IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
IN RE LOUISIANA-PACIFIC INNER-SEAL Civil No. CV-95-879-JO-LEAD
SIDING LITIGATION
SUPPLEMENTAL FUNDING AGREEMENT
This SUPPLEMENTAL FUNDING AGREEMENT ("Supplemental Agreement") is dated
and effective as of October 26, 1998, by and between the Plaintiffs in the above
litigation, for themselves and on behalf of the Settlement Class as that term is
defined in the October 18, 1995 Settlement Agreement ("Class Members") and
defendant Louisiana-Pacific Corporation ("L-P"), collectively, the "Parties."
BACKGROUND
The Parties entered into a Settlement Agreement on October 18, 1995 and
an Amendment to Settlement Agreement dated April 26, 1996, both of which were
approved by the Court in the above matter by its Order, Final Judgment, and
Decree, dated April 26, 1996 (the "Settlement Agreement"). The Settlement
Agreement creates a mechanism for the receipt, inspection, and
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payment of claims filed by a Class Member with the Claims Administrator. The
Parties have negotiated this Supplemental Agreement in order to offer to Class
Members an alternative to the relief provided by the Settlement Agreement.
This Supplemental Agreement does not in any respect alter or amend the
Settlement Agreement, which remains in full force and effect to the same extent
as if this agreement never had been executed. To the extent Class Members who
have filed claims with the Claims Administrator ("Claimants") individually elect
to accept the early payment proposals ("Early Payment") or to participate in the
Second Settlement Fund contained in this Supplemental Agreement, the provisions
governing such proposals will control the respective rights and obligations of
the electing Claimants and L-P.
AGREEMENT
The Parties agree as follows:
1. DEFINITIONS
All terms used in this Supplemental Agreement shall have the same
meaning as set forth in the Settlement Agreement unless otherwise stated in this
agreement.
2. ADVICE TO CLAIMANTS
As soon as practicable following the execution of this Supplemental
Agreement, the Claims Administrator will notify in writing each Claimant who has
filed an approved claim and whose property has been inspected of: (a) the
current status of his claim; (b) its expected payment date; and (c) the
proposals described in this Supplemental Agreement.
3. OFFER OF EARLY PAYMENT - MANDATORY CONTRIBUTIONS
(a) Under the terms of the Settlement Agreement, L-P is required to
contribute a minimum of $275 million to the Settlement Fund over a seven-year
period (the "Mandatory Contributions"). To date, L-P has contributed $195
million to the Settlement Fund. The remaining $80 million is payable in annual
installments on each June 7 of the next four years, commencing on June 7, 1999
(the "Remaining $80 Million").
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(b) L-P agrees to offer to each Claimant whose claim has been approved
by the Claims Administrator and who otherwise is entitled to be paid from the
Remaining $80 Million an amount equal to the present value of his Damage Award
discounted at the rate of 9% per annum to reflect its early payment. For
example, a Claimant with a Damage Award of $6,000 payable on June 7, 1999 who is
offered an Early Payment on November 1, 1998 would be offered $5,694; a Claimant
with a $6,000 Damage Award payable on June 7, 2000 and offered Early Payment on
November 1, 1998 would be offered an Early Payment of $5,206.
(c) The amount of the discount of the Early Payment will be calculated
from the first day of June of the year in which the Damage Award otherwise would
be payable under the Settlement Agreement to the first day of the month in which
the offer is made -- provided that such offers are mailed to Class Members no
later than the 15th day of such month.
4. OFFER OF EARLY PAYMENT - OPTIONAL CONTRIBUTIONS
(a) In addition to the Mandatory Contributions, under the circumstances
described in the Settlement Agreement, L-P may make two optional $50 Million
contributions to the Settlement Fund (the "$100 Million Optional
Contributions"). If L-P elects to make the two optional contributions, the first
is payable in August, 2001, and the second, in August, 2002.
(b) L-P agrees to offer to pay to each Claimant whose claim has been
approved by the Claims Administrator and who otherwise is entitled to be paid
from the proceeds of the $100 Million Optional Contributions an amount equal to
the present value of his Damage Award discounted at the rate of 12% per annum to
reflect its early payment and the elimination of the uncertainty of payment. For
example, a Claimant with a Damage Award of $6,000 payable on August 7, 2001 who
is offered an Early Payment on November 1, 1998 would be offered $4,321; a
Claimant with a $6,000 claim payable on August 7, 2002 and offered Early Payment
on November 1, 1998 would be offered $3,834.
(c) The amount of the discount of the Early Payment will be calculated
from the first day of June of the year in which the Damage Award otherwise would
be payable under the
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Settlement Agreement to the first day of the month in which the offer is made --
provided that such offers are mailed to Class Members no later than the 15th day
of such month.
