Case No. 02-13533 (AJG), (Jointly Administered)United States Bankruptcy Court, S.D. New York.
October 15, 2003
Marcia L. Goldstein, Lori R. Fife, Alfredo R. Perez, Adam P. Strochak, WEIL, GOTSHAL MANGES LLP New York, N.Y. for Debtors and Debtors In Possession
G. Larry Engel, James Hoover, MORGAN, LEWIS BOCKIUS LLP, San Francisco, California for Wells Fargo Bank, N.A.
STIPULATION AND ORDER REGARDING PROCEDURES FOR RESOLUTION OF THE DEBTORS’ OBJECTION TO CERTAIN WELLS FARGO BANK CLAIMS AND WELLS FARGO BANK’S OBJECTION TO PLAN OF REORGANIZATION
ARTHUR GONZALEZ, Bankruptcy Judge
WHEREAS, on July 21, 2002 (the “Commencement Date”) and November 8, 2002, WorldCom, Inc. (“WorldCom”) and certain of its direct and indirect subsidiaries, as debtors and debtors in possession (collectively, the “Debtors”), commenced cases under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. By order dated July 22, 2002, and subsequent orders, the Debtors’ chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered.
WHEREAS, on May 28, 2003, July 10, 2003, August 6, 2003, and September 12, 2003, the Court approved the Debtors’ Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code, dated May 23, 2003, the First Supplement thereto, dated July 9, 2003,
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the Second Supplement thereto, dated August 6, 2003, and the Third Supplement thereto, dated September 12, 2003 (collectively, the “Disclosure Statement”) and scheduled the hearing for the Court to consider the confirmation of the Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (as amended, supplemented, or modified, the “Plan”). Capitalized terms not defined herein shall have the meanings ascribed to such terms in the Plan and Disclosure Statement.
WHEREAS, the Debtors and Wells Fargo Bank, N.A. (“WFB”) enter into this Stipulation with respect to the pending disputes generally described in the following documents (and other documents incorporated by reference therein):
a. The proofs of claim filed by WFB against all or almost all of the Debtors, individually and/or collectively, asserting Claims arising from the Debtors’ prepetition draw of the 364-Day Facility.
b. The “Debtors’ Fourth Omnibus Objection to Proofs of Claim (Bank Group Claims-Duplicate Claims),” dated April 23, 2003 (Docket No. 5153), and the related “Response of Wells Fargo Bank, N.A.,” filed May 15, 2003, and related “Wells Fargo Bank, N.A.’s Request for Judicial Notice” (Docket Nos. 5870, 5876) (collectively, the “WFB POC Proceeding”).
c. The Plan and the related “Objection by Wells Fargo Bank, N.A., to the Debtors’ Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code,” dated July 28, 2003, and related “Errata,” dated August 6, 2003 (Docket Nos. 7752, 8102) and “Opening Statement of Wells Fargo Bank,” dated September 7, 2003 (Docket No. 8743), and the “Supplemental Objection by Wells Fargo Bank, N.A., to WorldCom Debtors’ Second Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code,” dated September 30, 2003 (Docket No. 9170) (the “WFB Plan Objections”).
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WHEREAS, WFB does not object to: (a) substantive consolidation of the WorldCom Debtors or the Intermedia Debtors, (b) the MCIC Settlement; (c) the Intermedia Settlement; (d) the Bank Settlement (as to the other Banks); (e) the MCI Subordinated Debt Settlement; (f) the MCIC Senior Debt Amendment; (g) the Ad Hoc MCI Trade Claims Committee Settlement; or (h) the Pre-merger MCI Creditors Settlement.
WHEREAS, WFB does object to the effect of the Plan on WFB’s claims, including the release or discharge of WFB claims against Debtors and non-debtors, and reserves the right to challenge the classification, release and treatment of its claims under the Plan and to seek classification and treatment of its claims in any class.
WHEREAS, WFB and Debtors believe that their disputes can best be resolved promptly and comprehensively as a matter of law in the context the claims dispute resolution process, based upon the record from the aforementioned pleadings and other filings, proposed confirmation hearing exhibits, depositions and discovery responses and related documents and transcripts and further discovery referenced herein (collectively, the “Factual Record”), as well as from certain supplemental facts.
WHEREAS, but for the approval of this Stipulation, WFB’s objection to the Plan could require a longer and more complex confirmation hearing than otherwise is required.
