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Full title: Ex Parte Motion to Pay Certain Employee Compensation and Benefits and Maintenance and Continuation of Such Benefits and Other Employee-Related Programs Filed by Debtor The Prospect-Woodward Home (Attachments: # 1 Exhibit Proposed Interim Order # 2 Exhibit Proposed Final Order) (Graham, Owen) (Entered: 08/30/2021)

Document posted on Aug 29, 2021 in the bankruptcy, 23 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

The above-captioned debtor (“Hillside Village” or the “Debtor”), hereby moves (this “Motion”) pursuant to sections 105(a), 363(b), 507, 1107(a), and 1108 of title 11 of the United States Code (the “Bankruptcy Code”), and Rules 6003 and 6004 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) for the entry of interim and final orders authorizing, but not directing, the Debtor to (i) pay certain prepetition wages, salaries, and other compensation; (ii) honor any prepetition obligations in respect of, and continue in the ordinary course of business until further notice (but not assume), certain of the Debtor’s paid time off policies, severance practices, and employee benefit plans and programs, as described below; (iii) reimburse Employees (as defined below) for prepetition expenses that Employees incurred on behalf of the Debtor in the ordinary course of business on a prepetition basis; (iv) pay all related prepetition payroll taxes and other deductions; (iv) honor worker’s compensation obligations and related obligations; and (v) pay any prepetition claims of administrators and providers in the ordinary course of business to the extent that any of the foregoing programs are administered, insured, or paid through a third-party administrator or provider.The Debtor seeks authorization, in its sole discretion, to continue the ET Policy and to continue its practice of making cash payments for unused ET which has accrued prepetition where deemed to be justified by individual employee circumstances, in each case in a manner consistent with the Debtor’s prepetition practices.To avoid harming Employees who incurred the Reimbursable Expense Obligations, the Debtor requests authority, but not direction, to satisfy all prepetition Reimbursable Expense Obligations to the extent Employees have paid for such expenses directly from their own funds or are otherwise personally liable for such expenses.Therefore, pursuant to Bankruptcy Code sections 105(a), 363, 507, 1107(a), and 1108, the Debtor seeks authority to pay the Employee Obligations and to maintain and continue the Employee Plans and Programs, in and in the ordinary course of business, in the exercise of its business judgment.Similarly, Bankruptcy Code section 507(a)(5) grants priority to contributions to employee benefit plans, up to an aggregate amount of $13,650 multiplied by the number of employees covered, less any amounts paid to such employees under Bankruptcy Code section 507(a)(4).

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW HAMPSHIRE In re: ) Chapter 11 ) The Prospect-Woodward Home, ) Case No. 21-10523-BAH ) Debtor.1 ) ) EMERGENCY EX PARTE MOTION OF DEBTOR FOR ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING (I) PAYMENT OF CERTAIN EMPLOYEE COMPENSATION AND BENEFITS AND (II)MAINTENANCE AND CONTINUATION OF SUCH BENEFITS AND OTHER EMPLOYEE-RELATED PROGRAMS The above-captioned debtor (“Hillside Village” or the “Debtor”), hereby moves (this “Motion”) pursuant to sections 105(a), 363(b), 507, 1107(a), and 1108 of title 11 of the United States Code (the “Bankruptcy Code”), and Rules 6003 and 6004 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) for the entry of interim and final orders authorizing, but not directing, the Debtor to (i) pay certain prepetition wages, salaries, and other compensation; (ii) honor any prepetition obligations in respect of, and continue in the ordinary course of business until further notice (but not assume), certain of the Debtor’s paid time off policies, severance practices, and employee benefit plans and programs, as described below; (iii) reimburse Employees (as defined below) for prepetition expenses that Employees incurred on behalf of the Debtor in the ordinary course of business on a prepetition basis; (iv) pay all related prepetition payroll taxes and other deductions; (iv) honor worker’s compensation obligations and related obligations; and (v) pay any prepetition claims of administrators and providers in the ordinary course of business to the extent that any of the foregoing programs are administered, insured, or paid through a third-party administrator or provider. In support of the Motion, the 1 The last four digits of the Debtor’s federal taxpayer identification are 2146. The address of the Debtor’s headquarters is 95 Wyman Road, Keene, New Hampshire 03431

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Debtor relies upon the Declaration of Toby Shea, Chief Restructuring Officer, in Support of the Debtor’s First Day Pleadings (the “First Day Declaration”) filed with the Court contemporaneously herewith. In further support of the Motion, the Debtor respectfully represents as follows: JURISDICTION AND VENUE 1. This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b). 2. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. 3. The statutory predicates for the relief requested herein are Bankruptcy Code sections 105(a), 363(b), and 507, and Bankruptcy Rules 6003 and 6004. BACKGROUND 4. On the date hereof (the “Petition Date”), the Debtor commenced this case by filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code (the “Chapter 11 Case”). 5. The factual background regarding the Debtor, including business operations, capital and debt structure, and the events leading to the filing of the Chapter 11 Case is set forth in the First Day Declaration and incorporated herein by reference. 6. The Debtor continues to operate and manage its business as a debtor in possession pursuant to Bankruptcy Code sections 1107 and 1108. 7. No trustee, examiner, or creditors’ committee has been appointed in the Chapter 11 Case. 8. In connection with the operation of its business, the Debtor currently employs approximately: 72 full-time employees and 61 part-time employees (together, the “Employees”). All Employees are employed at the Debtor’s campus located in Keene, New Hampshire (the “Property” or the “Hillside Village Campus”).

