as a debtor in possession for and on behalf of its Estate, shall release and discharge and be deemed to have conclusively, absolutely, unconditionally, irrevocably, and forever released and discharged all Released Parties for and from any and all claims or Causes of Action existing as of the Effective Date in any manner arising from, based on, or relating to, any Claim or Interest that is treated in the Plan, the business or contractual arrangements between any Debtor and any Released Party, the restructuring of Claims and Interests prior to or in the Chapter 11 Cases, or any act, omission, occurrence, or event in any manner related to any such Claims, Interests, corporate or debt restructuring, or the Chapter 11 Cases, including any claim relating to or arising out of the Chapter 11 Cases, the negotiation and filing of the Plan, the filing of the Chapter 11 Cases, the formulation, preparation, negotiation, dissemination, filing,

implementation, administration, confirmation, or consummation of the Plan, the Disclosure Statement, any document filed by the Debtors in respect of the Plan, the Plan Supplement, any employee benefit plan, instrument, release, or other agreement or document created, modified amended or entered into in connection with the Plan. The Reorganized Debtors and any newlyformed entities that will be continuing the Reorganized Debtors businesses after the Effective Date shall be bound, to the same extent that the Debtors are bound, by the releases and -27-

discharges set forth above; provided, however, that the Debtors shall not release any claims or Causes of Action if any, against the Debtors directors as of the Petition Date (other than any director who continued to serve as an officer and a director subsequent to the Petition Date) or any holders of Interests in the Debtors as of the Petition Date in any way relating to (i) the CHI Management Agreements and (ii) any claims of CHI or any other Person or entity arising under or from the rejection of the CHI Management Agreements (the Debtor Releases). 59. The Debtor Releases are the product of extensive arms length and good

faith negotiations among various parties in interest in the Chapter 11 Cases, including the Released Parties, and their respective counsel and professional advisors, if any, and have been critical to obtaining the support of the non-Debtor Released Parties for the Plan. The Debtor Releases are integral and vital to the compromises contained in the Plan and provide consideration for a consensual chapter 11 plan that is significantly beneficial to the Debtors other creditor constituencies. The Debtors have been advised by the non-Debtor Released Parties that unless the Debtor Releases are included in the Plan, the Plan will not have the support of such parties. Furthermore, the non-Debtor Released Parties have advised the Debtors that without the Debtor Releases they will not agree to the terms of the Plan and the treatment of Claims and Interests thereunder, including, without limitation, the Senior Secured Notes Claims and the Senior Notes Claims (collectively, the Non-Debtor Released Party Claims). 60. The contributions of the non-Debtor Released Parties have benefitted the

Debtors Estates and Creditors, because absent the treatment provided for the Non-Debtor Released Party Claims under the Plan, there is a significant possibility that the holders of Allowed Claims would receive substantially less recovery in the Chapter 11 Cases than is currently provided for, and anticipated under, the Plan. Accordingly, the Debtor Releases are an

-28-

integral element of the Plan, which is a global agreement among various parties in the Chapter 11 Cases and premised on all of its mutually-interdependent elements. Such releases will allow the Reorganized Debtors to proceed without the threat of litigation and allow all interested parties to put these Chapter 11 Cases behind them and move forward to focus on strengthening the Debtors businesses for the benefit of the Debtors new shareholders. Moreover, virtually all of the Released Parties played integral and instrumental parts in formulating and implementing the Debtors restructuring, as they shared the common goal of the Debtors prompt and successful emergence from chapter 11 and worked hard to achieve it. 61. By providing the Debtor Releases, the Debtors, their Estates and creditors

and the non-Debtor Released Parties will avoid the burdens and uncertainties necessarily attendant to litigation and the Debtors continued existence in chapter 11. Finally, the

contributions of the Debtors officers, directors and professional advisors have benefitted the Debtors Estates and creditors through, among other things, the negotiation of a consensual chapter 11 plan which, under the facts and circumstances of the Chapter 11 Cases, is in the best interests of the Debtors Estates and creditors. In light of the foregoing, the Debtor Releases are necessary and appropriate under the circumstances of the Chapter 11 Cases and should be approved pursuant to section 1123(b)(3)(A) of the Bankruptcy Code. b. 62. Releases by Non-Debtors

