EXHIBIT 99.2
ARMSTRONG
DISCLOSURE STATEMENT, DATED MARCH 14,
2003, FOR THE FIRST AMENDED PLAN OF REORGANIZATION
OF ARMSTRONG WORLD INDUSTRIES, INC.
THE FIRST AMENDED PLAN OF REORGANIZATION OF ARMSTRONG WORLD INDUSTRIES,
INC., WHICH IS ATTACHED AS EXHIBIT "A" TO THIS DISCLOSURE STATEMENT,
CONTAINS THE ASBESTOS PI PERMANENT CHANNELING INJUNCTION, AN INJUNCTION
AGAINST CONDUCT NOT OTHERWISE ENJOINED UNDER THE BANKRUPTCY CODE. FOR A
DESCRIPTION OF THE ACTS TO BE ENJOINED AND THE IDENTITY OF THE ENTITIES
THAT WOULD BE SUBJECT TO THE ASBESTOS PI PERMANENT CHANNELING INJUNCTION,
SEE SECTION VI.D OF THIS DISCLOSURE STATEMENT, ENTITLED, "THE ASBESTOS PI
TRUST - THE ASBESTOS PI PERMANENT CHANNELING INJUNCTION," AND SECTION 1.25
OF THE PLAN OF REORGANIZATION. THE FIRST AMENDED PLAN OF REORGANIZATION
ALSO CONTAINS THE CLAIMS TRADING INJUNCTION, WHICH RESTRICTS THE TRANSFER
OF ASBESTOS PERSONAL INJURY CLAIMS AND ASBESTOS PROPERTY DAMAGE CLAIMS. SEE
SECTION 1.44 OF THE FIRST AMENDED PLAN OF REORGANIZATION.
This Disclosure Statement has not been approved by the Bankruptcy Court as
containing "adequate information" within the meaning of section 1125(a) of
the Bankruptcy Code. Prior to the solicitation of votes to accept or reject
the Plan, Armstrong World Industries, Inc. intends to seek an order of the
Bankruptcy Court approving this Disclosure Statement.
ARMSTRONG
TO: HOLDERS OF CLAIMS (INCLUDING ASBESTOS PERSONAL INJURY CLAIMS) AGAINST
AND EQUITY INTERESTS IN ARMSTRONG WORLD INDUSTRIES, INC.
HOLDERS OF COMMON STOCK OF ARMSTRONG HOLDINGS, INC.
GENERAL
We are transmitting to you with this letter the Disclosure Statement with
respect to the first amended chapter 11 plan of reorganization (the "PLAN") of
Armstrong World Industries, Inc. ("AWI"). The Disclosure Statement describes the
provisions of the Plan for AWI, which is supported by the major constituencies
in AWI's chapter 11 case - the Official Asbestos Claimants' Committee (the
"ASBESTOS PI CLAIMANTS' COMMITTEE"), the Legal Representative for Future
Personal Injury Claimants (the "FUTURE CLAIMANTS' REPRESENTATIVE"), and the
Official Committee of Unsecured Creditors (the "UNSECURED CREDITORS'
COMMITTEE"). The Disclosure Statement has been approved for dissemination to
parties in interest. You should read the Disclosure Statement carefully. A
summary of the distributions that will be made under the Plan is included in
Sections II and V of the Disclosure Statement. If you are entitled to vote on
the Plan, a ballot is enclosed for you. WE URGE YOU TO VOTE TO ACCEPT THE PLAN.
THE PLAN IS THE PRODUCT OF EXTENSIVE NEGOTIATIONS AMONG AWI AND THE
REPRESENTATIVES OF ITS PRINCIPAL CONSTITUENCIES, INCLUDING UNSECURED CREDITORS
AND ASBESTOS PERSONAL INJURY CLAIMANTS. AWI AND THESE REPRESENTATIVES BELIEVE
THAT THE PLAN IS IN THE BEST INTERESTS OF ALL CREDITORS AND WILL ALLOW AWI TO
EMERGE FROM CHAPTER 11 AS A VIABLE ONGOING BUSINESS ENTERPRISE. THE PLAN HAS THE
SUPPORT OF AWI, THE REPRESENTATIVES OF ALL OF THE HOLDERS OF PRESENT AND FUTURE
ASBESTOS-RELATED PERSONAL INJURY CLAIMS AGAINST AWI, AND THE REPRESENTATIVES OF
ALL UNSECURED CREDITORS.
ARMSTRONG HOLDINGS, INC. SHAREHOLDERS
Although we are concurrently distributing the Disclosure Statement (and related
Plan) to shareholders of Armstrong Holdings, Inc. ("HOLDINGS"), such
shareholders are not entitled to vote on the Plan. By order of the Court
overseeing AWI's chapter 11 case, however, Holdings' shareholders do have
standing to object to confirmation of the Plan. In addition, as discussed in
Section V.P, entitled "THE PLAN OF REORGANIZATION -- Holdings Plan of
Liquidation," in connection with AWI's solicitation of votes with respect to the
Plan, Holdings will solicit its shareholders for approval of the Holdings Plan
of Liquidation. If the Holdings Plan of Liquidation is approved prior to the
first anniversary of the Effective Date, AWI will issue to Armstrong Worldwide,
Inc. ("AWWD"), the direct parent of AWI and a wholly-owned subsidiary of
Holdings, or directly to Holdings, warrants to purchase shares of the new common
stock of reorganized AWI, which Holdings will distribute under the Holdings Plan
of Liquidation.
CREDITORS OF AWI
The Plan is attached to the Disclosure Statement as Exhibit "A." In order for a
class to accept the Plan, at least two-thirds in dollar amount of the claims
voted in such class and more than one-half in number of the claims voted in the
class must be voted to accept the Plan. Moreover, the Plan requires that at
least 75% of the holders of asbestos-related personal injury claims who vote on
the Plan vote in favor of the Plan. Your acceptance will facilitate and expedite
the emergence of AWI from chapter 11.
If you did not receive a ballot with the Disclosure Statement, please see the
summary of who may not vote on the Plan on page __ of the Disclosure Statement.
If you believe that you are entitled to vote on the Plan but did not receive a
ballot, received a damaged ballot, lost your ballot, or if you have any other
questions about the Plan or this Disclosure Statement, please call Innisfree M&A
Incorporated, AWI's special ballot tabulation and solicitation agent, at (877)
750-2689.
Please note that BALLOTS MUST BE RECEIVED NO LATER THAN 5:00 P.M.,
_____________, TIME, ON _________________. If you are entitled to vote on the
Plan, a ballot and return envelope are enclosed for your convenience. IT IS OF
THE UTMOST IMPORTANCE THAT YOU VOTE PROMPTLY TO ACCEPT THE PLAN.
Sincerely,
ARMSTRONG WORLD INDUSTRIES, INC.
--------------------------------
Michael D. Lockhart, Chairman
--------------------------------
ASBESTOS PI CLAIMANTS' COMMITTEE
--------------------------------
[ ]
Chairperson
UNSECURED CREDITORS' COMMITTEE
--------------------------------
[ ]
FUTURE CLAIMANTS' REPRESENTATIVE
--------------------------------
Dean M. Trafelet
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TABLE OF CONTENTS
-----------------
I. Introduction......................................................................................................1
II. Overview of the Plan..............................................................................................5
III. General Information..............................................................................................11
A. Description and History of Business....................................................................11
B. Competition............................................................................................13
C. Proposed Dissolution of Armstrong Holdings, Inc........................................................14
D. Events Leading to the Commencement of the Chapter 11 Case..............................................14
1. AWI's Involvement with Asbestos-Containing Materials.........................................14
2. Prepetition Asbestos-Related Personal Injury Litigation Against AWI..........................17
3. Owens Corning Fiberglas Filing for Protection under Chapter 11...............................17
4. Downgrading of AWI's Credit Rating...........................................................17
IV. The Chapter 11 Case..............................................................................................18
A. General.......................................................................................................18
B. Professionals Retained in the Chapter 11 Case.................................................................18
1. AWI's Attorneys and Advisers........................................................................18
2. Committees..........................................................................................19
C. Significant Events During the Chapter 11 Case..........................................................21
1. Employee Related Matters.....................................................................21
2. Vendor and Customer Issues...................................................................21
3. The DIP Credit Facility......................................................................22
4. AWI's Exclusive Right to File and Confirm a Plan.............................................23
5. The Bar Date (for Claims other than Asbestos Personal Injury Claims).........................23
6. Asbestos Property Damage Claims..............................................................25
7. Insurance Coverage Issues....................................................................27
8. Litigation Involving the Center for Claims Resolution........................................30
9. Other Litigation.............................................................................32
10. Settlement of Claims.........................................................................35
11. Settlement and Release of Intercompany Claims................................................36
12. Department of Labor Investigation............................................................36
13. Delisting of Holdings' Common Stock and Certain of AWI's Debt
Securities from the New York Stock Exchange..................................................36
V. The Plan of Reorganization...............................................................................................37
A. Classification and Treatment of Claims and Equity Interests in AWI.....................................37
1. Administrative Expenses......................................................................37
2. Priority Tax Claims..........................................................................40
3. Class 1: Priority Claims....................................................................41
4. Class 2: Secured Claims.....................................................................41
5. Class 3: Convenience Claims.................................................................42
6. Class 4: Asbestos Property Damage Claims....................................................42
7. Class 5: COLI Claims........................................................................43
8. Class 6: Unsecured Claims other than Convenience Claims.....................................44
9. Class 7: Asbestos Personal Injury Claims....................................................45
10. Class 8: Environmental Claims...............................................................47
11. Class 9: Affiliate Claims...................................................................47
12. Class 10: Subsidiary Debt Guarantee Claims..................................................47
13. Class 11: Employee Benefit Claims...........................................................48
14. Class 12: AWWD's Equity Interests in AWI....................................................48
B. Conditions to Confirmation.............................................................................49
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C. Conditions Precedent to the Effective Date under the Plan..............................................52
D. Description of the Reorganization Consideration........................................................53
E. 144A Offering..........................................................................................55
F. Exit Facility..........................................................................................56
G. Executory Contracts and Unexpired Leases...............................................................56
H. Insurance Policies and Agreements......................................................................57
I. Indemnification and Reimbursement Obligations..........................................................58
J. Compensation and Benefit Programs......................................................................58
K. Cancellation of Existing Debt Securities...............................................................61
L. Expiration of the Retention Period.....................................................................61
M. Compensation of the Applicable Trustees................................................................61
N. Listing of the New Common Stock........................................................................61
O. Corporate Reorganization Actions.......................................................................61
P. Holdings Plan of Liquidation...........................................................................62
Q. Distributions Under the Plan...........................................................................64
1. Distribution Date............................................................................64
2. Disputed Unsecured Claims Reserve............................................................64
3. Timing of Distributions under the Plan.......................................................64
4. Fractional Shares............................................................................65
5. Provisions for Treatment of Disputed Claims..................................................65
6. Amendments to the Claims Settlement Guidelines...............................................65
7. Distribution of Unclaimed Property...........................................................66
R. Discharge of AWI.......................................................................................66
S. Modification of the Plan...............................................................................66
T. Revocation or Withdrawal of the Plan...................................................................66
U. Rights of Action.......................................................................................67
V. Dissolution of the Committees..........................................................................67
W. Exculpation............................................................................................67
X. Supplemental Documents.................................................................................68
VI. The Asbestos PI Trust...................................................................................................69
A. General Description of the Asbestos PI Trust..................................................................69
1. Creation and Purposes of the Asbestos PI Trust...............................................69
2. The Asbestos PI Trustees.....................................................................69
3. The Trustees' Advisory Committee.............................................................70
4. The Future Claimants' Representative.........................................................70
5. Transfer of Certain Property to the Asbestos PI Trust........................................71
6. Ability to Amend Asbestos PI Trust Documents.................................................73
7. Asbestos PI Trust Distribution Procedures....................................................73
B. The Asbestos PI Insurance Asset........................................................................84
C. The Asbestos PI Permanent Channeling Injunction........................................................85
D. Application of the Claims Trading Injunction to Asbestos Personal Injury Claims........................87
E. Compliance with QSF Regulations........................................................................88
VII. The Asbestos PD Trust..................................................................................................89
A. Creation of Asbestos PD Trust.................................................................................89
1. General Description of the Asbestos PD Trust........................................................89
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2. The Asbestos PD Trustees............................................................................89
3. Transfer of Certain Property to the Asbestos PD Trust...............................................89
B. Asbestos PD Claims Resolution Procedures......................................................................90
C. Discharge of Asbestos Property Damage Claims..................................................................90
D. Application of the Claims Trading Injunction to Asbestos Property Damage Claims...............................90
VIII. Confirmation and Consummation Procedure...............................................................................91
A. Solicitation of Votes.........................................................................................91
B. The Confirmation Hearing......................................................................................91
C. Confirmation..................................................................................................92
1. Acceptance...................................................................................92
2. Unfair Discrimination and Fair and Equitable Tests...........................................92
3. Feasibility..................................................................................93
4. Best Interests Test..........................................................................93
D. Consummation..................................................................................................94
IX. Management of Reorganized AWI...........................................................................................95
A. Board of Directors and Management.............................................................................95
1. Composition of the Board of Directors...............................................................95
2. Identity of Officers................................................................................95
B. Compensation of Executive Officers.....................................................................96
C. Incentive Compensation Plans and New Long-Term Incentive Plan..........................................97
D. Management Contracts...................................................................................98
E. Amendment and Restatement of AWI's Articles of Incorporation and By-Laws...............................98
X. Exemptions from Securities Act Registration..............................................................................99
A. Stockholder and Registration Rights Agreement.................................................................100
B. "Deemed" Issuance of New Warrants to the Asbestos PI Trust....................................................101
XI. Reorganization Value....................................................................................................102
XII. Risk Factors...........................................................................................................106
A. Overall Risks to Recovery by Holders of Claims................................................................106
1. Ability to Refinance Certain Indebtedness...................................................106
2. Ownership by the Asbestos PI Trust..........................................................106
3. Dividend Policies...........................................................................106
4. Projected Financial Information.............................................................106
5. Value of Consideration to Be Distributed under the Plan.....................................107
B. The Asbestos PI Permanent Channeling Injunction..............................................................107
C. Absence of Public Market for the Plan Notes, New Common Stock and New Warrants...............................107
D. Certain Provisions of AWI's Amended and Restated Articles of Incorporation, Bylaws and
the Pennsylvania Business Corporation Law.......................................................................107
XIII. Certain Federal Income Tax Consequences of the Plan..................................................................108
A. Consequences to AWI..........................................................................................108
1. Cancellation of Debt........................................................................108
2. Limitation on NOL Carryforwards and Other Tax Attributes....................................109
3. Alternative Minimum Tax.....................................................................110
4. Treatment of the Asbestos PI Trust and Asbestos PD Trust....................................110
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B. Consequences to Holders of Unsecured Claims and Convenience Claims....................................111
1. Gain or Loss - Generally....................................................................111
2. Treatment of Unsecured Claims that Constitute Securities....................................112
3. Distributions in Discharge of Accrued but Unpaid Interest...................................113
4. Ownership and Disposition of the Plan Notes.................................................113
5. Disposition of New Common Stock.............................................................115
C. Consequences to Holders of Asbestos Personal Injury Claims...................................................115 D.
Consequences to Holders of Asbestos Property Damage Claims......................................................115 E.
Information Reporting and Withholding...........................................................................116
XIV. Alternatives to Confirmation and Consummation of the Plan.............................................................117
A. Liquidation under Chapter 7..................................................................................117
B. Alternative Plan of Reorganization...........................................................................117
XV. Conclusion and Recommendation..........................................................................................118
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DISCLOSURE STATEMENT, DATED MARCH 14,
2003, FOR THE FIRST AMENDED PLAN OF REORGANIZATION OF
ARMSTRONG WORLD INDUSTRIES, INC.
I. INTRODUCTION
Armstrong World Industries, Inc. ("AWI") submits this Disclosure Statement
pursuant to section 1125 of title 11 of the United States Code (the "BANKRUPTCY
CODE") to the holders of Claims (each a "CLAIMANT," and all or some of them
"CLAIMANTS") and to Armstrong Worldwide, Inc. ("AWWD"), the holder of the common
stock of AWI, in connection with (i) the solicitation of acceptances or
rejections of the first amended chapter 11 plan of reorganization (the "PLAN")
of AWI, dated March 14, 2003, filed with the United States Bankruptcy Court for
the District of Delaware (the "BANKRUPTCY COURT"), and (ii) the hearing on
confirmation of the Plan (the "CONFIRMATION HEARING") scheduled for
___________________.
This Disclosure Statement is also being provided to shareholders of AWI's
publicly held indirect parent company, Armstrong Holdings, Inc. ("HOLDINGS"). In
connection with the Plan, Holdings' shareholders will be requested to approve
the dissolution and winding up of Holdings following consummation of the Plan.
See Section V.P, entitled "THE PLAN OF REORGANIZATION - Holdings Plan of
Liquidation," for more information.
UNLESS OTHERWISE DEFINED HEREIN, ALL CAPITALIZED TERMS CONTAINED IN THIS
DISCLOSURE STATEMENT SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN THE PLAN.
Attached as Exhibits to this Disclosure Statement are the following documents:
1. the Plan (Exhibit "A");
2. the Order of the Bankruptcy Court, dated ____________,
approving this Disclosure Statement (Exhibit "B");
3. Financial Appendix (Exhibit "C");
4. Ballot Tabulation and Solicitation Procedures, as approved
by the order of the Bankruptcy Court, dated ____________
(the "VOTING PROCEDURES") (Exhibit "D");
5. Liquidation Analysis (Exhibit "E"); and
6. list of AWI's Subsidiaries (Exhibit "F").
In addition, the Ballot for acceptance or rejection of the Plan is enclosed with
this Disclosure Statement if you are entitled to vote to accept or reject the
Plan.
Holdings is the publicly held Armstrong parent holding company. It owns all of
the stock of AWWD, which in turn owns all of the stock of AWI. Holdings became
the parent company of AWI on May 1, 2000, following AWI shareholder approval of
a plan of exchange under which each share of AWI was automatically exchanged for
one share of Holdings. Stock certificates that formerly represented shares of
AWI were automatically converted into certificates representing the same number
of shares of Holdings. As a result, all publicly held stock certificates that
bear the name "Armstrong World Industries, Inc." actually represent shares of
stock of Holdings. The publicly held debt of AWI was not affected in the
transaction. Holdings was formed for purposes of the share exchange, and
Holdings does not have any other significant assets or operations.
Additional information concerning AWI and its financial condition, on a
consolidated basis, and results of operations, on a consolidated basis, is set
forth in AWI's and Holdings' joint (i) Annual Report on Form 10-K for the fiscal
year ended December 31, 2001, (ii) Quarterly Reports on Form 10-Q for the
1
quarterly periods ended September 30, 2002, June 30, 2002, and March 31, 2002,
and (iii) Current Reports on Form 8-K filed since the most recent 10-K report.
You may read and copy these documents (and any other document AWI or Holdings
files with the Securities and Exchange Commission (the "SEC")) at the SEC's
Public Reading Room located at 450 Fifth Street, N.W., Washington D.C. 20549.
You may obtain information on the operation of the Public Reading Room by
calling the SEC at 1-800-SEC-0300. The SEC also maintains an Internet site
(www.sec.gov) through which you can access reports, proxy and information
statements and other information regarding Holdings and AWI. These documents
also may be viewed by accessing the Internet site maintained by AWI in
connection with the Plan (www.armstrongplan.com).
Certain exhibits to the Plan are included with this Disclosure Statement. The
remaining exhibits to the Plan will be contained in a separate exhibit volume,
which will be filed with the clerk of the Bankruptcy Court by [INSERT DATE],
which is not later than the earlier of (i) fifteen (15) days before the deadline
for filing objections to confirmation of the Plan and (ii) thirty (30) days
prior to the Confirmation Hearing. Such exhibit volume may be inspected in the
office of the clerk of the Bankruptcy Court during normal court hours and may
also be viewed at AWI's Internet site (www.armstrongplan.com). Claimants and
AWWD, as well as Holdings' shareholders, also may obtain a copy of the exhibit
volume, once filed, from AWI by written request sent to the following address:
Armstrong World Industries, Inc.
Post Office Box 3666
Lancaster, Pennsylvania 17604-3666
On _____________, after notice and a hearing, the Bankruptcy Court approved this
Disclosure Statement as containing information of a kind and in sufficient
detail adequate to enable hypothetical, reasonable investors typical of the
Claimants to make an informed judgment as to whether to accept or reject the
Plan. APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A
DETERMINATION BY THE BANKRUPTCY COURT AS TO THE FAIRNESS OR THE MERITS OF THE
PLAN.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR
HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED
HEREIN.
On __________, after notice and a hearing, the Bankruptcy Court entered an order
approving the Voting Procedures. Among other things, these procedures (i)
designate which Claimants are entitled to vote on the Plan and (ii) establish
other procedures governing the solicitation and tabulation of Ballots. A copy of
the Voting Procedures is attached to this Disclosure Statement as Exhibit "D."
See Section VIII.A, entitled, "CONFIRMATION AND CONSUMMATION PROCEDURE -
Solicitation of Votes," for a complete description of the Voting Procedures.
Each Claimant entitled to vote to accept or reject the Plan should read this
Disclosure Statement and the Plan in their entirety before voting on the Plan.
Under the Bankruptcy Code, only classes of claims or equity interests that are
"impaired" are entitled to vote to accept or reject the Plan. The Claims in each
of Classes 3, 4, 6, 7, and 8 and AWWD's Equity Interests in AWI in Class 12 of
the Plan are impaired (see Section V.A, entitled, "THE PLAN OF REORGANIZATION --
Classification and Treatment of Claims and Equity Interests in AWI," for a
description of these classes). Claimants in these classes who, pursuant to the
Voting Procedures, are entitled to vote on the Plan and AWWD may do so by
completing and mailing the enclosed Ballot to the address set forth on the
Ballot so that it is received by 5:00 p.m., Eastern Time, on ______________ (the
"VOTING DEADLINE").
BENEFICIAL OWNERS OF DEBT SECURITIES OF AWI THAT ARE REGISTERED EITHER FULLY OR
AS TO PRINCIPAL ONLY ("DEBT SECURITIES") WHO HOLD SUCH SECURITIES THROUGH
NOMINEES SHOULD RETURN THEIR INDIVIDUAL BALLOTS TO THEIR NOMINEES IN SUFFICIENT
TIME TO ALLOW THEIR NOMINEES TO COMPLETE AND RETURN A MASTER BALLOT PRIOR TO THE
VOTING DEADLINE UNLESS SUCH BENEFICIAL OWNERS RECEIVE "PREVALIDATED" BALLOTS.
"PREVALIDATED" BALLOTS MAY BE SENT DIRECTLY TO THE ADDRESS SET FORTH ON THE
BALLOT. See the Voting Procedures, a copy of which is annexed hereto as Exhibit
"D," and Section VIII.A, entitled, "CONFIRMATION AND CONSUMMATION PROCEDURE --
Solicitation of Votes," for a more detailed description of the Voting
Procedures. If you have any questions about the type of Ballot you received,
please call AWI's special balloting and solicitation agent, Innisfree M&A
2
Incorporation ("INNISFREE"), at (877) 750-2689. Shareholders of Holdings are not
entitled to vote on the Plan, but may object to confirmation of the Plan.
If you did not receive a Ballot, it is because AWI believes that, in accordance
with the Voting Procedures, you are not entitled to vote on the Plan. Because
AWI does not have records of the addresses of individual holders of Asbestos
Personal Injury Claims and because no deadline for the filing of Asbestos
Personal Injury Claims (other than Asbestos PI Contribution Claims) has been set
in the Chapter 11 Case, this Disclosure Statement is being sent to attorneys who
may represent holders of Asbestos Personal Injury Claims, together with a form
of Ballot. The Voting Procedures provide special procedures for voting by
attorneys on behalf of holders of Asbestos Personal Injury Claims (to the extent
such attorneys are authorized to do so) or voting by individual holders of
Asbestos Personal Injury Claims. Please review the Voting Procedures for
detailed instructions regarding how to vote with respect to Asbestos Personal
Injury Claims.
===============================================================================
The following are NOT entitled to vote on the Plan
and, therefore, have not received Ballots with this
Disclosure Statement:
>> SHAREHOLDERS OF ARMSTRONG HOLDINGS, INC.
>> ADMINISTRATIVE EXPENSE CLAIMANTS
>> HOLDERS OF PRIORITY TAX CLAIMS
>> HOLDERS OF SECURED CLAIMS
>> HOLDER OF COLI CLAIMS
>> HOLDERS OF AFFILIATE CLAIMS
>> HOLDERS OF SUBSIDIARY DEBT GUARANTEE CLAIMS
>> HOLDERS OF EMPLOYEE BENEFIT CLAIMS
>> CLAIMANTS WHOSE CLAIMS HAVE BEEN FULLY DISALLOWED
>> CLAIMANTS WHOSE CLAIMS ARE THE SUBJECT OF PENDING OBJECTIONS
AND HAVE NOT BEEN ALLOWED FOR VOTING PURPOSES
===============================================================================
If you are not listed above and you did not receive a Ballot, received a damaged
Ballot, or lost your Ballot, please call Innisfree, at (877) 750-2689.
