Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 1 of 17 IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA In re: KidsPeace Corporation, 1 Debtor. Chapter 11 Case No. (Joint Administration Requested) In re: KidsPeace Children s Hospital, Inc., Debtor. Chapter 11 Case No. (Joint Administration Requested) In re: KidsPeace Mesabi Academy, Inc., Debtor. Chapter 11 Case No. (Joint Administration Requested) In re: KidsPeace National Centers, Inc., Debtor. Chapter 11 Case No. (Joint Administration Requested) In re: KidsPeace National Centers of Georgia, Inc., Debtor. Chapter 11 Case No. (Joint Administration Requested) 1 The Debtors and the last four digits of their respective taxpayer identification numbers are as follows: KidsPeace Corporation (3394); KidsPeace Children s Hospital, Inc. (4910); KidsPeace Mesabi Academy, Inc. (4179); KidsPeace National Centers, Inc. (4908); KidsPeace National Centers of Georgia, Inc. (7440); KidsPeace National Centers of New England, Inc. (1326); KidsPeace National Centers of North America, Inc. (4765); Iron Range School, Inc. (0561); and KidsPeace National Centers of New York, Inc. (1888). The Debtors address is 5300 KidsPeace Drive, Orefield, Pennsylvania 18069.
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 2 of 17 In re: KidsPeace National Centers of New England, Inc., Debtor. Chapter 11 Case No. (Joint Administration Requested) In re: KidsPeace National Centers of North America, Inc., Debtor. Chapter 11 Case No. (Joint Administration Requested) In re: Iron Range School, Inc., Debtor. Chapter 11 Case No. (Joint Administration Requested) In re: KidsPeace National Centers of New York, Inc., Debtor. Chapter 11 Case No. (Joint Administration Requested) MOTION OF THE DEBTORS FOR AN ORDER ESTABLISHING CERTAIN NOTICE, CASE MANAGEMENT, AND ADMINISTRATIVE PROCEDURES The above-captioned debtors and debtors in possession (collectively, the "Debtors"), by and through their undersigned proposed attorney, hereby submit this motion (the "Motion") pursuant to Section 105(a) of title 11 of the United States Code, 11 U.S.C. 101 et seq. as amended (the "Bankruptcy Code") and Rules 2002 and 9007 of the Federal Rules of Bankruptcy Procedure (each a "Bankruptcy Rule" and collectively, the "Bankruptcy Rules"), for the entry of 31988-5 2
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 3 of 17 an order, in substantially the form attached hereto, establishing certain notice, case management, and administrative procedures. In support of this Motion, the Debtors respectfully state as follows: JURISDICTION 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). 2. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. 3. The statutory bases for the relief requested herein are section 105(a) of the Bankruptcy Code and Rules 2002 and 9007 of the Bankruptcy Rules. BACKGROUND 4. On the date hereof (the "Petition Date"), each of the Debtors filed a voluntary petition for relief under chapter 11 the Bankruptcy Code. The Debtors are operating their businesses and managing their property as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee or examiner has been made in these chapter 11 cases (the Chapter 11 Cases ) and, as of the date of the filing of this Motion, no official committees have been appointed or designated. 5. KidsPeace Corporation ( KP Corp. ), which is located in Orefield, Pennsylvania, is a nonprofit corporation organized under the laws of the Commonwealth of Pennsylvania. KP Corp., through its subsidiary corporations, (i) operates a unique 96-bed psychiatric hospital, the KidsPeace Children s Hospital, which provides acute behavioral healthcare to children ages 4 to 18 and young adults ages 18 to 21 from Pennsylvania and other states; (ii) provides a comprehensive range of residential treatment programs, regular and special education services, and a variety of foster care and community-based treatment programs to help children, 31988-5 3
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 4 of 17 adolescents and young adults overcome challenges and transform their lives; and (iii) provides mental, emotional and physical healthcare and education services in an atmosphere of teamwork, compassion and creativity. 6. KP Corp. operates through six "subsidiary" nonprofit Pennsylvania member corporations and one subsidiary nonprofit New York corporation. KP Corp. is the sole member of each corporation. Except for employees of KidsPeace Mesabi Academy ( KPMA ), all fulltime and part-time employees are employed by KP Corp., regardless of which subsidiary operates a particular program. All full-time and part-time employees at KPMA are employed by KPMA. There is also one inactive subsidiary corporation that provides no services or programs. 7. KP Corp. employs approximately 1,951 full and part-time employees, including approximately 143 licensed nurses, 8 physicians and 50 specialized teachers, providing various services, including, but not limited to, residential and educational services, foster care placement, community-based programs and outpatient services to children, families, and communities at the Pennsylvania, Georgia, and Maine campuses, and through foster care offices across the country. KPMA employs approximately 127 full and part-time employees. KP Corp also contracts with approximately 740 foster parents, who are not employees but who are provided with twice per month stipends whenever foster children are placed in their homes. 8. Historically, the Debtors have operated a successful business and have been financially sound. In recent years, however, the Debtors, like many other organizations in their field, have faced increased challenges. Reimbursement rates, particularly rates under the Medicaid program, the Debtors largest payor, have been cut dramatically. Occupancy rates for residential programs have fallen significantly as eligibility criteria have been raised and 31988-5 4
