914 - TerreStar Networks Inc., et al.

10-15446-shl Doc 914 Filed 02/08/12 Entered 02/08/12 22:35:42 Main Document 

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Hearing Date: February 14, 2012 at 11:30 a.m. (ET) 

AKIN GUMP STRAUSS HAUER & FELD LLP 

One Bryant Park 

New York, New York 10036 

(212) 872-1000 (Telephone) 

(212) 872-1002 (Facsimile) 

Ira S. Dizengoff 

Arik Preis 

Ashleigh L. Blaylock 

Counsel to the Debtors and Debtors in Possession 

UNITED STATES BANKRUPTCY COURT 

SOUTHERN DISTRICT OF NEW YORK 

) 

In re: ) Chapter 11 

) 

TERRESTAR NETWORKS INC., et al., 1 ) Case No. 10-15446 (SHL) 

) 

Debtors. ) Jointly Administered 

) 

DEBTORS’ MEMORANDUM OF LAW IN SUPPORT OF CONFIRMATION OF THE 

JOINT CHAPTER 11 PLAN OF TERRESTAR NETWORKS INC., ET AL. 

1 

The Debtors in these chapter 11 cases, along with the last four digits of each Debtor‘s federal taxpayeridentification 

number, are: TerreStar Networks Inc. (3931); TerreStar License Inc. (6537); TerreStar 

National Services Inc. (6319); TerreStar Networks Holdings (Canada) Inc. (1337); TerreStar Networks 

(Canada) Inc. (8766); and 0887729 B.C. Ltd. (1345).


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TABLE OF CONTENTS 

i 

Page(s) 

PRELIMINARY STATEMENT .......................................................................................................1 

BACKGROUND AND PLAN OVERVIEW ..................................................................................3 

A. The Prior Plan ..............................................................................................3 

B. The Sale Transaction and Subsequent Repayments of Debt ........................4 

i. The Sale Transaction ........................................................................4 

ii. The Funding Date and First Paydown .............................................5 

iii. The Second Paydown .......................................................................6 

C. The Global Settlement .................................................................................7 

D. The Current Plan ..........................................................................................8 

i. Overview and Summary of the Plan ................................................8 

ii. Voting Status ..................................................................................10 

iii. Informal Plan Objections ............................................................... 11 

ARGUMENT .................................................................................................................................12 

I. The Plan Satisfies Each Requirement for Confirmation ........................................12 

A. The Plan Complies with the Applicable Provisions of the 

Bankruptcy Code (11 U.S.C. § 1129(a)(1)) ...............................................12 

i. The Plan Satisfies the Classification Requirements of 11 

U.S.C. § 1122 .................................................................................13 

ii. 

iii. 

The Plan Satisfies the Seven Mandatory Plan Requirements 

of 11 U.S.C. §§ 1123 (a)(1)-(a)(7) .................................................15 

The Plan Provides for Several of the Discretionary 

Provisions Set Forth in 11 U.S.C. §§ 1123(b) ................................18 

B. The Debtors, as Plan Proponents, Have Complied with the 

Applicable Provisions of the Bankruptcy Code (11 U.S.C. 

§ 1129(a)(2)) ..............................................................................................18 

i. The Debtors Have Complied with the Disclosure Statement 

and Solicitation Requirements of 11 U.S.C. § 1125 ......................19 

ii. 

The Debtors Have Complied with the Plan Acceptance 

Requirements of 11 U.S.C. § 1126 ................................................20 

C. The Plan Has Been Proposed in Good Faith and Not by any Means 

Forbidden by Law (11 U.S.C. § 1129(a)(3)) ..............................................21


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D. The Plan Provides for Bankruptcy Court Approval of Certain 

Administrative Payments (11 U.S.C. § 1129(a)(4)) ...................................22 

E. All Necessary Information Regarding the Directors and Officers of 

the Debtors Under the Plan Has Been Disclosed (11 U.S.C. 

§ 1129(a)(5)) ..............................................................................................23 

F. The Plan Does Not Contain Rate Changes Subject to the 

Jurisdiction of Any Governmental Regulatory Commission (11 

U.S.C. § 1129(a)(6)) ..................................................................................25 

G. The Plan Is in the Best Interests of Creditors and Interest Holders 

(11 U.S.C. § 1129(a)(7)) ............................................................................25 

H. Acceptance by All Impaired Classes (11 U.S.C. § 1129(a)(8)) .................27 

I. The Plan Provides for Payment of Priority Claims (11 U.S.C. 

§ 1129(a)(9)) ..............................................................................................28 

J. The Plan Has Been Accepted by at Least One Impaired Class 

Entitled to Vote (11 U.S.C. § 1129(a)(10)) ................................................29 

K. The Plan Is Not Likely to Be Followed by Liquidation or the Need 

for Further Financial Reorganization (11 U.S.C. § 1129(a)(11)) ...............30 

L. The Plan Provides for Full Payment of All Statutory Fees (11 

U.S.C. § 1129(a)(12)) ................................................................................33 

M. The Plan Does Not Violate the Requirement that Appropriate 

Treatment of Retiree Benefits Be Provided (11 U.S.C. 

§ 1129(a)(13)) ............................................................................................33 

N. The Requirements Related to Domestic Support Obligations, 

Unsecured Claims Against Individual Debtors and Transfers by 

Nonprofit Organizations Do Not Apply to the Plan (11 U.S.C. 

§ 1129(a)(14), (15) and (16)) .....................................................................33 

O. The Plan Satisfies the ―Cram-Down‖ Requirements of 11 U.S.C. 

§ 1129(b) ....................................................................................................34 

i. The Plan Does Not Discriminate Unfairly with Respect to 

the Rejecting Classes .....................................................................35 

ii. 

iii. 

The Plan is Fair and Equitable with Respect to the 

Rejecting Classes ...........................................................................36 

The Requirement that the Bankruptcy Court May only 

Approve One Plan Has Been Met (11 U.S.C. § 1129(c)) ..............37 

ii


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P. The Principal Purpose of the Plan is Not Avoidance of Taxes (11 

U.S.C. § 1129(d)) .......................................................................................37 

II. 

III. 

The Plan Settlement of Claims and Controversies Is Fair and Equitable 

and Should Be Approved .......................................................................................37 

The Limited Release, Exculpation, and Injunction Provisions of the Plan 

Should Be Approved ..............................................................................................39 

A. The Debtor Release Should Be Approved .................................................40 

B. The Third-Party Release Should Be Approved ..........................................42 

C. The Injunction Should Be Approved .........................................................45 

D. The Exculpation Should be Approved .......................................................46 

IV. The Modifications to the Plan are not Material .....................................................49 

V. Request for a Waiver of Bankruptcy Rule 3020(e), 6004(h) and/or 7062 .............51 

CONCLUSION ..............................................................................................................................53 

iii


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TABLE OF AUTHORITIES 

CASES 

Page(s) 

Aetna Cas. and Sur. Co. v. Clerk U.S. Bankr. Ct., N.Y. (In re Chateaugay Corp.), 

89 F.3d 942 (2d Cir. 1996).......................................................................................................14 

Bank of Am. Nat’l Trust & Sav. Ass’n v. 203 N. LaSalle St. P’ship, 

526 U.S. 434 (1999) ...........................................................................................................25, 36 

Bos. Post Rd. Ltd. P’ship v. FDIC (In re Bos. Post Rd. Ltd. P’ship), 

21 F.3d 477 (2d Cir. 1994).................................................................................................13, 34 

Captran Creditors’ Trust v. McConnell (In re Captran Creditors’ Trust), 

128 B.R. 469 (M.D. Fla. 1991) ................................................................................................47 

Citicorp Acceptance Co., Inc. v. Ruti-Sweetwater (In re Sweetwater), 

57 B.R. 354 (D. Utah 1985) .....................................................................................................50 

Deutsche Bank AG, London Branch v. Metromedia Fiber Network, Inc. (In re 

Metromedia Fiber Network, Inc.), 416 F.3d 136 (2d Cir. 2005) .......................................42, 43 

Enron Corp. v. New Power Co. (In re New Power Co.), 

438 F.3d 1113 (11th Cir. 2006) ...............................................................................................51 

Frito-Lay, Inc., v. LTV Steel Co., Inc. (In re Chateaugay Corp.), 

10 F.3d 944 (2d Cir. 1993).......................................................................................................13 

Heartland Fed. Sav. & Loan Ass’n v. Briscoe Enters., Ltd. II (In re Briscoe Enters., Ltd. 

II), 994 F.2d 1160 (5th Cir. 1993) .....................................................................................12, 31 

In re 203 N. LaSalle St. Ltd. P’ship, 

190 B.R. 567 (Bankr. N.D. Ill. 1995), aff’d, Bank of Am., Ill. V. LaSalle St. P’ship, 

195 B.R. 692 (N.D. Ill. 1996), aff’d 126 F.3d 955 (7th Cir. 1997), rev’d on other 

grounds, Bank of Am. Nat’l Trust and Sav. Ass’n v. 203 N. LaSalle St. P’ship, 523 

U.S. 1106 (1998) ......................................................................................................................35 

In re 266 Washington Assocs., 

141 B.R. 275 (Bankr. E.D.N.Y. 1992) .....................................................................................30 

In re 500 Fifth Ave. Assocs., 

148 B.R. 1010 (Bankr. S.D.N.Y. 1993 ....................................................................................13 

In re Adelphia Commc’ns. Corp., 

368 B.R. 140 (Bankr. S.D.N.Y. 2007), aff’d, 544 F.3d 420 (2d Cir. 2008) ..........14, 25, 41, 43 

iv


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In re AG Consultants Grain Div., Inc., 

77 B.R. 665 (Bankr. N.D. Ind. 1987) .......................................................................................24 

In re Am. Solar King Corp., 

90 B.R. 808 (Bankr. W.D. Tex. 1988) ...............................................................................24, 51 

In re Aztec Co., 

107 B.R. 585 (Bankr. M.D. Tenn. 1989) .................................................................................35 

In re Bally Total Fitness of Greater N.Y., Inc., 

No. 07-12395, 2007 WL 2779438 (Bankr. S.D.N.Y. Sept. 17, 2007) ............................. passim 

In re Buttonwood Partners, Ltd., 

111 B.R. 57 (Bankr. S.D.N.Y. 1990) .......................................................................................35 

In re Calpine Corp., 

No. 05-60200, 2007 WL 4565223 (Bankr. S.D.N.Y. Dec. 19, 2007), 

aff’d, 354 Fed. Appx. 479 (2d Cir. 2009) .............................................................41, 45, 48, 49 

In re Cellular Info. Sys., Inc., 

171 B.R. 926 (Bankr. S.D.N.Y. 1994) .....................................................................................21 

In re Coram Healthcare Corp., 

315 B.R. 321 (Bankr. D. Del. 2004) ........................................................................................14 

In re Drexel Burnham Lambert Grp., Inc., 

138 B.R. 723 (Bankr. S.D.N.Y. 1992) ...............................................................................12, 13 

In re Eagle Bus Mfg., Inc., 

134 B.R. 584 (Bankr. S.D. Tex. 1991), aff’d, 158 B.R. 42 (S.D. Tex. 1993)..........................24 

In re Enron Corp., No. 01-16034 

(Bankr. S.D.N.Y. July 15, 2004) [Docket No. 19758] ............................................................30 

In re Eddington Thread Mfg. Co., 

181 B.R. 826 (Bankr. E.D. Pa. 1995) ......................................................................................31 

In re FF Holdings Corp., 

No. 98-37, 1998 U.S. Dist. LEXIS 10741 (D. Del. Feb. 17, 1998) ........................................14 

In re Freymiller Trucking, Inc., 

190 B.R. 913 (Bankr. W.D. Okla. 1996) .................................................................................35 

In re Granite Broad. Corp., 

369 B.R. 120 (Bankr. S.D.N.Y. 2007) .....................................................................................36 

In re Greate Bay Hotel & Casino, Inc., 

251 B.R. 213 (Bankr. D.N.J. 2000) .........................................................................................14 

v


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In re Heritage Org., LLC, 

375 B.R. 230, 299 n.86 (Bankr. N.D. Tex. 2007) ...................................................................13 

In re Homestead Partners, Ltd., 

197 B.R. 706 (Bankr. N.D. Ga. 1996) .......................................................................................8 

In re Ionosphere Clubs, Inc., 

98 B.R. 174 (Bankr. S.D.N.Y. 1989) .......................................................................................13 

In re Jartran, Inc., 

44 B.R. 331 (Bankr. N.D. Ill. 1984) ........................................................................................48 

In re Johns-Manville Corp., 

68 B.R. 618 (Bankr. S.D.N.Y. 1986), 

aff’d in part, rev’d in part on other grounds, 78 B.R. 407 (S.D.N.Y. 1987), 

aff’d, Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 

843 F.2d 636 (2d Cir. 1988)...............................................................................................18, 35 

In re Kaiser Aluminum Corp., 

No. 02-10429, 2006 WL 616243 (Bankr. D. Del. Feb. 6, 2006), 

aff’d, 343 B.R. 88 (D. Del. 2006) ............................................................................................13 

In re Leslie Fay Cos., 

207 B.R. 764 (Bankr. S.D.N.Y. 1997) .....................................................................................31 

In re Mount Vernon Plaza Cmty. Urban Redevelopment Corp. I, 

79 B.R. 305 (Bankr. S.D. Ohio 1987) ......................................................................................51 

In re Oneida Ltd., 

351 B.R. 79 (Bankr. S.D.N.Y. 2006) .................................................................................41, 49 

In re One Times Square Assocs. Ltd. P’ship, 

159 B.R. 695, 703 (Bankr. S.D.N.Y. 1993) ............................................................................14 

In re Prudential Energy, 

58 B.R. 857 (Bankr. S.D.N.Y. 1986) .......................................................................................31 

In re Pub. Serv. Co. of N.H., 

88 B.R. 521 (Bankr. D.N.H. 1988) ..........................................................................................48 

In re PWS Holding Corp., 

228 F.3d 224 (3d Cir. 2000)...............................................................................................47, 48 

In re Repurchase Corp., 

332 B.R. 336 (Bankr. N.D. Ill. 2005), aff’d, No. 04-32933 (DHC), 

2008 WL 4379035 (N.D. Ill. 2008) .........................................................................................31 

vi


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In re Sherwood Square Assocs., 

107 B.R. 872 (Bankr. D. Md. 1989) ........................................................................................43 

In re Simplot, 

No. 06-00002, 2007 WL 2479664 (Bankr. D. Idaho Aug. 28, 2007) ......................................12 

In re Source Enters., Inc., 

No. 06-11707, 2007 WL 2903954 (Bankr. S.D.N.Y. Oct. 1, 2007) ........................................49 

In re SGPA, Inc., 

No. 01-02609, 2001 WL 34750646 (Bankr. M.D. Pa. Sept. 28, 2001) ..................................30 

In re Spiegel, Inc., 

No. 03-11540, 2005 WL 1278094 (Bankr. S.D.N.Y. May 25, 2005) ...............................38, 41 

In re Texaco, Inc., 

84 B.R. 893 (Bankr. S.D.N.Y. 1988) ...........................................................................21, 24, 31 

In re Tower Auto., Inc., 

No. 05-10578 (Bankr. S.D.N.Y. July 12, 2007) ......................................................................41 

In re Toy & Sports Warehouse, Inc., 

37 B.R. 141 (Bankr. S.D.N.Y. 1984) .......................................................................................18 

In re Trans World Airlines, Inc., 

185 B.R. 302 (Bankr. E.D. Mo. 1995) .....................................................................................24 

In re W.E. Parks Lumber Co., 

19 B.R. 285 (Bankr. W.D. La. 1982) .......................................................................................24 

In re Winn-Dixie Stores, Inc., 

356 B.R. 239 (Bankr. M.D. Fla. 2006) ....................................................................................48 

In re WorldCom, Inc., 

No. 02-13533, 2003 WL 23861928 (Bankr. S.D.N.Y. Oct. 31, 2003) ........................31, 35, 48 

In re Zenith Elecs. Corp., 

241 B.R. 92 (Bankr. D. Del. 1999) ....................................................................................34, 48 

Iridium Operating LLC v. Official Comm. of Unsecured Creditors (In re Iridium 

Operating LLC), 478 F.3d 452, 462, 465 (2d Cir. 2007) .........................................................39 

John Hancock Mut. Life Ins. Co. v. Route 37 Bus. Park Assocs., 

987 F.2d 154 (3d Cir. 1993).....................................................................................................34 

JPMorgan Chase Bank, N.A. v. Charter Commc’ns Operating, LLC (In re Charter 

Commc’ns), 419 B.R. 221 (Bankr. S.D.N.Y. 2009) ..........................................................24, 30 

vii


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Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 

843 F.2d 636 (2d Cir. 1988).........................................................................................12, 21, 31 

Liberty Nat’l Enters. v. Ambanc La Mesa Ltd. P’ship (In re Ambanc La Mesa Ltd. 

P’ship), 115 F.3d 650 (9th Cir. 1997) ......................................................................................34 

Momentum Mfg. Corp. v. Employee Creditors Comm. (In re Momentum Mfg. Corp.), 

25 F.3d 1132 (2d Cir. 1994).....................................................................................................19 

Rosenberg v. XO Commc’ns, Inc. (In re XO Commc’ns, Inc.), 

330 B.R. 394 (Bankr. S.D.N.Y. 2005) .....................................................................................43 

SEC v. Drexel Burnham Lambert Grp., Inc. (In re Drexel Burnham Lambert Grp.), Inc., 

960 F.2d 285 (2d Cir. 1992)...............................................................................................28, 41 

Teamsters Nat’l Freight Indus. Negotiating Comm. v. U.S. Truck Co., Inc. (In re U.S. 

Truck Co., Inc.), 800 F.2d 581 (6th Cir. 1986) ........................................................................31 

Upstream Energy Servs. v. Enron Corp. (In re Enron Corp.), 

326 B.R. 497 (S.D.N.Y. 2005) ...........................................................................................47, 48 

STATUTES 

11 U.S.C. 

§ 363.........................................................................................................................................37 

§ 507(a) ....................................................................................................................................28 

§ 1122...........................................................................................................................12, 13, 51 

§ 1123) ...............................................................................................................................12, 51 

§ 1123(a) ............................................................................................................................15, 17 

§ 1123(a)(1) .............................................................................................................................15 

§ 1123(a)(2) .............................................................................................................................15 

§ 1123(a)(3) .............................................................................................................................15 

§ 1123(a)(4) .............................................................................................................................15 

§ 1123(a)(5) .............................................................................................................................15 

§ 1123(a)(6) .............................................................................................................................17 

§ 1123(a)(7) .............................................................................................................................17 

§ 1123(b) ..................................................................................................................................18 

§ 1123(b)(3)(A) ........................................................................................................................41 

§ 1125...........................................................................................................................12, 18, 19 

§ 1125(b) ..................................................................................................................................19 

§ 1126...........................................................................................................................12, 18, 20 

§ 1126(c) ............................................................................................................................20, 27 

§ 1126(d) ............................................................................................................................20, 27 

§ 1126(f).............................................................................................................................20, 28 

§ 1126(g) ..................................................................................................................................28 

§ 1127.......................................................................................................................................51 

§ 1127(a) ............................................................................................................................21, 50 

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§ 1127(d) ..................................................................................................................................50 

§ 1129.......................................................................................................................................12 

§ 1129(a)(1) .............................................................................................................................12 

§ 1129(a)(2) .............................................................................................................................18 

§ 1129(a)(3) .......................................................................................................................22, 47 

§ 1129(a)(4) .............................................................................................................................22 

§ 1129(a)(5) .................................................................................................................23, 24, 25 

§ 1129(a)(6) .............................................................................................................................25 

§ 1129(a)(7) .................................................................................................................25, 26, 27 

§ 1129(a)(7)(A)(i) ....................................................................................................................26 

§ 1129(a)(7)(A)(ii) ...................................................................................................................26 

§ 1129(a)(8) .................................................................................................................27, 28, 34 

§ 1129(a)(9) .......................................................................................................................28, 29 

§ 1129(a)(10) ...........................................................................................................................30 

§ 1129(a)(11) .....................................................................................................................31, 32 

§ 1129(a)(12) ...........................................................................................................................33 

§ 1129(a)(13) ...........................................................................................................................33 

§ 1129(a)(14) ...........................................................................................................................34 

§ 1129(a)(15) ...........................................................................................................................34 

§ 1129(a)(16) ...........................................................................................................................34 

§ 1129(b) ............................................................................................................................28, 34 

§ 1129(b)(2)(B)(ii) ...................................................................................................................36 

§ 1129(b)(2)(C)(ii) ...................................................................................................................36 

§ 1129(c) ..................................................................................................................................37 

§ 1129(d) ..................................................................................................................................37 

28 U.S.C. 

§ 1930(a)(6) .............................................................................................................................33 

31 U.S.C. 

§ 3717.......................................................................................................................................33 

OTHER AUTHORITIES 

Fed. R. Bank. P. 

3017..........................................................................................................................................18 

3018..........................................................................................................................................18 

3019(a) ....................................................................................................................................50 

3020 .........................................................................................................................................51 

6004(h) ....................................................................................................................................51 

7062 .........................................................................................................................................51 

9019..........................................................................................................................................41 

9019(a) ....................................................................................................................................37 

H.R. Rep. No. 95-595 (1977) ...................................................................................................12, 18 

S. Rep. No. 95-989 (1978) .................................................................................................12, 18, 28 

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The above-captioned debtors and debtors in possession (each, a ―Debtor‖ and, 

collectively, the ―Debtors‖) submit this memorandum of law (the ―Memorandum‖) in support of 

entry of an order, substantially in the form attached hereto as Exhibit A, confirming the Joint 

Chapter 11 Plan of TerreStar Networks Inc., et al., dated as of December 27, 2012 

[Docket No. 873] (as amended from time to time, the ―Plan‖) 2 pursuant to section 1129 of title 

11 of the United States Code (the ―Bankruptcy Code‖). In support of this Memorandum, the 

Debtors respectfully state as follows: 

PRELIMINARY STATEMENT 

1. The Debtors, together with their key stakeholders, have made tremendous 

progress since the commencement of these cases. In a dramatic change from the posture of the 

first five months of their Chapter 11 Cases, over the past year, the Debtors were able to formulate 

a successful sale process that maximized the value of these estates and to facilitate a consensual 

resolution of numerous substantial contested issues that stood as obstacles to a chapter 11 plan 

and the Debtors‘ emergence from chapter 11. Indeed, having already resolved the major issues in 

the Chapter 11 Cases by virtue of the Settlement, and having paid off all of their prepetition 

issued secured debt obligations and postpetition DIP financing obligations, the Debtors stand 

before the Bankruptcy Court with the support of all remaining major constituents, including the 

support of the overwhelming majority of creditors entitled to vote on the Plan, seeking 

confirmation of the Plan – a Plan that will implement the Settlement and the distribution of the 

remaining sale proceeds, and properly wind down these estates. 

2 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in 

the Plan or the Disclosure Statement for the Joint Chapter 11 Plan of TerreStar Networks Inc., et al. 

[Docket No. 874] (as may be amended from time to time, the ―Disclosure Statement‖), as applicable. 

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2. As this Bankruptcy Court and all parties in interest are aware, the Debtors have 

facilitated contentious negotiations among various parties with widely disparate interests over 

the past sixteen months. Over time, those facilitated discussions bore fruit and maximized the 

value available for distribution to all of the Debtors‘ creditors. Moreover, those negotiations 

(which culminated in several settlements, including the Settlement, approved by this Bankruptcy 

Court) paved the way for a consensual plan, which the Debtors now offer for the Bankruptcy 

Court‘s confirmation. As further set forth herein, the Debtors respectfully submit that the Plan 

complies with all requirements set forth in the Bankruptcy Code, and that no objection stands in 

the way of confirmation of the Plan. 

3. As discussed more fully below, the solicitation conducted by the Debtors and the 

Voting Agent complies with all applicable nonbankruptcy law requirements governing the 

solicitation of a chapter 11 plan, as well as all applicable requirements of the Bankruptcy Code, 

the Bankruptcy Rules and the Local Bankruptcy Rules of the Southern District of New York (the 

―Local Rules‖). In addition, as already noted, the Plan is supported by all of the Debtors‘ major 

creditors and, as set forth below, holders of general unsecured claims in Class 3, who are the only 

creditors entitled to vote on the Plan, have almost unanimously voted to accept the Plan. 

Moreover, notwithstanding the deemed rejection of the Plan by Class 4 and the extensive 

noticing of the hearing on confirmation of the Plan, no objections to confirmation have been 

received. Finally, as further set forth below, the Debtors meet the ―cram-down‖ requirements of 

the Bankruptcy Code with respect to Class 4. 

4. Based on, among other things, the settlement underlying the Plan and the 

overwhelming support for the Plan among the Debtors‘ creditors, the Debtors respectfully assert 

that the Plan is in the best interests of the Debtors‘ estates and all parties in interest. In addition, 

2


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as set forth herein, the Debtors submit that all of the requirements for confirmation of the Plan 

under Bankruptcy Code section 1129 have been satisfied and, thus, the Plan should be confirmed. 

A. The Prior Plan 

BACKGROUND AND PLAN OVERVIEW 3 

5. On November 5, 2010, the Debtors filed with the Bankruptcy Court, among other 

things, the Prior Plan and the accompanying disclosure statement. 4 

On December 22, 2010, the 

Bankruptcy Court entered orders approving, inter alia, the adequacy of the disclosure statement 

[Docket No. 312] and the solicitation procedures proposed in connection therewith [Docket No. 

314]. 

6. The only creditor that the Debtors were certain supported the Prior Plan was 

EchoStar, in its capacity as plan sponsor and as holder of approximately one-half of the Senior 

Secured Notes, approximately one-third of the Senior Exchangeable Notes, and approximately 

one-half of the outstanding PMCA debt. In light of the Debtors‘ concern that the Plan would 

lack the requisite support for confirmation, and despite the fact that EchoStar had agreed to 

backstop a $125 million rights offering to purchase preferred stock in connection with the Prior 

Plan that would have provided the Debtors with the financing necessary to emerge from chapter 

11, the Debtors withdrew the Prior Plan on February 16, 2011. See Docket No. 424. 

3 

4 

The factual background concerning the Debtors‘ business operations, capital structure and prepetition 

indebtedness and the events leading up to the commencement of these Chapter 11 Cases is set forth in 

detail in the Declaration of Jeffrey W. Epstein Pursuant to Local Bankruptcy Rule 1007-2 in Support of 

First Day Pleadings (the ―First Day Declaration‖) [Docket No. 3] and the Disclosure Statement. The 

factual background contained in the First Day Declaration and the Disclosure Statement is hereby expressly 

incorporated by reference as if set forth fully herein. 

On December 2, 8 and 28, 2010, the Debtors filed amended versions of the Prior Plan [Docket Nos. 222, 

250 and 330, respectively] and accompanying disclosure statement [Docket Nos. 223, 251 and 331, 

respectively]. 

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B. The Sale Transaction and Subsequent Repayments of Debt 

7. Between February 16, 2011 and mid-April 2011, the Debtors embarked on dual 

paths. First, the Debtors continued to run an ―informal‖ auction process for the sale of their 

assets. In that regard, the Debtors engaged in extensive negotiations with a potential stalking 

horse regarding the contours of a potential bid. Second, the Debtors engaged in restructuring 

negotiations with the Ad Hoc Group, the Creditors‘ Committee, Sprint and Harbinger regarding 

the terms of a potential restructuring. Despite the best efforts of all parties in both paths, the 

Debtors ultimately decided to engage in a ―naked‖ auction (i.e., an auction process with no 

―stalking horse‖), while preserving the optionality of continuing either of the pending dual paths 

to the extent that such path would provide increased value for the Debtors‘ estates. 

i. The Sale Transaction 

8. On April 15, 2011, the Debtors filed a motion with the Bankruptcy Court seeking 

approval of bid and auction procedures for a sale of substantially all of the Debtors‘ assets 

[Docket No. 533] (the ―Sale Motion‖). Pursuant to the Sale Motion, the Debtors requested that 

the Bankruptcy Court (a) approve the Debtors‘ proposed bid procedures (the ―Bid Procedures‖) 

and (b) set a date for (i) an auction (the ―Auction‖) for the sale of substantially all of the assets 

(the ―Assets‖) of the Debtors‘ estates and (ii) a hearing (the ―Sale Hearing‖) for approval of any 

successful bidder (any such bidder, the ―Successful Bidder‖) at the Auction, all as more fully set 

forth in the Sale Motion. 

9. On May 4, 2011, the Bankruptcy Court entered the revised Bid Procedures Order, 

which provided, among other things, that the Debtors, with the reasonable consent of the 

Creditors‘ Committee, could seek approval of entry into a stalking horse agreement at any time 

before the Bid Deadline. In the subsequent weeks, the Debtors‘ discussions with interested 

parties produced a highly attractive offer with numerous benefits for the estate, and the Debtors 

4


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sought and received permission to enter into a purchase agreement (the ―Purchase Agreement‖) 

with the interested party that produced the highest and best offer (the ―Stalking Horse Bidder‖). 

See [Docket Nos. 617 and 645]. 

10. Ultimately, the Debtors received no further bids in the Auction, and the Sale to the 

Stalking Horse Bidder (the ―Purchaser‖) was approved. See Docket No. 668. Pursuant to the 

Purchase Agreement, the Purchaser agreed to purchase substantially all of the Debtors‘ assets for 

$1.375 billion. Furthermore, and in an unprecedented move for a transaction of this size, the 

Purchaser agreed to pay $1.345 billion on the Funding Date after entry of the order approving the 

Sale – and before actually receiving the assets it is purchasing – subject only to receipt of 

competition and antitrust regulatory approvals and other customary conditions set forth in the 

Purchase Agreement. 5 

ii. 

The Funding Date and First Paydown 

11. On July 6, 2011, the Debtors filed a motion [Docket No. 662] (the ―First 

Paydown Motion‖) with the Bankruptcy Court seeking to use the proceeds of the Sale to repay 

their outstanding secured debt obligations to decrease all, or in the alternative, a portion of, their 

secured obligations, thereby stopping (or reducing) the postpetition interest accrual being 

incurred by the estates. The purpose of the First Paydown Motion was to preserve as much of 

the sale proceeds as possible for the benefit of the Debtors‘ unsecured creditors. Various 

creditors voiced concerns with regard to the relief requested in the First Paydown Motion, 

however. Specifically, they were concerned that, inter alia, paying in full all of the Senior 

Secured Notes obligations would harm any recoveries available from the pending Lien Litigation. 

Therefore, on August 3, 2011, the Bankruptcy Court entered an order agreed upon by the Debtors‘ 

5 

The remaining $30 million of the Purchase Price will be paid pursuant to the terms of the Purchase 

Agreement. 

5


Pg 16 of 336 

major stakeholders approving the repayment of approximately $975 million of the Debtors‘ 

secured debt obligations [Docket No. 730] (the ―First Paydown Order‖). 

The amount 

contemplated to be paid pursuant to the First Paydown Order was an amount that unsecured 

creditors agreed would not impact their recoveries in the event the Lien Litigation were 

successful. 

12. On August 11, 2011, after having fulfilled all conditions precedent to the Funding, 

the Debtors received $1.345 billion in proceeds from the Purchaser (the ―Funding Date 

Payment‖). On that same date, and within hours of receiving the Funding Date Payment, the 

Debtors repaid approximately $975 million of the obligations under the (i) DIP facility 

(approximately $85 million), (ii) Purchase Money Credit Agreement 6 (approximately $90 million) 

and (iii) Senior Secured Notes Indenture ($800 million) (cumulatively, the ―First Paydown‖), 

thereby curbing the postpetition interest accrual on their secured obligations and helping to 

maximize unsecured creditor recoveries. 

iii. 

The Second Paydown 

13. On September 13, 2011, the Debtors filed a second ―paydown‖ motion, seeking 

entry of an order authorizing the Debtors to repay certain amounts due and owing under the 

Senior Secured Notes Indenture (the ―Second Paydown Motion‖) [Docket No. 768]. 

The 

Second Paydown Motion was not opposed by any party, and was formally supported by EchoStar, 

the Creditors‘ Committee and Harbinger. Pursuant to the Second Paydown Motion, the Debtors 

sought to repay $143,959,275.00 (the ―October 5 Payment‖) due and owing under the Senior 

Secured Notes Indenture, which amount was approximately equivalent to the then outstanding 

6 

As set forth in the Disclosure Statement, on October 12, 2011, this Court approved the PMCA 9019 Motion 

[Docket No. 800] (the ―PMCA Order‖), granting the Debtors authority to repay the then outstanding 

amounts under the PMCA. Pursuant to the PMCA Order, on October 13, 2011, the Debtors repaid the 

PMCA in full. 

6


Pg 17 of 336 

principal obligations under the Senior Secured Notes Indenture. 

On October 4, 2011, the 

Bankruptcy Court approved the Second Paydown Motion, and on October 5, 2011, the Debtors 

made the October 5 Payment to the holders of the Senior Secured Notes. 

C. The Global Settlement 

14. On November 14, 2011, after several months of good-faith and arms‘-length 

negotiations with their major constituents, the Debtors filed a motion (the ―Global Settlement 

Motion‖) seeking approval of a stipulation and order (the ―Global Settlement Order‖) 

authorizing the Debtors‘ entry into a consensual global settlement (the ―Global Settlement‖) by 

and among the Debtors and the Settlement Parties. 7 

Significantly, the Global Settlement 

resolved and settled all of the outstanding pending and potential, formal and informal, disputes in 

their Chapter 11 Cases as of the date of the Global Settlement Motion, which included, among 

others: (a) the adversary proceeding filed by Sprint against the Indenture Trustee for the Debtors‘ 

15% Notes (the ―Lien Litigation‖); (b) the Debtors‘ objection to proofs of claim filed by Sprint; 

(c) the Creditors‘ Committee‘s T2 Litigation; (d) the dispute as to whether the holders of the 15% 

Notes are due a ―make-whole‖ premium under the indenture governing the 15% Notes, and 

whether they are entitled to compound and/or default interest; (e) the motion filed by the 

Creditors‘ Committee to re-characterize certain prepetition loans made by TSC to TSN as an 

equity contribution; (f) certain claims filed by LightSquared Inc. and LightSquared LP; and (g) 

various parties‘ divergent viewpoints with regard to the valuation of the Debtors‘ assets, and the 

7 

The ―Settlement Parties‖ consist of the following: (a) the statutory committee of unsecured creditors 

appointed in these chapter 11 cases (the ―Creditors’ Committee‖), (b) EchoStar Corporation, in its capacity 

as largest holder of the 15% Notes (as defined below) and as a holder of the 6.5% Notes (as defined below) 

(―EchoStar‖), (c) the ad hoc group of certain holders of the 15% Notes (the ―Ad Hoc Group‖), (d) 

Harbinger Capital Partners Master Fund I, Ltd. and Credit Distressed Blue Line Master Fund, Ltd. 

(collectively, ―Harbinger‖), (e) LightSquared Inc. and LightSquared LP (collectively, ―LightSquared‖), (f) 

Sprint Nextel Corporation (―Sprint‖), (g) Solus Alternative Asset Management LP (―Solus‖), and (h) U.S. 

Bank National Association, as indenture trustee and collateral agent for the 15% Notes (the ―15% Notes 

Trustee‖ and, collectively with the Debtors, the Creditors‘ Committee, EchoStar, the Ad Hoc Group, 

LightSquared, Harbinger, Sprint, and Solus, the ―Settlement Parties‖). 

7


Pg 18 of 336 

appropriate allocation of expenses against such entity‘s valuations (all as more fully set forth in 

the Global Settlement Motion). 

15. In exchange for the above resolution of pending and impending disputes, the 

Settlement Parties agreed to resolve certain claims and for the Debtors to make certain payments 

on account of their secured obligations and certain costs attendant therewith, including, inter alia, 

the full and final satisfaction of the then outstanding obligations related to the 15% Notes 

(collectively, and as set forth more fully in the Global Settlement Order, the ―Settlement 

Payments‖). 

16. On December 14, 2011, the Bankruptcy Court approved the Global Settlement 

Motion and entered the Global Settlement Order, as amended, and on December 16, 2011 (the 

―Payment Date‖), the Debtors made the Settlement Payments. 

Upon entry of the Global 

Settlement Order, as noted above, all formal and informal disputes as of the date of the Global 

Settlement Motion, including pending adversary proceedings, motions, applications and appeals, 

were released and deemed withdrawn with prejudice. 

D. The Current Plan 

i. Overview and Summary of the Plan 

17. On November 18, 2011, the Debtors filed with the Bankruptcy Court, among 

other things, the Plan and Disclosure Statement. On December 6, 2011 and December 19, 2011, 

the Debtors filed amended versions of the Plan [Docket Nos. 850 and 862] and Disclosure 

Statement [Docket Nos. 851 and 863]. On December 21, 2011, the Bankruptcy Court entered an 

order approving, inter alia, the adequacy of the disclosure statement and the solicitation 

8


Pg 19 of 336 

procedures proposed in connection therewith [Docket No. 868]. 8 

On December 27, 2011, the 

Debtors filed solicitation versions of the Plan and Disclosure Statement [Docket Nos. 873 and 

874, respectively]. 

18. The Plan, among other things, sets forth the Debtors‘ post-Effective Date 

corporate structure, establishes a Liquidating Trust and provides for the treatment of Classes of 

Claims against and Interests in the Debtors. Specifically, among other things: 

(a) 

(b) 

(c) 

(d) 

Holders of Other Priority Claims will receive Cash in the full amount of 

such Allowed Other Priority Claim on the Initial Distribution Date; 

On the Initial Distribution Date, except to the extent that a holder of an 

Allowed Other Secured Claim agrees to a less favorable treatment, at the 

option of the Debtors or the Reorganized Debtors (i) each Allowed Other 

Secured Claim shall be reinstated and Unimpaired in accordance with 

section 1124(2) of the Bankruptcy Code, or (ii) each holder of an Allowed 

Other Secured Claim shall receive, in full satisfaction, settlement, release, 

and discharge of, and in exchange for, such Other Secured Claim, either 

(w) Cash in the full amount of such Allowed Other Secured Claim, 

including any postpetition interest, (x) the proceeds of the sale or 

disposition of the collateral securing such Allowed Other Secured Claim 

to the extent of the value of the holder‘s secured interest in such collateral, 

(y) the collateral securing such Allowed Other Secured Claim and any 

interest on such Allowed Other Secured Claim, or (z) such other 

distribution as necessary to satisfy the requirements of section 1129 of the 

Bankruptcy Code; 

Each holder of an Allowed Unsecured Claim shall receive, in full and final 

satisfaction of its Claim, its Pro Rata share (calculated with reference to all 

Allowed and Disputed Class 3 Claims against the applicable Debtor) of 

Liquidating Trust Interests applicable to such Debtor based on each such 

Debtor‘s Allocated Value; provided, however, that if, pursuant to Article 

V.G. of the Plan, the provisions of Exhibit 3 to the Plan are triggered, the 

treatment of holders of Allowed Claims in Class 3 shall be as provided in 

Exhibit 3 to the Plan; and 

On the Effective Date, all Equity Interests shall be deemed cancelled and 

shall be of no further force and effect, whether surrendered for 

8 

On December 27, 2011, the Debtors filed the finalized solicitation versions of the Plan and Disclosure 

Statement reflecting certain non-material modifications to the version of the Plan that was filed with the 

version of the Disclosure Statement approved as having adequate information [Docket Nos. 873 and 874]. 

9


Pg 20 of 336 

cancellation or otherwise, and there shall be no distribution to the holders 

of Equity Interests. 

ii. 

Voting Status 

19. On December 29, 2011, the Debtors commenced the solicitation of votes to accept 

or reject the Plan (―Solicitation‖) from holders of Claims in Class 3 (the ―Voting Class‖). In 

connection therewith, the Debtors‘ voting agent, The Garden City Group, Inc. (the ―Voting Agent‖ 

or ―GCG‖), distributed to holders of Claims in the Voting Class a solicitation package (the 

―Solicitation Package‖) containing, among other things, (i) the Plan, (ii) the Disclosure 

Statement, (iii) the appropriate form of ballots (the ―Ballots‖) for each holder of a Claim in the 

Voting Class to vote to accept or reject the Plan, (iv) the Cover Letter, (v) the Confirmation 

Hearing Notice and (vi) the Disclosure Statement Order (without exhibits). The Disclosure 

Statement Order established February 1, 2012 at 5:00 p.m. (ET) (the ―Voting Deadline‖) as the 

deadline for returning Ballots to the Voting Agent. 

20. After the Voting Deadline, the Voting Agent tabulated the votes to accept or reject 

the Plan reflected in the Ballots received on or before the Voting Deadline. Thereafter, the 

Voting Agent filed a declaration certifying the results and methodology for the tabulation of 

Ballots accepting or rejecting the Plan [Docket No. 910] (the ―GCG Declaration‖). As set forth 

in the GCG Declaration and in the table below, Class 3 voted to accept the Plan. 

Accepting 

Rejecting 

Ballot 

Count 

% Ballot 

Count 

Dollar Amount 

% Dollar 

Amount 

Ballot 

Count 

% Ballot 

Count 

Dollar 

Amount 

% Dollar 

Amount 

0887729 B.C. Ltd. 

1 100.00% $945.00 100.00% 0 0.00% $0.00 0.00% 

TerreStar License Inc. 

5 100.00% $176,640,840.31 100.00% 0 0.00% $0.00 0.00% 

10


Pg 21 of 336 

TerreStar National Services Inc. 

6 100.00% $176,651,862.31 100.00% 0 0.00% $0.00 0.00% 

TerreStar Networks (Canada) Inc. 

1 100.00% $594,402.64 100.00% 0 0.00% $0.00 0.00% 

TerreStar Networks Holdings (Canada) Inc. 

0 0.00% $0.00 0.00% 0 0.00% $0.00 0.00% 

TerreStar Networks Inc. 

18 94.74% $456,733,736.55 99.999993% 1 5.26% $3,394.80 0.000007% 

iii. 

Informal Plan Objections 

21. In January of 2012, the Texas Comptroller of Public Accounts (the ―Texas 

Comptroller‖) asserted an informal objection that it was owed unremitted sales and use taxes 

arising from the installation of equipment and facilities in Texas in the approximate amount of 

$200,000 (including interest and penalties), the prepetition portion of which the Texas 

Comptroller asserted was entitled to priority treatment and the postpetition portion of which 

administrative treatment. Although the governmental bar date had passed at that time, the Texas 

Comptroller argued that it had grounds for relief from the governmental bar date and, on 

January 3, 2012, filed priority and administrative claims (Claim Nos. 143 and 144, the ―Texas 

Comptroller Claims‖) in the amounts of $158,520.31 and $47,881.82, respectively. As further 

discussed herein, the Debtors were able to reach a consensual resolution of the Texas 

Comptroller Claims with the Texas Comptroller, which is set forth in the Confirmation Order. 

11


Pg 22 of 336 

ARGUMENT 

I. The Plan Satisfies Each Requirement for Confirmation 

22. To confirm the Plan, the Bankruptcy Court must find that the Debtors have 

satisfied the provisions of Bankruptcy Code section 1129 by a preponderance of the evidence. 9 

The Debtors respectfully submit that the Plan complies with all relevant sections of the 

Bankruptcy Code, including sections 1122, 1123, 1125, 1126 and 1129, the Bankruptcy Rules 

and applicable non-bankruptcy law. This memorandum addresses each requirement individually. 

A. The Plan Complies with the Applicable Provisions of the Bankruptcy Code 

(11 U.S.C. § 1129(a)(1)) 

23. Bankruptcy Code section 1129(a)(1) requires that a chapter 11 plan comply with 

the applicable provisions of the Bankruptcy Code, including, principally, rules governing 

classification of claims and interests and the contents of a plan of reorganization. 10 

Accordingly, 

determining whether the Plan complies with Bankruptcy Code section 1129(a)(1) requires 

applying sections 1122 and 1123. As explained below, the Plan complies with Bankruptcy Code 

sections 1122 and 1123 in all respects. 

9 

10 

See In re Bally Total Fitness of Greater N.Y., Inc., No. 07-12395, 2007 WL 2779438, at *3 (Bankr. 

S.D.N.Y. Sept. 17, 2007) (―The Debtors, as proponents of the plan, have the burden of proving the 

satisfaction of the elements of Sections 1129(a) and (b) of the Bankruptcy Code by a preponderance of the 

evidence.‖); see also Heartland Fed. Sav. & Loan Ass’n v. Briscoe Enters., Ltd. II (In re Briscoe Enters., 

Ltd. II), 994 F.2d 1160, 1165 (5th Cir. 1993) (―[t]he combination of legislative silence, Supreme Court 

holdings, and the structure of the [Bankruptcy] Code leads this Court to conclude that preponderance of the 

evidence is the debtor‘s appropriate standard of proof both under § 1129(a) and in a cramdown‖) (footnote 

omitted). 

See Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 843 F.2d 636, 648-49 (2d Cir. 1988) 

(suggesting that Congress intended the phrase ―‗applicable provisions‘ in [section 1129(a)(1)] to mean 

provisions of Chapter 11 . . . such as section 1122 . . . .‖); In re Drexel Burnham Lambert Grp., Inc., 138 

B.R. 723, 757 (Bankr. S.D.N.Y. 1992) (noting that ―[t]he legislative history of § 1129(a)(1) explains that 

this provision embodies the requirements of §§ 1122 and 1123, respectively, governing classification of 

claims and the contents of the Plan‖) (citations omitted); see also In re Simplot, No. 06-00002, 2007 WL 

2479664, at *14 (Bankr. D. Idaho Aug. 28, 2007) (noting that the objective of 1129(a)(1) is to assure 

compliance with the sections of the Bankruptcy Code governing classification and the contents of a plan 

reorganization); S. Rep. No. 95-989, at 126 (1978); H.R. Rep. No. 95-595, at 412 (1977). 

12


Pg 23 of 336 

i. The Plan Satisfies the Classification Requirements of 11 U.S.C. § 1122 

24. The classification requirements of Bankruptcy Code section 1122 provide: 

(a) 

(b) 

Except as provided in subsection (b) of this section, a plan may place a 

claim or an interest in a particular class only if such claim or interest is 

substantially similar to the other claims or interests of such class. 

A plan may designate a separate class of claims consisting only of every 

unsecured claim that is less than or reduced to an amount that the court 

approves as reasonable and necessary for administrative convenience. 

25. The Second Circuit has recognized that, under Bankruptcy Code section 1122, 

plan proponents have significant flexibility to place similar claims into different classes, 

provided there is a rational basis to do so. 11 

Courts have identified grounds justifying separate 

classification, including: (a) where members of a class possess different legal rights 12 and 

11 

12 

See Bos. Post Rd. Ltd. P’ship v. FDIC (In re Bos. Post Rd. Ltd. P’ship), 21 F.3d 477, 482-83 (2d Cir. 1994) 

(finding that courts cannot prohibit separate classification of substantially similar claims); Frito-Lay, Inc., v. 

LTV Steel Co., Inc. (In re Chateaugay Corp.), 10 F.3d 944, 956-57 (2d Cir. 1993) (finding separate 

classification appropriate because classification scheme had a rational basis; separate classification based 

on bankruptcy court-approved settlement); In re 500 Fifth Ave. Assocs., 148 B.R. 1010, 1018 (Bankr. 

S.D.N.Y. 1993), aff’d, No. 93 Civ. 844, 1993 WL 316183 (S.D.N.Y. May 21, 1993) (although discretion is 

not unlimited, ―the proponent of a plan of reorganization has considerable discretion to classify claims and 

interests according to the facts and circumstances of the case . . . .‖); Drexel, 138 B.R. at 757 (―Courts have 

found that the Bankruptcy Code only prohibits the identical classification of dissimilar claims. It does not 

require that similar classes be grouped together . . . .‖) (citation omitted); In re Ionosphere Clubs, Inc., 98 

B.R. 174, 177-78 (Bankr. S.D.N.Y. 1989) (―[A] debtor may place claimants of the same rank in different 

classes and thereby provide different treatment for each respective class.‖). 

See Drexel, 138 B.R. at 757; see also In re Heritage Org., LLC, 375 B.R. 230, 299 n.86 (Bankr. N.D. Tex. 

2007) finding that if equitable subordination of one creditor in a class was appropriate, separate 

classification of that creditor would be necessary); In re Kaiser Aluminum Corp., No. 02-10429, 2006 WL 

616243, at *5 (Bankr. D. Del. Feb. 6, 2006), aff’d, 343 B.R. 88 (D. Del. 2006) (permitting classification 

scheme after consideration of creditors‘ legal rights). 

13


Pg 24 of 336 

(b) where there are good business reasons for separate classification. 13 

26. Article III of the Plan provides for separate classification of Claims and Interests 

into four different Classes based upon differences in the legal or factual nature of those Claims 

and Interests or based on other relevant and objective criteria. As such, valid business, factual 

and legal reasons exist for the Plan‘s classification scheme, which ―does not offend one‘s 

sensibility of due process and fair play.‖ 14 

Administrative Claims, DIP Claims, U.S. Trustee Fees 

and Priority Tax Claims are not classified and are separately treated in Article II of the Plan. The 

Classes of Claims and Interests are as follows: 

Class 1 

Class 2 

Class 3 

Class 4 

Other Priority Claims 

Other Secured Claims 

Unsecured Claims 

Equity Interests 

27. Additionally, each of the Claims or Interests in a particular Class under the Plan is 

substantially similar to the other Claims or Interests in such Class, and the classification structure 

is necessary to implement certain aspects of the Plan. Accordingly, the Debtors submit that the 

Plan fully complies with and satisfies the requirements of Bankruptcy Code section 1122. 

13 

14 

See Aetna Cas. and Sur. Co. v. Clerk U.S. Bankr. Ct., N.Y. (In re Chateaugay Corp.), 89 F.3d 942, 949 (2d 

Cir. 1996) (finding that debtor must have a legitimate business reason supported by credible proof to justify 

separate classification of unsecured claims); Bally Total Fitness, 2007 WL 2779438, at *3 (same). Courts 

have found a legitimate business reason exists where, among other things, a debtor‘s business would be 

adversely affected if the debtor was precluded from separately classifying creditors for purposes of treating 

certain groups essential to a reorganized debtor‘s ongoing business differently than those that are not. See, 

e.g., In re Coram Healthcare Corp., 315 B.R. 321, 349 (Bankr. D. Del. 2004) (―Numerous courts have held 

that separate classification and treatment of trade claims is acceptable if the separate classification is 

justified because they are essential to a reorganized debtor‘s ongoing business.‖) (citing In re FF Holdings 

Corp., No. 98-37, 1998 U.S. Dist. LEXIS 10741, at *16 (D. Del. Feb. 17, 1998)); see also Chateaugay, 89 

F.3d at 949-50 (―Congress gave reorganizing debtors considerable flexibility in their treatment of general 

unsecured creditors to position themselves for future economic viability.‖) (citations omitted); In re Greate 

Bay Hotel & Casino, Inc., 251 B.R. 213, 224 (Bankr. D.N.J. 2000) (permitting separate classification of 

similar claims when classification ―promotes the rehabilitative goals of Chapter 11.‖). 

In re Adelphia Commc’ns. Corp., 368 B.R. 140, 246-47 (Bankr. S.D.N.Y. 2007) (quoting In re One Times 

Square Assocs. Ltd. P’ship, 159 B.R. 695, 703 (Bankr. S.D.N.Y. 1993), aff’d, 544 F.3d 420 (2d Cir. 2008). 

14


Pg 25 of 336 

ii. 

The Plan Satisfies the Seven Mandatory Plan Requirements of 11 U.S.C. 

§§ 1123 (a)(1)-(a)(7) 

28. The Plan meets the seven mandatory requirements of Bankruptcy Code section 

1123(a), which requires that a plan: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

designate classes of claims and interests; 

specify unimpaired classes of claims and interests; 

specify treatment of impaired classes of claims and interests; 

provide the same treatment for each claim or interest of a particular class, 

unless the holder of a particular claim agrees to less favorable treatment of 

such claim or interest; 

provide adequate means for the plan‘s implementation; 

provide for the prohibition of nonvoting equity securities and provide an 

appropriate distribution of voting power among the classes of securities; 

and 

contain only provisions that are consistent with the interests of the 

creditors and equity security holders and with public policy with respect to 

the manner of selection of the reorganized company‘s officers and 

directors. 

29. The Plan satisfies the first three requirements of Bankruptcy Code section 1123(a): 

designating Classes of Claims and Interests, as required by section 1123(a)(1); specifying the 

Classes of Claims and Interests that are Unimpaired under the Plan, as required by section 

1123(a)(2); and specifying the treatment of each Class of Claims and Interests that is Impaired, 

as required by section 1123(a)(3). 15 

The Plan also satisfies Bankruptcy Code section 1123(a)(4) 

because the treatment of each Allowed Claim or Interest within a Class is the same as the 

15 

Plan, Article III. 

15


Pg 26 of 336 

treatment of each other Allowed Claim or Interest in that Class, 16 unless the holder of a Claim or 

Interest consents to less favorable treatment on account of its Claim or Interest. 

30. Various provisions of the Plan provide adequate means for the Plan‘s 

implementation, thus satisfying the fifth requirement of Bankruptcy Code section 1123(a)(5). 17 

Specifically, Article V of the Plan provides, among other things, for: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

(i) 

establishment of the Liquidating Trust to make Distributions pursuant to 

the Plan; 

a mechanism to establish an Interim TSN Trust in the event that the 

Closing Date does not occur on or before the Effective Date; 

the general settlement of Claims and Interests and other specific Plan 

settlements; 

issuance of the New Common Stock; 

the cancellation of certain securities and agreements; 

exemptions from registration laws for the Liquidating Trust Interests, as 

well as for the Interim TSN Trust Interests and Interim TSN Trust 

Warrants (in each case, if any); 

the continuation of each Debtor‘s corporate existence as a Reorganized 

Debtor and the vesting of assets in each respective Debtor; 

the filing of the New Certificates of Incorporation and the New By-Laws 

for each of the other Reorganized Debtors; 

the appointment of officers and directors of the Reorganized Debtors; 

16 

17 

Importantly, in Class 3, all holders of Claims are receiving the same treatment – i.e., a pro rata recovery of 

the Debtors‘ allocated value from the Sale Proceeds – even though such treatment may result in varying 

percentage recoveries. Certain Class 3 Claimants at TSNSI and 088 are receiving no recovery, but to be 

clear, all holders of Claims in Class 3 were treated in the same manner. Importantly, no holder of a Claim 

in Class 3 who is not receiving a distribution voted to reject the Plan. 

Section 1123(a)(5) specifies that adequate means for implementation of a plan may include: retention by 

the debtor of all or part of its property; the transfer of property of the estate to one or more entities; 

cancellation or modification of any indenture; curing or waiving of any default; amendment of the debtor‘s 

charter; or issuance of securities for cash, for property, for existing securities, in exchange for claims or 

interests or for any other appropriate purpose. 11 U.S.C. § 1123(a)(5). 

16


Pg 27 of 336 

(j) 

(k) 

(l) 

(m) 

the authorization of the Reorganized Debtors to undertake certain 

restructuring transactions, including those contemplated by or necessary to 

effectuate the Plan; 

the authorization of the Reorganized Debtors to take corporate action; 

the authorization of the Reorganized Debtors to enter into agreements and 

to take any necessary action to implement and further the Plan and any 

securities issued pursuant to the Plan; and 

the maintenance of Causes of Action and the preservation of all Causes of 

Action not expressly settled or released. 

31. Bankruptcy Code section 1123(a)(6), which requires that a plan prohibit the 

issuance of nonvoting equity securities, is also satisfied. Pursuant to the terms of the New 

Certificates of Incorporation for the Reorganized Debtors, the issuance of nonvoting equity 

securities is prohibited. 18 

32. Finally, the Plan satisfies Bankruptcy Code section 1123(a)(7), which requires 

that the Plan ―contain only provisions that are consistent with the interests of creditors and equity 

security holders and with public policy with respect to the manner of selection of any officer, 

director, or trustee under the plan . . . .‖ 19 

The Debtors have disclosed in the Plan Supplement the 

identities of the members of the New Boards for Reorganized Debtors. 20 

Moreover, the Plan 

Supplement adequately discloses the manner by which the individuals proposed to serve as the 

officers and directors of the Reorganized Debtors will be elected. 21 

The officers and directors of 

the Reorganized Debtors will be appointed or elected in a manner that is consistent with 

Delaware corporate law or applicable Canadian corporate law and the Bankruptcy Code, and is 

consistent with the interests of holders of Claims and Interests and with public policy. 

18 

19 

20 

21 

Plan Supplement [Docket No. 909], Exhibit C (the ―New Certificate of Incorporation‖) § 4.1. 

11 U.S.C. § 1123(a)(7). 

Plan Supplement [Docket No. 909], Exhibit E (the ―Identity of New Boards‖); Plan Supplement, Exhibit F 

(the ―New By-Laws‖). 

New By-Laws § 2.1. 

17


Pg 28 of 336 

33. For these reasons, the Debtors submit that the Plan satisfies the mandatory plan 

requirements set forth in Bankruptcy Code section 1123(a). 

iii. 

The Plan Provides for Several of the Discretionary Provisions Set Forth 

in 11 U.S.C. §§ 1123(b) 

34. The Plan contains various provisions that may be construed as discretionary, but 

are not required for Confirmation under the Bankruptcy Code. Specifically, the Plan provides for 

treatment of executory contracts and for certain settlements, releases, exculpation and injunction 

provisions, both for the Debtors and for third parties. Such discretionary provisions comply with 

Bankruptcy Code section 1123(b) and are not inconsistent with the applicable provisions of the 

Bankruptcy Code (as further set forth herein). 

Thus, the Debtors respectfully submit that 

Bankruptcy Code section 1123(b) is satisfied. 

B. The Debtors, as Plan Proponents, Have Complied with the Applicable 

Provisions of the Bankruptcy Code (11 U.S.C. § 1129(a)(2)) 

35. As explained in more detail below, the Debtors have satisfied Bankruptcy Code 

section 1129(a)(2), which requires that the proponent of a plan of reorganization comply with the 

applicable provisions of the Bankruptcy Code. The legislative history to Bankruptcy Code 

section 1129(a)(2) indicates that this provision is intended to require compliance with the 

disclosure and solicitation requirements set forth in Bankruptcy Code section 1125 and the plan 

acceptance requirements set forth in section 1126. 22 

The Debtors have complied with these 

22 

In re Johns-Manville Corp., 68 B.R. 618, 630 (Bankr. S.D.N.Y. 1986), aff’d in part, rev’d in part on other 

grounds, 78 B.R. 407 (S.D.N.Y. 1987), aff’d, Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 

843 F.2d 636 (2d Cir. 1988) (―Objections to confirmation raised under § 1129(a)(2) generally involve the 

alleged failure of the plan proponent to comply with § 1125 and § 1126 of the [Bankruptcy] Code.‖) 

(citations omitted); In re Toy & Sports Warehouse, Inc., 37 B.R. 141, 149 (Bankr. S.D.N.Y. 1984) (stating 

that to comply with section 1129(a)(2), ―[t]he proponent must comply with the ban on post-petition 

solicitation of the plan unaccompanied by a written disclosure statement approved by the court in 

accordance with [Bankruptcy] Code §§ 1125 and 1126.‖) (citation omitted); see also H.R. Rep. No. 95-595, 

at 412 (1977); S. Rep. No. 95-989, at 126 (1978) (―Paragraph (2) [of section 1129(a)] requires that the 

proponent of the plan comply with the applicable provisions of chapter 11, such as section 1125 regarding 

disclosure.‖). 

18


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provisions, including sections 1125 and 1126, as well as Bankruptcy Rules 3017 and 3018, by 

distributing the Disclosure Statement and soliciting acceptances of the Plan through their Voting 

Agent pursuant to the Disclosure Statement and Solicitation and Voting Procedures Order. 

i. The Debtors Have Complied with the Disclosure Statement and 

Solicitation Requirements of 11 U.S.C. § 1125 

36. Bankruptcy Code section 1125 prohibits the solicitation of votes on a plan of 

reorganization ―unless, at the time of or before such solicitation, there is transmitted to such 

holder the plan or a summary of the plan, and a written disclosure statement approved, after 

notice and a hearing, by the court as containing adequate information.‖ 23 

The purpose of section 

1125 is to ensure that parties in interest are fully informed regarding the financial condition of 

the debtor, the means for implementation of the plan and related transactions, and the treatment 

of all classes of claims and interests, so that they may make an informed decision whether to 

approve or reject the plan. 24 

37. The Debtors have satisfied Bankruptcy Code section 1125. Before the Debtors 

began their solicitation of votes on the Plan, the Bankruptcy Court approved the Disclosure 

Statement as containing adequate information and approved the procedures for soliciting and 

tabulating the votes on, and for objecting to, the Plan. 25 

The Disclosure Statement and 

Solicitation and Voting Procedures Order specifies in great detail the content of the various 

Solicitation Packages that the Debtors provided to holders of Claims and Interests and the timing 

23 

24 

25 

11 U.S.C. § 1125(b). 

See Momentum Mfg. Corp. v. Emp. Creditors Comm. (In re Momentum Mfg. Corp.), 25 F.3d 1132, 1136 

(2d Cir. 1994) (finding that section 1125 of the Bankruptcy Code obliges a debtor to engage in full and fair 

disclosure that would enable a hypothetical reasonable investor to make an informed judgment about the 

plan). 

Disclosure Statement and Solicitation Procedures Order at 2. 

19


Pg 30 of 336 

and method of delivery of the Solicitation Packages. 26 

As will be further detailed in the GCG 

Declaration, through their Voting Agent, the Debtors complied in all respects with the content 

and delivery requirements of the Disclosure Statement and Solicitation and Voting Procedures 

Order. 

ii. 

The Debtors Have Complied with the Plan Acceptance Requirements of 

11 U.S.C. § 1126 

38. Bankruptcy Code section 1126 provides that only holders of allowed claims and 

equity interests in impaired classes that will receive or retain property under a plan on account of 

such claims or equity interests may vote to accept or reject a plan. 27 

Section 1126(c) specifies 

the requirements for acceptance of a plan by a class of claims as follows: 

A class of claims has accepted a plan if such plan has been accepted by 

creditors, other than any entity designated under subsection (e) of [section 

1126], that hold at least two-thirds in amount and more than one-half in 

number of the allowed claims of such class held by creditors, other than any 

entity designated under subsection (e) of [section 1126], that have accepted 

or rejected such plan. 28 

39. Classes 1 and 2 are Unimpaired under the Plan. Pursuant to Bankruptcy Code 

section 1126(f), holders of Claims in the Unimpaired Classes are not entitled to vote on the Plan 

and are conclusively deemed to have accepted the Plan. Class 3 (the Voting Class) is impaired 

and entitled to vote under the Plan and, as such, the Debtors solicited acceptances and rejections 

of the Plan from this Voting Class. 

40. As required by Bankruptcy Code section 1126(c), the Plan was accepted by the 

Voting Class because creditors representing two-thirds in amount and more than one-half in 

26 

27 

28 

Disclosure Statement and Solicitation Procedures Order at 3-6. 

11 U.S.C. § 1126. 

11 U.S.C. § 1126(c). Because there are no impaired classes of interests that will receive property under the 

Plan, 11 U.S.C. § 1126(d) (the corollary for impaired classes of interests) is irrelevant here. 

20


Pg 31 of 336 

number of holders of Claims voting in the Voting Class voted to accept the Plan – indeed, the 

Plan was almost unanimously approved. 29 

C. The Plan Has Been Proposed in Good Faith and Not by any Means 

Forbidden by Law (11 U.S.C. § 1129(a)(3)) 

41. Bankruptcy Code section 1129(a) compels a bankruptcy court to reject a plan if it 

is not proposed in ―good faith‖ or if it is proposed by any means ―forbidden by law.‖ 30 

The 

Second Circuit has construed the good-faith standard as requiring a showing that ―the plan was 

proposed with honesty and good intentions and with a basis for expecting that the reorganization 

can be effected.‖ 31 

Additionally, ―good faith‖ should be evaluated in light of the totality of the 

circumstances surrounding confirmation. 32 

42. The Debtors have proposed the Plan with honesty, good intentions and a desire to 

effectuate a full and feasible consummation of their sale (and any necessary reorganization) 

while maximizing value for the benefit of all stakeholders. The Plan is the product of extensive 

arm‘s-length negotiations among the Debtors and all major parties in interest, which negotiations 

were difficult and contentious. Thus, the Plan contains a series of compromises that represent a 

good faith effort to provide the highest available recovery to each of the Debtors‘ creditor 

constituencies under the totality of the circumstances. The distributions under the Plan are based 

upon the allocation of proceeds from the Sale, which allocation was agreed to by all of the 

Debtors‘ major stakeholders as part of the Settlement. Pursuant to the Plan, proceeds from the 

29 

30 

31 

32 

Class 3 Claimants at TSNSI and 088 are not receiving any property under the Plan, and Class 3 for TSN 

Holdings (Canada) is vacant. Notwithstanding the foregoing, and consistent with Second Circuit caselaw 

(as set forth herein), the Plan still meets all requisite requirements for confirmation. 

11 U.S.C. § 1126(c). 

Johns-Manville, 843 F.2d at 649 (internal quotations and citation omitted); In re Texaco, Inc., 84 B.R. 893, 

907 (Bankr. S.D.N.Y. 1988) (―[I]n the context of a [Chapter 11] reorganization . . . a plan is considered 

proposed in good faith if there is a likelihood that the plan will achieve a result consistent with the 

standards prescribed under the Code.‖) (internal quotations and citations omitted). 

In re Cellular Info. Sys., Inc., 171 B.R. 926, 945 (Bankr. S.D.N.Y. 1994) (internal citations omitted). 

21


Pg 32 of 336 

Sale will be used by the Liquidating Trust to satisfy Claims, as provided in the Plan and in 

accordance with the Settlement. Consistent with the overriding purpose of chapter 11 of the 

Bankruptcy Code, the Chapter 11 Cases were filed, and the Plan was proposed, with the 

legitimate purpose of maximizing the value of their estates to satisfy their obligations to creditors. 

Accordingly, the Debtors submit that Bankruptcy Code section 1129(a)(3) is satisfied. 

D. The Plan Provides for Bankruptcy Court Approval of Certain 

Administrative Payments (11 U.S.C. § 1129(a)(4)) 

43. Bankruptcy Code section 1129(a)(4) requires that certain professional fees and 

expenses paid by the plan proponent, by the debtor or by a person issuing securities or acquiring 

property under the Plan 33 be subject to approval of the Bankruptcy Court as reasonable. 34 

Here, 

the Plan mandates that all payments made or to be made by the Debtors for services or for costs 

or expenses incurred by Professionals in connection with these Chapter 11 Cases before the 

Effective Date, including all Accrued Professional Compensation Claims, have been approved by, 

or are subject to the approval of, the Bankruptcy Court as reasonable. 

44. Pursuant to the Plan, Professionals asserting a Claim for Accrued Professional 

Compensation for services rendered before the Effective Date must file and serve on the Debtors 

and such other Entities that are designated by the Bankruptcy Rules, the Confirmation Order, the 

Interim Compensation Order or other order of the Bankruptcy Court, an application for final 

allowance of such Claim for Accrued Professional Compensation no later than 45 days after the 

Effective Date. 

Additionally, the Plan provides that the Reorganized Debtors may pay 

33 

34 

As set forth in the Purchase Agreement, the Purchaser has the obligation to ―provide funding to Sellers in 

order to operate the Business, administer the Chapter 11 Cases (if any), and comply with their obligations 

under this Agreement after December 31, 2011 in amounts to be reflected in a budget to be mutually agreed 

upon by Purchaser, on the one hand, and Sellers, on the other hand, on or prior to December 31, 2011.‖ See 

Purchase Agreement, section 9.11. Therefore, unsecured creditor recoveries are not reduced by the accrual 

of such costs, fees, or expenses. 

11 U.S.C. § 1129(a)(4). 

22


Pg 33 of 336 

Professionals or other Entities in the ordinary course of business after the Effective Date without 

the need to file a final fee application and without any further notice to any party, or any action, 

order or approval of the Bankruptcy Court, provided that the Purchaser be provided invoices 

documenting the reasonable fees and expenses. 35 

Moreover, the Plan makes clear that, to the 

extent the Bankruptcy Court or any higher court denies or reduces by a Final Order any amount 

of a Professional‘s fees or expenses, then ―those reduced or denied amounts shall no longer 

constitute Accrued Professional Compensation.‖ 36 

45. For these reasons, the Plan thus complies with the requirements of Bankruptcy 

Code section 1129(a)(4). 

E. All Necessary Information Regarding the Directors and Officers of the 

Debtors Under the Plan Has Been Disclosed (11 U.S.C. § 1129(a)(5)) 

46. Bankruptcy Code section 1129(a)(5) provides that a plan of reorganization may be 

confirmed if the proponent discloses (a) the identity of those individuals who will serve as 

management of the reorganized debtor and shown that such appointment is consistent with the 

interests of creditors, equity security holders and public policy and (b) the identity of any insider 

to be employed or retained by the reorganized debtor, and the compensation to be paid to any 

such insider. 37 

In cases where the post-confirmation officers or directors have not been selected 

and identified pre-confirmation, courts have found that disclosure of the identities of known 

35 

36 

37 

Plan, Article II.A.2(c). 

Plan, Article I.A.3. 

11 U.S.C. § 1129(a)(5). 

23


Pg 34 of 336 

officers and directors and the manner in which additional officers and directors will be selected 

may be sufficient to satisfy the requirements of section 1129(a)(5). 38 

47. In determining whether the post-effective date management of a debtor is 

consistent with the interests of creditors, equity security holders and public policy, a court must 

consider proposed management‘s competence, discretion, experience and affiliation with entities 

having interests adverse to the debtor. 39 

In general, however, ―[t]he [d]ebtor should have first 

choice of its management, unless compelling cause to the contrary exists.‖ 40 

The case law is also 

clear that a plan may contemplate the retention of the debtor‘s existing directors and officers. 41 

48. In accordance with Articles V.L and V.M of the Plan, the Debtors filed a list of the 

initial members of the boards of directors and the initial officers of the Reorganized Debtors 

listed therein with the Bankruptcy Court as part of the Plan Supplement on February 3, 2012 

[Docket No. 909]. The initial members of the boards of directors and the initial officers of the 

Reorganized Debtors consist of the current directors and officers of the Debtors and, as such, 

38 

39 

40 

41 

See, e.g., JPMorgan Chase Bank, N.A. v. Charter Commc’ns Operating, LLC (In re Charter Commc’ns), 

419 B.R. 221, 260 n.30 (Bankr. S.D.N.Y. 2009) (―To the extent the Plan‘s satisfaction of 11 U.S.C. 

§ 1129(a)(5) remains at issue, the Court concludes that this confirmation standard is satisfied. It is 

undisputed that two out of the eleven seats on the Debtors‘ board of directors remain vacant. Although 

section 1129(a)(5) requires the plan to identify all directors of the reorganized entity, that provision is 

satisfied by the Debtors‘ disclosure at this time of the identities of the known directors.‖) (emphasis in 

original) (citing In re Am. Solar King Corp., 90 B.R. 808, 815 (Bankr. W.D. Tex. 1988) (―The debtor‘s 

inability to specifically identify future board members does not mean that the debtor has fallen short of the 

requirement imposed [in subsection (a)(5)(A)(i)] . . . .‖)); In re AG Consultants Grain Div., Inc., 77 B.R. 

665, 669 (Bankr. N.D. Ind. 1987) (holding that the debtor complied with section 1129(a)(5) despite the fact 

that it did not specifically reveal identity and affiliation of any individuals who would serve after 

confirmation); In re Eagle Bus Mfg., Inc., 134 B.R. 584, 599 (Bankr. S.D. Tex. 1991) (finding sufficient 

disclosure of officer and director identities ―to the extent known as of the Hearing.‖), aff’d, 158 B.R. 421 

(S.D. Tex. 1993). 

See In re Sherwood Square Assocs., 107 B.R. 872, 878 (Bankr. D. Md. 1989); see also In re W.E. Parks 

Lumber Co., Inc., 19 B.R. 285, 292 (Bankr. W.D. La. 1982) (a court should consider whether ―the initial 

management and board of directors of the reorganized corporation will be sufficiently independent and free 

from conflicts and the potential of post-reorganization litigation so as to serve all creditors and interested 

parties on an even and loyal basis‖). 

Sherwood Square Assocs., 107 B.R. at 878. 

See, e.g., Texaco Inc., 84 B.R. at 908 (determining that section 1129(a)(5) was satisfied where plan 

disclosed debtor‘s existing directors and officers who would continue to serve in office after plan 

confirmation); see also In re Trans World Airlines, Inc., 185 B.R. 302, 314 (Bankr. E.D. Mo. 1995). 

24


Pg 35 of 336 

have significant knowledge of the Debtors‘ businesses, and are very experienced in financial and 

management matters. 

Based on the standard set forth above, the Debtors submit that the 

appointment of each of the proposed initial directors and officers of the Reorganized Debtors is 

consistent with the interests of the Debtors‘ creditors, equity security holders and public policy. 

In addition, while the directors of the Reorganized Debtors will include certain insiders of the 

Debtors, no insider will receive compensation after the Effective Date for his service on the 

board of the Reorganized Debtors. 

1129(a)(5). 

49. For these reasons, the Plan satisfies the requirements of Bankruptcy Code section 

F. The Plan Does Not Contain Rate Changes Subject to the Jurisdiction of Any 

Governmental Regulatory Commission (11 U.S.C. § 1129(a)(6)) 

50. Bankruptcy Code section 1129(a)(6) requires that any regulatory commission 

having jurisdiction over the rates charged by a reorganized debtor in the operation of its business 

approve any rate change provided for in a plan of reorganization. 42 

This section is inapplicable 

to the Plan, however, because the Plan does not provide for a change in any rates that are subject 

to regulatory approval. 

G. The Plan Is in the Best Interests of Creditors and Interest Holders (11 U.S.C. 

§ 1129(a)(7)) 

51. Bankruptcy Code section 1129(a)(7) requires that a plan be in the best interests of 

creditors and stockholders. The ―best interests‖ test focuses on individual dissenting creditors 

rather than classes of claims, 43 and requires that for a plan to be approved, the court must find 

that each holder of a claim or interest has either accepted the plan or will receive or retain value 

42 

43 

See 11 U.S.C. § 1129(a)(6). 

Bank of Am. Nat’l Trust & Sav. Ass’n v. 203 N. LaSalle St. P’ship, 526 U.S. 434, 442 n.13 (1999) (―The 

‗best interests‘ test applies to individual creditors holding impaired claims, even if the class as a whole 

votes to accept the plan.‖). 

25


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that is not less than the amount it would receive if the debtor were liquidated in a hypothetical 

proceeding under chapter 7 of the Bankruptcy Code. 44 

52. By its express terms, section 1129(a)(7) applies only to holders of impaired claims 

or equity interests. 45 

To the extent a holder of an impaired claim or interest votes to accept the 

Plan, the best interests test is satisfied. 46 

Moreover, to the extent a holder of an impaired claim or 

interest would receive at least as great as a distribution pursuant to the proposed chapter 11 plan 

as it would in a chapter 7 liquidation, the best interests test is satisfied. 47 

The best interests test is 

therefore clearly satisfied with respect to all holders in Class 3 who voted to accept the Plan. The 

Debtors respectfully submit that the best interest test is also satisfied with respect to the sole 

creditor in Class 3 who voted to reject the Plan and all holders in Class 4 because such holders 

would receive no greater distribution in a chapter 7 liquidation than they are receiving under the 

Plan. 

53. In this case, it is clear that there would be less value distributable to holders in 

Class 3, and no value distributable to holders in Class 4 in a chapter 7 liquidation. As set forth in 

the liquidation analysis attached as Exhibit D to the Disclosure Statement (the ―Liquidation 

Analysis‖), which is discussed in greater detail in the Declaration of C.J. Brown in Support of 

Confirmation of the Joint Chapter 11 Plan of TerreStar Networks Inc., et al., filed 

contemporaneously herewith, recoveries to holders in Class 3 would diminish on account of the 

increased costs of administering these cases under chapter 7 (as well as a loss in value due to the 

delay in receiving their distributions). This diminishment of Class 3 recoveries would therefore 

44 

45 

46 

47 

11 U.S.C. §1129(a)(7)(A)(ii); see also In re Adelphia Commc’ns Corp., 368 B.R. 140, 251 (Bankr. 

S.D.N.Y. 2007). 

11 U.S.C. § 1129(a)(7). 

11 U.S.C. § 1129(a)(7)(A)(i). 

11 U.S.C. § 1129(a)(7)(A)(ii). 

26


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remove holders in Class 4 even further from any value available from the Debtors‘ estates. 

Because the Liquidation Analysis demonstrates that holders in Class 3 would receive less value 

in a liquidation than under the Plan, and holders in Class 4 would not receive any distribution in 

a hypothetical liquidation under chapter 7 of the Bankruptcy Code (and because that is the same 

treatment holders in Class 4 will receive under the Plan), all stakeholders‘ treatment under the 

Plan is no worse than in a chapter 7 liquidation. 

54. Because the Plan was accepted by Class 3 and provides for at least as great a 

recovery for holders of Claims in Class 3 and Equity Interests in Class 4 as such holders would 

receive in a hypothetical chapter 7 liquidation, the Plan satisfies the requirements of Bankruptcy 

Code section 1129(a)(7). 

H. Acceptance by All Impaired Classes (11 U.S.C. § 1129(a)(8)) 

55. Bankruptcy Code section 1129(a)(8) requires that each class of claims or interests 

must either accept the plan or be unimpaired thereby. 48 

Pursuant to Bankruptcy Code section 

1126(c), a class of claims accepts a plan if the holders of allowed claims holding at least twothirds 

in amount and at least one-half in number that vote accept the plan. 49 

Pursuant to 

Bankruptcy Code section 1126(d), a class of interests accepts a plan if holders of at least twothirds 

in amount of the allowed interests in that class vote to accept the plan. 50 

A class that is not 

impaired under a plan, and each holder of a claim or interest in such a class, is conclusively 

presumed to have accepted the plan. 51 

On the other hand, a class is deemed to have rejected a 

48 

49 

50 

51 

11 U.S.C. § 1129(a)(8). 

11 U.S.C. § 1126(c). 

11 U.S.C. § 1126(d). 

11 U.S.C. § 1126(f); see SEC v. Drexel Burnham Lambert Grp., Inc. (In re Drexel Burnham Lambert Grp.), 

Inc., 960 F.2d 285, 290 (2d Cir. 1992) (noting that an unimpaired class is presumed to have accepted the 

plan); see also S. Rep. No. 95-989, at 123 (1978) (section 1126(f) of the Bankruptcy Code ―provides that 

no acceptances are required from any class whose claims or interests are unimpaired under the Plan or in 

the order confirming the Plan‖). 

27


Pg 38 of 336 

plan if the plan provides that the claims or interests of that class do not receive or retain any 

property under the plan on account of such claims or interests. 52 

56. As demonstrated by the GCG Declaration, the single Voting Class voted to accept 

the Plan. 53 

Although the fact that Class 4 is deemed to reject appears to preclude satisfaction of 

Bankruptcy Code section 1129(a)(8), the Bankruptcy Code provides for an alternate means of 

compliance in section 1129(b), with which the Debtors comply. 54 

I. The Plan Provides for Payment of Priority Claims (11 U.S.C. § 1129(a)(9)) 

57. Bankruptcy Code section 1129(a)(9) requires that persons holding allowed claims 

entitled to priority under section 507(a) receive specified cash payments under a plan equivalent 

to such allowed claims. Unless the holder of a particular claim agrees to a different treatment 

with respect to such claim, section 1129(a)(9) requires a plan to provide as follows: 

(i) 

(ii) 

with respect to a claim of a kind specified in section 507(a)(2) or 507(a)(3) 

of [the Bankruptcy Code], on the effective date of the plan, the holder of 

such claim will receive on account of such claim cash equal to the allowed 

amount of such claim; 

with respect to a class of claims of a kind specified in section 507(a)(1), 

507(a)(4), 507(a)(5), 507(a)(6) or 507(a)(7) of [the Bankruptcy Code], 

each holder of a claim of such class will receive - 

a) if such class has accepted the plan, deferred cash payments of a value, as 

of the effective date of the plan, equal to the allowed amount of such claim; 

or 

b) if such class has not accepted the plan, cash on the effective date of the 

plan equal to the allowed amount of such claim; 

(iii) 

with respect to a claim of a kind specified in section 507(a)(8) of [the 

Bankruptcy Code], the holder of such claim will receive on account of 

such claim regular installment payments in cash - 

52 

53 

54 

11 U.S.C. § 1126(g). 

As noted above, Class 3 Claimants at TSNSI and 088 are not receiving any property under the Plan, and 

Class 3 for TSN Holdings (Canada) is vacant. Notwithstanding the foregoing, and consistent with Second 

Circuit caselaw (as set forth herein), the Plan still meets all requisite requirements for confirmation. 

See infra I.N. 

28


Pg 39 of 336 

a) of a total value, as of the effective date of the plan, equal to the allowed 


b) over a period ending not later than 5 years after the date of the order for 

relief under section 301, 302, or 303; and 

c) in a manner not less favorable than the most favored nonpriority 

unsecured claim provided for by the plan (other than cash payments made 

to a class of creditors under section 1122(b)); and 

(iv) 

with respect to a secured claim which would otherwise meet the 

description of an unsecured claim of a governmental unit under section 

507(a)(8), but for the secured status of that claim, the holder of that claim 

will receive on account of that claim, cash payments, in the same manner 

and over the same period, as prescribed in subparagraph (C). 55 

58. In accordance with Bankruptcy Code sections 1129(a)(9)(A), (B) and (C), Articles 

II and III.C.1 of the Plan provide that Administrative Claims, U.S. Trustee Fee, Priority Tax 

Claims, and Other Priority Claims shall be paid in full, in cash, on the Initial Distribution Date 

(or such other later date upon which such Claim arises or is Allowed). Thus, the Plan satisfies 

the requirements of sections 1129(a)(9)(A), (B) and (C). 

J. The Plan Has Been Accepted by at Least One Impaired Class Entitled to 

Vote (11 U.S.C. § 1129(a)(10)) 

59. Bankruptcy Code section 1129(a)(10) requires that at least one impaired class 

entitled to vote must accept the plan. 56 

Section 1129(a)(10) provides that, ―if a class of claims is 

impaired under a plan, at least one class of claims that is impaired under the Plan [must] accept [ ] 

the plan, determined without including any acceptance of the Plan by any insider.‖ 57 

60. The requirement set forth in Bankruptcy Code section 1129(a)(10) is a per plan 

requirement, not a per debtor requirement. See In re Charter Commc’ns, 419 B.R. at 266 (―[I]t is 

55 

56 

57 

11 U.S.C. § 1129(a)(9). 

See In re 266 Washington Assocs., 141 B.R. 275, 287 (Bankr. E.D.N.Y. 1992), aff’d, 147 B.R. 827 

(E.D.N.Y.1992) (―Section 1129(a)(10) operates as a statutory gatekeeper barring access to cram down 

where there is absent even one impaired class accepting the plan.‖). 

