Case KRH Doc 676 Filed 11/25/15 Entered 11/25/15 14:41:58 Desc Main Document Page 1 of 23

Transcription

1 Document Page 1 of 23 IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION In re: HEALTH DIAGNOSTIC LABORATORY, INC., et al., Chapter 11 Case No (KRH) (Jointly Administered) Debtors. 1 MOTION OF THE DEBTORS AND DEBTORS IN POSSESSION FOR ENTRY OF AN ORDER GRANTING RELIEF FROM THE AUTOMATIC STAY AND ESTABLISHING PROCEDURES FOR ACCESS TO PROCEEDS OF CERTAIN INSURANCE POLICIES The above-captioned debtors and debtors-in-possession (collectively, the Debtors ), by their undersigned counsel, hereby move (the Motion ) the Court for the entry of an order, substantially in the form attached hereto as Exhibit A (the Order ), pursuant to sections 105(a), 362, and 541 of the United States Bankruptcy Code, 11 1 The Debtors in these cases, along with the last four digits of each Debtor s federal tax identification number, are: Health Diagnostic Laboratory, Inc. (0119), Central Medical Laboratory, LLC (2728) and Integrated Health Leaders, LLC (2434). HUNTON & WILLIAMS LLP Riverfront Plaza, East Tower 951 East Byrd Street Richmond, Virginia Telephone: (804) Facsimile: (804) Tyler P. Brown (VSB No ) Jason W. Harbour (VSB No ) Henry P. (Toby) Long, III (VSB No ) Justin F. Paget (VSB No ) Counsel to the Debtors and Debtors in Possession

2 Document Page 2 of 23 U.S.C. 101 et seq. (the Bankruptcy Code ), and rules 4001, 9006, and 9014 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ) establishing procedures for access to proceeds of the Insurance Policies (defined below) and granting relief from the automatic stay to the extent necessary to allow for payments related thereto. In support of the Motion, the Debtors set forth, as follows: I. Jurisdiction, Venue and Predicate for Relief 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 28 U.S.C. 1334(b). Venue is proper pursuant to 28 U.S.C and This matter is a core proceeding within the meaning of 28 U.S.C. 157 (b)(2). 2. The predicates for the relief requested herein are sections 105(a), 362, and 541 of the Bankruptcy Code, and Bankruptcy Rules 4001, 9006, and II. Background A. Chapter 11 Cases 3. On June 7, 2015 (the Petition Date ), each of the Debtors filed with the Court its respective voluntary petition for relief under chapter 11 of the Bankruptcy Code, commencing the above-captioned chapter 11 cases. The Debtors continue to operate and manage their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On June 9, 2015, the Court entered an order authorizing the joint administration of these chapter 11 cases [Doc. No. 42]. 4. On June 9, 2015, the Court entered the Order Establishing Certain Notice, Case Management and Administrative Procedures [Doc. No. 40] (the Case Management Order ). The Case Management Order, among other things, approved the Notice, Case Management and Administrative Procedures (the Case Management Procedures ). 2

3 Document Page 3 of On June 16, 2015, the United States Trustee for the Eastern District of Virginia (the U.S. Trustee ) appointed the statutory committee of unsecured creditors (the Committee ). No trustee or examiner has been appointed. 6. On September 17, 2015, the Court entered the Order (I) Approving Asset Purchase Agreement and Authorizing the Sale of the Central Medical Laboratories, LLC Assets Outside the Ordinary Course of Business, (II) Authorizing the Sale of Assets Free and Clear of All Liens, Claims, Encumbrances and Interests, (III) Authorizing the Assumption and Sale and Assignment of Certain Executory Contracts and Unexpired Leases and (IV) Granting Related Relief [Doc. No. 511] (the CML Sale Order ) approving, among other things, the sale of substantially all of the assets of Debtor Central Medical Laboratories, LLC ( CML ) and the sale, assumption, and assignment of certain related contracts and leases, to Oncimmune (USA), LLC (the CML Transaction ). The CML Transaction closed as of September 22, On September 17, 2015, the Court also entered the Order (I) Approving Asset Purchase Agreement and Authorizing the Sale of Assets of the Debtors Outside the Ordinary Course of Business, (II) Authorizing the Sale of Assets Free and Clear of All Liens, Claims, Encumbrances and Interests, (III) Authorizing the Assumption and Sale and Assignment of Certain Executory Contracts and Unexpired Leases and (IV) Granting Related Relief [Doc. No. 512] (the HDL Sale Order ) approving the sale of substantially all of the Debtors business assets and the sale, assumption, and assignment of certain contracts and leases to True Health Diagnostics, LLC (the HDL Sale ). The HDL Sale closed on September 29,

