Case ref Doc 12 Filed 05/21/13 Entered 05/21/13 15:40:19 Desc Main Document Page 1 of 16

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1 Document Page 1 of 16 IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA KidsPeace Corporation, 1 KidsPeace Children s Hospital, Inc., KidsPeace Mesabi Academy, Inc., KidsPeace National Centers, Inc., KidsPeace National Centers of Georgia, Inc., 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

2 Document Page 2 of 16 KidsPeace National Centers of New England, Inc., KidsPeace National Centers of North America, Inc., Iron Range School, Inc., KidsPeace National Centers of New York, Inc., MOTION OF THE DEBTORS, PURSUANT TO SECTIONS 105(a) AND 503 OF THE BANKRUPTCY CODE AND BANKRUPTCY RULES 3002 AND 3003, FOR AN ORDER ESTABLISHING PROCEDURES FOR THE ASSERTION OF SECTION 503(b)(9) CLAIMS RELATING TO GOODS RECEIVED BY THE DEBTORS WITHIN TWENTY DAYS BEFORE THE PETITION DATE 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 sections 105(a) and 503 of 11 U.S.C. 101 et seq., as amended (the "Bankruptcy

3 Document Page 3 of 16 Code") and Rules 3002 and 3003 of the Federal Rules of Bankruptcy Procedure (each a "Bankruptcy Rule" and collectively, the "Bankruptcy Rules"), for the entry of an order in substantially the form attached hereto, establishing procedures for the assertion of section 503(b)(9) claims (the "503(b)(9) Claims") relating to goods received by the Debtors within twenty days before the petition date (the "Twenty-Day Period"). 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 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 and The statutory bases for the relief requested herein are sections 105(a) and 503 of the Bankruptcy Code and Rules 3002 and 3003 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 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

4 Document Page 4 of 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, 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

5 Document Page 5 of 16 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 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, 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 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, 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 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 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

6 Document Page 6 of 16 $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 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 (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

7 Document Page 7 of 16 expire on varying dates between November of 2013 and April of 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. 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, 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,

8 Document Page 8 of 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 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

9 Document Page 9 of 16 Goods Received 19. Prior to the Petition Date, and in the ordinary course of their businesses, the Debtors purchased a variety of goods for use in their operations. Goods were received by the Debtors on a regular basis, and certain of the goods were received within the Twenty-Day Period. The Debtors estimate that within the Twenty-Day Period, the Debtors received goods from suppliers with a value of approximately $376,876. Many of these suppliers have not yet been paid for these goods. RELIEF REQUESTED 20. By this Motion, the Debtors seek to establish an administrative claim bar date by which creditors who assert claims that first accrued or were incurred during the period from and including twenty (20) days before the Petition Date and are entitled to an administrative expense priority under 11 U.S.C. 503(b)(9) ( 503(b)(9) Claims ) 2 must file their administrative proofs of claim or be forever barred from, among other things, asserting or being paid on account of such claims. 21. Although section 503(b)(9) of the Bankruptcy Code provides a priority status for prepetition claims for the value of goods received within the Twenty-Day Period, these 503(b)(9) Claims in all other respects are identical to other prepetition claims. As such, there is no reason 2 Congress amended the Bankruptcy Code effective as of October 15, 2005, adding section 503(b)(9), which provides, in relevant part, that: (b) After notice and a hearing, there shall be allowed, administrative expenses, including * * * * 11 U.S.C. 503(b)(9). (9) the value of any goods received by the debtor within 20 days before the date of the commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor s business