11 U.S.C. § 1129(a)(10). 

29


Pg 40 of 336 

appropriate to test compliance with section 1129(a)(10) on a per-plan basis, not, as [objecting 

parties] argue, on a per-debtor basis.‖); In re Enron Corp., No. 01-16034 (ALG) (Bankr. S.D.N.Y. 

July 15, 2004) [Docket No. 19758] (order confirming joint chapter 11 plan where each debtor did 

not have an impaired accepting class); In re SGPA, Inc., No. 01-02609, 2001 WL 347506 (Bankr. 

M.D. Pa. Sept. 28, 2001) (joint chapter 11 plan of reorganization complied with section 

1129(a)(10) because at least one class of impaired creditors accepted the plan, notwithstanding 

the fact that each debtor entity did not have an accepting impaired class). As set forth above and 

evidenced by the GCG Declaration, the holders of Claims in Class 3 entitled to vote on the Plan 

(the only Impaired Class of Claims entitled to vote on the Plan) have overwhelmingly (nearly 

100% in number and amount) voted to accept the Plan – indeed, the Debtors received only one 

vote to reject the Plan, from a holder of a Claim in the amount of $3,394.80. Thus, the Plan 

satisfies Bankruptcy Code section 1129(a)(10). 

K. The Plan Is Not Likely to Be Followed by Liquidation or the Need for 

Further Financial Reorganization (11 U.S.C. § 1129(a)(11)) 

61. Bankruptcy Code section 1129(a)(11) requires that, as a condition precedent to 

confirmation, the Bankruptcy Court determine that the Plan is feasible. 

Specifically, the 

Bankruptcy Court must determine that: 

Confirmation of the plan is not likely to be followed by the liquidation, or 

the need for further financial reorganization, of the debtor or any successor 

to the debtor under the plan, unless such liquidation or reorganization is 

proposed in the plan. 58 

58 

11 U.S.C. § 1129(a)(11). 

30


Pg 41 of 336 

62. To demonstrate that a plan is feasible, it is not necessary that success be 

guaranteed; the standard is rather that a debtor must demonstrate a reasonable assurance that 

consummation of the plan will not likely be followed by a further need for financial 

reorganization. 59 

In evaluating feasibility, courts have identified the following probative 

factors: 60 (a) the prospective earnings of the business or its earning power; 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

the soundness and adequacy of the capital structure and working capital 

for the business that the debtor will engage in post-confirmation; 

the prospective availability of credit; 

whether the debtor will have the ability to meet its requirements for capital 

expenditures; 

economic and market conditions; 

the capability of management, and the likelihood that the same 

management will continue; and 

any other related matter which determines the prospects of a sufficiently 

successful operation to enable performance of the provisions of the plan. 

63. The Plan contemplates the possibility that the Debtors may ―reorganize‖ for a 

short period of time in the event that the Closing Date does not occur on or before the Effective 

Date. In that case, the Debtors would simply operate their business until consummation of the 

Sale to the Purchaser (and the costs associated with the operation of the business will be paid 

59 

60 

See Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 843 F.2d 636, 649 (2d Cir. 1988) (―[T]he 

feasibility standard is whether the plan offers a reasonable assurance of success. Success need not be 

guaranteed.‖); see also Heartland Fed. Sav. & Loan Ass’n v. Briscoe Enters., Ltd. II (In re Briscoe Enters., 

Ltd. II), 994 F.2d 1160, 1166 (5th Cir. 1993) (―Only a reasonable assurance of commercial viability is 

required.‖) (internal citation omitted); In re Eddington Thread Mfg. Co., 181 B.R. 826, 832-33 (Bankr. E.D. 

Pa. 1995) (finding that a plan is feasible ―so long as there is a reasonable prospect for success and a 

reasonable assurance that the proponents can comply with the terms of the plan.‖). 

See, e.g., In re WorldCom, Inc., No. 02-13533 (ALG), 2003 WL 23861928, at *58 (Bankr. S.D.N.Y. Oct. 

31, 2003); In re Leslie Fay Cos., 207 B.R. 764, 789 (Bankr. S.D.N.Y. 1997); In re Texaco Inc., 84 B.R. 893, 

910 (Bankr. S.D.N.Y. 1988); In re Prudential Energy, 58 B.R. 857, 862-63 (Bankr. S.D.N.Y. 1986); see 

also Teamsters Nat’l Freight Indus. Negotiating Comm. v. U.S. Truck Co., Inc. (In re U.S. Truck Co., Inc.), 

800 F.2d 581, 589 (6th Cir. 1986); In re Repurchase Corp., 332 B.R. 336, 342 (Bankr. N.D. Ill. 2005), aff’d, 

No. 04-32933 (DHC), 2008 WL 4379035 (N.D. Ill. 2008). 

31


Pg 42 of 336 

pursuant to the Purchase Agreement). 61 

Upon consummation of the Sale, the Reorganized 

Debtors will transfer their assets to the Purchaser and wind up their estates pursuant to the Plan. 

Should the Closing occur before the Effective Date, the Plan provides for the liquidation and 

distribution of the Debtors‘ assets. In all events, the Plan, at its core, contemplates the winding 

up of the Debtors‘ estates, and the liquidation and distribution of the Debtors‘ assets (with all 

costs associated with either event being paid pursuant to the terms of the Purchase Agreement). 

Bankruptcy Code section 1123(b)(4) permits liquidation plans that ―provide for the sale of all or 

substantially all of the property of the estate, and the Distribution of the proceeds of such sale 

among holders of claims or interests‖ in chapter 11 proceedings and, thus, such a plan does not 

violate the requirements of section 1129(a). 62 

Moreover, when a plan of liquidation is tested 

against Bankruptcy Code section 1129(a)(11), the feasibility standard is greatly simplified. In 

the context of a liquidating plan, feasibility is established by demonstrating the debtor‘s ability to 

satisfy the conditions precedent to the effective date and otherwise have sufficient funds to meet 

its post-confirmation date obligations to pay for the costs of administering and fully 

consummating the plan and closing the chapter 11 cases. The Debtors believe that all Plan 

obligations will be satisfied without the need for further reorganization of the Debtors. 

64. Accordingly, the Debtors submit that the Plan satisfies the feasibility requirement 

of Bankruptcy Code section 1129(a)(11). 

61 

62 

To the extent that the Effective Date occurs before the Closing, the Reorganized Debtors‘ operating costs 

will be paid by the Purchaser from the Effective Date until Closing. To the extent, therefore, that the 

feasibility of the Plan in such scenario relies in any way on the creditworthiness of the Purchaser, the 

Debtors respectfully request that the Bankruptcy Court take judicial notice of the creditworthiness of the 

Purchaser by virtue of its status as a wholly owned subsidiary of DISH, and judicial notice of the 

creditworthiness of DISH by virtue of DISH‘s most recent 10-Q SEC filing, which was filed on 

November 7, 2011 and is available upon request to counsel for the Debtors. 

11 U.S.C. § 1123(b)(4). 

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L. The Plan Provides for Full Payment of All Statutory Fees (11 U.S.C. 

§ 1129(a)(12)) 

65. Bankruptcy Code section 1129(a)(12) requires the payment of all fees owed 

pursuant to 28 U.S.C. § 1930. 63 

The Plan provides that the Debtors shall pay all fees due and 

owing to the U.S. Trustee, including quarterly fees payable under 28 U.S.C. § 1930(a)(6), plus 

interest due and payable under 31 U.S.C. § 3717 (if any) on all disbursements, including Plan 

payments and disbursements in and outside the ordinary course of the Debtors‘ business as of the 

Effective Date. 64 

The Plan thus complies with the requirements of Bankruptcy Code section 

1129(a)(12). 

M. The Plan Does Not Violate the Requirement that Appropriate Treatment of 

Retiree Benefits Be Provided (11 U.S.C. § 1129(a)(13)) 

66. Bankruptcy Code section 1129(a)(13) requires that a plan of reorganization 

provide for the continuation, after the plan‘s effective date, of all retiree benefits at the level 

established by agreement or by court order pursuant to Bankruptcy Code section 1114 at any 

time before confirmation of the plan, for the duration of the period that the debtor has obligated 

itself to provide such benefits. The Debtors do not have any liabilities arising under any 

agreement struck pursuant to Bankruptcy Code section 1114, and thus this section is not 

applicable to the Plan. 

N. The Requirements Related to Domestic Support Obligations, Unsecured 

Claims Against Individual Debtors and Transfers by Nonprofit 

Organizations Do Not Apply to the Plan (11 U.S.C. § 1129(a)(14), (15) and 

(16)) 

67. None of the Debtors has any domestic support obligations, is an individual or is a 

nonprofit organizations. Therefore, sections 1129(a)(14), (15), and (16) of the Bankruptcy Code 

63 

64 

11 U.S.C. § 1129(a)(12). 

Plan, Article II.B. 

33


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do not apply to the Plan. 

O. The Plan Satisfies the “Cram-Down” Requirements of 11 U.S.C. § 1129(b) 

68. Bankruptcy Code section 1129(b) provides that if a chapter 11 plan satisfies all 

applicable requirements of section 1129(a) other than section 1129(a)(8)‘s requirement that all 

impaired classes accept the plan, the plan may be confirmed so long as it does not discriminate 

unfairly and it is fair and equitable with respect to each class of claims and interests that is 

impaired and has not accepted the plan. 65 

69. As discussed above, the sole Voting Class voted to accept the Plan. As discussed 

above, however, because Class 4 is deemed to reject the Plan, the Debtors cannot satisfy section 

1129(a)(8) with respect to such Class and thus must satisfy the cram-down requirements of 

section 1129(b). 

65 

11 U.S.C. § 1129(b)(1). See also Boston Post Rd. Ltd. P’ship v. FDIC (In re Boston Post Rd. Ltd. P’ship), 

21 F.3d 477, 480 (2d Cir. 1994) (―[i]f the debtor chooses to utilize the cramdown procedure (having failed 

to secure the vote of all the impaired classes), the plan must meet all of the statutory requirements 

enumerated in § 1129(b) (essentially that the plan is fair and equitable and does not discriminate unfairly 

against any impaired claims)‖); In re Zenith Elecs. Corp., 241 B.R. 93, 105 (Bankr. D. Del. 1999) 

(explaining that ―[w]here a class of creditors or shareholders has not accepted a plan of reorganization, the 

court shall nonetheless confirm the plan if it ‗does not discriminate unfairly and is fair and equitable‘‖ 

(quoting 11 U.S.C. § 1129 (b)(1))); see also Liberty Nat’l Enters. v. Ambanc La Mesa Ltd. P’ship (In re 

Ambanc La Mesa Ltd. P’ship), 115 F.3d 650, 653 (9th Cir. 1997) (―the [p]lan [must satisfy] the ‗cramdown‘ 

alternative . . . in 11 U.S.C. § 1129(b), which requires that the [p]lan ‗does not discriminate unfairly‘ 

against and ‗is fair and equitable‘ towards each impaired class that has not accepted the [p]lan.‖); John 

Hancock Mut. Life Ins. Co. v. Route 37 Bus. Park Assocs., 987 F.2d 154, 157 n.5 (3d Cir. 1993) (the plan 

―must not ‗discriminate unfairly‘ against and must be ‗fair and equitable‘ with respect to all impaired 

classes that do not approve the plan‖ (quoting 11 U.S.C. § 1129(b))). 

34


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i. The Plan Does Not Discriminate Unfairly with Respect to the Rejecting 

Classes 

70. The Bankruptcy Code does not set forth any one standard for determining if a 

plan discriminates unfairly against impaired, rejecting classes. 66 

Rather, courts typically 

examine the facts and circumstances of the particular case to determine whether ―unfair 

discrimination‖ exists. 67 

At a minimum, however, the unfair discrimination standard prevents 

creditors and interest holders with similar legal rights from receiving materially different 

treatment under a proposed plan without compelling justifications for doing so. 68 

Courts in the 

Second Circuit have ruled that ―[u]nder section 1129(b) of the Bankruptcy Code, a plan unfairly 

discriminates where similarly situated classes are treated differently without a reasonable basis 

for the disparate treatment.‖ 69 

71. Put simply, the Plan‘s treatment of the Impaired rejecting Class (Class 4) is proper 

because no member of Class 4 is similarly situated to any holder of a Claim to any other Claims 

– indeed, holders of Claims in Class 3 are by definition senior to and different from holders of 

66 

67 

68 

69 

See In re Johns-Manville Corp., 68 B.R. 618, 636 (Bankr. S.D.N.Y. 1986), aff’d, 78 B.R. 407 (S.D.N.Y. 

1987), aff’d, 843 F.2d 636 (2d Cir. 1988) (―The language and legislative history of the statute provides little 

guidance in applying the ‗unfair discrimination‘ standard . . . .‖); In re 203 N. LaSalle St. Ltd. P’ship, 190 

B.R. 567, 585 (Bankr. N.D. Ill. 1995) (noting ―the lack of any clear standard for determining the fairness of 

a discrimination in the treatment of classes under a Chapter 11 plan‖ and that ―the limits of fairness in this 

context have not been established.‖), aff’d, Bank of Am., Ill. v. LaSalle St. P’ship, 195 B.R. 692 (N.D. Ill. 

1996), aff’d, 126 F.3d 955 (7th Cir. 1997), rev’d on other grounds, Bank of Am. Nat’l Trust and Sav. Ass’n 

v. 203 N. LaSalle St. P’ship, 526 U.S. 434 (1999). 

See In re Freymiller Trucking, Inc., 190 B.R. 913, 916 (Bankr. W.D. Okla. 1996) (holding that a 

determination of unfair discrimination requires a court to ―consider all aspects of the case and the totality of 

all the circumstances.‖); In re Aztec Co., 107 B.R. 585, 589 (Bankr. M.D. Tenn. 1989) (noting that courts 

―have recognized the need to consider the facts and circumstances of each case to give meaning to the 

proscription against unfair discrimination‖). 

See In re WorldCom, No. 02-13533 (ALG), 2003 WL 23861928, at *59 (Bankr. S.D.N.Y. Oct. 31, 2003) 

(requiring a reasonable basis to justify disparate treatment). 

Id; see also In re Buttonwood Partners, Ltd., 111 B.R. 57, 63 (Bankr. S.D.N.Y. 1990) (courts assess 

whether ―(i) there is a reasonable basis for discriminating, (ii) the debtor cannot consummate the plan 

without discrimination, (iii) the discrimination is proposed in good faith, and (iv) the degree of 

discrimination is in direct proportion to its rationale,‖ but also noting that the second prong, assessing 

whether the debtor cannot consummate the plan without discrimination, is not dispositive of the question of 

unfair discrimination). 

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Interests in Class 4 – and each member of Class 4 will equally receive no distribution under the 

Plan (i.e., no holder of an Equity Interest in Class 4 will receive any treatment that is different 

than any other holder for Equity Interests in Class 4). Therefore, the Plan necessarily does not 

unfairly discriminate with respect to Class 4. 

ii. 

The Plan is Fair and Equitable with Respect to the Rejecting Classes 

72. Bankruptcy Code sections 1129(b)(2)(B)(ii) and 1129(b)(2)(C)(ii) set forth the socalled 

―absolute priority rule.‖ This central tenet of bankruptcy law requires that if the holders of 

claims or interests in a particular class receive less than full value for their claims or interests, no 

holders of claims or interests in a junior class may receive any property under the plan. 70 

The 

corollary of the absolute priority rule is that if the holders of claims or interests in a particular 

class receive less than full value for their claims or interests, then senior classes cannot receive 

more than a 100% recovery for their claims or interests. 71 

73. The Plan‘s treatment of the Impaired rejecting Class complies with the absolute 

priority rule because no holder of any junior Claim or Interest will receive any recovery under 

the Plan (indeed, there is no class junior to Class 4), and no senior Class is receiving more than 

full recovery on account of its Claims (including Claims for interest and other contractual rights). 

Thus, the Plan satisfies the requirements of Bankruptcy Code section 1129(b) as to the Impaired 

rejecting Classes. 

70 

71 

11 U.S.C. § 1129(b)(2)(B)(ii), (C)(ii); see also Bank of Am. Nat’l Trust and Sav. Ass’n v. 203 N. LaSalle St. 

P’ship, 526 U.S. 434, 441-42 (1999). 

See In re Granite Broad. Corp., 369 B.R. 120, 140 (Bankr. S.D.N.Y. 2007) (―There is no dispute that a 

class of creditors cannot receive more than full consideration for its claims, and that excess value must be 

allocated to junior classes of debt or equity, as the case may be.‖). 

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iii. 

The Requirement that the Bankruptcy Court May only Approve One 

Plan Has Been Met (11 U.S.C. § 1129(c)) 

74. Other than the Plan (including previous versions thereof), one other plan 

(including previous versions thereof) had been filed in the Chapter 11 Cases; however, such Prior 

Plan was withdrawn on February 16, 2011. Accordingly, the requirements of section 1129(c) of 

the Bankruptcy Code have been satisfied. 

P. The Principal Purpose of the Plan is Not Avoidance of Taxes (11 U.S.C. 

§ 1129(d)) 

75. Bankruptcy Code section 1129(d) states ―the court may not confirm a plan if the 

principal purpose of the plan is the avoidance of taxes or the avoidance of the application of 

section 5 of the Securities Act of 1933.‖ 72 

The Plan satisfies this provision. Notably, no 

governmental or any other entity has raised any objection to the Plan on these grounds; indeed, 

all tax Claims will be paid in full pursuant to the Plan. The Debtors therefore submit that the 

Plan satisfies the requirements of Bankruptcy Code section 1129(d). 

II. 

The Plan Settlement of Claims and Controversies Is Fair and Equitable and Should 

Be Approved 

76. The Plan constitutes a good faith compromise and settlement pursuant to 

Bankruptcy Code section 363 and Bankruptcy Rule 9019(a) of all Claims, Interests and 

controversies relating to the contractual, legal and subordination rights that a holder of a Claim 

or Interest may have with respect to any Allowed Claim or Interest, or any distribution to made 

on account thereof. 73 

Such settlement, as reflected in the relative distributions and recoveries 

under the Plan, (i) will save the Debtors and their estates the costs and expenses of prosecuting 

disputes, the outcome of which is likely to consume substantial resources of the Debtors‘ estates 

72 

73 

11 U.S.C. § 1129(d). 

Plan, Article IX.A. In addition to the overall Settlement, the proposed Confirmation Order settles the 

claims of the Texas Comptroller of Public Accounts regarding its claim to recover taxes in the amount of 

less than $200,000. 

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and require substantial time to adjudicate and (ii) has facilitated the creation and implementation 

of the Plan and benefits the Debtors‘ estates, stakeholders and all parties in interest. 74 

77. Moreover, in response and in order to resolve an informal objection to the Plan 

related to the Texas Comptroller Claims, the Debtors have included a provision in the proposed 

Confirmation Order acceptable to the Texas Comptroller providing the following: in full and 

final satisfaction of the Texas Comptroller Claims, the Texas Comptroller is entitled to an 

Allowed Priority Tax Claim in the amount of $147,004.66 (the ―Texas Priority Tax Claim‖) in 

respect of tax liabilities incurred during the period from October 1, 2007 through 

October 19, 2010, and an Allowed Administrative Claim in the amount of $42,701.82 (the 

―Texas Administrative Claim‖) in respect of tax liabilities incurred during the period from 

October 20, 2010 through September 30, 2011, which Texas Priority Tax Claim and Texas 

Administrative Claim will be paid pursuant to the Plan; provided that if the Effective Date has 

not occurred as of June 30, 2012, the Texas Comptroller shall be entitled to assert an additional 

Administrative Claim for postpetition interest, which interest will be calculated at 4.25% per 

annum on the amount of the Texas Administrative Claim, and which interest will begin accruing 

on July 1, 2012. 75 

This settlement was negotiated in good faith, at arm‘s length, and represents a 

fair and reasonable settlement of the Texas Comptroller‘s Claims, in light of the various risks and 

74 

75 

In re Spiegel, Inc., No. 03-11540 (BRL), 2005 WL 1278094, at *10 (Bankr. S.D.N.Y. May 25, 2005) 

(finding a settlement that met this standard constituted a ―good faith compromise‖ in compliance with 

Bankruptcy Rule 9019(a)). 

For the avoidance of doubt, even if the Effective Date has not occurred by June 30, 2012, the Texas 

Comptroller shall not be entitled to any Claim for postpetition interest (other than any amounts on account 

of interest already included in the Texas Administrative Claim) that may otherwise have accrued from the 

Petition Date through and including June 30, 2012. 

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costs of fully litigating whether the Texas Comptroller would be entitled to additional interest 

and penalties with respect to its Claims. 76 

III. 

The Limited Release, Exculpation, and Injunction Provisions of the Plan Should Be 

Approved 

78. The Plan provides for (i) the release of certain causes of action of the Debtors and 

their estates, (ii) the release of certain causes of action by certain holders of Claims and Interests, 

(iii) the exculpation from claims for certain parties, and (iv) a permanent injunction enjoining the 

prosecution of certain claims. The release, exculpation and injunction provisions contained in 

the Plan are proper because, among other things, such provisions are the product of arm‘s-length 

negotiations and have been critical to the formulation of the Plan (indeed, parties have voted 

overwhelmingly to support such provisions). The Debtors submit, therefore, that as explained 

below, such provisions meet the requirements in this Circuit. 

76 

To the extent that the foregoing constitutes a settlement of not only a Plan objection but also of the Texas 

Comptroller‘s Claims, the Debtors submit that such settlement meets the standards for approval in this 

Circuit. To evaluate whether a settlement is fair and equitable, courts in the Second Circuit consider factors 

including: 

 

 

 

 

 

 

the balance between any litigation‘s possibility of success and the settlement‘s future benefits; 

the likelihood of complex and protracted litigation, with its attendant expense, inconvenience, 

and delay; 

the paramount interests of the creditors, including each affected class‘s relative benefits and 

the degree to which creditors either do not object to or affirmatively support the proposed 

settlement; 

whether other parties in interest support the settlement; 

the competency and experience of counsel supporting the settlement; and 

the extent to which the settlement is the product of arm‘s-length bargaining. 

See Iridium Operating LLC v. Official Comm. of Unsecured Creditors (In re Iridium Operating LLC), 478 

F.3d 452, 462, 465 (2d Cir. 2007) (internal citations omitted). The Debtors believe that all factors weigh in 

favor of approval of the compromise with the Texas Comptroller in light of the Debtors‘ evaluation of the 

cost of litigating the Texas Comptroller‘s Claims and the impact of such costs on creditors‘ recoveries 

under the Plan, the likelihood of the Debtors‘ success in such litigation and the arms‘-length nature of the 

negotiations leading up to the compromise. 

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A. The Debtor Release Should Be Approved 

79. Article IX.B of the Plan (the ―Debtor Release‖) contains a release of the Released 

Parties 77 from all claims and causes of action that the Debtors, the Reorganized Debtors and the 

estates and their Affiliates would have been entitled to assert based on or relating to, among other 

things, (i) the Debtors, (ii) the Chapter 11 Cases, (iii) the purchase, sale or rescission of the 

purchase or sale of any security of the Debtors or the Reorganized Debtors, (iv) the subject 

matter of, or the transactions or events giving rise to, any Claim or Interest that is treated in the 

Plan, (v) the business or contractual arrangements between any Debtor and any Released Party, 

(vi) the restructuring of Claims and Interests before or during the Chapter 11 Cases, (vii) the 

negotiation, formulation or preparation of the Plan and Disclosure Statement, or related 

agreements, instruments or other documents, or (viii) other acts, omissions, transactions, 

agreements or events taking place on or before the Effective Date. The Debtor Release does not 

absolve any Released Party from liability with respect to any act or omission that constitutes 

gross negligence, willful misconduct, criminal acts or fraud (the ―Release Carve Out‖). Further, 

77 

―Released Party‖ means each of (in each case solely in their respective capacities): (a) the Debtors; (b) the 

current and former directors and officers of the Debtors who were directors or officers of the Debtors as of 

or after the Petition Date; (c) EchoStar; (d) the DIP Agent; (e) the Purchase Money Agent; (f) the Creditors‘ 

Committee and the current and former members thereof; (g) Deloitte & Touche Inc., in its capacity as 

Information Officer; (h) the Indenture Trustees; (i) the members of the New Boards; (j) the members of the 

Interim TSN Trust Board (in the event that the provisions of Exhibit 3 are triggered pursuant to Article V.G. 

of the Plan); (k) the Liquidating Trust Trustee; (l) the members of the Liquidating Trust Board; (m) the 

Reorganized Debtors; (n) Harbinger, LightSquared Inc. and LightSquared LP; (o) Sprint; (p) the Ad Hoc 

Group, the members thereof as of the date of the Global Settlement Order and the former members who, as 

of the date of entry of the Confirmation Order, have not objected to the Plan and, as of the Effective Date, 

have not sought (in any manner, whether by filing a motion or otherwise) the reimbursement or other 

payment of any fees or expenses, (including, without limitation, the fees and expenses of any advisors) in 

connection with the Chapter 11 Cases, in their capacity as such; (q) Solus; and (r) with respect to each of 

the foregoing Entities in clauses (a) through (q), such Entities‘ subsidiaries, Affiliates, members, officers, 

directors, agents, financial advisors, accountants, investment bankers, consultants, attorneys, employees, 

partners, and representatives, in each case, only in their capacity as such; provided, however, that for the 

avoidance of doubt, nothing in this Plan shall be deemed to release the Purchaser or any of its Affiliates 

from their obligations under the Purchase Agreement; provided, further, that Articles IX.B and IX.C of the 

Plan shall not apply to DISH, which was released as and to the extent provided pursuant to the Purchase 

Agreement (including Exhibit A thereto). 

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in light of the releases granted pursuant to the Purchase Agreement and the Sale Order, the 

Debtor Release does not apply to the Purchaser or, solely to the extent it is a party to the 

Purchase Agreement for the purposes of Section 6.19 thereof, DISH with respect to any claims, 

obligations, rights, suits, damages, Causes of Action, remedies and liabilities arising under the 

Purchase Agreement. 

80. Bankruptcy Code section 1123(b)(3)(A) specifically provides that a chapter 11 

plan may provide for ―the settlement or adjustment of any claim or interest belonging to the 

debtor or to the estate.‖ 78 

Although a release may not qualify as a settlement under Bankruptcy 

Rule 9019, the rules governing the approval of a settlement are useful in evaluating plan releases. 

In reviewing releases in a debtor‘s plan, courts frequently use the ―best interests of the estate‖ 

benchmark for approval of a settlement under Bankruptcy Rule 9019. 79 

81. The Debtor Release is limited to Claims that belong to the Debtors. It is well 

settled that debtors are authorized to settle or release their claims in a chapter 11 plan. 80 

Indeed, 

courts in this district have approved similar debtor-release provisions in other chapter 11 cases. 81 

In this case, the Debtors do not believe that there are any valuable Claims against the Released 

Parties. In addition, the Debtors‘ release of Claims is a key component of their consensual Plan 

process and the Settlement that resolved all major issues in these cases. Accordingly, the 

78 

79 

80 

81 

11 U.S.C. § 1123(b)(3)(A). 

See generally In re Bally Total Fitness of Greater NY, No. 07-12395, 2007 WL 2779438 (BRL), at *12 

(Bankr. S.D.N.Y. Sept. 17, 2007) (―To the extent that a release or other provision in the Plan constitutes a 

compromise of a controversy, this Confirmation Order shall constitute an order under Bankruptcy Rule 

9019 approving such compromise.‖); Spiegel, 2005 WL 1278094, at *11 (approving releases pursuant to 

section 1123(b)(3) of the Bankruptcy Code and Bankruptcy Rule 9019(a)). 

See In re Adelphia Commc’ns., 368 B.R. 140, 263 n. 289 (Bankr. S.D.N.Y. 2007), aff’d, 544 F.3d 420 (2d 

Cir. 2008) (holding that a debtor may release its own claims); In re Oneida Ltd., 351 B.R. 79, 94, n.1 

(Bankr. S.D.N.Y. 2006) (noting that a debtor‘s release of its own claims is permissible). 

See, e.g., In re Calpine Corp., No. 05-60200 (BRL), 2007 WL 4565223, at *9 (Bankr. S.D.N.Y. Dec. 19, 

2007), aff’d, 354 Fed. Appx. 479 (2d Cir. 2009); In re Tower Auto., Inc., No. 05-10578 (ALG) (Bankr. 

S.D.N.Y. July 12, 2007) [Docket No. 2932]. 

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Debtors submit that the Debtor Release is consistent with applicable law, represents a valid 

settlement of whatever Claims the Debtors may have against the Released Parties pursuant to 

Bankruptcy Code section 1123(b)(3)(A), represents a valid exercise of the Debtors‘ business 

judgment, and should be approved. 

B. The Third-Party Release Should Be Approved 

82. In addition to the Debtor Release, the Plan also provides for the release and 

discharge of the Released Parties from all claims that holders of Claims or Interests would have 

been entitled to assert individually or collectively, except for claims or liabilities arising out of 

willful misconduct, fraud or gross negligence (the ―Third-Party Releases‖). 82 

As set forth in 

further detail herein, the Third-Party Releases constitute a good-faith settlement and compromise 

of claims released by the holders of Claims and Interests, given in exchange for good and 

valuable consideration. The Third-Party Releases are fair, equitable and reasonable and in the 

best interests of the Debtors and all holders of Claims. 

83. In the Second Circuit, a third-party release is permissible where ―unusual 

circumstances render the release terms important to success of the plan.‖ 83 

When reviewing such 

releases, courts focus on the following factors, which examine whether: 

 

 

 

 

the estate received substantial consideration; 

the enjoined claims were ―channeled‖ to a settlement fund rather than 

extinguished; 

the enjoined claims would indirectly impact the reorganization ―by way of 

indemnity or contribution‖; 

the plan otherwise provided for the full payment of the enjoined claims; or 

82 

83 

Plan, Article IX.C. 

Deutsche Bank AG, London Branch v. Metromedia Fiber Network, Inc. (In re Metromedia Fiber Network, 

Inc.), 416 F.3d 136, 143 (2d Cir. 2005). 

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the affected creditors consent. 84 

84. With respect to the first factor, substantial consideration is being exchanged in 

return for the Third-Party Releases. 

The Released Parties played an integral role in the 

formulation of the Settlement, which formed the basis for the Plan, and have expended 

significant time and resources analyzing and negotiating the issues presented by the Debtors‘ 

prepetition capital structure and postpetition settlement proposals. As such, the Released Parties 

have contributed much to the estates by converting the Chapter 11 Cases from ones with many 

hotly contested issues to ones where all major constituents support the Plan, thereby facilitating 

the expeditious reorganization of the Debtors and the implementation of the restructuring 

contemplated by the Plan. In so doing, the Released Parties have compromised aspects of their 

asserted Claims or other legal and/or equitable rights to reach the consensual resolution that 

allowed for the maximization and preservation of value for all of the Debtors‘ creditors. 

85. In addition, certain of the Released Parties – the Debtors‘ directors and officers – 

share an identity of interest with the Debtors. Consistent with responsible business practices, the 

Debtors maintain insurance policies for their current and past directors and officers. Accordingly, 

any lawsuits filed by third parties against these individuals would essentially constitute actions 

against the Debtors‘ estates, and adverse judgments could deplete estate assets if they exceed the 

applicable policy limits. Although the Debtors do not believe any material liabilities exist 

against current or former directors or officers, the Debtors seek approval of the proposed Third- 

84 

In re Adelphia Commc’ns., 368 B.R. at 267 (citing Metromedia Fiber Network, 416 F.3d at 142-43); SEC v. 

Drexel Burnham Lambert Grp., Inc. (In re Lambert Grp., Inc.), 960 F.2d 285, 293 (2d Cir. 1992) (―In 

bankruptcy cases, a court may enjoin a creditor from suing a third party, provided the injunction plays an 

important part in the debtor‘s reorganization plan.‖); see also Rosenberg v. XO Commc’ns, Inc. (In re XO 

Commc’ns, Inc.), 330 B.R. 394, 440 (Bankr. S.D.N.Y. 2005) (finding that non-consensual third party 

releases satisfied Metromedia standard where substantial consideration was provided for the releases, there 

was an identity of interest between the debtor and releasees ―as a result of indemnification/contribution 

exposure of the Debtor,‖ and the release was necessary to the Plan process). 

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Party Releases for the same reasons the Debtors maintain D&O Liability Insurance Policies – as 

prophylactic protection against unknown liabilities or frivolous lawsuits. As a result, including 

the Debtors‘ directors and officers among the Released Parties covered by the Third-Party 

Releases limits the Reorganized Debtors‘ post-emergence obligations, thereby benefitting the 

Debtors‘ unsecured creditors whose recovery is limited to any proceeds remaining from the Sale 

Transaction. 

86. Third, certain of the entities and individuals granted a release under the Plan 

would have a potential claim for indemnification and contribution against the Debtors for any 

liabilities incurred on such claims, as well as any expenses incurred to defend against such 

claims. If the Debtors had to satisfy indemnification and contribution claims by any of the 

Released Parties, such claims would reduce the recoveries to the Debtors‘ unsecured creditors. 

The Debtors‘ estates therefore would be directly and adversely impacted if the released claims 

were pursued. Fourth, the Debtors expect a nearly (if not completely) consensual Plan and 

confirmation process. Therefore, the Third-Party Releases are proper with respect to these 

holders of Claims because such holders‘ votes in favor of the Plan (or lack of objection thereto, 

as applicable) indicate their consent to the Third-Party Releases. 

87. Finally, because the Third-Party Releases are the product of arm‘s-length 

negotiations, they are fair and equitable. Moreover, the Third-Party Releases are reasonable and 

consistent with public policy because they protect the Plan – with appropriate carveouts for 

willful misconduct, fraud and gross negligence – and insulate the Debtors from indirect 

liability. 85 

Indeed, the Third-Party Releases do not release parties from criminal or similar 

85 

Plan, Article IX.C. 

44


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liability, and governmental entities tasked with enforcement are best suited to bring any such 

actions, if any exist. 

C. The Injunction Should Be Approved 

88. Pursuant to its terms, the Plan permanently enjoins all Entities from bringing any 

action that is released pursuant to the Plan or Confirmation Order (the ―Injunction‖). 86 

Additionally, the Releasing Parties 87 are permanently enjoined from bringing any actions against 

the Released Parties or Exculpated Parties (defined below) on account of any Claim that is 

released. 

The Injunction is necessary to effectuate the Plan‘s releases and to protect 

the Reorganized Debtors from potential litigation from prepetition creditors as they 

implement the provisions of the Plan after the Effective Date. Such litigation would hinder the 

efforts of the Reorganized Debtors to effectively fulfill their responsibilities as contemplated in 

the Plan and maximize value for all holders of Claims and Interests. The Injunction is narrowly 

tailored to achieve its purpose, and similar injunctions have been approved by courts in 

other chapter 11 cases; the Injunction should therefore be approved. 88 

86 

87 

88 

Plan, Article IX.F. 

―Releasing Parties‖ means all Entities who have held, hold or may hold Claims or Interests that have been 

released pursuant to Article IX. B or Article IX. C of the Plan, discharged pursuant to Article IX. E of the 

Plan or are subject to exculpation pursuant to ‎Article IX.D of the Plan. 

See, e.g., In re Calpine Corp., No. 05-60200 (BRL), 2007 WL 4565223, at *10 (Bankr. S.D.N.Y. Dec. 19, 

2007), aff’d, 354 Fed. Appx. 479 (2d Cir. 2009); In re Bally Total Fitness of Greater NY, No. 07-12395, 

2007 WL 2779438, at *8 (Bankr. S.D.N.Y. Sept. 17, 2007) (finding that the exculpation, release, and 

injunction provisions were appropriate because they were fair and equitable, necessary to successful 

reorganization and integral to the plan). 

45


Pg 56 of 336 

D. The Exculpation Should be Approved 

89. Pursuant to the terms of the Plan, the Exculpated Parties 89 are protected from 

liability for actions taken or omitted pre- or postpetition in connection with or related to the 

Debtors‘ restructuring efforts, the Chapter 11 Cases, the Canadian Proceedings, the Purchase 

Agreement, the Paydown Orders, the Settlement, the Plan Settlement, the formulation, 

preparation, dissemination, negotiation or filing of the Disclosure Statement or the Plan or any 

contract, instrument, release or other agreement or document created or entered into in 

connection with the Disclosure Statement or the Plan, the Settlement, the Plan Settlement, the 

filing of the Chapter 11 Cases, the Canadian Proceedings, the pursuit of Confirmation and 

implementation of the Plan, including the issuance of Plan securities or the distribution of 

property under the Plan (collectively, the ―Exculpation Provision‖). 90 

The scope of the 

Exculpation Provision is appropriately limited to the Exculpated Parties‘ participation in these 

Chapter 11 Cases, has no effect on liability that results from gross negligence, willful misconduct 

or fraud and does not apply to any acts or omissions expressly set forth in and preserved by the 

Plan. 

89 

90 

―Exculpated Party‖ means each of: (a) the Debtors, and the Reorganized Debtors; (b) the Creditors‘ 

Committee and the current and former members thereof, in their capacity as such; (c) EchoStar; (d) the 

Indenture Trustees; (e) the Purchase Money Agent; (f) Deloitte & Touche Inc., in its capacity as 

information officer in the Canadian Proceedings; (g) the New Boards of the Reorganized Debtors and the 

members of the Interim TSN Trust Board (in the event that the provisions of Exhibit 3 are triggered 

pursuant to Article V.G. of the Plan), in connection with the Chapter 11 Cases, including, but not limited to, 

any action taken in furtherance of this Plan, the Purchase Agreement and the Sale Order; (h) Harbinger, 

LightSquared Inc. and LightSquared LP; (i) Sprint; (j) the Ad Hoc Group, the members thereof as of the 

date of the Global Settlement Order and the former members that, as of the date of entry of the 

Confirmation Order, have not objected to the Plan and, as of the Effective Date, have not sought (in any 

manner, whether by filing a motion or otherwise) the reimbursement or other payment of any fees or 

expenses, including, without limitation, the fees and expenses of any advisors) in connection with the 

Chapter 11 Cases, in their capacity as such; (k) Solus; and (l) with respect to each of the foregoing Entities 

in clauses (a) through (k), such Entities‘ subsidiaries, affiliates, members, officers, directors, agents, 

financial advisors, accountants, investment bankers, consultants, attorneys, employees, partners, and 

representatives, in each case solely in their capacity as such. 

Plan, Article IX.D. 

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90. Policy considerations, including the protection of statutory committees and their 

members, weigh strongly in favor of exculpatory clauses such as the Exculpation Provision. 

Notably, courts have ruled that exculpation provisions do not affect the liabilities of third parties, 

but merely set forth the appropriate standard of liability for the exculpated parties. 91 

Courts have 

found exculpation provisions appropriate where, as here, they do not extend to gross negligence, 

willful misconduct or fraud. 92 

Courts evaluate the appropriateness of exculpation provisions 

based upon a number of factors, including whether the Plan was proposed in good faith, whether 

liability is limited and whether the exculpation provision was necessary for plan negotiations. 93 

91. As discussed above, to confirm the Plan, the Bankruptcy Court must find, among 

other things, that the Plan has been proposed in good faith and not by any means forbidden by 

law. 94 

Such a finding would extend to the parties involved in the formulation of the Plan — i.e. 

the Debtors and the Creditors‘ Committee. Thus, if the Bankruptcy Court confirms the Plan, 

cause exists to approve the Exculpation Provision. Moreover, it is well established that the 

liability of statutory committees and their professionals retained under Bankruptcy Code section 

91 

92 

93 

94 

In re PWS Holding Corp., 228 F.3d 224, 245 (3d Cir. 2000) (the exculpation provision, ―which is 

apparently a commonplace provision in Chapter 11 plans, does not affect the liability of [third] parties, but 

rather states the standard of liability under the Code . . . .‖). 

See Upstream Energy Servs. v. Enron Corp. (In re Enron Corp.), 326 B.R. 497, 501 (S.D.N.Y. 2005) 

(finding that the exculpation provision was appropriate where such provision excluded gross negligence 

and willful misconduct). 

See, e.g., Captran Creditors’ Trust v. McConnell (In re Captran Creditors’ Trust), 128 B.R. 469, 476 (M.D. 

Fla. 1991), aff’d, 979 F.2d 212 (11th Cir. 1992) (the factors used to evaluate the language of an exculpation 

provision ―include, but are not limited to: how the exculpatory clause limits liability, intent of the parties, 

and the manner in which the exculpatory clause was made a part of the agreement‖). 

11 U.S.C. § 1129(a)(3). 

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Pg 58 of 336 

1103 is limited to acts of gross negligence and willful misconduct. 95 Finally, exculpation for 

participating in the plan process is appropriate where plan negotiations could not have occurred 

without protection from liability. 96 

The Plan would not have materialized if the negotiating 

parties had known they would not be protected from liability, other than for willful misconduct 

or gross negligence, in connection therewith. 

92. The Exculpated Parties should be exculpated for acts in connection with the 

Chapter 11 Cases, other than those acts involving willful misconduct or gross negligence, as a 

matter of public policy. Indeed, failing to include an exculpation clause such as the Exculpation 

Provision in a plan of reorganization would chill the critical participation of the management and 

the advisors to debtors in possession, as well as essential creditor groups, in the process of trying 

to formulate and negotiate consensual chapter 11 plans. In light of the bankruptcy policy in 

favor of consensual chapter 11 plans and the negotiations that create them, it stands to reason that 

exculpation provisions are essential to the process and should be approved. 97 

95 

96 

97 

See In re Calpine Corp., No. 05-60200 (BRL), 2007 WL 4565223, at *10 (Bankr. S.D.N.Y. Dec. 19, 2007) , 

aff’d, 354 Fed. Appx. 479 (2d Cir. 2009) (finding that exculpation provisions that do not relieve any party 

of liability for gross negligence or willful misconduct finding to be appropriate); Enron Corp., 326 B.R. at 

501 (noting that the bankruptcy court had addressed the exculpation provision, finding it appropriate 

because it excluded gross negligence and willful misconduct); PWS Holding, 228 F.3d at 246-47 (holding 

that the appropriate standard of liability under section 1103 of the Bankruptcy Code is ―willful misconduct 

or ultra vires acts,‖ and approving an exculpation of the creditors‘ committee and its professionals subject 

only to liability for willful misconduct or gross negligence). 

See Enron Corp., 326 B.R. at 503 (excising similar exculpation provisions would ―tend to unravel the 

entire fabric of the Plan, and would be inequitable to all those who participated in good faith to bring it into 

fruition‖); see also In re Winn-Dixie Stores, Inc., 356 B.R. 239, 261 (Bankr. M.D. Fla. 2006) (holding 

exculpation provision was appropriate where beneficiaries expected such provision to be included in 

chapter 11 plan in exchange for participation in the chapter 11 cases); In re WorldCom, No. 02-12533 

(ALG), 2003 WL 23861928, at *28 (Bankr. S.D.N.Y. Oct. 31, 2003) (finding that the exculpation provision 

was appropriate when its inclusion in the plan was vital to the successful negotiation of the plan). 

See In re Jartran, Inc., 44 B.R. 331, 363 (Bankr. N.D. Ill. 1984) (―the spirit of Chapter 11 [is] to promote 

consensual plans . . . .‖); see also In re Zenith Elecs. Corp., 241 B.R. 92, 105 (Bankr. D. Del. 1999) (stating 

that the Bankruptcy Code has an overall policy of fostering consensual plans of reorganization); In re 

Homestead Partners, Ltd., 197 B.R. 706, 710 (Bankr. N.D. Ga. 1996) (―the development of consensual 

reorganizations lies at the heart of Chapter 11 policy . . . .‖); In re Pub. Serv. Co. of N.H., 88 B.R. 521, 539- 

40 (Bankr. D.N.H. 1988) (―it is a ‗strong policy‘ underlying chapter 11 of the Bankruptcy Code to foster 

consensual plans . . . .‖). 

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93. The Exculpated Parties played a critical role in the formulation of the Settlement 

and the Plan and the expectation of an eventual exculpation similar to the one contained in the 

Exculpation Provision played a role in bringing these parties to the table. Moreover, the scope of 

the Exculpation Provision itself and the composition of the Exculpated Parties are entirely 

consistent with established practice in this and other jurisdictions. 98 

Accordingly, the 

Exculpation Provision should be approved. 

IV. 

The Modifications to the Plan are not Material 

94. Since Solicitation, the Debtors made certain modifications (the ―Modifications‖) 

to the Plan and Disclosure Statement and filed the Plan and Disclosure Statement, as modified, 

with the Bankruptcy Court on February 8, 2012. Specifically, the Modifications include (i) a 

provision that, to the extent that the Debtors waive the condition precedent to the Effective Date 

that the Closing Date Payment shall have been received, the Debtors‘ will notify the Creditors‘ 

Committee and the Purchaser of such waiver two weeks before the contemplated Effective Date 

and such parties shall maintain all rights with respect thereto, (ii) the identification and address 

of the Liquidating Trustee and (iii) certain other ministerial changes unrelated to the treatment of 

Claims under the Plan. The Modifications do not materially or adversely affect the way any 

Claim or Interest is treated under the version of the Plan distributed to holders of Claims in the 

Voting Class in connection with the prepetition solicitation of votes on the Plan. 

98 

See, e.g., In re Calpine Corp., 2007 WL 456223, at *10; In re Source Enters., Inc., No. 06-11707 (ALG), 

2007 WL 2903954, at *13 (Bankr. S.D.N.Y. Oct. 1, 2007) (approving exculpation provision because 

provision was in the best interests of the debtors‘ estates and the creditors); In re Bally Total Fitness of 

Greater NY, No. 07-12395, 2007 WL 2779438, at *8 (Bankr. S.D.N.Y. Sept. 17, 2007) (finding that the 

exculpation, release, and injunction provisions appropriate because they were fair and equitable, necessary 

to successful reorganization, and integral to the plan); In re Oneida Ltd., 351 B.R. 79, 94 n.22 (Bankr. 

S.D.N.Y. 2006) (in overruling objection to exculpation clause, noting that exculpation language that 

―generally follows the text that has become standard in this district, is sufficiently narrow to be 

unexceptionable‖). 

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95. Bankruptcy Code section 1127 provides, in relevant part: 

The proponent of a plan may modify such plan at any time before 

confirmation, but may not modify such plan so that such plan as modified 

fails to meet the requirements of section 1122 and 1123 of the [Bankruptcy 

Code]. After the proponent of a plan files a modification of such plan with 

the court, the plan as modified becomes the plan . . . . 

Any holder of a claim or interest that has accepted or rejected a plan is 

deemed to have accepted or rejected, as the case may be, such plan as 

modified, unless, within the time fixed by the court, such holder changes 

such holder‘s previous acceptance or rejection. 99 

96. Bankruptcy Rule 3019, designed to implement Bankruptcy Code section 1127, in 

turn provides, in relevant part: 

In a . . . chapter 11 case, after a plan has been accepted and before its 

confirmation, the proponent may file a modification of the plan. If the court 

finds after hearing on notice of the trustee, any committee appointed under 

the [Bankruptcy] Code, and any other entity designated by the court that the 

proposed modification does not adversely change the treatment of the claim 

of any creditor or the interest of any equity security holder who has not 

accepted in writing the modification, it shall be deemed accepted by all 

creditors and equity security holders who have previously accepted the 

plan. 100 

97. Here, the requirements of Bankruptcy Code section 1127(d) have been met 

because all holders of Claims and Interests in these Chapter 11 Cases have received notice of the 

hearing on confirmation of the Plan and will have an opportunity to object to the Modifications 

at that time. 101 

Moreover, the Debtors submit that several of their major creditors, or their 

representatives – including the Creditors‘ Committee, reviewed the Modifications and have not 

objected to any such Modifications. 

99 

100 

101 

11 U.S.C. §§ 1127(a), (d). 

Fed. R. Bankr. P. 3019(a). 

See Affidavit of Service of Eamon Mason – Notice of Rescheduled Confirmation Hearing Time, ECF No. 

894 (Jan. 11, 2012); see also Citicorp Acceptance Co., Inc. v. Ruti-Sweetwater (In re Sweetwater), 57 B.R. 

354, 358-59 (D. Utah 1985) (creditors who had knowledge of pending confirmation hearing had sufficient 

opportunity to raise objections to modifications of the plan). 

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Pg 61 of 336 

98. Bankruptcy Code section 1127 provides a plan proponent with the right to modify 

a plan ―at any time‖ before confirmation. 102 

This right would be meaningless if the promulgation 

of all plan modifications, ministerial or substantive, adverse to certain claimants or not, 

necessitated the resolicitation of votes. Indeed, courts have typically allowed a plan proponent to 

make non-material changes to a plan without any special procedure or resolicitation. 103 

Accordingly, because the Modifications are non-material and do not materially adversely affect 

the treatment of any creditor that has previously accepted the Plan, and the Plan continues to 

comply with the requirements of Bankruptcy Code section 1122 and 1123, the Debtors believe 

that resolicitation is not required. 

V. Request for a Waiver of Bankruptcy Rule 3020(e), 6004(h) and/or 7062 

99. The Debtors respectfully request that the Bankruptcy Court direct that the order 

confirming the Plan become effective immediately upon its entry notwithstanding the 14-day 

stay imposed by Bankruptcy Rule 3020(e), 6004(h) and/or 7062. 

Under the unique 

circumstances of the Chapter 11 Cases, including, but not limited to, the fact that the Debtors and 

the Purchaser are seeking regulatory approval of their FCC transfer of control application as soon 

as possible (thereby triggering the payment by the Purchaser of the remaining $30 million that 

will be made available for Distribution to creditors under the Plan and in accordance with terms 

of the Purchase Agreement), and given the near unanimous support of the Plan by affected 

102 

103 

11 U.S.C. § 1127. 

See, e.g., In re Am. Solar King Corp., 90 B.R. 808, 826 (Bankr. W.D. Tex. 1988) (stating that ―[I]f a 

modification does not ‗materially‘ impact a claimant‘s treatment, the change is not adverse and the court 

may deem that prior acceptances apply to the amended plan as well.‖) (citation omitted); see also Enron 

Corp. v. New Power Co. (In re New Power Co.), 438 F.3d 1113, 1117-18 (11th Cir. 2006) (―[T]he 

bankruptcy court may deem a claim or interest holder‘s vote for or against a plan as a corresponding vote in 

relation to a modified plan unless the modification materially and adversely changes the way that claim or 

interest holder is treated.‖); In re Mount Vernon Plaza Cmty. Urban Redevelopment Corp. I, 79 B.R. 305, 

306 (Bankr. S.D. Ohio 1987) (all creditors were deemed to have accepted plan as modified because ―[n]one 

of the changes negatively affects the repayment of creditors, the length of the [p]lan, or the protected 

property interests of parties in interest.‖). 

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creditors and the fact that no objections to Confirmation of the Plan have been filed, the request 

for waiver of the stay is reasonable. 

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CONCLUSION 

For the reasons set forth herein, the Debtors submit that the Plan complies with and 

satisfies all applicable requirements of the Bankruptcy Code. 

Accordingly, the Debtors 

respectfully request that the Bankruptcy Court (i) confirm the Plan and (ii) grant the Debtors 

such other and further relief as is just and proper. 

New York, New York 

Dated: February 8, 2012 

/s/ Ira S. Dizengoff 




Telephone: (212) 872-1000 

Facsimile: (212) 872-1002 


Arik Preis 



53


Pg 64 of 336 

EXHIBIT A 

Proposed Form of Confirmation Order


Pg 65 of 336 



) 


) 


) 

Debtors. ) Jointly Administered 

) 

FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER CONFIRMING 

THE JOINT CHAPTER 11 PLAN OF TERRESTAR NETWORKS INC., ET. AL. 

The above-captioned debtors and debtors in possession (each, a “Debtor” and, 

collectively, the “Debtors”) having: 

a. commenced, on October 19, 2010 (the “Petition Date”), these chapter 11 cases 

(collectively, the “Chapter 11 Cases”) by filing voluntary petitions for relief under 

chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”); 

b. continued to operate their businesses and manage their properties as debtors in possession 

pursuant to Bankruptcy Code sections 1107(a) and 1108; 

c. filed, on November 18, 2011, the Joint Chapter 11 Plan of TerreStar Networks Inc., et al. 

[Docket No. 842] (as amended, the “Plan”) 2 ; 

d. filed, on November 18, 2011, the Disclosure Statement for the Joint Chapter 11 Plan of 

TerreStar Networks Inc., et al. [Docket No. 843] (the “Disclosure Statement”); 

e. filed, on November 18, 2011, the Motion for Entry of an Order (A) Approving the 

Disclosure Statement for the Debtors' Joint Chapter 11 Plan and (B) Establishing 

Solicitation and Voting Procedures with Respect to the Debtors' Joint Chapter 11 Plan 

[Docket No. 844]; 

f. filed, on December 6, 2011, the First Revised Joint Chapter 11 Plan of TerreStar 

Networks Inc., et al. [Docket No. 850]; 

1 

2 

The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal taxpayeridentification 

number, are: TerreStar License Inc. [6537]; TerreStar National Services Inc. [6319]; 

TerreStar Networks Inc. [3931]; 0887729 B.C. Ltd. [1345]; TerreStar Networks (Canada) Inc. [8766]; and 

TerreStar Networks Holdings (Canada) Inc. [1337]. 

Capitalized terms used herein but otherwise not defined shall have the meanings ascribed to them in the 

Plan, the Disclosure Statement or the Plan Confirmation Brief, as applicable.


Pg 66 of 336 

g. filed, on December 6, 2011, the First Revised Disclosure Statement for the Joint Chapter 

11 Plan of TerreStar Networks Inc., et al. [Docket No. 851]; 

h. filed, on December 19, 2011, the Second Revised Joint Chapter 11 Plan of TerreStar 

Networks Inc., et al. [Docket No. 862]; 

i. filed, on December 19, 2011, the Second Revised Disclosure Statement for the Joint 

Chapter 11 Plan of TerreStar Networks Inc., et al. [Docket No. 863]; 

j. filed, on December 27, 2011, the solicitation version of the Joint Chapter 11 Plan of 

TerreStar Networks Inc., et al. [Docket No. 873]; 

k. filed, on December 27, 2011, the solicitation version of the Disclosure Statement for the 

Joint Chapter 11 Plan of TerreStar Networks Inc., et al. [Docket No. 874]; 

l. distributed solicitation materials beginning on or about December 29, 2011, consistent 

with the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure (the “Bankruptcy 

Rules”) and the Order (A) Approving the Disclosure Statement for the Joint Chapter 11 

Plan of the Debtors and (B) Establishing Solicitation and Voting Procedures with 

Respect to the Joint Chapter 11 Plan of the Debtors [Docket No. 868] (the “Disclosure 

Statement and Solicitation Procedures Order”), which Disclosure Statement and 

Solicitation Procedures Order also approved, among other things, solicitation procedures 

(the “Solicitation Procedures”) and related notices, forms and ballots (collectively, the 

“Solicitation Packages”) as evidenced by the Affidavit of Service of Jeffrey S. Stein - 

Solicitation Mailing [Docket No. 880] (the “GCG Affidavit”); 

m. published, on January 5, 2012 and January 11, 2012, respectively, notice of the 

Confirmation Hearing (the “Confirmation Hearing Notice”) in The Wall Street Journal 

(National Edition), USA Today (National Edition) and The Global and Mail (National 

Edition) consistent with the Disclosure Statement and Solicitation Procedures Order, as 

evidenced by the Notice of Certification of Publication - Notice of Hearing to Consider 

Confirmation of the Chapter 11 Plan Filed by the Debtors and Related Voting and 

Objection Deadlines [Docket No. 897] and the Affidavit of Service of Eamon Mason - 

Notice of Rescheduled Confirmation Hearing [Docket No. 893] (collectively, the 

“Publication Affidavits”); 

n. filed, on February 3, 2012, the Plan Supplement to the Joint Chapter 11 Plan of 

TerreStar Networks Inc., et al. [Docket No. 909] (the “Plan Supplement”); 

o. filed, on February 6, 2012, the Declaration of Jeffrey S. Stein of the Garden City Group, 

Inc. Certifying the Methodology for the Tabulation of Votes on and Results of Voting with 

Respect to the Joint Chapter 11 Plan of TerreStar Networks Inc., et al., with Respect to 

Claims in Class 3 [Docket No. 910] (the “Voting Certification”) detailing the results of 

the Plan voting process; 

p. filed, on February 8, 2012, the Debtors’ Memorandum of Law in Support of Confirmation 

of the Joint Chapter 11 Plan of TerreStar Networks Inc., et al. [Docket No.___] (the 

“Plan Confirmation Brief”); 

2


Pg 67 of 336 

q. filed, on February 8, 2012, the Declaration of Jeffrey W. Epstein in Support of 

Confirmation of the Joint Chapter 11 Plan of TerreStar Networks Inc. et al. [Docket 

No.___]; 

r. filed, on February 8, 2012, the Declaration of C.J. Brown in Support of Confirmation of 

the Joint Chapter 11 Plan of TerreStar Networks Inc. et al. [Docket No. ___]; and 

s. filed, on February 8, 2012, a revised version of the Plan to reflect certain non-material 

and technical modifications to the terms thereof [Docket No. 913]. 

This Bankruptcy Court having: 

a. entered, on July 7, 2011, the Order (A) Approving Asset Purchase Agreement And 

Authorizing The Sale Of Assets Of Debtor Outside The Ordinary Course Of Business; (B) 

Authorizing The Sale Of Assets Free And Clear Of All Liens, Claims, Interests And 

Encumbrances; (C) Authorizing The Assumption And Sale And Assignment Of Certain 

Executory Contracts And Unexpired Leases; And (D) Granting Related Relief [Docket 

No. 668] (the “Sale Order”); 

b. entered, on December 15, 2011, the Stipulation and Agreed Order Approving the 

Debtors’ Motion for an Order Pursuant to Bankruptcy Code Section 363(b) and Federal 

Rule of Bankruptcy Procedure 9019 Approving the Stipulation Among the Debtors, the 

Creditors’ Committee, EchoStar, the Ad Hoc Group, Harbinger, Lightsquared, Sprint, 

Solus, and the 15% Notes Trustee [Docket No. 857] (the “Global Settlement Order”). 

c. entered, on December 21, 2011, the Disclosure Statement and Solicitation Procedures 

Order [Docket No. 868]; 

d. set February 14, 2012, at 11:30 a.m., prevailing Eastern Time, as the date and time for the 

commencement of the Confirmation Hearing pursuant to Bankruptcy Rules 3017 and 

3018 and Bankruptcy Code sections 1126, 1128 and 1129; 

e. reviewed the Plan, the Disclosure Statement, the Plan Confirmation Brief, and all 

pleadings, exhibits, statements, responses and comments regarding Confirmation; 

f. heard the statements, arguments and objections (if any) made by counsel in respect of 

Confirmation; 

g. considered all oral representations, testimony, documents, filings and other evidence 

regarding Confirmation; and 

h. taken judicial notice of all papers and pleadings filed in the Chapter 11 Cases. 

NOW, THEREFORE, after due deliberation and based upon the record set forth above, it 

appearing to the Bankruptcy Court that notice of the Confirmation Hearing, the Plan and all 

modifications thereto have been adequate and appropriate as to all parties affected or to be 

3


Pg 68 of 336 

affected by the Plan and the transactions contemplated thereby and that any party in interest so 

affected has had the opportunity to object to Confirmation; and, after due deliberation and based 

upon the record described above, it appearing to the Bankruptcy Court that the legal and factual 

bases set forth in the documents filed in support of Confirmation and presented at the 

Confirmation Hearing establish just cause for the relief granted herein; the Bankruptcy Court 

hereby makes and issues the following Findings of Fact, Conclusions of Law and Order: 3 

I. FINDINGS OF FACT AND CONCLUSIONS OF LAW 

IT IS HEREBY DETERMINED, FOUND, ADJUDGED, DECREED AND ORDERED 

THAT: 

A. Jurisdiction and Venue 

1. On the Petition Date, the Debtors commenced the Chapter 11 Cases in this 

Bankruptcy Court. Venue in this Bankruptcy Court was proper as of the Petition Date with 

respect to the Debtors pursuant to 28 U.S.C. §§ 1408 and 1409. Confirmation of the Plan is a 

core proceeding under 28 U.S.C. § 157(b)(2). 

The Bankruptcy Court has subject matter 

jurisdiction over this matter pursuant to 28 U.S.C. § 1334. The Bankruptcy Court has exclusive 

jurisdiction to determine whether the Plan complies with the applicable provisions of the 

Bankruptcy Code and should be confirmed. 

B. Eligibility for Relief 

2. The Debtors were and are entities eligible for relief under Bankruptcy Code 

section 109. 

3 

The findings of fact and the conclusions of law set forth herein shall constitute the Bankruptcy 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 that any of the following findings of fact 

constitute conclusions of law, they are adopted as such. To the extent that any of the following conclusions 

of law constitute findings of fact, they are adopted as such. 

4


Pg 69 of 336 

C. Commencement and Joint Administration of the Chapter 11 Cases 

3. On the Petition Date, the Debtors commenced the Chapter 11 Cases by filing 

voluntary petitions for relief under chapter 11 of the Bankruptcy Code in this Court. By prior 

order of the Bankruptcy Court, the Chapter 11 Cases have been consolidated for procedural 

purposes only and are being jointly administered pursuant to Bankruptcy Rule 1015 [Docket 

Nos. 32, 445]. The Debtors have operated their businesses and managed their properties as 

debtors in possession since the Petition Date pursuant to Bankruptcy Code sections 1107(a) and 

1108. No trustee or examiner has been appointed in the Chapter 11 Cases. 

D. Plan Supplement 

4. On February 3, 2012, the Debtors filed the Plan Supplement [Docket No. 909] 

consisting of the following: (a) the Liquidating Trust Agreement; (b) the Interim TSN Trust 

Agreement; (c) the New Corporate Governance Documents; (d) to the extent known, the identity 

of the members of the New Boards (the “Boards of Directors”) and the nature and compensation 

for any Director who is an “insider” under the Bankruptcy Code; (e) to the extent known, the 

identity of the officers of the Reorganized Debtors (the “Officers”); (f) the Assumed Executory 

Contract and Unexpired Lease List; (g) the Rejected Executory Contract and Unexpired Lease 

List; (h) the Schedule of Retained Causes of Action; (i) the New Employment Agreements; (j) a 

Schedule of the Insurance Policies; (k) the Summary of Terms and Conditions of Tail Insurance; 

and (l) the Interim TSN Warrant Agreement. 

5. All materials included in the Plan Supplement are integral to, part of and 

incorporated by reference into the Plan. The Plan Supplement complies with the terms of the 

Plan, and the filing and notice of such documents was good and proper in accordance with the 

Bankruptcy Code, the Bankruptcy Rules and the Disclosure Statement and Solicitation 

Procedures Order, and no other or further notice is or shall be required. 

5


Pg 70 of 336 

E. Modifications to the Plan 

6. Subsequent to the Voting Deadline, the Debtors made certain modifications to the 

Plan. Any and all modifications to the Plan since the entry of the Disclosure Statement and 

Solicitation Procedures Order are consistent with all of the provisions of the Bankruptcy Code, 

including Bankruptcy Code sections 1122, 1123, 1125 and 1127. None of the modifications 

made since the entry of the Disclosure Statement and Solicitation Procedures Order effects a 

materially adverse change in the treatment of any holder of a Claim or Interest under the Plan. 

Accordingly, pursuant to Bankruptcy Code section 1127(a) and Bankruptcy Rule 3019, these 

modifications do not require additional disclosure under Bankruptcy Code section 1125 or the 

resolicitation of votes under Bankruptcy Code section 1126, nor do they require that the holders 

of Claims or Interests be afforded an opportunity to change previously cast acceptances or 

rejections of the Plan. The Plan as modified and attached hereto as Exhibit A shall constitute the 

Plan submitted for Confirmation. 

F. Judicial Notice 

7. The Bankruptcy Court takes judicial notice of the docket of the Chapter 11 Cases 

and all related adversary proceedings and other documents filed and orders entered thereon, 

maintained by the clerk of the applicable court or its duly appointed agent, including all 

pleadings and other documents on file, all orders entered, all hearing transcripts, and all evidence 

and arguments made, proffered or adduced at the hearings held before the applicable court 

during the pendency of the Chapter 11 Cases. 

Any resolutions of informal objections to 

Confirmation explained on the record at the Confirmation Hearing are hereby incorporated by 

reference. 

6


Pg 71 of 336 

G. Disclosure Statement and Solicitation Procedures Order 

8. On December 21, 2011, the Bankruptcy Court entered the Disclosure Statement 

and Solicitation Procedures Order, which, among other things: (a) approved the Disclosure 

Statement in the form attached to the Disclosure Statement and Solicitation Procedures Order as 

containing adequate information within the meaning of Bankruptcy Code section 1125 and 

Bankruptcy Rule 3017; (b) fixed December 21, 2011, as the Voting Record Date; (c) fixed 

February 1, 2012, at 5:00 p.m. prevailing Eastern Time as the deadline for voting to accept or 

reject the Plan (the “Voting Deadline”); (d) fixed February 1, 2012, at 5:00 p.m. prevailing 

Eastern Time as the deadline for objecting to the Plan; (e) fixed February 13, 2012, at 10:00 

a.m. 4 prevailing Eastern Time as the date and time for the commencement of the Confirmation 

Hearing; (f) approved the Solicitation Procedures and the form of the Solicitation Packages; and 

(g) approved the form and method of notice of the Confirmation Hearing Notice set forth therein. 

H. Transmittal and Mailing of Materials, Notice 

9. As evidenced by the GCG Affidavit and the Publication Affidavits, due, adequate 

and sufficient notice of the Disclosure Statement, the Plan, the Plan Supplement and the 

Confirmation Hearing, together with all deadlines for voting on or objecting to the Plan and with 

respect to Confirmation, has been given to: (a) all known holders of Claims and Interests; (b) all 

parties that requested notice in accordance with Bankruptcy Rule 2002; and (c) all counterparties 

to Executory Contracts and Unexpired Leases with the Debtors, in substantial compliance with 

the Disclosure Statement and Solicitation Procedures Order and Bankruptcy Rules 2002(b), 3017 

and 3020(b), and no other or further notice is or shall be required. Adequate and sufficient 

notice of the Confirmation Hearing, and any applicable dates, deadlines and hearings described 

4 

The Bankruptcy Court subsequently rescheduled the Confirmation Hearing to February 14, 2012, at 11:30 

a.m. prevailing Eastern Time. The Debtors provided notice of the rescheduled Confirmation Hearing date 

on January 10, 2012. See Docket No. 889. 

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in the Disclosure Statement and Solicitation Procedures Order was given in compliance with the 

Bankruptcy Rules, the Disclosure Statement and Solicitation Procedures Order, as evidenced by 

the GCG Affidavit and the Publication Affidavits, and no other or further notice is or shall be 

required. 

10. The Debtors published the Confirmation Hearing Notice once each in The Wall 

Street Journal (National Edition), USA Today (National Edition) and The Globe and Mail 

(National Edition) in substantial compliance with the Disclosure Statement and Solicitation 

Procedures Order and Bankruptcy Rule 2002(l), as evidenced by the Publication Affidavits, and 

no other or further notice is or shall be required. 

I. Solicitation 

11. Votes for acceptance and rejection of the Plan were solicited in good faith and in 

compliance with Bankruptcy Code sections 1125 and 1126, Bankruptcy Rules 3017 and 3018, 

the Disclosure Statement, the Disclosure Statement and Solicitation Procedures Order, all other 

applicable provisions of the Bankruptcy Code, and all other applicable rules, laws and 

regulations. 

12. Specifically, the Solicitation Packages approved by the Bankruptcy Court in the 

Disclosure Statement and Solicitation Procedures Order (including the Disclosure Statement, the 

Plan, the form of ballots and related notices approved thereby) were transmitted to and served on 

all holders of Claims or Interests in Classes that were entitled to vote to accept or reject the Plan, 

and relevant portions of the Solicitation Packages and other notices approved by the Disclosure 

Statement were transmitted to and served on other parties in interest in the Chapter 11 Cases, all 

in compliance with Bankruptcy Code section 1125, the Disclosure Statement and Solicitation 

Procedures Order, the Solicitation Procedures and the Bankruptcy Rules. 

Transmittal and 

service were adequate and sufficient, and no further notice is or shall be required. 

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J. Voting Certifications 

13. The Debtors filed the Voting Certifications before the commencement of the 

Confirmation Hearing, consistent with the Disclosure Statement and Solicitation Procedures 

Order. All procedures used to tabulate ballots received in connection with Confirmation were 

fair and conducted in accordance with the Disclosure Statement and Solicitation Procedures 

Order, as evidenced by the GCG Affidavit. 

14. As set forth in the Plan and Disclosure Statement, holders of Claims in Class 3 

(the “Voting Class”) were eligible to vote on the Plan pursuant to the Solicitation Procedures. 5 

In addition, holders of Claims in Classes 1 and 2 (together, the “Deemed Accepting Classes”) are 

deemed to accept the Plan and, therefore, are not entitled to vote to accept or reject the Plan. 

Finally, holders of Claims in Class 4 (the “Deemed Rejecting Class”) are deemed to reject the 

Plan and, therefore, are not entitled to vote to accept or reject the Plan. 

15. As further evidenced by the Voting Certifications, the Voting Class voted to 

accept the Plan (the “Impaired Accepting Class”). 

K. Bankruptcy Rule 3016 

16. The Plan is dated and identifies the Entities submitting it, thereby satisfying 

Bankruptcy Rule 3016(a). 

The filing of the Disclosure Statement with the clerk of the 

Bankruptcy Court satisfied Bankruptcy Rule 3016(b). 

L. Burden of Proof 

17. The Debtors, as proponents of the Plan, have met their burden of proving the 

elements of Bankruptcy Code sections 1129(a) and 1129(b) by a preponderance of the evidence, 

which is the applicable evidentiary standard for Confirmation. 

5 

Although Class 4 is Impaired under the Plan, holders of Equity Interests are not receiving any Distribution 

under the Plan and, therefore, are conclusively presumed to have rejected the Plan pursuant to Bankruptcy Code 

section 1126(g). 

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M. Compliance with the Requirements of Bankruptcy Code Section 1129 

18. The Plan complies with all applicable provisions of Bankruptcy Code section 

1129 as follows: 

i. Section 1129(a)(1)—Compliance of the Plan with Applicable Provisions of 

the Bankruptcy Code 

19. The Plan complies with all applicable provisions of the Bankruptcy Code as 

required by Bankruptcy Code section 1129(a)(1), including sections 1122 and 1123. 

a. Sections 1122 and 1123(a)(1)—Proper Classification 

20. The classification of Claims and Interests under the Plan is proper under the 

Bankruptcy Code. Pursuant to Bankruptcy Code sections 1122(a) and 1123(a)(1), Article III of 

the Plan provides for the separate classification of Claims and Interests into four (4) Classes, 

based on differences in the legal nature or priority of such Claims and Interests (other than 

Administrative Claims, Priority Tax Claims and statutory fees owed to the U.S. Trustee 

(“Statutory Fees”), which are addressed in Article II of the Plan and which are not required to be 

designated as separate Classes pursuant to Bankruptcy Code section 1123(a)(1)). Valid business, 

factual and legal reasons exist for the separate classification of the various Classes of Claims and 

Interests created under the Plan and the classifications were not done for any improper purpose. 

In addition, the creation of such Classes does not unfairly discriminate between or among 

holders of Claims or Interests. 

21. As required by Bankruptcy Code section 1122(a), each Class of Claims and 

Interests contains only Claims or Interests that are substantially similar to the other Claims or 

Interests within that Class. Accordingly, the requirements of Bankruptcy Code sections 1122(a) 

and 1123(a)(1) have been satisfied. 

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b. Section 1123(a)(2)—Specification of Unimpaired Classes 

22. Article III of the Plan specifies that Claims in Classes 1 and 2 are Unimpaired 

under the Plan. Additionally, Article II of the Plan specifies that Administrative Claims, Priority 

Tax Claims and Statutory Fees are Unimpaired, although these Claims are not classified under 

the Plan. Accordingly, the requirements of Bankruptcy Code section 1123(a)(2) have been 

satisfied. 

c. Section 1123(a)(3)—Specification of Treatment of Impaired Classes 

23. Article III of the Plan specifies the treatment of each Impaired Class under the 

Plan, including Classes 3 and 4. Accordingly, the requirements of Bankruptcy Code section 

1123(a)(3) have been satisfied. 

d. Section 1123(a)(4)—No Discrimination 

24. Pursuant to Bankruptcy Code section 1123(a)(4), Article III of the Plan uniformly 

provides for the same treatment of each Claim or Interest in a particular Class, as the case may 

be, unless the holder of a particular Claim has agreed to a less favorable treatment with respect to 

such Claim. In particular, all holders of Claims in Class 3 (the only Voting Class) have received 

the same treatment—i.e., their Pro Rata allocation of the applicable Debtors’ Allocated Value— 

even though such treatment may result in varying percentage recoveries. Accordingly, the 

requirements of Bankruptcy Code section 1123(a)(4) have been satisfied. 

e. Section 1123(a)(5)—Adequate Means for Plan Implementation 

25. Pursuant to Bankruptcy Code section 1123(a)(5), Article V and various other 

provisions of the Plan specifically provide in detail adequate and proper means for the Plan’s 

implementation, including, but not limited to: (a) the general settlement of Claims and Interests; 

(b) sources of consideration for Plan Distributions; (c) the authorization and Distribution of the 

Liquidating Trust Interests and the execution of related documents; (d) the description of 

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operations of the Debtors between the Confirmation Date and Effective Date (and, if different) 

the Closing Date; (e) modifications to the Plan in the event that the Closing Date does not occur 

on or before the Effective Date; (f) the cancellation of securities and agreements; (g) the 

authorization of the New Certificates of Incorporation and New By-Laws; (h) the selection of the 

initial Reorganized Debtors’ Boards of Directors; (i) the selection of the initial Officers of the 

Reorganized Debtors; (j) the treatment of employee benefits; (k) the vesting of Retained Assets 

in the Reorganized Debtors; (l) the proposed restructuring transactions under the Plan; 

(m) authorization for post-Confirmation corporate action by the Reorganized Debtors; (n) the 

treatment of Intercompany Claims under the Plan; (o) the application of Bankruptcy Code 

section 1146; (p) the authorization to enter into or continue the D&O Liability Insurance 

Policies; (q) the preservation of certain specified rights of action; (r) the payment of fees and 

expenses of the Indenture Trustees; (s) the single satisfaction of Claims under the terms of the 

Plan; and (t) the Reorganized Debtors’ entry into the Interim TSN Trust Agreement and the 

execution of related documents and the issuance or Distribution of the Interim TSN Trust 

Interests and Interim TSN Trust Warrants (but authorization to effectuate these agreements and 

make Distributions thereunder, solely in the event that the provisions of Exhibit 3 to the Plan are 

triggered pursuant to Article V.G. thereof, and subject to the requirements of Article X.C. of the 

Plan). 

26. Moreover, the Reorganized Debtors will have, immediately upon the Effective 

Date, sufficient Cash, Liquidating Trust Interests and, if necessary, Interim TSN Trust Interests 

and Interim TSN Warrants (but solely in the event that the provisions of Exhibit 3 to the Plan are 

triggered pursuant to Article V.G. thereof) to make all payments required to be made on the 

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Effective Date pursuant to the terms of the Plan. Accordingly, the requirements of Bankruptcy 

Code section 1123(a)(5) have been satisfied. 

f. Section 1123(a)(6)—Voting Power of Equity Securities 

27. The New Certificates of Incorporation of Reorganized Debtors, attached as 

Exhibit C to the Plan Supplement, (and any other documents which purport to issue securities 

under the Plan) prohibits the issuance of nonvoting equity securities to the extent prohibited by 

Bankruptcy Code section 1123(a)(6), thereby satisfying Bankruptcy Code section 1123(a)(6). 

g. Section 1123(a)(7)—Selection of Officers and Directors 

28. The identities and affiliations of the members of the New Board of each of the 

Reorganized Debtors as of the Effective Date are listed in Exhibit E to the Plan Supplement, the 

identities of the initial Officers of the Reorganized Debtors are listed in Exhibit F to the Plan 

Supplement, and the New Employment Agreements are included in Exhibit J to the Plan 

Supplement. The New Corporate Governance Documents describe the manner of the selection 

of additional members of the Board of Directors of the Reorganized Debtors following the 

Effective Date. The selection of the initial Directors and Officers of each Reorganized Debtor 

was, is and will be consistent with the interests of holders of Claims and Interests and public 

policy. 

Accordingly, the requirements of Bankruptcy Code section 1123(a)(7) have been 

satisfied. 

h. Section 1123(b)—Discretionary Contents of the Plan 

29. The Plan contains various provisions that may be construed as discretionary, but 

are not required for Confirmation under the Bankruptcy Code. 

As set forth below, such 

discretionary provisions comply with Bankruptcy Code section 1123(b) and are not inconsistent 

with the applicable provisions of the Bankruptcy Code. Thus, Bankruptcy Code section 1123(b) 

is satisfied. 

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(i) 

Section 1123(b)(1)-(2)—Claims and Executory 

Contracts 

30. Pursuant to Bankruptcy Code sections 1123(b)(1) and 1123(b)(2), Article III of 

the Plan impairs or leaves unimpaired, as the case may be, each Class of Claims and Interests, 

and Article VI of the Plan provides for the assumption, assumption and assignment, or rejection 

of the Executory Contracts and Unexpired Leases of the Debtors not previously assumed, 

assumed and assigned, or rejected pursuant to Bankruptcy Code section 365 and appropriate 

authorizing orders of the Bankruptcy Court; provided, however, that subject to the limitations set 

forth in the Plan, the Debtors shall be authorized, after consultation with the Creditors’ 

Committee or the Liquidating Trustee, as applicable, to alter, amend or supplement the list of the 

“Rejected Executory Contracts and Unexpired Leases” in the Plan Supplement until and 

including the Effective Date. 

(ii) 

Section 1123(b)(3)—Settlement, Releases, Exculpation, 

Injunction, and Preservation of Claims and Causes of 

Action 

(A) 

Settlements Under the Plan 

31. The Plan settles or implements the previously approved Global Settlement, 

(defined below) as set forth in the Global Settlement Order, 6 of numerous issues in the Chapter 

11 Cases pursuant to Bankruptcy Rule 9019 and Bankruptcy Code sections 363 and 1123. These 

6 

The Plan is premised on a global settlement approved by the Bankruptcy Court [Docket No. 857] 

(the “Global Settlement Order”) among the Debtors, the Creditors’ Committee, Harbinger Capital Partners 

LLC and certain of its managed and affiliated funds (“Harbinger”), LightSquared Inc. and LightSquared 

LP, Sprint Nextel Corporation (“Sprint”), Solus Alternative Asset Management LP (“Solus”), EchoStar 

Corporation (“EchoStar”), the ad hoc group of certain holders of Senior Secured Notes (the “Ad Hoc 

Group”) and the Senior Secured Note Indenture Trustee (collectively, the “Settling Parties”), which 

facilitated the implementation of the Debtors’ primary value maximization goals and includes the 

settlement of the following: (a) the Lien Litigation; (b) the TSC Intercompany Claim Recharacterization 

Litigation; (c) the T-2 Litigation; (d) the Sprint Claims Objection; (e) the Make-Whole Premium Objection; 

(f) disputes regarding allocation of expenses; (g) disputes regarding the valuation of Debtor-entity 0887729 

B.C. Ltd.; (h) disputes regarding the valuation of various entities; and (i) the recovery percentages for 

holders of Unsecured Claims, which remain static irrespective if the Bankruptcy Court modifies but still 

confirms the Plan (collectively, the “Global Settlement”). A more thorough discussion of the Global 

Settlement is contained in the Disclosure Statement, Article B(v). 

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settlements are in consideration for the distributions made pursuant to the Global Settlement 

Order and the Distributions and other benefits provided under the Plan. Any other compromise 

and settlement provisions of the Plan and the Plan itself constitute a compromise of all Claims, 

Interests or Causes of Action relating to the contractual, legal and subordination rights that a 

holder of a Claim or Interest may have with respect to any Allowed Claim or Interest or any 

distribution to be made on account of such an Allowed Claim or Interest. The settlements 

contained in the Plan, including the Plan Settlement, are the product of extensive arm’s-length 

negotiations. Therefore, the settlements, including the Plan Settlement, are fair and equitable 

and in the best interest of the Debtors’ Estates and are approved pursuant to Bankruptcy Rule 

9019, to the extent that such settlement have not already been approved by the Bankruptcy 

Court. 

(B) 

Debtors’ Releases, Third-Party Releases, 

Exculpation, Plan Injunction and Retained 

Causes of Action 

32. Releases by the Debtors. The releases and discharges of Claims and Causes of 

Action given by the Debtors described in Article IX.B of the Plan (the “Debtor Releases”) are a 

necessary and important aspect of the Plan. The Debtor Releases are based on sound business 

judgment and are reasonable and acceptable pursuant to the standards that courts in this district 

generally apply. 

33. Exculpation. The Exculpation provision described in Article IX.D of the Plan is 

appropriate under applicable law because it is part of a Plan proposed in good faith, was vital to 

the Plan formulation process and is appropriately limited in scope. The Exculpation Provision, 

including its carve-out for gross negligence and willful misconduct, is entirely consistent with 

established practice in this jurisdiction and others. 

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34. Injunction. The injunction provisions set forth in Article IX.F of the Plan (the 

“Plan Injunctions”) are essential to the Plan and are necessary to preserve and enforce the 

Debtor Releases and the Plan, and are narrowly tailored to achieve that purpose. 

35. Third-Party Releases by Holders of Claims and Interests. The releases of 

Claims and Causes of Action by Holders of Claims and Interests described in Article IX.C of the 

Plan (the “Third-Party Releases”) are an important aspect of the Plan. They are designed to 

provide finality for the Released Parties regarding the Parties’ respective obligations under the 

Plan. The Ballots and Notice of Non-Voting Status clearly direct all applicable holders of 

Claims and Interests to Article IX of the Plan for further information about the release 

provisions. Thus, those holders of Claims and Interests were given due and adequate notice that 

Third-Party Releases would be provided under the Plan and the votes in favor of the Plan (or 

lack of objection thereto, as applicable) indicate such holders’ consent to the Third-Party 

Releases. The Released Parties played an integral role in the formulation of the deal underlying 

the Global Settlement Order, which formed the basis for the Plan, and have expended significant 

time and resources analyzing and negotiating the issues presented by the Debtors’ prepetition 

capital structure, Chapter 11 Cases, and postpetition settlement proposals. The Released Parties 

have compromised aspects of their asserted Claims or other legal and/or equitable rights to reach 

the consensual resolution that allowed for the maximization and preservation of value for all of 

the Debtors’ creditors. Thus, the Third-Party Releases are appropriate, important to the success 

of the Plan and consistent with controlling Second Circuit precedent. 