4 Document Page 4 of 23 B. The Insurance Policies and the Mallory Lift Stay Motion 8. On October 2, 2015, LaTonya S. Mallory ( Ms. Mallory ) filed the Motion for Determination of Inapplicability of Automatic Stay or, Alternatively, for an Order Granting Relief from the Automatic Stay (the Mallory Lift Stay Motion ) [Doc. No. 557), seeking an order declaring that the proceeds of certain insurance policies from National Union (the Insurer ), Policy No , which was extended by endorsement effective August 1, 2015 (the Policy ), and Policy No (the Policy, together with the Policy, the Insurance Policies ), which were attached to the Mallory Lift Stay Motion as Exhibit A and Exhibit B, are not property of the Debtors estates within the meaning of section 541(a) of the Bankruptcy Code and that the automatic stay of section 362(d) of the Bankruptcy Code does not bar Ms. Mallory from accessing the proceeds of the Insurance Policies or, in the alternative, granting relief from the automatic stay to allow Ms. Mallory to exercise her rights as an insured under the Insurance Policies. 9. Specifically, in the Mallory Lift Stay Motion, Ms. Mallory seeks access to the proceeds of the Insurance Policies in connection with (i) the DOJ Complaint (as defined in the Mallory Lift Stay Motion); (ii) the litigation related to the Aetna Complaint (as defined in the Mallory Lift Stay Motion) (the Aetna Action ); and (iii) the Estate Claims (as defined in the Mallory Lift Stay Motion). 10. On November 11, 2015, the Committee filed its objection to the Mallory Lift Stay Motion (the Committee s Objection ) [Doc. No. 645] and the Debtors filed their objection to the Mallory Lift Stay Motion (the Debtors Objection ) [Doc. No. 646]. 4

5 Document Page 5 of The Mallory Lift Stay Motion identifies provisions of the Insurance Policies concerning Coverage A and Coverage B. Mallory Lift Stay Motion, 8. The Insurance Policies also contain Coverage D The Mallory Lift Stay Motion also identifies some of the order of payments provisions in paragraph 11 of the Insurance Policies (collectively, the Order of Payments Provisions ). Mallory Lift Stay Motion, 9. In their entirety, the Order of Payment Provisions provide as follows: In the event of Loss arising from any Claim for which payment is due under the provisions of this D&O Coverage Section but which Loss, in the aggregate, exceeds the remaining available Separate Limit of Liability of Shared Limit of Liability applicable to this D&O Coverage Section, then the Insurer shall: (a) first pay such Loss for which coverage is provided under Coverage A of this D&O Coverage Section, then with respect to whatever remaining amount of the applicable Separate Limit of Liability or Shared Limit of Liability is available after payment of such Loss, (b) then pay such Loss for which coverage is provided under Coverage B(ii) of this D&O Coverage Section, and (c) Then pay such Loss for which coverage is provided under Coverage B(i), C or D of this D&O Coverage Section. In the event of Loss arising from a Claim for which payment is due under the provisions of this D&O Coverage Section (including those circumstances described in the first paragraph of this Clause 11), the Insurer shall at the written request of the Named Entity: (a) first pay such Loss for which coverage is provided under Coverage A of this D&O Coverage Section, then (b) either pay or hold payment for such Loss for which coverage is provided under Coverage B, C, or D of this D&O Coverage Section. 2 The Coverage D provisions of the Insurance Policies state This D&O Coverage Section shall pay the Costs of Investigation of the Company arising from a Company Shareholder Derivative Investigation in response to a Derivative Demand, up to the amount set forth in Item 7(d) of the Declarations. Payment of Costs of Investigation to a Company shall be made in accordance with and subject to Clause 8 of this D&O Coverage Section. 5