5. OFFERS OF EARLY PAYMENT TO BE PROMPTLY MADE
L-P's offers of Early Payment to Claimants who otherwise would be paid
from the proceeds of the Remaining $80 Million and the $100 million Optional
Contributions will be communicated by the Claims Administrator to the relevant
Claimants as soon as practicable following the execution of this Supplemental
Agreement.
6. TRANSMITTAL TO RECIPIENTS OF OFFER OF EARLY PAYMENT
(a) The Claims Administrator shall transmit an offer of Early Payment
to each Claimant entitled to receive one under paragraph 3 or 4, above. The
transmittal will explain the proposal and include a check in the amount of the
Early Payment. In addition, the transmittal will advise each Claimant that he is
under no obligation to accept the payment and that the Early Payment is offered
in complete satisfaction of the Claimant's Damage Award and the claim on which
it is based.
(b) Each Claimant will have sixty (60) days from the date of the
transmittal to cash the check, unless the period is extended by L-P in its sole
discretion. If the Claimant fails to cash the check within such sixty (60) day
period (or if extended by L-P, such extended period), he will be deemed to have
rejected the offer.
(c) A Claimant's failure to cash the check shall not affect his rights
and obligations under the Settlement Agreement, all of which remain in full
force and effect.
7. CREDIT FOR EARLY PAYMENT
To take into account their early payment, all payments made to
Claimants pursuant to paragraphs 3 and 4, above, will be credited against L-P's
mandatory and optional payment obligations under paragraphs 4.3, 4.7, and 4.8 of
the Settlement Agreement. The credit shall be equal to the aggregate face amount
of the claims to which such payments relate. For example, if Claimants who hold
$25 million of claims that otherwise would be paid from the next mandatory
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contribution due June 7, 1999 accept the offer of early payment, the mandatory
contribution due on that date will be $5 million. Similarly, if Claimants who
hold $35 million of claims that otherwise would be paid from the proceeds of the
first optional $50 million contribution accept the offer of early payment, the
optional payment due in 2001 will be $15 million.
8. CREATION OF $125 MILLION SECOND SETTLEMENT FUND
L-P will create a separate account within the existing Settlement Fund
(the "Second Settlement Fund"), which will be capitalized at $125 million. The
cash funding for the Second Settlement Fund will be provided no later than ten
(10) business days following the expiration of the Right of Withdrawal Period
(Paragraph 17, below) with the right not having been exercised. The Second
Settlement Fund will be open to receive claims as soon as practicable following
the execution of this Supplemental Agreement and will remain open until December
31, 1999. The Second Settlement Fund is created as a source of payment for all
approved claims filed prior to December 31, 1999 that are in excess of the first
$375 million of claims.
9. ELIGIBLE CLAIMS
Claims that may be filed with the Second Settlement Fund ("Eligible
Claims") are: (a) claims for subsequent damage or for the benefit of the "65%
Rule;" (b) claims that previously have been approved but remain unpaid (other
than a claim that is the subject of an offer of Early Payment); and (c) approved
claims filed prior to the close of the Second Settlement Fund.
10. ELECTION TO PARTICIPATE
The Claims Administrator will notify in writing each Claimant who has
filed an Eligible Claim of L-P's offer to establish the Second Settlement Fund
and describe its terms. Each such Claimant will have sixty (60) days from the
date of the notice to return to the Claims Administrator an Election to
Participate form evidencing his desire to participate in the Second Settlement
Fund. Only Claimants who timely return the Election to Participate form to the
Claims Administrator will be allowed to participate in the Second Settlement
Fund.
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(503) 727-2000
11. PROMPT INSPECTION; CALCULATION OF DAMAGE AWARD
The claim of each Claimant that is approved by the Claims Administrator
will be promptly inspected by the Independent Adjuster in accordance with the
protocol adopted under the Settlement Agreement. Thereafter, the Claims
Administrator will calculate the applicable damage award, if any, based upon the
results of the inspection of the Independent Adjuster (the "Damage Award").
12. CALCULATION OF PRO RATA SHARE
As soon as practicable following the close of the Second Settlement
Fund, the Claims Administrator will calculate the pro rata share of each
Claimant who has filed an Eligible Claim and who timely files an Election to
Participate form in accordance with the formula S = D($125 million/A), where S
is the Claimant's pro rata share of the Second Settlement Fund; D is the amount
of the Claimant's Damage Award, and A is the aggregate amount of all claims
filed against the Second Settlement Fund (the "Pro Rata Share").