If you are not entitled to vote solely because your Claim is the subject of a
pending objection, you may apply to the Bankruptcy Court for an order allowing
your Claim for voting purposes only. YOU MUST FILE ANY SUCH MOTION NO LATER THAN
_____________________ (FIFTEEN (15) DAYS AFTER THE DEADLINE FOR AWI TO COMPLETE
ITS MAILING OF SOLICITATION PACKAGES).
The Bankruptcy Code defines "acceptance" of a plan by a class of claimants as
acceptance by holders of at least two-thirds in dollar amount and more than
one-half in number of the claims of that class that cast ballots for acceptance
or rejection of the plan. AWI is seeking acceptance of the Plan by Claimants in
Classes 3, 4, 6, 7, and 8, as well as by AWWD, the holder of the Equity
Interests in Class 12. For a complete description of the requirements for
acceptance of the Plan, see Section VIII, entitled, "CONFIRMATION AND
CONSUMMATION PROCEDURE." Moreover, the Plan requires that at least 75% of the
holders of Asbestos Personal Injury Claims who vote on the Plan vote to accept
the Plan.
The record date for determining which holders of Unsecured Claims (including
holders of Debt Securities) are entitled to vote on the Plan is ___________. THE
TRUSTEES FOR THE DEBT SECURITIES ARE NOT ENTITLED TO VOTE ON BEHALF OF THE
HOLDERS OF SUCH SECURITIES, AND, CONSEQUENTLY, SUCH HOLDERS MUST SUBMIT THEIR
OWN BALLOTS. Please see the Voting Procedures for further information regarding
voting procedures that have been established for holders of Debt Securities.
3
After carefully reviewing this Disclosure Statement, including the exhibits,
each Claimant in an impaired class that is entitled to vote and AWWD should vote
on the enclosed Ballot and return the Ballot in the envelope provided so that it
is actually received by the Voting Deadline -- 5:00 p.m. Eastern time on
____________. If you have a Claim in more than one class and you are entitled to
vote Claims in more than one class, you will receive separate Ballots for each
Claim.
All Ballots for Debt Securities should be returned to the following
address:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
(Attn: Armstrong World Industries, Inc.)
All Claimants other than holders of Debt Securities should vote and
return their Ballots to Trumbull Services LLC ("TRUMBULL") at one of
the following two addresses:
BY HAND DELIVERY OR COURIER: BY MAIL:
4 Griffin Road North P.O. Box 1117
Windsor, CT 06095 Windsor, CT 06095
(Attn: Armstrong World Industries, Inc.) Attn: Armstrong World Industries,Inc.)
IF YOU HAVE ANY QUESTIONS ABOUT THE PLAN, THIS DISCLOSURE STATEMENT, OR THE
VOTING PROCEDURES, PLEASE CALL INNISFREE AT (877) 750-2689.
TO BE COUNTED, YOUR BALLOT MUST BE ACTUALLY RECEIVED AT THE APPROPRIATE ADDRESS
BY THE VOTING DEADLINE -- 5:00 P.M., EASTERN TIME ON _______________. BALLOTS
MUST BE DELIVERED BY MAIL, COURIER, OR DELIVERY SERVICE. FACSIMILE BALLOTS WILL
NOT BE ACCEPTED. ANY COMPLETED BALLOTS RECEIVED THAT DO NOT INDICATE EITHER AN
ACCEPTANCE OR REJECTION OF THE PLAN OR THAT INDICATE BOTH AN ACCEPTANCE AND A
REJECTION OF THE PLAN WILL NOT BE COUNTED.
Pursuant to section 1128 of the Bankruptcy Code, the Confirmation Hearing will
be held on _____________, at _________ [a.m.] [p.m.], before the [INSERT NAME OF
JUDGE AND ADDRESS OF COURTROOM]. The Bankruptcy Court has directed that
objections, if any, to confirmation of the Plan be served and filed on or before
__________, at 4:00 p.m. (Eastern Time), in the manner described in this
Disclosure Statement under Section VIII.B, entitled, "CONFIRMATION AND
CONSUMMATION PROCEDURE -- The Confirmation Hearing." The Confirmation Hearing
may be adjourned from time to time by the Bankruptcy Court without further
notice except for an announcement of the adjournment date made at the
Confirmation Hearing or at any subsequent adjourned date of the Confirmation
Hearing.
===============================================================================
AWI AND THE REPRESENTATIVES OF THE UNSECURED CREDITORS AND THE ASBESTOS
PERSONAL INJURY CLAIMANTS BELIEVE THAT THE PLAN PROVIDES THE BEST POSSIBLE
RECOVERIES TO THE CLAIMANTS AND THAT ACCEPTANCE OF THE PLAN IS IN THE BEST
INTERESTS OF EVERY CLASS OF CLAIMANTS. ACCORDINGLY, AWI, THE ASBESTOS PI
CLAIMANTS' COMMITTEE, THE FUTURE CLAIMANTS' REPRESENTATIVE, AND THE
UNSECURED CREDITORS' COMMITTEE ALL RECOMMEND THAT YOU VOTE TO ACCEPT THE
PLAN. THE ASBESTOS PD COMMITTEE, HOWEVER, DOES NOT SUPPORT THE PLAN.
===============================================================================
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II. OVERVIEW OF THE PLAN
The following is a brief overview of the provisions of the Plan. This overview
is qualified in its entirety by reference to the Plan, a copy of which is
included as Exhibit "A." In addition, for a more detailed description of the
terms of the Plan, see Section V, entitled, "THE PLAN OF REORGANIZATION."
The Plan accomplishes the following objectives, which AWI believes are essential
components of a successful reorganization:
o Resolution of AWI's liability for all Asbestos Personal
Injury Claims;
o Fair treatment for Unsecured Claims;
o Resolution of AWI's liability for all Asbestos Property
Damage Claims; and
o Corporate reorganization of AWI and liquidation of Holdings.
The Plan designates 12 classes -- eleven classes of Claims and one class of
Equity Interests in AWI (which are held by AWWD, AWI's sole shareholder). These
classes take into account the differing nature and priority under the Bankruptcy
Code of the various Claims and Equity Interests.
The Plan accomplishes, and is premised on, a resolution of AWI's liability for
all Asbestos Personal Injury Claims (Class 7) by channeling them to a trust
established by AWI (the "ASBESTOS PI TRUST"). In exchange for the Asbestos PI
Insurance Asset and the Reorganization Consideration (see Section V.D, entitled,
"THE PLAN OF REORGANIZATION - Description of Reorganization Consideration") to
be transferred pursuant to the terms of the Plan, the Asbestos PI Trust will
assume and be responsible for all liability for Asbestos Personal Injury Claims
and certain other obligations associated with the Asbestos PI Insurance Asset.
All Asbestos Personal Injury Claims will be determined and paid pursuant to the
terms, provisions, and procedures of the Asbestos PI Trust, the Asbestos PI
Trust Distribution Procedures, and the Asbestos PI Trust Agreement. Moreover, as
described in Section VI.C, entitled, "THE ASBESTOS PI TRUST - The Asbestos PI
Permanent Channeling Injunction," Asbestos Personal Injury Claimants will be
permanently enjoined from pursuing their claims against Reorganized AWI and
certain other parties.
Similarly, the Plan accomplishes, and is premised on, a resolution of AWI's
liability for all Asbestos Property Damage Claims. Under the Plan, AWI may
elect, if fewer than 25 Disputed Asbestos Property Damage Claims are outstanding
as of the Effective Date, to channel such claims to a trust (the "ASBESTOS PD
TRUST") or to seek individual adjudications of the merits of the remaining
claims. If established, the Asbestos PD Trust will be funded with the Asbestos
PD Trust Funding Obligation. If Class 4 (Asbestos Property Damage Claims) votes
to accept the Plan, the Asbestos PD Trust Funding Obligation will be determined
based upon the number of Disputed Asbestos Property Damage Claims remaining
(ranging from $2 million to $500,000), which amount will be funded solely from
insurance proceeds as provided in section 11.2 of the Plan. If Class 4 votes to
reject the Plan and the Asbestos PD Trust is created, the Asbestos PD Trust
Funding Obligation will be equal to the Asbestos PD Insurance Asset having a
value equal to the aggregate value of all Allowed Asbestos Property Damage
Claims as estimated by the Bankruptcy Court. In exchange for the Asbestos PD
Trust Funding Obligation, the Asbestos PD Trust will assume and be responsible
for all liability for Asbestos Property Damage Claims and certain other
obligations associated with the Asbestos PD Insurance Asset. All Asbestos
Property Damage Claims will be determined and paid pursuant to the terms,
provisions, and procedures of the Asbestos PD Trust, the Asbestos PD Claims
Resolution Procedures, and the Asbestos PD Trust Agreement, and all Asbestos
Property Damage Claimants will be permanently enjoined from pursuing their
claims against Reorganized AWI and certain other parties.
Pursuant to the terms of the Plan, each holder of a Convenience Claim (Class 3)
will receive a cash payment of 75% of the Allowed Amount of such Convenience
Claim on the Effective Date or as soon as practicable after such Convenience
Claim becomes Allowed. A "CONVENIENCE CLAIM" is an Unsecured Claim other than a
5
Debt Security Claim that otherwise would be classified as a general Unsecured
Claim, but which either (i) is in an amount less than or equal to $10,000 or
(ii) has been reduced to $10,000 by the holder of such Claim on the Ballot.
For all Unsecured Claims other than Convenience Claims (Class 6), each holder of
an Allowed Unsecured Claim in Class 6 will receive its Pro Rata Share of the
following elements of Reorganization Consideration:
>> 34.43% of the New Common Stock,
>> 34.43% of the first $1.05 billion of (x) up to $300 million
of Available Cash and (y) principal amount of Plan Notes
and/or 144A Offering Proceeds,
>> 60% of the first $50 million of the amount of Available Cash
remaining after making provision for the Distribution
provided in section 3.2(f)(ii)2 of the Plan and the funding
of the Asbestos PI Trust in section 10.1(b)(i)2 of the Plan,
>> 60% of the amount of Plan Notes and/or 144A Offering
Proceeds equal to the difference (if positive) of $50
million less the amount of Available Cash remaining after
making provision for the Distribution provided in section
3.2(f)(ii)2 of the Plan and the funding of the Asbestos PI
Trust in section 10.1(b)(ii) of the Plan, and
>> 34.43% of the remaining Available Cash and Plan Notes and/or
144A Offering Proceeds after making provision for the
Distribution provided in sections 3.2(f)(ii)2, 3.2(f)(ii)3
and 3.2(f)(ii)4 of the Plan and the funding of the Asbestos
PI Trust in sections 10.1(b)(ii), 10.1(b)(iii) and
10.1(b)(iv) of the Plan.
The proposed capital structure for Reorganized AWI, including post-Effective
Date financing arrangements that Reorganized AWI expects to enter into in order
to meet the working capital needs of its ongoing business operations (and, if
necessary, increase the amount of Available Cash to $350 million), is as
follows:
>> Retained cash for working capital purposes of up to $100
million on a consolidated basis. AWI currently estimates
that it will retain cash in the amount of $90 million for
working capital purposes.
>> Exit financing facility for working capital needs in the
approximate amount of $300 million. AWI's projections assume
that $76 million will be drawn under the exit financing
facility to increase Available Cash to $350 million. AWI
estimates that such borrowing will be repaid by the end of
2003. In addition, letters of credit will be issued under
the exit financing facility to replace the Letters of Credit
and to issue letters of credit in the ordinary course of
Reorganized AWI's business. See Section V.F, entitled, "THE
PLAN OF REORGANIZATION - Exit Facility," for a description
of the proposed exit financing facility.
>> Plan Notes in an aggregate principal account equal to the
higher of (x) $1.125 billion less the amount of Available
Cash and (y) $775 million (the "PLAN NOTE AMOUNT"). See
Section V.D.2, entitled, "THE PLAN OF REORGANIZATION -
Description of the Reorganization Consideration - Plan
Notes," for a description of the Plan Notes. If Reorganized
AWI completes a 144A Offering, the aggregate principal
amount of Plan Notes will be reduced by the amount of the
144A Offering Proceeds.
>> 60-70 million shares of New Common Stock to be issued to the
Asbestos PI Trust and holders of Unsecured Claims. See
Section V.D.1, entitled, "THE PLAN OF REORGANIZATION -
Description of the Reorganization Consideration - New Common
6
Stock," for a description of the New Common Stock. The
Existing AWI Common Stock, which is held directly by AWWD
(and indirectly by Holdings), will be cancelled on the
Effective Date.
>> If the Holdings Plan of Liquidation is approved within one
year after the Effective Date, New Warrants to purchase 5%
of the New Common Stock on a fully diluted basis. See
Section V.P, entitled, "THE PLAN OF REORGANIZATION -
Holdings Plan of Liquidation," for a description of the
Holdings Plan of Liquidation and Section V.D.4, entitled,
"THE PLAN OF REORGANIZATION - Description of the
Reorganization Consideration - New Warrants," for a
description of the New Warrants.
IMPORTANT NOTE: The industry in which AWI operates is affected by numerous
uncertainties. Those uncertainties and other investment risks make it difficult
to determine a precise value for AWI and the equity interests distributed under
the Plan. The recoveries described in the table below represent AWI's best
estimate of these values given the information available at this time. This
estimate does not predict the potential trading prices of the securities under
the Plan. Unless otherwise noted, the information in the following table and in
the sections below is based upon an assumed Effective Date of July 1, 2003. The
estimated recoveries set forth below are based upon the following assumptions:
>> The Plan Notes, together with the 144A Offering Proceeds (if
any), will be in the aggregate principal amount of $775
million, and the Plan Notes will be worth their face value.
If the 144A Offering is completed, the 144A Offering will
yield net proceeds of at least $775 million.
>> The estimated reorganization value for AWI is between $2,700
million and $3,300 million (with a midpoint valuation of
$3,000 million).
>> The estimated Equity Value of the New Common Stock (based on
the residual value of the equity of Reorganized AWI) is
between $25.60 per share and $34.40 per share, with a
midpoint value of $30.00 per share (assuming a distribution
of approximately 67.5 million shares of New Common Stock to
holders of Unsecured Claims and the Asbestos PI Trust).
>> AWI will have Available Cash of approximately $350 million
as of the Effective Date.
>> The estimated value of the New Warrants is $40-50 million.
Based upon these assumptions, AWI estimates that the total value of the
Reorganization Consideration to be available to be distributed pro rata to
holders of Allowed Unsecured Claims in Class 6 will be approximately $1.098
billion, consisting of New Common Stock with an aggregate value of approximately
$698 million (or approximately 64% of the Reorganization Consideration
distributed to Class 6), Available Cash in the amount of approximately $133
million (or approximately 12% of the Reorganization Consideration distributed to
Class 6), and Plan Notes and/or 144A Offering Proceeds in the amount of
approximately $267 million (or approximately 24% of the Reorganization
Consideration distributed to Class 6). Based upon AWI's estimate of total
Allowed Unsecured Claims in Class 6 of approximately $1.65 billion, AWI
estimates that each holder of an Allowed Unsecured Claim will receive total
Distributions equal to 66.5% of its Allowed Unsecured Claim. That means, for
example, that a holder of an Allowed Unsecured Claim in the amount of $100,000
would receive approximately $66,500 of Reorganization Consideration consisting
of approximately $42,500 in value of New Common Stock, $8,000 in cash, and
$16,000 in either Plan Notes or cash (depending upon whether and the extent to
which the 144A Offering is completed).
7
SUMMARY OF CLASSIFICATION AND
TREATMENT UNDER THE PLAN1
The Plan classifies Claims and Equity Interests in AWI for all purposes,
including voting, confirmation, and distribution, as follows:
- ---------------------------- ----------------------------------------------------------- ---------------- --------------- ----------
CLASS TREATMENT STATUS ENTITLED ESTIMATED
TO VOTE? RECOVERY
- ---------------------------- ----------------------------------------------------------- ---------------- --------------- ----------
CLASS 1: Priority Claims Paid in full, in cash, on the later of the Effective Date Unimpaired No 100%
or as soon as practicable after such Priority Claim
becomes Allowed.
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
CLASS 2: Secured Claims Reinstated - Any defaults related to Secured Claims will Unimpaired No 100%
be cured.
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
CLASS 3: Convenience Paid 75% of Allowed Amount of Convenience Claim, in cash, Impaired Yes 75%
Claims on later of the Effective Date or as soon as practicable
after such Convenience Claim becomes Allowed.
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
CLASS 4: Asbestos All Asbestos Property Damage Claims will be channeled to Impaired Yes Unknown
Property Damage Claims the Asbestos PD Trust, which will be funded exclusively
with the Asbestos PD Trust Funding Obligation. If
fewer than 25 Disputed Asbestos Property Damage
Claims remain outstanding as of the Effective Date,
however, AWI may elect, in its sole discretion, not
to channel Asbestos Property Damage Claims to the
Asbestos PD Trust, but to litigate the merits of
each Disputed Asbestos Property Damage Claim before
the Bankruptcy Court and pay the Allowed Amount of
each such Asbestos Property Damage Claim in full,
in cash, from the proceeds of insurance.
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
CLASS 5: COLI Claims Reinstated - Any defaults related to the COLI Claims Unimpaired No 100%
will be cured.
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
CLASS 6: Unsecured Claims Each holder of an Allowed Unsecured Claim will receive Impaired Yes 66.5%
other than Convenience its Pro Rata Share of (i) 34.43% of the New Common Stock,
Claims (ii) 34.43% of the first $1.05 billion of (x) up to $300
million of Available Cash and (y) the Plan Notes
and/or 144A Offering Proceeds, (iii) 60% of the
next $50 million of the remaining Available Cash,
(iv) 60% of the remaining amount of Plan Notes
and/or 144A Offering Proceeds to the extent that
Available Cash in (iii) is less than $50 million,
and (v) 34.43% of the remaining Available Cash and
Plan Notes and/or 144A Offering Proceeds.
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
- -------------------
1 This table is only a summary of the classification and treatment of
Claims and Equity Interests under the Plan. Reference should be made to the
entire Disclosure Statement and the Plan for a complete description of such
classification and treatment.
8
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
CLASS 7: Asbestos All Asbestos Personal Injury Claims will be channeled to Impaired Yes Unknown
Personal Injury Claims the Asbestos PI Trust, which will be funded pursuant to
section 10.1 of the Plan.
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
CLASS 8: Environmental Each Environmental Claim will be treated as an Allowed Impaired Yes 66.5%
Claims Unsecured Claim to the extent it becomes Allowed prior to
any Distribution Date. Other treatment determined as
applicable under the relevant settlement agreement.
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
CLASS 9: Affiliate Claims Reinstated Unimpaired No 100%
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
CLASS 10: Subsidiary Debt Reinstated Unimpaired No 100%
Guarantee Claims
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
CLASS 11: Employee Reinstated Unimpaired No 100%
Benefit Claims
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
CLASS 12: AWWD's Equity If the Holdings Plan of Liquidation is approved by the Impaired Yes N/A
Interests in AWI board of directors and requisite shareholders of Holdings
prior to the first anniversary of the Effective
Date, the holder of the Equity Interests in AWI
will receive the New Warrants (which will be
distributed in accordance with the Holdings Plan of
Liquidation). If such approval is not obtained
prior to the first anniversary of the Effective
Date, the holder of the Equity Interests in AWI
will not receive any distribution, and no New
Warrants will be issued.
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
As a separate condition to confirmation of the Plan, at least 75% of the holders
of Asbestos Personal Injury Claims who vote on the Plan must vote to ACCEPT the
Plan. Moreover, for confirmation of the Plan to occur, the Confirmation Order
must contain findings that are consistent with and those that are required by
section 524(g) of the Bankruptcy Code. Section 524(g) contains requirements for
a "channeling injunction" of the type that is provided under the Plan (see
Section V.B, entitled, "THE PLAN OF REORGANIZATION -- Conditions to
Confirmation" and Section VI.C, entitled, "THE ASBESTOS PI TRUST - The Asbestos
PI Permanent Channeling Injunction"). Only AWI and the Asbestos PI Claimants'
Committee, the Future Claimants' Representative and, if Class 6 votes to accept
the Plan, the Unsecured Creditors' Committee, may waive the satisfaction of
these conditions to confirmation of the Plan.
Following confirmation of the Plan, the Plan will not become effective until the
first Business Day of the month immediately following the date by which all of
the conditions precedent to the effectiveness of the Plan have been satisfied or
waived or, if a stay of the Confirmation Order is in effect on such date, the
first Business Day of the month immediately following the date of the
expiration, dissolution, or lifting of such stay (the "EFFECTIVE DATE"). These
conditions are described in Section V.C, entitled, "THE PLAN OF REORGANIZATION
- -- Conditions Precedent to the Effective Date under the Plan." For purposes of
this Disclosure Statement, AWI has assumed that the Effective Date will be July
1, 2003. Of course, there can be no certainty that the Effective Date will occur
by such date. The satisfaction of many of the conditions to the occurrence of
the Effective Date is beyond the control of AWI.
Distributions on account of Allowed Unsecured Claims will be made on the
"INITIAL DISTRIBUTION DATE" (a date selected by Reorganized AWI within fifteen
(15) days after the Effective Date) and on subsequent Distribution Dates.
9
Distributions on account of all other Allowed Claims (other than Asbestos
Personal Injury Claims and Asbestos Property Damage Claims) will be made on the
Effective Date or as soon as practicable thereafter, but in no event more than
fifteen (15) days after the Effective Date.
The timing of distributions to holders of Allowed Asbestos Personal Injury
Claims will be established by the Asbestos PI Trustees pursuant to the Asbestos
PI Trust Agreement and the Asbestos PI Trust Distribution Procedures. The timing
of distributions to holders of Allowed Asbestos Property Damage Claims will be
established by the Asbestos PD Trustees pursuant to the Asbestos PD Trust and
the Asbestos PD Claims Resolution Procedures.
Notwithstanding the foregoing, a payment will only be made on account of a
Disputed Claim after, and to the extent that, such Disputed Claim becomes
Allowed. All payments to be made in cash under the Plan will be made, at the
election of Reorganized AWI or the Disbursing Agent, by check or wire transfer.
10
III. GENERAL INFORMATION
A. DESCRIPTION AND HISTORY OF BUSINESS.
AWI is a Pennsylvania corporation that was incorporated in 1891 to carry on the
business founded by Thomas M. Armstrong in 1860. Together with its subsidiaries,
it is referred to here as "Armstrong." Through its U.S. operations and U.S. and
international subsidiaries, Armstrong designs, manufactures and sells flooring
products (resilient, wood, carpeting and sports flooring), as well as ceiling
systems, around the world. Armstrong products are sold primarily for use in the
finishing, refurbishing and repair of residential, commercial and institutional
buildings. Armstrong also designs, manufactures and sells kitchen and bathroom
cabinets.
Holdings became the indirect parent company (and AWWD became the direct parent
company) of Armstrong on May 1, 2000, following AWI shareholder approval of a
plan of exchange pursuant to which each share of AWI was exchanged for one share
of Holdings. As a result, stock certificates dated before that date that bear
the name "Armstrong World Industries, Inc." actually represent stock of
Holdings. Until the filing of the Plan, the common stock of Holdings was
publicly traded on the New York Stock Exchange under the ticker symbol "ACK."
The Holdings common stock currently is quoted on the OTC (over-the-counter)
bulletin board with the ticker symbol "ACKHQ." Holdings and AWWD were formed for
purposes of the share exchange and do not hold any other significant assets or
engage in any operations.
Armstrong conducts its business through the following business segments:
Resilient Flooring -- Armstrong is a worldwide manufacturer of a
broad range of floor coverings for homes and commercial and
institutional buildings, which are sold with adhesives, installation
and maintenance materials and accessories. Armstrong's flooring
products include vinyl sheet and vinyl tile, linoleum and laminate
flooring. Various products offer ease of installation, reduced
maintenance (no-wax), and cushioning for greater underfoot comfort.
The products are sold in a wide variety of types, designs, and colors
to commercial, residential and institutional customers through
wholesalers, retailers (including large home centers and buying
groups), contractors, and to the hotel/motel and manufactured homes
industries.
Building Products -- The Building Products segment includes
commercial and some residential ceiling systems. Commercial suspended
ceiling systems, designed for use in shopping centers, offices,
schools, hospitals, and other commercial and institutional settings,
are available in numerous colors, performance characteristics and
designs and offer characteristics such as acoustical control,
accessibility to the plenum (the area above the ceiling), rated fire
protection, and aesthetic appeal. Armstrong sells commercial ceiling
materials and accessories to ceiling systems contractors and to
resale distributors. Ceiling materials for the home provide noise
reduction and incorporate features affording ease of installation.
These residential ceiling products are sold through wholesalers and
retailers (including large home centers). Framework (grid) products
for Armstrong suspension ceiling systems products are manufactured
through a joint venture with Worthington Industries (WAVE) and are
sold by both Armstrong and the WAVE joint venture.
Wood Flooring -- The Wood Flooring segment manufactures and
distributes wood and other flooring products. These products are used
primarily in residential new construction and remodeling, with some
commercial applications in stores, restaurants and high-end offices.
Wood Flooring sales are generally made through independent wholesale
flooring distributors and retailers (including large home centers and
buying groups) under the brand names Bruce(TM), Hartco(TM) and
Robbins(TM).
