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1 MICHAEL L. TUCHIN (CA State Bar No. 150375) 2 3 4 5 6 7 8


Proposed Reorganization Counsel for the Verified Petition Pending MARTIN R. BARASH (CA State Bar No. 162314) Verified Petition Pending COURTNEY E. POZMANTIER (CA State Bar No. 242103) Verified Petition Pending KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 Avenue of the Stars, 39th Floor Los Angeles, CA 90067 Telephone: (310) 407-4000 Facsimile: (310) 407-9090 Emails: mtuchin@ktbslaw.com mbarash@ktbslaw.com cpozmantier@ktbslaw.com

ROBERT M. CHARLES, JR. (NV Bar No. 6593) DAWN M. CICA (NV Bar No. 4565) LEWIS AND ROCA LLP 3993 Howard Hughes Pkwy., Suite 600 Las Vegas, NV 89169 Telephone: (702) 949-8200 Facsimile: (702) 949-8398 Emails: rcharles@lrlaw.com dcica@lrlaw.com Proposed Reorganization Co-Counsel for the Debtor and Debtor in Possession

9 Debtor and Debtor in Possession 10


KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA Case No. 2:11-bk-28676 (MKN) Chapter 11 [PROPOSED] DISCLOSURE STATEMENT DESCRIBING CHAPTER 11 PLAN OF REORGANIZATION FOR NEVADA CANCER INSTITUTE (DATED DECEMBER 6, 2011) Disclosure Statement Hearing Hearing Date: Hearing Time: Place: TBD TBD Courtroom 2 (3rd Floor) Foley Federal Building 300 Las Vegas Blvd. South Las Vegas, NV 89101

11 12 In re

13 NEVADA CANCER INSTITUTE, a Nevada nonprofit corporation,1 14 Debtor. 15 16 17 18 19 20 21

Plan Confirmation Hearing 22 23 24 25 26 27 28


1

Hearing Date: Hearing Time: Place:

TBD TBD Courtroom 2 (3rd Floor) Foley Federal Building. 300 Las Vegas Blvd. South Las Vegas, NV 89101

The Debtors address and last four digits of its Federal Tax I.D. are: One Breakthrough Way, Las Vegas, NV 89135 [EIN XX-XXX2553].

135229.11

1,vl+,& )_ 1128676111206000000000009

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TABLE OF CONTENTS Page

4 INTRODUCTION ............................................................................................................................. 1 5 II. GENERAL DISCLAIMERS AND INFORMATION ................................................................. 2 6 III. WHO MAY VOTE TO ACCEPT OR REJECT THE PLAN ..................................................... 4 7 8 9 IV. A. B. 6 Allowed Claims. ........................................................................................................ 5 Impaired Claims. ....................................................................................................... 6

10 VOTES NECESSARY FOR PLAN CONFIRMATION .................................................................. 6


KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

11 V. CRAMDOWN: TREATMENT OF NON-CONSENTING CLASSES ....................................... 7 12 VI. INFORMATION REGARDING VOTING IN THIS CASE ..................................................... 7 13 A. Voting Instructions. ................................................................................................... 7

14 VII. WHO MAY OBJECT TO PLAN CONFIRMATION .............................................................. 9 15 VIII. 10

16 BACKGROUND ON THE DEBTOR, THE DEBTORS BUSINESS, EVENTS PRECIPITATING THE BANKRUPTCY FILING, AND THIS CASE ............................ 10 17 A. Description and History of the Debtors Business. ................................................. 10 18 B. The Debtors Corporate Structure, Board of Directors and Management. ............. 11 19 C. The Medical Group. ................................................................................................ 13 20 D. The Debtors Capital Structure. .............................................................................. 14 21 1. Secured Debt. .............................................................................................. 15 22 a. The Credit Facility. ......................................................................... 15 23 b. The Administration Building Parcel Loan. ..................................... 16 24 c. Oncology Supply. ............................................................................ 17 25 d. The CMS Claim. ............................................................................. 17 26 2. Unsecured Debt. .......................................................................................... 18 27 E. Assets. ..................................................................................................................... 19 28 i

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1. 2.

Unrestricted Cash. ....................................................................................... 19 Restricted Cash/Trust Funds. ...................................................................... 19 a. b. c. d. e. Cash Collateral Account.................................................................. 19 Engelstad Endowment Fund............................................................ 19 Patient Cares Committee Fund. ....................................................... 20 The Saffer Endowment Fund. ......................................................... 20 Other Donor Restricted Funds......................................................... 21

3.

Real Estate. .................................................................................................. 21 a. b. c. d. e. The Flagship Building. .................................................................... 21 The Research Building. ................................................................... 22 The Vacant Land. ............................................................................ 22 The Administration Building Parcel. .............................................. 22 The Alta-Hualapai Parcel. ............................................................... 24

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Events Leading to the Debtors Restructuring and Chapter 11. .............................. 24 The UCSD Sale. ...................................................................................................... 27 The Plan Support Agreement. ................................................................................. 30 Overview of the Plan. .............................................................................................. 31 The Chapter 11 Case. .............................................................................................. 32 1. 2. 3. 4. 5. 6. First Day Motions........................................................................................ 32 Use of Cash Collateral................................................................................. 33 Appointment of the Creditors Committee.................................................. 34 The UCSD Sale. .......................................................................................... 34 Pleadings Relating to the Plan and Disclosure Statement. .......................... 34 Leases and Executory Contracts. ................................................................ 34 a. b. Assumed/Rejected Leases and Executory Contracts. ..................... 34 Other Leases and Executory Contracts. .......................................... 35

Claims Filed by Creditors. .......................................................................... 35 a. The Schedules and the Bar Dates. ................................................... 35 ii

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b.

Claim Objections. ............................................................................ 36

Litigation. .................................................................................................... 37 a. b. c. Prepetition Litigation....................................................................... 37 Avoidance Actions .......................................................................... 37 Retention of Claims, Causes of Action and Other Rights. .............. 38

Engagement of A&M. ................................................................................. 38 Retention of Professionals. .......................................................................... 38

8 IX. SUMMARY OF MATERIAL PLAN PROVISIONS .............................................................. 39 9 10


KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

A.

Classification and Treatment of Claims Under the Plan. ........................................ 39 1. Unclassified Claims..................................................................................... 41 a. b. 2. Administrative Claims..................................................................... 41 Priority Tax Claims. ........................................................................ 44

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Classified Claims (Classes 1-4)................................................................... 44 a. b. c. Class 1 (Lender Secured Claims) .................................................... 44 Class 2 (Other Secured Claims, Including Secured Tax Claims). ........................................................................................... 47 Class 3 (Priority Claims, other than Priority Tax Claims). ............. 48 Class 4 (General Unsecured Claims). ............................................. 48

17 d. 18 B. 19 1. 20 a. 21 b. 22 c. 23 d. 24 25 26 27 28 3. 2. Resolution of Claims Relating to Assumed Contracts and Leases. ............................................................................................. 51 Objections to Assumption/Cure Payment Amounts........................ 50 Cure Payments................................................................................. 50 Assumption of Agreements. ............................................................ 49 Assumption of Executory Contracts and Unexpired Leases ....................... 49 Treatment of Executory Contracts and Unexpired Leases. ..................................... 49

Rejection of Executory Contracts and Unexpired Leases. .......................... 51 a. b. Rejected Agreements....................................................................... 51 Bar Date for Rejection Damage Claims. ......................................... 51

Postpetition Contracts and Leases. .............................................................. 52 iii

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C.

Means of Execution and Implementation of Plan. .................................................. 52 1. 2. 3. 4. 5. 6. Funding of the Plan. .................................................................................... 52 Vesting of Assets Generally. ....................................................................... 52 The Charitable Trust Funds. ........................................................................ 52 Vesting of Rights of Action in Reorganized Debtor. .................................. 53 Vesting of Preserved Avoidance Actions and Other Rights in Creditor Trust. ............................................................................................. 53 Creation of the Creditor Trust and Appointment of Creditor Trustees. ...................................................................................................... 53 a. b. c. 7. 8. 9. 10. 11. 12. Powers and Duties. .......................................................................... 54 Termination of the Creditor Trust. .................................................. 54 Additional Provisions of the Creditor Trust Agreement. ................ 55

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11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 2. 28 E. D. 13.

Objections to Claims. .................................................................................. 55 Distribution of Property Under the Plan. .................................................... 55 Full Satisfaction........................................................................................... 55 Compliance with Tax Requirements. .......................................................... 56 Setoff, Recoupment and Other Rights......................................................... 56 The Effective Date. ..................................................................................... 56 a. b. c. Conditions to the Effective Date. .................................................... 56 Waiver of Conditions. ..................................................................... 56 Notice of the Effective Date. ........................................................... 57

Authorization of Corporate Action. ............................................................ 57

The Reorganized Debtor. ........................................................................................ 57 1. 2. Directors and Officers. ................................................................................ 57 Amended Articles of Incorporation and Bylaws. ........................................ 58

Other Plan Provisions. ............................................................................................. 58 1. Exculpation Regarding Solicitation and Prosecution of Plan Confirmation. .............................................................................................. 58 Dissolution of Creditors Committee. ......................................................... 58

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3. 4.

Exemption from Certain Transfer Taxes. .................................................... 59 Modification of the Plan. ............................................................................. 59

Effect of Confirmation of the Plan. ......................................................................... 59 1. 2. 3. 4. Discharge and Injunction. ........................................................................... 59 Estate Release. ............................................................................................. 60 Payment of U.S. Trustee Fees. .................................................................... 61 Retention of Jurisdiction. ............................................................................ 61

8 X. FEASIBILITY ............................................................................................................................ 61 9 XI. LIQUIDATION ANALYSIS/BEST INTERESTS TEST ........................................................ 62 10 XII. RISK FACTORS ..................................................................................................................... 64
KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

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A.

Bankruptcy Considerations. .................................................................................... 64 1. 2. Parties in Interest May Object to the Debtors Classification of Claims.......................................................................................................... 64 Failure to Secure Confirmation of the Plan. ................................................ 65 Non-Consensual Confirmation. ................................................................... 65 The Debtor May Object to the Amount or Classification of a Claim. ........ 65 The Effective Date Might Not Occur. ......................................................... 66

14 3. 15 4. 16 5. 17 B. 18 C. 19 20 21 22 XIII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN .................................................................................................................................. 67 A. B. Liquidation Under Chapter 7................................................................................... 67 Alternative Plan of Reorganization. ........................................................................ 67 Risks Associated with the Reorganized Debtor. ..................................................... 66 Risks Associated with the UCSD Sale. ................................................................... 66

23 XIV. TAX CONSEQUENCES OF PLAN ..................................................................................... 67 24 25 1. 26 2. 27 B. 28 Certain U.S. Federal Income Tax Consequences of the Plan to the Holders of Claims. ................................................................................................................ 70 v The UCSD Sale. .......................................................................................... 70 Cancellation of Debt.................................................................................... 69 A. Certain U.S. Federal Income Tax Consequences of the Plan to the Debtor and Reorganized Debtor. ......................................................................................... 69

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1. 2. 3. 4. 5.

General. ....................................................................................................... 70 Definition of Securities. .............................................................................. 70 Holders of Claims not Constituting Tax Securities. .................................... 71 Original Issue Discount and Contingent Payment. ..................................... 72 Accrued Interest .......................................................................................... 73

Bad Debt and/or Worthless Securities Deduction. .................................................. 74 Information Reporting and Backup Withholding.................................................... 74 Importance of Obtaining Professional Tax Assistance. .......................................... 75

9 XV. RECOMMENDATION AND CONCLUSION ...................................................................... 75 10


KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

LIST OF EXHIBITS

EXHIBIT NO. 1 2 3 4 5 6

DESCRIPTION Chapter 11 Plan of Reorganization for Nevada Cancer Institute (Dated December 6, 2011) Pending Prepetition Lawsuits Plan Support Agreement Preserved Avoidance Actions Annual Projected Budget for Reorganized Debtor Liquidation Analysis

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1 2 3 4 5 6 7 8 9 Voting Information: 10
KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

SUMMARY INFORMATION1 Debtor: Recommendation: Vote Required to Accept the Plan: Nevada Cancer Institute, a Nevada nonprofit corporation The Debtor recommends that you vote in favor of the Plan. Acceptance of the Plan requires the affirmative vote of two-thirds in amount and a majority in number of the Allowed Claims actually voted in each Class of impaired Claims entitled to vote. Only entities holding Claims in Classes 1 and 4 are impaired and therefore entitled to vote. If any of these Classes rejects the Plan, however, the Court nevertheless may confirm the Plan if the cramdown requirements of Bankruptcy Code section 1129(b) are satisfied with respect to such Class. If you are entitled to vote, you should have received a Ballot with this Disclosure Statement: After completing and signing your Ballot, you should return it to: Klee, Tuchin, Bogdanoff & Stern LLP Attn: Shanda Dahl 1999 Avenue of the Stars, 39th Floor Los Angeles, CA 90067 For your Ballot to be counted, the Ballot Tabulator must receive it not later than 5:00 p.m. Pacific time on [_________], 2012. Confirmation Hearing: The Confirmation Hearing will be held on [___________], 2012 at __:__ _.m. Pacific time. The Confirmation Hearing may be continued from time to time without further notice. Pursuant to LR 3019, the Court may consider modifications to the Plan at the Confirmation Hearing, which may be incorporated in the Confirmation Order. The treatment that creditors will receive if the Court confirms the Plan is set forth in the Plan and summarized in Section IX of this Disclosure Statement. The terms of the Plan are controlling, and all creditors and interested parties are urged to read the Plan in its entirety.

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1

Treatment of Claims:

Capitalized terms not otherwise defined in this Disclosure Statement have the meanings ascribed to them in the Chapter 11 Plan of Reorganization for Nevada Cancer Institute (Dated December 6, 2011) (the Plan), a true and correct copy of which is attached hereto as Exhibit 1. The Plan, once confirmed, is the legally binding document regarding the treatment of Claims against the Debtor and the terms and conditions of the Debtors reorganization. Accordingly, to the extent that there is any inconsistency between the terms contained herein and those contained in the Plan, the terms of the Plan will govern.

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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

The Effective Date:

The Effective Date of the Plan will be the first Business Day on which the conditions set forth in the Plan have been satisfied or waived by the Debtor and on which no stay of the Confirmation Order is in effect. All inquiries about the Plan and Disclosure Statement should be in writing and should be sent to: Klee, Tuchin, Bogdanoff & Stern LLP Attn: Courtney E. Pozmantier, Esq. 1999 Avenue of the Stars, 39th Floor Los Angeles, CA 90067 Facsimile: (310) 407-9090

Questions:

IMPORTANT NOTICE:

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THE PLAN, DISCLOSURE STATEMENT, AND BALLOTS CONTAIN IMPORTANT INFORMATION THAT IS NOT INCLUDED IN THIS SUMMARY. THAT INFORMATION COULD MATERIALLY AFFECT YOUR RIGHTS. YOU SHOULD THEREFORE READ THE PLAN, DISCLOSURE STATEMENT, AND BALLOTS IN THEIR ENTIRETY. YOU ALSO SHOULD CONSULT WITH YOUR LEGAL AND FINANCIAL ADVISORS BEFORE VOTING ON THE PLAN.

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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

SUMMARY OF CLASSIFICATION AND TREATMENT OF CLAIMS CLASS AND/OR TREATMENT CLAIM TYPE Unclassified Claims Ordinary Course The Reorganized Debtor may pay any Administrative Administrative Claim that it reasonably Claims determines is an Ordinary Course Administrative Claim without the necessity of a motion or request for payment thereon. The Reorganized Debtor anticipates payment of Ordinary Course Administrative Claims on the later of the (i) Effective Date and (ii) date on which such Ordinary Course Administrative Claim becomes due in accordance with its terms. The holder of an Ordinary Course Administrative Claim does not need to file a motion seeking allowance and payment in order to be paid, but may do so in order to preserve its rights. Professional Fee Claims Unless the professional holding a Professional Fee Claim allowed by the Court agrees to different treatment, it will receive cash in the full amount of its Allowed Professional Fee Claim, without interest, within ten (10) days after the date on which the Court allows such Claim. Such holder is required under the Plan to file a motion seeking allowance of its Professional Fee Claim no later than 60 days after the Effective Date. Cure Payments as to executory contracts or unexpired leases assumed under the Plan will be paid in cash ten (10) days following the later of: (i) the Effective Date and (ii) entry of a Final Order resolving any dispute regarding (a) the amount of any proposed Cure Payment; (b) the ability of the Reorganized Debtor to provide adequate assurance of future performance to the extent required under the Bankruptcy Code; and/or (c) any other matter pertaining to such assumption. The holder of a Non-Ordinary Course Administrative Claim will receive cash in the full amount of its Allowed Non-Ordinary Course Administrative Claim, without interest, x IMPAIRED STATUS/ VOTING STATUS Not Entitled to Vote

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Not Entitled to Vote

Executory Contract and Lease Cure Amounts

Not Entitled to Vote

Non-Ordinary Course Administrative Claims

Not Entitled to Vote

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1 2 3 4 503(b)(9) Claims 5 6 7 8 9 10
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on or before the later of: (i) ten (10) days after the Effective Date, or (ii) ten (10) days after the date any order determining such Claim to be an Allowed Non-Ordinary Course Administrative Claim becomes a Final Order. The holder of an Allowed 503(b)(9) Claim will Not Entitled to Vote receive cash in the full amount of its Allowed 503(b)(9) Claim, without interest, on or before the later of: (i) ten (10) days after the Effective Date, or (ii) ten (10) days after the date any order determining such Claim to be an Allowed 503(b)(9) Claim becomes a Final Order. Such holder is required under the Plan to have filed a 503(b)(9) Claim by the 503(b)(9) Bar Date. The Reorganized Debtor will pay to each Not Entitled to Vote entity holding an Allowed Priority Tax Claim cash in the full amount of the Allowed Priority Tax Claim, plus interest calculated at the federal judgment rate, in equal, amortized, annual installments beginning on the first anniversary of the Petition Date that falls on a date following the occurrence of the Effective Date and, thereafter, on each anniversary of the Petition Date through the fifth anniversary of the Petition Date. An allowed Priority Tax Claim may be prepaid at any time without penalty.

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Priority Tax Claims

Secured Claims Class 1 Lender Secured Claims

The remaining cash proceeds of the UCSD Impaired Sale, if any, will be remitted to the Agent on Entitled to Vote the Effective Date, to reduce the debt under the Prepetition Credit Agreement. On the Effective Date, the Reorganized Debtor shall issue to the Agent, for the ratable benefit of the Lenders, the Research Building Note in the amount of $13 million. The Research Building Note will (i) be secured by a first-priority deed of trust on the Research Building (including all personal property located thereon as of the date of the Plan Support Agreement), and the Vacant Land; (ii) be a non-recourse obligation of the xi

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Reorganized Debtor; (iii) provide for annual principal amortization payments; (iv) be payable in full on the earlier of (x) the fifth anniversary of the Effective Date, (y) a default under the note, or (z) a sale of the Research Building or Vacant Land; (v) be non-interest bearing; and (vi) be subject to prepayment at any time without penalty. The Reorganized Debtor will continue to be obligated under the Prepetition Deed of Trust, as modified to secure the Research Building Note. Notwithstanding any of the foregoing, if the Research Building and/or the Vacant Land are sold for an aggregate amount in excess of $13,000,000 (the Excess Consideration), whether during the term of the Research Building Note or at any time within one (1) year after repayment thereof, the Reorganized Debtor shall pay 80% of the Excess Consideration to the Agent for the ratable benefit of the Lenders. Any funds that become property of the Debtors estate that are proceeds of the Lenders collateral that are not necessary to satisfy the obligations of the Debtor, the Estate and the Reorganization Debtor under the Plan and the UCSD Sale, and in which the Agent and the Lenders hold an interest, shall be distributed to the Agent for the ratable benefit of the Lenders thirty (30) days following the later of: (i) the bar date for the filing of proofs of claim by governmental entities; (ii) the expiration of the deadlines for filing objections to Administrative Claims, Priority Claims, Priority Tax Claims and Secured Tax Claims; and (iii) the settlement or adjudication to a Final Order of any and all objections to Administrative Claims, Priority Claims, Priority Tax Claims and Secured Tax Claims. Neither the Charitable Trust Funds nor any other charitable donations generated by the Debtor or its representatives constitute the Lenders collateral.

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KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

Class 2 Other Secured Claims, including Secured Tax Claims

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Unsecured Claims Class 4 General Unsecured Claims Priority Claims Class 3 Priority Claims, other than Priority Tax Claims

The Reorganized Debtor will, at its option, on Unimpaired or as soon as reasonably practicable after the Not Entitled to Vote Deemed to Accept Effective Date: (i) pay to such holder cash in the allowed amount of such holders Allowed Class 2 Claim; (ii) return the collateral securing such Allowed Class 2 Claim; or (iii) (a) cure any default, other than a default of the kind specified in Bankruptcy Code section 365(b)(2), with respect to such holders Allowed Class 2 Claim, without recognition of any default rate of interest or similar penalty or charge, and upon such cure, no default will exist; (b) reinstate the maturity of such Allowed Class 2 Claim as the maturity existed before any default, without recognition of any default rate of interest or similar penalty or charge; and (c) leave unaltered all other legal, equitable, and contractual rights with respect to such Allowed Class 2 Claim.

Unless the particular entity holding an Allowed Class 3 Claim agrees otherwise, each holder of an Allowed Class 3 Claim will receive, in full satisfaction of such Claim, cash in the full amount of the Allowed Class 3 Claim, without interest, on or before the latest of: (i) ten (10) days after the Effective Date; (ii) ten (10) days after the date on which the Class 3 Claim becomes an Allowed Class 3 Claim; and (iii) the date on which the Allowed Class 3 Claim becomes due and payable in accordance with its terms.

Unimpaired Not Entitled to Vote Deemed to Accept

Allowed Class 4 Claims will receive their Pro Rata share of the assets in the Creditor Trust, net of the fees and expenses incurred by the Creditor Trust and its professionals in administering the trust. The timing of payment to the holders of Allowed Class 4 Claims shall be determined by the Creditor Trust in accordance with the Creditor Trust Agreement. All payments made to holders of Allowed Class 4 Claims will be made via the Creditor Trust pursuant to the Creditor Trust Agreement. xiii

Impaired Entitled to Vote

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If Class 4 accepts the Plan within the meaning of Bankruptcy Code section 1126(c), then the holders of Lender Deficiency Claims shall be deemed to have waived their right to receive any consideration under Class 4 on account of such Lender Deficiency Claims. If Class 4 rejects the Plan within the meaning of Bankruptcy Code section 1126(c) and the Plan nevertheless is confirmed, all Allowed Lender Deficiency Claims shall participate in the Class 4 distributions.

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I. INTRODUCTION Nevada Cancer Institute, a Nevada nonprofit corporation (the Debtor), filed a voluntary

4 petition for relief under chapter 11 of title 11 of the United States Code (as amended, the 5 Bankruptcy Code) on December 2, 2011 (the Petition Date), thereby commencing the Case. 6 The Case is pending before the United States Bankruptcy Court for the District of Nevada (the 7 Court) under case number 2:11-bk-28676 (MKN). Pursuant to Bankruptcy Code sections 1107 8 and 1108, the Debtor is operating its business and managing its affairs as a debtor and debtor in 9 possession. 10
KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

The Debtor is the proponent of the Chapter 11 Plan of Reorganization for Nevada Cancer

11 Institute (Dated December 6, 2011) (the Plan) that is attached to this Disclosure Statement as 12 Exhibit 1. THE DOCUMENT YOU ARE READING IS THE DISCLOSURE STATEMENT 13 FOR THE ACCOMPANYING PLAN. The Plan sets forth the manner in which the Claims 14 against the Debtor will be treated following the Debtors emergence from chapter 11. This 15 Disclosure Statement describes certain aspects of the Plan, the Debtors current and future 16 business operations, the proposed reorganization of the Debtor, and other related matters. Under 17 the Plan, the Debtor will continue to operate as a nonprofit corporation on and after the Effective 18 Date. 19 For a complete understanding of the Plan, you should read this Disclosure Statement, the

20 Plan and the Exhibits to these documents in their entirety. 21 This Disclosure Statement sets forth the assumptions underlying the Plan, describes the

22 process that the Court will follow when determining whether to confirm the Plan, and describes 23 how the Plan will be implemented if it is confirmed by the Court. Bankruptcy Code section 1125 24 requires that a disclosure statement contain adequate information concerning a plan of 25 reorganization. 11 U.S.C. 1125(a). [The Court has approved the form of this document as an 26 adequate disclosure statement that contains adequate information to enable creditors entitled to 27 vote on the Plan to make an informed judgment when deciding whether to vote to accept or to 28 reject the Plan. The Courts approval of the adequacy of this Disclosure Statement, however, does 1

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1 not constitute a determination by the Court with respect to the fairness or the merits of the Plan or 2 the accuracy or completeness of the information contained in the Plan or Disclosure Statement.] 3 THE COURT HAS NOT YET CONFIRMED THE PLAN DESCRIBED IN THIS 4 DISCLOSURE STATEMENT. THEREFORE, THE PLANS TERMS ARE NOT YET 5 BINDING ON ANYONE. IF THE COURT LATER CONFIRMS THE PLAN AND THE 6 EFFECTIVE DATE OCCURS, THEN THE PLAN WILL BE BINDING ON THE 7 DEBTOR AND ON ALL PARTIES IN INTEREST IN THIS CASE, INCLUDING 8 CREDITORS OF THE DEBTOR. 9 The Debtor believes that the Plan provides the best possible recoveries to creditors under

10 the circumstances, that acceptance of the Plan is in the best interests of all parties in interest, and
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11 that any alternative would result in unnecessary delay, uncertainty, and expense to the Estate. The 12 Debtor therefore recommends that all eligible creditors entitled to vote on the Plan cast their 13 Ballots to accept the Plan. 14 15 16 II. GENERAL DISCLAIMERS AND INFORMATION Please carefully read this document and the Exhibits to this document. These documents

17 explain who may object to confirmation of the Plan, who is entitled to vote to accept or reject the 18 Plan, and the treatment that creditors can expect to receive if the Court confirms the Plan. The 19 Disclosure Statement also describes the history of the Debtor, the events precipitating the Case, 20 certain events in the Case, the effect of Plan confirmation, and some of the things the Court may 21 consider in deciding whether to confirm the Plan. It also addresses the Plans feasibility and how 22 your treatment under the Plan compares to the hypothetical treatment you would receive under a 23 chapter 7 liquidation. The statements and information contained in the Plan and Disclosure 24 Statement, however, do not constitute financial or legal advice. You should therefore consult your 25 own advisors if you have questions about the impact of the Plan on your Claims. 26 The financial information used to prepare the Plan and Disclosure Statement was prepared

27 by the Debtor from information in its books and records and is the sole responsibility of the 28 Debtor. The Debtors professionals and financial advisors have prepared the Plan and Disclosure 2

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1 Statement at the direction of, and with the review, input, and assistance of, the Debtors 2 management. The Debtors professionals and financial advisors have not independently verified 3 this information. 4 The statements and information that concern the Debtor that are set forth in this document

5 constitute the only statements and information that the Court has approved for the purpose of 6 soliciting votes to accept or reject the Plan. Therefore, no statements or information that are 7 inconsistent with anything contained in this Disclosure Statement are authorized unless otherwise 8 ordered by the Court. 9 You may not rely on the Plan and Disclosure Statement for any purpose other than to Nothing contained in the Plan or

10 determine whether to vote to accept or reject the Plan.


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11 Disclosure Statement constitutes an admission of any fact or liability by any party or may be 12 deemed to constitute evidence of the tax or other legal effects that the reorganization set forth in 13 the Plan may have on entities holding Claims. 14 Unless another time is expressly specified in this Disclosure Statement, all statements

15 contained in this document are made as of December 6, 2011. Under no circumstances will the 16 delivery of this Disclosure Statement or the exchange of any rights made in connection with the 17 Plan create an implication or representation that there has been no subsequent change in the 18 information included in this document. The Debtor assumes no duty to update or supplement any 19 of the information contained in this document, and it presently does not intend to undertake any 20 such update or supplement. 21 The Exhibits listed in the following table are attached to the Disclosure Statement. These

22 Exhibits are incorporated into the Disclosure Statement and will be deemed to be included in the 23 Disclosure Statement when they are Filed. 24 25 26 27 28 3

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1 2 3 4 5 6 7 8 9 10
KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

EXHIBIT NO. 1 2 3 4 5 6

DESCRIPTION Chapter 11 Plan of Reorganization for Nevada Cancer Institute (Dated December 6, 2011) Pending Prepetition Lawsuits Plan Support Agreement Preserved Avoidance Actions Annual Projected Budget for Reorganized Debtor Liquidation Analysis III.

11 12

WHO MAY VOTE TO ACCEPT OR REJECT THE PLAN This Section III1 contains a general discussion of the rules governing the treatment and

13 satisfaction of claims under a plan of reorganization proposed under the Bankruptcy Code. Where 14 a particular word (such as Debtor) or a phrase (such as Allowed Claim) is capitalized in this 15 Disclosure Statement, and not otherwise defined herein, that word or phrase has the meaning 16 provided in Section I (Definitions) of the Plan. Where, however, a particular word (such as 17 debtor) or phrase (such as allowed claim) is not capitalized in this Disclosure Statement, that 18 word or phrase is not intended to refer to the definitions provided in Section I of the Plan, but 19 rather, the word or phrase is intended to have the general meaning ascribed to it. To vote to accept 20 or reject the Plan, your Claim must be: (a) an impaired Claim against the Debtor; (b) neither a 21 Disputed Claim nor a Disallowed Claim; and (c) entitled to receive or retain some value under the 22 Plan. Holders of unimpaired Claims against the Debtor are deemed to have accepted the Plan and 23 do not vote, though they may object to Plan confirmation to the extent they otherwise have 24 standing to do so. Holders of Claims against the Debtor that do not receive or retain any value 25 26 27 28 4
1

Unless otherwise indicated, Section references are to sections of this Disclosure Statement.

