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Full title: Limited Objection and Reservation of Rights Filed by Creditor The MacMillin Company, LLC (RE: related document(s) 25 Motion for Conditional Use of Cash Collateral filed by Debtor The Prospect-Woodward Home) (Fischer, Jeremy) (Entered: 09/02/2021)

Document posted on Sep 1, 2021 in the bankruptcy, 6 pages and 0 tables.

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The Prospect-Woodward Home (“Prospect”), respectfully submits this Limited Objection and Reservation of Rights to apprise the Court of disputes regarding lien priority between MacMillin and other creditors of Prospect, and to respectfully request that the Court, in ruling on the above-captioned emergency motion [Dkt.I. MacMillin’s Secured Interest Prospect and MacMillin signed a construction contract on April 17, 2017, under which MacMillin agreed to construct a new senior living community for Prospect in Keene, New Hampshire (the “Project”). Therefore, under the mechanics lien laws, MacMillin acquired a mechanics lien on the Project property by operation of law no later than May 15, 2017, prior to the June 19, 2017 recording of the Loan and Security Agreement (as defined in the Cash Collateral Motion), and that lien persisted and increased in value throughout the life of the Project as work continued to be performed.As soon as Prospect obtained possession and control of the Project, Prospect stopped processing MacMillin’s final payment applications and took the position that it was entitled to withhold amounts owed MacMillin because of alleged construction defects.MacMillin’s position is that its mechanics lien has first-priority over any other interest recorded against the Project real property or appurtenances thereto (which are the subject of Prospect’s pending sale motion in this Court, Dkt.

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW HAMPSHIRE In re: THE PROSPECT-WOODWARD HOME, Chapter 11 Case No. 21-10523 (BAH) Debtor. LIMITED OBJECTION AND RESERVATION OF RIGHTS OF CREDITOR THE MACMILLIN COMPANY, LLC REGARDING EMERGENCY EX PARTE MOTION OF DEBTOR FOR ENTRY OF INTERIM AND FINAL ORDERS (I) AUTHORIZING THE USE OF CASH COLLATERAL, (II) GRANTING ADEQUATE PROTECTION,(III) MODIFYING THE AUTOMATIC STAY, (IV) SETTING A FINAL HEARING, AND (V) GRANTING RELATED RELIEF The MacMillin Company, LLC (“MacMillin”), a creditor of Debtor The Prospect-Woodward Home (“Prospect”), respectfully submits this Limited Objection and Reservation of Rights to apprise the Court of disputes regarding lien priority between MacMillin and other creditors of Prospect, and to respectfully request that the Court, in ruling on the above-captioned emergency motion [Dkt. No. 25] (the “Cash Collateral Motion”), refrain from entering any order that may adversely and prematurely impact MacMillin’s rights as to the disputed question of priority. I. MacMillin’s Secured Interest Prospect and MacMillin signed a construction contract on April 17, 2017, under which MacMillin agreed to construct a new senior living community for Prospect in Keene, New Hampshire (the “Project”). Prospect contracted separately with an architectural firm for the design and engineering of the Project. MacMillin began work on the Project no later than May 15, 2017. Therefore, under the mechanics lien laws, MacMillin acquired a mechanics lien on the Project property by operation of law no later than May 15, 2017, prior to the June 19, 2017 recording of

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the Loan and Security Agreement (as defined in the Cash Collateral Motion), and that lien persisted and increased in value throughout the life of the Project as work continued to be performed. See N.H. RSA § 447:2; Daniel v. Hawkeye Funding, Ltd. P’ship, 150 N.H. 581, 583 (2004). MacMillin substantially completed construction of the Project in the spring of 2019. As soon as Prospect obtained possession and control of the Project, Prospect stopped processing MacMillin’s final payment applications and took the position that it was entitled to withhold amounts owed MacMillin because of alleged construction defects. At the same time, Prospect hindered and frustrated MacMillin’s ability to perform its punchlist and warranty work. MacMillin adamantly denies the allegations of defective work, and further denies that the quality of its construction work had anything to do with Prospect’s bankruptcy.1 In August 2019, MacMillin filed a lawsuit to perfect its mechanics lien to secure its rights to payment. MacMillin Company, LLC v. Prospect-Woodward Home, No. 213-2019-CV-00215 (N.H. Super. Ct.). By order dated October 25, 2019, the court permitted attachment of mechanics liens to the Project property in the cumulative amount of $5,713,392. MacMillin’s position is that its mechanics lien has first-priority over any other interest recorded against the Project real property or appurtenances thereto (which are the subject of Prospect’s pending sale motion in this Court, Dkt. No. 10). II. The Cash Collateral Motion The Debtor filed the Cash Collateral Motion on August 30, 2021 and included with the Motion a proposed Interim Order (I) Authorizing The Debtor To Use Cash Collateral; (II) 1 Prospect was showing signs of financial distress long before the Project was completed. As early as February 2018, the lender’s representative notified Prospect that there were insufficient construction funds to complete the Project, a situation that persisted throughout the rest of the life of the Project. Prospect’s financial distress was then apparently exacerbated by (i) lower than expected resident move-ins (unrelated to any construction issues), and (ii) the COVID-19 pandemic.

