Opinion
Case Nos. 01-16034 [AJG], Jointly Administered, 02-22736 through 02-22742; 02-22744 through 02-22746, 02-22749; 02-22751 through 02-22754 (ASH) Jointly Administered.
February 6, 2003
TOGUT, SEGAL SEGAL LLP, New York, New York, Bankruptcy Co-Counsel for Enron Broadband Services, Inc., et al., By: Neil Berger, New York, New York.
INGRAM YUZEK GAINEN CARROLL BERTOLOTTI, LLP, Special Counsel for Metromedia Fiber Network, Inc, et al., David G. Ebert, New York, New York.
Enron Broadband Services, Inc. f/k/a Enron Communications, Inc. ("EBS") and Metromedia Fiber Network, Inc. ("Metromedia"), by and through their respective counsel, hereby stipulate:
WHEREAS, On December 2, 2001 (the "EBS Petition Date"), EBS and certain of its affiliates (collectively, the "Debtors") filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code with this Court; and
WHEREAS, on May 20, 2002 (the "MFN Petition Date"), Metromedia and its affiliated debtor entities (collectively, "Metromedia") filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court of the Southern District of New York, White Plains Division;
EBS' Administrative Expense Claim
WHEREAS, prior to the MFN Petition Date, EBS provided Metromedia with, among other things, the use certain portions of the EBS fiber-optic communications system (the "System") and in consideration for Metromedia's use of the System, Metromedia was obligated to remit agreed upon payments to EBS; and
WHEREAS, Metromedia and EBS are parties to certain agreements which obligate Metromedia to make payment to EBS for use of the System: (i) a Lease Agreement dated June 30, 1999 (the "Master Lease"); (ii) a Collocation Agreement dated June 30, 1999 (the "Collocation Agreement"), as amended November 15, 2000; and (iii) an Indefeasible Right to Use Agreement dated November 15, 2000 (the "IRU Agreement", together with the Master Agreement and the Collection Agreement, the "EBS Agreements"); and
WHEREAS, pursuant to the Master Lease, EBS leased to Metromedia six (6) fibers in the System that are routed from Salt Lake City, Utah to Houston, Texas and EBS provided and continues to provide or arrange for certain of Metromedia's maintenance and repair requirements, government or municipal approvals, as well as rights, licenses, authorizations, rights of way and other agreements necessary for installation and use of the System; and
WHEREAS, the fiber-optic route is delivered in two (2) segments: (a) a segment that is routed from Salt Lake City, Utah to Dallas, Texas with annual payments in the amount of $2,014,836.42 to EBS and (b) a segment that is routed from Dallas, Texas to Houston, Texas with annual payments in the amount of $762,306.58 to EBS (the "Annual Fees"); and
WHEREAS, EBS asserts that pursuant to the Master Lease, Metromedia is obligated to make annual payments of $2,777,143 to EBS for the entire twenty year term of the Master Lease, with an annual re-acceptance of the Master Lease, and that Metromedia is indebted to EBS under the terms of the Master Lease in the amount of $2,777,143 on account of the Metromedia's use and benefit of the System since the MFN Petition Date through September 30, 2002, and continuing thereafter; and
WHEREAS, in connection with the Master Lease, EBS and Metromedia entered into the Collocation Agreement, pursuant to which EBS provided Metromedia with the right and license to, among other things, locate, install, maintain and operate equipment in EBS' collocation facilities at regeneration space sites along the route from Salt Lake City, Utah to Houston, Texas; and
WHEREAS, EBS asserts that Metromedia is obligated to pay $78,956 to EBS monthly in consideration for its agreement to use all of the collocation facilities, and EBS calculates that it is owed $315,824 by Metromedia from the MFN Petition Date through September 30, 2002 pursuant to the Collocation Agreement; and
WHEREAS, pursuant to the IRU Agreement, EBS provides Metromedia with an indefeasible right to use fiber-optic cables located in both Salt Lake City, Utah (the "Salt Lake City Fibers") and Denver, Colorado (the "Denver Fibers"), and EBS asserts that Metromedia is obligated to pay $2,500 per month to EBS in consideration for the use of the Salt Lake City Fibers, and $5,000 per month to EBS in consideration for the use of the Denver Fibers, resulting in a monthly obligation of $7,500; and
