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Case 13-27091
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
IN RE:
WEST SIDE COMMUNITY HOSPITAL
INC.,
GARFIELD KIDNEY CENTER, LLC,
SUPERIOR HOME HEALTH, L.L.C.,
Debtors.
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Chapter 11
Honorable Eugene R. Wedoff
Case No. 13-27091 (Jointly Administered)
Case No. 13-27092
Case No. 13-27093
DISCLOSURE STATEMENT TO SECOND AMENDED
JOINT CHAPTER 11 PLAN
AS MORE FULLY DESCRIBED IN SECTION IV, (I) OBJECTIONS TO THE ADEQUACY
OF THIS DISCLOSURE STATEMENT OR TO THE PLAN MAY BE FILED WITH THE
BANKRUPTCY COURT AND SERVED ON COUNSEL FOR THE DEBTOR, ON OR
BEFORE JUNE 9, 2015 AND (II) BALLOTS ON THE PLAN MUST BE RECEIVED BY THE
CLERK OF THE BANKRUPTCY COURT NO LATER THAN JUNE 9, 2015, WITH THE
CONFIRMATION HEARING ON THE PLAN COMMENCING ON JUNE 17, 2015 AT 10:00
A.M. May 6, 2015
Robert M. Fishman
Allen J. Guon
David R. Doyle
Shaw Fishman Glantz & Towbin LLC
321 North Clark Street, Suite 800
Chicago, Illinois 60610
[email protected]
[email protected]
[email protected]
Counsel for Debtors
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DISCLAIMER
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED FOR PURPOSES OF
SOLICITING ACCEPTANCES OF THE SECOND AMENDED JOINT CHAPTER 11 PLAN
(THE “PLAN”) OF WEST SIDE COMMUNITY HOSPITAL, INC., GARFIELD KIDNEY
CENTER, LLC, AND SUPERIOR HOME HEALTH, L.L.C. A COPY OF THE PLAN IS
ATTACHED HERETO AS EXHIBIT 1. THE INFORMATION CONTAINED HEREIN MAY
NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO DETERMINE HOW TO
VOTE ON THE PLAN. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR MAKE ANY REPRESENTATIONS, OTHER THAN THE INFORMATION AND
REPRESENTATIONS CONTAINED IN THIS DISCLOSURE STATEMENT, REGARDING
THE PLAN OR THE SOLICITATION OF ACCEPTANCES OF THE PLAN.
ALL CLAIM AND INTEREST HOLDERS ARE ADVISED AND ENCOURAGED TO
READ THIS DISCLOSURE STATEMENT AND THE PLAN IN THEIR ENTIRETY BEFORE
VOTING TO ACCEPT OR REJECT THE PLAN. STATEMENTS MADE IN THIS
DISCLOSURE STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE
TO THE PLAN. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT
ARE MADE ONLY AS OF THE DATE HEREOF, AND THERE CAN BE NO ASSURANCE
THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT ANY TIME
AFTER THE DATE HEREOF.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE
WITH SECTION 1125 OF TITLE 11 OF THE UNITED STATES CODE AND RULE 3016(b)
OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE, AND NOT NECESSARILY
IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER
NONBANKRUPTCY LAW.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS, AND OTHER
ACTIONS, THIS DISCLOSURE STATEMENT SHALL NOT CONSTITUTE OR BE
CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, A STIPULATION, OR
A WAIVER, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT
NEGOTIATIONS. THIS DISCLOSURE STATEMENT SHALL NOT BE ADMISSIBLE IN
ANY NONBANKRUPTCY PROCEEDING (FOR EVIDENTIARY PURPOSES OR
OTHERWISE), NOR SHALL IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE
LEGAL EFFECTS OF THE PLAN AS TO CLAIMHOLDERS OR INTEREST HOLDERS
WEST SIDE COMMUNITY HOSPITAL, INC., GARFIELD KIDNEY CENTER, LLC, AND
SUPERIOR HOME HEALTH, L.L.C.
THE BANKRUPTCY COURT HAS NOT YET APPROVED THIS DISCLOSURE
STATEMENT OR DETERMINED WHETHER THE PLAN MEETS THE LEGAL
REQUIREMENTS FOR CONFIRMATION. THIS DISCLOSURE STATEMENT IS
SUBJECT TO BANKRUPTCY COURT APPROVAL AT THE HEARING ON
CONFIRMATION OF THE PLAN.
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INTRODUCTION
On July 2, 2013 (the “Petition Date”), West Side Community Hospital, Inc. d/b/a Sacred
Heart Hospital (“Sacred Heart”), Garfield Kidney Center, LLC (“Garfield”), and Superior Home
Health, L.L.C. (“Superior,” and together with Sacred Heart and Garfield, the “Debtors”) filed
petitions for relief under title 11 of the United States Code (the “Bankruptcy Code”) before the
United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the
“Bankruptcy Court” or “Court”). Pursuant to order of the Bankruptcy Court, the Debtors’ cases
are being jointly administered as Case No. 13-27091.
The Debtors hereby submit this disclosure statement (this “Disclosure Statement”)
pursuant to section 1125 of the Bankruptcy Code. This Disclosure Statement is prepared for use
in the solicitation of votes on the Plan proposed by the Debtors and filed with the Bankruptcy
Court. Capitalized terms not defined herein shall have the meanings ascribed to them in the
Plan.
This Disclosure Statement sets forth certain relevant information regarding the Debtors’
prepetition operating and financial history, the need to seek chapter 11 protection, significant
events that have occurred during the Debtors’ Cases, and the anticipated procedures for
liquidating the Debtors’ assets and liabilities. This Disclosure Statement also describes terms and
provisions of the Plan, including certain alternatives to the Plan, certain effects of confirmation
of the Plan, certain risk factors associated with the Plan, and the manner in which distributions
will be made under the Plan. In addition, this Disclosure Statement discusses the confirmation
process and the voting procedures that Holders of Claims and Interests must follow for their
votes to be counted.
FOR A DESCRIPTION OF THE PLAN AND VARIOUS RISK AND OTHER
FACTORS PERTAINING TO THE PLAN AS IT RELATES TO CLAIMS AGAINST AND
INTERESTS IN THE DEBTORS, PLEASE SEE SECTION II OF THIS DISCLOSURE
STATEMENT, ENTITLED “SUMMARY OF PRINCIPAL PROVISIONS OF THE PLAN,”
AND SECTION VIII, ENTITLED “RISK FACTORS AFFECTING PLAN.”
THIS DISCLOSURE STATEMENT CONTAINS SUMMARIES OF CERTAIN
PROVISIONS OF THE PLAN, STATUTORY PROVISIONS, DOCUMENTS RELATED TO
THE PLAN, EVENTS IN THE CASES, AND FINANCIAL INFORMATION. ALTHOUGH
THE DEBTORS BELIEVE THAT THE PLAN AND RELATED DOCUMENT SUMMARIES
ARE FAIR AND ACCURATE, SUCH SUMMARIES ARE QUALIFIED TO THE EXTENT
THAT THEY DO NOT SET FORTH THE ENTIRE TEXT OF SUCH DOCUMENTS OR
STATUTORY PROVISIONS. THE DEBTORS DO NOT WARRANT OR REPRESENT
THAT THE INFORMATION CONTAINED HEREIN, INCLUDING THE FINANCIAL
INFORMATION, IS WITHOUT ANY MATERIAL INACCURACY OR OMISSION.
II.
SUMMARY OF PRINCIPAL PROVISIONS OF THE PLAN
IN ACCORDANCE WITH LOCAL RULE 3016-1, THE FOLLOWING IS A
SUMMARY OF CERTAIN INFORMATION CONTAINED IN THE PLAN.
ALL
CREDITORS, INTEREST HOLDERS AND OTHER PARTIES-IN-INTEREST ARE URGED
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TO REVIEW THE PLAN IN ITS ENTIRETY BEFORE VOTING ON THE PLAN OR
TAKING ANY OTHER ACTION WITH RESPECT THERETO.
A.
Overview of the Plan. The Plan constitutes a joint plan of liquidation for all of
the Debtors. It provides for the transfer of each of the Debtors assets to a Liquidating Trust, the
liquidation of all of each Debtor’s property, and a distribution of property consistent with
section 726 of the Bankruptcy Code (the general distribution section for liquidation cases).
The Plan is intended to maximize distributions payable to holders of Allowed Claims and
Interests, and it is therefore designed to allow holders of Claims and Interests to receive
distributions in excess of those which would be available if the Debtors were liquidated under
chapter 7 of the Bankruptcy Code. The approval and consummation of the Plan and other
related agreements will enable the Debtors to make distributions to Holders of Allowed Claims
and Interests pursuant to the Plan.
B.
Summary of Plan, Classification of Claims and Interests and their
Treatment. The following summary of the Plan is qualified in its entirety by, and should be
read in conjunction with, the Plan. Under the Plan, Claims against and Interests in each of the
three Debtors are divided into Classes which group together substantially similar claims and
interests. For classification purposes, the Debtors are identified as follows:
Class No.
1
2
3
Debtor
Sacred Heart
Garfield
Superior
The following summarizes the classification and treatment of Claims and Interests by the
Debtors under the Plan. There can be no assurance that the amounts estimated in this Disclosure
Statement are correct, and the actual amount of Allowed Claims and number of Allowed
Interests may be significantly different from the estimates.
Class
Estimated Claims
and Interests in
each Class
Summary of Plan Treatment
Status
Class 1A, 2A
and 3A (NonTax Priority
Claims)
1A: Approximately
150 claims in the
amount of
$145,289.16.
Allowed Priority Non-Tax Claim will
paid in full on Effective Date or as
soon
thereafter
as
practical.
Distribution estimated at 100%.
Unimpaired.
2A: 0 claims
3A: 0 claims
{10615‐001 PLN A0364770.DOCX 14} 3 Voting
Rights
Deemed to
Accept.
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Estimated Claims
and Interests in
each Class
Summary of Plan Treatment
Status
Desc Main
Voting
Rights
Class 1B
(WARN
Priority Class
Claim)
1 claim in the amount
of $360,000.
The WARN Priority Class Claim will
be paid in full within 21 days of the
Effective Date. The $360,000 shall be
allocated to the WARN Plaintiffs and
their counsel pursuant to terms of the
proposed WARN Class Settlement.
Distribution estimated at 100%
Unimpaired.
Deemed to
Accept.
Class 1C, 2B
and 3B
(FirstMerit
Secured
Claims)
3 claims in the
amount of
$5,075,000.
FirstMerit’s Secured Claims shall be
secured by (i) $4.9 million to be held
in the FirstMerit Cash Collateral
Account, and (ii) the Garfield
Payment in the amount of $175,000.
FirstMerit’s Secured Claim shall be
Allowed in the aggregate amount of
all LC Draws plus (i) the Garfield
Payment and (ii) to the extent that
funds are available in the FirstMerit
Cash Collateral Account after any LC
Draw, termination or expiration of the
Letter of Credit, any Shortfall
Amount;
provided,
however,
FirstMerit’s total Allowed Claims
shall not exceed the aggregate amount
of $5,075,000. All other liens of
FirstMerit shall be released and First
shall have no other recourse against
any of the Debtors, their Estates, the
Liquidating Trust or any of the
Liquidating Trust Assets. The
FirstMerit Reimbursement Agreement
shall remain in full force and effect
except to the extent modified by this
Plan, which modifications shall be
deemed to be amendments to the
FirstMerit
Reimbursement
Agreement. To the extent Allowed,
the distribution is estimated at 100%.
Impaired.
Entitled to
vote.
Class 1D
(HHS Secured
Claim)
1 claim in the amount
of $1.9 million.
To the extent Allowed, HHS’s
Secured Claims shall be rendered
Unimpaired. Any balance of the Class
1D Claims not paid by setoff of such
amounts shall be treated as a Class 1G
Claim. Distribution estimated at 100%
Unimpaired.
Deemed to
accept.
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Class
Estimated Claims
and Interests in
each Class
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Summary of Plan Treatment
Status
Desc Main
Voting
Rights
Class 1E
(Other Secured
Claims against
Sacred Heart)
0 claims.
Holders of Allowed Other Secured
Claims shall be rendered Unimpaired.
Any balance of the Class 1E Claims,
to the extent not secured, shall be
treated as a Class 1F Claim.
Distribution estimated at 100%.
Unimpaired.
Deemed to
accept.
Class 2C
(General
Unsecured
Claims against
Garfield)
Approximately 45
claims in the
approximate amount
of $101,810.04.
Holders
of
Allowed
General
Unsecured Claim against Garfield
shall receive their pro rata share of
Garfield
Liquidation
Proceeds.
Garfield
Liquidation
Proceeds
remaining after payment of all
Allowed Claims against Garfield shall
be made available for Holders of
Claims and Interests against Sacred
Heart. Distribution estimated at 100%.
Impaired
Entitled to
vote.
Class 3C
(General
Unsecured
Claims against
Superior)
Approximately 27
claims in the
approximate amount
of $37,709.54.
Holders
of
Allowed
General
Unsecured Claim against Garfield
shall receive their pro rata share of
Superior Liquidation Proceeds and the
Superior Unsecured Creditor Carveout
in an amount not to exceed $50,000.
Distribution estimated at 100%.
Impaired.
Entitled to
vote.
Class 1F
(General
Unsecured
Claims against
Sacred Heart)
Approximately 320
claims in the
approximate amount
of $3,012,138.67.
Holders
of
Allowed
General
Unsecured Claims shall receive their
pro rata share of Sacred Heart
Unsecured Creditor Carveout in the
amount of $300,000. In addition, if
Sacred Heart Liquidation Proceeds
remain available for distribution after
payment of the HHS Deficiency
Carveout, Holders of Allowed General
Unsecured Claims shall receive their
pro rata share of the remaining Sacred
Heart Liquidation Proceeds on an
equal basis with any Allowed HHS
Deficiency Claims.
Distribution
estimated at 10% to 22.6%.
Impaired.
Entitled to
vote.
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Estimated Claims
and Interests in
each Class
Summary of Plan Treatment
Status
Desc Main
Voting
Rights
Class 1G
(HHS
Deficiency
Claims)
1 claim in the amount
of $12,873,174.04.
Holders of Allowed HHS Deficiency
Claims shall receive their pro rata
share of (a) $100,000.00 and (b) if
Sacred Heart Liquidation Proceeds are
available for distribution, the HHS
Deficiency Carveout (an amount
necessary to provide the same
percentage recovery for Class 1G
Claims as Holders of Class 1F Claims
received for the Sacred Heart
Unsecured Carveout). In addition, if
Sacred Heart Liquidation Proceeds
remain available for distribution after
payment of the HHS Deficiency
Carveout, Holders of Allowed HHS
Deficiency Claims shall receive their
pro rata share of the remaining Sacred
Heart Liquidation Proceeds on an
equal basis with Sacred Heart General
Unsecured Claims.
Distribution
estimated at 2.9% to 22.6%.
Impaired.
Entitled to
vote.
Class 1H –
(Ownership
Subordinated
Claims against
Sacred Heart)
3 claims; amount
unknown.
Holders of Allowed Ownership
Subordinated Claims shall receive
their pro rata share of the Sacred Heart
Liquidation Proceeds after all other
Allowed Claims against Sacred Heart
and expenses of the Liquidating Trust
have been paid in full. Distribution
estimated at 0%.
Impaired
Entitled to
vote.
Class 2D and
3D (Equity
Interest in
Garfield and
Superior)
Equity Interests
Holders of Equity Interests in Garfield
and Superior shall receive the releases
granted in Article 7.4(b) and the
injunction granted in Article 7.5.
Other than the foregoing releases and
injunction, such Holders shall neither
receive nor retain any property under
this Plan on account of such Interests.
Garfield Liquidation Proceeds and
Superior
Liquidation
Proceeds
remaining after payment of all
Allowed Claims against Garfield and
Superior shall be made available for
Holders of Claims and Interests
against Sacred Heart.
Impaired.
Entitled to
vote.
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Class
Class 1I
(Equity
Interests in
Sacred Heart)
Estimated Claims
and Interests in
each Class
Equity Interests
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Summary of Plan Treatment
Status
Holders of Equity Interests shall retain
their Equity Interests in Sacred Heart.
Unimpaired.
Desc Main
Voting
Rights
Class 1I
has
consented
to the
proposed
treatment
and is
deemed to
accept.
C.
Additional Information Regarding Classification and Treatment of Claims
and Interests. Following is a more detailed summary of the classifications and treatment of
Claims and Interests under the Plan.
Unclassified Administrative Claims and Priority Tax Claims against all Debtors.
Administrative Claims and Priority Tax Claims are not classified because the Bankruptcy Code
requires, and their Holders shall receive, payment in full in Cash either on the Effective Date
(because these Claims are liquidated), or at such time as may be agreed to with such Holders.
Administrative Claims include: (i) the Claims of Professionals retained in the Cases (ii) Claims
for goods provided to the Debtors within 20 days before the Petition Date in the ordinary course
of the Debtors’ business, if any (“§ 503(b)(9) Claims”), and (iii) Claims for goods and services
provided to the Debtors after the Petition Date in the ordinary course of the Debtors’ business.
Subject to the provisions of Article II of the Plan, Holders of Allowed Administrative Claims and
Priority Tax Claims shall receive (a) Cash equal to the unpaid portion of such Allowed
Administrative Claim or Priority Tax Claim, or (b) such other treatment upon which the Debtors
and such Holder shall have agreed.
As of April 20, 2015, the claims registers as maintained by the claims agent reflect
(i) approximately $168,000 in Administrative Claims against Sacred Heart, (ii) approximately
$33,600 in Administrative Claims against Garfield, and (iii) approximately $6,000 in
Administrative Claims against Superior. However, certain of those Administrative Claims are
improperly classified as Administrative Claims and subject to objection. Except for Professional
Fee Claims and § 503(b)(9) Claims, the Debtors have been paying most administrative creditors
in the ordinary course of business on a postpetition basis. Therefore, at present, the Debtors
estimate that Administrative Claims (net of Professional Fee Claims) will total approximately
$48,000 against Sacred Heart, $30,000 against Garfield, and $0 against Superior. The Debtors
estimate that, as of the Effective Date, unpaid Professional Fee Claims will total approximately
$360,000 for Sacred Heart, $360,000 for Garfield and $65,000 for Superior. Importantly,
Alvarez & Marsal’s Healthcare Industry Group LLC (“A&M”) has agreed to waive
approximately $500,000 of its Professional Fee Claim upon the Effective Date of the Plan.
With respect to Priority Tax Claims, Sacred Heart scheduled $197,000 in Priority Tax
Claims, Garfield scheduled $1,500 Priority Tax Claims and Superior scheduled $0.00 in Priority
Tax Claims. As of April 20, 2015, the claims registers as maintained by the claims agent reflect
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(i) approximately $258,258.37 in Priority Tax Claims against Sacred Heart, (ii) approximately
$2,762.56 in Priority Tax Claims against Garfield, and (iii) approximately $8,625.26 in Priority
Tax Claims against Superior. Subject to a final claims reconciliation, the Debtors estimate that
Allowed Priority Tax Claims will total $256,697.77 against Sacred Heart, $0.00 against Garfield
and $6,639.32 against Superior.
Class 1A, 2A and 3A – Non-Tax Priority Claims against all Debtors: Class 1A, 2A
and 3A Claims consist of all Allowed Claims, other than Administrative Claims, Priority Tax
Claims or WARN Class Priority Claims, that are entitled to priority in payment pursuant to
sections 507(a)(1) – (9) of the Bankruptcy Code. These Claims are Unimpaired under the Plan.
Under the Plan, each Holder of an Allowed Non-Tax Priority Claim shall be paid in full, without
interest, or on such other terms as may be agreed upon by such Holder and the Debtors, on the
Effective Date or as soon thereafter as may be practicable.
Sacred Heart scheduled $1,009,000 in Non-Tax Priority Claims, Garfield scheduled
$115,000 Non-Tax Priority Claims and Superior scheduled $87,000 Non-Tax Priority Claims.
As of April 20, 2015, the claims registers as maintained by the claims agent reflect, taking into
account scheduled claims, (i) approximately $3,363,050.42 in Non-Tax Priority Claims against
Sacred Heart, (ii) $113,714.00 Non-Tax Priority Claims against Garfield, and (iii) approximately
$87,524.00 in Non-Tax Priority Claims against Superior. However, $2,000,000 of the filed NonTax Priority Claims against Sacred Heart relate to an alleged class WARN Class Priority Claim
that is addressed in Class 1B below. In addition, most of the scheduled and filed Non-Tax
Priority Claims relate to employee wage claims that were paid by the Debtors during their Cases.
Subject to a final claims reconciliation, the Debtors estimate that (i) the Non-Tax Priority
Claims against Sacred Heart (but excluding WARN Class Priority Claims) will be approximately
$145,289.16, (ii) the Non-Tax Priority Claims against Garfield will be approximately $0.00, and
(iii) the Non-Tax Priority Claims against Superior will be approximately $0.00.
Class 1B – WARN Class Priority Claims against Sacred Heart: The Class 1B Claim
consists of the WARN Class Priority Claim to be allowed in the amount of $360,000 and paid
within 21 days of the Effective Date pursuant to the terms of the proposed WARN Class
Settlement. This Claim is unimpaired. A copy of the proposed WARN Class Settlement is
attached as Exhibit B to the Plan.
The WARN Class Priority Claim arises out of the WARN Adversary Proceeding filed in
the Bankruptcy Court on or about July 9, 2013 by Quinolla McCullough (the “Class
Representative”) asserting claims against Sacred Heart under the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. § 2101 et seq. (the “WARN Adversary Proceeding”).1 In
the complaint, the plaintiff, on behalf of herself and certain former employees of Sacred Heart,
alleged that Sacred Heart had failed to provide 60 days written notice before laying off certain of
its employees on or about July 1, 2013, as required by the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. §§ 2101 et seq. and sought approximately $1.3 million, plus
attorneys’ fees and expenses. On January 15, 2014, the Bankruptcy Court certified a class
1
The WARN Adversary Proceeding is entitled McCullough v. West Side Community Hospital, Inc., et al.
pending before the Bankruptcy Court as Adv. Pro. No. 13-00954. {10615‐001 PLN A0364770.DOCX 14} 8 Case 13-27091
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pursuant to the Consent Order Granting Plaintiff’s Motion for Class Certification and Related
Relief, which is comprised of former employees of Sacred Heart who: (i) worked at the Sacred
Heart’s facility and alleged that they were terminated without cause as part of, or as the result of,
the layoffs on or about July 1, 2013; and (ii) who were not provided 60 days’ advance written
notice of their terminations by Sacred Heart (collectively, with the Class Representative, the
“WARN Plaintiffs”)
Sacred Heart subsequently agreed to the terms of the WARN Class Settlement, pursuant
to which the WARN Class Priority Claim shall be allowed in the total aggregate amount of
$360,000, including attorneys’ fees and expenses to counsel for WARN Plaintiffs. The WARN
Class Priority Claim is to be allocated and paid to the WARN Plaintiffs within 21 days of the
Effective Date pursuant to the allocation and distribution procedures set forth in the WARN
Class Settlement.
The WARN Class Settlement remains subject to Bankruptcy Court approval. On
March 18, 2015, Sacred Heart and the WARN Plaintiffs filed a joint motion with the Class
Representative seeking entry of an order establishing a two-step approval process to facilitate
notice to WARN Plaintiffs and approval of the Settlement Agreement. On April 8, 2015, the
Court approved the form of notice and procedures for obtaining approval by the WARN
Plaintiffs and scheduled the Fairness Hearing for May 20, 2015.
Class 1C, 2B and 3B – FirstMerit Claims against all Debtors: Class 1C, 2B, 3B
Claims consist of the Debtors’ obligations to FirstMerit under that certain Reimbursement
Agreement dated May 25, 2012 with FirstMerit Bank, N.A. (“FirstMerit”) pursuant to which
FirstMerit issued a $4.9 million letter of credit (“Letter of Credit”) for the account of the Bentley
Management Group, LLC and BMG Management, LLC (collectively, the “Bentley Entities”) in
favor of Comerica Bank. FirstMerit asserts liens on substantially all of the Debtors’ assets under
the Reimbursement Agreement as security for the Letter of Credit. FirstMerit is currently
holding in the FirstMerit Cash Collateral Account approximately $3.6 million and $1.3 is held in
reserve in Garfield’s deposit account at FirstMerit. Of the $3.6 million held by FirstMerit in the
FirstMerit Cash Collateral Account, approximately $2.8 million is Cash transferred from Sacred
Heart, $400,000 was transferred from Garfield and $400,000 was transferred from Superior.
FirstMerit’s Class 1C, 2B and 3B Claims are impaired under the Plan. On the Effective
Date, Garfield shall (i) deliver to FirstMerit Cash the amount of $1,300,000, which FirstMerit
will deposit in the FirstMerit Cash Collateral Account and (ii) pay FirstMerit the amount of
$175,000 in partial satisfaction of FirstMerit’s Secured Claims against the Debtors (“Garfield
Payment”), which FirstMerit is authorized to retain immediately. FirstMerit’s Secured Claims
shall be deemed Allowed in the aggregate amount of all Letter of Credit draws (“LC Draws”)
plus (i) the Garfield Payment and (ii) to the extent that funds are available in the FirstMerit Cash
Collateral Account after any LC Draw, termination or expiration of the Letter of Credit, any
Shortfall Amount; provided, however, FirstMerit’s total Allowed Class 1C, 2B and 3B Claims
shall not exceed the aggregate amount of $5,075,000. FirstMerit shall also receive the releases
granted in Article 7.4(e) of the Plan.
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FirstMerit’s Class 1C, 2B and 3B shall be secured solely by the Cash on deposit in the
Cash Collateral Account as of the Effective Date and the Garfield Payment and all other security
interests and liens of FirstMerit on the Debtors’ Assets shall be released. FirstMerit’s sole
recourse for its Claims against the Debtors shall be from the Cash held in the FirstMerit Cash
Collateral Account and the Garfield Payment. FirstMerit shall have no recourse against any of
the Debtors, their Estates, the Liquidating Trust or any of the Liquidating Trust Assets
FirstMerit will extend the Letter of Credit through and including May 30, 2018, and will
not issue any notification to Comerica Bank that the Letter of Credit will not be extended prior to
February 15, 2018. Upon the occurrence of a LC Draw, FirstMerit may immediately remove
Cash from the FirstMerit Cash Collateral Account in the amount of a LC Draw and apply it to
FirstMerit’s Allowed Class 2B Claim. Upon expiration of the Letter of Credit, all funds
remaining in the FirstMerit Cash Collateral Account, after FirstMerit is reimbursed for all LC
Draws, shall be promptly transferred by FirstMerit to the Liquidating Trust. The FirstMerit
Reimbursement Agreement shall remain in full force and effect except to the extent modified by
this Plan, which modifications shall be deemed to be amendments to the FirstMerit
Reimbursement Agreement.
Class 2C – General Unsecured Claims against Garfield: Class 2C Claims are
Impaired under the Plan. Each Holder of an Allowed Class 2C Claim shall receive an amount
equal to the Holder’s pro rata share of the Garfield Liquidation Proceeds, up to a maximum of
one hundred percent (100%) of the Allowed amount of its Class 2C Claim, payable as provided
in Article VI of the Plan. Except to the extent required by the Bankruptcy Code or ordered by
the Bankruptcy Court, no distribution will be made on account of any Class 2C Claim for
postpetition interest, attorneys’ fees or costs, or for any punitive or exemplary damages, or for a
fine, penalty or forfeiture of any kind. Any Garfield Liquidation Proceeds remaining after
payment of all Allowed 2C Claims against Garfield shall be paid to the Liquidation Trustee for
the benefit of Holders of Claims and Interests against Sacred Heart.
The schedules of Garfield reflect liquidated General Unsecured Claims of approximately
$263,000. As of April 20, 2015, the claims registers as maintained by the claims agent reflect
approximately $435,620.26 in aggregate, liquidated General Unsecured Claims against Garfield.
However, certain of those General Unsecured Claims are grossly inflated and subject to
objection. Based on the amount of General Unsecured Claims filed and the Debtors’ Claims
analysis to date, the Debtors estimate that total General Unsecured Claims will be approximately
$101,810.04.
Class 3C – General Unsecured Claims against Superior: Class 3C Claims are
Impaired under the Plan. Each Holder of an Allowed Class 3C Claim shall receive an amount
equal to the Holder’s pro rata share of the Superior Liquidation Proceeds and the Superior
General Unsecured Carveout, up to a maximum of one hundred percent (100%) of the Allowed
amount of its Class 3C Claim, payable as provided in Article VI of the Plan. Except to the extent
required by the Bankruptcy Code or ordered by the Bankruptcy Court, no distribution will be
made on account of any Class 3C Claim for postpetition interest, attorneys’ fees or costs, or for
any punitive or exemplary damages, or for a fine, penalty or forfeiture of any kind.
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The schedules of Superior reflect liquidated General Unsecured Claims of approximately
$36,500. As of April 20, 2015, the claims registers as maintained by the claims agent reflect
approximately $48,392.00 in aggregate, liquidated General Unsecured Claims against Superior.
However, certain of those General Unsecured Claims are inflated and subject to objection.
Based on the amount of General Unsecured Claims filed and the Debtors’ Claims analysis to
date, the Debtors estimate that total General Unsecured Claims will be approximately
$37,709.54.
Class 1D – HHS Secured Claims against Sacred Heart: Class 1D Claims are
Unimpaired under the Plan and consist of all HHS’s Secured Claims. Each Allowed Class 1D
Claim shall be fully settled and satisfied by setoff of all funds due Sacred Heart by HHS, which
are unpaid on the date the Class 1D Claim is Allowed. Any balance of the Class 1D Claims not
paid by setoff of such amounts shall be a Class 1G Claim.
The HHS has filed a Secured Claim for alleged Medicare overpayments against Sacred
Heart in the amount of $14,773,174. The Debtors believe that the Secured Claims filed by HHS
are inflated and subject to objection. It is Sacred Heart’s position that HHS is currently
withholding over $1.9 million in Medicare receivables owed to Sacred Heart based on alleged
overpayments. To the extent that any Secured Claims of HHS are ultimately Allowed, the
Debtors estimate a 100% distribution to Class 1D Claims.
Class 1E – Other Secured Claims against Sacred Heart: Class 1E Claims are
Unimpaired under the Plan and consist of all Secured Claims against Sacred Heart other than
FirstMerit’s Class 1C Claim and HHS’s Class 1D Claim. Holders of Class 1E Claims shall
receive the properties on which they hold liens or which is subject to setoff under section 553 of
the Bankruptcy Code, to the extent of the value of the Claim Holder’s interest in Sacred Heart’s
interest in such property or to the extent of the amount subject to setoff, as applicable, as
determined pursuant to section 506(a) of the Bankruptcy Code and Bankruptcy Rule 3012 or, in
the case of a setoff, pursuant to section 553 of the Bankruptcy Code. Any balance of the Secured
Claims, to the extent not secured by the Assets on which they hold liens or which is subject to
setoff under section 553 of the Bankruptcy Code, shall be treated as General Unsecured Claims
in Class 1F.
The Debtors have not scheduled any Secured Claims in their Cases. As of April 20,
2015, the claims registers as maintained by the claims agent reflect that, other than HHS Secured
Claims addressed in Class 1D, approximately five Secured Claims totaling $59,185.92 have been
filed against Sacred Heart. The Debtors believe that none of these claims may be allowed.
Additionally, no Secured Claims have been filed against Garfield or Superior.
Class 1F – General Unsecured Claims of Sacred Heart: Class 1F Claims are Impaired
under the Plan. Each Holder of an Allowed Class 1F Claim shall receive an initial payment of
Cash in an amount equal to the Holder’s pro rata share of Unsecured Creditor Carveout in the
amount of $300,000, provided solely for the benefit of the Allowed Class 1F Claims. In
addition, if Sacred Heart Liquidation Proceeds remain for distribution after payment of the HHS
Deficiency Carveout, each Holder of an Allowed Class 1F Claim and each Holder of an Allowed
Class 1G Claim shall receive Cash in an amount equal to such Holder’s pro rata share of the
remaining Sacred Heart Liquidation Proceeds. Payment shall be made by the Liquidating
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Trustee, in the Liquidating Trustee’s sole discretion, after (a) all Allowed Administrative Claims,
Allowed Priority Tax Claims, Allowed Class 1A Claims, and Allowed Class 1B against Sacred
Heart have been paid in full, (b) the HHS Deficiency Carveout has been paid in full; and (c) the
Liquidating Trustee has determined, in his sole discretion, that there are sufficient Sacred Heart
Liquidation Proceeds remaining to satisfy all reasonably anticipated expenses of the Liquidating
Trust. Each Holder of an Allowed Class 1F Claim shall receive up to a maximum of one
hundred percent (100%) of the Allowed amount of its Class 1F Claim, payable as provided in
Article VI of the Plan. Except to the extent required by the Bankruptcy Code or ordered by the
Bankruptcy Court, no distribution will be made on account of any Class 1F Claim for
postpetition interest, attorneys’ fees or costs, or for any punitive or exemplary damages, or for a
fine, penalty or forfeiture of any kind.
