Case Document 107 Filed in TXSB on 07/25/18 Page 1 of 15 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

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1 Case Document 107 Filed in TXSB on 07/25/18 Page 1 of 15 In re: NEIGHBORS LEGACY HOLDINGS, INC., et al., Debtors. 1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION Chapter 11 Case No (MI) (Jointly Administered) DEBTORS APPLICATION FOR APPROVAL OF RETENTION OF COHNREZNICK LLP PURSUANT TO 11 U.S.C. 105(a) AND 363(b) TO (I) PROVIDE THE DEBTORS A CHIEF RESTRUCTURING OFFICER AND CERTAIN ADDITIONAL PERSONNEL AND (II) DESIGNATE CHAD J. SHANDLER AS CHIEF RESTRUCTURING OFFICER FOR THE DEBTORS THIS APPLICATION SEEKS AN ORDER THAT MAY ADVERSELY AFFECT YOU. IF YOU OPPOSE THE APPLICATION, YOU SHOULD IMMEDIATELY CONTACT THE APPLYING PARTY TO RESOLVE THE DISPUTE. IF YOU AND THE APPLYING PARTY CANNOT AGREE, YOU MUST FILE A RESPONSE AND SEND A COPY TO THE APPLYING PARTY. YOU MUST FILE AND SERVE YOUR RESPONSE WITHIN 21 DAYS OF THE DATE THIS WAS SERVED ON YOU. YOUR RESPONSE MUST STATE WHY THE APPLICATION SHOULD NOT BE GRANTED. IF YOU DO NOT FILE A TIMELY RESPONSE, THE RELIEF MAY BE GRANTED WITHOUT FURTHER NOTICE TO YOU. IF YOU OPPOSE THE APPLICATION AND HAVE NOT REACHED AN AGREEMENT, YOU MUST ATTEND THE HEARING. UNLESS THE PARTIES AGREE OTHERWISE, THE COURT MAY CONSIDER EVIDENCE AT THE HEARING AND MAY DECIDE THE APPLICATION AT THE HEARING. REPRESENTED PARTIES SHOULD ACT THROUGH THEIR ATTORNEY. To the Honorable Marvin Isgur: Neighbors Legacy Holdings, Inc. ( NLH ) and certain of its affiliates, debtors and debtors-in-possession in the above-captioned cases, file this application to employ CohnReznick LLP ( CohnReznick ) to provide restructuring services to the Debtors and designate Chad J. 1 Due to the large number of Debtors in these chapter 11 cases, a complete list of the Debtors and the last four digits of their tax identification numbers is not provided herein. A complete list of such information may be obtained on the website of the Debtors proposed claims and noticing agent at The location of Debtors principal place of business and the Debtors service address is: Richmond Avenue. Houston, Texas v5

2 Case Document 107 Filed in TXSB on 07/25/18 Page 2 of 15 Shandler ( Chad Shandler ) as the Chief Restructuring Officer ( CRO ) of the Debtors pursuant to 11 U.S.C. 105 and 363, together with the Affidavit of Chad J. Shandler (the Shandler Affidavit and, collectively, the Application ) and in support thereof, respectfully state as follows: I. JURISDICTION AND VENUE 1. This Court has jurisdiction over these cases pursuant to 28 U.S.C This is a core proceeding under 28 U.S.C. 157(b)(2)(A) and (O). The relief requested in the Application is authorized under 105 and 363 of the Bankruptcy Code. U.S.C Venue of the Debtors Chapter 11 cases is proper in this district pursuant to 28 II. BACKGROUND 3. On July 12, 2018 (the Petition Date ), the Debtors each commenced a case by filing a petition for relief under chapter 11 of the Bankruptcy Code (collectively, the Chapter 11 Cases ). The Debtors have requested that the Chapter 11 Cases be jointly administered. 4. The Debtors continue to operate their businesses and manage their properties as debtors and debtors in possession pursuant to Bankruptcy Code sections 1107(a) and To date, no creditors committee has been appointed in the Chapter 11 Cases by the Office of the United States Trustee for the Southern District of Texas (the United States Trustee ). No trustee or examiner has been appointed in the Chapter 11 Cases. 6. The Debtors currently operate 22 freestanding emergency centers (the Emergency Centers ) throughout the State of Texas, including in South Texas, El Paso, the Golden Triangle, the Permian Basin, the Panhandle, and the greater Houston area. The Debtors Emergency Centers are designed to offer an attractive alternative to traditional hospital v5 2

3 Case Document 107 Filed in TXSB on 07/25/18 Page 3 of 15 emergency rooms by reducing wait times, providing better working conditions for physicians and staff, and giving patient care the highest possible priority. 7. The Debtors original parent was founded in 2008, and the first Neighbors emergency center opened in At their peak, the Debtors operated 33 Emergency Centers across three states. In recent years, the Debtors have experienced financial difficulties caused in large part by increased competition, less favorable insurance payor conditions, declining revenues, and disproportionate overhead costs as compared to their operational income. These challenges have caused significant strain on the Debtors liquidity and threatened their ability to continue operating as a going concern. Prepetition, the Debtors engaged professionals and explored various out-of-court solutions, including closing unprofitable Emergency Centers and downsizing their corporate overhead. Ultimately, the Debtors out-of-court restructuring efforts were unsuccessful and the Debtors elected to commence these Chapter 11 Cases. 8. Additional factual background information regarding the Debtors, including their business operations, their corporate and capital structure, and the events leading to the Chapter 11 Cases, is set forth in detail in the Declaration of Chad J. Shandler in Support of Chapter 11 Petitions and First Day Pleadings. III. RELIEF REQUESTED 9. By this Application, pursuant to sections 105(a) and 363 of the Bankruptcy Code, the Debtors respectfully request entry of an order (a) authorizing the Debtors to employ and retain CohnReznick to provide restructuring services to the Debtors pursuant to the terms of the Services Agreement attached hereto as Exhibit A (the Second Services Agreement ), and (b) designating Mr. Shandler as CRO of the Debtors v5 3