WHEREAS, the Debtors and WFB advised the Court of the procedures contemplated herein on the record at the confirmation hearing on September 15, 2003.
NOW, THEREFORE, it is hereby stipulated, agreed, and ordered that:
1. The Debtors and WFB agree that the WFB Plan Objections shall be addressed as part of the claims reconciliation process and that a confirmation order may be
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entered, and the Plan may become effective, prior to final adjudication of the WFB Plan Objections.
2. Deferral of the WFB Plan Objections to the claims reconciliation process shall be without prejudice to WFB’s right to argue as to the proper classification and treatment of its claims under the Plan, free of releases or discharges. Entry of a confirmation order, any findings of fact or conclusions of law therein, or the occurrence of the Effective Date, shall not prejudice WFB’s right to argue as it deems appropriate as to how its claims should be classified or treated under the Plan and its right to argue that it is not bound by the Bank Settlement or Plan releases or discharges, provided, however, that, without impairing the express reservations of rights in this Stipulation with respect to such WFB arguments, nothing herein shall be construed to permit WFB to reargue or readjudicate any order that may be entered confirming the Plan.
3. Deferral of adjudication of the WFB Plan Objections is without prejudice to the Debtors’ right to argue that the acceptance of classes 3 A and 5 of the Plan binds WFB to the treatment provided for such classes under the Plan, or the right of WFB to oppose such argument.
4. The WFB Plan Objections and the WFB POC Proceeding shall be adjudicated at a hearing to be set to commence on January 27, 2004, or as soon thereafter as the Court is available. The Debtors and WFB shall diligently work in good faith to agree upon the admissibility of evidence contained within the Factual Record, as well as to certain stipulated facts and discovery to supplement the Factual Record, upon which the Court may adjudicate the WFB Plan Objections and the WFB POC Proceeding.
5. The Debtors also shall confer in good faith with WFB regarding a stipulation of undisputed facts as to the Intermedia Debtors. WFB may seek discovery and
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depositions pursuant to Rule 30(b)(6), on matters relating to WFB’s claims against the Intermedia Debtors and related arguments at issue pursuant to this Stipulation, and Debtors shall use reasonable efforts to respond to such discovery requests on a rolling basis with the objective of the completion of the aggregate discovery responses within no more than seven (7) weeks from the date of WFB’s discovery requests. In order to facilitate such cooperative discovery and depositions, WFB has identified to Debtors on October 11, 2003, an outline (the “WFB Outline”) of topics on which WFB expects to focus its discovery and depositions. The Debtors have responded to the WFB Outline with preliminary comments and, while the Debtors have not yet determined their final position as to the availability of any particular information or documents and reserve the right to object to any specific discovery requests that WFB may eventually propound, the Debtors agree that they will not seek a protective order against properly formulated requests covering topics identified in the WFB Outline on which the Debtors’ preliminary comments indicated that discovery could be provided
6. The Debtors reserve the right to object to WFB’s discovery demands or requests for depositions to the extent they are excessive or otherwise unreasonable, or otherwise objectionable under the Federal Rules of Bankruptcy Procedure and the Local Rules of the Court; provided, however, that: (1) absent good cause shown for delay while best efforts continue to expedite the response, any objections to such discovery or depositions shall be made by Debtors with specificity with twenty-one (21) days of service of the discovery demands, so that the meet and confer by the parties can occur while the time passes pending any motion to compel or for a protective order, which motion shall be heard within ten (10) days from the initial objection; (2) Debtors shall respond to any written discovery (e.g., interrogatories, requests for admission and document requests) within 21 days as to interrogatories and requests for admission and the later of thirty (30) days or
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December 12, 2003, as to document production, subject to good cause shown for delay while best efforts continue to expedite the response; provided that Debtors shall in good faith produce documents on a rolling basis as the same become available during such period; (3) whenever Debtors have an objection to discovery or depositions, Debtors shall comply with respect to any nonobjectionable portion of the discovery or deposition and continue to comply on a rolling basis as objections are resolved as to other parts of such discovery or depositions; and (4) the parties shall meet and confer on any objections and work cooperatively to minimize delays, including by responding on nonobjectionable matters or resolved matters without regard to or delay for other matters still in dispute. In any event, the parties shall cooperate in good faith to accomplish such discovery and depositions in time for the results to be reasonably prepared for use at the hearing.
