Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 1 of 38
Attorney or Party Name, Address, Telephone & FAX FOR COURT USE ONLY Nos., State Bar No. & Email Address Samuel R. Maizel (SBN 189301) [email protected] Tania M. Moyron (SBN 235736) [email protected] DENTONS US LLP 601 South Figueroa Street, Suite 2500 Los Angeles, CA 90017 Office: (213) 623-9300 Facsimile: (213) 623-9924
D Movant(s) appearing without an attorney 12] Attorney for Movant(s) Debtors and Debtors In Possession UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA - LOS ANGELES DIVISION In re: VERITY HEALTH SYSTEM OF CALIFORNIA, INC., et al. , LEAD CASE NO.:2:18-bk-20151-ER Debtors and Debtors In Possession. Jointly administered with: Case No. 2:18-bk-20162-ER • Affects All Debtors Case No. 2: 18-bk-20163-ER Case No. 2:18-bk-20164-ER • Affects Verity Health System of California, Inc. Case No. 2:18-bk-20165-ER • Affects O'Connor Hospital Case No. 2:18-bk-20167-ER • Affects Saint Louise Regional Hospital Case No. 2:18-bk-20168-ER • Affects St. Francis Medical Center Case No. 2: 18-bk-20169-ER • Affects St. Vincent Medical Center Case No. 2:18-bk-20171-ER • Affects Seton Medical Center Case No. 2:18-bk-20172-ER • Affects O'Connor Hospital Foundation Case No. 2:18-bk-20173-ER • Affects Saint Louise Regional Hospital Foundation Case No. 2:18-bk-20175-ER • Affects St. Francis Medical Center of Lynwood Case No. 2: 18-bk-20176-ER Foundation Case No. 2: 18-bk-20178-ER • Affects St. Vincent Foundation Case No. 2: 18-bk-20179-ER • Affects St. Vincent Dialysis Center, Inc. Case No. 2:18-bk-20180-ER • Affects Seton Medical Center Foundation Case No. 2:18-bk-20181-ER • Affects Verity Business Services • Affects Verity Medical Foundation CHAPTER: 11 • Affects Verity Holdings, LLC • Affects De Paul Ventures, LLC • Affects De Paul Ventures - San Jose Dialysis, LLC
Debtors and Debtors In Possession. DECLARATION THAT NO PARTY REQUESTED A HEARING ON MOTION LBR 9013-1(0)(3)
[No Hearinq Required]
1. I am the D Movant(s) or 12] attorney for Movant(s) or D employed by attorney for Movant(s).
2. On (date): 10/31/2019 Movant(s) filed a motion or application (Motion) entitled: Supplement To Application For
This form is mandatory. It has been approved for use in the United States Bankruptcy Court for the Central District of California.
December 2016 Page 1 F 9013-1.2.NO.REQUEST.HEARING.DEC American LegnlNet, Inc. A. ww:w FonnsWorkflo\ ccm ¥,8 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 2 of 38
Entry Of An Order Authorizing The Expansion Of The Scope Of The Services Of Berkeley Research Group, LLC To Provide A Chief Financial Officer To The Debtors Nunc Pro Tune To August 15, 2019 [Dkt. 3527), and Notice of Debtors' Supplement To Application For Entry Of An Order Authorizing The Expansion Of The Scope Of The Services Of Berkeley Research Group, LLC To Provide A Chief Financial Officer To The Debtors Nunc Pro Tune To Au ust 15, 2019 Dkt. 3528
3. A copy of the Motion and notice of motion is attached to this declaration.
4. On (date) : 10/31/1 9 Movant(s), served a copy of D the notice of motion or [8Jthe Motion and notice of motion on required parties using the method(s) identified on the Proof of Service of the notice of motion.
5. Pursuant to LBR 9013-1 (o), the notice of motion provides that the deadline to file and serve a written response and request for a hearing is 14 days after the date of service of the notice of motion, plus 3 additional days if served by mail, or pursuant to F.R.Civ.P. 5(b)(2)(D) or (F).
6. More than ~days have passed after Movant(s) served the notice of motion.
7. I checked the docket for this bankruptcy case and/or adversary proceeding, and no response and request for hearing was timely filed .
8. No response and request for hearing was timely served on Movant(s) via Notice of Electronic Filing, or at the street address, email address, or facsimile number specified in the notice of motion.
9. Based on the foregoing, and pursuant to LBR 9013-1 (o), a hearing is not required .
Movant(s) requests that the court grant the motion and enter an order without a hearing.
I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct.
Date: 11/21/19 Isl Tania M. Moyron Signature
Tania M. Moyron Printed name
This form is mandatory. It has been approved for use in the United States Bankruptcy Court for the Central District of California.
December 2016 Page 2 F 9013-1.2.NO.REQUEST.HEARING.DEC
n1crk11 n Lega l 'c-1. Int. www-Form.~WorkfJmv som ~ Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 3 of 38 Cas :18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 1 of 33
1 SAMUEL R. MAIZEL (Bar No. 189301) [email protected] 2 JOHN A. MOE, II (Bar No. 066893) [email protected] 3 TA IA M. MOYRON (Bar No. 235736) [email protected] 4 DENTONS US LLP 601 South Figueroa Street, Suite 2500 5 Los Angeles, California 90017-5704 Tel: (213) 623-9300 / Fax: (213) 623-9924 6 Attorneys for the Chapter 11 Debtors and 7 Debtors In Possession UNITED STATES BANKRUPTCY COURT 8 CENTRAL DISTRICT OF CALIFORNIA - LOS ANGELES DIVISION
9 In re Lead Case No. 2:18-bk-20151-ER
C>:-st- 10 ON VERITY HEAL TH SYSTEM OF o- Jointly Administered With: ..JC"') CALIFORNIA, INC., et al., W.._'.. 11 CASE NO.: 2:18-bk-20162-ER =r--f-o CASE NO.: 2:18-bk-20163-ER i:,...-st-o ...J-°' Debtors and Debtors In CASE NO.: 2:18-bk-20164-ER ...J u.f ...:5 12 VJ::, -o Possession. CASE NO.: 2:18-bk-20165-ER ;:i ifi ~"'t VJ> Or- -~=x:--A-ffi=e-c-ts-A---:1-:--1D------:eb-to_r_s------i CASE NO.: 2: 18-bk-20167-ER z 27 [No Hearing Required Unless Requested Pursuant to Local Bankruptcy Rule 2014-1] 28 US_Active\113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 4 of 38 Cas :18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 2 of 33 1 Verity Health System Of California, Inc. ("VHS") and the above-referenced affiliated 2 debtors, the debtors and debtors in possession in the above-captioned chapter 11 bankruptcy cases 3 (collectively, the "Debtors"), hereby file the Debtors' Supplemental Application for Entry of an 4 Order Authorizing the Expansion ofthe Scope ofthe Services ofBerkeley Research Group, LLC to 5 Provide a Chief Financial Officer to the Debtors Nunc Pro Tune to August 15, 2019 (this 6 "Application"), pursuant to§ 327(a) of title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. 1 7 (the "Bank:rnptcy Code '), Rules 2014 and 2016(a) of the Federal Rules of Bankruptcy Procedure 8 (the' Bankruptcy Rules"), and Rule 2014-1 of the Local Bankruptcy Rules of the United States 9 Bankruptcy Court for the Central District of California (the "LBR"), with compensation approved under§§ 330 and 331. As set forth in the notice concurrently filed herewith, any response or request °'"St 10 ON o- -' <"') LL.' for hearing, must be filed and served on the Debtors' counsel at the address provided at the top of =:r=:'. 11 1--o ...J-°'c.. s:to ....l u.f--,:O 12 this page and on the Office of the United States Trustee (the "U.S. Tru tee") not later than fourteen [/J:):z8 :J ~ c<"t r/J>Or--- (14) days from the date of service of notice of this Application. LBR 2014-l(b)(3)(E). In support z 17 1. This Court has jurisdiction to consider and determine this matter pursuant to 28 18 U.S.C. § 1334. Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409. This 19 is a core proceeding pursuant to 28 U.S.C. § 157(b). 20 II. 21 General Background 22 2. On August 31, 2018 ("Petition Date"), the Debtors each filed a voluntary petition 23 for relief under chapter 11 of the Bankruptcy Code. The Debtors continue to operate their 24 businesses and manage their properties as debtors in possession as authorized by §§ 1107(a) and 25 1108. 26 27 28 1 All references to "§" or "section" herein are to sections of the Bankruptcy Code. 1 US_Active\ 113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 5 of 38 Cas :18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 3 of 33 1 3. On August 31, 2018, this Court entered an order authorizing the joint administration 2 of the Debtors' chapter 11 cases (the "Cases"), pursuant to Bankruptcy Rule 1015(b) and LBR 3 1015-1 and 9013-l(q). 