4 Case Document 107 Filed in TXSB on 07/25/18 Page 4 of 15 IV. BASIS TO RETAIN COHNREZNICK FOR RESTRUCTURING SERVICES A. COHNREZNICK S AND CHAD SHANDLER S QUALIFICATIONS 10. CohnReznick is a financial advisory firm with extensive experience in restructuring and providing financial and operational guidance to companies in distressed situations. CohnReznick is headquartered in New York and is the eleventh largest accountancy firm in the United States. CohnReznick s professionals have provided financial advisory services to many debtors, creditors and other constituents in Chapter 11 and Chapter 7 cases, including, among others: UGHS Senior Living, Inc., UpLift Rx, Inc., ADPT DFW Holdings LLC St. Francis Hospital Poughkeepsie NY, Christ Hospital, Physicians Specialty Hospital El Paso, Renaissance Hospital Grand Prairie, Inc., Louisiana Medical Center and Heart Hospital, LLC, Meridian Behavioral Health LLC, Saint Michael s Medical Center, Inc., Southwest Hospital and Medical Center, Inc., Interfaith Medical Center, WorldCom, Inc., TOUSA, Inc., Fleming Companies, Inc., Fairmont General Hospital, CareCorps Management Company, and Centennial Healthcare. 11. Mr. Shandler is a CohnReznick partner specializing in providing corporate restructuring and financial advisory services to financially troubled companies, trustees, secured creditors, and creditor groups. His expertise includes developing and evaluating restructuring alternatives, valuing business enterprises, and negotiating with stakeholders. He also performs forensic services, including analyzing fraudulent and preferential transfers and solvency issues. He has been qualified as an expert witness in bankruptcy court and has been appointed a Special Fiscal Agent in the Superior Court of New Jersey. Currently, he serves as the liquidating trustee of several entities. His industry expertise includes senior living and healthcare, higher education, telecommunications, retail, manufacturing, publishing, multifamily housing and real estate, distribution, and sports and entertainment v5 4

5 Case Document 107 Filed in TXSB on 07/25/18 Page 5 of 15 B. THE ENGAGEMENT 12. As set forth in the Second Services Agreement, the Debtors have engaged CohnReznick as an independent contractor to the Debtors on the terms and conditions set forth in the Second Services Agreement. The Debtors and CohnReznick have agreed that Chad Shandler will serve as the Debtors CRO. In his capacity as CRO, Mr. Shandler is an officer of the Debtors. 13. CohnReznick will provide other professionals (the Professional Staff and collectively with, CohnReznick and the CRO, the Representatives ) 2 as necessary to assist the CRO and the Debtors in their restructuring efforts. The CRO and Professional Staff shall be under the approval and direct supervision of the Debtors or the Debtors board of directors (the Board ). 14. CohnReznick will perform a broad range of services on the Debtors behalf, including but not limited to: (a) (b) (c) The Professional Staff, in cooperation with the CRO, the applicable officers of the Debtors (the Officers ), and others, shall lead efforts to formulate a Plan of Reorganization, pursue potential causes of action, reconcile and resolve claims against the Debtors, and take other such actions as are necessary to close this bankruptcy matter; The Professional Staff shall approve all aspects of cash receipts and disbursements, including but not limited to weekly and monthly cash management reports, determination of cash requirements for payment of accounts payable, periodic payroll, and other operating expenses, and all reporting; The Professional Staff and the CRO shall direct the preparation of a rolling 13 week cash flow projection. They shall analyze historical cash disbursements and receipts and results of operation to determine the reasonableness of projected cash flows and short term cash needs; 2 As more fully explained in the Second Services Agreement, CohnReznick, from time to time, uses independent contractors or subcontractors, which CohnReznick may continue to use and which are included in the definition of Professional Staff and Representatives v5 5

6 Case Document 107 Filed in TXSB on 07/25/18 Page 6 of 15 (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) The Professional Staff and the CRO shall ensure that the Debtors can prepare timely and accurate monthly/weekly financial and operating data to assist in improving the visibility of the quantitative results of the operations in order to assist in improving decision making; The Professional Staff and the CRO shall direct the preparation of a multiyear financial projection and analyze historical results of operations to determine the reasonableness of forecasted results; The Professional Staff and the CRO shall ensure that the Debtors can prepare timely and accurate monthly/weekly financial and operating data to assist in improving the visibility of the quantitative results of the Debtors operations in order to assist in improving decision making; The Professional Staff and the CRO shall work with management to develop a plan to restructure the Debtors unfavorable long term leases and commence negotiations with lessors with the assistance of the Debtors counsel; The Professional Staff and the CRO shall develop an action plan and discuss the plan with the Board, counsel, creditors and/or governmental authorities as instructed by the Board; The Professional Staff and the CRO shall assist in the assembly of financial information to be issued relating to the sales of assets and business as required; The Professional Staff and the CRO shall meet with management, the Board, counsel, creditors, governmental authorities and other parties, as necessary; The Professional Staff and the CRO shall communicate with the Debtors creditors and governmental authorities (the general direction for which will be determined by the Board); The Professional Staff and the CRO shall assist the Debtors and their management in the negotiations with the Debtors commercial lessors and lenders, including without limitation, equipment lessors, equipment finance companies and the Debtors commercial bank lenders; and The Professional Staff and the CRO shall perform such other services as directed by the Board and mutually agreed to by CohnReznick v5 6