The schedules of Sacred Heart reflect liquidated General Unsecured Claims of
approximately $1,700,000. As of April 20, 2015, the claims registers as maintained by the
claims agent reflect approximately 346 claims totaling $103,513,891.97 in aggregate, liquidated
General Unsecured Claims against Sacred Heart. However, certain of those General Unsecured
Claims are grossly inflated and subject to objection. In addition, many of the Claims are based
on former employees’ claims for wages that have been paid in full. Moreover, certain creditors
have filed duplicative Claims, and Sacred Heart intends to object to such duplicative Claims such
that each Holder with an Allowed Claim will be entitled to a single recovery. Based on the
amount of General Unsecured Claims filed and Sacred Heart’s Claims analysis to date, Sacred
Heart estimates that total Allowed General Unsecured Claims will be approximately
$2,912,138.67.
Class 1G – HHS Deficiency Claims Against Sacred Heart: Class 1G Claims are
Impaired under the Plan. Each Holder of an Allowed Class 1G Claim shall receive Cash in an
amount equal to such Holder’s pro rata share of (a) $100,000.00 and (b) the HHS Deficiency
Carveout. Payment of the HHS Deficiency Carveout shall be made by the Liquidating Trustee,
in the Liquidating Trustee’s sole discretion, after (x) all Allowed Administrative Claims,
Allowed Priority Tax Claims, Allowed Class 1A, 1B, 1C Claims have been paid in full and
(y) the Liquidating Trustee has determined, in his sole discretion, that there are sufficient Sacred
Heart Liquidation Proceeds remaining to satisfy all reasonably anticipated expenses of the
Liquidating Trust.
In addition, if Sacred Heart Liquidation Proceeds remain for distribution after payment of
the HHS Deficiency Carveout, each Holder of an Allowed Class 1F Claim and each Holder of an
Allowed Class 1G Claim shall receive Cash in an amount equal to such Holder’s pro rata share
of the remaining Sacred Heart Liquidation Proceeds. Payment shall be made by the Liquidating
Trustee, in the Liquidating Trustee’s sole discretion, after the Liquidating Trustee has determined
that there are sufficient Sacred Heart Liquidation Proceeds remaining to satisfy all reasonably
anticipated expenses of the Liquidating Trust.
Each Holder of an Allowed Class 1G shall receive up to a maximum of one hundred
percent (100%) of the Allowed amount of its Class 1G Claim, payable as provided in Article VI
of the Plan. Except to the extent required by the Bankruptcy Code or ordered by the Bankruptcy
Court, no distribution will be made on account of any Class 1G Claim for postpetition interest,
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attorneys’ fees or costs, or for any punitive or exemplary damages, or for a fine, penalty or
forfeiture of any kind.
HHS has filed a Secured Claim for alleged Medicare overpayments against Sacred Heart
in the amount of $14,773,174. The Debtors believe that the Claims filed by HHS are grossly
inflated and subject to objection. It is Sacred Heart’s position that HHS is currently withholding
over $1.9 million in Medicare receivables owed to Sacred Heart based on alleged overpayments.
To the extent that HHS’s Claims are ultimately Allowed, after reduction for its Secured Claim,
the Debtors estimate a 2.9% to 22.6% distribution to Class 1G Claims.
Class 1H – Ownership Subordinated Claims: Class 1H Claims are Impaired under the
Plan. Each Holder of an Allowed Class 1H Claim shall receive Cash in an amount equal to the
Holder’s pro rata share of the Sacred Heart Liquidation Proceeds, up to a maximum of one
hundred percent (100%) of the Allowed amount of its Class 1H Claim after all Allowed
Administrative Claims, Allowed Priority Tax Claims and Allowed Class 1A, 1B, 1C, 1D, 1E, 1F
and 1G Claims against Sacred Heart have been paid or satisfied in full and the Liquidating
Trustee has determined, in his sole discretion, that there are sufficient Sacred Heart Liquidation
Proceeds remaining to satisfy all reasonably anticipated expenses of the Liquidating Trust.
Except to the extent required by the Bankruptcy Code or ordered by the Bankruptcy Court, no
distribution will be made on account of any Class 1H Claim for postpetition interest, attorneys’
fees or costs, or for any punitive or exemplary damages, or for a fine, penalty or forfeiture of any
kind.
Pursuant to the terms of the Novak Party Settlement, the Novak parties were entitled to
retain three allowed fully subordinated general unsecured claim against Sacred Heart
(collectively, the “Novak Party Subordinated Claim”). Although the allowed amount of the
Novak Party Subordinated Claim are undetermined at this time, Sacred Heart does not anticipate
any recovery for Class 1H Claims since all other Claims against Sacred Heart will not be paid in
full.
Class 2D and 3D – Equity Interests in Garfield and Superior: Class 2D and 3D
Interests are Impaired under the Plan. Holders of Class 2D and 3D Interests shall neither receive
nor retain any property under this Plan on account of such Interests. Any Cash remaining after
payment of all Allowed Claims against Garfield shall be paid to the Liquidation Trustee for the
benefit of Holders of Claims and Interests against Sacred Heart.
The Debtors anticipate that, after payment of all Garfield Claims in full, approximately
$66,000 will be available for distribution for the payment of Allowed Claims against Sacred
Heart. The Debtors anticipate that, after payment of all Superior Claims in full, no additional
funds will be available for distribution for the payment of Allowed Claims against Sacred Heart.
Class 1I – Equity Interest in Sacred Heart: Class 1I Interests are Unimpaired under
the Plan. Holders of Allowed Interests shall retain their Equity Interests under the Plan. To the
extent that any Sacred Heart Liquidation Proceeds remain after all Allowed Claims against
Sacred Heart have been paid or satisfied in full pursuant to this Plan, such Sacred Heart
Liquidation Proceeds shall be distributed to the Holder of the Allowed Classes 1I Interests.
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Sacred Heart does not anticipate any recovery for Class 1H Claims since all other Claims against
Sacred Heart will not be paid in full.
D.
Summary of Implementation of the Plan: As of the Effective Date, the
Liquidation Proceeds and all other Assets of each Estate shall be transferred, conveyed and
assigned to the Liquidating Trust. The Liquidation Proceeds and all other Assets of their
respective Estates transferred to the Liquidating Trust pursuant to the terms of the Liquidating
Trust Agreement shall be held in segregated accounts for the benefit the Holders of Claims and
Interests against each respective Estate. On the Effective Date, any executory contracts that
(i) the Debtors entered into prior to the Petition Date, (ii) are executory as of the Effective Date,
and (iii) have not been assumed or rejected pursuant to section 365 of the Bankruptcy Code
before the Effective Date, shall be deemed rejected. As set forth in the Plan, the Richard M.
Fogel shall be appointed as the Liquidating Trustee pursuant to the Liquidating Trust Agreement
and shall be responsible for liquidating and administering the Trust Assets for all distributions
pursuant to the Plan. All proofs of claim shall be liquidated and the Liquidating Trustee shall
make one or more distributions to Allowed Claims pursuant to the terms of the Plan.
E.
Novak Party Settlement. On the Effective Date, the Escrow Agent shall
release the Escrowed Settlement Funds in the amount of $500,000 to the Liquidating Trustee to
fund the obligations under this Plan. West Side Management Corp. consents to the treatment of
its Claims and Interests against the Debtors in this Plan. The Novak Parties shall receive the
applicable releases set forth in Article VII of this Plan and the Confirmation Order. In particular,
each Holder of a Claim (other than a Claim of a Governmental Unit) that receives a distribution
under this Plan unconditionally releases each of the Novak Parties from any Claims. The Novak
Parties shall also grant the applicable releases set forth in Article VII of this Plan and the
Confirmation Order. No release shall be granted on behalf of a Governmental Unit.
Notwithstanding the terms of the Novak Party Settlement, nothing in the Plan shall release any
claims against the Bentley Entities until such time as the Debtors (or the Liquidating Trustee
after the Effective Date) enter a settlement with the Bentley Entities approved pursuant to a Final
Order of the Bankruptcy Court.
F.
Maintenance of Cash Collateral Account By Trustee. To the extent the Letter
of Credit has not been drawn upon pursuant to its terms prior to the Effective Date, the
Liquidating Trustee shall be substituted for the Debtors and/or the Bentley Entities as the account
holder of record with respect to the FirstMerit Cash Collateral Account. Until such time as the
Letter of Credit is drawn upon, expires by its own terms or is otherwise released by beneficiary,
the FirstMerit Cash Collateral Account shall secure the Debtors’ obligations under the Letter of
Credit.
G.
Termination of Cash Collateral Account. To the extent that Comerica Bank
draws on the Letter of Credit or the Letter of Credit expires on or after the Effective Date, any
funds remaining in the FirstMerit Cash Collateral Account after satisfaction of any Allowed
Class 1C, 2B and 3B Claims, shall thereafter be delivered to the Liquidating Trustee for
distribution pursuant to the terms of this Plan and the Cash Collateral Account shall thereafter be
closed.
H.
Dissolution of Garfield and Superior. Immediately upon the transfer,
conveyance and assignment of the Liquidation Proceeds and all other Assets of the Garfield and
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Superior Estates to the Liquidating Trust, each of Garfield and Superior shall be deemed to be
dissolved without any further action by the Liquidating Trustee being required to effect such
dissolution. Notwithstanding the foregoing, nothing in this Plan is intended to substantively
consolidate, nor shall have the effect of substantively consolidating, any of the Debtors or their
respective Estates. As of the Effective Date, all Equity Interests in Superior and Garfield shall be
deemed cancelled.
I.
Continued Corporate Existence of Sacred Heart. Subject to the provisions of
the Plan, Sacred Heart shall continue to exist after the Effective Date, in accordance with
applicable law and pursuant to its articles of incorporation and by-laws in effect prior to the
Effective Date; provided, however, (i) the Liquidation Proceeds and all other Assets (including
Litigation Claims) of Sacred Heart’s Estate shall be transferred to the Liquidating Trust pursuant
to the terms of Article V of the Plan and (ii) the corporate purpose of Sacred Heart shall be
limited to taking such actions consistent with the implementation the Plan. On the Effective
Date, the Equity Interests in Sacred Heart shall revert to the Holders of Class 1I Interests and
Novak shall be its sole director and president. After the Effective Date, Sacred Heart shall be
solely responsible for all required tax disclosures or filings and for complying with all corporate
reporting requirements. None of the Estates, the Debtors, the Liquidating Trustee Protected
Parties, the Postpetition Releasees or any of their respective professionals, or their successors or
assigns shall incur any liability based upon actions taken by Sacred Heart after the Effective
Date.
J.
Medical Records. Notwithstanding anything in the Plan to the contrary, neither
the Liquidating Trustee nor the Liquidating Trust shall be covered entities as that term is defined
under HIPAA and the HIPAA Rules; provided, however, the Liquidating Trustee shall have
access to protected health information of former patients of the Debtors solely for the purposes
of implementing the Plan. In the Case, The Debtors entered into agreements with Recall Total
Information Management, Inc., Computer Programs & Systems, Inc. and APGME, Inc. that
provided for the continued access, storage and eventual secured destruction of certain protected
health information of former patients of the Debtors. The contact for information Recall Total
Information Management, Inc. is as follows: Recall Corporation, 4242 W. 42nd Street, Chicago,
Illinois 60632, Attn.: Lori Olson or Sales Manager; Phone: (312) 545-0463, Fax: (773) 9130564. The contact information for Computer Programs & Systems, Inc. is Computer Programs
& Systems, Inc. c/o Helmsing, Leach, Herlong, Newman and Rouse, P.C., 150 Government
Street, Suite 2000, Mobile Alabama, AL 36602, Attn: Christopher Conte, Phone: 251-434-0888;
E-mail: [email protected] The contact for information APGME, Inc. is as follows:
APGME, Inc. c/o Zayyad Law Offices, P.C., 9723 Southwest Highway, Oak Lawn, IL 60453,
Attn.: Nehad Zayyad, Phone: (708) 576-4300.
K.
Summary of Recovery Analysis: The Plan provides for the orderly liquidation
of the Estates. The Debtors believe that if the Plan is not consummated, it is likely that Holders
of Claims will receive less than what they would otherwise receive if the Plan is confirmed
because liquidation through any other means would, at a minimum, require payment in full of all
of the Professional Fee Claims of A&M. In addition, Sacred Heart would be required to return
to the Novak Parties the $500,000 settlement payment currently held in escrow. If this is the
case, distributions to unsecured creditors of Sacred Heart and Superior would be greatly reduced
– if not eliminated. Accordingly, the Debtors believe that the Plan provides the best
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recoveries possible for the Holders of Claims against and Interests in the Debtors, and
therefore, the Debtors strongly recommend that you vote to accept the Plan.
L.
Timing of Distributions Under the Plan: As detailed in Article VI of the Plan,
distributions under the Plan shall be made under the terms of the Liquidating Trust Agreement
and the Plan as soon as is practicable on the later to occur of (a) the Effective Date, (b) when a
Claim becomes an Allowed Claim, or (c) when Cash is available for distribution to a particular
Class pursuant to the treatment of such Class under the Plan.
III.
GENERAL INFORMATION REGARDING DISCLOSURE STATEMENT
A.
Purpose of Disclosure Statement. Pursuant to section 1125 of the Bankruptcy
Code, the Debtors have disseminated this Disclosure Statement, to all known Holders of Claims
against and Interests in the Debtors. The Disclosure Statement serves the following two
purposes: (i) solicitation of acceptances from those entitled to vote on the Plan; and
(ii) notification of the hearing in the Bankruptcy Court on confirmation of the Plan.
This Disclosure Statement is filed with respect to the Plan to describe, among other
things, the treatment of the various Classes of Claims against and Interests in the Debtors under
the Plan and the means for execution of the Plan. A copy of the Plan accompanies the
Disclosure Statement and is attached hereto as Exhibit 1. The rules of construction and
definitions contained in the Bankruptcy Code and Bankruptcy Rules are applicable to this
Disclosure Statement. Unless otherwise indicated, all statutory references in this Disclosure
Statement shall refer to the Bankruptcy Code and Bankruptcy Rules, as applicable.
B.
Approval of Disclosure Statement. The Bankruptcy Court has not yet
determined whether this Disclosure Statement contains information of a kind, and in sufficient
detail, as far as is reasonably practicable in light of the nature and history of the Debtors and the
condition of the Debtors’ books and records, which would enable a hypothetical investor to make
an informed judgment about the Plan. In determining whether this Disclosure Statement
provides adequate information, the Bankruptcy Court will consider the complexity of these
cases, the benefit of additional information to creditors and other parties in interest, and the cost
of providing additional information. Approval of this Disclosure Statement, however, does not
constitute a determination by the Bankruptcy Court as to the fairness or merits of the Plan.
Furthermore, this Disclosure Statement is not intended to be an offering memorandum or
securities prospectus and is exempt from all applicable federal and state securities laws pursuant
to section 1125(e) of the Bankruptcy Code.
C.
Dissemination of Disclosure Statement. This Disclosure Statement has been
provided to each party in interest whose Claim or Interest has been scheduled or who has filed a
proof of Claim or Interest in these Cases. It is intended to assist such parties in evaluating the
Plan and determining whether to accept or reject the Plan. This Disclosure Statement has been
made available online on the Claim Agent’s website at http://cases.gcginc.com/sacredheart/ and
from the Debtors’ counsel. Under the Bankruptcy Code, your vote for acceptance or rejection of
the Plan may not be solicited unless you receive a copy of this Disclosure Statement prior to or
concurrently with such solicitation. Each Holder of a Claim or Interest should carefully read this
Disclosure Statement and the Plan in their entirety before voting on the Plan.
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D.
Sources of Information and Disclaimer. This Disclosure Statement may not
be relied upon for any purpose other than to determine whether to accept or reject the Plan.
Nothing contained in this Disclosure Statement shall constitute an admission by the Debtors or
any other party regarding the subject matter of the Disclosure Statement, be admissible in any
proceeding (for evidentiary purposes or otherwise) involving the Debtors or any other party, or
be deemed advice on the tax or other legal effects of the Plan on Claim or Interest Holders. In
the event of any inconsistency between this Disclosure Statement and the Plan, the terms of the
Plan shall control.
Except as otherwise expressly indicated herein, the information contained in this
Disclosure Statement has been obtained from the Debtors’ books and records and certain
pleadings, papers and other documents filed with the Bankruptcy Court. There has been no
independent audit of the financial information contained in this Disclosure Statement.
IV.
CONFIRMATION PROCEDURES
A.
Restrictions on Solicitation of Votes. No information concerning the Plan or
any assets or liabilities of the Debtors has been authorized by the Bankruptcy Court to be
disseminated in connection with the solicitation of acceptances or rejections of the Plan other
than as set forth in this Disclosure Statement. No party has been authorized to solicit
acceptances or rejections of the Plan other than the Debtors as the proponents of the Plan. Any
inducements to secure your acceptance or rejection of the Plan other than as contained in this
Disclosure Statement should not be relied upon by Holders of Claims or Interests in voting on
the Plan. Any such information or inducement should be reported immediately to the Debtors
for further action as may be appropriate before the Bankruptcy Court.
B.
Classes Entitled to Vote. There are seventeen (17) different classes of Claims
and Interests under the Plan. Classes 1A, 1B, 1D, 1E, 1I, 2A, and 3A are unimpaired and are
presumed to have accepted the Plan pursuant to section 1126 of the Bankruptcy Code. Holders
of Claims and Interests in Classes 1C, 1F, 1G, 1H, 2B, 2C, 2D, 3B, and 3C and 3D are impaired
under the Plan and are entitled to vote on the Plan.
Pursuant to section 1123(a) of the Bankruptcy Code, Administrative Claims and Priority
Tax Claims are not subject to classification. As such, the Holders thereof are not entitled to vote
on the Plan. The treatment of Administrative Claims and Priority Tax Claims is set forth in
Article II of the Plan.
C.
Voting on the Plan. In order to vote on the Plan, Holders of Claims and
Interests in Classes eligible to vote should complete the enclosed ballot and return it to the
following address so that it is received by on or before June 9, 2015:
Clerk of the United States Bankruptcy Court
Northern District of Illinois, Eastern Division
219 South Dearborn, Room 713
Chicago, Illinois 60604
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ONLY THOSE BALLOTS RETURNED IN A TIMELY MANNER WILL BE COUNTED IN
DETERMINING WHETHER A PARTICULAR CLASS OF CLAIM OR INTEREST
HOLDERS HAS ACCEPTED OR REJECTED THE PLAN.
D.
Confirmation Hearing. Pursuant to section 1128 of the Bankruptcy Code, the
Bankruptcy Court has scheduled a hearing to consider the adequacy of this Disclosure Statement
and the confirmation of the Plan (the “Confirmation Hearing”) on June 17, 2015 at 10:00 a.m.
(prevailing central time), and it has directed that notice thereof be transmitted to all parties in
interest. The Confirmation Hearing will be held before the Honorable Eugene R. Wedoff,
Courtroom 744, 219 South Dearborn, Chicago, Illinois.
Any objections to the adequacy of the disclosure statement or confirmation of the Plan
must be in writing and must be filed with the Bankruptcy Court on or before June 9, 2015.
Objections must be served at the same time upon counsel for the Debtors:
Robert M. Fishman
Allen J. Guon
David R. Doyle
Shaw Fishman Glantz & Towbin LLC
321 North Clark Street, Suite 800
Chicago, Illinois 60654
The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court
without further notice other than by announcement of the next adjourned date at the
Confirmation Hearing or any adjourned Confirmation Hearing. At the Confirmation Hearing or
any adjourned Confirmation Hearing, the Bankruptcy Court shall enter an order confirming the
Plan if sufficient acceptances thereof have been received from Holders of Claims and Interests
entitled to vote on the Plan and if all other statutory requirements have been satisfied.
E.
Acceptances Necessary for Confirmation. At the Confirmation Hearing, the
Bankruptcy Court will determine, among other things, whether the Plan has been accepted by
each Class that is Impaired under the Plan. Under section 1126 of the Bankruptcy Code, an
Impaired Class of Claim Holders is deemed to have accepted the Plan if members of the class
that hold two-thirds (2/3) in amount, and more than one-half (1/2) in number, of the Allowed
Claims voting on the Plan have voted for acceptance of the Plan. An Impaired Class of Interest
Holders is deemed to have accepted the Plan if members of the class holding two-thirds (2/3) in
amount of the Allowed Interests voting on the Plan have voted for acceptance of the Plan.
Unless there is unanimous acceptance of the Plan by each Holder of a Claim or Interest in
an Impaired Class, the Bankruptcy Court, as an additional requirement for Confirmation, must
determine that, under the Plan, the members of each such Class will receive property of a value,
as of the Effective Date of the Plan, that is not less than the value that each such Class member
would receive if the Debtors were liquidated under chapter 7 of the Bankruptcy Code on the
Effective Date of the Plan.
F.
Confirmation Without Necessary Acceptances. Even if one or more classes
of Claims or Interests that are Impaired under the Plan reject the Plan, or are deemed to have
rejected the Plan, the Bankruptcy Court may confirm the Plan if it finds that at least one (1)
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Impaired Class of Claims has voted to accept the Plan (determined without including any
acceptance of the Plan by an insider) and that the Plan does not “discriminate unfairly,” and is
“fair and equitable” as to each Impaired Class of Claims or Interests that has not accepted the
Plan. This authority is contained in §§ 1129(a)(10) and 1129(b) of the Bankruptcy Code.
V.
HISTORY OF THE DEBTORS AND THEIR CHAPTER 11 CASES
A.
The Debtors’ Businesses
Sacred Heart, an Illinois corporation, was a 119-bed acute care hospital located at 3240
West Franklin Boulevard, Chicago, Illinois that also owned and operated medical clinics in the
Garfield Park neighborhood of Chicago, Illinois. Prior to the events leading up to the filing of
these Cases, Sacred Heart had annual revenues in excess of $40 million and net income of
approximately $10 million and employed approximately 270 employees.
Garfield, an Illinois limited liability company, is affiliated with Sacred Heart and
operated a 16-station hemodialysis center located at 3250 West Franklin Boulevard, Chicago,
Illinois. Garfield was a safety net provider of dialysis services to end stage renal disease patients
located in the Garfield Park and Humboldt Park neighborhoods of Chicago. At the time of the
bankruptcy filing, Garfield had annual revenues of approximately $3.2 million and employed
approximately 18 employees.
Superior, an Illinois limited liability company, provided home health care services within
Cook County, DuPage County and Will County, Illinois out of a facility at 4054 W. North Ave.,
2nd Floor, Chicago, Illinois. At the time of the bankruptcy filing, Superior had annual revenues
of approximately $2.0 million and employed 20 full and part-time personnel.
Edward Novak is the sole shareholder of Sacred Heart, and is also the sole shareholder of
West Side Management Corporation (“WSMC”). WSMC, in turn, is the sole the sole member of
Superior and Garfield.
B.
Criminal Indictment and Trial
On April 16, 2013, the U.S. Attorney for the Northern District of Illinois arrested certain
principals and insiders of the Sacred Heart, alleging that they had engaged in an illegal kickback
scheme to increase the hospital census and revenues by inducing patient referrals. Among those
arrested and charged included Edward Novak; Roy Payawal, the chief financial officer of Sacred
Heart; Dr. Percy Conrad May, Jr.; Dr. Subir Maitra; and Dr. Shanin Moshiri (the “Criminal
Action”).
Also on April 16, 2013, federal authorities seized $1,924,381, an amount sufficient to
cover the potential liability resulting from the alleged fraud (the “Seizure”). Federal authorities
also seized certain financial and operational files and documents. The Debtors were not charged
with any wrongdoing by the federal authorities and continued to operate after the arrests.
On October 22, 2013, a federal grand jury returned a 17-count indictment from the U.S.
Attorney for the Northern District of Illinois, charging the initial five defendants and three
additional defendants: Anthony Puorro, the chief operating officer of Sacred Heart; Dr. Rajiv
Kandala; and Noemi Velgara. The indictment alleges that Sacred Heart’s owners, executives,
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and administrators conspired between 2004 and April 2013 to pay physicians bribes concealed as
consulting, employment, and personal services compensation, rent, and instructional stipends in
return for referrals of Medicare and Medicaid patients. Although styled as payments for
legitimate services, the payments allegedly contained disguised bribes paid to and for the benefit
of Drs. May, Maitra, Moshiri, and Kandala in exchange for patient referrals.
On or about March 19, 2015, after a trial in the Criminal Action, the jury returned a
verdict finding Novak guilty of conspiracy and Medicare fraud. The jury verdict also found
Pawayal and Clarence Naglevoort, Sacred Heart’s former chief operating officer, guilty of
conspiracy and fraud.
C.
Retention of Alvarez & Marsal
On April 26, 2013, Mr. Novak retained A&M to oversee operations for the Debtors,
appointed Paul Rundell, a managing director at A&M, the Chief Restructuring Officer (“CRO”),
and ceded all operational control to the CRO and A&M. Mr. Novak also appointed an
independent board of directors, comprised of three physicians that had no involvement with any
alleged wrongdoing, to manage the Debtors. The prior executive management personnel
involved with the alleged fraud were also removed.
D.
Withholding of Medicare Receivables by CMS
As a result of the criminal charges, the Debtors suffered severe cash flow and reserve
shortages. Between the federal authorities’ Seizure and FirstMerit’s setoff against Sacred
Heart’s deposit accounts, over $4.7 million in cash was depleted from Sacred Heart, Garfield and
Superior, leaving barely enough cash for the hospital to operate.
Effective May 7, 2013, Centers for Medicare and Medicaid Services (“CMS”) began to
withhold Medicare payments from Sacred Heart, without notification, due to suspicion of fraud.
On May 21, 2013, Sacred Heart received a notice from CMS formally withholding all further
Medicare payments. On May 22, 2013, Sacred Heart sent a rebuttal to CMS urging it to resume
payments and warning that, without Medicare funding, the hospital would have to shut down.
CMS responded that it would continue to withhold payments for 180 days.
Sacred Heart also experienced a decline in patient census. Prior to the arrests, the
average daily census at Sacred Heart was approximately 40 patients per day. Shortly after the
arrests, Sacred Heart experienced more than a fifty percent (50%) decline in the average daily
census.
As a result of CMS’ refusal to resume Medicare payments, Sacred Heart had insufficient
cash to fund payroll and was unable to continue operations. On July 1, 2013, Sacred Heart
properly transitioned all of its patients to other healthcare facilities in the area. On July 2, 2013,
Sacred Heart suspended all patient care and terminated approximately 200 of their 270
employees. It is Sacred Heart’s position that, as of the Petition Date, the amount of Medicare
payments withheld by CMS exceeded $1.9 million. CMS has continued withhold Medicare
payments from Sacred Heart.
In addition, the Illinois Department of Health and Family Services has also withheld the
approximately $400,000 in Medicaid payments.
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The Debtors’ Bankruptcy Filings and First Day Motions
The Debtors believed that the chapter 11 process would provide the most efficient
platform to economically wind-down the businesses of the Debtors; maximize the value of the
Debtors through sales of their assets under 363 of the Bankruptcy Code; manage the claims of
CMS and other creditors of the Debtors; and provide a forum to resolve the transfers to
FirstMerit and Bentley Entities.
On or shortly after the Petition Date, the Debtors filed a number of so-called “First-Day”
motions or applications, including an application to employ Shaw Fishman Glantz & Towbin
LLC as the Debtors’ bankruptcy attorneys; an application to employ Paul Rundell and A&M as
the Debtors’ chief restructuring officer and other personnel; a motion to pay prepetition wages
and to continue postpetition employee benefit plans; a motion to authorize the continued use of
the Debtors’ existing business forms and records; a motion to provide adequate assurance of
payment to utilities; and an application to employ Garden City Group, Inc., as the Debtors’
claims and noticing agent. The Bankruptcy Court entered orders granting all of these First-Day
motions.
Subsequently, the Debtors filed a motion seeking the entry of an order finding the
appointment of a patient care ombudsman unnecessary. In the motion, the Debtors contended
that an ombudsman was unnecessary because (i) the assets of Superior had already been sold,
(ii) Sacred Heart had ceased operating, and (iii) Garfield already had sufficient safeguards in
place to ensure patient wellbeing pending a sale of its assets. The Bankruptcy Court entered an
order granting the motion.
F.
PostPetition Financing and Cash Collateral
1.
Postpetition Financing
Sacred Heart required Postpetition Financing to pay expenses incurred in the ordinary
course of their businesses associated with the maintenance and preservation of its assets. These
expenses included payroll, employee related expenses, maintenance costs, security, taxes, and
insurance. Accordingly, on July 3, 2013, in conjunction with their other First Day motions, the
Debtors filed a motion (“DIP Motion”) seeking authority to obtain postpetition financing
(“Postpetition Financing”) in the amount of $410,000 from BCL-M&E LLC (“BCL”). Under
the Postpetition Financing agreement, BCL was entitled to $10,000 for closing fees and
expenses, an interest fee of $75,000 for the first three months, and $30,000 for each subsequent
month that the loan remained outstanding.
On July 3, 2013, the Bankruptcy Court entered an interim order granting the relief
requested by the DIP Motion and authorizing the Postpetition Financing in the full amount and
set a final hearing on the motion for July 30, 2013. On July 30, 2013, the Bankruptcy Court held
a final hearing on the DIP Motion and entered a final order authorizing the Postpetition
Financing. As security for the Postpetition Financing, the Court granted BCL priming liens on
substantially all of the real and personal property of Debtors (but not including any avoidance
claims under the Bankruptcy Code).
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In October, 2013, Sacred Heart paid BCL the amount of $545,000 which satisfied the
Postpetition Financing in full.
2.
Use of Cash Collateral
On August 9, 2013, the Debtors filed a motion for authority to use cash collateral of
FirstMerit, with the exception of the $4.9 million that was in the possession of FirstMerit, to pay
the actual, ordinary and necessary expenses of the Debtors’ businesses and estates. As noted
above, FirstMerit asserts liens on substantially all of the Debtors’ assets as security for the Letter
of Credit. The motion sought authority to use cash collateral of FirstMerit and asked the
Bankruptcy Court grant FirstMerit replacement liens subject to the liens of BCL, subordinate to
its own prepetition liens, and pari passu with the replacement liens granted in connection with
the DIP Motion. FirstMerit agreed to the relief sought in the motion, acknowledging that it was
over-secured. Accordingly, on August 21, 2013, the Bankruptcy Court entered an order
authorizing the Debtors to use FirstMerit’s cash collateral and granting the motion.
On April 22, 2014, Garfield and Sacred Heart filed a motion for authority for Sacred
Heart to use $1.3 million of FirstMerit’s cash collateral that was held in the FirstMerit Cash
Collateral Account to pay administrative expenses and to provide partial funding for the Plan.
FirstMerit also obtained replacement liens. On May 7, 2014, the Court entered an order granting
the motion and authorizing Sacred Heart’s use of FirstMerit’s cash collateral. As adequate
protection for FirstMerit, among other things, Garfield is required to hold a $1.3 million reserve
in a deposit account at FirstMerit.
G.
Dispute with CMS and Retention of McGuireWoods
After the Petition Date, Sacred Heart continued its efforts to negotiate the release of over
$1.9 million in Medicare receivables from CMS. As part of that process, Sacred Heart obtained
Bankruptcy Court authority to employ law firm of McGuireWoods LLP, as its healthcare
regulatory counsel. Sacred Heart, with the assistance of its counsel, has also responded to
numerous requests for certain medical records from CMS’s contractors.
H.
The Marketing and Sale of the Debtors’ Assets
Since before the Petition Date, A&M actively marketed the Debtors’ assets for sale. As a
result of those efforts, the Debtors were able to liquidate all of the Debtors’ assets during these
Cases. The following is a summary of the sales of substantially all of the assets of Superior,
Garfield, and Sacred Heart.
1.
The Sale of Superior
Superior received an offer from Attentive Services Home Health II, Inc. (“Attentive”) to
buy its assets for a purchase price of $5,000, plus the assumption of all of Superior’s employeerelated obligations in amount of $82,177.10. Had Superior not received the offer, it intended to
terminate its 20 full and part-time employees and cease operating. On July 16, 2013, Superior
filed a motion seeking authority to sell its assets as a going concern to Attentive, free of all liens,
claims and encumbrances pursuant to section 363(f) of the Bankruptcy Code. On July 24, 2013,
the Court conducted the sale hearing, granted the motion and entered an order authorizing the
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sale of Superior to Attentive free and clear of all liens, claims and encumbrances pursuant to
§ 363(f) of the Bankruptcy Code. Superior and Attentive closed the sale on July 24, 2013.
2.
The Sale of Garfield
A. Marketing Efforts
Beginning in late April 2013, Garfield, through the efforts of A&M, marketed and
solicited bids for Garfield’s hemodialysis business and related assets. As a result of those
efforts, Garfield received a letter of intent from Total Renal Care, Inc. (the “TRC”) contained a
proposed $5.5 million purchase price, subject to a ten percent (10%) escrow holdback for
potential adjustments. The letter of intent also remained subject to additional due diligence and
the approval of a certificate of need permit from the Illinois Health Facilities and Services
Review Board (“HSFRB”).
