UNITED STATES BANKRUPTCY COURT DISTRICT OF MASSACHUSETTS EASTERN DIVISION : : : :

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1 Document Page 1 of 26 UNITED STATES BANKRUPTCY COURT DISTRICT OF MASSACHUSETTS EASTERN DIVISION x : In re : : CHARLES STREET : AFRICAN METHODIST EPISCOPAL : CHURCH OF BOSTON : : Debtor. : : x Chapter 11 Case No. 12- ( ) DECLARATION OF REV. GREGORY GROOVER IN SUPPORT OF CHAPTER 11 PETITION AND FIRST DAY MOTIONS Gregory G. Groover, Sr., hereby states under pains and penalties of perjury: 1. I am the Pastor and President of the Charles Street African Methodist Episcopal Church of Boston ( Charles Street AME or the Church ). I have been the pastor since I received my undergraduate degree from Morehouse College in Atlanta, Georgia. I have also received a Master of Divinity degree from Union Theological Seminary in New York, New York, a Master of Social Work degree from the Columbia University School of Social Work in New York, New York, and a Doctor of Ministry degree from New York Theological Seminary in New York, New York. Background of Charles Street AME 2. Charles Street AME is a nearly 200-year-old church that is and has been an important institution in the City of Boston. The Church has been continuously meeting and providing ministry and community services since 1818, when a few free African Americans began congregating in a house on Beacon Hill in Boston. They formed a new church, the First African Methodist Episcopal Society. Two decades later, the Massachusetts Legislature

2 Document Page 2 of 26 incorporated the Church by specific legislative act, Chapter 2 of the Acts & Resolves of The Church continues to operate under that special charter. During the pre-civil War era, the First African Methodist Episcopal Society was a center for both religious worship and political activism, serving as a safe haven for abolitionist activity and as a stop on the Underground Railroad. In 1876, the Church purchased the Charles Street Meeting House at the foot of Beacon Hill and changed its name to the Charles Street African Methodist Episcopal Church, the name by which it is known today. 3. Charles Street AME became the last African-American church to leave Beacon Hill, at the end of the exodus of the African-American community from Beacon Hill to the South End and lower Roxbury. In 1939, Charles Street AME moved to the Grove Hall neighborhood, straddling the boundary of the Roxbury and Dorchester sections of Boston. Charles Street AME purchased its current building at that time, and has now been in the same location for 73 years. 4. Charles Street AME flourished as the post-world-war-ii migration of African- Americans from the South resulted in a vibrant community in upper Roxbury. The Church became the first African-American church in Boston to have two Sunday services, in order to accommodate its large congregation. The two services continue today, as Charles Street AME has over 1,000 members. 5. In addition to its ministry, Charles Street AME has a longstanding charitable mission of serving its community through education, youth, music, immigrant and antipovertyfocused initiatives. In the Grove Hall community, Charles Street AME continues to stand as a symbol of unity, hope, and progress for its members and the Roxbury/Dorchester communities at large.

3 Document Page 3 of 26 Properties of Charles Street AME 6. The Church owns six specific properties. The first is the church building itself (the Church Building ), located at 551 Warren Street in Boston, on the corner of Elm Hill Avenue. The Church Building was constructed in 1888 and 1889 for use as the All Souls Unitarian Church. The Charles Street AME bought the building in 1939 and has used it for its worship services and community programs ever since. The building was designed by J. Williams Beal, a prominent Boston architect. The Church Building is also notable for its stained-glass windows and its tower clock and bell. Because of this rich architectural and cultural tradition, the Church Building was added to the National Register of Historic Places in Immediately next to the Church on Warren Street is a Charles-Street-AME-owned building with two vacant storefronts at 553 and 565 Warren Street (the Storefronts ). The Storefronts need significant work before they can be rented. Immediately next to that is another owned parcel, Warren Street, with a building that once was a social club (before Church ownership), and is now the site of a proposed community center (described in more detail below). Across the side street from the Church building are two parcels: a parking lot at 15 Elm Hill Avenue (the Parking Lot ) and a former parsonage at 5 Elm Hill Avenue, now used as office and meeting space (the Old Parsonage ). Lastly, the Church also owns another house, which served as the parsonage from the , located at 70 Sumner Street in Milton (the Milton Parsonage ). The Milton Parsonage has in the past been rented, but currently is vacant due to flood damage in a storm. 8. As noted above, the Church owns land at Warren Street. This land was purchased in 1999 (at the time the building on the site was vacant), and Charles Street AME