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1 under the Plan are deemed to reject the Plan. As defined by the Bankruptcy Code, a claim against 2 a debtor generally includes all rights to payment from that debtor. 3 A. 4 Allowed Claims. With the exceptions explained below, under the Bankruptcy Code, a claim generally is

5 allowed only if a proof of the claim is properly filed before any applicable bar date, and either no 6 party in interest has objected or the bankruptcy court has entered an order allowing the claim. 7 Under certain circumstances, as provided in the Bankruptcy Code, a creditor may have an allowed 8 claim even if a proof of claim was not filed and the applicable bar date for filing a proof of claim 9 has passed. For example, a claim may be deemed allowed if the claim is listed on a debtors 10 schedules and is not scheduled as disputed, contingent, or unliquidated.
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11

A holders claim must be an allowed claim for the holder of such claim to have the right to

12 vote on a plan. Generally, for voting purposes, a claim is deemed allowed to the extent that: (a) 13 either (1) a proof of claim is timely filed; or (2) a proof of claim is deemed timely filed either 14 under Bankruptcy Rule 3003(b)(1)-(2) or by an order of the bankruptcy court; and (b) either (1) 15 the claim is not subject to an objection; or (2) the claim is allowed by an order of the bankruptcy 16 court notwithstanding that objection. 17 A creditor whose claim is not allowed may still be entitled to vote to accept or reject a plan

18 if the creditor has timely filed a proof of claim that is not the subject of an objection filed before 19 the hearing on plan confirmation or a bankruptcy court order disallowing the claim entered before 20 the confirmation hearing. An entity whose claim is subject to an objection is not eligible to vote 21 on the plan unless and until that objection is resolved in the entitys favor or, after notice and a 22 hearing under Bankruptcy Rule 3018(a), a bankruptcy court temporarily allows the entitys claim 23 for the purpose of voting to accept or reject the plan. Any entity that seeks temporary allowance 24 of its claim for voting purposes must promptly file an appropriate motion and take the steps 25 necessary to arrange an appropriate and timely hearing. 26 information regarding voting in this Case. 27 28 5 Please refer to Section VI.A for

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1 B. 2

Impaired Claims. Generally speaking, under the Bankruptcy Code, a class of claims is impaired if the plan

3 alters the legal, equitable or contractual rights of the members of the class, even if the alteration is 4 beneficial to the creditors or interest holders in the class. A contract provision that entitles a 5 creditor to accelerated payment upon default, however, does not necessarily render a claim 6 impaired, even if the debtor defaulted and the plan does not provide the creditor with accelerated 7 payment. Instead, the claim is deemed unimpaired if, for example, the plan cures the default, 8 reinstates the maturity of the claim as it existed before the default, and compensates the creditor 9 for any damages incurred as a result of reasonable reliance upon the acceleration provision. 10 Section IX.A.2 of this Disclosure Statement and Section II.A of the Plan identify among other
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11 things, the Classes of Claims that the Debtor believes to be impaired under the Plan. 12 13 14 IV. VOTES NECESSARY FOR PLAN CONFIRMATION Under the Bankruptcy Code, impaired claims are placed in classes under a plan, and each

15 class accepts or rejects the plan as a class. Certain types of claims are not classified because the 16 Bankruptcy Code requires that they be treated in a specific way. These claims are considered 17 unimpaired, and their holders cannot vote. Section IX.A of this Disclosure Statement and Section 18 II.A of the Plan set forth a summary of the types of Claims against the Debtor, their treatment 19 under the Plan, and, where applicable, the classes in which they have been classified. 20 Under the Bankruptcy Code, a bankruptcy court may confirm a plan if at least one class of

21 impaired claims has voted to accept that plan (without counting the votes of any insiders whose 22 claims are classified within that class) and if certain statutory requirements are met both as to non23 consenting members within a consenting class and as to dissenting classes. A class of claims has 24 accepted the plan only when at least a majority in number and at least two-thirds in amount of the 25 allowed claims actually voting in that class vote to accept the plan. 26 Even if a debtor receives the requisite number of votes to confirm a proposed plan, the

27 Plan will not become binding unless and until, among other things, the bankruptcy court makes an 28 independent determination that confirmation is appropriate. This determination will be the subject 6

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1 of the hearing on confirmation of the plan. Also, even if all classes do not vote in favor of a plan, 2 the plan nonetheless may be confirmed if the dissenting classes are treated in a manner prescribed 3 by the Bankruptcy Code. 4 5 6 V. CRAMDOWN: TREATMENT OF NON-CONSENTING CLASSES Even if all classes do not consent to the proposed treatment of their claims under a plan,

7 the plan nonetheless may be confirmed if each dissenting class is treated in the manner prescribed 8 by the Bankruptcy Code. The process by which a dissenting class is forced to abide by the terms 9 of a plan is commonly referred to as cramdown. The Bankruptcy Code allows a dissenting class 10 to be crammed down if the plan does not discriminate unfairly and is fair and equitable as to
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11 such class. The Bankruptcy Code does not define unfair discrimination, but it does set forth 12 certain minimum requirements for fair and equitable treatment. For a class of secured claims, 13 fair and equitable can mean that the secured claimants retain their liens and receive deferred 14 cash payments, the present value of which equals the value of their interests in the collateral. For 15 a class of unsecured claims, a plan is fair and equitable if the claims in that class receive value 16 equal to the allowed amount of the claims, or, if the unsecured claims are not fully satisfied, no 17 claim or interest that is junior to such claims receives or retains anything under the plan.2 18 19 20 A. 21 VI. INFORMATION REGARDING VOTING IN THIS CASE Voting Instructions. The Debtor believes that Classes 1 and 4 are impaired and therefore entitled to vote on the

22 Plan except to the extent such holders hold Disputed Claims. The Debtor believes that Classes 2 23 and 3 are unimpaired and that the holders of claims in such classes are therefore not entitled to 24 vote on the Plan. Entities holding Administrative Claims and Priority Tax Claims are not Any party that disputes the Debtors

25 classified and are not entitled to vote on the Plan. 26 27 28 7


2

This paragraph does not purport to explain fully the applicable statutes or case law, which are complex.

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1 characterization of its Claim as unimpaired may request a finding of impairment from the Court to 2 obtain the right to vote, but such party must promptly take action to request such a finding and 3 arrange for the Court to hold a hearing and adjudicate such request no later than seven (7) days 4 prior to the Ballot deadline (i.e., no later than [__________], 2012). 5 In voting to accept or reject the Plan, please use only the Ballot sent to you with this

6 Disclosure Statement, and please carefully read the voting instructions on the Ballot for an 7 explanation of the applicable voting procedures and deadlines. If, after reviewing this Disclosure 8 Statement, you believe that you hold an impaired Claim and that you are entitled to vote on the 9 Plan, but you did not receive a Ballot, or if your Ballot is damaged or lost, please send a written 10 request for a Ballot to the Ballot Tabulator at the following address:
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11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Klee, Tuchin, Bogdanoff & Stern LLP Attn: Shanda Dahl 1999 Avenue of the Stars, 39th Floor Los Angeles, CA 90067 If you wish to vote to accept or reject the Plan, your Ballot must be returned to the Ballot Tabulator at the address listed above so that it is actually received by the Ballot Tabulator no later than 5:00 p.m. Pacific time, on [________], 2012 (the Balloting Deadline). If your Ballot is not timely received by the Ballot Tabulator, it will not be counted. Ballots sent by facsimile or email will not be accepted by the Ballot Tabulator and will not be counted in tabulating votes accepting or rejecting the Plan. If your Claim is a Disputed Claim and you nevertheless wish to vote on the Plan, you will be required to move the Court to temporarily allow your Claim for voting purposes. In order to do so, you must promptly take action to make such a motion and arrange for the Court to hold a hearing and adjudicate such motion no later than seven (7) days prior to the Ballot Deadline (i.e., no later than [__________], 2012). Any interested party desiring further information with respect to the Plan or seeking an additional copy of this document should contact in writing: Klee, Tuchin, Bogdanoff & Stern LLP, Attn: Courtney E. Pozmantier, Esq., 1999 Avenue of the Stars, 39th Floor, Los Angeles, CA 90067, Facsimile: (310) 407-9090. All pleadings and other papers Filed in this Case may be

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1 inspected free of charge during regular court hours at the Office of the Clerk, United States 2 Bankruptcy Court, Foley Federal Building, 300 Las Vegas Blvd., South, Las Vegas, NV 89101. 3 Documents may be accessed for a fee through the Courts electronic records system at 4 http://ecf.nvb.uscourts.gov, and certain documents pertaining to the Case are available on the 5 website of the Debtors proposed claims agent at http://www.kccllc.net/NevadaCancerInstitute. 6 7 8 VII. WHO MAY OBJECT TO PLAN CONFIRMATION A hearing has been scheduled for [________], 2012, at __:__ _:m. (Pacific time) at the

9 United States Bankruptcy Court, 300 Las Vegas Boulevard South, Courtroom [_], Las Vegas, 10 Nevada 89101, to determine whether the Court will confirm the Plan. If, after tabulating the
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11 Ballots, it appears that entities holding a sufficient number and amount of Claims have voted to 12 accept the Plan, the Debtor will file a memorandum of points and authorities supporting the entry 13 of the Confirmation Order. This memorandum will be served on the U.S. Trustee, counsel for the 14 Creditors Committee, counsel for the Agent, all entities that have requested special notice in the 15 Case, and all parties that have timely objected to confirmation of the Plan. 16 Any party in interest in the Caseincluding any creditor that voted (or was deemed to

17 have voted) to accept or reject the Planmay File an objection to confirmation of the Plan 18 assuming such party has standing to do so. Any such objection must be Filed and served on the 19 Debtor and its counsel; the U.S. Trustee; counsel for the Creditors Committee; and counsel for 20 the Agent by [__________], 2012. If you fail to properly and timely File an objection to Plan 21 confirmation, you may be deemed to have consented to the confirmation of the Plan. If you wish 22 to obtain more information, you should contact in writing: 23 24 25 26 27 28 9 Klee, Tuchin, Bogdanoff & Stern LLP Attn: Courtney E. Pozmantier, Esq. 1999 Avenue of the Stars, 39th Floor Los Angeles, CA 90067 Facsimile: (310) 407-9090

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1 2 3 4 A. 5

VIII. BACKGROUND ON THE DEBTOR, THE DEBTORS BUSINESS, EVENTS PRECIPITATING THE BANKRUPTCY FILING, AND THIS CASE Description and History of the Debtors Business. Founded in 2002, the Debtor is a nonprofit cancer institute committed to advancing the

6 frontiers of knowledge of cancer through research, enabling affiliated physicians to provide world7 class, research-linked clinical cancer services to patients, facilitating outreach and education 8 programs aimed at raising cancer awareness, and reducing the burden of cancer on the people of 9 Nevada. The Debtor has been designated by the State of Nevada as the States official cancer 10 institute, and is qualified as a nonprofit organization under section 501(c)(3) of the Internal
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11 Revenue Code. The Debtor maintains a state-of-the-art outpatient cancer treatment and research 12 facility in the Summerlin community of Las Vegas (the Flagship Building) and provides 13 comprehensive management services to physicians employed by the non-debtor oncology medical 14 group, Ruckdeschel Manno, Ltd. dba Nevada Cancer Institute Medical Group (the Medical 15 Group, and together with the Debtor, NVCI). The Flagship Building is located near the 16 intersection of Clark County Route 215 and Town Center Drive. 17 NVCI provides professional medical services, infusion therapy, radiation therapy,

18 diagnostic imaging, and related ancillary services, at the Flagship Building and at leased premises 19 located at the University Medical Center in central Las Vegas (UMC). The Flagship Building 20 houses its own diagnostic equipment including PET, CT, MRI, and digital mammography, and 21 provides a place for patients to obtain psychosocial and nutrition counseling, participate in a 22 survivorship clinic, and obtain pain management services. 23 In addition to providing a center for high quality patient care, the Flagship Building is

24 home to ongoing scientific research activities into the causes, prevention, and treatment of cancer. 25 One aspect of these research activities involves laboratory research, which has resulted in a variety 26 of adult stem cell and biomarker-related discoveries, although none has yet been commercialized. 27 Another aspect of these research activities involves the participation of patients treated in clinical 28 drug trials. These clinical trials, and prior studies, have made novel drugs available to Nevadans 10

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1 suffering from cancer that otherwise would not have been available to them. Since its inception, 2 NVCI has opened to enrollment a total of 176 trials including 13 first in human trials where 3 patients from other states and countries traveled to NVCI to participate. As of December 1, 2011, 4 there are 16 trials open to new enrollment, and another 39 trials that are closed to new enrollment 5 but open for purposes of patient follow up. 6 The Debtor also conducts educational programs and outreach throughout Nevada at

7 schools, workplaces, community centers, senior centers, faith-based organizations, union halls, 8 community activities, health fairs and support group meetings, organizes and trains patient 9 navigators to help arrange treatment and follow-up care, and provide referrals to community 10 resources, and maintains a mobile diagnostic unit or Hope Coach that brings digital
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11 mammography directly to Nevadans, including those who live in rural areas without nearby access 12 to mammograms. Through these efforts, and others, the Debtor has provided valuable

13 information, support, diagnosis and education to thousands of Nevadans. 14 B. 15 The Debtors Corporate Structure, Board of Directors and Management. The Debtor is a Nevada nonprofit corporation. It has no members or equity holders. The

16 Debtor is governed by a board of directors (the Board), which is comprised of 11 distinguished 17 business and medical professionals, who volunteer their service without compensation. The 18 members of the Board are as follows: 19 20 21 22 23 24 25 26 27 28 Dr. Javaid Anwar is the chief executive officer of Quality Care Consultants, LLC. Dr. Anwar is also the president of the Nevada State Board of Medical Examiners and the vice president of Health Care Services for MGM Resorts International. James D. Hammer is a founding principal of StorageOne, the largest privately owned self-storage company in the Las Vegas Valley. Mr. Hammer also founded Westar Development Company and Westar Properties Inc. Justine Harrison, Esq. was a founding member of the staff of the Debtor and served in a variety of progressive leadership roles for the Debtor prior to joining the Board. Before joining NVCI, Ms. Harrison served in management roles in the hospitality and wireless communications industries. 11

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1 2 3 4 5 6 7 8 9 10
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Dr. Ikram U. Khan currently serves as the president of Quality Care Consultants, LLC and is the medical director for MGM Resorts International and Employers Occupational Health.

William Lerner is a principal of Union Gaming Group, a global gaming research and advisory firm with offices in Las Vegas and Macau. Prior to Union Gaming, Mr. Lerner spent 16 years on Wall Street as a financial analyst in equity research.

Heather H. Murren, CFA is a cofounder of the Debtor and the former chairman of the Board. Ms. Murren was formerly a managing director, Global Securities

Research and Economics, of Merrill Lynch and also served on the Financial Crisis Inquiry Commission (FCIC), a 10-member Federal commission established to examine the domestic and global causes of the financial crisis. James J. Murren, CFA is a cofounder of the Debtor. Mr. Murren currently serves as the chairman of the board and chief executive officer of MGM Resorts International. Prior to joining MGM Resorts International, Mr. Murren spent 14 years on Wall Street as a top-ranked equity analyst. John Ritter is chairman of the board and chief executive officer of Focus Property Group, and has been actively involved in the real estate industry for more than 28 years, specializing in investments in land throughout the southwest region of the country, principally in Southern Nevada. Corey Sanders is chief operating officer of MGM Resorts International and oversees the companys wholly owned properties. Mr. Sanders served in other senior management positions with MGM Resorts International prior to becoming chief operating officer. William Scott IV is executive vice president corporate strategy and special counsel of MGM Resorts International. Mr. Scott also serves on the board of MGM China Holdings Limited.

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

12

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1 2 3 4

Michael Yackira, the chairman of the Board, is president and chief executive officer of NV Energy, Inc., a holding company that owns Nevada Power Company and Sierra Pacific Power Company.

The firm of Alvarez & Marsal Healthcare Industry Group, LLC (A&M) has been

5 providing management advisory services to the Debtor since March of 2011 in connection with its 6 operations, finances, and restructuring efforts, all in close consultation with the Board. Effective 7 as of the Petition Date, the Board appointed the following personnel from A&M as officers of the 8 Debtor: (i) George D. Pillari as Chief Restructuring Officer for the Debtor; (ii) Steven Kraus as 9 Chief Financial Officer and Treasuer for the Debtor; (iii) Diane Rafferty as Vice President, 10 Outcomes & Quality for the Debtor; and (iv) Raul Smith, Milen Hayriyan, Erica Lister and Brian
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11 Frank as Assistant Vice Presidents, Finance. 12 The Debtor currently does not have a chief executive officer or a chief operating officer.

13 Julie Kestner, an employee of the Debtor, is the Debtors Vice President, Finance. Lisa Madar is 14 the Debtors Corporate Secretary. 15 C. 16 The Medical Group. There are seven physicians employed by the Medical Group, which is not a debtor. The

17 Medical Group is a Nevada professional corporation, whose stated purpose (according to its 18 amended and restated articles of incorporation) is to provide medical services to support Nevada 19 Cancer Institute [and its] mission . . . . The physicians employed by the Medical Group do not 20 hold any equity interest in the Medical Group. The articles of incorporation for the Medical 21 Group mirror those of a nonprofit entity. The Medical Group was organized for the sole purpose 22 of compliance with the corporate practice of medicine doctrine under Nevada law, at the time it 23 began providing patient care. Under the doctrine, the Debtor was not permitted to directly employ 24 physicians. 25 The shares of the Medical Group are held by Dr. Ikram U. Khan and Dr. Javaid Anwar,

26 two distinguished physicians who are licensed to practice medicine in the State of Nevada and 27 who are members of the Board of the Debtor. Dr. Khan serves as one of two members of the 28 board of directors for the Medical Group, and as president, secretary and treasurer for the Medical 13

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1 Group. Dr. Anwar is the other member of the board of directors for the Medical Group and vice 2 president of the Medical Group. Dr. Khan and Dr. Anwar have not and will not receive any 3 distributions, dividends or compensation on account of the various positions they hold with the 4 Medical Group. 5 The Debtor does not hold an equity interest in the Medical Group, but the activities of the

6 two entities are closely coordinated. All of the managed care contracts for services provided to 7 patients at the Flagship Building and the UMC location are between managed care payor entities 8 and the Medical Group. The Debtor is not a party to any payor contracts. Although the Debtor 9 recently obtained a Medicare provider number, it has not billed any amounts under that number. 10
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Nevertheless, pursuant to a long-established practice, the Medical Group regularly

11 transfers to the Debtor one-hundred percent of the revenues collected from those managed care 12 contracts and Medicare. In turn, the Debtor pays the compensation of, and provides benefits to, 13 the physicians employed by the Medical Group, and handles all billing, administration and 14 management related to patient services provided by those physicians. This longstanding practice, 15 which both the Debtor and the Medical Group intend to continue postpetition has been 16 memorialized in that certain Management Services Agreement dated as of November 2, 2011. 17 D. 18 The Debtors Capital Structure. The Debtors unaudited balance sheet as of September 30, 2011 shows, on a book value

19 basis, the following approximate amounts: assets of $173.6 million, liabilities of $98.9 million, 20 and net assets of $80 million.3 21 The balance sheet reflects the following assets, on a book value basis, in the following

22 approximate amounts: (i) real property of $138 million; (ii) assets limited as to use of $20.4 23 million; (iii) pledge receivables of $18.87 million; (iv) clinical accounts receivable (net of doubtful 24 accounts) of $3.0 million; (v) equipment of $10.7 million; (vi) grant and other receivables of $1.3 25 million; (vii) inventories of $468,000; and (viii) cash of $2.1 million. 26 27 28 14
3

Based on information available to the Debtor, the book value of the assets does not reflect the market value of such assets.

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The balance sheet reflects the following liabilities, on a book value basis, in the following

2 approximate amounts: (i) $91 million in secured debt; (ii) accounts payable of $5.1 million; (iii) 3 other accrued liabilities of $2.0 million; (iv) current lease payments due of $783,000; and (v) other 4 long-term debt of $3.7 million. 5 6 7 1. Secured Debt. a. The Credit Facility.

The Debtor is the borrower under that certain Amended and Restated Credit and

8 Reimbursement Agreement, dated as of April 23, 2008 among the Debtor, Bank of America, N.A. 9 as Administrative Agent (Bank of America or the Agent), JPMorgan Chase Bank, National 10 Association as Syndication Agent, Bank of Scotland PLC and UBS Loan Finance LLC, as CoKLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

11 Documentation Agents and other lenders party thereto (as amended or modified, the Credit 12 Agreement). 13 The Credit Agreement amended and restated the then-existing credit agreement (dated as

14 of December 1, 2003), under which Bank of America, on behalf of the lenders thereunder (the 15 Lenders), had issued a letter of credit (Letter of Credit) to support $50 million in principal 16 amount of public bonds issued by the State of Nevada to fund the construction of the Flagship 17 Building (the Public Bonds). In connection with that amendment and restatement, the Lenders 18 agreed to provide an additional $100 million in credit facilities, consisting of $85 million under a 19 construction facility and $15 million under a revolving facility. 20 As of the commencement of the Debtors Case, the principal balance under the Credit

21 Agreement was approximately $91 million, comprised of approximately $44.4 million in 22 reimbursement obligations in respect of the Letter of Credit (which was drawn in April 2011) and 23 approximately $46.6 million in respect of the construction facility. There were no loans made 24 under the revolving facility and there are no amounts outstanding thereunder. The maturity date 25 under the Credit Agreement was April 23, 2011. As of that date, the Debtor had not reimbursed 26 the Lenders on account of the Letter of Credit draw or repaid the other amounts due under the 27 Credit Agreement. 28 15

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In conjunction with the Credit Agreement, the Debtor entered into that certain Amended

2 and Restated Construction Deed of Trust with Assignment of Rents, Security Agreement and 3 Fixture Filing (Prepetition Deed of Trust) and Security Agreement (BofA Security 4 Agreement), both dated April 23, 2008. The Prepetition Deed of Trust grants a lien in favor of 5 Bank of America, as Agent, to secure the indebtedness under the Credit Agreement, against 6 certain Las Vegas real estate that is owned by the Debtor, including any rents generated from that 7 real estate and all fixtures thereto. 8 The encumbered real estate is comprised of the following: (i) the Flagship Building and the

9 land on which it is situated (Clark County APN 164-13-712-010); (ii) the Ralph and Betty 10 Engelstad Cancer Research Building and the land on which it is situated (Clark County APN 164KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

11 13-618-001) (the Research Building); and (iii) certain vacant land adjacent to the Flagship 12 Building (Clark County APN 164-13-712-015) (the Vacant Land). Additional detail on the 13 Debtors real estate is set forth in section VIII.E.3 below. 14 The BofA Security Agreement grants a lien in favor of Bank of America, as Agent, to

15 secure the indebtedness under the Credit Agreement, against substantially all of the Debtors 16 personal property, including cash, accounts receivable, and a certain cash collateral account 17 established to provide additional collateral to the Lenders in respect of the Credit Agreement (the 18 Cash Collateral Account). As of the commencement of the Debtors Case, the balance of the 19 Cash Collateral Account was approximately $2.8 million. Pursuant to a cash collateral stipulation 20 negotiated between the Debtor and the Lenders, substantially all of the remaining funds will be 21 used to fund operations and administrative expenses during the pendency of this Case. As 22 discussed below in Section VIII.F, certain funds that were previously on deposit in the Cash 23 Collateral Account were consensually released by the Agent and Lenders prepetition, in order to 24 permit the Debtor to continue operating and to reduce debt under the Credit Agreement. 25 26 b. The Administration Building Parcel Loan.

In 2007, the Debtor borrowed approximately $3.7 million (the Administration Building

27 Parcel Loan) from NCI Admin Bldg., LLC (NAB) to acquire a fourth parcel of Summerlin real 28 estate (Clark County APN 164-13-712-020) (the Administration Building Parcel), which serves 16

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1 as security for that loan under a deed of trust in favor of NAB (the NAB Deed of Trust). NAB 2 is an affiliate of The Greenspun Corporation, a Las Vegas-based real estate development 3 company. The Greenspun family and the Greenspun Family Foundation, which are related to that 4 entity, have in the past provided philanthropic support to the Debtor. The Debtor owns the 5 Administration Building Parcel, but its only interest in the administration building itself was a 6 leasehold interest, which was vacated on or before May 18, 2011. As of the Petition Date, the 7 outstanding balance of the Administration Building Parcel Loan was approximately $3.7 million. 8 9 c. Oncology Supply.

Oncology Supply is the Debtors principal provider of oncology medication. Oncology

10 Supply and the Debtor are parties to a certain Application for New Account, the terms and
KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

11 conditions of which include the grant of a security interest on substantially all of the Debtors 12 personal property to secure the Debtors existing and future liabilities to Oncology Supply. On 13 October 5, 2009, Oncology Supply filed a UCC-1 financing statement with the Nevada Secretary 14 of State asserting a security interest in all assets of the Debtor.4 As such, it appears that the 15 security interests Oncology Supply may assert in assets of the Debtor are junior and subordinate to 16 those of the Agent, whose claims exceed $91 million substantially more than the value of the 17 Debtors assets. As of the Petition Date, the Debtor estimates that it owes Oncology Supply 18 approximately $500,000, a substantial portion of which is on account of goods delivered with 20 19 days of the commencement of the case. The Debtors cash collateral budget (the Budget) 20 provides for Oncology Supply to be paid in full during this chapter 11 case. 21 22 d. The CMS Claim.

NVCI has identified a potential error in certain billing practices related to clinical drug

23 trials that may have resulted in the receipt of overpayments from the Center for Medicare and 24 Medicaid Services (CMS). NVCI self-reported these potential overpayments to the Department 25 of Health and Human Services in July 2011. CMS has not conducted any reconciliations with 26 27 28 17
4

Oncology Supply does not have a control agreement or otherwise exercise control over any of the Debtors deposit accounts.

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1 respect to NVCI and there has not been any determination of liability by CMS related to the 2 overpayments. 3 In addition to asserting a Claim against the Debtor, CMS could assert a right of offset or

4 recoupment in the future against accounts receivable owed to NVCI. It is not clear whether 5 CMSs claim for offset or recoupment would be discharged by confirmation of the Plan. The 6 Budget provides for payment of the overpayments as determined by the Debtor. 7 8 2. Unsecured Debt.

As of shortly before the Petition Date, the Debtor had unsecured accounts payable due and

9 owing in respect of goods and services utilized in the ordinary course of its business of 10 approximately $5.5 million.5 In addition, as of the Petition Date, the Debtor: (a) had unsecured
KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

11 obligations in respect of prepetition employee compensation, related payroll taxes and accrued 12 obligations under certain of its employee benefit programs, (b) had pending against it litigation by 13 certain former NVCI employees asserting claims against the Debtor, and (c) had certain contingent 14 and/or unmatured obligations under executory contracts and unexpired leases. 15 Although the Debtor is not aware of any amounts outstanding thereunder, the Debtor is a

16 party to a certain Finance Agreement and Promissory Note dated as of December 23, 2003, 17 pursuant to which the Debtor borrowed $50 million from the Director of the State of Nevada 18 Department of Business and Industry, representing the proceeds of the public bonds issued to fund 19 construction of the Flagship Building. As noted above, the indenture trustee for the Public Bonds 20 made a draw on the Letter of Credit in April 2011, to satisfy the debt outstanding under the Public 21 Bonds. On or about April 15, 2011, Bank of America invoiced the Debtor in respect of its 22 obligation to reimburse the Lenders for that draw. 23 24 25 26 27 28 18
5

Claims that are not related to goods and services utilized in the ordinary course of business, such as the Lenders deficiency claims, are not included in this approximate amount.

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1 E. 2 3

Assets. 1. Unrestricted Cash.

As of shortly before the commencement of the Debtors Case, the Debtor had Unrestricted Cash comprises

4 approximately $226,742 in Unrestricted Cash on deposit.

5 revenues, charitable donations that are not held in trust or otherwise subject to restrictions that 6 would prevent such funds from being used to fund the Debtors operations, and funds released 7 from the Cash Collateral Account by the Agent for use in operations. Unrestricted cash does not 8 include the funds presently on deposit in the Cash Collateral Account, the Engelstad Endowment 9 Fund, the Patient Cares Committee Fund, the Saffer Endowment Fund, and the Other Donor 10 Restricted Funds, which terms are defined and described below (to the extent not defined above).
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11 12 13

2.

Restricted Cash/Trust Funds. a. Cash Collateral Account.

As noted, the balance of the Cash Collateral Account as of shortly before the

14 commencement of this Case was approximately $2.8 million. 15 16 b. Engelstad Endowment Fund.

The Debtor is the beneficiary of the Engelstad Endowment Fund, a $15 million

17 endowment fund given by the Engelstad Family Foundation, subject to the terms of that certain 18 agreement dated January 4, 2007, between the Debtor and the Engelstad Family Foundation (the 19 Gift Agreement). The Gift Agreement authorizes the Debtor to use the interest generated by the 20 principal in the Engelstad Endowment Fund only to establish and support a lung cancer program. 21 If the interest earned on the Engelstad Endowment Fund cannot be used for the approved

22 charitable purposes, the Gift Agreement provides that the Engelstad Endowment Fund and all 23 income earned thereon reverts to the Engelstad Family Foundation, for such other charitable 24 purposes as the foundation may, in its sole discretion, determine and direct. Until shortly before 25 26 27 28 19

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1 the filing of the Debtors voluntary petition, the charitable trust funds comprising the Engelstad 2 Endowment Fund were maintained in two segregated bank accounts of the Debtor.6 3 The Gift Agreement was modified as of November 15, 2011 by that certain First

4 Amendment to Gift Agreement (the Gift Amendment) to provide that the Engelstad Endowment 5 Fund (including the interest thereon) will serve as a financial backstop for a substantial portion of 6 the Philanthropic Commitment (as defined in section VIII.G below) to UCSD. Specifically, to the 7 extent the Debtor does not succeed in raising the funds necessary to make each payment required 8 in respect of the Philanthropic Commitment to UCSD, the shortfall will be satisfied from the 9 interest and principal of the Engelstad Endowment Fund. Any amounts not expended for this 10 purpose shall be used for the original purpose of the Engelstad Endowment Fund.
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11

The funds comprising the Engelstad Endowment Fund were transferred to an escrow in

12 accordance with the Gift Amendment shortly before the commencement of the Debtors Case. 13 14 c. Patient Cares Committee Fund.

The Debtor has possession of approximately $176,711 in donor-restricted funds

15 comprising the Patient Cares Committee Fund. These funds were solicited and donated for the 16 express charitable purpose of providing financial aid to Nevada cancer patients in need. Among 17 other things, these funds have been used in the past to fund insurance premiums, COBRA 18 payments, and treatment-related transportation costs for patients that are in need of cancer 19 treatment, but have little or no means to pay expenses due to their employment and/or financial 20 status. The funds comprising the Patient Cares Committee Fund are maintained in a segregated 21 bank account as charitable trust funds. 22 23 d. The Saffer Endowment Fund.

The Debtor has possession of approximately $350,000 pursuant to a certain Gift

24 Agreement executed in December 2008 (the Saffer Endowment Agreement) establishing the 25 Sandra and Morton Saffer Cancer Research Endowment Fund (the Saffer Endowment Fund). 26 27 28 20
6

One of these two accounts still holds the funds comprising the Saffer Endowment Fund, described below.

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1 Pursuant to the Saffer Endowment Agreement, the Debtor is permitted to use the net investment 2 income from this fund for specified cancer research purposes. The Saffer Endowment Agreement 3 provides that if the Debtor ceases to fund or pursue cancer research, the funds comprising the 4 Saffer Endowment Fund shall be transferred to another entity that delivers cancer research as a 5 primary objective. The funds comprising the Saffer Endowment Fund are maintained in a

6 segregated bank account as charitable trust funds. 7 8 e. Other Donor-Restricted Funds.

In addition to the foregoing, the Debtor is holding approximately $1.7 million in other These funds constitute charitable

9 donor-restricted funds (Other Donor-Restricted Funds).

10 donations, grants, scholarships and other funds that are subject to donor-imposed restrictions on
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11 their use. These restricted charitable funds were transferred to the Debtor, subject to these 12 restrictions, by approximately 30 different entities, most of which are charitable or educational 13 institutions. The Other Donor-Restricted Funds, which have been treated by the Debtor as

14 charitable trust funds, are on deposit in a segregated bank account. 15 16 17 3. Real Estate. a. The Flagship Building.

The Flagship Building comprises a 142,000 square foot structure situated on a 5.67 acre lot

18 located at One Breakthrough Way, Las Vegas, NV 89135. The Debtor owns both the land and the 19 building. The building was designed and outfitted for the diagnosis and treatment of cancer 20 patients on an outpatient basis and related research activities. The Flagship Building is home to a 21 medical oncology suite, a radiation oncology suite, a pathology lab, research laboratories, a 2422 seat chemotherapy suite, a cafeteria, a library, administrative space, and a specialty boutique 23 aimed at the needs and comfort of cancer patients. The Flagship Building is subject to the 24 Prepetition Deed of Trust. The Flagship Building was custom-built to house the foregoing

25 facilities and is not suited for purposes other than cancer treatment and research. 26 The Debtor purchased the underlying parcel from Howard Hughes Properties, Inc. The real property is subject to a variety of covenants, conditions and

27 (HHP) in 2003.

28 restrictions regarding use of the real estate. These include restrictions granted for the respective 21

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1 benefit of each of HHP and the UHS Holding Company, Inc. (UHS). UHS is affiliated with 2 Universal Health Services, Inc., a subsidiary of which owns and operates Summerlin Hospital 3 Medical Center. HHP and/or UHS assert that use of this real estate is limited by those restrictions 4 to that of a nonprofit cancer treatment and research center, and UHS asserts that the real property 5 may not be utilized for in-patient care. 6 7 b. The Research Building.

The Research Building comprises a 184,000 square foot structure situated on a 5.09 acre

8 lot located at 10530 Discovery Drive, Las Vegas, NV 89135. The Debtor owns both the land and 9 the building. The three-story structure with a full basement contains 24 biosafety level (BSL)-2 10 laboratories. One floor of the Research Building has not yet been built out.
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11

The Research Building is named in honor of Ralph and Betty Engelstad, in recognition of a

12 $20 million gift from the Engelstad Family Foundation in honor of Mr. Engelstad, the long-time 13 owner of the Imperial Palace, who died of lung cancer in 2002, of which $15 million has been 14 funded to date. On or before May 18, 2011, most of the Debtors research activities were moved 15 to the Flagship Building. The Debtor is informed that HHP and/or UHS assert that use of this real 16 estate is limited to research and that UHS asserts that the real property may not be utilized for in17 patient care. The Research Building is subject to the Prepetition Deed of Trust. 18 19 c. The Vacant Land.

The Vacant Land, which is adjacent to the Flagship Building, comprises 9.24 acres that

20 were purchased from HHP in 2005. HHP and/or UHS assert that use of this real estate is limited 21 in the same manner as the Flagship Building. The Vacant Land also is subject to the Prepetition 22 Deed of Trust. 23 24 d. The Administration Building Parcel.