WHEREAS, EBS calculates that it is owed $30,000 from the MFN Petition Date through September 30, 2002 pursuant to the payment terms of the IRU Agreement; and
WHEREAS, by its Motion dated October 7, 2002 in the Metromedia cases (the "EBS Motion"), EBS has sought an order pursuant to 11 U.S.C. § 503(a) and (b)(1) and 365(d)(10) allowing and compelling immediate payment of an administrative expense claim in the aggregate amount of $3,122,967 (the "EBS Administrative Claim"), representing the sum of: (a) $2,777,143 arising from the Master Lease, plus (b) $315,824 arising from the Collocation Agreement, and plus (c) $30,000 arising from the IRU Agreement, for a total of $3,122,967 for services provided to Metromedia under the System Agreements subsequent to the MFN Petition Date;
Metromedia's Administrative Expense Claim
WHEREAS, Metromedia asserts that prior to the EBS Petition Date, EBS and Metromedia entered into certain Internet Services and Collocation Agreements (collectively, the "Service and Lease Agreements"); and
WHEREAS, Metromedia asserts that pursuant to the Service and Lease Agreements, EBS agreed to make certain payments to Metromedia in exchange for the rights granted to EBS by Metromedia to operate telecommunication equipment at Metromedia's collocation spaces and for Metromedia to provide EBS with internet connectivity (collectively, the "Services"); and
WHEREAS, in exchange for receipt of such Services, EBS was obligated to pay Metromedia certain monthly service and lease fees and related charges (collectively, the "Service Charges"); and
WHEREAS, Metromedia asserts that EBS failed to make its annual advance payment to Metromedia, approximately nine (9) months of which pertained to periods after the EBS Petition Date, as required under the Service and Lease Agreements; and
WHEREAS, Metromedia asserts that EBS has failed to pay Metromedia an amount aggregating $1,964,966, for Services that EBS received from Metromedia under the Service and Lease Agreements after the EBS Petition Date through the date that EBS rejected its Service and Lease Agreements with Metromedia pursuant to EBS's Notice of Rejection, effective September 27, 2002 (the "Rejection Date"); and
WHEREAS, by its application dated October 25, 2002 (the "MFN Motion") Metromedia has sought allowance and payment of an administrative claim in the EBS case in the amount of $1,964,996 (the "MFN Administrative Claim"); and
The Parties' Contentions Regarding Their Respective Administrative Claims
WHEREAS, in its discussions with EBS, Metromedia has asserted, among other things, that: (a) it only utilized two (2) of the six (6) fibers in the System pursuant to the Master Lease and that as a result, EBS is not entitled to an administrative claim calculated upon the use of all six (6) filing pursuant to the Master Lease; and (b) Metromedia did not use all of the services pursuant to the Collocation Agreement and (c) that, as a result, it is entitled to reduce the amounts sought by EBS pursuant to its Motion; and
WHEREAS, Metromedia asserts that current market prices for the goods and services provided pursuant to their various agreements have decreased, thereby entitling it to further reduction of the amount sought by EBS; and
WHEREAS, Metromedia asserts that it has a right to set-off the MFN Administrative Claim against the EBS Administrative Claim and EBS disputes that assertion; and
WHEREAS, EBS, asserts that its estate did not receive any benefit from Metromedia pursuant to the Service and Lease Agreements and that, as a result, Metromedia is not entitled to an administrative expense claim or any set-off in the EBS case; and
WHEREAS, EBS seeks to reject the EBS Agreements and any and all other agreements, whether written or oral by and between EBS and Metromedia effective as of January 21, 2003; and
WHEREAS, EBS and Metromedia have engaged in negotiations regarding their respective legal positions as well as present market conditions, have exchanged documents and information, and wish to resolve all issues concerning the EBS Administrative Claim and the MFN Administrative Claim utilizing their best business judgment.