7 Case Document 107 Filed in TXSB on 07/25/18 Page 7 of 15 C. DISCLOSURES CONCERNING CONFLICTS OF INTEREST 15. To check and clear potential conflicts of interest in this case, CohnReznick has researched its client database to determine whether CohnReznick has or had any connection with, among others, the following entities: a. company and affiliated entities; b. major secured lenders (including current and former administrative agents); c. 50 largest unsecured creditors d. equity security holders; e. current and former officers and directors; f. counterparties to major contracts; and g. counterparties to major real property and personal property leases. 16. To the best of the Debtors knowledge, and based upon the Shandler Affidavit, CohnReznick is a disinterested person within the meaning of Section 101(14) of the Bankruptcy Code. To the best of the Debtors knowledge, CohnReznick does not hold any interest adverse to the Debtors or their estates. Furthermore, to the best of the Debtors knowledge, CohnReznick does not have any connection with the Debtors, their creditors, or any other party in interest herein, or their respective attorneys or accountants, the United States Trustee or any person employed in the office of the United States Trustee, except as set forth in the Shandler Affidavit. 17. From time to time, CohnReznick may have provided financial consulting and/or consulting services to certain creditors and other parties in interest in matters unrelated to this case. CohnReznick has informed the Debtors that during CohnReznick s retention by the Debtors in this case, they will not provide services to creditors of the Debtors, including, without v5 7

8 Case Document 107 Filed in TXSB on 07/25/18 Page 8 of 15 limitation, those listed in the Shandler Affidavit, in connection with any matters relating to the Debtors. However, given its diverse practice and client base, CohnReznick may provide services to clients in matters unrelated to these chapter 11 cases who are or become creditors of the Debtors or who may have interests adverse to such entities in unrelated matters. D. COMPENSATION 18. On August 28, 2017, Neighbors Global Holdings, LLC ( NGH ) and CohnReznick entered into a Services Agreement (the Initial Services Agreement ) pursuant to which NGH retained CohnReznick and Chad Shandler as CRO for NGH and its subsidiaries (collectively, the Neighbors Entities ). Under the Initial Services Agreement, NGH paid CohnReznick a $100, retainer (the Retainer ) and agreed to pay CohnReznick on an hourly basis upon presentation of weekly invoices, maintaining the balance of the Retainer remained at $100, On January 1, 2018, NGH and CohnReznick entered into the Second Services Agreement, which supersedes the Initial Services Agreement. The Second Services Agreement greatly enhanced the scope of services provided by CohnReznick, in particular the responsibilities of the CRO, for the Neighbors Entities and modified CohnReznick s compensation structure. The Second Services Agreement provides a hybrid fee structure where the CRO and a CohnReznick employee serving as the Debtors Interim Director of Practice Management are compensated on fixed fees and all other Representatives are billed hourly, plus CohnReznick will receive a completion fee. As set forth in Paragraphs 4a h of the Second Services Agreement, the Debtors will pay CohnReznick: (i) a monthly, non-refundable advisory fee of $120,000 for the CRO s services; provided that the Debtors have the right to convert the CRO to an hourly rate structure with at least five (5) days notice before the beginning of the next month; (ii) a fee of $2,000 per day for a Representative to serve as the Debtors Interim v5 8

9 Case Document 107 Filed in TXSB on 07/25/18 Page 9 of 15 Director, Practice Management (i and ii, collectively, the Flat Fees ); and (iii) a completion fee of $250,000 payable upon either (a) the confirmation of a plan of reorganization or liquidation; (b) the sale of substantially all assets of the Debtors; or (c) restructuring of obligations under the Credit Agreement; and (iv) standard hourly rates for all other Representatives providing services to the Debtors in accordance with CohnReznick s applicable hourly rates as detailed in the chart below, subject to a 10% agreed upon discount: Role Hourly Rate 3 Partner/Principal $610 - $815 Managers, Senior Managers, Directors $450 - $650 Other Professional Staff $300 - $450 Paraprofessionals $ The Second Services Agreement increased the amount of the Retainer to $200, As of the Petition Date, the balance of the Retainer was approximately $200, The Debtors submit that a retainer is appropriate for several reasons. First, these types of retainer agreements reflect normal business terms in the marketplace. Second, both CohnReznick and the Debtors are sophisticated business entities that have negotiated the retainer at arm s length. Third, the retention of CohnReznick is in the best interests of the Debtors estates, as the applicable retention agreement and retainer allow the Debtors to maintain the prepetition relationship established with CohnReznick. CohnReznick requests that the Retainer be held by CohnReznick as security throughout these cases until CohnReznick s fees and expenses are awarded and payable to CohnReznick on a final basis. 3 Rates are subject to adjustment on February 1st of each year v5 9