4 4. A detailed description of the Debtors' businesses, capital structure, and the events 5 leading to the commencement of these Cases is contained in the Declaration ofRichard G. Adcock 6 in Support ofEmergency First Day Motions [Docket No. 8]. 7 5. On September 17, 2018, the U.S. Trustee appointed a statutory creditors' committee 8 pursuant to§ 1102 (the "Committee"). 9 6. No trustee or examiner has been appointed in these Cases. 10 7. On October 12, 2018, the Debtors filed the Debtors Application for Enfly of an ON°"v o- u.....:.....JC') Order Authorizing Employment of Berkeley Research Group, LLC as Financial Advisor to the =r-- 11 f-o c., ....l-°'VO 2 ....l~ -,:g 12 Debtors Nunc Pro Tune to the Petition Date (the "Initial Application") together with the ~@ ~ ~ VJ~ ~~ 13 Declaration ofPeter C. Chadwick in Support Thereof (the "Initial Declaration") [Docket No. 493]. Z 3 V"I QO-,:,-_ f-ZUc!; z;;i,,;"sj· 14 On November 7, 2018, this Court entered the Order Granting Debtors' Application for Entry ofan UJC) UJ '-' O=u:J :Jzf- 0 15 Order Authorizing Employment of Berkeley Research Group, LLC as Financial Advisor to the SJ 17 Initial Application, Initial Declaration, and Initial Retention Order are all incorporated herein by 18 reference. 19 8. On August 15, 2019, the Chief Financial Officer of certain of the Debtors resigned 20 and the Boards of Directors voted to approve the appointment of Peter C. Chadwick as Chief 21 Financial Officer ("CFO"), effective as of August 15, 2019 (the "Appointment Date"). Effective 22 October 1, 2019, Mr. Chadwick was appointed as CFO to certain additional Debtor entities. 23 9. On September 3, 2019 the Debtors filed the Debtors' Chapter 11 Plan ofLiquidation 24 (the "Plan") and the related Disclosure Statement Describing Debtors ' Chapter 11 Plan of 25 Liquidation (the "Disclosure Statement"). 26 27 2 Terms not otherwise defined herein shall have the meaning ascribed to them in the Application or 28 Initial Retention Order as applicable. 2 US_Active\113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 6 of 38 Cas :18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 4 of 33 1 Ill. 2 Relief Requested 3 10. By this Application, the Debtors seek entry of an order, pursuant to §§ 327(a), 330 4 and 331, Bankruptcy Rule 2014(a) and LBR 2014-1, supplementing the Initial Retention Order to 5 authorize the expanded employment of Berkeley Research Group, LLC ("BRG") to include 6 provision of a Chief Financial Officer to the Debtors nunc pro tune to August 15, 2019, as supported 7 by the Declaration of Peter C. Chadwick (the "Chadwick Declaration '), attached hereto, and in 8 accordance with the terms set forth in that certain Letter of Engagement, dated as of July 23, 2018, 9 by and between the Debtors and BRG, as amended by that that certain Letter, dated as of August 30, 2018, by and between the Debtors and BRG, and as further amended by that certain Letter, C 17 accordance with the terms set forth in the Initial Application, the Initial Declaration and the Initial 18 Retention Order, subject to review and approval of this Court. 19 IV. 20 Services to Be Rendered 21 12. The Debtors seek to employ BRG to perform specific services, which are of special 22 interest and concern to the Debtors. As set forth in the Chadwick Declaration, the Chief Financial 23 Officer services and responsibilities that BRG is prepared to take on and render to the Debtors in 24 these Cases ( collectively, the "CFO Services ') will include but shall not be limited to the following: 25 a. Responsible for overall fiscal management for the entire health system including: 26 1. Treasury 27 ii. Bond Financing 28 iii. Strategy 3 US_Active\ 113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 7 of 38 Cas :18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 5 of 33 1 iv. Hospitals v. Medical Foundation 2 vi. Verity Holdings vii. VBS Corporation 3 b. Oversee facility CFO's efforts in regards to: 4 1. Strategy 5 11. Analysis 6 111. Capital Planning 1v. Budgeting and Forecasting 7 v. Reporting v1. Monthly operating reports to system 8 vii. Labor productivity management 9 v111. Physician and vendor contract review 1x. Capitation 10 x. Community benefit and charitable foundation 11 c. Oversee managers of government programs, including: 12 1. Medcare (Medicare?) and medical cost reporting 11. OSHPOD financial reporting 13 111. QAF/DSH programs oversight 14 IV. Monthly reserves analysis 15 d. Oversee controller encompassing: 16 1. All areas of accounting ii. Accounts Payable 17 111. Accounts Receivable IV. General Ledger 18 v. Payroll 19 e. Oversee manager of revenue cycle: 20 1. Ensure consistently strong collections 21 f. Oversee Vice President of Treasury 22 g. In consultation with management of the Company and subject to the 23 approval of the Board of Directors of Verity, develop and implement a chosen course of action to preserve asset value and maximize recoveries to 24 stakeholders. 25 h. Develop, as requested by management, business plan, and such other related 26 forecasts as may be required. 27 I. Provide information deemed by management to be reasonable and relevant to stakeholders and consult with key constituents as necessary. 28 4 US_Active\113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Cas :18-bk-20151-ER DocMain 3527 Document Filed 10/31/19 Page 8 Enteredof 38 10/31/19 16:12:40 Desc Main Document Page 6 of 33 1 J. To the extent reasonably requested by the Debtors, offer testimony before the Bankruptcy Court with respect to the services provided by the CFO and 2 participate in depositions, including by providing deposition testimony, related thereto. 3 k. Provide other services as requested or directed by the CEO, the Board or 4 other Debtors' personnel as authorized by the Board and agreed to by the 5 CFO andBRG. 6 V. 7 Qualifications and Selection of BRG 8 13. The qualification and selection ofBRG is set forth in detail in the Initial Application. 9 By way of background, in July 2018, BRG began its engagement serving as the financial advisor 10 to the Debtors which has continued since the Petition Date. In this capacity, Mr. Chadwick has ON°'"St o-..JC'"} U.._'.. 11 become intimately familiar with the operations, business, books, records, financial affairs, material =r---f-o c.. ' 17 complex financial matters. He has served as chief executive officer, chief operating officer, chief 18 financial officer, and advisor to companies in a variety of industries. Mr. Chadwick's healthcare 19 experience includes acting as the advisor or an officer to healthcare providers, including leading 20 hospital systems and long-term care providers through operational turnarounds and financial 21 restructurings. As an officer or advisor, Mr. Chadwick prepared and implemented post-acquisition 22 integration plans, viability plans, asset dissolution strategies, and liquidity enhancement plans. His 23 experience spans the spectrum from the largest U.S. companies to middle market proprietary 24 companies. 25 15. California Corporations Code Title 1, Chapter 3, Section 312, requires that any 26 corporation must have a chief financial officer. In this role Mr. Chadwick will work closely with 27 the Chief Executive Officer and General Counsel for the Debtors to ensure proper oversight of 28 these additional responsibilities as well as the financial advisory functions provided by BRG. It is 5 US_Active\113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 9 of 38 . Cas :18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 7 of 33 1 also expected that, as the Debtors have already filed the Plan and Disclosure Statement, the term of 2 the CFO Services will be relatively short. Absent the supplemental retention of Mr. Chadwick as 3 of August 15, 2019, the Debtors will suffer immediate and irreparable harm because the services 4 provided by Mr. Chadwick are necessary to the continued operating status of the entities in question 5 and an effective and efficient resolution of these Cases. 