Article IX.F. of the Plan provides for a consensual third-party release and

states that on the Effective Date, each Persons who (a) directly or indirectly, has held, holds, or may hold any Claim, (b) votes to accept the Plan in its capacity as a holder of any Claim or Interest, and (c) does not mark their Ballot to indicate their refusal to grant the releases provided in this paragraph, in consideration for the obligations of the Debtors and the Reorganized Debtors under the Plan including the New Secured Term Loans and the Cash, Reorganized PMC -29-

Holding Membership Interests, and other contracts, instruments, releases, agreements, or documents to be delivered in connection with the Plan (each, a Release Obligor), shall have conclusively, absolutely, unconditionally, irrevocably, and forever released and discharged the Debtors, the Reorganized Debtors, and all Released Parties for and from any Claim or Cause of Action existing as of the Effective Date in any manner arising from, based on, or relating to, in whole or in part, any or all of the Debtors, the subject matter of, or the transaction or event giving rise to, the Claim of such Release Obligor prior to or in connection with the Chapter 11 Cases, the business or contractual arrangements between or among any Debtors and Release Obligor or any Released Party, the restructuring of the claim of such Release Obligor prior to or in connection with the Chapter 11 Cases, or any act, omission, occurrence, or event in any manner related to such subject matter, transaction, obligation, restructuring or the Chapter 11 Cases, including any Claim relating to, or arising out of the Chapter 11 Cases, the filing of the Chapter 11 Cases, the formulation, preparation, negotiation, dissemination, filing,

implementation, administration, confirmation, or consummation of the Plan, the Disclosure Statement, any document filed by the Debtors in respect of the Plan, the Plan Supplement, any employee benefit plan, instrument, release, or other agreement or document, created, modified, amended or entered into in connection with the Plan; provided, however, that nothing in Article IX.F of the Plan shall release (i) any obligations of the Debtors or the Reorganized Debtors arising under the Plan, (ii) any of the Released Parties from any claim based on any act or omission that constitutes gross negligence or willful misconduct as determined by Final Order or (iii) any Claims or Causes of Action against the Debtors directors as of the Petition Date (other than any director who continued to serve as an officer and a director subsequent to the Petition Date) or any holders of Interests in the Debtors as of the Petition Date in any way relating to (x)

-30-

the CHI Management Agreements and (y) any claims of CHI or any other Person or entity arising under or from the rejection of the CHI Management Agreements (collectively, the Third Party Release). 63. Because the Third Party Release is consensual, the Debtors submit that the

release is appropriate under applicable case law. See Zenith Elecs. Corp., 241 B.R. at 111. c. 64. Exculpation

Pursuant to Article IX.G. of the Plan, except as otherwise specifically

provided in the Plan, the Plan Supplement or related documents, the Debtors, the Reorganized Debtors and the Released Parties shall neither have, nor incur any liability to any entity for any prepetition or postpetition act taken or omitted to be taken in connection with, or related to, or arising out of the Chapter 11 Cases, the filing of the Chapter 11 Cases, the formulation, preparation, negotiation, dissemination, filing, implantation, administration, confirmation or consummation of the Plan, the Disclosure Statement, the exhibits to the Plan and the Disclosure Statement, the Plan Supplement documents, any employee benefit plan, instrument, release or other agreement or document created, modified, amended or entered into in connection with the Plan, except for their willful misconduct or gross negligence as determined by a Final Order and except with respect to obligations arising under confidentiality agreements, joint interest agreements, or protective orders, if any, entered during the Chapter 11 Cases; provided, however, that each Released Party shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities pursuant to, or in connection with, the above referenced documents, actions, or inactions; provided, further, that Debtors directors as of the Petition Date (other than any director who continued to serve as an officer and a director subsequent to the Petition Date) and any holders of Equity Interests as of the Petition Date shall not be exculpated from any liability for any act or omission in connection with, related to, or arising out of (i) the CHI -31-

Management Agreements or (ii) any claims of CHI or any other Person or entity arising under or from the rejection of the CHI Management Agreements (the Exculpation). Because the Exculpation excludes any acts that constitute willful misconduct or gross negligence, the Debtors submit that it is consistent with the exculpation clause approved in In re PWS Holding Corp., 228 F.3d 224, 245-46 (3d Cir. 2000), and routinely approved in other chapter 11 plans in this District. 65. Accordingly, the Exculpation is appropriate and should be approved. d. 66. Injunction

Finally, Article IX.H. of the Plan contains an injunction provision (the

Injunction) which the Debtors believe is necessary to enforce and preserve the Debtor Releases, the Third Party Release and the Exculpation and should therefore be approved. Furthermore, in compliance with Bankruptcy Rule 3016, Article VII.I.8 of the Disclosure Statement, Article IX.H of the Plan, and the proposed Confirmation Order filed with the Court identify all acts to be enjoined by, and all Persons that would be subject to, the Injunction. 67. C. The Injunction is therefore appropriate and should be approved.