The Debtor owns the Administration Building Parcel, but not the structures situated on that

25 land. The Debtors acquisition of the Administration Building Parcel was part of a related series 26 of transactions in which: (i) the Debtor leased the Administration Building Parcel to NAB, (ii) 27 NAB agreed to construct a three-story administrative services building (the Administration 28 Building) and a 500-space parking structure (the Parking Structure) on that parcel, and (iii) the 22

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1 parties agreed that the Debtor would lease a substantial portion of the Administration Building and 2 Parking Structure (the Administration Building Lease). 3 Pursuant to these agreements, NAB constructed and currently owns the Administration

4 Building and Parking Structure. In order to finance the construction, NAB obtained a loan from 5 Wells Fargo Bank, N.A. (Wells Fargo) in an original principal amount of $30 million, the 6 balance of which is $21 million. In connection with that transaction, Wells Fargo obtained a deed 7 of trust against the Administration Building Parcel (Wells Fargo Deed of Trust) and a 8 subordination of the NAB Deed of Trust against that parcel. Wells Fargo also took an assignment 9 of rents from NAB under the Administration Building Lease. 10
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HHP asserts that use of this real estate is limited to that of a commercial office building, of

11 which 60% of the leasable space is to be occupied by the Debtor for administrative use, and only 12 40% by third parties, and that UHS asserts no more than 20% of the leaseable space may be used 13 for medical purposes. 14 Pursuant to the Administration Building Lease, the Debtor previously occupied a portion

15 of the Administration Building to house staff members from a variety of administrative 16 departments. On or about April 19, 2011, American Nevada Realty, an affiliate of NAB, served a 17 certain Five (5) Day Notice to Quit or Pay Rent, asserting that $144,732.33 was in default under 18 the Administration Building Lease and demanded payment. The Debtor did not pay that amount 19 and has not paid any amount to NAB since then. 20 On or before May 18, 2011, the Debtor moved its personnel out of the Administration

21 Building, surrendered possession of the Administration Building, and consolidated its operations 22 into the Flagship Building. 23 Building. 24 On or about November 12, 2011, American Nevada Company, LLC, on behalf of NAB, The Debtor no longer occupies any part of the Administration

25 issued a letter purporting to exercise rights under the Administration Building Lease to treat the 26 Debtors payment default under the Lease as an election by the Debtor to purchase the structures 27 on the Administration Building Parcel and pay NAB over $39 million under a separate option 28 23

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1 agreement to which NAB and the Debtors are parties. The Debtor reserves all of its rights with 2 respect to this asserted liability. 3 The Debtor filed a motion to reject the Administration Building Lease on the Petition Date,

4 pursuant to Bankruptcy Code section 365. 5 6 e. The Alta-Hualapai Parcel.

Pursuant to an act of Congress Section 2603 of the Omnibus Public Land Management

7 Act of 2009 (Act) the United States, through the Bureau of Land Management, granted to the 8 Debtor approximately 19 acres of undeveloped land near the intersection of Alta Drive and 9 Hualapai Road, in the City of Las Vegas, for the development of a nonprofit cancer institute (the 10 Alta-Hualapai Parcel). This parcel is subject to reversion to the Bureau of Land Management if
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11 (i) it is not owned by the Debtor, or (ii) it is not used for this specified purpose. At this time, the 12 Alta-Hualapai Parcel remains undeveloped. This parcel is not subject to any lien or deed of trust, 13 other than a lien for real property taxes. 14 F. 15 Events Leading to the Debtors Restructuring and Chapter 11. Like many nonprofit organizations across the country and many providers of medical

16 services generally (not-for-profit and for-profit), the Debtor has been facing significant financial 17 pressures. These pressures arise from the protracted decline in the economy, decreases in medical 18 reimbursement rates from managed care payor entities, increases in operational costs, decreases in 19 the amount and availability of charitable donations, a reduction in research funding opportunities 20 and increased competition. 21 According to the Debtors unaudited statement of operations and changes in net assets

22 (Operating Statement), for the 12 months ended December 31, 2010, the Debtor generated 23 unrestricted revenues and other support, including federal grants, state grants, and other grants, of 24 approximately $49.9 million and had expenses of approximately $73.4 million, resulting in a loss 25 from operations of approximately $23.4 million. By contrast, the Debtors audited Operating 26 Statements for 2009 and 2008 reflect income from operations of approximately $706,000 and 27 approximately $2.5 million, respectively. These financial statements likewise reflect that the 28 Debtor generated approximately $2.9 million in temporarily restricted donations, grants and 24

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1 investment income during 2010, down from approximately $4.8 million and $20.0 million in 2009 2 and 2008, respectively. 3 Beginning in 2010, the Debtor sought to address its financial situation by pursuing a

4 strategic partnership or other transaction. In March 2010, the Debtor engaged Cain Brothers, an 5 investment banking firm with particular expertise in the healthcare industry, to locate a suitable 6 strategic partner or other transaction. During the following one-year period, Cain Brothers

7 conducted a search for potential strategic partners or other transactions and helped to conduct due 8 diligence. During that period, the Debtor engaged in negotiations with several parties, but

9 ultimately was not able to reach an agreement on a transaction with any of them. 10
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By March 2011, the Debtor was facing an acute liquidity shortage and the prospect that the

11 Debtor would default under both its Credit Agreement and the indenture governing the Public 12 Bonds. In response to these developments, the Debtor retained A&M to assess the Debtors 13 operations, develop a business plan for stabilizing the Debtors liquidity situation, assist the 14 Debtors counsel in negotiating a forbearance with the Lenders, and assist the Debtor in 15 developing a restructuring aimed at maximizing value and preserving the philanthropic mission of 16 the Debtor (including maintaining high quality patient care). 17 Working together with A&M and the Debtors counsel, the Debtor negotiated a

18 forbearance agreement dated March 29, 2011, which agreement thereafter was amended on April 19 25, 2011 and July 18, 2011 (as amended from time to time, the Forbearance Agreement). 20 Pursuant to the Forbearance Agreement and the subsequent Plan Support Agreement (defined and 21 discussed below), the Agent and the consenting lenders agreed to forbear from exercising 22 remedies through the Petition Date. Pursuant to those agreements, as well as certain written 23 consents (the Consents) the Agent released an aggregate $8.55 million from the Cash Collateral 24 Account to fund the Debtors operating losses, including its restructuring costs prior to the 25 bankruptcy filing. 26 At the insistence of the Board, the Forbearance Agreement also included a commitment by

27 the Agent to release millions of dollars of additional funds from the Cash Collateral Account in 28 25

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1 order to conduct an orderly wind down of the Debtors operations and preserve patient safety in 2 the event a liquidation became necessary. 3 Pursuant to the foregoing agreements with the Agent and the Lenders, the Debtor was

4 required to: (i) obtain an additional $2.5 million in charitable donations that could be used to fund 5 operations; (ii) limit its expenditures to those specified in a budget developed by A&M and 6 approved by the Agent; (iii) agree to the release of an aggregate $11.5 million from the Cash 7 Collateral Account to permanently reduce the outstanding indebtedness under the Credit 8 Agreement (i.e. to its current principal balance of approximately $91 million); (iv) implement an 9 operational restructuring plan that was developed by A&M; and (v) develop a contingency plan 10 for winding down the Debtors operations if its efforts to find a strategic partner were not
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11 successful. The Debtor satisfied all of these requirements. 12 The operational restructuring, which was approved by the Board and implemented

13 beginning on April 8, 2011, involved: (i) the reduction of research activities that were not funded 14 by outside sources; (ii) the discontinuation of services that were not economically self-sustaining; 15 (iii) the termination of certain physicians whose salaries and other costs were not economically 16 justified by the size or profitability of their practice; (iv) the reduction of operating costs through 17 the outsourcing, downsizing, elimination and/or consolidation of employment positions; (v) the 18 consolidation of all operations into the Flagship Building by vacating both the Administration 19 Building and the Research Building; and (vi) the elimination of the employer match component of 20 the 401(k) and 403(b) retirement plans. 21 In the aggregate, the operational restructuring involved the termination of approximately

22 160 employees of NVCI, all of whom were given notice on April 8, 2011, and most of whom were 23 terminated as of that date. A relatively small number of those terminations were effectuated in 24 subsequent weeks. 25 The operational restructuring was designed to, and ultimately succeeded in, quickly

26 bringing expenses more in line with revenues, reducing operating expenditures by at least $10 27 million on an annualized basis, and permitting a slimmed-down organization to continue its 28 important work, while it developed a solution to its financial situation. 26

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1 G. 2

The UCSD Sale. In April 2011, the Debtor and Cain Brothers mutually terminated their investment banking

3 relationship, and the Debtor hired a new investment banking team at J.P. Morgan Securities LLC 4 (JP Morgan), which team specializes in transactions in the not-for-profit healthcare field. JP 5 Morgan assisted with the preparation of a confidential information memorandum, surveyed the 6 marketplace to identify potentially interested parties and reached out to those parties it determined 7 were most likely to be interested in a transaction with the Debtor. 8 In the aggregate, JP Morgan contacted approximately 20 public and private entities, three

9 of which executed non-disclosure agreements and received confidential information memoranda. 10 Several entities also conducted site visits. As part of its comprehensive process, JP Morgan
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11 identified and reached out to parties who might have interest in acquiring the Debtors real estate, 12 in addition to parties interested in its operations. The level of interest in the Debtor and its assets, 13 however, was very limited. The Debtors principal assets (i.e., cancer treatment and research 14 buildings) are highly specialized, subject to significant land use restrictions (as noted above), and 15 simply are not in great demand particularly in the current economic climate. 16 Nevertheless, as a result of these efforts, two entities interested in the Debtors clinical and

17 research operations conducted due diligence and thereafter presented the Debtor with written 18 expressions of interest. On July 25 and 26, 2011, these two entities made presentations regarding 19 their respective proposals to a group comprised of members of the Board, the Debtors counsel, JP 20 Morgan representatives, and A&M. At the request of the Agent, a subsequent meeting was held 21 with one of those entities the following week. Based upon these meetings, representatives of JP 22 Morgan and the Debtor thereafter negotiated with both entities in an effort to improve their 23 respective proposals and negotiate a mutually acceptable, non-binding letter of intent setting forth 24 the material terms of a transaction. These negotiations continued throughout August 2011. 25 As a result of these efforts, and with the input of the Agent and Lenders, the Board

26 determined to proceed with the acquisition proposal presented by The Regents of the University of 27 California (the Regents) on behalf of its UC San Diego Health System (UCSD), pursuant to 28 that certain executed Letter of Intent dated August 30, 2011 (the Letter of Intent). The Letter of 27

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1 Intent indicates the parties mutual interest in negotiating a transaction under which UCSD would 2 acquire the Flagship Building and substantially all of the Debtors assets, properties and rights 3 relating to the Debtors cancer business at the Flagship Building, and certain other assets, for $18 4 million in cash (subject to higher and better offers) pursuant to Bankruptcy Code section 363 (the 5 UCSD Sale). The Letter of Intent contemplates that UCSD will use those assets to operate a 6 nonprofit cancer center and continue the philanthropic mission of the Debtor. 7 A critical component of the Letter of Intent was the Debtors commitment to raise up to

8 $15 million in philanthropic support over a five-year period to support UCSDs efforts post9 closing. UCSD was not willing to proceed without this philanthropic commitment. 10
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Following execution of the Letter of Intent, the Debtor and UCSD engaged in extensive

11 negotiations regarding the form of a definitive asset purchase agreement for the proposed UCSD 12 Sale (Asset Purchase Agreement). These negotiations were undertaken in good faith and at 13 arms length. In accordance with the terms of the Plan Support Agreement (defined in Section 14 VIII.H below), the Agent and the Lenders were given an opportunity to review and comment on 15 drafts of the Asset Purchase Agreement, and the Approving Lenders (as such term is defined in the 16 Plan Support Agreement) agreed to the form of Asset Purchase Agreement negotiated by the 17 Debtor and UCSD. 18 One significant issue that arose in connection with negotiation of the Asset Purchase

19 Agreement was the amount of the Debtors philanthropic commitment to UCSD. Although the 20 Letter of Intent contemplated an aggregate philanthropic commitment of $15 million over 5 years, 21 UCSD subsequently required that such commitment total $20.8 million over that period, as 22 specified in the Funding Agreement entered into in connection with the Asset Purchase 23 Agreement (the Philanthropic Commitment). 24 Another significant issue was the requirement of UCSD that a substantial portion of the

25 Philanthropic Commitment be backed by some form of financial assurance. The Debtor did not 26 (and does not) have a means of providing such assurance on its own. Given the Debtors present 27 financial circumstances, and the prospect that the cancer services at the Flagship Building will 28 need to be shut down if the Debtor cannot timely consummate the UCSD Sale, the Engelstad 28

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1 Family Foundation agreed that the $15 million Engelstad Endowment Fund would serve as a 2 financial backstop for a substantial portion of the Philanthropic Commitment, as specifically set 3 forth in the Gift Amendment and the Funding Agreement. See also Section VIII.E.2.b above. As 4 noted above, in accordance with the Gift Amendment, the Debtor transferred the funds comprising 5 the Engelstad Endowment Fund into an escrow account. 6 Additionally, the Plan Support Agreement required a deposit by UCSD in an amount

7 necessary to protect the Debtor in the event of a breach of the Asset Purchase Agreement by 8 UCSD. The Debtor, the Agent and the Lenders were concerned that cash that would be necessary 9 and otherwise available for a possible orderly wind-down of the Debtors operations would be 10 used for the Debtors operations over the time necessary to pursue the sale to UCSD. The Asset
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11 Purchase Agreement now requires UCSD to fund a $1.8 million deposit into escrow upon entry of 12 an order of the Court approving bidding procedures and a break-up fee in favor of UCSD (the 13 Deposit). The Deposit is part of the purchase price to be paid by UCSD, and will be credited 14 against the amount due at the closing of the UCSD Sale. See Asset Purchase Agreement, 2.1. 15 The Asset Purchase Agreement provides for refund of the Deposit to UCSD upon termination of 16 the Asset Purchase Agreement, provided, however, that if the Asset Purchase Agreement is 17 terminated by the Debtor upon breach of or failure to perform in any material respect (which 18 breach or failure cannot be or has not been cured within 30-days after the giving of notice of such 19 breach or failure) any representation, warranty, covenant or agreement on the part of UCSD set 20 forth in the agreement such that a condition precedent to the Debtors obligation to perform under 21 the Asset Purchase Agreement stated in section 8.2 of the agreement would not be satisfied, the 22 Deposit shall remain in escrow pending (i) the escrow agents receipt of a joint letter of instruction 23 executed by both the Debtor and UCSD, or (ii) entry of an order of the Court regarding the 24 disposition of the Deposit based on a determination by the Court of the actual damages caused by 25 UCSDs breach or failure to perform. See Asset Purchase Agreement, 8.2, 10.1(h) and 10.2(b). 26 The Asset Purchase Agreement was executed on December 2, 2011 and on December 2,

27 2011, the Debtor filed its voluntary chapter 11 petition in the Court, in order to implement the 28 UCSD Sale, and to seek confirmation of a chapter 11 plan with respect to its remaining assets. 29

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1 H. 2

The Plan Support Agreement. In conjunction with its negotiation of the Letter of Intent, the Debtor also entered into

3 negotiations with the Agent and the Lenders regarding the restructuring of the Debtors 4 obligations to the Lenders, the disposition of those assets that are not included in the UCSD Sale, 5 and the reorganization of the Debtor as a go-forward, philanthropic entity. These negotiations 6 resulted in the execution of that certain Plan Support Agreement dated September 16, 2011 which 7 incorporates as an exhibit a certain term sheet setting forth the material terms upon which the 8 Lenders would support such efforts (as such agreement has been and may subsequently be 9 amended, the Plan Support Agreement). The Plan Support Agreement and the all amendments 10 and exhibits thereto are collectively attached hereto as Exhibit 3. The Plan Support Agreement
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11 was executed by the Debtor, the Agent and seven of eight Lenders (the Consenting Lenders) 12 holding in excess of 80% of the debt. 13 Pursuant to the Plan Support Agreement and the Consents, the Agent and the Consenting

14 Lenders extended the forbearance period under the Forbearance Agreement through the filing of 15 this Case and released the additional sum of $2.75 million from the Cash Collateral Account to 16 fund the Debtors operations and restructuring expenses through the Petition Date (for a total of 17 $8.55 million release since the Forbearance Agreement was first executed). Additional funds will 18 be released from the Cash Collateral Account, to be used in accordance with the Budget, after 19 UCSD funds into escrow the $1.8 million Deposit pursuant to the Asset Purchase Agreement. The 20 projections underlying the Budget do not provide for continued operations at the Flagship 21 Building or the UMC location after January 20, 2012, the anticipated closing of the UCSD Sale. 22 Importantly, by the Plan Support Agreement, the Agent and the Consenting Lenders have

23 consented to the proposed sale to UCSD provided that they receive $18 million in immediately 24 available funds upon the consummation of the sale and that the terms of the sale otherwise 25 conform to the Letter of Intent, and provided that the Agent has the right to consent to the 26 procedures for such sale, the terms of any auction and the form and substance of any order 27 approving such sale. In addition, subject to certain terms and conditions specified in the Plan 28 Support Agreement, the Consenting Lenders agreed to, among other things: (i) support the Plan; 30

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1 (ii) not to vote for, consent to, support or participate in the formulation of any plan of 2 reorganization other than the Plan; (iii) not to take any action that could delay successful 3 implementation of the UCSD Sale, the restructuring of the Debtor, or the transactions 4 contemplated under the Plan; and (iv) not to object to the solicitation of the Plan, support any such 5 objection by a third party or otherwise take any action that would materially delay the 6 confirmation or consummation of the Plan. The Debtor is required to comply with the various sale 7 and Plan confirmation milestones set forth in the Plan Support Agreement, unless such milestones 8 are extended in accordance with the Plan Support Agreement. Specifically, the Plan Support 9 Agreement could terminate if the Confirmation Order is not entered one-hundred twenty (120) 10 calendar days after the Petition Date or the Effective Date of the Plan does not occur within thirty
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11 (30) calendar days following entry of the Confirmation Order. 12 Under the terms of the Plan Support Agreement, the Consenting Lenders have agreed: (i)

13 to accept the $18 million of cash proceeds from the UCSD Sale at closing as a condition to 14 releasing the liens on the assets sold; and (ii) to accept the Research Building Note in satisfaction 15 of the Lenders remaining secured debt, pursuant to the Plan. Additionally, if Class 4 (General 16 Unsecured Claims) votes to accept the Plan, the Consenting Lenders have agreed that the Agent 17 and Lenders will not receive any consideration from the distribution to be made to Class 4 on 18 account of the Lender Deficiency Claims. 19 I. 20 Overview of the Plan. The Plan represents the culmination of the Debtors restructuring effort. After undertaking

21 a significant operational restructuring pre-petition, effectuating a sale of the Flagship Building and 22 certain other assets to UCSD, the Debtor is poised to consensually restructure its remaining 23 obligations to the Lenders pursuant to the Plan and emerge from chapter 11 expeditiously. 24 The Plan provides for the Debtor to continue as a philanthropic entity, to preserve the

25 Debtors important mission of increasing cancer knowledge and funding cancer research and 26 treatment. After emerging from chapter 11, the Reorganized Debtor will continue to hold and 27 maintain certain assets for future use, including the Research Building, the Alta-Hualapai parcel, 28 and the Vacant Land and will explore ways to potentially utilize these assets for the public good. 31

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1 The Reorganized Debtor will also fundraise in support of UCSD. The Reorganized Debtor will 2 use charitable donations to cover its annual carrying costs, including maintenance of its real 3 property, the required payments to the Lenders under the Research Building Note (as defined 4 below), and compensation of an employee to assist the Reorganized Debtor with fundraising and 5 administrative needs. The Debtor expects to have obtained a fundraising commitment prior to the 6 Effective Date that will provide at least one year of funding for the Reorganized Debtor. 7 As discussed above, the Engelstad Endowment Fund will be kept in escrow as a backstop

8 to the Reorganized Debtors Philanthropic Commitment to UCSD, and any funds remaining in the 9 escrow at the end of each year in excess of the Reorganized Debtors fundraising commitment will 10 revert back to the Reorganized Debtor to be used for Engelstad Endowment Fund purposes. The
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11 Reorganized Debtor will have ample funding from a variety of sources, and will emerge a 12 streamlined, self-sufficient entity capable of functioning outside of chapter 11. 13 J. 14 15 The Chapter 11 Case. 1. First Day Motions.

On the Petition Date, the Debtor Filed a number of emergency motions designed primarily

16 to minimize the impact of the chapter 11 filings on the Debtors operations and to facilitate the 17 Debtors compliance with the requirements of chapter 11. Specifically, the Debtor Filed the 18 following motions: 19 20 21 22 23 24 25 26 27 28 32 Emergency Motion for Interim and Final Use of Cash Collateral; Emergency Motion for Order Pursuant to Local Bankruptcy Rule 4001(c) Authorizing the Debtor to Pay Outstanding Employee Compensation and Honor Obligations Associated With Employee Benefit Programs And Policies; Emergency Motion Pursuant to Local Bankruptcy Rule 4001(c) for Order Establishing Notice Procedures and Permitting Debtor and Debtor in Possession to Serve Insured Depository Institutions by First-Class Mail; Emergency Motion Pursuant to Local Bankruptcy Rule 4001(e) for Order Authorizing Maintenance of Certain Prepetition Bank Accounts and Related Relief;

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Emergency Motion for Interim and Final Orders Pursuant to Local Bankruptcy Rule 4001(c) for Order Determining Adequate Assurance of Payment for Postpetition Utility Services;

Emergency Motion for Interim and Final Orders Pursuant to Local Bankruptcy Rule 4001(c) for Order Regarding Patient Care Ombudsman Under Section 333(a)(1) of the Bankruptcy Code; and

Emergency Motion Pursuant to Local Bankruptcy Rule 4001(c) For Order (1) Fixing Deadlines for Filing Proofs of Claim; (2) Establishing Consequences of Failing to Comply Therewith; and (3) Approving Form and Manner of Notice Thereof.

11

Detailed information regarding each of the above-listed motions is not contained in this

12 Disclosure Statement. These pleadings may be obtained by accessing PACER through the Courts 13 website (http://www.nvb.uscourts.gov), by accessing the website maintained by Kurtzman Carson 14 Consultants LLC (http://www.kccllc.net/NevadaCancerInstitute), or by sending a written request 15 to Klee, Tuchin, Bogdanoff & Stern LLP, Attn: Courtney E. Pozmantier, Esq., 1999 Avenue of the 16 Stars, 39th Floor, Los Angeles, CA 90067, Facsimile: (310) 407-9090. 17 18 2. Use of Cash Collateral.

Shortly before the Petition Date, the Debtor reached agreement with the Agent and the

19 Lenders on the terms of a stipulation permitting the Debtors use of cash collateral on a consensual 20 basis during the Case (the Cash Collateral Stipulation). Use of cash collateral is of vital 21 importance to the Debtors continuing ability to ensure patient safety and operate and maintain its 22 business. Under the Cash Collateral Stipulation, the Debtor will fund its pre-sale operations, and 23 the costs and expenses of this chapter 11 Case in accordance with the agreed-upon budget under 24 the Cash Collateral Stipulation (i.e. the Budget). Accordingly, the Debtor will be able to continue 25 operations and preserve its going concern value pending the sale to UCSD. The Budget provides 26 that the remaining funds in the estate will be used to fund solicitation, confirmation and 27 implementation of the Plan. 28 33

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1 2

3.

Appointment of the Creditors Committee.

Information regarding appointment of an Official Committee of Unsecured Creditors (the

3 Creditors Committee) and any professionals retained by any Committee may be obtained by 4 accessing PACER through the Courts website (http://www.nvb.uscourts.gov) or by contacting the 5 U.S. Trustee. 6 7 4. The UCSD Sale.

As contemplated by the Asset Purchase Agreement and the Plan Support Agreement, the

8 Debtor filed a motion on the Petition Date requesting that the Court (i) schedule a hearing on 9 approval of the UCSD Sale, (ii) approve procedures for the submission and consideration of 10 competing bids and the conduct of an auction in the event a qualified bid is received, (iii) approve
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11 the form and scope of notice associated with the sale, and (iv) authorize the break-up fee and 12 expense reimbursement for UCSD provided for in the Asset Purchase Agreement. Confirmation 13 of the Plan is conditioned on the closing of the UCSD Sale. 14 15 5. Pleadings Relating to the Plan and Disclosure Statement.

To facilitate the prompt confirmation and consummation of the Plan, the Debtor filed a

16 motion shortly after the Petition Date seeking an order of the Court (i) approving this Disclosure 17 Statement and related solicitation procedures, and (ii) scheduling a hearing on confirmation of the 18 Plan and related briefing and objection deadlines (the Solicitation Procedures Motion). The 19 Debtor also filed a request for an administrative order scheduling a hearing on the adequacy of the 20 Disclosure Statement and the Solicitation Procedures Motion on or before January 30, 2011. 21 22 23 6. Leases and Executory Contracts. a. Assumed/Rejected Leases and Executory Contracts.

As of the Petition Date, the Debtor was a lessee under several unexpired leases of non-

24 residential real property and party to hundreds of executory contracts and personal property leases. 25 The Debtor sought to reject certain of these leases and contracts as part of its first-day relief: 26 27 28 The executory contract between the Debtor and The Advisory Board Company; The sublease between the Debtor and Catholic Healthcare West, dba Saint Marys Regional Medical Center; 34

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The executory contract between the Debtor and OnTargetJobs, Inc., dba HEALTHeCAREERS;

The executory contract between the Debtor and Time Warner Telecom Holdings Inc.;

The executory contract between the Debtor and Tractmanager Inc., a Delaware corporation also known as MediTract Inc.; and

The lease between the Debtor and NCI Admin Bldg., LLC.

In addition, under the Asset Purchase Agreement, UCSD has the right to designate the

9 agreements that will be assumed and assigned to it as part of the sale. The Debtor will file with 10 the Bankruptcy Court and serve on the non-debtor parties to executory contracts and unexpired
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11 leases that may be assumed and assigned in connection with the proposed sale a Cure Notice: (a) 12 indicating the Debtors estimate of the amounts, if any, required to satisfy the cure and 13 compensation requirements of Bankruptcy Code section 365(b)(1) (Cure Costs) with respect to 14 such contracts and leases, (b) providing notice that UCSD or another qualified bidder may propose 15 to take an assignment of any of the contracts and leases, (c) identifying those particular contracts 16 and leases that UCSD proposes, at such time, to have assigned to it and (d) providing notice of the 17 deadline for responses or objections to the proposed assumption and assignment of the contracts 18 and leases and/or the Cure Costs with respect thereto. 19 20 b. Other Leases and Executory Contracts.

The Debtor is analyzing its remaining agreements that are subject to Bankruptcy Code The Debtor will make decisions

21 section 365 to help make assumption/rejection decisions.

22 regarding assumption or rejection of its remaining executory contracts and unexpired leases under 23 the Plan and will file the Schedule of Assumed Agreements and Schedule of Rejected Agreements 24 to reflect such decisions. 25 26 27 7. Claims Filed by Creditors. a. The Schedules and the Bar Dates.

The Debtor expects to File its Schedules of Assets and Liabilities (the Schedules) and

28 Statement of Financial Affairs (SOFA) shortly after the Petition Date. In addition, as part of its 35

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1 emergency first-day relief, the Debtor filed a motion requesting that the Court set a bar date for 2 filing proofs of claim. Information regarding the Schedules and SOFA and any claims bar date 3 that has been set by the Court in this case may be obtained by accessing PACER through the 4 Courts website (http://www.nvb.uscourts.gov) or by accessing the website maintained by 5 Kurtzman Carson Consultants LLC (http://www.kccllc.net/NevadaCancerInstitute). 6 7 b. Claim Objections.

The Plan extends the deadline for filing objections to Claims against the Debtor set forth in

8 LR 3007(e). Specifically, except as otherwise provided in Section II.B of the Plan (regarding 9 allowance and payment of Administrative Claims), Section IV.G of the Plan provides that 10 objections to Claims against the Debtor shall be Filed and served upon the holders of the affected
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11 Claims no later than the Claims Objection Deadline: the date that is the later of (a) 180 days after 12 the Effective Date, unless extended by the Court, and (b) 180 days after the date on which a proof 13 of claim in respect of a Claim against the Debtor has been Filed, unless extended by the Court. 14 Creditors should assume that the Debtor, the Reorganized Debtor or the Creditor Trust

15 may File an objection to any proof of claim that differs in amount or priority from the amount or 16 priority of that creditors Claim against the Debtor as listed in the Schedules, or if such creditors 17 Claim against the Debtor is listed in the Schedules as disputed, contingent, or unliquidated. 18 Therefore, in voting on the Plan, no creditor may rely on the absence of an objection to its proof of 19 claim as any indication that the Debtor, the Reorganized Debtor, the Creditor Trust or other parties 20 in interest ultimately will not object to the amount, priority, security, or allowability of its Claim 21 against the Debtor. Moreover, the Debtor, the Reorganized Debtor and the Creditor Trust reserve 22 their rights with respect to all objections to Claims and counterclaims they may have with respect 23 to Claims asserted against the Debtor and, except as specifically set forth in the Plan, further 24 reserve their rights to prosecute Claims of the Debtor and the Estate (including rights to 25 affirmative recoveries, rights to subordinate Claims against the Debtor, as well as other rights). 26 27 28 36

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8.

Litigation. a. Prepetition Litigation.

As of the Petition Date, the Debtor was a party to litigation pending in non-bankruptcy

4 forums. That litigation is set forth on Exhibit 2 hereto. The litigation in which the Debtor is a 5 defendant was stayed by Bankruptcy Code section 362(a). If the Plan is confirmed by the Court, 6 then pursuant to, and in furtherance of, the discharge provisions of section 1141(d) of the 7 Bankruptcy Code and the Plan, the commencement or continuation of litigation against the Debtor 8 based on a Claim against the Debtor, its estate or property of the Debtor that arose prior to the 9 Confirmation Date will be enjoined from proceeding except in conformity with the discharge 10 provision of section 1141(d) of the Bankruptcy Code and the Plan (or, as applicable, the claim
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11 adjudication process). 12 NO PERSON SHOULD VOTE TO ACCEPT OR REJECT THE PLAN IN THE

13 EXPECTATION THAT THE REORGANIZED DEBTOR AND/OR THE CREDITOR 14 TRUST WILL REFRAIN FROM PURSUING ANY ACTION WHETHER OR NOT THAT 15 ACTION WAS COMMENCED PRE-PETITION. EXCEPT AS SPECIFICALLY SET

16 FORTH IN THE PLAN, THE PLAN RELEASES NONE OF THE DEBTORS RIGHTS 17 TO COMMENCE ANY ACTIONS. INSTEAD, PURSUANT TO SECTIONS IV.D AND 18 IV.E OF THE PLAN, ALL OF THE RIGHTS OF THE DEBTOR AND THE ESTATE TO 19 PURSUE THESE ACTIONS ARE PRESERVED UNDER THE PLAN AND REVESTED 20 IN THE REORGANIZED DEBTOR AND THE CREDITOR TRUST. 21 22 b. Avoidance Actions

Payments made by the Debtor within 90 days (as to non-insiders) and one-year (as to

23 insiders) prior to the Petition Date may be recoverable under Bankruptcy Code section 547 as 24 preferential transfers. Also, the Debtor may have other potential avoidance actions, including 25 actions to set aside and/or recover fraudulent transfers arising under Bankruptcy Code sections 26 544 and 548 and applicable state law, which may apply to transfers preceding the Petition Date by 27 four or more years. As specifically provided in Section IV.E of the Plan, the Preserved Avoidance 28 37

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1 Actions will vest in the Creditor Trust on the Effective Date. See Section IX.C.4 below. Exhibit 4 2 to the Disclosure Statement lists all Preserved Avoidance Actions. 3 4 c. Retention of Claims, Causes of Action and Other Rights.

Except as expressly released or otherwise provided in the Plan, pursuant to Bankruptcy

5 Code section 1123(b), the Reorganized Debtor will be vested with, will retain and may enforce all 6 Claims, rights, and causes of action of the Debtor or the Estate against any person or entity, all of 7 which are preserved under the Plan, including rights of disallowance, offset, recharacterization 8 and/or equitable subordination with respect to Claims. 9 Notwithstanding the foregoing, the Creditor Trust will be vested with, will retain, and may

10 enforce all of the Debtors and the Estates rights of disallowance, offset, recharacterization and/or
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11 equitable subordination with respect to Class 4 Claims. 12 13 9. Engagement of A&M.

