Opinion
Case No. 01-16034 (AJG) Jointly Administered.
October 20, 2005
Luc A. Despins, Matthew S. Barr, Robert E. Winter, MILBANK, TWEED, HADLEY McCLOY LLP New York, Attorneys for Reorganized Debtors.
This stipulation and consent order (the "Stipulation and Consent Order") is entered into by and among Enron Corp. ("Enron") and EPC Estate Services, Inc. (f/k/a National Energy Production Corporation) ("NEPCO" and together with Enron, the "Reorganized Debtors") on the one hand, and Dick Corporation ("DC"), on the other hand. NEPCO, Enron and DC are collectively referred to herein as the "Parties."
RECITALS
A. Bankruptcy Cases. Commencing on December 2, 2001 and periodically thereafter, Enron and certain of its affiliates, including NEPCO, filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101- 1330 (as amended, the "Bankruptcy Code"), in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). The chapter 11 cases of the Reorganized Debtors and certain affiliated entities are being jointly administered for procedural purposes only (collectively, the "Bankruptcy Cases").
NEPCO filed its voluntary chapter 11 petition on May 20, 2002.
B. Confirmation of Reorganized Debtors' Plan. By order, dated July 15, 2004 (the "Confirmation Order"), the Bankruptcy Court confirmed the Supplemental Modified Fifth Amended Joint Plan Of Affiliated Debtors Pursuant To Chapter 11 Of The United States Bankruptcy Code (as amended, the "Plan"). The effective date of the Plan occurred on November 17, 2004. Paragraph 60(e) of the Confirmation Order provides that the Bankruptcy Court retains jurisdiction "to hear and determine any timely objections to . . . proofs of Claim . . . after the Confirmation Date, . . . and to allow, disallow, determine, liquidate, classify, estimate or establish priority of or secured or unsecured status of any Claim, in whole or in part."
C. EPC Agreement. NEPCO, DC and LSP-Kendall Energy LLC (as project owner) ("Kendall") entered into that certain Amended and Restated Turnkey Engineering, Procurement and Construction Agreement, dated as of November 11, 1999 (as amended, modified and supplemented from time to time, the "EPC Agreement"). Under the EPC Agreement, NEPCO and DC (collectively, the "Contractor") agreed to, among other things, design, engineer and construct a power generation facility in Kendall County, Illinois (the "Kendall Project") for Kendall.
D. Joint Venture Agreement. On May 12, 1999, NEPCO and DC entered into that certain Joint Venture Agreement (the "JV Agreement"), related to the Kendall Project. Under the JV Agreement, NEPCO and DC allocated the scope of work for the Kendall Project among themselves and each party was to be responsible for an equal share (50% each) of any profits or losses arising from work on the Kendall Project. After Enron filed its chapter 11 petition, DC alleges that NEPCO defaulted on NEPCO's obligations under the JV Agreement. After NEPCO filed its chapter 11 petition, DC, as the Contractor, completed the EPC Agreement without NEPCO's participation.
E. DC Claims. On December 9, 2002, DC filed proof of claim number 22264 against NEPCO (the "NEPCO Claim") in the amount of $20,800,000. On January 21, 2003, after the Enron bar date, DC filed proof of claim number 22486 against Enron (the "Enron Claim", and, together with the NEPCO Claim, the "DC Claims"), also in the amount of $20,800,000, as guarantor of NEPCO's obligations under the EPC Agreement and/or the JV Agreement, which proof of claim was later expunged. DC disputes the propriety of the expungement of the Enron Claim.
On August 1, 2002, the Bankruptcy Court entered an order fixing December 2, 2002, as the last date for creditors to file proofs of claim against NEPCO (the "NEPCO Bar Date"). On December 6, 2002, DC filed a motion seeking leave to file a late-filed proof of claim against NEPCO. On January 16, 2003, the Bankruptcy Court approved a stipulation and agreed order (Docket No. 5760) entered into by Enron and DC allowing DC to file a late-filed proof of claim against NEPCO, on or before January 31, 2003. Accordingly, the NEPCO Claim was deemed timely filed despite having been filed after the NEPCO Bar Date.
Enron objected to the Enron Claim pursuant to section 502(b) (9) of the Bankruptcy Code (Docket No. 20485) (the "Enron Claim Objection") on the basis that such claim was filed after the deadline to file claims against Enron, and on October 5, 2004, the Bankruptcy Court entered an order granting the Enron Claim Objection and disallowing and expunging the Enron Claim, among others (Docket No. 21248).