4 Document Page 4 of 26 began contemplating building a community center (the Roxbury Renaissance Center or RRC ). The Roxbury Renaissance Center was so named because the church community aimed to spark a Roxbury Renaissance, a renewal of the commitment among members in the African American community who dare to dream that Roxbury, Dorchester, and indeed all of Boston can be a better place for the most vulnerable. The Renaissance Center is currently 85% complete, but cannot yet be occupied. Construction came to a near halt as a result of the wrongful cessation of funding by the construction lender on the project in December 2009, and has not restarted. Charles Street AME s Operations 9. Charles Street AME has a current annual budget of approximately $1.3 million. It has a full time staff of five, as well as seven part-time contract workers. These include pastoral staff, building maintenance, program directors and musicians. The Church has no endowment. It funds it operations from tithes and offerings of its members, which are generally collected at Sunday services. The Church operates on a slight cash-flow-positive basis, and does not have significant cash on hand. None of the Church s cash is pledged to any lender. 10. The Church also has a pastoral residency program that trains two divinity school graduates, who serve as associate pastors (similar to medical residency programs for medicalschool graduates). The pastoral residency is funded by restricted-use grants from a third-party charitable foundation. 11. Because Charles Street AME operates week-to-week, it does not have any significant trade creditors. Prior to 2006, the Church had a single, $1.1 million loan with Citizens Bank. That loan had originally been made in 2001, as a consolidation loan for several smaller borrowings. Charles Street faithfully paid the interest and principal on the loan, which

5 Document Page 5 of 26 amortized on a 30-year schedule with a balloon maturity for remaining principal in December In 2009, the Church took out an approximately $450,000 loan with Tremont Credit Union to pay for major roofing repairs on the Church Building. That loan has been regularly paid, and matures in Charles Street s Relationship with OneUnited Bank 13. This Chapter 11 case has occurred because of the wrongful conduct and subsequent intransigence of Charles Street AME s largest creditor, OneUnited Bank ( OneUnited or the Bank ). The relationship between Charles Street AME and the Bank began in the late 2005/early 2006, when OneUnited approached me and offered to finance the RRC project. Prior to that time, the Church had not had the financial means to realize its vision of building the Roxbury Renaissance Center. 14. OneUnited appeared to make that all possible. They offered the Church two loans. The first loan (the Church Loan or the Commercial Loan ) was in the amount of $1,115,000 and was a simple refinance of the prior Citizens Bank consolidation loan (which was coming due in any event). It too was for five years, with a thirty-year amortization schedule and a balloon maturity of remaining principal at the end of November The Church Loan is full recourse and is secured by mortgages on the Church Building, the Storefronts, and the Milton Parsonage. The Church Loan had no other credit support. 15. The second loan (the Construction Loan or the RRC Loan ) was to be in the amount of $3,625,000 and was to be used to fund the cost of constructing the Roxbury Renaissance Center. The loan proceeds were to be disbursed in phases during construction, and even then directly to the contractor and only after approval by a third-party agent of the Bank

6 Document Page 6 of 26 specifically approving each draw request. Upon completion of construction, OneUnited had committed to roll over this loan to permanent financing in the form of a five-year term loan. The Construction Loan is (and the rollover if it occurred was to be) a full recourse loan secured by mortgages on the RRC property, the Old Parsonage and the Church Parking Lot. 16. The Construction Loan was guaranteed by the First Episcopal District of the African Methodist Episcopal Church ( the District ), the parent organization of the Church. The District is an unincorporated association of 330 congregations from Bermuda, Delaware and north to New England. 17. The closing on these two loans occurred in October Construction was originally planned to take less than two years, and so the original maturity date for the Construction Loan was June 1, The loan agreement did give the Church the right to purchase two 90-day extensions of the maturity date. 18. Although the principal of the Construction Loan was $3.6 million, after deductions of fees and reserves, Charles Street AME was left with only $2.9 million to use for construction of the RRC. Both the Bank and Charles Street AME knew that the total original planned cost of the RRC was estimated at $4.2 million. Initially, the Bank asked that the Church make a 20% equity contribution (approximately $800,000) to the actual construction of the project. However, because the Bank knew that Charles Street AME did not have the funds to make this contribution, the Bank encouraged the Church to cut the costs of the project to match the amount of the loan. The Bank later waived the equity requirement and simply began advancing to pay construction costs. 19. Construction was delayed, due to some environmental remediation that the Church itself paid for. RRC construction began in earnest in the spring of 2007, over eight to

