Post by avwriter on Nov 5, 2013 16:16:58 GMT -5
The Avantair trustee has asked the judge to liquidate the executive management deferred compensation fund, which would free up about $281,000 to pay Avantair creditors. Back rent for the Clearwater will eat up some of this, but there will be some left over to pay the next creditors in line: the employees. So if you haven't already, ex-Avantair employees should file a claim for unpaid wages.
As a side note, I found it interesting that Steve Santo's wife, Allison, is listed as an executive in the deferred compensation plan outlined in the court filing. I've heard rumors that she was on the payroll, and this seems to confirm that.
Here's the filing text:
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re:
AVANTAIR, INC.,
Debtor.
______________________________/
Case No. 08:13-bk-09719-CPM
Chapter 7
EXPEDITED MOTION OF THE CHAPTER 7 TRUSTEE FOR AN ORDER
(I) TERMINATING THE DEBTOR’S NON-QUALIFIED DEFERRED
CONPENSATION PLAN PURSUANT TO SECTION 363(b)(1) OF THE
BANKRUPTCY CODE; (II) DIRECTING GREAT-WEST FINANCIAL TO
LIQUIDATE THE DEFERRED COMPENSATION PLAN; (III) DIRECTING
GREAT-WEST FINANCIAL TO TURNOVER TO THE TRUSTEE THE FUNDS
RESULTING FROM THE LIQUIDATION OF THE DEFERRED COMPESATION
PLAN; AND (IV) AUTHORIZING THE TRUSTEE TO USE SUCH FUNDS IN
THE ORDINARY COURSE OF ESTATE ADMINISTRATION
Beth Ann Scharrer, as Chapter 7 Trustee for the bankruptcy estate of Avantair, Inc. (the
“Trustee”), by and through her undersigned counsel and pursuant to 11 U.S.C. Sections
363(b)(1) and 105(a) of the Bankruptcy Court moves for entry of an order: (i) permitting the
Trustee to terminate the Avantair Leadership Deferred Compensation Plan (the “Plan”); (ii)
directing Great-West Financial (“Great West”) to liquidate the Plan; (iii) directing Great West to
turnover to the Trustee all funds from the liquidation of the Plan; and (iv) authorizing the Trustee
to use the funds received from liquidation of the Plan in the ordinary course of estate
administration and in support hereof states as follows:
1. This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. Sections
157 and 1334. This matter is a core proceeding pursuant to 28 U.S.C. Section 157(b)(2). Venue
is proper in this Court pursuant to 28 U.S.C. Sections 1408 and 1409. The statutory predicates
for the relief requested herein are Sections 363(b)(1), 542, and 105(a) of the Bankruptcy Code.
2. On July 25, 2013, certain petitioning creditors filed an involuntary petition against
the Debtor. On August 1, 2013, the Court entered an order directing the appointment of an
Case 8:13-bk-09719-CPM Doc 331 Filed 10/25/13 Page 1 of 6
2
interim trustee (Doc. No. 27), and the Trustee was appointed as interim Chapter 7 trustee (Doc.
No. 32).
3. On August 16, 2013, the Court entered an order for relief under Chapter 7 against
the Debtor. Trustee is the duly-appointed Chapter 7 Trustee for the estate of Avantair, Inc.
4. Prior to the filing of the involuntary petition, the Debtor adopted the Plan. The
Plan was maintained for the purpose of providing deferred compensation for a select group of
management or highly compensated employees under Title I of the Employee Retirement
Income Security Act of 1974. True and correct copies of the Plan and the Nonqualified Deferred
Compensation Plan Adoption Agreement (the “Adoption Agreement”), are attached hereto as
Composite Exhibit “A.” Great West currently maintains and administers the Plan
5. The following 6 former officers/directors of the Debtor participated in the Plan
(the “Participants”):
a. Allison Santo;
b. Steven Santo;
c. Kevin V. McKamey;
d. Gari S. Kohihof;
e. Tom F. Palmiero; and
f. Curtis J. Miller.
6. By its express terms, the Plan is unfunded and constitutes an unsecured promise
by the Plan Sponsor (as defined in the Plan) to make benefit payments to the Participants in the
future. The Plan and Adoption Agreement provide that no Participant shall have any interest in
any assets set aside as a source of funds to satisfy the benefit obligations under the Plan. The
Participants are general unsecured creditor of the Plan Sponsor, the Debtor, and all assets in the
Plan remain the property of the Debtor.