10 Document Page 10 of 16 to differentiate between the procedures by which 503(b)(9) Claims and other prepetition claims are filed, objected to and adjudicated. To eliminate any uncertainty regarding the procedures to be used by claimants asserting 503(b)(9) Claims (the "503(b)(9) Claimants"), and to avoid piecemeal litigation by 503(b)(9) Claimants, the Debtors seek to establish, at the outset of these cases, procedures for the assertion (and determination) of 503(b)(9) Claims (the "503(b)(9) Procedures"). 22. The Debtors have not yet filed their schedules of assets and liabilities and statements of financial affairs (collectively, the "Schedules"), and, in fact, have requested an extension until forty-five (45) days from the Petition Date to file their Schedules. The Debtors anticipate that after the Schedules have been filed, they would ask the Court to set a bar date for the filing of prepetition claims at an appropriate time. To maintain uniformity and consistency, the Debtors now seek entry of an order establishing the 503(b)(9) Procedures for the assertion (and determination) of 503(b)(9) Claims pursuant to the normal prepetition claims process in these cases and subject to the general bar date to be set by the Court in these cases for the filing of all prepetition claims (the "General Bar Date"), as follows: (a) (b) (c) All 503(b)(9) Claims shall be filed by the General Bar Date, which will be set for all prepetition claims in these eases by a subsequent order of the Court, and in accordance with Bankruptcy Rules 3002 and 3003 and Local Bankruptcy Rule (b)(9) Claimants shall utilize the proof of claim form to be developed by the Debtors in connection with the general bar date process, which form will permit all parties to assert the amount and priority of their claims (including priority under section 503(b)(9) of the Bankruptcy Code) in one standardized form. The 503(b)(9) Claimants shall not file motions to compel allowance or payment of administrative expenses for their 503(b)(9) Claims or schedule a hearing to consider such claims. Consistent with section 502(a) of the Bankruptcy Code, all timely filed 503(b)(9) Claims shall be deemed accepted and allowed unless objected to by the Debtors or any

11 Document Page 11 of 16 other party in interest pursuant to section 502 of the Bankruptcy Code, Bankruptcy Rule 3007 or in accordance with further procedures for addressing claims as may be established by the Court ("Claims Procedures"). If such an objection to a 503(b)(9) Claim is filed, such claim shall be adjudicated and allowed in accordance with the Bankruptcy Code, the Bankruptcy Rules, the Local Bankruptcy Rules and any Claims Procedures established by the Court. (d) (e) To the extent that a 503(b)(9) Claim is allowed, the claim shall be paid pursuant to, and as set forth in, the applicable chapter 11 plan confirmed by the Court. Nothing in these 503(b)(9) Procedures shall affect the rights and remedies of the Debtors, any official committee appointed in these eases or any other party in interest with regard to avoidance actions, and nothing in these 503(b)(9) Procedures shall provide a 503(b)(9) Claimant a prima facie defense to any avoidance actions. 23. The Debtors request that the 503(b)(9) Procedures be the sole and exclusive method for creditors to assert, seek determination of and obtain payment of the 503(b)(9) Claims. The Debtors further request that all 503(b)(9) Claimants be prohibited from seeking any other means for the allowance or treatment of their 503(b)(9) Claims, unless leave is specifically granted by the Court. 24. Additionally, the Debtors request that all motions or other proceedings initiated by 503(b)(9) Claimants to assert rights related to 503(b)(9) Claims, whether currently pending or initiated in the future, except those proceedings initiated by the Debtors in accordance with the 503(b)(9) Procedures or those the Debtors already have consensually resolved, be stayed and the 503(b)(9) Claims asserted therein be resolved exclusively by the 503(b)(9) Procedures. BASIS FOR RELIEF 25. The proposed 503(b)(9) Procedures will provide clear guidance to all parties as to how 503(b)(9) Claims shall be filed in these eases and will streamline the process for consideration of such claims. Requiring 503(b)(9) Claimants to participate in the normal claims