36. Thus, each of the Release, Exculpation, Third-Party Release and Plan Injunctions 

provisions set forth in the Plan: (a) is within the jurisdiction of the Bankruptcy Court under 28 

U.S.C. §§ 1334(a), 1334(b) and 1334(d); (b) is an essential means of implementing the Plan 

16


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pursuant to Bankruptcy Code section 1123(a)(6); (c) is an integral element of the transactions 

incorporated into the Plan; (d) confers material benefits on, and is in the best interests of, the 

Debtors, the Estates and all stakeholders in the Chapter 11 Cases; (e) is important to the overall 

objectives of the Plan to finally resolve all Claims among or against the parties-in-interest in the 

Chapter 11 Cases with respect to the Debtors; and (f) is consistent with Bankruptcy Code 

sections 105, 1123 and 1129, other applicable provisions of the Bankruptcy Code and other 

applicable law. The record of the Confirmation Hearing and the Chapter 11 Cases is sufficient to 

support the Release, Exculpation, Third-Party Releases and Plan Injunctions provisions 

contained in Article IX of the Plan. 

37. Preservation of Claims and Causes of Action. Article V.X of the Plan 

appropriately provides for the preservation by the Debtors of the Causes of Action in accordance 

with Bankruptcy Code section 1123(b)(3)(B). 

A list of the Retained Causes of Action is 

provided in the Plan Supplement and such actions are retained pursuant to the Plan. The 

provisions regarding the Retained Causes of Action in the Plan are appropriate and are in the best 

interests of the Debtors, the Estates and all holders of Claims and Interests. 

i. Section 1123(d)—Cure of Defaults 

38. Article VI.B of the Plan provides for the satisfaction of any monetary defaults 

under each Executory Contract and Unexpired Lease to be assumed pursuant to the Plan in 

accordance with Bankruptcy Code section 365 by payment of any “cure amount” pursuant to the 

terms thereof. 

The Debtors, in accordance with the Plan, distributed notices of proposed 

assumption and proposed cure amounts to the applicable counterparties, which notices included 

procedures for objecting to and resolving proposed assumptions of Executory Contracts and 

Unexpired Leases and any cure amounts paid in connection therewith. 

Accordingly, the 

requirements of Bankruptcy Code section 1123(d) are satisfied. 

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ii. Section 1129(a)(2)—Compliance of the Debtors and Others With the 

Applicable Provisions of the Bankruptcy Code 

39. The Debtors, as proponents of the Plan, have complied with all applicable 

provisions of the Bankruptcy Code as required by Bankruptcy Code section 1129(a)(2), 

including Bankruptcy Code sections 1122, 1123, 1124, 1125, 1126 and 1128 and Bankruptcy 

Rules 3017, 3018 and 3019. 

40. Votes to accept or reject the Plan were solicited by the Debtors and their 

respective present and former members, partners, representatives, officers, directors, employees, 

advisors, attorneys and agents after the Bankruptcy Court approved the adequacy of the 

Disclosure Statement pursuant to Bankruptcy Code section 1125(a). 

41. The Debtors and their respective present and former members, partners, 

representatives, officers, directors, employees, advisors, attorneys and agents have solicited and 

tabulated votes on the Plan and have participated in the activities described in Bankruptcy Code 

section 1125 fairly, in good faith within the meaning of Bankruptcy Code section 1125(e) and in 

a manner consistent with the applicable provisions of the Disclosure Statement and Solicitation 

Procedures Order, the Disclosure Statement, the Bankruptcy Code, the Bankruptcy Rules and all 

other applicable rules, laws and regulations, and have participated in good faith and in 

compliance with the applicable provisions of the Disclosure Statement and Solicitation 

Procedures Order, the Disclosure Statement, the Bankruptcy Code, the Bankruptcy Rules and all 

other applicable rules, laws and regulations in the issuance and distribution of the Liquidating 

Trust Interests, and, if applicable, the Interim TSN Trust Interests and the Interim TSN Warrants, 

and are therefore entitled to the protections afforded by Bankruptcy Code section 1125(e) and the 

Release, Exculpation, Third-Party Release and Plan Injunctions provisions set forth in Article IX 

of the Plan. 

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42. The Debtors and their respective present and former members, officers, directors, 

employees, advisors, attorneys and agents have participated in good faith and in compliance with 

the applicable provisions of the Bankruptcy Code with regard to the offering, issuance and 

distribution of recoveries under the Plan and, therefore, are not, and on account of such 

Distributions will not be, liable at any time for the violation of any applicable law, rule or 

regulation governing the solicitation of acceptances or rejections of the Plan or Distributions 

made pursuant to the Plan, so long as such Distributions are made consistent with and pursuant 

to the Plan. Accordingly, the requirements of Bankruptcy Code section 1129(a)(2) are satisfied. 

iii. 

Section 1129(a)(3)—Proposal of Plan in Good Faith 

43. The Debtors have proposed the Plan in good faith and not by any means forbidden 

by law. In determining that the Plan has been proposed in good faith, the Bankruptcy Court has 

examined the totality of the circumstances surrounding the filing of the Chapter 11 Cases, the 

Plan itself and the process leading to its formulation. The good faith of each of the entities who 

negotiated the Plan is evident from the facts and records of the Chapter 11 Cases, the Disclosure 

Statement and the hearing thereon and the record of the Confirmation Hearing and other 

proceedings held in the Chapter 11 Cases. The Plan is the product of arm’s-length negotiations 

between and among the Settlement Parties. The Plan itself, and the process leading to its 

formulation, provide independent evidence of the good faith of the Entities who negotiated the 

Plan, serve the public interest and assure fair treatment of holders of Claims and Interests. The 

Settlement Parties negotiated the Plan (following agreement on the terms of the Global 

Settlement) for the legitimate and honest purpose of maximizing the value of the Debtors’ 

Estates for the benefit of all creditors. Consistent with the overriding purpose of chapter 11 of 

the Bankruptcy Code, the Chapter 11 Cases were filed by the Debtors, and the Plan was 

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proposed by the Debtors, with the legitimate purpose of maximizing the value of the Debtors’ 

Estates to satisfy their obligations to creditors. 

iv. 

Section 1129(a)(4)—Bankruptcy Court Approval of Certain Payments as 

Reasonable 

44. The procedures set forth in the Plan for the Bankruptcy Court’s review and 

ultimate determination of the fees and expenses to be paid by the Debtors (or the Purchaser 

pursuant to the terms of the Purchase Agreement) in connection with the Chapter 11 Cases, or in 

connection with the Plan and incident to the Chapter 11 Cases, satisfy the objectives of, and are 

in compliance with, Bankruptcy Code section 1129(a)(4). Accordingly, the requirements of 

Bankruptcy Code section 1129(a)(4) are satisfied. 

v. Section 1129(a)(5)—Disclosure of Identity of Proposed Management, 

Compensation of Insiders and Consistency of Management Proposals with 

the Interests of Creditors and Public Policy 

45. The Plan complies with the requirements of Bankruptcy Code section 1129(a)(5) 

because, in the Disclosure Statement, the Plan and/or the Plan Supplement, the Debtors have 

disclosed the following: (a) the identity of each proposed Director, each proposed Officer and the 

manner in which additional Officers and Directors of the Reorganized Debtors will be chosen 

following Confirmation; and (b) the identity of and nature of any compensation for any insider 

who will be employed or retained by the Reorganized Debtors. The method of appointment of 

Directors and Officers of the Debtors was, is and will be consistent with the interests of holders 

of Claims and Interests and public policy. Accordingly, the requirements of Bankruptcy Code 

section 1129(a)(5) are satisfied. 

vi. 

Section 1129(a)(6)—Approval of Rate Changes 

46. The Plan does not contain any rate changes subject to the jurisdiction of any 

governmental regulatory commission and therefore will not require governmental regulatory 

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approval. Therefore, Bankruptcy Code section 1129(a)(6) is inapplicable to the Chapter 11 

Cases. 

vii. 

Section 1129(a)(7)—Best Interests of Holders of Claims and Interests 

47. The liquidation analysis attached as Exhibit D to the Disclosure Statement (as 

amended and restated, the “Liquidation Analysis”) and the other evidence related thereto in 

support of the Plan that was proffered or adduced at or prior to, or in affidavits in connection 

with, the Confirmation Hearing: (a) are reasonable, persuasive, credible and accurate as of the 

dates such analysis or evidence was prepared, presented or proffered; (b) utilize reasonable and 

appropriate methodologies and assumptions; (c) have not been controverted by other evidence; 

and (d) establish that, with respect to each Impaired Class, each holder of an Allowed Claim or 

Interest in such Class has voted to accept the Plan or will receive under the Plan on account of 

such Claim or Interest property of a value, as of the Effective Date, that is not less than the 

amount such holder would receive if the Debtors were liquidated on the Effective Date under 

chapter 7 of the Bankruptcy Code. Accordingly, the requirements of Bankruptcy Code section 

1129(a)(7) are satisfied. 

viii. 

Section 1129(a)(8)—Conclusive Presumption of Acceptance by Unimpaired 

Classes; Acceptance of the Plan by Each Impaired Class 

48. Classes 1 and 2 are each of the Classes of Unimpaired Claims or Interests that are 

conclusively presumed to have accepted the Plan under Bankruptcy Code section 1126(f). 

49. Class 3 is the Class of Impaired Claims and has voted to accept the Plan. 

50. Class 4 is Impaired and is receiving no property under the Plan and as such, is 

presumptively deemed to reject the Plan. Accordingly, with respect to Class 4, the Debtors 

sought Confirmation under Bankruptcy Code section 1129(b) rather than Bankruptcy Code 

section 1129(a)(8). Thus, although Bankruptcy Code section 1129(a)(8) has not been satisfied 

21


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with respect to the Rejecting Class, based upon the record before the Bankruptcy Court, the Plan 

is confirmable because the Plan does not discriminate unfairly and is fair and equitable with 

respect to the Rejecting Class and thus satisfies Bankruptcy Code section 1129(b) with respect to 

such Class. 

ix. 

Section 1129(a)(9)—Treatment of Claims Entitled to Priority Pursuant to 

Bankruptcy Code Section 507(a) 

51. The treatment of Administrative Claims, Priority Tax Claims and Statutory Fees 

under Article II of the Plan and the treatment of Allowed Other Priority Claims under Article III 

of the Plan satisfy the requirements of, and comply in all respects with, Bankruptcy Code section 

1129(a)(9). Accordingly, the requirements of Bankruptcy Code section 1129(a)(9) are satisfied. 

x. Section 1129(a)(10)—Acceptance by at Least One Impaired Class 

52. As set forth in the Voting Certifications, the Impaired Accepting Class has voted 

to accept the Plan. Specifically, holders of Claims in Class 3 voted to accept the Plan. As such, 

there is at least one Class of Claims that is Impaired under the Plan and has accepted the Plan, 

determined without including any acceptance of the Plan by any insider (as defined by the 

Bankruptcy Code). Accordingly, the requirements of Bankruptcy Code section 1129(a)(10) have 

been satisfied. 

xi. 

Section 1129(a)(11)—Feasibility of the Plan 

53. The Plan satisfies Bankruptcy Code section 1129(a)(11). The evidence 

supporting the Plan proffered or adduced by the Debtors at, or prior to, or in affidavits filed in 

connection with, the Confirmation Hearing: (a) is reasonable, persuasive, credible and accurate 

as of the dates such analysis or evidence was prepared, presented or proffered; (b) utilizes 

reasonable and appropriate methodologies and assumptions; (c) has not been controverted by 

other evidence; (d) establishes that the Plan is feasible and Confirmation of the Plan is not likely 

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to be followed by the need for further financial reorganization; and (e) establishes that the 

Reorganized Debtors and/or the Liquidating Trust will have sufficient funds available to meet 

their obligations under the Plan. 

Accordingly, the requirements of Bankruptcy Code 

section 1129(a)(11) have been satisfied. 

xii. 

Section 1129(a)(12)—Payment of Bankruptcy Fees 

54. Article II of the Plan provides that all fees payable pursuant to section 1930 of the 

United States Judicial Code shall be paid for in full, in Cash, plus interest due and payable under 

31 U.S.C. § 3717 (if any), on all disbursements, including Plan payments and disbursements in 

and outside the ordinary course of the Debtors’ business as of the Effective Date. Accordingly, 

the requirements of Bankruptcy Code section 1129(a)(12) have been satisfied. 

xiii. 

Section 1129(a)(13)—Retiree Benefits 

55. Bankruptcy Code section 1129(a)(13) requires a plan to provide for “retiree 

benefits” (as defined in Bankruptcy Code section 1114) at levels established pursuant to 

Bankruptcy Code section 1114. Because the Debtors have no retiree benefits obligations, this 

section of the Bankruptcy Code is inapplicable. 

xiv. 

Sections 1129(a)(14), (15), and (16)—Domestic Support Obligations; 

Unsecured Claims Against Individual Debtors; Transfers by Nonprofit 

Organizations 

56. None of the Debtors have domestic support obligations, are individuals or are 

nonprofit organizations. Therefore, Bankruptcy Code sections 1129(a)(14), (15) and (16) do not 

apply to the Chapter 11 Cases. 

xv. 

Section 1129(b)—Confirmation of Plan Over Nonacceptance of Impaired 

Class 

57. Notwithstanding the fact that the Rejecting Class is deemed to have voted not to 

accept the Plan, the Plan may be confirmed pursuant to Bankruptcy Code section 1129(b)(1) 

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because (i) Impaired Class 3 has voted to accept the Plan and (ii) the Plan satisfies the 

requirements of Bankruptcy Code section 1129(b) with respect to Class 4. Specifically, each 

member of Class 4 will equally receive no distribution under the Plan, so the Plan necessarily 

does not unfairly discriminate with respect to Class 4 and there is no class junior to Class 4 and 

as such, no holder of any junior Claim or Interest will receive any recovery under the Plan. 

Further, no senior Class is receiving more than full recovery on account of its Claims (including 

Claims for interest and other contractual rights). 

58. As a result, the Plan satisfies the requirements of Bankruptcy Code section 

1129(b). Thus, the Plan may be confirmed even though Bankruptcy Code section 1129(a)(8) is 

not satisfied. After entry of the Confirmation Order and upon the occurrence of the Effective 

Date, the Plan shall be binding upon the members of, and holders of Interests in, the Rejecting 

Class. 

xvi. 

Section 1129(c)—Only One Plan 

59. Other than the Plan (including previous versions thereof), one other plan 

(including previous versions thereof) had been filed in the Chapter 11 Cases; however, such prior 

plan was withdrawn on February 16, 2011. Accordingly, the requirements of Bankruptcy Code 

section 1129(c) have been satisfied. 

xvii. 

Section 1129(d)—Principal Purpose of the Plan Is Not Avoidance of Taxes 

60. No governmental unit has requested that the Bankruptcy Court refuse to confirm 

the Plan on the grounds that the principal purpose of the Plan is the avoidance of taxes or the 

avoidance of the application of section 5 of the Securities Act. As evidenced by its terms, the 

principal purpose of the Plan is not such avoidance. 

Accordingly, the requirements of 

Bankruptcy Code section 1129(d) have been satisfied. 

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N. Satisfaction of Confirmation Requirements 

61. Based upon the foregoing, the Plan satisfies the requirements for confirmation set 

forth in Bankruptcy Code section 1129. 

O. Disclosure: Agreements and Other Documents 

62. The Debtors have disclosed all material facts regarding the Plan, the Purchase 

Agreement and the documents included in the Plan Supplement, including: (a) the Liquidating 

Trust Agreement; (b) the Interim TSN Trust Agreement; (c) the New Corporate Governance 

Documents; (d) to the extent known, the identity of the members of the New Boards and the 

nature and compensation for any Director who is an “insider” under the Bankruptcy Code; (e) to 

the extent known, the identity of the Officers of the Reorganized Debtors; (f) the Assumed 

Executory Contract and Unexpired Lease List; and (g) the Rejected Executory Contract and 

Unexpired Lease List, including the adoption, execution, and delivery of all contracts, leases, 

instruments, securities, releases, indentures and other agreements related to any such documents. 

P. Conditions to Confirmation 

63. Pursuant to Article X.A of the Plan, entry of a Final Order, in form and substance 

acceptable to the Debtors, approving the Disclosure Statement with respect to the Plan as 

containing adequate information within the meaning of Bankruptcy Code section 1125, is the 

only condition precedent to Confirmation. Thus, the condition precedent to Confirmation has 

been satisfied. 

Q. Likelihood of Satisfaction of Conditions Precedent to the Effective Date 

64. Each of the conditions precedent to the Effective Date, as set forth in Article X.B 

of the Plan, subject to regulatory approvals, are reasonably likely to be satisfied or, as set forth in 

and subject to the terms of the Plan, may be waived by the Debtors; provided that, in the event 

that the Creditors’ Committee or the Purchaser objects to the Debtors’ waiver of the condition 

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precedent to the Effective Date set forth in Article X.B.7 of the Plan within the two-week notice 

period provided under Article X.C. of the Plan, then the Debtors shall seek and obtain 

Bankruptcy Court approval of such waiver (which approval may be sought on an expedited 

basis) for the waiver of such condition to be effective. 

R. Implementation 

65. All documents and agreements necessary to implement the Plan, including those 

contained in the Plan Supplement, and all other relevant and necessary documents have been 

negotiated in good faith, at arm’s-length, and are in the best interests of the Debtors and the 

Reorganized Debtors and shall, upon completion of documentation and execution be valid, 

binding and enforceable documents and agreements not in conflict with any federal, provincial or 

state law. 

S. Corporate Action 

66. Upon the Effective Date, all actions contemplated by the Plan shall be deemed 

authorized and approved in all respects, including: (a) entry into the New Employment 

Agreements; (b) selection of the Directors and Officers of the Reorganized Debtors; (c) the 

establishment of the Disputed Claims Reserve; and (d) all other actions contemplated by the Plan 

(whether to occur before, on or after the Effective Date). All matters provided for in the Plan 

involving the corporate structure of the Debtors or the Reorganized Debtors, and any corporate 

action required by the Debtors or the Reorganized Debtors in connection with implementation of 

the Plan shall be deemed to have occurred and shall be in effect upon the Effective Date (except 

for the Interim TSN Trust, which shall only be implemented, if at all, pursuant to the terms of the 

Plan), without any requirement of further action by the Debtors, the Reorganized Debtors, or any 

of their respective directors or officers. 

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T. Executory Contracts and Unexpired Leases 

67. The Debtors have exercised reasonable business judgment in determining whether 

to assume or reject each of their Executory Contracts and Unexpired Leases as set forth in the 

Plan, the Plan Supplement, this Confirmation Order or otherwise (including the Sale Order) and 

such determinations with respect to the Debtors’ Executory Contracts and Unexpired Leases 

were done in accordance with the Sale Order. Each assumption or rejection of an Executory 

Contract or Unexpired Lease in accordance with the Plan, the Plan Supplement, this 

Confirmation Order or otherwise (including the Sale Order) shall be legal, valid and binding 

upon (a) the applicable Debtor and upon the Reorganized Debtors if such Executory Contract or 

Unexpired Lease is assumed and (b) all non-Debtor parties to such Executory Contract or 

Unexpired Lease, all to the same extent as if such assumption or rejection had been authorized 

and effectuated pursuant to a separate order of the Bankruptcy Court that was entered pursuant to 

Bankruptcy Code section 365 before Confirmation. 

U. Approval of the Liquidating Trust Agreement 

68. The proposed terms and conditions of the Liquidating Trust Agreement are fair 

and reasonable and are approved. The Liquidating Trust Agreement is an essential element of 

the Plan, and entry into and consummation of the transactions contemplated by the Liquidating 

Trust Agreement are in the best interests of the Debtors, the Debtors’ Estates and holders of 

Claims, and are approved in all respects. The Debtors have exercised reasonable business 

judgment in determining to enter into the Liquidating Trust Agreement and have provided 

sufficient and adequate notice of the Liquidating Trust Agreement. The Debtors are authorized, 

without any further notice to, or action, order or approval of, the Bankruptcy Court, to execute 

and deliver all agreements, documents, instruments and certificates relating thereto and to 

perform their obligations thereunder. 

The terms and conditions of the Liquidating Trust 

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Agreement have been negotiated in good faith, at arm’s length, are fair and reasonable, and are 

approved. 

The Liquidating Trust Agreement shall, upon execution, be valid, binding and 

enforceable, and shall not be in conflict with any federal or state law. 

V. Approval of the Interim TSN Trust Agreement, the Issuance of Interim TSN 

Warrants and Approval of the Interim TSN Warrant Agreement 

69. To the extent the provisions of Exhibit 3 to the Plan are triggered pursuant to 

Article V.G. thereof, the Debtors are authorized, without any further notice to, or action, order or 

approval of, the Bankruptcy Court, to execute and deliver all agreements, documents, 

instruments and certificates relating to their entry into the Interim TSN Trust Warrant Agreement 

and to perform their obligations thereunder, including the issuance of the Interim TSN Warrants. 

The terms and conditions of the Interim TSN Warrant Agreement have been negotiated in good 

faith, at arm’s length, are fair and reasonable and are approved. The Interim TSN Warrant 

Agreement shall, upon execution, be valid, binding and enforceable, and shall not be in conflict 

with any federal or state law. 

W. Retention of Jurisdiction 

70. The Bankruptcy Court properly may retain jurisdiction over the matters set forth 

in (a) Article XII and other applicable provisions of the Plan, (b) the Liquidating Trust 

Agreement, (c) the Interim TSN Trust Agreement, and (d) all other documents included in the 

Plan Supplement. 

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II. 

ORDER 

BASED ON THE FOREGOING FINDINGS OF FACT AND CONCLUSIONS OF 

LAW, IT IS THEREFORE ORDERED, ADJUDGED AND DECREED THAT: 

71. This Confirmation Order shall confirm the Plan. A copy of the Plan is attached 

hereto as Exhibit A. 

72. Confirmation of the Plan. The Plan and the Plan Supplement (as such may be 

amended by this Confirmation Order or in accordance with the Plan) and each of their provisions 

are confirmed in each and every respect pursuant to Bankruptcy Code section 1129. The 

documents contained in the Plan Supplement, and any amendments, modifications and 

supplements thereto, and all documents and agreements related thereto (including all exhibits 

and attachments thereto and documents referred to in such papers), and the execution, delivery 

and performance thereof by the Debtors and the Reorganized Debtors, are authorized and 

approved as finalized, executed and delivered. Without further order or authorization of the 

Bankruptcy Court, the Debtors, the Reorganized Debtors, the Liquidating Trustee, the Interim 

TSN Trust Board (as necessary), any other person necessary to take any actions to effectuate the 

provisions of the Plan, and their successors are authorized and empowered to make all 

modifications to all documents included as part of the Plan Supplement that are consistent with 

the Plan. As set forth in the Plan, once finalized and executed and upon the occurrence of the 

Effective Date, the documents comprising the Plan Supplement and all other documents 

contemplated by the Plan shall constitute legal, valid, binding and authorized obligations of the 

respective parties thereto, enforceable in accordance with their terms. 

73. Findings of Fact and Conclusions of Law. The findings of fact and the 

conclusions of law stated in this Confirmation Order shall constitute findings of fact and 

conclusions of law pursuant to Bankruptcy Rule 7052, made applicable to the proceeding by 

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Bankruptcy Rule 9014. To the extent any finding of fact shall be determined to be a conclusion 

of law, it shall be so deemed, and to the extent any conclusion of law shall be determined to be a 

finding of fact, it shall be so deemed. 

74. The terms of the Plan, the Plan Supplement and exhibits thereto are incorporated 

by reference into, and are an integral part of, this Confirmation Order. The terms of the Plan, the 

Plan Supplement, all exhibits thereto, and all other relevant and necessary documents, shall be 

effective and binding as of the Effective Date of the Plan. 

75. Plan Modifications. Subsequent to filing the Plan on December 27, 2011, the 

Debtors made certain non-material modifications to the Plan (the “Plan Modifications”), which 

are reflected in the version of the Plan attached hereto as Exhibit A. Except as provided for by 

law, contract or prior order of this Bankruptcy Court, none of the modifications made since the 

commencement of solicitation adversely affects the treatment of any Claim against or Interest in 

any of the Debtors under the Plan. The filing with the Bankruptcy Court of the Plan as modified 

by the Plan Modifications and the disclosure of the Plan Modifications on the record at the 

Confirmation Hearing constitute due and sufficient notice thereof. Accordingly, pursuant to 

Bankruptcy Code section 1127(a) and Bankruptcy Rule 3019, none of these modifications 

require additional disclosure under Bankruptcy Code section 1125 or resolicitation of votes 

under Bankruptcy Code section 1126 (especially in light of previously provided disclosures), nor 

do they require that holders of Claims or Interests be afforded an opportunity to change 

previously cast acceptances or rejections of the Plan. The Plan as modified and attached hereto 

shall constitute the Plan submitted for Confirmation by the Bankruptcy Court. 

76. Deemed Acceptance of Plan as Modified. In accordance with Bankruptcy Code 

section 1127 and Bankruptcy Rule 3019, all holders of Claims who voted to accept the Plan or 

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who are conclusively presumed to have accepted the Plan are deemed to have accepted the Plan 

as modified by the Plan Modifications. No holder of a Claim shall be permitted to change its 

vote as a consequence of the Plan Modifications. 

77. Plan Classification Controlling. The terms of the Plan shall govern the 

classification of Claims and Interests for purposes of the Distributions to be made thereunder. 

The classifications set forth on the ballots tendered to or returned by the holders of Claims or 

Interests in connection with voting on the Plan pursuant to the Disclosure Statement and 

Solicitation Procedures Order: (a) were set forth on the ballots for purposes of voting to accept 

or reject the Plan; (b) in no event shall be deemed to modify or otherwise affect, the actual 

classification of such Claims and Interests under the Plan for Distribution purposes; (c) may not 

be relied upon by any holder of a Claim or Interest as representing the actual classification of 

such Claim or Interest under the Plan for Distribution purposes; and (d) shall not be binding on 

the Debtors, Reorganized Debtors or Liquidating Trustee except for voting purposes. 

78. Administrative Claims Bar Date. Except as otherwise provided in Article II of the 

Plan, requests for payment of Administrative Claims must be filed and served on the 

Reorganized Debtors and the Purchaser pursuant to the procedures specified in the Confirmation 

Order and the notice of entry of the Confirmation Order (the “Notice of Confirmation”) attached 

hereto as Exhibit B, no later than 45 days after the Effective Date. Holders of Administrative 

Claims that are required to, but do not, file and serve a request for payment of such 

Administrative Claims by such date shall be forever barred, estopped and enjoined from 

asserting such Administrative Claims against the Debtors or Reorganized Debtors, the 

Purchaser, the Liquidating Trust and the Liquidating Trust Assets, or their respective 

property, and such Administrative Claims shall be deemed discharged as of the Effective 

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Date. Objections to such requests, if any, must be filed and served on the Reorganized Debtors 

and the requesting party no later than 90 days after the Effective Date. Notwithstanding the 

foregoing, no request for payment of an Administrative Claim need be filed with respect to an 

Administrative Claim previously Allowed by Final Order, including all Administrative Claims 

expressly Allowed under this Plan. 

79. The Reorganized Debtors or the Purchaser, in consultation with the Creditors’ 

Committee or the Liquidating Trustee, as applicable, may settle and pay any Administrative 

Claim in the ordinary course of business without any further notice to or action, order or 

approval of the Bankruptcy Court. In the event that any party with standing objects to an 

Administrative Expense Claim, the Bankruptcy Court shall determine the Allowed amount of 

such Administrative Claim. For the avoidance of doubt, all Administrative Claims shall be paid 

in accordance with the Purchase Agreement. 

80. General Settlement of Claims and Interests. As one element of, and in 

consideration for, an overall negotiated settlement of numerous disputed Claims and issues 

embodied in the Plan, pursuant to Bankruptcy Rule 9019 and Bankruptcy Code section 1123 and 

in consideration for the classification, Distributions, Releases and other benefits provided under 

the Plan, the provisions of the Plan shall, upon Consummation, constitute a good-faith 

compromise and settlement of all Claims, Interests and controversies resolved pursuant to the 

Plan. Subject to Article VII, all Distributions made pursuant to the Plan to holders of Allowed 

Claims and Interests in any Class are intended to be and shall be final. 

81. Approval of Settlements. The settlements provided in Article V of the Plan are 

expressly approved in all respects pursuant to Bankruptcy Rule 9019 and Bankruptcy Code 

section 1123, and the Debtors and the Reorganized Debtors are authorized, without further 

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approval of this Bankruptcy Court or any other party, to execute and deliver all agreements, 

documents, instruments and certificates relating to such settlements and to perform their 

obligations thereunder. 

82. In addition to (and as part of) those settlements provided in Article V of the Plan, 

in full and final satisfaction of its Claims [Claim Nos. 143 and 144], the Texas Comptroller of 

Public Accounts (the “Texas Comptroller”) shall be entitled to an Allowed Priority Tax Claim in 

the amount of $147,004.66 (the “Texas Priority Tax Claim”) in respect of tax liabilities incurred 

during the period from October 1, 2007 through October 19, 2010, and an Allowed 

Administrative Claim in the amount of $42,701.82 (the “Texas Administrative Claim”) in 

respect of tax liabilities incurred during the period from October 20, 2010 through September 30, 

2011, which Texas Priority Tax Claim and Texas Administrative Claim will be paid on or as 

soon as reasonably practicable after the Effective Date in accordance with Article III of the Plan; 

provided, however, that, if the Effective Date has not occurred as of June 30, 2012, the Texas 

Comptroller shall be entitled to assert an additional Administrative Claim for postpetition 

interest, which interest will be calculated at 4.25% per annum on the amount of the Texas 

Administrative Claim, and which interest will begin accruing on July 1, 2012. For the avoidance 

of doubt, even if the Effective Date has not occurred by June 30, 2012, the Texas Comptroller 

shall not be entitled to any Claim for postpetition interest (other than any amounts on account of 

interest already included in the Texas Administrative Claim) that may otherwise have accrued 

from the Petition Date through and including June 30, 2012. This settlement was negotiated in 

good faith, at arm’s-length, and represents a fair and reasonable settlement of the Texas 

Comptroller’s claims, in light of the various risks and costs to fully litigating whether the Texas 

Comptroller would be entitled to additional interest and penalties. 

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83. Operation as of the Effective Date. As of the Effective Date, unless otherwise 

provided in the Plan, the Plan Supplement or this Confirmation Order, the Reorganized Debtors 

may, consistent with and in accordance with the Plan, operate their businesses and may use, 

acquire and dispose of property and settle and compromise Claims and Interests without 

supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy 

Code or the Bankruptcy Rules and in all respects as if there were no pending cases under any 

chapter or provision of the Bankruptcy Code. 

84. Discharge of Debtors and Certain Other Parties. Except as otherwise specifically 

provided in the Plan, the Plan Supplement or this Confirmation Order, pursuant to Bankruptcy 

Code section 1141(d), the Distributions, rights and treatment that are provided in the Plan shall 

be in full and final satisfaction, settlement, release and discharge, effective as of the Effective 

Date, of all Claims, Interests and Causes of Action of any nature whatsoever, including any 

interest accrued on Claims or Interests from and after the Petition Date, whether known or 

unknown, against, liabilities of, Liens on, obligations of, rights against and Interests in, the 

Debtors, their Estates, the Purchaser, the Liquidating Trust and the Liquidating Trust Assets, or 

any of their respective assets or property, regardless of whether any property shall have been 

distributed or retained pursuant to the Plan on account of such Claims and Interests, including 

demands, liabilities and Causes of Action that arose before the Effective Date, any contingent or 

non-contingent liability on account of representations or warranties issued on or before the 

Effective Date, and all debts of the kind specified in Bankruptcy Code sections 502(g), 502(h) or 

502(i), in each case whether or not: (1) a Proof of Claim or Interest based upon such Claim, debt, 

right or Interest is filed or deemed filed pursuant to Bankruptcy Code section 501; (2) a Claim or 

Interest based upon such Claim, debt, right or Interest is Allowed pursuant to Bankruptcy Code 

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section 502; or (3) the holder of such a Claim or Interest has accepted the Plan; provided that, 

notwithstanding the foregoing, nothing in the Plan, the Plan Supplement or this Confirmation 

Order shall release or discharge any of the parties to the Purchase Agreement from any liabilities 

or obligations arising under the Purchase Agreement. Except as otherwise provided herein, any 

default by the Debtors or their Affiliates with respect to any Claim or Interest that existed before 

or on account of the filing of the Chapter 11 Cases shall be deemed cured on the Effective Date. 

This Confirmation Order shall be a judicial determination of the discharge of all Claims and 

Interests subject to the Effective Date occurring, except as otherwise expressly provided in the 

Plan. 

85. Releases by the Debtors. As provided for in Article IX.B of the Plan, pursuant to 

Bankruptcy Code section 1123(b), and except as otherwise specifically provided in the Plan or 

the Plan Supplement, the Debtor Releases in the Plan are approved. 

86. Releases by Holders of Claims and Interests. As provided for in Article IX.C of 

the Plan, as of the Effective Date, the Third-Party Releases in the Plan are approved. 

87. Exculpation. The exculpations set forth in Article IX.D. of the Plan are hereby 

approved and authorized. 

88. Injunction. From and after the Effective Date, and as contemplated in Article 

IX.F of the Plan, all Entities are permanently enjoined from commencing or continuing in any 

manner, any Cause of Action released or to be released pursuant to the Plan or this Confirmation 

Order. 

89. Notwithstanding anything contained in the Confirmation Order or the Plan to the 

contrary, nothing in the Plan or Confirmation Order shall discharge, release, or otherwise 

preclude: (1) any liability of the Debtors or Reorganized Debtors to the United States, its 

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agencies, departments, or agents (collectively, the “U.S. Government”) arising on or after the 

Effective Date; (2) any liability to the U.S. Government that is not a “claim” within the meaning 

of Bankruptcy Code section 101(5); (3) any valid right of setoff or recoupment of the U.S. 

Government against any of the Debtors; or (4) any liability of the Debtors or Reorganized 

Debtors under environmental law to any governmental unit as the owner or operator of property 

that such entity owns or operates after the Effective Date. Moreover, nothing in the 

Confirmation Order or the Plan shall release or exculpate any non-Debtor, including any 

Released Party and/or Exculpated Party, from any liability to the U.S. Government, including but 

not limited to any liabilities arising under the Internal Revenue Code, the environmental laws, or 

the criminal laws against any Released Party and/or Exculpated Party, nor shall anything in this 

Confirmation Order or the Plan enjoin the U.S. Government from bringing any claim, suit, action 

or other proceeding against any non-Debtor, including any Released Party and/or Exculpated 

Party, for any liability whatsoever; provided, however, that the foregoing sentence shall not limit 

the scope of discharge granted to the Debtors or Reorganized Debtors under Bankruptcy Code 

sections 524 and 1141. 

90. As to the U.S. Government, nothing in the Plan or Confirmation Order shall limit 

or expand the scope of discharge or injunction to which the Debtors or Reorganized Debtors are 

entitled under the Bankruptcy Code. The discharge and injunction provisions contained in the 

Plan and Confirmation Order are not intended and shall not be construed to bar the U.S. 

Government from, subsequent to the Effective Date, pursuing any police or regulatory action. 

91. Distributions. Notwithstanding anything contained in the Plan, the Plan 

Supplement or this Confirmation Order, as of the entry of this Confirmation Order, the various 

transfer registers for each of the Classes of Claims or Interests as maintained by the Debtors or 

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their respective agents shall be deemed closed, and there shall be no further changes made to 

reflect any new record holders of any Claims or Interests. The Debtors, the Liquidating Trustee 

and the Indenture Trustee shall have no obligation to recognize any transfer of Claims or 

Interests occurring on or after the Distribution Record Date; provided, however, the Liquidating 

Trustee may choose, in its sole discretion, to recognize a transfer of any Claim upon presentation 

of appropriate and acceptable documentation. 

92. Establishment of the Liquidating Trust. On the Effective Date, the Liquidating 

Trust will be established and become effective for the benefit of the holders of Allowed Claims 

entitled to Distributions from the Liquidating Trust under the Plan and for the purpose of, among 

other things: (a) administering the Liquidating Trust Assets; (b) resolving all Disputed Claims; 

(c) pursuing or abandoning Retained Causes of Action; and (d) making all required Distributions 

to the Liquidating Trust Beneficiaries as provided for under the Plan and the Liquidating Trust 

Agreement. The Liquidating Trust is intended to qualify as a liquidating trust pursuant to 

Treasury Regulation section 301.7701-4(d) and as a grantor trust pursuant to Treasury 

Regulation section 1.671-4(a), with no objective to continue or engage in the conduct of a trade 

or business. The Liquidating Trust shall not be deemed a successor in interest of the Debtors for 

any purpose other than as specifically set forth in the Plan or in the Liquidating Trust Agreement. 

On the Effective Date, the Debtors shall transfer the Liquidating Trust Assets then in their 

possession to the Liquidating Trust. To the extent that certain Liquidating Trust Assets become 

available on a date after the Effective Date, such Liquidating Trust Assets will be transferred to 

the Liquidating Trust within five (5) Business Days of the date that such Liquidating Trust 

Assets become available. The Liquidating Trust Assets may be transferred subject to certain 

liabilities, as provided in the Plan or the Liquidating Trust Agreement. Such transfer shall be 

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exempt from any stamp, real estate transfer, mortgage reporting, sales, use or other similar tax, 

pursuant to Bankruptcy Code section 1146(a). Upon delivery of the Liquidating Trust Assets to 

the Liquidating Trust, the Debtors their Estates, the Purchaser, the Liquidating Trust and the 

Liquidating Trust Assets, and their respective predecessors, successors and assigns shall be 

discharged and released from all liability with respect to the delivery of such Distributions. The 

Liquidating Trustee and the Liquidating Trust Board shall thereafter be authorized and appointed 

to take all actions necessary to operate the Liquidating Trust pursuant to the terms of the 

Liquidating Trust Agreement. 

93. Establishment of Interim TSN Trust and Issuance of Interim TSN Warrants. In 

the event that the Closing Date does not occur on or before the Effective Date, pursuant to the 

terms of the Plan, Exhibit 3 to the Plan will be triggered, in which case, on the Effective Date 

and subject to Bankruptcy Court and any other necessary regulatory approvals, the Interim TSN 

Trust will be established and become effective for the benefit of the holders of Allowed Claims 

entitled to Distributions from the Interim TSN Trust under the Plan and pursuant to the Interim 

TSN Trust Agreement. On the Effective Date, the holders of Allowed Unsecured Claims will, at 

their option, receive the Interim TSN Warrants or the Cash equivalent to such holder’s share of 

the Interim TSN Warrants. All Interim TSN Warrants shall be issued at an exercise price of 

$0.01, which shall be permitted to be exercised pursuant to and subject to the limitations of the 

Interim TSN Warrant Agreement. On or before the Effective Date, the Interim TSN Warrant 

Agreement shall be executed. To the extent the Interim TSN Trust is established, the Interim 

TSN Warrants will be available for Distribution to the holders of Allowed Claims entitled to 

Distributions from the Interim TSN Trust under the Plan, and the Interim TSN Trust Agreement. 

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The Interim TSN Trust Board shall thereafter be authorized and empowered to take all actions 

necessary to operate the Interim TSN Trust. 

94. After the Closing Date, all Retained Assets of Reorganized TSN will be 

contributed to the Liquidating Trust as determined by the Debtors or Reorganized Debtors in 

consultation with the Creditors’ Committee or the Liquidating Trustee, as applicable (or by the 

Bankruptcy Court if the foregoing parties do not agree). As soon as practicable after the Closing 

Date, each Reorganized Debtor will be wound up and dissolved. The New Common Stock will 

not, at any time, be distributed to the holders of the Interim TSN Warrants or Interim TSN Trust 

Interests. 

95. The Interim TSN Trust (to the extent established pursuant to the Plan) shall 

terminate as soon as practicable after Closing, but in no event later than the second anniversary 

of the Effective Date; provided that, on or after the date that is less than thirty (30) days before 

such termination date, the Bankruptcy Court, upon motion by a party in interest, may extend the 

term of the Interim TSN Trust for a finite period if such an extension is necessary to complete 

any pending matters required under the Interim TSN Trust Agreement provided that the 

aggregate of all extensions shall not exceed two years, unless the Interim TSN Trust Board 

receives an opinion of counsel or a favorable ruling from the Internal Revenue Service to the 

effect that any such extension would not adversely affect the status of the Interim TSN Trust as a 

liquidating trust within the meaning of Section 301.7701-4(d) of the Treasury Regulations for 

federal income tax purposes. Notwithstanding the foregoing, extensions beyond two years in the 

aggregate may be obtained so long as the conditions in the preceding sentence are met no more 

than six months prior to the expiration of the then-current termination date of the Interim TSN 

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Trust. There will not be any distribution of assets, i.e., the New Common Stock, by the Interim 

TSN Trust to holders of the Interim TSN Trust Interests. 

96. Section 1145 Exemption. To the extent that the Interim TSN Trust Interests, 

Interim TSN Warrants (each, in the event that the provisions of Exhibit 3 are triggered pursuant 

to Article V.G. of the Plan) and the Liquidating Trust Interests constitute “securities,” the 

exemption provisions of Bankruptcy Code section 1145 shall apply to the Interim TSN Trust 

Interests, Interim TSN Warrants (each, in the event that the provisions of Exhibit 3 are triggered 

pursuant to Article V.G. of the Plan) and Liquidating Trust Interests to the maximum extent 

permitted by law without further act or action by any person. 

97. Vesting of Assets in the Reorganized Debtors. Except as otherwise provided in 

the Plan, the Plan Supplement, this Confirmation Order, the Purchase Agreement, the Sale Order, 

or any agreement, instrument or other document incorporated therein, on the Effective Date, any 

and all property in each Estate and all Causes of Action (except those released pursuant to the 

Releases by the Debtors) shall vest in each respective Reorganized Debtor, free and clear of all 

Liens, Claims, charges or other encumbrances; provided that to the extent the Acquired Assets 

have been transferred to the Purchaser on or before the Effective Date, solely the Retained Assets 

will vest in each respective Reorganized Debtor; provided further that notwithstanding the 

foregoing, the Reorganized Debtors shall be obligated to transfer the Liquidating Trust Assets to 

the Liquidating Trust pursuant to the terms of the Plan and the Liquidating Trust Agreement. On 

and after the Effective Date, each Reorganized Debtor will operate its business in accordance 

with the terms hereof, the Plan, the Plan Supplement, the Purchase Agreement and the Sale 

Order, and, subject to such documents, it may use, acquire or dispose of property, and 

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compromise or settle any Claims, Interests or Causes of Action free of any restrictions of the 

Bankruptcy Code or Bankruptcy Rules. 

98. Effectuating Documents; Further Transactions. On and after the Effective Date, 

the Reorganized Debtors, the Liquidating Trustee and, as applicable, the Interim TSN Board, and 

the managers, officers and members of the Boards of Directors of each of the foregoing, are 

authorized to issue, execute, deliver, file or record such contracts, securities, instruments, 

releases, and other agreements or documents related to the foregoing, and take such actions as 

may be necessary or appropriate to effectuate, implement and further evidence the terms and 

conditions of the Plan, and the securities issued pursuant to the Plan in the name of and on behalf 

of the Reorganized Debtors, the Liquidating Trust or, as applicable, the Interim TSN Trust, 

without the need for any approvals, authorization or consents except for those expressly required 

pursuant to the Plan. The authorizations and approvals contemplated in the Plan shall be 

effective notwithstanding any requirements under nonbankruptcy law. 

99. Approval of Consents and Authorization to Take Acts Necessary to Implement 

Plan. Pursuant to Bankruptcy Code section 1142(b), section 303 of the Delaware General 

Corporation Law, and any other applicable provision of the business corporation laws of any 

applicable jurisdiction, each of the Debtors and the Reorganized Debtors is hereby authorized 

and empowered, without further notice to or action, order, or approval of the Bankruptcy Court 

or further action by the respective officers, directors, members, or stockholders of the Debtors or 

the Reorganized Debtors, to take such actions and to perform such acts as may be necessary, 

desirable, or appropriate to comply with, implement, or execute the Plan, the documents and 

agreements included as exhibits to the Plan Supplement, all other documents relating to the Plan, 

all documents, instruments, and agreements related thereto, and all annexes, exhibits, and 

41


Pg 106 of 336 

schedules appended thereto, and the obligations thereunder shall constitute legal, valid, binding 

and authorized obligations of each of the respective parties thereto, enforceable in accordance 

with their terms. On the Effective Date, the appropriate Officers of the Reorganized Debtors and 

members of the Boards of directors of the Reorganized Debtors are authorized and empowered to 

issue, execute, and deliver the agreements, documents, securities, and instruments contemplated 

by the Plan, the documents and agreements included as exhibits to the Plan Supplement, all other 

documents relating to the Plan, all documents, instruments, and agreements related thereto, and 

all annexes, exhibits and schedules appended thereto in the name of and on behalf of the 

Reorganized Debtors. 

On the Effective Date, or as soon thereafter as is practicable, the 

Reorganized Debtors shall file their amended certificates or articles of incorporation with the 

applicable governmental entity in which each such entity is (or will be) organized, as applicable, 

in accordance with the applicable general business law of each such jurisdiction. 

100. This Confirmation Order shall constitute all approvals and consents required, if 

any, by the federal, provincial or state laws, rules and regulations and any other governmental 

authority with respect to the implementation or consummation of the Plan, the documents and 

agreements included as exhibits to the Plan Supplement, all other documents relating to the Plan, 

all documents, instruments, and agreements related thereto, and all annexes, exhibits, and 

schedules appended thereto, and any other acts and transactions referred to in or contemplated by 

the Plan. 

101. Each of the Debtors and the Reorganized Debtors is hereby authorized and 

empowered, without further notice to or action, order, or approval of the Bankruptcy Court or 

further action by the respective officers, directors, members or stockholders of the Debtors or the 

42


Pg 107 of 336 

Reorganized Debtors, except as set forth in the Plan, or the Plan Supplement, to remove, elect, or 

appoint, as the case may be, Directors and Officers of the Debtors or the Reorganized Debtors. 

102. Regulatory Approval for Transfer of Licenses. Notwithstanding any other 

provision in the Plan, the Plan Supplement, the Sale Order, or this Confirmation Order, no 

transfer of control and/or assignment of any rights and interests of the Debtors in any federal 

license issued by the FCC, or Industry Canada, shall take place prior to the issuance of FCC or 

Industry Canada regulatory approval for such transfer of control and/or assignment pursuant to 

the Communications Act of 1934, and the rules and regulations promulgated thereunder. 

103. Section 1146 Exemption from Certain Taxes and Fees. Pursuant to Bankruptcy 

Code section 1146(a), any transfers of property in contemplation of, in connection with, or 

pursuant to the Plan and/or the Purchase Agreement shall not be subject to any stamp tax or other 

similar tax or governmental assessment in the United States or Canada, and this Confirmation 

Order shall direct and be deemed to direct the appropriate federal, provincial, state or local 

governmental officials or agents to forego the collection of any such tax or governmental 

assessment and to accept for filing and recordation instruments or other documents pursuant to 

such transfers of property without the payment of any such tax or governmental assessment. 

Such exemption specifically applies, without limitation, to: (1) the transfer of the Acquired 

Assets to the Purchaser pursuant to the Purchase Agreement; (2) the transfer of the Liquidating 

Trust Assets to the Liquidating Trust; (3) the creation of any mortgage, deed of trust, lien or 

other security interest; (4) the making or assignment of any lease or sublease; (5) any 

Restructuring Transaction; or (6) the making or delivery of any deed or other instrument of 

transfer under, in furtherance of or in connection with the Plan, including: (a) any merger 

agreements; (b) agreements of consolidation, restructuring, disposition, liquidation or 

43


Pg 108 of 336 

dissolution; (c) deeds; or (d) assignments executed in connection with any transaction occurring 

under the Plan. 

104. Assumption and Rejection of Executory Contracts and Unexpired Leases. Except 

as otherwise provided in the Plan, in the Plan Supplement, in the Purchase Agreement, or in any 

contract, instrument, release, indenture, or other agreement or document entered into in 

connection with the Plan, each of the Debtors’ Executory Contracts and Unexpired Leases 

(including the Designated Contracts) shall be deemed assumed as of the Effective Date, unless 

such Executory Contract or Unexpired Lease: (1) was assumed or rejected previously by the 

Debtors; (2) expired or terminated pursuant to its own terms before the Effective Date; (3) is the 

subject of a motion to assume filed on or before the Effective Date; or (4) is identified on the 

Rejected Executory Contract and Unexpired Lease List. 

105. Entry of this Order shall constitute a Bankruptcy Court order approving the 

assumptions or rejections of such Executory Contracts or Unexpired Leases, as set forth in the 

Plan, all pursuant to Bankruptcy Code sections 365(a) and 1123. To the extent not already 

included in the Sale Order with regard to any Designated Contract, the Confirmation Order shall 

constitute an order of the Bankruptcy Court, approving (i) the assumption and assignment, or 

rejection, as the case may be, of Executory Contracts and Unexpired Leases, as described above, 

pursuant to Bankruptcy Code sections 365(a) and 1123(b)(2), (ii) that the Reorganized Debtors 

had properly provided for the cure of any defaults that might have existed, (iii) that each 

assumption and assignment was in the best interest of the Reorganized Debtors, their Estates and 

all parties in interest in the Chapter 11 Cases, and (iv) the requirements for assumption and 

assignment of any Executory Contract or Unexpired Lease to be assumed had been satisfied. 

Unless otherwise indicated, all assumptions or rejections of Executory Contracts and Unexpired 

44


Pg 109 of 336 

Leases pursuant to the Plan are effective as of the Effective Date. Each Executory Contract or 

Unexpired Lease assumed pursuant to the Plan or by Bankruptcy Court order, but not assigned to 

a third party before the Effective Date, shall revest in and be fully enforceable by the applicable 

contracting Reorganized Debtor in accordance with its terms, except as such terms may have 

been modified by such order. 

106. Notwithstanding anything to the contrary in the Plan, but subject to the Purchase 

Agreement and the Sale Order, the Debtors, in consultation with the Creditors’ Committee and 

the Liquidating Trustee, as applicable, reserve the right to alter, amend, modify or supplement 

the Rejected Executory Contract and Unexpired Lease List in the Plan Supplement at any time 

before the Effective Date; provided that to the extent that, as of the Effective Date, there is any 

pending dispute between one or more of the Debtors and a counterparty to an Executory Contract 

or Unexpired Lease regarding such counterparty’s Cure Claim, the Debtors and Reorganized 

Debtors shall reserve the right to add the applicable Executory Contract or Unexpired Lease to 

the Rejected Executory Contract and Unexpired Lease List following the resolution of such 

dispute, in which event such Executory Contract or Unexpired Lease shall be deemed rejected 

and such counterparty shall have any and all rights with respect thereto. 

107. The Stipulation and Order Regarding the Assumption of Contracts Between 

TerreStar Networks, Inc. and Space Systems/Loral, Inc. dated as of July 7, 2011 (the 

“Stipulation”), which was “So Ordered” by this Bankruptcy Court on July 7, 2011 

[Docket No. 671], is incorporated by reference into the Plan and this Confirmation Order as if 

fully set forth in the Plan and this Confirmation Order. To the extent of any inconsistency 

between (a) any other provision of the Plan or this Confirmation Order and (b) any provision of 

the Stipulation, the Stipulation shall govern. 

45


Pg 110 of 336 

108. Claims Based on Rejection of Executory Contracts or Unexpired Leases. All 

Proofs of Claim with respect to Claims arising from the rejection of Executory Contracts or 

Unexpired Leases, if any, must be filed with the Bankruptcy Court within 30 days after the 

date of entry of an order of the Bankruptcy Court (including this Confirmation Order) 

approving such rejection. Any Claims arising from the rejection of an Executory Contract or 

Unexpired Lease not filed with the Bankruptcy Court within such time will be automatically 

disallowed, forever barred from assertion, and shall not be enforceable against the Debtors or the 

Reorganized Debtors, the Estates, the Purchaser, the Liquidating Trust and the Liquidating Trust 

Assets or their respective property without the need for any objection by the Reorganized 

Debtors or further notice to, or action, order or approval of, the Bankruptcy Court. All Allowed 

Claims arising from the rejection of the Debtors’ Executory Contracts or Unexpired Leases shall 

be classified as Unsecured Claims against the applicable Debtor and shall be treated in 

accordance with Article III of the Plan. The deadline to object to Claims arising from the 

rejection of Executory Contracts or Unexpired Leases pursuant to this Confirmation 

Order, if any, shall be the later of (a) 210 days following the date of entry of the 

Confirmation Order and (b) such other period of limitation as may be specifically fixed by 

an order of the Bankruptcy Court for objecting to such Claims. 

109. Cure of Defaults for Executory Contracts and Unexpired Leases Assumed. Any 

monetary defaults under each Executory Contract and Unexpired Lease to be assumed pursuant 

to the Plan shall be satisfied, in consultation with the Creditors’ Committee or Liquidating 

Trustee, as applicable, pursuant to Bankruptcy Code section 365(b)(1), by payment of the default 

amount in Cash on the Effective Date, subject to the limitations described below and in Article 

VI.B of the Plan, or on such other terms as the parties to such Executory Contracts or Unexpired 

46


Pg 111 of 336 

Leases may otherwise agree. In the event of a dispute regarding: (a) the amount of any payments 

to cure such a default; (b) the ability of the Reorganized Debtors or any assignee to provide 

“adequate assurance of future performance” (within the meaning of Bankruptcy Code 

section 365) under the Executory Contract or Unexpired Lease to be assumed; or (c) any other 

matter pertaining to assumption, the cure payments required by Bankruptcy Code 

section 365(b)(1) shall be made no later than ten (10) Business Days following the entry of a 

Final Order or orders resolving the dispute and approving the assumption. 

110. Assumption of any Executory Contract or Unexpired Lease pursuant to the 

Plan or otherwise shall result in the full release and satisfaction of any Claims or defaults, 

whether monetary or nonmonetary, including defaults of provisions restricting the change 

in control or ownership interest composition or other bankruptcy-related defaults, arising 

under any assumed Executory Contract or Unexpired Lease at any time before the 

effective date of the assumption. 

111. Provisions Governing Distributions. The Distribution provisions of Article VII of 

the Plan are hereby approved and authorized in their entirety. Except as otherwise set forth in 

the Plan, the Liquidating Trustee, Interim TSN Board and the Reorganized Debtors, as 

applicable, shall make all Distributions required under the Plan. For tax purposes, Distributions 

in full or partial satisfaction of Allowed Claims shall be allocated first to the principal amount of 

Allowed Claims, with any excess allocated to unpaid interest that accrued on such Claims. 

112. Notwithstanding anything contained in the Plan, the Plan Supplement or this 

Confirmation Order, the Liquidating Trustee will serve as Disbursing Agent to facilitate 

distributions to holders of Allowed Class 3 Claims pursuant to the Plan. In the event that Exhibit 

3 of the Plan is triggered pursuant to Article V.G. thereof, the Interim TSN Trust Board shall 

47


Pg 112 of 336 

make Distributions to holders of Claims in Class 3 when, and as authorized, pursuant to the 

Interim TSN Warrant Agreement and in compliance with the Plan. 

113. Release of Liens. Except as otherwise provided in the Plan or in any contract, 

instrument, release or other agreement or document created pursuant to the Plan (and except as 

may already have occurred pursuant to previous Bankruptcy Court or Canadian Court orders in 

these Cases), on the Effective Date and concurrently with the applicable Distributions made 

pursuant to the Plan, and, in the case of a Secured Claim, satisfaction in full of the portion of the 

Secured Claim that is Allowed as of the Effective Date, all mortgages, deeds of trust, Liens, 

pledges or other security interests against any property of the Estates shall be fully released and 

discharged, and all of the right, title and interest of any holder of such mortgages, deeds of trust, 

Liens, pledges or other security interests shall revert to the Reorganized Debtor and its 

successors and assigns. For the avoidance of doubt, all mortgages, deeds of trust, Liens, pledges 

or other security interests against any property of the Estates shall be fully released and 

discharged on the Effective Date without any further action of any party, including, but not 

limited to, further order of the Bankruptcy Court or the Canadian Court, or filing updated 

schedules or statements typically filed pursuant to the Uniform Commercial Code or the Personal 

Property Security Act (Ontario), or in accordance with any other real or personal property 

registry system in any of the applicable provinces in Canada. 

114. Failure of Consummation. If the Effective Date of the Plan does not occur, the 

Plan shall be null and void in all respects, and nothing contained in the Plan or the Disclosure 

Statement shall: (a) constitute a waiver or release of any Claims by or Claims against or Interests 

in the Debtors; (b) prejudice in any manner the rights of the Debtors, any holders of Claims or 

Interests, or any other Entity; or (c) constitute an admission, acknowledgment, offer or 

48


Pg 113 of 336 

undertaking by the Debtors, any holders of Claims or Interests, or any other Entity in any 

respect. 

115. Retention of Jurisdiction. Notwithstanding the entry of this Order and the 

occurrence of the Effective Date, on and after the Effective Date, the Bankruptcy Court shall 

retain such jurisdiction over the Chapter 11 Cases and all matters arising out of or related to the 

Chapter 11 Cases and the Plan, the Liquidating Trust Agreement, and the Interim TSN Trust 

Agreement, including jurisdiction with respect to those items enumerated in Article XII of the 

Plan, which are incorporated herein by reference. 

A. Immediate Binding Effect 

116. Immediate Binding Effect. The stays provided under Bankruptcy Rules 3020(e), 

6004(h) and/or 7062 are hereby waived. Subject to Article X.B of the Plan, and notwithstanding 

Bankruptcy Rules 3020(e), 6004(h) or 7062 or otherwise, upon the occurrence of the Effective 

Date, the terms of the Plan and the Plan Supplement shall be immediately effective and 

enforceable and deemed binding upon the Debtors, the Reorganized Debtors and any and all 

holders of Claims or Interests (irrespective of whether such Claims or Interests are deemed to 

have accepted the Plan), all Entities that are parties to or are subject to the settlements, 

compromises, releases, discharges and injunctions described in the Plan, each Entity acquiring 

property under the Plan, and any and all non-Debtor parties to Executory Contracts and 

Unexpired Leases with the Debtors. 

117. Conflicts. Except as set forth in the Plan, to the extent that any provision of the 

Disclosure Statement and Solicitation Procedures Order or any other order (other than this 

Confirmation Order, the Sale Order or the Global Settlement Order) referenced in the Plan (or 

any exhibits, schedules, appendices, supplements or amendments to any of the foregoing), 

conflict with or are, in any way, inconsistent with any provision of the Plan, the Plan shall 

49


Pg 114 of 336 

govern and control; provided, however, that, if there is a conflict between this Plan and a Plan 

Supplement document, the Plan Supplement document shall govern and control; and provided 

further, however, that, to the extent that any provision of the Plan conflicts with or is, in any 

way, inconsistent with any provision of this Confirmation Order, this Confirmation Order shall 

govern and control. Additionally, to the extent that any provision of the Plan or Confirmation 

Order conflicts with or is in any way inconsistent with any provision of the Sale Order, the 

Purchase Agreement or the Global Settlement Order, the Sale Order, the Purchase Agreement or 

the Global Settlement Order, as applicable, shall govern and control. 

118. Notice of Entry of the Confirmation Order. In accordance with Bankruptcy Rules 

2002 and 3020(c), (a) within ten (10) Business Days of the date of entry of this Confirmation 

Order, the Debtors shall serve the Notice of Confirmation, substantially in the form attached 

hereto as Exhibit B and (b) within ten (10) Business Days of the occurrence of the Effective 

Date pursuant to the terms of the Plan, the Debtors shall serve the notice of Effective Date, 

substantially in the form attached hereto as Exhibit C (the “Notice of Effective Date”) by United 

States mail, first-class postage prepaid, by hand, or by overnight courier service to all parties 

served with the notice of the Confirmation Hearing; provided, however, that no notice or service 

of any kind shall be required to be mailed or made upon any Entity to whom the Debtors mailed 

notice of the Confirmation Hearing, but received such notice returned marked “undeliverable as 

addressed,” “moved, left no forwarding address” or “forwarding order expired,” or similar 

reason, unless the Debtors have been informed in writing by such Entity, or are otherwise aware, 

of that Entity’s new address. 

119. To supplement the notice described in the preceding paragraph, within 

twenty (20) Business Days of serving the Notice of Effective Date, the Debtors shall publish the 

50


Pg 115 of 336 

Notice of Effective Date once in The Wall Street Journal (National Edition), USA Today 

(National Edition) and The Global and Mail (National Edition). 

120. Mailing and publication of the Notice of Confirmation and the Notice of Effective 

Date in the time and manner set forth herein shall be good and sufficient notice under the 

particular circumstances and in accordance with the requirements of Bankruptcy Rules 2002 and 

3020(c), and no further notice shall be necessary or required. 

121. The Notice of Confirmation and the Notice of Effective Date shall have the effect 

of an order of the Bankruptcy Court, shall constitute sufficient notice of the entry of this 

Confirmation Order to such filing and recording officers, and shall be a recordable instrument 

notwithstanding any contrary provision of applicable nonbankruptcy law. 

122. Professional Compensation. All final requests for Accrued Professional 

Compensation shall be filed no later than 45 days after the Effective Date, or any other date 

scheduled by the Bankruptcy Court. 

After notice and a hearing in accordance with the 

procedures established by the Bankruptcy Code and prior Bankruptcy Court orders, the Allowed 

amounts of such Accrued Professional Compensation shall be determined by the Bankruptcy 

Court. 

123. Objections to any Claim for Accrued Professional Compensation must be filed 

and served on the Reorganized Debtors, the Creditors’ Committee, the Office of the U.S. Trustee 

and the requesting party no later than the earlier of (a) 30 days after such application is filed or 

(b) 75 days after the Effective Date. All Accrued Professional Compensation and all claims for 

professional compensation sought under Bankruptcy Code section 503(b) shall be paid either by 

the Debtors or the Purchaser pursuant to the terms of the Purchase Agreement. 

51


Pg 116 of 336 

124. Dissolution of the Creditors’ Committee. On the Effective Date, the Creditors’ 

Committee shall dissolve, and its members shall be released and discharged from all further 

authority, duties, responsibilities and obligations relating to and arising from the Chapter 11 

Cases. The retention and employment of the Professionals retained by the Creditors’ Committee 

shall terminate as of the Effective Date; provided, however, that the Creditors’ Committee shall 

exist, and its Professionals shall be retained, after such date with respect to (a) all applications 

and objections filed, and any related hearing, pursuant to Bankruptcy Code sections 330 and 331 

and (b) enforcement of the provisions of the Purchase Agreement, the Global Settlement Order, 

the Plan or this Confirmation Order. 

125. References to Plan Provisions. The failure specifically to include or to refer to 

any particular article, section or provision of the Plan, Plan Supplement or any related document 

in this Confirmation Order shall not diminish or impair the effectiveness of such article, section 

or provision, it being the intent of the Bankruptcy Court that the Plan and any related documents 

be confirmed and approved in their entirety. 

126. Nonseverability of Plan Provisions Upon Confirmation. Each term and provision 

of the Plan, and the transactions related thereto as it heretofore may have been altered or 

interpreted by the Bankruptcy Court is: (a) valid and enforceable pursuant to its terms; (b) 

integral to the Plan and the transactions related thereto and may not be deleted or modified 

except by the Debtors, who reserve the right to modify the Plan as to material terms pursuant to 

Article XI of the Plan; and (c) nonseverable and mutually dependent. 

127. Final Order and Appeals. This Confirmation Order is a final order, and the time 

period by which any party in interest wishing to appeal entry of this Confirmation Order shall 

run from the date of the entry of this Confirmation Order. 

52


Pg 117 of 336 

128. Authorization to Consummate. The Debtors and the Reorganized Debtors are 

authorized to consummate the Plan at any time after the entry of this Confirmation Order subject 

to satisfaction or waiver (by the required parties and with appropriate notice, if any) of the 

conditions precedent to the Effective Date set forth in Article X.B of the Plan. 

Dated: ____________, 2012 


United States Bankruptcy Judge 

53


Pg 118 of 336 

Exhibit A 

Plan- Not Included, See Docket No. 913


Pg 119 of 336 

Exhibit B 

Notice of Confirmation


Pg 120 of 336 




(212) 872-1000 (Telephone) 

(212) 872-1002 (Facsimile) 


Arik Preis 





) 


) 


) 

Debtors. 

) Jointly Administered 

) 

NOTICE OF ENTRY OF ORDER CONFIRMING THE 

JOINT CHAPTER 11 PLAN OF TERRESTAR NETWORKS INC., ET AL. 

PLEASE TAKE NOTICE THAT, on [_____], the United States Bankruptcy Court for 

the Southern District of New York (the “Court”) entered the Findings of Fact, Conclusions of 

Law and Order Confirming the Joint Chapter 11 Plan of TerreStar Networks Inc., et al. (the 

“Confirmation Order”) [Docket No.____]. Among other things, the Confirmation Order 

confirmed the Joint Chapter 11 Plan of Reorganization of TerreStar Networks Inc., et al. 

(Confirmation Version) [Docket No. ___] (as amended from time to time in accordance with the 

terms of the Confirmation Order, the “Plan”), 2 thereby authorizing TerreStar Networks Inc. and 

its affiliated debtors and debtors in possession in the above-captioned chapter 11 cases 

(collectively, the “Debtors”) to implement the Plan in accordance with its terms. 

PLEASE TAKE FURTHER NOTICE THAT, pursuant to the Confirmation Order, all 

proofs of Claim with respect to Claims arising from the rejection of Executory Contracts or 

Unexpired Leases, if any, must be filed with the Court on or before [________, 2012], the date 

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal taxpayeridentification 

number, are: TerreStar Networks Inc. (3931), TerreStar License Inc. (6537), TerreStar National 

Services Inc. (6319), TerreStar Networks Holdings (Canada) Inc. (1337), TerreStar Networks (Canada) Inc. 

(8766); and 0887729 B.C. Ltd. (1345). 

2 Capitalized terms used but not otherwise defined herein shall have the same meaning ascribed to such terms in the 

Plan.


Pg 121 of 336 

that is 30 days after the date of entry of the Confirmation Order (or, with respect to any 

Executory Contract or Unexpired Lease that is added to the Rejected Executory Contract and 

Unexpired Lease List after confirmation but before the Effective Date, the date that is 30 days 

after such counterparty receives notice of being added to the Rejected Executory Contract and 

Unexpired Lease List). Any Claims arising from the rejection of an Executory Contract or 

Unexpired Lease not filed with the Court within such time will be automatically disallowed, 

forever barred from assertion, and shall not be enforceable against the Debtors or the 

Reorganized Debtors, the Estates, the Purchaser, the Liquidating Trust and the Liquidating Trust 

Assets or their respective property without the need for any objection by the Reorganized 

Debtors or further notice to, or action, order or approval of, the Bankruptcy Court. All Allowed 

Claims arising from the rejection of the Debtors’ Executory Contracts or Unexpired Leases shall 

be classified as Unsecured Claims against the applicable Debtor and shall be treated in 

accordance with Article III of the Plan. The deadline to object to Claims arising from the 

rejection of Executory Contracts or Unexpired Leases, if any, shall be the later of (a) 210 days 

following the date of entry of the Confirmation Order and (b) such other period of limitation as 

may be specifically fixed by an order of the Bankruptcy Court for objecting to such Claims. 

PLEASE TAKE FURTHER NOTICE THAT any proof of Claim that must be filed 

with the Court may be filed with the Debtors’ notice and claims agent, The Garden City Group, 

Inc., at the address listed below. Proofs of Claim must be actually received by [________, 2012] 

and must be delivered via first class U.S. Mail (postage prepaid), in person, by courier service or 

by overnight delivery. Facsimile and electronic submissions are not acceptable. In addition, 

copies of the Confirmation Order and the Plan are available (a) upon request to The Garden City 

Group, Inc. by (i) calling the Debtors’ restructuring hotline at (866) 682-1770; (ii) visiting the 

Debtors’ restructuring website at: www.TerreStarInfo.com; (iii) e-mailing the Debtors at 

TerreStarInfo@gcginc.com; (iv) writing to TerreStar Networks Inc., c/o The Garden City Group, 

Inc., P.O. Box 9649, Dublin, Ohio 43017-4949; and/or (b) for a fee, via PACER, by visiting 

https://ecf.nysb.uscourts.gov. 

PLEASE TAKE FURTHER NOTICE THAT the Plan and its provisions are binding 

on the Debtors, the Reorganized Debtors, any holder of a Claim or Interest and such holder’s 

respective successors and assigns, whether or not the Claim or Interest of such holder is Impaired 

under the Plan and whether or not such holder or Entity voted to accept the Plan. 


Dated: [____], 2012 

/s/ DRAFT 




(212) 872-1000 (Telephone) 

(212) 872-1002 (Facsimile) 


Arik Preis 



2


Pg 122 of 336 

Exhibit C 

Notice of Effective Date


Pg 123 of 336 




(212) 872-1000 (Telephone) 

(212) 872-1002 (Facsimile) 


Arik Preis 





) 


) 


) 

Debtors. 


) 

NOTICE OF (A) THE OCCURRENCE OF THE EFFECTIVE DATE 

UNDER THE JOINT CHAPTER 11 PLAN OF TERRESTAR NETWORKS INC., ET AL.; 

(B) ADMINISTRATIVE CLAIM BAR DATE; AND (C) DEADLINE FOR 

PROFESSIONALS TO FILE FINAL FEE APPLICATIONS 

PLEASE TAKE NOTICE THAT, on [_____], the United States Bankruptcy Court for 

the Southern District of New York (the “Bankruptcy Court”) entered the Findings of Fact, 

Conclusions of Law and Order Confirming the Joint Chapter 11 Plan of TerreStar Networks Inc., 

et al. (the “Confirmation Order”) [Docket No.____]. Among other things, the Confirmation 

Order confirmed the Joint Chapter 11 Plan of Reorganization of TerreStar Networks Inc., et al. 

(Confirmation Version) [Docket No. ___] (as amended from time to time in accordance with the 

terms of the Confirmation Order, the “Plan”), 2 thereby authorizing TerreStar Networks Inc. and 

its affiliated debtors and debtors in possession in the above-captioned chapter 11 cases 

(collectively, the “Debtors”) to implement the Plan in accordance with its terms. 

PLEASE TAKE FURTHER NOTICE THAT copies of the Confirmation Order and the 

Plan are available (a) upon request to The Garden City Group, Inc. by (i) calling the Debtors’ 

restructuring hotline at (866) 682-1770; (ii) visiting the Debtors’ restructuring website at: 

www.TerreStarInfo.com; (iii) e-mailing the Debtors at TerreStarInfo@gcginc.com; (iv) writing to 

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal taxpayeridentification 

number, are: TerreStar Networks Inc. (3931), TerreStar License Inc. (6537), TerreStar National 

Services Inc. (6319), TerreStar Networks Holdings (Canada) Inc. (1337), TerreStar Networks (Canada) Inc. 

(8766); and 0887729 B.C. Ltd. (1345). 

2 Capitalized terms used but not otherwise defined herein shall have the same meaning ascribed to such terms in the 

Plan.


Pg 124 of 336 

TerreStar Networks Inc., c/o The Garden City Group, Inc., P.O. Box 9649, Dublin, Ohio 43017- 

4949; and/or (b) at the clerk’s office for the Bankruptcy Court and on the Bankruptcy Court’s 

official website at http://www.nysb.uscourts.gov, for a fee, through an account obtained from 

Pacer Service Center at 1-800-676-6856. 

PLEASE TAKE FURTHER NOTICE THAT, on [______], the Effective Date under 

the Plan occurred. 

PLEASE TAKE FURTHER NOTICE THAT, pursuant to Article II of the Plan, all 

requests for payment of Administrative Claims must be filed and served on the Reorganized 

Debtors, the Purchaser and such other Entities who are designated by the Bankruptcy Rules, the 

Confirmation Order or other order of the Bankruptcy Court no later than [______], the date that 

is the 45th day after the Effective Date. Holders of Administrative Claims that are required 

to, but do not, file and serve a request for payment of such Administrative Claims by such 

date shall be forever barred, estopped and enjoined from asserting such Administrative 

Claims against the Debtors or Reorganized Debtors, the Liquidating Trust or their 

property, including the Liquidating Trust Assets, and such Administrative Claims shall be 

deemed discharged as of the Effective Date. Notwithstanding the foregoing, no request for 

payment of an Administrative Claim need be filed with respect to an Administrative Claim 

previously Allowed by Final Order, including all Administrative Claims expressly Allowed under 

the Plan. For the avoidance of doubt, holders of Administrative Claims which arise and are paid 

in the ordinary course of business before the Administrative Claims Bar Date are not required to 

file a request for payment. Additionally, no requests for payment are required for obligations 

which arise after the Effective Date or obligations that are allowed pursuant to the Plan. 

PLEASE TAKE FURTHER NOTICE THAT objections to payment of Administrative 

Claims, if any, must be filed and served on the Reorganized Debtors and the requesting party no 

later than [_______], the date that is the 90th day after the Effective Date. 

PLEASE TAKE FURTHER NOTICE THAT all Professionals or other Entities 

asserting a Claim for Accrued Professional Compensation for services rendered before the 

Effective Date must file an application for final allowance of such Claim for Accrued 

Professional Compensation, and serve that application on the Reorganized Debtors and the notice 

parties specified by the Order Establishing Procedures for Interim Compensation and 

Reimbursement of Expenses of Professionals [Docket No. 174], no later than [______], the date 

that is the 45th day after the Effective Date. 

PLEASE TAKE FURTHER NOTICE THAT objections to any Claim for Accrued 

Professional Compensation must be filed and served on the Reorganized Debtors, the Creditors’ 

Committee, the U.S. Trustee and the requesting party no later than the earlier of (a) 30 days after 

such application is filed or (b) 75 days after the Effective Date. 

2


Pg 125 of 336 

PLEASE TAKE FURTHER NOTICE THAT the Plan and its provisions are binding 

on the Debtors, the Reorganized Debtors, any holder of a Claim or Interest and such holder’s 

respective successors and assigns, whether or not the Claim or Interest of such holder is Impaired 

under the Plan and whether or not such holder or Entity voted to accept the Plan. 


Dated: [____], 2012 

/s/ DRAFT 




(212) 872-1000 (Telephone) 

(212) 872-1002 (Facsimile) 


Arik Preis 



3


Pg 126 of 336 

Exhibit B 

Unpublished Authorities


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Exhibit B-1 

In re Enron Corp., No. 01-16034 (ALG) (Bankr. S.D.N.Y. July 15, 2004) [Docket No. 19758]

01-16034-alg 10-15446-shl Doc 19758 914 Filed 02/08/12 07/15/04 Entered 02/08/12 07/15/04 22:35:42 07:57:22 Main Document 

Pg Pg 128 1 of 163 336 


NOT FOR PUBLICATION 


__________________________________________ 

: 

In re: : Chapter 11 

: 

ENRON CORP., et al., : Case No. 01-16034 (AJG) 

: 

Debtors. : (Jointly Administered) 

__________________________________________: 

FINDINGS OF FACT AND CONCLUSIONS OF LAW CONFIRMNG 

SUPPLEMENTAL MODIFIED FIFTH AMENDED JOINT PLAN OF 

AFFILIATED DEBTORS PURSUANT TO CHAPTER 11 OF 

THE UNITED STATES BANKRUPTCY CODE, AND RELATED RELIEF 

On June 3, 4, 7, 8, 9, 10, 14, 16, 17 and 18, 2004, this Court held 1 a confirmation hearing 

(the “Confirmation Hearing”) to consider a plan of reorganization under chapter 11 of title 11 of 

the United States Code (the “Bankruptcy Code”) proposed by Enron Corp. and certain of its 

direct and indirect subsidiaries, as debtors and debtors in possession (collectively, the 

“Debtors”). Specifically, the Debtors sought confirmation of the Debtors’ Fifth Amended Joint 

Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code, dated 

January 9, 2004 (the “Fifth Amended Plan”), as thereafter amended pursuant to that certain (a) 

Modification of Fifth Amended Plan, dated June 1, 2004 (the “Initial Modification”), and (b) 

Supplemental Modification of Fifth Amended Plan, dated July 2, 2004 (the “Supplemental 

Modification, and together with the Fifth Amended Plan and the Initial Modification, the 

1 This Court has subject matter jurisdiction over these cases under 28 U.S.C. §§ 157(a) and 1334(b) and under the 

July 10, 1984 "Standing Order of Referral of Cases to Bankruptcy Judges" of the United States District Court for the 

Southern District of New York (Ward, Acting C.J.). This is a core matter under 28 U.S.C. § 157(b)(2)(L). This 

decision constitutes findings of fact and conclusions of law under FED. R. CIV. P. 52, as made applicable by FED. R. 

BANKR. P. 7052 and FED. R. BANKR. P. 9014. To the extent any of the findings of fact constitute conclusions of 

law, they are adopted as such. To the extent any of the conclusions of law constitute findings of fact, they are 

adopted as such.


Pg Pg 129 2 of 163 336 

“Plan”). 2 

In the context of approval of the Plan, the Debtors also sought (a) approval of the 

settlements embodied in the Plan, (b) consideration of the Debtors’ Motion Pursuant to 

Bankruptcy Rule 9019 and Section 105 and 363 of the Bankruptcy Code Seeking Approval of 

the Global Compromise of Inter-Estate Issues (the “Global Compromise Motion”), dated May 4, 

2004 (Docket No. 18198), and (c) consideration of the Motion of Debtors Pursuant to Section 

363 of the Bankruptcy Code for Order approving and Authorizing Post-Confirmation Allocation 

Formula for Overhead and Expenses (the “Overhead Allocation Motion”), dated March 24, 2004 

(Docket No. 17283). 

The Court has reviewed and considered the Plan, all affidavits submitted, as well as the 

testimony proffered and adduced, the exhibits admitted into evidence at the Confirmation 

Hearing and the arguments of counsel presented at the Confirmation Hearing. The Court has 

also considered all objections to confirmation of the Plan. This Court is cognizant of the 

compromises and settlements of the parties and other relevant factors affecting these Chapter 11 

Cases and takes judicial notice of the entire record. Based upon the following findings of fact 

and conclusions of law, the Court will confirm the Plan, including approval of the settlements 

contained therein and approval of the Global Compromise Motion and will approve the 

Overhead Allocation Motion. In addition, the Court herein disposes of all objections to 

confirmation not otherwise previously resolved or withdrawn. 

I. INTRODUCTION 

The Confirmation Hearing, including the presentation of evidence and legal argument, 

consumed nine trial days, not including scheduling conferences. Ninety-nine (99) objectors filed 

objections (including supplemental objections and reservations of rights) to confirmation prior to 

2 Capitalized terms used in this decision that are not otherwise defined herein shall have the same meanings ascribed 

to them in the Plan. 

2


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and during the Confirmation Hearing. Additionally, six (6) Plan objectors also filed separate 

objections to the Global Compromise Motion. Objections to confirmation by seventy-five (75) 

objectors and one (1) objection to the Global Compromise Motion, have been fully and 

consensually resolved. These resolutions are documented by: (a) filed notices of withdrawal; 

(b) announcements on the record as to the withdrawal and/or other appropriate disposition; or (c) 

the entry of stipulations or settlement agreements that withdraw, moot or otherwise terminate an 

objection. 

The Court reviewed and considered: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

The Plan and its several modifications and supplements; 

All evidence submitted in support of confirmation by the Debtors, the Creditors’ 

Committee and the ENA Examiner, consisting of: (i) direct testimony by way of 

affidavits of Robert Bingham (the “Bingham Affidavit”), Jane Sullivan (the 

“Sullivan Affidavit”) and Raymond Bowen (the “Bowen Affidavit”) (Docket Nos. 

18777, 18779 and 18778, respectively), (ii) direct written testimony of Steven 

Zelin, the Debtors’ expert on valuation, regarding the valuation of PGE, 

CrossCountry and Prisma (Debtors’ Trial Exs. 24 and 25), (iii) direct live 

testimony of Steven Zelin, Debtors’ expert, on the Distribution Model and 

Liquidation Analysis, (iv) direct live testimony of Stephen Cooper, and (v) the 

Debtors’ trial exhibits admitted into evidence (Debtors’ Trial Exs. 1 – 26); 

The entire record 3 in these Chapter 11 Cases, including, but not limited to, such 

items specifically identified in the attachment to the Debtors proposed finds of 

fact as to the matters of which the Court can take judicial notice (Docket Nos. 

19307 and 19533) and Citations To The Record Respecting Statements Made By 

Counsel To The Enron North America Corp. Examiner At The June 16, 2004 

Confirmation Hearing (Docket No. 19283); 

Legal argument on behalf of the Debtors, the Creditors’ Committee, the ENA 

Examiner and the supporting argument of Baupost and Racepoint Partners; 

The Global Compromise Motion; 

The Overhead Allocation Motion; and 

Written submissions in support of Plan confirmation and the Global Compromise 

Motion. 

3 Although the Court has presided over these cases since the filing and is familiar with all aspects of these Chapter 

11 cases, the Court did not specifically review all of the more than 19,750 docket entries and more than 1,200 

related adversary proceedings for these findings of fact and conclusions of law. 

3


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The Court also reviewed and considered the following in connection with Plan 

confirmation, the Global Compromise Motion and the Overhead Allocation Motion: (a) the 

testimony of the Debtors’ five witnesses on cross-examination, redirect examination and re-cross 

examination; (b) legal argument on behalf of all objectors who timely sought leave to present 

arguments; (c) trial exhibits admitted into evidence (Exs. AV1-AV10); (d) written submissions 

in opposition to Plan confirmation and the Global Compromise Motion; (e) all objections filed in 

opposition to confirmation or the Global Compromise Motion and not withdrawn or otherwise 

resolved; and (f) the lack of any objections to the Overhead Allocation Motion. 

Each of the Debtors’ witnesses was credible, reliable and qualified to testify as to the 

topics addressed in his or her testimony. Among other things, Stephen Cooper and Robert 

Bingham brought their extensive experience as restructuring professionals involved in complex 

chapter 11 cases and, with respect to these cases, their knowledge of the facts and circumstances 

surrounding the negotiation and development of the global compromise and the Plan. Raymond 

Bowen contributed his knowledge of the Enron Companies’ prepetition and postpetition business 

activities and, in particular, his knowledge and experience gained postpetition while serving as 

Chief Financial Officer and Treasurer. The Debtors’ expert witness, Steven Zelin, was qualified 

to testify as an expert (without objection) as to valuation (relating to both going concern value 

under the Plan and liquidation value under a chapter 7) and as to the Distribution Model. Jane 

Sullivan, who certified the vote in these Chapter 11 Cases, has extensive experience in this field 

and is well qualified. 