Case 8:13-bk-09719-CPM Doc 331 Filed 10/25/13 Page 2 of 6
3
7. The Plan is presently invested in publicly traded securities with a fair market
value as of October 11, 2013 of $281,498.39.
8. The Plan allows the Debtor to terminate the Plan. The contractual right to
terminate the Plan constitutes property of the estate within the meaning of Section 541 of the
Bankruptcy Code, and the Trustee’s use of that right may constitute a use of property outside the
ordinary course of business. Thus, the Trustee seeks this Court’s authorization, out of an
abundance of caution, to exercise the right to terminate the Plan.
9. Section 363(b)(1) of the Bankruptcy Code authorizes a trustee, after notice and
hearing, to use property of the estate other than in the ordinary course of business. 11 U.S.C. §
363(b)(1). Courts may approve a trustee’s use of property of the estate under section 363(b)(10
of the Bankruptcy Code, if it is based upon the exercise of the trustee’s sound business judgment
and proposed in good faith and for fair value. See Committee of Equity Security Holders v.
Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063 (2nd Cir. 1983); Official Comm. of
Subordinated Bondholders v. Integrated Resources, Inc. (In re Integrated Resources, Inc.), 147
B.R. 650, 656 (S.D.N.Y. 1992); In re Abbotts Dairies of Pennsylvania, Inc., 788 F.2d 143 (3rd
Cir. 1986). If a sound business rationale exists, then a presumption attaches that the decision
was informed, in good faith and in the honest belief that the action was in the best interests of the
estate. Integrated Resources, 147 B.R. at 656.
10. Courts have applied four factors in determining whether a sound business
justification exists: (i) whether a sound business reason exists for the proposed transaction; (ii)
whether fair and reasonable consideration has been provided; (iii) whether the transaction has
been proposed and negotiated in good faith; and (iv) whether adequate and reasonable notice has
been provided. In re Lionel Corp., 722 F.2d at 1071. The termination of the Plan meets each of
these requirements.
Case 8:13-bk-09719-CPM Doc 331 Filed 10/25/13 Page 3 of 6
4
11. Given the Debtor’s insolvency and inability to continue to fund Plan obligations,
termination of the Plan constitutes an exercise of sound business judgment made in good faith.
Further, the termination would be in the best interests of the bankruptcy estate in that the funds
will revert to the Trustee for use in connection with estate administration. As the decision to
terminate the Plan is an exercise of sound business judgment, it should be approved pursuant to
Section 363(b)(1) of the Bankruptcy Code.
12. Section 105(a) of the Bankruptcy Code provides in relevant part that “the court
may issue any order, process or judgment that is necessary or appropriate to carry out the
provisions of this title.” 11 U.S.C. § 105(a). By the terms of the Plan and the Adoption
Agreement, the funds in the Plan were subject to the claims of the Debtor’s general creditors and
became property of the bankruptcy estate on the Petition Date. Moreover, the Participants do not
have any beneficial ownership interests in the Plan assets because they remained property of the
Debtor. Thus, the Trustee seeks the entry of an order directing Great West to liquidate the Plan
and turnover to the Trustee all funds realized as result of liquidation of the Plan, pursuant to
Section 105(a) and 542 of the Bankruptcy Code, for the benefit of the estate.
13. Finally, the Trustee seeks the entry of an order permitting her to use the liquidated
Plan funds for estate administration. All of the estate’s creditors will benefit from use of the
funds in that some of the funds will be used to recover other property belonging to the Debtor
that will be liquidated for the benefit of all creditors.
14. Notice of this Motion was provided to: (i) the United States Trustee; (ii) the
Participants; (iii) the Debtor; (iv) Counsel for the Debtor; (v) Great-West Financial; and (vi) all
parties receiving notice via the Court’s CM/ECF system and the Trustee requests the Court
approve such notice as good and sufficient, pursuant to Rules 2002(a)(2) and (h) and 6004(a) of
the Federal Rules of Bankruptcy Procedure.
Case 8:13-bk-09719-CPM Doc 331 Filed 10/25/13 Page 4 of 6
5
WHEREFORE, the Trustee respectfully requests that Court enter an Order: (i)
permitting the Trustee to terminate the Plan; (ii) directing Great West to liquidate the Plan; (iii)
directing Great West to turnover to the Trustee all funds from the liquidation of the Plan; (iv)
authorizing the Trustee to use the funds received from liquidation of the Plan in the ordinary
course of estate administration; and (v) for such other further relief the Court deems just and
proper.
Dated: October 25, 2013.