6 VI. 7 BRG's Compensation 8 16. The compensation structure and terms as defined in the Initial Application will apply 9 to the CFO Services as well. O::,;t- 10 17. The Initial Engagement Letter contains terms for indemnification, contribution, and ON 0- ..JM exculpation that indemnify BRG. As stated in the CFO Amendment, the Debtors have agreed to ~·::::r=: 11 f-o !l. ,;t-o ....:i-~ ....:i uf 17 Chadwick for proceedings both out of court and in chapter 11. 18 18. Accordingly, the Debtors request that the Court approve the CFO Amendment and 19 the indemnification and contribution provisions contained therein. 20 VII. 21 Retroactive Relief 22 19. The Debtors request that this Application be approved nunc pro tune to the August 23 15, 2019. In proper circumstances, the equitable aspects of bankruptcy proceedings permit the 24 court to retroactively approve the employment of professionals. See, e.g., Atkins v. Wain, Samuel 25 & Co. (In re Atkins), 69 F.3d 970, 974-76 (9th Cir. 1995); In re Mehdipour, 202 BR 474, 479 (9th 26 Cir. B.A.P. 1996); Gowan v. Lefkas Gen. Partners No. 1017 (In re Lefkas Gen. Partners No. 101 7), 27 153 B.R. 804, 808 (N.D. Ill. 1993). 28 6 US_Active\113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 10 of 38 Cas :18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 8 of 33 1 20. The Debtors submit that retroactive approval of the expansion of the scope of BRG's 2 retention to include Mr. Chadwick's CFO services is appropriate under the circumstances because 3 of the need for Mr. Chadwick's services immediately after the Appointment Date. 4 VIII. 5 Notice 6 21. Concurrent with the filing of this Application, the Debtors are providing notice of 7 the Application to: (i) the U.S. Trustee; (ii) the Debtors' secured lenders; (iii) counsel to Ally Bank, 8 as administrative agent under the proposed debtor in possession financing; (iv) the Committee and 9 its counsel; (v) the United States of America, and the State of California; and (vi) all parties that filed with the Court and served upon the Debtors requests for notice of all matters in accordance "''St 10 o-ON ...J"' u..' 11 with Bankruptcy Rule 2002(i) as of the date of this Application. The Debtors respectfully submit =r==f-o 0.., "TO ....J-°' 12 that, in light of the nature of the relief requested and the circumstances, no other or further notice ~ ~f ~§ ::> ai "' '1 ,;n>Or-- 13 need be provided. z 17 X. 18 Conclusion 19 WHEREFORE, the Debtors respectfully request an order (i) approving the expansion of 20 the scope of BRG's retention to include the CFO Services, on the terms set forth herein, nunc pro 21 tune to August 15, 2019, (ii) approving the compensation of BRG at the expense of the Debtors' 22 estate on the tenns set forth herein, and (iii) granting such other and further relief as the Court 23 deems just and proper. 24 25 26 27 28 7 US_Active\113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 11 of 38 Cas :18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 9 of 33 1 Dated: October 31, 2019 DENTONS US LLP SAMUEL R. MAIZEL 2 JOHN A. MOE, II TANIA M. MOYRON 3 By Isl Tania M Movron 4 Tania M. Moyron 5 Counsel to the Chapter 11 Debtors and 6 Debtors In Possession 7 8 9 ..:~ 10 o-ON ""-'-'""' 11 i-o=~ c..~o ,_J-0\ ....Jt. 17 18 19 20 21 22 23 24 25 26 27 28 8 US_Active\113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 12 of 38 Cas :18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 10 of 33 1 PETER C. CHADWICK DECLARATION 2 I, Peter C. Chadwick, hereby declare as follows: 3 1. I am a Managing Director of Berkeley Research Group, LLC ("BRG") and am duly 4 authorized to make this declaration (the "Declaration") on behalf of BRG. Except as otherwise 5 noted, the facts set forth in this Declaration are personally known to me and, if called as a witness, 3 6 I could and would testify thereto. 7 2. This Declaration is submitted in support of the Debtors' Supplement to Application 8 for En fly ofan Order Authorizing the Expansion ofthe Scope ofthe Services ofBerkeley Research 9 Group, Inc., to Provide a ChiefFinancial Officer to the Debtors Nunc Pro Tune to August 15,2019 (the "Application")4 for authorization to expand the employment of BRG to include provision of a a:: -st 10 o-ON "'-'-'"' Chief Financial Officer to the Debtors under the terms and conditions set forth in the Application. :::c=:: 11 f-o ...J-°'c..s:to ...J uS 17 Declaration ofPeter C. Chadwick in Support Thereof (the "Initial Declaration") [Docket No. 493]. 18 On November 7, 2018, this Court entered the Order Granting Debtors ' Application for Entry ofan 19 Order Authorizing Employment of Berkeley Research Group, LLC as Financial Advisor to the 20 Debtors Nunc Pro Tune to the Petition Date [Docket No. 785] (the "Initial Retention Order"). 21 5. Pursuant to the Debtors' request, I have agreed to provide CFO Services to the 22 Debtors in the above-captioned Cases, in accordance with the tenns and conditions of the 23 24 25 3 Certain of the disclosures herein relate to matters within the personal knowledge of other professionals at BRG and are based on information provided to me by such other BRG 26 professionals. 27 4 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such 28 terms in the Application, the Initial Application, or the Initial Declaration as appropriate. 9 US_Active\113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 13 of 38 Cas :18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 11 of 33 1 Engagement Letter and the related Initial Application, including the modifications in the CFO 2 Amendment, which are incorporated herein by reference. 3 6. In July 2018, BRG began its engagement serving as the financial advisor to the 4 Debtors which has continued since the Petition Date. In this capacity, I have become intimately 5 familiar with the operations, business, books, records, financial affairs, material agreements, sale 6 processes, and liquidation plan of the Debtors and, as a result, have become uniquely situated to 7 assist the Debtors. Accordingly, allowing for the expansion of BRG's retention is an efficient and 8 cost effective manner in which the Debtors may obtain necessary CFO services. 9 7. I am well suited to serve in the role of CFO. I have significant operating experience, including improving underperfom1ing businesses and advising debtors and creditors in complex 0( 'ST 10 ON o-_, <"l r.i..' financial matters. I have served as chief executive officer, chief operating officer, chief financial :: r=:: 11 i--o i:,...' 17 from the largest U.S. companies to middle market proprietary companies. 18 8. Other than the additional provision of the CFO Services and the expansion of the 19 indemnification provisions to include the CFO Indemnification, all other terms of the BRG 20 Retention remain the same. 21 9. If any new material facts or relationships are discovered or arise, BRG will provide 22 the Court with a supplemental declaration. 23 10. I am generally familiar with the Bankruptcy Code and the Bankruptcy Rules, and 24 BRG and I will comply with them, subject to the Orders of this Court. 25 II I 26 II I 27 II I 28 Ill 10 US_Active\113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 14 of 38 Case 2 8-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 12 of 33 I declare under penalty of perjury and of the laws in the United States of America, the 2 foregoing is true and correct. 