Court File No. 31-OR-364921
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
(COMMERCIAL LIST)
THE HONOURABLE MR. | ) | MONDAY, THE 23RD DAY |
) | ||
JUSTICE FARLEY | ) | OF AUGUST, 1999 |
IN THE MATTER OF THE PROPOSAL OF
THE T. EATON COMPANY LIMITED
ORDER
THIS MOTION, made without notice by THE T. EATON COMPANY LIMITED ("Eatons") for an order pursuant to section 47.1 of the Bankruptcy and Insolvency Act, R.S.C. 1985, as amended, (the "BIA") appointing Richter & Partners Inc. as interim receiver, without security of certain property of Eatons, was heard this day at the Courthouse, 361 University Avenue, Toronto, Ontario.
ON READING the Affidavit of Harold S. Stephen, Chief Financial Officer of Eatons sworn August 23, 1999 and the Exhibits thereto (the "Stephen Affidavit"), and the Consent of Richter and Partners Inc. to act as interim receiver dated August 20, 1999, and on hearing the submissions of counsel for Eatons, Retail Funding, Inc. ("RFI"), Richter & Partners, Inc. and other counsel present, if any.
1. THIS COURT ORDERS that this Motion is properly returnable today, without notice, and that any requirement for service of the Notice of Motion and the Motion Record be and is hereby dispensed with.
2. THIS COURT ORDERS that Richter & Partners Inc. be and is hereby appointed interim receiver (the "Interim Receiver"), without security, of all of the present and future inventory of Eatons and any proceeds arising from the sale thereof, and such other assets and property of Eatons as may be required by the Interim Receiver of Eatons to perform its obligations under this Order and the Agency Agreement as hereinafter defined, but only to the extent that they are so require (collectively, the "Assets"), but excluding without limitation any real property or premises owned or leased by Eatons (the "Excluded Assets") and, subject to the provisions hereof, the interim Receiver be and is hereby empowered and authorized to take possession and control of the Assets, other than the Excluded Assets, until further order of this Court, and to act at once in respect of the Assets in accordance with the powers and duties hereinafter set out. The Assets shall be subject to the rights and priorities of any parties now holding security thereon, including the Agent (as hereinafter defined) which has been or shall be granted by Eatons a security interest therein to the extent and in the manner contemplated by the Agency Agreement (as hereinafter defined).
3. THIS COURT ORDERS that the Interim Receiver shall, in addition to the foregoing, control all of Eatons receipts and disbursements, but shall not interfere with the business of Eatons, except to the extent required to perform its obligations under the Agency Agreement (as hereinafter defined) and this Order. Without prejudice to the rights and obligations of the Interim Receiver with respect to receipts and disbursements, discretion to be exercised by the "Merchant" under the Agency Agreement (as hereinafter defined) will be exercised by Eatons.
4. THIS COURT ORDERS that the agency agreement made as of July 29,1999 among Eatons and Gordon Brothers Retail Partners, LLC, Schottenstein/Bernstein Capital Group, LLC, Hilco Trading Co., Inc., and Garcel, Inc. (such parties excluding Eatons being collectively referred to herein as the "Agent"), as amended by amending agreement executed on August 20, 1999 among Eatons and the Agent (the agency agreement together with the amending agreement being collectively referred to herein as the "Agency Agreement") and the transactions contemplated thereby, be and are hereby approved, and the Interim Receiver be and is hereby authorized and directed to enter into the Agency Agreement and to complete the transactions contemplated thereby, subject to such further amendments as the Interim Receiver, Eatons and the Agent shall approve.
5. THIS COURT ORDERS that Eatons be and is hereby authorized and directed to execute and deliver the general security agreement in favour of the Agent substantially in the form contemplated by the Agency Agreement.
6. THIS COURT ORDERS that the Interim Receiver be and is hereby authorized and directed to receive the Initial Payment (as defined in the Agency Agreement) from the Agent in accordance with the Agency Agreement, and to forthwith pay such Initial Payment to RFI as assignee and successor to the Lenders, the Agent and the Loan Parties (as defined in the Restated Credit Agreement, which Restated Credit Agreement is as defined in the Stephen Affidavit) on account of amounts outstanding and owing by Eatons to RFI under the Restated Credit Agreement.
7. THIS COURT ORDERS that, notwithstanding:
(a) the pendency of these proceedings;
(b) the pendency of any petition for receiving order hereafter issued pursuant to the BIA in respect of Eatons, any receiving order issued in respect of Eaton' pursuant to any such petitions, or any assignment under the BIA being made or deemed to have been made; and
(c) the provisions of any federal pr provincial statute,
neither the Agency Agreement and the transactions contemplated thereby (including the rights and benefits of the Agent thereunder) nor any future advances of funds by RFI to Eatons under the Restated Credit Agreement, will be void or voidable to or by creditors, shareholders or other claimants.