The Debtor has engaged Alvarez & Marsal Healthcare Industry Group, LLC pursuant to

14 Bankruptcy Code section 363(b) to furnish personnel to serve as the Debtors Chief Restructuring 15 Officer, Chief Financial Officer and Treasurer, Vice President Outcomes & Quality, and Assistant 16 Vice Presidents, Finance. See also Section VIII.B above. 17 18 10. Retention of Professionals.

The Debtor has retained the following professionals, and has filed or will shortly file

19 applications with the Court seeking approval of their employment: 20 21 22 23 24 25 26 Klee, Tuchin, Bogdanoff & Stern LLP as the Debtors reorganization counsel; Lewis & Roca LLP as the Debtors reorganization co-counsel; Kurtzman Carson Consultants, LLC as the Debtors noticing and claims Agent; Hooper, Lundy and Bookman, Inc. as the Debtors healthcare and regulatory counsel; and Kamer Zucker Abbott as the Debtors labor and employment counsel.

The Debtor intends to seek a Court order establishing interim fee procedures for

27 professionals seeking compensation from the estate. Under the proposed procedures, subject to 28 the Debtors cash availability and absent a timely objection, professionals are eligible to receive 38

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1 85% of their monthly fees and 100% of their monthly costs upon passage of an objection period 2 following service of a monthly fee statement upon certain parties, with the opportunity for 3 professionals to request and obtain the hold back amounts at an interim or final fee hearing. 4 Please refer to the Courts docket for additional information on the retention of

5 professionals and the proposed interim fee procedures, including orders that may have been 6 entered with regard to these matters and any professionals retained by any Creditors Committee at 7 the expense of the Debtors estate. 8 9 10
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IX. SUMMARY OF MATERIAL PLAN PROVISIONS The Plan is the result of extensive, good faith negotiations and embodies a settlement among the Debtor, the Agent and the Consenting Lenders, each of which is supportive of the Plan and the Debtors expeditious emergence from chapter 11. Specifically, the Plan provides for continuation of the Debtor as a philanthropic entity, replacement of the Debtors remaining outstanding obligations to the Lenders (after payment of the $18 million in cash proceeds of the UCSD Sale to the Lenders) with a $13 million note secured by the Research Building (including all personal property therein as of the date of the Plan Support Agreement) and the Vacant Land (the Research Building Note), and the payment of fees and costs in favor of the Agent. Under the Plan, holders of Allowed General Unsecured Claims will share Pro Rata in the proceeds of the Creditor Trust, which will be funded with $175,000 in cash, the Preserved Avoidance Actions, and all of the Debtors and the Estates rights of disallowance, offset, recharacterization and/or equitable subordination with respect to the General Unsecured Claims. The following is a narrative description of certain provisions of the Plan, which is attached hereto as Exhibit 1 for reference. This summary of the Plan is qualified in its entirety by the actual terms of the Plan. In the event of any conflict, the terms of the Plan will control over any summary set forth in this Disclosure Statement. A. Classification and Treatment of Claims Under the Plan. The Bankruptcy Code requires that a plan divide the different claims against, and equity interests in, the debtor into separate classes based upon their legal nature. 39 Claims of a

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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1 substantially similar legal nature are usually classified together. The Bankruptcy Code does not 2 require the classification of administrative claims and certain priority claims, and they are 3 typically denominated unclassified claims. Because the Debtor is a nonprofit corporation, there 4 are no equity interests in the Debtor. 5 The Debtor believes that the classification of Classes specified in the Plan is appropriate

6 and consistent with the requirements of the Bankruptcy Code. The Court will determine the 7 appropriateness of the classification of the Classes under the Plan in conjunction with the hearing 8 on confirmation of the Plan. 9 Under Bankruptcy Code section 1124, a class of claims is impaired unless the plan

10 leaves unaltered the legal, equitable, and contractual rights of the holders of claims or interests, as
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11 applicable, in the class. In addition, a class of claims is impaired unless the plan cures all 12 defaults (other than those arising from the debtors insolvency, the commencement of the case, or 13 non-performance of a non-monetary obligation, which need not be cured) that occurred before or 14 after the commencement of the case, reinstates the maturity of the claims in the class, compensates 15 the claimants for their actual damages incurred as a result of their reasonable reliance on any 16 acceleration rights, and does not otherwise alter their legal, equitable, and contractual rights. 17 Except for any right to accelerate the debtors obligations, the holder of an unimpaired claim will 18 be placed in the position in which it would have been, inter alia, if the debtors case had not been 19 commenced. 20 A plan must designate each separate class of claims and interests either as impaired

21 (affected by the plan) or unimpaired (unaffected by the plan). If a class of claims or interests is 22 impaired, under the Bankruptcy Code, the holders of claims or interests, as applicable, in that 23 class are entitled (i) to vote to accept or reject the plan (unless the plan provides for no distribution 24 to the class, in which case the class is deemed to reject the plan), and (ii) to receive property with a 25 value at least equal to the value that the claimant would receive if the debtor were liquidated under 26 chapter 7 of the Bankruptcy Code. If a class of claims is unimpaired, the holders of claims in that 27 class are deemed to accept the plan. 28 40

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The following describes how and whether Claims against the Debtor are classified under

2 the Plan, whether the holders thereof are entitled to vote, and the treatment accorded such Claims 3 under the Plan. 4 5 1. Unclassified Claims.

Certain types of Claims are not placed into voting classes; instead, they are unclassified.

6 They are not considered impaired, and they do not vote to accept or reject a plan of reorganization 7 because they are automatically entitled to specific treatment provided for them in the Bankruptcy 8 Code. Therefore, the Debtor has not placed the following categories of Claims into a Class. 9 10
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a.

Administrative Claims (1) Allowance of Administrative Claims

11

Administrative Claims are Claims against the Estate for administrative costs or expenses The Bankruptcy Code

12 entitled to priority under Bankruptcy Code section 507(a)(2) or (b).

13 requires that all Administrative Claims be paid on the date that a plan of reorganization becomes 14 effective, unless a particular claimant agrees to a different treatment. 15 Allowance of Ordinary Course Administrative Claims: An entity holding an Ordinary

16 Course Administrative Claim may, but need not, File a motion or request for payment of its Claim. 17 The Reorganized Debtor or any other party in interest may File an objection to an Ordinary Course 18 Administrative Claim in their discretion. Unless a party in interest objects to an Ordinary Course 19 Administrative Claim, such Claim will be an Allowed Claim in accordance with the terms and 20 conditions of the particular transaction that gave rise to the Claim. 21 Allowance of Professional Fee Claims: Unless otherwise expressly provided in the Plan,

22 a Professional Fee Claim will be allowed only if: 23 (i) On or before 60 days after the Effective Date, the entity holding such Professional

24 Fee Claim both Files with the Court a final fee application or a motion requesting allowance of the 25 Professional Fee Claim and serves the application or motion on the Reorganized Debtor and the 26 U.S. Trustee; and 27 28 41 (ii) The Court determines it is an Allowed Claim.

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The Reorganized Debtor or any other party in interest may File an objection to such

2 application or motion within the time provided by the Bankruptcy Rules or within any other period 3 that the Court establishes. Entities holding Professional Fee Claims that do not timely File and 4 serve a fee application or motion for payment will be forever barred from asserting those Claims 5 against the Debtor, the Reorganized Debtor, the Estate, the Creditor Trust, or their respective 6 property. 7 Allowance of Cure Payments: Cure Payments shall be allowed in accordance with the

8 procedures set forth in Section III.A.2 of the Plan. 9 Allowance of Non-Ordinary Course Administrative Claims: Unless otherwise

10 expressly provided in the Plan, Non-Ordinary Course Administrative Claims will be allowed only
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11 if: 12 (i) On or before 60 days after the Effective Date, the entity holding such Non-Ordinary

13 Course Administrative Claim both Files with the Court a motion requesting allowance of the Non14 Ordinary Course Administrative Claim and serves the motion on the Reorganized Debtor and the 15 U.S. Trustee; and 16 17 (ii) The Court determines it is an Allowed Claim.

The Reorganized Debtor or any other party in interest may File an objection to such

18 motion within 60 days after the expiration of the deadline for the filing of a Non-Ordinary Course 19 Administrative Claim set forth in clause (i) above (i.e., within 120 days after the Effective Date), 20 unless such time period for filing such objection is extended by the Court. Entities holding Non21 Ordinary Course Administrative Claims that do not timely File and serve a request for payment 22 will be forever barred from asserting those Claims against the Debtor, the Reorganized Debtor, the 23 Estate, the Creditor Trust, or their respective property. 24 Allowance of 503(b)(9) Claims: Unless otherwise expressly provided in the Plan, a

25 503(b)(9) Claim will be allowed only if: 26 27 (i) The 503(b)(9) Claim is filed by the 503(b)(9) Bar Date or is deemed timely filed; and (ii) If an objection to such 503(b)(9) Claim is filed by a party in interest on or before the

28 Claim Objection Deadline, the Court determines it is an Allowed 503(b)(9) Claim. 42

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Entities holding 503(b)(9) Claims that did not timely File such Claims by the 503(b)(9)

2 Bar Date will be forever barred from asserting those Claims against the Debtor, the Reorganized 3 Debtor, the Estate, the Creditor Trust, or their respective property. 4 5 (2) Treatment of Administrative Claims.

Treatment of Allowed Ordinary Course Administrative Claims: Unless otherwise

6 agreed, Allowed Ordinary Course Administrative Claims will be paid by the Reorganized Debtor 7 in accordance with the terms and conditions of the particular transaction that gave rise to such 8 Claims. 9 Treatment of Professional Fee Claims: Unless otherwise agreed, an Allowed

10 Professional Fee Claim will be paid by the Reorganized Debtor within 10 days after the date on
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11 which the Court determines such Claim is an Allowed Claim. 12 Treatment of Cure Payments: Cure Payments will be made to the non-Debtor parties to

13 the executory contracts or unexpired leases in accordance with Section III.A.2 of the Plan. 14 Treatment of U.S. Trustee Fees: Under 28 U.S.C. 1930: The Reorganized Debtor will

15 pay to the U.S. Trustee all fees due and owing under 28 U.S.C. 1930 in cash on the Effective 16 Date. 17 Treatment of Non-Ordinary Course Administrative Claims: Unless the entity holding

18 a Non-Ordinary Course Administrative Claim allowed by the Court agrees to different treatment 19 or unless a different payment date is ordered by the Court, the Reorganized Debtor will pay to that 20 entity cash in the full amount of such Allowed Non-Ordinary Course Administrative Claim, 21 without interest, on or before the later of: (i) 10 days after the Effective Date, or (ii) 10 days after 22 the date any order determining such Claim to be an Allowed Non-Ordinary Course Administrative 23 Claim becomes a Final Order. 24 Treatment of 503(b)(9) Claims: Unless the entity holding a 503(b)(9) Claim that is

25 allowed by the Court agrees to different treatment, or already has been paid the full amount of 26 such Allowed 503(b)(9) Claim pursuant to an order of the Court, the Reorganized Debtor will pay 27 to that entity cash in the full amount of such Allowed 503(b)(9) Claim, without interest, on or 28 43

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1 before the later of: (i) 10 days after the Effective Date, or (ii) 10 days after the date any order 2 determining such Claim to be an Allowed 503(b)(9) Claim becomes a Final Order. 3 4 b. Priority Tax Claims.

Unless otherwise agreed, the Reorganized Debtor will pay to an entity holding an Allowed

5 Priority Tax Claim cash in the full amount of the Allowed Priority Tax Claim, plus interest 6 calculated at the federal judgment rate, in equal, amortized, annual installments beginning on the 7 first anniversary of the Petition Date that falls on a date following the occurrence of the Effective 8 Date and, thereafter, on each anniversary of the Petition Date through the fifth anniversary of the 9 Petition Date, provided, however, that the Reorganized Debtor may prepay any Priority Tax Claim 10 without penalty at any time.
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11 12

2.

Classified Claims (Classes 1-4).

Claims, other than Administrative Claims and Priority Tax Claims, are classified under the

13 Plan. Secured Claims are Claims that are secured by valid, enforceable and unavoidable liens 14 against property in which the Estate has an interest or that are subject to setoff under Bankruptcy 15 Code section 553. A Claim is a Secured Claim only to the extent of the value of the claimants 16 interest in the collateral securing the Claim. Priority Claims are Claims arising under Bankruptcy 17 Code sections 507(a)(4), 507(a)(5) and 507(a)(7). Priority Claims are not secured by Estate 18 property, but have statutory priority over General Unsecured Claims. General Unsecured Claims 19 are not secured by liens on Estate property and are not entitled to statutory priority. 20 21 *** The following section identifies the Plans treatment of the classified Claims against the

22 Debtors Estate. All descriptions set forth in the following section are qualified in their entirety by 23 the specific treatment of each of the classified Claims under the Plan. 24 25 26 a. Class 1 (Lender Secured Claims) Class 1 consists of the Lender Secured Claims. Class 1 is impaired under the Plan. If and to the extent any portion

Classification: Treatment:

27 of the $18 million in cash proceeds from the UCSD Sale has not been previously remitted to the 28 Agent, for the ratable benefit of the Lenders, the Debtor shall so remit the balance of such 44

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1 proceeds on the Effective Date. Payment of the $18 million in cash proceeds from the UCSD Sale 2 (whenever remitted) shall reduce the debt under the Prepetition Credit Agreement. 3 On the Effective Date, the Reorganized Debtor shall issue to the Agent, for the ratable

4 benefit of the Lenders, the Research Building Note, in the amount of $13 million, which shall be 5 secured by the Research Building and the Vacant Land. (For purposes of clarity, the Alta6 Hualapai Parcel shall not be encumbered by such note or any other obligation). The Research 7 Building Note will be in form and substance satisfactory to the Agent and the Approving Lenders 8 and will: 9 10
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(i) be payable to the Agent, for the ratable benefit of the Lenders; (ii) be secured by a first-priority deed of trust, in form and substance satisfactory to the

11 Agent and the Approving Lenders, on the Research Building (including all furniture, fixtures and 12 equipment owned by the Borrower and contained in such building as of the date of the Plan 13 Support Agreement) and the Vacant Land; 14 15 (iii) be a non-recourse obligation of the Reorganized Debtor; (iv) provide for annual principal amortization as follows: $250,000 at the end of the first

16 year following the Effective Date, $250,000 at the end of the second year following the Effective 17 Date, $350,000 at the end of the third year following the Effective Date, and $400,000 at the end 18 of the fourth year following the Effective Date (in each case payable on the respective anniversary 19 of the Effective Date, or if such date is not a Business Day, the first Business Day thereafter); 20 21 22 23 24 25 26 27 (v) be payable in full (less any prior amortization payments) on the earlier of: (x) the fifth anniversary of the Effective Date (or if such date is not a Business Day, the first Business Day thereafter), (y) default under such Note, and (z) sale of the Research Building or the Vacant Land; (vi) be non-interest bearing; and (vii) be subject to prepayment at any time without penalty. The Reorganized Debtor will continue to be obligated under the Prepetition Deed of Trust,

28 as modified to secure only the Research Building Note. The Reorganized Debtor also will provide 45

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1 an environmental indemnity. Agents title insurance policy may be amended, at the expense of the 2 Reorganized Debtor, to show the change in vesting and modifications to the obligations secured 3 by the Prepetition Deed of Trust, or at Agents discretion, a new title insurance policy may be 4 required. 5 Until such time as the Research Building Note is paid in full or the Research Building and

6 Vacant Land are no longer owned by the Reorganized Debtor, the Reorganized Debtor will be 7 solely responsible for the costs and maintenance of the Research Building and the Vacant Land in 8 a condition at least as good as that existing on the date of the Plan Support Agreement. The 9 Reorganized Debtor shall be solely responsible for maintaining insurance with respect to such 10 properties, and paying all taxes applicable to such properties. The Reorganized Debtor will
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11 maintain its status as a charitable 501(c)(3) entity. 12 Notwithstanding the provisions of Section II.C.1 of the Plan, if the Research Building

13 and/or the Vacant Land are sold for an aggregate amount in excess of $13 million (the Excess 14 Consideration), whether during the term of the Research Building Note or at any time within one 15 year after repayment thereof, the Reorganized Debtor will be required to share such Excess 16 Consideration with the Agent, for the ratable benefit of the Lenders, on an 80/20 basis, i.e., with 17 80% of the Excess Consideration being paid to the Agent, for the ratable benefit of the Lenders, 18 and 20% of the Excess Consideration being retained by the Reorganized Debtor. 19 If the Research Building and/or Vacant Land are no longer owned by the Reorganized

20 Debtor, the Reorganized Debtor nevertheless will continue to operate as a nonprofit corporation 21 dedicated to raising funds, generating support for, and otherwise advancing its philanthropic 22 objectives. 23 The Plan requires the Reorganized Debtor to provide quarterly reports to the Agent

24 regarding the Research Building Note and the Vacant Land, in form and substance satisfactory to 25 the Agent at all times from the effectiveness of the Research Building Note until the date that is 26 one year after the repayment thereof, including, without limitation, as to any leasing of, sales 27 offers with respect to, damage to and maintenance status of such properties. So long as the 28 Research Building Note is outstanding, the Agent and the Lenders will also be entitled to inspect 46

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1 the Research Building and the Vacant Land on an annual basis (or more frequently if a default has 2 occurred and is continuing under the Research Building Note). 3 Any funds that become property of the Debtors estate that are proceeds of the Lenders

4 collateral that are not necessary to satisfy the obligations of the Debtor, the Estate and the 5 Reorganized Debtor under the Plan and the UCSD Sale, will be distributed to the Agent for the 6 ratable benefit of the Lenders thirty (30) days following the later of: (i) the bar date for the filing 7 of proofs of claim by governmental entities; (ii) the expiration of the deadlines for filing 8 objections to Administrative Claims, Priority Claims, Secured Tax Claims and Priority Tax 9 Claims; and (iii) the settlement or adjudication to a Final Order of any and all objections to 10 Administrative Claims, Priority Claims, Secured Tax Claims and Priority Tax Claims.
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For

11 purposes of clarity, neither the Charitable Trust Funds (which include, without limitation, the 12 Engelstad Endowment Fund, the Patient Cares Committee Fund, the Saffer Endowment Fund, and 13 the Other Donor-Restricted Funds) nor any other charitable donations generated by the Debtor or 14 its representatives constitute the Lenders collateral. 15 16 b. Class 2 (Other Secured Claims, Including Secured Tax Claims).

Classification: Class 2 consists of Other Secured Claims against the Debtor, including

17 Secured Tax Claims. Each Class 2 Claim shall constitute its own subclass. 18 Treatment: Class 2 is unimpaired under the Plan, and the legal, equitable, and contractual

19 rights of holders of the Allowed Class 2 Claims are unaltered by the Plan. Unless the holder of an 20 Allowed Class 2 Claim in a particular Class 2 subclass agrees to other treatment, on or as 21 reasonably practicable after the Effective Date, such holder shall receive, at the Reorganized 22 Debtors option: (i) cash in the allowed amount of such holders Allowed Class 2 Claim, (ii) the 23 return of the collateral securing such Allowed Class 2 Claim, or (iii) (a) the cure of any default, 24 other than a default of the kind specified in Bankruptcy Code section 365(b)(2) that Bankruptcy 25 Code section 1124(2) requires to be cured, with respect to such holders Allowed Class 2 Claim, 26 without recognition of any default rate of interest or similar penalty or charge, and upon such cure, 27 no default shall exist; (b) the reinstatement of the maturity of such Allowed Class 2 Claim as the 28 maturity existed before any default, without recognition of any default rate of interest or similar 47

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1 penalty or charge; and (c) its unaltered legal, equitable, and contractual rights with respect to such 2 Allowed Class 2 Claim. Any defenses, counterclaims, rights of offset or recoupment of the 3 Debtor or the Estate with respect to such Claims shall vest in and inure to the benefit of the 4 Reorganized Debtor. 5 The Bankruptcy Court shall retain jurisdiction to determine the amount necessary to satisfy

6 any Allowed Class 2 Claim for which treatment is elected under clause (i) or clause (iii). With 7 respect to any Allowed Class 2 Claim for which treatment is elected under clause (i), any holder of 8 such Allowed Class 2 Claim shall release (and by the Confirmation Order shall be deemed to 9 release) all liens against property of the Estate. 10
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c.

Class 3 (Priority Claims, other than Priority Tax Claims).

11

Classification: Class 3 consists of Priority Claims against the Debtor, other than Priority

12 Tax Claims. 13 Treatment: Class 3 is unimpaired under the Plan, and the legal, equitable, and contractual

14 rights of holders of Allowed Class 3 Claims are unaltered by the Plan. Unless a particular entity 15 holding an Allowed Class 3 Claim agrees otherwise, the Reorganized Debtor shall pay to each 16 holder of an Allowed Class 3 Claim, in full satisfaction of such Claim, cash in the full amount of 17 the Allowed Class 3 Claim on or before the latest of: (i) ten (10) days after the Effective Date; (ii) 18 ten (10) days after the date on which the Class 3 Claim becomes an Allowed Class 3 Claim; and 19 (iii) the date on which the Allowed Class 3 Claim first becomes due and payable in accordance 20 with its terms. 21 22 23 d. Class 4 (General Unsecured Claims).

Classification: Class 4 consists of the General Unsecured Claims. Treatment: Class 4 is impaired under the Plan. Allowed Class 4 Claims shall receive

24 their Pro Rata share of the Net Trust Assets. On the Effective Date (i) the Unsecured Creditor 25 Cash shall be remitted to the Creditor Trust, and (ii) all Preserved Avoidance Actions shall be 26 vested in the Creditor Trust, pursuant to Section IV.E of the Plan. The timing of payments to the 27 holders of Allowed Class 4 Claims shall be determined by the Creditor Trust and in accordance 28 with the Creditor Trust Agreement. 48

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If Class 4 accepts the Plan within the meaning of Bankruptcy Code section 1126(c), then

2 the holders of the Lender Deficiency Claims shall be deemed to have waived their right to receive 3 any consideration under Class 4 on account of such Lender Deficiency Claims. If Class 4 rejects 4 the Plan within the meaning of Bankruptcy Code section 1126(c), all Allowed Lender Deficiency 5 Claims shall participate in the Class 4 distributions. 6 The nature and amount of distributions to holders of Class 4 Claims under the Plan will

7 depend on at least four variables: (1) the outcome of objections to Claims, (2) the recovery 8 realized, if any, on causes of action of the Estate, (3) costs incurred by the Creditor Trust, and (4) 9 whether the Lender Deficiency Claims will share in distributions to holders of Class 4 Claims. As 10 noted, the Debtor has engaged in only a preliminary analysis of claims. Under the Plan, the
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11 Creditor Trust will be charged with objecting to Class 4 Claims. The outcome of those objections 12 will affect (perhaps materially so) the distributions to holders of Allowed Class 4 Claims. 13 The Plan provides for the holders of Allowed Class 4 Claims to share in any recoveries

14 that may be realized by the Creditor Trust on Preserved Avoidance Actions (e.g., preference or 15 fraudulent transfer claims against parties with which the Debtor engaged in transactions 16 prepetition, to the extent not released under the Plan). Distribution of litigation proceeds is 17 contingent on the success of such litigation. 18 The Debtor has not undertaken an effort to determine what value, if any, such causes of

19 action may have. Nevertheless, these causes of action will vest in the Creditor Trust on the 20 Effective Date and any proceeds thereof will be distributed on a Pro Rata basis by the Creditor 21 Trust as more fully set forth in the Plan. 22 B. 23 24 25 Treatment of Executory Contracts and Unexpired Leases. 1. Assumption of Executory Contracts and Unexpired Leases a. Assumption of Agreements.

On the Effective Date, the Reorganized Debtor shall assume all executory contracts and

26 unexpired leases of the Debtor listed on the Schedule of Assumed Agreements. 27 The Debtor reserves the right to amend the Schedule of Assumed Agreements at any time

28 prior to the Effective Date to: (a) delete any executory contract or unexpired lease and provide for 49

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1 its rejection under the Plan or otherwise, or (b) add any executory contract or unexpired lease and 2 provide for its assumption under the Plan. The Debtor will provide notice of any amendment to 3 the Schedule of Assumed Agreements to the party or parties to the agreement affected by the 4 amendment. 5 The Confirmation Order will constitute a Court order approving the assumption, on the

6 Effective Date, of all executory contracts and unexpired leases identified on the Schedule of 7 Assumed Agreements. 8 9 b. Cure Payments.

Any amount that must be paid under Bankruptcy Code section 365(b)(1) to cure a default

10 under and compensate the non-debtor party to an executory contract or unexpired lease to be
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11 assumed under the Plan, is identified as the Cure Payment on the Schedule of Assumed 12 Agreements. Unless the parties mutually agree to a different date, such payment shall be made in 13 cash, ten (10) days following the later of: (i) the Effective Date and (ii) entry of a Final Order 14 resolving any dispute regarding (a) the amount of any Cure Payment, (b) the ability of the 15 Reorganized Debtor to provide adequate assurance of future performance within the meaning of 16 Bankruptcy Code section 365 with respect to a contract or lease to be assumed, to the extent 17 required, and/or (c) any other matter pertaining to assumption. 18 Pending the Courts ruling on such dispute, the executory contract or unexpired lease at

19 issue shall be deemed assumed by the Reorganized Debtor unless otherwise agreed by the parties 20 or ordered by the Court. 21 22 c. Objections to Assumption/Cure Payment Amounts.

Any entity that is a party to an executory contract or unexpired lease that will be assumed

23 under the Plan and that objects to such assumption (including the proposed cure payment) must 24 File with the Court and serve upon parties entitled to notice a written statement and supporting 25 declaration stating the basis for its objection. This statement and declaration must be Filed and 26 served by the deadline fixed by the Court for such objection. Any entity that fails to timely File 27 and serve such a statement and declaration will be deemed to waive any and all objections to the 28 proposed assumption (including the proposed Cure Payment) of its contract or lease. 50

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In the absence of a timely objection by an entity who is a party to an executory contract or

2 unexpired lease, the Confirmation Order shall constitute a conclusive determination as to the 3 amount of any cure and compensation due under the executory contract or unexpired lease, and 4 that the Reorganized Debtor has demonstrated adequate assurance of future performance with 5 respect to such executory contract or unexpired lease, to the extent required. 6 7 d. Resolution of Claims Relating to Assumed Contracts and Leases.

Payment of the Cure Payment established under the Plan, by the Confirmation Order or by

8 any other order of the Court, with respect to an assumed executory contract or unexpired lease, 9 shall be deemed to satisfy, in full, any prepetition or postpetition arrearage or other Claim against 10 the Debtor (including any asserted in a Filed proof of claim or listed in the Schedules) with respect
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11 to such contract or lease (irrespective of whether the Cure Payment is less than the amount set 12 forth in such proof of Claim or the Schedules). Upon the tendering of the Cure Payment, any such 13 Filed or scheduled Claim shall be disallowed, without further order of the Court or action by any 14 party. 15 16 17 2. Rejection of Executory Contracts and Unexpired Leases. a. Rejected Agreements.

On the Effective Date, all executory contracts and unexpired leases that (i) have not been

18 previously assumed or rejected and (ii) are not set forth on the Schedule of Assumed Agreements 19 (including all executory contracts and unexpired leases set forth on the Schedule of Rejected 20 Agreements), shall be rejected. For the avoidance of doubt, executory contracts and unexpired 21 leases that have been previously assumed or assumed and assigned pursuant to an order of the 22 Court, including those assumed and assigned in conjunction with the UCSD Sale, shall not be 23 affected by the Plan. The Confirmation Order will constitute a Court order approving the

24 rejection, on the Effective Date, of the executory contracts and unexpired leases to be rejected 25 under the Plan. 26 27 b. Bar Date for Rejection Damage Claims.

Any Rejection Damage Claim or other Claim against the Debtor for damages arising from

28 the rejection under the Plan of an executory contract or unexpired lease must be Filed and served 51

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1 upon counsel to the Reorganized Debtor and Creditor Trust within 30 days after the mailing of 2 notice of the occurrence of the Effective Date. Any such Claims that are not timely Filed and 3 served will be forever barred and unenforceable against the Debtor, the Reorganized Debtor, the 4 Estate, the Creditor Trust and their respective property, and entities holding such Claims will be 5 barred from receiving any distributions under the Plan on account of such untimely Claims. 6 7 3. Postpetition Contracts and Leases.

Except as expressly provided in the Plan or the Confirmation Order, all contracts, leases,

8 and other agreements that the Debtor enters into after the Petition Date will be retained by the 9 Reorganized Debtor and will remain in full force and effect following the Effective Date, 10 including the Funding Agreement that will be assumed by the Debtor in conjunction with the
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11 closing of the UCSD Sale. 12 C. 13 14 Means of Execution and Implementation of Plan. 1. Funding of the Plan.

All payments required by the Plan on and after the Effective Date, including remittance of

15 the Unsecured Creditor Cash to the Creditor Trust, will be satisfied from cash of the Debtor 16 (which, consistent with the Cash Collateral Order, includes funds in the Cash Collateral Account) 17 and the Reorganized Debtor. Notwithstanding the foregoing, any distribution to the holders of 18 Allowed Class 4 Claims shall be paid exclusively by the Creditor Trust from the Net Trust Assets. 19 20 2. Vesting of Assets Generally.

Except as otherwise provided in the Plan, all property of the Debtor and the Estate shall

21 vest in the Reorganized Debtor on the Effective Date, free and clear of all Claims, liens, 22 encumbrances, and interests. From and after the Effective Date, the Reorganized Debtor may 23 conduct its affairs and use, acquire and dispose of property without supervision by the Court and 24 free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than those restrictions 25 expressly imposed by the Plan and the Confirmation Order. 26 27 3. The Charitable Trust Funds.

On and after the Effective Date, the Reorganized Debtor shall retain its interest in its rights

28 to use and, where applicable, custody of the Charitable Trust Funds, consistent with all agreements 52

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1 and restrictions governing the disposition and use of such funds, any modifications to such 2 agreements and restrictions that may be authorized by the donors of such Charitable Trust Funds, 3 and otherwise applicable non-bankruptcy law. 4 5 4. Vesting of Rights of Action in Reorganized Debtor.

Except as provided in Section IV.E of the Plan with respect to Preserved Avoidance

6 Actions, all Claims, rights, and causes of action of the Debtor or the Estate against any person or 7 entity shall be preserved and vest in the Reorganized Debtor on the Effective Date, pursuant to 8 Bankruptcy Code section 1123(b), including causes of action that have been or may be brought by 9 or on behalf of the Debtor or the Estate, and the Debtors and Estates rights of disallowance, 10 offset, recharacterization and/or equitable subordination with respect to Claims other than Class 4
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11 Claims; provided, however, that no Claim, right or cause of action of the Debtor or the Estate that 12 is released under the Plan, the Confirmation Order, or any other order of the Court shall be 13 preserved or vested in the Reorganized Debtor or the Creditor Trust. 14 15 5. Vesting of Preserved Avoidance Actions and Other Rights in Creditor Trust.

The Preserved Avoidance Actions, and all of the Debtors and Estates rights of

16 disallowance, offset, recharacterization and/or equitable subordination with respect to Class 4 17 Claims shall be preserved and vested in the Creditor Trust on the Effective Date, pursuant to 18 Bankruptcy Code section 1123(b); provided, however, that no Claim, right or cause of action of 19 the Debtor or the Estate that is released under the Plan, the Confirmation Order, or any other order 20 of the Court shall be preserved or vested in the Reorganized Debtor or the Creditor Trust. 21 22 6. Creation of the Creditor Trust and Appointment of Creditor Trustees.

The Confirmation Order shall approve, effective on the Effective Date, the Creditor Trust

23 Agreement, which agreement shall provide for the appointment of one (1) to three (3) members, to 24 act as the Creditor Trustee or Creditor Trustees to administer the Creditor Trust. The Creditor 25 Trustee or Creditor Trustees shall be appointed by the Creditors Committee prior to the 26 Confirmation Date, provided that if no trustee is appointed by such date, the Debtor shall appoint 27 the Creditor Trustee or Creditor Trustees. The Creditor Trustee or Creditor Trustees shall serve 28 without any bond and shall act in accordance with the Creditor Trust Agreement and the Plan by 53

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1 majority vote. A Creditor Trustee shall not be compensated for his or her service as a Creditor 2 Trustee but may, if applicable, retain a professional firm in which said trustee is employed. 3 The Creditor Trust may engage counsel and other professionals as it deems appropriate,

4 and compensate such professionals from the corpus of the Creditor Trust for reasonable fees and 5 expenses incurred by such professionals, in accordance with the Creditor Trust Agreement and 6 without approval of the Court. Each Creditor Trustee shall serve for the duration of the Creditor 7 Trust, subject to earlier death, resignation, incapacity or removal as specifically provided in the 8 Creditor Trust Agreement. 9 10
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a.