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9. The Employees are critical to the operation of the Debtor’s business. The loss of Employees would impede the Debtor’s business and seriously inhibit its ability to conduct a postpetition sales process. The Hillside Village Campus is made up of independent living units, assisted living units, memory care units, and skilled nursing units. Thus, many of the Employees have specialized healthcare related skills to care for residents. Replacing Employees would be difficult for the Debtor given the limited number of individuals with the requisite skills and experience to provide care in the senior care space. 10. If the Debtor cannot assure its Employees that prepetition Employee Obligations (as defined below) will be promptly paid, certain Employees may seek employment elsewhere. The loss of Employees at this juncture would have a material adverse impact on the Debtor’s business and ability to conduct a sales process during this Chapter 11 Case. RELIEF REQUESTED 11. As more fully described below, the Debtor seeks authority to pay and honor all prepetition Employee Obligations in the ordinary course of business and to pay all costs incident to the Employee Obligations. The “Employee Obligations” are: a. Employee Compensation Obligations; b. Withholding Obligations; c. Employee Benefits Programs; d. ET; e. Workers’ Compensation; f. Unemployment Insurance; and g. Miscellaneous Employee Obligations.

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12. Additionally, the Debtor requests the right to modify, change, and discontinue any of the Employee Obligations in the ordinary course of business during the Chapter 11 Case in its sole discretion without the need for further order of the Court. 13. The Debtor also requests that all applicable banks and financial institutions (collectively, the “Banks”) be authorized and directed to receive, process, honor, and pay all checks presented for payment and electronic payment requests related to the Employee Obligations. EMPLOYEE OBLIGATIONS I. Employee Compensation Obligations 14. The Debtor seeks an order authorizing the Debtor to honor its outstanding prepetition payroll obligations. 15. As noted above, the Debtor has approximately 133 Employees. In the ordinary course of business, the Debtor incurs payroll obligations to its Employees, comprised generally of salaries and wages. Approximately 11 Employees are paid a fixed salary and approximately 122 are paid on an hourly basis. 16. The Debtor utilizes a biweekly payroll cycle. Employees are paid every other Friday, with the next pay date of September 3, 2021. Payroll is funded by ACH on the Thursday before payroll is disbursed. The Debtor uses a combination of Kronos (timekeeping), Oracle HCM (processing) and ADP (payment and tax processing) (collectively, the “Payroll Processing Service Providers”) for payroll processing services. The Debtor’s average biweekly payroll is approximately $110,000. The last payroll date before the Petition Date was August 20, 2021. 17. The Debtor estimates that approximately $115,000 in salaries and wages has accrued and remains unpaid as of the Petition Date (the “Employee Compensation Obligations”). To the best of the Debtor’s understanding, no Employee is owed more than the $13,650 statutory cap of Bankruptcy Code section 507(a)(4). Given the critical role of the Employees in the Debtor’s

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business operations, the Debtor seeks authority to honor its salary, wage, and bonus obligations by paying, in the ordinary course, any prepetition amounts owed to the Employees. 18. The Debtor also utilizes the services of three independent contractors (the “Independent Contractors”) to provide marketing consulting (the “Marketing Consultant”), hair styling, and manicure services. The Marketing Consultant is paid $200 per hour and works between 8-10 hours a week, depending on the needs of the Debtor. The Independent Contractors providing hair styling and manicure services charge fees for their services, which Debtor collects and distributes to the Independent Contractors, keeping 10% of the fees charged. The Independent Contractors are paid on a monthly basis and have been paid through the month of July. The only hours outstanding as of the Petition Date would be due for the month of August. II. Withholding Obligations 19. For each applicable pay period, the Debtor routinely deducts certain amounts from its Employees’ paychecks (the “Employee Deductions”). The Employee Deductions are property the Employees, which are forwarded by the Debtor to the appropriate third-party recipients. 20. The Debtor is required by law to withhold from an Employee’s wages amounts related to federal, state, and local income taxes, social security and Medicare taxes, garnishments, etc. (the “Payroll Taxes”, and together with the Employee Deductions, the “Withholding Obligations”) and remit the same to the appropriate taxing authorities (collectively, the “Taxing Authorities”). The Debtor’s Payroll Taxes, including both the Employee and the employer portion, for a typical payroll total approximately between $30,000 and $40,000 per pay period, with the employer’s portion is approximately $15,000 per pay period. 21. The Debtor seeks authority, but not direction, to continue to make the Withholding Obligations and to remit amounts withheld on behalf of third parties postpetition in the ordinary course of business.