7 Document Page 7 of 26 nine months behind schedule. The Bank disbursed funds paying the first nine drawdown requests submitted. With exception of the first drawdown request, which was delayed, the Bank funded the first nine drawdown requests within approximately two weeks of the contractor s submitting them to the Bank s approval agent. 20. Unbeknowst to the Church, during this entire period, OneUnited Bank was experiencing severe financial difficulties and management irregularities. These resulted in an extensive consent decree that Federal and Massachusetts bank regulators imposed on OneUnited in late The regulators alleged a broad range of unsound banking practices, including imprudent loan underwriting, excessive executive compensation and other matters. Also in 2008, OneUnited received $12 million in government funds under the Troubled Asset Relief Program ( TARP ). The Bank has since missed six dividend payments due to the government and its participation in the TARP program was the subject of a Congressional investigation. OneUnited s application for certain federal government grants has been the subject of a U.S. Department of Treasury Inspector General investigation. 21. OneUnited is the current name of a long-time Boston-based African-Americanowned bank (formerly Unity Bank and Boston Bank of Commerce) with a mission of serving Boston s African-American community. In the 2000s, it had a management change and embarked on a strategy of nationwide expansion and Internet banking offerings. With respect to the Church, that expansion strategy specifically manifested itself in (i) the Bank offering Charles Street AME the Church Loan and Construction Loan and (ii) the Bank opening a new Grove Hall branch on the same street as the church (just three blocks from the RRC), in May As construction fell behind schedule, the Church exercised both of its extension options pursuant to the loan agreement. Construction was still not complete, but the Bank gave

8 Document Page 8 of 26 three more modifications to the loan that further extended the maturity date until December 1, 2009 and allowed continued construction advances. The Church paid significant fees for each such modification, for which it had to undertake special fundraising among its membership. 23. On or about November 9, 2009, with construction approximately 85% complete and three weeks remaining on the then-current extension, the contractor submitted a tenth drawdown request, for approximately $240,000. The Bank s funds control agent approved this drawdown request and submitted it to OneUnited for disbursement, but the Bank, without explanation, refused to fund the request. The December 1, 2009 maturity passed; $2.8 million was outstanding on the Construction Loan. OneUnited inexplicably refused to fund any more on the Construction Loan even though its principal collateral was nearly complete. Indeed, in February 2010, the Bank summoned me to its offices and demanded an additional $1 million deposit be made, at which point the Bank would consider merely re-loaning the $2.8 million and would not advance any new funds. The Church did not have such funds. 24. Nevertheless, Charles Street AME determined to continue paying the regular interest payments on the Construction Loan and the Church Loan. The Bank accepted those payments, and did nothing for many months. 25. In late July or early August 2010, a group of potential benefactors learned of the situation with the Construction Loan and offered to help. Some of them and I called the Bank on August 6, The benefactors made a proposal to commence a negotiation to purchase the $2.8 million construction loan from the Bank at a discount (whereupon the loan would have been forgiven or terms relaxed, as a charitable donation). The opening offer made to the Bank, to start a negotiation, was a $1 million purchase price. It was explained to me that this was a structure

9 Document Page 9 of 26 that often benefits all parties, as commercial lenders in similar situations with uncompleted projects often want cash instead of the loan that is in difficulty. 26. The Bank reacted very unexpectedly. They did not even try to negotiate. Rather, within two hours of the end of the phone call, they sent me a one-page letter stating that they would not entertain any offers of less than full payment, and demanding that the Church immediately affirm that it would promptly pay the loan in full or else the Bank would immediately sue to collect. The Church did not have any such funds to pay the loan in full. 27. Shortly thereafter, in mid-august, the Church obtained the pro bono services of Ropes & Gray LLP. They attempted to open negotiations with the Bank about the situation. The Bank refused, merely demanding a $1 million cash deposit, and in early September commenced a lawsuit in Suffolk Superior Court against both the Church on the Construction Loan and the District on its guaranty. Although the Church Loan was cross-defaulted to the Construction Loan, the Bank took no action regarding the Church Loan. Nor did it seek to foreclose on any of the collateral for the Construction Loan. The Church stopped paying interest on the Construction Loan, but continued regular monthly payments on the Church Loan. 28. With the assistance of Ropes & Gray, the Church countersued the bank, bringing claims of failure to fund the tenth request and predatory lending with respect to both the Construction Loan and the Church Loan. The lawyers briefed preliminary issues, but the Bank took no precipitous action such as immediately trying to seek a judgment or attach any additional property of the Church. 29. Around the time of this legal maneuvering, there was one face-to-face settlement meeting with the Bank. It produced no substantial discussions. The court motions awaited hearing and decision by the Suffolk Superior Court.