Powers and Duties.

The Creditor Trust, acting through a majority of the Creditor Trustees, shall have the

11 following rights, powers and duties: 12 (a) The Creditor Trust shall have full right, power and discretion to manage the

13 Creditor Trust Property, and execute, acknowledge and deliver any and all instruments with 14 respect thereto, as it deems appropriate or necessary in its discretion; 15 (b) Administer the collection, prosecution, settlement, and/or abandonment of the

16 Preserved Avoidance Actions; 17 18 19 (c) (d) (e) Prosecute, settle and/or abandon objections to Class 4 Claims; Make interim and final distributions to the holders of Allowed Class 4 Claims; File all tax and regulatory forms, returns, reports and other documents required

20 with respect to the Creditor Trust; and 21 (f) File suit or any appropriate motion for relief in the Court or in any other court of

22 competent jurisdiction to resolve any disagreement, conflict, dispute or ambiguity in connection 23 with the exercise of its rights, powers or duties. 24 25 b. Termination of the Creditor Trust.

The Creditor Trust shall be irrevocable. The Creditor Trust shall terminate when the

26 Creditor Trustees have performed all of their duties under the Plan and the Creditor Trust 27 Agreement, including the final distribution of all the property of the Creditor Trust in respect of 28 Allowed Class 4 Claims, which date shall not be more than two (2) years and one (1) month after 54

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1 the Effective Date; provided, however, the Court may upon good cause shown order the Creditor 2 Trust to remain open so long as it may be necessary to liquidate and distribute all its property. 3 4 c. Additional Provisions of the Creditor Trust Agreement.

In addition to the provisions in the Plan with respect to the Creditor Trust, the Creditor

5 Trust Agreement will provide for, among other things, the removal of Creditor Trustees or 6 appointment of successor Creditor Trustees, the liability of the Creditor Trustees, the effect of 7 actions by the Creditor Trustees, and the indemnification of the Creditor Trustees. 8 To the extent not set forth in the Plan, the functions and procedures applicable to the

9 Creditor Trust and the powers and duties of the Creditor Trustees and the rights of the holders of 10 beneficial interests in the Creditor Trust shall be governed by the provisions of the Creditor Trust
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11 Agreement; provided, however, that in the event of any conflict, the terms of the Plan shall 12 govern. 13 14 7. Objections to Claims.

Except as otherwise provided in Section II.B of the Plan (regarding allowance of

15 Administrative Claims), any objection to a Claim against the Debtor shall be Filed and served 16 upon the holder of such Claim no later than the Claims Objection Deadline. After the Effective 17 Date, only the Reorganized Debtor shall have the authority to File, settle, compromise, withdraw 18 or litigate to judgment objections to Claims, other than Class 4 Claims. Following the Effective 19 Date, the Creditor Trust shall have the sole right and authority to File, settle, compromise, 20 withdraw or litigate to judgment objections to Class 4 Claims. 21 22 23 Plan. 24 25 9. Full Satisfaction. 8. Distribution of Property Under the Plan.

The procedures for distributing property under the Plan are set forth in Section IV.H of the

The Disbursing Agent (or Creditor Trust, as the case may be) shall make, and each holder

26 of an Allowed Claim against the Debtor shall receive, the distributions provided for in the Plan, if 27 any, in full satisfaction and discharge of such holders Claim against the Debtor. 28 55

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1 2

10.

Compliance with Tax Requirements.

The Reorganized Debtor (or Creditor Trust, as the case may be) shall comply with all

3 withholding and reporting requirements imposed on it by governmental units, if any, and all 4 distributions pursuant to the Plan shall be subject to such withholding and reporting requirements. 5 6 11. Setoff, Recoupment and Other Rights.

Notwithstanding anything to the contrary contained in the Plan, the Reorganized Debtor or

7 the Creditor Trust may, but shall not be required to, setoff, recoup, assert counterclaims or 8 withhold against the distributions to be made pursuant to this Plan on account of any claims that 9 the Debtor, the Estate, or the Reorganized Debtor may have against the entity holding an Allowed 10 Claim; provided, however, that neither the failure to effect such a setoff or recoupment, nor the
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11 allowance of any Claim against the Debtor or the Reorganized Debtor, nor any partial or full 12 payment during the Case or after the Effective Date in respect of any Allowed Claim, shall 13 constitute a waiver or release by Debtor, the Estate, the Reorganized Debtor or the Creditor Trust 14 of any Claim that any or all of them may possess against such holder. 15 16 12. The Effective Date.

The Plan shall not become binding unless and until the Effective Date occurs. The

17 Effective Date is the first Business Day, on which no stay of the Confirmation Order is in effect, 18 on which all of the following conditions have been satisfied or waived as set forth in the Plan: 19 20 21 22 23 24 25 26 27 b. (3) a. Conditions to the Effective Date. (1) (2) The Confirmation Order shall have become a Final Order; The Research Building Note and related instruments evidencing the liens and security interests securing such note shall have been executed; and All other agreements, writings and undertakings required under the Plan shall be executed and ready for consummation. Waiver of Conditions.

The requirement that the conditions to the occurrence of the Effective Date be satisfied

28 may be waived in whole or in part, and the time within which any such conditions must be 56

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1 satisfied may be extended, by mutual agreement of the Debtor and the Agent. The failure to 2 timely satisfy or waive any of such conditions may be asserted by the Debtor regardless of the 3 circumstances giving rise to the failure of such condition to be satisfied, including any action or 4 inaction by the Debtor. The failure of the Debtor to exercise any of the foregoing rights shall not 5 be deemed a waiver of any other rights and each such right shall be deemed ongoing and subject to 6 assertion at any time. 7 8 c. Notice of the Effective Date.

Promptly after the occurrence of the Effective Date, the Debtor shall File and mail a

9 Notice of Occurrence of Effective Date to all creditors of record as of the date of entry of the 10 Confirmation Order.
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11 12

13.

Authorization of Corporate Action.

Any matters provided for or required by the Plan that require corporate action by the

13 Debtor or the Reorganized Debtor, including, without limitation, the adoption by the Reorganized 14 Debtor of the Amended Articles of Incorporation and Bylaws, shall, as of the Effective Date, be 15 deemed to have occurred and be effective as provided herein, and shall be authorized, approved 16 and ratified in all respects without any requirement of further action by the directors of the Debtor 17 or the Reorganized Debtor. 18 D. 19 20 The Reorganized Debtor. 1. Directors and Officers.

As of the Effective Date, the individuals identified on the List of Directors and Officers for

21 Reorganized Debtor shall serve as the directors and officers of the Reorganized Debtor, in 22 accordance with the Amended Articles of Incorporation and Bylaws. The List of Directors and 23 Officers for Reorganized Debtor will be filed on or before the Exhibit Filing Date, and upon such 24 filing shall become Exhibit B to the Plan (subject to any modifications made prior to the 25 Confirmation Date). 26 27 28 57

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1 2

2.

Amended Articles of Incorporation and Bylaws.

The Amended Articles of Incorporation and Bylaws of the Reorganized Debtor shall

3 prohibit the issuance of non-voting equity securities as required by Bankruptcy Code section 4 1123(a)(6). 5 E. 6 7 Other Plan Provisions. 1. Exculpation Regarding Solicitation and Prosecution of Plan Confirmation.

None of the Debtor, the Estate, the Reorganized Debtor, the Creditors Committee, the

8 Prepetition Agent, the Lenders or any of the foregoing parties respective members, officers, 9 directors, employees, advisors, professionals or agents shall have or incur any liability to any 10 holder of a Claim for any act or omission occurring on or after the Petition Date in connection
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11 with, related to, or arising out of the Case, the pursuit of confirmation of the Plan, the 12 consummation or administration of the Plan, or property to be distributed under the Plan, except 13 for willful misconduct, and in all respects, the Debtor, the Estate, the Reorganized Debtor, the 14 Creditors Committee, the Prepetition Agent, the Lenders or any of the foregoing parties 15 respective members, officers, directors, employees, advisors, professionals or agents shall be 16 entitled to rely on the advice of their respective counsel with respect to their duties and 17 responsibilities in connection with the Case and the Plan. 18 19 2. Dissolution of Creditors Committee.

Upon the Effective Date, the Creditors Committee shall be released and discharged from

20 the rights and duties arising from or related to the Case, except with respect to final applications 21 for professionals compensation. The professionals retained by the Creditors Committee and the 22 members thereof shall not be entitled to compensation or reimbursement of expenses for any 23 services rendered or expenses incurred after the Effective Date, except for services rendered and 24 expenses incurred in connection with any applications by such professionals or Creditors 25 Committee members for allowance of compensation and reimbursement of expenses pending on 26 the Effective Date or timely Filed after the Effective Date as provided in the Plan, to the extent the 27 same may be approved by the Court. 28 58

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1 2

3.

Exemption from Certain Transfer Taxes.

In accordance with Bankruptcy Code section 1146(c), the issuance, transfer or exchange of

3 a security, or the making or delivery of an instrument of transfer under the Plan with respect to any 4 and all property may not be taxed under any law imposing a stamp tax or similar tax. The 5 Confirmation Order shall direct all governmental officials and agents to forego the assessment and 6 collection of any such tax or governmental assessment and to accept for filing and recordation any 7 of the foregoing instruments or other documents without payment of such tax or other 8 governmental assessment. 9 10
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4.

Modification of the Plan.

Subject to the restrictions set forth in Bankruptcy Code section 1127, the Debtor reserves

11 the right to alter, amend, or modify the Plan before its substantial consummation. 12 F. 13 14 Effect of Confirmation of the Plan. 1. Discharge and Injunction.

The rights afforded in the Plan and the treatment of all Claims shall be in exchange

15 for and in complete satisfaction, discharge, and release of all Claims of any nature 16 whatsoever arising prior to the Effective Date against the Debtor and the Estate, including 17 any interest accrued on such Claims from and after the Petition Date. 18 Except as otherwise provided in the Plan or the Confirmation Order, on the Effective

19 Date, (a) the Debtor, the Estate, the Reorganized Debtor and their respective property are 20 discharged and released hereunder to the fullest extent permitted by Bankruptcy Code 21 sections 524 and 1141 from all Claims and rights against them that arose before the Effective 22 Date, including all debts, obligations, demands, and liabilities, and all debts of the kind 23 specified in Bankruptcy Code sections 502(g), 502(h), or 502(i), regardless of whether or not 24 (i) a proof of Claim based on such debt is Filed or deemed Filed, (ii) a Claim based on such 25 debt is allowed pursuant to Bankruptcy Code section 502, or (iii) the holder of a Claim based 26 on such debt has or has not accepted the Plan; (b) any judgment underlying a Claim 27 discharged hereunder is void; and (c) all entities are precluded from asserting against the 28 Debtor, the Estate, the Reorganized Debtor and their respective property, any Claims or 59

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1 rights based upon any act or omission, transaction, or other activity of any kind or nature 2 that occurred prior to the Effective Date. 3 Except as otherwise provided in the Plan or the Confirmation Order, on and after the

4 Effective Date, all entities who have held, currently hold, or may hold a Claim, against the 5 Debtor, the Estate, or the Reorganized Debtor, that is based upon any act or omission, 6 transaction, or other activity of any kind or nature that occurred prior to the Effective Date, 7 that otherwise arose or accrued prior to the Effective Date, or that otherwise is discharged 8 pursuant to the Plan, are permanently enjoined from taking any of the following actions on 9 account of any such discharged Claim, (the Permanent Injunction): (a) commencing or 10 continuing in any manner any action or other proceeding against the Debtor, the Estate, the
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11 Reorganized Debtor, or their respective property that is inconsistent with the Plan or the 12 Confirmation Order; (b) enforcing, attaching, collecting, or recovering in any manner any 13 judgment, award, decree, or order against the Debtor, the Estate, the Reorganized Debtor or 14 their respective property, other than as expressly permitted under the Plan; (c) creating, 15 perfecting, or enforcing any lien or encumbrance against property of the Debtor, the Estate, 16 the Reorganized Debtor, or their respective property, other than as expressly permitted 17 under the Plan; and (d) commencing or continuing any action, in any manner, in any place 18 that does not comply with or is inconsistent with the provisions of the Plan, the Confirmation 19 Order, or the discharge provisions of Bankruptcy Code section 1141. Any person or entity 20 injured by any willful violation of such Permanent Injunction shall recover actual damages, 21 including costs and attorneys fees, and, in appropriate circumstances, may recover punitive 22 damages, from the willful violator. 23 24 2. Estate Release.

As of the Effective Date, the Debtor (on behalf of itself and the Estate) releases and

25 forever waives and discharges as against the Released Parties, all Claims, actions, costs, 26 causes of action, damages, demands, debts, expenses (including attorneys fees), judgments, 27 losses (including any claims for contribution or indemnification), liabilities, obligations, 28 rights, or suits, whether past or present, liquidated or unliquidated, fixed or contingent, 60

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1 matured or unmatured, known or unknown, foreseen or unforeseen, then existing or 2 thereafter arising, in law, equity or otherwise that are based in whole or part on any act, 3 omission, transaction, event or other occurrence taking place on or prior to the Effective 4 Date relating in any way to the Debtor or the Case; provided, however, that the foregoing 5 shall not effectuate a release of any obligation of such parties arising under the agreements 6 relating to the UCSD Sale, the Plan, or the Confirmation Order. The releases set forth in 7 this paragraph shall be binding upon the Reorganized Debtor, the Creditor Trust, and any 8 chapter 7 trustee, in the event the Case is at any time converted to chapter 7. 9 10
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3.

Payment of U.S. Trustee Fees.

The Reorganized Debtor shall pay all U.S. Trustee Fees due and owing under 28 U.S.C.

11 1930 until such time as it moves for entry of a final decree and the Court enters such a decree; 12 provided, however, that if the Creditor Trust opposes such motion, the Creditor Trust thereafter 13 shall bear the cost of any and all U.S. Trustee Fees until the Court enters a final decree closing the 14 Case. Notwithstanding LR 3022, the Clerk shall enter a final decree in the Case only upon an 15 Order of the Court following the Filing of a properly noticed motion. 16 17 4. Retention of Jurisdiction.

Notwithstanding the entry of the Confirmation Order or the occurrence of the Effective

18 Date, the Court shall retain jurisdiction over the Case after the Effective Date to the fullest extent 19 provided by law, as more particularly set forth in Section VII.D of the Plan. 20 21 22 X. FEASIBILITY The Bankruptcy Code provides that a plan may only be confirmed if confirmation is not

23 likely to be followed by the liquidation or the need for further financial reorganization of the 24 debtor, unless such liquidation or reorganization is proposed in the Plan. 11 U.S.C. 1129(a)(11). 25 This is referred to as the feasibility requirement. 26 Following the Effective Date, the Reorganized Debtor will have discrete financial Specifically, the Reorganized Debtor will be required to meet its remaining

27 obligations.

28 Philanthropic Commitment to UCSD, pay the costs of maintaining the Research Building, the 61

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1 Vacant Land, and the Alta-Hualapai Parcel, make the specified amortization payments to the 2 Lenders under the Research Building Note, and pay the salary of the administrative employee that 3 will assist the Reorganized Debtor with its fundraising and other activities. As set forth in the 4 annual projected budget for Reorganized Debtor attached hereto as Exhibit 5 (the Annual 5 Projected Budget) the total cost of these obligations (other than the Philanthropic Commitment) 6 is expected to be approximately $925,000 each year.7 In addition, the Reorganized Debtor will 7 make a one-time expenditure to purchase a malpractice tail insurance policy. 8 The Reorganized Debtor will have ample sources of funding with which to meet its

9 obligations under both the Philanthropic Commitment and the Annual Projected Budget. The 10 Reorganized Debtor intends for fundraising and charitable donations to be the primary source of
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11 funding for these obligations. The Debtor expects to have obtained fundraising commitments as 12 of the Effective Date sufficient to fund at least one year of the Annual Projected Budget. 13 Additionally, the Debtor already has procured the commitment of the $15 million Engelstad 14 Endowment Fund, which is now in escrow, to provide a substantial financial backstop to the 15 Philanthropic Commitment. 16 Under these circumstances, the Plan is not likely to be followed by the liquidation or the

17 need for further financial reorganization of the Reorganized Debtor. As a result, the Plan satisfies 18 the feasibility requirement set forth in Bankruptcy Code section 1129. 19 20 21 XI. LIQUIDATION ANALYSIS/BEST INTERESTS TEST Bankruptcy Code section 1129(a)(7) requires that each holder of a Claim against the

22 Debtor in an impaired Class either (i) vote to accept the Plan, or (ii) receive or retain under the 23 Plan cash or property of a value, as of the effective date of the Plan, that is not less than the value 24 25 26 27 28 62
7

If, at any point in time, the Research Building and/or Vacant Land are no longer owned by the Reorganized Debtor, the Reorganized Debtor will not be required to fund the carrying costs of preserving those assets, although the Reorganized Debtor will continue as a nonprofit corporation dedicated to raising funds and generating support for and otherwise advancing its philanthropic objectives.

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1 such holder would receive or retain if the Debtor were liquidated under chapter 7 of the 2 Bankruptcy Code. This is commonly referred to as the Best Interests Test. 3 In a chapter 7 case, a trustee or trustees would be elected or appointed to liquidate the

4 debtors assets and make distributions to creditors in accordance with the priorities set forth in the 5 Bankruptcy Code. Secured creditors generally are paid from the proceeds of sale of the properties 6 securing their liens. If any assets are remaining after the satisfaction of secured claims,

7 administrative expenses generally are next to receive payments. Unsecured claims are paid from 8 any remaining sales proceeds or other estate assets, according to their rights to priority. 9 Unsecured claims with the same right to priority receive a pro rata distribution based on the 10 amount of their allowed claim in relation to the total amount of allowed unsecured claims with the
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11 same right to priority. Finally, interest holders (if any) receive the balance that remains, if any, 12 after all creditors are paid. 13 Thus, for the Court to confirm the Plan, the Court must find that all creditors in impaired

14 Classes who do not accept the Plan will receive at least as much under the Plan as such creditors 15 would receive under a hypothetical chapter 7 liquidation. 16 The Debtor prepared the liquidation analysis attached hereto as Exhibit 6, reflecting the

17 estimated cash proceeds, net of liquidation-related costs, that would be realized if the Debtor was 18 liquidated in accordance with chapter 7 of the Bankruptcy Code. The liquidation analysis projects 19 that, under any scenario, all creditors would receive substantially less (or nothing) if the Debtor 20 were to be liquidated under chapter 7 of the Bankruptcy Code. Even under the best-case scenario, 21 which assumes the highest recoveries from the liquidation of the assets of the Estate, the proceeds 22 of these assets would go solely to satisfy the Lender Secured Debt, administrative expenses and 23 priority claims. Accordingly, all of the Debtors creditors will receive at least as much under the 24 Plan as they would receive in a chapter 7 liquidation. 25 THE LIQUIDATION ANALYSIS, INCLUDING THE CLAIMS ESTIMATES, WAS

26 PREPARED SOLELY TO ASSIST THE COURT IN MAKING THE FINDINGS 27 REQUIRED UNDER SECTION 1129(a)(7) OF THE BANKRUPTCY CODE AND MAY 28 NOT BE USED OR RELIED UPON FOR ANY OTHER PURPOSE. 63

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THE DEBTOR BELIEVES THAT ANY ANALYSIS OF A HYPOTHETICAL

2 LIQUIDATION REQUIRES ESTIMATES AND ASSUMPTIONS ABOUT FUTURE 3 EVENTS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC, 4 COMPETITIVE AND OPERATIONAL UNCERTAINTIES AND CONTINGENCIES 5 BEYOND THE CONTROL OF THE DEBTOR OR A CHAPTER 7 TRUSTEE. NEITHER 6 THE LIQUIDATION ANALYSIS, NOR THE FINANCIAL INFORMATION ON WHICH 7 IT IS BASED, HAS BEEN EXAMINED OR REVIEWED BY INDEPENDENT 8 ACCOUNTANTS IN ACCORDANCE WITH STANDARDS PROMULGATED BY THE 9 AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THERE CAN BE 10 NO ASSURANCE THAT ACTUAL RESULTS WOULD NOT VARY MATERIALLY
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11 FROM THE HYPOTHETICAL RESULTS REPRESENTED IN THE LIQUIDATION 12 ANALYSIS. 13 14 15 XII. RISK FACTORS The Debtors ability to perform its obligations under the Plan is subject to various factors The following discussion

16 and contingencies, some of which are described in this section.

17 summarizes only some material risks associated with the Plan and the Reorganized Debtor, and is 18 not exhaustive. Moreover, this section should be read in connection with the Plan and the other 19 disclosures contained in this Disclosure Statement. 20 21 22 23 24 25 A. 26 27 PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN, ALL HOLDERS OF CLAIMS AGAINST THE DEBTOR THAT ARE IMPAIRED SHOULD, WITH THEIR ADVISORS, READ AND CONSIDER CAREFULLY THE FACTORS SET FORTH HEREIN, AS WELL AS ALL OTHER INFORMATION SET FORTH OR OTHERWISE REFERENCED IN THIS DISCLOSURE STATEMENT AND THE PLAN. Bankruptcy Considerations. 1. Parties in Interest May Object to the Debtors Classification of Claims.

Section 1122 of the Bankruptcy Code provides that a plan may place a claim in a particular

28 class only if the claim is substantially similar to the other claims in that class. The Debtor believes 64

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1 that the classification of holders of Claims against the Debtor under the Plan complies with the 2 requirements set forth in the Bankruptcy Code because the classes established under the Plan each 3 encompass Claims that are substantially similar to similarly classified Claims. Nevertheless, there 4 can be no assurance that the Court will reach the same conclusion. 5 6 2. Failure to Secure Confirmation of the Plan.

Bankruptcy Code section 1129 sets forth the requirements for confirmation of a chapter 11

7 plan, and requires the Court to make a series of specified, independent findings. There can be no 8 assurance that the Court will find that the Plan meets these requirements and confirm the Plan. If 9 the Plan is not confirmed, it is unclear what distributions, if any, holders of Allowed Claims would 10 receive with respect to their Allowed Claims.
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11

The Plan may be modified as necessary for confirmation of the Plan.

Any such

12 modifications could result in a less favorable treatment of any non-accepting Class, as well as of 13 any Classes junior to such non-accepting Class, than the treatment currently provided in the Plan. 14 Such a less favorable treatment could include a distribution of property to the Class affected by the 15 modification of a lesser value than currently provided in the Plan or no distribution of property 16 whatsoever under the Plan. 17 18 3. Non-Consensual Confirmation.

In the event that any impaired class of claims does not accept a chapter 11 plan, the Court

19 may nevertheless confirm the plan under the procedure for non-consensual confirmation described 20 in Section V of this Disclosure Statement. The Debtor believes that the Plan would satisfy the 21 requirements for non-consensual confirmation. Nevertheless, there can be no assurance that the 22 Court will reach this conclusion. 23 24 4. The Debtor May Object to the Amount or Classification of a Claim.

Except as otherwise provided in the Plan, the Debtor, the Reorganized Debtor and the

25 Creditor Trust reserve the right to object to the amount or classification of any Claim against the 26 Debtor. The estimates set forth in this Disclosure Statement cannot be relied on by any holder of a 27 Claim against the Debtor. 28 65

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1 2

5.

The Effective Date Might Not Occur.

Even if the Court confirms the Plan, the Plan shall not become binding until the Effective

3 Date occurs. The Effective Date is the first Business Day on which the conditions set forth in 4 Section IV.L.1 of the Plan have been satisfied or waived by the Debtor and on which no stay of 5 the Confirmation Order is in effect. There can be no assurances as to whether or when the 6 Effective Date will occur. 7 B. 8 Risks Associated with the UCSD Sale. If the UCSD Sale is not approved by the Court and/or is not implemented by the Debtor,

9 the Plan will not be feasible. First, the Plan is premised on a reduction of the Debtors obligations 10 to the Lenders debt by $18 million from the cash consideration received from the UCSD Sale.
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11 Second, the agreed-upon Budget assumes that the UCSD Sale will be closed, and that UCSD will 12 commence its own operations at the Flagship Building, no later than the week ended January 13, 13 2012. The Plan Support Agreement does not provide for continued operations (i.e., the funding of 14 continued operating losses) after that date absent closing of the UCSD Sale. Thus, if the Debtor is 15 not able to consummate the UCSD Sale within this time-frame, the Debtor may not have sufficient 16 resources to pursue confirmation of the Plan. 17 C. 18 Risks Associated with the Reorganized Debtor. In addition to fundraising in support of UCSD, the Reorganized Debtor will have various

19 financial responsibilities after the Effective Date, including yearly amortization payments on the 20 Research Building Note, maintenance of the Research Building, the Vacant Land and the Alta21 Hualapai parcel, including insurance and taxes for these properties, and ultimately, repayment of 22 the Research Building Note. The Debtor expects to have obtained fundraising commitments as of 23 the Effective Date that will fund at least one year of the Annual Projected Budget for the 24 Reorganized Debtor, but there is no assurance that the Reorganized Debtor will be able to meet its 25 obligations thereafter. 26 27 28 66

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1 2 3 A. 4

XIII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN Liquidation Under Chapter 7. If no plan of reorganization can be confirmed, the Case may be converted to a case under

5 chapter 7 of the Bankruptcy Code, in which case a trustee would be elected or appointed to 6 liquidate the Debtors assets for distribution in accordance with the priorities established by the 7 Bankruptcy Code. A discussion of the effects that a chapter 7 liquidation would have on the 8 recoveries of the holders of Claims against the Debtor is set forth in Section XI above and in the 9 liquidation analysis attached hereto as Exhibit 6. 10
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As noted above and in the Liquidation Analysis, the Debtor believes that in a liquidation

11 under chapter 7, there would likely be no assets available to distribute to the holders of Allowed 12 General Unsecured Claims. 13 B. 14 Alternative Plan of Reorganization. If the Plan is not confirmed, the Debtor (or any other party in interest) could attempt to

15 formulate a different plan. Such a plan might involve a reorganization and continuation of the 16 Debtors business, or an orderly liquidation of the Debtors assets. Before and during the course 17 of negotiations with the Agent, the Lenders, and UCSD, and in consultation with its professionals, 18 the Debtor explored various alternatives. The Debtor believes that the Plan enables creditors to 19 realize the most value under the circumstances. 20 21 22 XIV. TAX CONSEQUENCES OF PLAN The following is a summary of certain anticipated U.S. federal income tax consequences of

23 the Plan to the Debtor, the Reorganized Debtor and certain holders of Claims against the Debtor 24 that are entitled to vote to accept or reject the Plan. This summary is provided for informational 25 purposes only and is based on the Internal Revenue Code of 1986, as amended (the Code), 26 Treasury Regulations thereunder, and administrative and judicial interpretations and practice, all 27 as in effect on the date hereof and all of which are subject to change, with possible retroactive 28 effect. Due to the lack of definitive judicial and administrative authority in a number of areas, 67

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1 substantial uncertainty may exist with respect to some of the tax consequences described below. 2 In addition, a substantial amount of time may elapse between the date of this Disclosure Statement 3 and the receipt of a final distribution under the Plan. Events occurring after the date of this 4 Disclosure Statement, including changes in law and changes in administrative positions, could 5 affect the U.S. federal tax consequences of the Plan. No opinion of counsel has been obtained, 6 and the Debtor and Reorganized Debtor do not intend to seek a ruling from the Internal Revenue 7 Service (IRS) as to any of such tax consequences, and there can be no assurance that the IRS 8 will not challenge one or more of the tax consequences of the Plan described below. 9 This summary does not apply to holders of Claims that are not United States persons for

10 U.S. federal income tax purposes or that are otherwise subject to special treatment under U.S.
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11 federal income tax law. This summary does not purport to cover all aspects of U.S. federal 12 income taxation that may apply to the Debtor, the Reorganized Debtor and holders of Claims 13 based upon their particular circumstances. Additionally, this summary does not discuss any tax 14 consequences that may arise under state, local or foreign tax law. 15 The following summary is not a substitute for careful tax planning and advice based

16 on the particular circumstances of each creditor. All creditors are urged to consult their 17 own tax advisors as to the U.S. federal income tax consequences, as well as any applicable 18 state, local and foreign tax consequences, of the Plan. 19 To ensure compliance with requirements imposed by the IRS, you must be informed

20 that any tax advice contained in this Disclosure Statement is not intended or written to be 21 used, and cannot be used, by any taxpayer for the purpose of avoiding tax-related penalties 22 under the Code. The tax advice contained in this Disclosure Statement was written to 23 support the promotion of the transactions described in this Disclosure Statement. Each 24 taxpayer should seek advice based on the taxpayers particular circumstances from an 25 independent tax advisor. 26 27 28 68

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1 A. 2

Certain U.S. Federal Income Tax Consequences of the Plan to the Debtor and Reorganized Debtor. 1. Cancellation of Debt.

3 The net proceeds from the UCSD Sale (the UCSD Sale Proceeds) shall be paid to the 4 Agent for the ratable benefit of the Lenders, and this payment shall reduce the debt (the Existing 5 Lender Debt) under the Credit Agreement. In addition, on the Effective Date, the Reorganized 6 Debtor will issue to the Agent, for the ratable benefit of the Lenders, the Research Building Note. 7 Whether the Research Building Note will constitute a debt for U.S. federal income tax purposes 8 will be determined based on all of the relevant facts and circumstances. Some of the significant 9 factors that courts have relied upon in making a determination of whether an instrument is a debt 10
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for U.S. federal income tax purposes are: (i) repayment terms, (ii) debt/equity ratio of the debtor, 11 (iii) identity of the debt holders, (iv) remedies of the debt holders, (v) the degree of subordination, 12 (vi) convertibility, (vii) management control, (viii) intention of the parties and (ix) similarity to 13 independent creditor loans. The following discussion assumes that, with respect to the Research 14 Building Note, the parties intend to create a debtor-creditor relationship and that the Research 15 Building Note will be treated as debt for U.S. federal income tax purposes. In addition, the 16 following discussion assumes that the Research Building and the Vacant Land will be: (a) treated 17 as owned by the Reorganized Debtor for U.S. federal income tax purposes and (b) used by the 18 Reorganized Debtor in furtherance of its tax-exempt purposes. 19 Ordinarily, the Debtor and/or Reorganized Debtor would recognize cancellation of debt 20 income (CODI) in an amount equal to the excess of: (i) the amount owed under the Existing 21 Lender Debt over (ii) the sum of the UCSD Sale Proceeds and the issue price of the Research 22 Building Note. However, because the Debtor and the Reorganized Debtor are, and are expected to 23 be, tax-exempt organizations under Code 501(c)(3), the Debtor and the Reorganized Debtor 24 should not recognize CODI. 25 In addition, any other debts of the Debtor and the Reorganized Debtor that are satisfied 26 under the Plan and would otherwise give rise to CODI should not result in CODI to the Debtor 27 and/or the Reorganized Debtor because of their tax-exempt status. 28 69

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1 2

2.

The UCSD Sale.

The Debtor expects to consummate the UCSD Sale prior to the confirmation of the Plan.

3 Ordinarily, gain or loss would be recognized by the Debtor in an amount equal to the difference 4 between the UCSD Sale Proceeds and the Debtors adjusted tax basis in the property sold pursuant 5 to the UCSD Sale. However, because the Debtor is a tax-exempt organization under Code 6 501(c)(3), no gain or loss should be recognized by the Debtor in connection with the UCSD Sale. 7 In addition, because substantially all of the Debtors use of the Flagship Building and other 8 property being sold in the UCSD Sale have been in furtherance of its tax-exempt purposes, income 9 generated by the UCSD Sale (if any) will not be treated as taxable unrelated business or debt10 financed income to the Debtor.
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11 B. 12 13

Certain U.S. Federal Income Tax Consequences of the Plan to the Holders of Claims. 1. General.

The federal income tax consequences of the Plan to a holder of a Claim against the Debtor

14 will depend, in part, on whether the Claim constitutes a tax security for federal income tax 15 purposes, what type of consideration was received in exchange for the Claim, whether the holder 16 reports income on the accrual or cash basis, whether the holder has taken a bad debt deduction or 17 worthless security deduction with respect to the Claim and whether the holder receives 18 distributions under the Plan in more than one taxable year. 19 20 2. Definition of Securities.

There is no precise definition of the term security under the federal income tax law.