12 Document Page 12 of 16 adjudication process will provide the Debtors the opportunity to address the allowance of claims in an orderly and efficient way, will not impair in any way the substantive rights of any parties and will ensure that similarly situated creditors receive equal treatment. 26. Under section 101(10)(A) of the Bankruptcy Code, a "creditor" is defined as an "entity that has a claim against the debtor that arose at the time of or before the order for relief...." Accordingly, entities holding prepetition claims, including prepetition claims under section 503(b)(9) of the Bankruptcy Code, are plainly "creditors" under the Bankruptcy Code and Bankruptcy Rules The status of entities holding 503(b)(9) Claims as "creditors" has important consequences, including that such entities are permitted to file proofs of claim. See 11 U.S.C. 501(a) ("[a] creditor... may file a proof of claim"). In fact, under Bankruptcy Rules 3002(a) and 3003(c)(2), 503(b)(9) Claimants must file claims if they want their 503(b)(9) Claims to be allowed. Fed. R. Bankr. P. 3002(a) (a "creditor... must file a proof of claim or interest for the claim or interest to be allowed...") (emphasis added); Fed. R. Bankr. P. 3003(c)(2) ("Any creditor or equity security holder whose claim or interest is not scheduled or scheduled as disputed, contingent, or unliquidated shall file a proof of claim or interest within the time prescribed by subdivision (c)(3) of this rule; any creditor who fails to do so shall not be treated as a creditor with respect to such claim for the purposes of voting and distribution."). 28. Section 502(a) of the Bankruptcy Code provides that "[a] claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest 3 There is some case law addressing the issue of whether an entity holding a postpetition administrative expense claim also is a "creditor" under the Bankruptcy Code. See, e,g., In re CM Holdings, Inc., 264 B.R. 141, (Bankr. D. Del. 2000) (discussing whether administrative claimants are "creditors" for purposes of application of section 502(d) of the Bankruptcy Code and concluding they are not). In light of the prepetition nature of claims under section 503(b)(9) of the Bankruptcy Code relating to goods received by the Debtors in the ordinary course of business in the Twenty-Day Period case law discussing whether postpetition administrative claimants are creditors is irrelevant here

13 Document Page 13 of 16 objects." (emphasis added). It is clear that by classifying holders of prepetition claims under section 503(b)(9) as "creditors," Congress desired that such claimants be subjected to the entire claim filing and objection process established by sections 501 and 502 of the Bankruptcy Code and Bankruptcy Rules 3001 through Importantly, this means that section 502 of the Bankruptcy Code, which provides that litigation in respect of a claim is initiated through a debtors objection, thus placing the control over the timing of objecting to a Twenty-Day Claim with a debtor, not with creditors. As such, the proper order of events for 503(b)(9) Claims is for (a) the Debtors to file their Schedules, (b) the Court to establish a General Bar Date for the filing of proofs of claim, (c) 503(b)(9) Claimants to file their 503(b)(9) Claims on a proof of claim form by the General Bar Date and (d) the Debtors to file any objections to such claims that are necessary. 29. It is common practice for a debtor to defer claims litigation to later in a chapter 11 case. In doing so, the Debtors here will avoid burdening themselves with ad hoc claims litigation initiated by creditors during the early stages of a case, when there are a host of pressing issues to address. Moreover, by deferring claims litigation issues at the early stages of these cases, the Debtors will be able to structure the claims review process to maximize efficiency. For example, the Debtors will be able to analyze all claims of various categories in one coordinated process, and will be able to structure contested litigation so that multiple claims can be addressed at the same hearing, such that witnesses will not be required to come to Court time and time again. 30. No part of the proposed process is inconsistent with section 503 of the Bankruptcy Code, which grants the underlying priority status to the 503(b)(9) Claims. Section 503(a) of the Bankruptcy Code provides that an entity may timely file a request for payment of an administrative expense..." 11 U.S.C. 503(a) (emphasis added). Unlike postpetition

