Opinion
Case No. 01-16034 (AJG) Jointly Administered.
February 6, 2003
Upon the motion dated December 5, 2002 (the "Motion") of Enron North America Corp. ("ENA" or "Seller"), as debtor and debtor in possession, pursuant to sections 105, 363(b), (f), (m) and (n), and 365 of title 11, United States Code 11 U.S.C. § 101 et seq. (the "Bankruptcy Code") and Rules 2002, 6006, 6004, 9013 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules") and S.D.N.Y. Local Bankruptcy Rule 9013, for the entry of the following two orders: (A) an order (the "Procedures Order") (I) authorizing and scheduling an auction (the "Auction") at which ENA would solicit bids for a credit derivative contract, as evidenced by a Confirmation Letter Agreement, dated December 22, 2000 (the "Contract") by and between ENA and ACE Capital Re Overseas Ltd. ("ACE"), (II) approving the procedures to be used in connection with the Auction (the "Bidding Procedures"), (III) scheduling a hearing (the "Sale Hearing") on the sale of the Contract free and clear of liens, claims, encumbrances, rights of setoff, netting, deduction and recoupment, and other interests by means of an assumption and assignment of the Contract pursuant to sections 105, 363, and 365 of the Bankruptcy Code, (IV) approving procedures (the "Cure Amount Procedures") to determine the amounts to cure any defaults under the Contract (the "Cure Amounts"), (V) approving the form and scope of notices with respect to the Bidding Procedures, the Sale Hearing, the winning bid at the Auction (the "Notice of Sale"), the Auction, and (VI) setting the date for objections to the Motion; and (B) this Order approving the sale of the Contract free and clear of liens, claims, encumbrances, rights of setoff, netting, deduction and recoupment, and other interests to Canadian Imperial Bank of Commerce, London Branch ("CIBC" or "Buyer") by means of assumption and assignment pursuant to section 365 of the Bankruptcy Code in accordance with the terms of the Purchase and Sale Agreement, dated as of January 30, 2003 (the "Purchase Agreement"), by and between CIBC and ENA, and the Procedures Order having been entered by this Court on December 19, 2002; and ENA having conducted an Auction in accordance with the procedures set forth in the Procedures Order; and the Sale Hearing having been held before the Court on February 6, 2003; and the Court having jurisdiction to consider and determine the Motion in accordance with 28 U.S.C. § 1334; and due notice of the Motion having been provided, and it appearing that no other or further notice need be provided; and after due deliberation and sufficient cause appearing therefor;
All capitalized terms used, unless otherwise defined herein, shall have the meaning ascribed to them in either the Motion or the Purchase Agreement (as defined herein).
IT IS HEREBY FOUND AND DETERMINED:
A. The Court has jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. § 157 and 1334.
B. As evidenced by the certificate of service filed with the Court, and based on the representations of counsel at the hearing, (A) proper, timely, adequate, and sufficient notice of the Motion, a substantially similar form of this Order, the Purchase Agreement, the transactions contemplated therein, the Auction, the Cure Procedures and the Sale Hearing has been provided in accordance with sections 105, 363 and 365 of the Bankruptcy Code and Bankruptcy Rules 2002, 6004, 6006, and 9013 and S.D.N.Y. Local Bankruptcy Rule 9013 to all interested persons and entities, including, but not limited to, (i) the Office of the United States Trustee, (ii) counsel for the DIP Lenders, (iii) counsel for the statutory committee of unsecured creditors in the Debtors' chapter 11 cases (the "Creditors' Committee"), (iv) Buyer's counsel, (v) ACE, the counterparty to the Contract, (vi) all entities known to ENA to have, or to have asserted, any lien, claim, encumbrance interest, rights of setoff, recoupment, netting, deduction or other interest, in or upon the Contract, (vii) all parties who submitted a prior bid for the Contract, (viii) all parties who expressed in writing to ENA an interest in the Contract, (ix) all relevant taxing authorities, (x) the Examiners for Enron Corp. and Enron North America, (xi) counsel for the Employment-Related Issues Committee; and (xii) all entities who had filed a notice of appearance and request for service of papers in these cases in accordance with the Court's Amended Case Order, dated February 26, 2002, and the Court's Amended Case Order dated February 26, 2002, (B) such notice was good and sufficient and appropriate under the particular circumstances, and (C) no other or further notice of the Motion, this Order, the Purchase Agreement, the transactions contemplated therein, the Auction, the Cure Amount Procedures, or the Sale Hearing is required.