6 Document Page 6 of 23 In the event that the Insurer withholds payment under Coverage B, C or D of this D&O Coverage Section pursuant to the above request, then the Insurer shall at any time in the future, at the request of the Named Entity, release such Loss payment to the Company, or make such Loss payment directly to the Individual Insured in the event of covered Loss under any Claim covered under this D&O Coverage Section pursuant to Coverage A of this D&O Coverage Section. The Financial Insolvency of any Company or Individual Insured shall not relieve the Insurer of any of its obligations to prioritize payment of covered Loss under this D&O Coverage Section pursuant to this Clause 11. Order of Payment Provisions. 13. The Mallory Lift Stay Motion, however, fails to identify Endorsement #7.I.A.3(iii) of the Policy, or Endorsement #8.II.B.3 and 8.II.F of the Policy (collectively, the Government Claim Endorsements ). Endorsement #7.I.A.3(iii) of the Policy states Loss shall not include the return of funds which were received from any federal, state or local government agency and any interest, fines or penalties arising out of the return of such funds; provided, however, that with regard to Claims for Wrongful Acts arising out of the return, or request to return such funds, this policy shall pay Defense Costs up to an amount not to exceed $1,000,000 ( Government Funding Defense Costs Sublimit of Liability ). This Government Funding Sub-limit of Liability shall be part of and not in addition to the Policy Aggregate Limit of Liability and any Separate Limit of Liability or Shared Limit of Liability applicable to the D&O Coverage Section, and shall in no way serve to increase such Policy Aggregate Limit of Liability, Separate Limit of Liability or Shared Limit of Liability. With respect to any Defense Costs coverage afforded pursuant to this paragraph 2, it is further understood and agreed that the Insurer shall be liable to pay only 50% of such Defense Costs, excess of a retention in the amount of $1,000,000, up to the Government Funding Defense Costs Sublimit of Liability, and subject to the Policy Aggregate Limit of Liability and any Separate Limit of Liability or Shared Limit of Liability applicable to the D&O Coverage Section. It is a condition of this insurance that the remaining 50% of such Defense Costs shall be carried by the Insureds at their own risk and be uninsured. 6

7 Document Page 7 of Endorsement #8.II.B.3 and 8.II.F of the Policy contain substantially similar provisions. 15. The Debtors have sought coverage under the Insurance Policies. Specifically, the Debtors have sought coverage under Coverage B of the Insurance Policies based on claims asserted against the Debtors in connection with (i) Connecticut General Life Insurance Company, et al. v. Health Diagnostics Laboratory, Inc., Civil Action No , filed in the United States District Court for the District of Connecticut (the CIGNA Action ); and (ii) the Aetna Action. The Debtors also have sought coverage under Coverage D of the Insurance Policies based on an received from the Committee dated October 28, 2015, relating to the Committee s investigation of alleged claims against certain of the Debtors former and current directors and officers, and third-parties (the Committee Investigation ). 16. In addition, a number of potential insureds other than Ms. Mallory have sought coverage under the Insurance Policies in connection with, among other things, a demand letter from the Committee dated October 26, 2015, relating to the Committee Investigation. 17. On November 18, 2015, the Court held a hearing on the Mallory Lift Stay Motion, the Committee s Objection, and the Debtors Objection (the November 18 Hearing ). At the November 18 Hearing, the Court scheduled the evidentiary hearing on the Mallory Lift Stay Motion for December 10, The Debtors believe that the relief requested in this Motion will eliminate the need for any relief to be granted under the Mallory Lift Stay Motion. 7

8 Document Page 8 of 23 III. Relief Requested 19. By this Motion, the Debtors seek the entry of the Order establishing procedures (the Access Procedures ) for the Debtors former and current directors and officers listed on Exhibit B 3 hereto ( D&Os ) to access to the proceeds of the Insurance Policies and granting relief from the automatic stay to the extent necessary to allow for payments of the proceeds of the Insurance Policies. 20. Specifically, the Debtors seek approval of the following Access Procedures to govern access to the proceeds of the Insurance Policies: 4 a. The automatic stay is hereby modified to the extent necessary to authorize payments of proceeds of the Insurance Policies up to the amount of $800,000 to any individual D&O or her or his attorneys, subject to the terms of the Insurance Policies and these Access Procedures. The authorization provided in this Paragraph a. is limited to, and shall not exceed, payment of an aggregate amount of $4,000,000 to all D&Os or their attorneys. b. Absent further order of this Court, the Debtors shall not request that the Insurer make payments of proceeds of the Insurance Policies to the Debtors or the Debtors attorneys in excess of the aggregate amount of $800,000, provided that all payments of proceeds of the Insurance Policies to the Debtors or the Debtors attorneys shall be subject to the terms of the Insurance Policies and these Access Procedures. c. Substantially contemporaneously with submitting a request for payment to the Insurer, the D&O or the Debtors, as applicable, shall provide to counsel for the Debtors, the Committee, any successor of the Debtors, including without limitation any liquidating trustee appointed pursuant to a confirmed chapter 11 plan, and the D&Os (collectively, the Notice Parties ), a written statement disclosing the aggregate amount of such request for payment and documentation supporting such request for payment. 3 The Debtors reserve the right to supplement the list of D&Os on Exhibit B at any time by filing a notice with the Court. 4 The following is only a summary of the Access Procedures and certain provisions of the Order. To the extent there is any difference between this summary, on the one hand, and the Access Procedures and the Order, on the other hand, the terms of the Access Procedures and the Order shall control. 8