7. If WFB desires to take further depositions pursuant to Rule 30(b)(6), it shall serve a concise list of specific topics on which it wishes to take testimony from the Debtors. Within 10 days of receipt of such list, the Debtors shall identify to WFB its proposed Rule 30(b)(6) designees by name and title, subject to the Debtors right to supplement or change the designees prior to the deposition for good cause,provided, however, that if the Debtors are not able to identify a Rule 30(b)(6) designee on a particular topic, the Debtors shall so advise WFB and shall assist in determining what alternative form of discovery may be available. Absent good cause shown for delay while best efforts continue to expedite the deposition, such Rule 30(b)(6) depositions may be taken on 10 days prior notice, when WFB determines that it has sufficient relevant discovery data to make the same productive.
8. Promptly after request for the same, Debtors shall provide to WFB an official, admissible copy (electronic or “soft” copies, where available) of any depositions
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taken during the Chapter 11 case of any present or former Debtor employee, officer or director or any Committee witness, as well as the Debtors’ discovery responses to interrogatories or requests for admissions of any objector (besides WFB).
9. The parties agree that the transcript of the deposition of Seth Moldoff may be used at the hearing in lieu of live testimony. In addition, the Debtors agree that WFB may make a proffer of any additional testimony of Seth Moldoff at least five (5) business days before the hearing, regarding WFB’s reliance and related facts as to the closing, funding and conversion to a term loan under the 364 Day Facility. If WFB elects to proceed by proffer, the Debtors reserve the right to cross-examine Mr. Moldoff.
10. The Debtors and WFB each shall file briefs at a mutually agreed time at least five business days prior to the scheduled commencement of the hearing, which may include and summarize excerpts from the Factual Record. The parties shall present oral argument on such scheduled hearing date, which may include supporting references to or exhibits of such Factual Record
11. Notwithstanding any other provision of this Stipulation, WFB reserves the right to make at least the following arguments, which the Debtors reserve the right to dispute (except that the Debtors shall not assert that the fact of confirmation of the Plan, should it be confirmed, precludes such arguments), and confirmation of the Plan shall be without prejudice to such arguments by either party:
a. That WFB is entitled to select among alternative remedies and that WFB is entitled to cumulative remedies against the WorldCom Debtors and the Intermedia Debtors;
b. That WFB is entitled to a Class 12 claim against the Intermedia Debtors, as well as a Class 6 Claim against MCIC, that each such claim is not subsumed by
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Class 3 A recoveries, and that WFB is entitled to opt out of Class 3 A,provided, however, that nothing herein shall preclude the Debtors from arguing that the acceptance of the Plan by Class 3 A creditors binds WFB to the terms of the Bank Settlement;
c. That WFB cannot be compelled to release claims against non-debtors, including under section 524(e) of the Bankruptcy Code or to release Intermedia Debtors or MCIC Debtors with respect to Class 12 or 6 claims, respectively;
d. That the incorporation of various settlements in the Plan, pursuant to which certain classes of creditors or equity receive greater recoveries than others, is a consideration that the Court may take into account in adjudicating the WFB POC Proceeding in connection with WFB’s objections to the classification, treatment or release of its claims,provided, however, that nothing in this reservation shall be construed to allow for reargument or readjudication the Court’s approval of any settlement, should the Court enter an order confirming the Plan;
e. That indemnification of certain officers, directors, and employees by the Debtors pursuant to section 8.07 of the Plan does not affect any claim of WFB against any Debtor or non-debtor or any objections to be heard by the Court under this Stipulation.
12. WFB reserves the right to object to the Modification of the Second Amended Plan as it relates to the settlement with preferred shareholders of Intermedia. Such objection shall be heard by the Court on October 15, 2003.
13. In the event the Plan is confirmed and becomes effective prior to final adjudication of the WFB POC Proceeding, WFB shall be entitled to receive a Class 5 distribution contemporaneously with distributions to other members of Class 5, subject to a holdback for any amount WFB may be entitled to receive under Class 3 A. The other Banks
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participating in the Bank Settlement may receive their benefits thereunder without regard to WFB’s position.
14. 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.
15. 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.
16. This Stipulation, and the terms and conditions contained herein, are subject to the approval of the Court and shall inure to the benefit of the Debtors, their successors and assigns, including, without limitation, a trustee, if any, appointed under chapter 7 or 11 of the Bankruptcy Code.
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17. Nothing herein shall be construed to affect the claims or priorities of creditors other than WFB in these bankruptcy proceedings.
SO ORDERED
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