_/s/ Lynn Welter Sherman __
Lynn Welter Sherman
Florida Bar No. 375616
Tiffany A. DiIorio
Florida Bar No. 0719706
Adams and Reese LLP
As a side note, I found it interesting that Steve Santo's wife, Allison, is listed as an executive in the deferred compensation plan outlined in the court filing. I've heard rumors that she was on the payroll, and this seems to confirm that.
Here's the filing text:
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
In re:
AVANTAIR, INC.,
Debtor.
______________________________/
Case No. 08:13-bk-09719-CPM
Chapter 7
EXPEDITED MOTION OF THE CHAPTER 7 TRUSTEE FOR AN ORDER
(I) TERMINATING THE DEBTOR’S NON-QUALIFIED DEFERRED
CONPENSATION PLAN PURSUANT TO SECTION 363(b)(1) OF THE
BANKRUPTCY CODE; (II) DIRECTING GREAT-WEST FINANCIAL TO
LIQUIDATE THE DEFERRED COMPENSATION PLAN; (III) DIRECTING
GREAT-WEST FINANCIAL TO TURNOVER TO THE TRUSTEE THE FUNDS
RESULTING FROM THE LIQUIDATION OF THE DEFERRED COMPESATION
PLAN; AND (IV) AUTHORIZING THE TRUSTEE TO USE SUCH FUNDS IN
THE ORDINARY COURSE OF ESTATE ADMINISTRATION
Beth Ann Scharrer, as Chapter 7 Trustee for the bankruptcy estate of Avantair, Inc. (the
“Trustee”), by and through her undersigned counsel and pursuant to 11 U.S.C. Sections
363(b)(1) and 105(a) of the Bankruptcy Court moves for entry of an order: (i) permitting the
Trustee to terminate the Avantair Leadership Deferred Compensation Plan (the “Plan”); (ii)
directing Great-West Financial (“Great West”) to liquidate the Plan; (iii) directing Great West to
turnover to the Trustee all funds from the liquidation of the Plan; and (iv) authorizing the Trustee
to use the funds received from liquidation of the Plan in the ordinary course of estate
administration and in support hereof states as follows:
1. This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. Sections
157 and 1334. This matter is a core proceeding pursuant to 28 U.S.C. Section 157(b)(2). Venue
is proper in this Court pursuant to 28 U.S.C. Sections 1408 and 1409. The statutory predicates
for the relief requested herein are Sections 363(b)(1), 542, and 105(a) of the Bankruptcy Code.
2. On July 25, 2013, certain petitioning creditors filed an involuntary petition against
the Debtor. On August 1, 2013, the Court entered an order directing the appointment of an
Case 8:13-bk-09719-CPM Doc 331 Filed 10/25/13 Page 1 of 6
2
interim trustee (Doc. No. 27), and the Trustee was appointed as interim Chapter 7 trustee (Doc.
No. 32).
3. On August 16, 2013, the Court entered an order for relief under Chapter 7 against
the Debtor. Trustee is the duly-appointed Chapter 7 Trustee for the estate of Avantair, Inc.
4. Prior to the filing of the involuntary petition, the Debtor adopted the Plan. The
Plan was maintained for the purpose of providing deferred compensation for a select group of
management or highly compensated employees under Title I of the Employee Retirement
Income Security Act of 1974. True and correct copies of the Plan and the Nonqualified Deferred
Compensation Plan Adoption Agreement (the “Adoption Agreement”), are attached hereto as
Composite Exhibit “A.” Great West currently maintains and administers the Plan
5. The following 6 former officers/directors of the Debtor participated in the Plan
(the “Participants”):
a. Allison Santo;
b. Steven Santo;
c. Kevin V. McKamey;
d. Gari S. Kohihof;
e. Tom F. Palmiero; and
f. Curtis J. Miller.
6. By its express terms, the Plan is unfunded and constitutes an unsecured promise
by the Plan Sponsor (as defined in the Plan) to make benefit payments to the Participants in the
future. The Plan and Adoption Agreement provide that no Participant shall have any interest in
any assets set aside as a source of funds to satisfy the benefit obligations under the Plan. The
Participants are general unsecured creditor of the Plan Sponsor, the Debtor, and all assets in the
Plan remain the property of the Debtor.
Case 8:13-bk-09719-CPM Doc 331 Filed 10/25/13 Page 2 of 6
3
7. The Plan is presently invested in publicly traded securities with a fair market
value as of October 11, 2013 of $281,498.39.
