Opinion
Case No. 01-16034 [AJG], Jointly Administered
August 7, 2003
FRANK A. OSWALD (FAO-1223), Member of the Firm, TOGUT, SEGAL SEGAL LLP, One Penn Plaza, Suite 3335, New York, New York 10119, bankruptcy co-counsel for ENRON CORP., Debtor and Debtor in Possession.
DAVID FLEISCHER (DF-9230), STEPHEN Z. STARR (SZS-3793), PAUL, HASTINGS, JANOFSKY WALKER LLP, 75 East 55th Street, New York, New York 10022 attorneys for GENERAL ELECTRIC CAPITAL CORPORATION.
This Stipulation and Order Pursuant to 11 U.S.C. § 363(e) and 554 Regarding Abandonment of Certain Property, Providing for Reduced Adequate Protection Payments to General Electric Capital Corporation and Related Relief (the "Stipulation") is entered into as of August 6, 2003 by and between Enron Corp. ("Enron" or the "Debtor"), one of the above-captioned debtors and debtors in possession, and General Electric Capital Corporation ("GE Capital"), with reference to the following recitals:
RECITALS
WHEREAS, on December 2, 2001 (the "Petition Date"), Enron filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the Southern District of New York ("Bankruptcy Court");
WHEREAS, prior to the Petition Date, Enron and GE Capital entered into that certain Master Lease Financing Agreement, dated as of March 29, 2001, as amended (the "Lease Finance Agreement");
WHEREAS, pursuant to the Lease Finance Agreement, Enron and GE Capital entered into Schedule Nos. 1 through 3 (each a "Schedule" and, collectively, the "Schedules"), dated March 29, June 29 and September 26, 2001, respectively (the Schedules and the Lease Finance Agreement are hereinafter collectively referred to as the "2001 Agreement");
WHEREAS, the 2001 Agreement is a financing arrangement through which GE Capital extended to Enron an amount equal to $21,686,190.40 in the aggregate to finance (or refinance in the case of Schedule No. 1) the purchase of certain office furniture and equipment (the "GE Collateral");
WHEREAS, pursuant to the 2001 Agreement, Enron was obligated to make monthly principal payments to GE Capital in the following amounts:
Schedule 1: $136,112.39
Schedule 2: $ 27,556.86
Schedule 3: $ 48,184.70
TOTAL: $211,853.95
In addition to the above principal payments, the interest component of each monthly payment was equal to the product of the Daily Borrowing Rate and the Lease Balance (as those terms are defined in the 2001 Agreement);
WHEREAS, GE Capital has purportedly properly perfected its liens against and security interests in the GE Collateral as first priority fully perfected liens and security interests;
WHEREAS, the Debtor and GE Capital are parties to a Stipulation and Order Providing Adequate Protection Payments to General Electric Capital Corporation and Related Relief, dated January 18, 2002, which was "so ordered" by the Bankruptcy Court on January 18, 2002 (the "Adequate Protection Stipulation");
WHEREAS, the Debtor and GE Capital are parties to a Stipulation and Order Pursuant to 11 U.S.C. § 363(e), 363(f) and 506 Determining Secured and Unsecured Claims of General Electric Capital Corporation in Respect of Certain Property Located at Enron Center South; Providing for Payment and Satisfaction of Such Claims; and Providing for Additional Adequate Protection and Related Relief, dated January 16, 2003, which was "so ordered" by the Bankruptcy Court on January 30, 2003 (the "January 16 Stipulation");
WHEREAS, in accordance with the provisions of the January 16 Stipulation, GE Capital was paid a total of $5,653,662.78 for its secured claim with respect to the GE Collateral identified in Schedule Nos. 2 and 3, and the monthly adequate protection payments for such collateral ended;
WHEREAS, in accordance with the provisions of the January 16 Stipulation, the monthly adequate protection payment for the GE Collateral identified in Schedule No. 1 (the "Schedule No. 1 Collateral") continued;
WHEREAS, by motion dated June 27, 2003, Enron sought authority to sell certain of the Schedule No. 1 Collateral (the "Surplus Collateral") free and clear of the liens and security interests of GE Capital, or alternatively to abandon the Surplus Collateral (the "Surplus Collateral Motion");
WHEREAS, by motion dated July 3, 2003, GE Capital sought relief from the automatic stay with respect to all Schedule No. 1 Collateral (the "Stay Relief Motion");
WHEREAS, Harris County, City of Houston, Houston Independent School District and Houston Downtown Management District (collectively, the "Texas Taxing Authorities") filed limited objections to the Surplus Collateral Motion and the Stay Relief Motion, asserting that they have first priority liens in the Schedule No. 1 Collateral for ad valorem taxes pursuant to Texas state law;
WHEREAS, the Texas Taxing Authorities do not oppose Enron's abandonment of the Surplus Collateral;
WHEREAS, the landlord of the Navigation Street Warehouse (as such term is used in the Surplus Collateral Motion) as licensor, Enron solely as to the Recitals and paragraphs 3, 7, 8, 14, 15, and 18 through and including 22 therein, and GE Capital and the Texas Taxing Authorities as licensees, have entered into that certain License Agreement dated as of August 6, 2003 (the "License Agreement"), a copy of which is attached hereto as Exhibit A; and
WHEREAS, following discussions among representatives of GE Capital and Enron, the parties have agreed to settle certain issues raised in the Surplus Collateral Motion, and to adjourn the hearing with respect to the Stay Relief Motion and Enron's request in the Surplus Collateral Motion to reduce the monthly adequate protection payment for the Retained Collateral (as defined below).