10 Document Page 10 of As time went on, the Church asked OneUnited if it would merely put the lawsuit on hold so that the Church could see if it could raise funds to complete the RRC and to potentially reach a deal with the Bank; fundraising beyond the basic operating needs of the Church proved difficult with the lawsuit pending. The Bank refused. In August 2011 Ropes & Gray proposed to the Bank s counsel that the entire situation be put to mediation, with a mediator of OneUnited s choosing. The Bank refused. 31. Ultimately a hearing occurred on the preliminary court motions in October Around that same time, the Charles Street AME began efforts to refinance the Church Loan, which was coming due December 1, However, it became clear that, without a resolution of the litigation, no new lender could be found to step into the middle of a difficult situation. Even with that, preliminary talks were held with a potential lender. 32. The Church Loan matured by its terms, and OneUnited sent default and acceleration notices. However, they took no action to sue on the Church Loan or to foreclose on any of its collateral. The Church sent a payment to OneUnited in early December in the amount of the regular monthly payments on the Church Loan. The Bank cashed that check, but then a short time later (before year-end) wrote a new check in the same amount of that payment and sent the money back to Charles Street AME. The Church contacted the Bank about the return of the payment, but never received any response. Events Immediately Leading to the Chapter 11 Case 33. On January 5, 2012, the Suffolk Superior Court granted the Bank s preliminary motion to dismiss the Church s countersuit (and the District s corresponding countersuit). On February 3, 2012, Charles Street AME and the District sought discretionary, interlocutory single-

11 Document Page 11 of 26 justice relief from the Massachusetts Appeals Court. On February 13, 2012, the single justice ordered a hearing to be held. 34. The very next day, without any notice to the Church, the Bank began Internet advertising of a foreclosure sale on the Church Building, the Storefronts and the Milton Parsonage the collateral for the Church loan. I only learned of the advertising from a parishioner whose neighbors had seen the ads online. 35. A hearing was held on February 16, 2012, and on February 27, 2012, Justice Agnes of the Appeals Court entered an order completely reversing the dismissal of the counterclaims and reinstating them in full. Among other things, the justice wrote that the Church s countersuit (and the District s countersuit) present actions by the Bank that are certainly as egregious as those in involved in Fremont, which I am told was the primary major case in which the Massachusetts Attorney General successfully prosecuted predatory lending from the recent lending boom. 36. The Bank has since sent a formal notice of foreclosure, setting March 22, 2012 for an auction sale of the Church. Remarkably, the Bank proposes to auction the Church Building from the very steps of the Church, rather than a neutral site. A sale of the church properties on Warren and Sumner Streets would result in a closure of Charles Street AME for the first time in 194 years. Charles Street AME would be unable to continue its community initiatives. The employees at Charles Street AME would be without jobs. 37. On March 4, 2012, Charles Street AME planned a press conference at which a few pastors who had expressed outrage at the Bank s intention to foreclose were invited to speak. Because of the support for the church, the press conference evolved into a rally attended by approximately 300 community members, including supporters from churches across

12 Document Page 12 of 26 Massachusetts, who celebrated Charles Street AME s importance in the community and protested against the foreclosure. 38. Following the Bank s foreclosure advertising, the Church continued to attempt to negotiate with the Bank, as it seemed unlikely that the Bank either wanted to own the Church Building or would actually want it sold, because the price was very likely to be well below the amount of the Church Loan. The Bank refused to even send a form of forbearance agreement. 39. Professor Charles Ogletree of the Harvard Law School, a prominent and nationally-known legal scholar who knows all the parties (both me and the most senior Bank officers) offered to try to facilitate discussions. The Church was willing to do so; the Bank was not. The Church did meet with Professor Ogletree; the Bank has apparently refused to discuss the matter. 40. During this period leading up to the foreclosure date, there has been an extraordinary level of publicity and political interest in the situation. That has caused two major benefactors to step forward, as well as more focused interest from financing sources. It remains clear, however, that no new funds will be available so long as OneUnited continues to threaten the Church Building. Accordingly, on the Church s behalf, Ropes & Gray sent a letter to the Bank s counsel stating that there was a serious possibility of donated funds and new lending that could pay off the Church Loan, obviating the need for a foreclosure. In order to effectuate that, Ropes & Gray asked if OneUnited would agree to apply a full payoff amount for the Church Loan only to the Church Loan (as opposed to applying it to the Construction Loan), and would agree to no longer threaten the Church Building itself based on the Construction Loan. The Bank would not even answer the questions.

13 Document Page 13 of 26 Other Major Creditors 41. In addition to OneUnited, there are two other major creditors. First is Thomas Construction, the general contractor for the RRC project. Thomas asserts that it is owed approximately $650,000 for the unpaid draw plus retainage from prior draws. Thomas Construction has a mechanics lien on the RRC property. 42. Second is Tremont Credit Union, which in 2011 loaned approximately $450,000 to Charles Street AME for major roofing repairs on the Church Building. Tremont Credit Union now has a second priority mortgage on the Church Building to secure such payments. The Church has regularly paid Tremont Credit Union. 43. In contrast to OneUnited, both Tremont Credit Union and Thomas Construction have been in regular dialogue with Charles Street AME regarding the situation. Filing Chapter Accordingly, the Church was left with no options other than use the power of Chapter 11 to propose a fair restructuring deal, to be approved by this Court. The Church is promptly filing a plan of reorganization, based on charitable donations to the parent District, that will allow completion of the RRC and an appropriate payment plan for the full amount of the OneUnited obligations. However, since the Appeals Court has stated that OneUnited may have very well broken the law in its lending practices to the Church and District, the Church and District will also continue that litigation because it may, after the restructuring, reduce the amount owed. 45. The Church hopes to be able to proceed rapidly through Chapter 11, and will shortly be seeking hearings for a plan confirmation process to occur over the next few months. Facts in Support of First Day Motions

