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UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT HARTFORD DIVISION ) Chapter 11 ) ) Case No. 12-22206 (ASD) ) ) ) (Jointly Administered) )

In re: SPECTRUM HEALTH CARE LLC, ET AL1 Debtors.

MOTION FOR ORDER AUTHORIZING THE DEBTORS TO WIND DOWN AND CEASE TO OPERATE THE WATERBRIDGE NURSING HOME FACILITY TO THE HONORABLE ALBERT S. DABROWSKI, U.S. BANKRUPTCY JUDGE: Spectrum Health Care, LLC (Spectrum), Spectrum Healthcare Torrington, LLC (Torrington), Spectrum Healthcare Derby, LLC (Derby), Spectrum Healthcare Waterbridge, LLC (Waterbridge), Spectrum Healthcare Hartford, LLC (Hartford), Spectrum Healthcare Winsted, LLC (Winsted) and Spectrum Healthcare Manchester, LLC (Manchester), as Debtors and Debtors-in-Possession in the above-captioned jointly administered cases (the Debtors), hereby seek an order of this Court pursuant to Sections 363 and 364 of Title 11 of the United States Code, 11 U.S.C. 101 et. seq. (the Bankruptcy Code), authorizing the Debtors to cease to operate the nursing home facility maintained by Waterbridge, and providing for the funding of such termination. represents as follows: I. BACKGROUND 1. On September 10, 2012, (the Petition Date), the Debtors filed voluntary In support of this motion, the Debtors respectfully

petitions for relief under Chapter 11 of Title 11 of the Bankruptcy Code and since that time have

Spectrum Health Care, LLC, Case No. 12-22206; Spectrum Healthcare Torrington, LLC, Case No. 12-22212; Spectrum Healthcare Derby LLC, Case No. 12-22208; Spectrum Healthcare Waterbridge LLC, Case No. 1222207; Spectrum Healthcare Hartford, LLC, Case No. 12-22210; Spectrum Healthcare Winsted, LLC, Case No. 12-22211; and Spectrum Healthcare Manchester LLC, Case No. 12-22209.

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continued to operate as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. The Debtors proceedings are being jointly administered by Orders dated September 12, 2012. 2. Pursuant to 11 U.S.C. 1107(a) and 1108, the Debtors continue to operate their

businesses and manage their financial affairs as debtors-in-possession. No trustee or examiner has been appointed in the jointly administered cases of the Debtors and a Creditors Committee has been appointed. 3. Torrington, Derby, Waterbridge, Hartford, and Manchester (collectively, the

Operating Entities) operate skilled nursing facilities located in Connecticut (the Facilities). Spectrum (the Management Company) is the management company that manages the Facilities pursuant to management agreements with the Operating Entities. By order dated December 2, 2012, the Court entered an order authorizing the Debtors to Wind Down and Cease to Operate the Winsted Nursing Home Facility. As a result, collectively, there are 641 beds in the Debtors facilities. The Debtors have approximately 650 employees; approximately 300 of the Debtors employees belong to the New England Health Care Employees Union District 1199. 4. Waterbridge is a 90-bed skilled care nursing facility located at 126 Ford Street, Waterbridge operates under the name Hilltop Health Center.

Ansonia, Connecticut.

Waterbridge employs approximately 100 people, which includes part-time and per diem employees. Approximately 50% of Waterbridges employees belong to District 1199. 5. 6. The Debtor currently has 84 residents in its care. As explained below, due to a complete impasse in the negotiations with the

landlord, THCI/Healthbridge (THCI), the Debtors have no choice but to close the Waterbridge facility.

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II.