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 5 of 17 placements from states outside Pennsylvania have declined due to the cost-saving measures of many state governments. 9. The Debtors annual revenues on a consolidated basis were $123,248,393 for the fiscal year ending on December 31, 2009; $114,151,765 for the fiscal year ending on December 31, 2010; $116,370,155 for the fiscal year ending on December 31, 2011 and $119,927,620 for the fiscal year ending on December 31, 2012. The Debtors annual expenses on a consolidated basis were $122,675,885 in 2009; $120,648,428 in 2010; $118,004,981 in 2011, and $124,485,531 in 2012, respectively. Earnings before interest, depreciation and amortization for the Debtors were $9,224,864 in 2009; $1,946,559 in 2010; $6,467,408 in 2011, and $3,114,768 in 2012. 10. For the 3 month period ending March 31, 2013, the Debtors revenues on a consolidated basis were approximately $30,699,949 and their expenses for the same period were approximately $30,931,804. 11. The Debtors total assets, as shown on their books, were $97,180,719 in 2009; $93,313,153 in 2010; $90,568,550 in 2011, and $86,666,989 in 2012. The Debtors total liabilities, as shown on their books, were $108,661,513 in 2009; $121,504,923 in 2010; $138,705,097 in 2011, and $158,587,999 in 2012. As discussed below, the Debtors owe approximately $56,206,821 in bond debt, and they have been told that their pension liability is allegedly about $100,000,000 of which the Debtors currently reflect $83,049,412 on their books. 12. The Debtors' primary secured debts are the following: (i) A loan pursuant to a credit agreement dated September 14, 2009 (as amended from time to time) with Gemino Healthcare Finance ( Gemino ) for a $7,500,000 line of credit, which is secured by a first priority position on the Debtors accounts receivable, worth approximately $28 million. The current outstanding amount on the Gemino line is approximately $4 million. Gemino, KP Corp., KPCH, KPNC, and the Bond Trustee entered into a Subordination and 31988-5 5
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 6 of 17 Intercreditor Agreement dated as of April 6, 2010 (as amended from time to time) that governs the rights and remedies of Gemino and the Bond Trustee (as defined below), respectively, to each party s individual secured collateral. (ii) In 1998 and 1999, KidsPeace Corporation, KidsPeace National Centers, Inc., and KidsPeace Children s Hospital, Inc. (the Obligated Group ) issued revenue bonds (the 1998 Bonds and the 1999 Bonds, and collectively, the Bonds ) through the Lehigh County General Purpose Authority in the original principal amount of $74,985,000. The amount of Bond debt currently outstanding is $51,310,000 plus accrued interest. UMB Bank, N.A, the Indenture Trustee for the Bonds (the Bond Trustee ) was granted a lien on, and security interest in, all of the Gross Receipts (as defined in the Trust Indenture for the Bonds) to secure the Bonds. As a result of the default by the Obligated Group in the payment of debt service on the Bonds in 2012, Debtors, with the exception of KP Georgia, entered into a Forbearance Agreement (the Forbearance Agreement ) dated January 11, 2013 with the Indenture Trustee, consented to by the holders of the majority in principal amount of the Bonds (the Majority Bondholders ) whereby, among other things, KidsPeace Corporation executed a mortgage limited to $15,000,000 on the Debtors Orchard Hills Campus in Orefield, PA in favor of the Bond Trustee, as mortgagee, as partial consideration for the Bond Trustee s agreement to forbear from the exercise of remedies available to it due to the defaults of the Obligated Group. (iii) In December 2003, KP Georgia issued Certificates of Participation (the Certificates ) in two separate series totaling $3,600,000. A portion of these Certificates, totaling $3,240,000, constitutes Series A bonds, principal payment of which is guaranteed by the U.S. Department of Agriculture (the USDA ). Another portion of these Certificates, totaling $360,000, constitutes Series B bonds, with no USDA guarantee. The Certificates are secured by a general pledge of gross revenue and certain real estate of KP Georgia, Inc., pursuant to a loan and trust agreement. The current outstanding balance on the Certificates approximates $2,910,000. (iv) The Debtors currently have a mortgage payable to National Penn Bank, secured against the National Headquarters building in Schnecksville, PA, at a fixed rate of interest of 6.7% due in monthly installments of principal and interest of $16,308 through May 2014, with a final payment of $1,088,428 in June 2014. (v) Certain insurance programs of the Debtors require the Debtors to post letters of credit (the LOCs ). The Debtors have LOCs with M & T Bank. The Debtors are required to cash collateralize these LOCs. The secured letters of credit totaling $1,853,722 were outstanding on December 31, 2012, and remain in place to secure obligations under various insurance policies. The letters of credit expire on varying dates between November of 2013 and April of 2014. The cash collateral put in place for the letters of credit was $1,853,722, and the cash is in an account with M & T Bank. 31988-5 6
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 7 of 17 13. In addition, the Debtors were formerly sponsors of the KidsPeace Defined Benefit Pension Plan (the "Pension Plan"), which is an ERISA-qualified defined benefit pension plan, guaranteed by the Pension Benefit Guaranty Corporation (the PBGC ). The Debtors have not made any contributions to the Pension Plan since September 2011, benefits under the Pension Plan were "frozen" as of January 1, 2009, and the PBGC alleges that the Pension Plan is underfunded by approximately $100,000,000. In addition, KidsPeace did not make its annual Pension Plan contributions of approximately $3 million in the fiscal year ending on December 31, 2011. Changes in federal law significantly increased the Debtors required annual contributions to the Pension Plan, in amounts that the Debtors could no longer afford to pay. Therefore, the Debtors Board of Directors made the decision to stop making annual contributions and pursue the Pension Plan s termination with the PBGC. On March 27, 2012, the PBGC filed a U.S. Treasury lien against KidsPeace for approximately $2.9 million, representing the missed contributions through the end of 2011 and then another lien reserve of $4,175,029 in December, 2012 (collectively, the PBGC Liens ). The PBGC Liens encumber substantially all of the Debtors assets with various priorities. On January 10, 2013, the Debtors, the PBGC, the Bond Trustee and Gemino entered into a PBGC Subordination and Intercreditor Agreement (the PBGC Subordination Agreement ), in which the PBGC agreed to subordinate the PBGC liens to Gemino s liens under the Credit Agreement and the Bond Trustee s liens under the Indenture, other than in respect of Orchard Hills campus real property. 14. The PBGC terminated the Pension Plan as of March 31, 2012 and became Trustee of the Pension Plan effective April 30, 2013, as provided in the Agreement for Appointment of Trustee and Termination of Plan between the Debtors and the PBGC dated April 30, 2013. 31988-5 7