3 Executed this 31st day of October, 2019, in Los 4 5 PETER C. CHADWICK 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 US_Active\113548200\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 15 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 13 of 33 Exhibit A Engagement Letter Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 16 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 14 of 33 Initial Engagement Letter Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 17 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 15 of 33 Berkeley Research Group, LLC 1800 M Street I Suite 200 Washington, DC 20036 0 202.480.2700 -:::• BRG F 202.419.1844 thinkbrg.com July 23, 2018 Board of Directors of Verity Health System c/o David Sachs, Chief Financial Officer Verity Health System 2040 E. Mariposa Avenue El Segundo, CA 90245 Dear Mr. Sachs: This letter agreement ("Agreement") confirms the engagement of Berkeley Research Group, LLC ("BRG") to provide financial consulting services to Verity Health System and any subsidiaries (collectively "Verity" and/or "Client" and/or the "Company") to assist you with preparing financial planning in support of Company's exploration of strategic options and any other similar services requested by Verity management and Its Board of Directors Scope of Services The scope of work under this engagement shall consist of the following activities ("Services"): • Analyze potential filing jurisdictions; • Identify likely professionals representing various stakeholders; • Review financials of each facility and capital stack to understand potential conflicts between stakeholders; • Understand current liquidity and runway to identify strategic alternatives; • Understand sale process and timeline and the impact of liquidity constraints; • Identify likely buyers or strategic limitations of certain potential buyers; • Advise on regulatory issues related to sale and/or wind down of hospitals, including federal, state and local regulations, notices and/or other requirements and • Identify likely challenges to consummating strategic transactions from local, state, or national stakeholders; and • Other services as requested or directed by the CEO, the board of directors of the Company (the "Board") or other Company personnel as authorized by the Board and agreed to by BRG. It is understood and agreed that BRG's Services may include advice and recommendations, but that all decisions in connection with the implementation of such advice and recommendations will be the responsibility of Client. Berkeley Research Group LLC 1800 M Street, Suite 200 • Washington, DC 20036 USA Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 18 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 16 of 33 -:::• BRG Fees & Expenses Client will pay BRG professional fees, which will be based on the actual hours charged at BRG's standard hourly rates, which are in effect when the Services are rendered ("Professional Fees"). Hourly rates may change in the future from time to time and are typically adjusted annually. BRG's current hourly rates are as follows: Managing Director upto $750 Director up to $600 Professional Staff up to $450 Case Managers $125 -$ 295 In addition to Professional Fees, BRG will be reimbursed for direct out-of-pocket expenses including, but not limited to, travel, costs of reproduction, typing, research, communications, computer usage, legal counsel, any applicable sales or excise taxes, and other direct expenses, not to exceed $10,000 in any given month without the direct written approval of Client. BRG will bill for Services every week and will provide customary descriptions regarding the Services rendered. BRG will provide additional details regarding Services rendered upon request by Client. BRG's invoices statements shall be paid upon receipt. Client agrees that It will review BRG's invoices upon receipt and will promptly advise BRG of any objection to or dispute with the invoice and the work reflected in the invoice. Without liability, BRG reserves the right to withhold delivery of Services, testimony, reports or data (written or oral), or suspend work, if the account on this engagement is not current. A late payment charge of one percent (1%) per month (or the maximum rate permitted by law, whichever is less) may be added to any outstanding invoices that are past due. Please remit payments by wire to: Account Name: Berkeley Research Group, LLC Account No: 8026286672 Bank: PNC Bank, N.A. ABA No: 031207607 [email protected] Cash on Account Initially, Client will forward to BRG the amount of $50,000, which funds wlll be held "on account" to be applied to BRG's Professional Fees, charges and disbursements for the engagement (the "Initial Cash on Account"). To the extent that this amount exceeds BRG's fees, charges and disbursements upon the completion of the engagement, BRG will refund any unused portion. Client agrees to increase or supplement the Initial Cash on Account from time to time during the course of the engagement in such amounts as Client and BRG mutually shall agree are reasonably necessary to increase the Initial Cash on Account to a level that will be sufficient to fund Professional Fees, charges, and disbursements to be incurred. Berkeley Research Group LLC 1800 M Street, Suite 200 • Washington, lJC 20036 USA Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 19 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 17 of 33 -:::• BRG Upon transmittal of an Invoice, BRG may immediately draw upon the Initial Cash on Account (as replenished from time to time) in the amount of the invoice. Client agrees upon submission of each such invoice to promptly wire the invoice amount to BRG as replenishment of the Initial Cash on Account (together with any supplemental amount to which BRG and Client mutually agree), without prejudice to Client's right to advise BRG of any differences it may have with respect to such invoice. BRG has the right to apply to any outstanding invoice (including amounts billed prior to the date hereof), up to the remaining balance, if any, of the Initial Cash on Account (as may be supplemented from time to time) at any time subject to (and without prejudice to) Client's opportunity to review BRG's invoices. Company Responsibilities Client agrees that the delivery of Services and Professional Fees charged are dependent on timely and effective cooperation from the Client. Accordingly, Client shall furnish to BRG financial information and other information regarding the business of Client as BRG may reasonably request in connection with the Agreement. Client also represents that information furnished to BRG is accurate and complete at the time it is furnished and agrees to keep BRG advised of developments materially affecting Client or its financial position. Client shall make decisions and take further actions, as Client determines in its sole discretion, relating to any recommendations made by BRG in connection with this Agreement. BRG shall not make any management decisions on behalf of Client and will not be responsible for Client's decision to pursue, or not to pursue, any business strategy or to implement, or not implement, recommendations made by BRG. As part of the Services, BRG may be requested to assist Client (and its legal or other advisors) in negotiating with Client's creditors and equity holders and with other interested parties. In the event that BRG participates in such negotiations, the representations made and the positions advanced will be those of Client and its management, not BRG or its employees. Confidentiality BRG shall not disclose any confidential or privileged information to any third party; provided, however, that BRG may disclose confidential or privileged information (a) to BRG's employees, affiliates, vendors or agents who provide Services in connection with this engagement so long as the same enter into a confidentiality agreement substantially similar to the Confidentiality Agreement, (bl with Client's written consent, or (c) when legally required to do so. Both parties agree that confidential and proprietary information will not be construed to include information that is available from public sources or sources not subject to obligations of confidentiality to Client. Work papers associated with BRG's consulting Services are the confidential property of BRG. This section shall be read in conjunction with and shall not replace that certain confidentiality agreement entered