14 Document Page 14 of 26 Motion for Authority to (a) Continue Using Debtors Bank Accounts, Business Forms, and Cash Management System; and (b) Waive or Suspend the Requirements of 11 U.S.C. Section 345(b) (the Cash Management Motion ) 46. By the Cash Management Motion, the Church requests, among other things, a waiver of certain operating guidelines established by the Office of the United States Trustee for the District of Massachusetts (the U.S. Trustee ) that otherwise would require that the Church close all prepetition bank accounts, open new debtor in possession accounts, and order new business forms and stationery. 47. The Church maintains 11 bank accounts (the Bank Accounts ) to collect and transfer funds from and for, and to pay expenses incurred by, the Church. The Bank Accounts are maintained at the following banks (the Depository Banks ): Depository Bank Number of Accounts Citizens Bank 10 OneUnited Bank Trustee Account. The Church maintains a trustee account with Citizens Bank (the Trustee Account ). The Church uses the Trustee Account to deposit and disburse funds taken in and paid out in the ordinary course of the Church s operations. 49. Payroll Account. The Church maintains a separate payroll account with Citizens Bank (the Payroll Account ) to fund payroll of all employees. 50. Steward Account. The Church maintains a separate account with Citizens Bank to cover the necessary reimbursable expenses of the pastor, Rev. Gregory Groover, and others, to conduct the Church s ministry (the Steward Account ). 51. Obligation Account. The Church maintains a separate account with Citizens Bank from which the Church pays its fixed obligations (the Obligation Account ).

15 Document Page 15 of Benevolence Account. The Church maintains a separate account at Citizens Bank to serve functions specific to its ministry (the Benevolence Account ). The Church makes its charitable donations through the Benevolence Account. 53. Capital Campaign Account. The Church maintains a separate account at OneUnited Bank (the Capital Campaign Account ) which held money raised to fund the construction of the Roxbury Renaissance Center (the RRC ), a community center for residents of the Roxbury and Dorchester neighborhoods of Boston. The Church has withdrawn all funds from the Capital Campaign Account. 54. Temporarily and Permanently Restricted Accounts. The Church maintains four deposit accounts that hold donated or granted funds (the Restricted Accounts ); the use of funds in these accounts is temporarily or permanently limited by donor or grantor restriction. For instance, the Church uses one of the Restricted Accounts to fund the Helen Young Davis Scholarship. Another of the Restricted Accounts is used to fund the Church s emergency needs. The Pastoral Residency Program Account funds a rigorous training program for full-time pastors. The Church maintains the Restricted Accounts at Citizens Bank. As of March 14, 2012, the Restricted Accounts held approximately $397, A detailed listing of the Bank Accounts is attached to the Cash Management Motion as Exhibit A. 56. The Church seeks a waiver of the requirements that it immediately close all of its Bank Accounts and open new postpetition bank accounts. Enforcing this requirement would cause significant disruption to the Church s operations, result in delays in payments to administrative creditors and others, and impair the Church s efforts to maximize the value of its estate. The Church believes that the cost and time required to open new bank accounts and

16 Document Page 16 of 26 obtain new checks during the early days of its chapter 11 case is an unnecessary distraction from its charitable mission. 57. In connection with continuing the use of the prepetition Bank Accounts, the Church also requests the authority to pay prepetition Depository Bank fees and charges to the extent of the amount of the Church s cash held by such Depository Bank (with the exception of OneUnited Bank). Each Depository Bank likely has setoff rights with respect to any of the Church s cash it holds and could request that this Court lift the automatic stay to exercise those setoff rights. The Church seeks authority to pay these amounts to the extent the Church determines, in its good faith business judgment, that the Depository Banks have valid setoff claims pursuant to 11 U.S.C. 553 (but only to the extent of such claims). This will save the Church the time and expense of defending lift stay requests and/or negotiating stipulated orders to allow setoff. 58. To minimize expenses to its estate, the Church also requests authorization to continue to use all correspondence and business forms (including, but not limited to, letterheads, purchase orders, multi-copy checks, envelopes, promotional materials, and other business forms (collectively, the Business Forms )) existing immediately prior to the Petition Date without reference to the Church s status as Debtor in possession. Once the Church s existing stock is exhausted, the Church will imprint the legend DIP or Debtor in Possession and the case number for the Church s chapter 11 case on any new stock of correspondence and business forms acquired. 59. Changing correspondence and business forms would be needlessly expensive and burdensome to the Church s estate and disruptive to the Church s operations. The Church only maintains accounts with less than 50 vendors and contractors, so the time and expense of