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III. Employee Benefits Programs 22. In the ordinary course of business, the Debtor provides its Employees with various benefits (collectively, the “Employee Benefits Programs”). The Debtor seeks authority to pay and/or honor its unpaid prepetition obligations under the Employee Benefits Programs which were incurred in the ordinary course of business (the “Prepetition Benefits”). A. Health Plans 23. The Debtor provides its Employees with medical and dental insurance plans through third-party providers. Participating Employees make contributions to the Health Plans (as defined below) through payroll deductions. 24. The Debtor offers three medical insurance plans (the “Medical Plans”) to its Employees through Harvard Pilgrim Health Care (“Harvard Pilgrim”). As of the Petition Date, approximately 36 Employees participate in the Medical Plans. The Debtor has paid the monthly premiums for the Medical Plans for August. The total amount payable by the Debtor in connection with the Medical Plans is approximately $35,000 per month. 25. The Debtor offers one dental insurance plan (the “Dental Plan”, and together with the Medical Plans, the “Health Plans”) through Delta Dental (“Delta”). As of the Petition Date, approximately 63 Employees participate in the Dental Plan. The Debtor has paid the monthly premiums for the Dental Plan for August. The total amount payable by the Debtor in connection with the Dental Plan is approximately $3,500 per month. 26. The Debtor believes it is necessary and appropriate to continue to honor its obligations to Employees under the Health Plans. The Debtor seeks authority, but not direction, to pay, in the ordinary course of business, any prepetition amounts due under the Health Plans. The Debtor also requests authority, but not direction, to continue to offer the Health Plans and honor

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its obligations thereunder in the ordinary course of business during the administration of the Chapter 11 Case. B. EAP 27. The Debtor offers Employees an employee assistance program (“EAP”) through ESI Employee Assistance Group (“ESI”). The Debtor seeks authority, but not direction, to continue with the EAP in place prior to the Petition Date in the ordinary course and honor any payments owed by the Debtor to ESI with respect to the EAP (approximately $4,000 per year), regardless of when they arose. C. Income Protection Plans 28. The Debtor offers certain Income Protection Plans (as defined herein) to its Employees. Employees are provided with free basic life insurance and accidental death and dismemberment insurance equivalent to one times each Employee’s base salary to a maximum of $100,000 for non-exempt Employees and two times each Employee’s base salary to a maximum of $200,000 for exempt Employees (the “Group Life Insurance”). Employees are also offered voluntary term life and disability insurance (the “Voluntary Life and Disability Insurance”, and together with the Group Life Insurance, the “Income Protection Plans”). The Group Life Insurance is offered through Mutual of Omaha and the Voluntary Life and Disability Insurance is offered through Colonial Life. The Debtor has paid the monthly premiums for the Income Protection Plans for February. The total amount payable by the Debtor in connection with the Income Protection Plans is approximately $1,000 per month. 29. The Debtor believes it is necessary and appropriate to continue to honor its obligations to Employees under the Income Protection Plans. The Debtor seeks authority, but not direction, to pay, in the ordinary course of business, any prepetition amounts due under the Income Protection Plans. The Debtor also requests authority, but not direction, to continue to offer the

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Income Protection Plans and honor its obligations thereunder in the ordinary course of business during the administration of the Chapter 11 Case. D. Workers’ Compensation Plan 30. The Debtor maintains premium-based workers’ compensation insurance plan (the “Workers’ Compensation Plan”). The total amount payable by the Debtor in connection with the Workers’ Compensation Plan is approximately $5,000 per month. As of the Petition Date, the Debtor estimates that it does not owe anything in connection with the Workers’ Compensation Plan. 31. The Debtor believes it is necessary and appropriate to continue to honor its obligations to Employees under the Workers’ Compensation Plan. The Debtor seeks authority, but not direction, to pay, in the ordinary course of business, any prepetition amounts due under the Workers’ Compensation Plan. The Debtor also requests authority, but not direction, to continue to offer the Workers’ Compensation Plan and honor its obligations thereunder in the ordinary course of business during the administration of the Chapter 11 Case. E. 403(b) Plan 32. The Debtor offers eligible Employees an opportunity to participate in a 403(b) plan (the “403(b) Plan”), which is administered by Principal Financial Group, Inc. (“Principal”). The Debtor does not currently match Employee Contributions. Select employees are provided additional compensation referred to as the IRA Continuation Match Bonus. This program is in place to provide employees who were employed by the Debtor’s predecessor entity the same level of retirement benefits as were offered by that entity. As of the Petition Date, approximately ten Employees participate in the 403(b) Plan, and four employees are eligible for the IRA Contribution Match Bonus. The total amount payable by the Debtor in connection with the 403(b) Plan is approximately $3,375 per month, and the total amount payable for the IRA Contribution Match