After conducting extensive due diligence, the TRC adjusted its purchase price to
$3,250,000, subject to certain adjustments and holdbacks, and the assumption and assignment of
certain unexpired leases and executory contracts. Despite this purchase price reduction, Garfield
ultimately determined that the transaction proposed by the Buyer presented the highest and best
opportunity to maximize value for the estate because (i) the issues uncovered during the due
diligence review would likely adversely impact the purchase price with respect to any potential
purchasers that have not yet conducted extensive due diligence; (ii) the Buyer was one of the
leading providers of hemodialysis services in the United States and, as a result, Garfield believed
that the Buyer had the qualifications, background and financial wherewithal to promptly obtain a
Certificate of Need from the HFSRB; and (iii) the Sale would enable Garfield to satisfy all
creditor claims in full and was supported by WSMC, Garfield’s sole member.
On or about November 20, 2013, the Court entered an order authorizing Garfield to sell
substantially all of its assets to TRC and the sale closed in December 2013 and generated net
proceeds of $2.7 million (excluding a $250,000 holdback). Garfield and the Buyer have engaged
in discussions regarding the return of the Holdback to Garfield, the holdback is not likely to be
recovered without litigation.
3.
The Sale of Sacred Heart
A. Marketing Efforts and Sale of Equipment
Beginning in May 2013, Sacred Heart, through the efforts of A&M, actively marketed
and solicited bids from buyers interested in reopening the hospital and rehiring many of Sacred
Heart’s former employees. In this regard, A&M canvassed potential interested parties for the
hospital and developed a list of approximately fifteen (15) potential buyers that would have an
interest in restarting the hospital. The list consisted of (i) competitors and companies in the
healthcare business; (ii) financial buyers with prior or current interest in the healthcare business
sector; and (iii) any other companies referred to A&M by, among other parties, Sacred Heart’s
employees who were knowledgeable about the business.
From May to November 2013, A&M contacted each of those potential purchasers and
provided them with publically available information and a non-disclosure agreement to be
executed by any party wanting to receive non-public information concerning Sacred Heart’s
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business. Out of this group, five (5) parties expressed an interest in purchasing the hospital
assets and executed a non-disclosure agreement. A&M sent confidential financial information to
all such restricted parties.
In the meantime, on August 9, 2013, Sacred Heart filed a motion to approve its retention
of Ettin Group, LLC (the “Auctioneer”) to auction the personal property (namely, inventory,
equipment, machinery and rolling stock) of Sacred Heart as a “back-up plan” if it was unable to
find a buyer of the hospital as a going concern. The motion also sought authority to conduct the
auction and sell the personal property of Sacred Heart if no buyer was found. On August 20,
2013, the Court approved the motion to retain the auctioneer.
Ultimately, Sacred Heart determined that none of the potential purchasers were interested
in purchasing or restarting the hospital as a going concern. Accordingly, on October 15, 2013,
the Auctioneer conducted an auction of the personal property of Sacred Heart, generating over
$900,000 in gross proceeds, of which $545,000 was used to repay the Postpetition Financing.
B. Sale of Real Estate
Sacred Heart also found it difficult to sell its real property (the “Real Estate”). Sacred
Heart, through A&M, consulted several real estate brokers, who independently concluded that,
due to the location of the Real Estate and the size, age and condition of the hospital and ancillary
buildings, the Real Estate had had little value and would be difficult to sell in a reasonable time
period. In addition, the monthly administrative expenses associated with maintaining, securing,
insuring the buildings, along with accruing real estate taxes are currently in excess of $50,000.00
per month.
In December 2013, APGME Corp. (“APGME”) approached Sacred Heart and offered to
purchase the Real Estate. Specifically, APGME agreed to pay Sacred Heart the amount of
$250,000 for the Real Estate, subject to certain customary purchase price adjustments, and to
maintain Sacred Heart’s medical and business records in accordance with applicable federal and
state law.
In light of the difficulty in selling the Real Estate and the expense of maintaining the
medical records, Sacred Heart agreed. Accordingly, on November 26, 2013, Sacred Heart filed a
motion to authorize the sale of the Real Estate of Sacred Heart to APGME free and clear of all
liens and interests on the terms set forth above. On December 17, 2013, the Court granted the
motion and authorized the sale. Sacred Heart and APGME closed the sale of the Real Estate on
or about December 23, 2013.
I.
Civil Forfeiture Action
On June 27, 2014, the U.S. government commenced a civil forfeiture action in the United
States District Court for the Northern District of Illinois, Case No. 14 C 4888 (the “Civil
Forfeiture Action”) with respect to the funds taken in the Seizure. The government alleged that
the funds are traceable to fraudulent referrals of Medicare and Medicaid patients by Drs.
Kuchipudi and Kandala to Sacred Heart. On August 6, 2014, Sacred Heart filed its Verified
Claim of West Side Community Hospital, Inc. (the “Claim”), asserting its interest in and right to
the seized funds.
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On or about August 18, 2014, Sacred Heart moved to stay the Civil Forfeiture Action
pending conclusion of the trial in the Criminal Action and confirmation of the Plan. The district
court granted the motion, and the Civil Forfeiture Action remains stayed before the district
court.
J.
Investigation of Bentley Transfers
The Bentley Entities are non-debtor affiliates that are owned or controlled by Novak.
The Bentley Entities are in the medical reinsurance business and own two medical malpractice
reinsurance funds.
On or about May 25, 2012, the Debtors and the Bentley Entities entered into a
Reimbursement Agreement with FirstMerit pursuant to which FirstMerit issued the Letter of
Credit in the amount of $4.9 million for the account of the Bentley Entities in favor of Comerica
Bank. Comerica Bank, in turn, issued a Standby Letter of Credit in the amount of $4.9 million in
favor of First Professionals Insurance Company, Inc. for the account of the Bentley Entities and
Magna Carta Insurance, Ltd.
The Debtors each pledged substantially all of their assets, including cash, as security
under the Reimbursement Agreement. As of the Petition Date, FirstMerit held approximately
$4.9 million of the Debtors’ cash to secure the LOC, of which approximately $4.1 million came
directly or indirectly from Sacred Heart. Between May 30, 2012, and April 17, 2013, Sacred
Heart made the following transfers directly or indirectly to FirstMerit to secure the Letter of
Credit as follows (the “Initial Bentley Transfers”):
Date of Transfer
05/30/12
08/30/12
10/31/12
11/30/12
12/31/12
01/02/13
02/04/13
03/04/13
04/02/13
Total:
Amount
$1,121,045
$360,000
$120,000
$120,000
$120,000
$120,000
$120,000
$120,000
$120,000
$2,321,045.00
On April 17, 2013, FirstMerit asserted its purported right of setoff and withdrew the
amount of $2,810,950 from the Debtors’ accounts in order to further secure the Letter of Credit
(the “Subsequent Bentley Transfers,” and with the Initial Bentley Transfers, the “Bentley
Transfers”). The Transfers are as follows:
Debtor
Sacred Heart
Garfield
Superior
{10615‐001 PLN A0364770.DOCX 14} Date of Transfer
April 17, 2013
April 17, 2013
April 17, 2013
Total:
25 Amount
$2,010,950
$400,000
$400,000
$2,810,950.00
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The Debtors have investigated the Transfers and the potential recovery of those assets for
the benefit of their respective estates.
In December 2014, after months of arm’s length negotiations, the Debtors agreed to settle
all claims with Novak and certain of his affiliated entities, West Side Community Hospital
Limited Partnership (“WSCHLP”), WSMC, Park Place, L.L.C. (“Park Place,” and together with
Novak, WSCHLP and WSMC, the “Novak Parties”). On January 29, 2015, the Bankruptcy
Court approved the settlement pursuant to the Order Approving Settlement with the Novak
Parties and Granting Related Relief (the “Novak Party Settlement”).
Pursuant to the Novak Party Settlement, the Novak Parties agreed to pay Sacred Heart
$1,000,000, of which $500,000 would be paid immediately and $500,000 was placed into escrow
pending confirmation of a Plan which provided for (1) mutual releases between the Debtors and
the Novak Parties, (2) the Novak Parties to retain their interests as holders of equity securities in
any of the Debtors, (3) a release of the Novak Parties by all non-governmental creditors
accepting payment under a Plan, and (4) a settlement between the Debtors, Bentley Entities and
such other parties as may be necessary under which the Debtors shall recover an amount not
greater than $2.8 million (the “Bentley Settlement”). In addition, the Novak Parties assigned to
Sacred Heart any claims they had against a Management Liability Package Policy issued by
Allied World Assurance Company, Ltd. (as discussed in detail below) for reimbursement of
attorneys’ fees and expenses incurred in responding to certain governmental regulatory
proceedings. As part of the settlement, the Novak Parties were allowed to retain certain claims
against Sacred Heart that are subordinated to all other creditors. The parties have agreed in
principal to the Bentley Settlement, but the parties have not been able to formally document their
agreement prior to the deadline for the filing of the Plan and Disclosure Statement.
The Plan also incorporates a settlement with FirstMerit concerning the Debtors’ claims
against FirstMerit regarding the Transfers and Reimbursement Agreement. As a result of the
settlement, and as set forth in Section II.B above, FirstMerit’s Secured Claims shall not exceed
the amount of $5,075,000 and shall be secured solely by (i) $4.9 million to be held in the
FirstMerit Cash Collateral Account, and (ii) a payment from Garfield in the amount of $175,000.
All other liens of FirstMerit shall be released and FirstMerit shall have no other recourse against
any of the Debtors, their Estates, the Liquidating Trust or any of the Liquidating Trust Assets. In
addition, FirstMerit has agreed to not give a notice of non-renewal of the Letter of Credit until
February 15, 2018, which effectively extends the Letter of Credit through May 30, 2018.
K.
Insurance Recoveries
On or about September 1, 2012, Allied World Assurance Company, Ltd. (“Allied”)
issued a Management Liability Package Policy (the “Policy”) to Sacred Heart, with Superior,
Garfield and other entities named as additional insureds. The Policy contains multiple “Insuring
Agreements” that, in relevant part, provide coverage for discrete types of claims and losses in
connection with Wrongful Acts and Regulatory Wrongful Acts, including the Defense Costs
relating to defending Insureds from Claims (all as defined in the Policy). Insuring Agreement E
applies to regulatory claims against any insured for losses the insured persons or the Debtors
would be required to pay in connection with Regulatory Wrongful Acts. Insuring Agreement E
also has a liability sublimit of $200,000 (“Regulatory Sublimit”), such that Allied will not pay
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for losses related to Regulatory Claims in excess of that amount. The Policy obligates Allied to
pay losses covered by the Insuring Agreements, including reasonable Defense Costs until the
regulatory sublimit has been exhausted.
The Debtors incurred substantial costs related to the Criminal Action, and assert that they
have met the contractual conditions of Insuring Agreement E, including the $200,000 deductible,
and are entitled to payment from Allied in the full amount of the Regulatory Sublimit. Certain
former officers and directors of the Debtors have also asserted a right to recover from Allied
under Insuring Agreement E. The Debtors are currently negotiating the terms of a settlement
with Allied and the other former officers of Sacred Heart whereby the Debtors would receive the
amount of $99,000 from Allied in satisfaction of all amounts due under the Regulatory Sublimit.
The proposed settlement, when finalized, will require bankruptcy court approval.
L.
Storage of Medical Information
The Debtors qualify as a “Covered Entity” as defined under the Health Insurance
Portability and Accountability Act of 1996 (“HIPAA”) and the HIPAA Privacy and Security
Rules, 45 C.F.R. Parts 160 and 164, as amended (“HIPAA Rules”). Accordingly, under the
various laws, rules and regulations governing access to patient records and confidentiality of
patient protected health information, including, without limitation HIPAA, the HIPAA Rules,
and the Illinois records retention requirement, the Debtors must comply with certain guidelines
and timetables for the retention, destruction and provision of access to the protected health
information.
Notwithstanding the fact that the medical records were stored at the former Sacred Heart
hospital, the Debtors needed a long-term solution to securely store, index, provide access,
maintain and eventually destroy medical records and other protected health information in
compliance with applicable law long after the Debtors cease to exist. As part of that long-term
solution, the Debtors’ tangible medical records and certain other media which likely contained
protected health information were delivered to Recall Total Information Management, Inc.
(“Recall”) pursuant to the Order Authorizing the Debtors to Enter into an Agreement with Recall
for the Storage and Disposition of Protected Health Information dated October 29, 2014.
In addition to the information provided to Recall, Sacred Heart had also maintained
certain electronic records containing protected health information that may be accessed via the
medical billing and related software licensed from CPSI located on computer servers purchased
from CPSI (collectively, the “CPSI Agreements”). Pursuant to the Order Approving Settlement
with Computer Programs & Systems, Inc. and Granting Related Relief dated December 19,
2014, the Court approved a settlement with CPSI whereby CPSI agreed to permanently store,
maintain, provide access and, eventually securely destroy the Records. In exchange, CPSI
received a general unsecured claim against Sacred Heart in the amount of $49,225.00, the CPSI
Agreements were rejected, and CPSI retained the rights to the servers and related computer
hardware holding the electronic records.
VI.
SUMMARY OF OTHER SIGNIFICANT PROVISIONS OF THE PLAN
A.
Means for Execution of the Plan. In accordance with sections 1123(a)(5)(D)
and 1123(b)(4) of the Bankruptcy Code, all Assets shall be sold, otherwise liquidated or
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abandoned. This Plan shall be funded by the Cash held by Sacred Heart, Garfield and Superior
and from liquidation of such other Assets of the Estates, including the net proceeds of the sale or
disposition of any Litigation Claims.
B.
Liquidating Trust. On or before the Effective Date, the Debtors shall establish
a liquidating trust in accordance with the Liquidating Trust Agreement. On the Effective Date,
the Debtors shall be deemed to have transferred the Liquidation Proceeds and all other Assets of
their respective Estates to the Liquidating Trust pursuant to the terms of the Liquidating Trust
Agreement. The Liquidation Proceeds and all other Assets of their respective Estates transferred
to the Liquidating Trust pursuant to the terms of the Liquidating Trust Agreement shall be held
in segregated accounts for the benefit of the Holders of Claims and Interests against each
respective Estate. By confirmation of the Plan, the Bankruptcy Court will specifically approve
and designate the Liquidating Trust and the Liquidating Trustee as the representative of the
respective Estates and will find that the Liquidating Trust and the Liquidating Trustee are acting
on behalf of and for the benefit of the Liquidating Trust’s beneficiaries.
C.
Liquidating Trustee. The Liquidating Trustee shall be appointed pursuant to
the Liquidating Trust Agreement and shall be responsible for liquidating and administering the
Trust Assets for all distributions pursuant to the Plan. On the Effective Date, the Liquidating
Trustee shall become the appointed representative of the respective Estates in accordance with
section 1123(b)(3) of the Bankruptcy Code, shall assume all surviving liabilities of each of the
Estates and shall pay such liabilities as provided under this Plan. The Liquidating Trustee shall
have and perform all of the duties, responsibilities, rights and obligations set forth in the
Liquidating Trust Agreement. The Liquidating Trust and the Liquidating Trustee shall be bound
by all orders of the Bankruptcy Court entered prior to the Effective Date, to the same extent as
the Debtors were bound by the terms of such orders. The Liquidating Trustee may retain counsel
and other professionals as the Liquidating Trustee, in his sole discretion, deem appropriate,
without further order of the Bankruptcy Court, to assist the Liquidating Trustee in performing his
duties, rights and obligations under this Plan.
D.
Plan Injunction. Article 7.2 of the Plan contains the following injunction:
Except for actions as Holders may take to prosecute or defend their respective Claims or
Interests in the Bankruptcy Court against the Debtors or Liquidating Trustee, entry of a
Confirmation Order will operate as an injunction against the commencement or
continuation of an action, the employment of process, or any act to collect, recover or offset
any Claim of any Holder against the Debtors, their Estates, or the Liquidating Trust;
provided, however, that to the extent that the provisions of § 362(a) have been modified by
the Bankruptcy Court prior to the Effective Date, actions against the Debtors consistent
with such modification and the Plan are permitted.
E.
Exculpation and Indemnification. Article 7.3 of the Plan contains the
following exculpation and indemnification provisions in favor of (a) the Debtors’ Postpetition
Officers, Directors and Professionals, and (b) the Liquidating Trust and the Liquidating Trustee:
(a)
From and after the Effective Date, to the fullest extent permitted by
applicable law, (i) Paul Rundell, David McLaughlin, Karen Davis, Aisha M. Jaleel, Zivojin
Pavlovic, Spiros Stamelous, Thomas Abraham, and Sherry Hendrix; (ii) the Debtors’
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agents, attorneys, accountants, consultants, financial advisors (and their officers, directors,
and shareholders) retained or employed by order of the Bankruptcy Court; and (iii) any
Person that may be liable derivatively through any of the foregoing and each of their
representatives (collectively, the “Postpetition Releasees”) shall not have and shall not
incur any liability to any Person for any and all claims, causes of action and other
assertions of liability, or for any act or omission arising in connection with, relating to or
arising out of the Cases, the pursuit of confirmation of this Plan, the pursuit of the
approval of the adequacy of the Disclosure Statement, the confirmation and
implementation of this Plan, the consummation of this Plan, or the administration of this
Plan, the existence of the Trust Assets, or any other property to be distributed or
abandoned under this Plan (the “Postpetition Released Matters”) except for such
Postpetition Releasees’ willful misconduct or fraud as determined by a Final Order. To the
fullest extent permitted by applicable law, the Liquidating Trust shall indemnify, defend,
and hold harmless the Postpetition Releasees (without the Postpetition Releasees having to
first pay from their own funds) from and against any and all Claims, causes of action,
liabilities, obligations, losses, costs, judgments, damages (including attorney fees and costs)
for any act or omission in connection with, relating to or arising out of the Postpetition
Released Matters, other than acts or omissions to act to the extent determined by a Final
Order to be due to such Postpetition Releasee’s own respective willful misconduct or fraud.
This exculpation and indemnification shall not apply to any causes of action against the
Postpetition Releasees arising under Chapter 5 of the Bankruptcy Code. All rights of the
Persons exculpated and indemnified pursuant hereto shall survive confirmation of the Plan
and the closing of the Cases.
(b)
From and after the Effective Date, to the fullest extent permitted by
applicable law, the Liquidating Trustee and each of his officers, directors, shareholders,
employees and representatives together with any Person that may be liable derivatively
through any of the foregoing and each of their representatives (collectively the
“Liquidating Trustee Protected Parties”) shall not have and shall not incur any liability to
any Person for any and all Claims, causes of action and other assertions of liability, or for
any act or omission, (i) arising out of the discharge of the powers and duties conferred
upon the Liquidating Trustee by the Plan, the Liquidating Trust, or any court order,
(ii) relating to or taken in furtherance of the Plan, the Liquidating Trust or any court
order, (iii) relating to the character, nature or existence of the Trust Assets, (iv) relating to
the Postpetition Released Matters, except for acts or omissions to act to the extent
determined by a Final Order to be due to such Liquidating Trustee Protected Parties’ own
respective willful misconduct or fraud. No Holder of a Claim or Interest, or any other
party in interest, will have or pursue any claim or cause of action against the Liquidating
Trustee Protected Parties (i) arising out of the discharge of the powers and duties conferred
upon the Liquidating Trustee by the Plan, the Liquidating Trust, or any court order, (ii)
relating to or taken in furtherance of the Plan, the Liquidating Trust or any court order,
(iii) relating to the character, nature or existence of the Trust Assets, or (iv) relating to the
Postpetition Released Matters, except for acts or omissions to act to the extent determined
by a Final Order to be due to such Liquidating Trustee Protected Parties’ own respective
willful misconduct or fraud. Any act taken pursuant to the Plan, the Liquidating Trust or
court order, will be conclusively deemed not to constitute fraud or willful misconduct. To
the fullest extent permitted by applicable law, the Liquidating Trust shall indemnify,
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defend, and hold harmless the Liquidating Trustee Protected Parties (without the
Liquidating Trustee Protected Parties having to first pay from their own funds) and each
of their designated representatives from and against any and all Claims, causes of action,
liabilities, obligations, losses, costs, judgments, damages (including attorney fees and cost),
except for willful misconduct or fraud as determined by a Final Order. All rights of the
Liquidating Trustee Protected Parties exculpated and indemnified pursuant hereto shall
survive confirmation of the Plan and the closing of the Cases.
F.
Releases. Article 7.4 of the Plan grants the following releases:
(a)
On the Effective Date, the Debtors and their Estates and any other entity
acting on any of their behalves, release unconditionally, and are hereby deemed to release
unconditionally, each of the Novak Parties from any and all Claims, obligations, rights,
suits, damages, Litigation Claims, remedies, and liabilities whatsoever (including those
existing under the Bankruptcy Code), whether known or unknown, foreseen or unforeseen,
existing or hereinafter arising, in law, equity or otherwise, based in whole or in part on any
act, omission, transaction, event or other occurrence taking place prior to the Effective
Date; provided, however, nothing in this Article 7.4(a) shall release any Claims against the
Bentley Entities or any of the obligations of the Novak Parties under the terms and
conditions of this Plan or the Novak Party Settlement. For the avoidance of any doubt, and
notwithstanding anything to the contrary contained herein, all claims of the Debtors, the
Estates and the Liquidating Trustee against the Bentley Entities are preserved and not
released under this Plan.
(b)
On the Effective Date, each Holder of a Claim (other than a Claim of
a Governmental Unit or FirstMerit) that receives a distribution under this Plan releases
unconditionally, and is hereby deemed to have unconditionally released each of the Novak
Parties from any and all Claims (including, without limitation, derivative claims),
obligations, rights, suits, damages, Litigation Claims, remedies, and liabilities whatsoever
(including those existing under the Bankruptcy Code) whether known or unknown,
foreseen or unforeseen, existing or hereinafter arising, in law, equity or otherwise, based in
whole or in part on any act, omission, transaction, event or other occurrence taking place
prior to the Effective Date and relating in any way whatsoever to the Debtors or their
Estates. This release shall also apply to: (i) any Person or Entity that is or was the Holder
of a Claim (other than a Claim of any Governmental Unit or FirstMerit) on or after the
Petition Date and (ii) any Person or Entity acquiring a Claim directly or indirectly from a
Person or Entity that is bound by the release pursuant to this Article 7.4(b) as if such
acquiring Person or Entity has agreed to be bound to such release with respect to such
acquired Claim. For the avoidance of any doubt, and notwithstanding anything to the
contrary contained herein, (i) nothing in this Plan is intended to or shall affect, release or
compromise any Claim, cause of action, remedy, defense, right of setoff or recoupment or
right of seizure or forfeiture that the United States or any of its agencies has, may have or
may assert against Novak or the Novak Parties, including any such claims of the United
States against Novak or the Novak Parties under the Federal Debt Collection Procedures
Act (28 U.S.C. § 3001 et seq.) and (ii) nothing in this Plan is intended to or shall release or
adversely affect any claims that FirstMerit may have or assert against the Novak Parties.
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(c)
On the Effective Date, the Novak Parties release unconditionally, and
are hereby deemed to have unconditionally released (i) the Debtors’ managers, directors,
members, member officers, officers, and employees; (ii) the Debtors’ agents, attorneys,
accountants, consultants (and their officers, directors, and shareholders); and (iii) any
Person that may be liable derivatively through any of the foregoing and each of their
representatives from any and all Claims (including, without limitation, derivative claims),
obligations, rights, suits, damages, Litigation Claims, remedies, and liabilities whatsoever
(including those existing under the Bankruptcy Code) whether known or unknown,
foreseen or unforeseen, existing or hereinafter arising, in law, equity or otherwise, based in
whole or in part on any act, omission, transaction, event or other occurrence taking place
prior to the Effective Date and relating in any way whatsoever to the Debtors or their
Estates, provided, however, nothing in this Article 7.4(c) shall release any Allowed Class
1H Claims or Allowed Class 1I Interests.
(d)
WARN Employee Releases of the Debtors and their Estates and the
Novak Parties. On the Effective Date, the WARN Plaintiffs unconditionally release the
Debtors, their current and former managers, directors, officers, agents, attorneys,
accountants, consultants, and their Estates from all WARN Claims other than those
WARN Claims entitled to treatment under Classes 1B of this Plan. For the avoidance of
doubt, this release is intended to include a release of all WARN Class Priority Claims
against Sacred Heart, Garfield and Superior. Nothing in this Article shall impair or
diminish the releases granted under the WARN Class Settlement.
(e)
On the Effective Date, the Debtors and their Estates and any other
entity acting on any of their behalves, release unconditionally, and are hereby deemed to
release unconditionally, the FirstMerit Parties from any and all Claims, obligations, rights,
suits, damages, Litigation Claims, remedies, and liabilities whatsoever (including those
existing under the Bankruptcy Code), whether known or unknown, foreseen or unforeseen,
existing or hereinafter arising, in law, equity or otherwise, based in whole or in part on any
act, omission, transaction, event or other occurrence taking place prior to the Effective
Date; provided, however, nothing in this Article 7.4(e) shall release any of the obligations of
FirstMerit under the terms and conditions of this Plan.
(f)
On the Effective Date, FirstMerit releases unconditionally, and is
hereby deemed to have unconditionally released (i) the Debtors’ managers, directors,
members, member officers, officers, and employees; (ii) the Debtors’ agents, attorneys,
accountants, consultants (and their officers, directors, and shareholders); and (iii) any
Person that may be liable derivatively through any of the foregoing and each of their
representatives from any and all Claims (including, without limitation, derivative claims),
obligations, rights, suits, damages, Litigation Claims, remedies, and liabilities whatsoever
(including those existing under the Bankruptcy Code) whether known or unknown,
foreseen or unforeseen, existing or hereinafter arising, in law, equity or otherwise, based in
whole or in part on any act, omission, transaction, event or other occurrence taking place
prior to the Effective Date and relating in any way whatsoever to the Debtors or their
Estates, provided, however, nothing in this Article 7.4(f) is intended to or shall release any
claims that FirstMerit may have or assert against the Novak Parties, the Bentley Entities or
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any of the obligations of the Debtors or Liquidating Trustee under the terms and
conditions of this Plan.
(g)
Notwithstanding anything to the contrary in the Plan, the provisions
of Articles 7.4(a), 7.4(b) and 7.5 shall only take effect after the Escrowed Settlement Funds
are transferred by the Escrow Agent to the Liquidating Trust and all other obligations of
the Novak Parties under this Plan have been performed.
G.
Novak Party Injunction. Article 7.5 of the Plan contains the following
injunction in favor of the Novak Parties: In consideration for the Novak Parties’ funding the
Novak Party Settlement, entry of a Confirmation Order will operate as an injunction
against the commencement or continuation of an action, the employment of process, or any
act to collect, recover or offset any Claim of any Holder (other than a Claim by any
Governmental Unit) that receives a distribution under this Plan against the Novak Parties,
which injunction shall be effective so long as the Novak Parties are performing their
obligations under the Plan and no default has occurred.
H.
Disputed Claims. The Debtors, prior to the Effective Date, and the Liquidating
Trustee, from and after the Effective Date, reserve all rights to prosecute any and all objections
to Claims and Interests, including Administrative Claims. All objections to Claims must be filed
and served on the holders of such Claims by the Claims Objection Deadline. Unless a Claim is
objected to by the Claims Objection Deadline, such Claim shall be deemed Allowed in the
amount requested. All Claim objections by the Liquidating Trustee shall be litigated to a Final
Order except to the extent the Liquidating Trustee, in his discretion, elects to withdraw any such
objections or compromise, settle or otherwise resolve any such objection, in accordance with the
terms of the Liquidating Trust Agreement, in which event the Liquidating Trustee may settle,
compromise or otherwise resolve any Disputed Claim without approval of the Bankruptcy Court.
Within thirty (30) days of the Claims Objection Deadline, Novak shall have the right, at his sole
expense, to object to any Claim against Sacred Heart that is not already Allowed or subject to a
pending Claim objection filed by the Liquidating Trustee.
I.
Retention of Litigation Claims. Pursuant to section 1123(b)(3)(B) of the
Bankruptcy Code, the Litigation Claims, including any and all avoidance and other actions
arising under chapter 5 of the Bankruptcy Code, and actions to collect the Debtors’ accounts
receivable shall be retained, prosecuted and enforced by the Liquidating Trustee, except to the
extent expressly released through this Plan. The Liquidating Trustee may enforce, sue on, settle
or compromise any or all such Litigation Claims or, in the exercise of his discretion, may elect to
not pursue certain Litigation Claims. The Liquidating Trustee may designate and employ any
professional employed in the Cases to represent him in connection with the claims retained
herein, and the Liquidating Trustee shall retain any and all defenses, counterclaims and rights
held by the Debtors or their Estates. Further, the net proceeds of the Litigation Claims shall be
paid into the Liquidation Proceeds for use or distribution pursuant to the Plan.
J.
Intercompany Claims. No distributions shall be made under the Plan on
account of inter-company claims or interests between and among any of the Debtors.
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K.
Administrative Expense Claims. All requests for the allowance and/or
payment of an Administrative Claim (other than Professional Fee Claims) must be filed with
the Bankruptcy Court and served on counsel for the Debtors and the Liquidating Trustee no
later than thirty (30) days after the Effective Date. Unless such request is objected to, such
Administrative Claim shall be deemed allowed in the amount requested. In the event that an
Administrative Claim is objected to, the Bankruptcy Court shall determine the Allowed amount
of such Administrative Claim.
VII.
ADMINISTRATION OF THE LIQUIDATING TRUST AFTER CONFIRMATION
On the Effective Date, the Liquidating Trustee will be appointed pursuant to the
Liquidating Trust Agreement. The Liquidating Trustee will complete the liquidation of the
Debtors’ assets and will administer the Liquidating Trust. Pursuant to the Liquidating Trust
Agreement, approximately every three (3) months after the Effective Date, the Liquidating
Trustee shall file with the Bankruptcy Court a status report disclosing any material events
relating to the liquidation, the likelihood of distributions to Holders of Claims during the next
three (3) month period subsequent to the filing of the report, and the amounts of any payments
made and expenses incurred during such six-month period.
The actions contemplated by the Liquidating Trustee following confirmation include, but
are not limited to, the following: objections to Claims where appropriate; prosecution of
avoidance actions, claims and other Litigation Claims; and recovery of refunds and prepaid
expenses due where practicable. The Plan provides for the Court to reserve jurisdiction to
resolve any litigation and other disputes that may arise from activities under the Plan. The
Liquidating Trustee may also pay all post-confirmation claims in the ordinary course of business,
including their professional fees and costs, without application to or approval by the Court.
The Liquidating Trustee shall be entitled to compensation and the reimbursement of the
actual and necessary expenses that he incurs in his duties as the Liquidating Trustee. To the
extent the Liquidating Trustee requires any employees or staff, such persons will receive such
compensation as is customary for the services required to be performed. The Liquidating
Trustee may retain, employ and compensate such professionals as may be necessary to assist the
Liquidating Trustee in performing his duties under the Plan.
VIII. RISK FACTORS TO BE CONSIDERED
Any objection to the Plan filed by a member of a Class could either prevent or delay
confirmation of the Plan and the Debtors’ estimate as to the final amounts of Allowed Claims in
each Class may prove to be lower than the actual amount of Allowed Claims.
IX.
ACCEPTANCE AND CONFIRMATION
To confirm the Plan, the Bankruptcy Code requires that the Court make a series of
determinations concerning the Plan with respect to the Debtors and the Debtors’ Estates,
including that: (i) the Plan has classified Claims in a permissible manner; (ii) the contents of the
Plan comply with the technical requirements of Chapter 11 of the Bankruptcy Code; (iii) the
Debtors have proposed the Plan in good faith; and (iv) the Debtors’ disclosures concerning the
Plan have been adequate and have included information concerning all payments made or
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promised in connection with the Plan and the Debtors’ Cases, as well as the identity and
affiliations of, and compensation to be paid to, all insiders. The Debtors believe that all of these
conditions have been met or will be met and will seek findings of the Court to this effect at the
hearing on confirmation of the Plan.
The Bankruptcy Code also requires that the Plan be accepted by the requisite votes of
holders of Claims, that the Plan be feasible, and that confirmation of the Plan be in the “best
interests” (absent unanimity) of the holders in each impaired class of Claims and Interests. To
confirm the Plan, the Court must find that all of these conditions are met. Thus, even if all
classes of Claims accept the Plan by the requisite votes, the Court must make independent
findings respecting the Plan’s feasibility and whether it is in the best interests of Holders of
Claims and Interests before it may confirm the Plan. The classification, “best interests,” and
feasibility conditions to confirmations are discussed below.
A.
Classification of Claims. The Bankruptcy Code requires that the Plan place
each Claim or Interest in a class with other Claims or Interests which are substantially similar.
The Debtors believe that the Plan satisfies the Bankruptcy Code’s standards for appropriate
classification.
B.