17 Document Page 17 of 26 replacing forms is outweighed by the Church s use of these forms. Parties doing business with the Church undoubtedly will be aware of the Church s status as Church in possession due to the Church s provision of notice of the commencement of this chapter 11 case and significant publicity regarding the Church s financial situation and chapter 11 case. Accordingly, adding a Debtor in Possession legend would have little practical effect. 60. The Church s Bank Accounts at each Bank are collectively insured for up to $250,000 by the Federal Deposit Insurance Corporation ( FDIC ), a department, agency, or instrumentality of the United States. With respect to the Citizens Bank Accounts, the Church requests an extension of 30 days after the Petition Date to come into compliance with the requirements of Section 345(b), without prejudice to its right to seek further extensions or waivers, for cause shown. Motion for Authority to Pay Wages, Compensation, Employee Benefits, and Other Related Obligations (the Wage Motion ) 61. By the Wage Motion, to prevent the disruption the Church would suffer if prepetition employment-related obligations are not paid when due or as expected, as well as to maintain the morale of the Church s employees during this critical time, the Church requests entry of an order authorizing, but not directing, the Church to pay the prepetition Employee Wages and Benefits (as defined below) and to continue to honor the Employee Wages and Benefits in the ordinary course of business. 62. The Church has a full-time staff of five, as well as eleven part-time workers (the Church Employees ). The Church also operates a pastoral residency program, providing compensation and benefits for five pastoral residents and one coordinator who are paid from a restricted grant for the residency program (the Residency Employees and, together with the Church Employees, the Employees ). The Church s average aggregate monthly compensation

18 Document Page 18 of 26 to Employees for wages, salaries, and other compensation is approximately $45, exclusive of the deductions and exclusions detailed below. Employees are paid in arrears on a variety of schedules. 63. The Church estimates that the aggregate amount of accrued prepetition wages and salaries that remain unpaid to the Employees as of the Petition Date does not exceed approximately $4, exclusive of deductions and exclusions (the Unpaid Wages and Salaries ). 1 To the best of the Church s knowledge, none of the Employees are individually owed more than $11,725 on account of wages earned prior to the Petition Date. 64. For each applicable pay period, the Church deducts certain amounts from paychecks (collectively, the Deductions ), including, without limitation garnishments for child support and similar deductions. The Church withholds, on average, approximately $100 per month in Deductions from employees paychecks. 65. The Church is also required by law to (i) withhold from an employee s wages amounts related to, among other things, federal, state, and local income taxes, Social Security, and Medicare taxes (collectively, the Withheld Amounts ) for remittance to the appropriate federal, state, or local taxing authorities and (ii) make matching payments for Social Security and Medicare taxes and pay additional amounts, based upon a percentage of gross payroll, for state and federal unemployment insurance (the Employer Payroll Taxes, together with the Withheld Amounts, the Payroll Taxes ). The Church estimates that it will withhold approximately $6, per month in Payroll Taxes from Employees paychecks. 1 The calculation of Unpaid Wages and Salaries incorporates payments owing on account of wages and salaries, as well as outstanding paychecks that had not been cashed as of the Petition Date. The calculation does not attempt to incorporate amounts for other benefits, including health benefits.

19 Document Page 19 of The Church also offers or provides employees (and their dependents) with certain benefits. These employee benefits (collectively, the Employee Benefits ) include, but are not limited to: (i) paid time-off benefits; and (ii) health insurance. 67. The Church provides full-time Employees with paid leave in connection with vacation time, sick days, holidays, personal days, jury duty, and bereavement leave (collectively the PTO Benefits ). No Employees are entitled to a cash payout for accrued and unused vacation days. 68. The Church offers coverage to eligible employees (and their dependents) for health care and other related benefits (collectively, the Health Care Benefits and, together with the PTO Benefits, the Employee Benefits ). 69. The Church offers a medical plan that is administered by Blue Cross/Blue Shield of Massachusetts ( BCBS ). The Church estimates that they pay approximately $5,371 per month in fixed premiums to BCBS. There are currently three employees enrolled with BCBS. As of the Petition Date, the Church estimates that it owes approximately $9, for premiums owed to BCBS. 70. In the ordinary course of its ministry, the Church uses the services of third-party administrators to whom the Church outsources tasks associated with the payment of compensation or benefits to employees (some of which are described above) (the costs associated therewith, the Third-Party Administrative Costs and, collectively with the Unpaid Wages and Salaries and the Employee Benefits, the Employee Wages and Benefits ). The ordinary course services provided by these third-parties ensure that the Church s obligations with respect to employees continue to be administered in the most cost-efficient manner and comply with all applicable laws.

