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IN THE UNITED STATES COURT FOR THE DISTRICT OF DELAWARE

In re: Chapter 11

CMC II, LLC,1 Case No. 21-10461 (JTD)

Debtors. (Jointly Administered)

RE: D.I. Nos. 54, 94 & 108

DECLARATION OF PAUL RUNDELL IN SUPPORT OF DIP FINANCING MOTION AND BIDDING PROCEDURES MOTION

I, Paul Rundell, hereby declare under penalty of perjury that the following is true to the

best of my knowledge, information, and belief:

1. I am the Chief Restructuring Officer of CMC II, LLC and certain of its affiliates,

the debtors and debtors-in-possession in the above-captioned cases (collectively, the “Debtors” or the “Company”) in the above-captioned chapter 11 cases (the “Chapter 11 Cases”).

2. I am a Managing Director of Alvarez & Marsal North America Corporate

Restructuring (“A&M”) in its Restructuring and Turnaround Group in Chicago, Illinois. I have more than twenty (20) years of experience specializing in restructuring, and have assisted clients with financial or operational challenges, including business strategy and planning, financial analysis and support, cash management, crisis management, turnaround consulting, market analysis and operational improvement. I have served as interim chief executive officer, chief restructuring officer, and held other officer positions in the restructuring context, both in and out

of court.

1 The Debtors in these chapter 11 cases, along with the last four digits of their respective tax identification numbers, are as follows: CMC II, LLC (6973), Salus Rehabilitation, LLC (4037), 207 Marshall Drive Operations LLC (8470), 803 Oak Street Operations LLC (3900), Sea Crest Health Care Management, LLC (2940), and Consulate Management Company, LLC (5824). The address of the Debtors’ corporate headquarters is 800 Concourse Parkway South, Maitland, Florida 32751. Case 21-10461-JTD Doc 114 Filed 03/31/21 Page 2 of 7

3. I submit this declaration (this “Declaration”) in support of the Motion of the

Debtors for Entry of Interim and Final Orders (I) Authorizing the Debtors to (A) Obtain Post-

Petition Financing Pursuant to 11 U.S.C. §§ 105, 361, 362, 364(c)(1), 364(c)(2), 364(c)(3) and

364(e), (B) Granting Senior Liens and Superpriority Administrative Expense Status; (II)

Scheduling Final Hearing; and (III) Granting Related Relief [Docket No. 94] (the “DIP Motion”);

the Debtors’ Reply to Objections of the Official Committee of Unsecured and Angela

Ruckh to the Motion of the Debtors for Entry of Interim and Final Orders (i) Authorizing the

Debtors to Obtain Post-Petition Financing Pursuant to 11 U.S.C. §§ 105, 361, 362, 364(c)(1),

364(c)(2), 364(c)(3) and 364(e), (B) Granting Senior Liens and Superpriority Administrative

Expense Status; (ii) Scheduling Final Hearing; and (iii) Granting Related Relief [Docket No. 108]

(the “DIP Reply”); the Debtors’ Motion for Entry of Orders (I)(a) Establishing Bidding

Procedures for the Sales of the SNF Assets and Manager and Remaining Assets; (b) Establishing

Procedures Relating to Assumption and Assignment of Certain Executory Contracts and

Unexpired Leases, Including Notice of Proposed Cure Amounts; (c) Approving Form and Manner

of Notice; (D) Scheduling a Hearing to Consider Any Proposed Sale; and (e) Granting Certain

Related Relief; and (II)(a) Approving Sales of the SNF Assets and Manager and Remaining Assets;

(b) Authorizing Assumption and Assignment of Certain Executory Contracts and Unexpired

Leases in Connection Therewith; and (c) Granting Related Relief [Docket No. 54] (the “Bidding

Procedures Motion”); and the Debtors’ Reply to Objections to Motion For Entry of Orders (I)(a)

Establishing Bidding Procedures for the Sales of the SNF Assets and Manager and Remaining

Assets; (b) Establishing Procedures Relating to Assumption and Assignment of Certain Executory

Contracts and Unexpired Leases, Including Notice of Proposed Cure Amounts; (c) Approving

Form and Manner of Notice; (d) Scheduling a Hearing to Consider Any Proposed Sale; and (e)

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Granting Certain Related Relief; and (II)(a) Approving Sales of the SNF Assets and Manager and

Remaining Assets; (b) Authorizing Assumption and Assignment of Certain Executory Contracts and Unexpired Leases in Connection Therewith; and (c) Granting Related Relief [Docket No.