11
Cabinets -- The Cabinets segment manufactures kitchen and bathroom
cabinetry and related products, which are used primarily in
residential new construction and remodeling. Through its nationwide
system of company-owned and independent distribution centers, the
Cabinets segment provides design, fabrication and installation
services to single-family builders, multi-family builders and
remodelers under the brand names IXL(TM), Bruce,(TM) and
Armstrong(TM).
Textiles & Sports Flooring -- The Textiles and Sports Flooring
business segment manufactures carpeting and sports flooring products
that are mainly sold in Europe. The carpeting products consist
principally of carpet tiles and broadloom used in commercial
applications as well as the leisure and travel industry. Sports
flooring products include artificial turf surfaces. Both product
groups are sold through wholesalers, retailers and contractors.
Armstrong businesses principally sell products through building products
distributors, who re-sell its products to retailers, builders, contractors,
installers and others. Armstrong also sells a significant portion of its
products to home center chains and industry buying groups. For example, in 2001,
Armstrong sales to The Home Depot, Inc. totaled approximately $340.8 million. No
other customer accounted for more than 10% of Armstrong's revenue.
Raw materials essential to Armstrong businesses are purchased worldwide in the
ordinary course of business from numerous suppliers. The principal raw materials
used in each business include the following:
BUSINESS PRINCIPAL RAW MATERIALS
- --------------------------------------------------------------------------------
Resilient Flooring Synthetic resins, plasticizers, PVC, l
latex, linseed oil, limestone, films,
pigments and inks
Building Products Mineral fibers and fillers,
clays, starches, newspaper, and perlite,
as well as steel used in the production
of metal ceilings and manufacturing of
ceiling grids
Wood Flooring Lumber, veneer, acrylics, and plywood
Cabinets Lumber, veneer, plywood, particleboard
and fiberboard
Textiles and Sports Flooring Yarn, latex, bitumen and wool
- --------------------------------------------------------------------------------
Armstrong's laminate flooring products are sourced from third parties under
long-term supply contracts.
Armstrong also purchases significant amounts of packaging materials for all
products and uses substantial amounts of energy such as electricity and natural
gas and water in its manufacturing operations. In general, adequate supplies of
raw materials were available to all of Armstrong's businesses. Armstrong cannot
guarantee that a significant shortage of one raw material or another will not
occur, however.
Customers' orders for Armstrong products are typically for immediate shipment.
Thus, in each business group, Armstrong keeps sufficient inventory on hand to
satisfy orders, or manufactures product to meet delivery dates specified in
orders. As a result, there historically has been no material backlog in any
industry segment.
Patent protection is important to Armstrong's business in the United States and
other markets. Armstrong's competitive position has been enhanced by U.S. and
foreign patents on products and processes developed or perfected within
Armstrong or obtained through acquisition or license. In addition, Armstrong
also benefits from its trade secrets for certain products and processes. Patent
protection extends for varying periods according to the date of patent filing or
grant and the legal term of a patent in the various countries where patent
protection is obtained. The actual protection afforded by a patent, which can
vary from country to country, depends upon the type of patent, the scope of its
coverage, and the availability of legal remedies in the country. Although
Armstrong considers that, in the aggregate, its patents and trade secrets
constitute a valuable asset of material importance to its business, Armstrong
does not regard any of its businesses as being materially dependent upon any
single patent or trade secret, or any group of related patents or trade secrets.
12
Armstrong products are sold around the world under numerous brand-name
trademarks that are considered in the aggregate to be of material importance.
Certain of Armstrong trademarks, including, without limitation, house marks
Armstrong(TM), Bruce(TM), Hartco(TM), Robbins(TM), and DLW(TM), and product line
marks Ceramaguard(TM), Cirrus(TM), Corlon(TM), Cortega(TM), Designer
Solarian(TM), Excelon(TM), Fundamentals(TM), i-Ceilings(TM), Medintech(TM),
Minatone(TM), Natural Inspirations(TM), Second Look(TM), Switftlock(TM),
ToughGuard(TM), Traffic Zone(TM), Travertone(TM) and Ultima(TM) are important to
Armstrong's business because of their significant brand name recognition.
Trademark protection continues in some countries as long as the mark is used
and, in other countries, as long as it is registered. Registrations are
generally for fixed, but renewable, terms.
Armstrong's world headquarters are located in Lancaster, Pennsylvania. Armstrong
owns a 100-acre, multi-building campus comprising the site of its corporate
headquarters, most operational headquarters, and its U.S. R&D operations and
marketing and service headquarters. Altogether, Armstrong's headquarters
operations occupy over 986,000 square feet of floor space.
Armstrong produces and markets Armstrong products and services throughout the
world, owning and operating 50 manufacturing plants in 15 countries. Twenty-nine
of these facilities are located throughout the United States. In addition,
Armstrong has an interest through joint ventures in nine additional plants in
five countries.
NUMBER
BUSINESS SEGMENT OF PLANTS LOCATION OF PRINCIPAL FACILITIES
---------------- --------- -------------------------------------
Resilient Flooring 14 California, Illinois, Oklahoma,
Pennsylvania, Mississippi, Canada,
Germany, Sweden, Australia, and the
U.K.
Building Products 15 Alabama, Florida, Georgia, Oregon,
Pennsylvania, China, France,
Germany and the U.K.
Wood Flooring 13 Arkansas, Tennessee, Texas, and
West Virginia
Cabinets 3 Nebraska, Pennsylvania, and Tennessee
Textiles and Sports Flooring 5 Belgium, Germany, and The Netherlands
Sales offices are leased and owned worldwide, and leased facilities are used to
supplement Armstrong's owned warehousing facilities.
Productive capacity and the extent of utilization of Armstrong facilities are
difficult to quantify with certainty because in any one facility, maximum
capacity and utilization vary periodically depending upon the product that is
being manufactured, and individual facilities manufacture multiple products.
Armstrong believes its facilities have sufficient productive capacity to meet
its current and anticipated future needs. Armstrong believes that its various
facilities are adequate and suitable. Additional incremental investments in
plant facilities are made as appropriate to balance capacity with anticipated
demand, improve quality and service, and reduce costs.
As of September 30, 2002, Armstrong had approximately 16,700 full and part time
employees around the world, of whom approximately 4,900 are located outside of
the United States. About 67% of the approximately 8,100 hourly or salaried
production and maintenance employees in the United States are represented by
labor unions. This percentage includes all hourly production employees of
Armstrong plants and warehouses where labor unions exist, regardless of whether
or not the employees actually pay union dues.
B. COMPETITION.
There is strong competition in all of the industry segments in which Armstrong
does business. Competition in each industry segment and each geographic area
where Armstrong does business includes numerous companies. Principal methods of
competition include price, product performance and service. In addition, product
styling is a significant component of competition. Increasing competition in the
13
U.S. from worldwide producers is apparent in Armstrong's businesses. Over recent
years, there has continued to be excess production capacity in many geographic
markets, which tends to increase price competition.
C. PROPOSED DISSOLUTION OF ARMSTRONG HOLDINGS, INC.
Holdings, which is not a debtor, will be seeking approval from its shareholders
of the dissolution and winding up of Holdings in connection with the Plan (and,
as part thereof, the termination of the corporate existence of AWWD) pursuant to
Subchapter F, Chapter 19 of the Pennsylvania Business Corporation Law of 1988
(the "PENNSYLVANIA BCL") or in such other manner as is consistent with the terms
of the Plan and permitted by law. See Section V.P, entitled "THE PLAN OF
REORGANIZATION -- Holdings Plan of Liquidation."
D. EVENTS LEADING TO THE COMMENCEMENT OF THE CHAPTER 11 CASE.
1. AWI'S INVOLVEMENT WITH ASBESTOS-CONTAINING MATERIALS.
AWI's involvement in asbestos personal injury litigation relates primarily to
its involvement in the high temperature insulation contracting business.
Throughout the early 1900's, AWI (then known as Armstrong Cork Company)
manufactured, installed, and serviced low temperature primarily cork based
products for cold storage insulation and pipe covering applications. In
addition, as an adjunct to these cold storage contracting activities, from
around 1910 to 1933, AWI manufactured various high temperature insulation
products, including some that contained asbestos. These products have not been
the subject of significant claims.
Commencing in 1939, AWI expanded its low temperature insulation contracting
business into high temperature contracting services. AWI generally manufactured
its own low temperature insulation materials for use in its contracting
services, but did not manufacture the high temperature insulation materials used
in its contracting operations. Some of the high temperature products furnished
and installed in the contracting operations contained asbestos. AWI believes
that its sale and installation of asbestos-containing insulation products was
limited to the United States and Canada.
As a part of overall organizational changes that took place in the late 1950's,
AWI separated the insulation contracting business from the remainder of the
company with the formation of a separate, independent subsidiary, Armstrong
Contracting and Supply Corporation ("ACANDS"). From January 1, 1958 through July
1969, ACandS operated as an independent subsidiary in the insulation contracting
business. During this period, AWI licensed certain trade names and trademarks to
ACandS, which ACandS placed on certain insulation products manufactured by
others. In addition, from 1964 through 1969, another independent subsidiary of
AWI, National Cork Company ("NCC"), operated an insulation contracting business.
Other than two specific products, AWI did not manufacture or sell any asbestos
containing thermal insulation materials during this period.
In August of 1969, a group of ACandS management employees formed a holding
company and purchased the stock of ACandS from AWI. In connection with such
sale, AWI assigned certain trade names to ACandS, but ACandS was not licensed to
use, and did not use, AWI's trademark or the trade style "(A)rmstrong." ACandS
continues to exist today and is now known as ACandS, Inc. On September 19, 2002,
ACandS filed a voluntary petition for relief under chapter 11 of the Bankruptcy
Code with the Bankruptcy Court.
AWI manufactured only two asbestos containing insulation materials between 1939
and 1968 - LT Cork Covering and Armaspray. LT Cork Covering (1956-1959) was a
cork product with a purchased paper wrapper that contained chrysotile asbestos.
Armaspray (1966-1968) was an investigatory high temperature spray applied
insulation material that contained less than 10% amosite asbestos and was sold
only to ACandS for installation. LT Cork Covering with the asbestos paper
covering and Armaspray were not commercially successful products, and AWI had no
involvement with asbestos containing insulation materials after AWI stopped
making Armaspray in 1968. AWI has no information to suggest that LT Cork
Covering was sold outside the United States.
The following asbestos containing insulation products were sold and/or installed
by AWI during various points of AWI's history from about 1910 to 1957 (and to a
very limited extent from 1958 to 1969), or are believed to have been used,
installed, or sold by AWI's former subsidiaries ACandS from 1958 to 1969 and NCC
14
from 1964 to 1969. This information is not intended to be an exhaustive list,
but is intended to identify those products that have been the most identified by
claimants in the course of AWI's history and based upon information acquired
about the activities of ACandS from 1958 to 1969 and NCC from 1964 to 1969.
These products were primarily (if not exclusively) used in the high temperature
insulation contracting installation operations where AWI, ACandS, or NCC
employed insulators. This list does not include products that may have contained
some portion of the "Armstrong" name but did not contain asbestos.
Nonpareil Pipecovering, Block and Cement (1910 -1930's only)
85% Magnesia Pipecovering and Block (Keasbey & Mattison or Ehret Magnesia)?
Hy-Temp Pipecovering and Block (Keasbey & Mattison)
Bestfelt Pipecovering and Block (Keasbey & Mattison)
Air Cell Pipecovering and Block (Keasbey & Mattison)
Duplex Pipe Insulation (Keasbey & Mattison)
No. 152 Asbestos Cement (Keasbey & Mattison)
Hy-Temp Cement (Keasbey & Mattison)
85% Magnesia Cement (Keasbey & Mattison)
Amblerex No. 2 Cement (Keasbey & Mattison)
Mineral Wool Cement (Keasbey & Mattison)
Kamatt Pipecovering (Keasbey & Mattison
Kaytherm Block (Keasbey & Mattison)
Mani-Ply Insulation (Keasbey & Mattison)
No. 151 Cement (Keasbey & Mattison)
Velvet Hard Finish Cement (Keasbey & Mattison)
Asbestos Floats (Keasbey & Mattison)
Millboard, Rollboard, Paper and Range Boiler Jackets (Keasbey & Mattison)
LT Cork Covering
Armabestos Pipecovering and Block (UNR)
Armatemp Cements (Eagle-Picher)
Armstrong LK Pipecovering and Block (Owens-Illinois)
Armstrong's Limpet (Turner-Newall, Keasbey & Mattison after 1962 only)
Armaspray
CC Navy Sealer
LT Sealer
P Series (2) Sealer
Insul Mastic
Sure Mastic
Asbestos Asphaltum Mastic
Fibrated/Aquaseal Emulsion
SP Emulsion
15
Plastic/Weatherproof Emulsion
Cold Erection Plastic Emulsion
Asbestos Shorts (Keasbey & Mattison)
Asbestos Cloth (various manufacturers)
Kaylo Pipecovering and Block (Owens Illinois)
No. 1 Insulating Cement (Baldwin Hill)
V-18 High Temperature Block (Vermiculite Co.)
In addition to the products listed above, AWI, ACandS, or NCC may have used
other asbestos-containing high temperature insulation products manufactured by
other manufacturers in the course of their contract insulation installation
activities, depending on the requirements of the particular contract involved.
It is impossible to state with certainty what other specific asbestos-containing
products might have been called for by these contracts.
From 1932 until 1982, AWI manufactured various forms of resilient floor tiles,
some of which contained encapsulated chrysotile asbestos. From 1954 until 1983,
some of the sheet vinyl resilient floor coverings that AWI manufactured and sold
were on an asbestos-containing backing material, which was designated as
"Hydrocord." The chrysotile asbestos was bound into the Hydrocord backing by a
latex binder, and, as installed, the backing was covered by a sheet vinyl floor
covering that did not contain asbestos.
From the early 1950's until the late 1980's, AWI manufactured and sold gasket
materials primarily intended for mechanical applications, including internal
combustion engines. Some of these gasket materials contained encapsulated
asbestos fiber. As a general matter, this gasket material was not sold directly
to end users but to secondary processors for the creation of prefabricated
gaskets for resale.
In addition to plants within the United States, AWI subsidiaries have
manufacturing plants in Reservoir (Victoria), Australia; Gateshead (Team
Valley), England; Munster, Germany, and Montreal, Canada that produced
asbestos-containing floor tiles and/or sheet vinyl products or the Hydrocord
backing (in U.K., Canada, and Australia), and AWI's plant in Portumna, Ireland
also may have manufactured asbestos-containing floor tiles. Although Hydrocord
was manufactured by AWI within the United States, it was shipped as a backing
for certain sheet vinyl products manufactured at plants in Canada, Australia,
and the United Kingdom.
AWI's resilient floor covering products, including those that contained
asbestos, were distributed worldwide. In addition to sales within North America,
AWI's gasket products were distributed primarily within Europe and Japan,
although an effort was made to distribute them worldwide.
All AWI-manufactured acoustical ceiling products never contained asbestos. AWI,
however, sold a specialty asbestos cement ceiling board between the mid 1940's
and the mid 1970's. This ceiling product, which was composed of asbestos
containing Portland cement manufactured by both Keasbey & Mattison and National
Gypsum Company, was slate-like in its appearance (which made it readily
distinguishable from AWI's acoustical ceiling materials), was intended for use
in high humidity areas, and was generally attached to the surface with furring
strips and fasteners (and not a suspended grid system).
During the period between the mid-1930's and mid-1980's, some of the related
adhesive products that AWI manufactured and sold for use in the installation of
resilient floor tile or acoustical ceiling tile contained encapsulated
chrysotile asbestos.
AWI manufactured two distinct roof deck systems: (1) Fluid Applied and (2)
Travelon Weather Deck. Components of both systems contained asbestos. These were
special-purpose systems that were distinguishable from traditional built-up
roofing. Both roofing systems were unique and specially directed to a highly
specialized segment of the roofing market. These products were not commercially
successful and, therefore, were discontinued shortly after their introduction in
the mid-1960's.
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2. PREPETITION ASBESTOS-RELATED PERSONAL INJURY LITIGATION
AGAINST AWI.
Nearly all the asbestos-related personal injury and wrongful death lawsuits
brought against AWI relate to individuals who claim they were exposed to the
asbestos-containing high-temperature thermal insulation products used by AWI in
its insulation contracting activities prior to 1958, or used by ACandS in
connection with ACandS's use of AWI's licensed tradename or trademarks after
1958. The majority of these claimants seek compensatory and punitive damages
arising from their alleged exposure to these products. Many of these claims
involve allegations of negligence, strict liability, and breach of warranty, and
some allege conspiracy or other claims that seek to make AWI responsible for the
activities of ACandS. In some instances, personal injury claims have been
asserted against AWI on account of its asbestos-containing gaskets or flooring
materials. LT Cork Covering and Armaspray have rarely been identified by
plaintiffs as a cause of injury.
As of September 30, 2000, approximately 173,000 asbestos-related personal injury
and wrongful death claims were pending against AWI within the tort system in a
multitude of jurisdictions. As a result, AWI lacked an effective means to
address its liability for asbestos-related personal injury claims in a
comprehensive manner. Moreover, only the Bankruptcy Code provides a vehicle for
AWI to address both its present, as well as future, unknown Asbestos Personal
Injury Claims.
3. OWENS CORNING FIBERGLAS FILING FOR PROTECTION UNDER CHAPTER
11.
On October 5, 2000 Owens Corning Fiberglas Corp. ("OCF"), a manufacturer of
insulation products, filed for protection under chapter 11 of the Bankruptcy
Code to address its asbestos liability. This filing adversely affected AWI's
attempts at that time to obtain a credit facility to replace its then-existing
$450 million credit facility, which was due to expire on October 19, 2000.
Following the OCF filing, the potential lenders under the new credit facility
reevaluated their credit exposure to AWI, primarily due to AWI's asbestos
personal injury liability. AWI could not reach agreement on a new facility with
acceptable terms, and the existing credit facility expired. In addition, AWI was
concerned about a possibility of increased settlement demands of asbestos
plaintiffs given that OCF, which had previously been a major defendant in
asbestos litigation, had filed for chapter 11 protection.
4. DOWNGRADING OF AWI'S CREDIT RATING.
On October 25, 2000, both Standard & Poors and Moody's Investors Services
(collectively, the "RATING AGENCIES") downgraded AWI's long-term debt rating,
citing the reduction in committed credit facilities, prospects for weaker
operating performance, and continued uncertainty surrounding AWI's asbestos
personal injury liability as a result of, among other things, OCF's chapter 11
filing. Both agencies also indicated the possibility of additional downgrades.
On November 17, 2000, the Rating Agencies further downgraded AWI's long-term
debt rating to below investment grade.
After October 25, 2000, AWI was unable to issue commercial paper and instead
borrowed from its remaining $450 million credit facility. As of December 6,
2000, approximately $50 million of commercial paper was outstanding, and the
entire $450 million credit facility had been drawn and was outstanding.
In response to the large number of Asbestos Personal Injury Claims then
outstanding, the increase in settlement demands over recent years and the
resulting liquidity issues, AWI filed for protection under chapter 11 of the
Bankruptcy Code on December 6, 2000.
17
IV. THE CHAPTER 11 CASE
A. GENERAL.
On December 6, 2000 (the "COMMENCEMENT DATE"), AWI filed a voluntary petition
for relief under chapter 11 of the Bankruptcy Code with the Bankruptcy Court in
order to use the court-supervised reorganization process to achieve a resolution
of its liability for asbestos-related personal injury and wrongful death claims.
Also filing under chapter 11 were two of AWI's wholly-owned subsidiaries, Nitram
Liquidators, Inc. ("NITRAM") and Desseaux Corporation of North America, Inc.
("DESSEAUX"). The cases are being jointly administered as In re Armstrong World
Industries, Inc., et al., Case No. 00-4471 (RJN) (the "CHAPTER 11 CASE").
Currently AWI is operating its business and managing its properties as a debtor
in possession subject to the provisions of the Bankruptcy Code. Pursuant to the
provisions of the Bankruptcy Code, AWI is not permitted to pay any claims or
obligations that arose prior to the Commencement Date unless specifically
authorized by the Bankruptcy Court. Similarly, Claimants may not enforce any
Claims against AWI that arose prior to the Commencement Date unless specifically
authorized by the Bankruptcy Court. In addition, as a debtor in possession, AWI
has the right, subject to the Bankruptcy Court's approval, to assume or reject
any executory contracts and unexpired leases in existence at the Commencement
Date. Parties having Claims as a result of any such rejection may file claims
with the Bankruptcy Court, which will be addressed as part of the Chapter 11
Case.
The Chapter 11 Case originally was assigned to the Honorable Joseph J. Farnan,
Jr., a U.S. District Court Judge for the District of Delaware. During the fourth
quarter of 2001, the U.S. Court of Appeals for the Third Circuit assigned U.S.
District Court Judge Alfred M. Wolin of New Jersey to preside over the Chapter
11 Case in the District of Delaware. Judge Wolin also presides over other
asbestos-related chapter 11 cases pending in the District of Delaware. Judge
Wolin retained issues relating to asbestos personal injury claims and referred
other asbestos-related issues and bankruptcy-related matters in the Chapter 11
Case to U.S. Bankruptcy Judge Randall J. Newsome.
Since the Commencement Date, AWI, the Unsecured Creditors' Committee, the
Asbestos PI Claimants' Committee, and more recently, the Future Claimants'
Representative, have been engaged in substantive negotiations regarding the
terms of the plan of reorganization. During the course of the Chapter 11 Case,
the parties participated in numerous status conferences before Judge Wolin in an
effort to resolve their differences with respect to, among other things, the
distribution of assets and classification of Claims in connection with the
formulation of a viable plan of reorganization. As a result of such status
conferences, on November 4, 2002, AWI filed a plan of reorganization with the
consent of the Unsecured Creditors' Committee, the Asbestos PI Claimants'
Committee, and the Future Claimants' Representative. On ________________, 2003,
AWI filed the Plan, which also has the support of the Unsecured Creditors'
Committee, the Asbestos PI Claimants' Committee, and the Future Claimants'
Representative. The Plan is not supported by the Asbestos PD Committee.
THE PLAN ONLY RELATES TO AWI; IT DOES NOT RELATE TO NITRAM AND DESSEAUX, THE TWO
AFFILIATED DEBTORS IN THESE CHAPTER 11 CASES. THE DEBTORS AND THEIR AFFILIATES
ARE NOT BEING SUBSTANTIVELY CONSOLIDATED UNDER THE PLAN.
B. PROFESSIONALS RETAINED IN THE CHAPTER 11 CASE.
1. AWI'S ATTORNEYS AND ADVISERS:
The principal professionals that AWI has retained with respect to chapter 11
matters are as follows:
ATTORNEYS FINANCIAL ADVISOR
Weil, Gotshal & Manges LLP Lazard Freres & Co. LLC ("LAZARD")
767 Fifth Avenue 30 Rockefeller Plaza, 61st Floor
New York, New York 10153 New York, New York 10020
(212) 310-8000 (212) 632-6000
(212) 310-8007 (telecopy) (212) 332-1748 (telecopy)
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Richards, Layton & Finger, P.A. RESTRUCTURING CONSULTANTS, AUDITORS
One Rodney Square AND ACCOUNTANTS
P.O. Box 551
Wilmington, Delaware 19899 KPMG, LLP
(302) 651-7700 99 High Street
(302) 651-7701 (telecopy) Boston, Massachusetts 02110
(617) 988-1000
(617) 988-0800 (telecopy)
CLAIMS AGENT SPECIAL BALLOT SOLICITATION AND TABULATION
AGENT
Trumbull Services, LLC Innisfree M&A Incorporated
4 Griffin Road North 501 Madison Avenue, 20th Floor
Windsor, Connecticut 06095 New York, NY 10022
(860) 687-3806 (877) 750-2689
(860) 683-8697 (telecopy)
2. COMMITTEES.
On or about December 15, 2000, the United States Trustee for the District of
Delaware (the "U.S. TRUSTEE"), pursuant to her authority under section 1102 of
the Bankruptcy Code, appointed the Unsecured Creditors' Committee and the
Asbestos PI Claimants' Committee. On or about July 19, 2001, the U.S. Trustee
appointed the Official Committee of Asbestos Property Damage Claimants (the
"ASBESTOS PD COMMITTEE," and together with the Unsecured Creditors' Committee
and the Asbestos PI Claimants' Committee, the "COMMITTEES"). By order dated on
or about March 1, 2002, the Bankruptcy Court approved the appointment of Dean M.
Trafelet as the Future Claimants' Representative. The Committees and the Future
Claimants' Representative have participated actively in all aspects of the
Chapter 11 Case.
(A) ASBESTOS PI CLAIMANTS' COMMITTEE.
The Asbestos PI Claimants' Committee currently consists of the following nine
members:
>> Robert M. Gardner, Sr.
>> Norma H. Garrison, Executor of the Estate of
Daniel M. Garrison
>> Joe Donald Smiley
>> Kaye Smith, Executor of the Estate of Willie
Hampton
>> Roberta Jeffrey, Executor of the Estate of Frank
Jeffrey
>> John A. Spague
>> Frank H. Biele, Jr.
>> Susan Wright, Special Administrator of the Estate
of Charles Wright; and
>> Miron Fidyk.
