UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ------------------------------------------------------------x In re Chapter 11 COLLINS & AIKMAN CORPORATION,

et al., Debtors. -------------------------------------------------------------x COLLINS & AIKMAN PRODUCTS CO. and COLLINS & AIKMAN AUTOMOTIVE EXTERIORS, INC. Plaintiffs, - against ARMADA RUBBER MANUFACTURING CO., Defendant. ------------------------------------------------------------x DEBTORS' MOTION TO APPROVE SETTLEMENT AND COMPROMISE OF CLAIMS WITH RESPECT TO ARMADA RUBBER MANUFACTURING CO. The above-captioned debtors Collins & Aikman Products Co. and Collins & Aikman Automotive Exteriors, Inc. (the Debtors), for their Motion to Approve Settlement and Compromise of Claims With Respect To Armada Rubber Manufacturing Co. (the Motion), respectfully state as follows: INTRODUCTION 1. By this Motion, the Debtors request authority to settle and compromise certain Adv. Pro. No. 07-5710 (SWR) Case No. 05-55927 (SWR) (Jointly Administered) Hon. Steven W. Rhodes

claims the Debtors have against Armada Rubber Manufacturing Co. (the Defendant), and requests that the Court enter an Order in the form annexed hereto as Exhibit A. If the Motion is granted, the Debtors will compromise an alleged $2,535.00 claim against the Defendant for

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$2,535.00 and the parties will exchange mutual releases with respect to claims based on the post-petition payments referred to in the Complaint. JURISDICTION 2. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 1334. This

matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). 3. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. BACKGROUND 4. On May 17, 2005 (the Petition Date), the Debtors filed voluntary petitions

for relief (collectively, the Chapter 11 Cases) under chapter 11 of the Bankruptcy Code, 11 U.S.C. 101-1330 (the Bankruptcy Code). The Debtors are operating their businesses and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. The Debtors cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure (as amended, the Bankruptcy Rules). No trustee or examiner has been appointed in any of the Chapter 11 Cases. 5. On May 24, 2005, the United States Trustee appointed an official committee of

unsecured creditors pursuant to section 1102 of the Bankruptcy Code (the Committee). 6. Prior to and subsequent to the Petition Date, the Defendant allegedly provided

certain services, materials and/or equipment to the Debtors at the Debtors' Morristown, Indiana manufacturing plant. 7. On or about May 16, 2007, the Debtors commenced the above-captioned

adversary proceeding to recover $2,535.00 of alleged post-petition overpayments (the Action).

8.

The Defendant and the Debtors were able to reconcile their accounts relating to

the payments referred to in the Action and Defendant acknowledges that it owes the Debtors the $2,535.00 the Debtors sought to recover in the Action. THE SETTLEMENT 9. 10. The parties have engaged in negotiations to resolve the Action. Based upon all of the foregoing, including the investigation by the Debtors into

the facts and circumstances surrounding the Action and the parties efforts to reconcile their books and records, in the sound exercise of their business judgment, the Debtors believe that it would be in the best interests of their estates and their creditors to resolve the Action pursuant to the terms of the Settlement Agreement (the Settlement Agreement). The Settlement Agreement settles only the claims asserted in the Action and the parties to the Settlement Agreement reserve all other claims against each other. THE TERMS 11. If the Court approves the Settlement Agreement, a copy of which is attached

hereto as Exhibit B: a. b. The Defendant shall pay the Debtors the sum of $2,535.00; The Settlement Agreement by and between the Debtors and Defendant, a copy of which is attached hereto as Exhibit B, will become effective and the parties will release each other with respect to claims based on the postpetition payments referred to in the Action. 12. Based upon all of the foregoing, including the investigation by Debtors into the

facts and circumstances surrounding the dispute, the Debtors, in the sound exercise of their business judgment, believe that it would be in the best interests of the Debtors' estates and their creditors to resolve these disputes upon the terms and conditions set forth herein.

13.