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 8 of 17 15. On January 11, 2013, UMB, as the Bond Trustee, the Majority Bondholders and the Debtors, excepting for KP Georgia, entered into a resolution, memorialized in a Term Sheet, Forbearance Agreement and Plan Support Agreement (the Majority Bondholders Resolution ). Pursuant to the Majority Bondholders Resolution, the Bond Trustee and the Majority Bondholders have agreed to support a plan of reorganization proposed by the Debtors that restructures their debt in a reduced amount on terms set forth in the Term Sheet and Plan Support Agreement. 16. Although the Debtors were generally current with their trade creditors in the time period leading up to the Petition Date, the Debtors estimate that they owe trade creditors the approximate amount of $2 million. 17. Notwithstanding the past and present financial restructuring initiatives, including the filing of the Chapter 11 Cases, the Debtors have maintained exemplary patient care. The Debtors have maintained more than sufficient cash and working capital to satisfy day-to-day operations and expenses and anticipate that they will continue to do so, especially with the anticipated debtor-in-possession financing. The remaining restructuring efforts of the Debtors relate primarily to future debt structure associated with the Bonds and the PBGC. 18. Additional information regarding the Debtors and the Corporation, and the background to the Debtors' bankruptcy filing, is set forth in the Declaration of William R. Isemann in Support of First Day Motions for Relief filed substantially contemporaneously herewith and incorporated herein. RELIEF REQUESTED 19. By this Motion, the Debtors seek the entry of an order establishing certain notice, case management, and administrative procedures, as set forth in Exhibit A hereto (the "Case 31988-5 8
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 9 of 17 Management Procedures"), which include the following: (a) directing that matters requiring notice under Bankruptcy Rule 2002(a)(2)-(6) will be served upon a specified list of parties and those creditors who file with the Court a request that they receive such notices pursuant to Bankruptcy Rule 2002; (b) allowing electronic service of all documents (except complaints and summonses); and (c) directing that all matters be heard at monthly omnibus hearings to be scheduled in advance by the Court. The Debtors further request that the Bankruptcy Code, the Bankruptcy Rules, and the Local Bankruptcy Rules for the Eastern District of Pennsylvania (the "Local Bankruptcy Rules") apply to these Chapter 11 Cases to the extent that they do not conflict with the Case Management Procedures. BASIS FOR RELIEF 20. The Debtors have more than 4,000 potential creditors and anticipate that many of these creditors and other parties in interest in these Chapter 11 Cases may file requests for service of filings pursuant to Bankruptcy Rule 2002 (the "2002 List"). 2 The Debtors also expect that numerous motions and applications will be filed in these Chapter 11 Cases in pursuit of various forms of relief. The Case Management Procedures, including a schedule of regular, monthly omnibus hearings, will permit all parties in interest, including the Debtors, to plan for and schedule attendance at hearings. This will reduce the need for emergency hearings and requests for expedited relief, and will foster consensual resolution of important matters. 21. Moreover, by directing that certain notices be mailed only to a shortened mailing list and those creditors who file with the Court a request that they receive such notices, all parties in interest will be assured of receiving appropriate notice of matters affecting their interests and 2 Bankruptcy Rule 2002(i) provides, in pertinent part: "[The court may order that notices... be transmitted to the United States Trustee and be mailed only to the committees elected under 705 or appointed under 1102 of the Bankruptcy Code or to their authorized agents and to the creditors and equity security holders who serve on the trustee or debtor in possession and file a request that all notices be mailed to them." Fed. R. Bankr. P. 2002. 31988-5 9
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 10 of 17 ample opportunity to prepare for and respond to such matters. Further, a shortened mailing list will significantly reduce the substantial administrative and financial burden that would otherwise be placed on the Debtors' estates and other parties in interest who file documents in these Chapter 11 Cases. Similarly, electronic service of documents will further reduce the administrative and financial burden on the Debtors' estates, as well as on other serving parties, and will, in many cases, allow for more expedient service of documents. Finally, the Debtors, by and through their proposed claims agent, Rust Omni, will establish a case website (the "Case Website") where, among other things, electronic copies of all pleadings filed in these Chapter 11 Cases shall be posted within three (3) business days of filing and may be viewed free of charge. 