Opinion
Case No. 01-16034 [AJG], Jointly Administered (Post-Confirmation).
May 26, 2005
Neil Berger (NB-3599), Anthony M. Vassallo (AV-3169), TOGUT, SEGAL SEGAL LLP, New York, New York, Bankruptcy Co-Counsel for the Reorganized Debtors.
Enron Corp. ("Enron"), for itself and on behalf of its affiliated reorganized debtors in the above-referenced case (collectively, the "Debtors"), and Longhorn Leasing, Ltd. ("Longhorn") hereby stipulate and agree as follows:
WHEREAS, commencing on December 2, 2001 (the "Petition Date"), Enron and certain Debtors filed their respective voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") with the Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"); and WHEREAS, by order dated January 9, 2002, the Bankruptcy Court entered an Order (the "Termination Procedures Order") approving the Debtors' motion to establish streamlined procedures for rejecting unexpired executory contracts and unexpired leases of nonresidential real property; and
WHEREAS, on July 15, 2004, the Court entered an Order (the "Confirmation Order") confirming the Supplemental Modified Fifth Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code (the "Plan"); and
WHEREAS, the effective date of the Plan occurred on November 17, 2004; and
WHEREAS, the Confirmation Order established a deadline of sixty (60) days after the Plan's effective date for parties to file applications for administrative expense claims, and therefore, the time to file such applications expired on January 17, 2005 (the "Administrative Claim Deadline"); and
WHEREAS, commencing in 1987, the Debtors leased more than 200 photocopiers (the "Photocopiers") from Longhorn pursuant to Master Lease Agreement No. 011287-ER, dated February 12, 1987 (the "Master Agreement"), and numerous supplemental schedules (the "Lease Agreements," and together with the Master Agreement, the "Master Lease"); and
WHEREAS, pursuant to the Termination Procedures Order, on or about March 27, 2002, the Debtors served a Notice of Rejection on Longhorn and its counsel giving notice of the Debtors' intention to reject the Master Lease, effective as of March 31, 2002; and
WHEREAS, by a letter dated March 29, 2002, Longhorn's counsel contacted the Debtors and requested that the rejection date pursuant to the notice be changed to April 10, 2002, and further requested that the Debtors serve an amended notice with that new rejection date; and
WHEREAS, the Debtors filed and served a supplemental Notice of Rejection, dated April 4, 2002, setting a rejection date of April 10, 2002; and
WHEREAS, Longhorn never objected or responded to the supplemental Notice of Rejection and thus the Master Lease was rejected effective as of April 10, 2002 (the "Rejection Date"); and
WHEREAS, on or about May 9, 2002, the Debtors paid Longhorn $107,979.25 for the Debtors' use of the Photocopiers for the postpetition period through the Rejection Date, which payment Longhorn accepted without protest; and
W HEREAS, Longhorn and the Debtors attempted to negotiate the return to Longhorn of all of the Photocopiers the Debtors were leasing pursuant to the Master Lease; and
WHEREAS, the Debtors removed the Photocopiers from their various locations at the Debtors' premises to a staging area, encompassing two floors of the Debtors' headquarters, with equipment that was to be returned to other vendors, pursuant to procedures the Debtors implemented for these chapter 11 cases; and WHEREAS, by a letter dated and notarized on June 3, 2002, the Debtors affirmatively confirmed to Longhorn that they were not using any of the Photocopiers and proceeded to identify the serial number of each of the Photocopiers that the Debtors expected Longhorn to retrieve; and
WHEREAS, the Debtors and Longhorn disagreed whether the Debtors were required to comply with Longhorn's demand that the Debtors inspect and certify the operating condition of each Photocopier and deliver the Photocopiers to Longhorn; and
WHEREAS, by a letter dated June 11, 2002, Longhorn notified the Debtors that it had made an affirmative business decision to abandon the Photocopiers to the Debtors; and
WHEREAS, by a letter dated June 11, 2002, the Debtors, among other things, acknowledged Longhorn's abandonment of the Photocopiers to the Debtors; and
WHEREAS, on November 26, 2003, the Debtors commenced an adversary proceeding No. 03-93535 (the "Adversary Proceeding") by filing a complaint against Longhorn to avoid and recover preferential and/or fraudulent transfers that were allegedly made by the Debtors to Longhorn in the amount of $88,428.04 (the "Transfers"); and
WHEREAS, the Debtors filed a Notice of Discontinuance of the Adversary Proceeding, with prejudice, dated January 28, 2005; and WHEREAS, Longhorn filed a proof of claim (Claim No. 609800) in the Debtors' bankruptcy cases for a secured claim in the amount of $191,601.33 (the "Secured Claim"); and
WHEREAS, the Secured Claim was withdrawn pursuant to a Notice of Withdrawal of Scheduled Claims and Proof of Claim No. 609800, dated January 15, 2005 (the "Notice of Withdrawal"), that was filed with the Bankruptcy Court on January 26, 2005; and
WHEREAS, the Notice of Withdrawal was without prejudice to Longhorn's ability to file prior to the Administrative Claim Deadline a proof of claim for any and all administrative amounts Longhorn believed it was owed by the Debtors; and