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Bonus program is approximately $190 per pay period. As of the Petition Date, the Debtor estimates it owes approximately $1,675 in connection with the 403(b) Plan. 33. The Debtor seeks authority, but not direction, to continue with the 403(b) Plan in place prior to the Petition Date in the ordinary course and honor any payments owed by the Debtor to Principal with respect to the 403(b) Plan, regardless of when they arose. IV. Earned Time 34. In the ordinary course of its business, the Debtor offers earned time (“ET”) to eligible Employees for vacations, personal days, and holidays. 35. The written ET policy of the Debtor does not provide for unlimited rollover of ET. Rather, there is a maximum number of hours that can be outstanding for any employee at any point in time. For full-time Employees, the maximum limit is 200 hours; for hourly Employees, the maximum limit is prorated based on the number of worked hours. Employees that are regularly scheduled for more than 16 hours a week are eligible to accrue ET. ET is accrued based on hours worked, and the accrual schedule is based on the Employee’s length of service. 36. The Debtor estimates that the outstanding amount of unused ET which has accrued in the ordinary course of the Debtor’s business, if payable in cash, is approximately $115,000. The Debtor seeks authorization, in its sole discretion, to continue the ET Policy and to continue its practice of making cash payments for unused ET which has accrued prepetition where deemed to be justified by individual employee circumstances, in each case in a manner consistent with the Debtor’s prepetition practices. In addition, the Debtor seeks authorization, in its sole discretion, for the Debtor to make cash payments for unused ET that has accrued postpetition upon the termination of an Employee to the extent that the Debtor would have done so under the ET Policy before the Petition Date.

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V. Reimbursable Expense Obligations 37. Prior to the Petition Date, in the ordinary course of business, the Debtor reimbursed Employees for reasonable and legitimate expenses incurred on behalf of the Debtor in the scope of the Employee’s employment (“Reimbursable Expense Obligations”). All such expenses are incurred with the applicable Employee’s understanding that he or she will be reimbursed by the Debtor in accordance with the Debtor’s reimbursement policy, as described in more detail below. In all cases, reimbursement is contingent on the Debtor’s determination that the charges are for legitimate, reimbursable business expenses. 38. The Debtor processes expense and reimbursement claims on a rolling basis. As such, it is difficult for the Debtor to determine the exact amount of Reimbursable Expense Obligations outstanding as of the Petition Date because, among other things, Employees may have expenses that they have yet to submit to the Debtor for reimbursement. As of the Petition Date, the Debtor believes that there is approximately $1,000 in Reimbursable Expense Obligations. The Debtor requests the authority to Employees for Reimbursable Expense Obligations. 39. The Reimbursable Expense Obligations are ordinary course expenses that the Debtor’s Employees incur in performing their job functions. It is essential to the continued operation of the Debtor’s business that the Debtor be permitted to continue reimbursing, or making direct payments on behalf of, Employees for such expenses. 40. Employees incurred the Reimbursable Expense Obligations as business expenses on the Debtor’s behalf and with the understanding that they would be reimbursed. To avoid harming Employees who incurred the Reimbursable Expense Obligations, the Debtor requests authority, but not direction, to satisfy all prepetition Reimbursable Expense Obligations to the extent Employees have paid for such expenses directly from their own funds or are otherwise

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personally liable for such expenses. The Debtor also seeks authority to continue its reimbursement policy in the ordinary course of business during the administration of the Chapter 11 Case. BASIS FOR RELIEF REQUESTED 41. The Debtor’s ability to successfully operate is contingent on reliable and loyal Employees. As stated above, competition for qualified employees is intense in the Debtor’s industry. Thus, it is essential to assure the Employees that the Debtor will honor the Employee Obligations and continue and maintain the Employee Plans and Programs in the ordinary course of business throughout the Chapter 11 Case. A failure to promptly do so will create concern and discontent among the Employees and could lead to resignations. The loss of even a few key personnel would immediately and irreparably harm the Debtor’s ability to maintain operations to the detriment of all interested parties. 42. Therefore, pursuant to Bankruptcy Code sections 105(a), 363, 507, 1107(a), and 1108, the Debtor seeks authority to pay the Employee Obligations and to maintain and continue the Employee Plans and Programs, in and in the ordinary course of business, in the exercise of its business judgment. This relief is necessary to retain Employees, the loss of which would disable the Debtor’s business operations. I. A Significant Portion of the Employee Obligations Is Entitled to Priority Treatment 43. Bankruptcy Code section 507(a)(4)(A) grants priority status to up to $13,650 for employee claims for “wages, salaries, or commission, including vacation, severance, and sick leave pay” earned within 180 days before the Petition Date. See 11 U.S.C. § 507(a)(4)(A). Similarly, Bankruptcy Code section 507(a)(5) grants priority to contributions to employee benefit plans, up to an aggregate amount of $13,650 multiplied by the number of employees covered, less any amounts paid to such employees under Bankruptcy Code section 507(a)(4).