10 Case Document 107 Filed in TXSB on 07/25/18 Page 10 of In addition, CohnReznick will be reimbursed for its reasonable out-of-pocket expenses incurred in connection with this assignment, such as travel, lodging, duplicating, messenger, computer research and telephone charges. Consistent with local practice, nonworking travel time will be charged at half rates. 23. CohnReznick intends to maintain detailed, contemporaneous time records in tenths of an hour and to apply to the Court for the allowance of compensation for professional services and reimbursement of expenses in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, the Guidelines for Professional Compensation established by the Office of the United States Trustee (the UST Guidelines ), and any additional procedures that may be established by the Court in these Chapter 11 cases. CohnReznick has agreed to accept as compensation such sums as may be allowed by the Court. CohnReznick understands that interim fee and final fee awards are subject to approval by this Court; provided, however, that to the extent the Second Services Agreement contemplates a flat fee for services, there will not be contemporaneous time records kept for such services. 24. CohnReznick intends to make reasonable effort to comply with the U.S. Trustee s requests for information and additional disclosures as set forth in the UST Guidelines in connection with this Application and any interim and final fee applications to be filed in this case. 25. The proposed compensation is comparable to that generally charged by financial consulting firms of similar stature to CohnReznick and for comparable engagements, both in and out of court. 26. The hours worked, the results achieved and the ultimate benefit to the Debtors from the work to be performed by CohnReznick in connection with this engagement, have been v5 10

11 Case Document 107 Filed in TXSB on 07/25/18 Page 11 of 15 taken into account in setting the above fee structure. CohnReznick will endeavor to coordinate with the other retained professionals in this bankruptcy case to eliminate unnecessary duplication or overlap of work. 27. In light of the foregoing, and given the numerous issues which CohnReznick may be required to address in the performance of its services hereunder, the Debtors believe that the proposed compensation is both fair and reasonable. 28. As set forth above, CohnReznick rendered prepetition financial advisory services to the Debtors and received compensation in connection with these services. Some invoices submitted to the Debtors were paid within the 90 day period prior to the Petition Date. These payments are set forth in the Shandler Affidavit. CohnReznick believes these payments were made in the ordinary course of business or financial affairs of the Debtors and CohnReznick and according to ordinary business terms. In addition, CohnReznick continued to perform services for the Debtors which would constitute new value under section 547 of the Bankruptcy Code. E. THE INDEMNITY 29. As set forth in the Second Services Agreement, the Debtors agree to indemnify Mr. Shandler to the same extent as the most favorable indemnification it extends to its officers or directors, whether under the Debtors bylaws, its certificate of incorporation, by contract or otherwise, and no reduction or termination in any of the benefits provided under any such indemnities shall affect the benefits provided to Mr. Shandler. Mr. Shandler shall be covered as an officer under the Debtors existing director and officer liability insurance policy. 30. The indemnity is a reasonable term and condition of the Engagement and a similar form has been approved by several other Courts in this and other Districts. Unlike the market for other professionals that a debtor may retain, indemnification is a standard term of the market for firms that provide restructuring, turnaround and crisis management services. In fact, v5 11

12 Case Document 107 Filed in TXSB on 07/25/18 Page 12 of 15 the indemnity is comparable to those generally obtained by firms of similar stature to CohnReznick and for comparable engagements, both in and out of court. 31. The indemnification of financial consultants and investment bankers is reasonable and, indeed, commonly approved in connection with the retention of such professionals. See, e.g., In re United Artists Theatre Company, 315 F.3d 217, 230 (3d Cir. 2003) ( [W]e believe Houlihan Lokey s indemnification to be reasonable and therefore permissible under 328. ); In re Joan and David Halpern, Inc., 248 B.R. 43 (Bankr. S.D.N.Y. 2000), aff d, 2000 WL (S.D.N.Y. Dec. 6, 2000); see also In re DEC International, Inc., 282 B.R. 423, 429 (W.D. Wis. 2002) (affirming bankruptcy court s finding that indemnity of financial advisor was reasonable); In re Comdisco, Inc., 2002 WL at *6 (N.D. Ill. Sept. 23, 2002). V. AUTHORITY FOR RELIEF REQUESTED 32. The Debtors respectfully submit that the terms of the proposed engagement of CohnReznick including, without limitation, the fee structure and the indemnity, should be approved. 33. The retention of interim corporate officers such as a CRO and other temporary employees is proper under section 363 of the Bankruptcy Code. Section 363(b)(1) of the Bankruptcy Code provides in relevant part that [t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate. 11 U.S.C. 363(b)(l). 34. The debtor s business judgment is given significant weight. See, e.g., Meyers v. Martin (In re Martin), 91 F.3d 389, 395 (3d Cir. 1996) (citing Fulton State Bank v. Schipper (In re Schipper), 933 F.2d 513, 515 (7th Cir. 1991)); Comm of Equity Sec Holders v. Lionel Corp. (In re Lionel Corp.) 722 F.2d 1063, 1070 (2d Cir. 1983); In re Delaware &Hudson Ry. Co., v5 12