22. As noted above, the Case Management Procedures summarized herein are set forth in detail in Exhibit A attached hereto. The Case Management Procedures will be (a) distributed to the Core Group (as defined in the Case Management Procedures) and the 2002 List with the notice of commencement of these Chapter 11 Cases (to save mailing costs) and (b) available at all times by accessing the Case Website. Moreover, the Debtors will re-distribute the Case Management Procedures to the 2002 List in the event the Case Management Procedures are modified hereafter. A. Notice Procedures 23. Given the administrative cost of mailing notices to all of the Debtors' creditors and parties in interest in these Chapter 11 Cases, the Debtors request that the mailing matrix for matters requiring notice under Bankruptcy Rule 2002(a)(2)-(6) be limited in accordance with the Case Management Procedures. 24. The Debtors request, pursuant to Bankruptcy Rule 2002(l), authority to serve notice of pleadings and related filings upon all creditors and parties in interest, but to only serve 31988-5 10
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 11 of 17 hard copies of such filings upon the Core Group. The Debtor's submit that service of a proposed notice, attached as Exhibit B, which conspicuously directs parties to consult the Case Website or Debtors' counsel for complete copies of the pleadings and/or other such filings is efficient and effective. 25. The Debtors have made diligent inquiry into the most effective means of giving all parties adequate notice of the significant upcoming events and believe that the combination of a written notice delivered via first class mail in conjunction with postings on the website, will provide a more than adequate alert to parties' with claims subject to objections of all pertinent deadlines and risks. Accordingly, the Debtors urge the Court to approve the proposed form of notice. 26. The Case Management Procedures shall not, however, affect the Debtors' obligation to give notice to all creditors and parties in interest of (a) the meeting of creditors, (b) the dismissal or conversion of these Chapter 11 Cases, (c) the time fixed to accept or reject a proposed modification of a chapter 11 plan, (d) the time fixed for filing proofs of claim, (e) the time fixed for filing objections to and the hearing on the disclosure statement and a chapter 11 plan or (f) entry of an order confirming a chapter 11 plan. Nor shall the limited notice requested herein prevent a party whose rights may be substantially affected by the relief requested from being served with notice. B. Electronic Service 27. The Debtors also request that the Court allow electronic service of documents to further reduce the administrative and financial burden of providing notice to the Debtors' creditors and other parties in interest. The Case Management Procedures contain provisions that the Debtors believe will ensure that electronic service is efficient and effective. The Debtors 31988-5 11
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 12 of 17 request that the Court implement certain electronic service procedures in accordance with the Court's Standing Orders Nos. M-03-3005 (Provisions for Electronic Case Filing), M-03-3011 (Amendment 1 to Standing Order M-03-3005) and M-04-3009 (Amendment 2 to Provisions for Electronic Filing) (collectively, the "Administrative Procedures") for filings in the Court's Case Management/Electronic Case Filing (CM/ECF) System (the "Electronic Filing System"). Further, the Debtors request that the filing deadlines should not require three (3) additional days notice as set forth in Rule 6(e) of the Federal Rules of Civil Procedure (made applicable to contested matters indirectly by Bankruptcy Rule 9014(b) and to adversary proceedings by Bankruptcy Rule 7005(b)(2)(D)) and Bankruptcy Rule 9006(f) when a document is served by electronic mail. C. Omnibus Hearing Dates 28. Given the number of potential parties in interest and the complexity of these Chapter 11 Cases, the Debtors respectfully request entry of an order scheduling regular, monthly omnibus hearings (the "Omnibus Hearings") in accordance with the Case Management Procedures, subject to the Court's schedule. The Debtors will send notices of the Omnibus Hearings to the 2002 List and the Core Group (as defined in the Case Management Procedures) when they are scheduled and post the schedule of Omnibus Hearings on the Case Website. 31988-5 12
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 13 of 17 APPLICABLE AUTHORITY 29. The Bankruptcy Code, the Bankruptcy Rules and the Local Bankruptcy Rules provide the Debtors with authority to establish notice, case management, and administrative procedures. In particular, Bankruptcy Rule 2002(a) provides that, unless otherwise ordered by the Court, notice of certain matters must be given to, among others, all of the Debtors' creditors, equity security holders, and other parties in interest. See Fed. R. Bankr. P. 2002(a). The Bankruptcy Rules further provide that "[t]he court may from time to time enter orders designating the matters in respect to which, the entity to whom, and the form and manner in which notices shall be sent except as otherwise provided by these rules." Fed. R. Bankr. P. 2002(m). 30. In addition, section 105(a) of the Bankruptcy Code grants bankruptcy courts broad authority and discretion to enforce the provisions of the Bankruptcy Code either under specific statutes or under equitable common law principles. Specifically, section 105(a) provides: 11 U.S.C. 105(a). The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process. 31. Section 102(1) of the Bankruptcy Code states that where the Bankruptcy Code provides for an action to occur "after notice and a hearing," such action may occur "after such notice as is appropriate in the particular circumstances, and such opportunity for a hearing as is appropriate in the particular circumstances.." 11 U.S.C. 102(1)(A). 31988-5 13