The Asbestos PI Claimants' Committee has retained the following professionals:
ATTORNEYS ACCOUNTANTS AND FINANCIAL ADVISOR
Caplin & Drysdale, Chartered L. Tersigni Consulting PC
399 Park Avenue, 27th Floor 201 West Main Street, Suite 220
New York, New York 10022 Stamford, CT 06902
(212) 319-7125 (203) 569-9090
(212) 644-6755 (telecopy) (203) 569-9098 (telecopy)
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Campbell & Levine, LLC ASBESTOS BODILY INJURY CONSULTANTS
800 King Street, Suite 300
Wilmington, Delaware 19801 Legal Analysis Research & Planning, Inc.
(302) 426-1900 970 Calle Arroyo
(302) 426-9947 (telecopy) Thousand Oaks, California 91360
(805) 499-3572
(809) 499-7126 (telecopy)
(B) UNSECURED CREDITORS' COMMITTEE.
The Unsecured Creditors' Committee currently consists of the following five
members:
>> Wachovia Bank, N.A.
>> Deutsche Bank
>> Wells Fargo Bank Minnesota, N.A. as Indenture
Trustee
>> Bank One, N.A. as Successor Indenture Trustee
>> OCM Opportunities Fund, III, L.P.
The Unsecured Creditors' Committee has retained the following professionals:
ATTORNEYS INVESTMENT BANKER AND FINANCIAL ADVISOR
Paul, Weiss, Rifkind, Wharton & Garrison Houlihan Lokey Howard & Zukin Capital
1285 Avenue of the Americas 685 Third Avenue
New York, New York 10019 New York, New York 10017
(212) 373-3000 (212) 497-4100
(212) 757-3990 (telecopy) (212) 661-3070 (telecopy)
Cozen O'Connor ASBESTOS CLAIMS CONSULTANTS
1201 North Market Street
Wilmington, Delaware 19801 Chambers Associates Incorporated
(888) 207-2440 805 15th Street, NW-Suite 500
(302) 295-2013 (telecopy) Washington, DC 20005
(202) 371-9770
(202) 371-6601 (telecopy)
(C) FUTURE CLAIMANTS' REPRESENTATIVE.
The Future Claimants' Representative has retained the following professionals:
ATTORNEYS INVESTMENT BANKER AND FINANCIAL ADVISOR
Kaye Scholer, LLP Peter J. Solomon Company
425 Park Avenue 767 Fifth Avenue
New York, New York 10022 New York, New York 10153
(212) 836-8000 (212) 508-1600
(212) 836-8689 (telecopy) (212) 508-1633 (telecopy)
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Young Conaway Stargatt & Taylor, LLP ASBESTOS BODILY INJURY CONSULTANTS
The Brandywine Building-17th Floor
1000 West Street Analysis Research Planning Corporation
Wilmington, Delaware 1900 M Street, N.W.
(302) 571-6600 Suite 410
(302) 571-1253 (telecopy) Washington, D.C. 20036
(202) 797-1111
(202) 797-3619 (telecopy)
(D) ASBESTOS PD COMMITTEE.
The Asbestos PD Committee currently consists of the following three members:
>> Christine Wood
>> TrizecHahn Office Properties
>> Stephen Tancredi
The Asbestos PD Committee has retained Klehr, Harrison, Harvey, Branzburg &
Ellers LLP, 919 Market Street, Suite 100, Wilmington, Delaware 19801, (302)
426-1189, (302) 426-9193 (telecopy), as its counsel.
C. SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASE.
1. EMPLOYEE RELATED MATTERS.
To maintain the continued support, cooperation, and morale of AWI's employees
and to minimize any salary, wage, and employee benefit disruptions that might
have been occasioned by the commencement of the Chapter 11 Case, AWI obtained
orders of the Bankruptcy Court that authorized AWI to (i) pay employees for
prepetition wages, salaries, and other compensation and (ii) continue its
employee benefit programs, including maintenance of AWI's workers' compensation
programs.
In order to (i) ensure that AWI's senior level executives and managers (the "KEY
EMPLOYEES") continued to provide essential management and other necessary
services during the Chapter 11 Case, (ii) minimize Key Employee turnover and
(iii) provide incentives to attract new senior level employees to fill critical
vacant positions, AWI designed a special retention program (the "EMPLOYEE
RETENTION PROGRAM") for the Key Employees and sought Bankruptcy Court approval
of the program. The Employee Retention Program is comprised of annual cash
retention payments for certain Key Employees, a severance benefit plan, the
assumption of certain (and the ability to enter into new) change in control
agreements and an employment agreement, and the continued maintenance of
customary incentive compensation plans in which the Key Employees participate,
including an annual incentive plan for key managers and senior level executives
and a long-term cash incentive plan.
In addition, during the course of the Chapter 11 Case, AWI sought and obtained
the approval of the Bankruptcy Court to assume AWI's indemnification obligations
to its officers and directors, as well as officers and directors of Holdings. In
addition, counsel for the board of directors of Holdings is continuing to hold a
fund of $1 million to fund any unpaid professional fees of Holdings' board or
other obligations to Holdings' directors.
2. VENDOR AND CUSTOMER ISSUES.
Following the commencement of the Chapter 11 Case, AWI took certain actions in
the Bankruptcy Court, including obtaining orders of the Bankruptcy Court, that
authorized AWI to (i) pay claims of critical trade vendors (the "CRITICAL
VENDORS") that supply AWI with essential materials and services; (ii) provide
postpetition deposits with the Critical Vendors and other suppliers to secure
payment for postpetition materials; (iii) pay Claims of prepetition common
carriers, warehouses, and holders of mechanics' liens; (iv) pay prepetition
Claims held by certain building products distributors through which AWI sells
the majority of its vinyl and laminate flooring products, residential
ceiling/grid products, and installation/accessory products; (v) honor certain
21
customer warranty programs in accordance with its prepetition practices and
honor any postpetition obligations in respect thereof; and (vi) implement global
procedures for resolving and paying valid reclamation claims.
3. THE DIP CREDIT FACILITY.
In order to fund its ongoing business operations during the pendency of the
Chapter 11 Case, AWI, Nitram and Desseaux entered into a debtor in possession
financing facility (the "DIP CREDIT FACILITY") with JPMorgan Chase Bank
("JPMORGAN CHASE" or the "AGENT"), as agent for a syndicate of financial
institutions, including JPMorgan Chase (collectively, the "LENDERS"). The terms
of the DIP Credit Facility are memorialized in a Revolving Credit and Guaranty
Agreement dated as of December 6, 2000, as amended from time to time (the
"CREDIT AGREEMENT").
The following are the major elements of the DIP Credit Facility:
>> The DIP Credit Facility originally provided for a
total commitment (the "COMMITMENT") of $400
million. The Commitment was available for working
capital and other general corporate purposes and
for the issuance of standby and import documentary
letters of credit for purposes satisfactory to the
Agent (collectively, the "LETTERS OF CREDIT").
Through subsequent amendments, AWI and the Lenders
agreed to reduce the Commitment to $75 million and
limit it to Letters of Credit.
>> The DIP Credit Facility contemplates that all
obligations (i) are secured by a perfected first
priority lien on all cash maintained in the Letter
of Credit Account (as such term is defined in the
Credit Agreement) and (ii) will constitute
superpriority obligations over any and all
administrative expenses of the kind specified in
section 503(b) or 507(b) of the Bankruptcy Code,
subject in each case only to (x) in the event of
the occurrence of an Event of Default (as such
term is defined in the Credit Agreement), the
payment of allowed and unpaid professional fees
and disbursements incurred by AWI, Nitram,
Desseaux or any of the Committees in an aggregate
amount not to exceed $5 million, and (y) the
payment of bankruptcy filing fees.
>> The DIP Credit Facility originally provided that
the sum of the aggregate outstanding amount of
direct borrowings plus undrawn amount of
outstanding Letters of Credit issued for the
account of AWI would at no time exceed the
borrowing base, which included inventory,
receivables and certain other assets of AWI
meeting certain eligibility standards determined
by the Agent.
>> The term of the DIP Credit Facility, as amended,
extends through December 6, 2003.
As of December 31, 2002, Armstrong had cash on hand of approximately $380
million. As a result, since the Commencement Date, AWI has not drawn on the DIP
Credit Facility. In the ordinary course of its business, however, AWI has
requested the Lenders from time to time to issue Letters of Credit. As of
December 31, 2002, Letters of Credit in the aggregate face amount of
approximately $28.7 million had been issued and remained outstanding under the
DIP Credit Facility.
In the fourth quarter of 2002, AWI and the Lenders further amended the DIP
Credit Facility. The latest amendment (i) extended the maturity date under the
Credit Agreement to December 6, 2003, (ii) terminated all obligations of the
Lenders to make loans or advances and limited the Commitment under the DIP
Credit Facility to issuances of Letters of Credit, (iii) reduced the total
Commitment from $200 million to $75 million and (iv) suspended certain reporting
requirements under the Credit Agreement. By order dated October 29, 2002, the
Bankruptcy Court authorized and approved such amendment.
22
4. AWI'S EXCLUSIVE RIGHT TO FILE AND CONFIRM A PLAN.
The Bankruptcy Court has approved five extensions of the periods during which
AWI has the exclusive right to file and confirm a chapter 11 plan under section
1121(a) of the Bankruptcy Code (the "EXCLUSIVE PERIODS"). The most recent order
of the Bankruptcy Court, entered on September 4, 2002, provides that the
Exclusive Periods are extended through and including April 4, 2003 (for filing a
plan) and June 3, 2003 (for confirmation of a plan).
5. THE BAR DATE (FOR CLAIMS OTHER THAN ASBESTOS PERSONAL INJURY
CLAIMS).
On January 30, 2001, AWI filed with the Bankruptcy Court its schedules of assets
and liabilities, except for Schedule F (Creditors Holding Unsecured Claims
Against the Estate), which was filed on March 21, 2001, pursuant to the
Bankruptcy Court's order dated February 21, 2001 extending AWI's time to file
such schedule (together, the "SCHEDULES"). AWI listed an aggregate of
approximately 181,198 Claims on its Schedules.
On March 30, 2001, AWI filed a motion seeking an order fixing a bar date for the
filing of proofs of claim against AWI's estate for, essentially, all Claims
except those for personal injury based on asbestos exposure. By order dated
April 18, 2001 (the "BAR DATE ORDER"), the Bankruptcy Court set a bar date of
August 31, 2001 (the "BAR DATE"). AWI mailed notices of the Bar Date and proof
of claim forms to all the entities identified in the Schedules, among others
(the "BAR DATE NOTICE"). Notice of the Bar Date also was published on two
occasions in the national editions of The New York Times, The Wall Street
Journal, and The USA Today, as well as in at least fourteen trade publications
and various regional newspapers.
Pursuant to the Bar Date Order, each creditor holding a prepetition claim was
required, subject to certain limited exceptions, to file a proof of claim on or
before the Bar Date. Specifically, as provided in the Bar Date Notice, the
following types of creditors were not required to file proofs of claim on or
before the Bar Date:
>> creditors holding claims that already had been
properly filed with the clerk of the Bankruptcy
Court using a claim form that substantially
conforms to Official Form No. 10;
>> creditors holding claims that (a) are listed on
the Schedules, (b) are not described in the
Schedules as "disputed," "contingent," or
"unliquidated," and (c) are in the same amount and
of the same nature as set forth in the Schedules;
>> creditors asserting an Administrative Expense
against AWI's chapter 11 estate under section
503(b) or 507(a) of the Bankruptcy Code;
>> creditors holding Claims of AWI or a subsidiary of
AWI against another debtor or another subsidiary
of a debtor;
>> creditors holding Claims that had been Allowed by
an order of the Bankruptcy Court entered on or
before the Bar Date;
>> creditors holding asbestos-related personal injury
Claims (other than a claim for contribution,
indemnity, reimbursement, or subrogation);
>> current employees of AWI for prepetition benefits
or deferred compensation; and
>> creditors holding Claims that had been paid in
full by AWI prior to the Bar Date.
As discussed below in Section IV.C.6, entitled "THE CHAPTER 11 CASE --
Significant Events During the Chapter 11 Case -- Asbestos Property Damage
Claims," the Bankruptcy Court subsequently extended the Bar Date for Asbestos
Property Damage Claims to March 20, 2002.
23
2,651 proofs of claim against AWI, not including Asbestos Personal Injury Claims
or Asbestos Property Damage Claims, either were received by Trumbull or filed
with the clerk of the Bankruptcy Court on or before the Bar Date. In addition,
140 additional proofs of claim, not including Asbestos Personal Injury Claims or
Asbestos Property Damage Claims, were filed against AWI after the Bar Date.
Thus, excluding Asbestos Personal Injury Claims and Asbestos Property Damage
Claims, as of March 10, 2003, a total of 2,792 proofs of claim had been filed
against AWI in the Chapter 11 Case. For information regarding the Asbestos
Property Damage Claims filed against AWI in the Chapter 11 Case, see Section
IV.C.6, entitled "THE CHAPTER 11 CASE -Significant Events During the Chapter 11
Case - Asbestos Property Damage Claims."
Since the Bar Date, AWI, together with its professionals, has engaged in an
extensive process of reviewing and reconciling the proofs of claim asserted
against AWI in the Chapter 11 Case. To date, the Debtors have filed and
prosecuted seven omnibus objections to Claims, as well as several additional
objections addressing specific Claims. In addition, the Debtors have engaged in
discussions with a wide variety of Claimants regarding, among other things, the
withdrawal of Claims where appropriate.
As a result of these efforts, the Debtors have successfully disallowed and
expunged a total of 1,240 Claims asserted against AWI, leaving a total of 1,551
proofs of claim outstanding against AWI in the aggregate amount of approximately
$1.88 billion, not including Asbestos Personal Injury Claims, Asbestos Property
Damage Claims or Claims listed on the Schedules ("SCHEDULED CLAIMS"). In
addition, pursuant to three of the seven omnibus objections to claims, AWI has
obtained orders from the Bankruptcy Court reclassifying as Unsecured Claims
approximately 123 Claims that were initially asserted as priority or filed as
secured or administrative expense Claims.
Furthermore, in connection with each of the omnibus objections to Claims filed
by AWI, as well as settlements and compromises between AWI and certain of the
claimants, AWI has resolved and agreed to allow a total of 923 Claims in the
aggregate amount of approximately $195.9 million.
In addition to the foregoing, of the 7,228 Scheduled Claims that were not
scheduled as Asbestos Personal Injury Claims or Asbestos Property Damage Claims,
approximately 3,730 Scheduled Claims (in the aggregate scheduled amount of
approximately $214.76 million) were listed as contingent, disputed and/or
unliquidated, were not superseded by a subsequent timely-filed proof of claim
and, therefore, are now deemed null and void. Moreover, 1,353 Scheduled Claims
(totaling approximately $1.5 billion) have been superseded by a subsequently
filed proof of claim. In addition, on or about March __, 2003, the Debtors filed
an amended Schedule F (Unsecured Claims) with the Bankruptcy Court pursuant to
which an additional [437] of these 7,228 Scheduled Claims in the total amount of
[approximately $20.8 million] have been eliminated (amended to $0.00), and [126]
of such Scheduled Claims have been reduced by a total amount of [approximately
$19.3 million]. Pursuant to the Bar Date Order, however, the holders of such
amended Scheduled Claims have until May __, 2003 to file a proof of claim if
they disagree with the amended amount of their Scheduled Claims.
AWI expects the total amount of Allowed Unsecured Claims to be treated in Class
6 will be approximately $1.65 billion as a result of AWI's continued claims
reconciliation and objection process.
Effective on September 1, 2002, the Bankruptcy Court amended its Local Rules for
Bankruptcy Practice and Procedure (the "LOCAL RULES") by adding Local Rule
3007-1, which governs omnibus objections to claims. Pursuant to the new Local
Rule, among other things, all substantive objections (as defined in Local Rule
3007-1) that apply to a particular proof of claim must be asserted in a single
omnibus objection. With respect to non-substantive objections, however, multiple
objections may be filed regarding a particular proof of claim. Due to the volume
of Claims filed against AWI in the Chapter 11 Case and the significant amount of
time required for AWI and its professionals to analyze and reconcile such
Claims, on or about October 29, 2002, AWI and its affiliated Debtors filed a
Motion for an Order Granting Relief from Certain Aspects Relating to the Filing
of Omnibus Objections to Claims (the "OMNIBUS CLAIMS Motion"), pursuant to which
the Debtors have requested relief from that portion of Local Rule 3007-1
limiting the Debtors' substantive objections to claims. At a hearing held by the
Bankruptcy Court on November 22, 2002, the Bankruptcy Court denied the relief
requested by the Debtors in the Omnibus Claims Motion, other than to clarify
that the mere attachment of a notice or other pleading to a proof of claim does
not constitute "documentation" attached to a proof of claim. As a result of the
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denial of the Omnibus Claims Motion, the modified claims objection procedures
imposed by the Local Rules are likely to add delay to AWI's claims
reconciliation process.
Basic information regarding Claims that have been scheduled and filed in the
Chapter 11 Case can be accessed using the following website:
www.trumbull-services.com.
6. ASBESTOS PROPERTY DAMAGE CLAIMS.
(A) AWI'S LIMITED INVOLVEMENT WITH ASBESTOS PROPERTY DAMAGE
CLAIMS
Prior to the commencement of the Chapter 11 Case, AWI had very limited
involvement with Asbestos Property Damage Claims. Unlike Asbestos Personal
Injury Claims asserted against AWI, AWI's liability for Asbestos Property Damage
Claims generally is not the result of AWI's insulation installation contracting
activities. Instead, Asbestos Property Damage Claims that have been actively
pursued against AWI have concerned primarily resilient floor covering products
manufactured and sold by AWI prior to 1983.
Beginning sometime in the 1950's through 1983, AWI manufactured three types of
resilient floor covering products that contained asbestos. First, until 1972,
AWI manufactured a low priced asphalt floor tile that contained asbestos. There
are few claims involving such asphalt tiles. Any such asphalt tiles are now at
least 30 years old in any building where they still exist. Second, after World
War II AWI began to manufacture and market a new line of sheet flooring, called
Corlon, made from vinyl plastic. The Corlon sheet flooring contains no asbestos,
but AWI also manufactured a Hydrocord felt backing material containing asbestos
that could be used to lay the vinyl sheet flooring directly over on-grade
concrete. AWI discontinued the use of asbestos in the Hydrocord backing in 1983.
Few property damage claims have been asserted with respect to the Hydrocord
backing. This product is not subject to any abrasion unless the vinyl surface
layer, which does not contain asbestos, has completely worn through. Third,
until 1983 AWI manufactured a vinyl tile, called Excelon, that contained
asbestos. Most property damage claims that have involved AWI products are
related to Excelon. It was a popular product that has held up well over the
years and is still present in many buildings.
In contrast to Asbestos Personal Injury Claims, as of the Commencement Date,
only five asbestos property damage actions were commenced against AWI from 1993
to the Commencement Date. Moreover, as of the Commencement Date, only six of the
273 asbestos property damage cases brought against AWI since the early 1980's
remained unresolved, and of those six only three were actively being pursued.
Furthermore, as to the Asbestos Property Damage Claims that were resolved during
the more than 20 year period prior to the Commencement Date, the total amount
paid by AWI on account of such claims was less than $10 million.
(B) THE ASBESTOS PD BAR DATE
On or about August 3, 2001, the Asbestos PD Committee filed a motion (the
"MOTION TO EXTEND") pursuant to which it sought to (i) extend the Bar Date to
enable holders of alleged Asbestos Property Damage Claims to have additional
time to file proofs of claim and (ii) compel AWI to engage in an extensive,
nationwide noticing program. By order dated August 27, 2001, the Bankruptcy
Court extended the Bar Date for Asbestos Property Damage Claims until the
disposition of the Motion to Extend.
At a hearing held on March 1, 2002, the Bankruptcy Court ruled that (i) the
deadline for certain law firms to file a class proof of claim on behalf of a
putative class of holders of alleged Asbestos Property Damage Claims was March
8, 2002, (ii) the deadline for all other holders of Asbestos Property Damage
Claims to file proofs of claim in the Chapter 11 Case was March 1, 2002, and
(iii) the notice of the Bar Date provided by AWI was consistent and complied
with applicable law and satisfied all requirements of due process. The ruling
was memorialized in an order of the Bankruptcy Court entered on or about March
18, 2002 (the "ORDER DENYING THE MOTION TO EXTEND"). The Bankruptcy Court
subsequently modified its Order Denying the Motion to Extend by order dated May
21, 2002, ruling that the deadline for all holders of Asbestos Property Damage
Claims to file proofs of claim in the Chapter 11 Case was March 20, 2002.
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As of December 18, 2002, a total of 581 Asbestos Property Damage Claims,
totaling approximately $877 million, had been asserted against AWI. As a result
of the claims reconciliation efforts expended by the Debtors to date, however,
the Debtors have successfully disallowed and expunged, or the Claimant has
withdrawn, a total of 124 Asbestos Property Damage Claims (in the aggregate
amount of approximately $81.6 million), leaving a total of 457 Asbestos Property
Damage Claims outstanding against AWI in the aggregate amount of approximately
$795 million.
(C) THE CLASS ACTION PROCEEDING.
On August 17, 2001, certain holders of Asbestos Property Damage Claims (the
"ASBESTOS PD PLAINTIFFS") commenced a class action adversary proceeding in the
Bankruptcy Court and filed a motion seeking certification of a nationwide class
for damages and remediation and a separate nationwide class for testing, in each
case consisting of all property owners (residential and otherwise) that have AWI
asbestos-containing flooring products in their structures. On October 1, 2001,
AWI filed a motion to dismiss the class action proceeding on the grounds that
(i) the commencement of the class action proceeding violated the automatic stay
imposed by section 362 of the Bankruptcy Code, (ii) the putative class action
representatives failed to state claims upon which relief could be granted, and
(iii) the putative class action representatives failed to state a claim for
class relief. In addition, on April 12, 2002, AWI and the Asbestos PI Claimants'
Committee filed separate objections to the motion for class certification.
After a one-day trial on the issue of class certification, by order dated July
2, 2002, the Bankruptcy Court denied the motion for class certification. On or
about July 12, 2002, the Asbestos PD Plaintiffs filed a motion for leave to
appeal the Bankruptcy Court's denial of their motion for class certification.
AWI filed a memorandum of law in opposition to such motion for leave to appeal
on July 26, 2002. By order dated October 4, 2002, the District Court denied the
motion for leave to appeal.
(D) THE DAUBERT HEARING.
On September 26, 2002 and September 27, 2002, the Bankruptcy Court conducted a
Daubert hearing on the issue of what evidence holders of Asbestos Property
Damage Claims should be required to present to demonstrate proof of property
damage in their structures as a result of the presence of AWI
asbestos-containing floor products in such structures. In the Daubert hearing,
AWI challenged the use of the "settled dust method" proposed by the claimants as
a method for determining proof of property damage in their structures. On
October 22, 2002, the Bankruptcy Court granted AWI's requested relief and ruled
that the "settled dust method" is not a scientifically valid method for proving
asbestos property damage from flooring in a building. The Asbestos PD Committee
has filed a motion for leave to appeal from such ruling. AWI has objected to
such motion, which is still pending before the District Court. If the holders of
Asbestos Property Damage Claims are able to appeal from the Daubert ruling and
succeed on the merits of such appeal, remaining holders of Asbestos Property
Damage Claims will have to meet a lower standard of proof with respect to the
issue of property damage in their structures.
(E) STATUS CONFERENCE ON ASBESTOS PROPERTY DAMAGE CLAIMS
FOLLOWING THE DAUBERT RULING.
Following the Daubert ruling, the Bankruptcy Court conducted a status conference
on November 1, 2002, after which the Bankruptcy Court entered an order regarding
required product identification proof for Asbestos Property Damage Claims.
Thereafter, on December 5, 2002, the Court entered an Amended Order Regarding
Required Product Identification for Asbestos Property Damage Claims, which
requires each holder of an Asbestos Property Damage Claim to submit the
following information to AWI's counsel no later than February 10, 2003: (i) the
name and address of each building (or other discrete location) alleged to
contain asbestos-containing products manufactured or sold by AWI for which an
Asbestos Property Damage Claim is asserted; (ii) the type of asbestos-containing
product for which an Asbestos Property Damage Claim is asserted; and (iii) the
basis, including all documentation, upon which the claimant has identified an
asbestos-containing product manufactured or sold by AWI (the "PRODUCT I.D.
ORDER"). Such order further provides that any Asbestos Property Damage Claim for
which such information is not provided shall be disallowed in its entirety upon
further order of the Bankruptcy Court.
26
(F) SETTLEMENT OF CERTAIN ASBESTOS PROPERTY DAMAGE CLAIMS
On February 10, 2003, AWI and the holders of 360 Asbestos Property Damage Claims
(the "SETTLED CLAIMS") entered into a Settlement Agreement and Release (the "PD
SETTLEMENT AGREEMENT"). The Settled Claims represent approximately 78% of the
total number of Asbestos Property Damage Claims pending as of February 10.