NOW, THEREFORE, IT IS HEREBY STIPULATED, CONSENTED TO AND AGREED by and between the parties that:
1. Effective Date. This Stipulation shall be effective upon (i) approval by the Bankruptcy Court of this Stipulation and its entry on the docket in the Debtor's chapter 11 case; and (ii) approval by the Bankruptcy Court of that certain stipulation between the Texas Taxing Authorities and GE Capital dated August 6, 2003 (the "Texas Taxing Authorities Stipulation") and its entry on the docket in the Debtor's chapter 11 case.
2. Abandonment of Surplus Collateral. Enron will not sell the Surplus Collateral and hereby withdraws that portion of the Surplus Collateral Motion seeking authority to sell the Surplus Collateral. The Surplus Collateral be and hereby is abandoned pursuant to section 554(a) of the Bankruptcy Code to GE Capital. GE Capital shall remains subject to the provisions of the Texas Taxing Authorities Stipulation.
3. Relief from Stay as to the Surplus Collateral. The provisions of the automatic stay pursuant to section 362(a) of the Bankruptcy Code with respect to the Surplus Collateral be and hereby are terminated and annulled as to GE Capital and the Texas Taxing Authorities pursuant to sections 362(d)(1) and (d)(2) of the Bankruptcy Code.
4. Modification of Adequate Protection Stipulation. Beginning August 1, 2003, the monthly adequate protection payment for the Schedule No. 1 Collateral that Enron is retaining (the "Retained Collateral") shall be reduced from $81,667.43 to $60,000 (the "Interim Payment Amount") on an interim basis, until either (i) the parties agree on what the final monthly adequate protection payment should be with the consent of the Official Committee of Unsecured Creditors (the "Creditors' Committee"), or (ii) the Bankruptcy Court determines such amount (the "Final Payment Amount"). If the Final Payment Amount is greater than the Interim Payment Amount, Enron shall pay the aggregate difference from August 1, 2003 to GE Capital. If the Final Payment Amount is less than the Interim Payment Amount, Enron shall take a credit for the aggregate difference from August 1, 2003 against future payments to GE Capital until such difference has been reduced to zero; provided that, if future payments owing to GE Capital by Enron are insufficient to offset such difference, GE Capital shall promptly refund the overpayment to Enron.
5. License Agreement. The License Agreement in the form annexed as Exhibit A hereto, which provides, inter alia, that it is executed by Enron solely as to the Recitals and paragraphs 3, 7, 8, 14, 15, and 18 through and including 22 therein, is hereby incorporated herein by reference and constitutes part of this Stipulation. Approval of this Stipulation by the Bankruptcy Court shall constitute approval and authorization for Enron to enter into the License Agreement annexed hereto as Exhibit A solely as to the Recitals and paragraphs 3, 7, 8, 14, 15, and 18 through and including 22 therein.