F. By letter dated September 23, 2004, DC's counsel reduced the amount sought in the NEPCO Claim to approximately $17.7 million and alleged that the NEPCO Claim consists of (i) NEPCO's share of the purported losses incurred in the Kendall Project in the amount of $3,657,988 and (ii) approximately $14.1 million for purported obligations arising from NEPCO's alleged unauthorized use of documents and alleged trade secrets produced for the Kendall Project and personnel charged to the JV Agreement (comprised of DC's estimated lost profits of $9.1 million and DC's share of document development costs of $5 million) (the "Document Use Allegations").
G. Estimation Order. On February 18, 2004, the Bankruptcy Court entered that certain Order, Pursuant To Sections 105(a), 363(b) And 502(c) Of The Bankruptcy Code And Federal Rules Of Bankruptcy Procedure 3018, 7042 And 9019, (1) Establishing Procedures To Estimate Unliquidated And Contingent Claims, (2) Establishing Procedures To Estimate Counterclaims, (3) Establishing Procedures To Compromise Claims And Counterclaims And (4) Fixing Notice Procedures And Approving Form And Manner Of Notice (Docket No. 16353) (the "Estimation Order").
H. Estimation Objection. On March 10, 2005, NEPCO filed the Objection Of EPC Estate Services, Inc. To Proof Of Claim No. 22264 Filed By Dick Corporation Pursuant To Claims Estimation Procedures (Estimation Objection Number 34) (Docket No. 24227) (the "Estimation Objection") seeking entry of an order estimating the NEPCO Claim at zero dollars ($0) for all purposes in the Bankruptcy Cases, including distribution. The Estimation Objection invoked the procedures contained in the Estimation Order.
I. Statement of Claim. On April 14, 2005, DC filed Dick Corporation's Statement Of Claim In Response To The Objection Of EPC Estate Services, Inc. To Proof Of Claim No. 22264, Filed By Dick Corporation, Pursuant To Claims Estimation Procedures (Estimation Objection Number 34) (Docket No. 25218), which further reduced the asserted amount of the NEPCO Claim to $8,106,669.
J. Kendall Claims. On or about October 15, 2002, Kendall filed proof of claim number 16037 against Enron ("Claim 16037"). Kendall also filed proof of claim number 25379 ("Claim 25379", and together with Claim 16037, the "Kendall Claims"), which was deemed to have been timely filed on October 31, 2002, pursuant to the Stipulation And Consent Order Regarding Proof Of Claim Of LSP-Kendall Energy LLC, entered by the Bankruptcy Court on August 8, 2005 (Docket No. 26870). The Kendall Claims allege certain contract breaches and guaranty obligations related to the EPC Agreement. The Reorganized Debtors allege that, in the event that the Reorganized Debtors are liable to Kendall on account of the Kendall Claims, DC may be contractually obligated to reimburse the Reorganized Debtors for a portion of any such liability. DC disputes that it is contractually obligated to reimburse the Reorganized Debtors for any portion of the Kendall Claims.
K. The Reorganized Debtors have reviewed the DC Claims to determine whether and to what extent they should be allowed. Based on their review, the Reorganized Debtors have meritorious defenses to the DC Claims, and may have counterclaims arising from the same transactions, including with regards to the Kendall Claims. DC maintains that the defenses and counterclaims alleged by the Reorganized Debtors are not meritorious and further maintains that DC's Statement of Claim was understated. However, to avoid the cost, uncertainty and delay that would attend litigation, the Parties negotiated a consensual resolution of the DC Claims.
AGREEMENT
NOW, THEREFORE, in consideration for the mutual covenants and agreements set forth in the Stipulation and Consent Order, and with the intent to be legally bound, it is hereby agreed between the Parties as follows, and binding on all parties in interest in the Bankruptcy Cases as of the Effective Date (as defined below) of this Stipulation and Consent Order:
1. Treatment Of DC Claims. Upon the entry of a final, non-appealable order approving a settlement or otherwise resolving the Kendall Claims (the "Allowance Date"), with no further action by either Party, the DC Claims shall automatically be deemed Allowed General Unsecured Claims against NEPCO (Class 67) and Enron (Class 185), respectively, under the Plan, in the applicable amounts set forth below:
(a) In the event that the Kendall Claims are Disallowed (as that term is defined in the Plan) in their entirety or become Allowed Claims (as defined in the Plan) in an aggregate amount less than $7.5 million each, the DC Claims shall be Allowed Claims in the amount of $2.5 million each;
(b) In the event that the Kendall Claims become Allowed Claims in an aggregate amount between $7.5 million and $15 million each, the DC Claims shall be reduced to reflect DC's alleged liability under the JV Agreement and shall be Allowed Claims in the amount of $1.25 million each; or
(c) in the event that the Kendall Claims become Allowed Claims in an aggregate amount greater than $15 million each, the DC Claims shall be reduced to reflect DC's alleged liability under the JV Agreement and shall be Allowed Claims in the amount of $0 each.