With the exception of Ms. Sullivan, each of the Debtors’ witnesses has testified before 

the Court on prior occasions in these Chapter 11 Cases. The Court has found their testimony 

credible and reliable on each occasion, including, without limitation, in approving postpetition 

4


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financing, extensions of exclusivity, asset sales and the formation and implementation of 

CrossCountry. Ms. Sullivan has testified before the Court previously in the context of certifying 

the vote in In re WorldCom, Inc., Case No. 02-13533 (AJG), where her testimony was found to 

be credible and reliable. 

The parties objecting to confirmation of the Plan presented no witnesses, whether fact or 

expert. 4 

The objecting parties’ efforts to attack the credibility of the Debtors’ witnesses were 

unpersuasive. Further, they presented no credible contraverting evidence in any form or manner 

nor did they successfully call into question the views expressed by the witnesses. 

In conjunction with a status conference held regarding the Confirmation Hearing, the 

Debtors sought a ruling from the Court that, due to the absence of any objections as to the 

valuation of PGE, CrossCountry and Prisma, Debtors’ Trial Exhibits 24 and 25 (comprising the 

Blackstone Report and Blackstone Report Supplement) shall be admitted as part of the Debtors’ 

case in chief in lieu of the presentation of direct testimony, affidavit, proffer or deposition. 

Further, the Debtors sought a ruling that cross-examination as to the Blackstone Report and 

Blackstone Report Supplement be limited to the Distribution Model and the Liquidation Analysis 

as set forth in the Blackstone Report and the Blackstone Report Supplement. (Notice, Docket 

No. 18616, at 2; Docket No. 18670, at 4). No party objected to any of the foregoing ruling 

requests. The Court granted such requests. Accordingly, Debtors’ Trial Exhibits 24 and 25 were 

admitted into evidence, the going concern valuation of PGE, CrossCountry and Prisma as set 

forth therein was uncontroverted and accepted by the Court and no evidence was adduced by any 

4 The PBGC attempted to offer the testimony of Karen Justesen as an expert to testify as to the PBGC’s calculation 

of the Debtors’ unfunded pension plan liabilities. The Court ruled that Ms. Justesen would not be qualified as an 

expert witness on a procedural basis for purposes of the Confirmation Hearing and further that her testimony as a 

non-expert was not relevant to any objection to confirmation of the Plan. The Court did not rely upon any part of 

Ms. Justesen's brief testimony in considering confirmation of the Plan. 

5


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of the objecting parties on valuation issues except insofar as liquidation analysis is concerned. 

(6/7/04 Zelin Tr. at 12:17 – 14:17). 

Based upon the above and the further findings of fact and conclusions of law set forth 

below, the Court will issue orders: (a) approving the settlements and compromises embodied in 

the Plan, including the global compromise; (b) granting the Global Compromise Motion; 

provided, however, that, should confirmation of the Plan be reversed on appeal, approval of the 

Global Compromise Motion shall not remain in effect; (c) granting the Overhead Allocation 

Motion; (d) confirming the Plan; and (e) disposing of all objections to confirmation and the 

Global Compromise Motion not otherwise previously resolved or withdrawn. The Debtors 

satisfied all procedural and due process requirements with regard to the Plan, the Global 

Compromise Motion and the Overhead Allocation Motion. Due and proper notice and 

opportunity to be heard have been given as to such motions, the relief requested therein and the 

Plan. 

As reflected in the findings of fact set forth herein, the evidence before the Court amply 

supports confirmation of the Plan, including the global compromise embodied therein, approval 

of the Global Compromise Motion and the Overhead Allocation Motion. Among other 

considerations set forth herein, it is particularly compelling that: (a) the Plan is supported by the 

Debtors, the Creditors’ Committee and the ENA Examiner; (b) all Plan Classes in which votes 

were cast (other than the Portland Debtors, for which the Confirmation Hearing has been 

adjourned) voted in favor of the Plan; (c) even if the claims asserted by the Vanguard Group, 

Inc., f/k/a the Ad Hoc Committee of Yosemite Noteholders (“Vanguard”) and Appaloosa 

Management LLP (“Appaloosa”) and Angelo, Gordon & Co., L.P. (“Angelo Gordon” and 

6


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together with Vanguard and Appaloosa, the “CLN Noteholders”) 5 were temporarily allowed for 

voting purposes, the classes in which such votes would be counted (Class 5 and Class 185) 

would not alter the outcome of the vote; and (d) none of the parties objecting to confirmation of 

the Plan has offered a single lay or expert witness or expert report to contradict any evidence 

presented by the Debtors at the Confirmation Hearing or in support of their objections. 

II. FINDINGS OF FACT 6 

A. Background, the Plan, Solicitation and Voting 

1). Background 

Commencing December 2, 2001, and periodically thereafter, each of the Debtors filed a 

voluntary petition for relief pursuant to chapter 11 of the Bankruptcy Code. (Bingham Affidavit 

9; Docket No. 1 in each of these Chapter 11 Cases). By order, dated December 3, 2001, as 

supplemented by orders entered following the Petition Date for each Debtor filing its Chapter 11 

Case after December 2, 2001, the Debtors’ cases were consolidated for procedural purposes and 

are being jointly administered. (Bingham Affidavit 9). 

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. (Bingham 

Affidavit 10). The Chapter 11 Cases involve most of the major institutional investors in the 

United States, as well as many from around the world. Similarly, these Chapter 11 Cases 

involve thousands of trade creditors, energy traders, former employees and other creditor and 

equity constituencies located domestically and worldwide. (Bingham Affidavit 9). 

5 Any reference herein to “creditors,” “parties” or “beneficial holders of claims” in connection with the CLN 

Noteholders is for ease of reference only and does not mean that the CLN Noteholders are in fact creditors, parties in 

interest or beneficial holders of claims. 

6 Citations contained herein to Debtors’ Trial Ex. 1 refer to the Fifth Amended Plan. Citations contained herein to 

Debtors’ Trial Ex. 5 refer to the Modified Fifth Amended Plan. Citations to certain transcripts are taken from the 

rough drafts of such transcripts and the pagination and/or line references may change in the final transcript. 

7


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On December 12, 2001, the United States Trustee for the Southern District of New York 

(the “U.S. Trustee”) appointed a statutory unsecured creditors’ committee to serve in all of these 

Chapter 11 Cases (as reconstituted from time to time, the “Creditors’ Committee”). (Docket No. 

195, as amended, modified and/or supplemented by Docket Nos. 490, 6359 and 12594). 7 

On March 27, 2002, the U.S. Trustee appointed an employment-related issues committee 

(as reconstituted from time to time, the “Employee Related Issues Committee”) (Docket No. 

2464, as amended, modified and/or supplemented by Docket Nos. 2548 and 5255). 

On June 21, 2002, the Court issued a memorandum decision denying (a) requests for an 

additional energy traders’ committee and a separate ENA creditors’ committee and (b) a motion 

to require ENA to obtain separate counsel. See generally In re Enron Corp., 279 B.R. 671 

(Bankr. S.D.N.Y. 2002), aff’d sub. nom Mirant Americas Energy Mktg., L.P. v. Official Comm. 

Of Unsecured Creditors Of Enron Corp., 2003 WL 22327118 (S.D.N.Y. Oct. 10, 2003). At that 

time, the Court found that the Creditors’ Committee had fiduciary duties to all Creditors, 

including ENA creditors, and that the ENA Examiner had a fiduciary duty solely to the ENA 

creditors. See id. As evidenced by the level of negotiation regarding the Plan, the global 

compromise embodied in the Plan and the Global Compromise Motion, the Creditors’ 

Committee and the ENA Examiner have acted on behalf of the Creditors in these Chapter 11 

Cases. Accordingly, the interests of ENA creditors have been and continue to be adequately 

represented. 

7 By virtue of the U.S. Trustee’s action, the Creditors’ Committee was appointed for each of the Debtors. According 

to the Debtors, there are a number of Debtors that do not have any unsecured creditors. (This issue will be discussed 

more fully in the discussion of the “96 Debtors.”) However, the Debtors state that proofs of claims that allege an 

unsecured claim have been filed against each and every estate. Therefore, because such claims have yet to be 

adjudicated, the Creditors’ Committee represents each and every Debtor in that, as of this date, unsecured claims are 

outstanding as to each estate. 

8


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During the course of these Chapter 11 Cases, and often in consultation with the 

Creditors’ Committee, the Debtors have endeavored to maximize recoveries to Creditors in a 

variety of ways, including, but not limited to, selling a substantial portion of their asset portfolio, 

thereby generating billions of dollars of cash available for distribution to Creditors, settling a 

substantial percentage of the most significant liabilities of the Debtors’ estates, thereby 

consensually reducing and resolving billions of dollars in Claims against the estates and 

prosecuting litigation against a number of Creditors and other parties seeking affirmative 

recovery on behalf of these estates. (Bingham Affidavit 11). Despite being forced to reduce 

the workforce in certain instances, the Debtors have preserved approximately 24,000 jobs. 

(6/8/04 Cooper Tr. at 23:20 – 24:2). As part of their efforts to maximize value, the Debtors 

stabilized and preserved their operations, including operations of non-Debtors. (6/8/04 Cooper 

Tr. at 12:5 – 12, 12:17 – 16:16). 

In February 2002, the Debtors employed Stephen Cooper and Stephen Forbes Cooper, 

LLC (“Cooper LLC”) to provide and perform management services for all Debtors on the terms 

and conditions set forth in such agreement. With various changes made to the employment 

agreement in response to filed objections, all objections were resolved prior to the Court’s 

issuance of the order approving the Cooper LLC employment, dated April 4, 2002. (Docket No. 

2725). 

On June 6, 2002, the Board of ENE announced its intention to compose the Board of, at 

least a majority – and, preferably, entirely – new independent directors. (Form 8-K of ENE, filed 

6/13/02; Debtors’ Trial Ex. 2, § IV.A.10). In furtherance of this objective, on June 6, 2002, the 

four remaining long-standing directors, Robert A. Belfer, Norman P. Blake, Dr. Wendy L. 

Gramm and Herbert, S. Winokur Jr., resigned from the Board. (Form 8-K of ENE, filed 6/13/02; 

9


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Debtors’ Trial Ex. 2, § IV.A.10). As of this date, the reconstituted Board of ENE consists of 

John A. Ballantine, Corbin A. McNeill, Jr., Raymond S. Troubh and Ron W. Haddock. (Forms 

8-K of ENE, filed 6/13/02, with regard to Messrs. Ballantine, McNeill and Troubh and filed 

8/5/02, with regard to Mr. Haddock; Debtors’ Trial Ex. 2, § IV.A.10). 

During January and February 2002, approximately ten (10) different creditors, primarily 

trading creditors and sureties, moved for appointment of a trustee or examiner for ENA. No 

trustee has been appointed in these Chapter 11 Cases. Pursuant to an order, dated March 12, 

2002 consensually resolving a pending motion for appointment of an examiner, Harrison J. 

Goldin was appointed to serve as the ENA Examiner with respect to cash management and 

overhead allocations. (Docket No. 2066). The ENA Examiner’s role was later expanded and 

refined through a series of orders, including an order, dated April 24, 2002, appointing the ENA 

Examiner to serve as a “facilitator of a chapter 11 plan in the ENA chapter 11 case.” (Bingham 

Affidavit 12; Docket Nos. 3302, 3599 and 10993). 

As acknowledged by the CLN Noteholders in their Objection to the Debtors’ Proposed 

Disclosure Statement and Balloting Procedures (Docket No. 13556), the ENA Examiner’s role 

expanded to include, inter alia, serving as a fiduciary protecting the interests of the ENA estate 

and as a plan facilitator for ENA, working with the Debtors and the Creditors’ Committee to 

facilitate the chapter 11 plan process for ENA and its subsidiaries. (6/17/04 Draft Tr. at 146:8 – 

24). 

In addition to the appointment of the ENA Examiner, the Court also appointed an ENE 

Examiner, by order dated April 8, 2002. (Docket No. 2838). The order granted the ENE 

Examiner authority and power to investigate transactions involving special purpose vehicles or 

entities created or structured by the Debtors or at the behest of the Debtors, that are, inter alia, 

10


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not reflected on the ENE balance sheets. (Docket No. 2838). The Court's approval order 

occurred subsequent to the Debtors’ agreement to the appointment of the ENE Examiner in 

response to Creditors' motions (and joinders) seeking the appointment of a trustee, appointment 

of either a trustee or examiner, or appointment of an examiner for ENE. 8 

The terms of the 

appointment order were a result of many negotiating sessions with divergent creditor groups and 

the SEC. (Debtors’ Trial Ex. 2, § IV.A.4.b.). On May 22, 2002, the U.S. Trustee appointed Neal 

Batson as the ENE Examiner. (Docket No. 3924). The Court, by order dated May 24, 2002, 

approved the appointment. (Docket No. 4003). The ENE Examiner has filed a series of reports 

wherein he reported and commented upon the transactions identified above. (Docket Nos. 6615, 

9551, 11960 and 14455). By order dated October 7, 2002, the Court expanded the scope of the 

ENE Examiner’s role to address issues raised by several NEPCO customers and creditors of 

customers. (Docket No. 6959). 

2). Bar Date and Proofs of Claim 

On August 1, 2002, the Court entered an Order Pursuant to Bankruptcy Rules 2002(a)(7), 

2002(l), and 3003(c)(3) Establishing Deadlines for Filing Proofs of Claim and Approving the 

Form and Manner of Providing Notice Thereof (as modified on October 23, 2003, the “Bar Date 

Order”). (Docket Nos. 5518 and 13669). 

The Bar Date Order established a deadline (the “Bar Date”) for filing proofs of claim in 

each of the Debtors’ Chapter 11 Cases. The Court established October 15, 2002 as the Bar Date 

for the first fifty-seven (57) Debtors. The Bar Date Order established the Bar Date for 

subsequently filed Debtors as the last business day of the month that is two (2) months after the 

8 No hearing was ever held regarding these motions and joinders, as the parties sought to consensually resolve the 

issues. A resolution was reached whereby an ENE Examiner would be appointed and the motions and joinders 

would be adjourned without date, subject to renewal at the requests of any of the parties. To date, no such request 

has been made. 

11


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date such Debtor filed its schedules of assets and liabilities and statement of financial affairs 

(collectively, the “Schedules”). On October 23, 2003, the Court entered a Supplemental Order 

Pursuant to Bankruptcy Rules 2002(a)(7), 2002(l) and 3003(c)(3) Modifying Deadlines for Filing 

Proofs of Claim and Approving the Form and Manner of Providing Notice Thereof, establishing 

the Bar Date for any Debtor that filed its Schedules after October 23, 2003 as the last business 

day of the month that is one (1) month after the date such Schedules were filed. (Docket No. 

13669). 

In excess of 24,500 proofs of claim have been filed in these Chapter 11 Cases. 

Approximately 5,000 of these claims are contingent or unliquidated. As of June 23, 2004, the 

Debtors had filed thirty-seven (37) omnibus objections to proofs of claim, as well as over fifty 

(50) individual objections to proofs of claim and have successfully expunged or reclassified over 

12,500 claims in the amount of $694 billion (excluding the value of unliquidated claims). 

(Docket No. 12506; Docket No. 18663, at 18 – 21, Ex. G, Docket Nos. 19154, 19213 and 

19217). A substantial amount of work, however, remains to resolve the outstanding proofs of 

claim to a level consistent with what the Debtors believe to be the proper amount of liabilities 

against the estate. (6/3/04 p.m. Bingham Tr. at 91:24 – 92:8; 6/8/04 Cooper Tr. at 24:18 – 25:8, 

65:25 – 66:6). 

While the Court does not directly maintain a Claims Register for the Debtors’ cases, the 

Court entered an order, inter alia, (a) authorizing the Debtors to employ Bankruptcy Services 

LLC (“BSI”) as the Court’s noticing and claims agent, (b) appointing BSI as agent for the Clerk 

of the Court and custodian of court records and, thus, the authorized repository for all proofs of 

claims filed in these Chapter 11 Cases, and (c) authorizing and directing BSI to maintain the 

12


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official Claims Registers for each of the Debtors. (Docket No. 1191). Such order was entered 

pursuant to section 156(c) of title 28 of the United States Code. 

The Claims Register, as maintained by BSI, the Court-approved claims agent for the 

Debtors (Docket No. 1191), reveals that each of the Debtors has at least two (2) proofs of claim 

filed against them by non-insiders asserting unsecured claims against such Debtor and many 

Debtors have significantly more than two general unsecured claims filed against them. FTI 

Consulting, Inc. (“FTI”) was retained by the Debtors to work with BSI and to assist with claims 

management. (Docket No. 8201). 

Despite the fact that proofs of claim have been filed against each of the Debtors, 

Appendix C to the Disclosure Statement (Debtors’ Trial Ex. 8) sets forth the estimated assets and 

claims against each of the Debtors. In accordance with the Debtors’ books and records, the 

Debtors estimate that there are no non-insider unsecured creditors (other than the PBGC) for 51 

of the Debtors. 

3). Certain Debtors 

As set forth in Section 7.9 of the Initial Modification, pursuant to the Court’s order, dated 

April 8, 2004, and the notice, dated May 17, 2004, in connection therewith (Docket Nos. 17625 

and 18434), (a) a majority of the equity interests of Enron Mauritius Company, Enron India 

Holdings Ltd. and Offshore Power Production C.V. (collectively, the “Dabhol Debtors”) were 

sold, (b) such entities were, inter alia, removed as Debtors and Proponents of the Plan, and 

(c) Classes 58, 59, 60, 246, 247 and 248 of the Plan have been rendered unnecessary and 

inoperative. 

In addition, as stated on the record at the Confirmation Hearing, the Debtors and the 

Creditors’ Committee have reached a settlement in principal, subject to definitive documentation 

13


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and Court approval, with certain former employees of Portland General Holdings (“PGH”). 

Consequently, the Confirmation Hearing was adjourned with respect to the Portland Debtors and 

the Debtors may move to dismiss one or both of the Portland Debtors’ cases upon approval of 

the settlement by the Court. 

Although not excluded from the Plan, Enron Development Funding Limited (“EDF”), a 

Debtor, is also the subject of insolvency proceedings in the Cayman Islands. (Stipulation, 

Docket No. 11953). In light of the joint proceedings, until such time as the Cayman scheme of 

arrangement proceedings has been concluded, no distributions of assets held by or attributed to 

EDF will be made to Creditors holding Allowed Claims pursuant to the Plan. The Court has 

been advised that it is currently anticipated that the Cayman proceedings will conclude in August 

2004. 

4). The Plan and Disclosure Statement 

In October 2002, Enron presented a chapter 11 plan structure with potential economic 

outcomes to the Creditors’ Committee. (Debtors’ Trial Ex. 13). On July 11, 2003, the Debtors 

filed their Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States 

Bankruptcy Code and the accompanying disclosure statement. (Docket Nos. 11698 and 11699). 

The Debtors filed an Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the 

United States Bankruptcy Code and the accompanying disclosure statement on September 18, 

2003. (Docket Nos. 12822 and 12823). Thereafter, on November 13, 2003, the Debtors further 

amended their Plan by filing a Second Amended Joint Plan of Affiliated Debtors Pursuant 

Chapter 11 of the United States Bankruptcy Code and the disclosure statement thereto. (Docket 

Nos. 14154 and 14155). The Debtors filed their Third Amended Joint Plan of Affiliated Debtors 

Pursuant to Chapter 11 of the United States Bankruptcy Code and the disclosure statement 

14


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thereto on December 17, 2003. (Docket Nos. 14893 and 14894). On January 4, 2004, the 

Debtors filed their Fourth Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of 

the United States Bankruptcy Code and its accompanying Disclosure Statement. (Docket Nos. 

15153 and 15154). 

With respect to the Plan, the Debtors also filed (a) Modification of Fifth Amended Plan, 

dated June 1, 2004 (the “Initial Modification”), and (b) Supplemental Modification of Fifth 

Amended Plan, dated July 2, 2004. (Docket No. 18793 and 19477). 

On January 9, 2004, after due notice and a hearing, the Court entered, pursuant to, inter 

alia, section 1125 of the Bankruptcy Code and Rule 3017(b) of the Federal Rules of Bankruptcy 

Procedure (“Bankruptcy Rule”), an order approving the Debtors’ Disclosure Statement, which, 

inter alia, approved the Disclosure Statement, finding that it contained “adequate information” 

within the meaning of section 1125 of the Bankruptcy Code and established procedures for the 

Debtors’ solicitation and tabulation of votes on the Plan (the “Solicitation Procedures Order”) 


Various objectors, including The Bank of New York, as indenture trustee for the CLN 

Noteholders, objected to the Solicitation Procedures Order as initially proposed because, among 

other reasons, such order did not provide for a mechanism for the direct solicitation of indirect 

noteholders of financing transactions. In order to resolve these objections, the Debtors modified 

paragraphs 17 – 19 of the Solicitation Procedures Order to include a process for direct 

solicitation of indirect noteholders pursuant to Fiduciary Stipulations. Based largely on such 

modifications, the objectors withdrew their objections to the Solicitation Procedures Order. 

(1/7/04 Hearing Tr. at 34 – 40). 

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5). Solicitation Procedures and Voting Extensions 

The final Solicitation Procedures Order established March 24, 2004 at 5:00 p.m. (New 

York Time) (the “Voting Deadline”) as the deadline to submit ballots on the Plan to the 

Solicitation and Tabulation Agent and established March 24, 2004 at 4:00 p.m. (New York 

Time) as the deadline to file and serve objections to confirmation of the Plan. (Debtors’ Trial 

Ex. 3). 

On January 9, 2004, the Court also entered an order, pursuant to sections 105(a), 502(c), 

1125 and 1126 of the Bankruptcy Code and Bankruptcy Rules 3003, 3017 and 3018, establishing 

voting procedures in connection with the Plan process and temporary allowance of claims 

procedures related thereto (the “Voting Procedures Order”). (Docket No. 15296). 

On February 13, 2004, after due notice, a hearing and opportunity to be heard, the Court 

entered an Order Establishing, Among Other Things, Procedures and Deadlines Concerning 

Objections to Confirmation and Discovery in Connection Therewith. (the “Confirmation 

Discovery Procedures Order,” Docket No. 16233). The Confirmation Discovery Procedures 

Order directed the Debtors to establish and staff an electronic document depository (the 

“Depository”) to include the documents identified therein relating to confirmation of the Plan 

and the global compromise and settlement, which depository was established and staffed on or 

before March 3, 2004, in compliance with the Confirmation Discovery Procedures Order. The 

Confirmation Discovery Procedures Order also provided that any party in interest which, on or 

before March 3, 2004, filed an objection to confirmation of the Plan setting forth the legal and 

factual basis in support thereof, would be entitled to review documents contained in the 

Depository and to seek further discovery of the Debtors, the Creditors’ Committee, or the ENA 

Examiner in connection with confirmation of the Plan and the global compromise and settlement 

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underlying the Plan, subject to the restrictions set forth therein. Several parties in interest filed 

objections to confirmation on or before March 3, 2004, including, but not limited to, the CLN 

Noteholders, thus providing those parties with a reasonable opportunity to access the Depository 

and seek further discovery of the Debtors, the Creditors’ Committee and the ENA Examiner 

concerning confirmation of the Plan and the global compromise and settlement. The 

Confirmation Discovery Procedures Order further provided that, in the event a dispute arose 

concerning any request for discovery in connection with confirmation of the Plan, the Court 

would schedule a chambers conference to discuss and resolve such dispute as soon as possible. 

Prior to the commencement of the Confirmation Hearing, the Court resolved all such disputes. 

None of the Creditors that filed objections to confirmation of the Plan after March 3, 

2004 sought discovery or requested reconsideration of the Confirmation Discovery Procedures 

Order. Additional discovery disputes were addressed by the Court on various matters related to 

the Confirmation Hearing, including, but not limited to, the following: 

(a) 

(b) 

(c) 

In conjunction with the Confirmation Discovery Procedures Order, the Court held 

a conference to address discovery disputes between Baupost and the ENA 

Examiner and issued a ruling addressing such issues. 

Outside of the context of the Confirmation Discovery Procedures Order, Hiroo 

Awano requested a discovery conference seeking to compel responses to his 

discovery requests over the Debtors’ objections (including an objection that Mr. 

Awano failed to follow the procedures set forth in the Confirmation Discovery 

Procedures Order). The parties initially agreed to postpone a scheduled 

conference so as to enable them to explore a consensual resolution of the issues. 

When a settlement was not forthcoming, Mr. Awano renewed his request for the 

discovery conference and the Court held a telephonic hearing on May 18, 2004. 

Thereafter, the matter was consensually resolved. 

Although not arising under the Confirmation Discovery Procedures Order, but 

during this same time period, the Court held two (2) discovery conferences in 

connection with the Motion of the EDO Creditors for Order Granting Temporary 

Allowance of Claims for Voting Purposes. (Docket No. 16313). At the first 

conference, Appaloosa advised the Court that it would not be seeking any 

discovery in connection with its motion. Despite this representation, Appaloosa 

then noticed the deposition of The Bank of New York. The Debtors objected and 

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Pg Pg 145 18 of 163 336 

the Court held a discovery conference and overruled the Debtors’ objection -- 

allowing the deposition to go forward. 

As evidenced by the foregoing, all parties in interest had numerous opportunities to raise with the 

Court any concerns relating to discovery or the trial process. 

Appaloosa served additional discovery requests seeking certain documents and 

communications related to temporary allowance of claims for voting purposes and voting on the 

Plan. The Debtors and Creditors’ Committee objected to these discovery requests, inter alia, 

because they asserted that the requests were overly broad and burdensome, as they were entitled 

to do under the Confirmation Discovery Procedures Order. (Confirmation Discovery Procedures 

Order at 12, Docket No. 16233; Docket No. 18557, Exs. C and D; and Docket No. 18781, Ex. 

B). Appaloosa did not file a motion to compel the Debtors or the Creditors’ Committee to 

produce these documents. At Ms. Sullivan’s deposition on May 28, 2004, Appaloosa first 

requested the production of preliminary voting results provided to the Debtors by Innisfree and 

the applicable correspondences between the Debtors and Innisfree. Because the Debtors viewed 

this subsequent request as specific, not overly broad or burdensome, the Debtors voluntarily 

produced these documents on the next business day, June 1, 2004, even though the new request 

was untimely under the Confirmation Discovery Procedures Order and the Debtors’ objection to 

the first request was not the subject of a motion to compel or any request for a discovery 

conference. 

Although it was argued that discovery was sought from the Creditors’ Committee in 

connection with voting-related correspondence and documents that were not produced, there is 

no evidence in the record that the Creditors’ Committee was in possession of voting-related 

correspondence and documents between the Debtors and third parties. Even if the Creditors’ 

Committee was in possession of these documents, Appaloosa did not file a motion to compel the 

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Pg Pg 146 19 of 163 336 

Creditors’ Committee to produce such documents and Appaloosa did not raise any issues related 

to its discovery requests with respect to the Creditors’ Committee until the Confirmation 

Hearing. In addition, the record does not support a finding that Vanguard ever requested that the 

Debtors or the Creditors’ Committee produce documents related to voting and solicitation as part 

of its discovery requests. 

On April 1, 2004, the Court held a status conference regarding confirmation of the Plan at 

which counsel for the Debtors, Creditors’ Committee and CLN Noteholders, among others, were 

present. During this hearing, counsel for the Debtors requested a continuance of the 

Confirmation Hearing so that the Debtors, the Creditors’ Committee and all objectors could 

commence and conclude discovery and for the Debtors to submit relevant expert reports. (4/1/04 

Hearing Tr. at 183:16 – 187:4). Counsel for the Debtors also informed the Court that, in 

connection with the adjournment of the Confirmation Hearing, several dates in the Voting 

Procedures Order, Solicitation Procedures Order and the Confirmation Discovery Procedures 

Order would also be extended and the Debtors would submit an order to the Court providing for 

such extensions. (4/1/04 Hearing Tr. at 187:5 – 188:7, 188:22 – 189:8). 

On April 5, 2004, the Debtors submitted and the Court entered an Order Adjourning 

Confirmation Hearing and Adjusting Deadlines in Connection Therewith (the “Adjournment 

Order”). 9 

(Docket No. 17528). Pursuant to the Adjournment Order, inter alia, certain deadlines 

with regard to voting on the Plan were extended to May 24, 2004, solely in conjunction with a 

9 Certain deadlines in the Adjournment Order were further extended pursuant to the (a) Amended Supplemental 

Order Adjusting Deadlines in Connection With the Debtors' Chapter 11 Plan dated May 7, 2004 (the “Amended 

Adjournment Order,” Docket No. 18290), (b) Second Amended Supplemental Order Adjusting Deadlines in 

Connection with the Debtors' Chapter 11 Plan dated May 20, 2004 (the “Second Amended Adjournment Order,” 

Docket No. 18491), and (c) Third Amended Supplemental Order Adjusting Deadlines in Connection with the 

Debtors' Chapter 11 Plan dated May 27, 2004 (the “Third Amended Adjournment Order,” Docket No. 18693). For 

convenience, the Adjournment Order, Amended Adjournment Order, Second Amended Adjournment Order and 

Third Amended Adjournment Order are collectively referred to as the “Adjournment Orders.” 

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Pg Pg 147 20 of 163 336 

settlement of an Allowed Claim, temporary allowance motion, or resolution of an objection to 

confirmation of the Plan, without prejudice to further extensions by agreement of the Debtors 

and the party entitled to vote on the Plan. 

The CLN Noteholders did not “directly” complain about or otherwise object to the 

extension of such deadlines under the Adjournment Order until May 7, 2004. Even though the 

CLN Noteholders “indirectly” raised the issue of their objection to the Adjournment Order in 

their objections to various Voting Stipulations heard on May 7, 2004, they never requested that 

the Court vacate or reconsider the Adjournment Order. 

Although the Solicitation Procedures Order established the Voting Deadline of March 24, 

2004 as the date by which Creditors were required to submit ballots to vote on the Plan, this 

deadline was never designed nor intended to be the final date for votes to be counted. (Debtors’ 

Trial Ex. 3 at 27). See generally In re OBT Partners, Ill. Ltd. P’ship, 214 B.R. 863 (N.D. Ill. 

1997) (noting that “[t]he voting deadline is not a line drawn in the sand.”). As set forth in 

paragraph 3(m) of the Voting Procedures Order, claims that are allowed pursuant to a Courtapproved 

settlement agreement on or before April 14, 2004 would be “entitled to vote on the 

Plan in accordance with the terms of such settlement.” (Debtors’ Trial Ex. 20). Paragraphs 4(b) 

and 6(c) of the Voting Procedures Order further provide that hearings on temporary allowance 

and ballot correction motions would conclude on April 8, 2004 and orders related to such 

motions shall be entered by April 14, 2004. 10 (Debtors’ Trial Ex. 20 at 4). 

Further, the Adjournment Orders extended certain dates related to deadlines for hearings 

and orders on temporary allowance motions and Court-approved settlements that affected voting. 

(Docket Nos. 17528, 18290, 18491 and 18693). The Debtors did not include any votes in the 

10 Appaloosa withdrew its objection to the Voting Procedures Order in early January 2004 and did not contest any of 

the provisions in such order. 

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Vote Certification that were received after the Voting Deadline, unless they were approved by 

order of the Court as expressly contemplated by paragraphs 3(m), 4(b) and 6(c) of the Voting 

Procedures Order. (Sullivan Affidavit 8, 10; Initial Vote Certification 13, 18 and Ex. E, 

Debtors’ Trial Ex. 19). 

Despite receiving (a) initial notice at the April 1, 2004 hearing that certain deadlines 

under the Voting Procedures Order and Solicitation Procedures Order would be extended, and 

(b) subsequent notice of entry of the Adjournment Order on April 5, 2004, as stated previously, 

the first time the CLN Noteholders “directly” objected to the Adjournment Order was at the May 

7, 2004 hearing in oral argument in opposition to the approval of the Voting Stipulations. 

Although Appaloosa did mention in its objection (Docket No. 17734) to the J. Aron temporary 

allowance stipulation (the “J. Aron Stipulation,” Docket No. 17597) that Appaloosa did not have 

notice that the Voting Deadline was going to be extended, any such mention is procedurally 

defective to constitute an objection to the Adjournment Order. 11 

To the extent that the CLN Noteholders sought to challenge the effectiveness of the 

Adjournment Order, they needed to do so by seeking to have that order, as noted above, vacated 

or reconsidered, or by seeking leave to appeal. Although objections and comments were raised 

by the CLN Noteholders regarding entry of the Adjournment Order, at the conclusion of the May 

7, 2004 hearing on the Voting Stipulations, the CLN Noteholders informed the Court that they 

had no objections to entry of the Amended Adjournment Order that extended the deadlines in the 

Adjournment Order. (5/7/04 Hearing Tr. at 137:20 – 139:7, 166:24 – 167:6). While the CLN 

Noteholders reserved the right, at the May 7, 2004 hearing, to object to future deadline 

11 Vanguard filed a joinder to Appaloosa=s objection that did not raise any specific legal challenges to the J. Aron 

Stipulation. (Docket No. 17893). 

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extensions, they never objected to any extensions of the dates made by subsequent Adjournment 

Orders. 

Further, and more importantly, the Adjournment Order did not generally extend the 

Voting Deadline regarding the casting of ballots. Rather, as such deadline applies to the casting 

of ballots by a party in conjunction with a settlement of an Allowed Claim, temporary allowance 

motion, or resolution of objection to confirmation under the Voting Procedures Order that could 

be filed by April 14, 2004, the Adjournment Order extended such deadline to May 24, 2004. 

(Docket No. 17528). Moreover, at the time of the entry of any Voting Stipulations under which 

a vote was cast after March 24, 2004, the Adjournment Orders were in effect and, therefore, any 

issue as to the timing of the casting of any ballot related thereto is without merit. 

As to the CLN Noteholders’ alleged requirement of notice of an extension, Exhibit D to 

the Solicitation Procedures Order specifically provides that “[t]he Debtors[,] in consultation with 

the Creditors= Committee, may extend the Voting Deadline in their discretion and without 

further notice” (emphasis added). In addition, there was no prohibition in any of the various 

voting and solicitation orders that restricted the Debtors’ ability to agree to extend the deadline to 

cast a ballot for a particular Creditor during settlement negotiations. The Court also determined 

that sufficient cause existed to enter the Adjournment Orders and no notice or motion was 

required prior to the entry of such orders. 

Accordingly, based upon all of foregoing, the CLN Noteholders have waived all 

objections to the entry of the Adjournment Orders. 

6). Vote Solicitation 

On August 12, 2003, an order was entered retaining Innisfree M&A Incorporated 

(“Innisfree”) as the Debtors’ solicitation and tabulation agent. (Docket No. 12250). Jane 

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Sullivan is a Director of Innisfree. (Sullivan Affidavit 1). Innisfree and Ms. Sullivan, in 

particular, are highly experienced in bankruptcy solicitation matters. Ms. Sullivan has over 

twenty (20) years of experience in public securities solicitations and over thirteen (13) years of 

experience in bankruptcy matters. Ms. Sullivan has worked on over ninety (90) bankruptcy 

solicitations, tabulations and certifications of the vote, including, among others, In re WorldCom. 

(6/5/04 Sullivan Tr. at 167:4 – 12; Sullivan Affidavit 2). Ms. Sullivan and Innisfree also have 

substantial experience regarding the solicitation of securities Creditors. (Sullivan Affidavit 

23). 

In accordance with the Solicitation Procedures Order, Innisfree began mailing the 

Solicitation Materials to Creditors in late January of 2004. Innisfree completed the general 

mailing of Solicitation Packages and Non-Voting Solicitation Packages on February 3, 2004. 12 

(Sullivan Affidavit 27). During the solicitation process, Innisfree mailed approximately 36,000 

Solicitation Packages and 473,000 Non-Voting Solicitation Packages. (Sullivan Affidavit 33). 

In addition to the general mailing, Innisfree conducted a mailing for beneficial holders of 

claims related to “Financing Transactions,” as that term is used in the Disclosure Statement, 

which allowed the beneficial holders of certain claims to be solicited directly with Solicitation 

Materials pursuant to a Court-approved stipulation with the beneficial holder’s agent or trustee 

(the “Fiduciary Stipulations”). (Sullivan Affidavit 28). 

Pursuant to the Fiduciary Stipulations, these beneficial holders were solicited directly 

with either “live” ballots or provisional ballots, depending on whether the claim was disputed as 

12 See Affidavit of Service of Voting and Non-Voting Documents by Innisfree (Docket No. 16349); Amended 

Affidavit of Service of Voting and Non-Voting Documents by Innisfree (Docket No. 16897); Supplemental 

Affidavit of Service of Voting and Non-Voting Documents by Innisfree (Docket No. 16826); Second Supplemental 

Affidavit of Service of Voting and Non-Voting Documents by Innisfree (Docket No. 18418); and Second Amended 

Affidavit of Service of Voting and Non-Voting Documents by Innisfree (Docket No. 18419). 

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of January 9, 2004. (Sullivan Affidavit 29). Paragraph 18(f) of the Solicitation Procedures 

Order provides that the Debtors and the Creditors’ Committee reserved their rights to contest the 

direct tabulation of any allowed votes cast in connection with the Fiduciary Stipulations. 


There were a total of nine Fiduciary Stipulations relating to financing transactions 

commonly known as (a) Osprey/Whitewing (“Whitewing”); (b) E-NEXT; (c) Choctaw, 

Zephyrus and Sequoia (“Choctaw”); (d) Enron Teeside Operations Limited (“ETOL”); (e) 

Deutsche Trust Company Limited (“DTCL”); (f) Brazos LP (“Brazos”); (g) Flagstaff Capital 

Corporation (“Flagstaff”); (h) Yosemite and Credit-Linked Notes (“CLN”); and (i) Margaux. 13 

Innisfree completed the mailing of Solicitation Packages to voting beneficial holders 

pursuant to the Fiduciary Stipulations on February 20, 2004. (Docket No. 16826; Sullivan 

Affidavit 29). 

7). Temporary Claim Allowance for Voting Purposes 

The deadline for Creditors to file temporary allowance motions and ballot correction 

motions was February 17, 2004. (Sullivan Affidavit 30, Debtors’ Trial Ex. 20, 4, 6). 

Numerous parties, including some provisionally allowed to submit ballots pursuant to Fiduciary 

Stipulations, filed motions to temporarily allow their claims for voting purposes because their 

claims were not entitled to vote pursuant to the Voting Procedures Order. (Sullivan Affidavit 

30). Innisfree complied with the solicitation procedures for Creditors that filed temporary 

allowance motions. (Sullivan Affidavit 30 – 31). 

13 See Affidavit of Service of Jane Sullivan Regarding CLN, Whitewing, Margaux and Marlin (Docket No. 16061); 

Affidavit of Service of Jane Sullivan Regarding Flagstaff, Brazos and Choctaw (Docket No. 16062); Affidavit of 

Service of Jane Sullivan Regarding ETOL and DTCL (Docket No. 16063); Affidavit of Service of Jane Sullivan 

Regarding E-NEXT (Docket No. 16064); Affidavit of Service of Jane Sullivan Regarding Amended CLN (Docket 

No. 16065); Affidavit of Service of Jane Sullivan Regarding Amended Margaux (Docket No. 16413); Affidavit of 

Service of Jane Sullivan Regarding Amended CLN, Whitewing, Margaux and Marlin (Docket No. 18416). 

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After reviewing the Sullivan Affidavit and hearing the testimony of Ms. Sullivan, the 

Court finds Ms. Sullivan to be a credible witness. Because Ms. Sullivan was traveling out of the 

country on the day the Sullivan Affidavit was to be filed, Ms. Sullivan delivered an executed and 

notarized signature page to the Debtors’ counsel with instructions that such signature page was to 

be held in escrow until Ms. Sullivan had reviewed and approved the final form of the Sullivan 

Affidavit. (6/4/04 Sullivan Tr. at 125:11 – 126:22, 164:9 – 165:18). Further, because the 

signature page was only attached to the Sullivan Affidavit after Ms. Sullivan reviewed and 

approved the final form of the Sullivan Affidavit and no credible evidence has been adduced to 

contradict Ms. Sullivan’s testimony and Ms. Sullivan adopted the contents of the Sullivan 

Affidavit during her testimony, the Court accepts the Sullivan Affidavit in its entirety as a valid 

and truthful affidavit that was not fraudulently submitted. 

As described in the affidavits of service of Innisfree, sworn to by Ms. Sullivan on 

February 17, 2004, March 10, 2004 and March 11, 2004 (each a “Sullivan Service Affidavit” and 

collectively, the “Sullivan Service Affidavits,” Docket Nos. 16349, 16826 and 16897), (a) the 

transmittal and service of the Solicitation Packages were adequate and sufficient under the 

circumstances of these Chapter 11 Cases and (b) adequate and sufficient notice of the 

Confirmation Hearing (including the March 24, 2004 deadline for filing and serving objections 

to confirmation) and other requirements, deadlines, hearings and matters described in the 

Solicitation Procedures Order was provided in compliance with the Bankruptcy Rules and the 

Solicitation Procedures Order and no other or further notice is required. No evidence was 

submitted by any objector sufficient to rebut the Debtors’ evidence regarding solicitation of the 

vote. 

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8). Vote Tabulation 

Innisfree carefully monitored whether ballots were received by the Voting Deadline. 

(Sullivan Affidavit 40). Innisfree began receiving ballots in late February 2004. (Sullivan 

Affidavit 41). Innisfree also received provisional ballots from Creditors that had filed a motion 

to temporarily allow their claims for voting purposes. (Sullivan Affidavit 45). Innisfree timeand 

date-stamped, or hand-marked, these provisional ballots upon receipt, updated the voting 

information in Innisfree’s computer system and filed these claims separately until they were 

either allowed, or not allowed, to vote pursuant to an order by the Court. (Sullivan Affidavit 

45). 

Whenever the Court entered an order temporarily allowing, or not allowing, a claim, the 

Debtors’ counsel would advise FTI and Innisfree of the entry of the order and the impact of the 

order on how the specific claim was to be treated. (Sullivan Affidavit 46). Additionally, other 

claims were withdrawn by Creditors or expunged by Court orders through May 24, 2004. 

(Sullivan Affidavit 53). Because FTI provided updated data files to Innisfree reflecting these 

changes, Innisfree also ran periodic audit reports with FTI to ensure that the updated data 

received from FTI was consistent with the voting records compiled by Innisfree. If any 

discrepancies were found, Innisfree made corrections to its database as needed. (Sullivan 


Innisfree is a neutral party retained as an agent to solicit and tabulate ballots. (Sullivan 

Affidavit 54). Neither Innisfree’s retention nor its compensation is based on whether the 

certified results reflect acceptance or rejection of the Plan or whether the Plan is confirmed. 

(Sullivan Affidavit 54). Innisfree followed the procedures set forth in the Voting Procedures 

Order and the Solicitation Procedures Order. (Sullivan Affidavit 6, 10). Innisfree’s internal 

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Pg Pg 154 27 of 163 336 

process for compiling and organizing voting data, including the computer programs used in such 

process and quality control process are reasonable and were designed and used to support the 

vote certification. (Sullivan Affidavit 16 – 21, 23, 24). The only objectors that challenged the 

voting and tabulation process were the CLN Noteholders. 

Innisfree undertook quality control measures designed to ensure the accuracy of the vote 

tabulation and certification. (Sullivan Affidavit 22, 25). As part of the quality control 

process, Innisfree: (a) worked closely with FTI to address questions and issues related to the 

non-securities data that was provided to Innisfree; (b) received regular updates from FTI related 

to non-securities claims; and (c) participated in weekly conference calls beginning in September 

2003 with the Debtors, the Debtors’ counsel, FTI and BSI to address any issues related to the 

non-securities data provided by FTI, the solicitation and voting process for all claims. (Sullivan 

Affidavit 22, 25). 

Innisfree performed several audits of the ballot tabulations. (Sullivan Affidavit 53). 

Innisfree conducted an initial audit following the Voting Deadline and, shortly thereafter, 

conducted a second complete audit of the ballots to verify the results of the initial audit. 

(Sullivan Affidavit 53). The cumulative effect of Innisfree’s quality control measures helped 

to resolve potential and open issues and increased the accuracy of the databases used by Innisfree 

in tabulating the vote. (Sullivan Affidavit 22, 25). Innisfree periodically provided interim 

voting reports to the Debtors and advised the Debtors that such interim voting reports were 

unaudited and subject to further revision. (6/4/04 Sullivan Tr. at 110:21 – 111:3). In fact, Ms. 

Sullivan testified that, as is true in most cases, the initial voting report was completely 

inaccurate. (6/4/04 Sullivan Tr. at 135:23 – 136:6, 166:8 – 21). Certain ballots and provisional 

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Pg Pg 155 28 of 163 336 

ballots were allowed to vote after the Voting Deadline pursuant to Court orders. (Sullivan 


9). Plan Elections 

Innisfree also tabulated whether Creditors made certain elections under Sections 7.3, 7.4, 

7.7, 7.8 and 28.2 of the Plan (the “Plan Elections”). The Plan Elections were made either on the 

ballot or the provisional ballot that was sent to Creditors. (Sullivan Affidavit 34). All of the 

Plan Elections and Provisional Plan Elections that were not properly made were separately 

tracked and recorded by Innisfree and the Debtors mailed a notice to the affected Creditors 

informing them that their Plan Election was not properly executed. (Sullivan Affidavit 51). 

The Election Procedures Order allowed the Debtors to solicit Creditors for the limited 

purpose of making the Plan Elections (the “Provisional Plan Elections”). (Docket No. 17296; 

Sullivan Affidavit 38). If a Creditor’s claim is later allowed for distribution purposes, the 

Provisional Plan Elections will be applied to the Creditor’s claim as long as it complies with the 

Election Procedures Order. (Docket No. 17296; Sullivan Affidavit 38). No evidence was 

submitted by any objector to rebut the Debtors’ evidence concerning Plan Elections. The vote in 

WorldCom was certified by Ms. Sullivan and accepted by the Court. (6/4/04 Sullivan Tr. at 

167:10 – 14). Ms. Sullivan has never had a vote certification rejected by a court based upon the 

fact that it contained errors. (6/4/04 Sullivan Tr. at 167:16 – 19). 

10). Vote Certification 

As set forth in detail in the Vote Certification, the procedures used to distribute 

Solicitation Packages and tabulate Ballots were fair, properly conducted and in accordance with 

the Solicitation Procedures Order, the Voting Procedures Order and all applicable Federal and 

local Bankruptcy Rules. (Debtors’ Trial Ex. 19). In accordance with Local Rule 3018-1, on 

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May 26, 2004, the Affidavit of Jane Sullivan Certifying Tabulation of Acceptances and 

Rejections of Fifth Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the 

United States Bankruptcy Code (the “Initial Vote Certification”) (Docket No. 18671; Debtors’ 

Trial Ex. 19), was filed with the Court. 

Based on orders entered on or after May 26, 2004, on June 2, 2004, the Supplemental 

Affidavit of Jane Sullivan Certifying Tabulation of Acceptances and Rejections of Fifth 

Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States 

Bankruptcy Code (Docket No. 18863) (the “Amended Vote Certification” and, together with the 

Initial Vote Certification, the “Vote Certification”) was filed with the Court. 

As set forth in Article XXX of the Plan, Claims in Classes 1 and 2 of the Plan are not 

impaired. Pursuant to section 1126(f) of the Bankruptcy Code, Classes 1 and 2 are deemed to 

have accepted the Plan and were not entitled to vote. As set forth in Article XXX of the Plan and 

consistent with the Voting Procedures Order, Class 190 was deemed to have accepted the Plan. 

Classes 183 and 376 through 385 are impaired and anticipated to receive no distributions under 

the Plan. (Bingham Affidavit 64). Pursuant to section 1126(g) of the Bankruptcy Code, 

Classes 183 and 376 through 385 are deemed to have rejected the Plan and were not entitled to 

vote. 

Of the remaining 372 impaired Classes, four (4) Classes relate to the Portland Debtors for 

which confirmation has been adjourned and six (6) Classes relate to the Dabhol Debtors, which 

have since been severed from these jointly administered cases and withdrawn as proponents of 

the Plan. In addition, ten (10) Classes relate to EREC Subsidiary I (Classes 49 and 237), EREC 

Subsidiary II (Classes 50 and 238), EREC Subsidiary III (Classes 51 and 239), EREC Subsidiary 

IV (Classes 52 and 240) and EREC Subsidiary V (Classes 53 and 241). These five (5) entities 

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were created immediately prior to the bankruptcy filing for the Wind Entities as limited liability 

companies to succeed the Wind Entities in conjunction with the asset sale to GE Power Systems. 

(Debtors’ Trial Ex. 10 at M-5). Accordingly, these Classes are duplicative of the Classes for the 

Wind Entities and no ballots were cast in these Classes. 

Of the remaining 352 impaired Classes, ballots were cast in 110 Classes by non-insiders. 

(Debtors’ Trial Ex. 19, Exhibit F). With the exception of 2 Classes for PGH (a Debtor for which 

confirmation has been adjourned), each of these Classes voted to accept the Plan. (Debtors’ 

Trial Ex. 19, Exhibit F). Of the 110 Classes, 52 are Convenience Classes under the Plan. With 

the exception of the Convenience Class for PGH (a Debtor for which confirmation has been 

adjourned), the 51 other Classes voted to accept the Plan. (Debtors’ Trial Ex. 19, Ex. F). With 

respect to the Convenience Class for ENA, of the total of 134 votes cast totaling $1,752,014.66, 

126, ballots totaling $1,623,038.26, representing 93.15% of the total amount voted to accept the 

Plan and seven ballots totaling $119,976.40, representing 6.85% of the total amount voted to 

reject the Plan. (Debtors’ Trial Ex. 19, Ex. F). 

Six Classes voted to accept the Plan based on ballots cast by insiders, where such ballots 

were the only votes cast in those Classes. (Debtors’ Trial Ex. 19, Ex. G). Of the 237 impaired 

Classes for which no ballots were cast, 141 of these Classes are Classes of impaired Claims 

against a Debtor for which at least one other impaired Class has accepted the Plan. There are 96 

Debtors for which no ballots were cast, whether insider or non-insider, in any impaired Class for 

each of those specific Debtors. 14 

(Debtors’ Trial Ex. 19, Exs. F and G). 

14 The 96 Debtors for which no votes were received are as follows: PBOG Corp.; Palm Beach Development 

Company, LLC; Tenant Services, Inc.; EESO Merchant Investments, Inc.; Enron Federal Solutions, Inc.; Enron 

LNG Marketing LLC; Enron International Fuel Management Company; Enron Communications Leasing Corp.; 

Intratex Gas Company; Enron Processing Properties, Inc.; The New Energy Trading Company; EES Service 

Holdings, Inc.; ZWHC LLC; Zond Pacific, LLC; Enron Fuels International, Inc.; Artemis Associates, LLC; EGS 

New Ventures Corp.; Louisiana Gas Marketing Company; Louisiana Resources Company; LGMI, Inc.; LRCI, Inc.; 

Enron Communications Group, Inc.; Enrock Management, LLC; ECI Texas, L.P.; Enrock, L.P.; ECI-Nevada Corp.; 

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Excluding the Portland Debtors (for which confirmation has been adjourned), all of the 

Debtors are included in the global compromise embodied in the Plan and also the subject of the 

Global Compromise Motion. More specifically, each of the 96 Debtors for which no ballots 

were cast, are all included in the substantive consolidation component of the global compromise. 

(Bingham Affidavit 82). 

As reflected on Appendix C-I, the Debtors estimate that there are no third party creditors 

against 51 of the 96 Debtors for which no votes were received. These 51 Debtors have directly 

held assets totaling approximately $68.5 million. The Debtors further estimate the remaining 45 

Debtors have third-party unsecured claims of approximately $910 million and directly held 

assets totaling approximately $296.5 million. In the aggregate, these 96 Debtors hold less than 

4.5% of the assets directly held by all of the Debtors and have estimated third party claims 

against the Debtors representing only approximately 1.5% of the aggregate estimated claims. 

The summary contained in this paragraph regarding assets and claims is based on the information 

contained in the “Total Directly Held Assets” and “Pre Petition General Unsecured Claims” in 

Appendix C-I to the Disclosure Statement. (Debtors’ Trial Ex. 8). Across all voting Classes, 

St. Charles Development Company, LLC; Calcasieu Development Company, LLC; Calvert City Power I, LLC; 

Enron ACS, Inc.; LOA, Inc.; Enron India LLC; Enron International Holdings Corp.; Enron Warpspeed Services, 

Inc.; Modulus Technologies, Inc.; Enron Telecommunications, Inc.; Datasystems Group, Inc.; Omicron Enterprises, 

Inc.; EFS I, Inc.; EFS II, Inc.; EFS III, Inc.; EFS V, Inc.; EFS VI, L.P.; EFS VII, Inc.; EFS IX, Inc.; EFS X, Inc.; 

EFS XII, Inc.; EFS XV, Inc; EFS XVII, Inc.; Jovinole Associates; EFS Holdings, Inc.; Green Power Partners I LLC; 

TLS Investors, LLC; ECT Securities Limited Partnership; ECT Securities LP Corp.; Enron International Asset 

Management Corp.; Enron Brazil Power Holdings XI Ltd.; Enron Holding Company LLC; Enron Development 

Management Ltd.; Enron International Korea Holdings Corp.; Enron Caribe VI Holdings Ltd.; Enron International 

Asia Corp.; Enron Brazil Power Investments XI Ltd.; Paulista Electrical Distribution, LLC; Enron Pipeline 

Construction Services Company; Enron Pipeline Services Company; Enron Trailblazer Pipeline Company; Enron 

Liquid Services Corp.; Enron Machine and Mechanical Services, Inc.; Enron Permian Gathering Inc.; Transwestern 

Gathering Company; Enron Gathering Company; EGP Fuels Company; Enron Asset Management Resources, Inc.; 

Enron Brazil Power Holdings I Ltd.; Enron do Brazil Holdings Ltd.; Enron Renewable Energy Corp.; Enron 

Acquisition III Corp.; EFS IV, Inc.; EFS VIII, Inc.; EFS XIII, Inc.; Enron Credit Inc.; Richmond Power Enterprises, 

L.P.; ECT Strategic Value Corp.; Atlantic Commercial Finance, Inc.; ET Power 3 LLC; Nowa Sarzyna Holding 

B.V.; Enron South America LLC; Enron Global Power & Pipelines LLC; Cabazon Power Partners LLC; Cabazon 

Holdings LLC; Victory Garden Power Partners I LLC; Oswego Cogen Company, LLC; and Enron Equipment 

Procurement Company. 

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over 9,400 ballots aggregating approximately $26.6 billion were cast and included in the Vote 

Certification, with each Class in which ballots were cast (excluding PGH) voting to accept the 

Plan. (Debtors’ Trial Ex. 19 at Ex. F). 

All Classes of impaired Claims and Equity Interests either have accepted the Plan or will 

receive fair and equitable treatment in accordance with section 1129(b) of the Bankruptcy Code. 

(Debtors’ Trial Ex. 1, § 29.3; Bingham Affidavit 79). 

On May 7, 2004, the Court approved the following stipulations regarding temporary 

allowance of claims (the “Voting Stipulations”): 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

(i) 

Stipulation and Order Regarding Temporary Allowance of Bank of Tokyo- 

Mitsubishi, Ltd. claims for voting purposes. (Docket No. 18273). 

Stipulation and Order Regarding (A) Temporary Allowance of Certain Claims of 

AEP Energy Services Gas Holding Company and Houston Pipeline Company LP 

for Voting Purposes and (B) Withdrawal of the AEP Parties’ Supplement to Initial 

Objection to Confirmation of the Fifth Amended Joint Plan. (Docket No. 18275). 

Stipulation and Order Regarding Temporary allowance of AEP Energy Services, 

Inc. Claims for Voting Purposes. (Docket No. 18277). 

Stipulation and Order Regarding Temporary Allowance of Claims Filed by 

Deutsche Trustee Company Limited. (Docket No. 18279). 

Stipulation and Order Regarding Temporary Allowance of Claims of ETOL. 


Stipulation and Order Regarding Temporary Allowance of Claims Filed by 

Barclays Bank PLC. (Docket No. 18281). 

Stipulation and Order Regarding Temporary Allowance of Toronto Dominion 

(Texas), Inc. Claims for Voting Purposes. (Docket No. 18282). 

Stipulation and Order Regarding Temporary Allowance of Claims Related to the 

E-Next Financing Transaction. (Docket No. 18283). 

Stipulation and Order Regarding Temporary Allowance of Claims J. Aron & 

Company and European Power Source Company (UK) Limited for Voting 

Purposes. (Docket No. 18284). 

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Pg Pg 160 33 of 163 336 

Stipulation and Order Regarding Temporary Allowance of Reliant Claims for Voting Purposes. 


The CLN Noteholders objected to all of the Voting Stipulations. Such objections alleged 

only that: (a) claims that are disputed on grounds similar to the CLN Claims cannot be 

temporarily allowed; (b) the Debtors cannot contend that Bankruptcy Rule 3018 is unenforceable 

and then temporarily allow claims under Bankruptcy Rule 9019; and (c) the Debtors engaged in 

a scheme to gain additional acceptances by waiting until after the voting deadline to confirm that 

Creditors voted in favor of the Plan and then agreed to temporarily allow such claims. 

The CLN Noteholders did not attempt to designate any votes as being solicited or cast in 

bad faith pursuant to section 1126(e) of the Bankruptcy Code. The CLN Noteholders instead 

argued at the Confirmation Hearing that all votes to accept or reject the Plan should not be 

counted because the Debtors acted in bad faith with respect to Voting Stipulations and certain 

other stipulations that affect voting. The CLN Noteholders have not put forth evidence sufficient 

to support their allegations and the record in these cases clearly refutes any such allegations. 

The CLN Noteholders were the only parties that litigated the temporary allowance of 

claims in Classes 5 and 185. In accordance with the Voting Procedures Order and a Fiduciary 

Stipulation entered with respect to such claims, the CLN Noteholders were entitled to submit 

provisional ballots pending determination of their entitlement to vote. (Debtors’ Trial Exs. 3 and 

20). Of the provisional ballots cast by all holders of Yosemite and Credit-Linked Notes, of 

which the CLN Noteholders are some, (a) 89 accepting votes were cast in Class 5 in the 

aggregate amount of $549,440,162.50, (b) 104 rejecting votes were cast in Class 5 in the 

aggregate amount of $1,315,861,765.55, (c) 50 accepting votes were cast in Class 185 in the 

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aggregate amount of $339,987,249.50, and (d) 62 rejecting votes were cast in Class 185 in the 

aggregate amount of $764,181,540.55. (Debtors’ Trial Ex. 19). 

Prior to resolution of the temporary allowance requests with respect to the CLN 

Noteholders’ claims (the “CLN Claims”), an order was entered providing that, if the CLN 

Claims were temporarily allowed to vote on the Plan, holders of notes related to the Mahonia 

Financing Transaction would also be entitled to vote on the Plan. (Docket No. 16739). 

Accordingly, holders of claims related to the Mahonia Financing Transaction submitted 

provisional ballots. Thereafter, the holders of these claims entered into a stipulated order to vote 

these claims in favor of the Plan in the event these claims were temporarily allowed for voting 

purposes. (Docket No. 18650). Of the provisional ballots cast by the holders of notes related to 

the Mahonia Financing Transaction, two (2) accepting votes were cast in Class 5 in the aggregate 

amount of $939,832,064.00 and two (2) accepting votes were cast in Class 185 in the aggregate 

amount of $1,377,774,191.00. (Debtors’ Trial Ex. 19). 

Based on the information set forth on Exhibits E and F to the Vote Certification, even if 

the Court had temporarily allowed the claims of all holders of Yosemite and Credit-Linked Notes 

for voting purposes, Classes 5 and 185 would still have voted to accept the Plan. Including these 

votes, without consideration of votes cast in connection with the Mahonia Financing Transaction, 

would have resulted in Class 5 having accepting votes representing 70.16% of the dollar amounts 

voted and 92.04% numerosity and Class 185 having accepting votes representing 72.30% of the 

dollar amounts voted and 60.78% numerosity. (Debtors’ Trial Ex. 19). Inclusion of votes on 

behalf of holders of claims related to the Mahonia Financing Transaction would have further 

increased the acceptance rates for both of these Classes. (Debtors’ Trial Ex. 19). 

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Pg Pg 162 35 of 163 336 

On May 24, 2004, the Court rendered its decision with respect to the request of the 

holders of Yosemite and Credit-Linked Notes for temporary allowance of their claims for voting 

purposes. As set forth in the recitation of decision on the record of May 24, 2004, the Court 

ruled that: 

(a) 

(b) 

(c) 

As of the Petition Date, the claims of the holders of Yosemite and Credit-Linked 

Notes were held by defendants in the MegaClaim Litigation. (May 24, 2004 

Transcript at page 25). The holders of Yosemite and Credit-Linked Notes took 

the Disputed Claims subject to the Debtors’ section 502(d) objections. (5/24/04 

Hearing Tr. at 24). 

In light of the objections raised by the Debtors and the extensive findings by the 

ENE Examiner, the holders of Yosemite and Credit-Linked Notes had the burden 

of proof to present sufficient evidence that they have colorable claims capable of 

temporary allowance. (5/24/04 Hearing Tr. at 17). 

After considering all of the evidence in the record as well as applicable pleadings, 

adversary proceedings, answers and other filings with the Court, the holders of 

Yosemite and Credit-Linked Notes provided no argument in defense of the claims 

in the MegaClaim Litigation against Citibank that would undermine the basis for 

the section 502(d) objection. The holders of Yosemite and Credit-Linked Notes 

have failed to establish any basis under Bankruptcy Rule 3018 to temporarily 

allow their alleged claims to vote in full or in part based upon any other 

considerations. (5/24/04 Hearing Tr. at 27). 

The claims of the holders of Yosemite and Credit-Linked Notes were temporarily allowed for 

purposes of voting in the amount of zero dollars and the Court would issue its opinion as to 

whether equitable subordination constitutes a proper claims objection upon (a) notification by 

May 27, 2004 that a bond or cash-equivalent collateral in the amount of $350 million had been 

posted to secure the Debtors’ interests in the claims against Citibank in the MegaClaim 

Litigation, and (b) the request of the holders of Yosemite and Credit-Linked Notes by May 27, 

2004 that the Court reconsider their temporary allowance motions. (5/24/04 Hearing Tr. at 27 – 

29). 

The due process rights of the holders of Yosemite and Credit-Linked Notes with regard to 

temporary allowance of their claims have been protected throughout the temporary allowance 

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Pg Pg 163 36 of 163 336 

process. The holders of Yosemite and Credit-Linked Notes filed several pleadings related to 

temporary allowance, hearings were held to consider the merits of arguments raised therein, and, 

at the conclusion of the May 24, 2004 hearing, the Court allowed the holders of Yosemite and 

Credit-Linked Notes to further pursue temporary allowance of their claims provided a bond or 

cash equivalent collateral in the amount of $350 million was posted by May 27, 2004. (5/24/04 

Hearing Tr. at 27 – 29; Docket No. 18711). The holders of Yosemite and Credit-Linked Notes 

did not post this collateral. 

Pursuant to an order, dated May 27, 2004, the Court memorialized its May 24, 2004 

decision and denied the request of the holders of Yosemite and Credit-Linked Notes to have their 

claims temporarily allowed for voting purposes as claims in Classes 5 and 185 of the Plan. 


Innisfree provided a true and accurate certification of the vote. No evidence was 

submitted by any objector to rebut the accuracy of the Vote Certification. 

Counsel for the Debtors announced certain technical and immaterial modifications to the 

Plan at the Confirmation Hearing. (Confirmation Hearing Tr. passim). Some of these 

modifications were filed and served on June 1, 2004 (Docket No. 18793; Affidavit of Service 

Docket No. 18960, dated June 8, 2004). Such modifications will have no impact on the 

treatment of any claims and interests and thus, pursuant to Bankruptcy Rule 3019, all 

acceptances of the Plan are deemed acceptances of the Plan as modified at the Confirmation 

Hearing. (Bingham Affidavit 73). 

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Pg Pg 164 37 of 163 336 

B. The Global Compromise 

1). History of Negotiations Leading Up To Global Compromise 

In accordance with the Court’s orders, Cooper LLC was retained by all Debtors to 

provide and perform management services on the terms and conditions set forth in such 

agreement. (Docket No. 2725). Mr. Cooper testified his fiduciary duties and responsibilities 

were owed to each of the Debtors’ estates. (6/8/04 Cooper Tr. at 17:25 – 18:2). 

In addition to being a member of Cooper LLC, Stephen Cooper is a founding member of 

Zolfo Cooper, LLC (“ZC”), an affiliate of Cooper LLC. (Docket No. 1497). 15 

ZC has provided 

crisis management and restructuring services to troubled companies since 1982. (Docket No. 

1497). On September 5, 2002, all of the membership interests of Zolfo Cooper Management, 

LLC and Zolfo Cooper Capital, LLC were transferred to ZC. (Docket No. 7686). The members 

of ZC then transferred all of the membership interests in ZC to Kroll, Inc., a publicly traded 

Delaware corporation. (Docket No. 7686). As a result, ZC became a wholly owned subsidiary 

of Kroll, Inc. and subsequently changed its name to Kroll Zolfo Cooper, LLC. (Docket No. 

8058). Kroll, Inc. did not purchase the membership interests of Cooper LLC, however, through a 

series of agreements, Kroll, Inc. became the beneficial recipient of all proceeds paid to Cooper 

LLC. (Docket No. 8058). 

In November 2001, the Debtors retained The Blackstone Group (“Blackstone”) as their 

financial advisors to assist in the evaluation of restructuring alternatives and options. In 

December 2001, the Debtors asked Blackstone to develop an approach for the structuring of a 

chapter 11 plan. (Debtors’ Trial Ex. 24 at 8). 

15 ZC subsequently changed its name to Kroll Zolfo Cooper, LLC. 

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Pg Pg 165 38 of 163 336 

Mr. Cooper saw as his primary fiduciary duty maximizing the value of the Debtors’ 

estates in the aggregate so that value could also be maximized on an individual Debtor basis. 

(6/9/04 Cooper Tr. at 62:13 – 18). Shortly after Mr. Cooper was retained by the Debtors in 

February 2002, he made clear to the Creditors’ Committee that he intended to work in an open 

and productive manner with them to maximize value for all economic stakeholders. (6/8/04 

Cooper Tr. at 27:3 – 18). 

Because these Chapter 11 Cases raise numerous complex issues arising principally from 

the interrelationships among the Debtors and their approximately 2,400 subsidiaries, these 

interrelationships required examination of the Debtors’ respective liabilities, rights to assets, 

extensive intercompany claims and varying degrees of entanglement. (Bingham Affidavit 13, 

6/8/04 Cooper Tr. at 27:19 – 28:9). To prevent these issues from posing a barrier to the efficient 

conclusion of these Chapter 11 Cases, the Debtors and the Creditors’ Committee determined that 

a resolution was necessary if a chapter 11 plan for any Debtor were to succeed and before any 

distribution to Creditors could be made. (Bingham Affidavit 13; 6/8/04 Cooper Tr. at 32:22 – 

33:10). 

The Debtors’ efforts to negotiate the global compromise and the Plan were aimed at 

maximizing Creditors’ recoveries and minimizing the risks and costs of litigation. (Bingham 

Affidavit 11). There was no need for the Debtors to negotiate with and among each other 

because of various other mechanisms in place – including, but not limited to, the Distribution 

Model, the postpetition overhead allocation formula and the Bankruptcy Transaction Review 

Committee (the “BTRC”). (6/8/04 Cooper Tr. at 18:3 – 19:11, 26:10 – 27:2; Debtors’ Trial Ex. 

24 at 23, 130 – 156; 6/7/04 Zelin Tr. at 20:25 – 21:23). These mechanisms helped to ensure 

fairness and reasonableness between and among the various Debtor estates. Moreover, the 

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Creditors’ Committee and its advisor – who represented the economic stakeholders of all of the 

Debtors – were involved in formulation of the Plan. (6/8/04 Cooper Tr. at 27:3 – 5; Bingham 

Affidavit 14, 16; 6/4/04 Bingham Tr. at 26:2 – 10). There was a very wide range of views 

amongst the members of the Creditors’ Committee as to whether the global compromise should 

include a 0/100 or a 100/0 distribution formula reflecting a resolution of a variety of inter-estate 

issues, including substantive consolidation. (6/8/04 Cooper Tr. at 117:24 – 118:6). 

Given the diverse creditor body and the many complex issues posed by these Chapter 11 

Cases and mindful of their respective fiduciary duties to Creditors, the Debtors and the 

Creditors’ Committee engaged in intensive analysis and spirited discussions and debate 

regarding the terms of a chapter 11 plan and related matters. (Bingham Affidavit 14; 6/4/04 

Bingham Tr. at 52:24 – 53:15; 6/8/04 Cooper Tr. at 28:10 – 23; 5/16/02 Hearing Tr. at 164 – 72). 

The discussions or negotiations with the Creditors’ Committee began as early as February 

2002. (6/9/04 Cooper Tr. at 85:15 – 17). These negotiations involved discussions on a variety of 

issues that led to the development of the Plan, including (a) maximizing value to Creditors, 

(b) resolving issues regarding substantive consolidation and other inter-estate and inter-creditor 

disputes, and (c) facilitating an orderly and efficient distribution of value to Creditors. (Bingham 

Affidavit 14). The Plan and the global compromise and settlement embodied therein represent 

the culmination of these efforts, which included the joint substantive consolidation analysis 

discussed below. (Bingham Affidavit 14). 

Commencing in February 2002, Mr. Bingham began to interface with representatives of 

Blackstone to discuss the formulation of a computerized model to synthesize estimates and 

projections regarding assets and liabilities, as well as to calculate Creditor recoveries under a 

chapter 11 plan depending on various assumptions and variables. (Bingham Affidavit 15; 

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Pg Pg 167 40 of 163 336 

6/7/04 Zelin Tr. at 21:3 – 23; 6/3/04 a.m. Bingham Tr. at 67:18 – 68:6). Blackstone devised the 

Distribution Model, which is described in Appendix C of the Disclosure Statement. (Debtors’ 

Trial Ex. 8; 6/7/04 Zelin Tr. at 27:23 – 26:4; Debtors’ Trial Ex. 24 at 23, 130 – 156; Bingham 

Affidavit 15). Mr. Zelin, the Debtors’ expert, has supervised the creation of financial models 

in many other chapter 11 cases. (6/7/04 Zelin Tr. at 20:8 – 16). The Distribution Model has 

been extensively diligenced by the Debtors, the Creditors’ Committee and its advisors and the 

ENA Examiner and his professionals. (6/7/04 Zelin Tr. at 25:16 – 26:11; Debtors’ Trial Ex. 24 

at 23). Moreover, the well-diligenced Distribution Model allowed the Debtors to evaluate the 

various potential inter-estate issues that might exist and determine the economic consequences of 

various positions and the potential impact on creditor recoveries. (Debtors’ Trial Ex. 24 at 132). 

On October 29, 2002, the Debtors made a presentation to the Creditors’ Committee 

regarding a plan structure, which considered a variety of scenarios. (Bingham Affidavit 16; 

Debtors’ Trial Ex. 13). Between October 29, 2002 and January 15, 2003, the Debtors and their 

professionals and professionals for the Creditors’ Committee met three or four times to further 

analyze the Distribution Model in connection with the development of the Plan. (6/4/04 

Bingham Tr. at 26:2 – 16). 

On January 15, 2003, the Debtors made a presentation to the Creditors’ Committee 

suggesting an approach to consider the treatment of Claims and the mechanics of distributions. 

(Bingham Affidavit 16; Debtors’ Trial Ex. 14). The Debtors and the Creditors’ Committee 

continued to engage in substantive discussions regarding the outlines of a plan and subsequently 

agreed to a 30/70 distribution formula included in the global compromise and the Plan to resolve 

a variety of inter-estate issues, including substantive consolidation. (Bingham Affidavit 16). 

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Pg Pg 168 41 of 163 336 

Thereafter, the Debtors and their professionals met with the professionals of the Creditors’ 

Committee on a weekly basis. (6/4/04 Bingham Tr. at 26:12 – 16). 

Consistent with the expanded role of the ENA Examiner as plan facilitator for the ENA 

Creditors, the ENA Examiner and his professionals were also involved in the Plan negotiations 

on behalf of stakeholders of ENA and its subsidiaries, particularly those stakeholders that held 

guaranties issued by ENE and other entities. (6/8/04 Cooper Tr. at 30:15 – 31:16). 

On February 14, 2003, the Debtors made a detailed presentation to the ENA Examiner 

and certain Creditors of ENA and its subsidiaries, which represented a cross-section of Creditors 

(including traders, insurers and institutional investors), with respect to the concepts underlying 

the global compromise embodied in the Plan. (Bingham Affidavit 16; Debtors’ Trial Ex. 15). 

Attendees at the February 14, 2003 meeting included either principals or counsel for the 

CLN Noteholders, specifically Mr. David Tepper of Appaloosa and Ms. Hollace Cohen, counsel 

for Vanguard. Confidential information was provided to attendees at this meeting that would not 

have been provided unless the parties had signed confidentiality agreements. (6/4/04 Bingham 

Tr. at 18:10 – 15, 20:11 – 22:20). 

The ENA Examiner’s report stated that the confidentiality agreement was executed 

before the end of January 2003, and that for several months before that the Debtors had 

numerous meetings and conversations with the ENA Examiner and his professionals to review 

the Debtors’ proposed structure for a plan and that the Debtors provided written materials to the 

ENA Examiner even prior to the execution of the confidentiality agreement. (2/10/03 ENA 

Examiner’s Report, at 5 – 7). 

Using estimated claims and asset values available at that time, the presentation included a 

broad spectrum of potential estimated creditor recoveries using approximately fifteen (15) 

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different sets of assumptions regarding a number of inter-estate issues. The alternative scenarios 

were provided to demonstrate the disparity of results depending upon the ultimate resolution of 

these contested issues. The presentation explained the need for a consensual resolution of certain 

inter-estate issues to conserve the resources of the Debtors’ estates and maximize returns to 

Creditors. (Bingham Affidavit 16). 

At the February 14, 2003 meeting, the Debtors proposed a distribution calculation based 

on 30% of the recovery under a substantive consolidation scenario and 70% of the recovery 

based on a non-consolidation scenario. (Debtors’ Trial Ex. 15 at 23). On May 7, 2003, the ENA 

Examiner made a counter-proposal to the Debtors and the Creditors’ Committee. (Bingham 

Affidavit 17; Debtors’ Trial Ex. 16). Rather than the 30/70 distribution formula suggested by 

the Debtors and the Creditors’ Committee, in the May 7, 2003 presentation, the ENA Examiner 

advocated a 10/90 formula. In addition, the counter-proposal advocated, among other proposals, 

a reallocation of certain assets to ENA. (Bingham Affidavit 17; Debtors’ Trial Ex. 16). On 

May 30, 2003, the ENA Examiner made another counter-proposal raising a number of additional 

concerns. (Bingham Affidavit 18; Debtors’ Trial Ex. 17). On May 30, 2003, the Debtors and 

the Creditors’ Committee issued an analysis of the ENA Examiner’s May 7, 2003 counterproposal. 

(Bingham Affidavit 19; Debtors’ Trial Ex. 18). 

In the summer of 2003, the Debtors and the Creditors’ Committee reached a compromise 

with the ENA Examiner, which was incorporated into the Initial Plan filed on July 11, 2003, 

along with the disclosure statement filed in connection therewith. (Bingham Affidavit 20). As 

reflected in the Initial Plan, as modified by, the First Amended Plan, these terms included: 

(a) 

Recoveries to Creditors holding Allowed Unsecured Claims would be equal to 

30% of their recoveries in a modified substantive consolidation scenario plus 70% 

of their recoveries in a scenario where there is no consolidation; 

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(b) 

(c) 

Holders of Allowed Guaranty Claims would be entitled to participate in the 

modified substantive consolidation scenario to the extent of 50% of their Allowed 

Guaranty Claims (rather than the 0% that a holder of an Allowed Guaranty Claim 

might otherwise receive in a complete substantive consolidation scenario); 

The net economic equity value of the following assets attributed to ENE on the 

Debtors’ books and records would be reallocated for the benefit of ENA and its 

Creditors – 

(i) 

(ii) 

(iii) 

the value attributable to Enron Canada, 

50% of the value attributable to CPS, and 

the value attributable to Bridgeline Holdings; 

(d) 

(e) 

Distributions to Creditors on account of their Allowed Unsecured Claims would 

be made from a common currency of pooled assets, except that holders of 

Allowed Unsecured Claims Against ENA and certain of its subsidiaries would be 

entitled to receive Cash in lieu of up to $125 million in Plan Securities; and 

The ENA Examiner would be consulted with respect to one of the five Persons 

and the Creditors’ Committee would be consulted with respect to four of the five 

Persons to be appointed by the Debtors to the Board of Directors of Reorganized 

ENE and, to the extent that the Litigation Trust and Remaining Asset Trusts are 

created, the Litigation Trust Board and the Remaining Asset Trust Boards. 

(Debtors’ Trial Ex. 2, § I.B.1.c.). 

At that time, the ENA Examiner executed and delivered a letter agreement, dated July 10, 

2003, wherein he informed the Debtors and the Creditors’ Committee that he believed the 

compromises and settlements incorporated into the Initial Plan were reasonable and that the 

economic treatment to Creditors of ENA and its subsidiaries was fair and worthy of being 

accepted by such Creditors. (Bingham Affidavit 20). As acknowledged by Appaloosa in its 

Objection to the Motion of The Baupost Group, L.L.C. and Racepoint Partners, L.P. for an Order 

Directing the Appointment of an Examiner to Investigate and Report on (1) the Fairness to the 

Estate and Creditors of Enron Corp. of the Proposed Settlement Between Enron Corp. and Enron 

North America Corp. That is Contained in the Debtors’ Joint Plan and (2) Related Matters, filed 

in August 2003, the ENA Examiner became an active participant in the plan formulation process 

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as a fiduciary for the ENA estate. (Docket No. 12523 at 10, 15 – 16). Appaloosa and Angelo 

Gordon further asserted that 

[t]he Committee and the Debtors have conducted an exhaustive investigation of 

substantive consolidation issues, again at considerable expense to the estates. The 

plan formulation process undertaken by the Debtors and the Committee began 

nearly a year ago and, since January 2003, included the extensive efforts of the 

ENA Examiner, producing a fragile consensus through a difficult, protracted 

negotiation. 

(Docket No. 12523 at 10). Moreover, the objection recognized that the plan negotiation process 

directed by the Court “produced a negotiated consensus among the Debtors, the [Creditors’] 

Committee and the ENA Examiner concerning complex issues. . . .” (Docket No. 12523 at 3 – 4; 

6/17/04 Draft Hearing Tr. at 172 – 74). Vanguard similarly objected to the relief requested by 

Baupost and stated that the Baupost motion was 

a blatant and belated attempt by Baupost to delay and derail confirmation of the 

thoroughly negotiated and well vetted Joint Plan and the fair and carefully crafted 

compromises contained therein, regardless of the harm that would be caused to 

the Debtors and their creditors from the inherent cost and delay if the relief 

requested [by Baupost] were granted. 

(Docket No. 12526 at 3). 

In October 2003, the ENA Examiner notified the Court, the Debtors and the Creditors’ 

Committee that he was withdrawing his support for the Initial Plan and the First Amended Plan 

due to certain misunderstandings between the ENA Examiner, on the one hand and the Debtors 

and the Creditors’ Committee, on the other hand, regarding the terms of the global compromise, 

including, among others, (a) whether and to what extent the Debtors intended to challenge Enron 

Guaranty Claims held by Creditors of ENA and its subsidiaries on the basis of constructive 

fraudulent conveyances, and (b) the allocation of ownership of certain affirmative claims and 

causes of action that may be commenced by or on behalf of the Debtors’ estates against third 

parties. (Bingham Affidavit 22). 

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In an effort to preserve the global compromise, the Debtors, the Creditors’ Committee 

and the ENA Examiner resumed discussions and negotiations over the terms of a joint chapter 11 

plan in October and November 2003. At that time, the parties could not reach a mutual 

understanding and, on November 13, 2003, the Debtors, with the support of the Creditors’ 

Committee, but without the support of the ENA Examiner, filed the Second Amended Joint Plan 

of Affiliated Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code (the “Second 

Amended Plan”), as well as the disclosure statement filed in connection therewith. (Bingham 

Affidavit 22). The ENA Examiner objected to the disclosure statement for the Second 

Amended Plan. (Docket No. 14085). On November 13, 2003, the Debtors and the Creditors’ 

Committee filed a joint reply to the ENA Examiner’s objection. (Docket No. 14181). 

After the filing of the Second Amended Plan on November 13, 2003, the Court convened 

a chambers’ conference among the Debtors, Creditors’ Committee, ENA Examiner and their 

respective professionals and strongly urged the parties to continue to attempt to achieve a global 

resolution satisfactory to the Debtors, the Creditors’ Committee and the ENA Examiner. 

(Bingham Affidavit 23). Following additional negotiations, on December 5, 2003, the Debtors, 

the Creditors’ Committee and the ENA Examiner agreed to modify certain provisions of the 

previous global compromise. (Bingham Affidavit 23). These modifications were incorporated 

in the Debtors’ Third Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the 

United States Bankruptcy Code (the “Third Amended Plan”), filed on December 17, 2003, along 

with the disclosure statement filed in connection therewith. (Bingham Affidavit 23). 

On January 4, 2004, the Debtors filed the Fourth Amended Joint Plan of Affiliated 

Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code (the “Fourth Amended 

Plan”) and disclosure statement (Docket Nos. 15153 and 15154 ) filed in connection therewith. 

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The Fourth Amended Plan addressed certain objections that had been interposed to the adequacy 

of the information contained in the disclosure statement and Third Amended Plan. (Bingham 

Affidavit 24). The evolution of the Plan terms and the extensive negotiations and discussions 

between the ENA Examiner, the Creditors’ Committee and the Debtors is further evidenced by 

the periodic reports filed by the ENA Examiner regarding the status of the chapter 11 plan 

developments and recommendations related to exclusivity. (Docket Nos. 5415, 7539, 9181, 

10577, 15193 and 18167). In particular, the report filed on or about January 5, 2004 (Docket No. 

15193) contains the ENA Examiner’s recitation of the circumstances and events related to 

withdrawal of his support for the First Amended Plan. In addition, changes and modifications to 

the Plan as a result of the discussion and negotiations between the Debtors, the Creditors’ 

Committee, the ENA Examiner and other parties in interest are evidenced by the prior filings of 

the Plan on July 11, 2003, September 18, 2003, November 13, 2003, December 17, 2003 and 

January 4, 2004 (Docket Nos. 11698, 12822, 14154, 14893 and 15153) and the disclosure 

statements related thereto. (Docket Nos. 11699, 12823, 14155, 14894 and 15154). 