into between BRG and Client, dated July 10, 2018 (the "Confidentiality Agreement"). Ownership of Deliverables & Data Client acknowledges and agrees that BRG is the sole owner of any deliverables provided in connection with the Services, Including, without limitation, all copyrights, trademarks, patents and trade secrets and other intellectual property rights (including, without limitation, goodwill) therein, and all rights attendant thereto. BRG hereby grants to Client a non-exclusive, world-wide, royalty-free irrevocable Berkeley Research Group LLC 1800 M Street, Suite 200 • Washington, DC 20036 USA Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 20 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 18 of 33 -:::• BRG right to use the deliverables for its own internal purposes. To the extent that Client wishes to disclose to any third party the work product of BRG, it will so advise BRG prior to such disclosure. Client hereby advises BRG that its work product may be disclosed to potential purchasers of Client's businesses so long as such potential purchaser has signed a non-disclosure and a non-reliance agreement acceptable to BRG. BRG may require any third party to execute a non-reliance and release letter acceptable to BRG in form and substance. Further, BRG will not assume, or be deemed to have assumed, any responsibility, obligation or liability to any third party to which any advice, report or other work product is disclosed or otherwise made available. Client represents and warrants that Client has any and all necessary right, title, license and authority (including any and all necessary permissions from third-party owners) to transfer to BRG, grant access to BRG or allow BRG to use for the purpose of rendering Services to Client, any and all of the data or other information that Client provides to BRG for such purpose. Client agrees to indemnify BRG against any and liabilities, including liabilities arising from claims brought by third parties and any and all costs of defense, arising from such transfer, access or use. ConfHcts of Interest We confirm that no principal or staff member of BRG has any financial interest or business connection with the Company or Integrity Healthcare, LLC, or any of its owners, and we are aware of no conflicts in connection with this engagement. BRG is engaged by many other companies and individuals. It is possible that some of BRG's past, present or future clients will have disputes with and other matters relating to Client during the course of and subsequent to this engagement. BRG reserves the right to accept unrelated engagements with other parties consistent with internal, prior practices, and will not be required to advise Client of such engagements in the future. Arbitration This Agreement shall be interpreted and controlled by the laws of the state of California. Any controversy, dispute, or claim between Client on the one hand and BRG on the other hand of whatever nature arising out of, in connection with, or in relation to the interpretation, performance or breach of this agreement, including any claim based on contract, tort, or statute ("Claims"), shall be resolved at the request of any party to this agreement, by final and binding arbitration, administered by Judicial Arbitration & Mediation Services, Inc. (JAMS), or its successor entity, pursuant to its Comprehensive Arbitration Rules & Procedures {Streamlined Arbitration Rules & Procedures), and judgment upon any award rendered by the arbitrator may be entered by any State or Federal Court having jurisdiction thereof. Any such arbitration shall take place exclusively in Los Angeles. Client, on the one hand, and BRG on the other hand, agree that all Claims shall be brought within one year of the date such Claim arises. The prevailing party shall be entitled to reasonable attorneys' fees and costs incurred in any arbitration or litigation brought in connection with this Agreement, as well as reasonable attorneys' fees and costs incurred in appealing or In connection with any action to enforce any judgment entered by the arbitrator in any court having jurisdiction. If a party to any arbitration proceeding filed in connection with this Agreement fails to pay any costs of the arbitration required to be paid by such party in the time required for payment, the arbitrator is authorized to provide an appropriate remedy, including an entry of a default and an arbitration award on the merits against such party. Berkeley Research Group LLC 1800 M Street, Suite 200 • Washington, DC 20036 USA Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 21 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 19 of 33 -:::• BRG Indemnification & Limitation of Liability Client agrees to Indemnify and hold harmless BRG against any and all losses, claims, damages, liabilities, penalties, judgments, awards, costs, fees, e,cpenses and disbursements including, without limitation, defending any action, suit, proceedings or investigation (whether or not in connection with proceedings or litigation in which BRG is a party), directly or indirectly, caused by, relating to, based upon, arising out of or in connection with the engagement of BRG or any Services rendered pursuant to this engagement, unless there is a final non-appealable order of a court of competent jurisdiction finding BRG directly liable for bad faith, gross negligence or willful misconduct. These indemnification provisions extend to the members, principals, employees, representatives, agents, counsel and affiliates of BRG. The parties shall not be liable to each other for any delays resulting from circumstances or causes beyond its reasonable control, including, without limitation, fire or other casualty, act of God, strike or labor dispute, war or other violence, or any law, order or requirement of any governmental agency or authority. Notwithstanding the indemnification and any other terms of this Agreement, the parties shall not be liable to each other for any consequential, inctdental, special or punitive damages, nor shall BRG be liable for direct compensatory damages in excess of two times the fees actually received by BRG for the performance of Services hereunder. Termination Client or BRG may terminate this engagement upon seven (7) days' written notice. In the event the engagement is terrninated prior to the completion of Services, Clients agrees to pay BRG for all Professional Fees and expenses incurred through the termination date. Other Terms In the event BRG is requested pursuant to subpoena or other legal process to produce any documents or to provide testimony relating to engagements for Client in judicial or administrative proceedings to which BRG is not a party, Client shall reimburse BRG at standard billing rates for all professional time and e,cpenses, including reasonable attorneys' fees, incurred in preparing for and responding to requests for documents and providing testimony. Client will only use any advice, report or work product produced under this engagement for making its own internal business decisions. Client will solely rely on its own analysis and review to make any investment or other business decision. BRG wilt not render an assurance report or assurance opinion as part of this engagement, nor will the Services constitute an audit, review or examination of any entity's financial statements or prospective financial statements in accordance with generally accepted auditing standards or other applicable professional standards. None of the Services or any report will constitute any legal opinion or advice, nor will the Services or any reports constitute a fairness opinion, investment or accounting advice. BRG will not conduct a review to detect fraud or illegal acts, nor will BRG render any opinion as to the fairness or advisability of any proposed transaction. In addition, Client Berkeley Research Group LLC 1800 M Street, Suite 200 • Washington, DC 20036 USA Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 22 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 20 of 33 -:::• BRG acknowledges that no reliance shall be placed on draft reports, conclusions or advice, whether oral or written, issued by BRG as the same may be subject to further work, revision and other factors which may mean that such drafts are substantially different from any final report issued by BRG. Client will not use the report or work product under this engagement for any use beyond the use set forth in this letter. Unless otherwise explicitly stated, all provisions of this Agreement shall survive the expiration or termination of this engagement. Neither party may assign, transfer or delegate any of the rights or obligations hereunder without the prior written consent of the other party. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This engagement letter and its terms and conditions constitute the entire Agreement between BRG and Client with respect to the subject matter hereof and supersedes all other oral and written representations, understandings or agreements relating to the subject matter hereof. No waiver, amendment or other modification of this Agreement shall be effective unless in writing and signed by each party to be bound thereby. This Agreement may be executed in one or more counterparts, each of which may be signed and transmitted via facsimile or PDF electronic delivery with the same validity as if it were an ink-signed document. B~rkeley Research Group LLC 1800 M Street, Suite 200 • Washington, DC 20036 USA Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 23 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 21 of 33 -:::• BRG Closing We look forward to working with you on this matter. Please sign and return a copy of this engagement letter signifying your agreement with the terms and provisions herein. If you have any questions, please call Peter Chadwick at (202) 909-2800. Very truly yours, Berkeley Research Group, LLC By~ Peter C. Chadwick Managing Director Agreed: Verity Health System Chief Financial Officer Berkeley Research Group LLC 1800 M Street, Suite 200 • Washington, DC 20036 USA Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 24 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 22 of 33 First Amended EL Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 25 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 23 of 33 -:::• BRG Berkeley Research Group Effective August 30, 2018 Elspeth Paul General Counsel Verity Health System 2040 E. Mariposa Avenue El Segundo, CA 90245 Dear Ms. Paul: This letter serves to amend that engagement agreement between Berkeley Research Group, LLC ("BRG") and Verity Health System ("Verity" or the "Company") dated July 23, 2018 (the "Agreement") to provide the necessary financial advisory services required within a bankruptcy proceeding. All capitalized terms not defined herein shall have the meanings ascribed to such terms in the Agreement. This amendment (the "Amendment") amends the Scope of Services (the "Services") to include, but not be limited to the following: a) Assist with managing and monitoring liquidity, including: a. Provide updates to the 13-week DIP cash flow forecast and related model; b. Provide liquidity impacts of sale process; c. Assist in development of a weekly reporting package for compliance with terms of the debtor in possession agreement (the "DIP Agreement"); d. Assist as needed with managing payables, including vendor disbursements; and e. Identify any near-term actions to enhance liquidity; b) Provide information and analysis necessary to support the Debtors' sale process under§ 363, including to: a. Model recoveries to creditors from bids received and in various bid scenarios; b. Assist with bidder due diligence; and c. Assist with auction processes; c) Liaise with secured lenders (the "Lenders") and assist in managing Lender information demands and facilitating constructive dialogue to resolve Lender issues; d) Participate in meetings and provide support to the Debtors and their other professional advisors in negotiations with potential investors, lenders, the Creditors' Committee, the United States Trustee's Office, other parties-in-interest, and professionals hired by same, as requested; e) Coordinate restructuring activities with Cain Brothers, a division of KeyBanc Capital Markets ("Cain Brothers"), to achieve case efficiencies and avoid duplication of efforts, and, to the extent necessary, assist with preparation of any financial materials or analyses that may be required as a part of their efforts; 1800 lv1 Strc·et NVV SL'C011d floor Was!i111gto11 DC 2003G IT 202 480 2700 I F 202 4 ·19 ; 8~-1 I tl1inkiJ1 ~I co111 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 26 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 24 of 33 ••• • • • •• • BRG Berkeley Research Group f) Advise and assist with any issues related to sale and/or wind down of hospitals, including federal, state and local regulations, challenges from local, state or national stakeholders, notices and/or other requirements; g) Report to the Board: assist in preparation of reports to the boards of directors of the Debtors and the status of implementation of restructuring initiatives; h) Assist the Debtors with financial advisory services in connection with bankruptcy related matters, including reviewing and evaluating any court motions, applications or other forms of relief filed or to be filed by the Debtors, or any other parties-in interest; i) Assist with monitoring compliance with Bankruptcy Court orders; j) Assist with developing and implementing accounting and operating procedures to segregate prepetition and postpetition business transactions; k) Assist in managing and executing the reconciliation process involving claims filed by creditors; I) Review and provide analysis of any bankruptcy plan and disclosure statement relating to the Debtors; m) Attend Court hearings as may be required; n) Provide Court testimony, as agreed to between the Debtors and BRG; o) Assist in review of financial information with respect to the Debtors' Schedules of Assets and Liabilities and Statements of Financial Affairs; p) Assist with developing and monitoring the Monthly Operating Report process; q) Render such other general business consulting or such other assistance as the management or its counsel may deem necessary that are consistent with the role of a financial advisor; and r) Provide other services as requested or directed by the CEO, the board of directors of the Debtors (the "Board") or other Debtors' personnel as authorized by the Board and agreed tobyBRG. - This Amendment is authorized and is incorporated and made an attachment to the above identified Agreement upon execution. Unless otherwise amended in this Amendment, all terms and conditions of the Agreement are incorporated herein and remain in full force and effect. This Amendment may be executed in one or more counterparts, each of which may be signed and transmitted via facsimile or PDF electronic delivery with the same validity as if it were an ink signed document. ! 800 lv1 Street N\IV Secoml floor I Wc1sh111qto11 DC 200~',G IT 202 <-180 .2700 I F ~·02 .4 ·19 1E,I,\ I lhi11i • •• • ® • • BRG Berkeley• Research Group Very truly yours, Berkeley Research Group, LLC By: ___ ,...... -_____ Peter C. Chadwick Managing Director Agreed: Verity Health System Ms. Elspeth Paul General Counsel , .. ,,•L• I .,.•,. ~.•. . I I ,, I I I ....I I •• ~ I I EE JO Sl aElBd iuawn:ioo LI!BIAJ rt 6lf.l:.E/Crt paJ8lU3 6:C/t£/01 P81!::I LZS£ :mo ~3-TS'Dbf-)jQ-8i[:i aSB:) n oo E . 