Distributions to DC on account of such Allowed Claims shall occur in accordance with the terms of the Plan.
2. DC Cooperation With Respect To Kendall Claims. Recognizing that the Reorganized Debtors allege that, absent approval of this Stipulation and Consent Order, DC may have liability for some portion of the Kendall Claims:
(a) DC shall cooperate with and provide timely assistance to the Reorganized Debtors in their defense of the Kendall Claims, including producing documents that may be useful in such defense and by providing witnesses with knowledge of the Kendall Claims to offer testimony related to the Reorganized Debtors' defenses to the Kendall Claims.
(b) Nothing herein shall be deemed to require a waiver by DC of any applicable attorney-client privilege or claim of attorney work product, except that the Parties shall use their good faith efforts to enable the Reorganized Debtors to access documents as to which a claim of privilege is asserted without waiving such claim of privilege.
(c) The Reorganized Debtors shall reimburse DC within 30 days of the submission of invoices by DC, the reasonable documented costs (including internal DC personnel time) on account of DC's cooperation and reasonable documented out-of-pocket counsel fees. In the event that the Reorganized Debtors reasonably require DC personnel time, the Reorganized Debtors shall compensate DC at a rate of $150 per hour plus all reasonably necessary documented out-of pocket expenses associated therewith; provided, however, that the first 50 hours of DC personnel time shall be without charge to the Reorganized Debtors. Counsel fees incurred by DC shall be reimbursed solely to the extent that (i) one or more employees of DC are called by the Reorganized Debtors as witnesses at a deposition or hearing in connection with litigation of the Kendall Claims and DC reasonably requires the assistance of counsel to defend itself at such deposition or hearing, (ii) the Reorganized Debtors seek communication directly with counsel to DC relating to the Reorganized Debtors' request for assistance; or (iii) DC reasonably requires counsel's advice or consultation with respect to any assistance requested by the Reorganized Debtors, provided that as to this clause (iii), DC shall obtain prior approval from the Reorganized Debtors before incurring more than ten (10) hours in the aggregate of such advice or consultation.
3. Binding Nature. This Stipulation and Consent Order (i) shall inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns and (ii) shall be binding upon and enforceable against the Parties and their respective successors and assigns as of the Effective Date.
4. Bankruptcy Court Approval. Notwithstanding anything to the contrary herein, this Stipulation and Consent Order is expressly subject to and contingent upon its approval by the Bankruptcy Court. If this Stipulation and Consent Order, or any portion hereof, is not approved by the Bankruptcy Court or if it is overturned or modified on appeal, this Stipulation and Consent Order shall be of no further force and effect, and, in such event, neither this Stipulation and Consent Order nor any negotiations and writings in connection with this Stipulation and Consent Order shall in any way be construed as or deemed to be evidence of or an admission on behalf of any Party hereto regarding any claim or right that such Party may have against any other party hereto.
5. Release Of Reorganized Debtor Released Parties By DC Releasing Parties. Upon the occurrence of the Effective Date, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, DC on behalf of itself, its predecessors, and, to the extent they have the authority or capacity, its present and former shareholders, officers, directors, employees, partners, sureties, agents, representatives, subsidiaries, affiliates, successors and assigns (collectively, the "DC Releasing Parties"), hereby unequivocally release and forever discharge the Reorganized Debtors, and any of their respective predecessors, affiliates, successors, assigns, trustees, agents, consultants, heirs, directors, officers, employees, shareholders, executives, servants, attorneys, accountants, partners, representatives and other related persons and entities, in any capacity whatsoever (collectively, the "Reorganized Debtor Released Parties"), from any and all rights, claims, demands, actions, liabilities, causes of action, costs, losses, liens, debts, damages, dues, accounts, sum or sums of money, covenants, contracts, agreements, expenses, judgments, extents, executions, awards, bonds, bills, specialties, reckonings, demands and suits of every nature, kind and description whatsoever, either at law, in admiralty, in equity or otherwise, whether known or unknown, foreseen or unforeseen, suspected or unsuspected, fixed or contingent, disclosed or undisclosed, matured or un-matured, material or immaterial, whether individual, class, derivative or representative, and whether or not asserted or raised and existing, or alleged to exist or to have existed (collectively, the "Claims"), which any of the DC Releasing Parties ever had, now have or may have against the Reorganized Debtor Released Parties arising out of, in connection with or relating to the DC Claims, the EPC Agreement or the JV Agreement, but excluding (i) any Claims arising out of, in connection with or relating to the Document Use Allegations or (ii) any Claims arising out of, in connection with or relating to this Stipulation and Consent Order.