9 Document Page 9 of 23 The Notice Parties shall have fourteen (14) days to object to such payment. Any Notice Party who objects to such payment shall notify all of the other Notice Parties and the Insurer of its objection, and if such objection cannot be resolved consensually, shall, within fourteen (14) days of providing such notice, seek relief from this Court or another mutually agreeable forum to resolve such objection prior to payment. d. In addition to the requirement in Paragraph c. above, with respect to any requests by Ms. Mallory for payments of defense costs she has incurred in defending against the DOJ Complaint, the requests for payment also shall include: (i) supporting documentation evidencing the payment of the $1,000,000 retention and invoices relating thereto; and (ii) supporting documentation for any defense costs in excess of the $1,000,000 retention concerning (1) the 50% of such defense costs that Ms. Mallory has paid and (2) the 50% of such defense costs that Ms. Mallory seeks from proceeds of the Insurance Policies. The foregoing requirements in this Paragraph d. shall only apply to any requests by Ms. Mallory for payment of defense costs she has incurred in defending against the DOJ Complaint. Nothing herein constitutes an admission of the Debtors or of any other D&Os that the Government Claim Endorsements apply to any claims made against them or a waiver of any rights to coverage the Debtors or any other D&Os have under the Insurance Policies. e. By the fifteenth (15 th ) day of each month, the Insurer shall provide the Notice Parties with a report indicating (i) the amount of proceeds of the Insurance Policies paid to each D&O during the prior month; (ii) the total amount of proceeds of the Insurance Policies paid as of the last day of the prior month; and (iii) the total remaining amount of coverage limits available under the Insurance Policies. IV. Basis for Relief Requested A. The Proceeds of the Insurance Policies Are Property of the Debtors Estates and Protected by the Automatic Stay 21. Property of a debtor s bankruptcy estate is broadly defined to include all legal and equitable interests of the debtor in property as of the commencement of the case. 11 U.S.C. 541(a)(1). The proceeds of the Insurance Policies are property of the Debtors estates because the Insurance Policies are mixed-coverage policies providing 9

10 Document Page 10 of 23 coverage for the Debtors and for D&Os. See In re Allied Digital Techs. Corp., 306 B.R. 505, 512 (Bankr. D. Del. 2004) (concluding that when there is coverage for the directors and officers and the debtor, the proceeds will be property of the estate if depletion of the proceeds would have an adverse effect on the estate to the extent the policy actually protects the estate s other assets from diminution ). 22. Although some courts have held that policy proceeds are not property of the estate when payment to the debtor is completely subordinate to payment to directors and officers, that is not the case here. See, e.g., In re Downey Financial Corp., 428 B.R. 595, 608 (Bankr. D. Del. 2010) (holding that there was no means by which the Debtors interests in Coverages B(i) and B(ii) could become superior to, or even equal to, the [individual] Insured s interest in Coverage A ). Here, the Order of Payments Provisions only subordinate the Debtors rights to coverage [i]n the event of Loss arising from any Claim for which payment is due under the provisions of this D&O Coverage Section but which Loss, in the aggregate, exceeds the remaining available Separate Limit of Liability or Shared Limit of Liability applicable to this D&O Coverage Section. Order of Payments Provisions. 23. Likewise, depletion of the proceeds of the Insurance Policies would adversely affect the Debtors estate because the Insurance Policies protect the Debtors assets from diminution. See Allied, 306 B.R. at 512. Specifically, the Debtors have sought coverage under Coverage B of the Insurance Policies in connection with the CIGNA Action and the Aetna Action, and have sought coverage under Coverage D of the Insurance Policies. As such, and for the additional reasons set forth in the Debtors 10

