Opinion
Case No. 02-13533 (AJG), (Jointly Administered)
December 23, 2003
Marcia L. Goldstein, Esq, Lori R. Fife, Esq., Alfredo R. Perez, Esq., WEIL, GOTSHAL MANGES LLP, New York, NY, for Debtors and Debtors in Possession
Gerard R. Luckman, Esq., Silverman Perlstein Acampora LLP, Jericho, New York, for Counsel for Capital Telecommunications, Inc.
Adam P. Strochak, Esq., WEIL, GOTSHAL MANGES LLP, Washington, DC, for Debtors and Debtors in Possession
STIPULATION AND AGREED ORDER RESOLVING MOTION OF CAPITAL TELECOMMUNICATIONS, INC. FOR ALLOWANCE OF ADMINISTRATIVE EXPENSE CLAIM
This Stipulation and Agreed Order (this "Stipulation") is made as of the 23rd day of December, 2003, by and between WorldCom, Inc. and certain of its direct and indirect subsidiaries including MCI WorldCom Network Services, Inc. ("Network Services") (collectively, the "Debtors"), as debtors and debtors in possession, and Capital Telecommunications, Inc. ("CTI"), by and through their respective undersigned counsel.
WHEREAS, on July 21, 2002 (the "Commencement Date") and November 8, 2002, the Debtors commenced cases under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). By order dated July 22, 2002 and subsequent orders, the Debtors' chapter 11 cases have been consolidated for procedural purposes and are being jointly administered. The Debtors have continued to operate their businesses and manage their properties as debtors-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.
WHEREAS, on October 31, 2003, the Court entered an order (the "Confirmation Order") confirming the Debtors' Modified Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the "Plan"). Capitalized terms not defined herein shall have the meanings ascribed to them in the Plan.
WHEREAS, effective December 13, 1999, Network Services and CTI entered into a Telecommunications Services Agreement for certain telecommunications services (as amended from time to time, the "Services Agreement").
WHEREAS, the Services Agreement was amended twice, first on November 5, 2001 (the "First Amendment"), and then again on July 22, 2003 (the "Second Amendment").
WHEREAS, the Second Amendment is now the operative agreement between the parties.
WHEREAS, the Debtors ordered certain services from CTI pursuant to the terms of the Second Amendment and CTI deployed network equipment and procured network services in order to provide services to the Debtors as required by the Second Amendment.
WHEREAS, on or about September 12, 2003, prior to accepting any additional services under the Second Amendment, the Debtors notified CTI that they intended to reject the Services Agreement pursuant to section 365 of the Bankruptcy Code.
WHEREAS, on October 15, 2003, the Debtors filed a Plan Supplement, which included a supplement to Schedule 8.01(A) of the Plan. Pursuant to such supplement, the Services Agreement is rejected consistent with Section 8.01 of the Plan and paragraph 28 of the Confirmation Order.
WHEREAS, on October 27, 2003, CTI filed a Motion for Allowance of Administrative Expense Claim Pursuant to 11 U.S.C. § 503(b)(1) and 507(a)(1) (the "Motion"), seeking payment of an administrative expense claim of at least $2.94 million on account of an alleged six-month minimum service commitment by the Debtors under the Second Amendment (the "Claim").
WHEREAS, on December 11, 2003, the Debtors filed an objection to the Motion, contending that CTI is not entitled to an administrative expense claim.
WHEREAS, to resolve the Motion and avoid the cost and burden of further litigation, without admission of liability by any party, the Debtors and CTI have negotiated this Stipulation in good faith and at arms' length and desire that it shall be binding on each of them.
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Debtors and CTI, that:
1. The Motion is hereby withdrawn.
2. CTI shall be allowed an administrative expense claim in the amount of one million five hundred thousand dollars ($1,500,000) (the "Administrative Expense Claim").
Unless the Order approving this Stipulation is expressly stayed, the Debtors shall pay the Administrative Expense Claim to CTI by wire transfer, in accordance with instructions provided by CTI, not later than December 31, 2003.
4. The above-described Administrative Expense Claim shall be in full and complete satisfaction of the Claim. For and in consideration of the agreements of the Debtors as stated in this Stipulation, CTI, on behalf of itself and its successors and assigns, does hereby release, acquit, and forever discharge the Debtors and each of them; all successors and assigns of each of the Debtors; all predecessors of each of the Debtors; all officers, directors, shareholders, agents, representatives, consultants, attorneys, and employees of each of the Debtors and of each of the Debtor's predecessors, successors and assigns, of and from any and all claims, demands, actions, liabilities, obligations, costs, expenses, and causes of action, past, present, or future, known or unknown, relating to payment for services under the Services Agreement, as amended, including without limitation contractual minimum commitments, cancellation fees, any objection to rejection of the Services Agreement, and any claim for rejection damages,provided, however, that notwithstanding the foregoing CTI reserves and does not release any claim relating to any unpaid amounts that were due from the Debtors under the Services Agreement as of the Commencement Date, and the Debtors likewise reserve all rights to object to such claim.
6. Each person who executes this Stipulation represents that he or she is duly authorized to execute this Stipulation on behalf of the respective parties hereto and that each such party has full knowledge and has consented to this Stipulation.
7. This Stipulation may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument and it shall constitute sufficient proof of this Stipulation to present any copy, copies or facsimiles signed by the parties hereto to be charged.
8. This Stipulation, and the terms and conditions contained herein, are subject to the approval of the Court and shall insure to the benefit of CTI and its successors and assigns and to the benefit of the Debtors and their successors and assigns, including, without limitation, a trustee, if any, appointed under chapter 7 or 11 of the Bankruptcy Code.
9. This Stipulation is subject to, and conditioned upon, approval by the Bankruptcy Court.
IT IS SO ORDERED.