The Plan has been proposed in good faith and not by any means forbidden by law. The 

Plan is the result of extensive arm’s-length discussions, debate and/or negotiations among the 

Debtors, the Creditors’ Committee and the ENA Examiner. (Bingham Affidavit 74). 

The Plan is supported by substantially all of the major economic parties in interest in the 

Chapter 11 Cases, including (a) unanimous support of the Creditors’ Committee, which 

represents all unsecured claimholders of the Debtors’ estates, (b) the various parties with whom 

the Debtors negotiated settlements and which now support, or do not object to confirmation of, 

the Plan, including National City Bank and Baupost Group, and (c) the ENA Examiner on behalf 

of ENA’s Creditors. (Bingham Affidavit 74). Both the Creditors’ Committee and the ENA 

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Examiner submitted letters in support of the Plan, which were transmitted to Creditors along 

with their solicitation packages. (Debtors’ Trial Exs. 6 and 7). No evidence was submitted by 

any objector sufficient to rebut the Debtors’ evidence concerning the good faith, arm’s-length 

nature of negotiations regarding the Plan. 

2). Terms of the Global Compromise Embodied in the Plan 

On May 4, 2004, the Debtors filed the Global Compromise Motion, seeking approval of 

the terms of the global compromise, as set forth below, which set forth the terms analyzed, 

discussed and debated by the Debtors, Creditors’ Committee and the ENA Examiner. The 

various integrated elements of the global compromise (Bingham Affidavit 63) are: 

(a) 

(b) 

(c) 

(d) 

Distributions to Creditors based upon a formula pursuant to which, for Creditors 

other than those of the Portland Debtors, distributions will be made as if holders 

of an Allowed Claim were given the sum of (i) 70% of the distribution such 

holder would receive if the Debtors, other than the Portland Debtors, were not 

substantively consolidated, and (ii) 30% of the distribution such holder would 

receive if all of the Debtors’ estates, other than those of the Portland Debtors, 

were substantively consolidated in a hypothetical scenario, but notwithstanding 

this distribution formula, one-half of Allowed Guaranty Claims were included in 

such calculation (Bingham Affidavit 38); 

The resolution of Intercompany Claims and other inter-estate issues to give 

holders of Allowed Intercompany Claims 70% of the distribution such Debtor 

would receive if the Debtors were not substantively consolidated and no 

distribution under the hypothetical substantive consolidation scenario; 

The waiver of potential inter-Debtor remedies; 

The resolution of certain asset-ownership disputes between ENE and ENA, 

whereby: 

(i) 

(ii) 

(iii) 

the net economic equity value of Enron Canada will be deemed to be an 

asset of ENA, 

the net economic preferred equity value of RMTC will be deemed to be an 

asset of ENE, 

50% of the net economic value of CPS will be deemed to be an asset of 

ENE and 50% will be deemed to be an asset of ENA, and 

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(iv) 

the net economic equity value of Bridgeline Holdings will be deemed to 

be an asset of ENA; 

(e) 

The resolution of inter-estate issues regarding rights to certain claims and causes 

of action, including that: 

(i) 

(ii) 

(iii) 

(iv) 

each Debtor will retain the benefits of its single-Debtor claims or causes of 

action for its respective Creditors subject to the 30/70 distribution formula; 

proceeds from avoidance actions involving two Debtors, other than those 

included in the definition of Litigation Trust Claims or Special Litigation 

Trust Claims, will be shared 50/50 between the transferor Debtor and the 

Debtor whose antecedent debt was satisfied. (Debtors’ Trial Ex. 2, 

§ I.B.1.c.); 

certain significant claims and causes of action (that is, the Litigation Trust 

Claims and Special Litigation Trust Claims) will be deemed to be owned 

by ENE, subject to the 30/70 distribution formula; and 

a portion of the distributions to be made on account of Allowed Enron 

Guaranty Claims resulting from recoveries on Litigation Trust Claims and 

Special Litigation Trust Claims will be reallocated in accordance with the 

following formula: (a) 80% of such distributions will be retained by 

holders of such Allowed Enron Guaranty Claims and (b) 20% of such 

distributions will be deemed redistributed to holders of General Unsecured 

Claims, if any, against the subsidiary Debtor that is the primary obligor 

corresponding to such Allowed Enron Guaranty Claims; provided, 

however, that, to the extent a holder of an Allowed Enron Guaranty Claim 

also holds a General Unsecured Claim for the primary obligation against 

the subsidiary Debtor, such General Unsecured Claim will be excluded 

from the redistribution under part (b); and 

(f) 

Creation of Plan Currency—a blend of Creditor Cash and the equity interests of 

Prisma, PGE and CrossCountry—to pay General Unsecured Claims against each 

Debtor’s estate. 

3). Factors Supporting the Global Compromise and Substantive Consolidation 

From mid-2002 and continuing into 2003, the Debtors and the Creditors’ Committee 

undertook a diligence process to ascertain whether substantive consolidation would be an 

appropriate remedy for some or all of the Debtors in these Chapter 11 Cases. (Bingham 

Affidavit 33; 6/3/04 p.m. Bingham Tr. at 71:19 – 72:3). In that regard, the Debtors and their 

professionals, as well as the Creditors’ Committee and its professionals, each undertook an 

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Pg Pg 176 49 of 163 336 

evaluation of the merits of substantive consolidation from both a legal and a business standpoint. 

(6/8/04 Cooper Tr. at 27:23 – 28:9). The Debtors and the Creditors’ Committee, together with 

their professionals, separately reviewed and considered the Debtors’ books and records, public 

filings, key contracts and other documents, as well as the facts and legal theories underlying 

various related inter-estate issues (Bingham Affidavit 33; 6/3/04 Bingham Tr. at 71:10 – 72:10) 

and conducted numerous joint interviews of current and former employees, analyzed the relevant 

legal standards and evaluated the relationships between certain of the Debtors and their largest 

Creditors. (Bingham Affidavit 33). The Debtors and the Creditors’ Committee concluded that, 

for each of the Debtors, there are relevant facts weighing both for and against substantive 

consolidation. (Bingham Affidavit 34). Appendix M to the Disclosure Statement summarizes 

the conclusions reached by the Debtors and the Creditors’ Committee as a result of their 

diligence. (Debtors’ Trial Ex. 10). 

The Debtors considered numerous factors relevant to the issue of substantive 

consolidation for each Debtor, including, but not limited to, the following: 

(a) 

(b) 

(c) 

(d) 

(e) 

Many of the Debtors’ financial transactions and statements have been found 

fraudulent, avoidable or misstated by numerous investigators, including courtappointed 

examiners and governmental task forces; 

Each of the Debtors was able to prepare and file separate Schedules listing their 

prepetition assets and liabilities; 

Separate books and records were maintained for each of the Debtors prepetition; 

Prepetition, a consolidated federal tax return was filed that included most of the 

Debtors, but, to the extent applicable, individual state tax returns were prepared 

and filed for each of the Debtors; 

Prepetition, each of the Debtors observed corporate formalities including 

conducting periodic board meetings and annual shareholder meetings; other than 

the meetings held for ENE, the vast majority of these meetings were by written 

consent, rather than through in-person meetings involving debate and discussion; 

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Pg Pg 177 50 of 163 336 

(f) 

(g) 

(h) 

(i) 

(j) 

(k) 

(l) 

(m) 

(n) 

For substantially all of the Debtors, overlap existed as to the officers and directors 

of each Debtor and the officers and directors of other Debtors; 

Substantially all of the Debtors directly or indirectly participated in the 

centralized cash management system maintained by ENE prepetition; 

Substantially all of the Debtors received direct or indirect prepetition credit 

support from ENE through intercompany loans (whether directly to the Debtor or 

indirectly to the Debtor through the Debtor’s parent(s)), guaranties, indemnities, 

total return swaps or other means of support; 

With very few exceptions, prior to the Initial Petition Date, none of the Debtors 

disseminated financial information to Creditors or potential creditors or otherwise 

made such information available other than the consolidated financial statements 

for ENE and its subsidiaries; 

Of the Debtors, ENE was the only entity with a credit rating by the major 

domestic rating agencies and ENA became unable to continue its business 

operations upon the downgrade of ENE’s credit rating; 

Although some costs were allocated to subsidiaries, prepetition, ENE absorbed 

substantial overhead costs for most (if not all) of the Debtors; 

Substantially all of the Debtors utilized ENE’s centralized services for risk 

management, insurance procurement, legal, benefits and similar services; 

Although the internal transaction approval process for all of the Debtors did not 

expressly require approval of the board of the entity engaged in the transaction, it 

did require, depending on the dollar amount and type of transaction, approval by 

the head of the applicable business unit (who might not be an officer or director of 

that entity), the head of the applicable business segment (who might not be an 

officer or director of that entity), the Office of the Chair of ENE and/or the Board 

of Directors of ENE; and 

The Debtors’ accounting policies permitted non-cash settlements and novations of 

intercompany obligations by allowing subsidiaries to either (i) transfer their 

intercompany receivables owed by other subsidiaries to ENE, in exchange for a 

receivable from ENE or (ii) transfer their intercompany payables owed to other 

subsidiaries to ENE with ENE assuming the obligation, in exchange for a payable 

owed by the subsidiary to ENE. After the completion of a non-cash settlement, 

the entity with the original payable would have a payable to ENE and ENE would 

have a payable to the other subsidiary. The entity with the original receivable 

from a subsidiary of ENE would have a receivable from ENE. 

(Bingham Affidavit 34; Debtors’ Trial Ex. 10). 

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Pg Pg 178 51 of 163 336 

Based upon the Debtors’ review, at least one of the foregoing factors that would support 

substantive consolidation is present for each one of the Debtors, other than the Portland Debtors. 

(6/4/04 Bingham Tr. at 38:7 – 19; Debtors’ Trial Ex. 10). In addition, there was extensive 

entanglement between some or all of the Debtors arising principally from Intercompany Claims, 

as summarized in Appendix N of the Disclosure Statement and in the Blackstone Report. 

(Debtors’ Trial Ex. 11; Debtors’ Trial Ex. 24 at 152). A prime example of such entanglement is 

the fact that ENA is ENE’s single largest Creditor and ENA’s Claim against ENE is ENA’s 

single largest asset. (Bingham Affidavit 35). Similar intercompany entanglement exists 

among Debtors within particular business units, such as Retail Services and the Wind businesses 

and often extends to include ENE because the business units often operated on a negative cash 

flow basis and relied heavily on significant cash infusions from ENE (recorded by both Debtors 

as intercompany loans) to maintain their business operations. (Bingham Affidavit 35). 

In addition to entanglement issues, the evidence indicates that at least some Creditors 

may have dealt with the Debtors as a single economic unit. For example, the Debtors did not 

issue separate financial statements, but relied, instead, on ENE’s consolidated financial 

statements in dealing with creditors. (Bingham Affidavit 36). Similarly, although the CLN 

Noteholders have alleged that they hold among the largest claims against ENA, the transactions 

surrounding issuance of the Yosemite and Credit-Linked Notes were marketed based on the 

creditworthiness of ENE, not ENA. (Debtors’ Trial Ex. 10). In particular, the terms of such 

transactions provided that upon an event of default, which included ENE’s bankruptcy filing, 

senior unsecured obligations of ENE (not ENA) would be delivered to the relevant indenture 

trustee for the Yosemite and Credit-Linked Note trusts. (Debtors’ Trial Ex. 2, § III.F.51; Proof 

of Claim No. 11735). Although the CLN Noteholders oppose the global compromise regarding 

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Pg Pg 179 52 of 163 336 

substantive consolidation, they have adduced no evidence to show that any Creditor of ENA 

relied on the separate creditworthiness of ENA. 

The downgrade of ENE’s credit ratings following the events in the Fall of 2001 also 

negatively impacted the other Debtors’ ability to obtain credit and meet their financial 

obligations. Similarly, ENA’s ability to continue its trading operations was adversely affected 

by ENE’s credit downgrades. (Bingham Affidavit 36). As a result, the Debtors concluded that 

a compromise of the issue of substantive consolidation would be appropriate and fair from the 

vantage point of Creditors’ expectations. (Bingham Affidavit 36). The overwhelming 

incidence of common facts relevant to this analysis provides the basis for inclusion of all the 

Debtors (other than the Portland Debtors) in the global compromise. (Bingham Affidavit 37; 

Debtors’ Trial Ex. 10). 

The 30/70 distribution formula is not a precise mathematical quantification of the 

likelihood of substantive consolidation of each Debtor into each of the other Debtors, which 

would be impossible to calculate. Rather, the formula represents a negotiated compromise of 

numerous inter-estate issues, including substantive consolidation. (Bingham Affidavit 38). 

The 30/70 distribution formula is an integral element of the global compromise and it cannot be 

separated from the other elements in the compromise. (6/9/04 Cooper Tr. at 55:24 – 56:14; 

6/3/04 p.m. Bingham Tr. at 162:13 – 17; Bingham Affidavit 63). Creditors, such as those of 

EPMI and ENA, benefit from the global compromise because the pooling of claims under the 

30% scenario reduces the impact of liability on an individual estate as a result of potentially 

massive claims, such as those relating to alleged market manipulation. Therefore, the 30% 

scenario ensures that any such liability is spread among the Debtors. (6/8/04 Cooper Tr. at 84:4 

– 21; Proof of Claim No. 12172; Bingham Affidavit 38). No evidence was submitted by any 

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Pg Pg 180 53 of 163 336 

objector to sufficiently rebut the Debtors’ evidence concerning the factors relating to the global 

compromise as it relates to issues of substantive consolidation. 

4). Guaranty Claims and the Global Compromise 

As an integral part of the global compromise and its settlement of inter-estate issues, for 

purposes of calculating recoveries, Guaranty Claims are included in the substantive consolidation 

scenario at 50% of the amount that would be allowed in the stand-alone scenario. (Debtors’ 

Trial Ex. 24 at 153). Guaranty Claims are thereby treated better than the 30/70 formula would 

otherwise treat them because the 30% component would yield a zero distribution on a guaranty 

in a substantive consolidation scenario. Section 28.2 of the Plan provides an option to 

compromise and settle any constructive fraudulent transfer actions that have already been 

commenced, or for which Debtors have executed a tolling agreement, with respect to Claims 

against ENE predicated upon guaranties issued, amended, or replaced during the one-year period 

preceding the Initial Petition Date. (Debtors’ Trial Ex. 1, § 28.2). Creditors whose Claims have 

been challenged on these grounds have the opportunity to accept a discount to the allowed 

amount of such Claims at varying percentages based upon the proximity of the execution of the 

guaranty to the Initial Petition Date. (Debtors’ Trial Ex. 1, § 28.2). No evidence was submitted 

by any objector sufficient to rebut the Debtors’ evidence concerning the treatment of Guaranty 

Claims under the global compromise embodied in the Plan and set forth in the Global 

Compromise Motion. 

5). Intercompany Claims and the Global Compromise 

As an integral part of the global compromise and its settlement of inter-estate issues, 

except with respect to the Portland Debtors, the Debtors holding Allowed Intercompany Claims 

(that is, accounts and notes owed by one Debtor to another Debtor) will receive 70% of the 

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Pg Pg 181 54 of 163 336 

distribution such Debtor would receive if the Debtors were not substantively consolidated. 

(Bingham Affidavit 47; 6/7/04 Zelin Tr. at 218:7 – 14, 266:7 – 13). As the 30% scenario is 

based on the hypothetical substantive consolidation of all Debtors (excluding the Portland 

Debtors), no distribution will be made on Intercompany Claims under this scenario. (Bingham 

Affidavit 47; Debtors’ Trial Ex. 1, §§ 1.157, 2.1). 

The Debtors’ accounting policies permitted non-cash settlements of intercompany 

obligations by allowing subsidiaries to either (1) transfer their intercompany receivables owed by 

other subsidiaries to ENE, in exchange for a receivable from ENE, or (2) transfer their 

intercompany payables owed to other subsidiaries to ENE with ENE assuming the obligation, in 

exchange for a payable owed by the subsidiary to ENE. After the completion of a non-cash 

settlement, the entity with the original payable would have a payable to ENE and ENE would 

have a payable to the other subsidiary. The entity with the original receivable from a subsidiary 

of ENE would have a receivable from ENE. (Bingham Affidavit 46). 

Because of the scope and breadth of the intercompany transactions between the Debtors, 

there is some degree of inescapable entanglement. (Debtors’ Trial Ex. 11). For example, ENA 

holds the single largest claim against ENE and ENA’s Claim against ENE is ENA’s single 

largest asset. (Bingham Affidavit 35; 6/9/04 Cooper Tr. at 107:25 – 108:3; 6/7/04 Zelin Tr. at 

78:15 – 80:3). However, the entanglement is not “hopeless” in that the Debtors believe that, 

with sufficient time and resources, substantially all the material entries to the intercompany 

accounts could be reviewed, evaluated and potential challenges identified. (Bingham Affidavit 

47). 

The Intercompany Claims that would be allowed pursuant to the global compromise 

result from millions, if not hundreds of millions, of individual debits and credits arising from the 

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Pg Pg 182 55 of 163 336 

Debtors’ business operations. (Bingham Affidavit 48). Although it is theoretically possible to 

investigate each transaction, it is neither necessary nor cost-effective to do so. Professionals for 

the Debtors, the Creditors’ Committee and the ENA Examiner sampled entries, particularly those 

between ENE and ENA and determined that the Debtors’ books and records are sufficiently 

reliable to justify the allowance of Intercompany Claims as incorporated into the global 

compromise. (Bingham Affidavit 35, 48; 6/3/04 p.m. Bingham Tr. at 155:17 – 156:6, 156:23 

– 157:18). 

Pursuant to the global compromise, all other potential inter-Debtor remedies, such as the 

potential disallowance, subordination or re-characterization of Intercompany Claims, and certain 

affirmative claims or causes of action against any other Debtor, will be waived. (Bingham 

Affidavit 49; Debtors’ Trial Ex. 1, § 28.3). The Distribution Model identified the assets and 

liabilities of each Debtor’s estate. (6/8/04 Cooper Tr. at 18:12 – 17). Calculation of recoveries 

on intercompany claims is part of the Distribution Model. (6/7/04 Zelin Tr. at 21:17 – 23). The 

Distribution Model allows the evaluation of the impact on value allocations of various potential 

inter-estate issues that might be pursued in a chapter 11 case, including substantive 

consolidation. (6/7/04 Zelin Tr. at 24:20 – 25:10). 

The Distribution Model calculates the value that flows through intercompany receivables 

or payables and reflects movement of value from one estate to another. (6/8/04 Cooper Tr. at 

197:25 – 198:5; Debtors’ Trial Ex. 11). The Distribution Model resolves the circular nature of 

many of the intercompany relationships and settles at the optimal resolution. (Debtors’ Trial Ex. 

24 at 131 – 32; 6/7/04 Zelin Tr. at 24:25 – 25:13). The Distribution Model calculates how an 

increase in incremental value in one estate would benefit all Debtors in both the stand-alone and 

consolidated portions of the 30/70 distribution formula. (6/7/04 Zelin Tr. at 302:6 – 303:23). 

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Pg Pg 183 56 of 163 336 

Under the 70% component, incremental value to one estate benefits other estates as a result of 

the intercompany relationships by virtue of the added value flowing through the intercompany 

accounts. (6/7/04 Zelin Tr. at 302:6 – 303:23). Under the 30% component, the increase in value 

directly increases the recovery to the consolidated estate. (6/7/04 Zelin Tr. at 302:6 – 303:23). 

No evidence was submitted by any objector sufficient to rebut the Debtors’ evidence concerning 

treatment of Intercompany Claims under the global compromise embodied in the Plan and set 

forth in the Global Compromise Motion. 

6). Inter-Debtor Waivers and the Global Compromise 

Given that millions of entries were made in intercompany accounts, a thorough analysis 

of each of the factors in support of or against subordination or re-characterization would be 

prohibitively expensive and contrary to the goal of maximizing Creditors’ recoveries. (Bingham 

Affidavit 48). Section 28.3(a) of the Plan applies only to claims and causes of action that are 

property of the respective Debtors’ estates. (Bingham Affidavit 50). These inter-Debtor 

waivers were negotiated as an integral part of the global compromise to ensure that the efficient 

resolution of these Chapter 11 Cases would not be jeopardized by ongoing inter-estate disputes. 


The inter-Debtor waivers will not affect the Debtors’ ability to pursue third parties 

(including non-Debtor affiliates) on any claims, causes of action, or challenges available to any 

of the Debtors in the absence of substantive consolidation, including any avoidance actions or 

defenses to setoff for lack of mutuality. (Bingham Affidavit 51). Nor will such waivers inhibit 

the assertion of any defense in the MegaClaim Litigation, the Montgomery County Litigation, or 

any other litigation commenced by or on behalf of the Debtors, the Debtors in Possession, or the 

Reorganized Debtors. (Bingham Affidavit 51). No evidence was submitted by any objector 

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Pg Pg 184 57 of 163 336 

sufficient to rebut the Debtors’ evidence concerning inter-Debtor waivers under the global 

compromise embodied in the Plan and set forth in the Global Compromise Motion. 

7). Resolution of Asset-Ownership Disputes and the Global Compromise 

As an integral part of the global compromise and its settlement of inter-estate issues, for 

purposes of calculating distributions pursuant to the Plan, the net economic ownership of Enron 

Canada, RMTC, CPS and Bridgeline Holdings will be resolved, and to a certain extent 

reallocated, as follows (Bingham Affidavit 54): 

(a) 

(b) 

(c) 

(d) 

(e) 

The net economic equity value of Enron Canada will be deemed to be an asset of 

ENA; 

The net economic preferred equity value of RMTC will be deemed to be an asset 

of ENE; 

50% of the net economic value of CPS will be deemed to be an asset of ENE and 

50% will be deemed to be an asset of ENA; 

Allocation of the net economic ownership of CPS will be made only to the extent 

it is ultimately determined or otherwise agreed that the value in CPS constitutes 

property of the Debtors’ estates; and 

The net economic equity value of Bridgeline Holdings will be deemed to be an 

asset of ENA. 

Given that ownership of these assets was ambiguous and hotly contested, in the Debtors’ 

judgment, a negotiated compromise was preferable to full-blown litigation. (Bingham Affidavit 

54). 

The Debtors, the Creditors’ Committee and the ENA Examiner believe there are factual 

and legal issues arising from the relative impact of these transactions on ENE and ENA, 

including whether all or part of these transactions should be avoided, unwound or otherwise 

challenged and the treatment of any intercompany claims or equity interests related thereto. The 

Debtors concluded that some of those issues favor ENE, while others favor ENA and its 

subsidiaries. Such conclusion was reasonable. Among the arguments that could be asserted by 

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or on behalf of ENE and ENA are: (a) whether the net economic equity value of Enron Canada 

should be attributed to ENE or ENA; (b) whether the net economic preferred equity value of 

RMTC should be attributed to ENE or ENA; (c) whether the net economic value of CPS should 

be attributed to ENE or ENA; and (d) whether the net economic equity value of Bridgeline 

Holdings should be attributed to ENE or ENA. (Bingham Affidavit 53). 

The dispute over the ownership of the net economic equity value of Enron Canada arose 

from the Slapshot financing transaction, which caused a potential shift of economic interest in 

Enron Canada from ENA to ENE. In the Slapshot transaction, ENE received $1 billion in 

preferred stock (ahead of ENA’s common stock) in return for a $1 billion increase in its payable 

to ENA. (Bingham Affidavit 53). 

The arguments favoring ownership of the net economic equity value of Enron Canada by 

ENE may include the fact that: (a) the transaction was properly authorized, documented, 

recorded and supported by consideration; (b) even if meritorious, such litigation would 

potentially produce additional prepetition unsecured Intercompany Claims and not a transfer of 

ownership of such assets; and (c) the measurement of damages, if any, to ENA from the addition 

of the preferred stock should be measure at the date the preferred stock was issued, not at the 

Initial Petition Date and any loss in value to the receivable from ENE as of the Initial Petition 

Date would not be recoverable. (Bingham Affidavit 53). 

The arguments favoring ownership by ENA may include the fact that (a) ENA did not 

receive adequate consideration for this transfer of economic interest, and (b) Slapshot was a “tax 

fiction” and a fraudulent conveyance, pursuant to which, in the course of a single day, 

approximately $1 billion (a portion of the Slapshot funding) circled through Enron Canada and 

the process of this flow arguably removed debt and equity interests in Enron Canada (a solvent, 

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non-Debtor entity) owned by ENA and replaced them with a claim against ENE. (Bingham 

Affidavit 53). It should be noted that, under the global compromise, ENA benefits both from 

its deemed economic equity interest in Enron Canada and allowance of a $1.039 billion 

intercompany claim of ENA against ENE representing the funds advanced by ENA to ENE to 

enable ENE to purchase the Enron Canada preferred stock. (6/4/04 Bingham. Tr. at 31:22 – 

32:14, 32:24 –33:5, 33:12 – 15). 

The dispute over the ownership of the net economic preferred equity value of RMTC 

arose out of the Valhalla financing transaction, which resulted in a shift of economic interest in 

RMTC from ENA to ENE. An entity that is currently beneficially owned by ENE invested $2.2 

billion to acquire all of the preferred stock of RMTC. The $2.2 billion was subsequently loaned 

by RMTC to ENE. RMTC and ENE entered into an agreement whereby RMTC could engage in 

multiparty setoffs of obligations (the “RMTC Setoff Letter”). ENA owns the common stock in 

RMTC. ENA and EPMI owe substantial amounts to RMTC due to trading activity. In addition 

to the $2.2 billion arising from Valhalla, ENE owes $3.4 billion to RMTC arising from Project 

NOLy. An indirect subsidiary of RMTC, New Energy Trading Co. (“NETCO”) received a 

transfer of $250 million from ENE shortly before the Initial Petition Date. ENE’s consideration 

for this transfer was an increase in its investment in ENA, which did not have any value. 


Among the arguments that favor ownership by ENE are: (a) the Valhalla transaction was 

properly authorized, documented, recorded and supported by consideration; (b) the RMTC Setoff 

Letter does not apply to the preferred stock because preferred stock is not an “obligation”; (c) 

even if meritorious, such litigation would potentially produce additional prepetition unsecured 

Intercompany Claims and not a transfer of ownership of such assets; and (d) the measurement of 

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the damages, if any, to ENA from the addition of the preferred stock should be measured at the 

date the preferred stock was issued, not at the Initial Petition Date and any loss in value to the 

receivable from ENE as of the Initial Petition Date would not be recoverable. (Bingham 


If litigated, ENA may assert that it is entitled to ownership of the net preferred equity 

value of RMTC because (a) ENA did not have receive adequate consideration for this transfer of 

economic interest, (b) Valhalla may be deemed to be a “tax fiction” and a fraudulent 

conveyance, and (c) the RMTC Setoff Letter must have been intended to permit RMTC to satisfy 

the preferred stock via setoff against the note receivable from ENE. If the setoff were 

effectuated, ENA would become the beneficial owner of the value in RMTC including the 

receivable created under Project NOLy. (Bingham Affidavit 53). 

ENE and ENA dispute the ownership of the net economic value of CPS because prior to 

the Slapshot transaction, the parent of Stadacona owed ENE approximately $400 million (which 

is in excess of the fair value of Stadacona). The essentially worthless common equity was 

owned through the Sundance structure, with ENA owning 90% of the value and the remaining 

10% owned by ENE. The Slapshot transaction replaced the ENE debt with debt into the 

structure. The banks “put” their position in the structure to ENE immediately prior to the Initial 

Petition Date. (Bingham Affidavit 53). 

If litigated, ENE may assert that the net economic value of CPS should be attributed to 

ENE because, as between ENE and ENA, under any reasonable scenario, the net economic value 

of CPS would belong to ENE. If the banks’ “put” remains effective, CPS’s value would flow to 

ENE because it stepped into the banks’ position. If the Slapshot transaction were to be voided, 

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CPS’s payable to ENE, which was satisfied via the Slapshot transaction, would be reinstated and 

therefore the value of CPS would flow to ENE. (Bingham Affidavit 53). 

Conversely, if litigated, ENA may assert that Slapshot created a cloud over ENE’s 

beneficial ownership of CPS, potentially altering it to a shared ownership with ENA. (Bingham 


ENE’s interests in Bridgeline Holdings resulted from a transfer of intercompany 

liabilities shortly before ENE’s bankruptcy. A “cash circle” involving Bridgeline Holdings was 

cleared in the month prior to the Initial Petition Date, to the benefit of ENE and the detriment of 

ENA. Enron accounting policies allowed but did not require non-cash settlement of 

intercompany accounts. Some group controllers effectuated such settlements, while some did 

not. (Bingham Affidavit 53). 

Arguments favoring attribution of ownership of the net equity value of Bridgeline 

Holdings to ENE are that (a) the intercompany accounts should remain as they were unless there 

was an error, (b) there is nothing in GAAP or the law that requires such settlements to be made 

or not made, and (c) even if meritorious, such litigation would potentially produce additional 

prepetition unsecured Intercompany Claims and not a transfer of ownership of such assets. 


Arguments in favor of ownership by ENA may include the fact that the transfers may be 

deemed to be fraudulent conveyances and that other cash circles involving ENE-ENA-EPMI and 

ENE-ENA-ENGMC were not cleared at all during two years prior to the Initial Petition Date, 

also to the benefit of ENE and the detriment of ENA. And, therefore, it would be inconsistent to 

leave the major cash circles in place and allow Bridgeline Holding’s cash circle to be eliminated. 

(Bingham Affidavit 53) 

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In March 2004, in vigorous opposition to the Plan, Baupost Group and Racepoint 

Partners (“Baupost/Racepoint”) filed with the Court (a) First Objection of the Baupost Group 

and Racepoint Partners, as Class 4 Creditors, to Confirmation of Fifth Amended Plan of 

Reorganization, dated March 2, 2004, (b) First Objection of the Baupost Group, as a Class 185 

Creditor, to Confirmation of Fifth Amended Plan of Reorganization, dated March 2, 2004, and 

(c) Supplemental Objection of the Baupost Group and Racepoint Partners, as Class 4 Creditors, 

to Confirmation of Fifth Amended Plan of Reorganization, dated March 23, 2004 (collectively, 

the “Baupost Plan Objections”). The Baupost Plan Objections raised issues regarding proposed 

asset transfers under the Plan and the release of avoidance actions affecting Enron Guaranty 

Claims on the basis that such Plan components were unduly prejudicial to ENE creditors in favor 

of ENA creditors. Baupost/Racepoint also indicated an intention to file a Second Supplemental 

Objection to the Plan and the May 14, 2004 deadline for doing so was extended by agreement of 

Baupost/Racepoint, the Debtors and the Creditors’ Committee, pending ongoing efforts to 

resolve certain matters set forth in the Baupost Plan Objections. 

The Baupost Plan Objections were ultimately resolved by the entry of a negotiated 

Stipulation and Order, Pursuant to 11 U.S.C. §§ 105(a), 502, 1126 and 1127, FED. R. BANKR. P. 

3018, 3019, 9014 and 9019 and LBR 3020-1(b), By and Among Debtors, Creditors’ Committee 

and The Baupost Group and The Racepoint Group Regarding Withdrawal of Confirmation 

Objections, Chapter 11 Plan Voting, and Certain Clarifications to Chapter 11 Plan and Related 

Matters, dated May 24, 2004 (Docket No. 18757) (the “Baupost Stipulation”), in which 

Baupost/Racepoint agreed to withdraw the Baupost Plan Objections and to cast their votes in 

favor of the Plan. 

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Subsequent to the Baupost Stipulation, Baupost/Racepoint filed a Comment of the 

Baupost Group and Racepoint Partners in Response to Objections Interposed by Certain Parties 

to Confirmation of Fifth Amended Joint Plan of Affiliated Debtors, dated June 1, 2004 (the 

“Baupost Comment”). (Docket No. 18786). As stated in the Baupost Comment, Baupost 

believes that the Plan is particularly beneficial to ENA creditors because under the global 

compromise, in addition to taking from ENE the value of Enron Canada (represented by the 

preferred stock in Enron Canada owned by ENE), ENA is also allowed to keep a $1.039 billion 

intercompany claim that represents the funds advanced to ENE by ENA, which ENE used to 

purchase the Enron Canada preferred stock. (Baupost Comment at 17). This intercompany 

claim is included in the Allowed Intercompany Claim held by ENA against ENE pursuant to the 

global compromise embodied and set forth in the Global Compromise Motion. (6/4/04 Bingham 

Tr. at 31:22 – 32:14, 32:24 – 33:5, 33:12 – 33:15). 

No evidence was submitted by any objector sufficient to rebut the Debtors’ evidence 

concerning the resolution of asset ownership disputes under the global compromise embodied in 

the Plan and set forth in the Global Compromise Motion. 

8). Ownership of Certain Claims and Causes of Action and the Global Compromise 


other than Litigation Trust Claims or Special Litigation Trust Claims, each Debtor will retain the 

benefits of its single-Debtor claims or causes of action for its respective Creditors, subject to the 

30/70 distribution formula. (Bingham Affidavit 55; Debtors’ Trial Ex. 1, § 28.1). To eliminate 

inter-estate disputes where the ownership of avoidance actions is unclear, pursuant to the Plan 

and the global compromise, such claims will be jointly prosecuted by each of the Debtors that 

could assert a cause of action on account of the subject transfer and the net proceeds realized 

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from such litigation (whether by settlement or judgment) will be allocated equally between each 

of the plaintiff Debtors. (Bingham Affidavit 56; Debtors’ Trial Ex. 1, § 28.1). To the extent 

that a Claim arising under section 502(h) of the Bankruptcy Code is allowed solely against ENE 

or the relevant subsidiary as a result of the voided transfer, an adjustment will be made to the 

amount of Intercompany Claims, as reflected on Exhibit F to the Plan, between ENE and such 

subsidiary pursuant to the methodology agreed upon by the Debtors, the Creditors’ Committee 

and the ENA Examiner, as set forth in the Plan Supplement. (Bingham Affidavit 56; Debtors’ 

Trial Ex. 1, §§ 1.21 and 1.195; Debtors’ Trial Ex. 4, Schedule X). 

Litigation Trust Claims and Special Litigation Trust Claims will be deemed to be owned 

by ENE, subject to the 30/70 distribution formula, notwithstanding the inclusion of other Debtors 

as plaintiffs in such actions. (Bingham Affidavit 57; Debtors’ Trial Ex. 1, §§ 1.168, 1.257, 

2.1(b)(iv)). The Debtors or the Creditors’ Committee have already commenced certain such 

actions, including the MegaClaim Litigation and the Montgomery County Litigation. (Bingham 


Any recoveries from the MegaClaim Litigation will be deemed to be assets of ENE. 

(6/8/04 Cooper Tr. at 194:14 – 17; 6/3/04 p.m. Bingham Tr. at 103:21 – 104:6; Debtors’ Trial 

Ex. 1, § 2.1(iv)). If ENE recovers any money from the MegaClaim Litigation, ENA will benefit 

as a result of its receivable from ENE. In addition, the 30/70 component of the global 

compromise enables ENA (and all other Debtors) to benefit from the assets of ENE. (6/9/04 

Cooper Tr. at 110:6 – 14). Furthermore, Creditors of ENE’s Debtor subsidiaries that hold 

Allowed Enron Guaranty Claims will benefit from such litigation on account of their claims 

against ENE. 

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Neither the Debtors nor any other party can accurately determine the value of the 

MegaClaim Litigation to any of the Debtors, including the value of ENA’s interests as plaintiff, 

given the ambiguity as to who is entitled to the actions and the fact that discovery has only just 

begun and the actions have not been adjudicated. (6/3/04 p.m. Bingham Tr. at 105:9 – 107:7, 

107:25 – 108:10, 166:11 – 18). Nonetheless, ENA benefits from the treatment of the MegaClaim 

Litigation and Montgomery County Litigation under the Plan and the global compromise 

because, inter alia, ENA receives additional benefits in the global compromise such as the asset 

transfers from ENE. (6/3/04 p.m. Bingham Tr. at 162:3 – 18). 

Deeming the Litigation Trust Claims and the Special Litigation Trust Claims as Assets of 

ENE is an integral part of the global compromise (including substantive consolidation and the 

asset-ownership issues discussed above) and is reasonable given the exchange of value through 

the asset transfers in favor of ENA, the difficulty of proving the relative harm to different Debtor 

entities with any degree of precision, the disputes over legal ownership of such Claims and 

causes of action and the central role of the validity of ENE’s financial statements in these 

actions. (Bingham Affidavit 58; 6/3/04 p.m. Bingham Tr. at 162:3 – 18). 

The Plan and the Global Compromise Motion also provide that Creditors of ENE’s 

Debtor subsidiaries that do not have Enron Guaranty Claims will nevertheless share in potential 

recoveries from Litigation Trust Claims and Special Litigation Trust Claims. Specifically, 

Section 10.1 of the Plan provides that a portion of the distributions to be made on account of 

Allowed Enron Guaranty Claims resulting from recoveries on Litigation Trust Claims or Special 

Litigation Trust Claims will be reallocated in accordance with the following formula: (a) 80% of 

such distributions will be retained by holders of such Allowed Enron Guaranty Claims; and (b) 

20% of such distributions will be deemed redistributed to holders of General Unsecured Claims 

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against the subsidiary Debtor that is the primary obligor corresponding to such Allowed Enron 

Guaranty Claims; provided, however, that, to the extent a holder of an Allowed Enron Guaranty 

Claim also holds a General Unsecured Claim for the primary obligation against the subsidiary 

Debtor, such General Unsecured Claim will be excluded from the redistribution under part (b). 

(Bingham Affidavit 59; Debtors Trial Ex. 1, § 10.1). 

If a compromise and settlement of, or a Final Order with respect to, a Litigation Trust 

Claim or a Special Litigation Trust Claim provides for the waiver, subordination or disallowance 

of a defendant’s Claim or Claims against a Debtor other than ENE, such waived, subordinated or 

disallowed Claim(s) will be deemed allowed at the lesser of (a) the “Estimated Allowed 

Amount” of such Claim on the Debtors’ claim management system, and (b) the filed proof of 

claim in respect of such Claim and such distribution will be assigned to ENE; provided that, if 

such proof of claim is filed as contingent or unliquidated, or at zero dollars, the Claim will be 

allowed at the “Estimated Allowed Amount.” (Bingham Affidavit 60; Debtors’ Trial Ex. 1, §§ 

22.13, 23.13). 

If the Litigation Trust and the Special Litigation Trust are created, the Debtors or the 

Reorganized Debtors, as the case may be, will transfer Cash, in an amount to be jointly 

determined by the Debtors or the Reorganized Debtors and the Creditors’ Committee, as 

necessary to fund the operations of the such trusts. (Debtors' Trial Ex. 1, Art. XXII and Art. 

XXIII; Debtors’ Trial Ex. 2, §§ XI.A.3, XI.B.3; Debtors’ Trial Ex. 4, Schedule A, § 1.7; 

Debtors’ Trial Ex. 4, Schedule B, § 1.7). 

The global compromise, therefore, provides for the economic benefits realized from 

Litigation Trust Claims and Special Litigation Trust Claims to be allocated to ENE for further 

distribution under the Plan independent of whether the recoveries are realized in cash or through 

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waiver, subordination or disallowance of Claims. (Bingham Affidavit 60; 6/9/04 Cooper Tr. at 

110:15 – 111:4). 


regarding the fairness of resolving the ownership of claims and causes of action under the global 

compromise embodied in the Plan and set forth in the Global Compromise Motion. 

9). Plan Currency 

Plan Currency, in the context of the Plan, means that all the economic stakeholders of the 

Debtors receive their pro rata share of cash and Plan Securities. It ensures that value for each 

Debtor is maximized under the Plan; whereas value would be lost through a separate plan for 

each Debtor. The use of a uniform Plan Currency also facilitates the ease of distribution and 

provides certainty for the marketplace pre-distribution permitting Creditors most easily to value 

the consideration to be received under the Plan. (6/8/04 Cooper Tr. at 61:5 – 62:4; Bingham 


The alternative to using Plan Currency would have entailed creating a scheme for each of 

the Debtors providing for distributions of either cash or some type of interest in stock, 

Intercompany Claims, third party receivables, assets to be liquidated in the future and/or any 

other potential forms of consideration. (Bingham Affidavit 42). As distributions on 

Intercompany Claims are a significant element of certain Debtors’ asset base, the uncertainty as 

to the form and manner of distributions on those Intercompany Claims would have led to further 

uncertainty, complications and delay. (Bingham Affidavit 42). 

Based on the Debtors’ current estimates of asset values and Allowed Claims, Plan 

Currency is expected to be approximately two-thirds in the form of Creditor Cash and 

approximately one-third in the form of Plan Securities. These estimates may vary based on 

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whether closing of the sales of PGE and CrossCountry occur. Currently, signed contracts exist 

for the purchase and sale of PGE and CrossCountry. The Debtors’ assets targeted for 

contribution to Prisma have not yet been contributed. In the event that the sales of PGE and 

CrossCountry are consummated, as currently estimated, the Plan Currency would be 

approximately 92% in the form of Creditor Cash and approximately 8% in the form of Prisma 

Common Stock. (Bingham Affidavit 42). 


regarding the use of Plan Currency under the global compromise embodied in the Plan and set 

forth in the Global Compromise Motion. 

10). ENA Creditors’ Option to Exchange Cash for Stock 16 


Creditors of ENA and its affiliates EPMI, EGLI, EGM, EIM, ENGMC, ENA Upstream, 

ECTRIC and ERAC may elect to receive up to $125 million in distributions in the form of Cash 

instead of Plan Securities, thereby providing more securities to other Debtors’ estates. (Bingham 

Affidavit 61; Debtors’ Trial Ex. 1, § 7.3). The cash election option is an integral part of the 

global compromise of other inter-estate issues and cannot be viewed in a vacuum. (Bingham 

Affidavit 62). No evidence was submitted by any objector sufficient to rebut the Debtors’ 

evidence regarding the cash election option for ENA Creditors. 

11). Liquidation Analysis and Benefits of the Global Compromise 

It would not be possible under one or more chapter 7 cases to more effectively wind 

down the estates and maximize value for creditors than under the Plan. (6/8/04 Cooper Tr. at 

16 By orders, dated April 1, 2004 and October 2, 2003, approving compromises and settlements set forth in 

stipulations, cash options were also offered for Wind Creditors and for beneficial holders of ETS Debentures, 

respectively. (Docket Nos. 17456 and 13269; Debtors’ Trial Ex. 1, §§ 7.7 and 7.8) 

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71:18 – 22). Even under the most optimistic chapter 7 assumptions, each holder of an Allowed 

General Unsecured Claim will receive pursuant to the Plan value that is not less than the amount 

such holder would receive in a chapter 7 liquidation. (Bingham Affidavit 90; Debtors’ Trial 

Ex. 9; 6/7/04 Zelin Tr. at 350:5 – 7; 6/3/04 a.m. Bingham Tr. at 42:10 – 23; Debtors’ Trial Ex. 24 

at errata 127, 128 n.1, 129 n.1). 

The Debtors’ Liquidation Analysis appropriately assumes the Court will approve the 

settlements and compromises embodied in the Plan, including the 30/70 distribution formula and 

the other agreements reached under the global compromise, as well as the exclusion of the 

Portland Debtors from the global compromise. Not only does this approach recognize that the 

many issues resolved by the global compromise would remain and require resolution in a 

conversion to chapter 7, but that practically it is more useful for Creditors to compare estimated 

recoveries using the same assumptions regarding these issues. (Bingham Affidavit 92; 6/3/04 

a.m. Bingham Tr. at 42:10 – 20). 

To have a clear understanding of the differences between recoveries under the Plan 

compared to a potential chapter 7, Creditors need an “apples to apples” comparison. (Bingham 

Affidavit 92). The CLN Noteholders objected to use of such a comparison at the Disclosure 

Statement Hearing and the Court overruled their objection recognizing not only the need for an 

“apples to apples” comparison, but also the practical limitation that, in order to prepare a 

liquidation analysis for each Debtor outside of the global compromise, then a variety of unknown 

variables must be resolved that are otherwise resolved by virtue of the compromise. (1/6/04 

Hearing Tr. at 148 – 166). 

Moreover, because the “best interests” test compares recoveries under the chapter 11 Plan 

to recoveries in a chapter 7 liquidation, the comparison must exclude the effect of outcomes of 

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legal issues existing in both chapter 11 and chapter 7. To make that comparison, recoveries must 

be compared in the two chapters assuming the common legal issues are resolved the same way in 

each chapter. Further, there is no basis to believe that the legal issues would be resolved in any 

different way, whether litigated in chapter 11 or chapter 7. 

The Debtors’ Liquidation Analysis reflects data output from the Distribution Model as of 

December 2003 and summarizes accurately the estimated recoveries to Creditors under a 

hypothetical chapter 7, based upon input provided by the sources listed in Debtors’ Trial Ex. 24. 

(Debtors’ Trial Ex. 9; Bingham Affidavit 89; 6/7/04 Zelin Tr. at 37:15 – 24; Debtors’ Trial Ex. 

24 at 23, errata 127, 128 n.1, 129 n.1). Moreover, the well-diligenced Distribution Model 

allowed the Debtors to evaluate the various potential inter-estate issues that might exist and 

determine the economic consequences of various positions and the potential impact on creditor 

recoveries. (Debtors’ Trial Ex. 24 at 132). The assumptions used in Debtors’ Trial Exhibits 9, 

24, 25 and 26 were reasonable. 

Exhibits AV2A through AV2Q are printed portions of a section of the Blackstone Model 

related to ENA and are not “stand-alone” liquidation analyses. (6/4//04 Bingham, Tr. at 9:20 – 

23). The Debtors have not performed and did not withhold any liquidation analyses that should 

have been provided in the Disclosure Statement. (6/4/04 Bingham Tr. at 11:23 – 12:7; 1/6/04 

Hearing Tr. at 150 – 155). 

The Blackstone Report includes a sensitivity analysis wherein six alternative outputs 

were generated using the Distribution Model. (Debtors’ Trial Ex. 24 at errata 155). These 

different scenarios demonstrate the flexibility of the model. (Debtors’ Trial Ex. 24 at errata 155). 

In addition, the different scenarios reflect variations on the terms of the global compromise 

assuming different outcomes on certain substantive issues. (6/7/04 Zelin Tr. at 30:25 – 31:6). 

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For example, Sensitivity 1 assumes that ENE owned all disputed assets and that all of the 

ownership disputes between ENE and ENA were resolved in ENE’s favor. (Debtors’ Trial Ex. 

24 at errata 155; 6/7/04 Zelin Tr. at 33:4 – 13, 138:22 – 139:2). Such resolution is consistent 

with the Debtors’ books and records as of the Initial Petition Date. (6/7/04 Zelin Tr. at 33:4 – 

13). Under Sensitivity 1 (Stand-Alone), the recovery for ENA creditors under a chapter 11 plan 

would be only 17.4%, as compared to a Plan recovery of 20.1%. (Debtors’ Trial Ex. 23 at errata 

155). 

In order to illustrate the calculation of the 30/70 distribution formula, Appendix C to the 

Disclosure Statement sets forth the assets and liabilities of each Debtor on a “stand alone basis,” 

which assumes all elements of the global compromise exist except for the 30/70 split. As a 

result, except for the three assumptions for liquidation described by Messrs. Bingham and Zelin 

in their testimony, detailed information regarding the assets and liabilities for each Debtor in a 

liquidation are disclosed in Appendix C. (Debtors’ Trial Ex. 8; Bingham Affidavit 15). 

Exhibit AV1 represents one part of the calculation to determine recovery under the 

distribution model with all of the global compromise assumptions in place except the 30/70 

distribution formula for purposes of determining the 70% portion of the formula. All of the 

testimony supported the finding that this calculation could never represent a stand-alone analysis 

of each estate because the settlements embodied in the global compromise were contingent upon 

the agreement as to the 30/70 distribution formula, the absence of which would undo all of the 

other settlements. The 30/70 distribution formula is an integral and necessary part of the global 

settlement. 

Exhibit AV1 does not contain a complete analysis of the assets and liabilities of ENA on 

a stand-alone basis. Messrs. Bingham and Zelin testified Ex. AV1 is a partial printout of a 

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section of the Blackstone Model related to ENA that was prepared on a liquidation basis and 

used as one of the components for the calculation reflected on Appendix L of the Disclosure 

Statement. (6/4/04 Bingham Tr. at 9:9 – 19; 6/7/04 Zelin Tr. at 68:21 – 23). Additionally, Mr. 

Zelin testified that Ex. AV1 “doesn’t take the Liquidation Analysis all the way through to what’s 

presented in Appendix L.” (6/7/04 Zelin Tr. at 74:20 – 22). 

The three primary assumptions that account for the difference between the Plan recovery 

percentage in Appendix C and the liquidation recoveries in Appendix L are (a) the diminished 

values of CrossCountry, PGE and Prisma, (b) the projected $100 million in incremental overhead 

assumed in a consensual or “best case scenario” liquidation, and (c) the 10% present-value 

discount for a projected one-year delay in distributions. (6/7/04 Zelin Tr. at 75:10 – 76:2; 

Bingham Affidavit 90). 

The $100 million adjustment to post-confirmation expenses (January 1, 2004 – December 

31, 2006) is derived by comparing the estimated expenses set forth in Appendix G to the 

Disclosure Statement ($850,899,000) to the expenses set forth in Appendix L to the Disclosure 

Statement ($950,900,000). (Debtors’ Trial Exs. 2 and 9). 

The estimates included in Appendix L do not include, inter alia, the additional potential 

costs and further delays to distribution that would result from (a) the appointment of separate 

chapter 7 trustees for multiple Enron estates and such trustees retaining their own separate legal 

and financial professionals, (b) any requests for a trustee election under section 702 of the 

Bankruptcy Code, 17 (c) any requests for the appointment of one or more Creditors’ Committees 

pursuant to section 705 of the Bankruptcy Code, and (d) any increase in the number of, or 

17 While the Debtors did not reference the consideration raised by section 702 of the Bankruptcy Code as a possible 

consequence in the absence of the global compromise, given the history of these cases, it is extremely likely that, 

even with a consensually agreed to single trustee, some creditor of one of the 177 Debtors would seek an election 

under section 702 of the Bankruptcy Code. 

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change to the nature of, inter-estate litigations. (6/7/04 Zelin Tr. at 40:7 – 19; Debtors’ Trial Ex. 

24 at 128 n.1). 

The timing of the occurrence of the Effective Date will not impact the conclusion set 

forth in Appendix L that Creditors will receive more under the Plan than they would in a case 

under chapter 7. (6/4/04 Bingham Tr. at 35:14 – 22). In addition, changes in the value of assets 

(including through litigation recoveries) and liabilities prior to the Effective Date will also not 

impact such conclusion set forth in Appendix L to the Disclosure Statement. (6/4/04 Bingham 

Tr. at 26:22 – 27:15, 34:12 – 36:22). 

The structure of the Plan has given, and will continue to give, the Debtors additional 

negotiating leverage when negotiating with potential purchasers of the platform entities—PGE, 

CrossCountry and Prisma. If the proposed purchase price is too low, the Debtors have the option 

of not selling the entity and instead spinning the stock out to Creditors. (6/7/04 Zelin Tr. at 

42:13 – 43:24; 6/8/04 Cooper Tr. at 19:12 – 21:7; Debtors’ Trial Exs. 24 and 25). 

Based on this evidence, which the Court finds credible and unrebutted, the value to be 

distributed to Creditors on account of Allowed Claims under the Plan, as of the Effective Date, is 

not less than the amount that such holder would receive or retain if the Debtors, or any of them, 

were liquidated under chapter 7. 

Absent the global compromise, Creditors would receive smaller distributions as a result 

of the delay and litigation that would occur without the global compromise. (6/8/04 Cooper Tr. 

at 33:16 – 34:5; Debtors’ Trial Ex. 26). 

Appendix L represents the “best case scenario”, assuming that one chapter 7 trustee, after 

doing the necessary diligence, would conclude that the global compromise is the best way of 

distributing value to Creditors most expeditiously and without protracted inter-estate litigation. 

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(6/7/04 Zelin Tr. at 39:11 – 40:3; Debtors’ Trial Ex. 24 at 128 n.1, 129 n.1). Under the more 

realistic scenario of multiple chapter 7 cases for thirteen (13) different Debtors, it would cost 

approximately $1.25 billion to litigate the issues resolved by the global compromise, thereby 

substantially reducing the value available for distributions to Creditors as compared with the 

“best case scenario.” (Debtors’ Trial Ex. 26; 6/8/04 Cooper Tr. at 32:22 – 34:9, 60:14 – 61:4). 

In addition, as found under the “best case scenario” there would likely be further costs, delay and 

disruption if, as previously discussed, a trustee election were sought under section 702 of the 

Bankruptcy Code. 

Throughout the Confirmation Hearing, the CLN Noteholders posited that a so-called 

“liquidation analysis” should be with the assumption that only ENA converted to chapter 7 to 

liquidate, but all the other Debtors confirmed the Plan, including the global compromise for all 

Debtors other than ENA. This theory is illogical and contrary to the entirety of the record before 

the Court. As discussed in detail throughout these findings of fact, the interrelationships between 

ENA, ENE and other Debtors are evidenced by, inter alia, the asset disputes, allowance of 

Intercompany Claims, settlement of substantive consolidation and resolution of other similar 

issues through the global compromise. Moreover, Messrs. Cooper and Zelin both testified as to 

the impossibility of this concept in these Chapter 11 Cases. (6/7/04 Zelin Tr. at 173:18 – 174:15; 

6/8/04 Cooper Tr. at 155:5 – 17). 

If the global compromise is not approved, the issue of intercompany accounts would be 

re-opened, and the accuracy of the balances, the appropriateness of the historical allocations of 

overhead to operating entities, and the historical absorption of non-allocated overhead by ENE 

would have to be determined. Additionally, there would have to be a resolution regarding recharacterization 

of the intercompany accounts as debt or equity, the impact of various debtor 

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agreements would have to be reviewed and evaluated for appropriateness and a series of 

ownership issues by way of contested assets would have to be resolved. (6/8/04 Cooper Tr. at 

35:3 – 20). 

If the issues that are the subject of the global compromise were to be litigated, the key 

inter-Debtor issues that would most likely be investigated and litigated include intercompany 

issues, including the accuracy of intercompany accounts and balances, the appropriateness of 

historical overhead allocations, potential re-characterization of intercompany accounts as debt or 

equity, the impact of various inter-Debtor agreements and the resolution of asset-ownership 

issues. In addition to these intercompany issues, absent the global compromise, the Debtors 

would have to address the propriety of substantive consolidation, ownership of third-party 

preference and fraudulent conveyance actions, timing of insolvency of each Debtor, impact and 

validity of the master netting agreements and other contractual arrangements, impact of RMTC, 

ownership of the aiding and abetting actions against third parties and investigation and pursuit of 

potential intercompany fraud actions. (6/8/04 Cooper Tr. at 34:10 – 36:15). 

There will be an increase in cost to obtain new counsel and professional advisors for the 

Debtors if separate representation is requested for certain Debtors. (6/8/04 Cooper Tr. at 37:3 – 

20). 

Absent confirmation of the Plan and approval of the global compromise, conversion to 

chapter 7 could well require 13 chapter 7 trustees, 13 law firms, 13 financial advisors and 

additional conflict attorneys. Estates for which separate representation would be needed most 

likely include ENE, ENA, EPMI, ENGMC, EESI, EEMC, EESO, EBS (Broadband), ECTRIC, 

EDF, ETS, NEPCO and the Wind Entities. (6/8/04 Cooper Tr. at 37:16 – 38:9; Debtors’ Trial 

Ex. 26). 

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The trustee and attorneys for each chapter 7 Debtor would have to (a) familiarize 

themselves with the state of affairs of the Debtor, including locating and organizing resources to 

manage the day-to-day businesses, (b) assess the current litigation and claims, (c) establish all of 

the business processes necessary to manage the estate, (d) undertake intercompany evaluations, 

and (e) file and prosecute litigation. (6/8/04 Cooper Tr. at 39:3 – 15). 

Mr. Cooper assumed that, in the interest of efficiency, the Court would appoint an expert 

to review, evaluate, and, if necessary, correct the intercompany accounts. (6/8/04 Cooper Tr. at 

38:23 – 39:2). This assumption is reasonable, as well as conservative, in its impact on costs. 

FTI estimated that review and evaluation of intercompany accounts would cost 

approximately $25 million (6/8/04 Cooper Tr. at 42:7 – 10). Based upon this estimate, if a 

review of those intercompany accounts had to go back to 1997, the cost of a court-appointed 

expert would be at least $200 million. (6/8/04 Cooper Tr. at 39:25 – 40:6, 41:19 – 42:11). 

A credible estimate of the legal, financial and other professional fees that would be 

incurred in the absence of the global compromise would be as follows: 

(a) 

(b) 

$5 million per month for ENE for the first 36 months, $2.5 million per month for 

the next 24 months and $1.3 million per month for the next 24 months, for a total 

of $270 million over and above the day-to-day operations of the estate and the 

budget for post-confirmation operations; 

$2.5 million per month for ENA for the first 36 months, $1.3 million per month 

for the next 24 months and $0.6 million per month for the next 24 months, for a 

total of $135 million over and above the day-to-day operations of the estate and 

the budget for post-confirmation operations; 

(c) $2 million per month for the combined Wind Entities for the first 36 months, $1 

million per month for the next 24 months and $0.5 million per month for the next 

24 months, for a total of $108 million over and above the day-to-day operations of 

the estate and the budget for post-confirmation operations; 

(d) 

$10 million per month for the 10 other estates for the first 36 months, $5 million 

per month for the next 24 months and $2.5 million per month for the next 24 

months, for a total of $540 million over and above the day-to-day operations of 

the estate and the budget for post-confirmation operations; 

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(e) 

(f) 

The total legal, financial and other professional fees incurred by the Debtors in the 

absence of the global compromise would amount to an estimated $1.053 billion, 

with an additional estimated $200 million for a Court-appointed expert to perform 

a retrospective analysis of intercompany claims going back to 1997; and 

The grand total in legal, financial and other professional fees that would be 

incurred in the absence of the global compromise would be an estimated $1.253 

billion. 

(6/8/04 Cooper Tr. at 40:16 – 42:4; Debtors’ Trial Ex. 26). Absent the global compromise, the 

Debtors assembled a plausible time estimate as follows: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

2 to 3 months to engage trustees and professionals; 

2 to 4 months to reach agreement on Court-appointed expert on intercompany 

accounts and the scope of the expert’s review; 

Up to 18 months for investigation by the expert; 

8 to 12 months of discovery following the expert’s report; 

1 to 2 years of trying 100 – 200 causes of action; and 

1 to 2 years of appeals if only half of the litigation outcomes are unsatisfactory to 

specific plaintiffs. 

(6/8/04 Cooper Tr. at 39:24 – 40:15). These estimates are reasonable. 18 

Practical considerations that would make conversion to a chapter 7 in the absence of the 

global compromise difficult and costly include finding or developing human resources systems, 

cash management systems, internal tax advice and internal claims management on a standalone 

basis for each Debtor. (6/8/04 Cooper Tr. at 42:14 – 23). 

The $1.25 billion estimated cost absent the global compromise did not include all of the 

other day-to-day costs of running the Debtors’ estates. (6/8/04 Cooper Tr. at 42:12 – 23). These 

18 These cost and timing estimates were developed by Mr. Cooper after his deposition testimony. They were not 

submitted in any documentary form prior to the confirmation hearing. The Court recognizes that the objectors that 

cross-examined Mr. Cooper at the hearing with respect to these estimates did not have an opportunity to prepare for 

such examination prior to the hearing because these estimates were first raised by Mr. Cooper at the Hearing. 

However, upon hearing these estimates, the objectors relied on their cross-examination of Mr. Cooper and did not 

seek leave to present any contrary evidence regarding the assumptions that underlaid his estimates. The Court finds 

that the premises upon which Mr. Cooper relies and the associated estimates are reasonable. 

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expenses were allocated in accordance with the post-confirmation overhead allocation formula. 

(6/8/04 Cooper Tr. at 43:21 – 25). 

12). Global Compromise Is Fair and Reasonable 

The divergence in Creditor viewpoints demonstrates that the resolution reached in the 

global compromise falls well within the reasonable range of litigation outcomes. The Court has 

taken judicial notice that, based on the objections, that neither ENE Creditors nor ENA Creditors 

are fully satisfied with the results. The fact is that, absent the global compromise, individual 

Creditors would be mounting offensives to promote their individual agendas and these Chapter 

11 Cases would devolve into full-scale estate-wide litigation. (See, e.g., Docket Nos. 16649, 

16650, 16692, 16701, 16702, 16707, 17236, 17244, 17937, 18422, 18426, 18483 and 18490). 

Based on the foregoing, the benefits obtained from avoiding estate-wide litigation by 

Creditors with conflicting interests are compelling and, absent the global compromise, litigation 

of the complex inter-estate issues resolved by the global compromise would have resulted in 

substantially lower recoveries for virtually all Creditors. (Debtors’ Trial Ex. 26). 

The settlement reflected in the global compromise is supported by sound business 

justifications. Moreover, the Court has presided over these Chapter 11 Cases for more than two 

and a half years, and based on the entirety of the record in these proceedings, has independently 

evaluated and assessed the merits of the issues resolved by the global compromise and concludes 

that the settlements embodied therein are fair, reasonable, in the best interests of the Debtors’ 

estates and well within the range of reasonable litigation outcomes. 

The benefits of the global compromise for Creditors outweigh the cost. The global 

compromise benefits all Creditors by, inter alia, reducing the potential cost of litigation, 

including the cost of performing diligence regarding a multitude of underlying facts and 

transactions, the professional fees associated with litigation, the delay and uncertainty associated 

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with litigation, the prolonged cost of administering the estates, the resulting depletion of the 

estates’ assets, as well as Creditors’ lost time-value of money resulting from later distributions. 

The global compromise will save Creditors hundreds of millions of dollars and give them the 

certainty of distributions now, rather than the uncertainty of any future distributions, which will 

be greatly reduced after extended estate-wide litigation. Most importantly, however, the global 

compromise provides Creditors a fair and reasonable alternative to litigation, which, in the 

context of the Plan, is supported by the Creditors’ Committee and the ENA Examiner, who has 

fiduciary duties and obligations to the ENA estate, in the context of the Plan and the result it 

reaches falls well within the range of possible litigation outcomes. 

Other than cross-examination of the witnesses to challenge the reliability of the premises 

put forth by the Debtors’ witnesses, there was no independent evidence presented by any 

objector refuting any of the Debtors’ contentions. 

No evidence was submitted by any objector to rebut the Debtors’ evidence concerning 

the benefits of the global compromise and that the global compromise and Plan are in the best 

interest of creditors. 

C. Other Plan Considerations 

1). Classification and Treatment of Claims 

The Plan provides for separate classification of Claims and Equity Interests in 385 

Classes 19 based upon differences in the legal nature and/or priority of such Claims and Equity 

Interests, or in order to implement the provisions of the global compromise. 

(a) 

Class 1 provides for the separate classification of the Priority Non-Tax Claims. 

19 Classes 182 and 364 are expected to receive no distributions under the Plan. Similarly, General Unsecured 

Claims Classes 58, 59, and 60 and Convenience Claims Classes 246, 247 and 248 have been rendered inoperative 

given the severance of the Dabhol Debtors from these Chapter 11 Cases. 

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(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

(i) 

(j) 

(k) 

Class 2 provides for the separate classification of the Secured Claims. 

Classes 3 through 182 provide for the separate classification of the General 

Unsecured Claims on a per Debtor basis. 

Class 183 provides for the separate classification of the Enron Subordinated 

Debenture Claims. 

Class 184 provides for the separate classification of the Enron TOPRS Debenture 

Claims. 

Classes 185 through 189 provide for the separate classification for Guaranty 

Claims against Enron, Wind, ENA, ACFI and EPC, respectively. 

Classes 191 – 372 provide for the separate classification of Convenience Claims 

on a per Debtor basis. 

Classes 373 through 375 provide for the separate classification of the 

Convenience ENA Guaranty Claims, the Convenience ACFI Guaranty Claims 

and the Convenience EPC Guaranty Claims. 

Classes 376 through 382 provide for the separate classification of the 

Subordinated Claims. 

Classes 383 and 384 provide for the separate classification of the Enron Preferred 

Equity Interests and Enron Common Equity Interest, respectively. 

Class 385 provides for the separate classification of Other Equity Interests. 

(Bingham Affidavit 73; Debtors’ Trial Ex. 1, Art. IV). 

As required by section 1123(a)(1) of the Bankruptcy Code, Article IV of the Plan 

designates Classes of Claims and Classes of Equity Interests. As required by sections 1123(a)(2) 

and 1123(a)(3) of the Bankruptcy Code, Article XXX of the Plan specifies whether each Class of 

Claims and Equity Interests is impaired or unimpaired under the Plan. As provided by Articles 

V through XX and XXX of the Plan, Classes 1 and 2 are rendered unimpaired and Classes 3 

through 385 are impaired or deemed impaired, as contemplated by section 1123(b)(1). As 

required by section 1123(a)(4) of the Bankruptcy Code, Articles V through XXI of the Plan 

specify the treatment of each Class or Equity Interest in each particular Class and provide for the 

same as the treatment of each other Claim or Equity Interest in such Class. 

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The reason for the separate classification for the Enron Guaranty Claims is to give effect 

to the global compromise embodied in the Plan. (6/3/04 p.m. Bingham Tr. at 66:18 – 67:6; 

Bingham Affidavit 73). Given that guaranties presumably were made by the Debtors with full 

knowledge of each Debtor’s corporate separateness, the Debtors believe the case for total 

substantive consolidation and its typical elimination of guaranty claims altogether is subject to 

differing interpretations and a recognition of 50% of Allowed Guaranty Claims in the 30% 

scenario is warranted. (Bingham Affidavit 39; 6/4/04 Bingham Tr. at 14:2 – 16:19). 

The separate classification of the Convenience Claims is based on valid business, factual 

and legal reasons and is therefore reasonable and proper under the Plan as it avoids thousands of 

Creditors holding fractional interests in securities in the three business platforms of PGE, Prisma 

and CrossCountry, if they are not sold prior to distributions under the Plan. (Debtors’ Trial Ex. 

1, Article XVI). The Convenience Claims within each Convenience Class are substantially 

similar and the separate classification of the Convenience Claims was for purposes of 

convenience of implementing the Plan, not for gerrymandering of votes. 

Valid business, factual and legal reasons exist for the separate classification of the 

various Classes of Claims and Equity Interest created under the Plan and such Classes do not 

unfairly discriminate between or among holders of Claims and Equity Interest. The Debtors’ 

classification scheme has a rational basis because it is based upon the respective legal rights of 

each holder of a Claim or Equity Interest, as implemented in the Plan. For example, Class 185 

(Enron Guaranty Claims) is classified separately from Class 4 (ENE General Unsecured) in order 

to implement the distribution and treatment of provisions of the global compromise. The 

classification scheme was not proposed to create a consenting impaired class and, thereby, 

manipulate class voting. (Bingham Affidavit 73). Moreover, both Class 4 and Class 185 voted 

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to accept the Plan. (Debtors’ Trial Ex. 19). Thus, the Plan meets the requirements of section 

1122(a) of the Bankruptcy Code. 

Pursuant to the global compromise and the Plan, a Creditor holding a Guaranty Claim 

will receive, in addition to what it will receive on account of its corresponding Allowed General 

Unsecured Claim, a distribution that includes (a) 70% of the distribution such holder would 

receive if the Debtors were not substantively consolidated, and (b) 30% of the distribution such 

holder would receive if all the Debtors’ estates, other than the estate of the Portland Debtors, 

were substantively consolidated, with one adjustment. Because guaranty claims receive zero in a 

substantive consolidation, the Guaranty Claims here would have received 70% of their 

distribution without consolidation and 30% of zero. The global compromise, however, provides 

they get 70% of their distribution without consolidation plus one-half the 30% distribution they 

would receive if their allowed guaranty claims were not eliminated in a substantive 

consolidation. Thus, the treatment afforded to such Claims is distinct from that provided to 

Allowed General Unsecured Claims. (Bingham Affidavit 39 and 63). 

Claims in Classes 376 through 382 relating to Subordinated Claims shall be determined 

pursuant to a Final Order in accordance with the provisions of the Bankruptcy Code under the 

principles of equitable subordination or otherwise. (Debtors’ Trial Ex. 1, § 1.179). The Plan 

provides the Court with flexibility to determine the amount and extent of subordination of any 

claim. (See, e.g., Debtors’ Trial Ex. 1, § 1.180). 

Schedule S of the Plan Supplement lists the types of claims the Debtors believe are 

entitled to the benefits of subordination according to the provisions of the underlying documents. 

(Bingham Affidavit 72; Debtors’ Trial Ex. 4, Schedule S). The rights of the Debtors, except as 

otherwise expressly provided in the Baupost Stipulation, and of any other party in interest in 

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these Chapter 11 Cases are expressly reserved until further order of the Court finally approving 

the types of claims entitled to the benefits of subordination as currently described in Schedule S 

of the Plan Supplement. (5/28/04 Hearing Tr. at 8:15 – 21). 


concerning classification and treatment of claims. 

2). Valuation of Platform Entities 

The Plan provides that the value of the Prisma Common Stock, CrossCountry Common 

Equity, Existing PGE Common Stock or PGE Common Stock, as the case may be, will be 

determined by the Court as of the Confirmation Date, as the same may be increased or reduced in 

accordance with the provisions of the Plan. To the extent that all of the Prisma Common Stock, 

CrossCountry Common Equity, Existing PGE Common Stock or PGE Common Stock, as the 

case may be, is converted into Cash, one or more promissory notes, equity interests of the 

purchaser thereof or such other form of consideration prior to the later to occur of (a) the 

commencement of distributions with respect thereto, and (b) the Effective Date, the value shall 

be such amount realized in Cash or the then-fair market value of the consideration received as 

determined by the Court. To the extent that a portion, but not all, of the Prisma Common Stock, 

CrossCountry Common Equity, Existing PGE Common Stock or PGE Common Stock, as the 

case may be, is converted into Cash, one or more promissory notes, equity interests of the 

purchaser thereof or such other form of consideration prior to the later to occur of (a) the 

commencement of distributions with respect thereto, and (b) the Effective Date, the value of such 

Prisma Common Stock, CrossCountry Common Equity, Existing PGE Common Stock or PGE 

Common Stock, as the case may be, the value shall be equal to the sum of (i) the Cash or thenfair 

market value of such consideration as determined by the Court realized from such 

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disposition plus, (ii) the product of (y) such consideration realized per share upon such 

disposition of Prisma Common Stock, CrossCountry Common Equity, Existing PGE Common 

Stock or PGE Common Stock, as the case may be, times (z) the number of shares Prisma 

Common Stock, CrossCountry Common Equity, Existing PGE Common Stock or PGE Common 

Stock, respectively, remaining with the Debtors immediately following such disposition. 

(Debtors’ Trial Ex. 1, § 1.264). 

The Debtors’ expert, Steven Zelin, submitted unopposed expert opinion on valuation of 

PGE, CrossCountry and Prisma. Hence, pursuant to the Court’s prior ruling, Debtors’ Trial 

Exhibits 24 and 25 (the Blackstone Report and Blackstone Supplement) were admitted into 

evidence and the going concern valuation of PGE, CrossCountry and Prisma as set forth therein 

was uncontroverted and accepted by the Court. (Docket No. 18616, page 2). The evidence of 

valuation as to the three platform businesses of the Debtors, as set forth in the Blackstone Report, 

uses valuation dates during and at year-end 2003. (Debtors’ Trial Ex. 24 at 15 – 17, errata 55, 85 

and 125). 

Based on the Blackstone Report, the evidence of the following findings is unrebutted and 

accepted by the Court: 

(a) 

(b) 

The indicative equity value range for PGE set forth in Debtors’ Trial Exhibit 24 is 

$1.132 billion to $1.413 billion, with a midpoint of $1.273 billion. (Debtors’ 

Trial Ex. 24 at errata 55). 

The indicative equity value range for CrossCountry set forth in Debtors’ Trial 

Exhibit 24 is $1.417 billion to $1.576 billion with a midpoint of $1.497 billion. 

(Debtors’ Trial Ex. 25 at 85). 

(c) The indicative equity value range for Prisma set forth in Debtors’ Trial Exhibit 24 

is $713 million to $918 million with a midpoint of $815 million. (Debtors’ Trial 

Ex. 24 at 125). 

The Blackstone Report Supplement (Debtors’ Trial Ex. 25) was provided solely to 

provide updated “bring-down” valuations of PGE, CrossCountry and Prisma from the May 4, 

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2004 Blackstone Report. (Debtors’ Trial Ex. 25 at 6). Although contracts of sale have been 

entered into for PGE and CrossCountry, because such transactions have not yet closed, the 

Blackstone valuations of these entities are independent of the contract prices associated with 

these transactions. (Debtors’ Trial Ex. 25 at 6 n.1). 

Based on the Blackstone Report Supplement, dated May 31, 2004, the evidence of the 

following findings is unrebutted and accepted by the Court: 

(a) 

(b) 

The indicative equity value range for PGE set forth in Debtors’ Trial Exhibit 25 is 

$1.166 billion to $1.459 billion, with a midpoint of $1.313 billion. (Debtors’ 

Trial Ex. 25 at 18). 

The indicative equity value range for CrossCountry set forth in Debtors’ Trial 

Exhibit 25 is $1.614 billion to $1.770 billion with a midpoint of $1.692 billion. 

(Debtors’ Trial Ex. 25 at 36). 

(c) The indicative equity value range for Prisma set forth in Debtors’ Trial Exhibit 25 

is $776 million to $989 million with a midpoint of $882 million. (Debtors’ Trial 

Ex. 25 at 41). 

The aggregate increase in the midpoint indicative equity value ranges of PGE, CrossCountry and 

Prisma resulting from the bring down of the valuations of PGE, CrossCountry and Prisma to 

May 31, 2004 is $302 million. (Debtors’ Trial Ex. 25 at 7). 

Using the midpoint indicative equity value for each of the Operating Entities, the Court 

has ample evidence to conclude that: 

(a) 

The indicative equity value of PGE is $1.312 billion and, assuming 62.5 million 

shares of PGE Common Stock will be issued pursuant to the Plan, the value of 

each share of PGE Common Stock will be $21.008. (Debtors’ Trial Exhibit 1, § 

1.186; Debtors’ Trial Ex. 25 at 18; 6/7/04 Zelin Tr. at 128:7 – 11). 

(b) The indicative equity value of CrossCountry is $1.692 billion and, assuming 75.0 

million shares of common equity will be issued pursuant to the Plan, the value of 

each share of CrossCountry Common Stock will be $22.56 per share. (Debtors’ 

Trial Ex. 1, § 1.68; Debtors’ Trial Ex. 25 at 36:20). 

20 In the event that CrossCountry is an Entity other than a corporation and assuming 75.0 million units of common 

equity of such Entity will be issued pursuant to the Plan, the value of each such unit of common equity of 

CrossCountry will be $22.56 per unit. (Debtors’ Trial Ex. 1, § 1.68). 

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(c) 

The indicative equity value of Prisma is $882 million and, assuming 40.0 million 

shares of Prisma Common Stock will be issued pursuant to the Plan, the value of 

each share of Prisma Common Stock will be $22.05. (Debtors’ Trial Ex. 1, § 

1.209; Debtors’ Trial Ex. 25, at 41). 

As the testimony regarding the valuation of PGE, CrossCountry and Prisma was neither 

questioned nor refuted by any other evidence or party during the Confirmation Hearing, the 

Court accepts the Blackstone Report, Blackstone Report Supplement and Mr. Zelin’s testimony 

as conclusive evidence of the value of these assets for the purposes of Plan confirmation. 

If the pending sale contracts for PGE and CrossCountry close, then the going concern 

value and the liquidation value would be the same. (6/7/04 Zelin Tr. at 105:16 – 106:10). 

However, as stated by Mr. Zelin, there are certain downward adjustments that would more likely 

occur in a chapter 7 contract closing on PGE and CrossCountry than a chapter 11 contract 

closing. (6/7/04 Zelin Tr. at 44:18 – 46:07; 90:06 – 91:19; 206:20 – 207:07). 

3). Cramdown 

The Distribution Model flows the asset values through a traditional recovery “waterfall,” 

paying senior-most Creditors first and allocating value consistent with Bankruptcy Code 

priorities. (Debtors’ Trial Ex. 24 at 131). The Distribution Model assumes that priority claims 

are paid in full prior to distributions to any holders of Allowed General Unsecured Claims. 

(6/7/04 Zelin Tr. at 298:13 – 24). The Distribution Model is consistent with the absolute priority 

rule. (6/7/04 Zelin Tr. at 260:24 – 261:3). 

The Plan delineates 385 separate classes of Claims and Equity Interests. Of these, Class 

1 (Priority Non-Tax Claims) and Class 2 (Secured Claims) will be paid in full. Classes 183 

(Enron Subordinated Debenture Claims), 184 (Enron TOPRS Debenture Claims) and 376 

through 385 (Subordinated Claims, Enron Preferred Equity Interests, Enron Common Equity 

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Interests and Other Equity Interests) are estimated to receive no distributions under the Plan. 

Creditors in Classes 3 through 375 (excepting Classes 182 and 364) 21 are estimated to receive 

distributions ranging from 5.1% to 75.7% of the allowed amount of their claims. The Plan also 

provides for payment in full of Allowed Administrative Expense Claims and Allowed Priority 

Tax Claims. (Bingham Affidavit 64; Debtors’ Trial Ex. 1, §§ 3.1 and 3.3). No party has 

objected to the cramdown of the Classes of Equity Interests that are deemed to reject the Plan. 


Upon approval of the global compromise embodied in the Plan and set forth in the Global 

Compromise Motion, all Classes of impaired Claims and Equity Interests either have accepted 

the Plan or will receive fair and equitable treatment in accordance with section 1129(b) of the 

Bankruptcy Code. (Bingham Affidavit 79). 

The Debtors’ estimated recoveries on Allowed Equity Interests are reflected in the 

Disclosure Statement as $0. (Debtors’ Trial Ex. 2 at 90). Consistent with the fact that it is 

anticipated that holders of Allowed Equity Interests will not receive or retain any property under 

the Plan in respect of such interests, notices of non-voting status were sent to the holders of these 

interests and they were deemed to have rejected the Plan. (Debtors’ Trial Ex. 3 at 4 – 5, J). 

Nevertheless, in the event that all Allowed Claims are paid in full, with interest, the Plan 

provides that excess Plan Currency and Trust Interests are available for redistribution to holders 

of Allowed Subordinated Claims, Enron Preferred Equity Interests, Enron Common Equity 

Interests and Other Equity Interests. (Debtors’ Trial Ex. 1, §§ 17.2, 18.2, 19.2 and 20.1). Under 

21 Classes 182 and 364 are expected to receive no distributions under the Plan. Similarly, General Unsecured 

Claims Classes 58, 59, and 60 and Convenience Claims Classes 246, 247, and 248 have been rendered inoperative 

given the severance of the Dabhol Debtors from these Chapter 11 Cases. 

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the Plan, no assets are transferred into the trusts for equity interests until all Allowed Claims are 

paid in full with interest. (Debtors’ Trial Ex. 1, §§ 18.2 and 19.2). 


relating to cramdown of the Plan pursuant to section 1129(b) of the Bankruptcy Code. 

4). Good Faith 

The Plan has been proposed in good faith and not by any means forbidden by law. 

(Bingham Affidavit 74). The purposes of the Plan, including the disposition or distribution of 

all of the Debtors’ assets and the prosecution of litigation for the benefit of the Debtors’ estates, 

is appropriate and value-maximizing. The global compromise embodied in the Plan and the 

Global Compromise Motion was the result of good faith negotiations between the Debtors, the 

Creditors’ Committee and the ENA Examiner. (Bingham Affidavit 16 – 18, 20, 22, 23; 

Debtors’ Trial Exs. 13 – 18). 

No credible evidence has been presented by any objector sufficient to rebut the Debtors’ 

evidence that the voting and solicitation process, including the entry of stipulations and orders 

affecting voting and ballots cast on the Plan, was conducted in good faith. No evidence was 

submitted by any objector to rebut the Debtors’ evidence relating to the good faith nature of the 

Plan and the negotiations leading to the Plan and the voting process. 

5). Wind-Down and Post-Confirmation Governance 

Except as provided in the Plan, confirmation of the Plan is not likely to be followed by 

liquidation or the need for further financial reorganization of the Debtors. (Bingham Affidavit 

83). 

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Article XXXVII of the Plan provides that the occurrence of the Effective Date and the 

substantial consummation of the Plan are subject to satisfaction of the following conditions 

precedent: 

(a) 

(b) 

(c) 

(d) 

(e) 

Entry of the Confirmation Order: The Clerk of the Court shall have entered the 

Confirmation Order, in form and substance reasonably satisfactory to the Debtors 

and the Creditors’ Committee and the effectiveness of which shall not have been 

stayed ten (10) days following the entry thereof. 

Execution of Documents; Other Actions: All other actions and documents 

necessary to implement the Plan shall have been effected or executed. 

Prisma Consents Obtained: The requisite consents to the transfer of the Prisma 

Assets to Prisma and the issuance of the Prisma Common Stock have been 

obtained. 

CrossCountry Consents Obtained: The requisite consents to the issuance of the 

CrossCountry Common Equity have been obtained. 

PGE Approval: The requisite consents for the issuance of the PGE Common 

Stock have been obtained. 

(Debtors’ Trial Ex. 1, § 37.1). 

The Plan also provides that, to the extent practicable and legally permissible, each of the 

above conditions precedent may be waived, in whole or in part, by the Debtors with the consent 

of the Creditors’ Committee. (Debtors’ Trial Ex. 1, § 37.2). 

As required by section 1123(a)(5), Articles XII through XLI of the Plan provide adequate 

means for implementation of the Plan through, inter alia, issuance and distribution of Plan 

Securities, creation of the various trusts, transfer of certain assets to the trusts and disbursement 

of funds to certain parties. (Debtors’ Trial Ex. 1, Arts. XXII through XXXII). 

Upon satisfaction of the applicable conditions set forth in Section 32.1(c) of the Plan, 

each of PGE, CrossCountry Distributing Company and Prisma intends to issue Plan Securities 

pursuant to section 1145(a)(1) of the Bankruptcy Code. Each of PGE, CrossCountry 

Distributing Company and Prisma is an “affiliate participating in a joint plan with [each 

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Debtor],” as such phrase is used in section 1145(a)(1) of the Bankruptcy Code, and such issuance 

of each Plan Security pursuant to the Plan will be “in exchange for a claim against, [or] interest 

in . . . [a Debtor],” as such phrase is used in section 1145(a)(1)(A) of the Bankruptcy Code. 