11 Document Page 11 of 23 Objection, the proceeds of the Insurance Policies are property of the Debtors estates and are protected by the automatic stay. 24. Although the Debtors believe that the proceeds of the Insurance Policies are property of the Debtors estates, the Court does not need to reach this conclusion to grant the relief requested herein and enter the Order. To avoid potentially unnecessary litigation concerning whether the proceeds of the Insurance Policies are property of the Debtors estates, the Order expressly provides that the Order is without prejudice to the rights of parties in interest to assert that proceeds of the Insurance Policies are, or are not, property of the Debtors estates. See Order, 3.b and 3.c. B. The Court Should Exercise Its Discretion to Limit and Condition Access to the Proceeds of the Insurance Policies. 25. In order to protect the interests of the Debtors and their estates in the proceeds of the Insurance Policies, and to avoid unnecessary disputes concerning access to such proceeds, the Court has the discretionary authority, pursuant to sections 105 and 362 of the Bankruptcy Code, to limit and condition access to the proceeds of the Insurance Policies. 26. Indeed, courts have imposed similar limitations as requested in this Motion. For example, in In re Boston Regional Medical Center, Inc., 285 B.R. 87 (Bankr. D. Mass. 2002), the bankruptcy court declined to make a final determination about whether the request for payment of defense costs by individual insureds under the debtor s directors, officers and trustees liability insurance policy violated the plan injunction, but nevertheless permitted limited relief by allowing payments of expert witness costs not to exceed $600,000. Id. at

12 Document Page 12 of In another case, In re Adelphia Commc ns Corp., 285 B.R. 580, 586 (Bankr. S.D.N.Y. 2002), the bankruptcy court determined that the proceeds of the debtors directors and officers liability insurance policy were property of the estate, as the estate was worth more with the policy than without it, and concluded that the automatic stay applied. Id. at 593. Observing that the court in Boston Regional Medical Center had adopted a thoughtful, and common sense, approach, the court in Adelphia Communications exercised its discretion and limited directors and officers to only $300,000 each to fund certain defense costs, with the court retaining control over future expenditures of policy proceeds. Id. at 600. The court explained that, as here, given the presence of entity coverage, unfettered access to the policy proceeds was inappropriate, and the best way to balance the competing claims at this time... is to allow... meaningful payments on account of defense costs, but still subject to limits that preserve the bulk of the policies proceeds, without prejudice to parties rights in further proceedings down the road. Id.; see also In re MF Global Holdings Ltd., 469 B.R. 177 (Bankr. S.D.N.Y. 2012) (imposing an initial cap on defense costs and reporting requirements). 28. It is anticipated that in the near future Ms. Mallory and other D&Os likely will incur defense costs that could be payable from proceeds of the Insurance Policies. Absent the relief requested in this Motion, unnecessary disputes concerning access to the proceeds of the Insurance Policies may arise and a race to such proceeds may ensue. 29. Instead of a potentially contentious, chaotic process, the Debtors submit that the proposed Access Procedures are in the best interest of the Debtors and all parties in interest because the Access Procedures balance the competing interests of the D&Os in 12

13 Document Page 13 of 23 the proceeds of the Insurance Policies by allowing meaningful payments, while still preserving the Debtors interest in the proceeds, which represents an important asset of the Debtors estates. 30. As a result, the Debtors request that the Court exercise its discretion and approve the Access Procedures. V. Notice 31. Notice of this Motion has been provided in accordance with the Case Management Procedures, including to each of the D&Os and the Insurer. The Debtors submit that no other or further notice need be provided. VI. No Previous Request 32. No previous request for the relief sought herein has been made by the Debtors to this or any other court. 13

14 Document Page 14 of 23 WHEREFORE, the Debtors respectfully request that the Court grant the Debtors the relief requested herein and such other and further relief as the Court deems just and proper. DATED: November 25, 2015 Respectfully submitted, /s/ Jason W. Harbour Tyler P. Brown (VSB No ) Jason W. Harbour (VSB No ) Henry P. (Toby) Long, III (VSB No ) Justin F. Paget (VSB No ) HUNTON & WILLIAMS LLP Riverfront Plaza, East Tower 951 East Byrd Street Richmond, Virginia Telephone: (804) Facsimile: (804) Counsel to the Debtors and Debtors-in-Possession 14