TBD] (the “Bidding Procedures Reply”). I am authorized to submit this Declaration on behalf of the Debtors.

4. In my capacity as chief restructuring officer of the Debtors, and based upon my review of relevant documents and my discussions with other members of the Debtors’ management team, I am generally familiar with the Debtors’ day-to-day operations, business affairs, books and records, and the information in the DIP Motion, DIP Reply, Bidding Procedures Motion, and the

Bidding Procedures Reply.

5. The statements in this Declaration are, except where specifically noted, based on

(a) my personal knowledge of the Debtors’ operations and finances based on information provided by the Debtors, (b) my review of relevant documents, including information provided by other parties, (c) information provided to me by employees of A&M working under my supervision, (d) information provided to me by, or discussions with, the members of the Debtors’ management team or their other advisors, and/or (e) my opinion based upon my experience. If called upon to testify, I would testify competently to the facts as set forth in this Declaration.

6. The Debtors commenced these Chapter 11 Cases in response to the recent entry of adverse money judgments in a long-running qui tam action brought by Ms. Angela Ruckh. Despite years of efforts to resolve the Ruckh litigation, including prior to commencing these Chapter 11

Cases without the need for a court-supervised process, the Debtors were unable to do so.

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7. It is my understanding that the Debtors’ current employees, management and the

Debtors’ non-Debtor affiliates, were not involved in the conduct of their predecessors at issue in

the Ruckh litigation because the conduct at issue pre-dates the acquisition of the Debtors.

8. Debtor CMC II, LLC was acquired in July 2012 and has been providing at-cost

management services since that time. I am not aware of any changes in the Debtors’ or non-

Debtors’ corporate structures to avoid paying claims and the Debtors’ affiliates are not parties to

the Ruckh litigation.

9. Prior to the Petition Date, I evaluated options for obtaining debtor in possession

financing with Evans Senior Investments, the Debtors’ broker (“ESI”). At the request of myself

and Alan Carr, the Debtors’ independent manager, ESI ran a process prior to the Petition Date to

contact potential lenders and transaction parties in the industry to solicit interest in providing a debtor-in-possession loan to fund these chapter 11 cases. Although 40 parties were contacted by

ESI, the Debtors received only the proposed DIP facility (the “DIP Facility”) from CPSTN

Operations, LLC, an affiliate of the Debtors (the “DIP Lender”). Ultimately, in conjunction with the Debtors’ advisors, I determined that the terms and conditions of the proposed DIP Facility were the best and only available option under the circumstances to adequately address the Debtors’ financing needs during these Chapter 11 Cases.

10. The DIP Facility was negotiated at arms’ length among the proposed DIP Lender, the Debtors’ proposed counsel, and myself, and was vetted and approved by Alan Carr, the

Debtors’ independent manager. These arm’s-length negotiations resulted in a DIP Facility that has a reasonable interest rate, PIK interest, reasonable sale milestones and other terms and conditions that are at or below market.

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11. Absent approval of the DIP Facility, which will provide the Debtors with sufficient

liquidity to administer these Chapter 11 Cases through the sale process, the value of the Debtors’

estates would risk being destroyed, to the detriment of all stakeholders. The DIP Facility will

enable the Debtors to maintain their operating businesses, fund the of these Chapter

11 Cases and a value-maximizing sale process, and continue providing quality resident care.

12. The U.S. Department of Justice (the “DOJ”) has placed an administrative freeze

on certain of the Debtors’ prepetition receivables as a potential set-off against $2.9 million in cash

being held by the Debtors that is currently earmarked to pay certain Medicare and payroll taxes,

further increasing the Debtors’ liquidity needs.

