Opinion ID: 1451642
Heading Depth: 2
Heading Rank: 3

Heading: The Contribution Agreement and Bankruptcy Proceeding

Text: On March 28, 2003, Venture and its subsidiaries filed for Chapter 11 bankruptcy in the Eastern District of Michigan (the Bankruptcy Proceeding). In order to allow Venture to exit the Bankruptcy Proceeding, Winget began negotiations with the Lenders, the result of which was an agreement (the Contribution Agreement), which was executed on September 23, 2003. The Contribution Agreement called for a reorganization of Winget's companies, whereby Deluxe, P.I.M., Venco, and their subsidiaries would fall under the umbrella of Venture. Winget agreed to this restructuring in exchange for one hundred percent of the equity in the newly restructured Venture. Under the Contribution Agreement, Winget was not required to agree to exit financing in an amount exceeding $85 million. Winget argued that its amount was critical to maintaining Venture; any amount under $85 million would provide Venture with insufficient liquidity to run the company, and any amount above $85 million would require payments that Venture would be unable to satisfy. As the Bankruptcy Proceeding commenced, Black Diamond became the debtor-in-possession lender to Venture, financing the company's operation during the Bankruptcy Proceeding. In taking this position, Black Diamond acquired substantial interests from the Lenders, including JP Morgan's interest in its capacity as a lender. In the months following the commencement of the Bankruptcy Proceeding, the Defendants began to negotiate with Venture and the unsecured creditors, without Winget's participation, to create another plan that would enable exit financing exceeding $85 million. Winget maintained that any such plan would be unenforceable per the terms of the Contribution Agreement, and alleged that with this knowledge, and Winget's expected rejection of a new plan, the Defendants formulated a scheme to coerce Winget into participation (the Scheme).