13. ADVICE TO PARTICIPANTS IN SECOND SETTLEMENT FUND
As soon as the Pro Rata Share of the participants in the Second
Settlement Fund has been calculated by the Claims Administrator, each
participant will be advised in writing: (a) of the amount of his damage as shown
in the Calculation Worksheet; (b) of the amount of his Pro Rata Share of the
Second Settlement Fund (not to exceed the amount of his Damage Award); (c) that
the Pro Rata Share is offered to him in complete satisfaction of his claim for
damage as described in the Calculation Worksheet; (d) that recipients of
distributions from the Second Settlement Fund may not file additional damage
claims with the Claims Administrator during the remaining term of the
Settlement; and (e) that there is no right to arbitrate the amount of the pro
rata distribution.
14. BACK END OPT-OUT RIGHT
If the Claimant is dissatisfied with the amount of his Pro Rata Share,
he may reject it by providing written notice to the Claims Administrator
postmarked no later than thirty (30) days from the date of such written
notification (the "Back End Opt-Out Right"). Unless the Claimant
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exercises his Back End Opt-Out Right by providing timely written notice to the
Claims Administrator, he conclusively will be deemed to have accepted his Pro
Rata Share in full and complete satisfaction of the damage claim described in
the Calculation Worksheet.
15. PAYMENT OF PRO RATA SHARE
Payment of the Pro Rata Share of each participant in the Second
Settlement Fund who fails timely to exercise his Back End Opt-Out Right will be
mailed to him as soon as practicable following the expiration of the Right of
Withdrawal Period (Paragraph 17, below) with the right not having been
exercised.
16. WRITTEN NOTICE TO L-P
The Claims Administrator will provide L-P with prompt written notice
(no less often than biweekly) of the number of Claimants with Eligible Claims
who have exercised their Opt-In Rights, of the number who have not, and of the
aggregate amount of their claims. In addition, within ten (10) business days
after the expiration of the period for the exercise of Back End Opt-Out Rights,
the Claims Administrator will advise L-P in writing of the number of Claimants
who timely exercised their Back End Opt-Out Rights and of the aggregate amount
of their claims.
17. L-P'S RIGHT OF WITHDRAWAL
If, in its sole discretion, L-P believes that the number of Claimants
who elect not to participate in the Second Settlement Fund (whether by not
opting-in or by opting out) is excessive, it may withdraw its offer to establish
the Second Settlement fund (the "Right of Withdrawal"). The Right of Withdrawal
must be exercised by providing written notice to the Claims Administrator
postmarked within ten (10) business days following receipt of advice from the
Claims Administrator as to the number of Claimants exercising their Back End
Opt-Out Rights (the "Right of Withdrawal Period"). If L-P timely exercises its
Right of Withdrawal, its offer to establish the Second Settlement Fund is null
and void, and thereafter the rights and obligations of L-P and all Class Members
shall be governed exclusively by the terms of the
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Settlement Agreement, except to the extent those rights and obligations were
modified pursuant to a claimant's acceptance of any offer of Early Payment.
18. REVIVAL OF CLAIMS; MAINTENANCE INSTRUCTIONS
All Claimants also will be advised that pursuant to the terms of the
Settlement Agreement if there are unpaid claims at the end of the settlement
term, L-P must pay them; or, if it does not, each unpaid Claimant will be free
after that date to pursue whatever legal remedies are available, subject to any
legal defenses L-P may have, including the defense that a Claimant has failed
properly to maintain his siding. In this regard, each Claimant will be provided
with a copy of L-P's written maintenance instructions, which would be the basis
for any maintenance defense if not followed.
19. PERSONAL AND PUBLISHED NOTICE
The substance of this Supplemental Agreement will be communicated
personally in a direct mailing to each Claimant who files an Eligible Claim or
who is entitled to receive an offer of Early Payment. In addition, notice of the
offer may be included in the published third year notice that must be provided
under the Settlement Agreement and in such other publications and in such other
manner as the Parties jointly may agree.
20. TAX STATUS OF SECOND SETTLEMENT FUND
The Second Settlement Fund will be established and maintained as a
separate account within the existing Qualified Settlement Fund ("QSF") in
accordance with Section 468B of the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder. The Claims Administrator is
appointed to act as administrator of the fund within the meaning of Treas. Reg.
Sec. 1-468B-2(k)(3). As the Administrator, the Claims Administrator shall comply
with all applicable duties and obligations under IRC sec. 468B and any relevant
implementing regulations.
21. REPRESENTATIONS AND WARRANTIES
L-P represents and warrants that: (a) it has all requisite corporate
power and authority to execute, deliver, and perform this agreement and to
consummate the transactions contemplated
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hereby; (b) the execution, delivery, and performance of this Supplemental
Agreement have been duly authorized by all necessary corporation action; and (c)
this agreement has been validly executed by L-P and constitutes its legal,
valid, and binding obligation.