The Plan Proponents Have Complied with the Applicable Provisions of the Bankruptcy Code (Section 1129(a)(2)) 68. Section 1129(a)(2) of the Bankruptcy Code requires that the proponent of

a chapter 11 plan comply with the applicable provisions of the Bankruptcy Code. 11 U.S.C. 1129(a)(2). The principal purpose of this section of the Bankruptcy Code is to ensure that a plan proponent has complied with the requirements of sections 1125 and 1126 of the Bankruptcy Code in soliciting acceptances of a chapter 11 plan. See In re Resorts Intl Inc., 145 B.R. 412, 468-69 (Bankr. D.N.J. 1990); see also H.R. Rep. No. 95-595, at 412 (1977), as reprinted in 1978 U.S.C.C.A.N. 5963, 6368.

-32-

69.

Here, the Debtors, as the proponents of the Plan, have complied with all

applicable provisions of the Bankruptcy Code, including, without limitation, sections 1125 and 1126 thereof, and Bankruptcy Rules 3017 and 3018 regarding the Disclosure Statement and solicitation of the Plan. On September 9, 2011, the Court entered the Disclosure Statement Order, thereby approving the Debtors proposed procedures for solicitation and tabulation of votes to accept or reject the Plan. As evidenced by the Solicitation Package Affidavits of Service, the Disclosure Statement, the Plan, the appropriate Ballots and Master Ballots, the Confirmation Hearing Notice, and the Notice of Non-Voting Status (as defined in the Disclosure Statement Order) and all other related documents were distributed in accordance with the Disclosure Statement Order. Furthermore, the Debtors have complied with all other orders of this Court entered during the pendency of the Chapter 11 Cases and with the applicable provisions of the Bankruptcy Code and Bankruptcy Rules with respect to post-petition disclosure and solicitation of acceptances of the Plan. 70. Accordingly, the Debtors have fully complied with all provisions of the

Bankruptcy Code and, in particular, with the provisions of section 1125 of the Bankruptcy Code. As a result, the Debtors have satisfied the requirements of section 1129(a)(2) of the Bankruptcy Code. See In re Drexel Burnham Lambert Group Inc., 138 B.R. 723, 769 (Bankr. S.D.N.Y. 1992) (section 1129(a)(2) of the Bankruptcy Code satisfied where debtors complied with all provisions of the Bankruptcy Code and the Bankruptcy Rules governing notice, disclosure and solicitation relating to plan). D. The Plan Has Been Proposed in Good Faith (Section 1129(a)(3)) 71. Section 1129(a)(3) of the Bankruptcy Code requires that a chapter 11 plan

be proposed in good faith and not by any means forbidden by law. 11 U.S.C. 1129(a)(3). Although not defined in the Bankruptcy Code, good faith has been interpreted by the courts to -33-

include: (i) the debtors legitimate and honest purpose in proposing the plan and reasonable hope of success, Century Glove, Inc., 1993 U.S. Dist. LEXIS 2286, at *15; (ii) a showing that the plan was proposed with honesty and good intentions, Kane v. Johns-Manville Corp., 843 F.2d 636, 649 (2d Cir. 1988) (citations omitted); and (iii) the existence of a reasonable likelihood that the plan will achieve a result consistent with the objectives and purposes of the Bankruptcy Code, In re Madison Hotel Assocs., 749 F.2d 410, 425 (7th Cir. 1984) (citations omitted). The Court must also consider the totality of the circumstances surrounding a chapter 11 plan to determine if it has been proposed in good faith. In re New Valley Corp., 168 B.R. 73, 81 (Bankr. D.N.J. 1994); See Century Glove, 1993 WL 239489 at *4. 72. The Debtors submit that they have proposed the Plan in good faith and not

by any means forbidden by law. The Plan itself, the process leading to its formulation, and the overwhelming support for the Plan received from voting Classes provides independent evidence of the Debtors good faith. The Debtors and their directors, officers, employees, agents,

affiliates and professionals (acting in such capacity) have acted in good faith within the meaning of section 1125(e) of the Bankruptcy Code, thereby satisfying the good faith requirement of Section 1129(a)(3). E. Payments for Services or Costs and Expenses (Section 1129(a)(4)) 73. Section 1129(a)(4) of the Bankruptcy Code requires that any payments by