(Debtors’ Trial Ex. 1, §§ 1.193 and 32.1(c); Debtors’ Trial Ex. 24 at 31, 57 – 58 and 87 – 109). 

If formed, each of the Litigation Trust and Special Litigation Trust will constitute a “successor to 

[a Debtor] under the [P]lan,” as such phrase is used in section 1145(a)(1) of the Bankruptcy 

Code and any distribution of Trust Interests pursuant to the Plan will be “in exchange for a claim 

against, [or] interest in . . . [a Debtor],” as such phrase is used in section 1145(a)(1)(A) of the 

Bankruptcy Code. (Debtors’ Trial Ex. 1, §§ 1.88, 22.1 and 23.1). 

On the Effective Date of the Plan, the Reorganized Debtor Plan Administrator will (a) 

facilitate the prosecution or settlement of objections to and estimations of Claims, (b) prosecute 

or settle claims and causes of action held by the Debtors, (c) assist the Litigation Trustee and the 

Special Litigation Trustee in performing their duties, (d) calculate and assist the Disbursing 

Agent in implementing all distributions in accordance with the Plan, (e) file all required tax 

returns and pay taxes and other obligations, (f) report periodically to the Court on the status of 

the Claims resolution process, distributions on Allowed Claims and prosecution of causes of 

action, (g) liquidate the Remaining Assets and provide for the distribution of the net proceeds 

thereof in accordance with the Plan, (h) consult with and provide information to the DCR 

Overseers in connection with the voting or sale of the Plan Securities to be deposited into the 

Disputed Claims reserve, and (i) perform such other responsibilities as may be vested in the 

Reorganized Debtor Administrator pursuant to the Plan, the Reorganized Debtor Plan 

Administration Agreement or Court order, or as necessary and proper to carry out the provisions 

of the Plan. (Bingham Affidavit 93; 6/3/04 p.m. Bingham Tr. at 122:12 – 123:3). 

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As of the Effective Date, the Reorganized Debtor Plan Administrator will be Cooper 

LLC, as the fiduciary responsible for, inter alia, insuring compliance with the Plan pursuant to 

and in accordance with the provisions of the Plan and the Reorganized Debtor Plan 

Administration Agreement, a copy of which was filed as Exhibit O to the Plan Supplement. The 

responsibilities of the Reorganized Debtor Plan Administrator are set forth in the Plan. (Debtors’ 

Trial Ex. 1 at § 36.2; Debtors’ Trial Ex. 4 at Schedule O; Bingham Affidavit 76). The 

Reorganized Debtor Plan Administrator will have responsibility for overseeing the 

administration of the Reorganized Debtors, subject to the supervision of the Board of Directors 

of the Reorganized Debtors. (Bingham Affidavit 66). 

Pursuant to Article XXXV of the Plan and except to the extent that the responsibility for 

the same is vested in the Reorganized Debtor Plan Administrator pursuant to the Reorganized 

Debtor Plan Administration Agreement, the Disbursing Agent shall be empowered to (a) take all 

steps and execute all instruments and documents necessary to effectuate the Plan, (b) make 

distributions contemplated by the Plan, (c) comply with the Plan and the obligations thereunder, 

(d) file all tax returns and pay taxes in connection with the reserves created pursuant to Article 

XVIII of the Plan, and (e) exercise such other powers as may be vested in the Disbursing Agent 

pursuant to order of the Court, pursuant to the Plan, or as deemed by the Disbursing Agent to be 

necessary and proper to implement the provisions of the Plan. (Debtors’ Trial Ex. 1 at § 35.2). 

Pursuant to Article XXII of the Plan, the Litigation Trustee, upon direction by the 

Litigation Trust Board and the exercise of their collective reasonable business judgment, shall, in 

an expeditious but orderly manner, liquidate and convert to Cash the assets of the Litigation 

Trust, make timely distributions and not unduly prolong the duration of the Litigation Trust. The 

liquidation of the Litigation Trust Claims may be accomplished either through the prosecution, 

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compromise and settlement, abandonment or dismissal of any or all claims, rights or causes of 

action, or otherwise. The Litigation Trustee, upon direction by the Litigation Trust Board, shall 

have the absolute right to pursue or not to pursue any and all Litigation Trust Claims as it 

determines is in the best interests of the beneficiaries of the Litigation Trust, and consistent with 

the purposes of the Litigation Trust and shall have no liability for the outcome of its decision 

except for any damages caused by willful misconduct or gross negligence. The Litigation 

Trustee may incur any reasonable and necessary expenses in liquidating and converting the 

assets to Cash and shall be reimbursed in accordance with the provisions of the Litigation Trust 

Agreement. (Debtors’ Trial Ex. 1 at § 22.6(a)). 

The Litigation Trustee shall be named in the Confirmation Order or in the Litigation 

Trust Agreement and shall have the power (a) to prosecute for the benefit of the Litigation Trust 

all claims, rights and causes of action transferred to the Litigation Trust (whether such suits are 

brought in the name of the Litigation Trust or otherwise), and (b) to otherwise perform the 

functions and take the actions provided for or permitted herein or in any other agreement 

executed by the Litigation Trustee pursuant to the Plan. Any and all proceeds generated from 

such claims, rights and causes of action shall be the property of the Litigation Trust. (Debtors’ 

Trial Ex. 1 at § 22.6(b)). 

Pursuant to Article XXIII of the Plan, the Special Litigation Trustee, upon direction by 

the Special Litigation Trust Board and the exercise of their collective reasonable business 

judgment, shall, in an expeditious but orderly manner, liquidate and convert to Cash the assets of 

the Special Litigation Trust, make timely distributions and not unduly prolong the duration of the 

Special Litigation Trust. The liquidation of the Special Litigation Trust Claims may be 

accomplished either through the prosecution, compromise and settlement, abandonment or 

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dismissal of any or all claims, rights or causes of action, or otherwise. The Special Litigation 

Trustee, upon direction by the Special Litigation Trust Board, shall have the absolute right to 

pursue or not to pursue any and all claims, rights or causes of action, as it determines is in the 

best interests of the beneficiaries of the Special Litigation Trust and consistent with the purposes 

of the Special Litigation Trust, and shall have no liability for the outcome of its decision except 

for any damages caused by willful misconduct or gross negligence. The Special Litigation 

Trustee may incur any reasonable and necessary expenses in liquidating and converting the 

assets to Cash. (Debtors’ Trial Ex. 1 at § 23.6(a)). 

The Special Litigation Trustee shall be named in the Confirmation Order or in the Special 

Litigation Trust Agreement and shall have the power (a) to prosecute for the benefit of the 

Special Litigation Trust all claims, rights and causes of action transferred to the Special 

Litigation Trust (whether such suits are brought in the name of the Special Litigation Trust or 

otherwise), and (b) to otherwise perform the functions and take the actions provided for or 

permitted herein or in any other agreement executed by the Special Litigation Trustee pursuant to 

the Plan. Any and all proceeds generated from such claims, rights and causes of action shall be 

the property of the Special Litigation Trust. (Debtors’ Trial Ex. 1 at § 23.6(b)). 

Cooper LLC shall assume the duties of the Reorganized Debtor Plan Administrator and 

the Litigation Trustee (if such trust(s) is (are) formed). (Debtors’ Trial Ex. 4 at Schedule A, 

Schedule B, Schedule O). Mr. Cooper has had extensive prior experience in Chapter 11 

restructurings and informal restructurings spanning 30 years. Mr. Cooper’s experience includes 

the following activities and offices: (a) a founder of what was then Touche Ross's reorganization 

advisory services group; (b) a founder of his own firm with one of his former partners in the 

early '80s and the balance of his career has been with that firm; (c) the chief restructuring officer 

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Pg Pg 221 94 of 163 336 

of the Laidlaw corporation for the last five to seven years; (d) the financial advisor for Morrison 

Knudsen and their successor, the Washington Group; (e) a financial advisor to Sunbeam; and (f) 

the financial advisor to Polaroid. Based on Mr. Cooper’s extensive prior experience with respect 

to restructuring activities, the Court finds that the post-confirmation involvement of Cooper LLC 

is both appropriate and beneficial for the Debtors, their estates and their Creditors. (6/8/04 

Cooper Tr. at 12:15 – 21). 

Pursuant to the Plan and except as set forth in Article XXV therein, the Reorganized 

Debtors will retain all assets not otherwise transferred to the Litigation Trust, the Special 

Litigation Trust, the Severance Settlement Fund Trust, the Operating Trusts, or the Operating 

Entities. (Debtors’ Trial Ex. 2, § VII.C; Debtors’ Trial Ex. 1, §§ 1.219 and 42.1). Remaining 

Assets may include Cash, Claims, avoidance actions and other causes of action against third 

parties on behalf of the Debtors’ estates, proceeds of liquidated assets, the Debtors’ stock in the 

Enron Companies, trading contracts, equity investments, inventory, real property and other 

miscellaneous assets. The winding down of the Debtors’ estates remains a complicated process 

as there are a significant number of individual assets that need to be collected or sold, or 

otherwise handled. (Debtors’ Trial Ex. 2, § VII.C; Debtors’ Trial Ex. 1, §§ 36.2 and 42.1). 

Some of these assets are currently involved in litigation proceedings and/or complex 

cross-ownership structures. In addition, the Reorganized Debtors will have sufficient funds to 

continue to manage the assets until such assets are liquidated, to pursue the litigation and to 

make distributions, in each case, as contemplated by the Plan. (Debtors’ Trial Ex. 2, § VII.C; 

Debtors’ Trial Ex. 1, Art. XXXVI; Debtors’ Trial Ex. 1, § 42.1). As set forth in the Blackstone 

Report, the aggregate assumed value of the Remaining Assets, including Mariner, Sithe and 

Stadacona, was $2.698 billion. The Mariner, Sithe and Stadacona assets have been sold, 

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resulting in a net assumed value of $2.04 billion for the Remaining Assets that have not yet been 

sold. (Debtors’ Trial Ex. 24 at 139 – 141). 

The Debtors intend to ensure that their defined benefit plans are fully funded and that the 

funding will be sufficient to prevent further harm to current employees and retirees. (6/8/04 

Cooper Tr. at 68:4 – 10). The Debtors have begun to take the steps necessary to terminate the 

defined benefit plans pursuant to a standard termination by seeking approval of the board of 

directors, notifying employees, seeking approval of the PBGC and seeking an appropriate tax 

ruling from the Internal Revenue Service. (6/8/04 Cooper Tr. at 96:7 – 12). The Debtors are 

current on their minimum contribution obligations with respect to defined benefit plans and 

premium funding to the PBGC. (Docket No. 15132 at 3 n.3). The Debtors have entered into 

negotiations with the PBGC regarding the amount of shortfalls for the Cash Balance Plan (6/8/04 

Cooper Tr. at 96:13 – 16). The Debtors have the financial means to ensure the full funding of 

such defined benefit plans. (6/8/04 Cooper Tr. at 69:11 – 14). 

The Plan includes provisions designed to streamline the governance and oversight of 

these Chapter 11 Cases, including provisions to appoint a five-member board of directors of 

Reorganized ENE. (Bingham Affidavit 67). The Restated Articles contain a prohibition in the 

charter of a debtor of issuance of non-voting equity securities. (Debtors’ Trial Ex. 4 at Schedule 

Q(1), Section 4.1; Debtors’ Trial Ex. 4 at Schedule Q(1), Art. 4). As required by section 

1123(a)(7), Article XL of the Plan contains provisions with respect to the manner of selection of 

directors of the Reorganized Debtors. (Debtors’ Trial Ex. 1, Art. XL). 

As set forth in the Schedule U and V to the Plan Supplement, filed on March 9, 2004 and 

as modified by the Debtors’ Notice of Modifications to Scheduled Directors, Officers, and 

Insiders, filed on June 2, 2004 (the “Governance Modification,” Docket No. 18841), the Board 

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of Directors of Reorganized ENE shall consist of five individuals, including, Stephen D. Bennett, 

Rick A. Harrington, James R. Latimer, III and John J. Ray, III. Due to previously unforeseen 

obligations and time constraints, one additional director has removed his name from 

consideration regarding the Board of Directors of Reorganized ENE. (Bingham Affidavit 76; 

Docket No. 18841). If the Debtors select a replacement person during the period prior to the 

Effective Date, such selection shall be made in a manner consistent with the provisions of 

Section 40.1 of the Plan and the Debtors shall file a notice thereof with the Court. If the Debtors 

select a replacement person after the Effective Date, such selection shall be made in accordance 

with the Reorganized Debtors Certificate of Incorporation and the Reorganized Debtors Bylaws, 

as the same may be amended. (Docket No. 18841 at 1 – 2; Debtors’ Trial Ex. 4, Schedule O 

§ 12). 

Three of these individuals were selected by the Debtors after consultation with the 

Creditors’ Committee and one was selected by the Debtors after consultation with the ENA 

Examiner. The remaining individual to be named shall be selected by the Debtors after 

consultation with the Creditors’ Committee. (Bingham Affidavit 76). No officer or director of 

the proposed Reorganized Debtors has any motivation to favor one Debtor over another. (6/8/04 

Cooper Tr. at 70:19 – 24). By virtue of ENE’s obligation to carry out the Plan and the partial 

substantive consolidation embodied therein, all directors and officers of ENE shall have 

fiduciary duties to all Creditors of all Debtors to carry it out fairly. 

Section 33.4 of the Plan provides that the ENA Examiner’s role shall conclude on the 

Effective Date and the ENA Examiner and the professionals retained by the ENA Examiner shall 

be released and discharged from any remaining obligations outstanding pursuant to the orders of 

the Court, with certain limited exceptions. Pursuant to Section 33.4(b) of the Plan, the term of 

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Pg Pg 224 97 of 163 336 

the ENA Examiner’s involvement in the Chapter 11 Cases may be extended. In the event that a 

motion seeking such extension is timely filed, any party in interest, including, without limitation, 

the Debtors or the Creditors’ Committee, may interpose an objection or a response with respect 

thereto. (Bingham Affidavit 67; Debtors’ Trial Ex. 1, § 33.4(b)). 

As set forth in Schedule A to the Plan Supplement, the Litigation Trust Board will be 

comprised of five persons selected by ENE, after consultation with the Creditors’ Committee 

with respect to four and the ENA Examiner with respect to one. (Debtors’ Trial Ex. 4, Schedule 

A, § 4.1). Consistent with the foregoing, as of the date hereof, the members of the Litigation 

Trust Board include Stephen D. Bennett, Rick A. Harrington, James R. Latimer, III and John J. 

Ray, III. The final member of the Litigation Trust Board will consist of the fifth member 

appointed by ENE following consultation with the Creditors’ Committee. 

As set forth in Schedule B to the Plan Supplement, the Special Litigation Trust Board 

will be comprised of no less than three persons and no more than five persons. Three of the 

initial members of the Special Litigation Trust Board shall be representatives from ABN AMRO 

Bank, CALYON as successor in interest to Credit Lyonnais and Wells Fargo Bank Minnesota, 

N.A. and the remaining two members (if any) will be determined and nominated by the 

Creditors’ Committee. (Debtors’ Trial Ex. 4, Schedule B, § 4.1). 

As set forth in Schedule Y to the Plan Supplement, the Guidelines for the Disputed 

Claims Reserve provide that the DCR Overseers will be comprised of five individuals selected 

by ENE, after consultation with the Creditors’ Committee with respect to four and the ENA 

Examiner with respect to one. (Debtors’ Trial Ex. 4, Scheduled Y, § VII.1). The DCR 

Overseers include Stephen D. Bennett, Rick A. Harrington, James R. Latimer, III and John J. 

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Ray, III. The final member of the DCR Overseers will consist of the fifth member appointed by 

ENE following consultation with the Creditors’ Committee. 

As set forth in Schedule Z to the Plan Supplement, the Guidelines for the DCR Overseers 

provide that (a) in determining how the Disbursing Agent should vote Plan Securities, the DCR 

Overseers shall, subject to the remainder of the guidelines set forth in Schedule Z, exercise their 

business judgment to vote the Plan Securities in a manner that they believe will maximize the 

value of the Plan Securities, or the proceeds thereof, upon their release from the DCR to holders 

of Allowed Claims, (b) in fulfillment of their responsibilities, each of the DCR Overseers shall 

have the same duties, liabilities, defenses and standards of care of a director of a corporation 

chartered under the Delaware General Corporation Law, and (c) in the event that any of the DCR 

Overseers has a conflict of interest in any matter or issue, such DCR Overseer must fully 

disclose the nature of such conflict or potential conflict and shall not be entitled to vote or take 

part in any action with respect to such matter or issue. (Guidelines for DCR Overseers, 

§§ IV.A.1, V.A and VI). 

Following consummation of the Plan, the Debtors intend to reorganize internally for the 

purposes of managing their assets over the next several years to conduct an orderly windingdown 

of their business affairs. (Bingham Affidavit 93). The Plan maximizes value to 

Creditors by providing a structure that allows the Debtors to wind-down their affairs over a 

number of years, while at the same time maximizing the value of all of their assets and 

distributing them to Creditors. (6/7/04 Zelin Tr. at 38:5 – 39:3; 6/8/04 Cooper Tr. at 64:25 – 

66:14). The Debtors have assumed that the estates would be wound down over a three-year 

period, through December 31, 2006, plus several more years to complete the liquidation process. 

(6/7/04 Zelin Tr. at 94:21 – 95:10; Debtors’ Trial Ex. 9, at L-3, L-4, L-6). 

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The structure of a value-maximizing wind-down of estates has already begun to benefit 

Creditors, as seen by the fact that Debtors have been able to obtain a significantly higher price 

for CrossCountry than possible in a chapter 7. (6/7/04 Zelin Tr. at 42:24 – 43:24). If the Debtors 

were forced to sell assets in a chapter 7, the leverage or balance of power in those sale 

negotiations would shift. As a result, the liquidation values for CrossCountry, Prisma and PGE 

would be less than the values of those assets under the Plan. (6/7/04 Zelin Tr. at 41:17 – 43:24). 

Pursuant to Section 42.3 of the Plan, once each Debtor makes its final distribution 

pursuant the Plan, it is deemed dissolved. Thus, the Debtors’ corporations cannot be trafficked 

in for any tax purpose and there would be no net operating losses available upon discharge. 

(Debtors’ Trial Ex. 1, § 42.3; 6/8/04 Cooper Tr. at 67:7 – 15). 

It would be very chaotic if, on the Effective Date, the automatic stay were to terminate 

and all Creditors were free then to enforce their prepetition claims against the Reorganized 

Debtors. It would not be possible to carry out the Plan and have an equitable distribution of 

assets if Creditors were able to sue the Reorganized Debtors to collect on their prepetition 

claims. (6/8/04 Cooper Tr. at 55:17 – 56). No evidence was submitted by any objector sufficient 

to rebut the Debtors’ evidence concerning wind-down and post-confirmation governance. 

6). Exculpation 

The Debtors are unaware of any valid cause of action, and no party offered any evidence 

of any claim, that would be waived as a result of the exculpation provision in Section 42.7 of the 

Plan. (6/9/04 Cooper Tr. at 92:24 – 93:7; 6/3/04 p.m. Bingham Tr. at 171:7 – 22). However, the 

Debtors never investigated whether there are any causes of action that could be asserted against 

potential defendants, and that would be released under Section 42.7. (6/9/04 Cooper Tr. at 139:3 

– 8). 

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The exculpation provision in the Plan is appropriately limited to a qualified immunity for 

acts of negligence and does not relieve any party of liability for gross negligence or willful 

misconduct. As part of their key employee retention program, the Court authorized (Docket No. 

3587) the Debtors to provide indemnification to their officers and directors for their postpetition 

acts, as provided for under the Articles of Incorporation of the Debtors, the Oregon Business 

Corporation Act and other applicable law and consistent with the scope of the exculpation 

provision in Section 42.7 of the Plan. 

The Debtors’ officers and directors, Mr. Cooper and employees of Mr. Cooper have 

provided services and consideration to the Debtors during the course of these Chapter 11 Cases. 

(6/8/04 Cooper Tr. at 12:17 – 13:6, 13:10 – 14:2, 14:6 – 18:16, 20:12 – 21:11 and 22:14 – 23:1; 

Bowen Affidavit 1, 19, 20, 42 and 64; Bingham Affidavit 4, 11, 15 and 16). Mr. Cooper 

has served as interim chief executive officer, interim president and chief restructuring officer. 

(6/8/04 Cooper Tr. at 11:24 – 25). Upon his employment by the Debtors, he took several 

immediate steps to address the state of confusion that existed, including rebuilding the entire 

senior management team, transitioning away from the previous senior management team and 

centralizing authority and responsibility for the Enron Companies’ decision-making processes. 

(6/8/04 Cooper Tr. at 12:17 – 13:6). 

To centralize authority, Mr. Cooper (a) ensured that the appropriate policies and 

procedures were put in place so that critical decisions flowed to the senior management group of 

the organization for review, evaluation and approval, and (b) simplified the Enron Companies by 

organizing the Debtors into simply configured groups organized around core assets, non-core 

assets, litigation and investigations, wind-down of the trading book, chapter 11 and 

miscellaneous issues. (6/8/04 Cooper Tr. at 13:7 – 14). 

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In addition to the evidence adduced at the Confirmation Hearing and on the full record of 

these Chapter 11 Cases, the Debtors, the Creditors’ Committee and the Employee Committee, 

including their directors, officers, employees, members, attorneys, consultants, advisors and 

agents (acting in such capacity) have provided valuable services to the Debtors’ estates in 

satisfaction of their statutory fiduciary duties. The ENA Examiner has provided valuable 

services to the estates of ENA and its subsidiaries in satisfaction of his duties imposed by the 

Court. The Indenture Trustees have provided valuable services to the applicable Debtors’ estates 

in satisfaction of their duties imposed by their respective indentures and applicable law. 


concerning exculpation. 

7). Post-Confirmation Overhead Allocation Formula 

Consistent with Section 2.3 of the Plan, on March 24, 2004, the Debtors filed, after 

consultation with the Creditors’ Committee and the ENA Examiner, the Overhead Allocation 

Motion with the Court and, in connection with the entry of the Confirmation Order, requested 

that the Court enter an order with respect to the allocation of overhead and expenses among the 

Debtors and the Reorganized Debtors, as the case may be. (Debtors’ Trial Ex. 1, § 2.3; Docket 

No. 17283). The Debtors and their professionals, in consultation with the Creditors’ Committee 

and the ENA Examiner and their professionals, have worked diligently to formulate a method of 

allocation for overhead and other expenses from and after the Confirmation Date (the “Post- 

Confirmation Allocation Formula”). In developing the Post-Confirmation Allocation Formula, 

the Debtors and their advisors reviewed the current allocation formula by which overhead and 

expenses are allocated to the Enron Companies. The Debtors initiated numerous discussions 

with the Debtors’ business department heads and top management focusing on financial and 

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operational allocation strategies. (Bowen Affidavit 42). No objections have been filed or 

asserted as to this Overhead Allocation Motion. 

The Post-Confirmation Allocation Formula provides for a methodology for allocation, 

from and after the Confirmation Date, of overhead and other expenses among the Enron 

Companies that benefit from such expenses. In broad terms, the proposed Post-Confirmation 

Allocation Formula is conceptually similar to the allocation formula in place for the postpetition 

period. The Post-Confirmation Allocation Formula uses the same cost departments to categorize 

overhead expenses. Like the postpetition allocation formula, pursuant to the Post-Confirmation 

Allocation Formula, the methodology of allocating expenses within each cost department to a 

particular Enron Company is based upon whether there is (a) a direct measure of usage or benefit 

between a particular expense and Enron Company, or (b) an indirect measure of usage or benefit. 

Where there is a direct measure of usage or benefit between a particular expense and a particular 

entity, the Post-Confirmation Allocation Formula uses that direct measure; where no direct 

measure of usage or benefit exists or is readily and reasonably available, then an indirect 

measure is used to allocate expenses. (Bowen Affidavit 44; Debtors’ Trial Ex. 23). 

While similar to the postpetition allocation formula, the Post-Confirmation Allocation 

Formula is not identical. Unlike the postpetition allocation formula, the Post-Confirmation 

Allocation Formula does not allocate expenses to the Enron Companies included in the Debtors’ 

operating platforms (that is, PGE, CrossCountry or Prisma) to the extent such operating 

platforms have service agreements that have become effective. Instead, those Enron Companies 

will be charged in accordance with the terms and conditions of the respective agreements. Also, 

in contrast to the postpetition allocation formula’s use of a methodology that takes into account 

each Enron Company’s average assets and revenues and, if such Enron Company is a Debtor, its 

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average assets and liabilities, the Post-Confirmation Allocation Formula uses assets and claims 

as proxies to indirectly measure the benefit of and thereby indirectly allocate, those certain 

expenses that cannot readily or otherwise be allocated directly. The Post-Confirmation 

Allocation Formula incorporates certain other developments and provisions for allocating 

overhead and other expenses, as well as funding such allocated expenses, that are not a part of 

the existing postpetition allocation formula. (Bowen Affidavit 45). 

The Post-Confirmation Allocation Formula is in the best interests of the Debtors, their 

estates and Creditors. The Post-Confirmation Allocation Formula represents a refinement of the 

postpetition allocation formula based upon the information learned by experience during the 

pendency of these Chapter 11 Cases. The Post-Confirmation Allocation Formula is the product 

of comprehensive and thoughtful exchange between and among the Debtors, the Creditors’ 

Committee and the ENA Examiner over the course of many negotiations. (Bowen Affidavit 

62). 

The Post-Confirmation Allocation Formula is conceptually sound and equitably 

distributes corporate overhead without incurring excessive additional expense in order to 

perform the allocations. The Post-Confirmation Allocation Formula (a) provides a formula for 

allocation, from and after the Confirmation Date, of overhead expenses and other expenses 

among the Debtors and their non-Debtor affiliates, (b) takes into consideration the evolving 

nature of the Enron Companies’ tasks from and after the Confirmation Date, (c) fully and fairly 

allocates expenses to such Enron Companies based upon the tasks from and after the 

Confirmation Date, and (d) eliminates instances of duplicative allocation of overhead expenses. 

(Bowen Affidavit 63). 

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Sufficient business justifications exist to merit the approval of the Post-Confirmation 

Allocation Formula. (Bowen Affidavit 64). No evidence was submitted by any objector 

sufficient to rebut the Debtors’ evidence regarding the Post-Confirmation Allocation Formula. 

8). Additional Facts in Support of Confirmation 

The Court is entitled to and has considered the entirety of the record in these Chapter 11 

Cases, but takes particular note of the documents listed herein and the additional documents 

identified by the Debtors. 

Article XXXIV of the Plan provides for the assumption, rejection, or assignment of any 

executory contract or unexpired lease of the Debtors not previously assumed or rejected (or 

subject to assumption or rejection) under section 365 of the Bankruptcy Code, as contemplated 

by section 1123(b)(2) of the Bankruptcy Code. (Debtors’ Trial Ex. 1, Art. XXXIV). 

Article II of the Plan provides for the settlement of certain claims of the Debtors pursuant 

to section 1123(b)(3) of the Bankruptcy Code and Bankruptcy Rule 9019. (Debtors’ Trial Ex. 1, 

Article II). 

ENE is a public-utility holding company registrant by reason of its ownership of PGE. 

ENE previously filed the Plan with the SEC. The SEC has (a) approved the Plan and the 

transactions contemplated therein under section 11(f) of PUHCA, and (b) authorized the Debtors 

under section 11(g) of PUHCA and related rules to disseminate the Plan and Disclosure 

Statement to Creditors and other parties in interest in order to solicit votes to approve the Plan. 

(Debtors’ Trial Ex. 4, Schedule CC). The Debtors no longer have, and the Reorganized Debtors 

will not have, any rates subject to approval of any governmental regulatory commission; thus, 

section 1129(a)(6) of the Bankruptcy Code is inapplicable. (Bingham Affidavit 77). 

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In accordance with sections 1129(a)(9)(A) and (B) of the Bankruptcy Code, the Plan 

provides that all Allowed Administrative Expense Claims under section 503(b) of the 

Bankruptcy Code and all Allowed Priority Claims under section 507(a) of the Bankruptcy Code 

(excluding Priority Tax Claims under section 507(a)(8) of the Bankruptcy Code) will be paid in 

full, in Cash, on the later of the Effective Date and the date such Claims become Allowed 

Claims, or as soon thereafter as is practicable. (Debtors’ Trial Ex. 1, Art. III). 

Allowed Administrative Expense Claims representing liabilities incurred in the ordinary 

course of business by the Debtors, including tax liabilities, or liabilities arising under loans or 

advances to or other obligations incurred by the Debtors in Possession during the Chapter 11 

Cases shall be paid by the Reorganized Debtor Plan Administrator in accordance with the terms 

and conditions of any particular transaction and any agreements relating thereto. (Debtors’ Trial 

Ex. 1, Art. III). The Confirmation Order will establish the bar date for Administrative Expense 

Claims. (Bingham Affidavit 80). 

Section 1129(a)(9)(C) permits deferred payment over a period of six years from the date 

of assessment of the tax so long as the amount so paid has a value, as of the effective date of the 

plan, equal to the allowed amount of the priority tax claim. 11 U.S.C. 1129(a)(9)(C). Section 3.3 

of the Plan complies with section 1129(a)(9)(C). (Bingham Affidavit 81; Debtors’ Trial Ex. 1, 

Art. III, § 3.3). On May 31, 2004, the Debtors filed and served a Notice of Election of Option 

with Respect to Payment of Priority Tax Claims. (Docket No. 18775). The notice stated that 

pursuant to the Plan, the Debtors have elected to exercise their option to make distributions to 

each holder of an Allowed Priority Tax Claim in full, in Cash, on the Effective Date. 

In accordance with sections 507 and 1129(a)(12) of the Bankruptcy Code, the Plan 

provides that all fees payable pursuant to section 1930 of title 28 of the United States Code, shall 

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be paid as and when due or otherwise pursuant to an agreement between the Reorganized 

Debtors and the U.S. Trustee until such time as a Chapter 11 Case for a Debtor shall be closed in 

accordance with the provisions of Section 42.17 of the Plan. (Debtors’ Trial Ex. 5, § 42.10). 

The Debtors have budgeted for and have the necessary Cash to pay these fees and charges on the 

Effective Date. (Bingham Affidavit 84). 

The Debtors have no “retiree benefits” within the meaning of section 1114(a) of the 

Bankruptcy Code. (Bingham Affidavit 85). 

Pursuant to the interim application procedures established under section 331 of the 

Bankruptcy Code, the Court authorized and approved the payment of certain fees and expenses 

of professionals retained in these Chapter 11 Cases. (Bingham Affidavit 75). All such fees 

and expenses, as well as all other accrued fees and expenses of professionals through the 

Effective Date, remain subject to final review for reasonableness by the Fee Committee and the 

Court under section 330 of the Bankruptcy Code. (Bingham Affidavit 75). All payments or 

bonuses to be made in connection with the Effective Date or that relate to the success of the 

reorganization or that otherwise are required to be disclosed, including any amounts to be paid to 

officers and directors, (a) are disclosed in the Disclosure Statement, (b) have been disclosed at or 

prior to the Confirmation Hearing, or (c) are subject to the approval of the Court. (Bingham 

Affidavit 75). 22 

22 As evidenced by the record in these Chapter 11 Cases and disclosed in the Debtors’ Memorandum of Law in 

Support of Confirmation, special fee arrangements have been approved by the Court with respect to the following 

persons: (i) Batchelder & Partners, Inc. (now known as Relational Advisors LLC) – retained pursuant to that certain 

Final Order, dated October 10, 2002 (Docket No. 7077), Pursuant to 11 U.S.C. §§ 327(a) and 328(a) Authorizing the 

Employment and Retention of Batchelder & Partners, Inc. as Financial Advisor for the Debtors and Debtors-in- 

Possession; (ii) The Blackstone Group L.P. – retained pursuant to that certain Final Order, dated October 10, 2002 

(Docket No. 7080), Pursuant to 11 U.S.C. §§ 327(a) and 328(a) Authorizing the Employment and Retention of The 

Blackstone Group L.P. as Financial Advisor for the Debtors and Debtors-in-Possession; (iii) Houlihan Lokey 

Howard & Zukin Financial Advisors, Inc. – retained pursuant to that certain Order, dated October 10, 2002 (Docket 

No. 7075), Pursuant to 11 U.S.C.§§ 328(a) and 1103, FED. R. BANKR. P. 2014 and S.D.N.Y. LBR 2014-1, 

Authorizing Employment and Retention of Houlihan Lokey Howard & Zukin Financial Advisors, Inc. as Financial 

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Pursuant to sections 503(b)(3) and (4) of the Bankruptcy Code, the Court will review any 

applications for substantial contribution to ensure compliance with the statutory requirements 

and that the fees requested are reasonable. (Bingham Affidavit 75). 

The Debtors have modified Section 42.12 of the Plan to provide that, unless otherwise 

ordered by the Court, the Debtors and each Enron Affiliate will retain and not destroy or 

otherwise dispose of Documents. (Initial Modification, at § 42.12). As such, the Court finds that 

Section 42.12 of the Plan adequately protects Creditors’ rights with respect to the preservation of 

documents. 

On or about March 28, 2002, the Court entered an order authorizing and approving the 

settlement of all amounts owed by New Power Holdings, Inc. and NPW to ENE, EESI, ENA and 

EPMI pursuant to certain commodities contracts between the parties. (Docket No. 2532, 

amended by Docket No. 3103). On or about January 13, 2003, Rufus T. Dorsey IV (the 

“NewPower Examiner”) was appointed in the Chapter 11 Cases of NewPower Holdings, Inc. and 

TNPC Holdings, Inc., currently pending in the Court for the Northern District of Georgia, 

Advisors to Official Committee of Unsecured Creditors Nunc Pro Tunc as of December 17, 2001; (iv) Cooper LLC- 

-retained pursuant to that certain Order, dated April 5, 2002 and as modified on October 24, 2002, May 29, 2003, 

November 20, 2003 (Docket Nos. 2725, 7420, 10942, 14379), Authorizing the Debtors to Enter Into an Agreement 

to Employ Stephen Forbes Cooper, LLC as an Independent Contractor to Provide Management Services For the 

Debtors Nunc Pro Tunc to January 28, 2002. (v) Susman Godfrey L.L.P. (“Susman”) – retained pursuant to that 

certain Nunc Pro Tunc Order, dated March 14, 2004 (Docket No. 2119), Pursuant to Bankruptcy Code §§ 327(e) 

and 330 Authorizing Employment of Susman Godfrey L.L.P. as Class Action Defense Counsel for the Debtors in 

Accordance With Its Normal Hourly Rates and Disbursement Policies, as modified pursuant to that certain Order, 

dated May 31, 2002 (Docket No. 4169), Modifying Original Order, Pursuant to Sections 327(a) and 330 of the 

Bankruptcy Code, Authorizing the Expansion of the Employment of Susman in Accordance with the Hourly Rates 

and Disbursement Policies Previously Approved by the Court and an Order, dated June 26, 2003 (Docket No. 

11458), Modifying Order, Pursuant to §§ 327(e) and 330 of the Bankruptcy Code, Authorizing the Expansion of the 

Retention of Susman. With respect to the fee arrangements referenced in clauses (i),(ii), (iii), and (iv) hereof, the 

advisors are paid monthly fees, transaction fees and success fees. In addition, the advisors listed in clauses (i), (ii) 

and (iii) are required to file interim and final fee applications with the Court; however, the Fee Committee only is 

entitled to comment on the reasonableness of expenses (not the monthly fee or success fees). With respect to the fee 

arrangements referenced in clause (v), certain of Susman’s fees and expenses are subject to Fee Committee review; 

however, with respect to Susman’s retention in connection with the MegaClaim litigation, Susman is to be paid a 

monthly fee and success fee without further application to the Court. 

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Newnan Division (the "NewPower Cases”). (Objection, Docket No. 17383). The Court finds 

that confirmation of the Plan does not (a) affect such appointment, or (b) interfere with orders 

entered in the NewPower Cases. 

Pursuant to the Fiduciary Services Agreement dated March 14, 2002, as amended on 

April 17, 2002, between the Debtors and State Street, approved by the Court on April 19, 2002 

(Docket No. 3174), State Street received a blanket indemnity for all liability incurred in 

connection with the provision of its services pursuant to such agreement. (Docket No. 2236 at 

6.2). The Fiduciary Services Agreement was entered into at the demand of the DOL, which had 

an opportunity to review and comment upon, and to which the DOL consented in writing. The 

DOL cannot now claim that a release from liability for one non-Debtor in this case is acceptable 

while another is not under the circumstances where there is no evidence that any additional 

consideration was provided by State Street to receive such release. 23 

III. CONCLUSIONS OF LAW 

A. Burden of Proof 

To obtain confirmation of the Plan, the Debtors must demonstrate that the Plan satisfies 

the provisions of section 1129 of the Bankruptcy Code by a preponderance of the evidence. See 

Heartland Federal Savings & Loan Ass’n v. Briscoe Enterprises., Ltd. II (In re Briscoe 

Enterprises., Ltd. II), 994 F.2d 1160, 1165 (5th Cir. 1993) (“The combination of legislative 

silence, Supreme Court holdings, and the structure of the [Bankruptcy] Code leads this Court to 

conclude that preponderance of the evidence is the debtor’s appropriate standard of proof under 

23 The payment of fees and expenses pursuant to the Fiduciary Services Agreement, including the payment of any 

indemnification rights, is subject to ongoing litigation in the Court. It is unclear at this time whether the Debtors or 

the employee benefit plans for which State Street serves as the independent fiduciary are ultimately obligated to 

provide the indemnification set forth in such agreement. Nothing contained herein shall constitute an admission by 

the Debtors with respect to which entity is ultimately liable for such indemnification obligation. 

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both § 1129(a) and in a cramdown”); see also In re Kent Terminal Corp., 166 B.R. 555, 561 

(Bankr. S.D.N.Y. 1994) (holding that, “the final burden of proof at . . . confirmation hearings 

remains a preponderance of the evidence.”). The Debtors have met that burden, by having 

demonstrated, by a preponderance of the evidence, that all of the requirements of section 1129 of 

the Bankruptcy Code have been satisfied with respect to the Plan. 

B. The Global Compromise Is Fair and Equitable and Is Approved 

Bankruptcy courts may approve settlements if they are fair, equitable and do not fall 

“below the lowest point in the range of reasonableness.” Protective Comm. for Indep. 

Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 428 (1968); Cosoff v. 

Rodman (In re W.T. Grant Co.), 699 F.2d 599, 608 (2d Cir. 1983); Nellis v. Shugrue, 165 B.R. 

115, 123 (S.D.N.Y. 1994); Vaughn v. Drexel Burnham Lambert Group, Inc. (In re Drexel 

Burnham Lambert Group, Inc.), 134 B.R. 499, 505 (Bankr. S.D.N.Y. 1991). The Debtors have 

demonstrated that the global compromise embodied in the Plan and set forth in the Global 

Compromise Motion is fair and equitable and falls well within the range of reasonable litigation 

outcomes. 

In addition, section 363(b)(1) of the Bankruptcy Code provides an additional basis to 

approve settlement agreements, which frequently involve the disposition of assets of the estate. 

See Martin v. Martin, 91 F.3d 389, 394 (3d Cir. 1996). The Debtors have shown that sound 

business justifications exist for the Debtors to enter into the global compromise. 

Section 105(a) of the Bankruptcy Code also provides an additional basis to approve the 

global compromise under the Court’s broad, equitable principles to achieve fairness and justice 

in the reorganization process. See Momentum Mfg. Corp. v. Employee Creditors Comm. (In re 

Momentum Mfg. Corp.), 25 F.3d 1132, 1136 (2d Cir. 1994). The Debtors have shown that the 

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global compromise is fair and just and that it preserves and protects the value of the Debtors’ 

estates for the benefit of the Creditors. 

1). The Benefits of Settlement Compared to the Costs of Litigation 

The compromises, settlements and waivers contained in the global compromise are fair 

and equitable and fall well within the reasonable range of litigation outcomes. If the global 

compromise is not adopted and the many individual inter-estate issues are litigated to their 

conclusion, with vast expense and delay, many Creditors would face greatly reduced recoveries. 

Mr. Cooper plausibly estimated that the Debtors would incur an additional $1.25 billion in legal, 

financial and other professional fees if the global compromise is not approved, which would 

reduce aggregate Creditor recoveries. (6/8/04 Cooper Tr. at 33:25 – 34:9, 38:10 – 42:11; 

Debtors’ Trial Ex. 26). 24 

Even the “best case scenario” provided in the Blackstone Report 

requires the same conclusion. (Debtors’ Trial Ex. 24 at errata 127-29 n. 1; 6/7/04 Zelin Tr. at 

39:4 – 41:16). In addition, the litigation and attendant cost and delay would be detrimental to the 

Debtors’ ability to conclude these Chapter 11 Cases. Accordingly, the global compromise falls 

within the range of reasonableness and is fair, equitable, reasonable and in the best interests of 

the estates. For the same reasons, sound business justifications also exist for the Debtors to enter 

into the global compromise. 

2). Prospect of Complex and Protracted Litigation if the Settlement Is Not Approved 

The inter-estate issues and Claims resolved by the global compromise involve numerous 

claimants and complicated factual scenarios and legal arguments that make litigation an 

undesirable and costly option. Without the global compromise, it would be necessary to address 

24 Barry v. Smith (In re N.Y., New Haven, & Hartford R. Co.), 632 F.2d 955, 961 (2d Cir. 1980) (“If a reasonable 

outcome of litigation would result in [creditors] receiving less than that afforded them by the Compromise Plan, then 

the plan should be sustained.”). 

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countless discrete inter-estate transactions and disputes, which could take years to unravel and 

likely involve extensive litigation. 

Significant costs are associated with pursuing litigation rather than compromise, 

including the cost of performing the necessary litigation diligence regarding a multitude of 

underlying facts and transactions, the professional fees associated with litigation, the uncertainty 

and delay associated with litigation, the prolonged costs of administering the estates and the 

resulting depletion of the estates’ assets. See Depoister v. Mary M. Holloway Found., 36 F.3d 

582, 587 (7th Cir. 1994) (citing substantial legal fees that would be generated if litigation is 

continued as support for settlement agreement). If the Debtors’ cases were to be converted to 

chapter 7 cases and litigation pursued rather than compromise, it is more likely than not that at 

least thirteen (13) trustees would be required as opposed to the “best case scenario” set forth in 

the Disclosure Statement. Such trustees would need to retain their own counsel and 

professionals to review numerous issues, including evaluating intercompany claims, at a total 

estimated cost of $1.25 billion in addition to all of the other day-to-day costs of operating the 

Debtors’ estates. In addition, such litigation would take at least an additional seven (7) years to 

resolve, delaying any distributions to Creditors. Implementation of the global compromise will 

eliminate the inevitable risks and costs that would be associated with full-blown litigation and 

will help safeguard Creditor recoveries at significantly higher levels at a much earlier point in 

time. 

The global compromise provides Creditors an assurance of recovery that inter-estate 

litigation does not provide. See Shugrue, 165 B.R. at 124 (discussing the existence of numerous 

claimants, various claims and complicated facts and legal arguments as factors supporting 

settlement). 

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Moreover, litigation of these issues would necessarily require a fact-intensive 

examination of the many complex intercompany transactions among the Debtors. The great 

difficulty and cost of unraveling these intercompany transactions is one of the principal reasons 

that the Debtors and the Creditors’ Committee worked together to craft the global compromise in 

order to maximize Creditor recoveries. (Debtors’ Trial Exs. 10 and 11). See In re Carla 

Leather, Inc., 44 B.R. 457, 471 (Bankr. S.D.N.Y. 1984) (citing considerable expense to 

reconstruct debtor’s books and records in support of finding that settlement was in best interests 

of creditors). In addition, litigation of the complex and novel legal issues resolved by the global 

compromise would likely involve lengthy appeals if the compromise is not approved. See 

Newman v. Stein, 464 F.2d 689, 694-95 (2d Cir. 1972) (citing the likelihood of protracted 

appeals as support for settlement agreement); In re Texaco, Inc., 84 B.R. 893, 902 (Bankr. 

S.D.N.Y. 1988) (same). 25 

3). Competency and Experience of Counsel Who Support the Settlement 

The Debtors and the Creditors’ Committee and their attorneys firmly believe the global 

compromise is fair to each of the Debtors and their respective Creditors and falls within the 

range of reasonableness required for approval by the Court. (Debtors’ Trial Ex. 6). The ENA 

Examiner, who has recommended Creditors vote in favor of the Plan, has also agreed that the 

global compromise is within the range of reasonableness as to Creditors of ENA and its direct 

and indirect subsidiaries in the context of the Plan. (Debtors’ Trial Ex. 7). The Debtors, the 

Creditors’ Committee and the ENA Examiner are represented by attorneys who are recognized 

as being knowledgeable and experienced in the field of complex chapter 11 bankruptcies. See In 

25 Although the global compromise itself may be subject to an appeal, absent the global compromise, appeals of the 

numerous litigations that are resolved under the global compromise would likely continue for longer than any appeal 

of the global compromise. 

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re Dow Corning Corp., 192 B.R. 415, 424 (Bankr. E.D. Mich. 1996) (considering counsel’s 

prominence in field of law as weighing heavily in favor of settlements). Moreover, the ENA 

Examiner, members of the Creditors’ Committee and the Debtors’ officers and directors are 

experienced business persons with many years of experience in distressed business situations. 

4). The Settlement Is the Product of Arm’s-Length Bargaining 

Over the course of approximately two (2) years, the Debtors and the Creditors’ 

Committee engaged in intensive analysis and extensive discussions regarding the formulation of 

the terms of a chapter 11 plan and the numerous related complex issues. Following the 

expansion of the ENA Examiner’s duties to include acting as a fiduciary in the role of a plan 

facilitator for the ENA Creditors, these negotiations included the ENA Examiner. The intense 

and, at times, acrimonious discussions regarding the terms of the global compromise, between 

the Debtors and Creditors’ Committee on the one hand and the ENA Examiner, on the other 

hand, ensued over the next several months and ultimately resulted in the global compromise as 

embodied in the Plan and set forth in the Global Compromise Motion. The settlement reflected 

in the global compromise is the product of extensive, arm’s-length, good faith negotiations 

among the Debtors, the Creditors’ Committee and the ENA Examiner. See Dow Corning, 192 

B.R. at 424 (considering the difficulty and contentiousness of negotiations in finding settlements 

were products of arm’s-length bargaining). 

5). The Inter-Debtor Waivers Are Appropriate 

The global compromise does not seek an improper “hybrid” substantive consolidation, as 

some objectors have contended. Rather, the 30/70 formula is a means to an end to the interestate 

acrimony that the Court sought to resolve when appointing the ENA Examiner as a “plan 

facilitator.” It is well established that debtors may properly reach a settlement regarding whether 

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the estates should be substantively consolidated. See In re Resorts Int’l, Inc., 145 B.R. 412, 418, 

459 (Bankr. D. N.J. 1990) (approving as fair and equitable a global settlement contained in plan 

settling all potential litigation, including substantive consolidation, fraudulent conveyance, 

preference and equitable subordination causes of action); In re Stoecker, 125 B.R. 767, 774 

(Bankr. N.D. Ill. 1991) (referring to settlement of substantive consolidation motion); In re Apex 

Oil Co., 118 B.R. 683, 688 (Bankr. E.D. Mo. 1990) (referring to court’s previous approval of 

settlement of several significant claims, including substantive consolidation). 

As a practical matter, if any Debtor’s estate were to retain the right to pursue avoidance 

actions against any other Debtor’s estate, all the estates would have to retain all their 

intercompany claims whether based on avoidance actions, re-characterization of debt to equity or 

otherwise. The Court finds and concludes that the benefits of preserving these actions are 

outweighed by the cost and delay entailed thereby. 

The provision in Section 28.3(a) of the Plan extinguishing claims that could have been 

asserted by the Debtors against one another is consistent with the preclusive effect the Plan will 

have if it is confirmed. Moreover, the inclusion of the specific provision in Section 28.3(a) 

regarding the waiver and extinguishment of claims makes these Chapter 11 Cases the converse 

of that in Maxwell Communication Corp. v. Societe Generale (In re Maxwell Corp.), 93 F.3d 

1036, 1044-45 (2d Cir. 1996), in which the confirmation order and the plan did not address 

whether the debtor could maintain an avoidance action to recover prepetition transfers. In these 

Chapter 11 Cases, the Plan is abundantly clear about the waiver and extinguishment of these 

claims. If the Plan is confirmed, any subsequent claim that is inconsistent with this provision 

will be barred by section 1141(a) of the Bankruptcy Code and res judicata. See In re PWS 

Holding Corp., 303 F.3d 308, 314-15 (3d Cir. 2002) (upholding plan’s extinguishment of state 

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law creditor causes of action that could have been commenced by the debtors as debtors in 

possession). 

6). ENE’s Deemed Ownership of Litigation Trust Claims Is an Integrated Part of the Global 

Compromise 

Pursuant to the Plan, ENE will be deemed the owner of Litigation Trust claims by virtue 

of the global compromise. Deeming these actions to be assets of ENE is an integral part of the 

global compromise and is fair and reasonable under the circumstances. ENE is the plaintiff in 

most of these actions, many of which involve the validity of ENE’s financial statements and 

there is often difficulty in proving the relative harm to different Debtor entities. Any recoveries 

from these actions will benefit all holders of Allowed General Unsecured Claims and Allowed 

Guaranty Claims by virtue of ENE’s contribution to the modified substantive consolidation 

scenario in the 30/70 compromise. Further, holders of Allowed Intercompany Claims against 

ENE and Allowed Enron Guaranty Claims will share in any recoveries on Litigation Trust 

Claims as Creditors of ENE. Additionally, ENA, in particular, obtains many other benefits from 

the global compromise, including the resolution of certain issues in favor of ENA in a manner 

not otherwise achievable absent the global compromise. These benefits include: (a) the deemed 

ownership of certain assets by ENA, which were reflected as assets of ENE on the Debtors’ 

books and records as of the Initial Petition Date; (b) the allowance of ENA’s $12.6 billion net 

Intercompany Claim against ENE; and (c) despite the agreed deemed assignment of the net 

economic equity value of Enron Canada to ENA, the allowance of the $1.039 billion 

Intercompany Claim of ENA against ENE arising from funds advanced to ENE by ENA, which 

ENE used to purchase the Enron Canada preferred stock. 

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7). The Global Compromise Is Not a Sub Rosa Plan 

Under the circumstances of these Chapter 11 Cases, the global compromise does not 

amount to a sub rosa plan. To constitute a sub rosa or de facto plan, creditors must have been 

denied the procedural and due process protections afforded under the Bankruptcy Code. 

However, in these cases, Creditors have already had more than adequate notice of the terms of 

the global compromise by virtue of service of the Plan, Disclosure Statement and Global 

Compromise Motion and they have had ample opportunity to provide input by, to the extent 

applicable, voting on the Plan and/or filing objections to the Plan and the Global Compromise 

Motion. 

Courts have recognized that settlement agreements are not sub rosa plans but can serve as 

an important “building block” to confirmation of a plan. See Sec. and Exch. Comm’n v. Drexel 

Burnham Lambert Inc. (In re Drexel Burnham Lambert Group, Inc.), 130 B.R. 910, 926-27 

(S.D.N.Y. 1991); In re Crowthers McCall Pattern, Inc., 114 B.R. 877, 885 (Bankr. S.D.N.Y. 

1990). The global compromise embodied in the Plan and set forth in the Global Compromise 

Motion is an essential building block to resolution of these Chapter 11 Cases. Without its 

approval, these Chapter 11 Cases will be mired in protracted, internecine litigation to resolve the 

many inter-estate issues that must be resolved prior to any resolution of these Chapter 11 Cases. 

Therefore, the Court concludes that the global compromise contained in the Global Compromise 

Motion is not a sub rosa plan. Alternatively, the Court could approve the global compromise to 

the extent it establishes the assets of each Debtor’s estate and subsequently approve distributions 

of these assets for those Debtors lacking a confirmed plan. 

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8). Approval of Global Compromise Is Warranted 

Approval of the global compromise is warranted based on the foregoing findings of fact 

and conclusions of law. The global compromise inures to the benefit of all of the Debtors and 

their respective estates. The Debtors have shown that if the global compromise is not 

implemented, the resulting inter-estate disputes will lead to protracted and costly litigation. The 

consequences of this sustained litigation would further increase administrative costs and 

expenses under a chapter 7 liquidation. Thus, the delay resulting from the inter-estate litigation 

would further diminish the value that could be derived from the sale of assets. Therefore, absent 

the global compromise, a chapter 7 liquidation of the Debtors’ estates would result in a 

significant reduction in the present value of the ultimate proceeds available to distribute in the 

Chapter 11 Cases. Further, if the global compromise is not approved, there is no evidence that 

any better compromise, from the objectors standpoint, would ever be reached. Indeed, the 

Baupost settlement is indicative of the fragile nature of the global compromise and the likelihood 

that were the global compromise not to be approved, the result would be that groups would 

splinter into various economic factions and increase the contentious nature of these cases— 

resulting in delay and significant additional costs. 

The Court concludes that the global compromise as embodied in the Plan should be 

approved for all Debtors. As discussed below, the Court concludes that the Plan complies with 

section 1129 of the Bankruptcy Code and can be confirmed. If, however, the Plan cannot be 

confirmed as to the 96 Debtors for which no ballots were cast in any impaired Class for each of 

those specific Debtors, the Global Compromise Motion can be approved as to those Debtors 

based on the findings of fact and conclusions of law contained herein. As previously noted, 

although the Court has concluded that the Global Compromise Motion does not constitute a sub 

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rosa plan, if for any reason it were subsequently determined to constitute a sub rosa plan, then 

the Global Compromise Motion may be approved for the limited purpose of determining the 

assets and liabilities of the estates, but not for purposes of making distributions to any specific 

Creditors in estates of Debtors not having a confirmed plan. 

C. The Plan Complies With Section 1129 of the Bankruptcy Code 

1). Section 1129(a)(1) 

Pursuant to section 1129(a)(1) of the Bankruptcy Code, a plan must “compl[y] with the 

applicable provisions of [the Bankruptcy Code].” 11 U.S.C. § 1129(a)(1). The Court concludes 

that the Plan complies fully with the requirements of section 1129(a)(1) of the Bankruptcy Code, 

including, as applicable, sections 1121, 1122, 1123, 1141 and 1145 of the Bankruptcy Code. 

(i) Section 1121 

The Court concludes that the Debtors have satisfied section 1121 of the Bankruptcy Code 

in that the Debtors have standing to file a plan. 

(ii) Section 1122(a) 

Section 1122 of the Bankruptcy Code provides that “a plan may place a claim or an 

interest in a particular class only if such claim or interest is substantially similar to the other 

claims or interests of such class.” 11 U.S.C. § 1122. Under section 1122(a), the relevant inquiry 

is whether all claims of a class have substantially similar rights to a portion of each Debtor’s 

estate. A plan proponent is afforded significant flexibility in classifying claims under 

section 1122(a) provided there is a reasonable basis for the classification scheme and all claims 

within a particular class are substantially similar. See Aetna Cas. & Sur. Co. v. Chateaugay 

Corp. (In re Chateaugay Corp.), 89 F.3d 942, 949 (2d Cir. 1996); In re Drexel Burnham 

Lambert Group, Inc., 138 B.R. 723, 757 (Bankr. S.D.N.Y. 1992). 

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Decisions interpreting section 1122(a) generally uphold separate classification of 

different groups of unsecured claims when a reasonable basis exists for the classification. The 

Bankruptcy Code only prohibits the identical classification of dissimilar claims and does not 

require the same classification for claims sharing some attributes. See In re Chateaugay Corp., 

155 B.R. 625, 630 (Bankr. S.D.N.Y. 1993); In re 499 W. Warren St. Assocs., Ltd. P’ship, 151 

B.R. 307, 312 (Bankr. N.D.N.Y. 1992). 

The Plan provides for separate classification of Claims and Equity Interests for each 

Debtor in 385 Classes based upon differences in the legal nature and/or priority of such Claims 

and Equity Interests. 

The treatment of Guaranty Claims is appropriate in light of the global compromise 

embodied in the Plan and such classification and treatment is in accordance therewith. If total 

substantive consolidation were ordered, any claim against multiple debtor entities for the same 

liability, whether joint, primary or secondary (including guaranty claims), typically would be 

deemed to constitute one claim to be satisfied out of the common pool of assets. See In re 

Gulfco. Inv. Corp., 593 F.2d 921, 928 (10th Cir. 1979); see also Moran v. Hong Kong & 

Shanghai Banking Corp. (In re Deltacorp Inc.), 179 B.R. 773, 777 (Bankr. S.D.N.Y. 1995). 

As a result, the multitude of Guaranty Claims would be extinguished in their entirety. 

Although substantive consolidation often results in all guaranty claims being eliminated, it is 

appropriate for a settlement of substantive consolidation to recognize a portion of guaranty 

claims. See In re Piece Goods Shops Co., 188 B.R. 778, 786 (Bankr. M.D.N.C. 1995); Drexel, 

138 B.R. at 748 (approving settlement and substantive consolidation contained in plan under 

which only a portion of guaranty claims were recognized). Therefore, the classification and 

treatment of Guaranty Claims as provided in the Plan is appropriate. 

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The separate classification of the Convenience Claims and the treatment of such Claims 

as provided in the Plan is appropriate. The separate classification of the Convenience Claims is 

valid and appropriate pursuant to section 1122 as it based on valid business, factual and legal 

reasons. 

Claims in Classes 376 through 382 relating to Subordinated Claims shall be determined 

pursuant to a Final Order in accordance with the provisions of the Bankruptcy Code under the 

principles of equitable subordination or otherwise. The Plan provides the Court with flexibility 

to determine the amount and extent of subordination of any claim. 

Furthermore, the Plan’s classification of the equitably subordinated Claims into a single 

class does not offend the guidelines set forth by section 1122 because upon Final Order that a 

Claim is an Other Subordinated Claim, all such Other Subordinated Claims will be substantially 

similar. In the event that distributions are made to holders of equitably subordinated Claims, 

such distributions will be made in accordance with the priority scheme set forth in Section 17.2 

of the Plan. (Debtors’ Trial Ex. 1, § 17.2). Accordingly, the Debtors’ classification scheme with 

respect to Subordinated Claims is reasonable. 

The Court concludes that the Plan’s classifications conform to the statute and separately 

classify claims based on reasonable business justifications and not for gerrymandering purposes. 

Valid business, factual and legal reasons exist for the separate classification of each of 

these Classes of Claims and Equity Interests created under the Plan and such Classes do not 

unfairly discriminate between or among holders of Claims and Equity Interests. The Debtors’ 

classification has a rational basis because it is based on the respective legal rights of each holder 

of a Claim or Equity Interest against the applicable Debtor’s estate. The classification scheme 

was not proposed to create a consenting impaired class and, thereby, manipulate class voting. 

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Cf. John Hancock Mut. Life Ins. Co. v. Route 37 Bus. Park Assocs., 987 F.2d 154, 161-62 (3d 

Cir. 1993) (determining that the proposed plan of reorganization had no reasonable prospect of 

confirmation because the debtor’s proposed classification scheme was an improper attempt to 

manipulate voting). Moreover, with the exception of PGH, all Classes that voted in respect of 

the Plan have voted in favor of the Plan. Thus, the Plan meets the requirements of section 

1122(a). 

(iii) Section 1123(a) 

Every chapter 11 plan must comply with the seven requirements set forth in section 

1123(a) of the Bankruptcy Code. The Court concludes that the Plan complies fully with each 

such requirement: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

The Plan designates Classes of Claims and Classes of Equity Interests 

as required by section 1123(a)(1). (Debtors’ Trial Ex. 1, Art. IV). 

The Plan specifies whether each Class of Claims and Equity Interests is impaired 

or unimpaired under the Plan and the treatment of each such impaired Class, as 

required by sections 1123(a)(2) and 1123(a)(3), respectively. (Debtors’ Trial Ex. 

1, Art. XXX). 

The Plan specifies whether each Class of Claims and Equity Interests is impaired 

or unimpaired under the Plan and the treatment of each such impaired Class, as 

required by sections 1123(a)(2) and 1123(a)(3), respectively. (Debtors’ Trial Ex. 

1, Art. XXX). 

The treatment of each Claim or Equity Interest in each particular Class is the same 

as the treatment of each other Claim or Equity Interest in such Class as required 

by section 1123(a)(4). (Debtors’ Trial Ex. 1, Art. IV-XXI). 

The Plan provides adequate means for implementation of the Plan through, inter 

alia, issuance and distribution of Plan Securities, creation of the various trusts, 

transfer of certain assets to the trusts and disbursement of funds to certain parties 

as required by section 1123(a)(5). (Debtors’ Trial Ex. 1, Arts. XII – XLI). 

The Restated Articles comply with the requirement of section 1123(a)(6) of the 

Bankruptcy Code, which requires a prohibition in the charter of a debtor of 

issuance of non-voting equity securities. (Debtors’ Trial Ex. 4, Sched. Q(1), Art. 

IV, § 4.1). 

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(g) 

The Plan contains provisions with respect to the manner of selection of directors 

of the Reorganized Debtors that are consistent with the interests of Creditors, 

Equity Interest holders and public policy in accordance with section 1123(a)(7). 

(Debtors’ Trial Ex. 1, Art. XL). 

(iv) Section 1123(b) 

Section 1123(b) of the Bankruptcy Code sets forth the permissive provisions that may be 

incorporated into a chapter 11 plan. Just as the Plan complies with section 1123(a), each 

provision of the Plan is also consistent with section 1123(b): 

(a) 

(b) 

(c) 

(d) 

Classes 1 and 2 are rendered unimpaired and Classes 3 through 385 are impaired 

or deemed impaired, as contemplated by section 1123(b)(1) of the Bankruptcy 

Code. (Debtors’ Trial Ex. 1, Arts. V – XX, XXX). 

The Plan provides for the assumption, assumption and assignment, or rejection of 

executory contracts and unexpired leases that have not been previously assumed 

or rejected under section 365 of the Bankruptcy Code, as contemplated by section 

1123(b)(2) of the Bankruptcy Code. (Debtors’ Trial Ex. 1, Art. XXXIV). 

The Plan provides for the settlement, or the retention and enforcement, of certain 

claims of the Debtors pursuant to section 1123(b)(3) of the Bankruptcy Code and 

Bankruptcy Rule 9019. (Debtors’ Trial Ex. 1, Art. II; Global Compromise 

Motion, Docket No. 18198). 

The Plan provides for the disposition of all or substantially all of the property of 

the Debtors’ estates and the distribution of the proceeds therefrom to holders of 

Allowed Claims and Allowed Equity Interests in accordance with section 

1123(b)(4) of the Bankruptcy Code. (Debtors’ Trial Ex. 2, § I.B.4). 

In accordance with section 1123(b)(3) of the Bankruptcy Code, the Reorganized Debtors 

or the Litigation Trust and Special Litigation Trust, as applicable, are authorized representatives 

of the Debtors’ estates. Enforcement of the Litigation Trust Claims and Special Litigation Trust 

Claims by the Reorganized Debtors, Litigation Trust, or Special Litigation Trust shall not result 

in any impairment or lapse of such claims and causes of action, notwithstanding any contrary 

state law. 

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(v) Section 1145 

Any issuance of the Plan Securities or the Trust Interests pursuant to the Plan will comply 

with section 1145(a)(1) of the Bankruptcy Code. 

2). Section 1129(a)(2) 

Section 1129(a)(2) of the Bankruptcy Code requires a plan proponent to “compl[y] with 

the applicable provisions of [the Bankruptcy Code].” 11 U.S.C. § 1129(a)(2). Section 

1129(a)(2) is intended to encompass the disclosure and solicitation requirements under section 

1125 of the Bankruptcy Code. See In re Johns-Manville Corp., 68 B.R. 618, 630 (Bankr. 

S.D.N.Y. 1986), aff’d in part, rev’d in part on other grounds, 78 B.R. 407 (S.D.N.Y. 1987), 

aff’d, Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988); In re Toy & Sports 

Warehouse, Inc., 37 B.R. 141, 149 (Bankr. S.D.N.Y. 1984); H.R. Rep. No. 95-595, at 412 

(1977); S. Rep. No. 95-989, at 126 (1978) (“Paragraph (2) [of section 1129(a)] requires that the 

proponent of the plan comply with the applicable provisions of chapter 11, such as section 1125 

regarding disclosure.”). The Debtors have complied with the applicable provisions of title 11, 

including, specifically, sections 1125, 1126 and 1141(d)(3) of the Bankruptcy Code. 

(i) Section 1125 

On January 9, 2004, after due notice and a hearing, the Court entered the Solicitation 

Procedures Order, which, inter alia, approved the Disclosure Statement, finding that it contained 

“adequate information” within the meaning of section 1125 of the Bankruptcy Code and 

established procedures for the Debtors’ solicitation of votes on the Plan. 

Nothing in the Bankruptcy Code would require the Debtors to have included with the 

Disclosure Statement a liquidation analysis for each Debtor on a “stand-alone” basis in the 

absence of the global compromise. The Debtors have properly incorporated the global 

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compromise into the Liquidation Analysis. The Liquidation Analysis need not be premised on a 

non-consolidated scenario, when the Debtors have already submitted one based on the global 

compromise, including a settlement of substantive consolidation issues, as embodied in the Plan. 

In re Stone & Webster, Inc., 286 B.R. 532, 544 (Bankr. D. Del. 2002). 26 

The Plan cannot be confirmed if the global compromise is not approved. The return on 

the Plan must be compared to the return in chapter 7 cases. Because the issues resolved in the 

global compromise will also exist in multiple chapter 7 cases, the only rational assumption to 

make for purposes of the best interests test is that the issues would be similarly resolved in 

chapter 7. Courts have consistently applied settlements embodied in chapter 11 plans to 

liquidation analyses. See In Matter of Texas Extrusion Corp., 844 F.2d 1142, 1159 (5th Cir. 

1988) (approving bankruptcy court’s application of an important settlement proposed in a joint 

plan of reorganization to liquidation analyses of four bankruptcy estates); In re MCorp Fin., Inc., 

160 B.R. 941, 961 (S.D. Tex. 1993) (acknowledging that a settlement that was a critical element 

of the plan and that was approved by the court should remain to affect a liquidation for the 

purposes of the best interests of the creditors test); In re Ames Dep’t Stores, Eastern Retailers 

Serv. Corp., et al., Nos. 90 B 11233 through 90 B 11285 (Bankr. S.D.N.Y. confirmed as of 

December 29, 1992) (finding that the assumption of settlements under the plan of reorganization 

26 As stated, on January 9, 2004 the Court approved the Disclosure Statement as providing adequate information. 

Further, regarding the adequacy of disclosure as to the Liquidation Analysis, there have been no intervening events 

that would render the information contained in the Disclosure Statement inadequate. Therefore, modifications to the 

Disclosure Statement and resolicitation of votes are not required. Mr. Zelin’s testimony indicates that the Debtors 

have entered into contracts for two of the platforms and that those contract values would increase their liquidation 

value, thereby reducing the difference between recoveries to Creditors from a chapter 7 liquidation versus their 

treatment under the Plan. The Court, however, finds that based upon Mr. Zelin’s further testimony concerning the 

benefits of selling the platforms under chapter 11, the overall net effect in the difference is not significant enough 

under the circumstances to warrant a modification to the Disclosure Statement. Therefore, as previously stated, the 

absence of such modification would not render the Disclosure Statement inadequate and require resolicitation of 

votes. This is because a creditor, in these cases, would not need to possess such information to make an informed 

judgment about the Plan. Therefore, the Disclosure Statement, which the Court previously approved, was, and 

continues to be, in compliance with section 1125. 

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with regard to, inter alia, substantive consolidation and claims, into the section 1129(a)(7) 

liquidation analysis was reasonable). The plain language of section 1125(a)(1) and the 

jurisprudence provide a debtor is not required to disclose information about other possible plans. 

Kirk v. Texaco, Inc., 82 B.R. 678 (S.D.N.Y. 1988). 

(ii) Section 1126 

The Debtors have solicited acceptances of the Plan consistent with section 1126(b) of the 

Bankruptcy Code. In accordance with section 1126 of the Bankruptcy Code and pursuant to the 

Solicitation Orders, the Debtors solicited acceptances or rejections of the Plan from holders of all 

Allowed Claims in each Class of impaired Claims that are to receive distributions under the Plan. 

Classes 1 and 2 of the Plan are unimpaired. As a result, pursuant to section 1126(f) of the 

Bankruptcy Code, holders of Claims in those Classes are conclusively presumed to have 

accepted the Plan. Classes 3 through 375 of the Plan are impaired. As a result, pursuant to 

section 1126(a) of the Bankruptcy Code, holders of Claims in such Classes (other than Class 

190) were entitled to vote to accept or reject the Plan. 27 The Debtors do not anticipate that 

Classes 376 through 385 of the Plan will receive any distributions under the Plan, therefore, the 

holders of Claims and Equity Interests in such Classes were not solicited and are conclusively 

presumed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code. The 

voting results are set forth above and evidenced by Debtors’ Trial Exhibit 19. The Debtors have 

complied with the applicable provisions of section 1126. 

(iii) Section 1141(d)(3) 

In determining whether a debtor should be denied a discharge under section 1141(d)(3), 

courts have distinguished a wholesale liquidation of a debtor’s assets from a supervised 

27 Class 190 (Intercompany Claims) is deemed to have voted to accept the Plan because the holders of such 

Intercompany Claims are the Plan proponents. 

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divestiture process. Specifically, courts have found that, where a debtor’s post-confirmation 

business consists of managing assets pending their sale to third parties, such debtor was entitled 

to a discharge. See, e.g., In re River Capital Corp., 155 B.R. 382, 387 (Bankr. E.D. Va. 1991); 

In re T-H New Orleans Ltd. P’ship, 188 B.R. 799, 804 (E.D. La. 1995), aff’d, In Matter of T-H 

New Orleans Ltd. P’ship, 116 F.3d 790, 803-04 (5th Cir. 1997); In Matter of First Am. Health 

Care of Ga., Inc., 220 B.R. 720, 726 (Bankr. S.D. Ga. 1998). 

Pursuant to the Plan, the Reorganized Debtors will retain all assets not otherwise 

transferred to the Litigation Trust, the Special Litigation Trust, the Severance Settlement Fund 

Trust, the Operating Trusts, or the Operating Entities. The Reorganized Debtors and the 

Reorganized Debtor Plan Administrator will continue to manage and operate these assets until a 

favorable sale or resolution of each of the Remaining Assets is finalized. These Remaining 

Assets may include Cash, claims, avoidance actions and other causes of action against third 

parties on behalf of the Debtors’ estates, proceeds of liquidated assets, the Debtors’ stock in the 

Enron Companies, trading contracts, equity investments, inventory, real property and other 

miscellaneous assets. The wind down of the Debtors’ estates remains a complicated process as 

there are a significant number of individual assets that need to be collected or sold, or otherwise 

handled. Some of these assets are the subject matter of pending litigation proceedings and/or 

complex cross-ownership structures. Further, the policy underlying section 1143(d)(3)(A) is to 

prevent trafficking in empty corporate shells for tax avoidance. H.R. No. 95-595, 95th Cong. at 

384 (1977); In re Rath Packing Co., 55 B.R. 528, 537 (Bankr. N.D. Iowa 1985). 

Based on case law precedents and the Plan’s stated purpose of providing a supervised 

divestiture of estate assets, section 1141(d)(3) of the Bankruptcy Code does not bar the 

application of a discharge to the Debtors. In fact, the indeterminate period of retention of the 

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assets after the Effective Date and the clear need for ongoing business operations to maximum 

value for all creditors in liquidating the assets necessitates the application of the section 1141 

discharge to the Reorganized Debtors. Based upon the foregoing, the Court concludes that the 

requirements of section 1129(a)(2) have been satisfied. Based upon the foregoing, the Court 

concludes that the requirements of section 1129(a)(2) of the Bankruptcy Code have been 

satisfied. 

3). Section 1129(a)(3) 

Section 1129(a)(3) of the Bankruptcy Code requires a plan be “proposed in good faith 

and not by any means forbidden by law.” 11 U.S.C. § 1129(a)(3). The United States Court of 

Appeals for the Second Circuit has defined the good faith standard as “requiring a showing that 

the plan was proposed with ‘honesty and good intentions’ and with ‘a basis for expecting that a 

reorganization can be effected.’” Koelbl v. Glessing (In re Koelbl), 751 F.2d 137, 139 (2d Cir. 

1984) (quoting Manati Sugar Co. v. Mock, 75 F.2d 284, 285 (2d Cir. 1935)); see also Johns- 

Manville, 68 B.R. at 631-32. In the context of a chapter 11 plan, courts have held that a plan is 

considered proposed in good faith “if there is a likelihood that the plan will achieve a result 

consistent with the standards prescribed under the [Bankruptcy] Code.” In re Leslie Fay Cos., 

207 B.R. 764, 781 (Bankr. S.D.N.Y. 1997) (quoting In re Texaco Inc., 84 B.R. 893, 907 (Bankr. 

S.D.N.Y. 1988), appeal dismissed, 92 B.R. 38 (S.D.N.Y. 1988)). “The requirement of good faith 

must be viewed in light of the totality of the circumstances surrounding the establishment of a 

chapter 11 plan.” In re Leslie Fay Cos., 207 B.R. at 781 (Bankr. S.D.N.Y. 1997) (citations 

omitted). 

As set forth in the findings of fact, the Plan is the result of extensive arm’s-length 

discussions, debate and/or negotiations among the Debtors, the Creditors’ Committee and the 

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ENA Examiner. Accordingly, the Court concludes that the Plan satisfies the requirements of 11 

U.S.C. § 1129(a)(3). 

4). Section 1129(a)(4) 

Section 1129(a)(4) of the Bankruptcy Code requires that certain professional fees and 

expenses paid by the plan proponent, by the debtor, or by a person issuing securities or acquiring 

property under the plan, be subject to approval of the court as reasonable. 28 

Section 1129(a)(4) 

of the Bankruptcy Code has been construed to require that all payments of professional fees 

made from estate assets be subject to review and approval by the Court as to their 

reasonableness. See, e.g., In re River Vill. Assocs., 161 B.R. 127, 141 (Bankr. E.D. Pa. 1993), 

aff’d, 181 B.R. 795 (E.D. Pa. 1995). 

Pursuant to the interim application procedures established under section 331 of the 

Bankruptcy Code, the Court authorized and approved the payment of certain fees and expenses 

of professionals retained in the Chapter 11 Cases. All such fees and expenses, as well as all 

other accrued fees and expenses of professionals through the Effective Date, remain subject to 

final review by the Fee Committee and the Court for reasonableness under section 330 of the 

Bankruptcy Code. In addition, pursuant to sections 503(b)(3) and (4) of the Bankruptcy Code, 

the Court must review any applications for substantial contribution to ensure compliance with 

the statutory requirements and that the fees requested are reasonable. Moreover, all payments or 

bonuses to be made in connection with the Effective Date or which relate to the success of the 

reorganization or which otherwise are required to be disclosed, including any amounts to be paid 

28 Section 1129(a)(4) of the Bankruptcy Code requires that: 

Any payment made or to be made by the proponent, by the debtor, or by a person issuing 

securities or acquiring property under the plan, for services or for costs and expenses in or in 

connection with the case, or in connection with the plan and incident to the case, has been 

approved by, or is subject to approval of, the court as reasonable. 

11 U.S.C. § 1129(a)(4). 

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to officers and directors, (a) are disclosed in the Disclosure Statement, (b) have been disclosed at 

or prior to the Confirmation Hearing, or (c) are subject to the approval of the Court. The 

foregoing procedures for the Court’s review and ultimate determination of the fees and expenses 

to be paid by the Debtors satisfy the objectives of section 1129(a)(4) of the Bankruptcy Code. 

5). Section 1129(a)(5) 

Section 1129(a)(5) of the Bankruptcy Code requires that the plan proponent disclose the 

identity and affiliations of the proposed officers and directors of the reorganized debtors; that the 

appointment or continuance of such officers and directors be consistent with the interests of 

creditors and equity interest holders and with public policy; and that there be disclosure of the 

identity and compensation of any insiders to be retained or employed by the reorganized debtors. 

Schedule U and V to the Plan Supplement filed on March 9, 2004, as modified by the 

Governance Modification, identifies the individuals the Debtors have preliminarily identified to 

serve as officers and directors of Reorganized ENE, as well as the other Reorganized Debtors, as 

of the Effective Date. 

The Reorganized Debtors’ employment of Cooper LLC is consistent with the interests of 

Creditors. Mr. Cooper, as the Chief Executive Officer and Chief Restructuring Officer of the 

Debtors, is intimately familiar with the business and assets of the Debtors. Cooper LLC’s 

appointment as Reorganized Debtor Plan Administrator is consistent with the interests of 

Creditors and public policy. See In re Apex Oil Co., 118 B.R. 683, 704-05 (Bankr. E.D. Mo. 

1990) (where debtors and the creditors’ committee believe control of entity by proposed 

individuals will be beneficial, the requirements of section 1129(a)(5) are satisfied); Toy & 

Sports, 37 B.R. at 149-50 (continuation of debtor’s president and founder, who had many years 

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of experience in the debtors’ business, satisfied section 1129(a)(5) and enhanced feasibility of 

the plan). 

Subject to Court approval and pursuant to their respective engagement agreements, 

certain professionals of the Debtors and the Creditors, may seek a success fee in connection with 

confirmation of the Plan. Based upon the foregoing, the Court concludes that the Debtors have 

satisfied or will be able to satisfy the requirements of section 1129(a)(5). 

6). Section 1129(a)(6) 

Section 1129(a)(6) of the Bankruptcy Code requires that any regulatory commission 

having jurisdiction over the rates charged by the reorganized debtor in the operation of its 

businesses approve any rate change provided for in the plan. The provision is not applicable to 

the Debtors and Reorganized Debtors. The SEC has, however, approved the Plan under section 

11(f) of PUHCA and issued a report in connection therewith. 

7). Section 1129(a)(7) 

Section 1129(a)(7) of the Bankruptcy Code requires that a plan be in the best interests of 

creditors and stockholders, as follows: 

With respect to each impaired class of claims or interests– 

(A) 

each holder of a claim or interest of such class– 

(i) 

(ii) 

has accepted the plan; or 

will receive or retain under the plan on account of such 

claim or interest property of a value, as of the effective date 

of the plan, that is not less than the amount that such holder 

would so receive or retain if the debtor were liquidated 

under chapter 7 of this title on such date . . . . 

11 U.S.C. § 1129(a)(7)(A). 

The “best interests” test focuses on individual dissenting creditors rather than classes of 

claims. See Bank of Am. Nat’l Trust & Sav. Ass’n v. 203 N. LaSalle St. P’ship, 526 U.S. 434, 

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442 (1999). The test requires that each holder of a claim or equity interest either accept the plan 

or receive or retain under the plan property having a present value, as of the effective date of the 

plan, not less than the amount such holder would receive or retain if the debtor were liquidated 

under chapter 7 of the Bankruptcy Code on such date. 

Under the “best interests” test, the court must find that each impaired creditor will receive 

or retain value not less than the amount he would receive if the debtor were liquidated. See 203 

N. LaSalle, 526 U.S. at 442; In re Century Glove, Inc., No. Civ. A. 90-400-SLR, Civ. A. 90-401- 

SLR, 1993 WL 239489, at *7 (D. Del. Feb. 10, 1993). As section 1129(a)(7) of the Bankruptcy 

Code makes clear, the liquidation analysis applies only to non-accepting impaired claims or 

equity interests. If a class of claims or equity interests unanimously accepts the plan, the “best 

interests” test automatically is deemed satisfied for all members of that accepting class. See 

Drexel, 138 B.R. at 761. 

Moreover, pursuant to section 1126(f) of the Bankruptcy Code, a class that is not 

impaired under the plan is conclusively deemed to have accepted the plan. Here, each holder of 

a Claim in Classes 1 and 2 is unimpaired and is conclusively deemed to have accepted the Plan. 

Therefore, the “best interests” test is satisfied with respect to each of these Classes. 

As an initial matter, to determine the value impaired Creditors and impaired Equity 

Interest holders would receive if the Debtors were liquidated, the Court must determine the 

dollar amount that would be generated from the liquidation of the Debtors’ assets and properties 

in the context of a chapter 7 liquidation case. The liquidation analysis need not be done on a 

“stand-alone,” Debtor-by-Debtor basis, but may be done based on certain assumptions (such as 

substantive consolidation or a compromise of substantive consolidation) if there is a legitimate 

basis for such assumptions. See Stone & Webster, 286 B.R. 532, 545. Moreover, it is impossible 

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to determine what an appropriate “stand alone” assumption for a liquidation analysis would be 

absent inclusion of the global compromise embodied in the Plan. Even assuming that an 

appropriate “stand-alone” chapter 7 case for ENA was based on no global compromise and only 

on ENA’s books and records as of the Initial Petition Date, ENA Creditors would stand to 

receive less than under the Plan. 

The assumptions used by the Debtors in their Liquidation Analysis as set forth in 

Appendix L to the Disclosure Statement are appropriate and reasonably based on the facts in 

these Chapter 11 Cases. In the context of the erosion of proceeds available for distribution 

associated with a chapter 7 case, confirmation of the Plan provides each non-accepting Creditor 

or Equity Interest holder with a recovery not less, and, in fact, more, than what such Creditor or 

Equity Interest holder would receive in a liquidation of the Debtors’ estates under chapter 7 of 

the Bankruptcy Code. 

The Plan provides for a reorganization to allow for an orderly wind-down of the Debtors’ 

business affairs over the next several years. The Debtors’ Liquidation Analysis clearly reflects 

that holders of Allowed Claims will receive under the Plan not less than such Creditors would 

receive in a chapter 7. Under the circumstances, the date of the actual occurrence of the 

Effective Date under the Plan has no impact on the satisfaction of the “best interests” test. 

Nor does the Plan violate the “best interests” of creditors test because Debtors have stated 

that they have relied upon the Debtors’ books and records with respect to the value of certain 

assets for particular Debtors, intercompany account balances and claims. ENE has cautioned 

Creditors that its financial statements filed with the SEC for fiscal years ended 1997 through 

2000 and for the first three quarters of 2001 should not be relied upon. (Bingham Affidavit 

58). While the Debtors’ prepetition financial statements may be unreliable in certain respects, 

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professionals for the Debtors, the Creditors’ Committee and the ENA Examiner sampled 

intercompany entries, particularly those between ENE and ENA, and determined that the 

Debtors’ books and records were generally reliable as they related to intercompany transactions. 

Indicating that prepetition financial statements may be unreliable does not amount to the type of 

“fanciful assumptions” that have concerned the Second Circuit because they “undermine the 

credibility of the entire reorganization proposal.” Pegasus Agency, Inc. v. Grammatikakis (In re 

Pegasus Agency, Inc.), 101 F.3d 882, 887 (2d Cir. 1996). 