15 Document Page 15 of 23 EXHIBIT A

16 Document Page 16 of 23 IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION In re: HEALTH DIAGNOSTIC LABORATORY, INC., et al., Chapter 11 Case No (KRH) (Jointly Administered) Debtors. 1 ORDER GRANTING RELIEF FROM THE AUTOMATIC STAY AND ESTABLISHING PROCEDURES FOR ACCESS TO PROCEEDS OF CERTAIN INSURANCE POLICIES Upon the motion (the Motion ) 2 of the above-captioned debtors and debtors in possession (collectively, the Debtors ), for the entry of an Order, pursuant to sections 105, 362, and 541 of the Bankruptcy Code, and Bankruptcy Rules 4001, 9006, and 9014, granting relief from the automatic stay and establishing procedures for access to proceeds of the Insurance 1 The Debtors in these cases, along with the last four digits of each Debtor s federal tax identification number, are: Health Diagnostic Laboratory, Inc. (0119), Central Medical Laboratory, LLC (2728) and Integrated Health Leaders, LLC (2434). 2 Capitalized terms used, but not otherwise defined, herein shall have the meanings set forth in the Motion. HUNTON & WILLIAMS LLP Riverfront Plaza, East Tower 951 East Byrd Street Richmond, Virginia Telephone: (804) Facsimile: (804) Tyler P. Brown (VSB No ) Jason W. Harbour (VSB No ) Henry P. (Toby) Long, III (VSB No ) Justin F. Paget (VSB No ) Counsel to the Debtors and Debtors in Possession

17 Document Page 17 of 23 Policies; and it appearing that the relief requested in the Motion is in the best interest of the Debtors and their estates and that the establishment of the procedures set forth herein (the Access Procedures ) is fair and reasonable; and the Court finding that it has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334 and this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); and notice of this Motion having been due and sufficient under the circumstances; and upon the record herein; and after due deliberation thereon; and good and sufficient cause appearing therefor; IT IS HEREBY ORDERED THAT: 1. The Motion is GRANTED. 2. The following Access Procedures shall govern access to the proceeds of the Insurance Policies as and to the extent set forth herein and subject to further order of the Court: a. The automatic stay is hereby modified to the extent necessary to authorize payments of proceeds of the Insurance Policies up to the amount of $800,000 to any individual D&O or her or his attorneys, subject to the terms of the Insurance Policies and these Access Procedures. The authorization provided in this Paragraph 2.a. is limited to, and shall not exceed, payment of an aggregate amount of $4,000,000 to all D&Os or their attorneys. b. Absent further order of this Court, the Debtors shall not request that the Insurer make payments of proceeds of the Insurance Policies to the Debtors or the Debtors attorneys in excess of the aggregate amount of $800,000, provided that all payments of proceeds of the Insurance Policies 2

18 Document Page 18 of 23 to the Debtors or the Debtors attorneys shall be subject to the terms of the Insurance Policies and these Access Procedures. c. Substantially contemporaneously with submitting a request for payment to the Insurer, the D&O or the Debtors, as applicable, shall provide to counsel for the Debtors, the Committee, any successor of the Debtors, including without limitation any liquidating trustee appointed pursuant to a confirmed chapter 11 plan, and the D&Os (collectively, the Notice Parties ), a written statement disclosing the aggregate amount of such request for payment and documentation supporting such request for payment. The Notice Parties shall have fourteen (14) days to object to such payment. Any Notice Party who objects to such payment shall notify all of the other Notice Parties and the Insurer of its objection, and if such objection cannot be resolved consensually, shall, within fourteen (14) days of providing such notice, seek relief from this Court or another mutually agreeable forum to resolve such objection prior to payment. d. In addition to the requirement in Paragraph 2.c. above, with respect to any requests by Ms. Mallory for payments of defense costs she has incurred in defending against the DOJ Complaint, the requests for payment also shall include: (i) supporting documentation evidencing the payment of the $1,000,000 retention and invoices relating thereto; and (ii) supporting documentation for any defense costs in excess of the $1,000,000 retention concerning (1) the 50% of such defense costs that Ms. Mallory has paid 3