a debtor for services or for costs and expenses in or in connection with the case, or in connection with the plan and incident to the case, either be approved by the Court as reasonable or subject to the approval of the Court as reasonable. 11 U.S.C. 1129(a)(4). In other words, the debtor must disclose to the Court all professional fees and expenses, and such fees and expenses must be subject to Court approval. In re Texaco, Inc., 85 B.R. 934, 939 (Bankr. S.D.N.Y. 1988). To date, all such payments have been approved by this Court or are subject to -34-

the approval of the Court pursuant to the Plan. The procedures for the Courts review and ultimate determination of the fees, costs and expenses to be paid by the Debtors in connection with the Chapter 11 Cases satisfy the requirements of section 1129(a)(4) of the Bankruptcy Code. Resorts Intl, 145 B.R. at 475-76 (stating that as long as fees, costs and expenses are subject to final approval of the court, section 1129(a)(4) of the Bankruptcy Code is satisfied). F. Service of Certain Individuals (Section 1129(a)(5)) 74. Section 1129(a)(5) of the Bankruptcy Code requires that a plan proponent

disclose, among other things, the identity and affiliations of any individual proposed to serve, after confirmation of the plan, as a director, officer, or voting trustee of the debtor . . . or a successor to the debtor under the plan, and require a finding that the appointment to, or continuance in, such office of such individual, is consistent with the interests of creditors and equity security holders and with public policy. 11 U.S.C. 1129(a)(5)(A)(i)-(ii). 75. In accordance with section 1129(a)(5) of the Bankruptcy Code, Articles

V.C and V.E of the Plan sets forth the means by which the Reorganized Debtors managers and officers shall be selected. The Plan Supplement provides the identifies and certain other information relating to the initial board of managers of Reorganized PMC Holding, and further provides that the initial officers of the Reorganized Debtors will be substantially the same as the officers of the Debtors on the Effective Date. Also, the Plan Supplement identifies the officers of the Reorganized Debtors, together with their applicable employment titles and their annual salaries for employment. In addition, the appointment of the Claims Administrator is consistent with the best interests of the holders of Claims and Interests and with public policy. 76. the Bankruptcy Code. Accordingly, the Plan satisfies the requirements of section 1129(a)(5) of

-35-

G.

Rate Changes (Section 1129(a)(6)) 77. Section 1129(a)(6) of the Bankruptcy Code requires any governmental

regulatory commission having jurisdiction over the rates charged by the post-confirmation debtor in the operation of its business to approve any rate change provided for in a chapter 11 plan. 11 U.S.C. 1129(a)(6). The Plan does not provide for or contemplate any rate change that would require the approval of any regulatory agency. 78. the Plan. H. The Plan Satisfies the Best Interests Test (Section 1129(a)(7)) 79. The Bankruptcy Code protects creditors and equity holders which are Accordingly, section 1129(a)(6) of the Bankruptcy Code is inapplicable to

impaired by a chapter 11 plan and have not voted to accept such plan through the best interests test of section 1129(a)(7) of the Bankruptcy Code. The best interests test requires that holders of impaired claims or interests which do not vote to accept the chapter 11 plan at issue 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 [the Bankruptcy Code] on such date. 11 U.S.C. 1129(a)(7)(A). If the bankruptcy court finds that each non-consenting member of an impaired class will receive at least as much under a chapter 11 plan as it would receive in a chapter 7 liquidation, then the plan satisfies the best interests test. Century Glove, 1993 U.S. Dist. LEXIS 2286, at *23. Claims and Interests in Classes 1, 2, 6, 7 and 9B are not implicated because the creditors in these Classes are Unimpaired under the Plan. Claims and Interests in Classes 3, 4, 5, 8 and 9A are Impaired under the Plan, and the best interests test must therefore be applied.

-36-

80.