8. THIS COURT ORDERS that the Agency Agreement and the transactions contemplated thereby and the assignment to and purchase by RFI of the Restated Credit Agreement and any future advances of funds by RFI to Eatons under the Restated Credit Agreement shall be binding on any trustee in bankruptcy that may be appointed in respect of Eatons and the security held by RFI for the obligations under the Restated Credit Agreement and the security granted to the Agent pursuant to the Agency Agreement shall retain their full perfection and priority.
9. THIS COURT ORDERS and declares that neither the Interim Receiver nor the Agent by virtue of their appointment is or shall be deemed or considered to be a successor employer, sponsor, or payor with respect to Eatons or any such former employees under the Canada Labour Code, the Labour Relations Act (Ontario), the Employment Standards Act (Ontario), the Pensions and Benefits Act (Ontario) or any other provincial or federal legislation, regulation or rule of law or equity applicable to employees or pensions or otherwise (collectively, "Labour Laws"), any collective agreement or other contract between Eatons and any of its present or former employees, notwithstanding the terms and provisions of the Agency Agreement and the performance of the obligations thereunder by each of the Interim Receiver or Agent.
10. THIS COURT ORDERS that the Interim Receiver and the Agent shall have access to and the right to use Eatons premises, computers, terminals, furniture, fixtures, equipment, books, records and data, including without limitation data in electronic format, intellectual property, contractual rights and other documents or information of Eatons to the extent necessary to complete and perform their obligations under the Agency Agreement, provided however that the Agent shall not have the right to continue any Sale (as defined in the Agency Agreement) beyond November 30, 1999, without the consent of the relevant landlord or further order of this Honourable Court.
11. THIS COURT ORDERS that the Interim Receiver is authorized to take all steps and to do all necessary or desirable acts in furtherance of and to complete the transactions contemplated under the Agency Agreement and to make payments to RFI from time to time of amounts received under the Agency Agreement or otherwise, on account of amounts owing to RFI.
12. THIS COURT ORDERS that from the date of this Order:
(a) RFI shall, in place of the Lenders ( as described in the Restated Credit Agreement), be entitled to make advances of funds to Eatons under the Restated Credit Agreement;
(b) all obligations of RFI as successor lender under the Restated Credit Agreement to make advances thereunder shall be at its discretion; and
(c) Eatons and the Interim Receiver be and are hereby authorized to borrow monies from RFI to provide operating funds under and in accordance with the terms of the Restated Credit Agreement or such other terms as may be agreed with RFI, and all such borrowings shall constitute advances to Eatons under the Restated Credit Agreement and shall be secured by the security acquired and held by RFI pursuant to the assignment to it of the Restated Credit Agreement and all related loans and security documents.
13. THIS COURT ORDERS that, in furtherance of its obligations under the Agency Agreement and this Order, the Interim Receiver shall be authorized:
(a) to take such steps as in the opinion of the Interim Receiver are necessary or appropriate to receive, preserve, protect and maintain control, liquidate and realize upon the inventory, or any part or parts thereof, including, but not limited to, the changing of locks and security codes, the relocating of inventory to safeguard same, the engaging of independent security personnel, the taking of physical inventories and the placement of such insurance coverages as may be necessary or desirable;
(b) to take such steps as in the opinion of the Interim Receiver are necessary or appropriate to maintain control over all receipts and disbursements arising out of or from the inventory, including, without limiting the generality of the foregoing, taking such steps as are necessary or desirable to control access to and use of all bank accounts of Eatons, approve all cheques or other instruments drawn on such accounts;
(c) to take such steps as in the opinion of the Interim Receiver are necessary or appropriate to verify the existence and location of all of the inventory, the terms of all agreements or other arrangements relating thereto, whether written or oral, the existence or assertion of any lien, charge, encumbrance or security interest thereon and any other matters which in the opinion of the Interim Receiver may affect the extent, value, existence, preservation and liquidation of such inventory;
(d) to deal with any regulatory body and any other governmental ministry, department or agency or any municipality concerning any and all approvals, any and all licenses, permits, authorizations, permissions, liabilities or obligations in respect of or in relation to the inventory and the disposition thereof, and to take all such steps as are necessary or incidental thereto;
(e) to liaise with Eatons and other interested parties in connection with the formulation of a proposal to be filed by Eatons; and
(f) to perform the inventory taking with the Agent in accordance with the provisions of the Agency Agreement, and to take reasonable steps to maintain records of goods supplied to Eatons which may be subject to claims under Section 81.1 of the BIA.
14. THIS COURT ORDERS that each of the sales contemplated by the Agency Agreement shall be considered in all respects and for all purposes to be a judicial sale for the purposes of any bulk sales or sale of an enterprise legislation.
15. THIS COURT ORDERS AND DECLARES that all sales by the Agent pursuant to the Agency Agreement are sales by or on behalf of and are made under the authority of a receiver or trustee under the BIA and that such sales are exempted from the application of any municipal licensing by-laws requiring licences for special sales as described in such by-laws. This Court further orders that the Interim Receiver be and is hereby authorized and empowered, for the purpose of exercising its power and duties under this Order, to apply for any permits, licences, approvals or permissions as may be required by any governmental or regulatory authority, and to participate in any administrative hearings or arbitrations with respect thereto. All of the foregoing shall be limited in application to the province of Ontario or any other province pursuant to an order rendered pursuant to section 22 hereof.