13. The availability of the DIP Facility has benefitted (or will benefit in the future)

many other creditors and parties-in-interest in these Chapter 11 Cases. Among other things, the

DIP Facility will (i) ensure the continued employment of the Debtors’ employees, (ii) ensure

payment of creditors’ claims arising under section 503(b)(9) of the Bankruptcy Code; (iii) provide

for the funding of a sale process, which contemplates the assumption of significant liabilities

including, among others, accrued wages, taxes, unpaid vacation and other benefits due to the

Debtors’ employees; (iv) preserve relationships with residents and vendors by allowing the

Debtors to continue to operate in the ordinary course of business; and (v) pay fees and expenses of the Debtors’ and the Committee’s professionals.

14. Although the Debtors have not yet borrowed on the DIP Facility, mainly because disbursements have been lower than projected, by the end of the week, the Debtors will only have

a projected ending cash balance of $544,000 as set forth in the revised thirteen week cash flow

attached hereto as Exhibit A. Furthermore, during the next couple of weeks, the weekly ending

cash balance is projected to fluctuate between $167,000 and $448,000. These are only projections,

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if we are off by a few hundred thousand dollars, the Debtors would need to borrow sooner than we

project. As the Chief Restructuring Officer and fiduciary for the Debtors, I am not comfortable

operating these Debtors without the proposed DIP Facility in place and fully available.

15. Additionally, the Debtors are accruing unpaid administrative expenses, currently estimated to be over a million dollars, which are projected to grow as these cases progress each week. The DIP Facility is necessary to ensure the Debtors will have access to liquidity once these administrative claims become due and payable.

16. Based on my experience, the need for a DIP Facility is not only needed for cash expenditures, it is also extremely important to stabilize the Debtors’ businesses and facilitate the reorganization process by reassuring vendors, employees and residents that the Debtors have ample liquidity to meet postpetition expenses and continue uninterrupted operation of their facilities.

17. It is anticipated that, if the transactions contemplated by the bidding procedures close, even without higher or better bids, assets will be available for distribution to unsecured creditors in these cases (likely between $1 million and $2 million).

18. I believe that the bidding procedures, fully comply with the DIP Facility milestones and provide the best opportunity for value-maximizing transactions that preserve as many jobs as possible while ensuring that the Debtors can continue operating their businesses and continue to provide for the uninterrupted care, welfare, and safety of their residents.

19. I believe that the sale process, bidding procedures and milestones are fair and appropriate under the circumstances of these Chapter 11 Cases and that the Debtors can operate within the bounds of the terms contained in the DIP Facility and the proposed Final DIP Order.

The Debtors’ proposed bidding procedures and timeline were heavily negotiated by the Debtors’

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independent fiduciaries with the DIP Lender prior to the filing of the Bidding Procedures Motion.

These proposed procedures will authorize the Debtors to market their assets (both operating assets as well as potential claims and causes of action), provide prospective bidders with diligence information, determine whether potential bidders are qualified, accept competing bids, and conduct an auction if qualified competing bids are received, all in consultation with the Committee and the DOJ. If the market determines any assets justify a higher price, then a competing bidder will emerge. The Debtors do not have liquidity to support a more protracted marketing period, and, moreover, understand from ESI that the extended period is not likely to produce commensurate additional value to justify the continued costs of supporting operations and chapter

11 expenses.

20. Extending out the proposed milestones in these cases will increase the ongoing costs of administering these cases, which in turn would reduce any recovery for general unsecured creditors.

21. To assist the Committee with its investigation, Alvarez & Marsal prepared a detailed intercompany claim analysis and provided it to FTI, the Committee’s financial advisor.

Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and correct.