6. The Navigation Street Warehouse. On account of the period August 16, 2003 through August 31, 2003, GE Capital shall be responsible for one-half of rent and other fees and related charges for the month of August 2003 ("August Rent") specified in the Lease (as such term is used in the License Agreement). Enron shall pay August Rent in its entirety to Navigation Realty Co., the landlord under the Lease, and offset one-half thereof against the adequate protection payment due to GE Capital for August 2003. For the month of September 2003, GE Capital shall be responsible for the License Fee (as such term is used in the License Agreement). Enron shall pay the License Fee to Navigation Realty Co., the licensor under the License Agreement, and offset such amount against the adequate protection payment due to GE Capital for September 2003. Except with respect to its one-half share of August Rent on account of the period August 16, 2003 through August 31, 2003, GE Capital shall have no liability for any obligations under the Lease. Enron shall have no liability of any kind with respect to the Navigation Street Warehouse on and after September 1, 2003 other than as expressly provided in this Stipulation, the License Agreement or the Lease.
7. Surplus Collateral at Enron North. The Surplus Collateral located on unused floors of Enron Center North may remain at its present location for the period through December 31, 2003 without any liability of GE Capital or the Surplus Collateral for rent or storage costs with respect to such Surplus Collateral. Upon reasonable notice to Enron, GE Capital may inspect and/or remove the Surplus Collateral located at Enron Center North and Enron shall reasonably cooperate in facilitating any such removal, including permitting rights of ingress, egress and use of elevators for such purposes and ensuring the presence of any personnel of Enron or Enron Center North whose presence is required or necessary in connection with any such inspection and/or removal (i.e., elevator operators, maintenance personnel with applicable keys, etc.). Removal of the Surplus Collateral from Enron Center North shall be made by movers reasonably acceptable to Enron who provide proof of workers compensation insurance and insurance covering any damage caused to Enron Center North in the course of removing the Surplus Equipment.
8. Maintenance of Insurance for Surplus Collateral. Enron shall not cancel the existing insurance coverage for the Surplus Collateral until August 31, 2003. GE Capital shall reimburse Enron, by way of offset by Enron against the monthly adequate protection payments due to GE Capital, for insurance premium payments with respect to the period from the effective date of this Stipulation through the date of cancellation of the insurance coverage for the Surplus Collateral. Enron shall provide GE Capital with proof of the maintenance of insurance coverage for the Surplus Collateral for such period and the cost thereof.
9. Adjournment of Motions. The Stay Relief Motion and the portion of the Surplus Collateral Motion seeking to reduce the monthly adequate protection payment for the Retained Collateral shall be adjourned until September 25, 2003 or as otherwise scheduled by the Bankruptcy Court.
10. Reservation of Rights. Other than as expressly agreed to by the parties herein, the parties reserve all of their rights, including, but not limited to, with respect to the Stay Relief Motion, the Retained Collateral, any claims (including administrative claims) that GE Capital may have arising out of any breaches of the Adequate Protection Stipulation or January 16 Stipulation by Enron, any failure of adequate protection in these proceedings, or otherwise. This Stipulation is without prejudice to any rights of the Texas Taxing Authorities; provided, however, that nothing contained herein shall be deemed to vary the provisions of the Texas Taxing Authorities Stipulation with respect to the rights and obligations of the Texas Taxing Authorities and the Texas Taxing Authorities shall remain bound by the License Agreement.
11. Final and Binding. The terms of this Stipulation are final and binding on the Debtor and each of its subsidiaries and affiliates, GE Capital, all other parties in interest in the Debtor's chapter 11 case, and the related Enron chapter 11 cases, including, without limitation, Navigation Realty Co., and any trustee or examiner previously appointed or that may be appointed in these chapter 11 cases.
12. Continuation of Adequate Protection Stipulation. Except as modified by this Stipulation, the terms of the Adequate Protection Stipulation shall continue.
13. New York Law. This Stipulation shall be interpreted and enforced by the Bankruptcy Court in accordance with the laws of the State of New York. The parties have jointly participated in drafting this Stipulation and any ambiguities shall not be construed against either party.
14. Modifications. This Stipulation may not be modified, altered, amended, or waived, except in a writing signed by all of the parties hereto; provided, however, Enron shall obtain the written consent of the Creditors' Committee prior to the execution of any such modification, amendment or supplement, which shall not be unreasonably withheld; and provided, further, that any such modification, amendment or supplement is neither material nor changes the economic substance of the transactions contemplated in this Stipulation.
15. Retention of Jurisdiction. The Bankruptcy Court shall retain jurisdiction to enforce the provisions of this Stipulation and to reconcile any disagreement or inconsistency regarding the terms of this Stipulation.
16. Authorized Signatory. The signatories to this Stipulation represent that they are authorized to enter into this Stipulation.
17. Counterparts. This Stipulation may be executed in counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same agreement. This Stipulation may be executed by facsimile signature, which shall have the effect and force as an original signature.