Best Interests of Impaired Classes. Notwithstanding acceptance of the Plan by
each impaired class of Claims, in order to confirm the Plan, the Court must determine that the
Plan is in the “best interests” of creditors and equity security holders. The “best interests” test
requires that the Court find that the Plan will provide to each member of each impaired class of
Claims property of a value, as of the Effective Date of the Plan, at least equal to the amount
such member would receive or retain if the Debtors were liquidated under chapter 7 of the
Bankruptcy Code. Importantly, A&M has agreed to subordinate to General Unsecured
Creditors approximately $500,000 of its Administrative Claim against the Estates, but only if
the Plan is confirmed.
Sacred Heart prepared the liquidation analysis for its Assets which is attached hereto as
Exhibit 2. You should review this liquidation analysis, which sets forth the amounts that Sacred
Heart expect that the Liquidating Trustee will distribute to the Debtors’ creditors versus the
amounts that the Debtors believe would be available in the event of a chapter 7 liquidation. No
liquidation analysis has been prepared for Garfield and Superior as the Plan contemplates that
Holders of Claims will be paid in full.
C.
Feasibility. As a condition to confirmation, the Bankruptcy Code generally
requires that confirmation is not likely to be followed by the liquidation of the Debtors or the
need for further financial reorganization. Since the Debtors are being liquidated under the Plan,
this standard is not relevant to confirmation of the Plan.
D.
Acceptance. As another condition to confirmation, the Bankruptcy Code
requires that each impaired class of Claims or Interests accept the Plan. The Bankruptcy Code
defines acceptance of the Plan by a class of Claims as acceptance by the holders of two-thirds
in amount and a majority in the number of Claims in that class. For a class of Interests,
acceptance is defined as acceptances by the holders of two-thirds in amount. For both purposes
only those who actually vote to accept or reject the Plan are counted.
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X.
ALTERNATIVES TO THE PLAN
The Debtors believe that the Plan provides holders of Claims with the earliest and
greatest possible value that can be realized on their Claims. The alternatives to confirmation of
the Plan include the submission of an alternative plan or plans of liquidation by one or more
other parties in interest or the chapter 7 liquidation of the Debtors. As of the date of this
Disclosure Statement, no alternative plans have been filed. As set forth above, the results of a
chapter 7 liquidation are likely to result in no material distribution to Holders of Allowed Claims.
XI.
TAX CONSEQUENCES
A detailed discussion of the federal and state income tax consequences of the Plan is not
practicable under the circumstances of these cases, and the Debtors express no opinion thereon.
Because the income tax consequences of the Plan may be different for different parties, each
party is urged to seek advice from its own tax advisor with respect to the income tax
consequences of the Plan. The Debtors believe, however, that there will be no adverse tax
consequences to the Estates as a result of the Plan’s consummation, and that the Estates have
sufficient tax attributes to prevent any negative tax implications resulting from the Plan’s
consummation.
XII.
Conclusion
The Debtors believe the Plan is feasible and in the best interests of the Debtors’ creditors
and equity security holders. Accordingly, the Debtors ask that you vote to accept the Plan. A
ballot for acceptance or rejection of the Plan is enclosed. Your vote is important.
West Side Community Hospital, Inc.,
Garfield Kidney Center, LLC, and Superior
Home Health, L.L.C.
Dated: May 6, 2015
By
Robert M. Fishman (IL ARDC 3124316)
Allen J. Guon (IL ARDC 6244526)
David R. Doyle (IL ARDC 6303215)
Shaw Fishman Glantz & Towbin LLC
321 North Clark Street, Suite 800
Chicago, IL 60654
Phone: (312) 541-0151
Counsel for Debtors
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One of their attorneys
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Exhibit
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
IN RE:
WEST SIDE COMMUNITY HOSPITAL
INC.
GARFIELD KIDNEY CENTER, LLC
SUPERIOR HOME HEALTH, L.L.C.,
Debtors.
)
)
)
)
)
)
)
)
)
)
Chapter 11
Honorable Eugene R. Wedoff
Case No. 13-27091 (Jointly Administered)
Case No. 13-27092
Case No. 13-27093
SECOND AMENDED JOINT CHAPTER 11 PLAN
May 6, 2015
Robert M. Fishman
Allen J. Guon
David R. Doyle
Shaw Fishman Glantz & Towbin LLC
321 North Clark Street, Suite 800
Chicago, Illinois 60654
[email protected]
[email protected]
[email protected]
Counsel for Debtors
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Exhibit
INTRODUCTION
West Side Community Hospital Inc. d/b/a Sacred Heart Hospital, Garfield Kidney
Center, LLC, and Superior Home Health, L.L.C., jointly propose this Second Amended Joint
Chapter 11 Plan to govern the liquidation of the Debtors’ Assets, the distribution of the proceeds
thereof and the satisfaction of the claims asserted by their creditors. All of the Debtors’
operating assets have been sold during the Cases and this Plan specifies how the sale proceeds
thereof, as well as the proceeds of any remaining Assets will be allocated among the Debtors’
creditors. In general, the creditors of Garfield and Superior will likely be paid in full, while the
creditors of Sacred Heart will receive an initial pro rata distribution from (a) funds marshalled
from the remaining sale proceeds; (b) collections from accounts and (c) a payment of $1 million
from ownership. Subsequent distributions to the creditors of Sacred Heart may also be made
from (x) recoveries of withheld Medicare and Medicaid receivables, (y) proceeds from litigation
recoveries and (z) recoveries of funds held as collateral for a certain letter of credit issued by
FirstMerit. The accompanying Creditor Information Sheet includes a high-level summary of this
Plan and its implementation and the accompanying Disclosure Statement includes a full
discussion of the Debtors’ history, business, and operations and other related matters.
ARTICLE I
DEFINED TERMS AND RULES OF INTERPRETATION
1.1
Defined Terms. As used herein, capitalized terms have the meanings set forth in
the text or the Glossary contained in Article X. Any capitalized term that is not otherwise
defined herein has the meaning given to that term in the Bankruptcy Code or the Bankruptcy
Rules, as applicable.
1.2
Rules of Interpretation and Computation of Time. For purposes of this Plan,
unless otherwise provided herein: (a) whenever from the context it is appropriate, each term,
whether stated in the singular or the plural, will include both the singular and the plural; (b)
unless otherwise provided in this Plan, any reference in this Plan to a contract, instrument,
release or other agreement or document being in a particular form or on particular terms and
conditions means that such document will be substantially in such form or substantially on such
terms and conditions; (c) any reference in this Plan to an existing document or schedule, filed or
to be filed, means such document or schedule, as it may have been or may be amended, modified
or supplemented pursuant to this Plan; (d) any reference to an entity as a Holder of a Claim or
Interest includes that entity’s successors and assigns; (e) all references in this Plan to Sections or
Articles are references to Sections or Articles of this Plan; (f) the words “herein,” “hereunder”
and “hereto” refer to this Plan in its entirety rather than to a particular portion of this Plan; (g)
captions and headings to Articles and Sections are inserted for convenience of reference only and
are not intended to be a part of or to affect the interpretation of this Plan; (h) the rules of
construction set forth in section 102 of the Bankruptcy Code and in the Bankruptcy Rules will
apply; and (i) in computing any period of time prescribed or allowed by this Plan, the provisions
of Bankruptcy Rule 9006(a) will apply.
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Exhibit
ARTICLE II
CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS
2.1
Debtor Classification And Identification.
Class No.
1
2
3
2.2
Debtor
West Side Community Hospital, Inc.
Garfield Kidney Center, LLC
Superior Home Health, L.L.C.
Unclassified Claims.
(a)
Administrative Claims. In accordance with section 1123(a)(1) of the
Bankruptcy Code, Administrative Claims have not been classified. Each Holder of an allowed
Administrative Claim shall be paid in full, without interest, or on such other terms as may be
agreed upon by such Holder and the applicable Debtor, on the Effective Date or as soon
thereafter as may be practicable, by the Estate of the applicable Debtor, provided, however, that
if such Holder’s Administrative Claim is (a) disputed as to amount, validity, priority or
enforceability or (b) subject to setoff by reason of an action that is or may be brought by the
Debtors, or otherwise, then such Administrative Claim shall be payable only to the extent
allowed by order of the Bankruptcy Court. Furthermore, no payment of a Professional’s fees
allowable pursuant to sections 330 and 331 of the Bankruptcy Code shall be made until such
Professional Fee Claim is allowed by order of the Bankruptcy Court. U.S. Trustee’s fees accrued
and payable pursuant to 28 U.S.C. § 1930 through and including the Effective Date shall be paid
in full on or before the Effective Date.
(b)
Priority Tax Claims. In accordance with section 1123(a)(1) of the
Bankruptcy Code, Priority Tax Claims have not been classified. Each Holder of an Allowed
Claim for taxes entitled to priority pursuant to section 507(a)(8) of the Bankruptcy Code shall be
paid by the applicable Debtor in full, without interest, or on such other terms as may be agreed
upon by such Holder and the applicable Debtor, on the Effective Date or as soon thereafter as
may be practicable. Notwithstanding the foregoing, any Holder of an Allowed Priority Tax
Claim will not be entitled to receive any payment on account of any penalty arising with respect
to or in connection with the Allowed Priority Tax Claim. Any such penalty will be subject to
treatment as a General Unsecured Claim against the applicable Debtor, and the Holder of an
Allowed Priority Tax Claim will not be permitted to otherwise assess or attempt to collect such
penalty from the applicable Debtors or the Liquidating Trust.
2.3
Allowance of Claims. In accordance with section 502 of the Bankruptcy Code,
the Bankruptcy Court shall have jurisdiction over the allowance of Claims and Interests.
However, nothing in this Plan shall be construed as to limit the jurisdiction of other courts or
agencies which may also have jurisdiction to adjudicate the Claim of a Governmental Unit.
2.4
Classification of Claims and Interests. A Claim or Interest is placed in a
particular Class for the purpose of receiving distributions pursuant to the Plan only to the extent
that such Claim or Interest is an Allowed Claim or Allowed Interest in that Class and such Claim
or Interest has not been paid, released or otherwise settled before the Effective Date. The
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Exhibit
Bankruptcy Court shall have exclusive jurisdiction over any dispute concerning the classification
of Claims or Interests, and resolution of any such dispute shall not be a condition precedent to
entry of a Confirmation Order or consummation of this Plan. The Claims or Interests against or
in the Debtors are classified as follows:
Classification and Treatment of Claims: Sacred Heart
1.
2.
Class 1A – Non-Tax Priority Claims.
(a)
Classification: Class 1A Claims consist of all Allowed Non-Tax Priority
Claims against Sacred Heart.
(b)
Treatment: Class 1A Claims are Unimpaired under the Plan. Under this
Plan, each Holder of an Allowed Non-Tax Priority Claim against Sacred
Heart shall be paid in full, without interest, or on such other terms as may
be agreed upon by such Holder and Sacred Heart, on the Effective Date or
as soon thereafter as may be practicable.
(c)
Voting: Class 1A Claims are Unimpaired and the Holders of Class 1A
Claims are deemed conclusively to have accepted the Plan pursuant to
section 1126(f) of the Bankruptcy Code. Holders of Claims in Class 1A
are not entitled to vote to accept or reject the Plan.
Class 1B – WARN Priority Claims.
(a)
Classification: Class 1B Claims consist of the WARN Class Priority
Claims against Sacred Heart.
(b)
Treatment: The Class 1B Claims are Unimpaired under the Plan. Each
Holder of an Allowed Class 1B Claim shall receive Cash to be paid in the
amount and manner specified in the WARN Settlement Agreement.
(c)
Voting: Class 1B Claims are Unimpaired and the Holders of Class 1B
Claims are deemed conclusively to have accepted the Plan pursuant to
section 1126(f) of the Bankruptcy Code. Holders of Claims in Class 1B
are not entitled to vote to accept or reject the Plan.
3. Class 1C – FirstMerit Secured Claim.
(a)
Classification: The Class 1C Claim consists of the FirstMerit Secured
Claims against Sacred Heart.
(b)
Treatment: FirstMerit’s Class 1C Claim is Impaired under the Plan.
FirstMerit’s 1C Claim shall be deemed Allowed in the aggregate amount
of the LC Draws plus (i) the Garfield Payment and (ii) to the extent that
funds are available in the FirstMerit Cash Collateral Account after any LC
Draw, termination or expiration of the Letter of Credit, any Shortfall
Amount; provided, however, FirstMerit’s total Allowed Class 1C, 2B and
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3B Claims shall not exceed the aggregate amount of $5,075,000. All
payments received by FirstMerit on account of the Allowed Class 1C
Claim shall also constitute payment of FirstMerit’s Allowed Class 2B and
3B Claims. Holders of Class 1C, 2B and 3B Claims shall receive the
releases granted in Article 7.4(e).
(c)
FirstMerit’s Allowed Class 1C Claim shall be secured solely by the Cash
on deposit in the Cash Collateral Account as of the Effective Date and the
Garfield Payment and all other security interests and liens of FirstMerit on
Sacred Heart Assets shall be released. FirstMerit’s sole recourse for its
Class 1C Claim against Sacred Heart and its Estate shall be from the Cash
held in the FirstMerit Cash Collateral Account and the Garfield Payment.
FirstMerit shall have no recourse against any of the Debtors, their Estates,
the Liquidating Trust or any of the Liquidating Trust Assets.
(d)
FirstMerit will extend the Letter of Credit through and including May 30,
2018, and will not issue any notification to Comerica Bank that the Letter
of Credit will not be extended prior to February 15, 2018. Upon the
occurrence of a LC Draw, FirstMerit may immediately remove Cash from
the FirstMerit Cash Collateral Account in the amount of a Comerica Bank
Draw and apply it to FirstMerit’s Allowed Class 1C Claim. Upon
expiration of the Letter of Credit, all funds remaining in the FirstMerit
Cash Collateral Account, after FirstMerit is reimbursed for all LC Draws,
shall be promptly transferred by FirstMerit to the Liquidating Trust. The
FirstMerit Reimbursement Agreement shall remain in full force and effect
except to the extent modified by this Plan, which modifications shall be
deemed to be amendments to the FirstMerit Reimbursement Agreement.
(e)
Voting: The Class 1C Claim is Impaired and the Holder of the Class 1C
Claim is entitled to vote to accept or reject the Plan.
4. Class 1D – HHS Secured Claims.
(a)
Classification: Class 1D Claims consist of the HHS Secured Claims
against Sacred Heart.
(b)
Treatment: Each Allowed Class 1D Claim shall be fully settled and
satisfied by setoff of all funds due Sacred Heart by HHS, which are unpaid
on the date the Class 1D Claim is Allowed. Any balance of the Class 1D
Claims not paid by setoff of such amounts shall be a Class 1G Claim.
(c)
Voting: Class 1D Claims are Unimpaired and Holders of Class 1D Claims
are deemed conclusively to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Holders of Class 1D Claims are not
entitled to vote to accept or reject the Plan
{10615-001 PLN A0364558.DOCX 18}
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5. Class 1E – Other Secured Claims.
(a)
Classification: Class 1E Claims consist of all Other Secured Claims
against Sacred Heart other than the FirstMerit Secured Claims and the
HHS Secured Claims.
(b)
Treatment: Class 1E Claims are Unimpaired under the Plan. Each Holder
of a Class 1E Claim shall receive the Assets on which it holds liens or
which is subject to setoff under section 553 of the Bankruptcy Code, to the
extent of the value of the Holder’s interest in Sacred Heart’s interest in
such Assets or to the extent of the amount subject to setoff, as applicable,
as determined pursuant to section 506(a) of the Bankruptcy Code and
Bankruptcy Rule 3012 or, in the case of a setoff, pursuant to section 553
of the Bankruptcy Code. Any balance of the Class 1E Claims, to the
extent not secured by the Assets on which they hold liens or which is
subject to setoff under section 553 of the Bankruptcy Code, shall be
treated as a Class 1F Claim.
(c)
Voting: Class 1E Claims are Unimpaired and Holders of Class 1E Claims
are deemed conclusively to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Holders of Class 1E Claims are not
entitled to vote to accept or reject the Plan.
6. Class 1F – General Unsecured Claims.
(a)
Classification: Class 1F Claims consist of all Allowed General Unsecured
Claims against Sacred Heart.
(b)
Treatment:
(i)
Class 1F Claims are Impaired under the Plan. Each Holder of an
Allowed Class 1F Claim shall receive an initial payment of Cash in
an amount equal to the Holder’s pro rata share of the Sacred Heart
Unsecured Creditor Carveout, provided solely for the benefit of the
Allowed Class 1F Claims.
(ii)
In addition, if Sacred Heart Liquidation Proceeds remain for
distribution after payment of the HHS Deficiency Carveout, each
Holder of an Allowed Class 1F Claim and each Holder of an
Allowed Class 1G Claim shall receive Cash in an amount equal to
such Holder’s pro rata share of the remaining Sacred Heart
Liquidation Proceeds. Payment shall be made by the Liquidating
Trustee, in the Liquidating Trustee’s sole discretion, after (a) all
Allowed Administrative Claims, Allowed Priority Tax Claims,
Allowed Class 1A Claims, and Allowed Class 1B against Sacred
Heart have been paid in full, (b) the HHS Deficiency Carveout has
been paid in full; and (c) the Liquidating Trustee has determined,
in his sole discretion, that there are sufficient Sacred Heart
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Liquidation Proceeds remaining to satisfy all reasonably
anticipated expenses of the Liquidating Trust.
(iii)
(c)
Each Holder of an Allowed Class 1F Claim shall receive up to a
maximum of one hundred percent (100%) of the Allowed amount
of its Class 1F Claim, payable as provided in Article VI of the
Plan. Except to the extent required by the Bankruptcy Code or
ordered by the Bankruptcy Court, no distribution will be made on
account of any Class 1F Claim for postpetition interest, attorneys’
fees or costs, or for any punitive or exemplary damages, or for a
fine, penalty or forfeiture of any kind.
Voting: Class 1F Claims are Impaired and Holders of Class 1F Claims are
entitled to vote to accept or reject the Plan.
7. Class 1G – HHS Deficiency Claims.
(a)
Classification: Class 1G Claims consist of all Allowed HHS Deficiency
Claims against Sacred Heart.
(b)
Treatment:
(i)
Class 1G Claims are Impaired under the Plan. Each Holder of an
Allowed Class 1G Claim shall receive Cash in an amount equal to
such Holder’s pro rata share of (a) $100,000.00 and (b) the HHS
Deficiency Carveout. Payment of the HHS Deficiency Carveout
shall be made by the Liquidating Trustee, in the Liquidating
Trustee’s sole discretion, after (x) all Allowed Administrative
Claims, Allowed Priority Tax Claims, Allowed Class 1A, 1B, 1C
Claims have been paid in full and (y) the Liquidating Trustee has
determined, in his sole discretion, that there are sufficient Sacred
Heart Liquidation Proceeds remaining to satisfy all reasonably
anticipated expenses of the Liquidating Trust.
(ii)
In addition, if Sacred Heart Liquidation Proceeds remain for
distribution after payment of the HHS Deficiency Carveout, each
Holder of an Allowed Class 1F Claim and each Holder of an
Allowed Class 1G Claim shall receive Cash in an amount equal to
such Holder’s pro rata share of the remaining Sacred Heart
Liquidation Proceeds. Payment shall be made by the Liquidating
Trustee, in the Liquidating Trustee’s sole discretion, after the
Liquidating Trustee has determined that there are sufficient Sacred
Heart Liquidation Proceeds remaining to satisfy all reasonably
anticipated expenses of the Liquidating Trust.
(iii)
Each Holder of an Allowed Class 1G shall receive up to a
maximum of one hundred percent (100%) of the Allowed amount
of its Class 1G Claim, payable as provided in Article VI of the
{10615-001 PLN A0364558.DOCX 18}
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Plan. Except to the extent required by the Bankruptcy Code or
ordered by the Bankruptcy Court, no distribution will be made on
account of any Class 1G Claim for postpetition interest, attorneys’
fees or costs, or for any punitive or exemplary damages, or for a
fine, penalty or forfeiture of any kind.
(c)
Voting: Class 1G Claims are Impaired and Holders of Class 1G Claims
are entitled to vote to accept or reject the Plan.
8. Class 1H – Ownership Subordinated Claims.
(a)
Classification: Class 1H Claims consist of all Ownership Subordinated
Claims against Sacred Heart.
(b)
Treatment: Class 1H Claims are Impaired under the Plan. Each Holder of
an Allowed Class 1H Claim shall receive Cash in an amount equal to the
Holder’s pro rata share of the Sacred Heart Liquidation Proceeds, up to a
maximum of one hundred percent (100%) of the Allowed amount of its
Class 1H Claim after all Allowed Administrative Claims, Allowed Priority
Tax Claims and Allowed Class 1A, 1B, 1C, 1D, 1E, 1F and 1G Claims
against Sacred Heart have been paid or satisfied in full and the Liquidating
Trustee has determined, in his sole discretion, that there are sufficient
Sacred Heart Liquidation Proceeds remaining to satisfy all reasonably
anticipated expenses of the Liquidating Trust. Except to the extent
required by the Bankruptcy Code or ordered by the Bankruptcy Court, no
distribution will be made on account of any Class 1H Claim for
postpetition interest, attorneys’ fees or costs, or for any punitive or
exemplary damages, or for a fine, penalty or forfeiture of any kind.
(c)
Voting: Class 1H Claims are Impaired and Holders of Class 1H Claims
are entitled to vote to accept or reject the Plan.
9. Class 1I – Equity Interests.
(a)
Classification: Class 1I Interests consist of all Interests in Sacred Heart.
(b)
Treatment: Class 1I Interests are Unimpaired under the Plan. Holders of
Allowed Interests shall retain their Equity Interests under the Plan. To the
extent that any Sacred Heart Liquidation Proceeds remain after all
Allowed Claims against Sacred Heart have been paid or satisfied in full
pursuant to this Plan, such Sacred Heart Liquidation Proceeds shall be
distributed to the Holder of the Allowed Classes 1I Interests.
(c)
Voting: Class 1I Interests are Unimpaired and the Holder of the Class 1I
Interests are deemed conclusively to have accepted the Plan pursuant to
section 1126(f) of the Bankruptcy Code. The Holder of Class 1I Interests
is not entitled to vote to accept or reject the Plan.
{10615-001 PLN A0364558.DOCX 18}
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Classification and Treatment of Claims: Garfield
10. Class 2A – Non-Tax Priority Claims.
(a)
Classification: Class 2A Claims consist of all Allowed Non-Tax Priority
Claims against Garfield.
(b)
Treatment: Class 2A Claims are Unimpaired under the Plan. Under this
Plan, each Holder of an Allowed Non-Tax Priority Claim against Garfield
shall be paid in full, without interest, or on such other terms as may be
agreed upon by such Holder and Garfield, on the Effective Date or as soon
thereafter as may be practicable.
(c)
Voting: Class 2A Claims are Unimpaired and the Holders of Class 2A
Claims are deemed conclusively to have accepted the Plan pursuant to
section 1126(f) of the Bankruptcy Code. Holders of Claims in Class 2A
are not entitled to vote to accept or reject the Plan.
11. Class 2B – FirstMerit Secured Claims.
(a)
Classification: The Class 2B Claim consists of the FirstMerit Secured
Claim against Garfield.
(b)
Treatment: FirstMerit’s Class 2B Claim is Impaired under the Plan.
FirstMerit’s Allowed 2B Claim shall be deemed Allowed in the aggregate
amount of all LC Draws plus (i) the Garfield Payment and (ii) to the extent
that funds are available in the FirstMerit Cash Collateral Account after any
LC Draw, termination or expiration of the Letter of Credit, any Shortfall
Amount; provided, however, FirstMerit’s total Allowed Class 1C, 2B and
3B Claims shall not exceed the aggregate amount of $5,075,000. All
payments received by FirstMerit on account of the Allowed Class 2B
Claim shall also constitute payment of FirstMerit’s Allowed Class 1C and
3B Claims. Holders of Class 1C, 2B and 3B Claims shall receive the
releases granted in Article 7.4(e).
(c)
On the Effective Date, Garfield shall (i) deliver to FirstMerit Cash the
amount of $1,300,000, which FirstMerit will deposit in the FirstMerit
Cash Collateral Account and (ii) pay FirstMerit the amount of $175,000 in
partial satisfaction of FirstMerit’s Class 1C, 2B, and 3C Claims against the
Debtors (“Garfield Payment”), which FirstMerit is authorized to retain
immediately.
(d)
FirstMerit’s Allowed Class 2B Claim shall be secured solely by the Cash
on deposit in the Cash Collateral Account as of the Effective Date and the
Garfield Payment and all other security interests and liens of FirstMerit on
Garfield Assets shall be released. FirstMerit’s sole recourse for its
Class 2B Claim against Garfield and its Estate shall be from the Cash held
in the FirstMerit Cash Collateral Account and the Garfield Payment.
{10615-001 PLN A0364558.DOCX 18}
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FirstMerit shall have no recourse against any of the Debtors, their Estates,
the Liquidating Trust or any of the Liquidating Trust Assets.
(e)
FirstMerit will extend the Letter of Credit through and including May 30,
2018, and will not issue any notification to Comerica Bank that the Letter
of Credit will not be extended prior to February 15, 2018. Upon the
occurrence of a LC Draw, FirstMerit may immediately remove Cash from
the FirstMerit Cash Collateral Account in the amount of a LC Draw and
apply it to FirstMerit’s Allowed Class 2B Claim. Upon expiration of the
Letter of Credit, all funds remaining in the FirstMerit Cash Collateral
Account, after FirstMerit is reimbursed for all LC Draws, shall be
promptly transferred by FirstMerit to the Liquidating Trust. The
FirstMerit Reimbursement Agreement shall remain in full force and effect
except to the extent modified by this Plan, which modifications shall be
deemed to be amendments to the FirstMerit Reimbursement Agreement.
(f)
Voting: The Class 2B Claim is Impaired and the Holder of the Class 2B
Claim is entitled to vote to accept or reject the Plan.
12. Class 2C –General Unsecured Claims.
(a)
Classification: Class 2C Claims consist of all Allowed General Unsecured
Claims against Garfield.
(b)
Treatment: Class 2C Claims are Impaired under the Plan. Each Holder of
an Allowed Class 2C Claim shall receive an amount equal to the Holder’s
pro rata share of the Garfield Liquidation Proceeds, up to a maximum of
one hundred percent (100%) of the Allowed amount of its Class 2C Claim,
payable as provided in Article VI of the Plan. Except to the extent
required by the Bankruptcy Code or ordered by the Bankruptcy Court, no
distribution will be made on account of any Class 2C Claim for
postpetition interest, attorneys’ fees or costs, or for any punitive or
exemplary damages, or for a fine, penalty or forfeiture of any kind. Any
Garfield Liquidation Proceeds remaining after payment of all Allowed 2C
Claims against Garfield shall be paid to the Liquidation Trustee for the
benefit of Holders of Claims and Interests against Sacred Heart.
(c)
Voting: Class 2C Claims are Impaired and Holders of Class 2C Claims
are entitled to vote to accept or reject the Plan.
13. Class 2D – Equity Interests.
(a)
Classification: Class 2D Interests consist of all Interests in Garfield.
(b)
Treatment: Class 2D Interests are Impaired under the Plan. Holders of
Class 2D Interests shall receive the releases granted in Article 7.4(b) and
the injunction granted in Article 7.5. Other than releases granted in
Article 7.4(b) and the injunction granted in Article 7.5., Holders of Class
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2D Interests shall neither receive nor retain any property under this Plan
on account of such Interests. Any Garfield Liquidation Proceeds
remaining after payment of all Allowed Claims against Garfield shall be
paid to the Liquidation Trustee for the benefit of Holders of Claims and
Interests against Sacred Heart.
(c)
Voting: The Class 2D Interests are Impaired and Holders of the Class 2D
Interests are entitled to vote to accept or reject the Plan.
Classification and Treatment of Claims and Interests: Superior
14. Class 3A – Non-Tax Priority Claims.
(a)
Classification: Class 3A Claims consist of all Allowed Non-Tax Priority
Claims against Superior.
(b)
Treatment: Class 3A Claims are Unimpaired under the Plan. Under this
Plan, each Holder of an Allowed Non-Tax Priority Claim against Superior
shall be paid in full, without interest, or on such other terms as may be
agreed upon by such Holder and Superior, on the Effective Date or as soon
thereafter as may be practicable.
(c)
Voting: Class 3A Claims are Unimpaired and the Holders of Class 3A
Claims are deemed conclusively to have accepted the Plan pursuant to
section 1126(f) of the Bankruptcy Code. Holders of Claims in Class 3A
are not entitled to vote to accept or reject the Plan.
15. Class 3B – FirstMerit Secured Claim.
(a)
Classification: The Class 3B Claim consists of the FirstMerit Secured
Claim against Superior.
(b)
Treatment: FirstMerit’s Class 3B Claim is Impaired under the Plan.
FirstMerit’s Allowed 3B Claim shall be deemed Allowed in the aggregate
amount of all LC Draws plus (i) the Garfield Payment and (ii) to the extent
that funds are available in the FirstMerit Cash Collateral Account after any
LC Draw, termination or expiration of the Letter of Credit, any Shortfall
Amount; provided, however, FirstMerit’s total Allowed Class 1C, 2B and
3B Claims shall not exceed the aggregate amount of $5,075,000. All
payments received by FirstMerit on account of the Allowed Class 3B
Claim shall also constitute payment of FirstMerit’s Allowed Class 1C and
2B Claims. Holders of Class 1C, 2B and 3B Claims shall receive the
releases granted in Article 7.4(e).
(c)
FirstMerit’s Allowed Class 3B Claim shall be secured solely by the Cash
on deposit in the Cash Collateral Account as of the Effective Date and the
Garfield Payment and all other security interests and liens of FirstMerit on
Superior Assets shall be released. FirstMerit’s sole recourse for its
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Class 3B Claim against Superior and its Estate shall be from the Cash held
in the FirstMerit Cash Collateral Account and the Garfield Payment.
FirstMerit shall have no recourse against any of the Debtors, their Estates,
the Liquidating Trust or any of the Liquidating Trust Assets.
(d)
FirstMerit will extend the Letter of Credit through and including May 30,
2018, and will not issue any notification to Comerica Bank that the Letter
of Credit will not be extended prior to February 15, 2018. Upon the
occurrence of a LC Draw, FirstMerit may immediately remove Cash from
the FirstMerit Cash Collateral Account in the amount of a LC Draw and
apply it to FirstMerit’s Allowed Class 3B Claim. Upon expiration of the
Letter of Credit, all funds remaining in the FirstMerit Cash Collateral
Account, after FirstMerit is reimbursed for all LC Draws, shall be
promptly transferred by FirstMerit to the Liquidating Trust. The
FirstMerit Reimbursement Agreement shall remain in full force and effect
except to the extent modified by this Plan, which modifications shall be
deemed to be amendments to the FirstMerit Reimbursement Agreement.
(e)
Voting: The Class 3B Claim is Impaired and the Holder of the Class 3B
Claim is entitled to vote to accept or reject the Plan.
16. Class 3C – General Unsecured Claims.
17.
(a)
Classification: Class 3C Claims consist of all Allowed General Unsecured
Claims against Superior.
(b)
Treatment: Class 3C Claims are Impaired under the Plan. Each Holder of
an Allowed Class 3C Claim shall receive an amount equal to the Holder’s
pro rata share of the Superior Liquidation Proceeds and the Superior
General Unsecured Carveout, up to a maximum of one hundred percent
(100%) of the Allowed amount of its Class 3C Claim, payable as provided
in Article VI of the Plan. Except to the extent required by the Bankruptcy
Code or ordered by the Bankruptcy Court, no distribution will be made on
account of any Class 3C Claim for postpetition interest, attorneys’ fees or
costs, or for any punitive or exemplary damages, or for a fine, penalty or
forfeiture of any kind.
(c)
Voting: Class 3C Claims are Impaired and Holders of Class 3C Claims
are entitled to vote to accept or reject the Plan.
Class 3D – Equity Interests.
(a)
Classification: Class 3D Interests consist of all Interests in Superior.
(b)
Treatment: Class 3D Interests are Impaired under the Plan. Holders of
Class 3D Interests shall receive the releases granted in Article 7.4(b) and
the injunction granted in Article 7.5. Other than releases granted in Article
7.4(b) and the injunction granted in Article 7.5., Holders of Class 3D
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Interests shall neither receive nor retain any property under this Plan on
account of such Interests. Any Cash remaining after payment of all
Allowed Claims against Superior shall be paid to the Liquidation Trustee
for the benefit of Holders of Claims and Interests against Sacred Heart.
(c)
Voting: The Class 3D Interests are Impaired and Holders of the Class 3D
Interests are entitled to vote to accept or reject the Plan.
2.5
Retention of Defenses and Rights of Setoff Regarding Claims. Except as
otherwise provided in this Plan, nothing shall prejudice the Debtors’ or the Liquidating Trustee’s
rights and defenses, both legal and equitable, with respect to any Claims, including, but not
limited to, all rights of setoffs or recoupment with respect to such Claims.
ARTICLE III
ACCEPTANCE OR REJECTION OF THE PLAN
3.1
Acceptance by Impaired Classes. In accordance with section 1126(c) of the
Bankruptcy Code and except as provided under sections 1126(e) and (g) of the Bankruptcy
Code, an Impaired Class of Claims or Interests shall have accepted the Plan if the Plan is
accepted by the Holders of at least two-thirds (2/3) in dollar amount and more than one-half (1/2)
in number of the Allowed Claims or Interests of such Class that have timely and properly voted
to accept or reject the Plan.