Pursuant to the Settlement Agreement, AWI has agreed to pay $2 million in cash
(the "PD SETTLEMENT AMOUNT") to Bilzin Sumberg Baena Price & Axelrod LLP, as
agent and attorney for the holders of the Settled Claims, in full and final
satisfaction, discharge, settlement and compromise, and release of the Settled
Claims and any other Asbestos Property Damage Claims that could have been or may
be properly asserted by such claimants. The payment of the Settlement Amount
will be made on the Initial Distribution Date. Upon AWI's payment of the PD
Settlement Amount, each of the Settled Claims filed by the Claimants shall be
deemed immediately withdrawn in its entirety.
On February 10, 2003, AWI filed a motion pursuant to Bankruptcy Rule 9019
seeking an order authoring and approving the PD Settlement Agreement (the "PD
SETTLEMENT MOTION"). AWI also requested pursuant to the PD Settlement Motion
that, in the event the Bankruptcy Court refuses to approve the PD Settlement
Agreement, the holders of the Settled Claims be granted a two week extension to
serve their product identification information on AWI in accordance with the
Product I.D. Order. Two objections were filed to the PD Settlement Motion--one
by the Asbestos PD Committee and one by the Los Angeles Unified School District.
A hearing on the Settlement Motion is scheduled for April 4, 2003. If the
Settlement Motion is approved by the Bankruptcy Court, there will be a total of
97 remaining Asbestos Property Damage Claims filed against AWI, only 26 of which
have responded to the Product I.D. Order.
(G) PRODUCT IDENTIFICATION RESPONSES
Of the remaining Asbestos Property Damage Claims only 26 (three of which relate
to the Asbestos PD Contribution Claims of the Celotex Trust) submitted any
information to AWI in response to the Product I.D. Order by February 10, 2003.
AWI believes that many of the 26 claimants submitted insufficient or incomplete
product identification information. The holders of 71 Asbestos Property Damage
Claims did not submit any information in response to the Product I.D. Order. On
March 6, 2003, in accordance with the Product I.D. Order, AWI filed an objection
seeking the disallowance of such 71 Asbestos Property Damage Claims.
7. INSURANCE COVERAGE ISSUES.
Throughout the Chapter 11 Case, AWI has been involved in litigation and
negotiations concerning the scope of liability insurance coverage available to
satisfy the various claims against AWI.
(A) MAERTIN LITIGATION.
Prior to the Commencement Date, AWI entered into settlement agreements (the
"MAERTIN SETTLEMENT AGREEMENTS") with a group of non-asbestos personal injury
plaintiffs (the "MAERTIN PLAINTIFFS") in respect of the Maertin Plaintiffs'
allegations that they had sustained injuries arising from exposure to
polychlorinated biphenyls allegedly found on ceiling material purportedly
manufactured by AWI. Pursuant to the Settlement Agreements, the Maertin
Plaintiffs settled their claims against AWI for an agreed amount (the "MAERTIN
SETTLEMENT AMOUNT") to be paid by AWI on January 21, 2001.
On September 20, 2000, AWI filed an action (the "MAERTIN COVERAGE CASE") in the
United States District Court for the Eastern District of Pennsylvania against
certain insurers (collectively, the "INSURERS") seeking a declaration that
certain insurance policies issued by the Insurers in favor of AWI (collectively,
the "MAERTIN INSURANCE POLICIES") provided coverage amounts to be paid pursuant
to the Settlement Agreements. Shortly after the filing of the Maertin Coverage
Case, AWI engaged in settlement negotiations with the Insurers to resolve the
payment obligations of the Insurers under the Maertin Settlement Agreements.
These negotiations were not successful, and on February 2, 2001, the Maertin
Coverage Case was stayed until such time as all parties to the Maertin Coverage
Case agreed or until ordered by the court overseeing the Chapter 11 Case or the
court before which the Maertin Coverage Case was pending.
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Due to the commencement of the Chapter 11 Case, AWI was prohibited from paying,
and the Maertin Plaintiffs were stayed from collecting, the Maertin Settlement
Amount. On March 29, 2001, the Maertin Plaintiffs filed a motion (the "MAERTIN
STAY RELIEF MOTION") seeking to modify the automatic stay to permit them to
enforce their rights under the Maertin Settlement Agreements and, in particular,
to recover the Maertin Settlement Amount from the proceeds of the Maertin
Insurance Policies (the "MAERTIN INSURANCE PROCEEDS"). On December 10, 2001, the
District Court entered an order in connection with the Maertin Stay Relief
Motion (the "MAERTIN STAY RELIEF ORDER"), pursuant to which the Maertin
Plaintiffs were authorized to proceed with their action. On December 18, 2001,
AWI filed a notice of appeal of the Maertin Stay Relief Order to the United
States Court of Appeals for the Third Circuit (the "MAERTIN APPEAL"). On or
about July 2, 2002, AWI filed its brief in the Maertin Appeal. The Maertin
Plaintiffs filed their response brief on November 1, 2002. The Third Circuit has
notified the parties that it intends to decide the merits of the appeal on the
pleadings and does not require oral argument.
On December 26, 2001, AWI filed a motion (the "MAERTIN STAY PENDING APPEAL
MOTION") requesting that the Bankruptcy Court stay the Maertin Stay Relief Order
pending the resolution of the Maertin Appeal. After extensive negotiations with
the Maertin Plaintiffs, AWI and the Maertin Plaintiffs entered into a
stipulation submitted on March 22, 2002, resolving the Maertin Stay Pending
Appeal Motion (the "MAERTIN STAY PENDING APPEAL STIPULATION"). The Maertin Stay
Pending Appeal Stipulation provides that the Maertin Plaintiffs are stayed from
taking any action to collect any claims, judgment or settlement against AWI or
its assets, other than with respect to the Maertin Insurance Policies or the
Maertin Insurance Proceeds.
On or about April 12, 2002, International Insurance Co. ("INTERNATIONAL") filed
an objection to the Maertin Stay Pending Appeal Stipulation on the grounds that
it did not prohibit the Maertin Plaintiffs from seeking recovery from the
Maertin Insurance Proceeds. On May 3, 2002, the Bankruptcy Court entered an
order approving the Maertin Stay Pending Appeal Stipulation (the "MAERTIN STAY
PENDING APPEAL ORDER") over International's objections. On May 13, 2002,
International filed a motion to reconsider the Maertin Stay Pending Appeal
Order, which motion subsequently was denied by the Bankruptcy Court on July 19,
2002.
On or about July 26, 2002, International filed a Notice of Appeal from the
Maertin Stay Pending Appeal Order. On or about July 29, 2002, OneBeacon
Insurance Company also filed a Notice of Appeal from the Maertin Stay Pending
Appeal Order (collectively, with the Notice of Appeal filed by International,
the "INSURERS' APPEAL"). On August 26, 2002, AWI filed a motion to dismiss the
Insurers' Appeal for lack of subject matter jurisdiction (the "MOTION TO
DISMISS") on the grounds that the Maertin Stay Pending Appeal Order was an
interlocutory order. On or about August 29, 2002, AWI and the Insurers entered
into a stipulation staying the briefing on the Insurers' Appeal until the
resolution of the Motion to Dismiss. On September 27, 2002, the Insurers filed a
response to the Motion to Dismiss (the "INSURERS' RESPONSE"). On October 7,
2002, AWI filed a reply to the Insurers' Response. The Motion to dismiss is sub
judice.
On or about November 14, 2001, the Maertin Plaintiffs commenced an action styled
Joan Maertin, et al. v. Armstrong World Industries, Inc., No. 01-CV-5321, in the
United States District Court for the District of New Jersey (the "POSTPETITION
MAERTIN ACTION"). In the Postpetition Maertin Action, the Maertin Plaintiffs
asserted various causes of action against certain insurance companies believed
to have issued to AWI insurance that covers the claims of the Maertin
Plaintiffs. In addition, in the Postpetition Maertin Action, the Maertin
Plaintiffs asserted claims of bad faith and fraud against AWI and certain other
defendants, including an employee of AWI (the "MAERTIN FRAUD CLAIMS"). AWI filed
a motion to dismiss the Postpetition Maertin Action as against AWI and its
employee or, in the alternative, a motion for summary judgment. Although the
court denied AWI's motion to dismiss the Maertin Fraud Claims, it granted AWI's
motion for summary judgment.
AWI and the Maertin Plaintiffs are currently involved in negotiations to resolve
the issues relating to the Postpetition Maertin Action and the Maertin Appeal.
(B) CENTURY ADVERSARY PROCEEDING.
Prior to the commencement of the Chapter 11 Case, AWI entered into a settlement
agreement (the "CENTURY SETTLEMENT AGREEMENT") with Century Indemnity Company,
as successor to Insurance Company of North America ("CENTURY"), to settle
disputes and coverage issues with respect to asbestos personal injury claims
under certain insurance policies (the "CENTURY POLICIES"). The Century
28
Settlement Agreement permits Century to stretch out payments due to a trust
established in connection with the Century Settlement Agreement (the "CENTURY
TRUST"). AWI agreed to indemnify Century against certain claims that may be
asserted directly against Century and that would have been covered under the
Century Policies.
Although Century timely made its first payment to the Century Trust in
accordance with the Century Settlement Agreement, Century failed to make a
substantial payment that was due on or before January 5, 2001 (the "2001
INSTALLMENT PAYMENT"). On February 12, 2001, Century filed a motion which, among
other things, sought to compel AWI to assume the Century Settlement Agreement
(the "CENTURY MOTION TO COMPEL"). On or about February 28, 2001, AWI filed a
response objecting to the Century Motion to Compel and requesting that the
Bankruptcy Court direct Century to make the outstanding 2001 Installment Payment
and continue to make all future payments due to the Century Trust. By order
dated June 13, 2001, the Bankruptcy Court denied the Century Motion to Compel
without prejudice and ordered Century to make payments due to the Century Trust.
However the Bankruptcy Court did not rule on the dispute between the parties as
to whether the Century Settlement Agreement is an executory contract. On June
21, 2001, Century remitted the 2001 Installment Payment to the Century Trust.
On or about January 3, 2002, Century commenced a proceeding (the "CENTURY
ADVERSARY PROCEEDING") against AWI, the CCR (as defined below) and Chase Bank of
Texas, N.A., as trustee, pursuant to which Century sought a declaration that (i)
Century need not make further payments due under the Century Settlement
Agreement, (ii) AWI must indemnify Century for certain claims asserted against
Century in an action pending in federal district court, and (iii) Century may
offset any indemnification claim against AWI against payments required to be
made by Century to the Century Trust (the "CENTURY COMPLAINT").
On August 29, 2001, Century filed a proof of claim (the "CENTURY PROOF OF
CLAIM") in the Chapter 11 Case pursuant to which Century asserted that it holds
a secured claim against AWI's estate in an unliquidated amount and that its
claim is secured by payments under a settlement agreement. On February 6, 2002,
AWI filed an objection to the Century Proof of Claim pursuant to section
502(e)(1)(B) of the Bankruptcy Code. On or about March 3, 2002, the Bankruptcy
Court entered an order granting Century's motion to consolidate the Century
Adversary Proceeding with the objection.
On or about February 6, 2002, AWI filed a Motion to Dismiss (the "CENTURY MOTION
TO DISMISS") against Century. Following the Bankruptcy Court's denial of the
Century Motion to Dismiss, AWI filed its answer, affirmative defenses, and
counterclaim (the "CENTURY ANSWER") to the Century Complaint on or about June
27, 2002. On or about October 24, 2002, Century filed a Motion to Dismiss the
Counterclaim asserted in the Century Answer (the "CENTURY MOTION TO DISMISS
COUNTERCLAIM"). AWI filed a response to the Century Motion to Dismiss
Counterclaim by November 21, 2002.
On or about November 12, 2002, the CCR filed its answer to the Century
Complaint. In such answer, the CCR asserted certain cross claims against AWI.
These cross claims, and AWI's counterclaims against the CCR in the Century
Adversary Proceeding, are discussed more fully in Section IV.C.8(c), entitled,
"THE CHAPTER 11 CASE - Significant Events During the Chapter 11 Case -
Litigation Involving the Center for Claims Resolution - The CCR's Cross Claims,
and AWI's Counterclaims, in the Century Adversary Proceeding." The Century
Adversary Proceeding has now been consolidated with the CCR Preference
Litigation. See Section IV.C.8(b), entitled "THE CHAPTER 11 CASE - Significant
Events During the Chapter 11 Case - Litigation Involving the Center for Claims
Resolution - The CCR Preference Litigation."
(C) LIBERTY MUTUAL ARBITRATION/LITIGATION.
AWI and Liberty Mutual Insurance Company ("LIBERTY MUTUAL") are involved in (i)
a pending alternative dispute resolution ("ADR") proceeding under the Agreement
Concerning Asbestos Related Claims dated June 19, 1985 (the "WELLINGTON
AGREEMENT") and (ii) a pending lawsuit in the United States District Court for
the Eastern District of Pennsylvania (the "PENNSYLVANIA LAWSUIT"). Both
proceedings relate to disputes about insurance coverage for Asbestos Personal
Injury Claims.
In the ADR, which was initiated in 1996, AWI is seeking a ruling that a
substantial majority of the Asbestos Personal Injury Claims that have been
asserted against it are "non-products" or general liability claims, which are
not within the definition of "products" or "completed operations hazards," as
those terms are defined in the insurance policies that Liberty Mutual issued to
29
AWI for the period from 1973 through 1981. The Liberty Mutual policies that were
in effect from 1973 through 1976 provide $40 million in coverage, plus defense
costs, for settlements and judgments incurred in connection with non-products
claims. The Liberty Mutual policies in effect for the period from 1977 through
1981 have no aggregate limit for non-products claims.
On January 29, 2002, a final judgment was issued in AWI's favor at the
conclusion of the trial phase of the ADR. Liberty Mutual subsequently appealed
from that final judgment to a panel of three appellate arbitrators pursuant to
the Wellington Agreement's ADR rules. The ADR appeal has been fully briefed.
Oral argument in the ADR appeal was originally scheduled to take place on
October 8, 2002, but that date was postponed because one of the appellate
arbitrators needed to be replaced. Oral argument has been rescheduled to take
place on March 11, 2003.
In the Pennsylvania Lawsuit, which was filed on July 1, 2002, AWI is seeking a
declaratory judgment with respect to certain issues concerning the Liberty
Mutual policies in effect from 1977 through 1981 that were not resolved in the
pending ADR. These issues include: (i) Liberty Mutual's relatively recent effort
to obtain reformation of the deductible and aggregate limit provisions of its
policies in effect from 1977 through 1981 to make them apply to all Asbestos
Personal Injury Claims and not, as written, only to products and completed
operations hazard claims; (ii) Liberty Mutual's relatively recent assertion that
all of the Asbestos Personal Injury Claims constitute a single occurrence for
purposes of the per-occurrence limits of its policies; (iii) the manner in which
AWI is entitled under the Wellington Agreement to expand its coverage block so
as to obtain coverage from Liberty Mutual's 1977 policy; and (iv) disputes about
the extent to which, if at all, Liberty Mutual will be entitled to collect
additional premiums in the event that it provides coverage for Asbestos Personal
Injury Claims under its policies in effect from 1977 through 1981.
On July 18, 2002, Liberty Mutual filed a motion with the Bankruptcy Court
requesting that the automatic stay be modified to allow it to file counterclaims
against AWI in the Pennsylvania Lawsuit ("LIBERTY MUTUAL'S STAY RELIEF MOTION").
Specifically, Liberty Mutual sought permission to file counterclaims setting
forth its position on some of the issues with respect to which AWI is seeking a
declaratory judgment in the Pennsylvania Lawsuit. AWI has not objected to
Liberty Mutual's request to file these proposed counterclaims. Liberty Mutual
also sought permission to file other counterclaims which, in the view of AWI,
would allow Liberty Mutual improperly to re-litigate certain issues that have
already been resolved against it in the trial phase of the ADR and are now on
appeal to the three appellate arbitrators, and AWI has objected to these
proposed counterclaims on that basis. On August 1, 2002, the Bankruptcy Court
adjourned the hearing on Liberty Mutual's Stay Relief Motion until January 24,
2003, at which time it has requested that AWI and Liberty Mutual provide a
report concerning the status of the ADR appeal. That hearing has since been
adjourned to May 13, 2003.
Pursuant to a stipulation between Liberty Mutual and AWI, the Pennsylvania
Lawsuit has been temporarily suspended because the Bankruptcy Court has not yet
ruled on Liberty Mutual's Stay Relief Motion.
(D) INSURANCE COVERAGE FOR ASBESTOS PROPERTY DAMAGE CLAIMS.
AWI has approximately $397 million in available insurance coverage to pay
asbestos-related property damage claims. Of this amount, approximately $37
million is available under primary policies issued to AWI from 1942 to 1981,
although slightly less than $7 million of this coverage was issued by a
now-insolvent insurer. There is approximately $15 million in remaining excess
coverage under AWI policies from 1960 to 1966. Further, under policies issued to
AWI after 1976, there also is approximately $345 million in available excess
coverage that is subject to combined limits applicable to both bodily injury and
property damage claims.
8. LITIGATION INVOLVING THE CENTER FOR CLAIMS RESOLUTION.
(A) SAFECO/CCR LITIGATION.
Prior to the Commencement Date, AWI was a member of The Center for Claims
Resolution (the "CCR"). The CCR was formed in 1988 by AWI and certain other
corporations (the "CCR MEMBERS") in order to have an agent to administer, settle
and manage all asbestos-related personal injury claims asserted against the CCR
Members. On or about March 28, 2000, Safeco Insurance Company of America
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("SAFECO") issued a performance bond in favor of the CCR (the "SAFECO BOND"),
which related to certain group settlement agreements to resolve asbestos-related
personal injury claims that were negotiated by the CCR on AWI's behalf.
Concurrently with the execution of the Safeco Bond, AWI executed an indemnity
agreement in favor of Safeco through which AWI could become liable to Safeco for
all losses and expenses incurred by Safeco arising out of or relating to the
Safeco Bond.
On or about October 27, 2000, Safeco notified the CCR and AWI that it intended
to cancel the Safeco Bond on February 28, 2001. The CCR issued a written demand
on Safeco demanding payment on the Safeco Bond on or about February 6, 2001.
Safeco subsequently commenced an adversary proceeding against the CCR seeking to
enjoin the CCR from drawing on the Safeco Bond. By order dated March 8, 2001,
the Bankruptcy Court dismissed such adversary proceeding on the grounds that
Safeco lacked standing to seek such relief.
On or about April 30, 2001, AWI commenced an adversary proceeding against Safeco
and the CCR (the "SAFECO/CCR ADVERSARY PROCEEDING") to enjoin Safeco and the CCR
from taking any action with respect to the Safeco Bond. The District Court is
presiding over the Safeco/CCR Adversary Proceeding. On or about February 27,
2002, the District Court consolidated the Safeco/CCR Adversary Proceeding with
similar adversary proceedings commenced by USG Corporation and Federal-Mogul
Corporation (the "CONSOLIDATED CCR PROCEEDINGS").
The parties completed discovery in the Consolidated CCR Proceedings in August
2002 and have filed cross-motions for summary judgment with respect to the issue
of whether the CCR is entitled to draw on the Safeco Bond. The briefing with
respect to the motions for summary judgment filed in connection with this phase
of the Consolidated Safeco/CCR Adversary Proceeding was completed by the parties
on September 27, 2002. The District Court has not yet ruled on the cross-motions
for summary judgment. To the extent the CCR is permitted to draw on the Safeco
Bond, any reimbursement claim by Safeco against AWI will constitute an "Asbestos
PI Contribution Claim" and will be channeled to the Asbestos PI Trust provided
that the proceeds of the Safeco Bond are used by the CCR to pay Asbestos
Personal Injury Claims. It is AWI's expectation that, if the CCR is permitted to
draw on the Safeco Bond, the CCR will be required to use such proceeds to pay
Asbestos Personal Injury Claims.
On December 5, 2002, AWI filed a motion for leave to amend its complaint. The
proposed amended complaint adds counts seeking (1) declaratory and injunctive
relief establishing that the Safeco Bond, if drawn, may only be used to pay
certain Asbestos Personal Injury Claim obligations of AWI authorized by
agreements between the parties and the law; (2) a constructive and/or express
trust requiring the CCR to use any proceeds from the Safeco Bond that it is able
to draw for the benefit of AWI; (3) avoidance of the transfer of the Safeco Bond
as a fraudulent transfer under state law and the Bankruptcy Code; and (4) an
order requiring the CCR to turn over to AWI any indemnity funds paid by AWI to
the CCR that were not paid out to asbestos claimants providing releases of
claims against AWI. The Court has not yet ruled on this motion. The special
master appointed by the District Court has recommended that the District Court
grant such motion. The CCR has filed an objection to such recommendation, and
the parties are awaiting a decision by the District Court
(B) CCR PREFERENCE LITIGATION.
Between September 7, 2000 and December 6, 2000 (the 90-day period prior to the
Commencement Date), AWI transferred and paid to the CCR the aggregate sum of
approximately $93.9 million in payment of invoices issued to AWI by the CCR on
July 5, 2000, August 3, 2000 and September 5, 2000. On October 8, 2002, AWI
commenced an adversary proceeding against the CCR seeking to avoid and recover
these payments pursuant to sections 547 and 550 of the Bankruptcy Code (the "CCR
PREFERENCE CLAIM"). The complaint also seeks to disallow all claims of the CCR
against AWI in the event that the Bankruptcy Court finds that the payments are
recoverable and the CCR fails to reimburse AWI for the transfers.
On November 15, 2002, the CCR served its Answer and Affirmative Defenses to the
CCR Preference Claim. This claim has now been consolidated with the Century
Adversary Proceeding for scheduling purposes. A joint motion has been filed by
AWI and the CCR seeking to extend the current discovery cut-off of May 2, 2003
to July 1, 2003.
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(C) THE CCR'S CROSS CLAIMS, AND AWI'S COUNTERCLAIMS, IN THE
CENTURY ADVERSARY PROCEEDING.
The CCR alleges that AWI signed certain agreements in which it allegedly
assigned to the CCR certain rights to insurance and insurance proceeds related
to asbestos-related personal injury claims. Stemming from those alleged
assignments, the CCR has asserted four cross-claim counts against AWI in the
Century Adversary Proceeding. In its cross-claims, the CCR seeks (1) declaratory
and injunctive relief establishing that the CCR has an absolute assignment of
past, present and future proceeds of certain AWI insurance policies and the
proceeds of the Century Trust and a similar trust established on AWI's behalf by
Travelers Indemnity Company and Travelers Casualty & Surety Company of America
(formerly known as The Aetna Casualty & Surety Company) (the "INSURANCE AND
TRUST PROCEEDS"); (2) declaratory and injunctive relief establishing that it is
the beneficiary of an express trust of the Insurance and Trust Proceeds; (3)
declaratory and injunctive relief establishing that it is the beneficiary of a
constructive trust of the Insurance Trust and Proceeds; and (4) declaratory
relief establishing an equitable lien on the Insurance Trust and Proceeds on the
CCR's behalf.
On December 5, 2002, AWI answered the CCR's cross-claims and asserted
counterclaims against the CCR. AWI seeks to avoid the alleged transfer of the
Insurance and Trust Proceeds and the Safeco Bond as a fraudulent transfer under
state law and the Bankruptcy Code. AWI also seeks avoidance of any transfer of
interest in rights to insurance or insurance proceeds. The CCR has filed a
motion to dismiss AWI's claims of fraudulent transfer relating to the Safeco
Bond. The motion has been fully briefed and is currently set for hearing on
April 4, 2003.
9. OTHER LITIGATION.
(A) EMC ADVERSARY PROCEEDING.
On or about October 16, 2001, AWI filed a complaint against EMC Corporation
("EMC"), which sought to avoid, pursuant to sections 549(a) and 550 of the
Bankruptcy Code, certain unauthorized transfers of property of AWI's estate made
after the Commencement Date (the "EMC ADVERSARY PROCEEDING"). The EMC Adversary
Proceeding related to AWI's postpetition payment of a prepetition invoice it had
received from EMC for a computer product package. Pursuant to the EMC Adversary
Proceeding, AWI sought to recover the postpetition payment from EMC on the
grounds that such payment was not authorized by the Bankruptcy Code or the
Bankruptcy Court. After engaging in extensive negotiations, AWI and EMC agreed
to resolve the EMC Adversary Proceeding pursuant to a settlement agreement (the
"EMC SETTLEMENT AGREEMENT"), which requires EMC to pay to AWI, within ten (10)
days after receipt of Bankruptcy Court approval, the aggregate sum of
$230,000.00 (Two Hundred Thirty Thousand Dollars and 00/100 Cents) (the "EMC
SETTLEMENT AMOUNT") in full and final satisfaction of all claims that were or
could have been asserted by AWI in the EMC Adversary Proceeding. The EMC
Settlement Agreement further provides that EMC shall be deemed to have withdrawn
any proof of claim it filed in the Chapter 11 Case.
On February 24, 2003, the Bankruptcy Court entered an order approving and
authorizing the EMC Settlement Agreement. AWI has received payment in full of
the EMC Settlement Amount.
(B) AVOIDANCE ACTIONS.
The two-year period by which AWI must commence avoidance actions under sections
544, 547, and 548 of the Bankruptcy Code expired on December 6, 2002. Throughout
the course of the Chapter 11 Case, AWI has continued to investigate prepetition
transactions and assess whether such transactions should be avoided as
preferences under section 547 of the Bankruptcy Code or as fraudulent transfers
in accordance with section 544 or 548 of the Bankruptcy Code. On October 10,
2002, AWI filed a motion with the Bankruptcy Court requesting authorization to
enter into tolling agreements with parties alleged to have received prepetition
transfers from AWI in order to afford AWI sufficient time to complete its
analysis of such prepetition transactions and discuss such analysis with the
Committees and the Future Claimants' Representative. By order dated November 1,
2002, the Bankruptcy Court approved the motion and authorized AWI to enter into
the tolling agreements.