22. INTEREST ON EARLY PAYMENT FUNDING AND SECOND SETTLEMENT FUND
All interest earned on the funds advanced by L-P to fund the Early
Payment offers and all interest earned on the funds advanced by L-P to fund the
Second Settlement Fund shall be applied as a full credit toward any remaining
mandatory or optional contributions from L-P under the Settlement Agreement.
23. MISCELLANEOUS PROVISIONS
a. No term or provision of this Supplemental Agreement shall alter or
amend any term or provision of the Settlement Agreement, no hearing on the
Supplemental Agreement is required under Rule 23, Fed. R. Civ. P., and all of
terms and provisions of the Settlement Agreement remain in full force and effect
to the same extent as though this Supplemental Agreement had never been
executed.
b. The Court, acting through the Special Master, shall oversee the
implementation, administration, and performance of this Supplemental Agreement
to assure that none of its provisions alter or affect the terms of the
Settlement Agreement. The Special Master also shall resolve any dispute that may
arise under this Supplemental Agreement which bears on any term or condition of
the Settlement Agreement or involves the construction or meaning of any
provision of the Settlement Agreement.
c. This Supplemental Agreement may not be modified or amended except in
a writing signed by all the Parties.
d. This Supplemental Agreement shall be governed and construed in
accordance with the laws of the State of Oregon, applied without regard to its
laws applicable to choice of law.
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e. The headings of the sections of this Supplemental Agreement are
included for convenience only and shall not be deemed to constitute part of this
agreement or to affect its construction.
f. This Supplemental Agreement may be executed in any number of
counterparts, all of which when taken together shall constitute one agreement.
g. Any additional administrative costs incurred by the Claims
Administrator or Independent Adjuster in the performance of the acts
contemplated by this Supplemental Agreement, as well as the cost of providing
published notice of its terms, shall be borne by L-P.
h. Any notice provided in connection with this Supplemental Agreement
or other document to be provided by one Party to the other shall be in writing
and delivered personally or sent by registered or certified mail, postage
prepaid: if to L-P, to the attention of L-P's respective representatives; and to
Plaintiffs' Class Counsel on behalf of Settlement Class members. As of the date
of this Supplemental Agreement, the respective representatives are as set forth
below.
Dated and effective as of October 26, 1998.
LOUISIANA-PACIFIC CORPORATION
By:/s/ Gary C. Wilkerson
------------------------------------------------
Gary C. Wilkerson
Vice President and General Counsel
LOUISIANA-PACIFIC CORPORATION
111 S.W. Fifth Avenue, Suite 4200
Portland, OR 97204
By:/s/ Michael H. Simon
------------------------------------------------
Michael H. Simon
PERKINS COIE LLP
1211 S. W. Fifth Avenue, Suite 1500
Portland, Oregon 97204
Counsel for Louisiana-Pacific Corp.
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Portland, Oregon 97204
(503) 727-2000
CLASS COUNSEL
By:/s/ Christopher I. Brain
------------------------------------------------
Christopher I. Brain
TOUSLEY BRAIN 700
Fifth Avenue, 56th Floor
AT&T Gateway Tower
Seattle, WA 98104-5056
By:/s/ Clyde Platt
------------------------------------------------
Steve W. Berman
Clyde Platt
HAGENS & BERMAN
1301 Fifth Avenue, Suite 2929
Seattle, WA 98101
By:/s/ Jeremy R. Larson
------------------------------------------------
Charles Nomellini
Jaremy R. Larson
FOSTER PEPPER & SHEFELMAN
1111 Third Avenue, Suite 3400
Seattle, WA 98101
By:/s/ Jonathan D. Selbin
------------------------------------------------
Elizabeth Cabraser
Jonathan D. Selbin
LIEFF, CABRASER, HEIMANN
& BERNSTEIN LLP
Embarcadero Center West
275 Battery Street, 30th Floor
San Francisco, CA 94111-3339
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1211 S.W. Fifth Avenue, Suite 1500
Portland, Oregon 97204
(503) 727-2000
By:/s/ A. Hoyt Rowell, III
------------------------------------------------
A. Hoyt Rowell, III
NESS, MOTLEY, LOADBOLT,
RICHARDSON & POOLE
174 East Bay Street, Suite 100
Charleston, S.C. 29041
By:/s/ William H. Garvin, III
------------------------------------------------
William H. Garvin, III
WELLER, GREEN, McGOWN & TOUPS
2937 Kerry Forrest Parkway, Suite A-2
Tallahassee, FL 32308
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(503) 727-2000