3.2
Acceptance by Unimpaired Classes and Unclassified Claims. Pursuant to
section 1126(f) of the Bankruptcy Code, each Unimpaired Class of Claims is presumed to have
accepted the Plan and, therefore, the votes to accept or reject this Plan will not be solicited from
such Classes.
3.3
Cramdown. If any Impaired Class of Claims or Interests entitled to vote shall
not accept the Plan by the requisite majorities provided in section 1126(c) or 1126(d) of the
Bankruptcy Code, as applicable, the Debtors reserve the right to (i) amend the Plan, or
(ii) undertake to have the Bankruptcy Court confirm the Plan under section 1129(b) of the
Bankruptcy Code, or (iii) both amend this Plan and seek Confirmation of any amended plan
pursuant to section 1129(b) of the Bankruptcy Code.
ARTICLE IV
MEANS FOR IMPLEMENTATION OF THE PLAN
4.1
Funding. In accordance with sections 1123(a)(5)(D) and 1123(b)(4) of the
Bankruptcy Code, all Assets shall be sold, otherwise liquidated or abandoned. This Plan shall be
funded by the Cash held by Sacred Heart, Garfield and Superior and from liquidation of such
other Assets of the Estates, including the Novak Settlement Payment (defined below) and the net
proceeds of the sale or disposition of any Litigation Claims. As of the Effective Date, the
Liquidation Proceeds and all other Assets of each Estate shall be transferred, conveyed and
assigned to the Liquidating Trust.
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4.1
Novak Party Settlement. On the Effective Date, the Escrow Agent shall release
the Escrowed Settlement Funds to the Liquidating Trustee to fund the obligations under this Plan
including, but not limited to the payment of the Sacred Heart Unsecured Creditor Carveout and
(ii) to the extent necessary, the payment of the Superior General Unsecured Creditor Carveout.
West Side Management Corp. consents to the treatment of its Claims and Interests against the
Debtors in this Plan. The Novak Parties shall receive the applicable releases set forth in Article
VII of this Plan and the Confirmation Order. The Novak Parties shall grant the applicable
releases set forth in Article VII of this Plan and the Confirmation Order. No release shall be
granted on behalf of a Governmental Unit. Notwithstanding the terms of the Novak Party
Settlement, nothing in this Plan shall release any claims against the Bentley Entities until such
time as the Debtors (or the Liquidating Trustee after the Effective Date) enter a settlement with
the Bentley Entities approved pursuant to a Final Order of the Bankruptcy Court.
4.2
Maintenance of Cash Collateral Account By Trustee. To the extent the Letter
of Credit has not been drawn upon pursuant to its terms prior to the Effective Date, the
Liquidating Trustee shall be substituted for the Debtors and/or the Bentley Entities as the account
holder of record with respect to the FirstMerit Cash Collateral Account. Until such time as the
Letter of Credit is drawn upon, expires by its own terms or is otherwise released by beneficiary,
the FirstMerit Cash Collateral Account shall secure the Debtors’ obligations under the Letter of
Credit.
4.3
Termination of Cash Collateral Account. To the extent that Comerica Bank
draws on the Letter of Credit or the Letter of Credit expires on or after the Effective Date, any
funds remaining in the FirstMerit Cash Collateral Account after satisfaction of any Allowed
Class 1C, 2B and 3B Claims, shall thereafter be delivered to the Liquidating Trustee for
distribution pursuant to the terms of this Plan and the Cash Collateral Account shall thereafter be
closed.
4.4
Intercompany Claims. No distributions shall be made under the Plan on account
of inter-company claims or interests between and among any of the Debtors. All intercompany
claims shall be released, discharged and satisfied on the Effective Date.
4.5
Dissolution of Garfield and Superior. Immediately upon the transfer,
conveyance and assignment of the Liquidation Proceeds and all other Assets of each Estate to the
Liquidating Trust, each of Garfield and Superior shall be deemed to be dissolved without any
further action by the Debtors or the Liquidating Trustee being required to effect such dissolution.
Notwithstanding the foregoing, nothing in this Plan is intended to substantively consolidate, nor
shall have the effect of substantively consolidating, the Debtors or their respective Estates.
4.6
Cancellation of Garfield and Superior Interests. As of the Effective Date, all
Equity Interests in Superior and Garfield shall be deemed cancelled.
4.7
Continued Corporate Existence of Sacred Heart. Subject to the provisions of
this Plan, Sacred Heart shall continue to exist after the Effective Date, in accordance with
applicable law and pursuant to its articles of incorporation and by-laws in effect prior to the
Effective Date; provided, however, (i) the Liquidation Proceeds and all other Assets (including
Litigation Claims) of Sacred Heart’s Estate shall be transferred to the Liquidating Trust pursuant
to the terms of Article V of the Plan and (ii) the corporate purpose of Sacred Heart shall be
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limited to taking such actions consistent with the implementation this Plan. On the Effective
Date, the Equity Interests in Sacred Heart shall revert to the Holders of Class 1I Interests and
Novak shall be its sole director and president. After the Effective Date, Sacred Heart shall be
solely responsible for all required tax disclosures or filings and for complying with all corporate
reporting requirements. None of the Estates, the Debtors, the Liquidating Trustee Protected
Parties, the Postpetition Releasees or any of their respective professionals, or their successors or
assigns shall incur any liability based upon actions taken by Sacred Heart after the Effective
Date.
4.8
Executory Contracts. All executory contracts that (i) the Debtors entered into
prior to the Petition Date, (ii) are executory as of the Effective Date, and (iii) have not been
assumed or rejected pursuant to section 365 of the Bankruptcy Code before the Effective Date,
shall be deemed rejected as of the Effective Date. Unless otherwise ordered by the Bankruptcy
Court, any claim arising from such rejection under this Plan shall be filed on or before thirty (30)
days after the Effective Date or forever be barred from recovery against the Estates.
ARTICLE V
THE LIQUIDATING TRUST
5.1
Liquidating Trust. On or before the Effective Date, the Debtors shall establish a
liquidating trust in accordance with the Liquidating Trust Agreement. On the Effective Date, the
Debtors shall be deemed to have transferred the Liquidation Proceeds and all other Assets of
their respective Estates to the Liquidating Trust pursuant to the terms of the Liquidating Trust
Agreement. The Liquidation Proceeds and all other Assets of their respective Estates transferred
to the Liquidating Trust pursuant to the terms of the Liquidating Trust Agreement shall be held
in segregated accounts for the benefit the Holders of Claims and Interests against each respective
Estate. By confirmation of the Plan, the Bankruptcy Court will specifically approve and
designate the Liquidating Trust and the Liquidating Trustee as the representative of the
respective Estates and will find that the Liquidating Trust and the Liquidating Trustee are acting
on behalf of and for the benefit of the Liquidating Trust’s beneficiaries.
5.2
Liquidating Trustee. The Liquidating Trustee shall be appointed pursuant to the
Liquidating Trust Agreement and shall be responsible for liquidating and administering the Trust
Assets for all distributions pursuant to the Plan. On the Effective Date, the Liquidating Trustee
shall become the appointed representative of the respective Estates in accordance with section
1123(b)(3) of the Bankruptcy Code, shall assume all surviving liabilities of each of the Estates
and shall pay such liabilities as provided under this Plan. The Liquidating Trustee shall have and
perform all of the duties, responsibilities, rights and obligations set forth in the Liquidating Trust
Agreement. The Liquidating Trust and the Liquidating Trustee shall be bound by all orders of
the Bankruptcy Court entered prior to the Effective Date, to the same extent as the Debtors were
bound by the terms of such orders. The Liquidating Trustee may retain counsel and other
professionals as the Liquidating Trustee, in his sole discretion, deem appropriate, without further
order of the Bankruptcy Court, to assist the Liquidating Trustee in performing his duties, rights
and obligations under this Plan.
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5.3
Liquidating Trustee’s Rights, Powers and Duties. On and after the Effective
Date, the Liquidating Trustee shall have, among others, the following rights and powers
(including all of the rights and powers of a trustee appointed under the Bankruptcy Code) with
respect to the implementation of this Plan:
1.
To receive, control, manage and dispose of all Trust Assets for the benefit
of holders of Allowed Claims who may receive distributions under the
Plan;
2.
To act as custodian of the Trust Assets, and liquidate and reduce such
assets to cash at such time as the Liquidating Trustee deems appropriate to
accomplish the purpose of the Liquidating Trust, in accordance with the
terms of the Plan and the Liquidating Trust Agreement;
3.
Calculate and pay all distributions required or permitted to be made under
the Plan, the Liquidating Trust Agreement and/or orders of the Bankruptcy
Court;
4.
Subject to the provisions of the Plan and the Liquidating Trust Agreement,
to establish, fund, and/or administer one or more bank accounts to
maintain all Cash and the Liquidation Proceeds;
5.
To employ, supervise and compensate such Persons as may be necessary
to assist the Liquidating Trustee in the performance of his duties under the
Plan;
6.
To employ, supervise and compensate attorneys, accountants, and other
professionals or other Persons retained to represent the interests of and
serve on behalf of the Liquidating Trust and waive any conflicts of interest
as deemed necessary or appropriate in its discretion;
7.
To file such tax returns as may be required by federal, state or local taxing
authorities and consistent with the treatment of the Liquidating Trust as a
grantor trust for federal income tax purposes;
8.
To object to or seek to recharacterize, reclassify or subordinate Claims
(exclusive of Class 1C, 2B or 3B Claims) filed against any of the Debtors
or their Estates on any basis, and pursuant to Bankruptcy Rule 9019(b)
and section 105(a) of the Bankruptcy Code, to compromise and settle any
such Claims including Disputed Claims;
9.
To seek estimation of contingent or unliquidated claims under section
502(c) of the Bankruptcy Code;
10.
To seek determination of tax liability under section 505 of the Bankruptcy
Code;
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11.
To prosecute, settle, dismiss, abandon or otherwise dispose of turnover
actions under sections 542 and 543 of the Bankruptcy Code (to the extent
not released under Article 7.4);
12.
To prosecute, settle, dismiss, abandon or otherwise dispose of any and all
causes of action of the Debtors or their Estates (to the extent not released
under Article 7.4) including, without limitation, all causes of action arising
under sections 510(c), 544, 545, 547, 548, 549, 550 and 553 of the
Bankruptcy Code, including the Litigation Claims, in accordance with
section 1123(b)(3)(B) of the Bankruptcy Code;
13.
To pay all expenses and make other necessary payments relating to the
Liquidating Trust Assets;
14.
To assert or waive any privilege or defense of the Debtors, including the
attorney-client privilege;
15.
To seek the examination of any entity (excluding FirstMerit) under
Bankruptcy Rule 2004;
16.
To provide indemnity for any entity entitled to indemnification under
Article 7.3 of this Plan;
17.
To perform any and all acts necessary or appropriate for the conservation
and protection of the Liquidating Trust Assets;
18.
To amend or modify this Plan in accordance with section 1127 of the
Bankruptcy Code; and
19.
To file and prosecute such motions, applications or other pleadings in the
Bankruptcy Court or other appropriate forum, and exercise all other
powers and rights, and take all other actions necessary or appropriate to
implement this Plan.
5.4
Retention of Litigation Claims. Pursuant to section 1123(b)(3)(B) of the
Bankruptcy Code, the Litigation Claims, including any and all avoidance and other actions
arising under chapter 5 of the Bankruptcy Code (to the extent not released under Article 7.4), and
actions to collect the Debtors’ accounts receivable shall be retained, prosecuted and enforced by
the Liquidating Trustee, except to the extent expressly released through this Plan. The
Liquidating Trustee may enforce, sue on, settle or compromise any or all such Litigation Claims
or, in the exercise of his discretion, may elect to not pursue certain Litigation Claims. The
Liquidating Trustee may designate and employ any professional employed in the Cases to
represent him in connection with the claims retained herein, and the Liquidating Trustee shall
retain any and all defenses, counterclaims and rights held by the Debtors or their Estates.
Further, the net proceeds of the Litigation Claims shall be paid into the Liquidation Proceeds for
use or distribution pursuant to the Plan.
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5.5
Compensation of Liquidating Trustee. The Liquidating Trustee shall be
compensated pursuant to the terms of the Liquidating Trust Agreement. As compensation for the
performance of his duties, the Liquidating Trustee shall be entitled to Liquidating Trustee’s
standard hourly rate and shall be entitled to reimbursement of his reasonable costs and expenses
incurred in carrying out his duties as the Liquidating Trustee. Any agents, financial advisors,
attorneys, consultants, independent contractors, representatives and other professionals, as
appropriate, retained or utilized by the Liquidating Trustee shall be entitled to reasonable
compensation for services rendered and reimbursement of expenses incurred. After the Effective
Date, the payment of the fees and expenses of the Liquidating Trustee and his agents, financial
advisors, attorneys, consultants, independent contractors, representatives and other professionals
shall be made in the ordinary course of business and shall not be subject to the approval of the
Bankruptcy Court.
Any successor Liquidating Trustee shall receive such reasonable
compensation and reimbursement of expenses in the same manner for service as the Liquidating
Trustee.
5.6
Post-Confirmation Management. From and after the Effective Date, the
Liquidating Trustee shall manage the Liquidating Trust and control and perform all postConfirmation responsibilities, including implementation of the Plan. The Debtors’ managers,
members, directors, employees, agents or other representatives will have no rights to possess,
control, or manage the Debtors’ or Estates’ former Assets.
5.7
Accounts. From and after the Effective Date, the Liquidating Trustee may
establish or maintain one or more interest-bearing accounts as he may determine may be
necessary or appropriate to effectuate the provisions of this Plan consistent with section 345 of
the Bankruptcy Code.
5.8
Substitution of Liquidating Trustee for the Debtors in Pending Litigation.
To the extent that any Party has sought and received relief from the provisions of section 362(a)
of the Bankruptcy Code prior to the Effective Date to proceed with litigation against the Debtors
in a forum other than the Bankruptcy Court, the Liquidating Trustee shall be substituted for the
Debtors in any such litigation.
5.9
Medical Records. Notwithstanding anything in the Plan to the contrary, neither
the Liquidating Trustee nor the Liquidating Trust shall be covered entities as that term is defined
under HIPAA and the HIPAA Rules; provided, however, the Liquidating Trustee shall have
access to protected health information of former patients of the Debtors solely for the purposes
of implementing this Plan. The Debtors entered into agreements with Recall Total Information
Management, Inc., Computer Programs & Systems, Inc. and APGME, Inc. that provided for the
continued access, storage and eventual secured destruction of certain protected health
information of former patients of the Debtors. The contact for information Recall Total
Information Management, Inc. is as follows: Recall Corporation, 4242 W. 42nd Street, Chicago,
Illinois 60632, Attn.: Lori Olson or Sales Manager; Phone: (312) 545-0463, Fax: (773) 9130564. The contact information for Computer Programs & Systems, Inc. is Computer Programs
& Systems, Inc c/o Helmsing, Leach, Herlong, Newman and Rouse, P.C., 150 Government
Street, Suite 2000, Mobile Alabama, AL 36602, Attn: Christopher Conte, Phone: 251-434-0888;
E-mail: [email protected] The contact for information APGME, Inc. is as follows:
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APGME, Inc. c/o Zayyad Law Offices, P.C., 9723 Southwest Highway, Oak Lawn, IL 60453,
Attn.: Nehad Zayyad, Phone: (708) 576-4300.
ARTICLE VI
PROVISIONS GOVERNING DISTRIBUTIONS AND CLAIMS RESOLUTION
6.1
Distributions. All distributions under this Plan shall be made by the Liquidating
Trustee pursuant to the terms and conditions contained in this Plan and the Liquidating Trust
Agreement; provided, however that no distribution shall be made on behalf of any Disputed
Claim prior to the resolution of such dispute. The Liquidating Trustee shall reserve sufficient
funds to satisfy any Disputed Claim to the extent provided for in this Plan. At the close of
business forty-five (45) days after the Effective Date (“Closing Date”), the Claims register shall
be closed, and there shall be no further changes in the record holders of any Claims or Interests.
The Liquidating Trustee shall have no obligation to recognize any transfer of any Claims or
Interests occurring after the applicable Closing Date. The Liquidating Trustee shall instead be
entitled to recognize and deal for all purposes under this Plan (except as to voting to accept or to
reject this Plan) with only those record holders stated on the Claims register as of the close of
business on the applicable Closing Date.
6.2
Effective Date Payments. As soon as is practicable after the Effective Date, the
Liquidating Trustee shall make distributions to Holders of Allowed Administrative Claims,
Allowed Priority Tax Claims, and Allowed Class 1A, 1B, 2A, and 3A Claims entitled to such
distributions pursuant to the Plan. All payments shall be made in accordance with the priorities
established by the Plan. Except to the extent required by the Bankruptcy Code or ordered by the
Bankruptcy Court, no distribution will be made on account of any Penalty Claims.
6.3
Distributions on a Subsequent Distribution Date. Unless otherwise provided
in the Plan, to the extent that Cash or other assets are available subsequent to the date of making
the payments required by Article 6.2 of this Plan (“Initial Distribution Date”), the Liquidating
Trustee may, on one or more subsequent dates (each a “Subsequent Distribution Date”),
distribute such Cash or other assets to the Holders of Allowed Claims and Interests in other
Classes and Holders of Claims entitled to distributions under the Plan that were Allowed on the
Initial Distribution Date or subsequently have become Allowed Claims on or before such
Subsequent Distribution Date in accordance with the treatment and priority of Claims established
by the Plan.
6.4
Distributions on the Final Distribution Date. Unless otherwise provided in the
Plan, to the extent that Cash or other assets are available subsequent to the Initial Distribution
Date and any Subsequent Distribution Date, after the liquidation of all Trust Assets, the
Liquidating Trustee shall establish a final distribution date (“Final Distribution Date”) upon
which the Liquidating Trustee shall distribute such Cash or other assets to the holders of Claims
and Interests entitled to distributions under the Plan that were Allowed on the Effective Date or
subsequently have become Allowed Claims on or before the Final Distribution Date in
accordance with the treatment and priority of Claims and Interests established by the Plan.
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6.5
Fractional Dollars; De Minimis Distributions. The Liquidating Trustee shall
have no obligation to make any distribution to a specific Holder of an Allowed Claim or Interest
if the amount to be distributed to that Holder on the relevant Distribution Date is less than $5.
6.6
Unclaimed Disbursements. Unless otherwise provided for in this Plan,
distributions to Holders of Allowed Claims and Interests shall be made at the address of each
such Holder as set forth on the Schedules or List of Equity Security Holders, as applicable, filed
with the Bankruptcy Court unless superseded by the address as set forth on the proof of Claim or
Interest filed by such Holders or by notifying the Liquidating Trustee, in writing, of a change of
address in accordance with the notice provisions of the Liquidating Trust Agreement. If any
Holder’s distribution is returned as undeliverable, no further distributions to such Holder shall be
made unless and until the Liquidating Trustee is notified by the Holder in accordance with the
provisions of this section, of such Holder’s then current address within 30 days of the postmark
of the returned distribution. Claims held by Holders whose distributions are returned as
undeliverable and who fail to notify the Liquidating Trustee of their respective correct addresses
within the 30-day period provided shall be disallowed. All unclaimed property shall, in the
discretion of the Liquidating Trustee, be used to satisfy the costs of administering the Plan or
become available for distribution in accordance with the Plan, and the Holder of any disallowed
Claim or Interest shall not be entitled to any other or further distribution under the Plan on
account of such disallowed Claim or Interest. To the extent any unclaimed property is not used
by the Liquidating Trustee to satisfy the foregoing costs of administration or for redistribution,
the Liquidating Trustee may donate such unclaimed property to the Credit Abuse Resistance
Education Program.
6.7
Time Bar to Cash Payments. All distributions made pursuant to this Plan that
are not negotiated within sixty (60) days after the relevant Distribution Date and that
consequently become unclaimed shall revert to and become property of the Liquidating Trust,
free and clear of any and all Claims, Interests, demands and causes of action, but subject to
further redistribution in accordance with the Plan.
6.8
Setoffs and Recoupments. The Liquidating Trustee may set off or recoup
against any Allowed Claim (to the extent not released under Article 7.4) and the distributions to
be made pursuant to the Plan on account of such Claim (before any distribution is made on
account of such Claim), the claims, rights and causes of action of any nature that the Debtors
may hold against the Holder of such Allowed Claim; provided, however that neither the failure
to effect such a setoff or recoupment nor the allowance of any Claim hereunder shall constitute a
waiver or release by the Debtors or the Liquidating Trustee of any such claims, rights and causes
of action that the Debtors or the Liquidating Trustee may possess against such Holder.
6.9
Disputed Payments. If any dispute arises as to the identity of a Holder of an
Allowed Claim who is to receive any distribution, the Liquidating Trustee may, in lieu of making
such distribution to such Person, either (i) retain such distribution or (ii) make such distribution
into an escrow account until the disposition thereof shall be determined by the Bankruptcy Court
or by written agreement among the interested parties to such dispute.
6.10 No Recourse to Estates or Liquidating Trust. Notwithstanding that the
Allowed amount of any particular Disputed Claim may be reconsidered under the applicable
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provisions of the Bankruptcy Code and Bankruptcy Rules or Allowed in an amount for which
there is insufficient cash in the relevant account to provide a recovery equal to that received by
other Holders of Allowed Claims in the relevant Class, no such Holder shall have recourse to the
Estates, the Debtors, the Liquidating Trustee Protected Parties, Postpetition Releasees or any of
their respective professionals, or their successors or assigns, or the Holder of any other Claim or
Interest, or any of their respective property. Nothing in the Plan, however, shall modify any right
of a Holder of a Claim under section 502(j) of the Bankruptcy Code.
6.11 Claims Adjudication and Objection Deadline.
The Debtors, prior to the
Effective Date, and the Liquidating Trustee, from and after the Effective Date, reserve all rights
to prosecute any and all objections to Claims and Interests, including Administrative Claims. All
objections to Claims must be filed and served on the holders of such Claims by the Claims
Objection Deadline. Unless a Claim is objected to by the Claims Objection Deadline, such
Claim shall be deemed Allowed in the amount requested. All Claim objections by the
Liquidating Trustee shall be litigated to a Final Order except to the extent the Liquidating
Trustee, in his discretion, elects to withdraw any such objections or compromise, settle or
otherwise resolve any such objection, in accordance with the terms of the Liquidating Trust
Agreement, in which event the Liquidating Trustee may settle, compromise or otherwise resolve
any Disputed Claim without approval of the Bankruptcy Court. Within thirty (30) days of the
Claims Objection Deadline, Novak shall have the right, at his sole expense, to object to any
Claim against Sacred Heart that is not already Allowed or subject to a pending Claim objection
filed by the Liquidating Trustee.
6.12 Estimation of Claims and Interests. The Debtors, prior to the Effective Date,
and the Liquidating Trustee, from and after the Effective Date, may (but are not required to) at
any time request that the Bankruptcy Court estimate any Disputed Claim or Interest that is
contingent or unliquidated pursuant to section 502(c) of the Bankruptcy Code for any reason,
regardless of whether any party previously has objected to such Claim or Interest or whether the
Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court shall retain
jurisdiction to estimate any such Claim or Interest, including during the litigation of any
objection to any Claim or Interest or during the appeal relating to such objection.
Notwithstanding any provision otherwise in the Plan, a Claim or Interest that has been
disallowed, but that either is subject to appeal or has not been the subject of a Final Order, shall
be deemed to be estimated at zero dollars, unless otherwise ordered by the Bankruptcy Court. In
the event that the Bankruptcy Court estimates any contingent or unliquidated Claim or Interest,
that estimated amount shall constitute a maximum limitation on such Claim or interest for all
purposes under the Plan (including for purposes of distributions), and the Liquidating Trustee,
may elect to pursue any supplemental proceedings to object to any ultimate distribution on such
Claim or Interest. Notwithstanding section 502(j) of the Bankruptcy Code, in no event shall any
Holder of a Claim or Interest that has been estimated pursuant to section 502(c) of the
Bankruptcy Code or otherwise be entitled to seek reconsideration of such estimation unless such
Holder has filed a motion requesting the right to seek such reconsideration on or before fourteen
(14) days after the date on which such Claim is estimated.
6.13 Administrative Claims Bar Date. All requests for the allowance and/or
payment of an Administrative Claim (other than as set forth in Article 6.14 of this Plan) must be
filed with the Bankruptcy Court and served on counsel for the Debtors and the Liquidating
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Trustee no later than thirty (30) days after the Effective Date. Unless such request is objected to,
such Administrative Claim shall be deemed allowed in the amount requested. In the event that
an Administrative Claim is objected to, the Bankruptcy Court shall determine the Allowed
amount of such Administrative Claim.
6.14 Professional Fee Claims. All final requests for compensation or reimbursement
of Professional fees pursuant to sections 327, 328, 330, 331, or 503(b) of the Bankruptcy Code
for services rendered prior to the Effective Date and substantial contribution claims under section
504(b)(4) must be filed and served no later than sixty (60) days after the Effective Date, or such
later date as the Bankruptcy Court may allow. Objections to applications of such Professionals
or other entities for compensation or reimbursement of expenses must be filed and served on the
requesting Professional no later than ten (10) days (or such longer period as may be allowed by
order of the Bankruptcy Court) after the date on which the applicable application for
compensation or reimbursement was served.
ARTICLE VII
EFFECT OF CONFIRMATION
7.1
No Discharge. The Confirmation Order shall not discharge any Debtor from any
debt and liability that arose before the Confirmation Date, as provided in section 1141(d)(3)(A)
of the Bankruptcy Code.
7.2
Injunction. Except for actions as Holders may take to prosecute or defend
their respective Claims or Interests in the Bankruptcy Court against the Debtors or
Liquidating Trustee, entry of a Confirmation Order will operate as an injunction against
the commencement or continuation of an action, the employment of process, or any act to
collect, recover or offset any Claim of any Holder against the Debtors, their Estates, or the
Liquidating Trust; provided, however, that to the extent that the provisions of § 362(a)
have been modified by the Bankruptcy Court prior to the Effective Date, actions against
the Debtors consistent with such modification and the Plan are permitted.
7.3
Exculpation and Indemnification of (a) the Debtors’ Officers, Directors and
Professionals and (b) the Liquidating Trust and Liquidating Trustee.
(a)
From and after the Effective Date, to the fullest extent permitted by
applicable law, (i) Paul Rundell, David McLaughlin, Karen Davis, Aisha M. Jaleel, Zivojin
Pavlovic, Spiros Stamelous, Thomas Abraham, and Sherry Hendrix; (ii) the Debtors’
agents, attorneys, accountants, consultants, financial advisors (and their officers, directors,
and shareholders) retained or employed by order of the Bankruptcy Court; and (iii) any
Person that may be liable derivatively through any of the foregoing and each of their
representatives (collectively, the “Postpetition Releasees”) shall not have and shall not
incur any liability to any Person for any and all claims, causes of action and other
assertions of liability, or for any act or omission arising in connection with, relating to or
arising out of the Cases, the pursuit of confirmation of this Plan, the pursuit of the
approval of the adequacy of the Disclosure Statement, the confirmation and
implementation of this Plan, the consummation of this Plan, or the administration of this
Plan, the existence of the Trust Assets, or any other property to be distributed or
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abandoned under this Plan (the “Postpetition Released Matters”) except for such
Postpetition Releasees’ willful misconduct or fraud as determined by a Final Order. To the
fullest extent permitted by applicable law, the Liquidating Trust shall indemnify, defend,
and hold harmless the Postpetition Releasees (without the Postpetition Releasees having to
first pay from their own funds) from and against any and all Claims, causes of action,
liabilities, obligations, losses, costs, judgments, damages (including attorney fees and costs)
for any act or omission in connection with, relating to or arising out of the Postpetition
Released Matters, other than acts or omissions to act to the extent determined by a Final
Order to be due to such Postpetition Releasee’s own respective willful misconduct or fraud.
This exculpation and indemnification shall not apply to any causes of action against the
Postpetition Releasees arising under Chapter 5 of the Bankruptcy Code. All rights of the
Persons exculpated and indemnified pursuant hereto shall survive confirmation of the Plan
and the closing of the Cases.
(b)
From and after the Effective Date, to the fullest extent permitted by
applicable law, the Liquidating Trustee and each of his officers, directors, shareholders,
employees and representatives together with any Person that may be liable derivatively
through any of the foregoing and each of their representatives (collectively the
“Liquidating Trustee Protected Parties”) shall not have and shall not incur any liability to
any Person for any and all Claims, causes of action and other assertions of liability, or for
any act or omission, (i) arising out of the discharge of the powers and duties conferred
upon the Liquidating Trustee by the Plan, the Liquidating Trust, or any court order,
(ii) relating to or taken in furtherance of the Plan, the Liquidating Trust or any court
order, (iii) relating to the character, nature or existence of the Trust Assets, (iv) relating to
the Postpetition Released Matters, except for acts or omissions to act to the extent
determined by a Final Order to be due to such Liquidating Trustee Protected Parties’ own
respective willful misconduct or fraud. No Holder of a Claim or Interest, or any other
party in interest, will have or pursue any claim or cause of action against the Liquidating
Trustee Protected Parties (i) arising out of the discharge of the powers and duties conferred
upon the Liquidating Trustee by the Plan, the Liquidating Trust, or any court order, (ii)
relating to or taken in furtherance of the Plan, the Liquidating Trust or any court order,
(iii) relating to the character, nature or existence of the Trust Assets, or (iv) relating to the
Postpetition Released Matters, except for acts or omissions to act to the extent determined
by a Final Order to be due to such Liquidating Trustee Protected Parties’ own respective
willful misconduct or fraud. Any act taken pursuant to the Plan, the Liquidating Trust or
court order, will be conclusively deemed not to constitute fraud or willful misconduct. To
the fullest extent permitted by applicable law, the Liquidating Trust shall indemnify,
defend, and hold harmless the Liquidating Trustee Protected Parties (without the
Liquidating Trustee Protected Parties having to first pay from their own funds) and each
of their designated representatives from and against any and all Claims, causes of action,
liabilities, obligations, losses, costs, judgments, damages (including attorney fees and cost),
except for willful misconduct or fraud as determined by a Final Order. All rights of the
Liquidating Trustee Protected Parties exculpated and indemnified pursuant hereto shall
survive confirmation of the Plan and the closing of the Cases.
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Releases.
(a)
On the Effective Date, the Debtors and their Estates and any other
entity acting on any of their behalves, release unconditionally, and are hereby deemed to
release unconditionally, each of the Novak Parties from any and all Claims, obligations,
rights, suits, damages, Litigation Claims, remedies, and liabilities whatsoever (including
those existing under the Bankruptcy Code), whether known or unknown, foreseen or
unforeseen, existing or hereinafter arising, in law, equity or otherwise, based in whole or in
part on any act, omission, transaction, event or other occurrence taking place prior to the
Effective Date; provided, however, nothing in this Article 7.4(a) shall release any Claims
against the Bentley Entities or any of the obligations of the Novak Parties under the terms
and conditions of this Plan or the Novak Party Settlement. For the avoidance of any doubt,
and notwithstanding anything to the contrary contained herein, all claims of the Debtors,
the Estates and the Liquidating Trustee against the Bentley Entities are preserved and not
released under this Plan.
(b)
On the Effective Date, each Holder of a Claim (other than a Claim of
a Governmental Unit or FirstMerit) that receives a distribution under this Plan releases
unconditionally, and is hereby deemed to have unconditionally released each of the Novak
Parties from any and all Claims (including, without limitation, derivative claims),
obligations, rights, suits, damages, Litigation Claims, remedies, and liabilities whatsoever
(including those existing under the Bankruptcy Code) whether known or unknown,
foreseen or unforeseen, existing or hereinafter arising, in law, equity or otherwise, based in
whole or in part on any act, omission, transaction, event or other occurrence taking place
prior to the Effective Date and relating in any way whatsoever to the Debtors or their
Estates. This release shall also apply to: (i) any Person or Entity that is or was the Holder
of a Claim (other than a Claim of any Governmental Unit or FirstMerit) on or after the
Petition Date and (ii) any Person or Entity acquiring a Claim directly or indirectly from a
Person or Entity that is bound by the release pursuant to this Article 7.4(b) as if such
acquiring Person or Entity has agreed to be bound to such release with respect to such
acquired Claim. For the avoidance of any doubt, and notwithstanding anything to the
contrary contained herein, (i) nothing in this Plan is intended to or shall affect, release or
compromise any Claim, cause of action, remedy, defense, right of setoff or recoupment or
right of seizure or forfeiture that the United States or any of its agencies has, may have or
may assert against Novak or the Novak Parties, including any such claims of the United
States against Novak or the Novak Parties under the Federal Debt Collection Procedures
Act (28 U.S.C. § 3001 et seq.) and (ii) nothing in this Plan is intended to or shall release or
adversely affect any claims that FirstMerit may have or assert against the Novak Parties.