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44. Indeed, “[w]age priority has been a feature of the bankruptcy law since 1898.” In re Garden Ridge Corp., Case No. 04-10324 (KJC), 2006 WL 521914, at *2 (Bankr. D. Del. Mar. 2, 2006) (citing 4 Alan N. Resnick & Henry J. Sommer, Collier on Bankruptcy ¶ 507.05[1] (15th ed. 2005)). Its purpose is to “alleviate hardship on workers . . . who may have no other source of income and “to encourage employees to stand by an employer in financial difficulty.” Id. (citing Collier on Bankruptcy ¶ 507.05[1]). This priority extends to certain other “benefits that are considered akin to compensation, such as vacation, severance and sick leave pay.” Id. 45. The Debtor believes that a substantial portion of the Employee Obligations relating to the period prior to the Petition Date constitutes priority claims under Bankruptcy Code sections 507(a)(4) and (5). Amounts that are paid on account of priority claims for the majority of the Employee Obligations would not otherwise be available for distribution to unsecured creditors. Therefore, the Debtor’s unsecured creditors will not be prejudiced by permitting priority obligations to be satisfied in the ordinary course of business during the Chapter 11 Case rather than at the conclusion of the Chapter 11 Case. Indeed, the Debtor submits that payment of Employee Obligations at this time enhances value for the benefit of the Debtor and all interested parties by retaining the Employees. The Debtor believes that honoring the Employee Obligations is important to sustain morale for the current Employees and ensure their retention. II. Payment is Appropriate Under Bankruptcy Code Sections 1107 and 1108 46. The Debtor, operating its business as Debtor in possession under Bankruptcy Code sections 1107(a) and 1108, is a fiduciary “holding the bankruptcy estate and operating the business for the benefit of its creditors and (if the value justifies) equity owners.” In re CoServ, LLC, 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002). “Implicit in the duties” of a chapter 11 debtor in possession is the duty “to protect and preserve the estate, including an operating business’s going-concern value.” Id. See also Official Comm. of Unsecured Creditors of Cybergenics Corp. ex rel.

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Cybergenics Corp. v. Chinery, 330 F.3d 548, 573 (3d Cir. 2003); In re Mushroom Transp. Co., Inc., 382 F.3d 325, 339 (3d Cir. 2004). 47. Courts have noted that there are instances in which a debtor in possession can fulfill its fiduciary duty “only . . . by the preplan satisfaction of a prepetition claim.” In re CoServ, LLC, 273 B.R. at 497. The CoServ Court specifically noted that preplan satisfaction of prepetition claims is a valid exercise of a debtor’s fiduciary duty when the payment “is the only means to effect a substantial enhancement of the estate.” Id. The court provided a three-pronged test for determining whether a preplan payment on account of a prepetition claim is a valid exercise of a debtor’s fiduciary duty: First, it must be critical that the debtor deal with the claimant. Second, unless it deals with the claimant, the debtor risks the probability of harm, or, alternatively, loss of economic advantage to the estate or the debtor’s going concern value, which is disproportionate to the amount of the claimant’s prepetition claim. Third, there is no practical or legal alternative by which the debtor can deal with the claimant other than by payment of the claim. Id. at 498. 48. Payment of the Employee Obligations as set forth herein meets each element of the CoServ Court’s standard. The Debtor’s operations are complex and rely on the skill and expertise of their Employees. The Employees possess unique knowledge regarding specific aspects of the Debtor’s operations, which would be virtually irreplaceable should such Employees be lost through a failure to pay the Employee Obligations. In addition, any failure by the Debtor to pay the Employee Obligations as set forth herein would negatively impact the morale of the Employees at a critical time for the Debtor and its business when the Employees are most needed. The Employees are also critical to the Debtor’s ability to maintain its operations consistent with past practices, which would be impossible without the continued efforts of the Employees. The damage to the value of the Debtor’s businesses and, hence, the costs to creditors as a whole, would be

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immediate and irreparable if the Employee Obligations were not met. In short, the potential harm and economic disadvantage that would stem from the failure to pay the Employee Obligations as set forth herein greatly outweighs the amount of any prepetition claims that the Debtor is seeking authorization to pay. 49. After careful consideration in consultation with its advisors, the Debtor has determined in its business judgment that to avoid significant disruption to its business operations there exists no practical or legal alternative to the payment of the Employee Obligations as set forth herein. Therefore, the Debtor can meet its fiduciary duties as debtor in possession under Bankruptcy Code sections 1107(a) and 1108 only by payment of the Employee Obligations as set forth herein. III. Payment is Appropriate Under Bankruptcy Code Section 541 50. The Debtor also seeks authority to pay the Withholding Obligations to the appropriate entities. These amounts principally represent the Employees’ earnings that governments, the Employees, and the judicial authorities have designated for deduction from the Employees’ paychecks. Indeed, certain Withholding Obligations are not property of the Debtor’s estate because the Debtor have withheld such amounts from Employees’ paychecks on another party’s behalf. See 11 U.S.C. § 541. See also City of Farrell v. Sharon Steel Corp. (In re Sharon Steel Corp.), 41 F.3d 92, 95 (3d Cir. 1994) (observing the “well-settled principle that debtors do ‘not own an equitable interest in property . . . [they] hold[] in trust for another,’ and that therefore funds held in trust are not ‘property of the estate’”) (quoting Begier v. IRS, 496 U.S. 53, 59 (1990)). 51. Further, federal and state laws require the Debtor to withhold certain tax payments from Employees’ paychecks and to pay such amounts to the appropriate taxing authority. See 26 U.S.C. §§ 6672 and 7501(a). See also Old Republic Nat’l Title Ins. Co. v. Tyler (In re Dameron), 155 F.3d 718, 721 (4th Cir. 1998) (holding that deposits subject to an express trust are excluded