21 Rather, all facts and circumstances pertaining to the origin and character of a Claim are relevant in 22 determining whether it is a security. Most authorities have held that the length of the term of a 23 debt instrument is an important factor in determining whether such instrument is a security for 24 U.S. federal income tax purposes. Generally, corporate debt instruments with maturities when 25 issued of less than five years are not considered securities, and corporate debt instruments with 26 maturities when issued of ten years or more are considered securities. The term of the Credit 27 Agreement was three years and, generally, a loan made thereunder would not be considered a 28 security for U.S. federal income tax purposes. The following discussion assumes that none of the 70

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1 Claims against the Debtor are a security for U.S. federal income tax purposes. Holders of Claims 2 are urged to consult their tax advisors with respect to the possible treatment of their Claims as tax 3 securities. 4 5 3. Holders of Claims not Constituting Tax Securities.

A holder of a Claim not constituting a tax security should recognize gain or loss equal to

6 the amount realized in satisfaction of the Claim minus the holders tax basis in the Claim. The 7 holders amount realized for this purpose generally will equal the sum of cash and the fair market 8 value of other property received, if any, on the date of distribution by the Reorganized Debtor, less 9 any amount allocable to interest on the holders Claim. For a discussion of the issue price of the 10 Research Building Note, see Original Issue Discount below.
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11

In connection with the foregoing, pursuant to the Plan, on the Effective Date, (i) the

12 Unsecured Creditor Cash shall be remitted to the Creditor Trust and (ii) all Preserved Avoidance 13 Actions shall be vested in the Creditor Trust (the Unsecured Creditor Cash and the Preserved 14 Avoidance Actions are referred to herein, collectively, as the Class 4 Claim Assets). The 15 holders of the Allowed Class 4 Claims will be the beneficiaries of the Creditor Trust and will be 16 entitled to distributions from the Creditor Trust in accordance with the Creditor Trust Agreement. 17 The Creditor Trust is intended to qualify as, and the discussion below assumes that the Creditor 18 Trust will be respected as, a liquidating trust for U.S. federal income tax purposes. In general, a 19 liquidating trust is not a separate taxable entity for U.S. federal income tax purposes, but is instead 20 treated as a grantor trust, i.e., a pass-through entity. For U.S. federal income tax purposes, all 21 parties (including the Debtor, the Reorganized Debtor, the Creditor Trustees and the Creditor 22 Trust beneficiaries) must treat the transfer of the Class 4 Claim Assets to the Creditor Trust as a 23 transfer of such assets directly to the Creditor Trust beneficiaries, followed by the beneficiaries 24 transfer of such assets to the Creditor Trust. Consistent therewith, all parties must treat the 25 Creditor Trust as a grantor trust of which the Creditor Trust beneficiaries are the owners and 26 grantors. Subject to the terms of the Creditor Trust Agreement, the Creditor Trustees will

27 determine the fair market value of the Class 4 Claim Assets as soon as possible after the Effective 28 Date, and the Creditor Trust beneficiaries and the Creditor Trustees must consistently use this 71

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1 valuation for all U.S. federal income tax purposes, including for determining gain, loss or tax 2 basis. Assuming the Creditor Trust qualifies as a liquidating trust for U.S. federal income tax 3 purposes, each Creditor Trust beneficiary generally should be required to report on the 4 beneficiarys U.S. federal income tax return its allocable share of any income, gain, loss, 5 deduction or credit, recognized or incurred by the Creditor Trust, in accordance with such 6 beneficiarys relative beneficial interest in the trust. The character of the items of income, gain, 7 loss, deduction or credit to any Creditor Trust beneficiary, and such beneficiarys ability to benefit 8 from any deductions or losses, may depend on such beneficiarys particular situation. 9 Any gain or loss recognized by a holder of a Claim not constituting a tax security will be

10 capital or ordinary depending on the status of the Claim in the holders hands. A holders tax
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11 basis in the Research Building Note should be the issue price of the Research Building Note on the 12 date of distribution by the Reorganized Debtor. The holding period for any property received 13 under the Plan by a holder of a Claim not constituting a tax security generally should begin on the 14 day following the day of receipt. 15 16 4. Original Issue Discount and Contingent Payment.

The Research Building Note will be treated as issued with original issue discount (OID)

17 to the extent that its stated redemption price at maturity exceeds its issue price. 18 An instruments stated redemption price at maturity includes all payments required to be

19 made over the term of the instrument other than payments of qualified stated interest, defined as 20 interest payments required to be made at fixed periodic intervals of one year or less. Because the 21 Research Building Note is non-interest bearing and will not be publicly traded on an established 22 securities market, the issue price of this note will be its imputed principal amount. The Research 23 Building Notes imputed principal amount will be the sum of the present values of all payments 24 due under the note, determined as of the date of its issuance, using a discount rate equal to the 25 applicable federal rate, compounded semi-annually. 26 A holder of a debt instrument that bears OID is required to include in gross income an

27 amount equal to the sum of the daily portions of OID for each day during the taxable year in 28 which the debt instrument is held. The daily portions of OID are determined by allocating to each 72

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1 day in an accrual period the prorata portion of the OID that is considered allocable to the accrual 2 period. The amount of OID that is allocable to an accrual period is generally equal to the product 3 of the adjusted issue price of the debt instrument at the beginning of the accrual period (the issue 4 price of the debt instrument increased by prior accruals of OID and decreased by prior cash 5 payments) and the debt instruments yield-to-maturity (the discount rate which, when applied to 6 all payments under the debt instrument, results in a present value equal to the issue price of the 7 debt instrument). 8 The general effect of the OID rules is that holders may be required to include OID in

9 income in advance of the receipt of cash in respect of such income. 10


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The Plan provides that if the Research Building and/or the Vacant Land are sold and there

11 is Excess Consideration, the Reorganized Debtor will pay 80% of the Excess Consideration to the 12 Agent for the ratable benefit of the Lenders (the Contingent Payment). Assuming that the 13 Contingent Payment is made pursuant to the Research Building Note, part of the Contingent 14 Payment will be treated as a payment of principal and part of the payment will be treated as 15 interest for U.S. federal income tax purposes. 16 The portion of the Contingent Payment that will be allocated to principal will be an amount

17 equal to the present value of the Contingent Payment determined by discounting the Contingent 18 Payment from the date it was made to the issue date of the Research Building Note at the federal 19 rate that would apply to a debt instrument that was issued on the Research Building Notes issue 20 date (i.e. the Effective Date) and that matures on the date that the Contingent Payment is made. 21 The remaining portion of the Contingent Payment that is not allocated to principal will be treated 22 as a payment of interest and will be includable in gross income by the holder of the Research 23 Building Note in the taxable year in which the payment is made. 24 25 5. Accrued Interest

To the extent that any amount received by a holder of a surrendered Allowed Claim under

26 the Plan is attributable to accrued but unpaid interest and such amount has not previously been 27 included in the holders gross income, such amount should be taxable to the holder as ordinary 28 interest income. Conversely, a holder of a surrendered Allowed Claim may be able to recognize a 73

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1 deductible loss (or, possibly, a write-off against a reserve for worthless debts) to the extent that 2 any accrued interest on the debt instruments constituting such Claim was previously included in 3 the holders gross income but was not paid in full by the Debtor and/or Reorganized Debtor. Such 4 loss may be ordinary, but the tax law is unclear on this point. 5 The extent to which the consideration received by a holder of a surrendered Allowed Claim

6 will be attributable to accrued interest on the debts constituting the surrendered Allowed Claim is 7 unclear. Certain U.S. Treasury Regulations generally treat a payment under a debt instrument first 8 as a payment of accrued and untaxed interest and then as a payment of principal. Application of 9 this rule to a final payment on a debt instrument being discharged at a discount in bankruptcy is 10 unclear. Pursuant to the Plan, distributions in respect of Allowed Claims will be allocated first to
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11 the principal amount of such Allowed Claims (as determined for U.S. federal income tax 12 purposes) and thereafter, to the remaining portion of such Allowed Claims, if any. However, the 13 provisions of the Plan are not binding on the IRS nor a court with respect to the appropriate tax 14 treatment for creditors. 15 C. 16 Bad Debt and/or Worthless Securities Deduction. A holder who, under the Plan, receives in respect of a Claim an amount less than the

17 holders tax basis in the Claim may be entitled in the year of receipt (or in an earlier year) to a bad 18 debt deduction in some amount under Code 166(a) or a worthless securities deduction under 19 Code 165(g). The rules governing the character, timing and amount of the bad debt and/or 20 worthless securities deductions place considerable emphasis on the facts and circumstances of the 21 holder, the obligor and the instrument with respect to which a deduction is claimed. Holders of 22 Claims against the Debtor, therefore, are urged to consult their tax advisors with respect to their 23 ability to take such a deduction. 24 D. 25 Information Reporting and Backup Withholding. All distributions under the Plan will be subject to applicable federal income tax reporting

26 and withholding. The Code imposes backup withholding on certain reportable payments to 27 certain taxpayers, including payments of interest. Under the Codes backup withholding rules, a 28 holder of a Claim may be subject to backup withholding with respect to distributions or payments 74

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1 made pursuant to the Plan, unless the holder: (i) comes within certain exempt categories (which 2 generally include corporations) and, when required, demonstrates this fact or (ii) provides a 3 correct taxpayer identification number and certifies under penalty of perjury that the taxpayer 4 identification number is correct and that the taxpayer is not subject to backup withholding because 5 of a failure to report all dividend and interest income. Backup withholding is not an additional 6 tax, but merely an advance payment that may be refunded to the extent it results in an 7 overpayment of tax. A holder of a Claim may be required to establish an exemption from backup 8 withholding or to make arrangements with respect to the payment of backup withholding. 9 E. 10
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Importance of Obtaining Professional Tax Assistance. THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF

11 CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN, AND IS NOT A 12 SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE

13 ABOVE DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT TAX 14 ADVICE. THE TAX CONSEQUENCES ARE IN MANY CASES UNCERTAIN AND MAY 15 VARY DEPENDING ON A HOLDERS INDIVIDUAL CIRCUMSTANCES.

16 ACCORDINGLY, ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT WITH THEIR 17 TAX ADVISORS ABOUT THE FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND 18 OTHER TAX CONSEQUENCES OF THE PLAN. 19 20 21 XV. RECOMMENDATION AND CONCLUSION The Debtor believes that Plan confirmation and implementation are preferable to any

22 feasible alternative. Accordingly, the Debtor urges entities who hold impaired Claims to vote 23 to accept the Plan by checking the box marked Accept on their Ballots and then returning 24 the Ballots as directed in the Plan and Disclosure Statement. 25 26 27 28 75

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EXHIBIT 1

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1 MICHAEL L. TUCHIN (CA State Bar No. 150375) 2 3 4 5 6 7 8


Proposed Reorganization Counsel for the Verified Petition Pending MARTIN R. BARASH (CA State Bar No. 162314) Verified Petition Pending COURTNEY E. POZMANTIER (CA State Bar No. 242103) Verified Petition Pending KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 Avenue of the Stars, 39th Floor Los Angeles, CA 90067 Telephone: (310) 407-4000 Facsimile: (310) 407-9090 Emails: mtuchin@ktbslaw.com mbarash@ktbslaw.com cpozmantier@ktbslaw.com

ROBERT M. CHARLES, JR. (NV Bar No. 6593) DAWN M. CICA (NV Bar No. 4565) LEWIS AND ROCA LLP 3993 Howard Hughes Pkwy., Suite 600 Las Vegas, NV 89169 Telephone: (702) 949-8200 Facsimile: (702) 949-8398 Emails: rcharles@lrlaw.com dcica@lrlaw.com Proposed Reorganization Co-Counsel for the Debtor and Debtor in Possession

9 Debtor and Debtor in Possession 10


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UNITED STATES BANKRUPTCY COURT 11 DISTRICT OF NEVADA 12 In re: 13 NEVADA CANCER INSTITUTE, a Nevada 14 nonprofit corporation,1 15 16 17 18 19 20 21 22 23 24 25 26 27 28
1

Case No.: 2:11-bk-28676 (MKN) Chapter 11 CHAPTER 11 PLAN OF REORGANIZATION FOR NEVADA CANCER INSTITUTE (DATED DECEMBER 6, 2011)

Debtor.

The Debtors address and last four digits of its Federal Tax I.D. are: One Breakthrough Way, Las Vegas, NV 89135 [EIN XX-XXX2553].

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1 2 3 I. 4 5 6 II. 7 8 9 1. 10
KLEE, TUCHIN, BOGDANOFF & STERN LLP 1999 AVENUE OF THE STARS, THIRTY-NINTH FLOOR LOS ANGELES, CALIFORNIA 90067 TELEPHONE: 310-407-4000

TABLE OF CONTENTS Page(s) DEFINITIONS AND RULES OF CONSTRUCTION ......................................................... 1 A. B. Definitions. ................................................................................................................ 1 Rules of Construction. ............................................................................................. 10

DESIGNATION OF CLASSES AND TREATMENT OF CLAIMS ................................ 11 A. B. Summary and Classification of Claims. .................................................................. 11 Allowance and Treatment of Unclassified Claims (Administrative Claims and Priority Tax Claims). ........................................................................................ 12 Administrative Claims................................................................................. 12 a. Allowance of Administrative Claims. ............................................. 12 Treatment of Administrative Claims. .............................................. 13

11 b. 12 2. 13 C. 14 1. 15 2. 16 3. 17 4. 18 III. 19 A. 20 1. 21 2. 22 3. 23 4. 24 B. 25 1. 26 2. 27 C. 28
134852.12

Priority Tax Claims. .................................................................................... 14

Classification and Treatment of Classified Claims. ................................................ 15 Class 1 (Lender Secured Claims). ............................................................... 15 Class 2 (Other Secured Claims, including Secured Tax Claims). ............... 17 Class 3 (Priority Claims, other than Priority Tax Claims). ......................... 18 Class 4 (General Unsecured Claims). ......................................................... 18

TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES............ 19 Assumption of Executory Contracts and Unexpired Leases. .................................. 19 Assumption of Agreements. ........................................................................ 19 Cure Payments............................................................................................. 19 Objections to Assumption/Cure Payment Amounts.................................... 20 Resolution of Claims Relating to Assumed Contracts and Leases. ............ 20

Rejection of Executory Contracts and Unexpired Leases. ...................................... 21 Rejected Agreements................................................................................... 21 Bar Date for Rejection Damage Claims. ..................................................... 21

Postpetition Contracts and Leases. .......................................................................... 21

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1 IV. 2 3 4 5 6 7 8 9 10
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MEANS OF EXECUTION AND IMPLEMENTATION OF THE PLAN ........................ 21 A. B. C. D. E. F. Funding of the Plan. ................................................................................................ 21 Vesting of Assets Generally. ................................................................................... 22 The Charitable Trust Funds. .................................................................................... 22 Vesting of Rights of Action in Reorganized Debtor. .............................................. 22 Vesting of Preserved Avoidance Actions and other Rights in Creditor Trust. ....... 23 Creation of the Creditor Trust and Appointment of Creditor Trustees. .................. 23 1. 2. 3. G. H. Powers and Duties. ...................................................................................... 23 Termination of the Creditor Trust. .............................................................. 24 Additional Provisions of the Creditor Trust Agreement. ............................ 24

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 V.
134852.12

Objections to Claims. .............................................................................................. 24 Distribution of Property Under the Plan. ................................................................ 25 1. 2. 3. 4. Manner of Cash Payments Under the Plan.................................................. 25 No De Minimis Distributions. ..................................................................... 25 No Distribution With Respect to Disputed Claims. .................................... 25 Delivery of Distributions, Undeliverable/Unclaimed Distributions. .......... 26 a. b. c. Delivery of Distributions in General. .............................................. 26 Undeliverable and Unclaimed Distributions. .................................. 26 Estimation of Disputed Claims for Distribution Purposes. ............. 27

I. J. K. L.

Full Satisfaction....................................................................................................... 27 Compliance with Tax Requirements. ...................................................................... 27 Setoff, Recoupment and Other Rights..................................................................... 27 The Effective Date. ................................................................................................. 28 1. 2. 3. Conditions to the Effective Date. ................................................................ 28 Waiver of Conditions. ................................................................................. 28 Notice of the Effective Date. ....................................................................... 28

M.

Authorization of Corporate Action. ........................................................................ 29

THE REORGANIZED DEBTOR ....................................................................................... 29 ii

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1 2 3 VI. 4 5 6 7 8 9 10
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A. B.

Directors and Officers. ............................................................................................ 29 Amended Articles of Incorporation and Bylaws. .................................................... 29

OTHER PLAN PROVISIONS............................................................................................ 29 A. B. C. D. E. F. G. H. I. J. Exculpation Re Solicitation and Prosecution of Plan Confirmation. ...................... 29 Revocation of Plan/No Admissions. ....................................................................... 30 Modification of the Plan. ......................................................................................... 30 Dissolution of Creditors Committee. ..................................................................... 30 Exemption from Certain Transfer Taxes. ................................................................ 30 Successors and Assigns. .......................................................................................... 31 Saturday, Sunday or Legal Holiday. ....................................................................... 31 Headings. ................................................................................................................. 31 Severability of Plan Provisions. .............................................................................. 31 Governing Law. ....................................................................................................... 31

11 12 13 14 VII. 15 16 17 18 19 VIII. 20 21 22 23 24 25 26 27 28
134852.12

EFFECT OF PLAN CONFIRMATION ............................................................................. 32 A. B. C. D. Discharge and Injunction. ....................................................................................... 32 Estate Release. ......................................................................................................... 33 Payment of U.S. Trustee Fees. ................................................................................ 34 Retention of Jurisdiction. ........................................................................................ 34

RECOMMENDATION AND CONCLUSION .................................................................. 36

iii

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1 2 3 4 5 6 7 8 9 10
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LIST OF EXHIBITS

EXHIBIT NO. A B C D E

DESCRIPTION Amended Articles of Incorporation and Bylaws List of Directors and Officers for Reorganized Debtor Creditor Trust Agreement Schedule of Assumed Contracts Schedule of Rejected Contracts

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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iv

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This Plan of Reorganization is proposed by Nevada Cancer Institute, a Nevada nonprofit

2 corporation, the debtor and debtor in possession in the above-captioned chapter 11 case: 3 4 5 A. 6 Definitions. In addition to such other terms as are defined elsewhere in the Plan, the following terms I. DEFINITIONS AND RULES OF CONSTRUCTION

7 (which appear in the Plan as capitalized terms) have the following meanings as used in the Plan: 8 503(b)(9) Bar Date means the date established by the Court as the deadline to file 503(b)(9)

9 Claims. 10
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503(b)(9) Claim means a claim against the Debtor entitled to treatment as an administrative

11 expense under Bankruptcy Code section 503(b)(9). 12 Administrative Claim means a Claim against the Estate for administrative costs or

13 expenses entitled to priority under Bankruptcy Code section 507(a)(2) or (b). 14 Administration Building Parcel means that certain real property identified by the Clark

15 County Assessor as APN 164-13-712-020. 16 Agent means Bank of America, N.A., as administrative agent under the Prepetition Credit

17 Agreement. 18 19 20 21 22 23 24 25 26 27 28
134852.12

Allowed or Allowed ______________ Claim means: (a) with respect to a Claim against the Debtor arising prior to the Petition Date (including a 503(b)(9) Claim): (i) either: (1) a proof of claim was timely Filed; or (2) a proof of claim is deemed timely Filed either under Bankruptcy Rule 3003(b)(1)-(2) or by a Final Order; and (ii) either: (1) the Claim is not a Disputed Claim; or (2) the Claim is allowed by a Final Order or under the Plan; and (b) with respect to a Claim against the Estate arising on or after the Petition Date (excluding a 503(b)(9) Claim), a Claim that has been allowed pursuant to Section II.B.1. of the Plan. 1

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Unless otherwise specified in the Plan, an Allowed Claim does not include interest on the

2 Claim accruing after the Petition Date. Moreover, any portion of a Claim that is satisfied, released or 3 waived during the Case is not an Allowed Claim. 4 Alta-Hualapai Parcel means approximately 19 acres of undeveloped land in Las Vegas,

5 Nevada, granted to the Borrower by the United States, through the Bureau of Land Management, 6 pursuant to Section 2603 of the Omnibus Public Land Management Act of 2009. 7 Amended Articles of Incorporation and Bylaws means the Articles of Incorporation and

8 Bylaws for the Reorganized Debtor which shall be in substantially the form Filed by the Exhibit Filing 9 Date. Upon such filing, the Amended Articles of Incorporation and Bylaws shall become Exhibit A to 10 the Plan (subject to any modifications made thereto prior to the Confirmation Date).
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11

Approving Lenders means the Lenders comprising holders owning more than 66 2/3% in

12 aggregate principal amount and representing more than 50% of the number of holders of the debt 13 under the Prepetition Credit Agreement. 14 15 Ballot means the ballot to vote to accept or reject the Plan. Ballot Tabulator means Shanda D. Dahl, a paralegal with Debtors Counsel, or any other

16 person or entity designated by the Debtors Counsel to tabulate ballots. 17 Ballot Deadline means the deadline established by the Court for the delivery of executed

18 Ballots to the Ballot Tabulator. 19 20 Bankruptcy Code means title 11 of the United States Code, 11 U.S.C. 101 et seq. Bankruptcy Rules means, collectively, (a) the Federal Rules of Bankruptcy Procedure and

21 (b) the Local Bankruptcy Rules for this Court, as applicable in the Case. 22 23 24 25 Board means the board of directors for the Debtor. Business Day means a day that is not a Saturday, Sunday, or legal holiday. Case means the Debtors case under chapter 11 of the Bankruptcy Code. Cash Collateral Account means that certain cash collateral account established prior to the

26 Petition Date as collateral for the Lender Claims (and any successor account), referred to in the Cash 27 Collateral Orders as the Blocked Account. 28
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Cash Collateral Orders means the orders entered in the Case approving, among other

2 things, the use by the Debtor of cash collateral in which the Estate and the Agent hold an interest. 3 Charitable Trust Funds means certain funds that are subject to donor restrictions limiting

4 the use of such funds for specified research, treatment, patient support and/or other charitable 5 purposes by the Debtor, and that are maintained in one or more segregated accounts of the Debtor, or 6 in one or more escrow accounts, in all cases subject to such restrictions. Charitable Trust Funds 7 include without limitation the Engelstad Endowment Fund, the Patient Cares Committee Fund, and the 8 Saffer Endowment Fund. 9 10
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Claim means a claim, as Bankruptcy Code section 101(5) defines the term claim. Claims Objection Deadline means the date that is the later of (a) 180 days after the

11 Effective Date, unless extended by the Court, and (b) 180 days after the date on which a proof of 12 claim in respect of a Claim against the Debtor has been Filed, unless extended by the Court. 13 Class means a group of Claims against the Debtor as classified in Section II.A, or any

14 subclass thereof. 15 16 Confirmation Date means the date of entry of the Confirmation Order. Confirmation Documents means the briefs, memoranda, declarations, and other writings

17 and evidence submitted by the Debtor in support of confirmation of the Plan. 18 19 20 21 Confirmation Hearing means the hearing by the Court on confirmation of the Plan. Confirmation Order means the Court order confirming the Plan. Consenting Lenders means the Lenders signatory to the Plan Support Agreement. Court means the United States Bankruptcy Court for the District of Nevada, or any other

22 court that exercises jurisdiction over the Case. 23 Creditors Committee means the official committee of unsecured creditors appointed

24 under Bankruptcy Code section 1102 by the U.S. Trustee. 25 Creditor Trust means that certain creditor trust to be established on the Effective Date

26 pursuant to the Creditor Trust Agreement. 27 28


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Creditor Trust Agreement means the agreement pursuant to which the Creditor Trust will

2 be formed and implemented, the substantially final version of which shall be Filed by the Exhibit 3 Filing Date and become Exhibit C to the Plan. 4 5 Creditor Trust Assets means: (a) the Unsecured Creditor Cash, which is to be deposited into the Creditor Trust on the

6 Effective Date; and 7 8 9 (b) the Net Litigation Proceeds. Creditor Trustee means a trustee of the Creditor Trust. Cure Payment means the payment of cash or the distribution of other property (as the

10 parties may agree or the Court may order), that is necessary to cure any and all defaults under an
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11 executory contract or unexpired lease of the Debtor so that the contract or lease may be assumed, or 12 assumed and assigned, pursuant to Bankruptcy Code section 1123(b)(2). 13 14 Debtor means Nevada Cancer Institute, a Nevada nonprofit corporation. Debtors Counsel means Klee, Tuchin, Bogdanoff & Stern LLP, reorganization counsel to

15 the Debtor. 16 17 Debtors Co-counsel means Lewis and Roca LLP, reorganization co-counsel to the Debtor. Disallowed Claim means a Claim against the Debtor that: (a) is not listed on the Schedules,

18 or is listed therein as contingent, unliquidated, disputed, or in an amount equal to zero, and whose 19 holder has failed to timely File a proof of claim; or (b) the Court has disallowed pursuant to order of 20 the Court. 21 Disclosure Statement means the disclosure statement to accompany the Plan, as it

22 subsequently may be modified or amended. 23 24 25 26 27 28


134852.12

Disputed Claim means a Claim against the Debtor: (a) as to which a proof of claim is Filed or is deemed Filed under Bankruptcy Rule

3003(b)(1); and (b) as to which: (i) An objection: (1) has been timely Filed; and (2) has not been denied by a Final Order or withdrawn; or 4

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1 2 3

(ii)

That Claim is listed on the Debtors Schedules as disputed, contingent or unliquidated.

Effective Date means the first Business Day on which the conditions set forth in Section

4 IV.L.1 have been satisfied or waived by the Debtor and on which no stay of the Confirmation Order is 5 in effect. 6 Engelstad Endowment Fund means those certain segregated funds subject to that certain

7 Gift Agreement dated January 4, 2007 between the Debtor and the Engelstad Family Foundation (as 8 modified from time to time). 9 10
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Estate means the estate created in the Case under Bankruptcy Code section 541. Exhibit Filing Date means the last Business Day that is at least ten (10) days before the

11 Confirmation Hearing. 12 13 docket. 14 15 docket: 16 17 18 (a) (b) (c) that has not been reversed, rescinded, stayed, modified, or amended; that is in full force and effect; and with respect to which: (1) the time to appeal or to seek review, remand, rehearing, or a Final Order means an order or judgment of the Court entered on the Courts official Filed means duly and properly filed with the Court and reflected on the Courts official

19 writ of certiorari has expired and as to which no timely filed appeal or petition for review, rehearing, 20 remand, or writ of certiorari is pending; or (2) any such appeal or petition has been dismissed or 21 resolved by the highest court to which the order or judgment was appealed or from which review, 22 rehearing, remand, or a writ of certiorari was sought. 23 Flagship Building means collectively the real property identified by the Clark County

24 Assessor as APN 164-13-712-010 and that certain treatment and research building constructed 25 thereon. 26 Funding Agreement means that certain Funding Agreement by and between the Debtor

27 and UCSD, entered into in connection with the UCSD Sale. 28


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General Unsecured Claim means a Claim against the Debtor that is not an Administrative

2 Claim, a Priority Claim, a Priority Tax Claim, a Secured Claim, a Secured Tax Claim, or an Other 3 Secured Claim. 4 Lender or Lenders means any or all of the lenders holding debt under the Prepetition

5 Credit Agreement. 6 Lender Claims means all Claims of the Agent and the Lenders against the Debtor,

7 including Claims arising under the Prepetition Credit Agreement and all other Prepetition Credit 8 Documents and the Cash Collateral Orders. 9 10
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Lender Deficiency Claims means Lender Claims that are not Secured Claims. Lender Secured Claims means Lender Claims that are Secured Claims. List of Directors and Officers means the list of individuals that will serve as directors and

11

12 officers of the Reorganized Debtor. On or before the Exhibit Filing Date, the Debtor will File the List 13 of Directors and Officers. Upon filing, such List shall become Exhibit B to the Plan (subject to any 14 modifications made prior to the Confirmation Date). 15 LR _______ means a rule under the Local Rules of Bankruptcy Practice of the United States

16 District Court for the District of Nevada. 17 Net Litigation Proceeds means the actual cash proceeds of the Preserved Avoidance

18 Actions vested in the Creditor Trust pursuant to Section IV.E, less all expenses incurred in generating 19 such proceeds including all attorneys fees and expenses, expert witness fees and expenses and court 20 costs. 21 Net Trust Assets means the Creditor Trust Assets minus the fees and expenses incurred by

22 the Creditor Trust and its professionals in administering the trust. 23 Non-Ordinary Course Administrative Claim means any Administrative Claim other than

24 an Ordinary Course Administrative Claim, a Professional Fee Claim, a 503(b)(9) Claim, a Cure 25 Payment, or a U.S. Trustee Fee. 26 Ordinary Course Administrative Claims means Administrative Claims based upon

27 liabilities that the Debtor incurs in the ordinary course of its business for goods and services and that 28
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1 are unpaid as of the Effective Date. Ordinary Course Administrative Claims do not include 2 Professional Fee Claims, 503(b)(9) Claims, Cure Payments or U.S. Trustee Fees. 3 Other Secured Claims means any Secured Claims that are not otherwise expressly

4 classified under the Plan. 5 Patient Cares Committee Fund means those certain segregated funds solicited by and

6 donated to the Debtor for the express charitable purpose of providing financial aid to Nevada cancer 7 patients in need of financial support. 8 9 Petition Date means December 2, 2011. Plan means this Chapter 11 Plan of Reorganization For Nevada Cancer Institute (Dated

10 December 6, 2011), as it subsequently may be modified or amended.


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11

Plan Support Agreement means that certain Plan Support Agreement dated as of

12 September 16, 2011 between the Debtor, the Agent and the Consenting Lenders, as such agreement 13 has been and may subsequently be amended. 14 Prepetition Credit Agreement means that certain Amended and Restated Credit and

15 Reimbursement Agreement dated as of April 23, 2008 (as amended from time to time) among the 16 Debtor, the lenders referred to therein and Bank of America, N.A., as administrative agent for such 17 lenders. 18 Prepetition Credit Documents means the Prepetition Credit Agreement, together with the

19 other agreements, instruments and documents contemplated thereby, including the Prepetition Deed of 20 Trust. 21 Prepetition Deed of Trust means that certain Amended and Restated Construction Deed of

22 Trust with Assignment of Rents, Security Agreement and Fixture Filing dated April 23, 2008, 23 executed by the Debtor in respect of the Prepetition Credit Agreement (as modified from time to 24 time). 25 Preserved Avoidance Actions means causes of action held by the Debtor or the Estate that

26 arise under chapter 5 of the Bankruptcy Code that are to be transferred to the Creditor Trust on the 27 Effective Date, as set forth on Schedule 4 to the Disclosure Statement. 28
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Priority Claim means an Allowed Claim entitled to priority under Bankruptcy Code

2 sections 507(a)(4), 507(a)(5), or 507(a)(7). Priority Claims do not include any Claims that accrue 3 after the Petition Date. 4 Priority Tax Claim means an Allowed Claim entitled to priority under Bankruptcy Code

5 section 507(a)(8). Priority Tax Claims do not include any Claims that accrue after the Petition Date. 6 Professional Fee Claim means a Claim under Bankruptcy Code sections 327, 328, 330,

7 331, 503, or 1103 for compensation for professional services rendered or expenses incurred for which 8 the Estate is liable for payment. 9 Pro Rata means proportionately so that the ratio of (a) the amount of consideration

10 distributed on account of a particular Allowed Claim to (b) the Allowed Claim, is the same as the ratio
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11 of (x) the amount of consideration available for distribution on account of Allowed Claims in the 12 Class in which the particular Allowed Claim is included to (y) the amount of all Allowed Claims of 13 that Class. 14 Released Parties means each of the Agent, the Lenders, the members of the Board, and, as

15 applicable, their respective accountants, affiliates, agents, assigns, attorneys, bankers, consultants, 16 directors, financial advisors, heirs, members, officers, parent entities, partners, representatives, 17 shareholders, subsidiaries, and successors. 18 Research Building means collectively the real property identified by the Clark County

19 Assessor as APN 164-13-618-001 and the research building constructed thereon. 20 Research Building Note means the note to be issued by the Reorganized Debtor on the

21 Effective Date, with the terms and conditions described in Section II.C.1. 22 Rejection Damage Claim means a Claim against the Debtor arising under Bankruptcy

23 Code section 365 from the rejection by the Debtor of an unexpired lease or executory contract. 24 Reorganized Debtor means the Debtor on and after the Effective Date, after giving effect

25 to the Plan. 26 Saffer Endowment Fund means The Sandra and Morton Saffer Cancer Research

27 Endowment Fund, which comprises a fund of approximately $350,000 governed by a certain Gift 28 Agreement executed by the Debtor and the donors thereof in December 2008.
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Schedule of Assumed Agreements means the schedule of executory contracts and

2 unexpired leases that the Debtor will assume on the Effective Date. On or before the Exhibit Filing 3 Date, the Debtor will File its initial Schedule of Assumed Agreements and serve it on the parties to 4 agreements listed on that schedule. Upon filing, such Schedule shall become Exhibit D to the Plan 5 (subject to any modifications made prior to the Confirmation Date). 6 Schedule of Rejected Agreements means the schedule of executory contracts and

7 unexpired leases that the Debtor will reject on the Effective Date. On or before the Exhibit Filing 8 Date, the Debtor will File its initial Schedule of Rejected Agreements and serve it on the parties to 9 agreements listed on that schedule. Upon filing, such schedule shall become Exhibit E to the Plan 10 (subject to any modification made prior to the Confirmation Date).
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11

Schedules means the Schedules of Assets and Liabilities Filed by the Debtor as such

12 Schedules may have been, or may subsequently be, amended before the Effective Date. 13 Secured Claim means a Claim against the Debtor, including a Secured Tax Claim and

14 Other Secured Claim, that is secured by a lien on property of the Debtor. A Claim against the Debtor 15 is a Secured Claim only to the extent of the value of the claimholders interest in the Debtors interest 16 in the collateral or to the extent of the amount subject to setoff against a Claim held by the Debtor, 17 whichever is applicable, and as determined under Bankruptcy Code section 506(a). 18 Secured Tax Claim means a governmental units Secured Claim against the Debtor for

19 unpaid taxes. 20 UCSD means The Regents of the University of California on behalf of its UC San Diego

21 Health System. 22 UCSD Sale means the sale of the Flagship Building and substantially all of the Debtors

23 assets, properties and rights relating to the Debtors cancer business at the Flagship Building, and 24 certain other assets, pursuant to an order entered in the Case pursuant to Bankruptcy Code section 363. 25 Unsecured Creditor Cash means cash in the amount of $175,000 to be deposited by the

26 Debtor or Reorganized Debtor into the Creditor Trust for the benefit of holders of Allowed Class 4 27 Claims. 28
134852.12

U.S. Trustee means the Office of the United States Trustee for the District of Nevada. 9

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1 2 1930. 3

U.S. Trustee Fees means fees or charges assessed against the Estate pursuant to 28 U.S.C.