(c)
On the Effective Date, the Novak Parties release unconditionally, and
are hereby deemed to have unconditionally released (i) the Debtors’ managers, directors,
members, member officers, officers, and employees; (ii) the Debtors’ agents, attorneys,
accountants, consultants (and their officers, directors, and shareholders); and (iii) any
Person that may be liable derivatively through any of the foregoing and each of their
representatives from any and all Claims (including, without limitation, derivative claims),
obligations, rights, suits, damages, Litigation Claims, remedies, and liabilities whatsoever
(including those existing under the Bankruptcy Code) whether known or unknown,
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foreseen or unforeseen, existing or hereinafter arising, in law, equity or otherwise, based in
whole or in part on any act, omission, transaction, event or other occurrence taking place
prior to the Effective Date and relating in any way whatsoever to the Debtors or their
Estates, provided, however, nothing in this Article 7.4(c) shall release any Allowed Class
1H Claims or Allowed Class 1I Interests.
(d)
WARN Employee Releases of the Debtors and their Estates and the
Novak Parties. On the Effective Date, the WARN Plaintiffs unconditionally release the
Debtors, their current and former managers, directors, officers, agents, attorneys,
accountants, consultants, and their Estates from all WARN Claims other than those
WARN Claims entitled to treatment under Classes 1B of this Plan. For the avoidance of
doubt, this release is intended to include a release of all WARN Class Priority Claims
against Sacred Heart, Garfield and Superior. Nothing in this Article shall impair or
diminish the releases granted under the WARN Class Settlement.
(e)
On the Effective Date, the Debtors and their Estates and any other
entity acting on any of their behalves, release unconditionally, and are hereby deemed to
release unconditionally, the FirstMerit Parties from any and all Claims, obligations, rights,
suits, damages, Litigation Claims, remedies, and liabilities whatsoever (including those
existing under the Bankruptcy Code), whether known or unknown, foreseen or unforeseen,
existing or hereinafter arising, in law, equity or otherwise, based in whole or in part on any
act, omission, transaction, event or other occurrence taking place prior to the Effective
Date; provided, however, nothing in this Article 7.4(e) shall release any of the obligations of
FirstMerit under the terms and conditions of this Plan.
(f)
On the Effective Date, FirstMerit releases unconditionally, and is
hereby deemed to have unconditionally released (i) the Debtors’ managers, directors,
members, member officers, officers, and employees; (ii) the Debtors’ agents, attorneys,
accountants, consultants (and their officers, directors, and shareholders); and (iii) any
Person that may be liable derivatively through any of the foregoing and each of their
representatives from any and all Claims (including, without limitation, derivative claims),
obligations, rights, suits, damages, Litigation Claims, remedies, and liabilities whatsoever
(including those existing under the Bankruptcy Code) whether known or unknown,
foreseen or unforeseen, existing or hereinafter arising, in law, equity or otherwise, based in
whole or in part on any act, omission, transaction, event or other occurrence taking place
prior to the Effective Date and relating in any way whatsoever to the Debtors or their
Estates, provided, however, nothing in this Article 7.4(f) is intended to or shall release any
claims that FirstMerit may have or assert against the Novak Parties, the Bentley Entities or
any of the obligations of the Debtors or Liquidating Trustee under the terms and
conditions of this Plan.
(g)
Notwithstanding anything to the contrary in the Plan, the provisions
of Articles 7.4(a), 7.4(b) and 7.5 shall only take effect after the Escrowed Settlement Funds
are transferred by the Escrow Agent to the Liquidating Trust and all other obligations of
the Novak Parties under this Plan have been performed.
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7.5
Novak Party Injunction. In consideration for the Novak Parties’ funding the
Novak Party Settlement, entry of a Confirmation Order will operate as an injunction
against the commencement or continuation of an action, the employment of process, or any
act to collect, recover or offset any Claim of any Holder (other than a Claim by any
Governmental Unit) that receives a distribution under this Plan against the Novak Parties,
which injunction shall be effective so long as the Novak Parties are performing their
obligations under the Plan and no default has occurred.
ARTICLE VIII
RETENTION OF JURISDICTION
8.1
Jurisdiction. The entry of a Confirmation Order shall not diminish or impair the
Court’s subject matter jurisdiction. Until the entry of a final decree, the Bankruptcy Court shall
retain subject matter jurisdiction of the Cases, and all proceedings arising therein or related
thereto, including proceedings that aid the consummation and effectuation of this Plan and the
implementation of the Liquidating Trust.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1
Amendments, Modifications, Revocation and Interpretation of the Plan.
Before the Confirmation Date, the Debtors may alter, amend, modify or withdraw the Plan at any
time subject to section 1127 of the Bankruptcy Code. In the event that inconsistencies exist
between the Plan and the Disclosure Statement, the Plan shall govern.
9.2
Effectuating Documents and Further Transactions. From and after the
Confirmation Date until the Effective Date, the Debtors shall be authorized to execute, deliver,
file, or record such contracts, instruments, releases and other agreements or documents and take
such actions on behalf of the Debtors as may be necessary or appropriate to effectuate and
further evidence the terms and conditions of this Plan.
9.3
Payment of Statutory Fees. All fees payable pursuant to 28 U.S.C. § 1930 shall
be paid by the Debtors on the Effective Date and thereafter by the Liquidating Trust through the
entry of a final decree closing these Cases.
9.4
Severability of Plan Provisions. If, prior to Confirmation, any term or provision
of the Plan is held by the Bankruptcy Court to be invalid, void or unenforceable, the remainder
of the terms and provisions of the Plan will remain in full force and effect and will in no way be
affected, impaired or invalided by such holding, alteration or interpretation. The Confirmation
Order will constitute a judicial determination and will provide that each term and provision of
the Plan, as it may be altered or interpreted in accordance with the foregoing, is valid and
enforceable pursuant to its terms.
9.5
Effect of Appeals. Provided that the Confirmation Order is not stayed pending
appeal, the Debtors may consummate the Plan notwithstanding such pending appeal, or the
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timely service and filing of a motion pursuant to any Bankruptcy Rule or Federal Rules of Civil
Procedure.
ARTICLE X
GLOSSARY
10.1
Definitions
“Administrative Claim” means a Claim for a cost or expense of administration of the
Cases allowable under sections 503(b) of the Bankruptcy Code and entitled to priority pursuant
to section 507(a) of the Bankruptcy Code, including: (i) any actual and necessary costs and
expense, incurred by the Debtors after the Petition Date, of preserving the Estates and operating
the Debtors’ businesses, including wages, salaries or commissions for services rendered after the
commencement of the Cases; (ii) Professional Fee Claims; (iii) all fees and charges properly
assessed against the Estates pursuant to 28 U.S.C. § 1930; and (iv) all Allowed Claims that are
entitled to treatment as Administrative Claims pursuant to a Final Order of the Bankruptcy
Court.
“Allowed” means, with respect to Claims or Interests: (a) any Claim or Interest scheduled
by the Debtors as undisputed, not contingent and liquidated; (b) any Claim or Interest as to
which no objection, adversary proceeding, or request for estimation has been filed; (c) any Claim
or Interest as to which any objection has been settled, waived, withdrawn or denied by a Final
Order; or (d) any Claim or Interest that is Allowed (i) by a Final Order, (ii) by an agreement
between the Holder of such Claim or Interest and the Debtors or the Liquidating Trustee, or (iii)
pursuant to this Plan. For the purpose of computing distributions under this Plan, Allowed
Claims shall not include penalties, punitive damages or interest with respect to such Claims
accruing from and after the Petition Date, except as provided in section 506(b) of the Bankruptcy
Code, or as otherwise expressly set forth in this Plan.
“Allowed Class __ Claim” means a Claim designated as falling under one of the Classes
of Claims described in Article III of this Plan that is an Allowed Claim.
“Allowed Class __ Interest” means an Interest designated as falling under one of the
Classes of Interests described in Article III of this Plan that is an Allowed Interest.
“Assets” means any and all assets and property of each of the respective Debtors,
whether tangible, intangible, real or personal, that constitute property of their respective Estates
pursuant to section 541 of the Bankruptcy Code. Assets may be referred to as “Sacred Heart
Assets,” “Garfield Assets,” or “Superior Assets” when describing the Assets of a particular
Debtor.
“Bankruptcy Code” means title 11, United States Code, as now in effect or as hereafter
amended.
“Bankruptcy Court” means the United States Bankruptcy Court for the Northern
District of Illinois, Eastern Division.
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“Bankruptcy Rules” means the Federal Rules of Bankruptcy Procedure and the Local
Rules of the Bankruptcy Court, as now in effect or hereafter amended.
“Bentley Entities” shall mean Bentley Management Group, LLC and BMG
Management, LLC and any subsidiaries, insiders and affiliates (other than the Novak Parties).
“Cash” means legal tender of the United States of America and equivalents thereof.
“Cases” means the cases under chapter 11 of the Bankruptcy Code commenced by the
Debtors in the Bankruptcy Court.
“Claims Bar Date” means November 15, 2013 except for (i) the Claim of any
governmental unit (as defined in 11 U.S.C. § 101(27)) in which case Claims Bar Date shall mean
December 30, 2013, and (ii) any Claim arising from the rejection of an executory contract or
unexpired lease of the Debtors in which case Claims Bar Date shall mean the later of
(a) November 15, 2013 or (b) the date that is thirty (30) days after the effective date of rejection
of such executory contract or unexpired lease.
“Claims Objection Deadline” means the last day for filing objections to Claims, which
day shall be six (6) months after the Effective Date (notwithstanding any previous order entered
by the Bankruptcy Court establishing a claims objection deadline prior to the Effective Date),
unless such date is extended by the Bankruptcy Court upon request by the Debtors or the
Liquidating Trustee.
“Class” means a category of Holders of Claims or Interests as described in Article III of
this Plan.
“Closing Date” shall have the meaning set forth in Article 6.1 of the Plan.
“Confirmation Date” means the date on which the Clerk of the Bankruptcy Court enters
the Confirmation Order on the docket of the Bankruptcy Court.
“Confirmation Order” means the order of the Bankruptcy Court, in form and substance
satisfactory to the Debtors, confirming this Plan pursuant to section 1129 of the Bankruptcy
Code.
“Debtors” means Sacred Heart, Garfield, and Superior, collectively.
“Deficiency Claim” means any Allowed Claim remaining of a Holder of an Allowed
Secured Claim, after application of all net proceeds from the liquidation of the Collateral
applicable to such Allowed Secured Claim. All Deficiency Claims are General Unsecured
Claims.
“Dispose (or Disposed or Disposition)” means sell, transfer or otherwise dispose of an
Asset such that the entire value of the Asset is liquidated to the form of Cash proceeds.
“Disputed Claim” means any Claim (a) as to which the Debtors or Liquidating Trustee
have interposed a timely objection or request for estimation in accordance with the Bankruptcy
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Code and the Bankruptcy Rules, (b) scheduled as disputed, unliquidated or contingent, or not
scheduled, (c) subject to setoff, recoupment or any avoidance action arising under sections 544
through 550 of the Bankruptcy Code, or (d) otherwise disputed by the Debtors or the Liquidating
Trustee in accordance with applicable law, which objection has not been withdrawn or
determined by a Final Order.
“Disclosure Statement” means that certain document as defined in section 1125(b) of
the Bankruptcy Code relating to this Plan, including all exhibits and schedules thereto, as
amended or supplemented from time to time, as approved by order of the Bankruptcy Court.
“Distribution Date” means any of the Initial Distribution Date, any Subsequent
Distribution Date, and the Final Distribution Date.
“Effective Date” means the business day on which the Plan becomes binding and
effective.
“Escrow Agent” means First American Title Insurance Company in its capacity as
escrow agent pursuant to the terms of the Strict Joint Order Escrow dated as of February 19,
2015.
“Escrowed Settlement Funds” means the $500,000 held in escrow by the Escrow Agent
pursuant to the terms of the Novak Party Settlement.
“Estate” refers to the respective estate of each Debtor created under section 541 of the
Bankruptcy Code. “Estates” refers to such estates collectively.
“Equity Interests” means an ownership interest in any of the Debtors, whether or not
transferable, and any option, warrant, or right, contractual or otherwise, to acquire any such
interest.
“Final Distribution Date” shall have the meaning set forth in Article 6.4 of this Plan.
“Final Order” means an order of the Bankruptcy Court as to which the time to appeal,
petition for certiorari or motion for reargument or rehearing has expired and as to which no
appeal, petition for certiorari or other proceedings for reargument or rehearing shall then be
pending or as to which any right to appeal, petition for certiorari, reargue or rehear shall have
been waived in writing in form and substance satisfactory to the Debtors or, in the event that an
appeal, writ of certiorari or reargument or rehearing thereof has been sought, such order of the
Bankruptcy Court shall have been determined by the highest court to which such order was
appealed, or certiorari, reargument or rehearing shall have been denied and the time to take any
further appeal, petition for certiorari or motion for reargument or rehearing shall have expired;
provided, however, that the possibility that a motion under Rule 59 or Rule 60 of the Federal
Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules, may be filed with
respect to such order shall not preclude such order from being a Final Order.
“FirstMerit” means FirstMerit Bank, N.A.
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“FirstMerit Parties” means FirstMerit, its parents, shareholders, sibling entities,
affiliates and their respective directors, officers, employees, agents, attorneys, accountants,
consultants and advisors.
“FirstMerit Cash Collateral Account” means the restricted bank account maintained at
FirstMerit, Account no. 5547001796 which has a Cash balance of approximately $3,500,000
million and secures the obligations under the Letter of Credit.
“FirstMerit Reimbursement Agreement Documents” means Reimbursement
Agreement dated as of May 25, 2012, by and between FirstMerit, the Debtors, Bentley
Management Group, LLC and BMG Management, LLC and all related security agreements,
guaranties, the Letter of Credit and all other agreements and documents related thereto.
“FirstMerit Shortfall” means the amount calculated by subtracting the amount of the
Garfield Payment from the sum of (i) the aggregate of presently unpaid LC renewal fees due
under the Reimbursement Agreement ($33,500), (ii) the aggregate of LC renewal fees that will
accrue under the Reimbursement Agreement until May 29, 2018 ($222,000, unless terminated
earlier), and (iii) unpaid legal fees and costs incurred by FirstMerit under the Reimbursement
Agreement (currently $76,315).
“Garfield” shall mean Garfield Kidney Center, LLC, and Illinois Limited Liability
Company and the debtor in Case No. 13-27092 pending before the Bankruptcy Court.
“Garfield Liquidation Proceeds” shall mean the Liquidation Proceeds of Garfield after
appropriate reserves and deductions are made in amounts sufficient to pay fully or otherwise
satisfy (i) Allowed Administrative Claims against Garfield, Allowed Priority Tax Claims against
Garfield, and Allowed Class 2A Claims and (ii) any incurred or anticipated costs of
administering the Liquidation Trust.
“Garfield Payment” shall have the meaning set forth in Article 2.4.11(c) of the Plan.
“General Unsecured Claim” means a Claim that is not an Administrative Claim, a
Priority Tax Claim, a Non-Tax Priority Claim, a WARN Priority Class Claim, a FirstMerit
Secured Claim, a HHS Secured Claim, a HHS Deficiency Claim, an Other Secured Claim or a
Novak Party Subordinated Claim. A Claim arising from the rejection of an executory contract or
unexpired lease, Claims allowed pursuant to sections 502(g), 502(h) and 502(i) of the
Bankruptcy Code, and deficiency Claims allowed pursuant to section 506(a) of the Bankruptcy
Code and Bankruptcy Rule 3012 shall be General Unsecured Claims.
“Governmental Unit” shall have the meaning set forth in section 101(27) of the
Bankruptcy Code.
“HHS” means the United States Department of Health & Human Services.
“HHS Deficiency Carveout” means a carveout from the Sacred Heart Trust Proceeds for
the purpose of making payments to Holders of Class 1G Claims. The amount of the HHS
Deficiency Carveout shall be equal to the amount necessary to provide the same percentage
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recovery for Holders of Class 1G Claims as Holders of Class 1F General Unsecured Claims
received from the Sacred Heart Unsecured Creditor Carveout.
“HIPAA and the HIPAA Rules” means the Health Insurance Portability and
Accountability Act of 1996 42 U.S.C. § 1320d) and its implementing regulations at 45 CFR Parts
160 and 164.
“Holder” means an Entity, Person or Governmental Unit that owns a Claim or Interest.
“Impaired” means, when used in reference to a Claim or Interest, a Claim or Interest
that is impaired within the meaning of section 1124 of the Bankruptcy Code.
“Initial Distribution Date” shall have the meaning set forth in Article 6.3 of this Plan.
“Interest” means the legal, equitable, contractual and other rights of the Holders of any
of the Debtors’ Equity Interests.
“LC Draw” means a timely draw made by Comerica Bank in compliance with the terms
of the Letter of Credit.
“Letter of Credit” means that certain Irrevocable Letter of Credit number
SB1200001410, in favor of Comerica Bank, as beneficiary, for the account of Bentley
Management Group, LLC and BMG Management, LLC in an amount not to exceed $4,900,000
dated as of May 30, 2012, any amendment thereto, and any replacement letter of credit.
“Liquidation Proceeds” means each of the respective Debtor’s available Cash on hand
as of the Effective Date in addition to Cash to be received from the resolution of any Litigation
Claims, the Novak Party Settlement and the net proceeds generated from the Disposition of the
Debtor’s remaining Assets including all interest thereon.
“Liquidating Trust” means a liquidating trust that will be established for the benefit of
Holders of Allowed Claims and Interests pursuant to the Plan and in accordance with the terms
of the Liquidating Trust Agreement.
“Liquidating Trust Agreement” means the Liquidating Trust Agreement through which
the Liquidating Trust will be established. A copy of the Liquidating Trust Agreement is attached
hereto as Exhibit A.
“Liquidating Trustee” means Richard M. Fogel, not individually but solely as the
liquidating trustee pursuant to this Plan.
“Liquidating Trustee Protected Parties” shall have the meaning set forth in
Article 7.3(b) of the Plan.
“Litigation Claims” means the causes of action, rights, suits or proceedings, whether in
law or in equity, whether known or unknown, whether pending or not, that the Debtors or their
respective Estates hold or may hold against any Person, Entity or Governmental Unit arising (a)
under the Bankruptcy Code, or (b) under any non-bankruptcy law, statute, rule, regulation or
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ordinance. Litigation Claims include, but are not limited to, causes of action: (1) arising under
chapter 5 of the Bankruptcy Code; (2) related to the Debtors’ claims against any of the Bentley
Entities; (3) related to the Debtors’ claims against FirstMerit or Comerica Bank in connection
with the Reimbursement Agreement or otherwise; (4) related to the Debtors’ claims to the
proceeds of any policy of insurance provided by Allied World Assurance Company, Ltd.; or (5)
related to the Debtors’ claims against the Department of Health and Human Services, Centers for
Medicare & Medicaid Services, including, but not limited to, claims to recover Medicare and
Medicaid receivables.
“Non-Tax Priority Claim” means a Class 1A, 2A, or 3A Claim, other than an
Administrative Expense Claim, WARN Class Priority Claim, or Priority Tax Claim, that is
entitled to priority in payment pursuant to sections 507(a)(1) – (10) of the Bankruptcy Code.
“Novak” means Edward Novak, individually, his spouse, his children and his heirs.
“Novak Parties” means Novak, West Side Community Hospital Limited Partnership,
Chen Medical Center, LLC, West Side Management Corporation, Park Place, LLC, provided,
however, the terms Novak Parties do not include any of the Bentley Entities.
“Novak Party Settlement” means the Settlement Agreement dated as of December ___,
2014, by and among the Novak Parties and the Debtors approved by the Court pursuant to the
Order Approving Settlement with the Novak Parties and Granting Related Relief entered on
January 29, 2015.
“Other Secured Claims” means a Claim that is secured by a Lien on property in which
the Estate has an interest or that is subject to setoff under section 553 of the Bankruptcy Code
(other than the Secured Claims of FirstMerit and HHS), to the extent of the value of the Holder’s
interest in the Estate’s interest in such property or to the extent of the amount subject to setoff, as
applicable, as determined pursuant to section 506(a) of the Bankruptcy Code or, in the case of a
setoff, pursuant to section 553 of the Bankruptcy Code.
“Ownership Subordinated Claim” means any and all Claims of any of the Novak
Parties.
“Penalty Claims” means any Allowed Claim, whether Secured or unsecured, for any
fine, penalty, or forfeiture, or for multiple, exemplary, or punitive damages, arising before the
Petition Date, to the extent that such fine, penalty, forfeiture, or damages are not compensation
for actual pecuniary loss suffered by the Holder of such Claim.
“Petition Date” means July 2, 2013, the date on which the Debtors filed their petitions
for relief commencing the Cases.
“Plan” means this Second Amended Joint Chapter 11 Plan and all supplements,
appendices and schedules hereto, either in its present form or as the same may be altered,
amended or modified from time to time.
“Professional” means (a) any professional employed in the Cases pursuant to section
327 or 1103 of the Bankruptcy Code or otherwise, and (b) any professional or other entity
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seeking compensation or reimbursement of expenses in connection with the Cases pursuant to
section 503(b)(4) of the Bankruptcy Code.
“Policy” shall mean the Management Liability Package Policy issued by Allied World
Assurance Company, Ltd. to Sacred Heart on or about September 1, 2012.
“Postpetition Released Matters” shall have the meaning set forth in Article 7.3(a) of the
Plan.
“Postpetition Releasees” shall have the meaning set forth in Article 7.3(a) of the Plan.
“Priority Tax Claim” means a Claim of a Governmental Unit of the kind specified in
sections 502(i) and 507(a)(8) of the Bankruptcy Code.
“Professional Fee Claim” means a Claim of a Professional for compensation or
reimbursement of costs and expenses relating to services rendered after the Petition Date and
prior to and including the Effective Date.
“Sacred Heart” means West Side Community Hospital, Inc., d/b/a Sacred Heart
Hospital, an Illinois Corporation and the debtor in Case No. 13-27091 pending before the
Bankruptcy Court.
“Sacred Heart Liquidation Proceeds” shall mean the Liquidation Proceeds of Sacred
Heart after appropriate reserves and deductions are made in amounts sufficient to pay fully or
otherwise satisfy (i) all Allowed Administrative Claims, Allowed Non-Tax Priority Claims,
Allowed Class 1A Claims and Allowed Class 1B Claims against Sacred Heart, (ii) the Sacred
Heart Unsecured Creditor Carveout provided solely for the benefit of Allowed Class 1F claims,
and (iii) any incurred or anticipated costs of administering the Liquidation Trust.
“Sacred Heart Unsecured Creditor Carveout” means the amount of $300,000 of the
Escrowed Settlement Funds provided solely for the benefit of Allowed 1F Claims pursuant to the
Novak Party Settlement.
“Secured Claim” means a Claim that is secured by a lien on Assets or that is subject to
setoff under section 553 of the Bankruptcy Code, to the extent of the value of the Claim Holder’s
interest in the Debtors’ interest in such Assets or to the extent of the amount subject to setoff, as
applicable, as determined pursuant to section 506(a) of the Bankruptcy Code and Bankruptcy
Rule 3012 or, in the case of a setoff, pursuant to section 553 of the Bankruptcy Code.
“Subsequent Distribution Date” shall have the meaning set forth in Article 6.3 of the
Plan.
“Superior” shall mean Superior Home Health, L.L.C., an Illinois Limited Liability
Company and the debtor in Case No. 13-27093 pending before the Bankruptcy Court.
“Superior Unsecured Carveout” means an amount up to $50,000 of the Escrowed
Settlement Funds provided solely for the benefit of Allowed 3C Claims pursuant to the Novak
Party Settlement.
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“Superior Liquidation Proceeds” shall mean the Liquidation Proceeds of Superior after
appropriate reserves and deductions are made in amounts sufficient to pay fully or otherwise
satisfy (i) Allowed Administrative Claims against Superior, Allowed Priority Tax Claims against
Superior, and Allowed Class 3A Claims and (ii) any incurred or anticipated costs of
administering the Liquidation Trust.
“Trust Assets” means all assets of the respective Estates that will be transferred to the
Liquidating Trust, along with all accrued interest thereon, the Liquidation Proceeds and all other
Assets of the respective Estates. Trust Assets may be referred to as “Sacred Heart Trust Assets,”
“Garfield Trust Assets,” or “Superior Trust Assets” when describing the segregated Assets of a
particular Debtor that have been transferred to the Liquidating Trust.
“Unimpaired” means a Claim that is not impaired within the meaning of section 1124 of
the Bankruptcy Code.
“WARN Adversary Proceeding” means the adversary proceeding entitled McCullough
v. West Side Community Hospital, Inc., et al. pending the Bankruptcy Court as Adv. Pro. No. 1300954, asserting claims against Sacred Heart under the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. § 2101 et seq.
“WARN Plaintiffs” means Quinola McCullough, on behalf of herself and all of the
members of the class of former employees of Sacred Heart that was certified by the Bankruptcy
Court pursuant to the Consent Order Granting Plaintiff’s Motion for Class Certification and
Related Relief entered on January 15, 2014 in the WARN Adversary Proceeding.
“WARN Class Priority Claims” means all of the Claims of the WARN Plaintiffs that
are fixed in the total amount of $360,000 pursuant to the WARN Class Settlement.
“WARN Class Settlement” the Settlement and Release Agreement, dated as of February
20, 2015 between Sacred Heart and Quinola McCullough, on behalf of herself and the WARN
Plaintiffs. A copy of the WARN Class Settlement is attached hereto as Exhibit B.
West Side Community Hospital, Inc.,
Garfield Kidney Center, LLC, and Superior
Home Health, L.L.C.
Dated: May 6, 2015
By:
Robert M. Fishman (IL ARDC 3124316)
Allen J. Guon (IL ARDC 6244526)
David R. Doyle (IL ARDC 6303215)
Shaw Fishman Glantz & Towbin LLC
321 North Clark Street, Suite 800
Chicago, IL 60654
Phone: (312) 541-0151
Counsel for Debtors
{10615-001 PLN A0364558.DOCX 18}
34
/s/ Allen J. Guon
One of their attorneys
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EXHIBIT A
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LIQUIDATING TRUST AGREEMENT
This Trust Agreement (the “Trust Agreement”), dated as of June __, 2015, by and between
West Side Community Hospital, Inc. (“Sacred Heart”), Garfield Kidney Center, LLC (“Garfield”),
and Superior Home Health, L.L.C. (“Superior”), debtors in possession (together, the “Debtors”),
as settlors, and Richard M. Fogel, not individually, but solely as the liquidating trustee of the
Liquidating Trust (the “Liquidating Trustee”) as trustee, is executed to facilitate the
implementation of the Debtors’ Second Amended Joint Chapter 11 Plan of Reorganization dated
as of May 6, 2015 (the “Plan”)1 that provides for (a) the establishment of the Liquidating Trust (as
defined below) created by this Trust Agreement and the retention and preservation of the Trust
Assets (as defined below) by the Liquidating Trustee, as the representative of the Debtors’
bankruptcy estates in accordance with Sections 1123(b)(3)(B) and 1145(a)(1) of the United States
Bankruptcy Code, 11 U.S.C. §§ 101-1330, as amended (the “Bankruptcy Code”), all for the benefit
of the Holders of Allowed Claims (as such classes are designated in the Plan) (collectively the
“Claimholders”) and (b) the collection, liquidation, and distribution of the Trust Assets (as defined
below), as required by the Plan. The Liquidating Trustee’s activities, powers and duties are those
determined to be reasonably necessary to, and consistent with, accomplishment of these purposes.
Recitals
WHEREAS, the Plan contemplates, among other things, the transfer of all assets of the
Debtors’ Estates (the “Trust Assets”) to a trust created for the benefit of the Claimholders, free and
clear of all liens, claims, and encumbrances pursuant to Section 1123(a)(5) of the Bankruptcy
Code, all as described in greater detail in the Plan and this Trust Agreement (the “Liquidating
Trust”); and
WHEREAS, pursuant to the Plan, the Liquidating Trust is being created so that the Trust
Assets may be transferred to a trust created for the benefit of the Claimholders, free and clear of
all liens, claims, and encumbrances pursuant to Section 1123(a)(5) of the Bankruptcy Code in
accordance with the Plan and this Trust Agreement; and
WHEREAS, under the terms of the Plan and the Order confirming the same (the
“Confirmation Order”), as of the Effective Date, the Debtors shall be deemed to have granted,
transferred, conveyed, and delivered to the Liquidating Trust, on behalf of, and for the benefit of,
the Claimholders, control of, and all the rights, title and interests in and to, the Trust Assets, free
and clear of all liens, claims, and encumbrances pursuant to Section 1123(a)(5) of the Bankruptcy
Code; and
WHEREAS, the Liquidating Trust is established pursuant to the Plan as a liquidating trust
in accordance with Treasury Regulation Section 301.7701-4(d) with no objective to continue or
engage in the conduct of a trade or business except, to the extent reasonably necessary to, and
consistent with, the liquidating purpose of the Liquidating Trust and the Plan; and
1
Capitalized terms not defined herein shall have the meanings ascribed to them in the Plan.
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WHEREAS, the Liquidating Trust is intended to qualify as a “grantor trust” for U.S.
federal income tax purposes, pursuant to Sections 671-677 of the Internal Revenue Code of 1986,
as amended, with the Claimholders treated as the grantors and owners of the trust.
NOW, THEREFORE, in consideration of the premises and agreements contained herein,
the parties hereto agree as follows:
ARTICLE I
Establishment of Liquidating Trust
Section 1.1 Creation and Name. There is hereby created a trust which shall be
known as the “Joint Plan Liquidating Trust” which is the Liquidating Trust created by the Plan.
Section 1.2 Declaration of Trust. In order to declare the terms and conditions
hereof, and in consideration of the confirmation of the Plan under the Bankruptcy Code, the
Debtors and the Liquidating Trustee have executed this Trust Agreement and effective as of the
Effective Date of the Plan, the Debtors hereby irrevocably transfer to the Liquidating Trust, and to
its successors and assigns, all of the right, title and interests of the Debtors in and to the Trust
Assets to have and to hold unto the Liquidating Trust and its successors and assigns forever, under
and subject to the terms and conditions set forth in this Trust Agreement and in the Plan for the
benefit of the Claimholders and their successors and assigns as provided for in this Trust
Agreement and in the Plan. The proceeds of the Trust Assets shall be used and distributed in
accordance with this Trust Agreement and the Plan.
Section 1.3 Purpose of Trust; Nature of Beneficial Interests. The Liquidating
Trust is organized for the primary purpose of liquidating the Trust Assets in an expeditious and
orderly manner for the benefit of the Claimholders and in accordance with the Plan, with no
objective to engage in the conduct of a trade or business. Claimholders with Allowed Claims shall
be automatically treated as having interests in the Trust. Claimholders shall have no voting rights
with respect to such interests. In the event of any inconsistency between the recitation of the duties
and powers of the Liquidating Trustee as set forth in this Trust Agreement and the Plan, the
provisions of the Plan shall govern.
Section 1.4 Liquidating Trustee’s Acceptance. The Liquidating Trustee
accepts the trust imposed upon them by this Trust Agreement and agrees to observe and perform
that trust, on and subject to the terms and conditions set forth in this Trust Agreement and the Plan.
In connection with and in furtherance of the purposes of the Trust, the Liquidating Trust hereby
expressly accepts the transfer of the Trust Assets, subject to the provisions of the Confirmation
Order and the Plan.
Section 1.5 Segregation of Trust Assets. The Sacred Heart Trust Assets, the
Garfield Trust Assets and the Superior Trust Assets shall be held in separate segregated accounts
and shall not be comingled.
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ARTICLE II
Distribution of Trust Assets
Section 2.1 Distribution of Trust Assets. Proceeds of the Trust Assets shall be
distributed in accordance with Article IV of the Plan.
Section 2.2 Generally. Except as otherwise set forth in the Plan, or as ordered
by the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the
“Bankruptcy Court”), all distributions to Holders of Allowed Claims and Interests as of the
Effective Date shall be made as soon as practicable after the Effective Date.
Section 2.3 Distributions by the Liquidating Trust. The Liquidating Trust
shall act as the Disbursing Agent and shall make all distributions required under this Liquidating
Trust and the Plan.
Section 2.4 Fractional Dollars; De Minimis Distributions. The Liquidating
Trust shall not have any obligation to make any distribution to a specific Holder of an Allowed
Claim or Interest if the amount to be distributed to that Holder on the relevant Distribution Date is
less than $5.