If the existence of unreliable prepetition financial statements could preclude the 

confirmation of a plan, it would be impossible to confirm any plan in these Chapter 11 Cases or 

in any other case with similar facts. Far from relying on speculative or unreliable assumptions, 

the global compromise lays to rest the many uncertainties involving intercompany transactions 

and potential avoidance claims that would otherwise jeopardize the resolution of these Chapter 

11 Cases. (6/8/04 Cooper Tr. at 34:16 – 35:21). 

No objector has challenged the Debtors’ proposed means of handling any asset or 

business. The sole question is whether the net present value recovery is equal or greater under 

the Plan than in chapter 7. No one has claimed “scrap value” is greater than the going concern 

value the Debtors are obtaining under the Plan by distributing their businesses to creditors or 

selling them as going concerns and distributing their proceeds. The purpose of a best interest 

liquidation analysis is to compare recoveries in a chapter 7 liquidation to a chapter 11 plan – not 

to compare different legal outcomes to disputed issues. Accordingly, the existence of a standalone 

liquidation analysis is irrelevant to confirmation of the Plan. As the Plan is premised upon 

the approval of the global compromise, no further liquidation analyses are required. 

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The Debtors’ evidence shows that the Plan creates better recovery than a liquidation 

under chapter 7 would provide. The Plan proposes that the Debtors utilize the assets to 

maximize value. The Debtors will maintain each business platform as a going concern and will 

sell the assets if they maximize value, otherwise the assets will be distributed to Creditors 

through the distribution of shares of the platform entities. The Debtors witnesses testified that 

there was no other way to maximize value other than as proposed in the Plan. In fact, the 

witnesses established that the ability of the Debtors to distribute stock instead of being forced to 

liquidate, as would be the case in chapter 7, enabled the Debtors to withdraw the platforms from 

the market place when the offering prices were less than “going concern value.” Moreover, the 

ability to withdraw the platforms enhances the Debtors’ ability in closing any contract as it 

increases the Debtors’ negotiating leverage. The ability to distribute such “going concern value” 

through the distribution of stock to creditors is not possible in a chapter 7. Therefore, once a 

case is converted to chapter 7, the marketplace can take advantage of such limitation. Even 

under the present circumstances where two of the platform entities are under contract for sale, 

the testimony supports the finding that these contracts will bring greater value to the estates if 

they are ultimately closed in chapter 11 rather than chapter 7. 

As discussed, under the Plan, Creditors are not limited to receiving only the liquidation 

value of the various platforms. Rather, Creditors will receive either the liquidation value if it 

exceeds the going concern value or will receive the going concern value if such is higher than the 

liquidation value. Therefore, on any given effective date, values under the Plan will always 

exceed a chapter 7 liquidation value on such dates because of the Debtors’ improved negotiating 

leverage in selling assets under chapter 11. 

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Based on the evidence, which the Court finds credible and unrebutted, the value to be 

distributed to Creditors on account of Allowed Claims under the Plan, as of the Effective Date, is 

not less than the amount that such holder would receive or retain if the Debtors, or any of them, 

were liquidated under chapter 7. Therefore, the Court concludes that the requirements of section 

1129(a)(7) of the Bankruptcy Code have been satisfied. 

8). Section 1129(a)(8) 

Section 1129(a)(8) of the Bankruptcy Code requires that each class of impaired claims or 

interests accept the plan: 

With respect to each class of claims or interests— 

(A) 

(B) 

such class has accepted the plan; or 

such class is not impaired under the plan 

11 U.S.C. § 1129(a)(8). 

Classes 1 and 2 are unimpaired under the Plan, are conclusively deemed to have accepted the 

Plan, pursuant to section 1126(f) of the Bankruptcy Code, and, therefore, satisfy section 

1129(a)(8)(B) of the Bankruptcy Code. As set forth in the Voting Certification, the impaired 

classes entitled to vote voted to accept the Plan by the requisite majorities that meet the 

acceptance requirements of section 1126(c). Thus, as to the unimpaired Classes and the impaired 

classes that vote to accept the Plan, the Court concludes that the requirement of 

section 1129(a)(8)(A) is satisfied. 

Classes of Creditors with respect to the 96 Debtors, referenced in footnote 14, are 

impaired and the Creditors in those classes did not cast any ballots. Therefore, section 

1129(a)(8)(A) is not satisfied as to these 96 Debtors. However, as will be discussed 

subsequently, the Plan may be confirmed as to those classes under section 1129(b) of the 

Bankruptcy Code. Classes 376 through 385 are deemed to have voted to reject the Plan. As to 

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those classes as well, the Plan may be confirmed under the cramdown provisions of section 

1129(b) of the Bankruptcy Code. 

9). Section 1129(a)(9) 

Section 1129(a)(9) of the Bankruptcy Code requires that persons holding claims entitled 

to priority under section 507(a) of the Bankruptcy Code receive specified cash payments under 

the plan. Unless the holder of a particular claim agrees to a different treatment with respect to 

such claim, section 1129(a)(9) requires the plan to provide as follows: 

(A) 

(B) 

with respect to a claim of a kind specified in 

section 507(a)(1) or 507(a)(2) of [the Bankruptcy Code], on 

the effective date of the plan, the holder of such claim will 

receive on account of such claim cash equal to the allowed 


with respect to a class of claims of a kind specified in 

section 507(a)(3), 507(a)(4), 507(a)(5), 507(a)(6) or 

507(a)(7) of [the Bankruptcy Code], each holder of a claim 

of such class will receive – 

(i) 

(ii) 

if such class has accepted the plan, deferred cash payments 

of a value, as of the effective date of the plan, equal to the 

allowed amount of such claim; or 

if such class has not accepted the plan, cash on the effective 

date of the plan equal to the allowed amount of such claim; 

and 

(C) 

with respect to a claim of a kind specified in 

section 507(a)(8) of [the Bankruptcy Code], the holder of 

such claim will receive on account of such claim deferred 

cash payments, over a period not exceeding six years after 

the date of assessment of such claim, of a value, as of the 

effective date of the plan, equal to the allowed amount of 

such claim. 

11 U.S.C. § 1129(a)(9). 

In accordance with sections 1129(a)(9)(A) and (B) of the Bankruptcy Code, the Plan 

provides that all Allowed Administrative Expense Claims under section 503(b) of the 

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Bankruptcy Code and all Allowed Priority Claims under section 507(a) (excluding Priority Tax 

Claims under section 507(a)(8)) will be paid in full, in Cash, on the later of the Effective Date 

and the date such Claims become Allowed Claims, or as soon thereafter as is practicable. 

(Debtors’ Trial Ex. 1, Art. III, V). Allowed Administrative Expense Claims representing 

liabilities incurred in the ordinary course of business by the Debtors, including postpetition tax 

liabilities, or liabilities arising under loans or advances to or other obligations incurred by the 

Debtors in Possession during the Chapter 11 Cases, which will be paid by the Reorganized 

Debtor Plan Administrator in accordance with the terms and conditions of any particular 

transaction and any agreements relating thereto. (Debtors’ Trial Ex. 1, Art. III). The 

Confirmation Order establishes a deadline for parties to assert Administrative Expense Claims. 

The Plan also satisfies the requirements of section 1129(a)(9)(C) with respect to the 

treatment of Priority Tax Claims under section 507(a)(8). On May 31, 2004, the Debtors filed 

and served a Notice of Election of Option with Respect to Payment of Priority Tax Claims, 

stating that, pursuant to the Plan, the Debtors have elected to exercise their option to make 

distributions to each holder of an Allowed Priority Tax Claim in full, in Cash, on the Effective 

Date. (Docket No. 18775). Based upon the foregoing, the Court concludes that the Plan satisfies 

the requirements of section 1129(a)(9) of the Bankruptcy Code. 

10). Section 1129(a)(10) 

Section 1129(a)(10) provides that, if a class of claims is impaired under a chapter 11 

plan, at least one class of impaired claims under such plan must vote to accept the plan. See 11 

U.S.C. § 1129(a)(10). Though the Plan governs the treatment of claims against the 177 jointly 

administered Debtors, pursuant to applicable law, the affirmative vote of one impaired class 

under the Plan is sufficient to satisfy section 1129(a)(10). See In re SGPA, Inc., Ch. 11 Case No. 

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1-01-02609 (Bankr. M.D. Pa. Sept. 28, 2001) (joint chapter 11 plan of reorganization complied 

with section 1129(a)(10) because at least one class of impaired creditors accepted the plan, 

notwithstanding the fact that each debtor entity did not have an accepting impaired class). The 

plain language and inherent fundamental policy behind section 1129(a)(10) of the Bankruptcy 

Code provides that an affirmative vote of one impaired class under a plan is sufficient to satisfy 

section 1129(a)(10) of the Bankruptcy Code. 

Further, aside from the plain meaning analysis, by virtue of the substantive consolidation 

component of the global compromise, the requirements of section 1129(a)(10) are satisfied as to 

each of the Debtors lacking an impaired accepting class because those Debtors are part of the 

global compromise embodied in the Plan. Substantive consolidation is not eliminated when the 

returns of creditors are adjusted to take into account their individual equities as they have been 

adjusted here. See Stone v. Eacho (In re Tiptop Tailors, Inc.), 128 F.2d 16, 16 (4th Cir. 1942), 

denying reh’g of 127 F.2d 284 (4th Cir. 1942). 

In addition, the Court notes that at least one court has confirmed a chapter 11 plan 

(without requiring either substantive consolidation or the filing of separate plans) where it 

appears that impaired classes of certain (but not all) of the jointly administered debtors vote only 

for the one plan before the court. See, e.g., In re Resorts Int’l Inc., 145 B.R. 412, 416 (Bankr. D. 

N.J. 1990). It is quite common for debtors with a complex corporate structure to file a joint 

chapter 11 plan pursuant to which the corporate form is preserved, or in which a “deemed 

consolidation” is proposed and approved. In such circumstances, all debtors are treated as a 

single legal entity for voting and distribution purposes. See, e.g., In re Genesis Health Ventures, 

Inc., 266 B.R. 591, 619 (Bankr. D. Del. 2001). 

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Accordingly, the Court concludes that the Plan satisfies section 1129(a)(10). 29 

11). Section 1129(a)(11) 

Section 1129(a)(11) of the Bankruptcy Code requires that the Court determine that the 

Plan is feasible as a condition precedent to confirmation. Specifically, the Court must determine 

that: 

Confirmation of the plan is not likely to be followed by the liquidation, or the 

need for further financial reorganization, of the debtor or any successor to the 

debtor under the plan, unless such liquidation or reorganization is proposed in the 

plan. 

11 U.S.C. § 1129(a)(11). 

The Plan is feasible within the meaning of this provision. The feasibility test set forth in 

section 1129(a)(11) requires the Court to determine whether the Plan is workable and has a 

reasonable likelihood of success. See Leslie Fay, 207 B.R. at 788. The Second Circuit has 

provided that “the feasibility standard is whether the plan offers a reasonable assurance of 

success. Success need not be guaranteed.” Kane v Johns-Manville Corp., 843 F.2d at 649. 

Based on the foregoing findings and conclusions of law, the Plan satisfies the feasibility standard 

of section 1129(a)(11). 

12). Section 1129(a)(12) 

Section 1129(a)(12) of the Bankruptcy Code requires the payment of “[a]ll fees payable 

under section 1930 [of title 28 of the United States Code], as determined by the court at the 

hearing on confirmation of the plan . . . .” Section 507 of the Bankruptcy Code provides that 

29 Alternatively, the Court could confirm the Plan for each Debtor having an actual impaired accepting Class of 

Claims and, having found that the global compromise is not a sub rosa plan as to the 96 Debtors lacking an impaired 

accepting class, approve the global compromise as contained in the Global Compromise Motion as to those 96 

Debtors. Further, even if the Court were to determine that the global compromise were a sub rosa plan as to the 96 

Debtors (because it determines the distribution scheme as to those Debtors), the Court could confirm the Plan for 

each of the Debtors having an actual impaired accepting Class of Claims and approve the global compromise as to 

the 96 Debtors, limited to establishing the assets and liabilities of those estates. 

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“any fees and charges assessed against the estate under [section 1930 of] chapter 123 of title 28” 

are afforded priority as administrative expenses. In accordance with sections 507 and 

1129(a)(12) of the Bankruptcy Code, the Plan provides that all fees payable pursuant to section 

1930 of title 28 of the United States Code, shall be paid as and when due or otherwise pursuant 

to an agreement between the Reorganized Debtors and the U.S. Trustee until such time as a 

Chapter 11 Case for a Debtor shall be closed in accordance with the provisions of Section 42.17 

of the Plan. (Debtors’ Trial Ex. 5, § 42.10). The Debtors have budgeted for and have the 

necessary Cash to pay these fees and charges on the Effective Date. (Bingham Affidavit 84). 

Thus, the Court concludes that the Plan satisfies the requirements of section 1129(a)(12) of the 


13). Section 1129(a)(13) 

Section 1129(a)(13) of the Bankruptcy Code requires that a plan provide for the 

continuation of retiree benefits at levels established pursuant to section 1114 of the Bankruptcy 

Code. In compliance with section 1129(a)(13) of the Bankruptcy Code, the Plan provides that 

from and after the Effective Date, the Reorganized Debtors shall continue to pay all retiree 

benefits (within the meaning of section 1114 of the Bankruptcy Code), if any, at the level 

established in accordance with subsection (e)(1)(B) or (g) of section 1114 of the Bankruptcy 

Code, at any time prior to the Confirmation Date and for the duration of the period during which 

the Debtors have obligated themselves to provide such benefits. (Debtors’ Trial Ex. 1, Art. XLII, 

§ 42.11). Accordingly, the Court concludes that the Plan satisfies the requirements of section 

1129(a)(13) of the Bankruptcy Code. 

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14). Section 1129(b) 

Section 1129(b) of the Bankruptcy Code provides a mechanism for confirmation of a 

plan when the plan is not accepted by all impaired classes of claims and equity interests, as 

follows: 

Notwithstanding section 510(a) of [the Bankruptcy Code], if all of the applicable 

requirements of [section 1129(a) of the Bankruptcy Code] other than [the 

requirement contained in section 1129(a)(8) that a plan must be accepted by all 

impaired classes] are met with respect to a plan, the court, on request of the 

proponent of the plan, shall confirm the plan notwithstanding the requirements of 

such paragraph if the plan does not discriminate unfairly, and is fair and 

equitable, with respect to each class of claims or interests that is impaired under, 

and has not accepted, the plan. 

11 U.S.C. § 1129(b)(1) (emphasis added). 

Thus, in accordance with section 1129(b) of the Bankruptcy Code, the Bankruptcy Court 

may impose a plan over the dissenting vote of impaired classes of claims or equity interests as 

long as the plan (a) does not “discriminate unfairly” and (b) is “fair and equitable” with respect 

to the dissenting class or classes. 

The Plan was proposed by all of the Debtors as a joint plan. The ENA Examiner, as an 

independent representative of the ENA Creditors, believes that the global compromise and 

settlement embodied in the Plan is a reasonable and fair resolution of these issues based upon the 

plausible outcomes of litigation. (Debtors’ Trial Ex. 6-7). 

With respect to the assertion that the Plan diverts value from ENA for the benefit of ENE, 

the Court rejected such position in connection with the hearing on the extension of exclusivity 

held on May 6, 2004. (5/6/04 Hearing Tr., passim). At such hearing, various Creditors argued 

that the Court should deny extension of the Debtors’ exclusive periods because the Plan was not 

market tested to allow for the filing of a competing plan, which was proposed by ENE (ENA’s 

controlling equity holder), and ENA has not proposed its own plan. After lengthy argument on 

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whether exclusivity should be denied, the Court granted the Debtors’ motion to extend 

exclusivity, thereby overruling the creditors’ objections. (Order Extending Exclusive Period For 

Debtors to Solicit Acceptances of their Joint Chapter 11 Plan, dated 5/6/04 (Docket No. 18245)). 

The various Creditors’ objections to the Plan in this regard have not changed. For the same 

reasons argued at length at the exclusivity hearing, the Plan does not violate section 1129(b) and 

the objections relative thereto are overruled. 

(i) The Plan Does Not Discriminate Unfairly 

A plan unfairly discriminates in violation of section 1129(b) of the Bankruptcy Code only 

if similar claims are treated differently by a debtor without a reasonable basis for the disparate 

treatment. See 11 U.S.C. § 1129(b). Pursuant to the Plan, similar Claims receive similar 

treatment under the Plan. The Court already has concluded that the Plan does not discriminate 

unfairly with respect to Class 185 Enron Guaranty Claims. The Plan does not “discriminate 

unfairly” with respect to the impaired Classes of Equity Interests that are deemed to reject the 

Plan. No party has objected to the cramdown of these Classes of Equity Interests. 

(ii) The Plan Does Not Violate the Absolute Priority Rule 

Section 1129(b)(2)(c) of the Bankruptcy Code requires that a plan be “fair and equitable” 

to a rejecting class of interests as follows: 

(C) With respect to a class of interests – 

(i) the plan provides that each holder of an interest of such class 

receive or retain on account of such interest property of a value, 

as of the effective date of the plan, equal to the greatest of the 

allowed amount of any fixed liquidation preference to which 

such holder is entitled, any fixed redemption price to which such 

holder is entitled, or the value of such interest; or 

(ii) the holder of any interest that is junior to the interests of such 

class will not receive or retain under the plan on account of such 

junior interest any property. 

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See 11 U.S.C. § 1129(b)(2)(C). 

Section 1129(b)(2)(B)(ii) of the Bankruptcy Code provides: 

(2) For the purpose of this subsection, the condition that a plan be fair and 

equitable with respect to a class includes the following requirements: 

11 U.S.C. § 1129(b)(2)(B)(ii). 

(B) With respect to a class of unsecured claims – 

. . . . 

(ii) the holder of any claim or interest that is junior to the claims of 

such class will not receive or retain under the plan on account of 

such junior claim or interest any property. 

Distributions made pursuant to the Plan conform with the requirements of section 

1129(b)(2)(B)(ii) of the Bankruptcy Code because distributions are made based on an order of 

priority such that, absent consent, holders of Allowed Claims or Equity Interests in a given Class 

must be paid in full before a distribution is made to a more junior Class. The Plan’s contingent 

right to payment afforded to the stockholders of ENE is the embodiment of and not a violation of 

the absolute priority rule. The shareholders receive that which section 1129(b)(2)(B) provides 

that they may receive—property remaining after creditors are paid in full. The issuance of a 

certificate representing shareholders contingent right to payment is not itself a distribution of 

property of the estate and, therefore, the absolute priority scheme is not violated. Classes of 

Creditors will receive present value distributions of their claims prior to any more junior Classes 

receiving distributions. 

Accordingly, the Plan satisfies the cramdown requirements of section 1129(b) of the 


D. The Release, Injunction and Exculpation Provisions of the Plan 

The Plan includes limited discharge, injunction and exculpation provisions that are 

necessary and appropriate in the context of these Chapter 11 Cases. 

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1). Discharge 

Section 42.3 provides for a discharge of Claims against and Equity Interests in the 

Debtors and Debtors in Possession. Section 1.46 of the Plan defines Claims as “any right to 

payment from the Debtors or from property of the Debtors or their estates . . . .” Section 1.139 

of the Plan defines Equity Interest as “any equity interest in any of the Debtors . . . .” Therefore, 

the discharge set forth in Section 42.3 comports with section 524(e) of the Bankruptcy Code as 

not providing for a discharge of non-debtor claims. In addition, the Debtors have modified 

Section 4.3 of the Plan to delete the reference to the “Reorganized Debtors’ subsidiaries, the 

Reorganized Debtor Plan Administrator, their agents and employees” from the entities against 

whom all Persons and Entities are precluded from asserting Claims. (Debtors’ Trial Ex. 5, 

§ 42.3). 

2). Injunctions 

Section 42.4 of the Plan enjoins Persons or Entities who have held, hold or may hold 

Claims (or other debt or liability discharged pursuant to the Plan) from commencing or 

continuing actions against the Debtors, the Debtors in Possession or the Reorganized Debtors, on 

any such Claim or other debt or liability or Equity Interest or other right of equity interest that is 

terminated or cancelled pursuant to the Plan. As Section 42.4 of the Plan is limited in scope to 

the Debtors, the Debtors in Possession or the Reorganized Debtors, this injunction is likewise 

appropriate. 

Several courts have found that governmental authorities are no different from other 

creditors in certain situations. See In re Pacific Gas & Elec. Co., 281 B.R. 1, 27 (Bankr. N.D. 

Cal. 2002) (finding that, “where the government acts like a creditor, it is stayed just like other 

creditors.”). Accordingly, section 502 of the Bankruptcy Code governs the allowance of claims, 

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and no exception exists within section 502 for claims based upon the alleged police or regulatory 

powers of a governmental unit or agency. 

3). Releases and Exculpations 

The Plan does not provide for broad third-party releases, but rather, limited exculpation 

for acts during these Chapter 11 Cases. The exculpation neither affects liability for prepetition 

actions nor absolves parties from liability for gross negligence or willful misconduct. 

Bankruptcy law fosters negotiation of plan terms among constituent creditors. Numerous 

parties negotiated the Plan and made various compromises. Exculpation for participating in the 

plan process is appropriate where plan negotiation could not have occurred without protection 

from liability. As recognized by the Second Circuit in Drexel, where a debtor’s plan requires the 

settlement of numerous, complex issues, protection of third parties against legal exposure may be 

a key component of such settlement. See Sec. and Exch. Comm’n v. Drexel Burnham Lambert 

Group, Inc. (In re Drexel Burnham Lambert Group, Inc.), 960 F.2d 285 (2d Cir. 1992). 

Moreover, without such exculpation, negotiation of a Plan in these Chapter 11 Cases would not 

have been possible – a result in contravention of the purposes of the Bankruptcy Code. Without 

creditor participation in plan formulation, the value of these chapter 11 estates would be 

immeasurably depleted by costly and lengthy litigation, thereby injuring all creditors. 30 

30 The DOL interposed an objection to confirmation of the Plan alleging that the exculpatory provisions of the Plan 

violate ERISA (Docket No. 17173, 12(C), 23-31.). The DOL objection, however, fails to consider that not all 

releases are precluded under ERISA. “A release is not an ‘agreement or instrument’ within the meaning of section 

1110(a).” Leavitt v. Northwestern Bell Telephone Co., 921 F.2d 160, 161 (8th Cir.1990). “Private settlements of 

ERISA claims do not compromise the policies underlying ERISA.” Id. at 162. This includes settlements containing 

releases. Specifically, “[s]ection 1110(a) prohibits agreements that diminish the statutory obligations of a fiduciary. 

A release, however, does not relieve a fiduciary of any responsibility, obligation, or duty imposed by ERISA; 

instead, it merely settles a dispute that the fiduciary did not fulfill its responsibility or duty on a given occasion.” Id. 

at 161-62. 

In the event of a conflict between ERISA and other federal law, ERISA is subordinated to other federal law. PBGC 

v. CF&I Fabricators of Utah, Inc. (In re CF&I Fabricators of Utah, Inc.), 150 F.3d 1293, 1301 (10th Cir. 1998), 

cert. denied, 526 U.S. 1145 (1999) (terms of ERISA not sole measure of determining value of claim for terminated 

plan in bankruptcy). The validity of this argument was recognized (but not decided) by the United States District 

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The exculpation provisions in Section 42.7 of the Plan are reasonable and customary and 

in the best interests of the estates. If the claims for which individuals are exculpated are actually 

brought, the Debtors and their employees may be asked for discovery and trial testimony. 

(6/9/04 Cooper Tr. at 90:20 – 25, 92:13 –15). To the extent any entity or individual cannot be 

exculpated as provided herein, the Court enjoins all such claims to be filed initially with this 

Court and only with the Court. Additionally, the Court is not precluded from hearing actions 

brought by parties under ERISA. 31 

The Court concludes that the release, injunction and 

exculpation provisions in Article XLII of the Plan are reasonable and appropriate in these 

Chapter 11 Cases. 

The Court further concludes that the exculpation provision found in Section 42.7 of the 

Plan is substantially similar to the exculpation provision found in the confirmed chapter 11 plan 

of In re WorldCom, Inc., Case No. 02-13533 (AJG)), as well as other complex chapter 11 cases. 

Contrary to certain arguments made during the Confirmation Hearing, nothing contained in the 

WorldCom Order Confirming the Debtors’ Modified Second Amended Joint Plan, entered by the 

Court on October 31, 2003 (the “WorldCom Order”) (Docket No. 9686, order confirming the 

plan of reorganization in the chapter 11 cases of In re WorldCom, Inc., Case No. 02-13533 

(AJG)) contradicts the scope of the exculpation in section 42.7 of the Plan. 

Court for the Southern District of New York in PBGC v. LTV Steel Corp. (In re Chateaugay Corp.), 87 B.R. 779, 

801 n.5 (S.D.N.Y. 1988), rev’d on other grounds, 496 U.S. 633 (1990). 

31 As was stated in Browning v. Levy, 283 F.3d 761, 779 (6th Cir. 2002): 

[T]he exclusive jurisdiction of the district courts over certain ERISA claims does not preclude such claims 

from being brought in bankruptcy proceedings, because the “bankruptcy court is not a free standing court,” 

but rather “a ‘unit’ of the district court.” In re Frontier Airlines, Inc., 84 B.R. 724, 727 (Bankr. Colo. 1988) 

(holding that the bankruptcy court had jurisdiction to hear claims arising under ERISA); 28 U.S.C. § 151. 

Because the bankruptcy court is a unit of the district court, and therefore able to share in the district courts’ 

exclusive jurisdiction over ERISA claims, the bankruptcy court has no less power to hear ERISA claims 

than it does any other non-core bankruptcy proceeding. Frontier Airlines, 84 B.R. at 727-28. 

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E. Other Plan Issues 

1). Standing 

Even though the Court has considered and addressed all of the substantive legal 

arguments made by Vanguard, Appaloosa and Angelo Gordon in connection with the Plan and 

the Global Compromise Motion, the Court makes the following ruling on their standing to 

address certain issues. 32 

Section 1128(b) of the Bankruptcy Code provides that “[a] party in interest may object to 

confirmation of a plan.” 11 U.S.C. § 1128(b). Section 1109(b) of the Bankruptcy Code further 

provides that: 

A party in interest, including the debtor, the trustee, a creditors’ committee, an 

equity security holders’ committee, a creditor, an equity security holder, or any 

indenture trustee, may raise and may appear and be heard on any issue in a case 

under this chapter. 

11 U.S.C. § 1109(b). Although section 1109(b) provides that a party in interest may raise and be 

heard on any issue in a case, a party in interest must still satisfy the general requirements of the 

standing doctrine. Southern Blvd. Inc. v. Martin Paint Stores (In re Martin Paint Stores), 207 

B.R. 57, 61 (Bankr. S.D.N.Y. 1997) (citing In re James Wilson Assocs., 965 F.2d 160, 169 (7th 

Cir. 1992)); see also In re Tascosa Petroleum Corp., 196 B.R. 856, 863 (D. Kan. 1996) 

(rejecting argument that 1109(b) would allow a creditor to object to absolutely any issue under 

chapter 11 and concluding that section 1109(b) does not waive traditional prudential limitations 

on standing). 

32 The issue of standing is a jurisdictional predicate and, therefore, there can be no waiver of this issue. See United 

States v. Hays, 515 U.S. 737, 742 (1995) (“The question of standing is not subject to waiver”); Wight v. 

Bankamerica Corp., 219 F.3d 79, 90 (2d Cir. 2000) (“[W]e have already held that arguments for or against standing 

may not be waived”). To the extent that any party suggests that the Court should not address the issue at this stage 

of the case because of the Creditors’ Committees failure to raise the issue any earlier, the Court disagrees and 

concludes that it is appropriate to address the issue. 

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Standing addresses the question of “whether [a] litigant is entitled to have a court decide 

the merits of a dispute or of particular issues.” Elk Grove Unified Sch. Dist. v. Newdow, 124 

S.Ct. 2301, 2308, 2004 WL 1300159, at *5 (June 14, 2004) (quoting Warth v. Seldin, 422 U.S. 

490, 498 (1975)). “’The doctrine of standing incorporates both constitutional and prudential 

limitations on federal court jurisdiction.’” Wight, 219 F.3d at 86 (quoting Lamont v. Woods, 948 

F.2d 825, 829 (2d Cir. 1991)). 

The constitutional component of standing stems from the case or controversy requirement 

of Article III of the Constitution. E.g., id. Standing in the constitutional sense has three 

elements: 

(i) the plaintiff must have sustained an "injury in fact," which means that a 

legally-protected interest must actually have been invaded in a concrete and 

particularized manner; (ii) the injury must be traceable to the defendant's action, 

i.e., there must be a causal connection; and (iii) a ruling in favor of the plaintiff 

will likely redress the injury. 

19 Court Street Assocs., LLC v. Resolution Trust Corp. (In re 19 Court Street Assocs., LLC), 190 

B.R. 983, 991 (Bankr. S.D.N.Y. 1996) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560- 

61 (1992)). 

Prudential standing refers to judicially-created limitations on the exercise of jurisdiction. 

See Elk Grove, 2004 WL 1300159 at *5 (“prudential standing . . . embodies ‘judicially selfimposed 

limits on the exercise of federal jurisdiction’”). The standing doctrine’s prudential 

requirements are rules of self-restraint and are applied to further the proper role of the courts in a 

democratic society. Wight, 219 F.3d at 86. Foremost of the prudential requirements is the rule 

that a party must assert its own legal rights. See id.; see also De Jesus-Keolamphu v. Village of 

Pelham Manor, 999 F. Supp. 556, 567 (S.D.N.Y. 1998) (“As a general prudential rule, a plaintiff 

may not claim standing to vindicate the constitutional or statutory rights of third parties”). Thus, 

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even if standing in the Article III sense has been established, a plaintiff must assert their own 

legal rights and interests and a plaintiff cannot rest a claim to relief on the legal rights of third 

parties. See Warth, 422 U.S. at 499; see also Kane v. Johns-Manville Corp., 843 F.2d 636, 643 

(2d Cir. 1988) (“Generally, litigants in federal court are barred from asserting the constitutional 

and statutory rights of others in an effort to obtain relief for injury to themselves”). 

follows: 

The policy justifications for the third-party standing doctrine has been articulated as 

Federal courts must hesitate before resolving a controversy, even one within their 

constitutional powers to resolve, on the basis of the rights of third persons not 

parties to the litigation. The reasons are two. First, the courts should not 

adjudicate such rights unnecessarily, and it may be that in fact the holders of those 

rights either do not wish to assert them, or will be able to enjoy them regardless of 

whether the in-court litigant is successful or not . . . . Second, third parties 

themselves usually will be the best proponents of their own rights. The courts 

depend on effective advocacy, and therefore should prefer to construe legal rights 

only when the most effective advocates of those rights are before them. 

Singleton v. Wulff, 428 U.S. 106, 113-14 (1976) as cited in De Jesus-Keolamphu, 999 F. Supp. at 

567. Based upon these concerns the Supreme Court has narrowly limited when a party will have 

standing to assert the rights of another. See De Jesus-Keolamphu, 999 F. Supp. at 567. Thirdparty 

standing will be recognized where: “(1) the third parties have suffered an ‘injury in fact,’ 

(2) the plaintiff has a ‘close relation’ to the third parties such that the plaintiff will effectively 

represent the third parties' interests, and (3) the third parties are hindered in their ability to 

protect their own interests.” See id. (citing Powers v. Ohio, 499 U.S. 400, 410-11 (1991)). 

The Creditors’ Committee argue that Vanguard, Appaloosa and Angelo Gordon do not 

have standing to object to all facets of the Global Compromise Motion. 33 

The Committee argues 

33 In connection with a motion in limine and confirmation, the Court permitted the parties to supplement the record 

with briefs on the issue. The Debtors briefed the issue in its memorandum of law in support of the Plan and later 

withdrew its objection. The Committee filed a response to the submissions filed by Vanguard, Appaloosa and 

Angelo Gordon. 

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that Vanguard, Appaloosa and Angelo Gordon may not assert the rights of other creditors of 

other bankruptcy estates to object to the Global Compromise Motion. 34 

Here, prudential concerns argue against Vanguard, Appaloosa and Angelo Gordon from 

asserting rights derived from other creditors of other bankruptcy estates to object to the Global 

Compromise Motion. Specifically, at the Hearing an issue was raised whether the Global 

Compromise Motion is a sub rosa plan as to the 96 Debtors referenced in footnote 14. It seemed 

apparent to the Court at the Hearing that Vanguard, Appaloosa and Angelo Gordon were 

attempting to assert the substantive rights of creditors and parties in interest in these 96 cases in 

connection with this issue. In the Court’s view, it is inappropriate for Vanguard, Appaloosa and 

Angelo Gordon (or any other party that is not a creditor or party in interest of the 96 Debtors) to 

assert the interests of creditors and parties in interest of these 96 Debtors where there has been no 

showing that Vanguard, Appaloosa and Angelo Gordon: i) have a ‘close relation’ to the creditors 

and parties in interest of these 96 Debtors; or ii) that the creditors and parties in interest of these 

96 estates are hindered in their ability to protect their own interests. See De Jesus-Keolamphu, 

999 F. Supp. at 567. These concerns are underscored by the fact that the record indicates that 

each of the 96 Debtors has creditors that appear to be unsecured and that can assert their own 

In addition to these briefs, the Court received affidavits from Vanguard, Appaloosa and Angelo Gordon disclosing 

Vanguard, Appaloosa and Angelo Gordon’s claims against the Debtors other than claims. Based upon the affidavits, 

it appears that Vanguard, Appaloosa and Angelo Gordon all hold direct claims against ENE and ENA; and Angelo 

Gordon holds direct claims against ENA Upstream. 

34 It is the Court’s understanding that in light of the applicability of the Global Compromise Motion to all of the 

Debtors, including ENE and ENA, the Creditors’ Committee later withdrew its objection to the standing of 

Vanguard, Appaloosa and Angelo Gordon to oppose the global compromise as sought for all Debtors under the Plan. 

Thus, to the extent that Vanguard, Appaloosa and Angelo Gordon hold independent claims in any of the Debtors’ 

estates, the Creditors’ Committee does not appear to object to Vanguard’s, Appaloosa’s and Angelo Gordon’s 

asserting their rights. Apparently, however, the Committee did not withdraw its objection concerning whether 

Vanguard, Appaloosa and Angelo Gordon have standing to pursue issues regarding approval of the global 

compromise outside of the Plan as to the 96 Debtors referenced in footnote 14. As previously noted, the Debtors 

withdrew the entirety of their objection. 

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objections to the Global Compromise Motion. Accordingly, the Court concludes that Vanguard, 

Appaloosa and Angelo Gordon may not assert the rights derived from the 96 Debtors. 

2). Section 1127 

Pursuant to section 1127 of the Bankruptcy Code, a plan proponent may modify a plan at 

any time before confirmation so long as the plan, as modified, satisfies the requirements of 

sections 1122 and 1123 of the Bankruptcy Code. In addition, Bankruptcy Rule 3019 provides, in 

relevant part, that: 

after a plan has been accepted and before its confirmation, the proponent may file 

a modification to the plan. If the court finds after hearing on notice to the trustee, 

any committee appointed under the Code, and any other entity designated by the 

court that the proposed modification does not adversely change the treatment of 

the claim of any creditor or the interest of any equity security holder who has not 

accepted in writing the modification, it shall be deemed accepted by all creditors 

and equity security holders who have previously accepted the plan. 

FED. R. BANKR. P. 3019. 

None of the modifications in the Plan Modification or the documents in the Plan 

Supplement constitute an adverse change. The following definition of adverse change is 

instructive on this point: “The best test is whether the modification so affects any creditor or 

interest holder who accepted the plan that such entity, if it knew of the modification, would be 

likely to reconsider its acceptance.” 9 COLLIER ON BANKRUPTCY 3019.01 (15th ed. Rev. 2004); 

see also In re Am. Solar King Corp., 90 B.R. 808, 826 (Bankr. W.D. Tex. 1988) (modification is 

not material if “the only adverse impact flowing from this modification is a miniscule dilution of 

the stock issue”); accord In re Century Glove, Inc., No. Civ. A. 90-400-SLR, Civ. A. 90-401- 

SLR, 1993 WL 239489, *3 (D. Del. Feb. 10, 1993) (citing Am. Solar King, 90 B.R. 808, that 

modifications only require further disclosure when debtor intends to solicit votes from previously 

dissenting creditors or when modification materially and adversely impacts parties who 

previously voted for the plan). 

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Certain technical and minor modifications were made to the Plan at the Confirmation 

Hearing. Such modifications will have no material adverse impact on the treatment of any 

claims and interests and thus, pursuant to Bankruptcy Rule 3019, all acceptances to the Plan are 

deemed acceptances of the Plan as modified at the Confirmation Hearing. As set forth above, the 

Plan complies fully with section 1122 and 1123 of the Bankruptcy Code. In addition, the 

Debtors have complied with section 1125 with respect to the Plan. Accordingly, the 

requirements of section 1127 of the Bankruptcy Code have been satisfied. 

3). Post-Confirmation Overhead Allocation Formula 

The Post-Confirmation Allocation Formula is in the best interests of the Debtors, their 

estates and Creditors. The Post-Confirmation Allocation Formula is conceptually sound and 

equitably distributes corporate overhead without incurring excessive additional expense in order 

to perform the allocations. Sufficient business justifications exist to merit the approval of the 

Post-Confirmation Allocation Formula. 

4). Remaining Objections 

(i) Shareholder Objections 

The objections of Edwin and Helen Doty (Docket No. 15229), Irwin Goldman (Docket 

No. 15538), J. Corey Qua (not docketed), Arnold Rahn (not docketed), and Hugo Renda (Docket 

No. 17465) (collectively, the “Shareholder Objections”) generally allege that the holders of ENE 

common stock should receive distributions under the Plan. The Bankruptcy Code requires that a 

holder of any interest that is junior to claims or other interests will not receive or retain under the 

plan on account of such junior interest. See 11 U.S.C. § 1129(b)(2)(B)(ii). As set forth above, 

the Court finds that the Plan complies with section 1129(b)(2)(B)(ii) of the Bankruptcy Code. 

Accordingly, the Shareholder Objections should be overruled. 

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(ii) Classification Objections 

The objections of Vanguard (Docket Nos. 18426, 16692 and 17244), Appaloosa (Docket 

Nos. 16707, 17236 and 18422), CIBC (Docket No. 17203), CRRA (Docket No. 17225), Reliance 

Trust Company (“Reliance”) (Docket No. 17221), and State Street Bank and Trust Company 

(“State Street”) (Docket No. 17166) (collectively, the “Classification Objections”) generally 

object to the classification and/or treatment of (a) guaranty claims, (b) joint liability claims, and 

(c) claims subject to contractual and/or equitable subordination. The Court finds that the 

treatment of Guaranty Claims and Joint Liability Claims is appropriate in light of the global 

compromise embodied in the Plan and such classification and treatment is in accordance 

therewith. Moreover, a plan proponent is given significant flexibility in classifying claims under 

section 1122(a) of the Bankruptcy Code if there is a reasonable basis for the classification 

scheme. See In re Drexel Burnham Lambert Group, Inc., 138 B.R. 723, 757 (Bankr. S.D.N.Y. 

1992). Furthermore, given the risk that a Guaranty Claim would not exist if there were 

substantive consolidation, it is appropriate to separately classify those claims and adjust the 

recovery on the Guaranty Claims to reflect this risk. With respect to contractual subordination 

issues, the Court concludes that all creditors within each class are receiving the same treatment. 

The extent to which a creditor is entitled to the benefits of subordination is a matter of intercreditor 

relationships, which is preserved by section 510 of the Bankruptcy Code. Section 8.1 of 

the Plan simply acknowledges that the contractual subordination rights, if any, of the holders of 

the “Senior Indebtedness” are preserved. Claims in Classes 376 through 382 relating to 

Subordinated Claims shall be determined pursuant to a Final Order in accordance with the 

provisions of the Bankruptcy Code under the principles of equitable subordination or otherwise. 

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(Debtors’ Trial Ex. 1, § 1.179). The Plan provides the Court with flexibility to determine the 

amount and extent of subordination of any claim. 

(iii) Best Interests/Feasibility Objections 

The objections of Vanguard (Docket Nos. 18426, 16692 and 17244), American Electric 

Power Company, Inc., American Electric Power Service Corporation, AEP Energy Services, 

Inc., AEP Energy Services Ltd., AEP Desert Sky LP, LLC, and AEP Desert Sky GP, LLC 

(collectively, “AEP”) (Docket No. 16701), Appaloosa (Docket Nos. 16707, 17236 and 18422), 

CRRA (Docket No. 17225), Q-West Energy Company, Cohort Energy Company, Riverside 

Products & Services, L.L.C., Linder Oil Company, a partnership, Mayne & Mertz, Inc., Stone 

Energy Corporation, Unimark L.L.C. and ProGas, Inc. (collectively, “Q-West”) (Docket No. 

17194), Reliance (Docket No. 17221), The State of Oregon, through its Department of Justice 

(Docket No. 17175), and Toronto Dominion (Texas), Inc. (“Toronto Dominion”) (Docket No. 

16700) (collectively, the “Best Interests Objections”) generally allege that the Plan does not 

satisfy the bests interests of creditors test or is not feasible under sections 1125, 1129(a)(2), 

1129(a)(7), and 1129(a)(11) of the Bankruptcy Code because (a) the Liquidation Analysis is 

insufficient and/or speculative, (b) a separate liquidation analysis is required for each Debtor, (c) 

the global compromise embodied in the Plan is not in the best interests of creditors, (d) the 

Effective Date is not certain, and (e) creditors would receive more under chapter 7. Based on the 

findings and conclusions set forth above, the Court concludes that the Best Interests Objections 

should be overruled. 

(iv) Cramdown Objections 

The objections of Vanguard (Docket Nos. 18426, 16692 and 17244), AEP (Docket No. 

16701), Appaloosa (Docket Nos. 16707, 17236 and 18422), Q-West (Docket No. 17194), PBGC 

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(Docket Nos. 16693 and 17248), Reliance (Docket No. 17221), and Upstream Energy Services, 

as Agent for Certain Texas Gas Producers (“Upstream”) (Docket No. 17157) (collectively, the 

“Cramdown Objections”) generally allege that the Plan does not satisfy sections 1129(a)(10) 

and/or 1129(b) of the Bankruptcy Code. As set forth above, the Court concludes that the Plan 

satisfies the requirements of sections 1129(a)(10) and 1129(b) of the Bankruptcy Code, and the 

Cramdown Objections should be overruled. 

(v) Global Compromise Objections 

The objections of Vanguard (Docket Nos. 18426, 16692 and 17244), AEP (Docket No. 

16701), Appaloosa (Docket Nos. 16707, 17236 and 18422), CRRA (Docket No. 17225), Q-West 

(Docket No. 17194), Reliance (Docket No. 17221), and Toronto Dominion (Docket No. 16700) 

(collectively, the “Global Compromise Objections”) generally allege that the partial substantive 

consolidation, including the inter-Debtor waivers and the establishment of the Litigation Trust, 

embodied in the Plan (a) is not fair, reasonable or equitable, (b) was not subject to higher and 

better offers, and (c) constitutes a sub rosa plan. For the reasons set forth above, the Court 

concludes that (a) the compromises, settlements and waivers contained in the global compromise 

are fair and equitable and fall well within the reasonable range of litigation outcomes, (b) sound 

business justifications exist for the Debtors to enter into the global compromise, (c) the global 

compromise is not a sub rosa plan, and (d) even if the global compromise were found to be a sub 

rosa plan as to the 96 Debtors referenced in footnote 14, nonetheless, the global compromise 

could be approved, limited to establishing the assets and liabilities of those estates. Accordingly, 

the Global Compromise Objections should be overruled. 

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(vi) Discharge, Release, Injunction and Exculpation Objections 

The objections of Vanguard (Docket Nos. 18426, 16692 and 17244), Ash Grove Cement 

Company, Inc. (“Ash Grove”) (Docket No. 17274), Grupo IMSA, S.A. de C.V. (“Grupo IMSA”) 

(Docket No. 17280), PBGC (Docket Nos. 16693 and 17248), Reliance (Docket No. 17221), 

State Street (Docket No. 17166), Toronto Dominion (Docket No. 16700), Upstream (Docket No. 

17157), and the United States Department of Labor (“DOL”) (Docket No. 17173) (collectively, 

the “Discharge Objections”) generally allege that: (a) the Debtors are not entitled to a discharge 

under section 1141(d)(3) of the Bankruptcy Code; (b) Section 42.4 of the Plan may limit the 

rights of creditors to assert claims, counterclaims and defenses in certain adversary proceedings; 

(c) the release, injunction and exculpation provisions are too broad; and (d) the exculpatory 

provisions of the Plan violate ERISA. As set forth above, the Court concludes that (a) the 

Debtors’ supervised divestiture of assets over an indeterminate period of time entitle them to a 

discharge under section 1141 of the Bankruptcy Code and (b) the release and exculpation 

provisions contained in the Plan are in the best interests of the Debtors’ estates and do not violate 

applicable bankruptcy and nonbankruptcy law, including ERISA. Furthermore, as stated on the 

record at the Confirmation Hearing, nothing set forth in Section 42.4 of the Plan limits the ability 

of a Person or Entity that is a plaintiff or defendant in an adversary proceeding or an action 

outside the Court from asserting defenses, counterclaims or cross-claims, including against the 

Debtors, the Debtors in Possession or the Reorganized Debtors, subject to any limitations 

imposed under applicable law upon the assertion of such defenses, counterclaims, or crossclaims. 

Accordingly, the Discharge Objections should be overruled. 

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(vii) Claims Estimation Objections 

The objections of Appaloosa (Docket Nos. 16707, 17236 and 18422), CRRA (Docket No. 

17225), Reliance Trust Company (Docket No. 17221), and Upstream (Docket No. 17157) 

(collectively, the “Claims Estimation Objections”) generally allege (a) the claims estimation 

procedures previously approved by the Court should not apply to claims subject to pending 

adversary proceedings and (b) Section 21.2 of the Plan improperly eliminates a claimant’s right 

to seek reconsideration under section 502(j) of the Bankruptcy Code. Section 21.2 of the Plan 

provides for the estimation of Claims, unless otherwise limited by an order of the Court. As 

provided in the Order Pursuant to Sections 105(a), 363(b) and 402(c) of the Bankruptcy Code 

and Federal Rules of Bankruptcy Procedure 3007, 7042, 9013, 9014 and 9019, (1) Establishing 

Procedures to Estimate Unliquidated and Contingent Claims, (2) Establishing Procedures to 

Adjudicate Counterclaims, (3) Establishing Procedures to Compromise Claims and 

Counterclaims, and (4) Fixing Notice Procedures and Approving Form and Manner of Notice, 

entered February 18, 2004 (Docket No. 16353), the holder of a fully liquidated claim may elect 

to exclude such claim from the estimation procedures. Furthermore, the Debtors have modified 

Section 21.2 of the Plan to clarify that such provision does not impair a claimant’s rights to seek 

reconsideration under section 502(j) of the Bankruptcy Code. Thus, Section 21.2 of the Plan 

does not (a) compel estimation of liquidated, disputed claims or (b) extinguish a claimant’s right 

to seek reconsideration. Accordingly, the Claims Estimations Objections should be overruled. 

(viii) Jurisdiction Objections 

The objections of Ash Grove (Docket No. 17274), Grupo IMSA (Docket No. 17280) and 

PBGC (Docket Nos. 16693 and 17248) (collectively, the “Jurisdiction Objections”) generally 

allege that the retention of jurisdiction by the Court is overly broad. Section 38.1 of the Plan 

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provides for the Court’s retention of appropriate jurisdiction, and the Plan does not attempt to 

wrest jurisdiction from other courts or administrative bodies with appropriate jurisdiction or vest 

jurisdiction in the Court outside of the Court’s properly retained jurisdiction. Accordingly, the 

Court concludes that such retention of jurisdiction is proper, see In re Friedberg, 192 B.R. 338, 

341 (Bankr. S.D.N.Y. 1996) and In re Johns-Manville Corp., 97 B.R. 174, 180 (Bankr. S.D.N.Y. 

1989), and the Jurisdiction Objections should be overruled. 

(ix) Distribution Issues 

The People of the State of California, ex rel. Bill Lockyer, Attorney General (Docket No. 

16676) allege that interim distributions should require Court approval. The Court concludes that 

this objection should be overruled because creditors are adequately protected by the provisions 

of the Plan and the order confirming the Plan. Specifically, (a) Section 32 of the Plan governs 

the time and manner of distributions under the Plan; (b) Section 21.2 of the Plan provides 

protection to all claimants in that, the Debtors may request the estimation for final distribution 

purposes of any contingent, unliquidated or Disputed Claim subject to notice and a hearing; (c) 

Section 21.3 of the Plan provides that the Disbursing Agent shall make adequate reserves for 

Disputed Claims, and (d) the Confirmation Order will establish (i) a deadline or bar date for 

creditors and parties in interest to assert Administrative Expense Claims against the Debtors, and 

(ii) the procedures for filing, resolving and reserving for such Administrative Expense Claims. 

Therefore, the Plan protects creditors’ rights with respect to Court approval of distributions under 

the Plan. 

Longacre Master Fund, Ltd. (Docket Nos. 17226 and 17812), joined by SPCP Group, 

LLC (Docket No. 19117), asserts that record dates should be established 30 days before any 

distributions under the Plan to allow for the accurate reflection of holders of Allowed Claims 

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throughout the post-confirmation period. Longacre also requests that language be added to the 

Plan regarding: (a) single checks to holders of multiple claims; and (b) utilizing addresses on 

notices of transfer. The Court concludes that these objections should be overruled because (i) 

Section 1.218 of the Plan provides that the Record Date will be established by the Court in the 

Confirmation Order for the purpose of determining the holders of Allowed Claims and Allowed 

Equity Interests entitled to receive distributions pursuant to the Plan; and (ii) the Bankruptcy 

Code does not require the Debtors to fashion “floating record dates” to aid claims traders in the 

secondary claims market. 

(x) Guaranty Settlement Objection 

Grupo IMSA (Docket No. 17280) alleges that Section 28.2 of the Plan unfairly forces a 

premature election to settle Guaranty Claims without the benefit of discovery and adjudication 

on the merits. Section 28.2 of the Plan does not force any party to settle. Rather, Section 28.2 

provides for a settlement election to be made on the Ballot. This provision does not force a 

litigant to make an election; if a litigant needs additional time for discovery, such litigant can 

choose not to exercise the election provided for in Section 28.2 of the Plan. Moreover, if the 

Debtors provided for the benefits of discovery and adjudication as well as for the benefit of the 

election provided for in Section 28.2 of the Plan, such discovery and adjudication would defeat 

the purpose of the settlement election in Section 28.2 of the Plan. Providing a mechanism for 

settlement is consistent with the Bankruptcy Code. See 11 U.S.C. § 1123(b)(3)(A). 

Accordingly, the objection should be overruled. 

(xi) Section 365 Objection 

Reliance (Docket No. 17221) objects to the Plan to the extent the Plan’s treatment of its 

agreement with the Debtors is inconsistent with section 365 of the Bankruptcy Code. The Plan 

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provides for the assumption, assumption and assignment, or rejection of executory contracts and 

unexpired leases that have not been previously assumed or rejected under section 365 of the 

Bankruptcy Code, as contemplated by section 1123(b)(2) of the Bankruptcy Code. (Debtors’ 

Trial Ex. 1, Art. XXXIV). The Court concludes that the Plan complies with section 365 of the 

Bankruptcy Code, and the objection of Reliance Trust Company should be overruled. 

(xii) Administrative Expense Claim Objection 

The objection of Grupo IMSA (Docket No. 17280) alleges that the Plan fails to 

adequately address Administrative Claims, to the extent that the treatment of Administrative 

Claims is not adequately addressed either in the Plan or in an order confirming such Plan, in 

violation of section 1129(a)(9). The Court concludes that the objection of Grupo IMSA should 

be overruled based on the fact that the Plan satisfies the requirements of section 1129(a)(9). 

(xiii) Document Retention Objection 

The objections of Ash Grove (Docket No. 17274) and Toronto Dominion (Docket No. 

16700) (the “Document Retention Objections”) assert that Section 42.12 of the Plan would 

permit the Debtors to improperly destroy Documents in their possession upon the first 

anniversary of the Confirmation Date, which documents may be both discoverable and integral 

to pending litigation. The Court concludes that the Document Retention Objections should be 

overruled based on the modifications to Section 42.12 of the Plan. 

(xiv) NewPower Investigation Objection 

The objection of the NewPower Examiner asserts that the Plan, to the extent that the 

Debtors seek to impair, alter or otherwise prejudice the NewPower Examiner’s investigation in 

the NewPower Cases, (a) does not comply with section 1104 of the Bankruptcy Code, (b) 

interferes improperly with the effectuation of the NewPower Examiner’s orders, and (c) is not 

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proposed in good faith in violation of section 1129(a)(3) of the Bankruptcy Code. The Court 

concludes that the objection of the NewPower Examiner should be overruled because (a) the 

NewPower Examiner was appointed in the NewPower Cases, not the Debtors’ Chapter 11 Cases, 

and the confirmation of the Plan does not affect such appointment, (b) res judicata and collateral 

estoppel appear to preclude the NewPower Examiner from pursuing a re-characterization of the 

settlement payment, and (c) the claim objection process, and not confirmation of the Plan, is the 

appropriate platform for the determination of this dispute. 

(xv) Plan Governance Objections 

The objection of Upstream (Docket No. 17157) suggests that, as a condition of 

confirmation, the Court should require a separate fiduciary be installed to provide post 

confirmation plan governance for the ENA Plan and the ENA Creditors. The Court concludes 

that the objection of Upstream Energy Services (Docket No. 17157) should be overruled 

because, as set forth above, the post confirmation governance provisions set forth in the Plan 

(including the ability of Creditors of ENA or its direct or indirect subsidiaries to file a motion 

seeking to extend the ENA Examiner’s duties post-Effective Date) are appropriate and sufficient 

to protect the interests of all creditors. 

(xvi) Good Faith Objections 

The objections of Vanguard (Docket Nos. 18426, 16692 and 17244), Appaloosa (Docket Nos. 

16707, 17236 and 18422), Grupo IMSA (Docket No. 17280), and Q-West Energy (Docket No. 

17194) (collectively, the “Good Faith Objections”) generally allege that the Plan was not 

proposed in good faith for the following reasons: (a) the Debtors failed to solicit higher and 

better liquidation transactions (addressed above as “Global Compromise Objections”); (b) the 

Debtors attempt to limit the affirmative defenses of setoff and recoupment (addressed above as 

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“Discharge Objections”); (c) the Debtors have gerrymandered the classes of claims in the Plan 

by separately classifying Enron General Unsecured Claims and Enron Guaranty Claims 

(addressed above as “Classification Objections”); (d) the Plan fails to maximize the distributions 

to ENA’s creditors because its distribution scheme, proposed under the guise of a global 

compromise, diverts substantial value away from ENA to or for the benefit of ENA’s sole 

shareholder, ENE, under circumstances where ENE is entitled to no distribution from ENA’s 

insolvent estate, and to the detriment of ENA’s creditors (addressed above as “Global 

Compromise Objections”); and (e) the Debtors have failed to establish a good faith process for 

resolving the claims of Grupo IMSA and other similarly situated creditors (addressed above as 

“Claims Estimation Objections”). As previously addressed herein, each of the Good Faith 

Objections should be overruled. 

(xvii) Additional Objections 

To the extent not withdrawn, resolved or otherwise specifically addressed above, for the 

reasons stated herein, the Plan complies with all applicable provisions of the Bankruptcy Code, 

and the Court concludes that the remaining objections should be overruled in their entirety. 

Each of the objections to the April 27 Plan, July 2 Plan or the Plan not heretofore 

withdrawn or resolved by written or oral agreement stated and made a part of the record of the 

Confirmation Hearing, is overruled and denied. 

IV. SUMMARY 

The Plan meets all the requirements of chapter 11 and should be confirmed, and the 

Global Compromise Motion, to the extent necessary (and subject to the condition that should 

confirmation of the Plan be reversed on appeal, approval of the Global Compromise Motion shall 

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not remain in effect), and the Overhead Allocation Motion satisfy all legal standards, are in the 

best interest of the Debtors’ estates, and should be approved. 

An appropriate Order will be entered. 

Dated: New York, New York 

July 15, 2004 

s/ Arthur J. Gonzalez 

UNITED STATES BANKRUPTCY JUDGE 

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Exhibit B-2 

In re Tower Auto., Inc., No. 05-10578 (ALG) (Bankr. S.D.N.Y. July 12, 2007) [Docket 

No. 2932]

05-10578-alg 10-15446-shl Doc 2932 914 Filed 02/08/12 07/12/07 Entered 02/08/12 07/12/0722:35:42 16:36:37 Main Document 

Pg Pg 292 1 of 45 336 



) 

) Chapter 11 

In re ) 

) Case No. 05-10578 (ALG) 

TOWER AUTOMOTIVE, INC., et al., 1 ) Jointly Administered 

) 

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER PURSUANT 

TO 11 U.S.C. §§ 1129(A) AND (B) AND FED. R. BANKR. P. 3020 CONFIRMING 

FIRST AMENDED JOINT PLAN OF TOWER AUTOMOTIVE, INC. 

AND ITS DEBTOR SUBSIDIARIES UNDER CHAPTER 11 OF THE 

BANKRUPTCY CODE WITH TECHNICAL MODIFICATIONS 

Tower Automotive, Inc. and certain of its direct and indirect subsidiaries, as debtors and 

debtors in possession (collectively, the “Debtors” or “Tower”) having: 

• commenced on February 2, 2005 (the “Petition Date”) chapter 11 cases by filing 

voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the 

“Bankruptcy Code”) (collectively, the “Chapter 11 Cases”); 

• continued to operate their businesses and manage their property as debtors in possession 

pursuant to sections 1107(a) and 1108 of the Bankruptcy Code; 2 

• filed on May 23, 2007, the Motion of the Debtors for an Order: (A) Approving the Asset 

Purchase Agreement by and between the Debtors and the Purchaser, or such other 

Purchase Agreement(s) Between the Debtors and the Successful Bidder at the Auction; 

(B) Authorizing the Sale of All or Substantially All of the Assets of the Debtors Free and 

Clear of All Claims and Interests; and (C) Authorizing the Assumption and Assignment 

of Certain Executory Contracts and Unexpired Leases in Connection Therewith (the 

“Sale Motion”) (Docket No. 2640) and filed on July 9, 2007, an affidavit by Eric 

Mendelsohn of Lazard Frères & Co. LLC in support of the Sale Motion (the 

“Mendelsohn Affidavit”) (Docket No. 2893); 

1 The Debtors are the following entities: Tower Automotive, Inc.; Algoods, USA, Inc.; R.J. Tower Corporation; 

Tower Automotive Bardstown, Inc.; Tower Automotive Bowling Green, LLC; Tower Automotive Chicago, 

LLC; Tower Automotive Finance, Inc.; Tower Automotive Granite City, LLC; Tower Automotive Granite City 

Services, LLC; Tower Automotive International, Inc.; Tower Automotive International Holdings, Inc.; Tower 

Automotive International Yorozu Holdings, Inc.; Tower Automotive Lansing, LLC; Tower Automotive 

Madison, LLC; Tower Automotive Michigan, LLC; Tower Automotive Milwaukee, LLC; Tower Automotive 

Plymouth, Inc.; Tower Automotive Products Company, Inc.; Tower Automotive Receivables Company, Inc.; 

Tower Automotive Services and Technology, LLC; Tower Automotive, s.r.o.; Tower Automotive Technology, 

Inc.; Tower Automotive Technology Products, Inc.; Tower Automotive Tool, LLC; Tower Services, Inc.; and 

Trylon Corporation. 

2 Unless otherwise noted, capitalized terms not defined in these Findings of Fact, Conclusions of Law and 

Confirmation Order (this “Confirmation Order”), shall have the meanings ascribed to them in the Plan. The 

rules of interpretation set forth in Article I of the Plan shall apply to this Confirmation Order. 

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• filed on May 23, 2007, the Debtors’ Motion for an Order Approving Cure and Notice 

Procedures for the Assumption and Assignment of Certain Executory Contracts and 

Unexpired Leases (the “Cure Procedures Motion”) (Docket No. 2638); 

• filed on June 6, 2007, the First Amended Joint Plan of Tower Automotive, Inc. and its 

Debtor Subsidiaries Under Chapter 11 of the Bankruptcy Code which the Debtors re-filed 

on July 9, 2007 so as to incorporate certain technical modifications as the First Amended 

Joint Plan of Tower Automotive, Inc. and its Debtor Subsidiaries Under Chapter 11 of the 

Bankruptcy Code with Technical Modifications (Docket No. 2879) attached hereto as 

Exhibit A (as modified and amended, and as modified hereby, the “Plan”); 

• filed on June 6, 2007, the Amended Disclosure Statement for the First Amended Joint 

Plan of Tower Automotive, Inc. and its Debtor Subsidiaries Under Chapter 11 of the 

Bankruptcy Code (as the same may have been subsequently modified and amended, the 

“Disclosure Statement”) (Docket No. 2712); 

• distributed solicitation materials beginning on or about June 8, 2007, consistent with the 

Bankruptcy Code, the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) 

and the Disclosure Statement Order, as evidenced by the Affidavit of Service of Bridget 

Gallerie of Bankruptcy Services LLC (“BSI”), the Debtors’ claims and balloting agent 

(the “Voting Agent”), (Docket No. 2803) (the “BSI Affidavit”) and the Affidavit of 

Service of Financial Balloting Group LLC (“FBG”) of Solicitation Packages and Non- 

Voting Notices on Holders of Public Securities (Docket No. 2878) (the “FBG 

Affidavit”); 

• filed on June 15, 2007, the Motion of the Debtors for Entry of An Order Approving 

Amended Agreements with the Milwaukee Unions, the Official Committee of Retired 

Employees, the UAW and the IUE-CWA (the “Retiree Settlement Amendment Motion”) 

(Docket No. 2766); 

• published notice of the Confirmation Hearing (as defined below) (the “Confirmation 

Hearing Notice”) in the USA Today, The New York Times, the Detroit Free Press/ Detroit 

News, Automotive News, and the national edition of The Wall Street Journal, consistent 

with the Disclosure Statement Order, as evidenced by the Affidavit of Publication in The 

New York Times of Alice Weber of The New York Times, Affidavit of Publication in 

The Wall Street Journal of Glenn Hellums, Jr. of The Wall Street Journal, Affidavit of 

Publication in USA Today Domestic of Karri Dvir of USA Today, Affidavit of 

Publication in the Detroit News and Free Press of Jay H. Heyman of Porte Advertising, 

Inc. and Affidavit of Publication of Automotive News (Docket Nos. 2874, 2875, 2876, 

2877, 2885) (collectively, the “Publication Affidavits”); 

• filed on July 2, 2007, the various documents comprising the Plan Supplement (the “Plan 

Supplement”) (Docket No. 2834); 

• filed on July 9, 2007, the Memorandum of Law in Support of Confirmation of the First 

Amended Joint Plan of Tower Automotive, Inc. and its Debtor Subsidiaries Under 

Chapter 11 of the Bankruptcy Code with Technical Modifications (the “Plan 

Confirmation Brief”) (Docket No. 2886), together with the Affidavit of James Mallak in 

Support of Confirmation of the First Amended Joint Plan of Tower Automotive, Inc. and 

its Debtor Subsidiaries Under Chapter 11 of the Bankruptcy Code with Technical 

Modifications (the “Mallak Affidavit”), Affidavit of Michael J. Talarico in Support of 

Confirmation of the First Amended Joint Plan of Tower Automotive, Inc. and its Debtor 

Subsidiaries under Chapter 11 with Technical Modifications (the “Talarico Affidavit”) 

and the Affidavit of Barbara Horvath in Support of Substantive Consolidation of the 

Substantively Consolidated Debtors and the International Holding Company Debtors (the 

“Horvath Affidavit”), as exhibits thereto in support of the Plan Confirmation Brief; and 

K&E 11771836.17 

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• filed on July 10, 2007, a report detailing the results of the Plan voting process (the 

“Voting Report”) (Docket No. 2896). 

This Court having: 

• entered an order approving the Cure Procedures Motion on June 5, 2007 (the “Cure 

Procedures Order”) (Docket No. 2717); 

• entered an order on June 5, 2007 which approved the Disclosure Statement as containing 

“adequate information” in accordance with section 1125 of the Bankruptcy Code and 

established certain solicitation, noticing and other related procedures (the “Disclosure 

Statement Order”) (Docket No. 2712); 

• set July 11, 2007, at 11:00 a.m., prevailing Eastern Time, as the date and time of a 

hearing pursuant to Bankruptcy Rules 3017 and 3018 and sections 1126, 1128 and 1129 

of the Bankruptcy Code to consider Confirmation of the Plan (the “Confirmation 

Hearing”); 

• entered an order approving the Retiree Settlement Amendment Motion on June 29, 2007 

(the “Retiree Settlement Order”) (Docket No. 2815); 

• entered an order approving the Sale Motion on July 12, 2007 (the “Sale Order”); 

• reviewed the Plan, Disclosure Statement, the Plan Confirmation Brief, the Mallak 

Affidavit, the Talarico Affidavit, the Horvath Affidavit, the Sale Motion, the Mendelsohn 

Affidavit, the Voting Report and all filed pleadings, exhibits, statements and comments 

regarding Confirmation (collectively, the “Confirmation Papers”); 

• heard the statements of counsel in respect of Confirmation; 

• considered all oral representations, testimony, documents, filings and other evidence 

regarding Confirmation; and 

• taken judicial notice of the papers and pleadings on file in the Chapter 11 Cases. 

NOW, THEREFORE, it appearing to this Court that (i) notice of the Confirmation 

Hearing was adequate and appropriate as to all parties to be affected by the Plan and the 

transactions contemplated thereby, and (ii) the legal and factual bases set forth in the 

Confirmation Papers and presented at the Confirmation Hearing establish just cause for the relief 

granted here; and after due deliberation thereon and good cause appearing therefore, the Court 

hereby makes and issues the following Findings of Fact, Conclusions of Law and Orders: 3 

3 This Confirmation Order constitutes the Court’s findings of fact and conclusions of law under Fed. R. Civ. P. 

52, as made applicable by Bankruptcy Rules 7052 and 9014. Any and all findings of fact shall constitute 

findings of fact even if they are stated as conclusions of law, and any and all conclusions of law shall constitute 

conclusions of law even if they are stated as findings of fact. 

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I. FINDINGS OF FACT AND CONCLUSIONS OF LAW 

IT IS HEREBY FOUND AND DETERMINED THAT: 

Jurisdiction and Venue 

a) On the Petition Date, the Debtors commenced these Chapter 11 Cases. Venue in the 

Southern District of New York was proper as of the Petition Date and continues to be proper as 

of the date hereof. Confirmation of the Plan is a core proceeding under 28 U.S.C. § 157(b)(2). 

The Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. § 1334; and the 

Court has exclusive jurisdiction to determine whether the Plan complies with the applicable 

provisions of the Bankruptcy Code and should be confirmed. 

Eligibility (11 U.S.C. § 109) 

b) The Debtors were and are entities eligible for relief under section 109 of the Bankruptcy 

Code. 

Modifications to the Plan 

c) All modifications to the Plan since the entry of the Disclosure Statement Order are 

consistent with all of the provisions of the Bankruptcy Code, including, but not limited to, 

sections 1122, 1123, 1125 and 1127 of the Bankruptcy Code. The modifications to the Plan are 

hereby approved, pursuant to section 1127 of the Bankruptcy Code and Bankruptcy Rule 3019. 

Disclosure Statement Order 

d) On June 5, 2007, the Court entered the Disclosure Statement Order that, among other 

things: (a) approved the Disclosure Statement as containing adequate information within the 

meaning of section 1125 of the Bankruptcy Code and Bankruptcy Rule 3017; (b) fixed July 6, 

2007 as the Voting Deadline (as defined in Exhibit 2 to the Disclosure Statement Order (the 

“Solicitation Procedures”)) for voting to accept or reject the Plan; (c) fixed July 11, 2007, at 

11:00 a.m., prevailing Eastern Time, as the date and time for the commencement of the 

Confirmation Hearing; (d) fixed July 6, 2007, as the deadline for objecting to the Plan; 

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(e) approved the form and method of notice of the Confirmation Hearing Notice (as defined in 

the Solicitation Procedures) and (f) fixed June 1, 2007 as the Voting Record Date (as defined in 

the Solicitation Procedures). 

Transmittal and Mailing of Materials; Notice 

e) As evidenced by the BSI Affidavit and the FBG Affidavit, all persons, entities or 

governmental agencies entitled or required to receive notice have received due, proper and 

adequate notice of the Disclosure Statement, the Plan, the Disclosure Statement Hearing, the 

Confirmation Hearing and other bar dates and hearings, along with all deadlines for voting on or 

objecting to the Plan, in accordance with the procedures set forth in the Disclosure Statement 

Order and in substantial compliance with Bankruptcy Rules 2002(b), 3017 and 3020(b), and such 

transmittal and service were adequate and sufficient and no other or further notice is or shall be 

required. The Debtors published the Confirmation Hearing Notice once each in the USA Today, 

The New York Times, the Detroit Free Press/ Detroit News, Automotive News, and the national 

edition of The Wall Street Journal, consistent with the Disclosure Statement Order, as evidenced 

by the Publication Affidavits. 

Voting Report 

f) Prior to the Confirmation Hearing, the Debtors filed the Voting Report. All procedures 

used to distribute the Solicitation Packages (as defined in the Solicitation Procedures) to the 

applicable Holders of Claims and to tabulate the Ballots and Master Ballots were fair and 

conducted in accordance with the Solicitation Procedures, the Disclosure Statement Order, the 

Bankruptcy Code, the Bankruptcy Rules, the local rules of the Bankruptcy Court for the 

Southern District of New York (the “Local Bankruptcy Rules”), and all other applicable rules, 

laws and regulations. 

g) As evidenced by the Voting Report, Classes 4, 5, 6 and 7 have voted to accept the Plan. 

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Judicial Notice 

h) The Court takes judicial notice of the docket of the Chapter 11 Cases maintained by the 

Clerk of the Court and/or its duly appointed agent, including, without limitation, all pleadings 

and other documents on file, all orders entered, and all evidence and arguments made, proffered 

or adduced at the hearings held before the Court during the pendency of the Chapter 11 Cases. 

The Court admits into evidence the Mallak Affidavit, the Talarico Affidavit and the Horvath 

Affidavit. Resolutions of objections to Confirmation explained on the record at the Confirmation 

Hearing are hereby incorporated by reference. 

Burden of Proof 

i) The Debtors, as proponents of the Plan, have met their burden of proving the elements of 

sections 1129(a) and 1129(b) of the Bankruptcy Code by a preponderance of the evidence, which 

is the applicable evidentiary standard for the Confirmation. Further, the Debtors have proven the 

elements of sections 1129(a) and 1129(b) of the Bankruptcy Code by clear and convincing 

evidence. 

The Plan Complies with the Applicable Provisions of the Bankruptcy Code 

j) The Plan complies with all applicable provisions of the Bankruptcy Code as required by 

section 1129(a)(1) of the Bankruptcy Code, including, without limitation, sections 1122 and 

1123 of the Bankruptcy Code. 

The Plan Satisfies the Classification Requirements of Sections 1122(a) and 1123(a)(1) of the 

Bankruptcy Code By Placing Only Substantially Similar Claims or Equity Interests in 

Each Class 

k) The classification of Claims and Equity Interests under the Plan is proper under the 

Bankruptcy Code. Pursuant to sections 1122(a) and 1123(a)(1) of the Bankruptcy Code, 

Article III of the Plan provides for the separate classification of Claims and Equity Interests into 

nine Classes, based on differences in the legal nature and/or priority of such Claims and Equity 

Interests (other than Administrative Expense Claims, Fee Claims and Priority Tax Claims, which 

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are addressed in Article II of the Plan). 4 As required by section 1122(a) of the Bankruptcy Code, 

each Class of Claims and Equity Interests contains only Claims or Equity Interests that are 

substantially similar to the other Claims or Equity Interests within that Class. As a result thereof, 

the requirements of sections 1122(a) and 1123(a)(1) of the Bankruptcy Code have been satisfied. 

The Plan Satisfies the Mandatory Plan Requirements of Section 1123(a) of the Bankruptcy 

Code 

l) The Plan fully complies with each requirement of section 1123(a)(1)-(8) of the 

Bankruptcy Code, as follows: 

1. Section 1123(a)(1). Article III of the Plan designates each Class of Claims and 

Equity Interests, as required by section 1123(a)(1) of the Bankruptcy Code. Further, 

Article II of the Plan designates claims of the types described in sections 507(a)(1) 

(Administrative Claims), 503(b) (Fee Claims) and 507(a)(8) (Priority Tax Claims) of 

the Bankruptcy Code. Because these Chapter 11 Cases were commenced as 

voluntary chapter 11 cases, there are no claims of a kind specified in section 

507(a)(2) (claims arising during the “gap” period in an involuntary case). As a result 

thereof, the requirements of section 1123(a)(1) of the Bankruptcy Code have been 

satisfied. 

2. Section 1123(a)(2). Article III of the Plan specifies that Claims in Classes 1 (Other 

Priority Claims), 2 (Other Secured Claims) and 3 (Second Lien Claims) are 

Unimpaired Classes under the Plan. Additionally, while not classified, Article II of 

the Plan specifies that Administrative Claims, DIP Facility Claims and Priority Tax 

Claims are unimpaired. As a result thereof, the requirements of section 1123(a)(2) of 

the Bankruptcy Code have been satisfied. 

3. Section 1123(a)(3). Article III of the Plan specifies the treatment of each Impaired 

Class under the Plan, including Classes 4 (International Holding Company Debtor 

Claims), 5 (R.J. Tower General Unsecured Claims), 6 (5.75% Convertible Senior 

Note Claims), 7 (Other General Unsecured Claims), 8 (6.75% Debenture Related 

Claims) and 9 (Common Equity Interests). As a result thereof, the requirements of 

section 1123(a)(3) of the Bankruptcy Code have been satisfied. 

4. Section 1123(a)(4). The Plan does not discriminate among Claims or Equity Interests 

of the same Class and uniformly provides for the same treatment of each Claim or 

Equity Interest of a particular Class. As a result thereof, the requirements of section 

1123(a)(4) of the Bankruptcy Code have been satisfied. 

5. Section 1123(a)(5). Article V of the Plan sets forth in detail the means for 

implementation of the Plan, including, inter alia, (i) consummation of the Sale 

Transaction in which, among other things, substantially all of the asserts of the 

Debtors including certain contracts and leases will be transferred to the Purchaser 

4 The Administrative Expense Claims and the Priority Tax Claims are not required to be designated pursuant to 

section 1123(a)(1) of the Bankruptcy Code. 11 U.S.C. § 1123(a)(1). 

K&E 11771836.17 

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Pg Pg 299 8 of 45 336 

(See Plan, Article V.A); (ii) establishment of the Post-Consummation Trust and the 

Unsecured Creditors Trust (See Plan, Articles V.B, C, VIII, IX); (iii) substantive 

consolidation of the Substantively Consolidated Debtors into a single entity and the 

International Holding Company Debtors into another entity, in both cases solely for 

purposes of voting and distributions under the Plan (See Plan, Article V.E); 

(iv) cancellation of notes, stock, instruments, certificates and equity interests (See 

Plan, Article V.F); (v) establishment of the Retained Professional Escrow Account 

which will ensure the payment of all accrued and/or unpaid fees and expenses 

awardable and allowable under sections 328, 330(a) or 331 of the Bankruptcy Code 

by all Retained Professionals (See Plan, Article V.G); (vi) all cash necessary for the 

Debtors or the Trusts to make payments pursuant to the Plan shall be obtained from 

the proceeds of the Sale or the proceeds of the Post-Consummation Trust Assets and 

the Unsecured Creditors Trust Assets (See Plan, Article V.L); and (vii) obtaining the 

relief granted in the Retiree Settlement Order (See Plan, Article V.O). As a result 

thereof, the requirements of section 1123(a)(5) of the Bankruptcy Code have been 

satisfied. 

6. Section 1123(a)(6). Because the Plan provides for the sale of substantially all of the 

Debtors’ assets to the Purchaser and the cancellation of all notes, stock, instruments, 

certificates and equity interests and because neither the Post-Consummation Trust nor 

the Unsecured Creditors Trust is issuing non-voting equity securities, section 

1123(a)(6) of the Bankruptcy Code, prohibiting the issuance of non-voting equity 

securities, has been satisfied. 

7. Section 1123(a)(7). The Plan complies with the requirements of section 1123(a)(7) of 

the Bankruptcy Code because the Debtors, at or prior to the Confirmation Hearing, 

will disclose the identity of the administrators of the Trusts to be established under 

the Plan. After the Effective Date of the Plan, the Debtors’ Remaining Assets will be 

transferred to a Post-Consummation Trust. See Plan, Article V. On the Effective 

Date and in compliance with the provisions of the Plan, the Debtors will establish the 

Post-Consummation Trust and the Post-Consummation Trust Plan Administrator will 

be appointed and will administer the Post-Consummation Trust in accordance with 

the Post-Consummation Trust Agreement. On the Effective Date, the Debtors and the 

Committee will establish the Unsecured Creditors Trust and the Unsecured Creditors 

Trust Plan Administrator will be appointed and will administer the Unsecured 

Creditors Trust in accordance with the terms of the Unsecured Creditors Trust 

Agreement. The appointment of both the Post-Consummation Trust Plan 

Administrator and the Unsecured Creditors Trust Plan Administrator is consistent 

with the interests of Creditors and with public policy. As a result thereof, the 

requirements of section 1123(a)(7) of the Bankruptcy Code have been satisfied. This 

provision as it pertains to the selection of officers and directors is not applicable in 

these Chapter 11 Cases because the Debtors are not reorganizing. 

8. Section 1123(a)(8). Each of the Debtors are corporations. Accordingly, section 

1123(a)(8) of the Bankruptcy Code is not implicated by the Plan. 

The Discretionary Contents of the Plan Comply with Section 1123(b) of the Bankruptcy 

Code 

m) The Plan contains various provisions that may be construed as discretionary, but are not 

required. Such discretionary provisions are not inconsistent in any way the applicable provisions 

of the Bankruptcy Code. 

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(i) 

Treatment of Executory Contracts and Unexpired Leases 

n) In accordance with section 1123(b)(2) of the Bankruptcy Code, Article VI of the Plan 

provides that on the Effective Date (i) the Debtors will assume and assign the Assumed 

Contracts to the Purchaser pursuant to the terms of the Purchase Agreement as of the Closing (as 

defined in the Purchase Agreement), (ii) the Debtors will assume and assign the Retained 

Contracts, if any, to the Post-Consummation Trust as of the Closing (as defined in the Purchase 

Agreement), and (iii) any executory contracts and unexpired leases not previously assumed, 

assumed and assigned or rejected will be rejected pursuant to section 365 of the Bankruptcy 

Code. The Confirmation Order will constitute an order of the Court approving such rejections 

pursuant to section 365 of the Bankruptcy Code as of the Effective Date. Within 5 days after the 

Effective Date, the Debtors will serve each party to an executory contract or unexpired lease that 

is being rejected with notice of such rejection. All proofs of claim arising from such rejection 

must be filed with the Voting Agent within 30 days after the date of service of notice of the 

rejection of the applicable executory contract or unexpired lease. 

(ii) 

Substantive Consolidation 

o) Pursuant to section 1123(a)(5)(C) of the Bankruptcy Code, the Plan provides for the 

substantive consolidation of the Substantively Consolidated Debtors into a single entity and the 

International Holding Company Debtors into another entity, in both scenarios, solely for 

purposes of voting and distributions under the Plan. 

p) As set forth in the Horvath Affidavit, the Debtors and their professionals, including a 

team of forensic accountants from FTI Consulting Inc. (“FTI”), the Debtors’ Court-approved 

financial advisors, spent significant time and attention analyzing intercompany relationships and 

dealings in order to determine the propriety of substantive consolidation. The due diligence 

employed by FTI and the Debtors was adequate. The methodology used, assumptions made and 

conclusions reached in the Horvath Affidavit are reasonable. For the reasons set forth in the 

K&E 11771836.17 

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Horvath Affidavit, substantive consolidation is an essential element of the Plan. Further, 

substantive consolidation of the Substantively Consolidated Debtors, on the one hand, and the 

International Holding Company Debtors, on the other hand, is in the best interests of all 

Creditors, necessary for the efficient liquidation of the Debtors and is appropriate in these 

Chapter 11 Cases. 

(iii) 

Releases/ Injunctions/ Exculpations 

q) The Plan provides for (A) the release by the Debtors of certain causes of action, 

(B) certain releases by Holders of Claims, (C) injunction provisions prohibiting parties from 

pursuing Claims released under the Plan, and (D) an exculpation provision. These provisions are 

proper because, among other things, they are the product of arm’s-length negotiations and have 

been critical to obtaining the support of the various constituencies for the Plan. Such release, 

exculpation and injunction provisions are fair and equitable, reasonable, in good faith, given for 

valuable consideration, and in the best interests of the Debtors and these Chapter 11 Cases, and 

there are no pending objections thereto. The record of the Confirmation Hearing and these 

Chapter 11 Cases is sufficient to support the release, injunction and exculpation provisions 

contained in Article XIII of the Plan. Neither the release, injunction nor the exculpation 

provisions, nor any other provisions of the Plan, are inconsistent with the Bankruptcy Code and, 

thus the requirements of section 1123(b) of the Bankruptcy Code are satisfied. 

r) Debtor Release. Article XIII.B of the Plan represents a valid settlement of whatever 

claims the Debtors may have against the Debtor Releasees pursuant to section 1123(b)(3)(A) of 

the Bankruptcy Code. The Debtors represent that they do not have any meaningful claims 

against the Debtor Releasees. Moreover, pursuing any such claims against the Debtor Releasees 

would not be in the best interest of the Debtors’ various constituencies and the costs involved 

would likely outweigh any potential benefit from pursuing such claims. The Debtor Release is 

limited solely to claims or causes of action that belong to the Debtors. The Debtors’ release of 

K&E 11771836.17 

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Pg Pg 302 11 of 336 45 

claims is a component of the consensual Plan process. No constructive purpose is furthered by 

preserving or seeking to prosecute any claims against the Debtor Releasees. 

s) Third Party Release. The Third Party Release is an important aspect of the Plan. The 

Third Party Release provides for: (i) the release by Creditors that vote in favor of the Plan and 

those parties who have otherwise consented to give a release, and (ii) the release, to the fullest 

extent permissible under applicable law, as such may be extended or interpreted subsequent to 

the Effective Date, by Creditors who reject the Plan or who do not vote to accept the Plan. The 

ballots explicitly stated that a vote to accept the Plan constitutes an acceptance and assent to the 

releases set forth in the Plan and directed parties to Article XIII of the Plan for further 

information about the release provisions. Thus, those voting to accept the Plan were on notice 

that they would be granting the Third Party Release. 

t) Exculpation. The Exculpated Parties are entitled to protection from lawsuits from 

disgruntled Creditors or any other parties in interest with respect to the Exculpated Parties’ 

participation in these Chapter 11 Cases. The exculpation provision is appropriately limited and 

does not relieve any party of liability for gross negligence or willful misconduct. 

u) Injunction. The injunction is necessary to preserve and enforce the releases granted by 

the Plan and is narrowly tailored to achieve that purpose. 