C. The requirements of Rule 9013(b) of the Local Rules of the United States Bankruptcy Court of the Southern District of New York have been waived.
D. A reasonable opportunity to object or be heard with respect to the Motion and the relief requested therein and this Order has been afforded to all interested persons and entities entitled to notice as set forth in Paragraph B above, including, but not limited to, (i) the Office of the United States Trustee, (ii) counsel for the DIP Lenders, (iii) counsel for the Creditors' Committee, (iv) Buyer's counsel, (v) ACE, the counterparty to the Contract, (vi) all entities known to ENA to have, or to have asserted, any lien, claim, or encumbrance, rights of setoff, recoupment, netting, deduction or other interests in or upon the Contract, (vii) all parties who submitted a prior bid for the Contract, (viii) all parties who expressed in writing to ENA an interest in the Contract, (ix) all relevant taxing authorities, (x) the Examiners for Enron Corp. and Enron North America, (xi) counsel for the Employment-Related Issues Committee; and (xii) all entities who had filed a notice of appearance and request for service of papers in these cases in accordance with the Court's Amended Case Order, dated February 26, 2002.
E. The Purchase Agreement was negotiated, proposed and entered into by and among the Buyer and ENA without collusion and in good faith. The Buyer is a good faith purchaser in accordance with 363(m) of the Bankruptcy Code and is entitled to all of the protections afforded thereby. Neither the Buyer nor ENA has engaged in any conduct that would cause or permit the Purchase Agreement to be avoided (or the validity of the sale affected) under 363(n) of the Bankruptcy Code or any other provisions of the Bankruptcy Code.
F. The relief sought in the Motion is in the best interests of ENA, its estate and all parties in interest.
G. ENA conducted a bidding process in accordance with the Procedures Order and determined, pursuant to the terms of the Procedures Order, that Buyer submitted the highest and best offer for the Contract.
H. The Contract to be sold pursuant to Motion and the Purchase Agreement is a credit derivative contract that is evidenced by the Confirmation Letter Agreement dated December 22, 2000 between ENA and ACE.
I. Notwithstanding the commencement of ENA's chapter 11 case or for any other reason, the Contract has not been terminated under its terms or under applicable law, and remains in full force and effect.
J. ENA has advanced sound and sufficient business justification, and it is a reasonable exercise of its business judgment, to: (i) sell the Contract on the terms and conditions set forth in the Purchase Agreement; (ii) assume and assign the Contract to Buyer; and (iii) consummate all transactions contemplated by the Purchase Agreement.
K. The provisions of sections 363(b), 363(f), 363(m), 363(n), 363(o) and 365 of the Bankruptcy Code have been complied with and are applicable to the sale of the Contract.
L. All of the transactions contemplated by the Purchase Agreement, including the sale of the Contract, are properly authorized under all applicable provisions of the Bankruptcy Code, including without limitation, sections 105, 363(b), 363(f), 363(m), 363(o), and 365 of the Bankruptcy Code.
M. ENA and Buyer have entered into, subject to entry of this Order, the Purchase Agreement wherein ENA and Buyer agree that, inter alia, the aggregate purchase price to be paid by Buyer to ENA is Two Million One Hundred Eighty Five Thousand (US $2,185,000) (the "Purchase Price") and that at Closing, Buyer shall wire transfer an amount equal to the Purchase Price in immediately available United States funds to the account or accounts specified by ENA in writing prior to the Closing.