14 Document Page 14 of 16 administrative claims, this "request" can be made with respect to 503(b)(9) Claims by the entities filing a proof of claim (just as proofs of claim are filed for other prepetition claims entitled to priority status). Once an entity files such a request on a proof of claim form, "after notice and hearing, there shall be allowed administrative expenses, including the value of any goods received by the debtor within twenty (20) days before the date of commencement of a [chapter 11 case, but only if such] goods have been sold to the debtor in the ordinary course of such debtor's business." 11 U.S.C. 503(b)(1), (b)(9). The filing of the proof of claim will provide an opportunity for review by the debtors and, if necessary, an objection with a related notice and the scheduling of a hearing. Thus, addressing 503(b)(9) Claims through the proof of claim process, as proposed by the Debtors, is entirely consistent with the Bankruptcy Code and the Bankruptcy Rules The process of having 503(b)(9) Claims asserted through the filing of proofs of claim by the General Bar Date thereby including such claims as part of the normal proof of claim and bar date process, is consistent with the process established by Courts in this and other circuits. See, e.g., In re Lower Bucks Hospital, (ELF) (Bankr. E.D. Pa. January 15, 2010); In re Philadelphia Newspapers, LLC, (JFK) (Bankr. E.D. Pa. April 21, 2009) In re Quebecor World (USA) Inc., (IMP) (Bankr. S.D.N.Y. Apr. 21, 2008) (providing for procedures, including a bar date, to assert 503(b)(9) 4 The proposed 503(b)(9) Procedures also do not impede any creditor's right to payment, because there is no immediate right to payment of 503(b)(9) Claims. Section 503(b)(9) of the Bankruptcy Code makes no mention of the timing by which any claim allowed thereunder must be paid. Indeed, there is nothing in the text of section 503(b)(9) that even suggests that a claimant has a right to immediate payment. See In re Bookbinders' Restaurant, Inc., , 2006 WL , at *4 (Bank.r. E.D. Pa. Dec. 28, 2006) (finding that "The text of 503(b)(9) neither states nor even implies that allowance of the expense encompasses an unqualified right to immediate payment. Nor does the text of the provision suggest that an administrative expense allowed under 503(b)(9) is to be treated in a more favorable manner than any other allowed 503(b) administrative expense"); In re Global Home Prods. LLC, , 2006 WL, *5 (Bankr. D. Del. Dec. 21, 2006) (finding that a 503(b)(9) claimant was not due immediate payment of his claim)

15 Document Page 15 of 16 claims and prohibiting the 503(b)(9) claimants from filing motions to seek payment of their claims outside the procedures established by the court); In re Dana Corp., (BRL) (Bankr. S.D.N.Y. Jul. 19, 2006) (providing for procedures to file 503(b)(9) claims through the normal proof of claim process); see also In re Aegis Mortgage Corp., (BLS) (Bankr. D. Del. Nov. 26, 2007) (same); In re Radnor Holdings Corp., (NW) (Bankr. D. Del. Aug. 23, 2006) (same). 32. As such, the Debtors submit that the proposed 503(b)(9) procedures are in the best interest of the Debtors estates and the administration of the Debtors chapter 11 cases. NOTICE 33. 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

16 Document Page 16 of 16 court. NO PRIOR REQUEST 34. No prior motion for the relief request herein has been made to this or any other WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form attached hereto, and grant such other and further relief as is just and proper. NORRIS, McLAUGHLIN & MARCUS, PA The Paragon Centre 1611 Pond Road, Suite 300 Allentown, PA Proposed counsel to the Debtors and Debtors-In- Possession Dated: May 21, 2013 By:/s/ Morris S. Bauer Morris S. Bauer, Esq

17 Case ref Doc 12-1 Filed 05/21/13 Entered 05/21/13 15:40:19 Desc Proposed Order Pursuant to Sections 105(a) and 503 of the Bankruptcy Code and Ba Page 1 of 4 IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA 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.,

18 Case ref Doc 12-1 Filed 05/21/13 Entered 05/21/13 15:40:19 Desc Proposed Order Pursuant to Sections 105(a) and 503 of the Bankruptcy Code and Ba Page 2 of 4 KidsPeace National Centers of North America, Inc., Iron Range School, Inc., KidsPeace National Centers of New York, Inc., ORDER, PURSUANT TO SECTIONS 105(a) AND 503 OF THE BANKRUPTCY CODE AND BANKRUPTCY RULES 3002 AND 3003, ESTABLISHING PROCEDURES FOR THE ASSERTION OF SECTION 503(b)(9) CLAIMS RELATING TO GOODS RECEIVED BY THE DEBTORS WITHIN TWENTY DAYS BEFORE THE PETITION DATE Upon the motion (the Motion ) 1 of the above-captioned debtors (collectively, the Debtors ) for the entry of an order establishing procedures for the assertion of section 503(b)(9) claims relating to goods received by the Debtors within twenty days before the Petition Date; it appearing that the relief requested in the Motion is in the best interests of the Debtors' estates, their creditors and other parties in interest; the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 157 and 1334; consideration of the Motion and the relief requested therein being a core proceeding pursuant to 28 U.S.C. 157(b); 1 Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Motion

