Case No. 04-13819 Jointly Administered.United States Bankruptcy Court, E.D. Virginia, Alexandria Division.
June 24, 2005.
Brian P. Leitch, Esq., Daniel M. Lewis, Esq., Michael J. Canning, Esq., ARNOLD PORTER LLP, Denver, Colorado, and Washington, DC, and New York, New York, Lawrence E. Rifken, Esq., Douglas M. Foley, Esq., David I. Swan, Esq., McGUIREWOODS LLP, McLean, Virginia, Counsel to the Debtors and Debtors-in-Possession.
Kimberley H. Tyson, Esq., Sherman Howard L.L.C., Denver, CO, and Stephen E. Leach, Esq., Leach Travell, a Professional Corporation, Vienna, VA, Counsel for Jeppesen Sanderson, Inc.
CONSENT ORDER RESOLVING MOTION OF JEPPESEN SANDERSON, INC. FOR RELIEF FROM STAY OR ADEQUATE PROTECTION
STEPHEN MITCHELL, Bankruptcy Judge
WHEREAS, on September 12, 2004 (the “Petition Date”), Debtors US Airways, Inc. (“US Airways”), US Airways Group, Inc., PSA Airlines, Inc. (“PSA”), Piedmont Airlines, Inc. (“Piedmont”), and Material Services Company, Inc. each filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, which cases are being jointly administered as captioned above;
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WHEREAS, Jeppesen Sanderson, Inc. (“Jeppesen”) is engaged in the business of supplying commercial airlines with various flight information products and navigational services;
WHEREAS, Jeppesen and Debtors are parties to various contracts relating to flight information products and navigational services, including the Master Service Agreement dated September 12, 1994; the LSI FMCS Navdata Update Service Agreement dated February 5, 1986; the Flight Planning Navdata Agreement dated June 1, 1987; and the Simulator Navdata Agreement dated July 10, 1987 (collectively, the “Contracts”);
WHEREAS, the flight information products and navigational services provided by Jeppesen are essential to the Debtors’ business operations;
WHEREAS, each of the Contracts have initial terms which have expired, but provide for automatic annual renewal periods and the parties have continued to perform under the Contracts as renewed;
WHEREAS, the Debtors did not assume the Contracts in their prior bankruptcy cases, however, neither Jeppesen nor the Debtors terminated the Contracts and the parties have continued to operate in accordance with their terms;
WHEREAS, on or about August 26, 2003, Jeppesen and the Debtors agreed to adjust the security deposit provided under the Contracts, such that as of the Petition Date Jeppesen held deposits from the Debtors, as follows:
US Airways $257,000 PSA $ 18,000 Piedmont $ 64,000
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WHEREAS, as of the Petition Date, Jeppesen had claims against the Debtors, as follows:
US Airways $331,069.35 PSA $ 32,833.43 Piedmont $ 9,315.02
WHEREAS, on or about April 22, 2005, Jeppesen filed a Motion for Relief from Stay or Adequate Protection (the “Motion”) (Docket # 2088), seeking relief from the automatic stay to terminate the Contracts unless Debtors provide Jeppesen adequate protection in the form of either a post-petition security deposit or letter of credit; and
WHEREAS, the Debtors and Jeppesen request approval from this Court to resolve the Motion, on the following terms:
1. The Debtors and Jeppesen agree, and this Court orders, that the Contracts are in existence and are executory contracts subject to assumption or rejection under Section 365 of the Bankruptcy Code. The term of the Contracts shall extend through March 31, 2006 and be automatically renewed on annual basis as of April 1, 2006 and subsequent one year periods (the “Extension Date”), unless one party provides to the other a notice to terminate at least ninety (90) days in advance of the Extension Date. Alternatively, the parties may, prior to the Extension Date, enter into new agreements for the provision of all navigational products and services currently being provided to the Debtors under the Contracts.
2. The Debtors have paid all post-petition amounts identified in the Motion and are current with their post-petition payment obligations to Jeppesen. The Parties shall continue to promptly reconcile and resolve any post-petition amounts due.
3. Relief from the automatic stay is hereby granted solely for the purpose of allowing Jeppesen to offset its pre-petition security deposits against its pre-petition claims
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with respect to each Debtor. In particular, Jeppesen may offset its entire pre-petition deposit of $257,000.00 against its pre-petition claim of $331,069.35 with respect to US Airways and its entire pre-petition deposit of $18,000.00 against its pre-petition claim of $32,833.43 with respect to PSA. After taking the offset, Jeppesen shall have pre-petition, unsecured claims of $74,069.35 against US Airways and $14,833.45 against PSA, for total pre-petition unsecured claims of $88,902.80 against the Debtors which shall be reduced to $44,451.40 if the Contracts are assumed by the Debtors in these bankruptcy cases. Further, Jeppesen may offset of $9,315.02 of its pre-petition deposit against its pre-petition claim of $9,315.02 with respect to Piedmont, leaving an excess deposit of $54,684.98.
4. Within five business days of execution by the parties of this proposed Consent Order, Debtors shall, by wire transfer, provide Jeppesen with a security deposit of $340,315.02 as adequate protection to secure amounts due from the Debtors to Jeppesen on a post-petition basis. Jeppesen shall be entitled to retain the excess pre-petition deposit, net of offset, of $54,684.98 as an additional post-petition deposit, so that Jeppesen shall be adequately protected with a total deposit of $395,000.00. Upon receipt of the security deposit, payment terms shall resume net 30 days from the date of invoice.
5. Should the Court enter an Order denying approval of the terms set forth in this Consent Order, then within five business days, Jeppesen shall, by wire transfer, return the $340,315.02 to Debtors. The security deposit shall be allocated between Debtors as follows: US Airways, $316,750.00; Piedmont, $26,075.00; and PSA, $52,175.00. Unless required by any new agreements between Debtors and Jeppesen, Debtors shall be entitled to return of this security deposit upon execution of new agreements with Jeppesen or upon termination of the Contracts, after payment of all outstanding charges.
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6. Nothing contained in this Stipulation shall be deemed an assumption or rejection of any Contract, and except as expressly set forth herein, nothing contained in this Stipulation shall be construed as an amendment or modification of the terms of the Contracts.
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