Thereafter, and prior to December 6, 2002, AWI completed its analysis of the
prepetition transfers made by AWI, including payments made by AWI to creditors
within the ninety (90) days preceding the Commencement Date. AWI discussed this
32
analysis with counsel for the Unsecured Creditors' Committee, the Asbestos PI
Claimants' Committee, and the Future Claimants' Representative. As a result of
these discussions, and with the approval of these constituencies, AWI
determined, other than with respect to the CCR Preference Claim, the fraudulent
transfer claims asserted against the CCR in the Century Adversary Proceeding and
the Safeco/CCR Litigation (see Section IV.C.8, entitled, "THE CHAPTER 11 CASE -
Significant Events During the Chapter 11 Case - Litigation Involving the Center
for Claims Resolution"), and one preference action against a former supplier,
not to pursue other avoidance actions.
(C) THE BARNES LITIGATION
In December of 2002, Herbert Friese, individually, and Diana Biehn and Lisa
Barnes Schuyler, as executrixes of the estate of Patricia Barnes (collectively,
the "BARNES PLAINTIFFS"), instituted an action against AWI in the United States
District Court for the District of New Jersey (the "NEW JERSEY DISTRICT Court")
styled as Diana Biehn and Lisa Barnes Schuyler, Executrixes of the Estate of
Patricia Barnes, and Herbert Friese, Individually v. Armstrong World Industries,
Inc., No. 1:02cv05109 (the "BARNES CASE").
In their complaint in the Barnes Case (the "BARNES COMPLAINT"), the Barnes
Plaintiffs allege that Patricia Barnes ("BARNES") was diagnosed with lung cancer
on March 9, 2001, and died some unspecified date thereafter. The Barnes
Complaint further alleges that, in or about 1970, AWI designed, manufactured,
assembled and/or distributed ceiling tiles that were coated with Aroclor 1254, a
substance containing polychlorinated biphenyls. The Barnes Complaint further
asserts that, as a result of alleged negligence on the part of AWI in the
design, manufacture, assembly and/or distribution of such ceiling tiles, Barnes
contracted cancer and a variety of injuries and incurred expenses.
Barnes' counsel filed a proof of claim on Barnes' behalf (the "BARNES CLAIM") in
the Chapter 11 Case. Although the Barnes Claim was not filed as administrative
expense claim, it alleges that Barnes' claim against AWI arose after the
Commencement Date, in March of 2001. Barnes was one of the Maertin Plaintiffs
who alleged in a prepetition action before the New Jersey Court (the
"PREPETITION NEW JERSEY ACTION") that they had sustained injuries arising from
exposure to polychlorinated biphenyls allegedly found on ceiling material
purportedly manufactured by AWI. See Section IV.C.7(a), entitled, "THE CHAPTER
11 CASE - Significant Events During the Chapter 11 Case - Insurance Coverage
Issues - Maertin Litigation." The allegations Barnes made in the Prepetition New
Jersey Action are virtually identical allegations to those asserted in the
Barnes Case. Barnes' claim in the Prepetition New Jersey Action, however, was
dismissed prior to the time at which the Maertin Plaintiffs entered into the
Maertin Settlement Agreements with AWI.
On or about January 31, 2003, AWI filed an objection (the "BARNES OBJECTION") to
the Barnes Claim, pursuant to which AWI requests that the Bankruptcy Court
disallow the Barnes Claim on various grounds, including, but not limited to, the
following: (i) the Barnes Claim does not attach sufficient documentation so as
to establish its prima facie validity under the Bankruptcy Rules, (ii) some or
all of the Barnes Claim is barred by applicable statutes of limitations and the
doctrine of laches, (iii) AWI did not manufacture or market Aroclor 1254, the
chemical product that is alleged to have caused Barnes' injury, and (iv) any
damages sustained by Barnes were directly and proximately caused by the acts or
omissions of entities other than AWI, not under the control of AWI and for which
AWI is not legally responsible. In the Barnes Objection, AWI requests that, to
the extent the Barnes Claim is not disallowed, it should be treated as a
prepetition, general unsecured claim. In the Barnes Objection, AWI also seeks
the entry of an Order finding that the commencement of the Barnes Case
constituted a violation of the automatic stay provisions of section 362(a)(1) of
the Bankruptcy Code and that, accordingly, the Barnes Case is void ab initio.
Contemporaneously with the filing of the Barnes Objection, AWI filed a third
party complaint (the "THIRD PARTY COMPLAINT") against Monsanto Company
("MONSANTO") and Solutia, Inc. ("SOLUTIA"), pursuant to which AWI alleges that
at all times material to the Barnes Case, Monsanto was in the business of
manufacturing, supplying, distributing and/or selling Aroclor 1254 (the product
that is alleged to have caused the injuries sustained by Barnes). Consequently,
in the Third Party Complaint, AWI avers that, to the extent AWI is held liable
for all or a part of any injuries or damages the Barnes Plaintiffs may have
sustained, then Monsanto (and/or Solutia, as Monsanto's assignee) is the party
primarily liable for such injuries and damages, and is liable to AWI by way of
indemnification and/or contribution for such damages.
33
Contemporaneously with the filing of the Barnes Objection and the Third Party
Complaint, AWI also filed a motion in the Barnes Case pursuant to which it seeks
to dismiss, transfer to the Bankruptcy Court, or stay the Barnes Case (the
"BARNES MOTION TO TRANSFER"). Out of an abundance of caution, AWI also filed in
the Bankruptcy Court a motion to transfer the Barnes Case to the Bankruptcy
Court (the "BANKRUPTCY COURT MOTION TO TRANSFER"). The Motion to Transfer
requests that the New Jersey Court dismiss the Barnes Case for failure to state
a claim upon which relief can be granted, or, if a dismissal is not granted, to
transfer the Barnes Case to the Bankruptcy Court. Alternatively, pursuant to the
Motion to Transfer, AWI requests that the New Jersey Court stay the Barnes Case
pending resolution of the Barnes Objection by the Bankruptcy Court.
The Barnes Objection and the Bankruptcy Court Motion to Transfer are currently
scheduled to be heard by the Bankruptcy Court on April 4, 2003.
(D) THE MARKLEY LITIGATION.
On or about August 29, 2001 and July 30, 2002, respectively, two class action
complaints (the "MARKLEY CLASS COMPLAINTS") asserting various federal law claims
under ERISA were filed in the United States District Court for the Eastern
District of Pennsylvania (the "PENNSYLVANIA DISTRICT COURT") by Dean A. Markley,
Michael Resetar, and Lori Shearer (collectively, the "MARKLEY CLASS
PLAINTIFFS"), individually and on behalf of a purported class of similarly
situated individuals who were participants in the Retirement Savings and Stock
Ownership Plan of Armstrong World Industries, Inc. (the "RSSOP") and who ceased
to be employed by AWI as a result of AWI's sale or divestiture of (i) Armstrong
Insulation Products on or about May 31, 2000, or (ii) its Installation Products
Group on or about July 31, 2000. The Markley Class Complaint was filed against
the Retirement Committee of Armstrong World Industries, Inc. (the "RETIREMENT
COMMITTEE"), the RSSOP, Holdings, and certain individual members of the
Retirement Committee (the "INDIVIDUAL DEFENDANTS," and collectively with the
Retirement Committee, the RSSOP, and Holdings, the "ARMSTRONG/MARKLEY
DEFENDANTS"), as well as Mellon Bank, N.A. ("MELLON," and collectively with the
Armstrong Markley Defendants, the "MARKLEY DEFENDANTS"). Each of the Markley
Class Plaintiffs is a former participant in AWI's Share In Success Plan (the
"SIS"). In 1996, the SIS was merged with AWI's Retirement Savings Plan to form
the RSSOP.
In addition to seeking class certification, the Markley Class Plaintiffs alleged
that the Markley Defendants (i) breached fiduciary duties in the administration
and investment of the RSSOP, (ii) breached fiduciary duties in connection with
the 1996 merger of the SIS and the RSP, and (iii) are liable for any breaches by
co-fiduciaries. In addition, the Markley Class Plaintiffs alleged that the
Armstrong/Markley Defendants failed to pay benefits as required by the RSSOP and
failed to follow the terms of the RSSOP.
The Armstrong/Markley Defendants filed answers denying all of the material
allegations in the Markley Class Complaints and interposing affirmative defenses
to the claims asserted therein. In addition, the Armstrong/Markley Defendants
filed a motion to dismiss, pursuant to which the Armstrong/Markley Defendants
sought to dismiss the allegations relating to events that occurred in 1996 and
denied the allegations in the Markley Class Complaints.
On or about February 28, 2003, the Pennsylvania District Court entered an order
consolidating the Markley Class Plaintiffs' cases into a single class action
(the "MARKLEY CLASS ACTION") and certifying a class (the "MARKLEY CLASS")
pursuant to Fed. R. Civ. P. 23(a) and 23(b)(2). The Markley Class is defined as
"All former participants in the [RSSOP] of [AWI] who were separated from [AWI's]
employment as a result of [AWI's] sale or divestiture of (1) Armstrong
Insulation Products (`AIP') on or about May 31, 2000, or (2) its Installation
Products Group (`IPG') on or about July 31, 2000." On or about August 31, 2001,
an omnibus proof of claim (the "MARKLEY CLASS PROOF OF CLAIM") was filed against
AWI's estate on behalf of the Markley Class Plaintiffs and the Markley Class
(collectively, the "MARKLEY CLASS MEMBERS"). The Markley Class Proof of Claim,
which was amended on or about October 1, 2002, alleges claims similar to the
allegations asserted against the Markley Defendants in the Markley Class Action.
The total amount of the claim asserted in the amended Markley Class Proof of
Claim is $3,865,324.53. In addition to the Markley Class Proof of Claim,
approximately 69 proofs of claim totaling approximately $1,390,919.08 were filed
against AWI on behalf of individual members of the Markley Class (the
"INDIVIDUAL MARKLEY PROOFS OF CLAIM," and collectively with the Markley Class
Proof of Claim, the "MARKLEY PROOFS OF CLAIM").
34
After engaging in extensive negotiations, the Defendants and the Markley Class
Members agreed to resolve the Markley Class Members' claims against the
Defendants (the "MARKLEY SETTLEMENT"). Generally speaking, the Markley
Settlement (which is subject to the approval of the Pennsylvania District Court
and the Bankruptcy Court) provides, inter alia, for the Markley Class Proof of
Claim to be deemed to be amended to assert a prepetition, general unsecured
claim against AWI's estate in the aggregate amount of $1 million (the "AMENDED
MARKLEY CLASS PROOF OF CLAIM"). The Amended Markley Class Proof of Claim will be
deemed to consist of individual claims held by the Markley Class Members, each
in an amount not to exceed $10,000. Therefore, if the Markley Settlement is
approved, the Amended Markley Class Proof of Claim will be treated as an Allowed
Convenience Claim in the amount of $1 million in the Chapter 11 Case and,
pursuant to Class 3 of the Plan, will be satisfied by payment of $750,000.00, in
cash, on the earlier of (a) December 15, 2003, or (b) five (5) Business Days
after the Effective Date. Even if AWI amends the Plan to provide for different
treatment for Convenience Claims or to change the definition of Convenience
Claims, the Markley Settlement obligates AWI to pay $750,000 upon the earlier of
(a) December 15, 2003, or (b) five Business Days after the Effective Date, and
AWI will have no obligation or ability to modify the amount payable.
The $750,000.00 payment by AWI, together with payments made by or on behalf of
the Defendants, will create settlement funds (the "MARKLEY SETTLEMENT FUNDS") in
the aggregate amount of $1,465,000.00. The other Markley Settlement Funds will
be paid by National Union Fire Insurance Company of Pittsburgh, Pa., which
operates as an insurer of the Armstrong/Markley Defendants under AWI's director
and officer liability policy, and Mellon. After the deduction of attorneys' fees
and/or expenses, incentive awards to the Markley Class Plaintiffs, and payments
to certain Markley Class Members in exchange for a release, the Markley
Settlement Funds will be allocated on a pro rata basis in accordance with a plan
of distribution to be approved by the Pennsylvania District Court (the "MARKLEY
PLAN OF DISTRIBUTION") to a "Match Account" established for each member of the
Markley Class in the RSSOP. The allocations will be made by the RSSOP and the
Retirement Committee in accordance with a schedule of allocation to be provided
by counsel to the Markley Class on which the RSSOP and the Retirement Committee
may conclusively rely. After such allocations are made, the RSSOP may make lump
sum distributions or further transfers of such individual accounts to, or IRA
rollover accounts or other pension accounts for the benefit of, Markley Class
Members, all in accordance with the terms of the RSSOP and the Markley Plan of
Distribution.
Upon approval of the Markley Settlement, counsel to the Markley Class will seek
to have the Individual Markley Proofs of Claim withdrawn with prejudice. To the
extent that the holders do not voluntarily withdraw such claims, because the
Markley Class is a non-opt out class and, accordingly, the Markley Class Members
are bound by the terms of the Markley Settlement, AWI will object to the
Individual Markley Proofs of Claim as duplicative and having been superseded by
the Amended Markley Class Proof of Claim. In addition, the claims asserted by
the Markley Class members in the Markley Class Action, whether asserted
individually or in a representative capacity, will be dismissed with prejudice.
Pursuant to the Markley Settlement, each member of the Markley Class will
receive a Class 3 (Convenience Claim) Ballot in an amount equal to his or her
pro rata share of the Markley Settlement Amount, based upon information provided
to AWI by the Markley Class Counsel. No Ballot sent to a Markley Class Member
will have a voting amount in excess of $10,000.
10. SETTLEMENT OF CLAIMS.
In order to enable AWI to efficiently and economically settle numerous claims
against its estate and, thus, limit its potential liability on such claims, the
Bankruptcy Court entered an order (the "CLAIMS SETTLEMENT ORDER") on June 3,
2002, pursuant to which the Bankruptcy Court approved various guidelines and
procedures with respect to the compromise and settlement of disputed claims
asserted both by and against AWI. Specifically, the Claims Settlement Order
authorizes AWI to settle certain prepetition claims in a manner substantially
consistent with its prepetition practice and without the need for obtaining
Bankruptcy Court approval of certain settlements on a case-by-case basis.
The claims subject to the Claims Settlement Order include, but are not limited
to, (i) claims that have been asserted against AWI's estate by current or former
employees for alleged wrongful termination or other contractual, statutory, and
tort-based employment claims allegedly occurring prior to the Commencement Date,
(ii) tax refund claims asserted by AWI against taxing authorities, (iii) tax
assessment claims asserted against AWI by taxing authorities, and (iv) general
35
unsecured claims. Asbestos Personal Injury Claims and claims asserted by or
against any of AWI's "insiders" (as such term is defined in section 101(31) of
the Bankruptcy Code) are not subject to the Claims Settlement Order.
Pursuant to the Claims Settlement Order, AWI is required to file quarterly
reports with the Bankruptcy Court detailing all settlements of claims into which
it has entered during such quarter.
11. SETTLEMENT AND RELEASE OF INTERCOMPANY CLAIMS.
As of the Commencement Date, Holdings and AWWD asserted certain intercompany
claims against AWI, and AWI asserted certain intercompany claims against
Holdings or AWWD, as a result of various relationships and transactions arising
out of Holdings' establishment in 2001 as a holding company for AWI and their
subsequent joint operation. Moreover, since the Commencement Date, additional
claims have been or could be asserted as a result of such relationships and
transactions by Holdings or AWWD against AWI or by AWI against Holdings or AWWD.
In the ordinary course of business, such intercompany claims have been recorded
on the books and records of Holdings, AWWD and AWI, and, assuming that all such
intercompany claims are valid, the net intercompany claim so recorded is in
favor of Holdings in the approximate amount of $12 million. In consideration of,
among other things, AWI's agreement under the Plan to fund the reasonable fees
and expenses associated with the Holdings Plan of Liquidation, the treatment of
Holdings, AWWD, and their respective officers and directors as PI Protected
Parties under the Asbestos PI Permanent Channeling Injunction, the simultaneous
release by AWI of any claims (known and unknown) AWI has against Holdings and
AWWD, and the proposed issuance of the New Warrants to AWWD, and to avoid
potentially protracted and complicated proceedings to determine the exact
amounts, nature and status under the Plan of all such claims and to facilitate
the expeditious consummation of the Plan and the completion of Holdings' winding
up, Holdings and AWWD will, effective upon and subject to the occurrence of the
Effective Date, release all such intercompany claims (known and unknown) against
AWI or any of AWI's subsidiaries.
12. DEPARTMENT OF LABOR INVESTIGATION.
After an audit by the United States Department of Labor (the "DOL"), AWI was
informed that the DOL is challenging the validity of the use of certain
contributions made by AWI to the Armstrong Employee Stock Ownership Plan (the
"ESOP") to fund debt payments as provided for by the ESOP. AWI is cooperating
with the DOL to address its questions and concerns about the transactions. AWI
believes that it fully complied with all applicable laws and regulations
governing the ESOP.
The DOL has not filed a proof of claim in the Chapter 11 Case. AWI signed a
tolling agreement with the DOL in which AWI agreed that it would not use any
delay in filing a late proof of claim during the period from October 17, 2002 to
March 1, 2003 as an argument against any attempt by the DOL to file an untimely
proof of claim, but AWI reserved its rights to object to any claim on the basis
that it was untimely as of October 17, 2002 or as a result of any delay by the
DOL in filing the claim after March 1, 2003. AWI intends to seek Bankruptcy
Court approval of any extension of the tolling agreement, if agreed to by AWI.
13. DELISTING OF HOLDINGS' COMMON STOCK AND CERTAIN OF AWI'S DEBT
SECURITIES FROM THE NEW YORK STOCK EXCHANGE.
Following the filing of the Plan, the New York Stock Exchange, Inc. determined
to suspend trading and pursue delisting of Holdings' common stock (NYSE: ACK)
and of AWI's 9.75% Debentures due April 15, 2008 and 7.45% Senior Quarterly
Interest Bonds due October 15, 2038 (NYSE: AKK). The common stock of Holdings is
now quoted on the OTC (over-the-counter) Bulletin Board ("OTCBB") with the
ticker symbol of ACKHQ. The OTCBB is a regulated quotation service that displays
real-time quotes, last sale prices, and volume information in OTC equity
securities. Information about the OTCBB may be found on the Internet at
www.otcbb.com.
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V. THE PLAN OF REORGANIZATION
AWI believes that (i) through the Plan, Claimants will obtain a substantially
greater recovery from its estate than the recovery that would be available if
AWI's assets were liquidated under chapter 7 of the Bankruptcy Code, and (ii)
the Plan will afford AWI the opportunity and ability to continue in business as
a viable going concern and thereby preserve ongoing employment for AWI's
employees.
The Plan is annexed hereto as Exhibit "A" and forms a part of this Disclosure
Statement. The summary of the Plan set forth below is qualified in its entirety
by the more detailed provisions set forth in the Plan.
A. CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS IN AWI.
The Plan classifies Claims and AWWD's Equity Interests in AWI separately and
provides different treatment for different classes of Claims and AWWD's Equity
Interests in accordance with the Bankruptcy Code. As described more fully below,
the Plan provides, separately for each class, either that Claims are unimpaired
or that holders of Claims and AWWD's Equity Interests will receive various types
of consideration (e.g., Available Cash, Plan Notes and/or 144A Offering
Proceeds, New Warrants and New Common Stock (collectively, the "REORGANIZATION
CONSIDERATION")) or no distribution, thereby giving effect to the different
rights of the holders of Claims of each class and AWWD.
1. ADMINISTRATIVE EXPENSES.
"ADMINISTRATIVE EXPENSES" are Claims constituting a cost or expense of
administration of the Chapter 11 Case allowed under section 503(b) of the
Bankruptcy Code. Such Claims include any actual and necessary costs and expenses
of preserving the estate of AWI, any expenses of professionals under sections
330 and 331 of the Bankruptcy Code, any actual and necessary costs and expenses
of operating the business of AWI, any indebtedness or obligations incurred or
assumed by AWI, as debtor in possession, in connection with the conduct of its
business, the acquisition or lease of property, the rendition of services, any
allowance of compensation and reimbursement of expenses to the extent allowed by
a Final Order under section 330 of the Bankruptcy Code, and fees or charges
assessed against the estate of AWI under section 1930 of title 28 of the United
States Code.
(A) ADMINISTRATIVE EXPENSE BAR DATE
By order dated ___________ (the "ADMINISTRATIVE EXPENSE BAR DATE ORDER"), the
Bankruptcy Court established a deadline for the filing of certain Administrative
Expenses against AWI's estate. THE DEADLINE FOR THE FILING OF ADMINISTRATIVE
EXPENSES OF THE TYPE DESCRIBED BELOW IS 5:00 P.M., NEW YORK CITY TIME, ON
_____________ (THE "ADMINISTRATIVE EXPENSE BAR DATE"), THE DATE THAT IS FIVE (5)
BUSINESS DAYS AFTER THE DATE SCHEDULED FOR THE COMMENCEMENT OF THE HEARING ON
CONFIRMATION OF THE PLAN. IF A HOLDER OF AN ADMINISTRATIVE EXPENSE IS REQUIRED
TO FILE A PROOF OF ADMINISTRATIVE EXPENSE AND FAILS TO FILE PROOF OF ITS
ADMINISTRATIVE EXPENSE SO THAT IT IS ACTUALLY RECEIVED AT THE ADDRESS SPECIFIED
BELOW BEFORE THE ADMINISTRATIVE EXPENSE BAR DATE, THEN SUCH ADMINISTRATIVE
EXPENSE WILL BE BARRED AND DISCHARGED, AND THE HOLDER OF SUCH ADMINISTRATIVE
EXPENSE WILL HAVE NO RIGHT TO ASSERT SUCH ADMINISTRATIVE EXPENSE AGAINST AWI,
AWI'S ESTATE, OR REORGANIZED AWI.
Not all holders of Administrative Expenses are required to file a proof of
Administrative Expense. Pursuant to the Administrative Expense Bar Date Order,
only an Entity asserting any of the following types of Claims as an
Administrative Expense must file proof of such Administrative Expense:
>> Any Administrative Expense representing personal
injury, property damage, or other tort claims
against AWI, excluding Asbestos Personal Injury
Claims.
>> Any Administrative Expense for breach of an
obligation - contractual, statutory or otherwise -
by AWI, including any environmental liability
(other than any environmental liability with
respect to property that is currently owned or
operated by AWI);
37
>> Any Administrative Expense for amounts incurred by
AWI after the Commencement Date in the ordinary
course of AWI's business if payment of such
amounts is alleged to be overdue by at least
(sixty (60) days as of the Confirmation Date.
>> Any Administrative Expense incurred by AWI outside
the ordinary course of its business or on other
than ordinary business terms, except to the extent
the incurrence of such Administrative Expense was
approved by the Bankruptcy Court (such as the DIP
Credit Facility Claim or any Claims under any
hedging agreement entered into after the
Commencement Date) or represents fees and expenses
of professionals arising under sections 330, 331,
503(b)2, 503(b)(3), 503(b)(4), or 503(b)(5) of the
Bankruptcy Code. AWI believes that any obligation
arising under a contract entered into after the
Commencement Date (other than an indemnification
or reimbursement obligation or an obligation
arising out of an alleged breach of such contract)
or any obligation to pay for goods or services
received after the Commencement Date is an
obligation arising in the ordinary course of
business and pursuant to ordinary business terms,
and the holder of any such Administrative Expense
does not need to file a proof of Administrative
Expense unless such Administrative Expense is
alleged to be overdue by at least sixty (60) days
as of the Confirmation Date.
>> Any Administrative Expense that would not
ordinarily be reflected as a payable on AWI's
books and records or as a liability on AWI's
financial statements.
>> Any Administrative Expense representing an
employee claim against AWI, other than a claim for
wages, benefits, pension or retirement benefits or
expense reimbursement by an employee who is
employed by AWI as of the Administrative Expense
Bar Date or a grievance claim under any collective
bargaining agreement to which AWI is a party.
If, however, a claim is of the type specified above and the holder of such
alleged Administrative Expense has asserted such claim in an action commenced
against and served on AWI on or before [DATE OF ENTRY OF ADMINISTRATIVE EXPENSE
BAR DATE ORDER] in which such holder alleges that AWI's liability is predicated
upon the operation of AWI's business after the Commencement Date or otherwise
alleges that such liability should be accorded Administrative Expense status,
such holder of an alleged Administrative Expense is not required to file a proof
of Administrative Expense.
A form of proof of Administrative Expense may be obtained by downloading it from
the Internet site maintained by AWI in connection with the Plan
(www.armstrongplan.com) or by calling AWI's claims agent, Trumbull, at (860)
687-3806.
All proofs of Administrative Expense must be mailed, hand delivered, or
delivered by courier service to AWI's claims agent, Trumbull, at the following
address so that they are actually received by Trumbull at one of the following
addresses by _________________:
BY HAND DELIVERY OR COURIER: BY MAIL:
4 Griffin Road North P.O. Box 1117
Windsor, CT 06095 Windsor, CT 06095
(Attn: Armstrong World Industries,Inc.)(Attn: Armstrong World Industries,Inc.)