Section 2.5 Delivery of Distributions. Unless otherwise provided for in the
Plan, distributions to Holders of Allowed Claims shall be made at the address of each such Holder
as set forth on the Schedules or List of Equity Security Holders, as applicable, filed with the
Bankruptcy Court unless superseded by the address as set forth on the proof of claim or Interest
filed by such Holders or by notifying the Liquidating Trustee, in writing, of a change of address in
accordance with the notice provisions of the Liquidating Trust Agreement. If any Holder’s
distribution is returned as undeliverable, no further distributions to such Holder shall be made
unless and until the Liquidating Trustee is notified by the Holder in accordance with the provisions
of this section, of such Holder’s then current address within 30 days of the postmark of the returned
distribution. Claims held by Holders whose distributions are returned as undeliverable and who
fail to notify the Liquidating Trustee of their respective correct addresses within the 30-day period
provided shall be disallowed. All unclaimed property shall, in the discretion of the Liquidating
Trustee, be used to satisfy the costs of administering the Plan or become available for distribution
in accordance with the Plan, and the Holder of any disallowed Claim shall not be entitled to any
other or further distribution under the Plan on account of such disallowed Claim. To the extent
any unclaimed property is not used by the Liquidating Trustee to satisfy the foregoing costs or for
redistribution, the Liquidating Trustee may donate such unclaimed property to the Current Abuse
Resistance Education Program.
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Section 2.6 Withholding and Reporting Requirements. In connection with
this Liquidating Trust and the Plan, the Liquidating Trustee shall, to the extent applicable, comply
with all tax withholding and reporting requirements imposed by any federal, state, provincial,
local, or foreign taxing authority and all distributions hereunder shall be subject to any such
withholding and reporting requirements. The Liquidating Trustee shall be authorized to take any
and all actions that may be necessary or appropriate to comply with such withholding and reporting
requirements. Notwithstanding any other provision of the Plan each Holder of an Allowed Claim
that is to receive a distribution pursuant to the Plan shall have sole and exclusive responsibility for
the satisfaction and payment of any tax obligations imposed by any governmental unit, including
income, withholding and other tax obligations, on account of such distribution.
ARTICLE III
Disputed Claims
Section 3.1 Treatment of Disputed Claims. In accordance with the Plan and
this Trust Agreement, the Liquidating Trustee reserves all rights to prosecute any and all timely
filed objections to Claims after the Confirmation Date. No payments or distributions of Trust
Assets, including payments on account of any alleged Administrative Claims, will be made on
account of a Disputed Claim, or, if less than the entire Claim is a Disputed Claim, the portion of a
Claim that is disputed, until such Claim becomes an Allowed Claim.
Section 3.2 Disputed Claims Reserve. Prior to making any distributions of
Trust Assets to the Holders of Allowed Claims or Interests, and to the extent provided for in the
Plan, the Liquidating Trustee shall establish appropriate reserves for Disputed Claims for each
Class as if such Disputed Claims were Allowed Claims in their Disputed Claim Amount.
ARTICLE IV
General Powers, Rights and Obligations of the Liquidating Trustee
Section 4.1 Appointment of Liquidating Trustee. Richard M. Fogel, not
individually but solely as Liquidating Trustee of the Liquidating Trust shall become the
Liquidating Trustee on the Effective Date.
Section 4.2 Legal Title. The Liquidating Trust shall hold legal title to all Trust
Assets except that the Liquidating Trustee may cause legal title or evidence of title to any of the
Trust Assets to be held by any nominee or person, on such terms, in such manner and with such
power as the Liquidating Trustee may determine advisable.
Section 4.3
General Powers.
(a)
Except as otherwise provided in this Trust Agreement or the Plan, and
subject to the retained jurisdiction of the Bankruptcy Court as provided for in the Plan, but
without prior or further authorization, the Liquidating Trustee may control and exercise
authority over the Trust Assets, over the acquisition, management and disposition thereof
and over the management and conduct of the business of the Liquidating Trust to the same
extent as if the Liquidating Trust were the sole owner of the Trust Assets in its own right.
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No person dealing with the Liquidating Trust shall be obligated to inquire into the
Liquidating Trustee’s authority in connection with the acquisition, management or
disposition of Trust Assets.
(b)
In connection with the management and use of the Trust Assets, the
Liquidating Trustee, except as otherwise expressly limited in this Trust Agreement, the
Plan, and the Confirmation Order, shall have, in addition to any powers conferred on it by
any other provision of this Trust Agreement, the power to take any and all actions as are
necessary or advisable to effectuate the purposes of the Liquidating Trust, including,
without limitation, the power and authority:
(i)
To accept the assets, on behalf of the Liquidating Trust,
transferred and provided to the Liquidating Trust under this Trust
Agreement and the Plan;
(ii)
To invest all Cash of the Liquidation Proceeds;
(iii)
Calculate and pay all distributions required or permitted to
be made under the Plan, this Trust Agreement and/or orders of the
Bankruptcy Court;
(iv)
To sell, convey, transfer, assign, liquidate, collect or
abandon Trust Assets, or any part thereof or any interest therein, on such
terms and for such consideration as the Liquidating Trustee deems desirable
or appropriate;
(v)
To act, not individually but solely in his representative
capacity of Liquidating Trustee for the Liquidating Trust, as custodian of
the Trust Assets and liquidating and reducing such assets to cash at such
time as the Liquidating Trustee deems appropriate to accomplish the
purpose of the Liquidating Trust, in accordance with the terms of the Plan;
(vi)
To employ, supervise and compensate professionals retained
to represent the interests of the Liquidating Trustee in connection with this
Trust Agreement and the Plan;
(vii)
To make and file tax returns as required by applicable state,
federal or local laws;
(viii)
To object to Claims or Interests filed or otherwise asserted
against the Debtors, the Debtors’ Estates and property of the Debtors or the
Debtors’ Estates;
(ix)
To assert or waive any privilege or defense of the Debtors,
including the attorney-client privilege;
(x)
To seek the examination of any entity under Bankruptcy
Rule 2004 (excluding FirstMerit Bank, N.A.);
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(xi)
To object to or seek to recharacterize, reclassify or
subordinate Claims (exclusive of Class 1C, 2B or 3B Claims) filed against
any of the Debtors or their Estates on any basis, and pursuant to Bankruptcy
Rule 9019(b) and section 105(a) of the Bankruptcy Code, to compromise
and settle any such Claims including Disputed Claims;
(xii)
To seek an estimation of contingent or unliquidated Claims
under section 502(c) of the Bankruptcy Code;
(xiii)
To seek the determination of the Debtors’ tax liabilities
under section 505 of the Bankruptcy Code;
(xiv)
To prosecute, settle, dismiss, abandon or otherwise dispose
of turnover actions under sections 542 and 543 of the Bankruptcy Code (to
the extent not released under Article 7.4 of the Plan);
(xv)
To prosecute, settle, dismiss, abandon or otherwise dispose
of any and all causes of action of the Debtors or their Estates (to the extent
not released under Article 7.4 of the Plan) including, without limitation, all
causes of action arising under sections 510(c), 544, 545, 547, 548, 549, 550
and 553 of the Bankruptcy Code, including the Litigation Claims, in
accordance with section 1123(b)(3)(B) of the Bankruptcy Code;
(xvi)
To provide indemnity for
indemnification under Article 7.3 of the Plan;
any
entity
entitled
to
(xvii)
To prosecute all Litigation Claims whether pending as of the
Effective Date or commenced thereafter;
(xviii)
To amend or modify the Plan in accordance with section
1127 of the Bankruptcy Code;
(xix)
To file and prosecute such motions, applications or other
pleadings in the Bankruptcy Court or other appropriate forum, and exercise
all other powers and rights, and take all other actions necessary or
appropriate to implement the Plan;
(xx)
To engage in all acts that would constitute the ordinary
course of business in performing the obligations of a Liquidating Trustee
under a trust of this type;
(xxi)
To change the state of domicile of the Liquidating Trust;
(xxii)
To establish and maintain funds, reserves and accounts
within the Liquidating Trust as deemed by the Liquidating Trustee, in his
discretion, to be useful in carrying out the purposes of the Liquidating Trust;
(xxiii)
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in any judicial, administrative, arbitration or other proceeding and to settle,
compromise, or dismiss any such proceeding, except as otherwise provided
for in this Liquidating Trust Agreement;
(xxiv)
To delegate any or all of the discretionary power and
authority herein conferred at any time with respect to all or any portion of
the Liquidating Trust to any one or more reputable individuals or recognized
institutional advisors or investment managers without liability for any
action taken or omission made because of such delegation, except for such
liability as is provided herein;
(xxv)
To seek the entry of a final decree closing the Chapter 11
Cases prior to the distribution of all Trust Assets or to reopen the Chapter
11 Cases if necessary to carry out the purposes of the Liquidating Trust or
Plan; and
(xxvi)
To perform such other acts and undertake such other conduct
as the Liquidating Trustee believes is necessary to carry out the purposes
and intent of this Liquidating Trust.
(c)
The Liquidating Trustee shall not at any time, on behalf of the Liquidating
Trust or the Holders, enter into or engage in any trade or business other than as a landlord
of real property included in the Trust Assets, and the Liquidating Trustee shall not use or
dispose of any part of the Trust Assets in furtherance of any such trade or business.
Section 4.4 Litigation. The Trust Assets shall include all Litigation Claims and
the Liquidating Trustee may enforce, sue on, settle, compromise (or decline to do any of the
foregoing) all Litigation Claims. The Liquidating Trust hereby expressly assumes, undertakes and
shall control the litigation of Litigation Claims. In connection with any Litigation Claims, the
Liquidating Trustee shall:
(a)
take such steps as it deems necessary to investigate, pursue, litigate, settle
and/or compromise the Litigation Claims, to reduce the Litigation Claims to cash proceeds
and to make distributions of the cash proceeds as required under this Trust Agreement, but
the Liquidating Trustee’s actions with respect to disposition of the Litigation Claims will
be taken in a manner so as to reasonably maximize the value of the Litigation Claims; and
(b)
on the Effective Date, and without having to obtain any further order of the
Bankruptcy Court, be deemed to have intervened as plaintiff, movant or additional party,
or substituted as the real party in interest, as appropriate, in any causes of action, including
adversary proceedings, contested matters, avoidance actions or motions which were filed
by the Debtors prior to the Effective Date, where the subject matter of such action involves
a Litigation Claim or any other Claim to the extent such Claim impacts the Trust Assets.
Section 4.5 Retention of Attorneys, Accountants and Other Professionals.
The Liquidating Trustee shall have authority to retain professionals to aid in the performance of
its responsibilities pursuant to the terms of the Plan and this Trust Agreement including, without
limitation, the litigation of Litigation Claims and distribution of Trust Assets:
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(a)
Such law firm(s) as the Liquidating Trustee may deem advisable to aid in
the liquidation of the Litigation Claims and to perform such other functions as may be
appropriate to carry out the purposes of the Liquidating Trust. The Liquidating Trustee
may commit the Liquidating Trust to and shall pay such law firm(s) reasonable
compensation from the Trust Assets for services rendered and expenses incurred. The
Liquidating Trustee may also engage such law firm(s) on a contingent fee basis as
permitted by applicable law;
(b)
An independent public accounting firm to review and audit the financial
books and records of the Liquidating Trust and to perform such other reviews and/or audits
as the Liquidating Trustee may deem advisable to carry out the primary purposes of the
Liquidating Trust. The Liquidating Trustee may commit the Liquidating Trust to and shall
pay such accounting firm reasonable compensation from the Trust Assets for services
rendered and expenses incurred; and
(c)
Such experts, advisors, consultants, investigators, appraisers, registrars,
transfer agents, custodians, auctioneers, brokers or other professionals as are advisable to
carry out the purposes of the Liquidating Trust. The Liquidating Trustee may commit the
Liquidating Trust to and shall pay all such persons or entities reasonable compensation
from the Trust Assets for services rendered and expenses incurred.
Section 4.6 Compensation of Liquidating Trustee and his Professionals. All
fees shall be paid to the Liquidating Trustee’s professionals without approval of the Bankruptcy
Court in accordance with Article 5.4 of the Plan. As compensation for the performance of his
duties, the Liquidating Trustee shall be entitled to the Liquidating Trustee’s standard hourly rate
and shall be entitled to reimbursement of his reasonable costs and expenses incurred in carrying
out his duties as the Liquidating Trustee. If the Liquidating Trustee objects to the fees of any
professional, the parties shall attempt to consensually resolve such objections and if the parties are
unable to reach a consensual resolution of any such objection, the party who received an objection
to its fees may seek payment of such fees by filing a motion with the Bankruptcy Court and
providing notice to the Liquidating Trustee. The Liquidating shall use reasonable efforts to
allocate fees and expenses of the Liquidating Trustee and the Liquidating Trustee’s professionals
between the Sacred Heart Trust Assets, the Garfield Trust Assets and the Superior Trust Assets.
Section 4.7 Standard of Care; Exculpation. The Liquidating Trustee shall
perform the duties and obligations imposed on the Liquidating Trustee by this Trust Agreement
with reasonable diligence and care under the circumstances. From and after the Effective Date, to
the fullest extent permitted by applicable law, the Liquidating Trustee and each of his officers,
directors, shareholders, employees and representatives together with any Person that may be liable
derivatively through any of the foregoing and each of their representatives (collectively the
“Liquidating Trustee Protected Parties”) shall not have and shall not incur any liability to any
Person for any and all Claims, causes of action and other assertions of liability, or for any act or
omission, (i) arising out of the discharge of the powers and duties conferred upon the Liquidating
Trustee by the Plan, the Liquidating Trust, or any court order, (ii) relating to or taken in furtherance
of the Plan, the Liquidating Trust or any court order, (iii) relating to the character, nature or
existence of the Trust Assets, or (iv) relating to the Postpetition Released Matters, except for acts
or omissions to act to the extent determined by a Final Order to be due to such Liquidating Trustee
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Protected Parties’ own respective willful misconduct or fraud after the effective date of the Trust
Agreement. No Holder of a Claim or Interest, or any other party in interest, will have or pursue
any claim or cause of action against the Liquidating Trustee Protected Parties (i) arising out of the
discharge of the powers and duties conferred upon the Liquidating Trustee by the Plan, the
Liquidating Trust, or any court order, (ii) relating to or taken in furtherance of the Plan, the
Liquidating Trust or any court order, (iii) relating to the character, nature or existence of the Trust
Assets, or (iv) relating to the Postpetition Released Matters, except for acts or omissions to act to
the extent determined by a Final Order to be due to such Liquidating Trustee Protected Parties’
own respective willful misconduct or fraud after the effective date of the Trust Agreement. Any
act taken pursuant to the Plan, the Liquidating Trust or court order, will be conclusively deemed
not to constitute fraud or willful misconduct. To the fullest extent permitted by applicable law,
the Liquidating Trust shall indemnify, defend, and hold harmless the Liquidating Trust Protected
Parties (without the Liquidating Trust Protected Parties having to first pay from their own funds)
and each of their designated representatives from and against any and all Claims, causes of action,
liabilities, obligations, losses, costs, judgments, damages (including attorney fees and cost), except
for willful misconduct or fraud as determined by a Final Order. All rights of the Liquidating Trust
Protected Parties exculpated and indemnified pursuant hereto shall survive confirmation of the
Plan and the closing of the Chapter 11 Cases. The Liquidating Trustee shall not be obligated to
give any bond or surety or other security for the performance of any of his duties; the Liquidating
Trustee Protected Parties shall be fully protected.
Section 4.8 Reliance by Liquidating Trustee Protected Parties. The
Liquidating Trustee Protected Parties may rely, and shall be fully protected, both in its/their
representative capacity and individually in acting upon any resolution, statement, certificate,
instrument, opinion, report, notice, request, consent, order or other instrument or document that it
has no reason to believe to be other than genuine and to have been signed or presented other than
by the proper party or parties or, in the case of facsimile transmissions, to have been sent other
than by the proper party or parties, in each case without obligation to satisfy itself that the same
was given in good faith and without responsibility for errors in delivery, transmission or receipt.
In the absence of willful misconduct or fraud, the Liquidating Trustee Protected Parties may rely
as to the truth of statements and correctness of the facts and opinions expressed therein and shall
be fully protected personally in acting thereon. The Liquidating Trustee may consult with legal
counsel, accounting, tax, or other professionals within the performance of his duties, and the
Liquidating Trustee Protected Parties shall be fully protected in respect of any action taken or
suffered by it/them in accordance with such advice or opinion of legal counsel. The Liquidating
Trustee may at any time seek instructions from the Bankruptcy Court concerning the acquisition,
management or disposition of the Trust Assets or any other matter pertaining to this Trust
Agreement and the Plan.
Section 4.9 Investment Obligations. The Liquidating Trustee shall invest and
re-invest the liquid Trust Assets consistent with the obligations of a trustee under Section 345 of
the Bankruptcy Code. The Liquidating Trustee shall not be liable in any way for any loss or other
liability arising from any investment, or the sale or other disposition of any investment, made in
accordance with this Section.
Section 4.10 Quarterly Reports. The Liquidating Trustee shall submit quarterly
status reports to the Bankruptcy Court. Each status report shall be due on the thirtieth (30th) day
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following the last day of the period covered by the report (or the next business day if the thirtieth
day following the last day of any calendar quarter year is not a business day). The Liquidating
Trustee shall continue to submit status reports until the Trust Assets are fully distributed or the
Bankruptcy Court determines on motion that such reports are no longer necessary. Each status
report shall contain a summary of all activity during the previous three (3) months, a summary of
the professional fees sought and obtained in the prior three (3) months and a summary of cash
receipts to and disbursements from the Liquidating Trustee, a summary of cash receipts to and
disbursements from the Liquidating Trust, and such other information as the Liquidating Trustee
deems appropriate for inclusion.
Section 4.11 Tax Filings and Notices; Withholding and Reporting
Requirements. The Liquidating Trustee shall prepare and provide to, or file with, the appropriate
parties such notices, tax returns and other filings, including all federal, state and local tax returns
for the Liquidating Trust as a grantor trust pursuant to Section 1.671-1(a) of the Treasury
Regulations, as may be required under the Internal Revenue Code of 1986, as amended (the
“Internal Revenue Code”), the Plan, or as may be required by applicable law of other jurisdictions
including, if required under applicable law, notices required to report interest, dividends or gross
proceeds. The Liquidating Trustee shall comply with all withholding and reporting requirements
imposed by any federal, state, local, or foreign taxing authority, and all distributions made
hereunder shall be subject to any such withholding and reporting requirements. The Liquidating
Trustee shall, when specifically requested by a Claimholder in writing, provide such Claimholder
with such tax information as is necessary for the preparation by such Claimholder of its income
tax return to the extent available to the Liquidating Trustee.
Section 4.12 Compliance with Reporting Laws. To the extent consistent with
the Plan, the Liquidating Trustee shall file with the applicable federal and state governmental
agencies the reports and other documents and take any other actions necessary to comply with
federal or state laws.
Section 4.13 Timely Performance. The Liquidating Trustee will make
continuing efforts to prosecute or settle the Litigation Claims, liquidate Trust Assets, make timely
distributions, and not unduly prolong the duration of the Liquidating Trust.
Section 4.14 Resignation. The Liquidating Trustee may resign as Liquidating
Trustee by giving written notice of his resignation to the Bankruptcy Court. The Liquidating
Trustee shall continue to serve as Liquidating Trustee for the shorter of (a) 90 days following the
tender of the notice of resignation or (b) until the appointment of a successor Liquidating Trustee
shall become effective in accordance with Section 4.15 of this Trust Agreement. In the event of
the death (in the case of a Liquidating Trustee that is a natural person), dissolution (in the case of
a Liquidating Trustee that is not a natural person), resignation, incompetency or removal of the
Liquidating Trustee prior to the full administration of the Trust Assets, the successor Liquidating
Trustee may petition the Bankruptcy Court or any other court of competent jurisdiction to resolve
any issues regarding the compensation paid pursuant to Section 4.5 of this Trust Agreement.
Section 4.15 Appointment of Successor Liquidating Trustees. In the event of
the death, dissolution, resignation, incompetency or removal of a Liquidating Trustee, Ira
Bodenstein shall be the successor Liquidating Trustee, which appointment shall be effective upon
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the death, resignation, incompetency or removal of the applicable Liquidating Trustee. Such
successor Liquidating Trustee, shall execute an instrument accepting the appointment under this
Trust Agreement and agreeing to be bound thereto, and thereupon, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring
Liquidating Trustee. Unless the Liquidating Trustee is removed for cause, the Liquidating Trustee
Protected Parties shall continue to be protected under the provisions of this Trust Agreement.
ARTICLE V
Retention of Jurisdiction
Pursuant to the Plan and Confirmation Order, the Bankruptcy Court shall retain exclusive
jurisdiction to hear and determine all matters arising out of, and related to the Chapter 11 Cases
and the Plan, in addition to jurisdiction to hear and determine all matters arising out of, and related
to, this Trust Agreement.
ARTICLE VI
Termination
The Liquidating Trust shall continue until such time as the termination of the Liquidating
Trust is approved by the Bankruptcy Court after distribution of all of the Trust Assets or, if the
Bankruptcy Court has previously entered a final decree closing the Chapter 11 Cases, the
Liquidating Trustee may terminate the Liquidating Trust without Bankruptcy Court approval after
distribution of all Trust Assets. The Liquidating Trustee shall at all times endeavor to liquidate
the Trust Assets expeditiously, and in no event shall the Liquidating Trustee unduly prolong the
duration of the Liquidating Trust. Notwithstanding the foregoing, after the termination of the
Liquidating Trust, the Liquidating Trustee shall have the power to exercise all the powers,
authorities and discretions herein conferred solely for the purpose of liquidating and winding up
the affairs of the Liquidating Trust. On distribution of all of the Trust Assets, the Liquidating
Trustee shall retain the books, records and files that shall have been delivered to or created by the
Liquidating Trustee. At the Liquidating Trustee’s discretion, all of such records and documents
may be destroyed at any time after two years from the distribution of all of the Trust Assets.
ARTICLE VII
Miscellaneous
Section 7.1 Notices. All notices, requests or other communications required or
permitted to be made in accordance with this Trust Agreement shall be in writing and shall be
delivered personally or by facsimile transmission or mailed by first-class mail or by overnight
delivery service:
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If to the Liquidating Trustee and the Debtors, at:
Shaw Fishman Glantz & Towbin LLC
321 N. Clark St., Suite 800
Chicago, IL 60654
Attn: Richard M. Fogel
Email: [email protected]
Fax: (312) 980-3888
Alvarez & Marsal Healthcare Industry Group LLC
55 West Monroe
Suite 4000
Chicago, IL 60603
Attn: Paul Rundell
Email: [email protected]
Fax: (847) 557-9010
With a copy to:
Shaw Fishman Glantz & Towbin LLC
321 N. Clark St., Suite 800
Chicago, IL 60654
Attn: Allen J. Guon
Email: [email protected]
Fax: (312) 980-3888
Notices sent out by facsimile transmission shall be deemed delivered when actually
received, and notices sent by first-class mail shall be deemed delivered when received and notices
sent by overnight delivery service shall be deemed delivered the next business day after mailing.
Section 7.2
Effective Date.
Effectiveness. This Trust Agreement shall become effective on the
Section 7.3 Intention of Parties to Establish Trust. This Trust Agreement is
intended to create a trust, and the Liquidating Trust created hereunder shall be governed and
construed in all respects as a trust.
Section 7.4 Investment Company Act. The Liquidating Trust is organized as
a liquidating entity in the process of liquidation, and therefore should not be considered, and the
Liquidating Trust does not and will not hold itself out as, an “investment company” or an entity
“controlled” by an “investment company” as such terms are defined in the Investment Company
Act.
Section 7.5 Taxation. For United States federal income tax purposes, it is
intended that the Liquidating Trust be classified as a liquidating trust under § 301.7701-4 of the
Treasury Regulations and as a grantor trust subject to the provisions of Subchapter J, Subpart E of
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the Internal Revenue Code that is owned by the Claimholders as grantors. Accordingly, the parties
hereto intend that, for United States federal income tax purposes, the Claimholders be treated as if
they had received a distribution of an undivided interest in the Trust Assets and then contributed
such interests to the Liquidating Trust. All Liquidating Trust earnings, including those retained in
the reserve account established for Disputed Claims, shall be taxable to the Claimholders.
Section 7.6 Counterparts. This Trust Agreement may be executed in one or
more counterparts (via facsimile or otherwise), each of which shall be deemed an original but
which together shall constitute but one and the same instrument.
Section 7.7 Governing Law and Domicile of Liquidating Trust. This
Liquidating Trust Agreement shall be governed by, construed under and interpreted in accordance
with the laws of the State of Illinois. The domicile and situs of the Liquidating Trust shall be
Illinois.
Section 7.8 Headings. Sections, subheadings and other headings used in this
Trust Agreement are for convenience only and shall not affect the construction of this Trust
Agreement.
Section 7.9 Severability. Any provision of this Trust Agreement which is
prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions of this
Trust Agreement, and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable any such provision in any other jurisdiction.
Section 7.10 Successors. This Trust Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
Section 7.11 No Suits by Claimholders. No Claimholder shall have any right
by virtue of any provision of this Trust Agreement to institute any action or proceeding in law or
in equity against any party other than the Liquidating Trustee on or under or with respect to the
Trust Assets.
Section 7.12 Irrevocability. The Liquidating Trust is irrevocable, but is subject
to amendment as provided for herein.
Section 7.13 Trust Continuance.
The death, dissolution, resignation,
incompetency or removal of any Liquidating Trustee shall not operate to terminate the Liquidating
Trust created by this Trust Agreement or to revoke any existing agency created under the terms of
this Trust Agreement or invalidate any action theretofore taken by the Liquidating Trustee. In the
event of the resignation or removal of any Liquidating Trustee, such Liquidating Trustee shall
promptly (a) execute and deliver such documents, instruments and other writings as may be
requested by the Bankruptcy Court or reasonably requested by the Debtors or a successor
Liquidating Trustee to effect the termination of the Liquidating Trustee’s capacity under this Trust
Agreement, (b) deliver to the Bankruptcy Court or a successor Liquidating Trustee all documents,
instruments, records and other writings related to the Liquidating Trust as may be in the possession
of such Liquidating Trustee and (c) otherwise assist and cooperate in effecting the assumption of
its obligations and functions by a successor Liquidating Trustee.
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Section 7.14 Enforcement and Administration. The Bankruptcy Court shall
enforce and administer the provisions of this Trust Agreement as set forth in the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Liquidating Trust
Agreement or caused this Trust Agreement to be duly executed by their respective officers
thereunto duly authorized as of the date first above written.
WEST SIDE COMMUNITY
HOSPITAL, INC., GARFIELD
KIDNEY CENTER, LLC, AND
SUPERIOR HOME HEALTH,
L.L.C.
Dated: June __, 2015
By:
Paul Rundell
Chief Restructuring Officer
of West Side Community
Hospital, Inc., Garfield
Kidney Center, LLC, and
Superior Home Health,
L.L.C.
RICHARD M. FOGEL, NOT
INDIVIDUALLY BUT SOLELY
AS
THE
LIQUIDATING
TRUSTEE
Dated: June __, 2015
By:
Richard M. Fogel
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SETTLEMENT AND RELEASE AGREEMENT
This Settlement and Release Agreement, dated as of February 20, 2015 (this “Settlement
Agreement” or “Settlement”), is entered into by and between West Side Community Hospital
Inc. d/b/a Sacred Heart Hospital (“Debtor”), on the one hand, and Quinola McCullough (“Class
Representative”), on behalf of herself and members of the certified Class (together with the Class
Representative, but excluding the Opt-Outs (as hereinafter defined), the “Class Members” or
“Class”), on the other hand. The Debtor and the Class Members are collectively referred to
herein as the “Parties,” or, as to each, a “Party.”
RECITALS
WHEREAS, on July 2, 2013 (“Petition Date”), Debtor, together with its affiliated entities
Garfield Kidney Center, LLC (“Garfield”) and Superior Home Health, L.L.C. (“Superior”), filed
voluntary petitions for relief in the United States Bankruptcy Court for the Northern District of
Illinois (“Bankruptcy Court”) under chapter 11 of title 11, United States Code (“Bankruptcy
Code”). The filing of the chapter 11 petitions commenced the bankruptcy cases (“Cases”)
pending before the Bankruptcy Court and styled as In re West Side Community Hospital, Inc.,
Case No. 13-27091 (Jointly Administered). Since the Petition Date, the Debtor, Garfield and
Superior have remained in possession of their assets as debtors in possession in accordance with
11 U.S.C. §§ 1107 and 1108;
WHEREAS, prior to the Petition Date, Debtor employed certain employees, including the
Class Members, in its business operations;
WHEREAS, prior to the Petition Date, Debtor terminated certain of its employees, on or
about July 1, 2013, and within 30 days of that date;
WHEREAS, Debtor believes that all of the terminations made were in compliance with
all applicable laws, including the Worker Adjustment and Retraining Notification Act, 29 U.S.C.
§§ 2101 et seq., and the Illinois Worker Adjustment and Retraining Act, 820 ILCS 65/10(a)
(collectively, the “WARN Act”);
WHEREAS, on or about July 9, 2013, the Class Representative filed with the Bankruptcy
Court a class-action adversary complaint commencing an adversary proceeding (“WARN
Action”) against Debtor, on behalf of herself and on behalf of the Class Members, alleging that
Debtor violated the WARN Act by ordering plant closings and/or mass layoffs on or about July 1,
2013 without providing sixty (60) days advance notice thereof. The Class Representative further
asserted that, as a consequence of this alleged failure, the Class Members have a partial priority
administrative expense claim, pursuant to 11 U.S.C § 503(b)(1)(A), or alternatively, full priority
status, under 11 U.S.C. § 507(a)(4) and (5), up to the $12,475 priority cap, with the balance, if
any, being a general unsecured claim against Debtor for damages for the alleged sixty (60) day
violation period. The WARN Action is entitled McCullough v. West Side Community Hospital
Inc., et al., Adv. No. 13-00954 (Bankr. N.D. Ill.);
WHEREAS, on August 27, 2013, the Plaintiff filed a First Amended Complaint
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(“Complaint”) and voluntarily dismissed Defendants Superior and Garfield from the WARN
Action;
WHEREAS, a tentative settlement has been reached by counsel for the parties as a result
of negotiations; and
WHEREAS, all Parties recognize that the outcome of the WARN Action is uncertain.
The Parties also acknowledge that Debtor has limited resources and that recoveries to Class
Members and other creditors can best be maximized by resolving the WARN Action in a
consensual manner and avoiding extensive, costly and uncertain litigation.
SETTLEMENT
NOW, THEREFORE, as material consideration and inducements to the execution of this
Settlement Agreement, and in consideration of the mutual promises and agreements set forth
herein, and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and intended to be binding, the Parties hereby agree as follows:
1.
Settlement Filings. The Parties shall file a joint motion in the Cases under Fed.
R. Bankr. P. 9019 and 7023 for approval of the Settlement through a bifurcated hearing process
(“Settlement Motion”). The Settlement Motion shall request an initial hearing at which time the
Parties shall seek entry of an order of the Bankruptcy Court preliminarily approving the
Settlement, and approving the form and manner of notice to the Class Members of the
Settlement, including, among other things, their right to object to the Settlement in person or to
appear by counsel. The Parties shall also request a date for a fairness hearing (“Fairness
Hearing”). At the Fairness Hearing, the Bankruptcy Court shall consider final approval of the
Settlement. The Settlement is subject to the entry of a final order by the Bankruptcy Court
approving this Settlement Agreement under Fed. R. Bankr. P. 9019 and 7023, after notice and
hearing to creditors and parties in interest, in accordance with applicable law and local rules
(“Settlement Order”). The Settlement Order shall be deemed final when fourteen (14) days have
elapsed from the entry Settlement Order, with no notice of appeal filed or after the Settlement
Order is finally affirmed on appeal, whichever first occurs.
2.
Class Certification. On January 15, 2014, this Court certified a class comprised
of former employees of the Debtor who: (i) worked at the Debtor’s facility located at 3240 W.
Franklin Boulevard, Chicago, Illinois and allege that they were terminated without cause as part
of, or as the result of, mass layoffs or plant closings ordered by the Debtor on or about July 1,
2013; (ii) who were not provided 60 days’ advance written notice of their terminations by the
Debtor; and (iii) who have not filed a timely request to opt-out of the Class. All former
employees who timely filed a request to opt-out of the Class are collectively referred to as the
“Opt-Outs.” In addition, the Court appointed Outten & Golden, LLP as class counsel (“Class
Counsel”) and Quinola McCullough as the Class Representative.
3.
Effective Date. The “Effective Date” of this Settlement Agreement shall be the
later of (i) the date upon which Settlement Order has become final and (ii) the occurrence of the
effective date of the Debtor’s chapter 11 plan (“Plan”) confirmed by the Bankruptcy Court to
11 U.S.C. § 1129. In the event that the Effective Date does not occur: (a) this Settlement
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Agreement and the recitals contained herein shall be without force or effect, and the Settlement
Agreement, nor any of the statements contained herein, shall be admissible in any proceeding
involving the Parties; (b) neither the Settlement Motion nor any of the pleadings filed in support
thereof shall be admissible in any proceeding involving the Parties; and (c) none of the
provisions hereof shall prejudice or impair any rights, remedies or defenses of any of the Parties.
4.
The Priority Claim.
(a)
Upon the Effective Date, the Class shall be awarded an allowed priority
claim pursuant to 11 U.S.C. §§ 507(a)(4) in the amount of Three Hundred Sixty Thousand
Dollars ($360,000.00) against Debtor (“WARN Claim”). The WARN Claim shall be satisfied in
full by a payment in the amount of Three Hundred Sixty Thousand Dollars ($360,000.00)
(“Settlement Payment”) to be distributed in accordance with the terms set forth below and the
Plan as soon as reasonably practicable following the Effective Date, but not later than 21 days.