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from the bankruptcy estate); In re Sharon Steel Corp., 41 F.3d at 95-97 (finding that state law requiring a corporate debtor to withhold city income tax from its employees’ wages created a trust relationship between debtor and the city for payment of withheld income taxes); In re DuCharmes & Co., 852 F.2d 194, 196 (6th Cir. 1988) (noting that individual officers of a company may be held personally liable for failure to pay trust fund taxes). A failure to pay over these amounts could subject the Debtor and its officers and directors to liability. See, e.g., John F. Olson, et al., Director & Officer Liability: Indemnification and Insurance § 3:21 (2003). 52. To avoid the potential of such liability, and because the Withholding Obligations are not property of the Debtor’s estate, the Debtor requests that the Court authorize it to remit these amounts to the appropriate parties in the ordinary course of business. IV. Payment is Appropriate Under Bankruptcy Code Section 363 53. Bankruptcy Code section 363(b)(1) provides that a debtor may “after notice and a hearing, use, sell, or lease, other than in the ordinary course of business, property of the estate.” 11 U.S.C. § 363(b)(1). A debtor’s decision to use, sell, or lease assets outside the ordinary course of business must be based upon the sound business judgment of that debtor. See Official Comm. of Unsecured Creditors of LTV Aerospace & Def. Co. v. LTV Co. (In re Chateaugay Corp.), 973 F.2d 141, 143 (2d Cir. 1992) (holding that a court determining an application pursuant to section 363(b) must find from the evidence a good business reason to grant such application). See also In re Ionosphere Clubs, Inc., 100 B.R. 670, 675 (Bankr. S.D.N.Y. 1989) (standard for determining a section 363(b) motion is whether the debtor has a “good business reason” for the requested relief). “Where the debtor articulates a reasonable basis for its business decisions (as distinct from a decision made arbitrarily or capriciously), courts will generally not entertain objections to the debtor’s conduct.” Comm. of Asbestos-Related Litigants and/or Creditors v. Johns-Manville Corp. (In re Johns-Manville Corp.), 60 B.R. 612, 616 (Bankr. S.D.N.Y. 1986). Consistent with a debtor’s

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fiduciary duties, where there is a sound business purpose for the payment of prepetition obligations, and where the debtor is able to “articulate some business justification, other than the mere appeasement of major creditors,” courts have authorized Debtor to make such payments under Bankruptcy Code section 363(b). See, e.g., In re Ionosphere Clubs, 98 B.R. at 175 (accepting debtor’s argument that payment of employee wage claims was “critical . . . in order to preserve and protect its business and ultimately reorganize, retain its currently working employees and maintain positive employee morale,” and finding that the debtor had “clearly demonstrated sound business reasons to justify such payments”). 54. In addition, the Debtor pays the Employee Obligations in the ordinary course of business, as permitted by Bankruptcy Code section 363(c). However, to the extent the Court finds that approval is necessary, and in an abundance of caution, the Debtor requests that the Court grant the relief requested herein and enter an order authorizing it to pay the Employee Obligations, consistent with its compensation, vacation, and other benefit policies and plans, and to permit, but not require, the Debtor, in its discretion, to maintain and continue the Employee Plans and Programs for their Employees as those practices, programs, policies, and plans were in effect as of the Petition Date, as such may be modified, terminated, amended, or supplemented from time to time hereafter. V. Payment is Appropriate Under Bankruptcy Code Section 105(a) and the Doctrine of Necessity 55. Courts have also authorized payment of prepetition claims in appropriate circumstances pursuant to Bankruptcy Code section 105(a). Section 105(a), which codifies the inherent equitable powers of the bankruptcy court, empowers the bankruptcy court to “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). Under Bankruptcy Code section 105(a), courts may permit pre-plan payments