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 14 of 17 32. As explained above, this case is large, complex, and involves more than 4,000 potential creditors and parties in interest, many of whom will have multiple concerns. The Debtors expect numerous parties to file notices pursuant to Bankruptcy Rule 2002 and requests for service of the various filings in these cases. The Debtors also expect that they and other parties will file numerous pleadings throughout each month, which would ordinarily result in numerous, fragmented hearings. The costs and burdens associated with multiple hearings per month, plus the costs associated with copying and mailing, overnighting, or otherwise serving paper copies of all filings, will impose economic and administrative burdens on the Debtors' estates, the Court, and all other parties in interest. The Debtors submit that electronic notice, whenever possible, should be permitted to alleviate this burden. 33. Further, pursuant to the Administrative Procedures, registration as a Filing User (as defined in the Administrative Procedures) constitutes a (1) waiver of the right to receive notice by first class mail and consent to receive notice electronically; and (2) waiver of the right to service by personal service or first class mail and consent to electronic service, except with respect to service of a summons and complaint under Fed. R. Bankr. P. 7004. Standing Order M- 03-3005 112(b). Pursuant to the terms of the Case Management Procedures, all parties on the 2002 List and all other parties in interest that may be directly affected by the relief sought in a particular filing will receive notice of such filing directly from the party submitting such documents to the Court well in advance of the applicable Omnibus Hearing. Further, all parties in these cases who are Filing Users will receive a "Notice of Electronic Filing" via electronic mail whenever a filing is effected, which will provide additional notice to such parties. Although email is nearly universally available, if a party cannot reasonably obtain access to email, then such party may seek an exemption pursuant to the Case Management Procedures to receive paper 31988-5 14
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 15 of 17 copies. Therefore, no party will be adversely affected by the proposed email service set forth herein. 34. The Debtors respectfully submit that adopting the Case Management Procedures will substantially reduce administrative burdens and result in substantial cost savings to the Debtors' estates. Pursuant to the Case Management Procedures, all parties in interest that may be directly affected by a request for relief, response, objection, or adversary proceeding filed with the Court will receive notice thereof directly from the entity submitting such documents to the Court well in advance of the relevant hearing. Thus, no party in interest will be adversely affected. 35. Courts in large chapter 11 cases routinely grant similar case management procedures to reduce the expense of case administration. See, In re Lower Bucks Hospital, Case No. 10-10239 (ELF) (Bankr. E.D. Pa. January 15, 2010); In re Philadelphia Newspapers, LLC, No. 09-11204 (JFK) (Bankr. E.D. Pa. Feb. 22, 2009); In re Bally Total Fitness of Greater N.Y., Inc., Case No. 07-12395 (Bankr. S.D.N.Y. Aug. 1, 2007); In re Dana Corp., Case No. 06-10354 (Bankr. S.D.N.Y. Mar. 7, 2006); In re Calpine Corp., Case No. 05-60200 (Bankr. S.D.N.Y. Jan. 18, 2006); In re Tower Auto., Inc., Case No. 05-10578 (Bankr. S.D.N.Y. Feb. 4, 2005); In re Spiegel, Inc., Case No. 03-11540 (Bankr. S.D.N.Y. Mar. 21, 2003); In re WorldCom, Inc., Case No. 02-13533 (Bankr. S.D.N.Y. July 29, 2002); In re The Warnaco Group, Inc., Case No. 01-41643 (Bankr. S.D.N.Y. June 20, 2001). 36. The establishment of the Case Management Procedures will promote the efficient and orderly administration of these Chapter 11 Cases. Indeed, authorizing the Debtors to serve their documents on a limited mailing matrix will ease the administrative and economic burdens on the Court and the Debtors' estates. Authorizing electronic service in these Chapter 11 Cases 31988-5 15
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 16 of 17 will allow efficient and effective service at a significantly reduced cost to the Debtors' estates and other serving parties. Early notice to all parties in interest of Omnibus Hearings will enable parties to plan efficiently for the use of hearing time, will avoid the need for numerous hearings within each month, and will lessen the burden on the Court and on the Debtors' estates. Additionally, parties in interest will still have the opportunity to bring true emergency matters before the Court on an expedited basis pursuant to the Local Bankruptcy Rules and the Case Management Procedures. For the reasons stated herein, the Debtors believe the Case Management Procedures are appropriate and should be approved and implemented in these Chapter 11 Cases. NOTICE 37. The Debtors have provided notice of this Motion to: (a) the Office of the United States Trustee for the Eastern District of Pennsylvania; (b) the Office of the United States Attorney for the Eastern District of Pennsylvania; (c) the Office of the Attorney General for the Commonwealth of Pennsylvania; (d) the Commonwealth of Pennsylvania Department of Labor and Industry; (e) the Commonwealth of Pennsylvania Department of Revenue; (f) the entities listed on the Consolidated List of Creditors Holding the 30 Largest Unsecured Claims filed by the Debtors pursuant to Bankruptcy Rule 1007(d); (g) counsel to UMB Bank Indenture Trustee for the Lehigh County General Purpose Authority Revenue Bonds, Series of 1998 and Series 1999 (KidsPeace Corporation); (h) the Internal Revenue Service; (i) Manufacturers and Traders Trust Co., Trustee for the 2003 Series A and Series B Georgia Bonds; (j) U.S. Department of Agriculture; (k) National Penn Bank; (l) Gemino Healthcare Finance; (m) M&T Bank; (n) the Pension Benefit Guaranty Corporation and (o) Healthcare Finance Group, LLC. In light of the nature of the relief requested, the Debtors respectfully submit that no further notice is necessary. 31988-5 16