19 Case ref Doc 12-1 Filed 05/21/13 Entered 05/21/13 15:40:19 Desc Proposed Order Pursuant to Sections 105(a) and 503 of the Bankruptcy Code and Ba Page 3 of 4 venue being proper before this court pursuant to 28 U.S.C and 1409; notice of the Motion having been adequate and appropriate under the circumstances; and after due deliberation and sufficient cause appearing therefor, it is hereby ORDERED that: 1. The Motion is granted. 2. All claims under section 503(b)(9) of the Bankruptcy Code (the "503(b)(9) Claims"), shall be asserted and determined in accordance with the following procedures (the "503(b)(9) Procedures"): (a) (b) (c) (d) (e) All 503(b)(9) Claims shall be filed by the General Bar Date, which will be set for all prepetition claims in these cases by a subsequent order of the Court, and in accordance with Bankruptcy Rules 3002 and 3003 and Local Bankruptcy Rule (b)(9) Claimants shall utilize the proof of claim form to be developed by the Debtors in connection with the general bar date process, which form will permit all parties to assert the amount and priority of their claims (including priority under section 503(b)(9) of the Bankruptcy Code) in one standardized form. The 503(b)(9) Claimants shall not file motions to compel allowance or payment of administrative expenses for their 503(b)(9) Claims or schedule a hearing to consider such claims. Consistent with section 502(a) of the Bankruptcy Code, all timely filed 503(b)(9) Claims shall be deemed accepted and allowed unless objected to by the Debtors or any other party in interest pursuant to section 502(c) of the Bankruptcy Code, Bankruptcy Rule 3007 or in accordance with further procedures for addressing claims as may be established by the Court ("Claims Procedures"). If such an objection to a 503(b)(9) Claim is filed, such claim shall be adjudicated and allowed in accordance with the Bankruptcy Code, the Bankruptcy Rules, the Local Bankruptcy Rules and any Claims Procedures established by the Court. To the extent that a 503(b)(9) Claim is allowed, the claim shall be paid pursuant to, and as set forth in, the applicable plan of reorganization confirmed by the Court. Nothing in these 503(b)(9) Procedures shall affect the rights and remedies of the Debtors, any official committee appointed in these cases or any other party in interest with regard to avoidance actions, and nothing in

20 Case ref Doc 12-1 Filed 05/21/13 Entered 05/21/13 15:40:19 Desc Proposed Order Pursuant to Sections 105(a) and 503 of the Bankruptcy Code and Ba Page 4 of 4 these 503(b)(9) Procedures shall provide a 503(b)(9) Claimant a prima facie defense to any avoidance actions. 3. The 503(b)(9) Procedures are the sole and exclusive method for creditors to assert, seek determination of and obtain payment of the 503(b)(9) Claims. Except as otherwise provided herein, all 503(b)(9) Claimants are prohibited from seeking any other means for the allowance or treatment of their 503(b)(9) Claims, unless leave is specifically granted by the Court. 4. All motions or other proceedings initiated by 503(b)(9) Claimants to assert rights related to 503(b)(9) Claims, whether currently pending or initiated in the future, except those proceedings initiated by the Debtors in accordance with the 503(b)(9) Procedures or those the Debtors already have consensually resolved, are stayed and the 503(b)(9) Claims asserted therein shall be resolved exclusively by the 503(b)(9) Procedures. 5. The Debtors are authorized to take all actions necessary to effectuate the relief granted pursuant to this Order in accordance with the Motion. 6. The terms and conditions of this Order shall be immediately effective and enforceable upon its entry. 7. This Court retains jurisdiction with respect to all matters arising from or related to the implementation of this Interim Order. Dated:,2013 Reading, Pennsylvania BY THE COURT RICHARD E. FEHLING UNITED STATES BANKRUPTCY JUDGE