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of prepetition obligations when such payments are essential to the continued operation of the debtor’s business and, in particular, where nonpayment of a prepetition obligation would trigger a withholding of goods or services essential to the debtor’s business reorganization plan. See, e.g., In re Ionosphere Clubs, 98 B.R. at 177 (finding that section 105 empowers bankruptcy courts to authorize payment of prepetition debt when such payment is needed to facilitate the rehabilitation of the debtor). 56. Numerous courts have used their section 105(a) powers under the “doctrine of necessity” to authorize payment of prepetition obligations where, as here, such payment is an essential element of the preservation of the debtor in possession’s potential for rehabilitation. See In re CoServ, 273 B.R. at 497 (reasoning that because the debtor-in-possession has fiduciary duties it must meet, it is logical that the bankruptcy court may “use Section 105(a) of the Code to authorize satisfaction of the prepetition claim in aid of preservation or enhancement of the estate”); In re Synteen Techs., Inc., No. 00-02203-W, 2000 WL 33709667, at *2 (Bankr. D.S.C. Apr. 14, 2000) (courts have permission to “allow payment of a prepetition claim when essential to the continued operation of the debtor”) (citation omitted); In re Just For Feet, Inc., 242 B.R. 821, 824 (D. Del. 1999) (“[C]ourts have used their equitable power under section 105(a) . . . to authorize the payment of pre-petition claims when such payment is deemed necessary to the survival of a debtor in a chapter 11 reorganization.”); In re NVR L.P., 147 B.R. 126, 127 (Bankr. E.D. Va. 1992) (“Under [section 105] the court can permit pre-plan payment of a prepetition obligation when essential to the continued operation of the debtor”); In re Eagle-Picher Indus., Inc., 124 B.R. 1021, 1023 (Bankr. S.D. Ohio 1991) (approving payment of prepetition unsecured claims of tool makers as “necessary to avert a serious threat to the Chapter 11 process”); In re Quality Interiors, Inc., 127 B.R. 391, 396 (Bankr. N.D. Ohio 1991) (“payment by a debtor-in-possession of pre-petition

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claims outside of a confirmed plan of reorganization is generally prohibited by the Bankruptcy Code,” but “[a] general practice has developed . . . where bankruptcy courts permit the payment of certain pre-petition claims, pursuant to 11 U.S.C. § 105, where the debtor will be unable to reorganize without such payment.”). 57. The “doctrine of necessity” is frequently invoked early in reorganization cases, during the so-called “breathing spell,” when preservation of the estate is most critical and often extremely difficult. See 2 Collier on Bankruptcy ¶ 105.02[4][a] (16th ed.) (discussing cases in which courts have relied upon the “doctrine of necessity” or the “necessity of payment” rule to pay prepetition claims immediately). For example, in In re Structurlite Plastics Corp., the court embraced “the principle that a bankruptcy court may exercise its equity powers under section 105(a) to authorize payment of prepetition claims where such payment is necessary to ‘permit the greatest likelihood of survival of the debtor.’” In re Structurlite Plastics Corp., 86 B.R. 922, 931 (Bankr. S.D. Ohio 1988) (quoting In re Chateaugay Corp., 80 B.R. 279, 287 (S.D.N.Y. 1987)). The court explained that “a per se rule proscribing the payment of prepetition indebtedness may well be too inflexible to permit the effectuation of the rehabilitative purposes of the Code.” Id. at 932. Flexibility of payment is particularly critical when the prepetition creditor provides vital goods or services to the debtor. 58. Here, many of the Employees rely on their compensation, benefits, and reimbursement of expenses to satisfy their daily living expenses and maintain their health and well-being. Consequently, these Employees will be exposed to significant financial hardships if the Debtor is not permitted to honor the Employee Obligations. If the Debtor is unable to satisfy such obligations, Employee morale and loyalty will suffer at a time when Employee support is critical. Further, if the Court does not authorize the Debtor to honor its various obligations under

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the Employee Benefits Plans, the Employees’ health coverage could be threatened, potentially burdening individual Employees with the costs of health care. At a minimum, the loss of health care coverage, or uncertainty regarding coverage, would result in considerable anxiety for the Employees at a time when the Debtor needs its Employees to perform their jobs at peak efficiency. For all of the foregoing reasons, a sound business purpose exists to pay the Employee Obligations. 59. In the absence of such payments, the Debtor believes that its Employees may seek alternative employment opportunities, perhaps with the Debtor’s competitors. Such a development would deplete the workforce, hinder the Debtor’s ability to service its residents, and likely diminish creditor and counterparty confidence in the Debtor. Moreover, the loss of valuable Employees and the recruiting efforts that would be required to replace such Employees would be a substantial and costly distraction at a time when the Debtor must focus on sustaining operations. Accordingly, the Debtor must be able to pursue all reasonable measures to retain the Employees by, among other things, continuing to honor wages, benefits, and related obligations, including those which accrued prior to the Petition Date, consistent with the terms set forth in the Interim Order and Final Order attached hereto. 60. Taken together, the nature of the Employee Obligations, the substantial harm to the Debtor’s business that would be caused if those obligations were not honored, the related potential for loss of value in the Debtor’s estate, and the fact that a significant portion of the obligations in question relates to priority wage claims, lead to the conclusion that the Employee Obligations fall well within the scope of obligations whose payments may be authorized pursuant to the doctrine of necessity.