Case 13-14508-ref Doc 4 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Main Document Page 17 of 17 court. NO PRIOR REQUEST 38. No prior motion for the relief request herein has been made to this or any other WHEREFORE, the Debtors respectfully request the entry of an Order, substantially in the form attached hereto, (a) establishing the Case Management Procedures and (b) granting such other and further relief as the Court deems appropriate. NORRIS, McLAUGHLIN & MARCUS, PA The Paragon Centre 1611 Pond Road, Suite 300 Allentown, PA 18104 mbauer@nmmlaw.com Proposed counsel to the Debtors and Debtors-In- Possession Dated: May 21, 2013 By:/s/ Morris S. Bauer Morris S. Bauer, Esq. 31988-5 17
Case 13-14508-ref Doc 4-1 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Exhibit A Page 1 of 10 NOTICE, CASE MANAGEMENT, AND ADMINISTRATIVE PROCEDURES These notice, case management, and administrative procedures (the "Case Management Procedures") have been approved by the United States Bankruptcy Court for the Eastern District of Pennsylvania (the "Court") for the chapter 11 cases (the "Chapter 11 Cases") of KidsPeace Corporation, KidsPeace Children s Hospital, Inc., KidsPeace Mesabi Academy, Inc., KidsPeace National Centers, Inc., KidsPeace National Centers of Georgia, Inc., KidsPeace National Centers of New England, Inc., KidsPeace National Centers of North America, Inc., Iron Range School, Inc., and KidsPeace National Centers of New York, Inc (collectively, the "Debtors") pursuant to the Motion for Entry of an Order Establishing Certain Notice, Case Management and Administrative Procedures (the "Motion"). 1 The Bankruptcy Code, the Bankruptcy Rules, and the Local Bankruptcy Rules shall govern all matters in these Chapter 11 Cases, except to the extent such rules conflict with or are inconsistent with the procedures set forth herein. A. Document Requests and Access to Documents The Debtors shall file an application to retain a notice, claims and balloting agent (the "Notice and Claims Agent"). The Notice and Claims Agent will maintain a case-specific website (the "Case Website"), where, among other things, electronic copies of all pleadings filed in the Chapter 11 Cases shall be posted within three (3) business days of filing and may be viewed free of charge. Additionally, electronic copies of all pleadings and documents are available for a fee via PACER on the Court's website at www.paeb.uscourts.gov. Finally, paper copies of all pleadings filed in the Chapter 11 Cases may be available from the Court or by contacting Debtor s counsel. 1 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Motion.
Case 13-14508-ref Doc 4-1 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Exhibit A Page 2 of 10 B. Master Service List and Electronic Mail Service 1. Procedures Established for Notices. Unless otherwise directed by the Court, all notices, motions, applications, and other requests for relief, all briefs, memoranda, declarations, replies, and other documents filed in support of such papers seeking relief (collectively, the Requests for Relief"), and all objections and responses to such Requests for relief (collectively, the "Objections", and together with the Requests for Relief and all other filed documents, the "Rule 2002 Court Filings") shall be filed with the Court and served in accordance with the notice procedures set forth herein (the "Notice Procedures"). 2. Definition of Entities Entitled to Service. All Rule 2002 Court Filings shall be served on the Core Group (as defined below) and Affected Entities (as defined below, and collectively with the Core Group, the "Service List") according to the Notice Procedures. A Rule 2002 Court Filing is deemed not to have been properly served until served, at a minimum, on all of the parties in the Core Group. a. Core Group - The following entities shall comprise the core group of entities in these Chapter 11 Cases (collectively, the "Core Group"): (a) the Office of the United States Trustee for the Eastern District of Pennsylvania; (b) the Office of the United States Attorney for the Eastern District of Pennsylvania; (c) the Office of the Attorney General for the Commonwealth of Pennsylvania; (d) the Commonwealth of Pennsylvania Department of Labor and Industry; (e) the Commonwealth of Pennsylvania Department of Revenue; (f) the entities listed on the Consolidated List of Creditors Holding the 30 Largest Unsecured Claims filed by the Debtors pursuant to Bankruptcy Rule 1007(d), until such time as a committee of unsecured creditors is appointed 2 ; (g) counsel to UMB Bank indenture trustee for the Lehigh County General Purpose Authority Revenue Bonds, Series of 1998 and Series 1999 (KidsPeach Corporation); (h) the Internal Revenue Service; (i) Manufacturers and Traders Trust Co., Trustee for the 2003 Series A and Series B Georgia Bonds; (j) U.S. Department of Agriculture; (k) National Penn Bank; (l) Gemino Healthcare Finance; (m) M&T Bank; (n) the Pension Benefit Guaranty Corporation and (o) Healthcare Finance Group, LLC. In light of the 2 To the extent that a committee is appointed, the committee and/or their counsel, shall replace the Consolidated List of Creditors Holding the 30 Largest Unsecured Claims on the Core Group. 31990-5
Case 13-14508-ref Doc 4-1 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Exhibit A Page 3 of 10 nature of the relief requested, the Debtors respectfully submit that no further notice is necessary. An updated Core Group list can be obtained on the Case Website. b. Affected Entities - This group shall be comprised of all entities with a particularized interest in the subject matter of the particular court filing (each, an "Affected Entity"). 3. 