Dated: March 31, 2021 Chicago, Illinois

By: /s/ Paul Rundell Name: Paul Rundell Title: Chief Restructuring Officer Alvarez & Marsal North American Corporate Restructuring

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Case 21-10461-JTD Doc 114-1 Filed 03/31/21 Page 1 of 2

EXHIBIT A Case 21-10461-JTD Doc 114-1 Filed 03/31/21 Page 2 of 2

CMC II, LLC, et. al. Weekly cashflow projection Summary in USD 000s Act Act Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10 Week 11 Week 12 Week 13 13 Week 3/20 3/27 4/3 4/10 4/17 4/24 5/1 5/8 5/15 5/22 5/29 6/5 6/12 6/19 6/26 Total Cash Receipts Patient collections 457 80 143 162 400 753 225 118 307 554 597 - - - - 3,255 Medicare advance recoupment (257) (0) (86) (97) (22) (22) (22) (22) (22) (22) (22) - - - - (337) Management fees 1,680 124 2,303 262 1,975 160 2,047 550 1,975 160 2,010 - - - - 11,443 Cash Receipts 1,880 204 2,361 326 2,353 890 2,250 645 2,260 691 2,585 - - - - 14,360 Operating disbursements Payroll and payroll taxes 1,677 216 1,845 253 1,845 253 1,845 253 1,845 253 1,845 - - - - 10,237 Benefits 11 53 58 40 14 40 89 40 14 40 52 - - - - 386 Pharmaceuticals - - 31 - - - 31 - - - 31 - - - - 93 Medical supplies - - 7 7 7 7 7 7 7 7 7 - - - - 64 Covid testing - - 36 - - - 36 - - - 36 - - - - 108 Purchased services - - 130 114 52 42 135 38 128 42 135 - - - - 814 Insurance ------213 ------213 Taxes - 133 - - - 148 - - - 148 - - - - - 296 Other trade vendors 15 389 329 323 338 261 262 447 328 259 263 - - - - 2,811 Management fees ------Lease payments - - 227 63 - - - 290 ------581 Operating disbursements 1,704 792 2,663 800 2,256 751 2,405 1,287 2,322 749 2,370 - - - - 15,602 Operating cashflow $ 176 $ (588) $ (302) $ (473) $ 97 $ 140 $ (156) $ (642) $ (62) $ (57) $ 215 $ - $ - $ - $ - $ (1,242) Restructuring fees - - 170 - - - 120 - 715 - 350 120 - 629 - 2,104 DIP cash interest and fees ------Non-operating disbursements - - 170 - - - 120 - 715 - 350 120 - 629 - 2,104 Cash flow $ 176 $ (588) $ (472) $ (473) $ 97 $ 140 $ (276) $ (642) $ (777) $ (57) $ (135) $ (120) $ - $ (629) $ - $ (3,346) Beginning cash balance 1,465 1,897 930 544 167 286 448 194 72 72 72 72 50 50 50 930 Cash flow 176 (588) (472) (473) 97 140 (276) (642) (777) (57) (135) (120) - (629) - (3,346) Decrease / (increase) in cash held in trust 257 0 86 97 22 22 22 22 22 22 22 - - - - 337 Cash reserve : employee benefits claims (379) ------DIP funding ------498 755 35 113 98 - 629 - 2,129 Ending cash balance 1,897 930 544 167 286 448 194 72 72 72 72 50 50 50 50 50 Beginning DIP balance ------499 1,254 1,289 1,402 1,500 1,510 2,139 - DIP funding ------498 755 35 113 98 - 629 - 2,129 DIP PIK interest ------1 - - - - 10 - - 10 Ending DIP balance $ - $ - $ - $ - $ - $ - $ - $ 499 $ 1,254 $ 1,289 $ 1,402 $ 1,500 $ 1,510 $ 2,139 $ 2,139 $ 2,139 Accrued, not paid professional fees 536 715 894 1,073 1,251 1,430 1,555 1,680 1,090 1,215 1,340 1,446 1,553 1,030 1,136 1,136 Implied DIP balance $ 536 $ 715 $ 894 $ 1,073 $ 1,251 $ 1,430 $ 1,555 $ 2,179 $ 2,344 $ 2,504 $ 2,742 $ 2,947 $ 3,062 $ 3,169 $ 3,275 $ 3,275

Cash held in trust balance 2,697 2,697 2,612 2,514 2,492 2,470 2,448 2,426 2,404 2,382 2,360 2,360 2,360 2,360 2,360 2,360