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61. Accordingly, for all of the foregoing reasons, the relief requested herein will benefit the Debtor’s estate and creditors by allowing the Debtor’s business operations to continue without interruption and should therefore be approved. VI. The Court Should Authorize Applicable Banks and Other Processors to Honor Checks and Electronic Fund Transfers in Accordance with the Motion 62. In connection with the foregoing, the Debtor respectfully requests that the Court (a) authorize all applicable Processors to receive, process, honor, and pay all checks and transfers issued by the Debtor in accordance with this Motion, without regard to whether any checks or transfers were issued before or after the Petition Date; (b) provide that all processors may rely on the representations of the Debtor with respect to whether any check or transfer issued or made by the Debtor before the Petition Date should be honored pursuant to this Motion (such Banks and other processors having no liability to any party for relying on such representations by the Debtor provided for herein); and (c) authorize the Debtor to issue replacement checks or transfers to the extent any checks or transfers that are issued and authorized to be paid in accordance with this Motion are dishonored or rejected by the Processors. VII. Immediate Relief is Justified 63. Pursuant to Bankruptcy Rule 6003, the Court may grant relief within twenty-one days after the filing of the petition regarding a motion to “use, sell, lease, or otherwise incur an obligation regarding property of the estate” only if such relief is necessary to avoid immediate and irreparable harm. Fed. R. Bankr. P. 6003(b). Immediate and irreparable harm exists where the absence of relief would impair a debtor’s ability to reorganize or threaten the debtor’s future as a going concern. See In re Ames Dep’t Stores, Inc., 115 B.R. 34, 36 n.2 (Bankr. S.D.N.Y. 1990) (discussing the elements of “immediate and irreparable harm” in relation to Bankruptcy Rule 4001).

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64. Moreover, Bankruptcy Rule 6003 authorizes the Court to grant the relief requested herein to avoid harm to the Debtor’ patients and other third parties. Unlike Bankruptcy Rule 4001, Bankruptcy Rule 6003 does not condition relief on imminent or threatened harm to the estate alone. Rather, Bankruptcy Rule 6003 speaks of “immediate and irreparable harm” generally. Cf. Fed. R. Bankr. P. 4001(b)(2), (c)(2) (referring to “irreparable harm to the estate”). Indeed, the “irreparable harm” standard is analogous to the traditional standards governing the issuance of preliminary junctions. See 9 Collier on Bankruptcy ¶ 4001.07[b][3] (discussing source of “irreparable harm” standard under Rule 4001(c)(2)). Courts will routinely consider third-party interests when granting such relief. See, e.g., Capital Ventures Int’l v. Argentina, 443 F.3d 214, 223 n.7 (2d Cir. 2006); see also Linnemeir v. Bd. of Trs. of Purdue Univ., 260 F.3d 757, 761 (7th Cir. 2001). 65. As described herein and in the First Day Declaration, the Debtor will suffer immediate and irreparable harm without Court authorization to pay the Employee Obligations and other related relief requested herein. Accordingly, Bankruptcy Rule 6003 has been satisfied, and the relief requested herein should be granted. WAIVER OF MEMORANDUM OF LAW 66. The Debtor requests that the Court waive and dispense with the requirement set forth in LBR 7102(b)(2) that any motion filed shall have an accompanying memorandum of law. The legal authorities upon which the Debtor relies are set forth in the Motion. Accordingly, the Debtor submits that a waiver of the requirements set forth in LBR 7102(b)(2) is appropriate under the circumstances. NOTICE 67. Notice of the Motion has been provided to: (a) the Office of the United States Trustee for the District of New Hampshire; (b) counsel to the New Hampshire Insurance Department; (c) the United States Attorney’s Office for the District of New Hampshire; (d) counsel

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to UMB Bank, as indenture trustee; (e) the Debtor’s twenty (20) largest unsecured creditors; and (f) any party filing a notice of appearance in this Chapter 11 Case. 68. The Debtor submits that, in light of the nature of the relief requested, no further notice of this Motion is required. NO PRIOR REQUEST 69. No prior request for the relief sought herein has been made to this Court or any other court.

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WHEREFORE, the Debtor respectfully requests entry of interim and final orders, substantially in the forms attached hereto as Exhibit A and Exhibit B, granting the relief requested herein and granting such other relief as is just and proper. Dated: August 30, 2021 /s/ Owen R. Graham HINCKLEY, ALLEN & SNYDER LLP Daniel M. Deschenes (Bar No. 14889) Owen R. Graham (Bar No. 266701) 650 Elm Street Manchester, New Hampshire 03101 Telephone: (603) 225-4334 Facsimile: (603) 224-8350 ddeschenes@hinckleyallen.com -and- Jennifer V. Doran (Pro Hac Vice Pending) 28 State Street Boston, Massachusetts 02109 Telephone: (617) 345-9000 Facsimile: (617) 345-9020 jdoran@hinckleyallen.com -and- POLSINELLI PC Jeremy R. Johnson (Pro Hac Vice Pending) Stephen J. Astringer (Pro Hac Vice Pending) 600 Third Avenue, 42nd Floor New York, New York 10016 Telephone: (212) 684-0199 Facsimile: (212) 684-0197 jeremy.johnson@polsinelli.com sastringer@polsinelli.com Proposed Counsel to the Debtor and Debtor in Possession

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