(iv) 

Unsecured Creditors Trust 

v) Pursuant to section 1123(b)(3) of the Bankruptcy Code, Article IX of the Plan provides 

that the Unsecured Creditors Trust Plan Administrator, acting as the appointed representative of 

the applicable Debtor estate or estates, shall have the right to commence and prosecute the 

Residual Chapter 5 Claims on behalf of the Unsecured Creditors Trust and that the proceeds 

shall be distributed to Beneficiaries pursuant to the terms of the Unsecured Creditors Trust 

Agreement. 

K&E 11771836.17 

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w) Pursuant to section 1123(b)(6) of the Bankruptcy Code, Article XIV of the Plan provides 

that, among other things, this Court shall retain jurisdiction over all matters arising in, arising 

under, and related to these Chapter 11 Cases and the Plan, including the prosecution of any 

adversary proceedings, including, but not limited to, the Residual Chapter 5 Claims. 

Accordingly, the continuing jurisdiction of the Court is consistent with applicable law and is 

therefore permissible under section 1123(b)(6) of the Bankruptcy Code. 

Bankruptcy Rule 3016 

x) The Plan is dated and identifies the entities submitting it, thereby satisfying Bankruptcy 

Rule 3016(a). The filing of the Disclosure Statement with the Clerk of Court satisfies 

Bankruptcy Rule 3016(b). 

The Debtors and Others Have Complied Fully With The Applicable Provisions of the 

Bankruptcy Code 

y) The Debtors, as proponents of the Plan, have complied with all applicable provisions of 

the Bankruptcy Code as required by section 1129(a)(2) of the Bankruptcy Code, including, 

without limitation, sections 1123, 1125 and 1126 of the Bankruptcy Code and Bankruptcy Rules 

3017, 3018 and 3019. 

z) Based on the record before the Court, votes for acceptance and rejection and/or any other 

election on the Plan as provided for on the Ballots were solicited in good faith and complied with 

sections 1125 and 1126 of the Bankruptcy Code, Bankruptcy Rules 3017 and 3018 and the 

Solicitation Procedures, Disclosure Statement Order and all other applicable rules, laws and 

regulations. 

aa) 

The Debtors, the Committee and their respective present and former members, 

shareholders, partners, representatives, officers, directors, employees, advisors, attorneys, and 

agents have solicited votes on the Plan and have participated in the activities described in section 

1125 of the Bankruptcy Code in good faith within the meaning of section 1125(e) of the 

Bankruptcy Code and in compliance with the applicable provisions of the Disclosure Statement 

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Pg Pg 304 13 of 336 45 

Order, the Disclosure Statement, the Bankruptcy Code, the Bankruptcy Rules, the Local 

Bankruptcy Rules, and all other applicable rules, laws and regulations and are entitled to the 

protections afforded by section 1125(e) of the Bankruptcy Code and the exculpation provisions 

set forth in Article XIII of the Plan. 

The Debtors Have Complied with Section 1125 of the Bankruptcy Code 

bb) 

The Debtors are proper debtors under section 109 of the Bankruptcy Code and proper 

proponents of the Plan under section 1121(a) of the Bankruptcy Code. 

cc) On June 5, 2007, the Court approved the Disclosure Statement pursuant to section 1125 

of the Bankruptcy Code as containing “adequate information” of a kind and in sufficient detail to 

enable hypothetical, reasonable investors typical of the Debtors’ Creditors to make an informed 

judgment whether to accept or reject the Plan. 

dd) 

The Solicitation Package (which contains the Disclosure Statement) approved by the 

Court in the Disclosure Statement Order, was transmitted to each Creditor in Classes 4, 5, 6 and 

7 that was entitled to vote to accept or reject the Plan, as well as to other parties in interest in 

these Chapter 11 Cases, in compliance with section 1125 of the Bankruptcy Code and the 

Disclosure Statement Order (the “Solicitation”). In addition, Holders of Claims and Equity 

Interest in Classes 1, 2, 3, 8 and 9 that were not entitled to vote to accept or reject the Plan were 

provided with certain non-voting materials approved by the Court in compliance with the 

Disclosure Statement Order. 

ee) 

The Debtors, the Committee, the Purchaser and their respective present and former 

members, officers, directors, employees, advisors, attorneys and agents did not solicit the 

acceptance or rejection of the Plan by any Holders of Claims or Equity Interest prior to the 

approval and transmission of the Disclosure Statement. Votes to accept or reject the Plan were 

only solicited by the Debtors and/or their agents after disclosure to Holders of Claims or Equity 

Interests of adequate information as defined in section 1125(a) of the Bankruptcy Code. 

K&E 11771836.17 

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Pg Pg 305 14 of 336 45 

The Debtors Have Complied with Section 1126 of the Bankruptcy Code 

ff) 

gg) 

As set forth in the Voting Report, Classes 4, 5, 6 and 7 have voted to accept the Plan. 

Holders of Claims in Classes 8 and 9 will receive no recoveries under the Plan and, thus, 

are deemed to have rejected the Plan. Nevertheless, as set forth below, pursuant to section 

1129(b) of the Bankruptcy Code, the Plan may be confirmed over the deemed rejections of 

Classes 8 and 9 because the Plan does not discriminate unfairly and is fair and equitable with 

respect to each such Class. See 11 U.S.C. § 1129(b). 

hh) 

Based upon the foregoing, the requirements of section 1129(a)(2) of the Bankruptcy 

Code have been satisfied. 

ii) 

The Debtors, the Committee, the Purchaser and their respective present and former 

members, officers, directors, employees, advisors, attorneys, and agents have participated in 

good faith and in compliance with the applicable provisions of the Bankruptcy Code with regard 

to the offering, issuance and distribution of recoveries under the Plan and, therefore, are not, and 

on account of such distributions will not be, liable at any time for the violation of any applicable 

law, rule, or regulation governing the Solicitation of acceptances or rejections of the Plan or such 

distributions made pursuant to the Plan. 

The Plan Has Been Proposed in Good Faith and Not By Any Means Forbidden by Law 

(Section 1129(a)(3) of the Bankruptcy Code) 

jj) 

In determining that the Plan has been proposed in good faith, the Court has examined the 

totality of the circumstances surrounding the filing of these Chapter 11 Cases, the Plan itself, and 

the process leading to its formulation. See Bankruptcy Rule 3020(b). The Plan satisfies the 

requirements of good faith. The Plan is the product of arm’s-length negotiations between the 

Debtors, the Holders of various secured and unsecured Claims against the Debtors, the 

Committee and the Purchaser. The Plan has been proposed by the Debtors with the legitimate 

and honest purpose of selling substantially all of the Debtors’ foreign and domestic assets to the 

Purchaser, to be followed by the orderly liquidation of the Debtors’ remaining assets, if any, and 

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Pg Pg 306 15 of 336 45 

the orderly distribution of proceeds to Holders of Allowed Claims pursuant to the Plan. The Plan 

therefore serves the public interest and assures fair treatment of Creditors. In addition, the Plan 

has not been proposed by any means prohibited by law (including, without limitation, any Law 

(as defined in the Purchase Agreement)). 

The Plan Provides For Court Approval Of Certain Administrative Payments (Section 

1129(a)(4) of the Bankruptcy Code) 

kk) 

The procedures set forth in the Plan for the Court’s review and ultimate determination of 

the fees and expenses to be paid by the Debtors satisfy the objectives of section 1129(a)(4) of the 

Bankruptcy Code. Therefore, the Plan complies with section 1129(a)(4) of the Bankruptcy 

Code. 

The Debtors Have Properly Disclosed the Identity of Proposed Officers and Directors and 

the Compensation of Insiders (Section 1129(a)(5) of the Bankruptcy Code) 

ll) 

The Plan complies with the requirements of section 1129(a)(5) of the Bankruptcy Code 

because the Debtors and the Committee will, at or prior to the Confirmation Hearing, disclose 

the identity of the Post-Consummation Trust Plan Administrator and the Unsecured Creditors 

Trust Administrator. 

The Plan Does Not Contain Any Rate Changes Subject to the Jurisdiction of any 

Governmental Regulatory Commission and will not Require Governmental Regulatory 

Approval (Section 1129(a)(6) of the Bankruptcy Code) 

mm) 

Because the Plan contemplates the sale, liquidation and distribution of all assets of the 

Debtors’ Estates and does not provide for any rate changes over which a governmental 

regulatory commission has jurisdiction, section 1129(a)(6) of the Bankruptcy Code is satisfied. 

The Plan is in the Best Interests of All Creditors of and Equity Interest Holders in the 

Debtors (Section 1129(a)(7) of the Bankruptcy Code) 

nn) 

The Plan satisfies the so-called “best interests of creditors test” set forth in section 

1129(a)(7) of the Bankruptcy Code. 

oo) 

As set forth in the liquidation analysis annexed to the Disclosure Statement as Exhibit C 

(the “Liquidation Analysis”), members of each Impaired Class will receive at least as much 

K&E 11771836.17 

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Pg Pg 307 16 of 336 45 

under the Plan as they would if the Debtors were liquidated under Chapter 7 of the Bankruptcy 

Code. The methodology used and assumptions made in the Liquidation Analysis are reasonable. 

pp) 

With respect to each Impaired Class, each Holder of an Allowed Claim or Equity Interest 

in such Class has accepted the Plan or will receive under the Plan on account of such Claim or 

Equity Interest property of a value, as of the Effective Date, that is not less than the amount such 

Holder would receive if the Debtors were liquidated on the Effective Date under Chapter 7 of the 


The Plan Has Not Been Accepted By All Impaired Classes (Section 1129(a)(8) of the 

Bankruptcy Code) 

qq) 

Because the Plan provides that Classes 8 (Trust Related Claims) and 9 (Common Equity 

Interests) will not receive any distribution or retain any property under the Plan, they are 

“Deemed Rejected Classes” and the Debtors are seeking confirmation under section 1129(b) of 

the Bankruptcy Code, not section 1129(a)(8) of the Bankruptcy Code. 

The Plan Provides For The Statutorily Mandated Treatment Of Administrative And 

Priority Tax Claims (Section 1129(a)(9) of the Bankruptcy Code) 

rr) 

The treatment of Allowed Working Capital Administrative Claims, Allowed Other 

Administrative Expense Claims, Allowed Priority Tax Claims, and Allowed Other Priority 

Claims under Articles II.A, II.C and III.B of the Plan satisfies the requirements of section 

1129(a)(9) of the Bankruptcy Code. The Plan complies in all respects with Section 1129(a)(9) of 

the Bankruptcy Code. 

At Least One Impaired Class Of Claims Has Accepted The Plan (Section 1129(a)(10) of the 


ss) 

As set forth in the Voting Report, Classes 4, 5, 6 and 7 have voted to accept the Plan. 

Accordingly, section 1129(a)(10) of the Bankruptcy Code has been satisfied in all respects. 

The Plan Is Feasible (Section 1129(a)(11) of the Bankruptcy Code) 

tt) 

The evidence proffered or adduced at the Confirmation Hearing, including the Talarico 

Affidavit: (a) is persuasive and credible, (b) has not been contravened by other evidence, and 

K&E 11771836.17 

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Pg Pg 308 17 of 336 45 

(c) establishes that the Debtors will have sufficient funds available to meet their obligations 

under the Plan, thus satisfying the requirements of section 1129(a)(11) of the Bankruptcy Code. 

The Plan Provides For The Payment Of All Fees Under 28 U.S.C. § 1930 (Section 

1129(a)(12) of the Bankruptcy Code) 

uu) 

Article XV.C of the Plan provides that all fees payable pursuant to section 1930 of title 

28 of the United States Code after the Effective Date, as determined by the Court at a hearing 

pursuant to section 1128 of the Bankruptcy Code, shall be paid prior to the closing of the Chapter 

11 Cases on the earlier of when due or the Effective Date, or as soon thereafter as practicable, 

and shall be payable by the Post-Consummation Trust, so long as the Post-Consummation Trust 

is in existence, and to the extent that the Chapter 11 Cases have not been closed and the 

Unsecured Creditors Trust is in existence at the time the Post-Consummation Trust terminates, 

shall be payable by the Unsecured Creditors Trust commencing with the calendar quarter 

following the Post-Consummation Trust's termination until such time as the Unsecured Creditors 

Trust is terminated and the Debtors’ bankruptcy cases are closed. The Trusts have adequate 

means to pay all such fees. The Plan therefore satisfies the requirements of section 1129(a)(12) 

of the Bankruptcy Code. 

The Plan Adequately and Properly Treats Retiree Benefits (Section 1129(a)(13) of the 


vv) 

Section 1129(a)(13) of the Bankruptcy Code requires a plan to provide for retiree benefits 

at levels established pursuant to section 1114 of the Bankruptcy Code. As detailed above, the 

Court entered the Retiree Settlement Order which further modify the Debtors’ retiree benefits. 

Payment of retiree benefits will be governed by and the Debtors will comply with the terms of 

the Retiree Settlement Order. 

The Plan therefore satisfies the requirements of 

section 1129(a)(13) of the Bankruptcy Code. 

K&E 11771836.17 

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Satisfaction of Confirmation Requirements 

ww) 

For all of the above reasons, the Plan satisfies all the requirements for Confirmation set 

forth in section 1129(a) of the Bankruptcy Code, except section 1129(a)(8) of the Bankruptcy 

Code. 

Confirmation of Plan Over Nonacceptance of Impaired Class (Section 1129(b) of the 


xx) 

Notwithstanding the fact that the Debtors have not complied with section 1129(a)(8) of 

the Bankruptcy Code, the Plan may be confirmed pursuant to section 1129(b)(1) of the 

Bankruptcy Code notwithstanding the existence of the Deemed Rejected Classes because Classes 

4, 5, 6 and 7 have voted to accept the Plan. 

The Plan Does Not Discriminate Unfairly Against Classes 8 or 9 or Any Other Class of 

Claims or Equity Interests 

yy) 

No Class under the Plan has Claims against (or Equity Interests in) the Debtors that is 

similar to the Claims (or Equity Interests) in the other Classes. Further, members within each 

Class are treated similarly. Accordingly, the Plan does not discriminate unfairly in respect to 

Classes 8 or 9 or any other Class of Claims or Equity Interests. 

The Plan is Fair and Equitable With Respect to Classes 8 and 9 and Any Other Class of 

Claims or Equity Interests 

zz) 

With respect to the Deemed Rejected Classes, no Holders of Claims or Equity Interests 

subordinate to the Holders of the Claims and Equity Interests in the Deemed Rejected Classes 

will receive or retain any property under the Plan. Accordingly the requirements of sections 

1129(b)(2)(B)(ii) and 1129(b)(2)(C)(ii) are satisfied with respect to the Deemed Rejected 

Classes, and the Plan is fair and equitable with respect to such Deemed Rejected Classes. 

aaa) 

Pursuant to section 1129(b) of the Bankruptcy Code, the Court finds that the Plan is “fair 

and equitable” (as defined in section 1129(b) of the Bankruptcy Code) with respect to the 

Deemed Rejected Classes and any other Class of Claims or Equity Interests and the Plan does 

K&E 11771836.17 

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Pg Pg 310 19 of 336 45 

not unfairly discriminate against such Deemed Rejected Classes or any other Class of Claims or 

Equity Interests. 

bbb) 

Based on the foregoing, the Plan satisfies the requirements of section 1129(b) of the 


Only One Plan (11 U.S.C. § 1129(c)) 

ccc) 

Other than the Plan (including previous versions thereof), no other plan has been filed in 

these Chapter 11 Cases. Accordingly, the requirements of section 1129(c) of the Bankruptcy 

Code have been satisfied. 

Principal Purpose of the Plan Is Not Avoidance of Taxes (Section 1129(d) of the 


ddd) 

No party in interest that is a governmental unit has requested that the Court not confirm 

the Plan on grounds that the principal purpose of the Plan is the avoidance of taxes or the 

avoidance of the application of section 5 of the Securities Act of 1933, and the principal purpose 

of the Plan is not such avoidance. Accordingly, the Plan satisfies the requirements of section 

1129(d) of the Bankruptcy Code. 

Preservation of Causes of Action 

eee) 

The provisions regarding Causes of Action in Article XIII.F of the Plan are appropriate 

and are in the best interests of the Debtors, their Estates and Holders of Claims and Equity 

Interests. 

Maintenance of Causes of Action 

fff) 

Except as otherwise provided in the Plan or this Confirmation Order, after the Effective 

Date the Post-Consummation Trust shall retain all rights to commence and pursue, as 

appropriate, any and all Other Actions, whether arising before or after the Petition Date, in any 

court or other tribunal including, without limitation, in an adversary proceeding filed in one or 

more of the Chapter 11 Cases and all actions set forth in the Plan Supplement. 

K&E 11771836.17 

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Pg Pg 311 20 of 336 45 

ggg) 

Except as otherwise provided in the Plan or this Confirmation Order, after the Effective 

Date the Unsecured Creditors Trust shall retain all rights to commence and pursue any and all 

Residual Chapter 5 Claims. 

hhh) 

Except as otherwise provided in the Plan, Purchase Agreement or Confirmation Order, in 

accordance with section 1123(b)(3) of the Bankruptcy Code, any claims, rights, and Causes of 

Action, and which such claims, rights and Causes of Action are Excluded Assets and are not 

Residual Chapter 5 Claims, that the Debtors may hold against any Entity shall vest upon the 

Effective Date in the Post-Consummation Trust. The Post-Consummation Trust, through its 

authorized agents and representatives, shall retain and may exclusively enforce any and all Other 

Actions. After the Effective Date, the Post-Consummation Trust shall have the exclusive right, 

authority, and discretion to institute, prosecute, abandon, settle, or compromise any and all Other 

Actions, without the consent or approval of any third party and without any further order of the 

Bankruptcy Court; provided, however, that the Post-Consummation Trust Administrator shall 

provide an accounting of such activities upon reasonable request of the Unsecured Creditors 

Trust Administrator. 

Preservation of All Causes of Action Not Expressly Sold, Settled or Released 

iii) 

Unless a Claim or Cause of Action against a Holder or other Person or Entity is acquired 

by Purchaser (and is an Excluded Asset) pursuant to the Purchase Agreement, or is a Residual 

Chapter 5 Claim, or is expressly waived, relinquished, released, compromised or settled in the 

Plan or any Final Order (including the Sale Order and the Confirmation Order), subject to the 

terms of the Purchase Agreement, the Debtors expressly reserve such Claim or Cause of Action 

for later adjudication by the Debtors or the Post-Consummation Trust (including, without 

limitation, claims and Causes of Action not specifically identified or of which the Debtors may 

presently be unaware or which may arise or exist by reason of additional facts or circumstances 

unknown to the Debtors at this time or facts or circumstances which may change or be different 

K&E 11771836.17 

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Pg Pg 312 21 of 336 45 

from those the Debtors now believe to exist) and, therefore, it is the intention of the Plan that no 

preclusion doctrine, including, without limitation, the doctrines of res judicata, collateral 

estoppel, issue preclusion, claim preclusion, waiver, estoppel (judicial, equitable or otherwise) or 

laches shall apply to such claims or Causes of Action upon or after the Confirmation or 

Consummation of the Plan based on the Disclosure Statement, the Plan or the Confirmation 

Order, except where such claims or Causes of Action have been released in the Plan (including, 

without limitation, and for the avoidance of doubt, the Debtor Release contained in Article 

XIII.B of the Plan) or any other Final Order (including the Confirmation Order). In addition, the 

Debtors and Post-Consummation Trust expressly reserve the right to pursue or adopt any claims 

alleged in any lawsuit in which the Debtors are a defendant or an interested party, against any 

Person or Entity, including, without limitation, the plaintiffs or co defendants in such lawsuits, 

unless such claims are acquired by Purchaser pursuant to the Purchase Agreement, or are a 

Residual Chapter 5 Claim. 

Likelihood of Satisfaction of Conditions Precedent to Effectiveness 

jjj) 

Each of the conditions precedent to the Effective Date, as set forth in Article XII of the 

Plan, has been satisfied or waived in accordance with the provisions of the Plan, or is reasonably 

likely to be satisfied. 

Actions in Furtherance of Plan 

kkk) 

The agreements, settlements, transactions and transfers authorized by the Plan and this 

Confirmation Order are fair and reasonable and are entered into in good faith. 

Assumed, Assigned and Rejected Executory Contracts and Unexpired Leases 

lll) 

The Plan satisfies all requirements for the assumption, assignment or rejection of 

executory contracts and unexpired leases contained in the Bankruptcy Code, including, without 

limitation, the requirement to cure all outstanding defaults, if any, and to provide adequate 

assurance of such contracts and leases. 

K&E 11771836.17 

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Pg Pg 313 22 of 336 45 

Conditions to Confirmation 

mmm) Entry of this Confirmation Order shall satisfy the conditions set forth in Article XII.A of 

the Plan. 

II. ORDER 

BASED ON THE FOREGOING FINDINGS OF FACT, IT IS THEREFORE 

ORDERED, ADJUDGED AND DECREED THAT: 

A. Order 

1. This Confirmation Order shall confirm the Plan. A copy of the Plan is attached 

hereto as Exhibit A. 

B. Objections 

2. To the extent that any objections to Confirmation have not been withdrawn, 

waived or settled prior to entry of this Confirmation Order or otherwise resolved as stated on the 

record of the Confirmation Hearing, they are hereby overruled on the merits. 

C. Findings of Fact and Conclusions of Law 

3. The findings of the Court set forth above and the conclusions of law stated herein 

shall constitute findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052, made 

applicable to this proceeding by Bankruptcy Rule 9014. To the extent any finding of fact shall 

be determined to be a conclusion of law, it shall be so deemed, and vice versa. 

D. Confirmation of the Plan 

4. The Plan and Plan Supplement (as such may be amended by this Confirmation 

Order) and each of their provisions are confirmed in each and every respect pursuant to section 

1129 of the Bankruptcy Code. The terms of the Plan, the Plan Supplement, and exhibits thereto 

are incorporated by reference into, and are an integral part of, this Confirmation Order. The 

terms of the Plan, the Plan Supplement, all exhibits thereto, and all other relevant and necessary 

documents, shall be effective and binding as of the Effective Date of the Plan. 

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E. Plan Modifications 

5. All modifications or amendments to the Plan since the entry of the Disclosure 

Statement Order are approved pursuant to section 1127(a) of the Bankruptcy Code and do not 

require additional disclosure or resolicitation under Bankruptcy Rule 3019. 

F. Plan Classification Controlling 

6. The terms of the Plan shall solely govern the classification of Claims and Equity 

Interests for purposes of the distributions to be made thereunder. The classifications set forth on 

the Ballots tendered to or returned by the Debtors’ Creditors in connection with voting on the 

Plan (a) were set forth on the Ballots solely for purposes of voting to accept or reject the Plan; 

(b) do not necessarily represent, and in no event shall be deemed to modify or otherwise affect, 

the actual classification of such Claims under the Plan for distribution purposes; (c) may not be 

relied upon by any Holder of a Claim as representing the actual classification of such Claims 

under the Plan for distribution purposes; and (d) shall not be binding on the Debtors and either of 

the Trusts except for voting purposes. 

G. Effects of Confirmation 

(a) Assumption and Rejection of Executory Contracts and Unexpired Leases 

7. The contract and unexpired lease provisions of Article VI of the Plan shall be, and 

hereby are, approved. 

(i) Assumption and Assignment of Assumed Contracts 

8. The Debtors will assume the Assumed Contracts and assign the Assumed 

Contracts to the Purchaser pursuant to the terms of the Purchase Agreement and Sale Order. The 

designation of a contract or lease as an Assumed Contract shall not be deemed an admission that 

such contract or lease constitutes an Executory Contract or Unexpired Lease. 

(ii) Assumption and Assignment of Retained Contracts 

9. The Debtors will assume and assign the Retained Contracts, if any, to the Post- 

Consummation Trust. The designation of a contract or lease as a Retained Contract shall not be 

deemed an admission that such contract or lease constitutes an Executory Contract or Unexpired 

Lease. 

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(iii) 

Approval of Assumptions and Assignments 

10. This Confirmation Order and the Sale Order shall constitute orders of the Court 

approving the assumptions and assignments described in Article VI.A of the Plan, pursuant to 

sections 363, 365 and 1123 of the Bankruptcy Code, as of the Effective Date. The Cure 

Procedures Order specified the procedures for providing notice to each party whose Executory 

Contract or Unexpired Lease is being assumed or assumed and assigned pursuant to the Plan of: 

(a) the contract or lease being assumed or assumed and assigned; (b) the cure amount, if any, that 

the applicable Debtor believes it would be obligated to pay in connection with such assumption; 

and (c) the procedures for such party to object to the assumption or assumption and assignment 

of the applicable contract or lease or the amount of the proposed cure claim. 

(iv) 

Executory Contracts and Unexpired Leases to Be Rejected 

11. On the Effective Date, except for an Executory Contract or Unexpired Lease that 

was previously assumed, assumed and assigned or rejected by an order of the Court or that is 

assumed pursuant to Article VI.A of the Plan, each Executory Contract and Unexpired Lease 

entered into by a Debtor prior to the Petition Date that has not previously expired or terminated 

pursuant to its own terms will be rejected pursuant to section 365 of the Bankruptcy Code. This 

Confirmation Order will constitute an order of the Court approving such rejections pursuant to 

section 365 of the Bankruptcy Code as of the Effective Date. Within five (5) days after the 

Effective Date, the Debtors will serve each party to an Executory Contract or Unexpired Lease 

that is being rejected with notice of such rejection. 

(v) 

Claims Based on Rejection of Executory Contracts or Unexpired 

Leases 

12. All proofs of Claim arising from the rejection (if any) of Executory Contracts or 

Unexpired Leases must be filed with the Voting Agent within thirty (30) days after the date of 

service of notice of the rejection of the applicable Executory Contract or Unexpired Lease. Any 

Claims arising from the rejection of an Executory Contract or Unexpired Lease for which proofs 

of Claim were not timely Filed within that time period will be forever barred from assertion 

against the Debtors or their Estates and property, or the Trusts, unless otherwise ordered by the 

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Court or as otherwise provided herein. All such Claims shall, as of the Effective Date, be subject 

to the permanent injunction set forth in Article XIII.G of the Plan. 

(vi) 

Cure of Defaults for Executory Contracts and Unexpired Leases 

Assumed Pursuant to the Plan 

13. Any monetary amounts by which any Executory Contract and Unexpired Lease to 

be assumed pursuant to the Plan (including pursuant to Article VI.A of the Plan) or otherwise is 

in default shall be satisfied, pursuant to section 365(b)(1) of the Bankruptcy Code, by payment of 

the default amount in Cash on the Effective Date or on such other terms as the parties to each 

such Executory Contract or Unexpired Lease may otherwise agree, with all such amounts to be 

payable by the Debtors out of the Post-Consummation Trust Priority Account. If the Post- 

Consummation Trust Priority Account is not sufficient to provide for payment in full of all cure 

amounts, the Post-Consummation Trust Plan Administrator shall utilize the other assets (or 

proceeds thereof) of the Post-Consummation Trust (other than assets held in segregated 

accounts), to the extent necessary, to pay such cure amounts in full. In the event of a dispute 

regarding: (a) the amount of any cure payments; (b) the ability of the Purchaser or any assignee 

to provide “adequate assurance of future performance” (within the meaning of section 365 of the 

Bankruptcy Code) under the contract or lease to be assumed; or (c) any other matter pertaining to 

assumption; the cure payments required by section 365(b)(1) of the Bankruptcy Code shall be 

made following the entry of a Final Order resolving the dispute and approving the assumption of 

any Executory Contracts or Unexpired Leases. 

(vii) 

Assumption of D&O Insurance Policies 

14. As of the Effective Date, the Post-Consummation Trust shall be deemed to have 

assumed all of the Debtors’ directors’ and officers’ liability insurance policies pursuant to 

section 365(a) of the Bankruptcy Code. Entry of the Confirmation Order will constitute the 

Court’s approval of the foregoing assumption of each of the directors’ and officers’ liability 

insurance policies. Notwithstanding anything to the contrary contained in the Plan, Confirmation 

of the Plan shall not discharge, impair or otherwise modify any indemnity obligations assumed 

by the foregoing assumption of the directors’ and officers’ liability insurance policies, and each 

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such indemnity obligation will be deemed and treated as an Executory Contract that has been 

assigned to the Post-Consummation Trust as to which no proof of claim need be Filed. 

(b) Existing Injunction and Stays Remain in Effect until Effective Date 

15. The stay imposed by section 362 of the Bankruptcy Code shall remain in full 

force and effect until the Effective Date. All injunctions or stays imposed during these Chapter 

11 Cases or contained in the Plan or this Confirmation Order shall remain in full force and effect 

in accordance with their terms. Nothing herein shall bar the taking of such other actions as are 

necessary to effectuate the transactions specifically contemplated by the Plan or by this 

Confirmation Order. 

H. Matters Relating to Implementation of the Plan 

(a) Sale of Assets 

16. On the Effective Date, the Debtors shall consummate the Sale Transaction and, 

among other things, the Acquired Assets including the Assumed Contracts, shall be transferred 

to the Purchaser free and clear of all Claims, Encumbrances (as defined in the Purchase 

Agreement) and Interests pursuant to the terms of the Purchase Agreement, Sale Order and 

Confirmation Order. All the terms of the Purchase Agreement and Sale Order are incorporated 

herein by reference. 

17. On the Effective Date, all Chapter 5 Claims, exclusive of the Residual Chapter 5 

Claims 5 , shall be transferred by the Debtors to the Purchaser pursuant to the Sale Order, 

Purchase Agreement, Plan and sections 1123 (a)(5)(D), 1123 (b)(3)(B) and 1123 (b)(4) of the 

Bankruptcy Code and the Purchaser shall be authorized to dismiss or settle such Chapter 5 

Claims without further order of the Bankruptcy Court and to prosecute any Chapter 5 Claims in 

the Bankruptcy Court that are not otherwise dismissed or settled. 

5 The definition of Residual Chapter 5 Claims in the Plan and Schedule 1.1(a)(ii) to the Purchase Agreement shall 

be hereby amended to include the Chapter 5 Claims against the following entities: (i) Visteon, (ii) Shape 

Corporation, (iii) Detroit Electro-Coatings, Co., LLC, (iv) TRW Steering & Suspension Systems, and (v) 

Acemco Automotive, Inc. 

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(b) Post-Consummation Trust and Unsecured Creditors Trust 

18. The provisions of the Plan related to the Post-Consummation Trust, the Post- 

Consummation Trust Administrator, the Unsecured Creditors Trust and the Unsecured Creditors 

Trust Plan Administrator, including, without limitation, Articles V.B, V.C, VIII and IX of the 

Plan are hereby approved and incorporated herein by reference. All of the expenses and 

distributions of the Post-Consummation Trust shall be paid from the funds received from the 

Purchaser under the Purchase Agreement, up to the Purchase Price Cap (as defined in the 

Purchase Agreement); provided, however, that the Purchaser shall be entitled to receive copies of 

reasonably detailed invoices (the “Invoices”) setting forth the services provided to the Post- 

Consummation Trust and shall have seven business days to object to the reasonableness of such 

invoices. After the Purchaser’s seven business day review period has expired, the Post- 

Consummation Trust shall be authorized to pay all invoices the Purchaser did not object to and to 

pay the undisputed portion of any invoices the Purchaser did object to. Any objections to the 

reasonableness of such invoices that are not resolved by the Purchaser and the Post- 

Consummation Trust shall be decided by the Bankruptcy Court after notice and a hearing. 

Copies of the Invoices shall be delivered by overnight mail to the Purchaser at c/o Lowenstein 

Sandler P.C., 65 Livingston Avenue, Roseland, New Jersey 07068, Attn: Richard Bernstein, 

Esq. 

19. In accordance with the settlement of the Committee’s limited objection to Plan 

confirmation read into the record at the Confirmation and Sale Hearing, the definition of 

Unsecured Creditors Trust Assets in the Plan shall include the following additional payments to 

be made on the Effective Date to the Unsecured Creditors Trust: (a) $650,000 from the Post- 

Consummation Trust (the “Additional Payment”); and (b) $350,000 from the Purchaser. Upon 

payment of the Additional Payment by the Post-Consummation Trust, $250,000 of the 

Additional Payment shall be deemed a Capped Payment as set forth in section 2.1(b) of the 

Purchase Agreement. 

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(c) 

Restructuring Transactions 

(i) Restructuring Transactions Generally 

20. On or after the Confirmation Date, the applicable Debtors and/or Post- 

Consummation Trust Plan Administrator, or the Purchaser, consistent with Section 5.11 of the 

Purchase Agreement, may enter into Restructuring Transactions without further order of the 

Bankruptcy Court. 

(d) Substantive Consolidation 

21. The Plan is predicated on the substantive consolidation of the Substantively 

Consolidated Debtors, on the one hand, as well as the substantive consolidation of the 

International Holding Company Debtors, on the other hand, each for voting and distribution 

purposes only, all as set forth more fully in Article XI of the Plan. 

22. The Court concludes that the substantive consolidation proposed in the Plan is 

necessary and appropriate and satisfies the test set forth in In re Augie/Restivo Baking, Co., 860 

F.2d 515, 518 (2d Cir. 1988). As outlined in the Plan Confirmation Brief, the benefits of 

substantive consolidation far outweigh any possible harm to Creditors. Accordingly, use of 

substantive consolidation as an equitable remedy is appropriate in this case. 

(e) Cancellation of Notes and Equity Interests 

23. On the Effective Date, except to the extent otherwise provided in the Plan, all 

notes, stock, instruments, certificates, and other documents evidencing the 5.75% Convertible 

Senior Note Claims, the 6.75% Trust Convertible Subordinated Debenture Claims, the 9.25% 

Senior Euro Note Claims, the 12% Senior Note Claims, and Equity Interests shall be cancelled, 

and the obligations of the Debtors thereunder or in any way related thereto shall be discharged. 

On the Effective Date, except to the extent otherwise provided in the Plan, any indenture relating 

to any of the foregoing, including but not limited to the 5.75% Convertible Senior Note 

Indenture, the 6.75% Trust Convertible Subordinated Debenture, the 9.25% Senior Euro Note 

Indenture and the 12% Senior Note Indenture shall be deemed to be canceled, as permitted by 

section 1123(a)(5)(F) of the Bankruptcy Code, and the obligations of the Debtors thereunder 

shall be discharged. The 5.75% Convertible Senior Note Indenture, the 9.25% Senior Euro Note 

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Indenture and the 12% Senior Note Indenture shall continue in effect solely for the purposes of: 

(i) allowing Holders of the 5.75% Convertible Senior Note Claims, the 9.25% Senior Euro Note 

Claims and the 12% Senior Note Claims to receive distributions under the Plan; and (ii) allowing 

and preserving the rights of the Indenture Trustees under the 5.75% Convertible Senior Note 

Indenture, the 9.25% Senior Euro Note Indenture and the 12% Senior Note Indenture to (x) make 

distributions in satisfaction of Allowed 5.75% Convertible Senior Note Claims, the 9.25% Senior 

Euro Note Claims and the 12% Senior Note Claims, (y) exercise their respective charging liens 

against any such distributions, and (z) seek compensation and reimbursement for any fees and 

expenses incurred in making such distributions. 

(f) Creation of Retained Professional Escrow Account 

24. On the Effective Date, the Post-Consummation Trust shall establish the Retained 

Professional Escrow Account and reserve the amounts necessary to ensure the payment of all 

Accrued Professional Compensation. 

(g) Retention by Debtors and Post-Consummation Trust of Other Actions 

25. Subject to Article XIII.F of the Plan, all Other Actions, along with any associated 

recoveries, proceeds and settlements, shall remain the property of the Debtors’ Estates and shall 

be devised to the Post-Consummation Trust, provided, however, no Acquired Assets or Residual 

Chapter 5 Claims (or the proceeds thereof) shall be devised to the Post-Consummation Trust. 

(h) Corporate Action 

26. Upon the entry of this Confirmation Order by the Court, all matters provided for 

under the Plan and the Purchase Agreement involving the corporate structure of the Debtors will 

be deemed authorized and approved without any requirement of further action by the Debtors, 

the Debtors’ shareholders or the Debtors’ boards of directors. On and after the Effective Date, 

the Trusts are authorized and directed to issue, execute and deliver the agreements, documents, 

and distributions contemplated by the Plan and the Purchase Agreement in the name of and on 

behalf of the Debtors. 

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(i) D&O Tail Coverage Policies 

27. To the extent provided under the Purchase Agreement, on the Effective Date the 

Debtors or the Post-Consummation Trust Plan Administrator will obtain sufficient tail coverage, 

in an amount consistent with the level of coverage existing prior to the Effective Date, for a 

period of six years under a directors’ and officers’ insurance policy for the current and former 

officers and directors of the Debtors utilizing the Post-Consummation Trust Priority Account. 

(j) ERISA Settlement Agreement 

28. The Post-Consummation Trust Plan Administrator, after the Effective Date, shall 

pay $2 million out of the Post-Consummation Indemnity Account pursuant to the terms of the 

ERISA Settlement Agreement, it being understood that any refund paid to the Debtors under the 

ERISA Settlement Agreement up to $2 million shall be returned to the Post-Consummation 

Indemnity Account. 

(k) Sources of Cash for Plan Distribution 

29. All Cash necessary for the Debtors, or the Trusts, as the case may be, to make 

payments pursuant to the Plan shall be obtained from the Sale Proceeds and the proceeds of the 

Post-Consummation Trust Assets and the Unsecured Creditors Trust Assets, as the case may be. 

(l) Release of Liens 

30. Except as otherwise provided in the Plan or in any contract, instrument, release or 

other agreement or document entered into or delivered in connection with the Plan, on the 

Effective Date and concurrently with the applicable distributions made pursuant to Article III of 

the Plan, all Interests, mortgages, deeds of trust, liens or other security interests against the 

property of any of the Debtors’ Estates will be fully released and discharged. 

31. Except as otherwise provided in the Purchase Agreement, pursuant to the terms of 

the Purchase Agreement and Sale Order, on the Effective Date all Acquired Assets shall be 

transferred to the Purchaser free and clear of all Claims, Encumbrances or Interests pursuant to 

sections 105, 363, 365, 1123 and 1141(c) of the Bankruptcy Code. 

32. On the Effective Date the Unsecured Creditors Trust Assets shall be transferred to 

the Unsecured Creditors Trust free and clear of all Claims, Encumbrances or Interests. 

(m) 

K&E 11771836.17 

Effectuating Documents; Further Transactions; Exemption from Certain 

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Transfer Taxes 

33. The chief executive officer or chief financial officer of each Debtor will be 

authorized to execute, deliver, file or record such contracts, instruments, releases and other 

agreements or documents and take such actions as may be necessary or appropriate to effectuate 

and implement the provisions of the Plan and the Purchase Agreement. The secretary and any 

assistant secretary of each Debtor will be authorized to certify or attest to any of the foregoing 

actions. Pursuant to section 1146 of the Bankruptcy Code, the following will not be subject to 

any stamp tax, real estate transfer tax or similar tax: (1) the Sale Transaction; (2) the creation of 

any mortgage, deed of trust, lien or other security interest; (3) the making or assignment of any 

lease or sublease; (4) any Restructuring Transaction; or (5) the making or delivery of any deed or 

other instrument of transfer under, in furtherance of or in connection with the Plan, including 

(a) any merger agreements; (b) agreements of consolidation, restructuring, disposition, 

liquidation or dissolution; (c) deeds; (d) bills of sale or (e) assignments executed in connection 

with any Restructuring Transaction pursuant to the Plan. 

(n) The Releases, Injunction and Exculpation Under the Plan 

34. The following releases, injunctions and exculpations set forth in Article XIII of 

the Plan are hereby approved and authorized in their entirety: 

(i) 

Releases by the Debtors 

ON THE EFFECTIVE DATE AND EFFECTIVE AS OF THE EFFECTIVE DATE 

AND IMMEDIATELY PRIOR TO THE TRANSFER OF THE RESPECTIVE TRUSTS’ 

ASSETS TO SUCH TRUSTS (SUCH THAT THE TRUSTS WILL NOT RECEIVE ANY 

CLAIM RELEASED HEREUNDER), FOR THE GOOD AND VALUABLE 

CONSIDERATION PROVIDED BY EACH OF THE DEBTOR RELEASEES, 

INCLUDING, BUT NOT LIMITED TO: (A) THE DISCHARGE OF DEBT AND ALL 

OTHER GOOD AND VALUABLE CONSIDERATION PAID PURSUANT TO THE 

PLAN OR OTHERWISE; AND (B) THE SERVICES OF THE DEBTORS’ PRESENT 

AND FORMER OFFICERS AND DIRECTORS IN FACILITATING THE 

IMPLEMENTATION OF THE RESTRUCTURING CONTEMPLATED BY THE PLAN, 

AND IN VIEW OF THE INDEMNIFICATION PURSUANT TO ARTICLE XIII.E OF 

THE PLAN OF DEBTORS’ FORMER OFFICERS AND DIRECTORS AS 

INDEMNIFIED PARTIES, EACH OF THE DEBTORS SHALL PROVIDE A FULL 

DISCHARGE AND RELEASE TO THE DEBTOR RELEASEES (AND EACH SUCH 

DEBTOR RELEASEE SO RELEASED SHALL BE DEEMED RELEASED AND 

DISCHARGED BY THE DEBTORS) AND EACH SUCH DEBTOR RELEASEE’S 

RESPECTIVE PROPERTIES FROM ANY AND ALL CLAIMS, CAUSES OF ACTION 

AND ANY OTHER DEBTS, OBLIGATIONS, RIGHTS, SUITS, DAMAGES, ACTIONS, 

CAUSES OF ACTION, REMEDIES, AND LIABILITIES WHATSOEVER, WHETHER 

KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, EXISTING AS OF THE 

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EFFECTIVE DATE OR THEREAFTER ARISING, IN LAW, AT EQUITY, WHETHER 

FOR TORT, FRAUD, CONTRACT, VIOLATIONS OF FEDERAL OR STATE 

SECURITIES LAWS, OR OTHERWISE, BASED IN WHOLE OR IN PART UPON ANY 

ACT OR OMISSION, TRANSACTION, OR OTHER OCCURRENCE OR 

CIRCUMSTANCES EXISTING OR TAKING PLACE PRIOR TO OR ON THE 

EFFECTIVE DATE ARISING FROM OR RELATED IN ANY WAY TO THE 

DEBTORS, INCLUDING, WITHOUT LIMITATION, THOSE THAT ANY OF THE 

DEBTORS OR THE TRUSTS WOULD HAVE BEEN LEGALLY ENTITLED TO 

ASSERT (WHETHER INDIVIDUALLY OR COLLECTIVELY) OR THAT ANY 

HOLDER OF A CLAIM OR EQUITY INTEREST OR OTHER PERSON OR ENTITY 

WOULD HAVE BEEN LEGALLY ENTITLED TO ASSERT FOR OR ON BEHALF OF 

ANY OF THE DEBTORS OR ANY OF THEIR ESTATES AND FURTHER INCLUDING 

THOSE IN ANY WAY RELATED TO THE CHAPTER 11 CASES OR THE PLAN; 

PROVIDED, HOWEVER, THAT THE FOREGOING DEBTOR RELEASE SHALL NOT 

OPERATE TO WAIVE OR RELEASE FROM ANY CAUSES OF ACTION EXPRESSLY 

SET FORTH IN AND PRESERVED BY THE PLAN OR PLAN SUPPLEMENT. 

THE DEBTORS SHALL NOT HAVE RELEASED NOR BE DEEMED TO HAVE 

RELEASED BY OPERATION OF ARTICLE XIII.B OF THE PLAN OR OTHERWISE 

ANY CLAIMS, DEBTS, OBLIGATIONS, RIGHTS, SUITS, DAMAGES, ACTIONS, 

INTERESTS, REMEDIES, LIABILITIES OR CAUSES OF ACTION THAT THEY OR 

THE TRUSTS MAY HAVE NOW OR IN THE FUTURE AGAINST THE NON- 

RELEASED PARTIES. 

ENTRY OF THE CONFIRMATION ORDER SHALL CONSTITUTE THE 

COURT’S APPROVAL, PURSUANT TO SECTION 363 OF THE BANKRUPTCY CODE 

AND BANKRUPTCY RULE 9019, OF THE DEBTOR RELEASE, WHICH INCLUDES 

BY REFERENCE EACH OF THE RELATED PROVISIONS AND DEFINITIONS 

CONTAINED IN THE PLAN, AND FURTHER, SHALL CONSTITUTE THE COURT’S 

FINDING THAT THE DEBTOR RELEASE IS: (A) IN EXCHANGE FOR GOOD AND 

VALUABLE CONSIDERATION PROVIDED BY THE DEBTOR RELEASEES, 

REPRESENTING GOOD FAITH SETTLEMENT AND COMPROMISE OF THE 

CLAIMS RELEASED BY THE DEBTOR RELEASE; (B) IN THE BEST INTERESTS OF 

THE DEBTORS AND ALL HOLDERS OF CLAIMS; (C) FAIR, EQUITABLE, AND 

REASONABLE; (D) APPROVED AFTER DUE NOTICE AND OPPORTUNITY FOR 

HEARING; AND (E) A BAR TO THE DEBTORS OR TRUSTS ASSERTING ANY 

CLAIM RELEASED BY THE DEBTORS AGAINST ANY OF THE DEBTOR 

RELEASEES OR THEIR RESPECTIVE PROPERTY. 

(ii) 

Third Party Release 

ON THE EFFECTIVE DATE, EFFECTIVE AS OF THE EFFECTIVE DATE, 

THE RELEASING PARTIES SHALL PROVIDE A FULL DISCHARGE AND RELEASE 

(AND EACH PERSON OR ENTITY SO RELEASED SHALL BE DEEMED RELEASED 

BY THE RELEASING PARTIES) TO THE DEBTOR RELEASEES, AND THEIR 

RESPECTIVE PROPERTY FROM ANY AND ALL CLAIMS, CAUSES OF ACTION 

AND ANY OTHER DEBTS, OBLIGATIONS, RIGHTS, SUITS, DAMAGES, ACTIONS, 

REMEDIES, AND LIABILITIES WHATSOEVER, WHETHER KNOWN OR 

UNKNOWN, FORESEEN OR UNFORESEEN, EXISTING AS OF THE EFFECTIVE 

DATE OR THEREAFTER ARISING, IN LAW, AT EQUITY, WHETHER FOR TORT, 

FRAUD, CONTRACT, VIOLATIONS OF FEDERAL OR STATE SECURITIES LAWS, 

OR OTHERWISE, BASED IN WHOLE OR IN PART UPON ANY ACT OR OMISSION, 

TRANSACTION, OR OTHER OCCURRENCE OR CIRCUMSTANCES EXISTING OR 

TAKING PLACE PRIOR TO OR ON THE EFFECTIVE DATE ARISING FROM OR 

RELATED IN ANY WAY TO THE DEBTORS, INCLUDING THOSE IN ANY WAY 

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RELATED TO THE CHAPTER 11 CASES OR THE PLAN; PROVIDED, HOWEVER, 

THAT THE FOREGOING THIRD PARTY RELEASE SHALL NOT OPERATE TO 

WAIVE OR RELEASE ANY OF THE DEBTOR RELEASEES FROM ANY CAUSES OF 

ACTION EXPRESSLY SET FORTH IN AND PRESERVED BY THE PLAN OR PLAN 

SUPPLEMENT, OR RELEASE THE PURCHASER FROM ITS OBLIGATIONS UNDER 

THE PURCHASE AGREEMENT, THE SALE ORDER, THE PLAN AND THE 

RETIREE SETTLEMENTS. 

THE THIRD PARTY RELEASE SHALL HAVE NO EFFECT ON THE CLAIMS 

OF RELEASEES TREATED UNDER THE PLAN, TO THE EXTENT OF ALLOWANCE 

OF CLAIMS AND SATISFACTION OF CLAIMS PURSUANT TO THE PLAN. 

THE RELEASING PARTIES SHALL NOT HAVE RELEASED NOR DEEMED 

TO HAVE RELEASED BY OPERATION OF ARTICLE XIII.C OF THE PLAN OR 

OTHERWISE ANY CLAIMS OR CAUSES OF ACTION THAT THEY, THE DEBTORS 

OR THE TRUSTS MAY HAVE NOW OR IN THE FUTURE AGAINST THE NON- 

RELEASED PARTIES. 

ENTRY OF THE CONFIRMATION ORDER SHALL CONSTITUTE THE 

COURT’S APPROVAL PURSUANT TO SECTION 363 OF THE BANKRUPTCY CODE 

AND BANKRUPTCY RULE 9019 OF THE THIRD PARTY RELEASE, WHICH 

INCLUDES BY REFERENCE EACH OF THE RELATED PROVISIONS AND 

DEFINITIONS CONTAINED IN THE PLAN, AND FURTHER, SHALL CONSTITUTE 

THE COURT’S FINDING THAT THE THIRD PARTY RELEASE IS: (A) IN 

EXCHANGE FOR GOOD AND VALUABLE CONSIDERATION PROVIDED BY THE 

THIRD PARTY RELEASEES, REPRESENTING GOOD FAITH SETTLEMENT AND 

COMPROMISE OF THE CLAIMS RELEASED BY THE THIRD PARTY RELEASE; 

(B) IN THE BEST INTERESTS OF THE DEBTORS AND ALL HOLDERS OF CLAIMS; 

(C) FAIR, EQUITABLE, AND REASONABLE; (D) APPROVED AFTER DUE NOTICE 

AND OPPORTUNITY FOR HEARING; AND (E) A BAR TO ANY OF THE 

RELEASING PARTIES ASSERTING ANY CLAIM RELEASED BY THE THIRD 

PARTY RELEASE AGAINST ANY OF THE THIRD PARTY RELEASEES OR THEIR 

PROPERTY. 

No provision contained in the Plan or in this Confirmation Order shall be construed as 

discharging, releasing or relieving any non-Debtor subsidiary or affiliate of Tower, in any 

capacity, from any liability with respect to the Pension Plan under any law, government policy or 

regulatory provision. PBGC and the Pension Plan shall not be enjoined or precluded from 

enforcing such liability against any party as a result of the Plan’s provisions for satisfaction, 

release and discharge of claims. 

Notwithstanding any other provision of the Plan or anything in the Plan to the contrary, 

including Section XIII.G of the Plan, nothing in the Plan, any amendment to the Plan, or in this 

Confirmation Order, shall release, enjoin, preclude, or otherwise affect in any way the 

prosecution of any claims, to the extent available under applicable nonbankruptcy law, against 

any non-Debtor affiliate or subsidiary based on control group liability arising from or relating to 

the Debtors' withdrawal from the United Furniture Workers Pension Fund A (the “Pension 

Fund”), provided, however, that (i) the Purchaser and all such non-Debtor affiliates and/or 

subsidiaries reserve all defenses to such claims and (ii) paragraph 37 of the Sale Order sets forth 

the resolution of the Pension Fund’s claims described in this paragraph. 

(iii) 

Exculpation 

Notwithstanding anything contained in the Plan to the contrary, the Exculpated Parties 

shall neither have nor incur any liability to any Person or Entity for any prepetition or 

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postpetition act taken or omitted to be taken in connection with or related to formulating, 

negotiating, preparing, disseminating, implementing, administering the Plan or otherwise, the 

Plan Supplement, the Disclosure Statement, the Post-Consummation Trust Agreement, the 

Unsecured Creditors Trust Agreement or any contract, instrument, release or other agreement or 

document created or entered into in connection with the Plan, or any other prepetition or 

postpetition act taken or omitted to be taken in connection with or in contemplation of the 

restructuring of the Debtors or confirming or consummating the Plan; provided, however, that 

the provisions of Article XIII.D of the Plan shall have no effect on the liability of any Person or 

Entity that results from any such act or omission that is determined in a Final Order to have 

constituted gross negligence or willful misconduct; provided further, that each Exculpated Party 

shall be entitled to rely upon the advice of counsel concerning its duties pursuant to, or in 

connection with, the above referenced documents; provided still further, that the foregoing 

Exculpation shall not apply to any acts or omissions expressly set forth in and preserved by the 

Plan or Plan Supplement. 

(iv) 

Injunction 

FROM AND AFTER THE EFFECTIVE DATE, ALL PERSONS AND ENTITIES 

ARE PERMANENTLY ENJOINED FROM COMMENCING OR CONTINUING IN ANY 

MANNER AGAINST THE DEBTORS, THE PURCHASER, THE COMMITTEE, THE 

COMMITTEE MEMBERS, THE RETIREE COMMITTEE, THE RETIREE 

COMMITTEE MEMBERS, INDENTURE TRUSTEES OR THE TRUSTS, THEIR 

SUCCESSORS AND ASSIGNS, AND EACH OF THEIR RESPECTIVE CURRENT AND 

FORMER MEMBERS, OFFICERS, DIRECTORS, MANAGED FUNDS INVESTMENT 

ADVISORS, AGENTS, FINANCIAL ADVISORS, ATTORNEYS, EMPLOYEES, 

PARTNERS, AFFILIATES AND REPRESENTATIVES (EACH OF THE FOREGOING 

IN ITS INDIVIDUAL CAPACITY AS SUCH), AND THEIR ASSETS AND 

PROPERTIES, AS THE CASE MAY BE, ANY SUIT, ACTION OR OTHER 

PROCEEDING, ON ACCOUNT OF OR RESPECTING ANY CLAIM, DEMAND, 

LIABILITY, OBLIGATION, DEBT, RIGHT, CAUSE OF ACTION, INTEREST OR 

REMEDY RELEASED OR TO BE RELEASED PURSUANT TO THE PLAN OR THE 

CONFIRMATION ORDER. 

FROM AND AFTER THE EFFECTIVE DATE, TO THE EXTENT OF THE 

RELEASE GRANTED IN ARTICLE XIII.C OF THE PLAN, THE RELEASING 

PARTIES SHALL BE PERMANENTLY ENJOINED FROM COMMENCING OR 

CONTINUING IN ANY MANNER AGAINST THE DEBTOR RELEASEES, THEIR 

SUCCESSORS AND ASSIGNS, AND EACH OF THEIR RESPECTIVE CURRENT AND 

FORMER MEMBERS, OFFICERS, DIRECTORS, MANAGED FUNDS, INVESTMENT 

ADVISORS, AGENTS, FINANCIAL ADVISORS, ATTORNEYS, EMPLOYEES, 

PARTNERS, AFFILIATES AND REPRESENTATIVES (EACH OF THE FOREGOING 

IN ITS INDIVIDUAL CAPACITY AS SUCH), AND THEIR ASSETS AND 

PROPERTIES, AS THE CASE MAY BE, ANY SUIT, ACTION OR OTHER 

PROCEEDING, ON ACCOUNT OF OR RESPECTING ANY CLAIM, DEMAND, 

LIABILITY, OBLIGATION, DEBT, RIGHT, CAUSE OF ACTION, INTEREST OR 

REMEDY RELEASED OR TO BE RELEASED PURSUANT TO ARTICLE XIII.C OF 

THE PLAN. 

EXCEPT AS OTHERWISE EXPRESSLY PROVIDED FOR IN THE PLAN, THE 

PURCHASE AGREEMENT OR IN OBLIGATIONS ISSUED PURSUANT TO THE 

PLAN, FROM AND AFTER THE EFFECTIVE DATE, ALL PERSONS AND ENTITIES 

SHALL BE PRECLUDED FROM ASSERTING AGAINST THE PURCHASER, THE 

DEBTORS, THE DEBTORS IN POSSESSION, THE DEBTORS’ ESTATES, THE 

TRUSTS, THE COMMITTEE, THE COMMITTEE MEMBERS, THE RETIREE 

COMMITTEE, THE RETIREE COMMITTEE MEMBERS, INDENTURE TRUSTEES, 

K&E 11771836.17 

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Pg Pg 326 35 of 336 45 

ANY OF THEIR SUCCESSORS AND ASSIGNS, AND EACH OF THEIR RESPECTIVE 

CURRENT AND FORMER MEMBERS, OFFICERS, DIRECTORS, MANAGED 

FUNDS, INVESTMENT ADVISORS, AGENTS, FINANCIAL ADVISORS, 

ATTORNEYS, EMPLOYEES, PARTNERS, AFFILIATES AND REPRESENTATIVES 

(EACH OF THE FOREGOING IN ITS INDIVIDUAL CAPACITY AS SUCH), AND 

THEIR ASSETS AND PROPERTIES, ANY OTHER CLAIMS OR EQUITY INTERESTS 

RELATED TO THE DEBTORS BASED UPON ANY DOCUMENTS, INSTRUMENTS, 

OR ANY ACT OR OMISSION, TRANSACTION OR OTHER ACTIVITY OF ANY 

KIND OR NATURE THAT OCCURRED PRIOR TO THE EFFECTIVE DATE. 

THE RIGHTS AFFORDED IN THE PLAN AND THE TREATMENT OF ALL 

CLAIMS AND EQUITY INTERESTS IN THE PLAN SHALL BE IN EXCHANGE FOR 

AND IN COMPLETE SATISFACTION OF CLAIMS AND EQUITY INTERESTS OF 

ANY NATURE WHATSOEVER RELATED TO THE DEBTORS, INCLUDING ANY 

INTEREST ACCRUED ON CLAIMS FROM AND AFTER THE PETITION DATE, 

AGAINST THE DEBTORS OR ANY OF THEIR ASSETS OR PROPERTIES. ON THE 

EFFECTIVE DATE, ALL SUCH CLAIMS AGAINST, AND EQUITY INTERESTS IN, 

THE DEBTORS SHALL BE SATISFIED AND RELEASED IN FULL. 

EXCEPT AS OTHERWISE EXPRESSLY PROVIDED FOR IN THE PLAN, THE 

PURCHASE AGREEMENT OR IN OBLIGATIONS ISSUED PURSUANT TO THE 

PLAN, ALL PARTIES AND ENTITIES ARE PERMANENTLY ENJOINED, ON AND 

AFTER THE EFFECTIVE DATE, ON ACCOUNT OF ANY CLAIM OR EQUITY 

INTEREST SATISFIED AND RELEASED HEREBY, FROM: 

K&E 11771836.17 

(i) 

(ii) 

COMMENCING OR CONTINUING IN ANY MANNER ANY 

ACTION OR OTHER PROCEEDING OF ANY KIND AGAINST 

ANY DEBTOR, THE PURCHASER, THE TRUSTS, THE 

COMMITTEE, THE COMMITTEE MEMBERS, THE RETIREE 

COMMITTEE, THE RETIREE COMMITTEE MEMBERS, THE 

INDENTURE TRUSTEES, AND EACH OF THEIR RESPECTIVE 

CURRENT AND FORMER MEMBERS, OFFICERS, DIRECTORS, 

MANAGED FUNDS, INVESTMENT ADVISORS, AGENTS, 

FINANCIAL ADVISORS, ATTORNEYS, EMPLOYEES, 

PARTNERS, AFFILIATES AND REPRESENTATIVES (EACH OF 

THE FOREGOING IN ITS INDIVIDUAL CAPACITY AS SUCH), 

OR ANY OF THEIR SUCCESSORS AND ASSIGNS, OR ANY OF 

THEIR ASSETS AND PROPERTIES; 

ENFORCING, ATTACHING, COLLECTING OR RECOVERING 

BY ANY MANNER OR MEANS ANY JUDGMENT, AWARD, 

DECREE OR ORDER AGAINST ANY DEBTOR, THE 

PURCHASER, THE TRUSTS, THE COMMITTEE, THE 

COMMITTEE MEMBERS, THE RETIREE COMMITTEE, THE 

RETIREE COMMITTEE MEMBERS, INDENTURE TRUSTEES 

AND ANY OF THEIR RESPECTIVE SUCCESSORS AND 

ASSIGNS, AND EACH OF THEIR RESPECTIVE CURRENT AND 

FORMER MEMBERS, OFFICERS, DIRECTORS, MANAGED 

FUNDS, INVESTMENT ADVISORS, AGENTS, FINANCIAL 

ADVISORS, ATTORNEYS, EMPLOYEES, PARTNERS, 

AFFILIATES AND REPRESENTATIVES (EACH OF THE 

FOREGOING IN ITS INDIVIDUAL CAPACITY AS SUCH), AND 

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Pg Pg 327 36 of 336 45 

THEIR RESPECTIVE ASSETS AND PROPERTIES; 

(iii) CREATING, PERFECTING, OR ENFORCING ANY 

ENCUMBRANCE OF ANY KIND AGAINST ANY DEBTOR, THE 

PURCHASER, THE TRUSTS, THE INDENTURE TRUSTEES, AND 

EACH OF THEIR RESPECTIVE CURRENT AND FORMER 

MEMBERS, OFFICERS, DIRECTORS, MANAGED FUNDS, 

INVESTMENT ADVISORS, AGENTS, FINANCIAL ADVISORS, 

ATTORNEYS, EMPLOYEES, PARTNERS, AFFILIATES AND 

REPRESENTATIVES (EACH OF THE FOREGOING IN ITS 

INDIVIDUAL CAPACITY AS SUCH), OR THE PROPERTY OR 

ESTATE OF ANY OF THE FOREGOING; OR 

(IV) 

ASSERTING ANY RIGHT OF SETOFF, SUBROGATION OR 

RECOUPMENT OF ANY KIND AGAINST ANY OBLIGATION 

DUE FROM ANY DEBTOR, THE PURCHASER, THE TRUSTS OR 

AGAINST THE PROPERTY OR ESTATE OF ANY DEBTOR, THE 

PURCHASER OR THE TRUSTS, AND EACH OF THEIR 

RESPECTIVE CURRENT AND FORMER MEMBERS, OFFICERS, 

DIRECTORS, MANAGED FUNDS, INVESTMENT ADVISORS, 

AGENTS, FINANCIAL ADVISORS, ATTORNEYS, EMPLOYEES, 

PARTNERS, AFFILIATES AND REPRESENTATIVES (EACH OF 

THE FOREGOING IN ITS INDIVIDUAL CAPACITY AS SUCH), 

EXCEPT TO THE EXTENT A RIGHT TO SETOFF, 

RECOUPMENT OR SUBROGATION IS ASSERTED WITH 

RESPECT TO A TIMELY FILED PROOF OF CLAIM; 

PROVIDED THAT NOTHING IN THIS CONFIRMATION ORDER 

SHALL ENJOIN THYSSENKRUPP BUDD COMPANY OR 

THYSSEN KRUPP BUDD SYSTEMS LLC FROM ASSERTING A 

RIGHT OF SET-OFF BY VIRTUE OF THE PROOFS OF CLAIM 

FILED BY THEIR AFFILIATES. 

BY ACCEPTING DISTRIBUTIONS PURSUANT TO THE PLAN, EACH 

HOLDER OF AN ALLOWED CLAIM RECEIVING DISTRIBUTIONS PURSUANT TO 

THE PLAN WILL BE DEEMED TO HAVE SPECIFICALLY CONSENTED TO THE 

INJUNCTIONS SET FORTH IN ARTICLE XIII.G OF THE PLAN. 

Notwithstanding any other provision of the Plan or anything in the Plan to the contrary, 

including the foregoing provisions of Section XIII.G of the Plan, nothing in the Plan, any 

amendment to the Plan, or in this Confirmation Order, shall enjoin any claims, to the extent 

available under applicable nonbankruptcy law, of the Pension Fund against any non-Debtor 

affiliates or subsidiaries any claims based on control group liability arising from or related to the 

Debtors’ withdrawal from the Pension Fund, provided, however, that (i) the Purchaser and all 

such non-Debtor affiliates and/or subsidiaries reserve all defenses to such claims and (ii) 

paragraph 37 of the Sale Order sets forth the resolution of the Pension Fund’s claims described in 

this paragraph. 

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Pg Pg 328 37 of 336 45 

I. Consummation 

35. The substantial consummation of the Plan, within the meaning of section 1127 of 

the Bankruptcy Code, shall be, and hereby is, deemed to mean the occurrence of the close of the 

Effective Date. 

J. Retention of Jurisdiction 

36. Notwithstanding the entry of the Confirmation Order and the occurrence of the 

Effective Date, the Court shall retain jurisdiction of all matters arising out of, or related to, these 

Chapter 11 Cases and the Plan pursuant to, and for the purposes of, sections 105(a) and 1142 of 

the Bankruptcy Code and for, among other things, the following purposes: 

a. allow, disallow, determine, liquidate, classify, estimate or establish the 

priority or secured or unsecured status of any Claim or Equity Interest, 

including the resolution of any request for payment of any Administrative 

Claim and the resolution of any and all objections to the allowance or 

priority of Claims or Equity Interests; 

b. grant or deny any applications for allowance of compensation or 

reimbursement of expenses authorized pursuant to the Bankruptcy Code or 

the Plan, for periods ending on or before the Effective Date; 

c. resolve any matters related to the assumption, assignment or rejection of 

any Executory Contract or Unexpired Lease to which a Debtor is party or 

with respect to which a Debtor may be liable and to hear, determine and, if 

necessary, liquidate, any Claims arising therefrom, including those matters 

related to any amendment to the Plan after the Effective Date pursuant to 

Article XV.D of the Plan which purports to add Executory Contracts or 

Unexpired Leases to the list of Executory Contracts and Unexpired Leases 

to be assumed; 

d. ensure that distributions to Holders of Allowed Claims are accomplished 

pursuant to the provisions of the Plan; 

e. decide or resolve any motions, adversary proceedings, contested or 

litigated matters and any other matters and grant or deny any applications 

involving a Debtor that may be pending on the Effective Date or instituted 

by the Trusts after the Effective Date, provided, however, that the Trusts 

shall reserve the right to commence actions in all appropriate jurisdictions; 

K&E 11771836.17 

f. enter such orders as may be necessary or appropriate to implement or 

consummate the provisions of the Plan, the Sale Transaction, the Post- 

Consummation Trust Agreement, the Unsecured Creditors Trust 

Agreement and all other contracts, instruments, releases, indentures and 

other agreements or documents adopted in connection with the Plan, Plan 

Supplement, Post-Consummation Trust Agreement, Unsecured Creditors 

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Pg Pg 329 38 of 336 45 

Trust Agreement or the Disclosure Statement; 

g. resolve any cases, controversies, suits or disputes that may arise in 

connection with the Consummation, interpretation or enforcement of the 

Sale Order, the Plan, or any Person’s or Entity’s obligations incurred in 

connection with the Plan; 

h. hear and determine all Chapter 5 Claims and Causes of Action that are 

pending as of the date hereof or that may be commenced in the future; 

i. issue injunctions, enforce them, enter and implement other orders or take 

such other actions as may be necessary or appropriate to restrain 

interference by any Person or Entity with Consummation or enforcement 

of the Plan, except as otherwise provided in the Plan; 

j. enforce Article XIII.A, Article XIII.B, Article XIII.C, Article XIII.D, and 

Article XIII.E of the Plan; 

k. enforce the injunction set forth in Article XIII.G of the Plan; 

l. resolve any cases, controversies, suits or disputes with respect to the 

releases, injunction and other provisions contained in Article XIII of the 

Plan, and enter such orders as may be necessary or appropriate to 

implement or enforce all such releases, injunctions and other provisions; 

m. enter and implement such orders as necessary or appropriate if the 

Confirmation Order is modified, stayed, reversed, revoked or vacated; 

n. resolve any other matters that may arise in connection with or relate to the 

Plan, the Disclosure Statement, the Sale Order, the Confirmation Order or 

any contract, instrument, release, indenture or other agreement or 

document adopted in connection with the Plan or the Disclosure 

Statement; and 

o. enter an order and/or Final Decree concluding these Chapter 11 Cases. 

K. Payment of Statutory Fees 

37. All fees payable pursuant to section 1930 of title 28 of the United States Code 

after the Effective Date, as determined by the Court at a hearing pursuant to section 1128 of the 

Bankruptcy Code, shall be paid prior to the closing of the Chapter 11 Cases on the earlier of 

when due or the Effective Date, or as soon thereafter as practicable, and shall be payable by the 

Post-Consummation Trust, so long as the Post-Consummation Trust is in existence, and to the 

extent that the Chapter 11 Cases have not been closed and the Unsecured Creditors Trust is in 

existence at the time the Post-Consummation Trust terminates, shall be payable by the 

K&E 11771836.17 

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Pg Pg 330 39 of 336 45 

Unsecured Creditors Trust commencing with the calendar quarter following the Post- 

Consummation Trust's termination until such time as the Unsecured Creditors Trust is terminated 

and the Debtors’ Chapter 11 Cases are closed. 

L. Section 1145 Exemption 

38. To the extent that the beneficial interests in the Trusts issued in accordance with 

the provisions of the Plan, the Post-Consummation Trust Agreement or the Unsecured Creditors 

Trust Agreement constitute securities, such beneficial interests shall be exempt from registration 

pursuant to section 1145 of the Bankruptcy Code. 

M. Exemption from Stamp Taxes 

39. Pursuant to section 1146 of the Bankruptcy Code, any transfers of property 

pursuant to the Plan, including, but not limited to the Sale Transaction, shall not be subject to any 

document recording tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, 

stamp act, real estate transfer tax, mortgage recording tax or other similar tax or governmental 

assessment in the United States, and the Confirmation Order shall direct the appropriate state or 

local governmental officials or agents to forego the collection of any such tax or governmental 

assessment and to accept for filing and recordation any of the foregoing instruments or other 

documents without the payment of any such tax or governmental assessment. 

N. Repayment of Industrial Revenue Bonds 

40. The Bank of New York Trust Company, N.A., as indenture trustee for the 

Industrial Revenue Bonds shall accept payment in full on the Industrial Revenue Bonds from the 

Sale Proceeds and, if paid in full at the time of the closing of the Sale Transaction, shall not draw 

on any outstanding letters of credit. 

O. Treatment of Second Lien Claims 

41. On the Effective Date, the Second Lien Collateral Account Final Balance shall be 

returned to the Second Lien Agent for the Pro Rata benefit of the Second Lien Lenders and the 

Second Lien Adjusted Base Claim shall be paid, in full in Cash, as provided for in section 

III.B.3. of the Plan. In addition, (i) each undrawn Prepetition Letter of Credit shall be returned to 

the issuer undrawn and marked canceled or Debtors shall be released, following payment of the 

K&E 11771836.17 

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Pg Pg 331 40 of 336 45 

Second Lien Collateral Account Final Balance and Second Lien Adjusted Base Claim to the 

Second Lien Agent, by Deutsche Bank Trust Company Americas, as issuer, from any and all 

liability or responsibility with respect to such undrawn letter of credit and (ii) the Second Lien 

Agent’s legal fees incurred prior to the Effective Date, but not paid prior to or on the Effective 

Date, shall be paid in accordance with the procedures outlined in Article III.B.3. of the Plan. 

42. No later than thirty (30) days after the closing of the Sale Transaction (expected to 

take place on or before July 31, 2007), the Purchaser or its successors, assigns, or transferees, as 

applicable, shall pay, or cause to be paid, to Perella Weinberg Partners, LP (“PWP”), as 

compensation for the financial advisory services provided by PWP to the Second Lien Agent, 

$3,500,000.00 in cash by wire transfer and such obligation shall constitute an Allowed 

Administrative Claim in the Debtors’ Chapter 11 Cases; provided, however, notwithstanding 

anything contrary in the Agreement, such Allowed Administrative Claim shall constitute an 

Assumed Liability (as defined in the Agreement) and under no circumstance shall the Post- 

Consummation Trust or the Unsecured Creditors Trust be required to pay any amounts in respect 

of such Claim. PWP will not be required to take any additional steps and there are no other 

conditions outstanding that will prevent the Purchaser or its successors, assigns, or transferees, as 

applicable, from paying, or causing to be paid, to PWP the aforementioned $3,500,000.00 fee. 

P. Special Provisions Regarding Subordinated Securities Claims 

43. Notwithstanding anything in the Plan to the contrary, including in Article XIII of 

the Plan, nothing in the Plan, any amendment to the Plan, or in the Confirmation Order shall: 

(i) impact in any way the right or ability of the lead plaintiffs in the Securities Litigation to 

pursue and recover on any Claims against the Debtors solely to the extent of any coverage 

provided by any insurance policy, including any directors and officers insurance policy; or 

(ii) release, enjoin, preclude, or otherwise affect in any way the prosecution of the claims 

asserted, or which may be asserted, against any non-Debtor in the Securities Litigation or the 

right of the lead plaintiffs in such litigation to (a) pursue further litigation, including without 

limitation appeals, against any non-Debtor defendants, or (b) to enter into or enforce any 

settlement or enforce any judgment obtained in connection therewith or relating thereto, 

K&E 11771836.17 

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Pg Pg 332 41 of 336 45 

provided, however, that notwithstanding the foregoing, (i) the terms and conditions of that 

certain Stipulation and Order Between the Debtors On the One Hand and the Securities Plaintiffs 

on the Other Hand Resolving Debtors’ Application for Order Reclassifying Securities Plaintiffs’ 

Claims (Docket # 2395) shall remain in full force and effect; and (ii) the sale of assets authorized 

pursuant to the Sale Order shall not give rise to claims in the Securities Litigation against 

Purchaser and any of its Affiliates, successors or assigns and each of their current and former 

members, officers, directors, managed funds, investment advisors, attorneys, employees, 

partners, Affiliates and representatives (each of the foregoing in its individual capacity), and 

shall not affect the Purchaser acquiring the assets set forth in the Sale Order free and clear of 

liens, claims and encumbrances. 

Q. Special Provision Regarding Nissan North America, Inc. 

44. The Purchaser has agreed, subject to the Effective Date, to be bound by the terms 

and conditions of the confidential settlement agreement entered into between the Debtors and 

Nissan North America, Inc., which settlement agreement is subject to approval of the Court. 

R. Special Provision Regarding Comerica Leasing Corporation 

45. Upon entry of this Confirmation Order, the Debtors will dismiss with prejudice 

their pending adversary proceeding against Comerica Leasing Corporation (A.P. # 07-01422). 

S. Special Provision Regarding United Furniture Workers Pension Fund A 

46. Nothing set forth herein or in the Plan shall operate to discharge, modify or waive 

the settlements by and among the Debtors, the Purchaser and the United Furniture Workers 

Pension Fund A (the “Pension Fund”), as more particularly set forth in the Sale Order and in that 

certain Stipulation and Order Between the Debtors and United Furniture Workers Pension Fund 

A Reducing and Fixing Proofs of Claim Nos. 6652, 6653, 6654, 6655, 6656, 6657, 6658, 6659, 

6660, 6661, 6662, 6663, 6664, 6665, 6666, 6667, 6668, 6669, 6670, 6671, 6672, 6673, 6674, 

6675, 6676 and 6677 dated June 20, 2007. 

T. References to Plan Provisions 

47. The failure specifically to include or to refer to any particular article, section or 

provision of the Plan, Purchase Agreement, Sale Order or any related agreement relating to the 

K&E 11771836.17 

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Pg Pg 333 42 of 336 45 

Plan in this Confirmation Order shall not diminish or impair the effectiveness of such article, 

section or provision, it being the intent of the Court that the Plan be confirmed, and such related 

agreements including, but not limited to, the Purchase Agreement and Sale Order, be approved in 

their entirety. 

U. Post-Confirmation Notices and Bar Dates 

(a) Notice of Entry of the Confirmation Order 

48. In accordance with Bankruptcy Rules 2002 and 3020(c), within five (5) business 

days of the date of entry of this Confirmation Order, the Debtors (or their agents) shall give 

notice of the entry of this Confirmation Order, in substantially the form of Exhibit B annexed 

hereto (the “Notice of Confirmation”) by United States mail, first class postage prepaid, by hand, 

or by overnight courier service to all parties having been served with the Confirmation Hearing 

Notice; provided, however, that no notice or service of any kind shall be required to be mailed or 

made upon any person to whom the Debtors mailed a Confirmation Hearing Notice, but received 

such notice returned marked “undeliverable as addressed,” “moved, left no forwarding address” 

or “forwarding order expired,” or similar reason, unless the Debtors have been informed in 

writing by such person, or are otherwise aware, of that person’s new address. 

49. To supplement the notice described in the preceding sentence, within fifteen days 

of the date of this Confirmation Order the Debtors shall publish the Notice of Confirmation once 

each in the USA Today, The New York Times, the Detroit Free Press/ Detroit News, Automotive 

News, and the national edition of The Wall Street Journal. 

50. The Notice of Confirmation shall have the effect of an order of the Court, shall 

constitute sufficient notice of the entry of this Confirmation Order to such filing and recording 

officers, and shall be a recordable instrument notwithstanding any contrary provision of 

applicable non-bankruptcy law. 

51. Mailing and publication of the Notice of Confirmation in the time and manner set 

forth in the preceding paragraph are good and sufficient under the particular circumstances and 

in accordance with the requirements of Bankruptcy Rules 2002 and 3020(c), and no further 

notice is necessary. 

K&E 11771836.17 

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Pg Pg 334 43 of 336 45 

(b) Professional Compensation 

52. Retained Professionals or other Entities asserting a Fee Claim for services 

rendered before the Confirmation Date must File and serve on the Post-Consummation Trust and 

such other Entities who are designated by the Bankruptcy Rules, the Confirmation Order, or 

other order of the Court an application for final allowance of such Fee Claim no later than 45 

days after the Effective Date; provided that any professional who may receive compensation or 

reimbursement of expenses pursuant to the Ordinary Course Professionals Order may continue to 

receive such compensation and reimbursement of expenses for services rendered before the 

Effective Date, without further Court review or approval, pursuant to the Ordinary Course 

Professionals Order. Objections to any Fee Claim must be Filed and served on the Post- 

Consummation Trust Plan Administrator and the requesting party by the later of (i) 75 days after 

the Effective Date and (ii) 30 days after the Filing of the applicable request for payment of the 

Fee Claim. To the extent necessary, this Confirmation Order will amend and supersede any 

previously entered order of the Court regarding the payment of Fee Claims. Each Holder of an 

Allowed Fee Claim shall be paid by the Post-Consummation Trust Plan Administrator from the 

Retained Professional Escrow Account. 

53. The Indenture Trustees may submit detailed invoices to the Debtors or the Trusts, 

as applicable, for all fees and expenses for which the Indenture Trustees seek reimbursement 

without the need for further Court approval. The Debtors or the Trusts, as applicable, upon 

review of such invoices, may pay those amounts that the Debtors or the Trusts, as applicable, in 

their sole discretion, deem reasonable, and shall object in writing to those fees and expenses, if 

any, that the Debtors or the Trusts, as applicable, deem to be unreasonable. In the event that the 

Debtors or the Trusts, as applicable, object to all or any portion of an Indenture Trustee’s 

invoice, the Debtors or the Trusts, as applicable, and such Indenture Trustee will endeavor, in 

good faith, to reach mutual agreement on the amount of such disputed fees and/or expenses. In 

the event that the Debtors or the Trusts, as applicable, and an Indenture Trustee are unable to 

resolve any differences regarding disputed fees or expenses, either party shall be authorized to 

move to have such dispute heard by the Court. 

K&E 11771836.17 

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Pg Pg 335 44 of 336 45 

V. Rights of the Purchaser 

54. Nothing contained in this Confirmation Order shall modify the rights of the 

Purchaser set forth in Section 2.2 of the Purchase Agreement to review and object to claims. 

W. Changes to Plan and Plan Supplement 

55. Effective as of the date hereof, and subject to the limitations contained in the 

Plan: (a) the Debtors reserve the right, in accordance with the Bankruptcy Code and the 

Bankruptcy Rules, to amend or modify the Plan and the exhibits comprising the Plan Supplement 

prior to the entry of the Confirmation Order; and (b) after the entry of the Confirmation Order, 

the Debtors or the Post-Consummation Trust, as the case may be, may, upon order of the Court, 

amend or modify the Plan and the exhibits comprising the Plan Supplement, in accordance with 

section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or reconcile any 

inconsistency in the Plan in such manner as may be necessary to carry out the purpose and intent 

of the Plan. Any such modification shall be made subject to the reasonable consent of the 

Purchaser, the Committee, and the Second Lien Agent (but only to the extent such modification 

materially affects the rights of the Second Lien Agent or the Second Lien Lenders), provided that 

if any party objects to such modification, the Debtors, the Purchaser or the Committee or the 

Second Lien Agent may seek an expedited hearing before the Court to address such objection. 

X. Effect of Confirmation Order 

56. If there is any direct conflict between the terms of the Plan or the Plan 

Supplement and the terms of this Confirmation Order, the terms of this Confirmation Order shall 

control. If there is any inconsistency between the terms of the Sale Order and the terms of this 

Confirmation Order, the terms of the Sale Order shall control. Nothing herein amends, modifies 

or affects in any way the Purchase Agreement and Sale Order. The Purchase Agreement and 

Sale Order shall continue in full force and effect notwithstanding entry of this Confirmation 

Order, Confirmation of the Plan or the occurrence of the Effective Date. 

K&E 11771836.17 

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Pg Pg 336 45 of 336 45 

Y. Authorization to Consummate 

57. The Debtors are authorized to consummate the Plan at any time after the entry of 

this Confirmation Order subject to satisfaction or waiver (by the required parties) of the 

conditions precedent to effectiveness set forth in Article XII of the Plan. 

Z. Captions 

58. Subsequent to the Effective Date, the Debtors shall use following caption with 

respect to the Debtors’ Chapter 11 Cases: 



) 

) Chapter 11 

In re ) 

TALT 1 

(f.k.a. Tower Automotive, Inc.) 

) Case Nos. 05-10576- 05-10601 (ALG) 


) 

AA. 

Final Confirmation Order 

59. This Confirmation Order is a final order and the period in which an appeal must 

be filed shall commence upon the entry hereof. 

IT IS SO ORDERED. 

Dated: New York, New York 

July 12, 2007 

/s/ Allan L. Gropper 

UNITED STATES BANKRUPTCY JUDGE 

1 The following case numbers are being jointly administered: 05-10576, 05-10577, 05-10578, 05-10579, 05- 

10580, 05-10581, 05-10582, 05-10583, 05-10584, 05-10585, 05-10586, 05-10587, 05-10588, 05-10589, 05- 

10590, 05-10591, 05-10592, 05-10593, 05-10594, 05-10595, 05-10596, 05-1097, 05-10598, 05-10599, 05- 

10560 and 05-10561. 

K&E 11771836.17 

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914 - TerreStar Networks Inc., et al.

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