Under Fed. R. Bankr. P. 9019, on motion and after notice and a hearing, the Court

may approve a compromise or settlement after notice is provided to all parties required to be served. 14. Settlements are generally favored by the law. In re Dow Coming Corp., 198 B.R. The benchmark for determining the propriety of a

214, 221 (Bankr. E.D. Mich. 1996).

bankruptcy settlement is whether the settlement is in the best interests of the estate. In re Lee Way Holding Corp., 120 B.R. 881, 890 (Bankr. S.D. Ohio 1990). In considering whether to approve a settlement as in the best interest of the debtor's bankruptcy estate, a bankruptcy court should consider, among other things: (i) the probability of the party's success in the litigation; (ii) the complexity of the litigation; and (iii) the litigation's expense, inconvenience and delay. Protective Committee for Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414 (1968); Matter of Energy Cooperative, Inc., 866 F.2d 1921 (7th Cir. 1989); In re Lee Way Holding Corp., supra. 15. A bankruptcy court should approve a proposed settlement if it is fair and equitable

and unless it falls below the lowest point in the range of reasonableness. In re Dow Corning, 198 B.R. 214, 222 (Bankr. E.D. Mich. 1996); see also, In re New Concept Housing, Inc., 951 F.2d 932, 938 (8th Cir. 1991). 16. Giving appropriate consideration to the above factors, the risk to the Debtors, the

complexity of the issues and the other risks inherent in litigation and weighing the expenses which the Debtors would necessarily incur in further prosecuting these claims through trial, and the delay and inconvenience which would be involved therewith, the Debtors believe that the Settlement is in the best interest of the Debtors' Estate. REQUEST FOR HEARING 17. The Debtors respectfully request that the Court schedule a Hearing on this matter

on an existing omnibus hearing date in the Chapter 11 Case, if an objection to the motion is filed. 4

NOTICE 18. Notice of this Motion has been given to the Core Group and Affected Parties as

required by the Case Management Procedures. In light of the nature of the relief requested, the Debtor submits that no further notice is required. NO PRIOR REQUEST 19. other court. No prior motion for the relief requested herein has been made to this or any

WHEREFORE, the Debtors respectfully request that this Court approve the Settlement Agreement and enter the proposed Order attached hereto as Exhibit A and grant to the Debtors such other and further relief as is just and appropriate in the circumstances. Dated: Uniondale, New York August 1, 2007 ROSEN SLOME MARDER LLP

By: /s/ Alan E. Marder Alan E. Marder 333 Earle Ovington Boulevard Suite 901 Uniondale, New York 11553-3622 (516) 227-1600 and Boyle Burdett H. William Burdett, Jr., Esq. 14950 East Jefferson Suite 200 Grosse Pointe Park, MI 48230 Attorneys for Collins & Aikman Products Co. and Collins & Aikman Automotive Exteriors, Inc.

G:\Collins & Aikman\Lit\Complaints\Armada Rubber\Motion to approve settlement 8-1-07.rtf

Exhibit A Armada Rubber Manufacturing Co. Check # 22810 94358 96306 100566 95725 105898 Date Paid 6/15/2005 6/13/2006 6/21/2006 7/17/2006 6/19/2006 8/15/2006 Over Paid Overpayment $ $ $ $ $ $ $ 1,625.00 980.00 (980.00) (980.00) 980.00 1,960.00 3,585.00

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ------------------------------------------------------------x In re Chapter 11 COLLINS & AIKMAN CORPORATION, et al., Debtors. -------------------------------------------------------------x COLLINS & AIKMAN PRODUCTS CO. and COLLINS & AIKMAN AUTOMOTIVE EXTERIORS, INC. Plaintiffs, - against ARMADA RUBBER MANUFACTURING CO., Defendant. ------------------------------------------------------------x NOTICE OF DEBTORS' MOTION TO APPROVE SETTLEMENT AND COMPROMISE OF CLAIMS WITH RESPECT TO ARMADA RUBBER MANUFACTURING CO. Plaintiffs Collins & Aikman Products Co. and Collins & Aikman Automotive Exteriors, Inc. have filed papers with this court to approve the settlement and compromise of claims asserted in the above-referenced action Armada Rubber Manufacturing Co. (the Motion) Your rights may be affected. You should read these papers carefully and discuss them with your attorney, if you have one in this bankruptcy case. (If you do not have an attorney, you may wish to consult one. If you do not want the court to grant the requested relief, or if you want the court to consider your views on the above Motion, within 15 days, you or your attorney must: Adv. Pro. No. 07-5710 (SWR) Case No. 05-55927 (SWR) (Jointly Administered) Hon. Steven W. Rhodes