JURISDICTION 7. The Court has jurisdiction to consider this Application pursuant to Sections 157

and 1334 of Title 28 of the United States Code. Venue is proper in this district pursuant to Sections 1408 and 1409 of Title 28 of the United States Code. This is a core proceeding pursuant to Section 157(b)(2) of the United States Code. 8. The statutory basis for the relief requested herein is 363 and 364 of the

Bankruptcy Code. III. RELIEF REQUESTED 9. Bankruptcy Code 363(b)(1) provides, in pertinent part, that the trustee, after

notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate . . .. 11 U.S.C. 363(b)(1). The rule . . . requires that a judge

determining a 363(b) application expressly find from the evidence presented before him at the hearing a good business reason to grant such an application. Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1071 (2d Cir. 1983). See also Ind. State Police Pension Trust v. Chrysler, LLC (In re Chrysler), 576 F.3d 108, 113-18 (2d Cir. 2009) (discussing Lionel). 10. Commencing in late November 2012, the Debtors approached THCI, the landlord

for the Waterbridge facility, in an attempt to renegotiate the terms of the existing lease between Waterbridge and THCI. Renegotiating the lease was necessary to the survival of Waterbridge because, since entering into the lease with THCI, changes in the nursing home industry, coupled with the current economic conditions, resulted in Waterbridge having insufficient operating income to support the rental payments called for by the lease. The Debtors and Waterbridge engaged in negotiations for close to a 60-day period and, although it appeared to the Debtors that the parties were close to finalizing the terms of the arrangement, THCI subsequently reversed 3

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course in February 2013 and informed the Debtors that it was not willing to make the concessions requested by the Debtors. That put the Debtors in a position of being unable to continue to operate Waterbridge, as paying all the obligations due under the Lease would result in Waterbridge operating at a severe loss. THCI further indicated that unless it was provided with a lease that provided the same economic benefits of the current lease, it would prefer the Debtors to close the facility so THCI could take the building back after all the residents have been discharged. Thereafter, the Debtors engaged in discussions with DSS to determine the best course of action. In light of THCIs position that it was unwilling to negotiate a new lease on reasonable economic terms, the Debtors, with DSSs input, have determined that it would be best to close the facility through the Chapter 11 Proceeding, as opposed to converting the case to a chapter 7 and placing the facility into a receivership. 11. The bankruptcy estate should ultimately incur no significant net cost associated

with the continued operations of Waterbridge as it winds down and terminates its operations. But by terminating Waterbridges operations, the Debtors will relieve the bankruptcy estate of the continued losses arising from Waterbridge and preserve for the bankruptcy estate and its creditors the Debtors other assets including, but not limited to, its causes of action. 12. In winding down and eventually terminating the operations of Waterbridge, the

Debtors will comply with state and federal laws and regulations affecting the health, care and welfare of the residents, provided, however, Waterbridge requests that this Court order that: (i) any requirement that Waterbridge may have to obtain a Certificate of Need pursuant to 17b352 and 17b-353, et. seq. of the Connecticut General Statutes to wind down and close Waterbridge is waived; and (ii) to the extent Waterbridge would be subject to the requirements of the Worker Adjustment and Retraining Notification Act (WARN Act), 29 U.S.C. 2101 et. seq., the Debtors be excused from providing the 60-day notice required by 2101 of the WARN 4

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Act based on business circumstances that were not reasonably foreseeable as of the time notice would have been required. 29 U.S.C. 2101(b)(2)(A). 13. The business circumstances that were not reasonably foreseeable were THCIs

reversal of position on modifying Waterbridges Lease and the recent indications of DSS that, subject to formal government approval, it would be inclined to support a closure of Waterbridge under the auspices of this Court. 14. Thus, good business reasons justify the wind down and termination of the

Debtors operations, on the terms and conditions set forth herein, and, therefore, the Debtors respectfully request that this Court, pursuant to Bankruptcy Code 363(b)(1), authorize Waterbridge to wind down and terminate the operations of Waterbridge. WHEREFORE, the Debtors respectfully request that this Court enter an order authorizing the wind down and termination of Waterbridges operations pursuant to Bankruptcy Code 363(b)(1), on the terms and conditions set forth herein, and granting such other and further relief as may be just and proper. Dated at Bridgeport, Connecticut, this 11th day of March, 2013. Pullman & Comley, LLC Attorneys for Debtors, SPECTRUM HEALTH CARE, LLC, ET AL By: /s/ Elizabeth J. Austin Elizabeth J, Austin (ct04383) Irve J. Goldman (ct02404) Jessica Grossarth (ct23975) Pullman & Comley, LLC 850 Main Street Bridgeport, CT 06604 T: (203) 330-2000; Fax (202) 576-8888 eaustin@pullcom.com igoldman@pullcom.com jgrossarth@pullcom.com