With respect to each impaired Class of Claims or Interests, the Voting

Declaration and the Debtors liquidation analysis attached as Exhibit D to the Disclosure Statement (the Liquidation Analysis) indicate that each holder of a Claim or Interest in an Impaired Class has voted to accept the Plan or will receive or retain under the Plan on account of such Claim or Interest property of a value, as of the Effective Date, that is not less than the amount that such holder would so receive or retain if the Debtors Estates were liquidated under chapter 7 of the Bankruptcy Code on such date. The Liquidation Analysis was prepared, under the direction and supervision of the Debtors management, by Whitby Santarlasci & Company, the Debtors financial advisor and investment banker in connection with the Chapter 11 Cases, with assistance from the Debtors personnel and professional advisors. The Liquidation Analysis is subject to the assumptions, qualifications and limitations set forth therein and in the Disclosure Statement. 81. The Debtors believe that the ranges of estimated liquidation values set

forth in the Liquidation Analysis are fair and reasonable estimates of the value of the Debtors assets upon a liquidation under chapter 7 of the Bankruptcy Code, and that based on those estimates, each Class of Claims and Interests under the Plan will receive under the Plan at least as much as that Class would receive in a hypothetical chapter 7 liquidation. 82. The Liquidation Analysis generally examines the effects that a conversion

of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code could have on the proceeds available for distribution under the Plan to holders of Allowed Claims. Based upon the Liquidation Analysis, holders of Allowed Administrative Claims, Priority Tax Claims, Other Priority Claims and Other Secured Claims would receive an estimated 0% recovery on their Allowed Claims in a chapter 7 liquidation, whereas to the contrary any and all such Allowed

-37-

Claims are Unimpaired under the Plan. Likewise, holders of Allowed Senior Notes Claims, General Unsecured Claims and Intercompany Claims would receive an estimated recovery of 0% with respect to their Allowed Claims under a chapter 7 liquidation scenario; however, under the Plan said creditors will receive a meaningful recovery under the Plan. Holders of Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI are not receiving any Distributions under the Plan. 83. In light of the foregoing, the Debtors submit that the Plan satisfies the

requirements of section 1129(a)(7) of the Bankruptcy Code, as the recoveries realized by holders of Allowed Senior Secured Notes Claims, Senior Notes Claims, and General Unsecured Claims under the Plan are estimated to be greater than the distributions such Holders would receive in a hypothetical chapter 7 case, and the Holders of Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI are not receiving any distribution under the Plan. I. Acceptance of the Plan by Each Impaired Class (Section 1129(a)(8)) 84. Section 1129(a)(8) of the Bankruptcy Code requires that each class of

claims or interests must either accept a chapter 11 plan or be unimpaired under such plan. 11 U.S.C. 1129(a)(8). A class of claims accepts a plan if the holders of at least two-thirds in dollar amount and more than one-half in the number of claims in the class vote to accept the plan, counting only those claims whose holders actually vote to accept or reject the plan. 11 U.S.C. 1126(c). A class of interests accepts a plan if the holders of at least two-thirds in amount of the interests in the class vote to accept the plan, counting only those claims whose holders actually vote to accept or reject the plan. 11 U.S.C. 1126(d). 85. Class 1 Other Priority Claims, Class 2 Other Secured Claims, Class 6

Convenience Class Claims, Class 7 Intercompany Claims and Class 9B Equity Interests in the Other Subsidiary Debtors are deemed to have accepted the Plan, and as evidenced by the Voting -38-

Declaration, the Class 3 Senior Secured Notes Claims, the Class 4 Senior Notes Claims and the Class 5 General Unsecured Claims voted to accept the Plan. Because the Plan provides that holders of Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI will not receive or retain any property under the Plan on account of such Interests, such Class is deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code. Nonetheless, the Plan is confirmable because, for the reasons set forth immediately below, the Plan satisfies section 1129(b)(1) of the Bankruptcy Code (i.e., the cramdown requirements) with respect to such Class 9A Equity Interests in PMC Holding and PMCI. J. Confirmation of the Plan Over Non-Acceptance of Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI Deemed to Have Rejected the Plan (Section 1129(b)) 86. Section 1129(b) of the Bankruptcy Code provides a mechanism for

confirmation of a chapter 11 plan when the plan is not accepted by all impaired classes of claims or interests thereunder. Specifically, section 1129(b) provides, in pertinent part: [I]f all of the applicable requirements of subsection (a) of [section 1129] 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. 11 U.S.C. 1129(b)(1). This section of the Bankruptcy Code essentially provides two (2) requirements for cramdown of a chapter 11 plan on a dissenting impaired class: (i) that the plan does not discriminate unfairly; and (ii) that the plan is fair and equitable with respect to such class. 11 U.S.C. 1129(b)(1). i. The Plan Complies with Section 1129(b)(1) Because It Does Not Discriminate Unfairly Against Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI

-39-

87.

