In re Safety-Kleen Corp
In re Safety-Kleen Corp., 410 B.R. 164, (Bankr. D. Del. 2009) the bankruptcy court concluded that a stock purchase agreement involving some unperformed, remaining mutual indemnification obligations relating to certain environmental matters was an executory contract.
The Safety-Kleen court considered the pertinent indemnity section of the stock purchase contract at issue, which provided that "subject to a certain dollar limit, Westinghouse and Rollins each held contingent, unliquidated rights of indemnification against the other with respect to any and all damages arising from pre-and-post-closing environmental matters, including contamination relating to the Coffeyville Facility." 410 B.R. at 166.
After acknowledging that "a contract is executory if both parties have unperformed obligations that, if not completed, would result in a material breach," id. at 167, and considering that "courts have ruled that contingent obligations under a contract are sufficient to render a contract executory when the contingent obligations are essential to the contract," id. at 168, the court concluded that the indemnity provisions of the stock purchase agreement at issue were material and the agreement was an executory contract at the time of the debtors' filing for bankruptcy, id. at 169-70.
In doing so, the Safety-Kleen court noted how the indemnity provisions provided benefits and burdens to both parties that continued at the time of the debtors' filing for bankruptcy: "Stated succinctly, the indemnity provisions were not nullities." Id. at 169.