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UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT HARTFORD DIVISION ) Chapter 11 ) ) Case No. 12-22206 (ASD) ) ) ) (Jointly Administered) )

In re: SPECTRUM HEALTH CARE LLC, ET AL1 Debtors.

ORDER AUTHORIZING THE DEBTORS TO WIND DOWN AND CEASE TO OPERATE THE WATERBRIDGE NURSING HOME FACILITY Upon the consideration of the Motion for Order Authorizing the Debtors to Wind Down and Cease to Operate the Waterbridge Nursing Home Facility (the Motion) filed by Spectrum Health Care, LLC (Spectrum), Spectrum Healthcare Torrington, LLC (Torrington), Spectrum Healthcare Derby, LLC (Derby), Spectrum Healthcare Waterbridge, LLC (Waterbridge), Spectrum Healthcare Hartford, LLC (Hartford), Spectrum Healthcare Waterbridge, LLC (Waterbridge) and Spectrum Healthcare Manchester, LLC (Manchester) as debtors and debtors in possession in the above jointly administered cases (the Debtors), by and through their attorneys, Pullman & Comely, LLC, pursuant to which Motion the Debtors seeks an order of this Bankruptcy Court, under 11 U.S.C. 363 and 364, authorizing her to cease to operate Waterbridge and providing for the funding of such termination, after due notice and a hearing and it appearing to the Court that just cause exists to grant the Motion, it is hereby; ORDERED, that the Motion is Granted;

Spectrum Health Care, LLC, Case No. 12-22206; Spectrum Healthcare Torrington, LLC, Case No. 12-22212; Spectrum Healthcare Derby LLC, Case No. 12-22208; Spectrum Healthcare Waterbridge LLC, Case No. 1222207; Spectrum Healthcare Hartford, LLC, Case No. 12-22210; Spectrum Healthcare Waterbridge, LLC, Case No. 12-22211; and Spectrum Healthcare Manchester LLC, Case No. 12-22209.

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ORDERED, that the Debtors are authorized to wind down and cease to operate Waterbridge, as more fully set forth in the Motion; and it is further ORDERED, that in the event of such wind down and termination of the operation of Waterbridge, in accordance with the requirement of the agreement, as set forth in the Connecticut Department of Social Services rate letter to Waterbridge, to exercise the statutory authority under Conn. Gen. Stat. 17b-340 to adjust the rates referenced therein to the extent necessary to reimburse Waterbridge and its Bankruptcy Estate for the reasonable and appropriate costs incurred by Waterbridge in the continued operation of Waterbridge, and arising from the wind down and termination of Waterbridges operations and no entity including, but not limited to, any secured, unsecured and administrative creditor in this case shall have any right, title, interest or claim against the proceeds of such reimbursements other than for and to the extent of the purposes specified in this paragraph and as permitted by the Interim Financing Order; and it is further ORDERED, that any requirement that Waterbridge may have to obtain a Certificate of Need pursuant to 17b-352 and 17b-353 of the Connecticut General Statutes to wind down and close Waterbridge is waived; and it is further ORDERED, that to the extent Waterbridge is subject to the Worker Adjustment and Retraining Notification Act, 29 U.S.C. 2101 et. seq., it is excused from providing the 60-day notice otherwise required by 29 U.S.C. 2101(a) based on business circumstances that were not reasonably foreseeable as of the time that notice would have been required, provided, however, that Waterbridge shall provide as much advance notice of any layoffs or terminations of employment as is required by applicable Collective Bargaining Agreements.

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