13 Case Document 107 Filed in TXSB on 07/25/18 Page 13 of 15 B.R. 169 (D. Del. 1991) (courts have applied a sound business purpose test to evaluate motions brought pursuant to section 363(b)); Comm. of Asbestos-Related Litigants v. Johns- Manville Corp. (In re Johns-Manville Corp), 60 B.R. 612 (Bankr. S.D.N.Y. 1986) ( Where the debtor articulates a reasonable basis for its business decisions (as distinct from decision made arbitrarily or capriciously), courts will generally not entertain objections to the debtor s conduct ). The business judgment rule is respected within the context of a chapter 11 case and shields a debtor s management from judicial second-guessing. 35. Bankruptcy courts have considered the propriety of a debtor in possession s employment of a corporate officer under Bankruptcy Code Section 363 on numerous occasions and regularly concluded that it is an appropriate exercise of business judgment to employ a corporate officer in such manner. See, e.g. In re Seahawk Drilling, Inc., Case No (Bankr. S.D. Tex. Feb. 14, 2011); In re Gulf Coast Oil Corp., Case No (Bankr. S.D. Tex. Sept. 29, 2008). 36. The retention of CohnReznick and its professionals is a sound exercise of the Debtors business judgment. Mr. Shandler has extensive experience with providing restructuring and related advisory services to many troubled companies, and is a seasoned turnaround and restructuring expert. Moreover, the terms of the Second Services Agreement were the product of arms-length negotiations and are economically fair, reasonable and beneficial to the estate. The compensation agreement provided for in the Second Services Agreement is consistent with and typical of arrangements entered into by other restructuring consulting firms with respect to rendering similar services for clients such as the Debtors. In light of the foregoing, the Debtors believe that the retention of CohnReznick and Mr. Shandler as the CRO, in conjunction with the v5 13

14 Case Document 107 Filed in TXSB on 07/25/18 Page 14 of 15 other Professional Staff provided by CohnReznick, will provide services that benefit the Debtors estates and creditors. The Debtors respectfully request that the Court enter an order (i) approving the retention of CohnReznick and the appointment of Chad Shandler as CRO pursuant to Sections 105 and 363 of the Bankruptcy Code; (ii) approving the compensation terms set out above; and (iii) granting such other and further relief as may be just and proper. Dated: July 25, 2018 Respectfully submitted, PORTER HEDGES, LLP By: /s/ John F. Higgins John F. Higgins State Bar No Eric M. English State Bar No Genevieve M. Graham State Bar No Main Street, 36th Floor Houston, Texas Telephone: (713) Fax: (713) Proposed Counsel for the Debtors and Debtors in Possession v5 14

15 Case Document 107 Filed in TXSB on 07/25/18 Page 15 of 15 CERTIFICATE OF SERVICE I certify that on July 25, 2018, I caused a copy of the foregoing document to be served by the Electronic Case Filing System in the United States Bankruptcy Court for the Southern District of Texas. /s/ John F. Higgins John F. Higgins v5 15

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32 Case Document Filed in TXSB on 07/25/18 Page 1 of 10 In re: NEIGHBORS LEGACY HOLDINGS, INC., et al., Debtors. 1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION Chapter 11 Case No (MI) (Jointly Administered) DECLARATION OF CHAD J. SHANDLER I, Chad J. Shandler, partner at CohnReznick LLP ( CohnReznick ), being duly sworn, hereby depose and say: 1. CohnReznick is a national advisory firm that specializes in corporate restructurings, operations improvement, litigation analytics, valuations and bankruptcy case management services. 2. I am duly authorized to make this Declaration on behalf of CohnReznick and submit this Declaration in connection with the application (the Application ) of the captioned debtors and debtors-in-possession (the Debtors ) for an order pursuant to sections 105 and 363 of the Bankruptcy Code authorizing the Debtors to retain and employ CohnReznick to provide restructuring services to the Debtors and appoint me as Chief Restructuring Officer ( CRO ). 3. Unless otherwise stated in this Declaration, I have personal knowledge of the facts set forth herein and, if called as a witness, I would testify thereto. Capitalized terms and 1 Due to the large number of Debtors in these chapter 11 cases, a complete list of the Debtors and the last four digits of their tax identification numbers is not provided herein. A complete list of such information may be obtained on the website of the Debtors proposed claims and noticing agent at The location of Debtors principal place of business and the Debtors service address is: Richmond Avenue. Houston, Texas v2

33 Case Document Filed in TXSB on 07/25/18 Page 2 of 10 phrases not otherwise defined herein shall have the meanings ascribed to such terms in the Application. 4. CohnReznick s Professional Staff 2 is well qualified to provide restructuring services in this Chapter 11 case. CohnReznick is a financial advisory firm with extensive experience in restructuring and providing financial and operational guidance to companies in distressed situations. CohnReznick was formed in October 2012 and is the result of a merger between the accounting and consulting firms J.H. Cohn LLP and The Reznick Group P.C. CohnReznick is headquartered in New York and is the eleventh largest accountancy firm in the United States, with over 2700 employees, 29 offices and $589+ million in annual revenues. The current partners, senior partners, managers, senior managers, directors, and other professional staff of CohnReznick have extensive experience working with financially troubled companies in complex financial restructurings out of court and in chapter 11 proceedings. CohnReznick and its principals have been involved as advisors to debtors, creditor and equity constituencies and government agencies in many chapter 11 cases. 5. In particular, CohnReznick has significant experience in providing financial advisory services to troubled hospitals and their creditors. CohnReznick s professionals have advised debtors, creditors and equity holders in many hospital and other healthcare Chapter 11 cases, as more fully described the Application. 6. CohnReznick will perform a broad range of services on the Debtors behalf, including but not limited to: (a) The Professional Staff, in cooperation with the CRO, the applicable officers of the Debtors (the Officers ), and others, shall lead efforts to formulate a Plan of Reorganization, pursue potential causes of action, reconcile and resolve claims against the Debtors, and take other such actions as are necessary to close this bankruptcy matter; 2 Defined terms shall have the same meaning ascribed to them in the Application v2