8. The Plan allows the Debtor to terminate the Plan. The contractual right to
terminate the Plan constitutes property of the estate within the meaning of Section 541 of the
Bankruptcy Code, and the Trustee’s use of that right may constitute a use of property outside the
ordinary course of business. Thus, the Trustee seeks this Court’s authorization, out of an
abundance of caution, to exercise the right to terminate the Plan.
9. Section 363(b)(1) of the Bankruptcy Code authorizes a trustee, after notice and
hearing, to use property of the estate other than in the ordinary course of business. 11 U.S.C. §
363(b)(1). Courts may approve a trustee’s use of property of the estate under section 363(b)(10
of the Bankruptcy Code, if it is based upon the exercise of the trustee’s sound business judgment
and proposed in good faith and for fair value. See Committee of Equity Security Holders v.
Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063 (2nd Cir. 1983); Official Comm. of
Subordinated Bondholders v. Integrated Resources, Inc. (In re Integrated Resources, Inc.), 147
B.R. 650, 656 (S.D.N.Y. 1992); In re Abbotts Dairies of Pennsylvania, Inc., 788 F.2d 143 (3rd
Cir. 1986). If a sound business rationale exists, then a presumption attaches that the decision
was informed, in good faith and in the honest belief that the action was in the best interests of the
estate. Integrated Resources, 147 B.R. at 656.
10. Courts have applied four factors in determining whether a sound business
justification exists: (i) whether a sound business reason exists for the proposed transaction; (ii)
whether fair and reasonable consideration has been provided; (iii) whether the transaction has
been proposed and negotiated in good faith; and (iv) whether adequate and reasonable notice has
been provided. In re Lionel Corp., 722 F.2d at 1071. The termination of the Plan meets each of
these requirements.
Case 8:13-bk-09719-CPM Doc 331 Filed 10/25/13 Page 3 of 6
4
11. Given the Debtor’s insolvency and inability to continue to fund Plan obligations,
termination of the Plan constitutes an exercise of sound business judgment made in good faith.
Further, the termination would be in the best interests of the bankruptcy estate in that the funds
will revert to the Trustee for use in connection with estate administration. As the decision to
terminate the Plan is an exercise of sound business judgment, it should be approved pursuant to
Section 363(b)(1) of the Bankruptcy Code.
12. Section 105(a) of the Bankruptcy Code provides in relevant part that “the court
may issue any order, process or judgment that is necessary or appropriate to carry out the
provisions of this title.” 11 U.S.C. § 105(a). By the terms of the Plan and the Adoption
Agreement, the funds in the Plan were subject to the claims of the Debtor’s general creditors and
became property of the bankruptcy estate on the Petition Date. Moreover, the Participants do not
have any beneficial ownership interests in the Plan assets because they remained property of the
Debtor. Thus, the Trustee seeks the entry of an order directing Great West to liquidate the Plan
and turnover to the Trustee all funds realized as result of liquidation of the Plan, pursuant to
Section 105(a) and 542 of the Bankruptcy Code, for the benefit of the estate.
13. Finally, the Trustee seeks the entry of an order permitting her to use the liquidated
Plan funds for estate administration. All of the estate’s creditors will benefit from use of the
funds in that some of the funds will be used to recover other property belonging to the Debtor
that will be liquidated for the benefit of all creditors.
14. Notice of this Motion was provided to: (i) the United States Trustee; (ii) the
Participants; (iii) the Debtor; (iv) Counsel for the Debtor; (v) Great-West Financial; and (vi) all
parties receiving notice via the Court’s CM/ECF system and the Trustee requests the Court
approve such notice as good and sufficient, pursuant to Rules 2002(a)(2) and (h) and 6004(a) of
the Federal Rules of Bankruptcy Procedure.
Case 8:13-bk-09719-CPM Doc 331 Filed 10/25/13 Page 4 of 6
5
WHEREFORE, the Trustee respectfully requests that Court enter an Order: (i)
permitting the Trustee to terminate the Plan; (ii) directing Great West to liquidate the Plan; (iii)
directing Great West to turnover to the Trustee all funds from the liquidation of the Plan; (iv)
authorizing the Trustee to use the funds received from liquidation of the Plan in the ordinary
course of estate administration; and (v) for such other further relief the Court deems just and
proper.
Dated: October 25, 2013.
_/s/ Lynn Welter Sherman __
Lynn Welter Sherman
Florida Bar No. 375616
Tiffany A. DiIorio
Florida Bar No. 0719706
Adams and Reese LLP