All distributions made by Debtor on account of the WARN Claim shall be referred to herein as
the “WARN Claim Distributions” and the Settlement Payment to be distributed pursuant to the
Settlement shall be referred to herein as the “Settlement Fund.”
(b)
The Parties agree that the WARN Claim shall be allowed against Debtor
in favor of the Class in complete and total satisfaction of all claims and potential claims of the
Class Members against Debtor under the WARN Act. The Parties further agree that, except as
otherwise expressly set forth in this Settlement Agreement, any and all payments by, and
obligations of, Debtor under this Settlement Agreement, including, but not limited to, the
obligation to pay the Class Representative Service Payments, Class Counsel’s Fees, Class
Counsel’s Expenses,1 and the Class Members’ individual share of applicable employee taxes,
shall be payable exclusively from the WARN Claim. For the avoidance of doubt, the Debtor
shall be responsible for the payment of the employer’s share of applicable taxes, which is the
only payment obligation of the Debtor under the Settlement that shall not be paid from the
WARN Claim.
(c)
Notwithstanding anything to the contrary in this Settlement Agreement,
nothing herein shall prohibit the Debtor from objecting to (i) any Class Members’ status as a
member of the Class or (ii) any claim filed by a Class Member that is not a WARN Claim.
5.
Responsibilities of Class Counsel. Class Counsel shall be responsible for the
production and mailing of all notices required to be provided to the Class Members (“Class
Notices”). The address of Class Counsel will be used as the return address for the Class Notices
and Class Counsel will respond to all inquiries of the Class arising from or related to this
Settlement. Subject to the Debtor’s review and approval, Class Counsel shall be responsible for
calculating the allocation of each Class Member’s net share of the WARN Claim as set forth in
paragraph 6(d) below.
1
The terms Class Representative Service Payments, Class Counsel’s Fees and Class Counsel’s
Expenses are defined in Section 5 below.
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6.
The Allocation of the Settlement Fund and Disbursement of the Net
Settlement Fund to Class Members.
(a)
Disbursement of Settlement Fund Payments. The liquidating trustee of
Debtor’s estate appointed under the Plan (“Liquidating Trustee”) shall be responsible for the
preparation and mailing of the individual settlement checks to Class Members, withholding and
paying all applicable taxes, remitting Class Counsel’s Fees and Expenses, preparing all tax forms
required in connection with this Settlement in accordance herewith and with any other orders of
the Bankruptcy Court, and shall bear the expense for the preparation and mailing of such
settlement checks and tax forms.
(b)
Class Counsel’s Fees and Class Counsel’s Expenses. Class Counsel is
entitled to attorneys’ fees (“Class Counsel’s Fees”) in the amount of thirty-three and one third
percent (33⅓%) of the Settlement Fund, net of (a) litigation expenses (including costs associated
with the production and mailing of the class notice) not to exceed $7,500 (“Class Counsel’s
Expenses”), and (b) the Class Representative Service Payment (defined below). Class Counsel’s
Fees and Class Counsel’s Expenses will be distributed to Class Counsel (according to
instructions to be supplied by Class Counsel) contemporaneously with the distribution of
proceeds from the WARN Claim to Class Members and shall be payment in full for Class
Counsel’s work and expenses in connection with this matter. For the avoidance of doubt, the
Parties agree that Class Counsel’s Fees and Class Counsel’s Expenses shall be payable solely
from WARN Claim Distributions and from no other source. Class Counsel shall be issued a
Form 1099 by Debtor for Class Counsel’s Fees and Class Counsel’s Expenses.
(c)
Service Payments to Class Representative. The Class Representative shall
receive a one-time payment of Five Thousand Dollars ($5,000.00) as compensation for her
service in this matter (“Class Representative Service Payment”). The Liquidating Trustee shall
distribute this payment to the Class Representative in addition to her individualized WARN
Claim Distribution and Class Counsel’s Fees shall not be deducted from the Class Representative
Service Payment. For the avoidance of doubt, the Parties agree that the Class Representative
Service Payment shall be payable solely from WARN Claim Distributions and from no other
source. The Class Representative Service Payment shall be characterized as non-employee
compensation to the Class Representative and shall be reported to any applicable taxing
authorities on behalf of the Class Representative on a Form 1099 issued to the Class
Representative with her taxpayer identification number.
(d)
Allocation of the Settlement Fund to Class Members. The WARN Claim
Distributions, after being first reduced by (i) the Class Representative Service Payment, (ii) Class
Counsel’s Fees and (iii) Class Counsel’s Expenses, shall be allocated to each Class Member on a
pro rata basis based on the relationship that such Class Member’s potential damages under the
WARN Act bears to the aggregate potential damages of all Class Members under the WARN
Act, and shall be made directly to Class Members (“Class Members’ Pro Rata Share”). The
WARN Claim Distributions made to individual Class Members shall be characterized as
employee compensation and shall be reported to any applicable taxing authorities on a Form W-2
issued by Debtor to such Class Member with his or her taxpayer identification number. Each
Class Member’s total allowed priority claim under 11 U.S.C. § 507(a) against the Debtor shall be
reduced by the Class Members’ Pro Rata Share without reduction for the (i) the Class
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Representative Service Payment, (ii) Class Counsel’s Fees and (iii) Class Counsel’s Expenses
(i.e., assuming that the full $360,000 was distributed among Class Members). The Settlement
Fund shall be allocated to each Class Member and the total reduction of each Class Member’s
remaining priority claim under 11 U.S.C. § 507(a) is attached hereto as Exhibit A.
7.
Settlement Checks. Following the WARN Claim Distributions, upon Class
Counsel’s written request, including email, the Liquidating Trustee shall provide Class Counsel
with the names of those Class Members whose settlement checks have been (i) returned as
undeliverable or (ii) remain uncashed or unnegotiated. Upon Class Counsel’s written notice of a
Class Member’s updated correct address for any returned settlement checks, the Liquidating
Trustee shall, within 10 days of receipt of said notice from Class Counsel, mail the returned
settlement check to the Class Member at such corrected address. Upon Class Counsel’s written
notice of a Class Member’s need for a “stop payment” on their settlement check and reissuance,
the Liquidating Trustee shall, within five business days of receipt of said notice from Class
Counsel, stop payment on the settlement check and reissue it, as requested. In the event that
there are any Settlement Funds remaining for any reason, including Settlement checks which are
not deposited, endorsed or negotiated, within ninety (90) days of their issuance, such residual
funds shall be held another sixty (60) days (“Residual Fund Waiting Period”) to be used to make
distributions to any individual who is subsequently determined to have been eligible to receive a
distribution as a Class Member but was not on the Class Member distribution list. Undistributed
funds remaining after the Residual Fund Waiting Period, shall become property of the liquidating
trust to be established under the Plan, free and clear of any and all claims and interests of the
Class Members, but subject to further redistribution in accordance with the Plan.
8.
The Class Notice. Class Counsel shall bear the responsibility of the preparation
of the Class Notices. Class Counsel’s address will be used as the return address for the Class
Notices so that any returned Class Notices will be returned to Class Counsel. Class Counsel
shall mail the Class Notices by first class mail to the Class Members no later than five (5)
business days after preliminary approval of this Settlement by the Bankruptcy Court. The Class
Notice, which includes the objection form (“Objection Form”), shall be in substantially the form
annexed hereto as Exhibit B or such substantially similar form as may be approved by the
Bankruptcy Court. In the event that a Class Notice is returned as undeliverable, Class Counsel
shall mail the Class Notice to the corrected address of the intended Class Member recipient as
may be determined by Class Counsel through a search of a national database or as may otherwise
be obtained by the Parties.
9.
Contents of the Class Notice. The Class Notice shall contain the following
information, which shall be individualized for each Class Member:

That the Settlement shall become effective only if it is finally approved by the
Bankruptcy Court under Fed. R. Bankr. P. 7023 and 9019;

That, if so approved, the Settlement shall be effective as to all Class Members;

That such Class Member has the right to object to this Settlement either in person
or through counsel and be heard at the Fairness Hearing; and
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That all Released Claims (defined below) of a Class Member (other than those
claims to be paid under the terms of this Settlement) shall be waived, and that no
person, including the Class Member, shall be entitled to any further distribution
thereon.
10.
Objection to Settlement Procedures. At or before such time as may be fixed by
the Bankruptcy Court for final approval of this Settlement at the Fairness Hearing, a Class
Member may object to this Settlement by sending timely written notice of such objection
(“Notice of Objection”) to Class Counsel and counsel to Debtor and at the addresses set forth in
Section 15(d) below and filing such Notice of Objection with the Bankruptcy Court. Such
objection shall clearly specify the relief sought and the grounds for such relief. In addition:
(a)
To be effective, the Notice of Objection must be postmarked no later than
the date fixed by the Bankruptcy Court. Class Counsel shall provide Debtor with copies of each
Notice of Objection received from Class Members within one (1) business day following receipt
thereof.
(b)
Any Class Member whose objection is sustained by the Court shall not
have an allowed claim against Debtor by reason of this Settlement Agreement and shall retain his
or her rights against the Debtor, if any. The Debtor reserves all rights against any Class Member
who is excluded from this Settlement including the right to assert that such Class Member did
not file a timely proof of claim in the Case.
(c)
Notwithstanding anything to the contrary in this Settlement, nothing
contained herein shall release or impair the rights and claims, if any, of any Class Member who
does not participate in this Settlement, nor shall anything contained herein affect the defenses
and offsets that Debtor, its estate, its respective subsidiaries, its respective affiliates, any
successors or assigns thereto, or any of the present or former officers, directors, employees,
agents, attorneys, consultants, stockholders or members of any thereof may have against any
such rights or claims.
11.
The Waiver and Release of any Released Claims by All Class Members if the
Settlement Becomes Effective.
(a)
Released Claims of Class Members. Except for the rights arising out of,
provided for, or reserved in this Settlement Agreement, upon the Effective Date, the Class
Members, for and on behalf of themselves, and their respective predecessors, successors, assigns,
heirs, personal representative and estates (collectively, the “Releasing Parties”), do hereby fully
and forever release and discharge (i) the Debtor, Garfield, Superior and their respective estates,
(ii) Edward Novak, West Side Community Hospital Limited Partnership, West Side
Management Corporation, and Park Place, L.L.C., and (iii) for each of the persons and entities
listed in (i) and (ii), their current and former shareholders, officers, directors, employees,
accountants, attorneys, representatives and other agents, and all of their respective predecessors,
successors and assigns (collectively, the “Released Parties”), of and from any and all claims,
demands, debts, liabilities, obligations, liens, actions and causes of action, costs, expenses,
attorneys’ fees and damages of whatever kind or nature, at law, in equity and otherwise, whether
known or unknown, anticipated, suspected or disclosed, which the Releasing Parties may now
{10615-001 SET A0397075.DOCX 5}
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have or hereafter may have against the Released Parties, which relate to or are based on the
WARN Act or back or severance pay or benefits under any federal, state or local law or
regulation arising out of the termination of the Class Members’ employment by the Debtor,
including, but not limited to: (a) all claims asserted or that could have been asserted in the
WARN Action; (b) the individual WARN Act claims; and (c) any other claims for back or
severance pay or benefits based on or arising out of any federal, state or local statute, ordinance
or regulation; provided, however, that the following claims and/or rights shall not be released:
(x) any claims for continuation of health or medical coverage, at the Class Member’s expense, or
at the expense of a beneficiary or dependent of a Class Member, to the extent allegedly required
by the relevant provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985; and
(y) rights, if any, unrelated to Class Members’ WARN claims, under the Debtors’ 401(k) plans.
The claims released hereunder are referred to herein as the “Released Claims.” The Released
Parties expressly reserve the right to object to, offset or oppose any and all claims, obligations, or
causes of action, of any type, except those claims expressly allowed hereunder. On the Effective
Date, in accordance with this Settlement, the Class Members agree that any claims that have
been scheduled on behalf of, or filed by, the Class Representative or the Class Members in the
Cases, on account of any alleged violation of the WARN Act or severance pay or benefits under
any federal, state or local law or regulation, including, without limitation, the individual WARN
claims are disallowed in their entirety and shall be deemed expunged from Debtor’s schedules or
claims register, as applicable. In addition, each Releasing Party shall be deemed as of the
Effective Date to have released the Class Representative from any and all claims whether
liquidated or unliquidated, contingent or non-contingent, asserted or unasserted, fixed or not,
matured or unmatured, disputed or undisputed, legal or equitable, known or unknown that he or
she may have against the Class Representative, any successors or assignees to their legal
interests, or any of their present or former agents, attorneys or consultants arising out of any
Released Claim or the terms of this Settlement.
(b)
Dismissal of WARN Act Litigation. Dismissal with prejudice of the
WARN Action shall be executed in a form agreeable to the Parties (“Dismissal”). Class Counsel
shall file the Dismissal with the Bankruptcy Court within fourteen (14) days following the
WARN Claim Distributions in accordance with this Settlement and the Plan. Dismissal of the
WARN Action shall not abate or limit the effectiveness of the Settlement Order, including the
releases set forth herein and the terms and conditions of this Settlement.
(c)
Plan Releases. The Plan shall also contain provisions providing that the
Releasing Parties shall release the Released Parties from the Released Claims.
12.
No Litigation. Except as may be necessary to enforce the terms of this
Settlement, the Debtor, the Class Representative, Class Counsel, the Releasing Parties, and any
other person who accepts payment hereunder agree that she or he shall not commence or proceed
with any action, claim, suit, proceeding or litigation on the Released Claims, or take any action
inconsistent with the terms of the Settlement.
13.
No Admission of Liability. This Settlement is intended to settle and dispose of
the Released Claims. Nothing herein shall be construed as an admission by any Party of any
facts or liability of any kind.
{10615-001 SET A0397075.DOCX 5}
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14.
Representations and Warranties. Each Party represents and warrants that upon
Bankruptcy Court approval of this Settlement and Plan effectiveness, it will have the legal right
and authority to enter into this Settlement and the transactions and releases contemplated hereby.
15.
Further Assurances. The Parties shall cooperate fully and shall execute and
deliver any and all supplemental papers, documents, instruments and other assurances and shall
do any and all acts that may be reasonably necessary or appropriate to give full force and effect
to the terms and intent of this Settlement.
16.
Miscellaneous.
(a)
Continuing Jurisdiction of Bankruptcy Court. The Bankruptcy Court shall
have full jurisdiction over this Settlement and any dispute or controversy arising from or related
to the interpretation or enforcement of this Settlement.
(b)
Governing Law/Jurisdiction. Except where superseded by applicable
federal law, this Settlement Agreement shall be governed by the laws of the State of Illinois.
(c)
Governing Provisions. Except as provided herein, in the event of a
conflict between the Plan and this Settlement, the terms of this Settlement Agreement shall
govern.
(d)
Notices. Any notice or other communication required or permitted to be
delivered under this Settlement between Class Counsel, Debtor or from any Class Member to the
Class Counsel, Debtor and/or the Bankruptcy Court shall be (i) in writing, (ii) delivered
personally, by courier service or by certified or registered mail, first-class postage prepaid and
return receipt requested, (iii) deemed to have been received on the date of delivery, and (iv)
addressed as follows (or to such other address as the Party entitled to notice shall hereafter
designate by a written notice filed with the Bankruptcy Court):
If to the Debtor, to:
SHAW FISHMAN GLANTZ & TOWBIN LLC
321 North Clark Street, Suite 800
Chicago, Illinois 60654
Attention: Allen J. Guon
If to Class Members or Class Counsel, to:
OUTTEN & GOLDEN LLP
3 Park Avenue, 29th Floor
New York, New York 10016
Attention: Jack A. Raisner
René S. Roupinian
{10615-001 SET A0397075.DOCX 5}
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19
Desc Exhibit
(e)
Non-Severability. Each of the provisions of this Settlement is a material
and integral part hereof. In the event that one or more of the provisions of this Settlement shall
become invalid, illegal or unenforceable in any respect, the entire Settlement shall be deemed
null and void unless all the Parties agree otherwise.
(f)
Amendments. This Settlement may not be modified, amended or
supplemented by the Parties except by a written agreement that the Parties have signed with any
required approval of the Bankruptcy Court.
(g)
Integration. This Settlement contains the entire agreement among the
Parties with respect to the matters covered by this Settlement, and no promise or understanding
or representation made by any Party or agent, director, officer, employee or attorney of any Party
that is not expressly contained in this Settlement shall be binding or valid.
(h)
Interpretation. This Settlement was the product of negotiations between
the parties and any rule of construction requiring that ambiguities are to be resolved against the
drafting party shall not apply in the interpretation of this Settlement.
(i)
Headings. The headings of this Settlement are for convenience only and
are not part of the Settlement and do not in any way define, limit, extend, describe or amplify the
terms, provisions or scope of this Settlement and shall have no effect on its interpretation.
Where appropriate, the use of the singular shall include the plural and the use of the masculine
gender shall include the feminine gender as well.
(j)
Signatures. Facsimile or other electronic copies of signatures on this
Settlement are acceptable, and a facsimile or other electronic copy of a signature on this
Settlement shall be deemed to be an original.
(k)
Counterparts. This Settlement may be executed in one or more
counterparts, each of which together or separately shall constitute an original and which, when
taken together, shall be considered one and the same binding agreement.
(l)
Cooperation. The Parties agree to cooperate with one another to effectuate
an efficient and equitable implementation of this Settlement; provided that nothing herein shall
require the Debtor to breach any commitments that they may have to any other person or entity,
including the purchaser of their assets and any secured lenders.
(m)
Binding Nature of Settlement. This Settlement shall be binding upon and
shall inure to the benefit of the Parties hereto and their respective successors, transferees,
assigns, heirs and estates
(n)
Recitals. The Recitals are hereby incorporated in full and made a part of
this Settlement Agreement.
[Remainder of Page Intentional Left Blank]
{10615-001 SET A0397075.DOCX 5}
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IN WITNESS WHEREOF, the Parties have executed and delivered this Settlement
Agreement as of the date first written above.
West Side Community
Hospital, Inc.
By:
Name: Paul Rundell
Title: Chief Restructuring
OUTTEN Ec GOLDEN
on behalf
Memb
(10615-001 SET A0397075,DOCX 5)
12
Officer
LLP
of the Class
Representative
NalnI1e:
Ja~cA. R&sner
Title:
Rene S, Roupinian
Class Counsel
and Class
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1 Page 63
13 of 69
19
EXHIBIT A
Desc Exhibit
Case 13-27091
Doc 456-1
407-1
455-2
Emp ID
20002
20459
20993
20938
20008
20926
20009
20409
21032
20633
21213
21106
21124
20889
20013
20014
20016
20017
20020
20825
21187
21200
20669
20964
20028
20031
20489
20413
20596
20440
21208
20040
21230
21217
20656
21211
21119
20046
20368
21143
21008
21120
21166
Filed 05/06/15
03/18/15
Entered 05/06/15
03/18/15 15:18:43
13:41:13
15:07:07
McCullough v.
Side64
Community
A
B
1 West
Page
14
of 69
19 Hospital
Adversary Proceeding #: 13-00954
Gross Pro Rata
Net Pro Rata
Damages
Damages
$3,429.84
$2,207.28
$645.08
$415.14
$3,812.00
$2,453.21
$844.61
$543.55
$1,931.42
$1,242.97
$684.08
$440.24
$879.17
$565.79
$564.92
$363.55
$1,028.33
$661.78
$949.02
$610.74
$658.02
$423.47
$253.61
$163.21
$2,403.05
$1,546.48
$471.20
$303.24
$1,118.05
$719.52
$1,118.05
$719.52
$2,067.80
$1,330.74
$1,773.33
$1,141.23
$1,691.94
$1,088.85
$180.47
$116.14
$748.14
$481.47
$3,389.92
$2,181.59
$1,982.53
$1,275.86
$3,297.67
$2,122.22
$4,817.65
$3,100.40
$615.36
$396.02
$528.71
$340.25
$3,603.15
$2,318.81
$937.36
$603.24
$500.70
$322.23
$482.95
$310.80
$2,123.99
$1,366.90
$1,523.07
$980.17
$1,424.26
$916.58
$2,108.81
$1,357.13
$312.36
$201.02
$1,277.94
$822.42
$8,360.97
$5,380.71
$1,329.26
$855.44
$931.88
$599.71
$606.92
$390.58
$1,067.90
$687.25
$458.65
$295.16
Desc Exhibit
Case 13-27091
Doc 456-1
407-1
455-2
21098
21192
21077
21091
21114
20061
21221
21113
21131
20068
20500
20789
20670
20750
20060
21086
21185
20070
21214
20363
20073
21093
21053
21153
20878
20731
21133
20590
21195
21116
20913
21028
20983
20782
21162
21089
20802
20270
20909
20456
20083
20084
21019
21024
20373
21238
20315
Filed 05/06/15
03/18/15
Entered 05/06/15
03/18/15 15:18:43
13:41:13
15:07:07
McCullough v.
Side65
Community
A
B
1 West
Page
15
of 69
19 Hospital
Adversary Proceeding #: 13-00954
$3,387.92
$4,296.72
$929.41
$1,929.11
$2,081.87
$2,200.88
$1,181.38
$1,263.68
$1,349.74
$9,216.46
$1,071.72
$2,197.49
$908.99
$1,188.30
$3,193.79
$1,546.67
$2,986.83
$408.26
$773.61
$1,257.06
$2,143.05
$2,379.72
$896.93
$951.01
$1,162.21
$705.35
$3,576.38
$2,025.20
$808.28
$2,997.52
$1,185.59
$2,051.06
$1,890.14
$3,214.97
$2,058.77
$1,027.20
$1,027.20
$1,027.20
$992.37
$992.37
$2,663.32
$1,014.02
$1,100.05
$509.45
$1,201.55
$267.26
$2,093.82
$2,180.30
$2,765.15
$598.12
$1,241.48
$1,339.79
$1,416.38
$760.28
$813.24
$868.63
$5,931.26
$689.70
$1,414.20
$584.98
$764.73
$2,055.37
$995.36
$1,922.18
$262.74
$497.86
$808.98
$1,379.16
$1,531.47
$577.22
$612.02
$747.94
$453.93
$2,301.58
$1,303.32
$520.17
$1,929.06
$762.99
$1,319.96
$1,216.40
$2,069.00
$1,324.92
$661.06
$661.06
$661.06
$638.64
$638.64
$1,713.98
$652.58
$707.94
$327.85
$773.26
$171.99
$1,347.48
Desc Exhibit
Case 13-27091
Doc 456-1
407-1
455-2
20939
20098
20666
20593
20442
21151
21036
20773
20544
20655
20109
21048
21228
20688
21145
21196
20483
20611
20628
21092
21015
20659
20961
20821
20250
20126
20922
21141
20660
21096
20130
21004
21180
20133
20135
20570
20992
20930
20947
20519
20945
21018
20141
20143
20714
20144
20145
Filed 05/06/15
03/18/15
Entered 05/06/15
03/18/15 15:18:43
13:41:13
15:07:07
McCullough v.
Side66
Community
A
B
1 West
Page
16
of 69
19 Hospital
Adversary Proceeding #: 13-00954
$1,904.29
$1,904.29
$3,057.92
$1,610.94
$1,610.94
$665.00
$2,455.85
$2,277.80
$1,294.11
$468.89
$1,367.88
$1,367.88
$783.00
$1,147.86
$2,564.72
$626.53
$2,346.43
$973.50
$1,355.87
$790.63
$88.88
$1,815.05
$1,498.35
$1,438.41
$1,804.76
$641.23
$641.23
$646.49
$178.29
$434.83
$1,045.49
$1,461.30
$2,545.30
$2,294.74
$2,489.49
$1,180.97
$4,312.15
$529.01
$1,397.98
$2,676.93
$814.45
$1,156.38
$5,508.62
$1,076.60
$1,067.08
$1,017.91
$2,823.42
$1,225.51
$1,225.51
$1,967.92
$1,036.72
$1,036.72
$427.96
$1,580.47
$1,465.88
$832.83
$301.76
$880.30
$880.30
$503.90
$738.70
$1,650.53
$403.20
$1,510.04
$626.50
$872.57
$508.81
$57.20
$1,168.08
$964.26
$925.69
$1,161.46
$412.66
$412.66
$416.05
$114.74
$279.83
$672.83
$940.42
$1,638.03
$1,476.78
$1,602.11
$760.02
$2,775.08
$340.45
$899.67
$1,722.74
$524.14
$744.19
$3,545.08
$692.85
$686.72
$655.08
$1,817.01
Desc Exhibit
Case 13-27091
Doc 456-1
407-1
455-2
21081
20829
21229
21108
20625
21148
21173
21224
21239
21128
20158
21071
20367
21149
21234
21237
21241
21220
20165
21168
20168
21058
20172
20174
20703
21067
20177
21115
20179
21099
21104
21150
20186
20690
20187
20777
21070
21210
21011
20991
20956
20976
21176
20803
20192
21027
20962
Filed 05/06/15
03/18/15
Entered 05/06/15
03/18/15 15:18:43
13:41:13
15:07:07
McCullough v.
Side67
Community
A
B
1 West
Page
17
of 69
19 Hospital
Adversary Proceeding #: 13-00954
$982.19
$656.67
$538.08
$1,418.19
$1,425.96
$1,322.07
$2,297.52
$471.57
$780.43
$3,360.11
$130.75
$1,410.20
$931.16
$1,322.07
$135.38
$173.63
$200.62
$733.59
$2,227.94
$462.64
$2,547.78
$2,628.95
$717.38
$1,156.93
$469.09
$2,025.72
$1,747.23
$2,897.30
$2,515.00
$3,360.77
$2,224.55
$477.71
$1,684.05
$663.26
$3,405.87
$798.36
$1,410.20
$1,616.67
$1,492.64
$1,980.28
$1,932.94
$1,075.28
$1,208.36
$765.89
$941.42
$1,865.84
$1,498.35
$632.09
$422.60
$346.28
$912.68
$917.68
$850.82
$1,478.57
$303.48
$502.24
$2,162.40
$84.15
$907.54
$599.25
$850.82
$87.12
$111.74
$129.11
$472.10
$1,433.79
$297.73
$1,639.63
$1,691.86
$461.67
$744.54
$301.88
$1,303.65
$1,124.43
$1,864.56
$1,618.53
$2,162.82
$1,431.61
$307.43
$1,083.77
$426.84
$2,191.85
$513.79
$907.54
$1,040.41
$960.59
$1,274.41
$1,243.95
$692.00
$777.64
$492.89
$605.85
$1,200.76
$964.26
Desc Exhibit
Case 13-27091
Doc 456-1
407-1
455-2
20485
20197
20892
21227
21121
21209
21132
20675
21035
20898
21043
20343
20984
21137
20788
20775
20566
21083
20205
20206
20359
20738
20589
20755
20268
21189
20213
20859
21184
20216
20860
20550
21163
21171
20867
20319
20505
20219
21123
21142
20943
21122
20912
20751
21044
21134
20104
Filed 05/06/15
03/18/15
Entered 05/06/15
03/18/15 15:18:43
13:41:13
15:07:07
McCullough v.
Side68
Community
A
B
1 West
Page
18
of 69
19 Hospital
Adversary Proceeding #: 13-00954
$1,592.55
$1,703.33
$1,966.13
$244.14
$2,053.36
$2,100.23
$600.16
$600.16
$617.74
$1,294.45
$894.77
$1,017.12
$2,224.38
$497.96
$1,983.10
$3,511.41
$2,203.45
$2,051.52
$983.87
$1,089.55
$1,132.57
$1,136.48
$2,190.57
$928.63
$2,415.31
$2,415.31
$1,651.07
$1,353.63
$2,299.42
$2,137.12
$1,161.57
$707.60
$1,396.71
$1,820.79
$795.02
$1,365.92
$2,089.27
$1,424.82
$1,836.21
$949.90
$1,672.55
$2,002.60
$2,373.24
$0.00
$0.00
$0.00
$0.00
$1,024.89
$1,096.18
$1,265.31
$157.12
$1,321.44
$1,351.61
$386.23
$386.23
$397.54
$833.04
$575.83
$654.57
$1,431.50
$320.46
$1,276.23
$2,259.77
$1,418.03
$1,320.25
$633.17
$701.18
$728.87
$731.38
$1,409.74
$597.62
$1,554.38
$1,554.38
$1,062.55
$871.13
$1,479.79
$1,375.35
$747.53
$455.37
$898.85
$1,171.77
$511.64
$879.04
$1,344.55
$916.94
$1,181.69
$611.31
$1,076.37
$1,288.77
$1,527.30
$0.00
$0.00
$0.00
$0.00
Desc Exhibit
Case 13-27091
Doc 456-1
407-1
455-2
Filed 05/06/15
03/18/15
Entered 05/06/15
03/18/15 15:18:43
13:41:13
15:07:07
McCullough v.
Side69
Community
A
B
1 West
Page
19
of 69
19 Hospital
Adversary Proceeding #: 13-00954
20971
20162
20171
21057
Total:
$0.00
$0.00
$0.00
$0.00
$360,000.00
Breakdown of Settlement
Gross Award
Less Class Counsel's
Expenses
Less Class Rep Service Fee
$360,000.00
Total
Less Class Counsel's Fees
Net Distribution to Class
$347,500.00
$115,821.75
$231,678.25
$7,500.00
$5,000.00
$0.00
$0.00
$0.00
$0.00
$231,678.25
Desc Exhibit
Case 13-27091
Doc 456-2
Filed 05/06/15 Entered 05/06/15 15:18:43
2 Page 1 of 2
EXHIBIT 2
Desc Exhibit
Case 13-27091
Doc 456-2
Filed 05/06/15 Entered 05/06/15 15:18:43
2 Page 2 of 2
Desc Exhibit
Sacred Heart Hospital
Chapter 11 Plan as of April 20th
Garfield Cash Balance as of April 15th
Transfer to First Merit
Garfield Reserve to First Merit
Garfield Unpaid Administrative Claims
Garfield Professional Fees through (June 2014 ‐ June 2015)
Garfield Unsecured Claims
Chapter 11
High
Chapter 11
Low
Chapter 7
$ 2,041
(1,300)
(175)
(20)
(360)
(120)
$ 2,041
(1,300)
(175)
(20)
(360)
(120)
$ 2,041
(1,300)
(175)
(20)
(360)
(120)
Funds Available after Payment of Garfield Claims
$ 66
$ 66
$ 66
Sacred Heart Cash Balance as of April 15th
Excess Cash from Garfield
First Merit Cash Collateral Account
HHS Accounts Receivable
Medicare & Medicaid Recoveries (unknown)
Seized Funds
Allied Settlement
Settlement Contribution from Equity
Add‐back of Voluntary Fee Deductions
Proceeds from Bentley Recoveries
Litigation Recoveries from First Merit/Preferences
1,787
66
3,600
1,900
‐
‐
99
450
‐
2,800
‐
1,787
66
3,600
1,900
‐
‐
99
450
‐
‐
‐
1,787
66
3,600
1,900
‐
‐
99
(500)
(500)
‐
‐
Total Sources
$ 10,702
$ 7,902
$ 6,452
First Merit Secured Claim (1)
HHS Secured Claim
3,600
1,900
3,600
1,900
3,600
1,900
Total Secured Claims
$ 5,500
$ 5,500
$ 5,500
Unpaid Administrative Expenses
503(b)(9) Claims
Administrative Expenses (April ‐ June)
Administrative Employee Claims Wages & Vacation
Professional Fees through (June 2014 ‐ June 2015)
Liquidating Trustee & Professional Fees
Chapter 7 Trustee Fees
50
50
50
33
360
250
‐
100
75
100
33
360
250
‐
100
75
100
33
360
‐
100
Total Administrative Claims
$ 793
$ 918
$ 768
Priority Tax Claims
Priority Employee Claims Wages & Vacation
Priority WARN Claims
Taxes on WARN Claims
268
164
360
24
268
164
360
24
268
164
1,300
87
Total Priority Claims
$ 816
$ 816
$ 1,819
Amount for Unsecured Claims
$ 3,593
$ 668
$ (1,635)
HHS Payment per the Plan
Unsecured Creditor Carveout Claims (10%)
100
300
100
300
‐
‐
HHS Deficiency Carveout
Remaining Amount for Unsecured Claims
Remaining Amount for HHS Deficiency Claim
1,187
379
1,627
268
‐
‐
‐
‐
‐
Total Unsecured Claims Paid
$ 3,593
$ 668
$ ‐
Payout for HHS Unsecured Claims
Payout for Other Unsecured Claims
22.6%
22.6%
2.9%
10.0%
0.0%
0.0%
HHS Claims Unsecured Trade Claims
Personal Injury Claims
Physician Claims
12,873
2,150
750
100
12,873
2,150
750
100
12,873
2,150
750
100
Unsecured Claims
$ 15,873
$ 15,873
$ 15,873
(1) Total amount held in First Merit cash collateral account is $5.075M and is comprised of $3.6M plus $1.475 transferred from Garfield.
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