The requirement under section 1129(b)(1) of the Bankruptcy Code that a

chapter 11 plan not discriminate unfairly against impaired, dissenting classes focuses on the treatment of the dissenting class relative to other classes consisting of similar legal rights. See H.R. Rep. No. 95-595, at 416 (The plan may be confirmed . . . if the class is not unfairly discriminated against with respect to equal classes and if junior classes will receive nothing under the plan. . . .); see also In re Buttonwood Partners, Ltd., 111 B.R. 57, 62 (Bankr. S.D.N.Y. 1990) (same). Moreover, section 1129(b)(1) does not prohibit discrimination among classes; it only prohibits discrimination that is unfair with respect to the class or classes that do not accept the plan. In re 11,111, Inc., 117 B.R. 471, 478 (Bankr. D. Minn. 1990). The weight of judicial authority holds that a chapter 11 plan unfairly discriminates in violation of section 1129(b) of the Bankruptcy Code only if similar claims are treated differently without a reasonable basis for the disparate treatment. In re Kennedy, 158 B.R. 589, 599 (Bankr. D.N.J. 1993); In re Buttonwood Partners, Ltd., 111 B.R. at 63. Thus, with respect to non-accepting classes, there is no unfair discrimination if: (i) the classes comprise dissimilar claims or

interests; or (ii) taking into account the particular facts and circumstances of the case, there is a reasonable basis for such disparate treatment. In re Johns-Manville Corp., 68 B.R 618, 636 (Bankr. S.D.N.Y. 1986); Buttonwood Partners, 111 B.R. at 63; In re Rivera Echevarria, 129 B.R. 11, 13 (Bankr. D.P.R. 1991). 88. Here, the Plan does not discriminate unfairly against the holders of Class 8

Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI, as a reasonable basis exists for separately classifying such holders of Interests from the holders of Claims in other Classes. Separately classifying these Holders simply reflects their different contractual and legal rights and is therefore appropriate.

-40-

ii.

The Plan Complies with Section 1129(b)(1) Because It Is Fair and Equitable with Respect to Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI

89.

Under section 1129(b)(2) of the Bankruptcy Code, a plan is fair and

equitable with respect to a dissenting class of interests if it follows the absolute priority rule. See 11 U.S.C. 1129(b)(2)(C)(ii); see also Bank of Am. Natl Trust & Savs. Assn v. 203 N. LaSalle St. Pship, 526 U.S. 434, 441-442 (1999); In re PPI Enters. (U.S.), Inc., 228 B.R. 339, 352 (Bankr. D. Del. 1998); In re Union Meeting Partners, 165 B.R. at 569. Under the Plan, no holder of any Interest that is junior to Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI will receive or retain any property under the Plan on account of such junior Interest. 90. Accordingly, the Plan satisfies the absolute priority rule of section

1129(b)(2) of the Bankruptcy Code and is fair and equitable with respect to Class 8 Subordinated Claims and Class 9A Equity Interests in PMC Holding and PMCI. K. Treatment of Priority Claims (Section 1129(a)(9)) 91. Section 1129(a)(9) of the Bankruptcy Code contains a number of

requirements concerning the payment of priority claims. 11 U.S.C. 1129(a)(9). The Debtors submit that the Articles III and IV of the Plan provide for the treatment of Allowed Claims entitled to priority pursuant to section 507(a)(2)-(8) of the Bankruptcy Code in a manner consistent with section 1129(a)(9) of the Bankruptcy Code. L. Acceptance of at Least One Impaired Class (Section 1129(a)(10)) 92. If a chapter 11 plan has one or more impaired classes of claims, section

1129(a)(10) of the Bankruptcy Code requires that at least one (1) such class vote to accept the plan, determined without including any acceptance of the plan by any insider. 11 U.S.C.

-41-

 1129(a)(10). As evidenced by the Voting Declaration, Class 3 Senior Secured Notes Claims, Class 4 Senior Notes Claims, and Class 5 General Unsecured Claims, each an Impaired Class of Claims entitled to vote on the Plan, have accepted the Plan, excluding the votes cast by any insiders, as that term is defined in section 101(31) of the Bankruptcy Code. 93. Code. M. Feasibility of the Plan (Section 1129(a)(11)) 94. Section 1129(a)(11) of the Bankruptcy Code provides that a chapter 11 Accordingly, the Plan satisfies section 1129(a)(10) of the Bankruptcy

plan may be confirmed only if [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). This requirement, commonly known as the feasibility standard, usually encompasses two interrelated determinations: (i) the debtors ability to consummate the