Vacant Land means approximately 9.24 acres of unimproved real property owned by the

4 Debtor and identified by the Clark County Assessor as APN 164-13-712-015. 5 B. 6 Rules of Construction. 1. The rules of construction in Bankruptcy Code section 102 apply to this Plan to the

7 extent not inconsistent herewith. 8 9 2. 3. Bankruptcy Rule 9006(a) applies when computing any time period under the Plan. A term that is used in this Plan and that is not defined in this Plan has the meaning

10 attributed to that term, if any, in the Bankruptcy Code or the Bankruptcy Rules.
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11

4.

The definition given to any term or provision in the Plan supersedes and controls

12 any different meaning that may be given to that term or provision in the Disclosure Statement. 13 5. Whenever it is appropriate from the context, each term, whether stated in the

14 singular or the plural, includes both the singular and the plural. 15 6. Any reference to a document or instrument being in a particular form or on

16 particular terms means that the document or instrument will be substantially in that form or on 17 those terms. No material change to the form or terms may be made after the Confirmation Date 18 without the consent of any party materially negatively affected. 19 7. Any reference to an existing document means the document as it has been, or may

20 be, amended or supplemented. 21 8. Unless otherwise indicated, the phrase under the Plan and similar words or

22 phrases refer to this Plan in its entirety rather than to only a portion of the Plan. 23 9. Unless otherwise specified, all references to Sections or Exhibits are references to

24 this Plans Sections or Exhibits. 25 10. The words herein, hereto, hereunder, and other words of similar import refer

26 to this Plan in its entirety rather than to only a particular portion hereof. 27 28
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1 2 3 A. 4

II. DESIGNATION OF CLASSES AND TREATMENT OF CLAIMS Summary and Classification of Claims. This Section classifies Claims against the Debtor except for Administrative Claims and

5 Priority Tax Claims, which are not classified for all purposes, including voting, confirmation, and 6 distribution under the Plan. A Claim against the Debtor is classified in a particular Class only to the 7 extent that the Claim falls within the Class description. To the extent that part of the Claim against the 8 Debtor falls within a different Class description, the Claim is classified in that different Class. The 9 following table summarizes the Classes of Claims under the Plan: 10
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11 12

CLASS None

DESCRIPTION Administrative Claims and Priority Tax Claims Lender Secured Claims Other Secured Claims (includes Secured Tax Claims) Priority Claims (excludes Priority Tax Claims) General Unsecured Claims

IMPAIRED/ UNIMPAIRED Unimpaired Impaired Unimpaired Unimpaired Impaired

VOTING STATUS Not Entitled to Vote Entitled to Vote Not Entitled to Vote Deemed to Accept Not Entitled to Vote Deemed to Accept Entitled to Vote

13 14 15 16 17 18 19 20 Class 3 Class 4 Class 1 Class 2

NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE PLAN, NO DISTRIBUTIONS WILL BE MADE AND NO RIGHTS WILL BE RETAINED ON 21 ACCOUNT OF ANY CLAIM AGAINST THE DEBTOR OR THE ESTATE THAT IS NOT AN ALLOWED CLAIM. 22 23 The treatment in this Plan is in full and complete satisfaction of the legal, contractual, and

24 equitable rights (including any liens) that each entity holding a Claim may have against the Debtor or 25 the Estate. This treatment supersedes and replaces any agreements or rights that any holder of a Claim 26 may have with or against the Debtor, the Estate, or their respective property. All distributions in 27 respect of Allowed Claims will be allocated first to the principal amount of such Allowed Claim, as 28
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1 determined for federal income tax purposes, and thereafter, to the remaining portion of such Allowed 2 Claim, if any. 3 B. 4 1. 5 a. 6 7 Allowance of Ordinary Course Administrative Claims: An entity holding an Ordinary Allowance of Administrative Claims. Administrative Claims. Allowance and Treatment of Unclassified Claims (Administrative Claims and Priority Tax Claims).

8 Course Administrative Claim may, but need not, File a motion or request for payment of its Claim. 9 The Reorganized Debtor or any other party in interest may File an objection to an Ordinary Course 10 Administrative Claim in their discretion. Unless a party in interest objects to an Ordinary Course
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11 Administrative Claim, such Claim will be an Allowed Claim in accordance with the terms and 12 conditions of the particular transaction that gave rise to the Claim. 13 Allowance of Professional Fee Claims: Unless otherwise expressly provided in the Plan, a

14 Professional Fee Claim will be Allowed only if: 15 (i) On or before 60 days after the Effective Date, the entity holding such Professional Fee

16 Claim both Files with the Court a final fee application or a motion requesting allowance of the 17 Professional Fee Claim and serves the application or motion on the Reorganized Debtor and the U.S. 18 Trustee; and 19 20 (ii) The Court determines it is an Allowed Claim.

The Reorganized Debtor or any other party in interest may File an objection to such

21 application or motion within the time provided by the Bankruptcy Rules or within any other period 22 that the Court establishes. Entities holding Professional Fee Claims that do not timely File and serve a 23 fee application or motion for payment will be forever barred from asserting those Claims against the 24 Debtor, the Reorganized Debtor, the Estate, the Creditor Trust, or their respective property. 25 Allowance of Cure Payments: Cure Payments shall be Allowed in accordance with the

26 procedures set forth in Section III.A.2 of the Plan. 27 Allowance of Non-Ordinary Course Administrative Claims: Unless otherwise expressly

28 provided in the Plan, Non-Ordinary Course Administrative Claims will be Allowed only if:
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(i)

On or before 60 days after the Effective Date, the entity holding such Non-Ordinary

2 Course Administrative Claim both Files with the Court a motion requesting allowance of the Non3 Ordinary Course Administrative Claim and serves the motion on the Reorganized Debtor and the U.S. 4 Trustee; and 5 6 (ii) The Court determines it is an Allowed Claim.

The Reorganized Debtor or any other party in interest may File an objection to such motion

7 within 60 days after the expiration of the deadline for the filing of a Non-Ordinary Course 8 Administrative Claim set forth in clause (i) above (i.e., within 120 days after the Effective Date), 9 unless such time period for filing such objection is extended by the Court. Entities holding Non10 Ordinary Course Administrative Claims that do not timely File and serve a request for payment will
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11 be forever barred from asserting those Claims against the Debtor, the Reorganized Debtor, the Estate, 12 the Creditor Trust, or their respective property. 13 Allowance of 503(b)(9) Claims: Unless otherwise expressly provided in the Plan, a 503(b)(9)

14 Claim will be Allowed only if: 15 16 (i) (ii) The 503(b)(9) Claim is filed by the 503(b)(9) Bar Date, or is deemed timely filed; and If an objection to such 503(b)(9) Claim is filed by a party in interest on or before the

17 Claim Objection Deadline, the Court determines it is an Allowed 503(b)(9) Claim. 18 Entities holding 503(b)(9) Claims that did not timely File such Claims by the 503(b)(9) Bar

19 Date will be forever barred from asserting those Claims against the Debtor, the Reorganized Debtor, 20 the Estate, the Creditor Trust, or their respective property. 21 22 b. Treatment of Administrative Claims.

Treatment of Allowed Ordinary Course Administrative Claims: Unless otherwise agreed,

23 Allowed Ordinary Course Administrative Claims will be paid by the Reorganized Debtor in 24 accordance with the terms and conditions of the particular transaction that gave rise to such Claim. 25 Treatment of Professional Fee Claims: Unless otherwise agreed, an Allowed Professional

26 Fee Claim will be paid by the Reorganized Debtor within 10 days after the date on which the Court 27 determines such Claim is an Allowed Claim. 28
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Treatment of Cure Payments: Cure Payments will be made to the non-Debtor parties to the

2 executory contracts or unexpired leases in accordance with Section III.A.2 of the Plan. 3 Treatment of U.S. Trustee Fees Under 28 U.S.C. 1930: The Reorganized Debtor will pay

4 to the U.S. Trustee all fees due and owing under 28 U.S.C. 1930 in cash on the Effective Date. 5 Treatment of Non-Ordinary Course Administrative Claims: Unless the entity holding a

6 Non-Ordinary Course Administrative Claim Allowed by the Court agrees to different treatment or 7 unless a different payment date is ordered by the Court, the Reorganized Debtor will pay to that entity 8 cash in the full amount of such Allowed Non-Ordinary Course Administrative Claim, without interest, 9 on or before the later of: (i) 10 days after the Effective Date, or (ii) 10 days after the date any order 10 determining such Claim to be an Allowed Non-Ordinary Course Administrative Claim becomes a
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11 Final Order. 12 Treatment of 503(b)(9) Claims: Unless the entity holding a 503(b)(9) Claim that is Allowed

13 by the Court agrees to different treatment, or already has been paid the full amount of such Allowed 14 503(b)(9) Claim pursuant to an order of the Court, the Reorganized Debtor will pay to that entity cash 15 in the full amount of such Allowed 503(b)(9) Claim, without interest, on or before the later of: (i) 10 16 days after the Effective Date, or (ii) 10 days after the date any order determining such Claim to be an 17 Allowed 503(b)(9) Claim becomes a Final Order. 18 19 2. Priority Tax Claims.

Unless otherwise agreed, the Reorganized Debtor will pay to an entity holding an Allowed

20 Priority Tax Claim cash in the full amount of the Allowed Priority Tax Claim, plus interest calculated 21 at the federal judgment rate, in equal, amortized, annual installments beginning on the first 22 anniversary of the Petition Date that falls on a date following the occurrence of the Effective Date and, 23 thereafter, on each anniversary of the Petition Date through the fifth anniversary of the Petition Date; 24 provided, however, that the Reorganized Debtor may prepay any Allowed Priority Tax Claim without 25 penalty, at any time. 26 27 28
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1 C. 2 3 4

Classification and Treatment of Classified Claims. 1. Class 1 (Lender Secured Claims). Class 1 consists of the Lender Secured Claims. Class 1 is impaired under the Plan. If and to the extent any portion of

Classification: Treatment:

5 the $18,000,000 million in cash proceeds from the UCSD Sale has not been previously remitted to the 6 Agent, for the ratable benefit of the Lenders, the Debtor shall so remit the balance of such proceeds on 7 the Effective Date. Payment of the $18,000,000 in cash proceeds from the UCSD Sale (whenever 8 remitted) shall reduce the debt under the Prepetition Credit Agreement. 9 On the Effective Date, the Reorganized Debtor shall issue to the Agent, for the ratable benefit

10 of the Lenders, the Research Building Note in the amount of $13,000,000, which shall be secured by
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11 the Research Building and the Vacant Land. (For purposes of clarity, the Alta-Hualapai Parcel shall 12 not be encumbered by such note or any other obligation). The Research Building Note will be in form 13 and substance satisfactory to the Agent and the Approving Lenders and will: 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
134852.12

(i) be payable to the Agent, for the ratable benefit of the Lenders; (ii) be secured by a first-priority deed of trust, in form and substance satisfactory to the Agent and the Approving Lenders, on the Research Building (including all furniture, fixtures and equipment owned by the Borrower and contained in such building as of the date of the Plan Support Agreement) and the Vacant Land; (iii) be a non-recourse obligation of the Reorganized Debtor; (iv) provide for annual principal amortization as follows: $250,000 at the end of the first year following the Effective Date, $250,000 at the end of the second year following the Effective Date, $350,000 at the end of the third year following the Effective Date, and $400,000 at the end of the fourth year following the Effective Date (in each case payable on the respective anniversary of the Effective Date, or if such date is not a Business Day, the first Business Day thereafter); (v) be payable in full (less any prior amortization payments) on the earlier of: (x) the fifth anniversary of the Effective Date (or if such date is not a Business Day, the first Business Day thereafter); 15

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1 2 3 4 5

(y) default under such Note; and (z) sale of the Research Building or the Vacant Land, (vi) be non-interest bearing, and (vii) be subject to prepayment at any time without penalty. The Reorganized Debtor will continue to be obligated under the Prepetition Deed of Trust, as

6 modified to secure only the Research Building Note. The Reorganized Debtor also will provide an 7 environmental indemnity. Agents title insurance policy may be amended, at the expense of the 8 Reorganized Debtor, to show the change in vesting and modifications to the obligations secured by the 9 Prepetition Deed of Trust, or at Agents discretion, a new title insurance policy may be required. 10
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Until such time as the Research Building Note is paid in full or the Research Building and

11 Vacant Land are no longer owned by the Reorganized Debtor, the Reorganized Debtor will be solely 12 responsible for the costs and maintenance of the Research Building and the Vacant Land in a 13 condition at least as good as that existing on the date of the Plan Support Agreement. The 14 Reorganized Debtor shall be solely responsible for maintaining insurance with respect to such 15 properties, and paying all taxes applicable to such properties. The Reorganized Debtor will maintain 16 its status as a charitable 501(c)(3) entity. 17 Notwithstanding the foregoing provisions of this Section II.C.1, if the Research Building

18 and/or the Vacant Land are sold for an aggregate amount in excess of $13,000,000 (the Excess 19 Consideration), whether during the term of the Research Building Note or at any time within one 20 year after repayment thereof, the Reorganized Debtor shall cause such Excess Consideration to be 21 shared with the Agent, for the ratable benefit of the Lenders, on an 80/20 basis, i.e., with 80% of the 22 Excess Consideration being paid to the Agent, for the ratable benefit of the Lenders, and 20% of the 23 Excess Consideration being retained by the Reorganized Debtor. 24 If the Research Building and/or the Vacant Land are no longer owned by the Reorganized

25 Debtor, the Reorganized Debtor nevertheless will continue to operate as a nonprofit corporation 26 dedicated to raising funds, generating support for, and otherwise advancing its philanthropic 27 objectives. 28
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At all times from the effectiveness of the Research Building Note until the date that is one year

2 after the repayment thereof, the Reorganized Debtor shall provide quarterly reports to the Agent 3 regarding the Research Building Note and the Vacant Land, in form and substance satisfactory to the 4 Agent, including without limitation as to any leasing of, sales offers with respect to, damage to and 5 maintenance status of such properties. So long as the Research Building Note is outstanding, the 6 Agent and the Lenders shall be entitled to inspect the Research Building and the Vacant Land on an 7 annual basis (or more frequently if a default has occurred and is continuing under the Research 8 Building Note). 9 Any funds that become property of the Debtors estate that are proceeds of the Lenders

10 collateral that are not necessary to satisfy the obligations of the Debtor, the Estate and the Reorganized
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11 Debtor under the Plan and the UCSD Sale, shall be distributed to the Agent for the ratable benefit of 12 the Lenders thirty (30) days following the later of: (i) the bar date for the filing of proofs of claim by 13 governmental entities; (ii) the expiration of the deadlines for filing objections to Administrative 14 Claims, Priority Claims, Secured Tax Claims and Priority Tax Claims; (iii) the settlement or 15 adjudication to a Final Order of any and all objections to Administrative Claims, Priority Claims, 16 Secured Tax Claims and Priority Tax Claims. For purposes of clarity, neither the Charitable Trust 17 Funds nor any other charitable donations generated by the Debtor or its representatives constitute the 18 Lenders collateral. 19 20 2. Class 2 (Other Secured Claims, including Secured Tax Claims).

Classification: Class 2 consists of Other Secured Claims against the Debtor, including

21 Secured Tax Claims. Each Class 2 Claim shall constitute its own subclass. 22 Treatment: Class 2 is unimpaired under the Plan, and the legal, equitable, and contractual

23 rights of holders of the Allowed Class 2 Claims are unaltered by the Plan. Unless the holder of an 24 Allowed Class 2 Claim in a particular Class 2 subclass agrees to other treatment, on or as reasonably 25 practicable after the Effective Date, such holder shall receive, at the Reorganized Debtors option: (i) 26 cash in the allowed amount of such holders Allowed Class 2 Claim, (ii) the return of the collateral 27 securing such Allowed Class 2 Claim, or (iii) (a) the cure of any default, other than a default of the 28 kind specified in Bankruptcy Code section 365(b)(2), that Bankruptcy Code section 1124(2) requires
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1 to be cured, with respect to such holders Allowed Class 2 Claim, without recognition of any default 2 rate of interest or similar penalty or charge, and upon such cure, no default shall exist; (b) the 3 reinstatement of the maturity of such Allowed Class 2 Claim as the maturity existed before any 4 default, without recognition of any default rate of interest or similar penalty or charge; and (c) its 5 unaltered legal, equitable, and contractual rights with respect to such Allowed Class 2 Claim. Any 6 defenses, counterclaims, rights of offset or recoupment of the Debtor or the Estate with respect to such 7 Claims shall vest in and inure to the benefit of the Reorganized Debtor. 8 The Bankruptcy Court shall retain jurisdiction to determine the amount necessary to satisfy

9 any Allowed Class 2 Claim for which treatment is elected under clause (i) or clause (iii). With respect 10 to any Allowed Class 2 Claim for which treatment is elected under clause (i), any holder of such
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11 Allowed Class 2 Claim shall release (and by the Confirmation Order shall be deemed to release) all 12 liens against property of the Estate. 13 14 3. Class 3 (Priority Claims, other than Priority Tax Claims).

Classification: Class 3 consists of Priority Claims against the Debtor, other than Priority Tax

15 Claims. 16 Treatment: Class 3 is unimpaired under the Plan, and the legal, equitable, and contractual

17 rights of holders of Allowed Class 3 Claims are unaltered by the Plan. Unless a particular entity 18 holding an Allowed Class 3 Claim agrees otherwise, the Reorganized Debtor shall pay to each holder 19 of an Allowed Class 3 Claim, in full satisfaction of such Claim, cash in the full amount of the Allowed 20 Class 3 Claim on or before the latest of: (a) 10 days after the Effective Date; (b) 10 days after the date 21 on which the Class 3 Claim becomes an Allowed Class 3 Claim; and (c) the date on which the 22 Allowed Class 3 Claim first becomes due and payable in accordance with its terms. 23 24 25 4. Class 4 (General Unsecured Claims).

Classification: Class 4 consists of the General Unsecured Claims. Treatment: Class 4 is impaired under the Plan. Allowed Class 4 Claims shall receive their

26 Pro Rata share of the Net Trust Assets. On the Effective Date (i) the Unsecured Creditor Cash shall 27 be remitted to the Creditor Trust, and (ii) all Preserved Avoidance Actions shall be vested in the 28 Creditor Trust, pursuant to Section IV.E. The timing of payments to the holders of Allowed Class 4
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1 Claims shall be determined by the Creditor Trust and in accordance with the Creditor Trust 2 Agreement. 3 If Class 4 accepts the Plan within the meaning of Bankruptcy Code section 1126(c), then the

4 holders of the Lender Deficiency Claims shall be deemed to have waived their right to receive any 5 consideration under Class 4 on account of such Lender Deficiency Claims. If Class 4 rejects the Plan 6 within the meaning of Bankruptcy Code section 1126(c), all Allowed Lender Deficiency Claims shall 7 participate in the Class 4 distributions. 8 9 10 A.
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III. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES Assumption of Executory Contracts and Unexpired Leases. 1. Assumption of Agreements.

11 12

On the Effective Date, the Reorganized Debtor shall assume all executory contracts and

13 unexpired leases of the Debtor listed on the Schedule of Assumed Agreements. 14 The Debtor reserves the right to amend the Schedule of Assumed Agreements at any time prior

15 to the Effective Date to: (a) delete any executory contract or unexpired lease and provide for its 16 rejection under the Plan or otherwise, or (b) add any executory contract or unexpired lease and provide 17 for its assumption under the Plan. The Debtor will provide notice of any amendment to the Schedule 18 of Assumed Agreements to the party or parties to the agreement affected by the amendment. 19 The Confirmation Order will constitute a Court order approving the assumption, on the

20 Effective Date, of all executory contracts and unexpired leases identified on the Schedule of Assumed 21 Agreements. 22 23 2. Cure Payments.

Any amount that must be paid under Bankruptcy Code section 365(b)(1) to cure a default

24 under and compensate the non-debtor party to an executory contract or unexpired lease to be assumed 25 under the Plan, is identified as the Cure Payment on the Schedule of Assumed Agreements. Unless 26 the parties mutually agree to a different date, such payment shall be made in cash, 10 days following 27 the later of: (i) the Effective Date and (ii) entry of a Final Order resolving any dispute regarding (a) 28 the amount of any Cure Payment, (b) the ability of the Reorganized Debtor to provide adequate
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1 assurance of future performance within the meaning of Bankruptcy Code section 365 with respect to 2 a contract or lease to be assumed, to the extent required, and/or (c) any other matter pertaining to 3 assumption. 4 Pending the Courts ruling on any such dispute, the executory contract or unexpired lease at

5 issue shall be deemed assumed by the Reorganized Debtor unless otherwise agreed by the parties or 6 ordered by the Court. 7 8 3. Objections to Assumption/Cure Payment Amounts.

Any entity that is a party to an executory contract or unexpired lease that will be assumed

9 under the Plan and that objects to such assumption (including the proposed Cure Payment) must File 10 with the Court and serve upon parties entitled to notice a written statement and supporting declaration
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11 stating the basis for its objection. This statement and declaration must be Filed and served by the 12 deadline fixed by the Court for such objection. Any entity that fails to timely File and serve such a 13 statement and declaration will be deemed to waive any and all objections to the proposed assumption 14 (including the proposed Cure Payment) of its contract or lease. 15 In the absence of a timely objection by an entity that is a party to an executory contract or

16 unexpired lease, the Confirmation Order shall constitute a conclusive determination as to the amount 17 of any cure and compensation due under the executory contract or unexpired lease, and that the 18 Reorganized Debtor has demonstrated adequate assurance of future performance with respect to such 19 executory contract or unexpired lease, to the extent required. 20 21 4. Resolution of Claims Relating to Assumed Contracts and Leases.

Payment of the Cure Payment established under the Plan, by the Confirmation Order or by any

22 other order of the Court, with respect to an assumed executory contract or unexpired lease, shall be 23 deemed to satisfy, in full, any prepetition or postpetition arrearage or other Claim against the Debtor 24 (including any asserted in a Filed proof of claim or listed in the Schedules) with respect to such 25 contract or lease (irrespective of whether the Cure Payment is less than the amount set forth in such 26 proof of Claim or the Schedules). Upon the tendering of the Cure Payment, any such Filed or 27 scheduled Claim shall be disallowed, without further order of the Court or action by any party. 28
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1 B. 2 3

Rejection of Executory Contracts and Unexpired Leases. 1. Rejected Agreements.

On the Effective Date, all executory contracts and unexpired leases that (i) have not been

4 previously assumed or rejected and (ii) that are not set forth on the Schedule of Assumed Agreements, 5 (including all executory contracts and unexpired leases set forth on the Schedule of Rejected 6 Agreements) shall be rejected. For the avoidance of doubt, executory contracts and unexpired leases 7 that have been previously assumed or assumed and assigned pursuant to an order of the Court, 8 including those assumed and assigned in conjunction with the UCSD Sale, shall not be affected by the 9 Plan. The Confirmation Order will constitute a Court order approving the rejection, on the Effective 10 Date, of the executory contracts and unexpired leases to be rejected under the Plan.
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11 12

2.

Bar Date for Rejection Damage Claims.

Any Rejection Damage Claim or other Claim against the Debtor for damages arising from the

13 rejection under the Plan of an executory contract or unexpired lease must be Filed and served upon 14 counsel to the Reorganized Debtor and the Creditor Trust within 30 days after the mailing of notice of 15 the occurrence of the Effective Date. Any such Claims that are not timely Filed and served will be 16 forever barred and unenforceable against the Debtor, the Reorganized Debtor, the Estate, the Creditor 17 Trust and their respective property, and entities holding such Claims will be barred from receiving any 18 distributions under the Plan on account of such untimely Claims. 19 C. 20 Postpetition Contracts and Leases. Except as expressly provided in the Plan or the Confirmation Order, all contracts, leases, and

21 other agreements that the Debtor entered into after the Petition Date will be retained by the 22 Reorganized Debtor and will remain in full force and effect following the Effective Date, as will the 23 Funding Agreement that was assumed by the Debtor during the chapter 11 case. 24 25 26 A. 27 IV. MEANS OF EXECUTION AND IMPLEMENTATION OF THE PLAN Funding of the Plan. All payments required by the Plan on and after the Effective Date, including remittance of the

28 Unsecured Creditor Cash to the Creditor Trust, will be satisfied from cash of the Debtor (which,
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1 consistent with the Cash Collateral Order, includes funds in the Cash Collateral Account) and the 2 Reorganized Debtor. Notwithstanding the foregoing, any distribution to the holders of Allowed Class 3 4 Claims shall be paid exclusively by the Creditor Trust from the Net Trust Assets. 4 B. 5 Vesting of Assets Generally. Except as otherwise provided in the Plan, all property of the Debtor and the Estate shall vest in

6 the Reorganized Debtor on the Effective Date, free and clear of all Claims, liens, encumbrances, and 7 interests. From and after the Effective Date, the Reorganized Debtor may conduct its affairs and use, 8 acquire and dispose of property without supervision by the Court and free of any restrictions of the 9 Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly imposed by the Plan 10 and the Confirmation Order.
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11 C. 12

The Charitable Trust Funds. On and after the Effective Date, the Reorganized Debtor shall retain its interests in, its rights to

13 use and, where applicable, custody of the Charitable Trust Funds, consistent with all agreements and 14 restrictions governing the disposition and use of such funds, any modifications to such agreements and 15 restrictions that may be authorized by the donors of such Charitable Trust Funds, and otherwise 16 applicable non-bankruptcy law. 17 D. 18 Vesting of Rights of Action in Reorganized Debtor. Except as provided in Section IV.E of the Plan with respect to Preserved Avoidance Actions,

19 all Claims, rights, and causes of action of the Debtor or the Estate against any person or entity shall be 20 preserved and vest in the Reorganized Debtor on the Effective Date, pursuant to Bankruptcy Code 21 section 1123(b), including causes of action that have been or may be brought by or on behalf of the 22 Debtor or the Estate, and the Debtors and Estates rights of disallowance, offset, recharacterization 23 and/or equitable subordination with respect to Claims other than Class 4 Claims; provided, however, 24 that no claim, right or cause of action of the Debtor or the Estate that is released under the Plan, the 25 Confirmation Order, or any other order of the Court shall be preserved or vested in the Reorganized 26 Debtor or the Creditor Trust. 27 28
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1 E. 2

Vesting of Preserved Avoidance Actions and other Rights in Creditor Trust. The Preserved Avoidance Actions, and all of the Debtors and Estates rights of disallowance,

3 offset, recharacterization and/or equitable subordination with respect to Class 4 Claims shall be 4 preserved and vest in the Creditor Trust on the Effective Date, pursuant to Bankruptcy Code section 5 1123(b); provided, however, that no Claim, right or cause of action of the Debtor or the Estate that is 6 released under the Plan, the Confirmation Order, or any other order of the Court shall be preserved or 7 vested in the Reorganized Debtor or the Creditor Trust. 8 F. 9 Creation of the Creditor Trust and Appointment of Creditor Trustees. The Confirmation Order shall approve, effective on the Effective Date, the Creditor Trust

10 Agreement, which agreement shall provide for the appointment of one (1) to three (3) members, to act
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11 as the Creditor Trustee or Creditor Trustees to administer the Creditor Trust. The Creditor Trustee or 12 Creditor Trustees shall be appointed by the Creditors Committee prior to the Confirmation Date; 13 provided that if no trustee is appointed by such date, the Debtor shall appoint the Creditor Trustee or 14 Creditor Trustees. The Creditor Trustee or Creditor Trustees shall serve without any bond and shall 15 act in accordance with the Creditor Trust Agreement and the Plan by majority vote. A Creditor 16 Trustee shall not be compensated for his or her service as a Creditor Trustee, but may, if applicable 17 retain a firm in which said trustee is employed. 18 The Creditor Trust may engage counsel and other professionals as it deems appropriate, and

19 compensate such professionals from the corpus of the Creditor Trust for reasonable fees and expenses 20 incurred by such professionals, in accordance with the Creditor Trust Agreement and without approval 21 of the Court. Each Creditor Trustee shall serve for the duration of the Creditor Trust, subject to earlier 22 death, resignation, incapacity or removal as specifically provided in the Creditor Trust Agreement. 23 24 1. Powers and Duties.

The Creditor Trust, acting through a majority of the Creditor Trustees, shall have the following

25 rights, powers and duties: 26 (a) The Creditor Trust shall have full right, power and discretion to manage the Creditor

27 Trust Property, and execute acknowledge and deliver any and all instruments with respect thereto, as it 28 deems appropriate or necessary in its discretion;
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(b)

Administer the collection, prosecution, settlement, and/or abandonment of the

2 Preserved Avoidance Actions; 3 4 5 (c) (d) (e) Prosecute, settle and/or abandon objections to Class 4 Claims; Make interim and final distributions to the holders of Allowed Class 4 Claims; File all tax and regulatory forms, returns, reports and other documents required with

6 respect to the Creditor Trust; and 7 (f) File suit or any appropriate motion for relief in the Court or in any other court of

8 competent jurisdiction to resolve any disagreement, conflict, dispute or ambiguity in connection with 9 the exercise of its rights, powers or duties. 10
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2.

Termination of the Creditor Trust.

11

The Creditor Trust shall be irrevocable. The Creditor Trust shall terminate when the Creditor

12 Trustees have performed all of their duties under the Plan and the Creditor Trust Agreement, including 13 the final distribution of all the property of the Creditor Trust in respect of Allowed Class 4 Claims, 14 which date shall not be more than two (2) years and one (1) month after the Effective Date; provided, 15 however, the Court may upon good cause shown order the Creditor Trust to remain open so long as it 16 may be necessary to liquidate and distribute all its property. 17 18 3. Additional Provisions of the Creditor Trust Agreement.