1. position at:

File with the court a written response or an answer, explaining your

United States Bankruptcy Court 211 W. Fort Street, Suite 2100 Detroit, MI 48226 If you mail your response to the court for filing, you must mail it early enough so the court will receive it on or before the date stated above. You must also mail a copy to: JOHN T. GREGG, ESQ. Barnes & Thornburg, LLC 300 Ottawa Avenue, NW Suite 500 Grand Rapids, MI 49503 ALAN E. MARDER Attorney for Plaintiffs Rosen Slome Marder LLP 333 Earle Ovington Blvd., Suite 901 Uniondale, New York 11553-3622 BOYLE BURDETT 14950 East Jefferson Suite 200 Grosse Pointe Park, MI 48230 If a response or answer1 is timely filed and served, the Clerk will schedule

2.

a hearing on the Motion and you will be served with a notice of the date, time and location of the hearing.

Response or answer must comply with F.R. Civ. P. 8(b), (c) and (e).

If you or your attorney do not take these steps, the court may decide that you do not oppose the relief sought in the Motion or objection and may enter an order granting that relief. Dated: Uniondale, New York August 1, 2007 ROSEN SLOME MARDER LLP

By: /s/ Alan E. Marder Alan E. Marder 333 Earle Ovington Boulevard Suite 901 Uniondale, New York 11553-3622 (516) 227-1600 And Boyle Burdett H. William Burdett, Jr., Esq. 14950 East Jefferson Suite 200 Grosse Pointe Park, MI 48230 Attorneys for Plaintiffs Collins & Aikman Products Co. and Collins & Aikman Automotive Exteriors, Inc.

G:\Collins & Aikman\Lit\Complaints\Armada Rubber\NOM approve settlement.doc

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ------------------------------------------------------------x In re Chapter 11 COLLINS & AIKMAN CORPORATION, et al., Debtors. -------------------------------------------------------------x COLLINS & AIKMAN PRODUCTS CO. and COLLINS & AIKMAN AUTOMOTIVE EXTERIORS, INC. Plaintiff, - against ARMADA RUBBER MANUFACTURING CO., Defendant. ------------------------------------------------------------x CERTIFICATE OF SERVICE
I, Alan E. Marder, hereby certify on this 1st day of August, 2007, I caused a true and correct copy of the Notice Of Debtors' Motion To Approve Settlement And Compromise Of Claims With Respect To Armada Rubber Manufacturing Co. and Debtors' Motion To Approve Settlement And Compromise Of Claims With Respect To Armada Rubber Manufacturing Co. to be served by regular U.S. mail, postage prepaid to the entities listed on the attached Service List.

Case No. 05-55927 (SWR) (Jointly Administered) Hon. Steven W. Rhodes

Adv. Pro. No. 07-5710 (SWR)

/s/ Alan E. Marder Alan E. Marder

Service List John T. Gregg, Esq. Barnes & Thornburg, LLC 300 Ottawa Avenue, NW Suite 500 Grand Rapids, MI 49503 Akin Gump Strauss Hauer & Feld LLP 590 Madison Avenue New York, New York 10022 Attn: Michael S. Stamper Philip C. Dublin Butzel Long PC 100 Bloomfield Hills Pkwy, Suite 100 Bloomfield Hills, MI 48304 Attn: Thomas B. Radom Dykema Gossett PLLC 400 Renaissance Center Detroit, MI 48243 Attn: Ronald Rose Brendan Best Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017-3954 Attn: Peter Pantaleo Erin Casey Alice Eaton Office of the United States Trustee 211 W. Fort Street, Suite 700 Detroit, MI 48226 Attn: Stephen E. Spence Wachtell Lipton Rosen & Katz 51 W. 52nd Street New York, New York 10019 Attn: Hal Novikoff

G:\Collins & Aikman\Lit\Complaints\Armada Rubber\cos.settlement.doc