9.1844 \ thtn\c:brg .com Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 28 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 26 of 33 -:- BRG Berkeley Research Group Very truly yours, Peter C. Chadwick Managing Director Agreed: Verity Health System By: ______ Ms. Elspeth Paul General Counsel 1800 M Street NW, Second floor I Washington, DC 200361T202.4802700 IF 202.419 18441 thinkbrg com Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 29 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 27 of 33 CFO Amendment Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 30 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 28 of 33 -:::• BRG Berkeley Research Group Effective August 15, 2019 Elspeth Paul General Counsel Verity Health System 2040 E. Mariposa Avenue El Segundo, CA 90245 Dear Ms. Paul: This letter serves to amend that engagement agreement between Berkeley Research Group, LLC ("BRG") and Verity Health System ("Verity" or the "Company") dated July 23, 2018 (the "Agreement") and previously amended on August 30, 2018 (the "Initial Amendment"). This amendment is necessary for BRG to provide necessary chief financial officer services (the "CFO Amendment") required by certain of the Company's entities in chapter 11 bankruptcy cases, in addition to the financial advisory services currently being rendered, pursuant to the terms of the Agreement and the Initial Amendment. All capitalized terms not defined herein shall have the meanings ascribed to such terms in the Agreement. The CFO Amendment engages Peter C. Chadwick as Chief Financial Officer ("CFO") for Seton Medical Center; St Francis Medical Center Foundation; St Vincent Foundation; Seton Medical Center Foundation; St Louise Regional Hospital Foundation; O'Connor Hospital Foundation; and Verity Medical Foundation, as of the effective date hereof, and as CFO of Verity Health System of California, Inc., effective as of October 1, 2019. The CFO Amendment also provides for the engagement of Mr. Chadwick as CFO of additional Verity entities, upon request by you and the Chief Executive Officer of Verity and upon the approval of the Board of Directors of each entity for which Mr. Chadwick is requested to serve in the CFO capacity. The CFO Amendment also supplements the Scope of Services (the "Services") to include, but not be limited, to the following (the "CFO Services"): a. Responsible for overall fiscal management for the entire health system including: i. Treasury ii. Bond Financing iii. Strategy iv. Hospitals V. Medical Foundation vi. Verity Holdings vii. VBS Corporation b. Oversee facility CFO's efforts in regards to: i. Strategy 1800 M Street NW. Second floor I Washington. DC 20036 IT 202 480 2700 IF 202.419 1844 I tllinkbrg .com Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 31 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 29 of 33 -:::• BRG Berkeley Research Group ii. Analysis iii. Capital Planning iv. Budgeting and Forecasting V. Reporting vi. Monthly operating reports to system (VHS?) vii. Labor productivity management viii. Physician and vendor contract review ix. Capital Requests (should this go with "Capital Planning") X. Capitation xi. Community benefit and charitable foundation C. Oversee managers of government programs, including: i. Medicare and medical cost reporting ii. OSHPOD financial reporting iii. QAF/DSH programs oversight iv. Monthly reserves analysis d. Oversee controller encompassing: i. All areas of accounting ii. Accounts Payable iii. Accounts Receivable iv. General Ledger V. Payroll e. Oversee manager of revenue cycle: i. Ensure consistently strong collections f. Oversee Vice President of Treasury g. In consultation with management and subject to the approval of the Board of Directors of Verity, develop and implement a chosen course of action to preserve asset value and maximize recoveries to stakeholders. h. Develop, as requested by management business plans and such other related forecasts as may be required. i. Provide information deemed by management to be reasonable and relevant to stakeholders and consult with key constituents as necessary. 1800 M Street NW, Second floor I Washington, DC 20036 I T 202 480.2700 I F 202 419 1844 I tl1inkbrg .com Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 32 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 30 of 33 • •••• • •• • BRG Berkeley Research Group j. To the extent reasonably requested by the Debtors, offer testimony before the Bankruptcy Court with respect to the services provided by the CFO and participate in depositions, including by providing deposition testimony, related thereto. k. Provide other services as requested or directed by the CEO, the Board or other Debtors' personnel as authorized by the Board and agreed to by the CFO and BRG. This CFO Amendment also supplements the Indemnification & Limitation of Liability terms of the Agreement (the "BRG Indemnification"), as follows: In addition to the BRG Indemnification, any BRG employees serving as officers of the Company or affiliates will receive the benefit of the most favorable indemnification and advancement provisions provided by the Company to its directors, officers, and any equivalently placed employees, whether under the Company's charter or by-laws, by contract, or otherwise. The Company shall specifically include and cover the CFO and any other employees and agents serving as officers of the Company or affiliates from time to time with direct coverage under the Company's policy for liability insurance covering its directors, officers and any equivalently placed employees ("D&O Insurance"). Prior to accepting any officer position, the Company shall, at the request of BRG, provide BRG a copy of Company's current D&O Insurance policy, a certificate(s) of insurance evidencing the policy is in full force and effect, and a copy of the signed board resolution and any other documents as BRG may reasonably request evidencing the appointment and coverage of the indemnitees. Company will maintain such D&O Insurance coverage for the period through which claims can be made against such persons. Company disclaims a right to distribution from the D&O Insurance coverage with respect to such persons. In the event that the Company is unable to include BRG employees and agents under the Company's policy or does not have first dollar coverage acceptable to BRG in effect for at least $10 million (e.g. there are outstanding or threatened claims against officers and directors alleging prior acts that may give rise to a claim), BRG may, at its option, attempt to purchase a separate D&O Insurance policy that will cover BRG employees and agents only. The cost of the policy shall be invoiced to the Company as an out-of-pocket expense. If BRG is unable or unwilling to purchase such D&O Insurance, then BRG reserves the right to terminate the CFO Amendment to the Agreement. Notwithstanding any other provision in this Agreement to the contrary, the Company's indemnification and advancement obligations shall be primary to (and without allocation against) any similar indemnification and advancement obligations of BRG, its affiliates and insurers indemnitees (which shall be secondary), and the Company's D&O Insurance coverage for the indemnitees shall be specifically primary to (and without allocation against) any other valid and collectable insurance coverage that may apply to the indemnitees (whether provided by BRG or otherwise). IN NO EVENT SHALL THE COMPANY, THE CFO, BRG, OR BRG PERSONNEL WHO SERVICE AS OFFICERS OF THE COMPANY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES OF ANY KIND IN CONNECTION WITH THIS AGREEMENT, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE CFO AND BRG SHALL NOT BE LIABLE TO THE COMPANY, OR ANY 1800 M Street NW, Second floor I Washington, DC 20036 IT 202 480.2700 IF 202 419 1844 I thinkbrg com Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 33 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 31 of 33 -:::• BRG Berkeley Research Group PARTY ASSERTING CLAIMS ON BEHALF OF THE COMPANY, EXCEPT FOR DIRECT DAMAGES FOUND IN A FINAL DETERMINATION TO BE THE DIRECT RESULT OF THE BAD FAITH, SELF-DEALING, OR INTENTIONAL MISCONDUCT OF BRG. BRG'S AGGREGATE LIABILITY, WHETHER IN TORT, CONTRACT OR OTHERWISE, IS LIMITED TO THE AMOUNT OF FEES PAID TO BRG FOR SERVICES UNDER THIS AGREEMENT (THE "LIABILITY CAP"). THE LIABILITY CAP IS THE TOTAL LIMIT