ACCORDINGLY, THE COURT HEREBY ORDERS THAT:
1. The findings of fact set forth above and the conclusions of law stated herein shall constitute the Court's findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014. To the extent any finding of fact later shall be determined to be a conclusion of law, it shall be so deemed, and to the extent any conclusion of law later shall be determined to be a finding of fact, it shall be so deemed.
2. The Motion is granted in its entirety.
3. The Purchase Agreement is approved in its entirety.
4. All parties in interest have had the opportunity to object to the relief requested in the Motion and to the extent that objections to the Motion or the relief requested therein, have not been withdrawn, waived, or settled, such objections and all reservations of rights included therein, are overruled on the merits. Those parties who did not object, or who withdrew their objections, to the Motion are deemed to have consented pursuant to section 363(f)(2) of the Bankruptcy Code.
5. The Auction and Sale Hearing have been conducted in accordance with the Procedures Order.
6. The approval by ENA of the sale of the Contract and the terms and conditions contemplated by the Purchase Agreement, including, without limitation, the closing of the transactions contemplated by the Purchase Agreement, are hereby approved pursuant to sections 105(a), 363(b), and 363(f) of the Bankruptcy Code.
7. Notwithstanding that a determination of the Cure Amount (as that term is defined herein), if any, is pending, ENA is authorized pursuant to sections 105(a) and 363(b) of the Bankruptcy Code to perform all of its obligations pursuant to the Purchase Agreement and to execute such other documents and take such other actions as are necessary to effectuate the transactions contemplated by the Purchase Agreement.
8. Notwithstanding that a determination of the Cure Amount (as that term is defined herein), if any, is pending, ENA is authorized pursuant to section 365(a) of the Bankruptcy Code to assume and assign the Contract to the Buyer effective as of the date hereof.
9. The sale of the Contract, pursuant to this Order and the Purchase Agreement, will vest the Buyer with good title to the Contract and will be a legal, valid and effective transfer of the Contract free and clear of all liens (including DIP Liens, if any), claims (as that term is defined in section 101(5) of the Bankruptcy Code), encumbrances, and rights of setoff, recoupment, netting, or deduction with all such liens (including DIP Liens, if any), claims (as that term is defined in section 101(5) of the Bankruptcy Code), encumbrances, and rights of setoff, recoupment, netting or deduction, if any, to attach to the proceeds of the sale in the order of their priority, with the same validity, force and effect which they now have, subject to any defenses parties in interest may possess with respect thereto.
10. Pursuant to sections 105(a), 363(f) and 365 of the Bankruptcy Code, upon the Closing (as defined in the Purchase Agreement), (a) on account of the transfer of the Contract, the Buyer shall not be subjected to any liabilities for the sale of the Contract, (b) the Contract shall be transferred to the Buyer free and clear of all liens (including DIP Liens, if any), claims (as that term is defined in section 101(5) of the Bankruptcy Code), encumbrances, and, rights of setoff, recoupment, netting and deduction, and (c) solely with respect to the Contract, except as expressly permitted by the Purchase Agreement, all persons and entities shall be barred from asserting against the Buyer, its affiliates, designees, officers, directors, employees, agents, successors or assigns or their respective properties:
(i) all mortgages, security interests, conditional sale or other title retention agreements, pledges, liens, claims, liabilities, judgments, demands, encumbrances, (including, without limitation, any claims and encumbrances (x) that purport to give to any party a right or option to effect a forfeiture, modification or termination of ENA's or the Buyer's interest in the Contract or (y) in respect of taxes), easements, restrictions, rights of first refusal and charges and interests of any kind or nature (collectively, "Third Party Interests"); and (ii) all debts arising under, relating to, or in connection with the Contract, claims (as that term is defined in section 101(5) of the Bankruptcy Code), obligations, demands, guaranties, options, rights, contractual commitments, restrictions, interests, rights of setoff, recoupment, netting or deduction, and matters of any kind and nature, whether arising prior to or subsequent to the commencement of these cases, whether under any theories of successor or transferee liability and whether imposed by agreement, understanding, law, equity or otherwise (including, without limitation, any claims and encumbrances (x) that purport to give to any party a right or option to effect a forfeiture, modification, right of first refusal or termination of ENA's or the Buyer's interest in the Contract or (y) in respect of taxes) (collectively, "Claims")
with all such Third Party Interests and Claims, if any, to attach to the proceeds of the sale in the order of their priority, with the same validity, force and effect which they now have against the Contract, subject to any defenses parties in interest may possess with respect thereto.