NOW, THEREFORE, EBS and Metromedia by their undersigned counsel, hereby stipulate and agree as follows:
1. Within five business day of the day on which the parties obtain the Bankruptcy Court's approval of the Stipulation and Agreed Order in both the EBS and Metromedia case ("Effective Date"), Metromedia shall pay to EBS $545,509 in immediately available funds (the "MFN Payment").
2. The MFN Payment shall fully and finally satisfy, and extinguish, both the EBS Administration Claim and MFN Administrative Claim and shall resolve all of the issues, disputes, contentions, claims and defenses asserted by the parties in both the EBS Motion and the MFN Motion. The parties' respective rights and defenses regarding pre-petition claims against the other's estates are expressly preserved.
3. Metromedia shall cease using the System by no later than January 31, 2003. Metromedia shall remove all equipment relating to the System on or before February 28, 2003. If Metromedia does not cease using the System on or before January 31, 2003, EBS shall be entitled to seek payment of administrative expense claims for MFN's use of the System from and after January 31, 2003. EBS shall in any event have the right to terminate all of the Services provided pursuant to the EBS Agreements on and after February 1, 2003 without further notice to Metromedia or Order of any Court.
4. On the Effective Date, the EBS Agreements and any and all other agreements, whether written or oral, by and between EBS and Metromedia will be deemed rejected and terminated pursuant to section 365 of the Bankruptcy Code as of January 31, 2003, to the extent that the Agreements have not previously been rejected or otherwise terminated by their terms.
5. Metromedia hereby waives any right to seek any extension or reinstatement of the EBS Agreements.
6. EBS and Metromedia will promptly seek Bankruptcy Court approval of this Stipulation in their respective chapter 11 cases.
7. Each of the parties represents and warrants that the person who executed this Stipulation and Order on its behalf is authorized to do so without further consent or authorizations.
8. No amendment or waiver of any provision of the Stipulation and Agreed Order, nor consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by all parties hereto and approved by the Bankruptcy Court; provided that such waiver shall be effective only in the specific instance and the specific purpose given.
9. All of the terms and provisions of this Stipulation shall become immediately effective as between the parties on the Effective Date Provided, however, that, in the event that the parties do not obtain the Bankruptcy Court's approval of this Stipulation and Agreed Order in both the EBS and MFN Case, all of this Stipulation and Agreed Order's recitals, terms, provisions and agreements shall be null and void, inadmissible for any and all purposes and shall have no evidentiary basis whatsoever.
10. Except to the extent required to repay the DIP Obligations pursuant to and in accordance with the Final Order and the documents, all proceeds received by the Debtors in connection with the Termination and Settlement Agreement shall be retained by the Debtors and neither disbursed nor used until the earlier to occur of (i) agreement by and between the Debtors and the Creditors' Committee with respect to the release of such proceeds and (ii) further order of this Court.
Capitalized terms used in this paragraph and not defined herein or in the Motion shall have the meanings ascribed to them in the Final Order Authorizing Debtors to Obtain Post-Petition Financing. Pursuant to 11 U.S.C. § 105, 361, 362, 364(c)(2), 364(c)(3) and 364(d)(1) dated July 2, 2002 (the "Final Order").
11. Nothing contained in this Stipulation/Order shall serve as direct, precedential or persuasive authority, including, without limitation, as "law of the case", res judicata, or any form of estoppel, in determining whether any agreement is a sale, lease, license, executory contract or other form of agreement
12. The Bankruptcy Court shall retain exclusive jurisdiction to determine any disputes arising from or relating to this Stipulation and Agreed Order.
13. This Stipulation and Agreed Order may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which shall constitute one and the same. Facsimile signatures shall be deemed to be original signatures for all purposes.
14. Except to the extent that the Bankruptcy Code applies, this Stipulation and Agreed Order shall be governed and construed in accordance with the laws of the State of New York without giving effect to New York's choice of law or conflict of law principles.
15. The parties hereto shall be responsible for their respective costs and expenses, including, without limitation, attorneys' fees incurred by it in negotiating, drafting and obtaining approval of the terms of this Stipulation and Agreed Order and shall not be responsible for the payment of any such fees or costs incurred by any other party hereto.
"SO ORDERED" on this 6th day of February 2003 in New York, New York.