20 Document Page 20 of From time to time, the Church invites guest pastors to preach at its church services, to be paid a small honorarium. As of the Petition Date, the Church estimate that it owes no more than $400 in such honoraria (the Honoraria ). 72. It is essential that the Church continue to honor its Employee Wages and Benefits obligations to ensure the continued operation of the Church s ministry and to maintain the morale of the employees. Absent the requested relief, employees may be unable to meet personal obligations, may be left without medical insurance, or may seek alternative employment opportunities. 73. The Deductions and Payroll Taxes principally represent employee earnings that governments (in the case of taxes) and judicial authorities (in the case of any involuntarily withheld amounts) have designated for deduction from employees paychecks. If the Church does not remit those amounts, the employees may face legal action and the Church may be burdened by inquiries and disputes concerning its failure to submit legally required payments. 74. Further, most, if not all, of the unremitted Deductions and Payroll Taxes constitute monies held in trust and are not property of the Church s bankruptcy estate. With respect to any such amounts held in trust, the Church believes that it is both entitled and required to continue directing such funds to the appropriate parties. 75. The Employee Wages and Benefits represent a competitive but reasonably limited set of policies targeted towards retaining and fairly compensating the workforce necessary to continue the Church s ministry. Accordingly, based on the foregoing, the Church submits that the requested relief is necessary and appropriate, is in the best interests of its estate and creditors, and should be granted in all respects

21 Document Page 21 of The Church pays the Employee Wages and Benefits with funds drawn by checks (the Checks ) or by means of electronic fund transfers (the Electronic Transfers ). Before the Petition Date, the Church sent certain parties Checks or Electronic Transfers on account of Employee Wages and Benefits that may not have cleared as of the Petition Date. 77. To the extent any Check or Electronic Transfer has not cleared as of the Petition Date, the Church request the Court authorize the banks, in the Church s sole discretion, to receive, process, honor, and pay the Checks or Electronic Transfers. If any party has not received payment for amounts owed on account of any Employee Wages and Benefits, the Church seeks authority to issue replacement Checks, re-issue Electronic Transfers, or otherwise make payments on account of Employee Wages and Benefits. The Church represents that each of the Checks and Electronic Transfers can be readily identified as relating directly to the authorized payment of amounts owed on account of Employee Wages and Benefits. Accordingly, if the relief requested is granted, Checks and Electronic Transfers other than those relating to authorized payments will not be honored inadvertently. Motion for Order (i) Extending Time to File Schedules and Statements, and (ii) Approving The Form and Manner of the Notice of Commencement (the Extension Motion ) 78. By the Extension Motion, the Church seeks entry of an order (i) extending the fourteen day deadline for the Church to file its Schedules and Statements for an additional seven days, without prejudice to the Church s ability to request additional time or to seek other relief; and (ii) approving the form and manner of notice of the commencement of these chapter 11 cases and of the meeting of creditors to be held pursuant to section 341 of the Bankruptcy Code, substantially in the form attached as Exhibit 1 to the proposed order approving the Extension Motion.

22 Document Page 22 of Given the sudden decision to file its chapter 11 petition and imminent foreclosure of the Church s properties, scheduled for March 22, 2012, the Church requests additional time to prepare its Schedules and Statements. While the Church, with the help of its professional advisors, has begun to prepare the Schedules and Statements, resources are limited for the nonprofit organization. The Church s primary focus has been to prevent the foreclosure and prepare for the filing of its chapter 11 case. Thus, the Church was unable to gather and analyze the necessary information to prepare and file its Schedules and Statements prior to the Petition Date. In view of the amount of work entailed in completing the Schedules and Statements, the competing demands upon the Church s employees and professionals during the initial postpetition period, and the Church s limited resources, the Church will not be able to complete the Schedules and Statements properly and accurately within the required fourteen day time period provided for under Bankruptcy Rule 1007(c). 80. Accordingly, the Church requests a seven day extension of the deadline to file its Schedules and Statements, for a total of 21 days after the Petition Date. Motion for Order Establishing Case Management Procedures (the Case Management Motion ) 81. By the Case Management Motion, the Church seeks entry of an order establishing the case management procedures listed in the Case Management Motion. 82. The Church submits that the Case Management Procedures are proper and sufficient under the existing circumstances. Adopting the Case Management Procedures will promote the Church s reorganization efforts by organizing the hearings and motion practice in these cases and, by allowing service by , preserve assets that otherwise would be consumed by unnecessary copying, postage, and related expenses.