11. ENA has demonstrated that it is an exercise of its sound business judgment to sell, assume and assign the Contract to the Buyer in connection with the consummation of the transactions contemplated by the Purchase Agreement, and the assumption and assignment of the Contract under section 365 of the Bankruptcy Code and the sale of the Contract is in the best interests of ENA, its chapter 11 estate and its creditors.
12. Notwithstanding anything to the contrary herein, at Closing, pursuant to Section 2.1(d) of the Purchase Agreement, Buyer shall assume and shall agree to pay, perform and discharge as and when they become due and payable, or are required to be performed, all Assumed Liabilities.
13. Upon the Closing, ENA will have demonstrated adequate assurance of the future performance of the obligations under the Contract on the part of the Buyer in accordance with section 365(f)(2)(B) of the Bankruptcy Code.
14. ENA is hereby authorized and directed in accordance with sections 105(a), 363 and 365 of the Bankruptcy Code to (a) assume and assign and transfer to the Buyer, upon the Closing, the Contract free and clear of all Claims and Third Party Interests, and (b) execute and deliver to the Buyer such documents or other instruments as may be necessary to assign and transfer the Contract free and clear of all Claims and Third Party Interests to Buyer in accordance with this Order and the terms of the Purchase Agreement.
15. Upon Closing pursuant to the Purchase Agreement, the Contract shall be transferred to, and remain in full force and effect for the benefit of the Buyer in accordance with its terms, notwithstanding any provision in the Contract (including, without limitation, those described in sections 365(b)(2) and (f) of the Bankruptcy Code) that prohibits, restricts, or conditions such assignment or transfer and, pursuant to section 365(k) of the Bankruptcy Code, ENA shall be relieved from any further obligation or liability for any breach of the Contract occurring after such assumption and assignment.
16. This Order (a) is and shall be effective as a determination that, upon the Closing, all Claims and Third Party Interests existing as to the Contract prior to the Closing have been unconditionally released, discharged and terminated in each case as to the Contract, and (b) is and shall be binding upon and shall govern acts of all entities, including, without limitation, all filing agents, filing officers, title agents, title companies, recorders of mortgages, recorders of deeds, registrars of deeds, administrative agencies, governmental departments, secretaries of state, federal, state, and local officials, and all other persons and entities, who may be required by operation of law, the duties of their office, or contract, to accept, file, register or otherwise record or release any documents or instruments that reflect that the Buyer is the assignee of the Contract free and clear of Claims and Third Party Interests, any rights or remedies as between ENA, the Buyer, or any of the parties to the Contract, pursuant to the terms of the Contract arising out of or relating to the events after the Closing.
17. Seller shall hold in an account (the "Cure Account") $200,900.55 of the proceeds received from the sale of the Contract to fund any and all amounts owing or otherwise required to be paid by Seller to ACE pursuant to Section 365(b)(1), if any (such amounts owing, if any, the "Cure Amounts"). Upon either a consensual determination of the Cure Amount by Seller and ACE (but subject to the prior consent of the Creditors' Committee) or an order of this Court fixing the Cure Amount owing, Seller shall disburse sufficient funds from the Cure Account to satisfy the Cure Amounts. Upon such disbursement, if any, Seller shall be deemed to have fully satisfied its obligations under Section 365(b)(1). Funds remaining in the Cure Account after a determination of the Cure Amounts (and disbursement therefor, if any) shall be held by Seller pursuant to the terms of paragraph 25 herein.