WHEREAS, on January 17, 2005, Longhorn timely filed an application (the "Application") for allowance of administrative expense claim and for entry of an order authorizing and directing payment of a claim of no less than $700,215.01 pursuant to sections 105(a), 503(a), 503(B)(1)(A) and 507(a) of the Bankruptcy Code; and
WHEREAS, in the Application, Longhorn alleged that, among other things, the Debtors (a) induced Longhorn to abandon the Photocopiers to the Debtors; and (b) misrepresented to the Bankruptcy Court and Longhorn that (i) they were no longer using the Photocopiers and (ii) the Master Lease was burdensome and unnecessary to the Debtors' estates; and
WHEREAS, on April 18, 2005, the Debtors filed with the Bankruptcy Court an objection (the "Objection") to the Application in which the Debtors alleged, among other things, that (a) the Master Lease had been properly rejected in accordance with the Termination Procedures Order; (b) Longhorn had affirmatively and voluntarily abandoned the Photocopiers to the Debtors; and (c) the Debtors made no misrepresentation to the Bankruptcy Court or Longhorn regarding the Master Lease and the Photocopiers; and
WHEREAS, a hearing date to consider the Objection was scheduled for May 26, 2005 at 10:00 a.m.; and
WHEREAS, as a result of good faith and arm's-length negotiations, the Debtors and Longhorn have agreed to settle all claims, issues and/or disputes arising from or relating to the Application, the Administrative Expense Claim and the Objection in accordance with the terms and conditions herein; and
WHEREAS, pursuant to section 36.3 of the Plan, the Debtors are authorized to, among other things, compromise and settle objections to claims without any further Bankruptcy Court approval; and
NOW, THEREFORE, the Debtors and Longhorn hereby agree and stipulate as follows:
1. This Stipulation shall be binding on the parties from the date of its complete execution by the parties hereto, but is expressly subject to, and contingent upon, its approval by the Bankruptcy Court (the date of entry of such approval order being the "Effective Date").
2. Longhorn's Administrative Expense Claim is hereby reduced, fixed and allowed in the amount of $10,000.00 and shall be entitled to distribution in accordance with the Plan. Payment to Longhorn pursuant to this Stipulation and Order should constitute full and final payment and satisfaction of the Administrative Expense Claim.
3. Except as expressly provided in this Stipulation, on the Effective Date, Longhorn agrees to waive and release the Debtors and their affiliates, including, without limitation, Enron, from any and all prepetition and postpetition claims, whether known or unknown, relating to, arising under or in connection with the Master Agreement.
4. On the Effective Date, the Debtors and their affiliates shall be deemed to have waived and released Longhorn from any and all claims relating to, arising under or in connection with the Master Lease.
5. Longhorn shall neither file any further proofs of claim nor amend any existing proofs of claim relating to, arising under or in connection with the Master Lease.
6. This Stipulation constitutes the entire agreement between the parties hereto with respect to the Application and supersedes all prior agreements and understandings, written and oral, between the parties with respect to the Application and the subject matter herein. All representations, warrants, promises, inducements, or statements of intention made by the parties hereto are embodied in this Stipulation, and no party hereto shall be bound by, or liable for, any alleged representations, warranty, inducement, or statement of intention that is not expressly embodied herein or otherwise set forth in this Stipulation.
7. This Stipulation shall be interpreted and enforced by the Bankruptcy Court in accordance with the Bankruptcy Code and, if state law applies, in accordance with the laws of the State of New York without reference to the conflicts of law provisions therein.
8. This Stipulation may be amended by the parties hereto without further order of the Court; provided, however, that, any such amendment shall neither be material in nature nor change the economic substance of the terms hereof.
9. This Stipulation shall be binding on the parties hereto and their respective successors and assigns including any trustee that may be appointed in the Debtors' bankruptcy cases.
10. The signatories to this Stipulation represent that they are authorized to enter into this Stipulation.
11. If this Stipulation is not approved by the Bankruptcy Court or if it is overturned or modified on appeal, then this Stipulation shall be of no further force and effect, and neither this Stipulation nor any negotiations and writings in connection with this Stipulation shall be in any way construed as, or deemed to be evidence of, an admission on behalf of any party hereto. The parties reserve their rights fully respecting the subject matter herein to the extent that this Stipulation is not approved by the Bankruptcy Court.
12. This Stipulation may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party. Facsimile signatures shall be binding to the same effect as originals.
SO ORDERED.