Trumbull will not accept proofs of Administrative Expense by facsimile or any
electronic means.
38
(B) ALLOWANCE OF ADMINISTRATIVE EXPENSES
The method by which an Administrative Expense becomes Allowed under the Plan
differs depending upon the type of Administrative Expense that is being
asserted.
Pursuant to section 1.8(c)(i) of the Plan, each Administrative Expense that
represents an actual or necessary cost or expense of preserving AWI's estate or
operating the business of AWI for payment of goods, services, wages, or benefits
or for credit extended to AWI, as debtor in possession, will be Allowed to the
extent that such postpetition liability is reflected on AWI's books and records
as of the Effective Date. Pursuant to section 2.1 of the Plan, these
Administrative Expenses (which are intended to represent the day-to-day
obligations of AWI to its vendors, employees, and parties to contracts) will be
assumed and paid by Reorganized AWI in accordance with the terms and conditions
of the particular transactions and any agreements relating thereto.
Also included within the Administrative Expenses Allowed pursuant to section
1.8(c)(i) are the DIP Credit Facility Claims. The "DIP CREDIT FACILITY CLAIM" is
the Claim of the Lenders arising under the DIP Credit Facility. See Section
IV.C.3, entitled, "THE CHAPTER 11 CASE -- Significant Events During the Chapter
11 Case -- The DIP Credit Facility," for a description of the DIP Credit
Facility. Section 2.3 of the Plan provides that, on the Effective Date, the DIP
Credit Facility Claim will be paid, in full, in cash. Because the DIP Credit
Facility has been modified so that the Commitment is only available for the
issuance of the Letters of Credit, AWI does not expect any amounts to be due and
owing to the Lenders on the Effective Date. AWI does expect, however, that
approximately $40.0 million in face amount of Letters of Credit issued on AWI's
behalf will be outstanding as of the Effective Date. Section 2.3 of the Plan
provides that, unless otherwise agreed to by the Lenders, to the extent that any
Letters of Credit issued pursuant to the DIP Credit Facility remain outstanding
on the Effective Date, AWI will pay to the Agent Bank, for the ratable benefit
of the Lenders, cash in an amount equal to the face amount of such Letters of
Credit, which will be held by the Agent Bank for the repayment of all amounts
due in respect of such Letters of Credit. On the Effective Date, AWI expects to
replace any outstanding Letters of Credit under the DIP Credit Facility with
Letters of Credit issued under an exit facility to which Reorganized AWI will be
a party. Accordingly, AWI does not expect to make any payments on account of the
DIP Credit Facility Claim.
Any Administrative Expense that is timely asserted against AWI but disputed by
AWI (whether because AWI disputes that it has liability or because AWI disputes
that such Administrative Expense is entitled to administrative expense priority
under sections 503(b) and 507(a)(i) of the Bankruptcy Code) will only become
Allowed when a court of competent jurisdiction enters an order allowing such
Administrative Expense and such order becomes a Final Order. Moreover, if AWI
disputes that such Administrative Expense is entitled to Administrative Expense
priority, then such Administrative Expense will only become an Allowed
Administrative Expense if and to the extent the Bankruptcy Court determines, by
a Final Order, that it is entitled to administrative expense priority. The
Allowed Amount of any such Administrative Expense will be paid in full, in cash,
as soon as practicable after such Administrative Expense becomes Allowed.
The Bankruptcy Court will fix in the Confirmation Order a date for the filing
of, and a date to hear and determine, all applications for final allowances of
compensation or reimbursement of expenses under section 330 of the Bankruptcy
Code or applications for allowance of Administrative Expenses arising under
section 503(b)(2)-(6) of the Bankruptcy Code. The Allowed Amount of all
Administrative Expenses arising under section 330, 331, 503(b)(2), 503(b)(3),
503(b)(4), 503(b)(5), or 503(b)(6) of the Bankruptcy Code will be paid in full,
in cash, (a) upon the later of (i) the Effective Date and (ii) the date upon
which any such Administrative Expense becomes Allowed or (b) at such later date
or upon such other terms as may be mutually agreed upon between each such
Administrative Expense Creditor and Reorganized AWI. ADMINISTRATIVE EXPENSES
ARISING UNDER SECTION 330 OR 503(B)(2)-(B)(6) OF THE BANKRUPTCY CODE ARE NOT
SUBJECT TO THE ADMINISTRATIVE EXPENSE BAR DATE ORDER.
Aside from payables that are recorded on AWI's books and records and paid in the
ordinary course of business, AWI estimates that, on the Effective Date, it will
have Administrative Expenses that may become Allowed in the following
approximate amounts:
39
NATURE OF CLAIMS ESTIMATED AMOUNT
- ---------------- ----------------
Unpaid fees and expenses of professionals retained in
the Chapter 11 Case................................. $18,200,000
Costs relating to post-reorganization financing..... 3,500,000
DIP Credit Facility Claims.......................... 0.00
Cash posted to secure
repayment of Letters of Credit...................... 0.00
Miscellaneous administrative expenses............... 9,200,000
TOTAL.................................. $ 30,900,000
These amounts exclude any underwriting commissions or other costs incurred in
connection with any 144A Offering.
2. PRIORITY TAX CLAIMS.
"PRIORITY TAX CLAIMS" are those Claims for taxes entitled to priority in payment
under section 507(a)(8) of the Bankruptcy Code. On the Commencement Date, the
Bankruptcy Court authorized AWI to pay most of the types of tax claims that
constitute Priority Tax Claims (with the exception of income taxes). As a
result, most of the Priority Tax Claims have been paid and resolved during the
Chapter 11 Case. AWI estimates that the amount of remaining Priority Tax Claims
that may become Allowed is $30,214.00. The following summarizes the types of
Allowed Priority Tax Claims that comprise AWI's estimate:
Income taxes......................................... $30,164.00
Real and personal property taxes..................... 0.00
Employment and other taxes........................... 50.00
TOTAL.................................. $30,214.00
Under the Plan, each holder of an Allowed Priority Tax Claim will be paid the
Allowed Amount of its Allowed Priority Tax Claim either (a) in full, in cash, on
the latest of (i) the Effective Date, (ii) the date such Allowed Priority Tax
Claim becomes Allowed, and (iii) the date such Allowed Priority Tax Claim is
payable under applicable non-bankruptcy law or (b) upon such other terms as may
be mutually agreed upon between each holder of a Priority Tax Claim and
Reorganized AWI. Although some additional claims have been filed in the Chapter
11 Case asserting an entitlement to treatment as Priority Tax Claims pursuant to
section 507(a)(8) of the Bankruptcy Code, AWI believes that most of these claims
do not represent valid Priority Tax Claims against AWI's estate, either (i)
because AWI is in the process of disputing or settling the asserted tax
liability and believes, ultimately, that such claims will be disallowed, or (ii)
because such claims were erroneously filed as Priority Tax Claims and are not
properly entitled to priority pursuant to section 507(a) of the Bankruptcy Code.
Most notably, the Pennsylvania Department of Revenue (the "PA DOR") filed a
claim in the total estimated amount of $4,264,648.33 for purported sales tax
liability, which claim is the subject of a pending audit. AWI, however, has
significant tax offsets and refund claims currently filed against the PA DOR
that AWI believes will be sufficient to eliminate any liability found as a
result of the audit. Therefore, AWI believes that it will have no further
liability on account of the PA DOR claim. Indeed, AWI is currently in
negotiations with the PA DOR regarding an agreed withdrawal of such claim.
40
3. CLASS 1: PRIORITY CLAIMS.
"PRIORITY CLAIMS" consist of those Claims that are entitled to priority in
accordance with section 507(a) of the Bankruptcy Code, other than an
Administrative Expense, DIP Credit Facility Claim or Priority Tax Claim. Such
Claims include (i) unsecured claims for accrued employee compensation earned
within ninety (90) days prior to the Commencement Date to the extent of $4,650
for each employee and (ii) contributions to employee benefit plans arising from
services rendered within one hundred eighty (180) days prior to the Commencement
Date, but only for each such plan to the extent of (x) the number of employees
covered by such plan multiplied by $4,650, less (y) the aggregate amount paid to
such employees from the estate of AWI for wages, salaries, or commissions.
Because AWI obtained orders from the Bankruptcy Court that allowed AWI to
satisfy its prepetition wage claims and employee benefit obligations during the
pendency of its Chapter 11 Case, AWI believes that no unpaid Priority Claims
exist.
Although some additional claims have been filed in the Chapter 11 Case asserting
an entitlement to treatment as Priority Claims pursuant to section 507(a) of the
Bankruptcy Code, AWI believes that most of these claims do not represent valid
Priority Claims against AWI's estate, as such Claims either (i) assert Claims
for Administrative Expenses, (ii) will be addressed as a result of the
assumption of the underlying agreement to which they relate, (iii) have already
been paid pursuant to an order of the Bankruptcy Court, or (iv) were erroneously
filed as Priority Claims and are not properly entitled to priority pursuant to
section 507(a) of the Bankruptcy Code. The only potentially valid Priority Claim
that has been filed, and has not been already disallowed or reclassified
pursuant to an objection, is that of the U.S. Customs Service, which filed an
unliquidated claim pursuant to section 507(a)(8)(F) for any customs duties, fees
or other charges that may be due and owing with respect to approximately 1,400
unliquidated prepetition entries (the "CUSTOMS CLAIM"). While the validity and
amount of the Customs Claim has not yet been determined, AWI does not currently
believe that it has any liability on account of the Customs Claim.
Pursuant to the Plan, the holder of an Allowed Priority Claim will be paid the
Allowed Amount of its Allowed Priority Claim, in full, in cash, on the later of
the Effective Date and as soon as practicable after the date such Priority Claim
becomes Allowed.
Priority Claims are unimpaired under the Plan.
4. CLASS 2: SECURED CLAIMS.
"SECURED CLAIMS" are the Claims against AWI to the extent of the value of any
interest in property of the estate of AWI securing such Claim, except for the
DIP Credit Facility Claim and the COLI Claims. The class of Secured Claims
includes the Secured Claims of governmental taxing authorities for real and
personal property, the aggregate amount of which totaled $0.00 as of the
Commencement Date. It also includes certain miscellaneous Secured Claims for
items such as utilities and mechanic's liens, the aggregate amount of which
totaled $41,429.00 as of November 15, 2002. Because AWI received authorization
to pay most of its Secured Claims during the course of the Chapter 11 Case, AWI
believes that few valid Secured Claims still exist. One such Claim is the
Secured Claim relating to financing for certain improvements made in connection
with AWI's facility in St. Helens, Oregon. Such Claim, which has an outstanding
principal balance of $74,145, will be reinstated on the Effective Date, and AWI
will pay to the holder thereof all past due interest (estimated to total $12,975
as of the assumed Effective Date of July 1, 2003).
Although several other entities have filed Claims against AWI alleging an
entitlement to treatment as Secured Claims, AWI does not currently believe that
any of such Claims are entitled to treatment as Secured Claims pursuant to
section 506(a) of the Bankruptcy Code. Indeed, the majority of such Claims were
filed by asbestos personal injury litigation co-defendants as Secured Claims on
the basis of alleged setoff rights. However, because AWI believes that such
Claims are subject to disallowance pursuant to section 502(e)(i)(B) of the
Bankruptcy Code (and has objected to such Claims on that basis), AWI does not
believe that any such Claims represent valid Secured Claims. Moreover, any
asbestos personal injury-related co-defendant claims, whether secured or
unsecured, will be channeled to the Asbestos PI Trust and addressed pursuant to
the Asbestos PI Trust Distribution Procedures. If any additional Secured Claims
are determined to exist, AWI believes that the value of such Secured Claims will
be de minimis. Although all Secured Claims are placed together in one category
for purposes of convenience, each Secured Claim will be treated as though in a
separate class for all purposes under the Plan.
41
In accordance with section 1124 of the Bankruptcy Code, notwithstanding any
contractual provision or applicable law that entitles the holder of an Allowed
Secured Claim to demand or receive payment of such Claim prior to the stated
maturity of such Claim from and after the occurrence of a default under the
agreements governing or instruments evidencing such Claim, such Allowed Secured
Claim will be reinstated, and AWI will (i) cure all defaults that occurred
before or from and after the Commencement Date (other than defaults of a kind
specified in section 365(b)(2) of the Bankruptcy Code), (ii) reinstate the
maturity of such Claim as such maturity existed prior to the occurrence of such
default, (iii) compensate the holder of such Claim for any damages incurred as a
consequence of any reasonable reliance by such holder on such contractual
provision or such applicable law, and (iv) not otherwise alter the legal,
equitable, or contractual rights to which the holder of such Claim is entitled.
The Secured Claims are unimpaired under the Plan.
5. CLASS 3: CONVENIENCE CLAIMS.
Under the Plan, a "CONVENIENCE CLAIM" is an Unsecured Claim (other than a Debt
Security Claim) in the amount of $10,000 or less or that is reduced to $10,000
at the election of the Claimant. Any Allowed Unsecured Claim in an amount equal
to or less than $10,000 automatically will be treated as a Convenience Claim.
Pursuant to the Plan, each holder of an Allowed Convenience Claim will be paid
75% of the Allowed Amount of its Allowed Convenience Claim in cash on the later
of the Effective Date and as soon as practicable after such Convenience Claim
becomes Allowed.
AWI estimates that the 75% payment with respect to Allowed Unsecured Claims of
$10,000 or less will total approximately $3.1 million. In addition, AWI expects
to finalize a settlement with the Markley Class Plaintiffs, who represent
approximately 360 former employees of AWI. See Section IV.C.9(d), entitled, "THE
CHAPTER 11 CASE - Significant Events During the Chapter 11 Case - Other
Litigation - The Markley Litigation." Pursuant to the proposed settlement, the
Markley Class will have an aggregate claim of $1 million against AWI, which will
be deemed to constitute a Convenience Claim consisting of individual claims of
the Markley Class Members each in an amount not to exceed $10,000. If such
settlement is approved and authorized, AWI will be obligated to pay the Markley
Class Counsel, for allocation among the Markley Class Members, the sum of
$750,000 in cash upon the earlier of (a) December 15, 2003 or (b) within five
(5) Business Days after the Effective Date.
Moreover, AWI estimates that 68 Claimants hold Allowed Unsecured Claims (other
than Debt Securities) over $10,000 and less than or equal to $12,500, and 69
Claimants hold Allowed Unsecured Claims (other than Debt Securities) over
$12,500 and less than or equal to $16,000. These Claimants may elect to have
their Allowed Unsecured Claims treated as Convenience Claims. AWI cannot
estimate how many of these Claimants will elect to have their Allowed Unsecured
Claims treated as Convenience Claims and has not included any Claims in excess
of $16,000 in its estimate (although such Claimants are entitled under the Plan
to reduce their Unsecured Claims to $10,000). If all of such holders of
Unsecured Claims greater than $10,000 and less than or equal to $16,000 elect to
be treated as Convenience Claims, AWI will be required to make an additional
cash payment of $7,500 per claim for total additional payments of approximately
$1 million. Accordingly, AWI has estimated that it will make total cash payments
with respect to Allowed Convenience Claims of approximately $4.85 million.
Convenience Claims are impaired under the Plan.
6. CLASS 4: ASBESTOS PROPERTY DAMAGE CLAIMS.
An "ASBESTOS PROPERTY DAMAGE CLAIM" is any Claim or remedy or liability against
AWI, whether or not such Claim, remedy, or liability is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured, whether or not the facts of
or legal bases therefor are known or unknown, under any theory of law, equity,
admiralty, or otherwise, for damages for property damage, including but not
limited to, the cost of inspecting, maintaining, encapsulating, repairing,
decontaminating, removing or disposing asbestos or asbestos-containing products
in buildings, other structures, or other property arising from the installation
in, presence in or removal from buildings or other structures of asbestos or
asbestos-containing products that was or were installed, manufactured, sold,
supplied, produced, distributed, released or marketed by AWI prior to the
Commencement Date, or for which AWI is allegedly liable, including, without
express or implied limitation, any such Claims, remedies and liabilities for
42
compensatory damages (such as proximate, consequential, general, and special
damages) and punitive damages, and any Claim, remedy or liability for
reimbursement, indemnification, subrogation and contribution, including, without
limitation, any Asbestos Property Damage Contribution Claim. Asbestos Property
Damage Claims will not include Asbestos Personal Injury Claims.
After taking into account the PD Settlement (see Section IV.C.6(f), entitled,
"THE CHAPTER 11 CASE - Significant Events During the Chapter 11 Case - Asbestos
Property Damage Claims - Settlement of Certain Asbestos Property Damage Claims")
and the disallowance of any Asbestos Property Damage Claim that did not provide
its product identification information to AWI by February 10, 2003, AWI expects
that only 25 Asbestos Property Damage Claims will remain pending against AWI's
estate. AWI believes that even these claims ultimately are grossly overstated
and subject to a number of defenses.
Pursuant to the Plan, if fewer than 25 Asbestos Property Damage Claims remain as
Disputed Claims by the Effective Date, AWI may elect, in its sole discretion, to
determine whether to create the Asbestos PD Trust or whether to litigate the
allowance of each individual remaining Asbestos Property Damage Claim in the
Bankruptcy Court. If AWI elects to litigate the allowance of the remaining
Asbestos Property Damage Claims, the allowance of such claims will not be
determined by the Asbestos PD Claims Resolution Procedures, but will, instead,
be governed by bankruptcy and applicable non-bankruptcy law.
If the Asbestos PD Trust is created, then all Allowed Asbestos Property Damage
Claims will be determined and paid pursuant to the terms, provisions, and
procedures of the Asbestos PD Trust, the Asbestos PD Trust Agreement, and the
Asbestos PD Claims Resolution Procedures. As a result of the discharge
provisions of sections 524 and 1141 of the Bankruptcy Code, the sole recourse of
the holder of an Allowed Asbestos Property Damage Claim will be the Asbestos PD
Trust, and such holder will have no right whatsoever at any time to assert its
Asbestos Property Damage Claim against Reorganized AWI.
If the Asbestos PD Trust is created, it will be funded with the Asbestos PD
Trust Funding Obligation. If Class 4 votes to accept the Plan, the Asbestos PD
Trust Funding Obligation will be determined by the number of remaining Asbestos
Property Damage Claims that are Disputed Claims as of the Effective Date. If ten
or more Asbestos Property Damage Claims remain as of the Effective Date, and
Class 4 votes to accept the Plan, the Asbestos PD Trust Funding Obligation will
be equal to $2 million; this amount will be reduced to $1 million if fewer than
ten but more than five Asbestos Property Damage Claims constitute Disputed
Claims as of the Effective Date or reduced to $500,000 if fewer than five
Asbestos Property Damage Claims constitute Disputed Claims as of the Effective
Date. If the Asbestos PD Trust is created, the Asbestos PD Trust Funding
Obligation will be funded directly from insurance proceeds, as provided in
section 11.2 of the Plan. If Class 4 votes to reject the Plan and the Asbestos
PD Trust is created, the Asbestos PD Trust Funding Obligation will be equal to
the Asbestos PD Insurance Asset having a value equal to the aggregate estimated
value of all Allowed Asbestos Property Damage Claims as determined by the
Bankruptcy Court.
THE ASBESTOS PD COMMITTEE OBJECTS TO THE TREATMENT OF ASBESTOS PROPERTY DAMAGE
CLAIMS UNDER THE PLAN AND URGES HOLDERS OF ASBESTOS PROPERTY DAMAGE CLAIMS TO
VOTE TO REJECT THE PLAN.
Asbestos Property Damage Claims are impaired under the Plan.
7. CLASS 5: COLI CLAIMS.
"COLI CLAIMS" are all amounts due to Pacific Life Insurance Company for loans
made by Pacific Life Insurance Company to AWI against (and collateralized by)
certain life insurance policies for which AWI is the holder and beneficiary and
for which certain of AWI's employees are insureds. The COLI Claims do not
include similar loans that were made to AWI after the Commencement Date, which
loans will be paid by AWI and Reorganized AWI in the ordinary course of
business.
In accordance with section 1124 of the Bankruptcy Code, notwithstanding any
contractual provision or applicable law that entitles the holder of an Allowed
COLI Claim to demand or receive payment of such Claim prior to the stated
maturity of such Claim from and after the occurrence of a default under the
43
agreements governing or instruments evidencing such Claim, such allowed COLI
Claim will be reinstated, and AWI will (i) cure all defaults that occurred
before or from and after the Commencement Date (other than defaults of a kind
specified in section 365(b)(2) of the Bankruptcy Code), (ii) reinstate the
maturity of such Claim as such maturity existed prior to the occurrence of such
default, (iii) compensate the holder of such Claim for any damages incurred as a
consequence of any reasonable reliance by such holder on such contractual
provision or such applicable law, and (iv) not otherwise alter the legal,
equitable, or contractual rights to which the holder of such Claim is entitled.
Based upon an assumed Effective Date of July 1, 2003, AWI estimates that the
outstanding principal balance on the COLI Claims as of the Effective Date will
total approximately $19.2 million.
COLI Claims are unimpaired under the Plan.
8. CLASS 6: UNSECURED CLAIMS OTHER THAN CONVENIENCE CLAIMS.
Class 6 consists of all Allowed Unsecured Claims other than Convenience Claims.
AWI estimates that the amount of Allowed Unsecured Claims other than Convenience
Claims is approximately $1.651 billion. This estimate does not include any
Unsecured Claims filed or scheduled with respect to retiree benefit plans
because, as described more fully in Section V.J, entitled, "THE PLAN OF
REORGANIZATION - Compensation and Benefit Programs," AWI intends to assume all
its obligations under such plans. Accordingly, any Claims with respect to the
benefits payable under such plans are treated as Employee Benefit Claims under
Class 11 of the Plan. In addition, this estimate does not include any Unsecured
Claims under any executory contracts that AWI intends to assume, all of which
Unsecured Claims will be paid as part of AWI's cure obligations relating to such
executory contracts and will be deducted from AWI's cash on hand in calculating
Available Cash. See Section V.G, entitled, "THE PLAN OF REORGANIZATION -
Executory Contracts and Unexpired Leases." Finally, the above estimate does not
include Unsecured Claims that will be treated as Convenience Claims because they
have been filed or scheduled in an amount equal to or less than $10,000 or that
AWI estimates will elect to "drop down" to Convenience Claim treatment, as
described in Section V.A.5, entitled, "THE PLAN OF REORGANIZATION -
Classification and Treatment of Claims and Equity Interests in AWI - Class 3:
Convenience Claims."
Each holder of an Allowed Unsecured Claim will receive on each Distribution Date
its Pro Rata Share of the following elements of Reorganization Consideration:
>> 34.43% of the New Common Stock,
>> 34.43% of the first $1.05 billion of (x) up to
$300 million of Available Cash and (y) the Plan
Notes and/or 144A Offering Proceeds,
>> 60% of the first $50 million of the amount of
Available Cash remaining after making provision
for the Distribution provided in section
3.2(f)(ii)2 of the Plan and the funding of the
Asbestos PI Trust in section 10.1(b)(i)2 of the
Plan,
>> 60% of the amount of Plan Notes and/or 144A
Offering Proceeds equal to the difference (if
positive) of $50 million less the amount of
Available Cash remaining after making provision
for the Distribution provided in section
3.2(f)(ii)2 of the Plan and the funding of the
Asbestos PI Trust in section 10.1(b)(ii) of the
Plan, and
>> 34.43% of the remaining Available Cash and Plan
Notes and/or 144A Offering Proceeds after making
provision for the Distribution provided in
sections 3.2(f)(ii)2, 3.2(f)(ii)3 and 3.2(f)(ii)4
of the Plan and the funding of the Asbestos PI
Trust in sections 10.1(b)(ii), 10.1(b)(iii) and
10.1(b)(iv) of the Plan.
In any Distribution made to the holder of an Allowed Unsecured Claim, there
shall be deducted from such Distribution the amount of each element of the
Reorganization Consideration (computed as provided in section 3.2(f)(ii) of the
Plan) previously distributed to such holder on account of such Allowed Unsecured
Claim in any Distribution made prior thereto.
44
Based upon AWI's projections, the total value of the Reorganization
Consideration being distributed to Class 6 will equal approximately $1.1
billion. Assuming that total Unsecured Claims and Environmental Claims equal
approximately $1.651 billion, AWI estimates that each holder of an Allowed
Unsecured Claim will receive a combination of New Common Stock, Available Cash,
and Plan Notes and/or 144A Offering Proceeds having a value of approximately
66.5% of the amount of such Allowed Unsecured Claim. Based upon AWI's
assumptions and estimates, that means, for example, that a holder of an Allowed
Unsecured Claim in the amount of $100,000 would receive approximately $66,500 of
Reorganization Consideration consisting of approximately $42,500 in value of New
Common Stock, $8,000 in cash, and $16,000 in either Plan Notes or cash
(depending upon whether and the extent to which the 144A Offering is completed).
Unsecured Claims other than Convenience Claims are impaired under the Plan.