OF BRG'S AGGREGATE LIABILITY FOR ANY AND ALL CLAIMS OR DEMANDS BY ANYONE PURSUANT TO THIS AGREEMENT, INCLUDING LIABILITY TO THE COMPANY, TO ANY OTHER PARTIES HERETO, AND OT ANY OTHERS MAKING CLAIMS RELATING TO THE WORK PERFORMED BY BRG PURSUANT TO THIS AGREEMENT. ANY SUCH CLAIMANTS SHALL ALLOCATE ANY AMOUNTS PAYABLE BY BRG AMONG THEMSELVES AS APPROPRIATE, BUT IF THEY CANNOT AGREE ON THE ALLOCATION IT WILL NOT AFFECT THE ENFORCEABILITY OF THE LIABILITY CAP. UNDER NO CIRCUMSTANCES SHALL THE AGGREGATE OF ALL SUCH ALLOCATIONS OR OTHER CLAIMS AGAINST BRG PURSUANT TO THIS AGREEMENT EXCEED THE LIABILITY CAP. Remainder of the page left intentionally blank 1800 M Street NW. Second floor I Wasllington. DC 20036 IT 202 480.2700 IF 202 419.1844 I tilinkbrg.com Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 34 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 32 of 33 -:::• BRG Berkeley Research Group This CFO Amendment is authorized and is incorporated and made an attachment to the above identified Agreement upon execution. Unless othenrvise amended in this CFO Amendment, all terms and conditions of the Agreement are incorporated herein and remain in full force and effect. This CFO Amendment may be executed in one or more counterparts, each of which may be signed and transmitted via facsimile or PDF electronic delivery with the same validity as if it were an ink-signed document. Very truly yours, Peter C. Chadwick Managing Director Agreed: Verity Health System By: ______ Ms. Elspeth Paul General Counsel Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 35 of 38 Case 2:18-bk-20151-ER Doc 3527 Filed 10/31/19 Entered 10/31/19 16:12:40 Desc Main Document Page 33 of 33 00 • • ® • a · @ BRG Berkeley Research Group This CFO Amendment is authorized and is incorporated and made an attachment to the above identified Agreement upon execution. Unless otherwise amended in this CFO Amendment, all terms and conditions of the Agreement are incorporated herein and remain in full force and effect. This CFO Amendment may be executed in one or more counterparts, each of which may be signed and transmitted via facsimile or PDF electronic delivery with the same validity as if it were an ink-signed document. Very truly yours, Berkeley Research Group, LLC By:______ Peter C. Chadwick Managing Director Agreed: Verity Health System By: Ms. Elspeth Paul General Counsel '1800 M Street NW. SHcond floor I Washington, DC 200:iG IT 202AB0.U00 Ir :~02.11·19_ 18441 thinkbrg.com Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 36 of 38 Cas :18-bk-20151-ER Doc 3528 Filed 10/31/19 Entered 10/31/19 16:25:46 Desc Main Document Page 1 of 3 1 SAMUELR. MAIZEL (Bar No. 189301) [email protected] 2 JOHN A. MOE, II (Bar No. 066893) [email protected] 3 TA TA M. MOYRON (Bar No. 235736) [email protected] 4 DENTONS US LLP 601 South Figueroa Street, Suite 2500 5 Los Angeles, California 90017-5704 Tel: (213) 623-9300 / Fax: (213) 623-9924 6 Attorneys for the Chapter 11 Debtors and 7 Debtors In Possession UNITED STATES BANKRUPTCY COURT 8 CENTRAL DISTRICT OF CALIFORNIA - LOS ANGELES DIVISION 9 In re Lead Case No. 2:18-bk-20151-ER i:i::v 10 VERITY HEALTH SYSTEM OF o-ON Jointly Administered With: r.,..'-'"' CALIFORNIA, INC., et al., CASE NO.: 2:18-bk-20162-ER :i:;::: 11 i--o CASE NO.: 2:18-bk-20163-ER e:i.,.st-o ..J-°' Debtors and Debtors In ..J.,f-,:0 12 CASE NO.: 2:18-bk-20164-ER Cl'l~zg Possession. CASE NO.: 2:18-bk-20165-ER ::J tJ.J 27 [No Hearing Required Unless Requested Pursuant to Local Bankruptcy Rule 2014-1) 28 US_Active\113549226\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 37 of 38 Cas :18-bk-20151-ER Doc 3528 Filed 10/31/19 Entered 10/31/19 16:25:46 Desc Main Document Page 2 of 3 1 PLEASE TAKE NOTICE that Verity Health System Of California, Inc. and the above 2 referenced affiliated debtors, the debtors and debtors in possession in the above-captioned chapter 3 11 bankruptcy cases (collectively, the "Debtors"), have filed the Debtors' Supplemental 4 Application for Entry of an Order Authorizing the Expansion of the Scope of the Services of 5 Berkeley Research Group, LLC to Provide a ChiefFinancial Officer to the Debtors Nunc Pro Tune 6 to August 15, 2019 (the' Applicati on"). By the Application, the Debtors seek entry of an order 7 supplementing the Order Granting Debtors' Application for Entry of an Order Authorizing 8 Employment ofBerkeley Research Group, LLC as Financial Advisor to the Debtors Nunc Pro Tune 9 to the Petition Date [Docket No. 785] (the "Initial Retention Order") to authorize the expanded <>',;t 10 employment of Berkeley Research Group, LLC ("BRG") to include provision of a Chief Financial o-ON ,-JM µ. I 11 Officer to the Debtors nunc pro tune to August 15, 2019, in accordance with the terms set forth in ::i:;:::'.f-o ~ vo ...:i-°' ...luf- 17 the Engagement Letter, will not supersede the financial advisory services authorized pursuant to 18 the Initial Retention Order, but will supplement the Services. The Application requests the 19 foregoing relief pursuant to pursuant to§§ 327(a), 330 and 331 , 1 Rule 2014(a) and 2016(a) of the 20 Federal Rules of Bankruptcy Procedure, and Rules 2014-1 of the Local Bankruptcy Rules of the 21 United States Bankruptcy Court for the Central District of California (the "LBR") 22 PLEASE TAKE FURTHER NOTICE that the Application is based upon the facts set 23 forth therein, the Declaration ofPeter C. Chadwick attached thereto, the Declaration OfRi chard G. 24 Adcock In Support of First-Day Motions, filed August 31, 2018 [Docket No. 8], and all exhibits 25 thereto, the entire record in this case, the statements, arguments and representations of counsel to 26 27 1 All references to"§" or "section" herein are to sections of title 11 of the United States Code, 11 28 U.S.C. §§ 101 et seq. US_Active\113549226\V-1 Case 2:18-bk-20151-ER Doc 3675 Filed 11/21/19 Entered 11/21/19 17:44:24 Desc Main Document Page 38 of 38 Cas :18-bk-20151-ER Doc 3528 Filed 10/31/19 Entered 10/31/19 16:25:46 Desc Main Document Page 3 of 3 1 be made at the hearing on the Application, if any, and any other evidence properly presented to the 2 Court. 3 PLEASE TAKE FURTHER NOTICE that any request for a copy of the Application must 4 be made in writing to Dentons US, LLP, 601 South Figueroa Street, Suite 2500 Los Angeles, 5 California 90017-5704, Attention Tania M. Moyron, Telephone No. (213) 623-9300, Facsimile No. 6 (213) 623-9924, Email: [email protected]. 7 PLEASE TAKE FURTHER NOTICE that, pursuant to LBR 2014-l(b)(3), any party 8 asserting an objection to the Application and/or wishing to request a hearing thereon, must, not 9 later than fourteen (14) days from the date of service of this Notice, file a response (the "Response") or request for hearing with the Bankruptcy Court in the form required by LBR 9013-l(f)(l), and <>',sj- 10 Oc-.i o-..Jc<) ~·:i:;:: 11 serve such objection or request for hearing on the Office of the United States Trustee, as well as t--o i:,..'S!"o ...l-°' ...Jtif--,:0 12 counsel for the Debtors whose name and address appear at the top, left-hand corner of the first page vi~ zg ;:J ~ 13;! of this Notice. A Response must be a complete written statement of all reasons in opposition to the ~-< ~~ 13 00...:----- E--~ui Z.,:r,i''Sf" 14 Application or in support, declarations and copies of all evidence on which the responding party UJC)UJ~ O:i:LiJ 1--0 intends to rely, and any responding memorandum of points and authorities. a-<;::iz 15 00o"' c<) ...l 16 PLEASE TAKE FURTHER NOTICE that, pursuant to LBR 9013-l(h), the failure to file 17 and serve a timely objection to the Application may be deemed by the Court to be consent to the 18 relief requested therein. 19 Dated: October 31, 2019 DENTONS US LLP 20 SAMUEL R. MAIZEL JOHN A. MOE, II 21 TANIA M. MOYRON 22 B y_----'-'/s"""/_,,Ti'-"a::.:..:n""ia::....!."M:..:..-'-'U'-'-'o,<.,.1::.cn..:::c·o.:..:.n ______Tania M. Moyron 23 24 Counsel to the Chapter 11 Debtors and Debtors In Possession 25 26 27 28 2 US_Active\113549226\V-1