2002 List - This group shall be comprised of all entities that have filed a request for service of filings pursuant to Bankruptcy Rule 2002. Notice of pleadings and related filings shall be served upon the 2002 List. The 2002 List shall not be provided with a hard copy of the pleadings and related filings. To the extent that a party on the 2002 Lists wishes to receive email copies of the full pleadings and related filings, such parties must provide an email address for service as set forth below. Any other party that wishes to see and/or obtain a full copy of the pleadings and related filings may visit the Case Website or contact counsel to the Debtors by mail to: Morris S. Bauer, Esq., Norris, McLaughlin & Marcus, The Paragon Centre, 1611 Pond Road, Suite 300, Allentown, PA 18104, or by calling: (610) 391-1800. a. Filing Requests for Documents Requires an Email Address A request for service of papers pursuant to Bankruptcy Rule 2002 (each, a "2002 Notice Request") filed with the Court shall be deemed proper if and only if it includes the following information with the request to the party filing such request: (a) name; (b) street address; (c) name of client(s), if applicable; (d) telephone number; (e) facsimile number; and (f) electronic mail (or email) address. b. Certification Opting Out of Email Service - Any individual or entity filing a 2002 Notice Request who does not maintain (and cannot practicably obtain) an email address and therefore cannot receive service by email must include in the 2002 Notice Request a certification to that effect (the "Certification"). The Certification shall include a statement certifying that the individual or entity (a) does not maintain an email address and (b) cannot practicably obtain an email address at which the individual or entity could receive service by email. Such individual will thereafter receive paper service as provided in the Case Management Procedures. c. At least every fifteen (15) days during the first sixty (60) days of the chapter 11 cases, and thereafter at least every thirty (30) days, the Debtors or the Notice and Claims Agent shall maintain and update the 2002 List by: (a) making any additions and deletions; (b) filing the updated 2002 List; (c) serving via email the updated 2002 List on the parties listed thereon; (d) filing a proof of service; and 31990-5
Case 13-14508-ref Doc 4-1 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Exhibit A Page 4 of 10 (e) simultaneously with the filing of the 2002 List, posting an updated version of the 2002 List on the Case Website. 4. Service of Motions. With respect to filings for which particular notices are required to be served on all creditors and parties in interest, including Bankruptcy Rules 2002(a)(2), (3) and (6), 4001, 6004, 6007, or 9019, parties shall serve all such filings only on the Service List by email or otherwise (if an exemption is granted) and in accordance with the following procedures, unless otherwise ordered by the Court: a. in the case of the use, sale, lease, or abandonment of property, on each entity asserting an interest in that property; b. in the case of a motion for relief or modification of the automatic stay, on each entity asserting a lien or encumbrance on the affected property; c. in the case of a motion relating to the use of cash collateral or obtaining credit, each party asserting an interest in the cash collateral, or a lien or other interest in property upon which a lien or encumbrance is proposed to be granted; d. in the case of a motion under Bankruptcy Rule 9019, all parties that are parties to the relevant compromise and settlement or that may be directly affected by such compromise or settlement; e. in the case of assumption, assignment, or rejection of an executory contract, or an unexpired lease, each party to the executory contract or the unexpired lease; f. any objection, opposition, response, reply, or further document filed directly in response to a document shall be served on the entity who filed such document; and g. except as otherwise provided herein, all matters for which the Bankruptcy Rules specifically require notice to all parties in interest shall be served on all parties in interest unless otherwise directed by the Court. 5. Except as set forth herein or otherwise provided by order of the Court, only written notice of the matters or proceedings described in the following Bankruptcy Rules shall be 31990-5
Case 13-14508-ref Doc 4-1 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Exhibit A Page 5 of 10 provided to creditors and parties in interest, with such written notice directing such creditors and parties in interest to the Case Website for full copies of the pleadings and filings: a. Bankruptcy Rule 2002(a)(1) (meeting of creditors pursuant to section 341 of the Bankruptcy Code); b. Bankruptcy Rule 2002(a)(2) (any proposed use, sale, or lease of property of the estate other than in the ordinary course of business, to the extent that such use, sale, or lease concerns all or substantially all of the Debtors' assets); c. Bankruptcy Rule 2002(a)(4) (hearing on the dismissal of a case or cases, or the conversion of a ease to another chapter); d. Bankruptcy Rule 2002(a)(5) (time fixed to accept or reject a proposed modification of a chapter 11 plan); e. Bankruptcy Rule 2002(a)(7) (time fixed for filing a proof of claim pursuant to Bankruptcy Rule 3003(c)); f. Bankruptcy Rule 2002(b)(1) (time fixed for filing objections and any hearing to consider approval of a disclosure statement); g. Bankruptcy Rule 2002(b)(2) (time fixed for filing objections and any hearing to consider confirmation of a chapter 11 plan); h. Bankruptcy Rule 2002(f)(1) (entry of an order for relief); i. Bankruptcy Rule 2002(f)(2) (dismissal or conversion of a case to another chapter of the Bankruptcy Code); j. Bankruptcy Rule 2002(f)(3) (time allowed for filing claims pursuant to Bankruptcy Rule 3002); k. Bankruptcy Rule 2002(f)(6) (waiver, denial, or revocation of a discharge as provided in Bankruptcy Rule 4006); l. Bankruptcy Rule 2002(f)(7) (entry of an order confirming a chapter 11 plan); and m. Bankruptcy Rule 2002(f)(8) (summary of the trustee's final report and account should a case be converted to chapter 7 of the Bankruptcy Code). 31990-5