34 Case Document Filed in TXSB on 07/25/18 Page 3 of 10 (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) The Professional Staff shall approve all aspects of cash receipts and disbursements, including but not limited to weekly and monthly cash management reports, determination of cash requirements for payment of accounts payable, periodic payroll, and other operating expenses, and all reporting; The Professional Staff and the CRO shall direct the preparation of a rolling 13-week cash flow projection. They shall analyze historical cash disbursements and receipts and results of operation to determine the reasonableness of projected cash flows and short term cash needs; The Professional Staff and the CRO shall ensure that the Debtors can prepare timely and accurate monthly/weekly financial and operating data to assist in improving the visibility of the quantitative results of the operations in order to assist in improving decision making; The Professional Staff and the CRO shall direct the preparation of a multiyear financial projection and analyze historical results of operations to determine the reasonableness of forecasted results; The Professional Staff and the CRO shall ensure that the Debtors can prepare timely and accurate monthly/weekly financial and operating data to assist in improving the visibility of the quantitative results of the Debtors operations in order to assist in improving decision making; The Professional Staff and the CRO shall work with management to develop a plan to restructure the Debtors unfavorable long term leases and commence negotiations with lessors with the assistance of the Debtors counsel; The Professional Staff and the CRO shall develop an action plan and discuss the plan with the Board, counsel, creditors and/or governmental authorities as instructed by the Board; The Professional Staff and the CRO shall assist in the assembly of financial information to be issued relating to the sales of assets and business as required; The Professional Staff and the CRO shall meet with management, the Board, counsel, creditors, governmental authorities and other parties, as necessary; The Professional Staff and the CRO shall communicate with the Debtors creditors and governmental authorities (the general direction for which will be determined by the Board); The Professional Staff and the CRO shall assist the Debtors and their management in the negotiations with the Debtors commercial lessors and v2

35 Case Document Filed in TXSB on 07/25/18 Page 4 of 10 lenders, including without limitation, equipment lessors, equipment finance companies and the Debtors commercial bank lenders; and (m) The Professional Staff and the CRO shall perform such other services as directed by the Board and mutually agreed to by CohnReznick. 7. To check and clear potential conflicts of interest in this case, CohnReznick has researched its client database to determine whether CohnReznick has or had any connection with, among others, the following entities (the Potential Parties in Interest ): a. company and affiliated entities; b. major secured lenders (including current and former administrative agents); c. 50 largest unsecured creditors d. equity security holders; e. current and former officers and directors; f. counterparties to major contracts; and g. counterparties to major real property and personal property leases. As part of this inquiry, CohnReznick then entered the names of Potential Parties in Interest into a computer database maintained by CohnReznick containing the names of all clients and conflict information concerning the clients of CohnReznick. 8. This inquiry revealed that CohnReznick has the following connections with the Debtors, their insiders and known creditors, other parties in interest, and their respective attorneys and accountants: Interested Party Category Disclosure American Express Top 50 Largest Unsecured Creditors CohnReznick has provided tax compliance services for a possible related entity. This work has no connection with the Debtors Chapter 11 cases. AT&T Creditor CohnReznick has provided dispute resolution services to AT&T in matters unrelated to the v2

36 Case Document Filed in TXSB on 07/25/18 Page 5 of 10 Debtors Chapter 11 cases. BBVA Compass Financial Corporation Everbank Commercial Finance, Inc. Top 50 Largest Unsecured Creditors Bank CohnReznick has provided consulting to BBVA Compass. The work has no connection to the Debtors Chapter 11 cases. CohnReznick has provided tax consulting services to a possible related entity. The work has no connection with the Debtors Chapter 11 cases. Key Bank, A. N.A. Bank, Agent CohnReznick has provided tax consulting services for a possible related entity. The work has no connection with the Debtors Chapter 11 cases. McKesson Creditor CohnReznick has served as financial advisors to creditor committees on which related entities of McKesson were creditors or members of the Committee. The work has no connection with the Debtors Chapter 11 cases. Porter Hedges LLP The Don Levin Trust Wells Fargo Equipment Finance, Inc. Other Significant Party Top 50 Largest Unsecured Creditors Top 50 Largest Unsecured Creditors CohnReznick has and continues to provide financial in matters where Porter Hedges LLP is also involved unrelated to Debtors Chapter 11 cases. In his capacity as the Liquidating Trustee of the UGHS Senior Living Trust, Chad J. Shandler has retained Porter Hedges as counsel. This matter has no connection with the Debtors Chapter 11 cases. CohnReznick has provided tax compliance services for a possible related entity. This work has no connection with the Debtors Chapter 11 cases. CohnReznick has provided tax compliance services for a possible related entity. This work has no connection with the Debtors Chapter 11 cases. Xcel Energy Creditor CohnReznick has provided consulting services to Excel Energy. The work has no connection to the Debtors Chapter 11 cases. 9. CohnReznick will not provide services to creditors of the Debtors, including, without limitation, those listed above, in connection with any matters relating to the Debtors v2