18. No person shall take any action to prevent, interfere with or otherwise enjoin consummation of the transactions contemplated in or by the Purchase Agreement or this Order.
19. The Purchase Agreement and any related agreements, documents or other instruments may be modified, amended or supplemented by the parties thereto in accordance with the terms thereof without further order of the Court; provided, however, that, in connection therewith, the parties shall obtain the prior written consent of the Creditors' Committee, which consent shall not be unreasonably withheld; and provided, further, that any such modification, amendment or supplement shall neither be material nor change the economic substance of the transactions contemplated hereby.
20. The failure to specifically include any particular provision of the Purchase Agreement in this Order shall not diminish or impair the effectiveness of such provisions, it being the intent of the Court that the Purchase Order and ENA's implementation of the transactions contemplated therein be approved in their entirety.
21. In the absence of a stay pending appeal, in the event that the Buyer and ENA elect to consummate the transactions contemplated by the Purchase Agreement at any time after the entry of this Order, then with respect to the transactions approved and authorized herein, the Buyer, as a purchaser in good faith within the meaning of section 363(m) of the Bankruptcy Code, shall be entitled to the protections of 363(m) of the Bankruptcy Code in the event this Order or any authorization contained herein is reversed or modified on appeal.
22. Each and every federal, state, and local governmental agency or department is hereby directed to accept any and all documents and instruments necessary and appropriate to consummate the transactions contemplated by the Purchase Agreement.
23. The Court shall retain exclusive jurisdiction (a) to enforce and implement the terms and provisions of the Purchase Agreement, all amendments thereto, any waivers and consents thereunder, and each of the agreements, documents and instruments executed therewith, (b) to compel delivery of the Purchase Price to ENA in accordance with the terms and conditions of the Purchase Agreement; and (c) to resolve any disputes, controversies or claims arising out of relating to the Purchase Agreement. The Court shall retain exclusive jurisdiction over any and all disputes arising under or otherwise relating to the construction, performance and enforcement of the terms and conditions of the Purchase Agreement and each of the agreements, documents and instruments executed in connection therewith.
24. ENA is authorized pursuant to section 363(b)(1) of the Bankruptcy Code to perform all of its obligations in connection with the Purchase Agreement in accordance with the terms of the Motion and to execute such documents and take such other actions as are necessary to effectuate such Purchase Agreement.
25. Except to the extent required to repay the DIP Obligations pursuant to and in accordance with the Final Order and the Documents, if any, and except with regards to $200,900.55 to be held in the Cure Account pursuant to paragraph 17 above, all proceeds received by ENA in connection with the transactions contemplated by the Purchase Agreement shall be retained by ENA and be neither disbursed nor used until the earlier to occur of (i) agreement by and between ENA and the Creditors' Committee with respect to the release of such proceeds and (ii) further order of this Court.
As defined in the Final Order Authorizing Debtors to Obtain Post-Petition Financing Pursuant to 11 U.S.C. § 105, 361, 362, 364(c)(1), 364(c)(2), 364(c)(3) and 364(d)(1), dated July 2, 2002 (the "Final Order").
26. The terms of this Order and the Purchase Agreement shall be binding on and inure to the benefit of ENA, the Debtors, Buyer and the Debtors' creditors and all other parties in interest, and any successors of ENA or the Debtors, Buyer and the Debtors' creditors, including any trustee or examiner appointed in these cases or any subsequent or converted cases of the Debtors under chapter 7 or chapter 11 of the Bankruptcy Code.
27. Any conflict between the terms and provisions of this Order and the Purchase Agreement shall be resolved in favor of this Order.
28. This Order shall be effective and enforceable immediately upon entry of this Order, pursuant to F.R.Bankr.P. 6004(g) and 6006(d).