Case 13-14508-ref Doc 4-1 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Exhibit A Page 6 of 10 6. Noticing a Matter for Hearing. Parties should consult the Local Bankruptcy Rules regarding the form and content of notices and visit www.paeb.uscourts.gov for sample notices. 7. Certificates of Service. In accordance with Local Bankruptcy Rule 9014-4, certificates of service of all Rule 2002 Court Filings, including a Service List, shall be filed with the Court; provided, however, that parties shall not be required to include the Service List when serving the certificate of service to such recipients. 8. Serving Adversary Proceedings. All pleadings and other Court filings in any adversary proceeding commenced in the Chapter 11 Cases shall be served upon the Core Group, each Affected Entity, and any other entities required to be served under any applicable Bankruptcy Rule or Local Bankruptcy Rule. C. Service by Electronic Mail 1. Service by Electronic Mail. All Rule 2002 Court Filings shall be electronically filed on the Court's Case Management/Electronic Case Filing (CWECF) System (the "Electronic Filing System"), other than service of a summons and complaint in an adversary proceeding or documents filed under seal, which shall be deemed to constitute proper service for all parties who are sent such email service. Subject to the limited exclusions set forth herein, each party that has filed a notice of appearance and a request for service of papers shall be deemed to have consented to electronic service of papers, in accordance with 2(b) of Standing Order M-03-3005. A party filing a Rule 2002 Court Filing that is served on entities via the Court's Electronic Filing System has no further obligation for service of such Rule 2002 Court Filing with respect to such entities to be proper. 2. If a 2002 Notice Request fails to include an email address and a Certification, the Debtors shall forward a copy of these Case Management Procedures to such party within five (5) 31990-5
Case 13-14508-ref Doc 4-1 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Exhibit A Page 7 of 10 business days, specifically requesting an email address or Certification. If no email address or no Certification is provided in response to such request, such party shall not be added to the 2002 List and shall not be served with copies of pleadings and documents filed in these Chapter 11 Cases unless such pleadings and/or documents directly affect such party. 3. The filing deadlines do not require three (3) additional days notice as set forth in Rule 6(e) of the Federal Rules of Civil Procedure (made applicable to contested matters indirectly by Bankruptcy Rule 9014(b) and to adversary proceedings by Bankruptcy Rule 7005(b)(2)(D)) and Bankruptcy Rule 9006(f) when a document is served by electronic mail, via the Court's Electronic Filing System. 4. Identification of Attorney. As set forth in 8 of Standing Order M-03-3005, (a) every Rule 2002 Court Filing shall identify the name address, and telephone number of the individual signing such document, and shall indicate an "electronic signature" (e.g., /s/ Jane Doe"), and (b) Rule 2002 Court Filings which require original signatures, documents requiring verification pursuant to Bankruptcy Rule 1008, and unsworn declarations under 28 U.S.C 1746, all shall be filed electronically and bear "electronic signatures." D. Omnibus Hearing Dates 1. All Matters to Be Heard. Periodic omnibus hearings will occur as may be scheduled by the Court (the "Omnibus Hearings"). Periodically, the Debtors shall request that future Omnibus Hearings be scheduled. All future Omnibus Hearings scheduled by the Court shall be posted on the Debtors' Case Website. Entities may contact the Clerk of the United States Bankruptcy Court at The Madison Building, 400 Washington Street, Reading, PA 19601, or go to www.paeb.uscourts.gov for information concerning future Omnibus Hearings that have been scheduled by the Court. 31990-5
Case 13-14508-ref Doc 4-1 Filed 05/21/13 Entered 05/21/13 15:11:08 Desc Exhibit A Page 8 of 10 2. All matters requiring a hearing in these cases shall be set for and be heard on an Omnibus Hearing unless otherwise ordered by the Court. All Requests for Relief and Objections thereto and all other matters will be considered or heard only at Omnibus Hearings, unless the Court orders otherwise, in accordance with the following: a. In the event that a party files a request for relief on or before twenty (20) calendar days prior to the next regularly scheduled Omnibus Hearing (or is scheduled for such Omnibus Hearing based on Paragraph 3 below), the matter shall be set for hearing on the next regularly scheduled Omnibus Hearing and the objection deadline shall be seven (7) business days prior to the Omnibus Hearing, with any replies thereto due no later than 10:00 a.m., prevailing Eastern Time, on the date that is two (2) business days prior to the date of the omnibus hearing at which the matter will be heard; provided, however, the Debtors may propose to interested parties to schedule matters on a date other than the next applicable Omnibus Hearing if the Debtors in good faith believe that the hearing on a particular matter may exceed one (1) hour; and b. In the event that a party files a request for relief fewer than twenty (20) calendar days prior to the next regularly scheduled Omnibus Hearing and an expedited hearing is not otherwise granted by the Court, the matter shall be scheduled for the next regularly scheduled Omnibus Hearing that is more than twenty (20) calendar days from the date of the filing of the motion or application; provided, however, the Debtors may propose to interested parties to schedule matters on a date other than the next applicable Omnibus Hearing if the Debtors in good faith believe that the hearing on a particular matter may exceed one (1) hour. 3. Procedures Regarding the Omnibus Hearings. The following procedures will apply unless the Court orders otherwise: a. Except as specifically set forth herein, all notice periods for Requests for Relief shall be computed in accordance with the Bankruptcy Rules and Local Bankruptcy Rules and nothing in these Case Management Procedures shall be deemed to change such requirements. b. Any notice of an Omnibus Hearing shall conspicuously contain, on the first page of such notice, the date and time that the hearing will be held in the event that an objection is filed in accordance with the applicable rules. c. Deadlines for responding to a request for relief shall be governed by the Local Bankruptcy Rules, as modified by paragraph 2 hereof. 31990-5