provisions of the plan; and (ii) the debtors ability to reorganize as a viable entity. In re Lakeside Global II, Ltd., 116 B.R. 499, 506 (Bankr. S.D. Tex. 1989) (stating that the definition of feasibility has been slightly broadened and contemplates whether [a] debtor can realistically carry out its Plan . . . and [b] whether the Plan offers a reasonable prospect of success and is workable). The courts have also universally interpreted the statute to mean that a debtor need only demonstrate a reasonable assurance of commercial viability, and the court need not require a guarantee of success in order to find that a plan satisfies the feasibility requirement. See e.g., In re T-H New Orleans Ltd. Pship, 116 F.3d 790, 801 (5th Cir. 1997); In re Briscoe Enters., Ltd., 994 F.2d 1160, 1165-66 (5th Cir. 1993); Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988); In re Prussia Assocs., 322 B.R. 572, 584 (Bankr. E.D. Pa. 2005); In re Greate Bay Hotel

-42-

& Casino, Inc., 251 B.R. 213, 226 (Bankr. D.N.J. 2000); Corestates Bank, NA. v. United Chem. Tech., Inc., 202 B.R. 33, 45 (E.D. Pa. 1996). 95. While the debtor bears the burden of proving plan feasibility, the

applicable standard is by a preponderance of the evidence -- proof that a given fact is more likely than not. In re Briscoe Enters., Ltd., 994 F.2d at 1164; see also In re T-H New Orleans Ltd. Pship, 116 F.3d at 802; Corestates Bank, NA, 202 B.R. at 45. Further, a number of courts have held that this constitutes a relatively low threshold of proof. In re Eddington Thread Mfg. Co., 181 B.R. 826, 833 (Bankr. E.D. Pa. 1995); In re Mayer Pollack Steel Corp., 174 B.R. 414, 423 (Bankr. E.D. Pa. 1994) (stating that the debtors have established that they meet the requisite low threshold of support for the Plan as a viable undertaking ...); see also In re Briscoe Enters. Ltd., 994 F.2d at 1116 (upholding the bankruptcy courts ruling that a reorganization that had only a marginal prospect of success was feasible because only a reasonable assurance of commercial viability was required). The courts have also made clear that speculative prospects of failure cannot defeat feasibility. The mere prospect of financial uncertainty cannot defeat confirmation on feasibility grounds. In re WorldCom, Inc., No. 02-13533-AJG, 2003 Bankr. LEXIS 1401, at *170 (Bankr. S.D.N.Y. Oct. 31, 2003). 96. As further set forth in the Trungale Declaration and the Santarlasci

Declaration, upon emergence from bankruptcy, the Debtors, through their reorganization, will have significantly reduced their debt obligations. The Debtors have also negotiated an Exit Financing that will provide adequate liquidity for the Reorganized Debtors working capital needs at emergence, have maintained normal trade credit terms with the majority of their principal suppliers, and have eliminated or re-negotiated lease terms on a number of

underperforming and non-performing restaurant locations in their pre-petition restaurant

-43-

portfolio through the reorganization process, which should materially improve the Debtors overall financial health and performance. Consequently, the Debtors will have more than sufficient ability to pay their debts as they come due. 97. Since the Plan expressly provides for the reorganization of the Debtors,

the Debtors submit that section 1129(a)(11) of the Bankruptcy Code is satisfied. The Plan provides for the Debtors Assets to vest in each respective Reorganized Debtor on the Effective Date free and clear of all Liens, Claims, charges, or other encumbrances such that each Reorganized Debtors may operate its business and conduct its affair, and may use, acquire, or dispose of their property as and assets and compromise or settle any Claims, Interest or Causes of Action. Moreover, the Debtors estimate that they will have sufficient Cash to ensure that the Holders of Allowed Administrative Claims, Professional Fee Claims, Priority Tax Claims and DIP Financing Claims and Allowed Claims in Classes 1 and 2 are satisfied in full, and Classes 3, 4, 5 and 6 will receive the Distributions required under the Plan. Additionally, Article VII.L.4. of the Plan provides for the creation and maintenance of a certain General Unsecured Claims Reserve for the benefit of any holders of Disputed Claims, subject to the terms of the Plan with respect thereto. 98. Accordingly, the Debtors submit that the Plan is feasible and meets the

requirements of section 1129(a)(11) of the Bankruptcy Code. In re Revco, 131 B.R. 615, 622 (Bankr. N.D. Ohio 1990) (holding that [s]ection 1129(a)(11) is satisfied as the plan provides that the property of [the] Debtors shall be liquidated). N. Payment of Statutory Bankruptcy Fees (Section 1129(a)(12)) 99. Section 1129(a)(12) of the Bankruptcy Code requires that all fees payable