23 Document Page 23 of 26 Motion for Order Pursuant to Sections 105(A) and 366 Of The Bankruptcy Code (A) Prohibiting Utility Providers from Altering, Refusing, or Discontinuing Service, (B) Deeming Utility Providers Adequately Assured of Future Performance, and (C) Establishing Procedures for Determining Adequate Assurance of Payment (the Utilities Motion ) 83. By the Utilities Motion, the Church seeks entry of the proposed interim and final orders: (i) prohibiting the Utility Providers from altering, refusing, or discontinuing service to the Church except as set forth in the Utilities Motion; (ii) determining that the Utility Providers have been provided with adequate assurance of payment on the basis of the provision of Two Weeks Deposits and the establishment of a Utility Deposit Account; and (iii) approving the Church s proposed procedures for Utility Providers to request additional assurance of payment. 84. In the normal course of its business, the Church incurs utility expenses for water, electricity, gas, sewer, and telecommunications services. These utility services are provided by utility providers (the Utility Providers ), a list of which is attached to the Utilities Motion as Exhibit A. 2 Prior to the Petition Date, the Church s average monthly payments to the Utility Providers aggregated approximately $3,425 per month. The Church anticipates that the average postpetition monthly cost for utility services during the Church s chapter 11 case will be approximately the same. 85. Uninterrupted utility services is essential to the Church s ongoing operations and, therefore, to the success of its reorganization. Should one or more of the Utility Providers refuse or discontinue service, even for a brief period, it would severely disrupt the Church s operations and hinder its ministry and public service in Roxbury and Dorchester. Such an interruption 2 The listing of any entity on Exhibit A to the Utilities motion is not an admission that such entity is a utility within the meaning of section 366 of the Bankruptcy Code. The Church reserves the right to assert at any time that any entity listed on Exhibit A is not entitled to adequate assurance pursuant to section 366 of the Bankruptcy Code. The Church further reserves the right to terminate the services of any Utility Provider at any time. The relief requested in the Utilities Motion is with respect to all Utility Providers and is not limited only to those identified in Exhibit A.

24 Document Page 24 of 26 would damage the Church s ministry to the detriment of its estate, creditors, and employees. It is critical that the Church s utility services continue uninterrupted. 86. To provide adequate assurance of payment for future services to the Utility Providers, the Church proposes to provide each such Utility Provider with a deposit (a Two Weeks Deposit ) against the Church s postpetition utility service charges equal to approximately two weeks worth of the estimated cost of the Church s average annual consumption of such Utility Provider s utility services. The Two Weeks Deposits, which equal $1, in the aggregate, will be placed, collectively, into an interest-bearing, newly-created, segregated account (the Utility Deposit Account ) within twenty days after the Petition Date, with the funds in such Utility Deposit Account to be held in escrow pending further order of this Court. Absent further order of this Court, the Church will maintain the Utility Deposit Account with a minimum balance of $1, until the conclusion of this chapter 11 case. 87. If the Church identifies an Added Utility Provider (as defined in the Utilities Motion), the Church will increase the amount held in the Utility Deposit Account by an amount equal to the estimated cost of two weeks of utility services used by the Church, based on a yearly average, from such Added Utility Provider. Any amount by which the amount in the Utility Deposit Account is increased with respect to the Added Utility Provider shall also increase the minimum balance to be maintained in the Utility Deposit Account. 88. In addition, the Church seeks to establish reasonable procedures (the Procedures ) by which a Utility Provider may request additional assurance of future payment if such Utility Provider believes that the provision of the applicable Two Weeks Deposit and the establishment of the Utility Deposit Account does not provide it with satisfactory adequate assurance, as set forth in the Utilities Motion.

25 Document Page 25 of The Church submits that the Court should grant the relief requested in the Utilities Motion because such relief is necessary to continue the Church s normal operations and to preserve the Church s ability to restructure its organization in an orderly manner. The Church could face a severe cash drain if the Utility Providers condition the provision of postpetition services to the Church upon the payment of exorbitantly burdensome and/or unreasonable deposits or other forms of adequate assurance. 90. If the Utility Providers are permitted to terminate utility services on the thirty-first day after the Petition Date, a substantial disruption to the Church s operations will occur, and the Church and its congregation will be irreparably harmed. If faced with imminent termination of utility services, the Church would be forced to pay whatever amounts are demanded by the Utility Providers to avoid the cessation of essential utility services and a severe disruption of the Church s operations, which would halt the Church s ministry and public outreach. 91. The Church submits that providing the Two Weeks Deposits in the Utility Deposit Account, a substantial cash reserve relative to the Church s estimated monthly consumption of utility services, provides adequate assurance to its Utility Providers under section 366(c) of the Bankruptcy Code. In addition, the Church submits that the Procedures set forth in the Utilities Motion, whereby any Utility Provider can request additional adequate assurance if it believes there are facts and circumstances that would merit greater protection, provide an orderly process for giving adequate assurance of payment to the Utility Providers without risking irreparable harm to the estate.

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