37 Case Document Filed in TXSB on 07/25/18 Page 6 of 10 However, given its diverse practice and client base, CohnReznick may provide services to clients in matters unrelated to this chapter 11 case who are or become creditors of the Debtors or who may have interests adverse to such entities in unrelated matters. 10. Neither CohnReznick nor, to the best of my knowledge, any employee of CohnReznick is or was a creditor or equity holder of the Debtors. 11. Neither CohnReznick, nor to the best of my knowledge, any employee of CohnReznick, is or was, within three years before the commencement of this case, an investment banker for the Debtors, in connection with the offer, sale or issuance of a security of the Debtors. 12. Neither CohnReznick, nor to the best of my knowledge, any employee of CohnReznick, is or was within two years before the commencement of this case, a director, officer or employee of the Debtors. 13. CohnReznick is a disinterested person within the meaning of Section 101(14) of the Bankruptcy Code, as modified by section 1107(b). CohnReznick does not hold any interest adverse to the Debtors or their estates. Furthermore, other than set forth above, CohnReznick does not have any connection with the Debtors, its creditors, or any other party in interest herein, or their respective attorneys or accountants, the United States Trustee or any person employed in the office of the United States Trustee. 14. CohnReznick does not and has not represented any person or entity, other than the Debtors, in matters related to this chapter 11 case. 15. The Debtors have numerous creditors and relationships with various individuals and entities that may be parties in interest in this case. Consequently, although every reasonable effort has been made to discover and eliminate the possibility of any conflict, including the efforts outlined above, CohnReznick is unable to state with certainty whether one of its clients or v2

38 Case Document Filed in TXSB on 07/25/18 Page 7 of 10 an affiliated entity holds a claim or otherwise is a party in interest in this chapter 11 case. If CohnReznick discovers any information that is contrary to or pertinent to the statements made herein, CohnReznick will disclose such information to the Court on notice to creditors and the United States Trustee promptly. CohnReznick does not advise, has not advised, and will not advise any entity, other than the Debtors, in matters related to this chapter 11 case. 16. On August 28, 2017, NGH and CohnReznick entered into the Initial Services Agreement pursuant to which NGH retained CohnReznick and Chad Shandler as CRO. Under the Services Agreement, NGH paid CohnReznick a $100, retainer (the Retainer ) and agreed to pay CohnReznick on an hourly basis upon presentation of weekly invoices, maintaining the balance of the Retainer at $100, On January 1, 2018, NGH and CohnReznick entered into the Second Services Agreement, which supersedes the Initial Services Agreement. The Second Services Agreement greatly enhanced the scope of services provided by CohnReznick, in particular the CRO s responsibilities, for the Neighbors Entities and modified CohnReznick s compensation structure. As set forth in Paragraphs 4a h of the Second Services Agreement, the Debtors will pay CohnReznick: (i) a monthly, non-refundable advisory fee of $120,000 for the CRO s services; (iii) a fee of $2,000 per day for a Representative to serve as the Debtors Interim Director, Practice Management; and (iii) a completion fee of $250,000 payable upon either (a) the confirmation of a plan of reorganization or liquidation; (b) the sale of substantially all assets of the Debtors; or (c) restructuring of obligations under the Credit Agreement. Additionally, the amount of the Retainer was increased to $200,000. As of the Petition Date, the balance of the Retainer was approximately $200, v2

39 Case Document Filed in TXSB on 07/25/18 Page 8 of CohnReznick requests that the Retainer be held by CohnReznick as security throughout these cases until CohnReznick s fees and expenses are awarded and payable to CohnReznick on a final basis. 19. In connection with its services as the Debtors financial advisor, CohnReznick and the Debtors billed $5,289, for services rendered and $356, for costs incurred from August 28, 2017, through July 9, The Debtors have agreed to pay CohnReznick based upon time expended by the Representatives in accordance with CohnReznick s applicable hourly rates as detailed in the chart below, subject to a 10% agreed upon discount: Role Hourly Rate 3 Partner/Principal $610 - $815 Managers, Senior Managers, Directors $450 - $650 Other Professional Staff $300 - $450 Paraprofessionals $ In addition, CohnReznick will be reimbursed for its reasonable out-of-pocket expenses incurred in connection with this assignment, such as travel, lodging, duplicating, messenger, computer research and telephone charges. Consistent with local practice, nonworking travel time will be charged at half rates. 22. CohnReznick rendered prepetition financial advisory services to the Debtors and received compensation in connection with these services. During the 90-day period prior to the Debtor s bankruptcy filing, the Debtors paid CohnReznick a total of $1,600,568.63, which included $1,497, for fees and $102, for expenses. 3 Rates are subject to adjustment on February 1st of each year v2