6. Release Of DC Released Parties By Reorganized Debtor Releasing Parties. Upon the occurrence of the Effective Date, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Reorganized Debtors, on behalf of themselves, their predecessors, and, to the extent they have the authority or capacity, their present and former shareholders, officers, directors, employees, partners, agents, representatives, subsidiaries, affiliates, successors and assigns (collectively, the "Reorganized Debtor Releasing Parties"), hereby unequivocally release and forever discharge DC, and any of its respective predecessors, affiliates, successors, assigns, trustees, agents, consultants, heirs, directors, officers, employees, shareholders, executives, servants, attorneys, accountants, partners, sureties, representatives and other related persons and entities, in any capacity whatsoever (collectively, the "DC Released Parties"), from any and all Claims which any of the Reorganized Debtor Releasing Parties ever had, now have or may have against the DC Released Parties arising out of, in connection with or relating to the DC Claims, the EPC Agreement or the JV Agreement, but excluding any Claims arising out of, in connection with or relating to this Stipulation and Consent Order.
7. Covenant Not To Sue. The DC Releasing Parties (without further action on their part) unconditionally and irrevocably covenant not to sue or to assert any Claims against the Reorganized Debtors in any way arising out of, in connection with or relating to the Document Use Allegations. With respect to any claims arising out of, in connection with or relating to the Document Use Allegations, DC specifically reserves all rights or actions, Claims, demands, and suits against any and all persons other than the Reorganized Debtors, including but not limited to Mr. John Gillis, Mr. Michael Ranz, SNC-Lavalin Constructors, Inc. and PCL Industrial Construction, Inc. With respect to the Document Use Allegations, this Stipulation and Consent Order constitutes a covenant not to sue and shall not be construed to constitute a release by DC of any Claims arising out of, in connection with or relating to the Document Use Allegations.
8. Non-Severability. The provisions of this Stipulation and Consent Order are mutually interdependent, indivisible and non-severable.
9. Entire Agreement. This Stipulation and Consent Order constitutes the entire agreement between the Parties hereto with respect to the subject matter hereof and supersedes all prior Stipulation and Consent Orders and understandings, written and oral, between the Parties with respect to the subject matter hereof. This Stipulation and Consent Order may not be modified or amended except by a writing signed by the Parties. All representations, warranties, promises, inducements or statements of intention made by the Parties hereto are embodied in this Stipulation and Consent Order, and no Party hereto shall be bound by, or liable for, any alleged representation, warranty, inducement or statement of intention that is not expressly embodied herein. The Parties represent and warrant that this Stipulation and Consent Order discloses all of the terms of the Parties' agreement with respect to the subject matter hereof.
10. Counterparts; Effective Date. This Stipulation and Consent Order may be executed in one or more counterparts and by facsimile, all of which shall be considered one and the same agreement. A facsimile copy of this Stipulation and Consent Order reflecting an original signature of one or more of the Parties shall be fully binding on, and in effect to, said Party or Parties to the same effect as a signed original of the Stipulation and Consent Order; provided, however, that the effective date of this Stipulation and Consent Order (the "Effective Date") shall be the date on which the Bankruptcy Court has entered a final non-appealable order approving the Stipulation and Consent Order.
11. Authority. The Parties hereto represent and warrant to each other that: (i) the signatories to this Stipulation and Consent Order are authorized to execute this Stipulation and Consent Order; (ii) each has full power and authority to enter into this Stipulation and Consent Order; and (iii) this Stipulation and Consent Order is duly executed and delivered, and constitutes a valid and binding agreement in accordance with its terms. DC hereby represents and warrants that it is the lawful holder of the DC Claims and has not and will not sell or otherwise transfer such Claims to any party.
12. Costs. Each Party hereto shall bear its own expenses incurred in connection with the negotiation, execution and Bankruptcy Court approval of this Stipulation and Consent Order.
13. Governing Law. This Stipulation and Consent Order shall be governed by, and construed in accordance with, the Bankruptcy Code and the laws of the state of New York, without regard to any principles of choice of law thereof which would require the application of the law of any other jurisdiction.
14. Retention of Jurisdiction. The Bankruptcy Court shall retain exclusive jurisdiction to interpret, implement and enforce the provisions of this Stipulation and Consent Order, and the Parties hereby consent to exclusive jurisdiction of the Bankruptcy Court with respect thereto. The Parties waive arguments of lack of personal jurisdiction or forum non-conveniens with respect to the Bankruptcy Court.
15. Assignments. The rights and obligations of the Parties under this Stipulation and Consent shall not be assigned or transferred without the prior written consent of the other party.
16. Headings. The descriptive headings of the several sections of this Stipulation and Consent Order are inserted for convenience of reference only and do not constitute a part of this Stipulation and Consent Order.