19 Document Page 19 of 23 and (2) the 50% of such defense costs that Ms. Mallory seeks from proceeds of the Insurance Policies. The foregoing requirements in this Paragraph 2.d. shall only apply to any requests by Ms. Mallory for payment of defense costs she has incurred in defending against the DOJ Complaint. Nothing herein constitutes an admission of the Debtors or of any other D&Os that the Government Claim Endorsements apply to any claims made against them or a waiver of any rights to coverage the Debtors or any other D&Os have under the Insurance Policies. e. By the fifteenth (15 th ) day of each month, the Insurer shall provide the Notice Parties with a report indicating (i) the amount of proceeds of the Insurance Policies paid to each D&O during the prior month; (ii) the total amount of proceeds of the Insurance Policies paid as of the last day of the prior month; and (iii) the total remaining amount of coverage limits available under the Insurance Policies. 3. The Debtors, the Committee, any D&O, or any other party in interest may seek to modify these Access Procedures pursuant to a further order of this Court, including without limitation by seeking relief from the automatic stay to obtain additional access to the proceeds of the Insurance Policies; provided, however, that: a. no such modification shall affect any payments that are made subsequent to the entry of this Order by any Insurer to or for the benefit of the Debtors or any D&O before such modification; and b. absent further order of this Court, no insured other than the D&Os, the 4

20 Document Page 20 of 23 Debtors, or any successor of the Debtors, including without limitation any liquidating trustee appointed pursuant to a confirmed chapter 11 plan, may access any of the coverage under the Insurance Policies. 4. Notwithstanding anything else in this Order, nothing in the Access Procedures or in this Order shall: a. limit the ability of the Debtors, the Committee, any D&O, or any other party in interest to assert that the proceeds of the Insurance Policies are, or are not, property of the Debtors estates; b. constitute a finding or conclusion that any of the proceeds of the Insurance Policies are property of the Debtors estates before the Debtors actual receipt thereof; or c. limit the ability of the Debtors, the Committee, any D&O or any other party in interest to object to the payment of any insurance proceeds requested by the D&Os or Debtors pursuant to these Access Procedures on the grounds that payment of the requested proceeds is not permitted under the provisions of the Insurance Policies, including, without limit, the Order of Payments Provisions. Any objection made pursuant to Paragraph 4.c, above, shall be subject to and resolved in accordance with the notice, objection, and relief procedures set forth in Paragraph 2.c, above. 5. This Order provides for access to the specified amount of proceeds of the Insurance Policies only to the extent those proceeds are available and payable under the terms of the Insurance Policies, and nothing herein shall: (i) modify, limit, or expand the Insurer s or any 5

21 Document Page 21 of 23 Insured s rights or obligations under the Insurance Policies; (ii) constitute an admission or acknowledgement that any coverage exclusion or other limitation applies to any claim for insurance coverage that has been or may be made by any party; or (iii) constitute a waiver of any rights to coverage that any party has under the Insurance Policies. 6. The Debtors are authorized and empowered to take such steps and perform such actions as may be necessary to implement and effectuate the terms of this Order. 7. This Court shall retain jurisdiction over all matters arising out of or related to this Order. Dated:, 2015 UNITED STATES BANKRUPTCY JUDGE WE ASK FOR THIS: /s/ Jason W. Harbour Tyler P. Brown (VSB No ) Jason W. Harbour (VSB No ) Henry P. (Toby) Long, III (VSB No ) Justin F Paget (VSB No ) HUNTON & WILLIAMS LLP Riverfront Plaza, East Tower 951 East Byrd Street Richmond, VA Tel: (804) Fax: (804) Counsel to the Debtors and Debtors in Possession 6

22 Document Page 22 of 23 CERTIFICATION OF ENDORSEMENT UNDER LOCAL BANKRUPTCY RULE I hereby certify that the foregoing proposed Order has been endorsed by or served upon all necessary parties. /s/ Jason W. Harbour 7

23 Document Page 23 of 23 LaTonya S. Mallory Joseph P. McConnell George Russell Warnick Noel L. Bartlett, Jr. Robert S. Galen Dennis M. Ryan Satyanarain Rangarajan Connie Chao-Shern Steve Carroll EXHIBIT B EMF_US v5