16. THIS COURT ORDERS that nothing herein contained shall vest in the Interim Receiver or the Agent the care, ownership, control, charge, occupation, possession or management (separately, and/or collectively, "Possession"), or require or obligate the Interim Receiver or the Agent to occupy or to take control, care, charge, occupation, possession or management of any of the Assets, Excluded Assets or other assets other than the inventory and, at such times as Eatons, from time to time, exercises its right to have the Agent sell certain of the FF&E, such FF&E (FF&E being defined in the Agency Agreement as certain furnishings, trade fixtures, equipment and improvements to real property) and nothing herein shall deem the Interim Receiver or the Agent to be in Possession of any of the Assets or Excluded Assets for the purposes of any legislation enacted for the protection or preservation of the environment including, without limitation, the Canadian Environmental Protection Act, the Transportation of Dangerous Goods Act (Ontario), the Environmental Protection Act (Ontario), the Emergency Plans Act, (1983) (Ontario), the Ontario Water Resources Act, the Occupational Health and Safety Act (Ontario) or the regulations thereunder, or any federal or provincial legislation, or rule of law or equity in any jurisdiction relating to the environment or the transportation of goods or hazardous waste (collectively "Environmental Laws"). For greater certainty, the Interim Receiver shall be entitled to the rights and protections afforded by section 14.06 of the BIA.
17. THIS COURT ORDERS that the Interim Receiver shall incur no liability or obligation as a result of its appointment or the fulfilment of its duties in carrying out the provisions of this Order, save and except for any gross negligence or wilful misconduct on its part.
18. THIS COURT ORDERS that any liability of the Interim Receiver whatsoever, except in respect of gross negligence and Wilful misconduct) whether in its personal capacity or in its capacity as Interim Receiver, and whether arising out of or from its appointment or the exercise of its powers hereunder, including without limitation arising in connection with Environmental Laws, Labour Laws or the Agency Agreement, shall be limited in the aggregate to the Net Realized Value of the Assets in the Possession of the Interim Receiver. "Net Realized Value of the Assets" shall mean the cash proceeds actually received by the interim Receiver in connection with the performance of its obligations under the Agency Agreement and this Order, after deducting all costs and expenses properly incurred in connection therewith, (including the remuneration and expenses of the Receiver and the fees and disbursements of its counsel), and after deduction of any amounts distributed, paid or payable by the Interim Receiver or subject to security or other rights in favour of third parties.
19. THIS COURT ORDERS that the Interim Receiver shall be at liberty to appoint, employ or retain such solicitors and counsel from time to time and on whatever basis, including on a temporary basis, as it may consider necessary or desirable for fulfilling its functions hereunder. All expenditures properly made or to be made and all obligations properly incurred or to be incurred by the Interim Receiver pursuant to this Order (including without limitation expenditures and obligations pursuant to the Agency Agreement and for professional fees and disbursements of the Interim Receiver, including the fees and disbursements of the Interim Receiver and the fees and disbursements of its legal counsel on a solicitor and his own client basis), shall constitute and shall form a charge on all the property, assets and undertaking of Eatons ranking in priority to the security held by RFI.
20. THIS COURT ORDERS that prior to the passing of accounts, the Interim Receiver shall beat liberty from time to time to apply reasonable amounts, out of the monies in its hands, against its fees and disbursements, including legal fees and disbursements, incurred at the Interim Receiver or its counsels standard rates and charges for such services rendered, either monthly or at such longer or shorter intervals as the Interim Receiver deems appropriate, and such amounts shall constitute advances against its remuneration and disbursements when fixed, providing that all of the same be subject to a passing of the Interim Receivers accounts from time to time.
21. THIS COURT ORDERS that the Interim Receiver be at liberty and is hereby authorized and empowered at any time and from time to time to apply to this Court for advice and directions in the discharge or a variation of its power and duties hereunder.
22. THIS COURT ORDERS that, without limiting the generality of any of the provisions hereof, the Interim Receiver be at liberty and is hereby authorized and empowered to apply, upon such notice as it may consider necessary or desirable, to any other Court in any other jurisdiction, whether in Canada or elsewhere, for an order recognizing the appointment of the Interim Receiver by this Court and confirming the powers of the Interim Receiver in such other jurisdiction or jurisdictions or to take such steps, actions or proceedings as may be necessary or desirable for the receipt, preservation, protection and maintenance of the Assets and any proceeds arising therefrom, and all Courts of all jurisdictions are hereby respectfully requested to make such orders and provide such other aid and assistance to the Interim Receiver, as an officer of this Court, as they may deem necessary or appropriate in furtherance of this Order.
23. THIS COURT ORDERS that liberty is reserved to any interested party to apply to this Court on three (3) business days notice to Eatons and the Interim Receiver for such further Order of this Court of for variation of this Order or otherwise as may be advised.
J.M. FARLEY