In addition to the provisions in the Plan with respect to the Creditor Trust, the Creditor Trust

19 Agreement will provide for, among other things, the removal of Creditor Trustees or appointment of 20 successor Creditor Trustees, the liability of the Creditor Trustees, the effect of actions by the Creditor 21 Trustees, and the indemnification of the Creditor Trustees. 22 To the extent not set forth in the Plan, the functions and procedures applicable to the Creditor

23 Trust and the powers and duties of the Creditor Trustees and the rights of the holders of beneficial 24 interests in the Creditor Trust shall be governed by the provisions of the Creditor Trust Agreement; 25 provided, however, that in the event of any conflict, the terms of the Plan shall govern. 26 G. 27 Objections to Claims. This Plan extends the deadline for filing objections to Claims against the Debtor set forth in

28 LR 3007(e). Specifically, except as otherwise provided in Section II.B (regarding allowance of


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1 Administrative Claims), any objection to a Claim shall be Filed and served upon the holder of such 2 Claim no later than the Claims Objection Deadline. After the Effective Date, only the Reorganized 3 Debtor shall have the authority to File, settle, compromise, withdraw or litigate to judgment objections 4 to Claims, other than Class 4 Claims. Following the Effective Date, the Creditor Trust shall have the 5 sole right and authority to File, settle, compromise, withdraw or litigate to judgment objections to 6 Class 4 Claims. 7 H. 8 Distribution of Property Under the Plan. Unless otherwise provided in the Plan, the following procedures apply to distributions made

9 pursuant to this Plan by the Reorganized Debtor or the Creditor Trust, as applicable. The Reorganized 10 Debtor shall be responsible for making all distributions required under the Plan, with the exception of
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11 distributions on account of Allowed Class 4 Claims, which shall be made by the Creditor Trust. To 12 the extent applicable, the Reorganized Debtor and Creditor Trust shall comply with all tax 13 withholding and reporting requirements imposed on them by any governmental unit with respect to 14 such distributions, and all distributions pursuant to the Plan shall be subject to such withholding and 15 reporting requirements. 16 17 1. Manner of Cash Payments Under the Plan.

Cash payments to domestic entities holding Allowed Claims will be tendered in U.S. Dollars

18 and will be made by checks drawn on a domestic bank or by wire transfer from a domestic bank. 19 Payments made to any foreign creditors holding Allowed Claims may be paid, at the option of the 20 Reorganized Debtor or the Creditor Trust, as applicable, in such funds and by such means as are 21 necessary or customary in a particular foreign jurisdiction. 22 23 2. No De Minimis Distributions.

Notwithstanding anything to the contrary in this Plan, no cash payment of less than $25 will be

24 made to any person or entity pursuant to the Plan. No consideration will be provided in lieu of the de 25 minimis distributions that are not made pursuant to this Section. 26 27 3. No Distribution With Respect to Disputed Claims.

No payments of cash or distributions of other property or other consideration of any kind shall

28 be made on account of any Disputed Claim unless and until such Claim becomes an Allowed Claim,
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1 or is deemed to be such for purposes of distribution, and then only to the extent that such Claim 2 becomes, or is deemed to be for distribution purposes, an Allowed Claim. Unless otherwise provided 3 herein, any holder of a Disputed Claim that becomes an Allowed Claim after the Effective Date will 4 receive its distribution no later than the next general distribution made by the Creditor Trust. 5 6 7 4. Delivery of Distributions, Undeliverable/Unclaimed Distributions. a. Delivery of Distributions in General.

The Reorganized Debtor or the Creditor Trust, as applicable, shall make distributions to each

8 holder of an Allowed Claim by mail as follows: (a) at the address set forth on the proof of claim filed 9 by such holder in respect of such Allowed Claim, unless such holder has provided written notice of 10 address change to the Reorganized Debtor or Creditor Trust, as applicable; (b) at the address set forth
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11 in any written notice of address change delivered to the Reorganized Debtor or Creditor Trust, as 12 applicable, after the date of any related proof of claim; and (c) at the address reflected in the Schedules 13 if no proof of claim is filed and the Reorganized Debtor or Creditor Trust, as applicable, has not 14 received a written notice of a change of address. 15 16 b. Undeliverable and Unclaimed Distributions.

If the distribution to the holder of any Allowed Claim is returned as undeliverable, no further

17 distribution shall be made to such holder unless and until the Reorganized Debtor or Creditor Trust, as 18 applicable, is notified in writing of such holders then current address. Subject to the other provisions 19 of the Plan, undeliverable distributions shall remain in the possession of the Reorganized Debtor or 20 Creditor Trust, as applicable, pursuant to this Section until such time as a distribution becomes 21 deliverable. 22 All undeliverable cash distributions will be held in unsegregated bank accounts for the benefit

23 of the entities entitled to the distributions. These entities will not be entitled to any interest actually 24 earned on account of the undeliverable distributions. The bank account will be maintained in the 25 name of the Reorganized Debtor or Creditor Trust, as applicable, but the undeliverable funds will be 26 accounted for separately. 27 Any holder of an Allowed Claim who does not assert in writing its entitlement to an

28 undeliverable distribution within one year after the Effective Date shall no longer have any interest or
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1 entitlement in such undeliverable distribution, and shall be forever barred from receiving any 2 distributions under this Plan, or from asserting a Claim against the Debtor, the Reorganized Debtor, 3 the Estate, the Creditor Trust, or their respective property, and the right to such undeliverable 4 distribution will be discharged. The Reorganized Debtor or the Creditor Trust shall be enabled and 5 empowered to retain all such undeliverable distributions, and, in the case of the Creditor Trust, 6 distribute such funds in accordance with the Creditor Trust Agreement; any such undeliverable 7 distributions shall not be subject to escheat to the State of Nevada or any other State. 8 Nothing contained in the Plan shall require the Debtor, Reorganized Debtor or Creditor Trust

9 to attempt to locate any holder of an Allowed Claim. 10


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c.

Estimation of Disputed Claims for Distribution Purposes.

11

The Reorganized Debtor or Creditor Trust, as applicable, may move for a Court order

12 estimating a Disputed Claim. The estimated amount of any Disputed Claim so determined by the 13 Court shall constitute the maximum recovery that the holder thereof may recover after the ultimate 14 liquidation of its Disputed Claim, irrespective of the actual amount ultimately Allowed. 15 I. 16 Full Satisfaction. The Disbursing Agent (or Creditor Trust, as the case may be) shall make, and each holder of

17 an Allowed Claim against the Debtor shall receive, the distributions provided for in the Plan, if any, 18 in full satisfaction and discharge of such holders Claims against the Debtor. 19 J. 20 Compliance with Tax Requirements. The Reorganized Debtor (or Creditor Trust, as the case may be) shall comply with all

21 withholding and reporting requirements imposed on it by governmental units, if any, and all 22 distributions pursuant to the Plan shall be subject to such withholding and reporting requirements. 23 K. 24 Setoff, Recoupment and Other Rights. Notwithstanding anything to the contrary contained in the Plan, the Reorganized Debtor or the

25 Creditor Trust may, but shall not be required to, setoff, recoup, assert counterclaims or withhold 26 against the distributions to be made pursuant to this Plan on account of any claims that the Debtor, the 27 Estate, or the Reorganized Debtor may have against the entity holding an Allowed Claim; provided, 28 however, that neither the failure to effect such a setoff or recoupment, nor the allowance of any Claim
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1 against the Debtor or the Reorganized Debtor, nor any partial or full payment during the Case or after 2 the Effective Date in respect of any Allowed Claim, shall constitute a waiver or release by Debtor, the 3 Estate, the Reorganized Debtor or the Creditor Trust of any Claim that any or all of them may possess 4 against such holder. 5 L. 6 The Effective Date. The Plan shall not become binding unless and until the Effective Date occurs. The Effective

7 Date is the first Business Day, on which no stay of the Confirmation Order is in effect, on which all of 8 the following conditions have been satisfied as set forth below, or waived as set forth in Section 9 IV.L.2: 10
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1. a. b.

Conditions to the Effective Date. The Confirmation Order shall have become a Final Order; The Research Building Note and related instruments evidencing the liens and security

11 12

13 interests securing such note shall have been executed; 14 d. All other agreements, writings and undertakings required under the Plan shall be

15 executed and ready for consummation. 16 17 2. Waiver of Conditions.

The requirement that the conditions to the occurrence of the Effective Date be satisfied may be

18 waived in whole or in part, and the time within which any such conditions must be satisfied may be 19 extended, by mutual agreement of the Debtor and the Agent. The failure to timely satisfy or waive 20 any of such conditions may be asserted by the Debtor regardless of the circumstances giving rise to 21 the failure of such condition to be satisfied, including any action or inaction by the Debtor. The 22 failure of the Debtor to exercise any of the foregoing rights shall not be deemed a waiver of any other 23 rights and each such right shall be deemed ongoing and subject to assertion at any time. 24 25 3. Notice of the Effective Date.

Promptly after the occurrence of the Effective Date, the Debtor shall File and mail a Notice of

26 Occurrence of Effective Date to all creditors of record as of the date of entry of the Confirmation 27 Order. 28
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1 M. 2

Authorization of Corporate Action. Any matters provided for or required by the Plan that require corporate action by the Debtor or

3 Reorganized Debtor, including, without limitation, the adoption by the Reorganized Debtor of the 4 Amended Articles of Incorporation and Bylaws shall, as of the Effective Date, be deemed to have 5 occurred and be effective as provided herein, and shall be authorized, approved and ratified in all 6 respects without any requirement of further action by the directors of the Debtor or the Reorganized 7 Debtor. 8 9 10 A.
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V. THE REORGANIZED DEBTOR Directors and Officers. As of the Effective Date, the individuals identified on the List of Directors and Officers for

11

12 Reorganized Debtor shall serve as the directors and officers of the Reorganized Debtor, in accordance 13 with the Amended Articles of Incorporation and Bylaws. The List of Directors and Officers for 14 Reorganized Debtor will be filed no later than the Exhibit Filing Date, and upon such filing shall 15 become Exhibit B to the Plan. 16 B. 17 Amended Articles of Incorporation and Bylaws. The Amended Articles of Incorporation and Bylaws of the Reorganized Debtor shall prohibit

18 the issuance of non-voting equity securities as required by Bankruptcy Code section 1123(a)(6). 19 20 21 A. 22 VI. OTHER PLAN PROVISIONS Exculpation Re Solicitation and Prosecution of Plan Confirmation. None of the Debtor, the Estate, the Reorganized Debtor, the Creditors Committee, the

23 Prepetition Agent, the Lenders or any of the foregoing parties respective members, officers, directors, 24 employees, affiliates, advisors, professionals or agents shall have or incur any liability to any holder of 25 a Claim for any act or omission occurring on or after the Petition Date in connection with, related to, 26 or arising out of the Case, the pursuit of confirmation of the Plan, the consummation or administration 27 of the Plan, or property to be distributed under the Plan, except for willful misconduct, and in all 28 respects, the Debtor, the Estate, the Reorganized Debtor, the Creditors Committee, the Prepetition
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1 Agent, the Lenders or any of the foregoing parties respective members, officers, directors, 2 employees, affiliates, advisors, professionals or agents shall be entitled to rely on the advice of their 3 respective counsel with respect to their duties and responsibilities in connection with the Case and the 4 Plan. 5 B. 6 Revocation of Plan/No Admissions. The Debtor reserves the right to revoke or withdraw the Plan prior to the Confirmation Date.

7 Notwithstanding anything to the contrary in the Plan, if the Plan is not confirmed or the Effective Date 8 does not occur, the Plan will be null and void, and nothing contained in the Plan or the Disclosure 9 Statement will: (a) be deemed to be an admission by the Debtor with respect to any matter set forth in 10 the Plan, including liability on any Claim or the propriety of any Claims classification; (b) constitute
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11 a waiver, acknowledgment, or release of any Claims against the Debtor, or of any claims of the 12 Debtor; or (c) prejudice in any manner the rights of any party in any further proceedings. 13 C. 14 Modification of the Plan. Subject to the restrictions set forth in Bankruptcy Code section 1127, the Debtor reserves the

15 right to alter, amend, or modify the Plan before its substantial consummation. 16 D. 17 Dissolution of Creditors Committee. Upon the Effective Date, the Creditors Committee shall be released and discharged from the

18 rights and duties arising from or related to the Case, except with respect to final applications for 19 professionals compensation. The professionals retained by the Creditors Committee and the 20 members thereof shall not be entitled to compensation or reimbursement of expenses for any services 21 rendered or expenses incurred after the Effective Date, except for services rendered and expenses 22 incurred in connection with any applications by such professionals or Creditors Committee members 23 for allowance of compensation and reimbursement of expenses pending on the Effective Date or 24 timely Filed after the Effective Date as provided in the Plan, to the extent the same may be approved 25 by the Court. 26 E. 27 Exemption from Certain Transfer Taxes. In accordance with Bankruptcy Code section 1146(c), the issuance, transfer or exchange of a

28 security, or the making or delivery of an instrument of transfer under the Plan with respect to any and
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1 all property may not be taxed under any law imposing a stamp tax or similar tax. The Confirmation 2 Order shall direct all governmental officials and agents to forego the assessment and collection of any 3 such tax or governmental assessment and to accept for filing and recordation any of the foregoing 4 instruments or other documents without payment of such tax or other governmental assessment. 5 F. 6 Successors and Assigns. The rights, benefits, and obligations of any entity named or referred to in this Plan shall be

7 binding on, and shall inure to the benefit of, any heir, executor, administrator, successor, or assign of 8 such entity. 9 G. 10
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Saturday, Sunday or Legal Holiday. If any payment or act under the Plan is required to be made or performed on a day that is not a

11 Business Day, then the payment or act may be completed on the next day that is a Business Day, in 12 which event the payment or act will be deemed to have been completed on the required day. 13 H. 14 Headings. The headings used in the Plan are inserted for convenience only and do not constitute a portion

15 of this Plan or in any manner affect the provisions of this Plan or their meaning. 16 I. 17 Severability of Plan Provisions. If before the Confirmation Date the Court holds that any Plan term or provision is invalid,

18 void, or unenforceable, the Court may alter or interpret that term or provision so that it is valid and 19 enforceable to the maximum extent possible consistent with the original purpose of that term or 20 provision. That term or provision will then be applicable as altered or interpreted. Notwithstanding 21 any such holding, alteration, or interpretation, the Plans remaining terms and provisions will remain 22 in full force and effect and will in no way be affected, impaired, or invalidated. The Confirmation 23 Order will constitute a judicial determination providing that each Plan term and provision, as it may 24 have been altered or interpreted in accordance with this Section, is valid and enforceable under its 25 terms. 26 J. 27 Governing Law. Unless a rule of law or procedure is supplied by (a) federal law (including the Bankruptcy

28 Code and Bankruptcy Rules), or (b) an express choice of law provision in any agreement, contract,
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1 instrument, or document provided for, or executed in connection with, the Plan, the rights and 2 obligations arising under the Plan and any agreements, contracts, documents, and instruments 3 executed in connection with the Plan shall be governed by, and construed and enforced in accordance 4 with, the laws of the State of Nevada without giving effect to the principles of conflict of laws thereof. 5 6 7 A. 8 VII. EFFECT OF PLAN CONFIRMATION Discharge and Injunction. The rights afforded in the Plan and the treatment of all Claims shall be in exchange for

9 and in complete satisfaction, discharge, and release of all Claims of any nature whatsoever 10 arising prior to the Effective Date against the Debtor and the Estate, including any interest
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11 accrued on such Claims from and after the Petition Date. 12 Except as otherwise provided in the Plan or the Confirmation Order, on the Effective

13 Date, (a) the Debtor, the Estate, the Reorganized Debtor and their respective property are 14 discharged and released hereunder to the fullest extent permitted by Bankruptcy Code sections 15 524 and 1141 from all Claims and rights against them that arose before the Effective Date, 16 including all debts, obligations, demands, and liabilities, and all debts of the kind specified in 17 Bankruptcy Code sections 502(g), 502(h), or 502(i), regardless of whether or not (i) a proof of 18 Claim based on such debt is Filed or deemed Filed, (ii) a Claim based on such debt is allowed 19 pursuant to Bankruptcy Code section 502, or (iii) the holder of a Claim based on such debt has 20 or has not accepted the Plan; (b) any judgment underlying a Claim discharged hereunder is 21 void; and (c) all entities are precluded from asserting against the Debtor, the Estate, the 22 Reorganized Debtor and their respective property, any Claims or rights based upon any act or 23 omission, transaction, or other activity of any kind or nature that occurred prior to the Effective 24 Date. 25 Except as otherwise provided in the Plan or the Confirmation Order, on and after the

26 Effective Date, all entities who have held, currently hold, or may hold a Claim against the 27 Debtor, the Estate, or the Reorganized Debtor, that is based upon any act or omission, 28 transaction, or other activity of any kind or nature that occurred prior to the Effective Date,
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1 that otherwise arose or accrued prior to the Effective Date, or that otherwise is discharged 2 pursuant to the Plan, are permanently enjoined from taking any of the following actions on 3 account of any such discharged Claim, (the Permanent Injunction): (a) commencing or 4 continuing in any manner any action or other proceeding against the Debtor, the Estate, the 5 Reorganized Debtor or their respective property, that is inconsistent with the Plan or the 6 Confirmation Order; (b) enforcing, attaching, collecting, or recovering in any manner any 7 judgment, award, decree, or order against the Debtor, the Estate, the Reorganized Debtor or 8 their respective property, other than as expressly permitted under the Plan; (c) creating, 9 perfecting, or enforcing any lien or encumbrance against property of Debtor, the Estate, the 10 Reorganized Debtor, or their respective property, other than as expressly permitted under the
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11 Plan; and (d) commencing or continuing any action, in any manner, in any place that does not 12 comply with or is inconsistent with the provisions of the Plan, the Confirmation Order, or the 13 discharge provisions of Bankruptcy Code section 1141. Any person or entity injured by any 14 willful violation of such Permanent Injunction shall recover actual damages, including costs and 15 attorneys fees, and, in appropriate circumstances, may recover punitive damages, from the 16 willful violator. 17 B. 18 Estate Release. As of the Effective Date, the Debtor (on behalf of itself and the Estate) releases and

19 forever waives and discharges as against the Released Parties, all Claims, actions, costs, causes 20 of action, damages, demands, debts, expenses (including attorneys fees), judgments, losses 21 (including any claims for contribution or indemnification), liabilities, obligations, rights, or 22 suits, whether past or present, liquidated or unliquidated, fixed or contingent, matured or 23 unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in 24 law, equity or otherwise that are based in whole or part on any act, omission, transaction, event 25 or other occurrence taking place on or prior to the Effective Date relating in any way to the 26 Debtor or the Case; provided, however, that the foregoing shall not effectuate a release of any 27 obligation of such parties arising under the agreements relating to the UCSD Sale, the Plan, or 28 the Confirmation Order. The releases set forth in this paragraph shall be binding upon the
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1 Reorganized Debtor, the Creditor Trust, and any chapter 7 trustee, in the event the Case is at 2 any time converted to chapter 7. 3 C. 4 Payment of U.S. Trustee Fees. The Reorganized Debtor shall pay all U.S. Trustee Fees due and owing under 28 U.S.C.

5 1930 until such time as it moves for entry of a final decree and the Court enters such a decree; 6 provided, however, that if the Creditor Trust opposes such motion, the Creditor Trust thereafter shall 7 bear the cost of any and all U.S. Trustee Fees until the Court enters a final decree closing the Case. 8 Notwithstanding LR 3022, the Clerk shall enter a final decree in the Case only upon an Order of the 9 Court following the Filing of a properly noticed motion. 10 D.
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Retention of Jurisdiction. Notwithstanding the entry of the Confirmation Order or the occurrence of the Effective Date,

11

12 the Court shall retain jurisdiction over the Case after the Effective Date to the fullest extent provided 13 by law, including the jurisdiction to: 14 1. Allow, disallow, determine, liquidate, classify, establish the priority or secured or

15 unsecured status of, estimate, limit, or subordinate any Claim; 16 2. Grant or deny any and all applications for allowance of compensation or

17 reimbursement of expenses authorized pursuant to the Bankruptcy Code or the Plan, for periods 18 ending on or before the Effective Date; 19 3. Resolve any motions pending on the Effective Date to assume, assume and assign,

20 or reject any executory contract or unexpired lease to which the Debtor is a party or with respect to 21 which the Debtor may be liable and to hear, determine and, if necessary, liquidate, any and all 22 Claims arising therefrom; 23 4. Resolve any and all other applications, motions, adversary proceedings, and other

24 matters involving the Debtor that may be pending on the Effective Date or that may be instituted 25 thereafter in accordance with the terms of the Plan; 26 5. Ensure that distributions to holders of Allowed Claims, including but not limited to

27 Allowed Administrative Claims, are accomplished pursuant to the provisions of the Plan; 28
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6.

Enter such orders as may be necessary or appropriate to implement or consummate

2 the provisions of the Plan and all contracts, instruments, releases, and other agreements or 3 documents entered into in connection with the Plan; 4 7. Resolve any and all controversies, suits, or issues that may arise in connection with

5 the consummation, interpretation, or enforcement of the Plan and/or Confirmation Order, or any 6 entitys rights or obligations under the Plan and/or Confirmation Order; 7 8. Modify the Plan before or after the Effective Date pursuant to Bankruptcy Code

8 section 1127, or modify the Disclosure Statement or any contract, instrument, release, or other 9 agreement or document created in connection with the Plan or the Disclosure Statement; or 10 remedy any defect or omission or reconcile any inconsistency in any order of the Court, the Plan,
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11 the Disclosure Statement or any contract, instrument, release, or other agreement or document 12 created in connection with the Plan or the Disclosure Statement, in such manner as may be 13 necessary or appropriate to consummate the Plan, to the extent authorized by the Bankruptcy 14 Code; 15 9. Issue injunctions, enter and implement other orders, or take such other actions as

16 may be necessary or appropriate to restrain interference by any entity with consummation or 17 enforcement of the Plan and/or the Confirmation Order; 18 10. Enter and implement such orders as are necessary or appropriate if the

19 Confirmation Order is for any reason modified, stayed, reversed, revoked, or vacated; 20 11. Determine any other matters that may arise in connection with or relate to the Plan,

21 the Disclosure Statement, the Confirmation Order, or any contract, instrument, release, or other 22 agreement or document created in connection with the Plan; and 23 24 12. Enter a final decree closing the Case.

If the Court abstains from exercising jurisdiction or is otherwise without jurisdiction over any

25 matter, this section shall have no effect upon and shall not control, prohibit, or limit the exercise of 26 jurisdiction by any other court having competent jurisdiction with respect to such matter. 27 28
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EXHIBIT 2

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EXHIBIT 2
Plaintiff/Complainant
Poynor, Shamine Class Action Lawsuit Samlowski, Wolfram

Defendant(s)
NVCI NVCI & Ruckdeschel Manno, Ltd. (constructive notice) NVCI & Ruckdeschel Manno, Ltd. NVCI NVCI NVCI NVCI NVCI NVCI

Agency/Venue
US District Court, District of Nevada Nevada, Eighth Judicial District Court US District Court, District of Nevada US District Court, District of Nevada US District Court, District of Nevada Nevada EEOC Nevada EEOC Nevada EEOC Workers Compensation Active

Status

Case No.
2:11-cv-00610-PMP-LRL A-11-643805-C

Settled

Jacobs, Richard Mullins, Meredith Fields, Karen Bolden, Monica Lancon, Leile Newsome, Sally Ishaq, Mo

Active Active Active Active Active Active On appeal

2:11-cv-01302-PMP-RJJ 2:11-cv-00819-RLH-RJJ A-11-649071-C EEOC: 846-2010-55403 NERC: 0804-10-0263L EEOC: 34B-2010-00511 EEOC: 487-2010-00391 NVCI is waiting for a response from Appeals Office. NERC: 0325-11-0116L EEOC: 34B-2011-00408

Calvert, Pamela

NVCI

Nevada EEOC

Settled

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SECOND AMENDMENT TO PLAN SUPPORT AGREEMENT This Second Amendment to Plan Support Agreement (this Amendment), dated as of November 18, 2011 (the Effective Date) is entered into among NEVADA CANCER INSTITUTE, a Nevada corporation (the Borrower), the lenders party hereto (the Lenders) and BANK OF AMERICA, N.A., as Administrative Agent for the Lenders (in such capacity, the Administrative Agent). RECITALS A. The Administrative Agent, the Lenders party thereto (the Consenting Lenders) and the Borrower are parties to that certain Plan Support Agreement dated as of September 16, 2011 (as heretofore amended pursuant to that certain First Amendment to Plan Support Agreement, dated as of October 31, 2011, the Plan Support Agreement). Pursuant to the Plan Support Agreement, the parties thereto agreed, among other things, to the terms set forth in the Plan Term Sheet. Capitalized terms herein not otherwise defined shall have the meaning ascribed in the Plan Support Agreement or the Plan Term Sheet, as applicable. B. The Borrower has requested that the Lenders consent to an extension of the Termination Date. The Lenders have agreed to such extension, subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of (i) the above Recitals and the mutual promises contained in this Amendment, and (ii) the execution of this Amendment, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows: 1. Incorporation of Recitals. Each of the foregoing Recitals is incorporated herein by this reference, and the parties hereto agree that each of such Recitals is true and correct in all respects. 2. Effective Date of Amendment. This Amendment shall be effective as of the Effective Date upon the execution hereof by the Borrower, the Administrative Agent and Approving Lenders, regardless of the date of execution of this Amendment. 3. Amendments to Existing Plan Support Agreement and the Plan Term Sheet.

(a) In Section 6 of the Plan Support Agreement, clause (a) is amended and restated in its entirety to read as follows: (a) at 5:00 P.M. prevailing Pacific Time on November 30, 2011 unless the Borrower has commenced the Bankruptcy Case (the Commencement Date) and has entered into the UCSD APA in form and substance acceptable to the Agent; and has filed, and is pursuing confirmation of, the Plan, and has filed a motion for authority to use cash collateral with a proposed cash collateral stipulation and order that is consistent in all material respects with the Plan Term Sheet and, among other things, provides for customary replacement liens and reimbursement of all of the Agents costs and expenses under the Credit Agreement, including, without limitation, professionals fees and

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expenses, and otherwise in form and substance acceptable to the Agent (an Acceptable Cash Collateral Order); (b) In Section 6 of the Plan Support Agreement, clause (g) is amended by deleting and replacing Eastern Time with Pacific Time. (c) In Section 6 of the Plan Support Agreement, clause (h) is amended by deleting and replacing Eastern Time with Pacific Time. (d) In the Plan Term Sheet, the Section entitled Preparation and Filing of Chapter 11 Case is amended by deleting and replacing November 3, 2011 with November 30, 2011. 4. Reaffirmation of Plan Support Agreement, Etc. As amended by this Amendment, the Plan Support Agreement and the Plan Term Sheet are in all respects ratified and confirmed. For the avoidance of doubt, the Borrower acknowledges and agrees that (a) nothing contained herein shall be interpreted as or be deemed to be a release or a waiver by the Administrative Agent or any Lender of any of the terms or conditions of the Plan Support Agreement, the Plan Term Sheet, the Credit Agreement or the other Loan Documents (as defined in the Credit Agreement; hereinafter referred to as the Loan Documents), and (b) the Administrative Agent hereby expressly reserves all of its rights and remedies under the Plan Support Agreement, the Plan Term Sheet, the Credit Agreement and the other Loan Documents, and in connection with all existing Events of Default (as defined in the Credit Agreement). 5. Governing Law; Jurisdiction. The governing law and jurisdiction provisions of Section 11 of the Plan Support Agreement are incorporated herein by reference. 6. Counterparts. This Amendment may be executed in any number of counterparts each of which, when so executed and delivered, shall be deemed an original, and all of which together shall constitute but one and the same instrument. 7. Severability. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. [Signatures follow.]

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THIRD AMENDMENT TO PLAN SUPPORT AGREEMENT This Third Amendment to Plan Support Agreement (this Amendment), dated as of November 30, 2011 (the Effective Date) is entered into among NEVADA CANCER INSTITUTE, a Nevada corporation (the Borrower), the lenders party hereto (the Lenders) and BANK OF AMERICA, N.A., as Administrative Agent for the Lenders (in such capacity, the Administrative Agent). RECITALS A. The Administrative Agent, the Lenders party thereto (the Consenting Lenders) and the Borrower are parties to that certain Plan Support Agreement dated as of September 16, 2011 (as heretofore amended pursuant to that certain First Amendment to Plan Support Agreement, dated as of October 31, 2011, and that certain Second Amendment to Plan Support Agreement, dated as of November 18, 2011, the Plan Support Agreement). Pursuant to the Plan Support Agreement, the parties thereto agreed, among other things, to the terms set forth in the Plan Term Sheet. Capitalized terms herein not otherwise defined shall have the meaning ascribed in the Plan Support Agreement or the Plan Term Sheet, as applicable. B. The Borrower has requested that the Lenders consent to an extension of the Bankruptcy Case Commencement Date and the deadline for filing the Plan and Disclosure Statement. The Lenders have agreed to such extensions, subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of (i) the above Recitals and the mutual promises contained in this Amendment, and (ii) the execution of this Amendment, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows: 1. Incorporation of Recitals. Each of the foregoing Recitals is incorporated herein by this reference, and the parties hereto agree that each of such Recitals is true and correct in all respects. 2. Effective Date of Amendment. This Amendment shall be effective as of the Effective Date upon the execution hereof by the Borrower, the Administrative Agent and Approving Lenders, regardless of the date of execution of this Amendment. 3. Amendments to Existing Plan Support Agreement and the Plan Term Sheet.

(a) In Section 6 of the Plan Support Agreement, clause (a) is amended and restated in its entirety to read as follows: (a) at (i) 5:00 P.M. prevailing Pacific Time on December 2, 2011 unless the Borrower has commenced the Bankruptcy Case (the Commencement Date) and has entered into the UCSD APA in form and substance acceptable to the Agent, and has filed a motion for authority to use cash collateral with a proposed cash collateral stipulation and order that is consistent in all material respects with the Plan Term Sheet and, among other things, provides for customary replacement liens and reimbursement of all of the

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Agents costs and expenses under the Credit Agreement, including, without limitation, professionals fees and expenses, and otherwise in form and substance acceptable to the Agent (an Acceptable Cash Collateral Order); or (ii) 5:00 P.M. prevailing Pacific Time on December 6, 2011 unless the Borrower has filed the Plan and the Disclosure Statement, and is pursuing confirmation thereof; (b) In the Plan Term Sheet, the Section entitled Preparation and Filing of Chapter 11 Case is amended and restated in its entirety to read as follows: The Borrower will reorganize through a Bankruptcy Proceeding to be filed in the United States Bankruptcy Court for the District of Nevada. The Bankruptcy Proceeding must be filed on or before December 2, 2011 (provided that the Agent may, in its sole discretion, grant a 15-day extension of such date at the request of the Borrower) (the Required Filing Date). Upon the filing of the Bankruptcy Proceeding, in addition to the necessary petitions, schedules and first day motions, Borrowers shall also file, on or before December 6, 2011, the Plan with the Bankruptcy Court and the Disclosure Statement with respect to the Plan and shall seek an order of the Bankruptcy Court (the Solicitation Order) setting the time and process for the approval of the Disclosure Statement and the solicitation of votes with respect to the Acceptable Plan. 4. Reaffirmation of Plan Support Agreement, Etc. As amended by this Amendment, the Plan Support Agreement and the Plan Term Sheet are in all respects ratified and confirmed. For the avoidance of doubt, the Borrower acknowledges and agrees that (a) nothing contained herein shall be interpreted as or be deemed to be a release or a waiver by the Administrative Agent or any Lender of any of the terms or conditions of the Plan Support Agreement, the Plan Term Sheet, the Credit Agreement or the other Loan Documents (as defined in the Credit Agreement; hereinafter referred to as the Loan Documents), and (b) the Administrative Agent hereby expressly reserves all of its rights and remedies under the Plan Support Agreement, the Plan Term Sheet, the Credit Agreement and the other Loan Documents, and in connection with all existing Events of Default (as defined in the Credit Agreement). 5. Governing Law; Jurisdiction. The governing law and jurisdiction provisions of Section 11 of the Plan Support Agreement are incorporated herein by reference. 6. Counterparts. This Amendment may be executed in any number of counterparts each of which, when so executed and delivered, shall be deemed an original, and all of which together shall constitute but one and the same instrument. 7. Severability. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. [Signatures follow.]

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Case 11-28676-mkn

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Case 11-28676-mkn

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Case 11-28676-mkn

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EXHIBIT 4

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(TO BE FILED)

Case 11-28676-mkn

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EXHIBIT 5

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Reorganized Debtor Annual Projected Budget D&O Insurance General Liability Financial Reporting and Filings Salary & Benefits, Development 1.0 FTEs Utilities Maintenance/Landscaping County Fees and HOAs Security Property Tax-Vacant Land Debt Service Total Estimated Annual Carrying Costs

Annual Expense 35,000 30,000 25,000 100,000 228,154 98,550 60,904 45,440 52,000 250,000 $ 925,048

Mal-practice Tail, One Time Expenditure

450,000

Case 11-28676-mkn

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EXHIBIT 6

Case 11-28676-mkn

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(TO BE FILED)

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