40 Case Document Filed in TXSB on 07/25/18 Page 9 of CohnReznick believes these payments were made in the ordinary course of business or financial affairs of the Debtors and CohnReznick and according to ordinary business terms. In addition, CohnReznick continued to perform services for the Debtors which would constitute new value under section 547 of the Bankruptcy Code. 24. CohnReznick intends to apply to the Court for payment of compensation and reimbursement of expenses in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the guidelines promulgated by the U.S. Trustee and the Local Bankruptcy Rules and interim payment procedures previously approved by order of this Court. 25. The proposed compensation is comparable to those generally charged by financial consulting firms of similar stature to CohnReznick and for comparable engagements, both in and out of court. 26. The proposed compensation also is consistent with CohnReznick s typical fee for work of this nature. The hourly rates are set at a level designed to compensate CohnReznick fairly for the work of its professionals and assistants and to cover fixed and routine overhead expenses. It is CohnReznick s policy to charge its clients for all disbursements and expenses incurred in the rendition of services. 27. The hours worked, the results achieved and the ultimate benefit to the Debtors from the work to be performed by CohnReznick in connection with this engagement, have been taken into account in setting the above fee structure. CohnReznick will endeavor to coordinate with the other retained professionals in this bankruptcy case to eliminate unnecessary duplication or overlap of work v2

41 Case Document Filed in TXSB on 07/25/18 Page 10 of In light of the foregoing, and given the numerous issues which CohnReznick may be required to address in the performance of its services hereunder, the proposed compensation is both fair and reasonable. 29. The indemnity is a reasonable term and condition of the CohnReznick engagement. Unlike the market for other professionals that a debtor may retain, indemnification is a standard term of the market for restructuring, turnaround and other crisis management consultants. In fact, the Indemnity is comparable to those generally obtained by firms of similar stature to CohnReznick and for comparable engagements, both in and out of court. 30. The proposed retention is reasonable and based on the customary compensation charged by CohnReznick and comparably skilled practitioners in matters outside and other than chapter 11 cases, as well as cases under chapter 11, and has been approved and implemented in not just this jurisdiction but also in chapter 11 cases elsewhere. Indeed, the entire engagement as set forth in the Services Agreement is common within the industry and reflects what is considered to be market both in and out of chapter 11 proceedings, in each case, in light of CohnReznick s experience in reorganizations and the scope of work to be performed pursuant to its retention. 31. Other than as set forth above, no other arrangement is proposed between the Debtors and CohnReznick for compensation to be paid in this case. 32. I declare that the foregoing is true and correct to the best of my knowledge. Executed this 20 th day of July CHAD J. SHANDLER PARTNER v2

42 Case Document Filed in TXSB on 07/25/18 Page 1 of 3 In re: NEIGHBORS LEGACY HOLDINGS, INC., et al., Debtors. 1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION Chapter 11 Case No (MI) (Jointly Administered) ORDER AUTHORIZING RETENTION OF COHNREZNICK LLP PURSUANT TO 11 U.S.C. 105(a) AND 363(b) TO (I) PROVIDE THE DEBTORS A CHIEF RESTRUCTURING OFFICER AND CERTAIN ADDITIONAL PERSONNEL AND (II) DESIGNATE CHAD J. SHANDLER AS CHIEF RESTRUCTURING OFFICER FOR THE DEBTORS [Docket No. ] This Court having considered the Debtors Application for Approval of Retention of CohnReznick LLP Pursuant to 11 U.S.C. 105(a) and 363(b) to (i) Provide the Debtors a Chief Restructuring Officer and Certain Additional Personnel and (ii) Designate Chad J. Shandler as Chief Restructuring Officer for the Debtors, together with the Affidavit of Chad J. Shandler (collectively, the Application ) 2 ; and the Court being satisfied, based on the representations made in the Application and the Shandler Declaration, the pleadings filed in this case, and the arguments of counsel, that CohnReznick and its employees represent no interest adverse to the Debtors estates with respect to the matters upon which they are to be engaged; that they are disinterested persons as that term is defined under section 101(14) of the Bankruptcy Code, as modified by section 1107(b) of the Bankruptcy Code; and it appearing that the Court has 1 Due to the large number of Debtors in these chapter 11 cases, a complete list of the Debtors and the last four digits of their tax identification numbers is not provided herein. A complete list of such information may be obtained on the website of the Debtors proposed claims and noticing agent at The location of Debtors principal place of business and the Debtors service address is: Richmond Avenue. Houston, Texas Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Application v2

43 Case Document Filed in TXSB on 07/25/18 Page 2 of 3 jurisdiction over this matter; and it appearing that notice of the Application is sufficient under the circumstances, and that no other or further notice need be provided; and it further appearing that the relief requested in the Application is in the best interests of the Debtors and their estates and creditors; and after due deliberation and sufficient cause appearing therefor, it is ORDERED, ADJUDGED, AND DECREED THAT: 1. The Application is APPROVED as set forth herein. 2. The Debtors are authorized to retain CohnReznick, to the extent applicable as set forth in the Application, to provide restructuring services to the Debtors pursuant to Sections 105 and 363 of the Bankruptcy Code for the purposes and within the scope set forth in the Application. 3. The Debtors are authorized to designate Chad Shandler as their Chief Restructuring Officer as set forth in the Application. 4. The terms and conditions of CohnReznick s retention, including, without limitation, the proposed compensation and the indemnity, are approved as set forth in the Application and the Second Services Agreement. 5. The terms and conditions of CohnReznick s retention, including, without limitation, the proposed compensation and the indemnity, are approved as set forth in the Application. 6. CohnReznick shall be compensated and reimbursed in accordance with the terms of the Second Service Agreement, subject to the approval of this Court and the procedures set forth in the Application including, without limitation, the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Rules of this Court for the Southern District of Texas and such procedures as may be fixed by order of this Court for all professional services v2 2