under 28 U.S.C. 1930 be paid or that the proposed chapter 11 plan provide for their payment on the effective date of the plan. 11 U.S.C. 1129(a)(12). Article XII.A. of the Plan provides -44-

that all fees due and payable pursuant to section 1930 of Title 28 of the United States Code prior to the Effective Date shall be paid by the Debtors on or before the Effective Date and all such fees payable after the Effective Date shall be paid by the applicable Reorganized Debtor. 100. Bankruptcy Code. O. Satisfaction of Retiree Benefits (Section 1129(a)(13)) 101. Section 1129(a)(13) of the Bankruptcy Code requires that a chapter 11 Therefore, the Plan satisfies the requirements of section 1129(a)(12) of the

plan provide for the continuation of retiree benefits at levels established pursuant to section 1114 of the Bankruptcy Code for the duration of the period that the debtor has obligated itself to provide such benefits. 11 U.S.C. 1129(a)(13). Article VIII.E of the Plan provides that as of and subject to the Effective Date, all employment and severance agreements and policies, and all employee compensation and benefit plans, policies and programs of the Debtors applicable generally to their employees, including agreements and programs subject to section 1114 of the Bankruptcy Code, as in effect on the Effective Date, including all savings plans, retirement plans, health care plans, disability plans, severance benefit plans, incentive plans, and life, accidental death, and dismemberment insurance plans, nonqualified deferred compensation plans, and senior executive retirement plans shall be deemed to be, and shall be treated as though they are, executory contracts that are assumed under the Plan, and the Debtors obligations under all such agreements and programs shall survive the Effective Date of the Plan, without prejudice to the Reorganized Debtors rights under applicable nonbankruptcy law to modify, amend, or terminate the foregoing arrangements in accordance with the terms and provisions thereof, except for (i) such executory contracts or plans specifically rejected pursuant to the Plan (to the extent such rejection does not violate section 1114 of the Bankruptcy Code), and (ii) such

-45-

executory contracts or plans as have previously been terminated, or rejected, pursuant to a Final Order, or specifically waived by the beneficiaries of such plans, benefits, contracts, or programs 102. Bankruptcy Code. P. Principal Purpose of the Plan (Section 1129(d)) 103. Section 1129(d) of the Bankruptcy Code provides that [n]otwithstanding As such, the Plan satisfies the requirements of section 1129(a)(13) of the

any other provision of this section, on request of a party in interest that is a governmental unit, the court may not confirm a plan if 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 principal purpose of the Plan is neither of the foregoing, and no governmental entity has filed any objection to the Plan asserting any such avoidance. 104. Bankruptcy Code. Q. Satisfaction of Bankruptcy Rule 3016(a) 105. Bankruptcy Rule 3016(a) provides that [e]very proposed plan and any Accordingly, the Plan satisfies the requirements of section 1129(d) of the

modification thereof shall be dated and, in a chapter 11 case, identified with the name of the entity or entities submitting or filing it. The Plan is dated and identifies the Debtors as the entities submitting the Plan; therefore, the Plan complies with Bankruptcy Rule 3016(a). III. RESOLUTIONS OF, OR RESPONSES TO, OBJECTIONS TO CONFIRMATION 106. As previously noted herein, as of the filing of this Memorandum, the

Debtors received nine (9) Plan Objections. With the exception of the Tri-State Objection, all of the Plan Objections have been resolved, or are anticipated to be resolved, through the proposed Confirmation Order.

-46-

IV.

CONCLUSION 107. For all the foregoing reasons, the Plan should be confirmed pursuant to

section 1129 of the Bankruptcy Code. Dated: October 27, 2011 Wilmington, Delaware YOUNG CONAWAY STARGATT & TAYLOR, LLP By: /s/ Robert F. Poppiti, Jr. Robert S. Brady (No. 2847) Robert F. Poppiti, Jr. (No. 5052) The Brandywine Building, 1000 West Street, 17th Floor Wilmington, DE 19801 Telephone: (302) 571-6600 Facsimile: (302) 571-1253 - AND TROUTMAN SANDERS LLP Mitchel H. Perkiel Brett D. Goodman The Chrysler Building, 405 Lexington Avenue New York, NY 10174 Telephone: (212) 704-6000 Facsimile: (212) 704-6288 COUNSEL FOR PERKINS & MARIE CALLENDERS INC., ET AL., Debtors and Debtors-in-Possession

-47-