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Granting Adequate Protection; (III) Scheduling A Final Hearing; and (IV) Granting Related Relief (the “Proposed Order”). Notwithstanding the clear legal priority of MacMillin’s mechanic’s lien over the liens held by each of the Secured Parties (as that term is defined in the Cash Collateral Motion), the Proposed Order purports to resolve the parties’ lien priority dispute and determine that the Secured Parties’ liens are superior to that held by MacMillin. See, e.g., Proposed Order, ¶ H (“Pursuant to these grants, the Bond Trustee holds valid and perfected first priority liens and security interests in substantially all of the Debtors’ real and personal property . . .) (emphasis added); ¶ 9 (granting the Bond Trustee “valid, binding, enforceable and perfected first priority mortgages . . . in all currently owned or hereafter acquired property and assets of the Debtor of any kind or nature . . .” to secure postpetition advances) (emphasis added); ¶ 10 (granting each Secured Party replacement liens on, among other things, the Debtors’ real property); ¶ 12 (granting each Secured Party superpriority administrative expense claims secured by, among other things, the Debtors’ real property); ¶ 14 (determining that the Proposed Order “shall be a conclusive and binding determination on all parties . . . as to the scope, extent, perfection, validity and enforceability, in all respects” of each Secured Parties’ lien on, among other things, the Debtors’ real property). Additionally, the Proposed Order purports to tie Prospect’s hands as debtor-in-possession and require that it align with the Secured Parties on these contested priority issues throughout this case. See Proposed Order, ¶ M (“The Debtor agrees that it shall not take any action to assert that . . . the Bond Claim or the SBW Claim is not secured by valid, enforceable, duly perfected first priority liens on and security interests in the Secured Parties’ respective Prepetition Collateral . . . .”) (emphasis added). These provisions of the Proposed Order are unnecessary to the relief sought and unfairly and improperly purport to determine a lien priority dispute that exists between MacMillin, on the one hand, and the Secured Parties, on the other.

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III. Relief Requested In the Cash Collateral Motion, Prospect acknowledges the existence of the mechanics liens, but asserts that certain other liens, held by Prospect’s lenders, are “superior” to the mechanics’ liens. See Cash Collateral Motion, ¶¶ 23-24. This assertion is included in several provisions of the Proposed Order, outlined above, that purport to unfairly and improperly resolve the parties’ lien priority in the Secured Parties’ favor. In fact, any other creditors’ interests in the Debtors’ real property and its appurtenances are inferior to MacMillin’s lien because, among other reasons, those other interests were recorded after MacMillin’s mechanics lien arose by operation of law. IV. Waiver of Requirements Under LBR 7102(b)(2) MacMillin requests that the Court waive and dispense with the requirement set forth in LBR 7102(b)(2) that any objection filed shall have an accompanying memorandum of law. The legal authorities are fully set forth above and, accordingly MacMillin submits that waiver of the LBR 7102(b)(2) requirements is appropriate under these circumstances. WHEREFORE, MacMillin respectfully submits this Limited Objection and Reservation of Rights with respect to the Cash Collateral Motion and requests that any order granting the Cash Collateral Motion make clear that order is not intended to, and shall not constitute, a determination of the lien priority dispute that exists among MacMillin, the Debtor, and the Secured Parties.

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Dated: September 2, 2021 Respectfully submitted, /s/ Jeremy R. Fischer Jeremy R. Fischer (BNH #07143) DRUMMOND WOODSUM 670 N. Commercial Street, Suite 207 Manchester, NH 03101 (603) 716-2895 jfischer@dwmlaw.com -and- Patrick Fitzmaurice PILLSBURY WINTHROP SHAW PITTMAN LLP 31 West 52nd Street New York, NY 10019 (212) 858-1171 patrick.fitzmaurice@pillsburylaw.com Counsel for The MacMillin Company, LLC

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CERTIFICATE OF SERVICE I hereby certify that I have served the foregoing motion via this Court’s CM/ECF system on all parties requesting CM/ECF notice in this bankruptcy proceeding. Dated: September 2, 2021 /s/ Jeremy R. Fischer

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