9. CLASS 7: ASBESTOS PERSONAL INJURY CLAIMS.
An "ASBESTOS PERSONAL INJURY CLAIM" is any Claim or remedy, liability, or Demand
against AWI now existing or hereafter arising, whether or not such Claim,
remedy, liability, or Demand is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured, whether or not the facts of or legal bases therefor are
known or unknown, under any theory of law, equity, admiralty, or otherwise, for
death, bodily injury, sickness, disease, or other personal injuries (whether
physical, emotional, or otherwise) to the extent caused or allegedly caused,
directly or indirectly, by the presence of or exposure (whether prior to or
after the Commencement Date) to asbestos or asbestos-containing products that
was or were installed, manufactured, sold, supplied, produced, distributed,
released, or marketed by AWI or an Entity for whose products or operations AWI
allegedly has liability or for which AWI is otherwise liable, including, without
express or implied limitation, any Claim, remedy, liability, or Demand for
compensatory damages (such as loss of consortium, wrongful death, survivorship,
proximate, consequential, general, and special damages) and punitive damages,
and any Claim, remedy, liability or Demand for reimbursement, indemnification,
subrogation and contribution (including, without limitation, any Asbestos PI
Contribution Claim), and any claim under any settlement entered into by or on
behalf of AWI prior to the Commencement Date relating to an Asbestos Personal
Injury Claim. An Asbestos Property Damage Claim or a workers' compensation claim
against AWI will not constitute an Asbestos Personal Injury Claim.
The following types of Claims and Demands are included in the definition of
Asbestos Personal Injury Claim:
>> Claims and Demands for personal injuries relating
to the asbestos-containing insulation installation
operations while such operations were conducted as
a division of AWI, regardless of when such
personal injuries manifest themselves;
>> Claims and Demands for personal injuries arising
out of asbestos-containing products manufactured
by AWI, including asbestos-containing flooring
products, asbestos-containing gaskets, Armaspray,
and LT Cork Covering, regardless of when exposure
to any such products occurs and when such personal
injuries manifest themselves;
>> Claims and Demands for personal injuries arising
from exposure to asbestos-containing products
where AWI is alleged to be liable for the conduct
of another Entity as a result of AWI's
relationship with such Entity at the time of the
acts giving rise to the alleged liabilities,
including Claims and Demands relating to the
activities of ACandS and NCC;
>> Claims and Demands relating to asbestos personal
injuries under settlement agreements executed by
or on behalf of AWI prior to the Commencement
Date; and
>> Asbestos PI Contribution Claims, which include the
following:
45
o Claims and Demands by co-defendants in actions
involving asbestos-related personal injuries or
wrongful death where the co-defendants allege that
AWI is liable for all or a portion of the
liabilities incurred by such co-defendants;
o Claims and Demands by distributors of AWI's
products, including AWI's asbestos-containing
flooring products, that AWI is obligated to
indemnify such distributors (as a contractual
matter or otherwise) because the products at issue
are allegedly AWI products;
o Any Claim or Demand by the CCR or any present or
former member of the CCR arising from the payment
of Asbestos Personal Injury Claims by such Entity;
o Claims and Demands under contractual
indemnifications pursuant to which AWI has agreed
to indemnify an Entity against asbestos-related
liabilities for which AWI otherwise would have
liability or allegedly would have liability as a
result of AWI's relationship with another Entity;
and
o Any reimbursement claim by Safeco to the extent
the Safeco Bond is drawn and the proceeds applied
to satisfy Asbestos Personal Injury Claims.
All Asbestos Personal Injury Claims will be determined and paid pursuant to the
terms, provisions, and procedures of the Asbestos PI Trust, the Asbestos PI
Trust Agreement and the Asbestos PI Trust Distribution Procedures. The sole
recourse of the holder of an Asbestos Personal Injury Claim will be the Asbestos
PI Trust, and such holder will have no right whatsoever at any time to assert
its Asbestos Personal Injury Claim against Reorganized AWI. Pursuant to the
Asbestos PI Channeling Injunction, on the Effective Date all entities will be
permanently and forever stayed, restrained, and enjoined from taking those
actions specified in the Plan for the purpose of, directly or indirectly,
collecting, recovering, or receiving payment of, on, or with respect to any
Asbestos Personal Injury Claims (other than actions brought to enforce any right
or obligation under the Plan, any exhibits to the Plan, or any other agreement
or instrument between AWI or Reorganized AWI and the Asbestos PI Trust, which
actions will be in conformity and compliance with the provisions of the Plan).
The Asbestos PI Trust will be funded with (i) the Insurance Asset and (ii) (a)
65.57% of the New Common Stock, (b) 65.57% of the first $1.05 billion of (x) up
to $300 million of Available Cash and (y) the Plan Notes and/or 144A Offering
Proceeds, (c) 40% of the first $50 million of Available Cash remaining after
making provision for the Distribution provided in section 3.2(f)(ii)2 of the
Plan and the funding of the Asbestos PI Trust in section 10.1(b)(ii) of the
Plan, (d) 40% of an amount of Plan Notes and/or 144A Offering Proceeds equal to
the difference (if positive) of $50 million less the amount of Available Cash
remaining after making provision for the Distribution provided in section
3.2(f)(ii)2 of the Plan and the funding of the Asbestos PI Trust in section
10.1(b)(ii) of the Plan, and (e) 65.57% of the remaining Available Cash and Plan
Notes and/or 144A Offering Proceeds after making provision for the Distribution
provided in sections 3.2(f)(ii)2, 3.2(f)(ii)3 and 3.2(f)(ii)4 of the Plan and
the funding of the Asbestos PI Trust in sections 10.1(b)(ii), 10.1(b)(iii) and
10.1(b)(iv) of the Plan. AWI estimates that the value of the assets with which
the Asbestos PI Trust will be funded, other than the Insurance Asset, will be
approximately $2.1 billion as of the Effective Date. If Class 6 votes to reject
the Plan, and the Holdings Plan of Liquidation is approved by the board of
directors and shareholders of Holdings prior to the first anniversary of the
Effective Date, on the later of the date of such approval and the Effective
Date, the New Warrants will be deemed to be issued with respect to Asbestos
Personal Injury Claims, but will automatically, and without further action by
the Asbestos PI Trust or approval of the Asbestos PI Trustees, be deemed to have
been transferred to AWWD.
For a description of the Asbestos PI Trust and the Asbestos PI Trust
Distribution Procedures, see Section VI, entitled, "THE ASBESTOS PI TRUST."
Asbestos Personal Injury Claims are impaired under the Plan.
46
10. CLASS 8: ENVIRONMENTAL CLAIMS.
"ENVIRONMENTAL CLAIMS" are those Claims as to which the treatment thereof is set
forth in an agreement by and between AWI and any party asserting a Claim against
AWI relating to alleged contamination under federal or state environmental laws
or regulations, pursuant to which agreement all or a portion of such Claim (to
the extent and subject to the limitations imposed by such agreement) may be
asserted by the holder thereof after the Effective Date, to the extent that such
agreement is approved and authorized by a Final Order of the Bankruptcy Court or
otherwise in accordance with the Claims Settlement Guidelines.
Each holder of an Environmental Claim will be entitled to treatment of its
Environmental Claim and will receive such consideration as is provided in the
settlement agreement applicable to such Environmental Claim. Without limiting
the provisions of such settlement agreement, to the extent any portion of an
Environmental Claim becomes Allowed prior to any distribution, such
Environmental Claim will be deemed to constitute, and will be treated as, an
Allowed Unsecured Claim under Class 6. The sole recourse of the holder of an
Environmental Claim will be in accordance with the rights of such holder set
forth in such settlement agreement. Nothing contained in the Plan or in any
settlement agreement relating to an Environmental Claim will constitute or be
deemed a waiver of any claim, right, or cause of action that AWI or Reorganized
AWI may have against any entity that is not a party to such settlement
agreement. AWI currently is negotiating an agreement with the Environmental
Protection Agency (the "EPA") to address AWI's alleged liability under federal
environmental laws. If such agreement is finalized and the requisite approvals
are obtained, the EPA will have a liquidated, Allowed Claim against AWI with
respect to certain offsite liabilities. Such Claim will be treated as an Allowed
Unsecured Claim for purposes of Distributions under the Plan. AWI has taken into
account its estimate of its potential liability to the EPA and to other entities
in calculating the estimated total amount of Allowed Unsecured Claims.
As of the date hereof, AWI has not entered into any settlement agreement with
respect to environmental-related claims, and, therefore, no Environmental Claims
currently exist.
Environmental Claims are impaired under the Plan.
11. CLASS 9: AFFILIATE CLAIMS.
Class 9 consists of all Affiliate Claims held among AWI and its affiliates
(other than (a) any Entity in which AWI has less than a fifty percent (50%)
direct or indirect interest, (b) AWWD or (c) Holdings). Neither Nitram nor
Desseaux, which are the subject of related chapter 11 cases that are pending in
the Bankruptcy Court, has any Affiliate Claims against AWI. The Affiliate Claims
consist principally of intercompany book entries, all of which are preserved by
the Plan. Accordingly, the Affiliate Claims are unimpaired under the Plan.
12. CLASS 10: SUBSIDIARY DEBT GUARANTEE CLAIMS.
Class 10 consists of all Subsidiary Debt Guarantee Claims. A "SUBSIDIARY DEBT
GUARANTEE CLAIM" is any Claim against AWI arising from the guaranty by AWI of an
obligation of one or more Entities that are subsidiaries of AWI as of the date
immediately preceding the Effective Date so long as such obligation has not been
accelerated or declared in default prior to the Effective Date (and such
acceleration has not been rescinded or such default waived), other than any
Claim relating to any obligations of Nitram or Desseaux and other than any Claim
relating to obligations arising from the sale or disposition of the business,
operations, or assets of any Entity. As of the date hereof, the following
Subsidiary Debt Guarantee Claims exist:
ESTIMATED
BALANCE AS OF
BENEFICIARY PRIMARY OBLIGOR TYPE JUNE 30, 2003
Banc of America Leasing Armstrong Wood Products
(Robbins) ("AWP") Lease $3,729,501.00
47
Wachovia Bank AWP AWP Somerset Industrial $10,000,000.00
Revenue Bond
Province of Quebec Armstrong World Industries Canadian Government Loan $91,423.00
Canada Ltd. (Canadian dollars - loan is
expected to be repaid on June 30, 2003)
In accordance with section 1124 of the Bankruptcy Code, each Subsidiary Debt
Guarantee Claim will be reinstated. Accordingly, the Subsidiary Debt Guarantee
Claims are unimpaired under the Plan.
13. CLASS 11: EMPLOYEE BENEFIT CLAIMS.
Under the Plan, AWI, except as provided in sections 8.7(b) and 8.7(c) of the
Plan, will be assuming all employment and severance policies, workers'
compensation programs, and all compensation and benefit plans, policies, and
programs. See Section V.J, entitled, "THE PLAN OF REORGANIZATION - Compensation
and Benefit Programs." In addition, AWI will be assuming any existing
prepetition collective bargaining agreements. Accordingly, any claims or
benefits arising under such programs, policies, or agreements will continue to
be paid by AWI in the ordinary course of its business. To avoid confusion
regarding the treatment of certain "protective" claims filed by present and
former employees for such benefits, AWI has created a separate Class under the
Plan, Class 11, consisting of Employee Benefit Claims. An "EMPLOYEE BENEFIT
CLAIM" is any Claim of a current or former employee of AWI, a current or former
employee of any current or former subsidiary of AWI, or of the Pension Benefit
Guaranty Corporation, for benefits payable or arising under any of the plans
being assumed pursuant to section 8.7(a) of the Plan or any collective
bargaining agreements being assumed under the Plan; provided, however, that any
Claim for damages or other relief arising from any termination of any plans
pursuant to section 8.7(b) of the Plan, any "rejection" of any plans as to any
party that objects to any amendment under section 8.7(c) of the Plan, based upon
any alleged breach by AWI of its responsibilities or duties under any plan
specified in section 8.7(a) of the Plan (other than any obligation to pay the
benefits arising thereunder, as modified), or related to the allegations made by
the plaintiffs in the Markley Class Action shall be deemed an Unsecured Claim.
In accordance with section 1124 of the Bankruptcy Code, each Employee Benefit
Claim will be reinstated. Accordingly, the Employee Benefit Claims are
unimpaired under the Plan.
14. CLASS 12: AWWD'S EQUITY INTERESTS IN AWI.
Class 12 consists of the Equity Interests in AWI. AWWD, as the parent company of
AWI, is the sole holder of Equity Interests in AWI. AWWD is wholly owned by
Holdings, which is expected to dissolve and wind up in connection with the Plan
pursuant to the Holdings Plan of Liquidation. See V.P, entitled, "THE PLAN OF
REORGANIZATION - Holdings Plan of Liquidation." Public shareholders of Holdings
do not have any direct interest in AWI, and any distribution to Holdings'
shareholders in connection with the Plan will be governed by the Holdings Plan
of Liquidation. If the Holdings Plan of Liquidation is approved by the board of
directors and shareholders of Holdings as required by the Pennsylvania BCL prior
to the first anniversary of the Effective Date, AWWD's existence will terminate,
and the New Warrants will be issued to Holdings in respect of the Equity
Interests in AWI. If the Holdings Plan of Liquidation is not approved by the
board of directors and requisite shareholders of Holdings prior to the first
anniversary of the Effective Date, no distribution will be made in respect of
the Equity Interests in AWI. If Class 6 votes to reject the Plan, however, no
distribution will be made under the Plan from AWI's estate in respect of the
Equity Interests in AWI but, in such event (and assuming the required approvals
of the board of directors and shareholders of Holdings of the Holdings Plan of
Liquidation have been received by the first anniversary of the Effective Date),
Reorganized AWI will issue the New Warrants as provided in section 7.26 of the
Plan in respect of the Asbestos Personal Injury Claims to Holdings (assuming
that AWWD's existence is terminated) and in accordance with section 10.1(b) of
the Plan. On the Effective Date, the certificates that previously evidenced
ownership of existing AWI common stock will be cancelled and will be null and
void, and AWWD, the holder thereof, will have no rights, and such certificates
will evidence no rights.
48
B. CONDITIONS TO CONFIRMATION.
The Plan will not be confirmed and the Confirmation Order will not be entered
until and unless each of the following conditions to confirmation is either
satisfied or waived in writing by each of AWI, the Asbestos PI Claimants'
Committee, the Future Claimants' Representative, and, if Class 6 accepts the
Plan, the Unsecured Creditors' Committee:
1. The Bankruptcy Court makes the following findings, each of which
shall be contained in the Confirmation Order:
(i) With respect to any Asbestos Personal Injury Claim
that is Allowed by the Asbestos PI Trust in
accordance with the Asbestos PI Trust Agreement
and the Asbestos PI Trust Distribution Procedures,
such allowance will establish the amount of legal
liability against the Asbestos PI Trust in the
amount of the liquidated value of such Claim, as
determined in accordance with the Asbestos PI
Trust Distribution Procedures.
(ii) With respect to any Asbestos Property Damage Claim
that is Allowed by the Asbestos PD Trust in
accordance with the Asbestos PD Trust Agreement
and the Asbestos PD Trust Claims Resolution
Procedures, such allowance will establish the
amount of legal liability against the Asbestos PD
Trust in the Allowed amount of such Asbestos
Property Damage Claim.
(iii) The Asbestos PI Permanent Channeling Injunction is
to be implemented in connection with the Plan and
the Asbestos PI Trust.
(iv) The Plan and its exhibits, including but not
limited to the transfer of the Asbestos PI
Insurance Asset to the Asbestos PI Trust, the
Asbestos PI Trust Agreement, the Asbestos PI Trust
Distribution Procedures and Articles X and XI of
the Plan, are a fair, equitable and reasonable
resolution of the liabilities of AWI for Asbestos
Personal Injury Claims and Asbestos Property
Damage Claims. The Plan and its exhibits, and the
negotiations that led up to them, do not violate
any obligation of AWI or breach any applicable
insurance policy, agreement or contract of AWI,
including, without limitation, obligations or
duties to cooperate under any insurance policies,
contracts or agreements, any management of claims
provisions in any applicable insurance policies or
agreements or contracts pertaining thereto, or any
consent-to-assignment provisions of any applicable
insurance policies, contracts or agreements, or
any consent-to-settlement provisions of any
applicable insurance policies, agreement or
contract of AWI, and AWI's discharge and release
of claims as provided in the Plan shall neither
diminish nor impair the enforceability of any such
insurance policies, contracts or agreements.
(v) AWI does not need the consent of its insurers to
transfer the Asbestos PI Insurance Asset to the
Asbestos PI Trust. In the alternative, AWI's
insurers have an obligation not to withhold
consent to such transfer unreasonably, and the
refusal to consent to such transfer under the
circumstances would be unreasonable.
(vi) If Class 4 does not accept the Plan and the
Asbestos PD Trust is created, AWI does not need
the consent of its insurers to transfer the
Asbestos PD Insurance Asset to the Asbestos PD
Trust. In the alternative, AWI's insurers have an
obligation not to withhold consent to such
transfer unreasonably, and the refusal to consent
to the transfer under the circumstances would be
unreasonable.
(vii) The Plan and its exhibits, including but not
limited to the transfer of the Asbestos PI
Insurance Asset to the Asbestos PI Trust, the
Asbestos PI Trust Agreement, the Asbestos PI Trust
Distribution Procedures and Articles X and XI of
the Plan, do not materially increase any insurer's
risk of providing coverage for asbestos-related
liabilities under the relevant insurance policies,
49
settlement agreements and/or contracts with
respect thereto as compared to the risk that
otherwise was being borne by the insurers prior to
the Effective Date.
(viii) Upon confirmation and consummation of the Plan,
including the effectuation of the transfer of the
Asbestos PI Insurance Asset, the Asbestos PI Trust
will have access to insurance coverage and/or
insurance payments pursuant to the transfer of the
Asbestos PI Insurance Asset so that the proceeds
of such insurance may be used to defend, resolve,
and satisfy (subject to any applicable policy
limits) the Asbestos PI Trust's obligations to
defend, resolve and satisfy Asbestos Personal
Injury Claims, and no insurer will have any
insurance coverage defense based on the Plan, the
transfer of the Asbestos PI Insurance Asset, the
Asbestos PI Trust Agreement, or the Asbestos PI
Trust Distribution Procedures or allowance of
claims thereunder, or the negotiations that
produced any of the foregoing.
(ix) If Class 4 votes to reject the Plan and the
Asbestos PD Trust is created, upon confirmation
and consummation of the Plan, including the
effectuation of the transfer of the Asbestos PD
Insurance Asset, the Asbestos PD Trust will have
access to insurance coverage and/or insurance
payments pursuant to the transfer of the Asbestos
PD Insurance Asset so that the proceeds of such
insurance may be used to defend, resolve, and
satisfy (subject to any applicable policy limits)
the Asbestos PD Trust's obligations to defend,
resolve and satisfy Asbestos Property Damage
Claims, and no insurer will have any insurance
coverage defense based on the Plan, the transfer
of the Asbestos PD Insurance Asset, the Asbestos
PD Trust Agreement, or the Asbestos PD Claims
Resolution Procedures or allowance of claims
thereunder, or the negotiations that produced any
of the foregoing.
(x) All insurers of AWI affording insurance coverage
that is the subject of the Asbestos PI Insurance
Asset and all insurers of AWI whose policies
provide coverage for the Asbestos Property Damage
Claims addressed in Article XI of the Plan have
been given notice and an opportunity to be heard
on matters relating to the Plan and its exhibits,
and are bound by the Plan and its exhibits and the
findings of fact and conclusions of law set forth
in the Confirmation Order.
(xi) The Plan complies with section 524(g) of the
Bankruptcy Code.
(xii) In light of the benefits provided, or to be
provided, to the Asbestos PI Trust on behalf of
each PI Protected Party, the Asbestos PI Permanent
Channeling Injunction is fair and equitable with
respect to the persons that might subsequently
assert Asbestos Personal Injury Claims against any
PI Protected Party.
(xiii) At the time of the order for relief with respect
to AWI, AWI had been named as a defendant in
personal injury, wrongful death and property
damage actions seeking recovery for damages
allegedly caused by the presence of, or exposure
to, asbestos or asbestos-containing products.
(xiv) The Asbestos PI Trust, as of the Effective Date,
will assume the liabilities of AWI with respect to
all Asbestos Personal Injury Claims and, upon such
assumption, Reorganized AWI and the AWI Progeny
will have no liability for any Asbestos Personal
Injury Claim.
(xv) The Asbestos PI Trust is to be funded in whole or
in part by securities of Reorganized AWI and by
the obligation of Reorganized AWI to make future
payments, including dividends.
50
(xvi) The Asbestos PI Trust is to own, or by the
exercise of rights granted under the Plan would be
entitled to own if specified contingencies occur,
a majority of the voting shares of AWI.
(xvii) AWI is likely to be subject to substantial future
demands for payment arising out of the same or
similar conduct or events that gave rise to the
claims that are addressed by the Asbestos PI
Permanent Channeling Injunction.
(xviii) The actual amounts, numbers and timing of the
future demands referenced in section 7.12(a)(xvii)
of the Plan cannot be determined.
(xix) Pursuit of the demands referenced in section
7.12(a)(xvii) of the Plan outside the procedures
prescribed by the Plan is likely to threaten the
Plan's purpose to deal equitably with claims and
future demands.
(xx) The terms of the Asbestos PI Permanent Channeling
Injunction, including any provisions barring
actions against third parties pursuant to section
524(g)(4)(A) of the Bankruptcy Code, are set out
in the Plan and in any disclosure statement
supporting the Plan.
(xxi) The Plan establishes, in Class 7 (Asbestos
Personal Injury Claims), a separate class of the
claimants whose claims are to be addressed by the
Asbestos PI Trust.
(xxii) The Future Claimants' Representative was appointed
as part of the proceedings leading to the issuance
of the Asbestos PI Permanent Channeling Injunction
for the purpose of protecting the rights of
persons that might subsequently assert demands of
the kind that are addressed in the Asbestos PI
Permanent Channeling Injunction and transferred to
the Asbestos PI Trust. The Future Claimants'
Representative has fulfilled his duties,
responsibilities, and obligations as the future
representative in accordance with section 524(g)
of the Bankruptcy Code.
(xxiii) Identifying each PI Protected Party in the
Asbestos PI Permanent Channeling Injunction is
fair and equitable with respect to persons that
might subsequently assert demands against each
such PI Protected Party, in light of the benefits
provided, or to be provided, to the Asbestos PI
Trust by or on behalf of any such PI Protected
Party.
(xxiv) Class 7 (Asbestos Personal Injury Claims) has
voted, by at least seventy-five percent (75%) of
those voting, in favor of the Plan.
(xxv) Pursuant to court orders or otherwise, the
Asbestos PI Trust will operate through mechanisms
such as structured, periodic, or supplemental
payments, pro rata distributions, matrices, or
periodic review of estimates of the numbers and
values of present claims and future demands, or
other comparable mechanisms, that provide
reasonable assurance that the Asbestos PI Trust
will value, and be in a financial position to pay,
present claims and future demands that involve
similar claims in substantially the same manner.
(xxvi) If Class 4 votes to accept the Plan and the
Asbestos PD Trust is created, Travelers Indemnity
Company, Travelers Casualty and Surety Company and
Liberty Mutual Insurance Company are collectively
obligated under insurance policies that they
issued to AWI with inception dates prior to
January 1, 1982 to distribute on the Initial
Distribution Date cash in the total amount equal
to the Asbestos PD Trust Funding Obligation to the
Asbestos PD Trust, and are not entitled to obtain
reimbursement of all or any part of that amount
from Reorganized AWI, including, but not limited
to, reimbursement under insurance policy
provisions relating to deductibles, premiums,
retrospective premiums or other charges.
51
(xxvii) If Class 6 votes to reject the Plan, the transfer
of the New Warrants to the holder of the Equity
Interests will not be subject to registration.
2. Class 7 (Asbestos Personal Injury Claims) has voted, by at
least 75 percent (75%) of those voting, in favor of the Plan.
3. The Confirmation Order will be, in form and substance,
acceptable to the Asbestos PI Claimants' Committee, the Future Claimants'
Representative, and, if Class 6 votes to accept the Plan, the Unsecured
Creditors' Committee.
4. If Class 4 does not vote to accept the Plan, the Bankruptcy
Court has entered an order estimating the aggregate value of all Asbestos
Property Damage Claims and determining that such value is not greater than the
amount of the insurance available to pay such claims under section 11.3 of the
Plan.
C. CONDITIONS PRECEDENT TO THE EFFECTIVE DATE UNDER THE PLAN.
The "effective date of the plan," as used in section 1129 of the Bankruptcy
Code, will not occur, and the Plan will be of no force and effect, until the
Effective Date. The occurrence of the Effective Date is subject to satisfaction
of the following conditions precedent:
>> The Confirmation Order has become a Final Order.
>> The Bankruptcy Court and/or the District Court, as
required, will have entered the Asbestos PI
Permanent Channeling Injunction (which may be
included in the Confirmation Order), which will
contain terms satisfactory to AWI, the Asbestos PI
Claimants' Committee, the Future Claimants'
Representative, and, if Class 6 votes to accept
the Plan, the Unsecured Creditors' Committee.
>> The Confirmation Order, the Claims Trading
Injunction and the Asbestos PI Permanent
Channeling Injunction will be in full force and
effect.
>> No proceedings to estimate any claims are pending.
>> All Asbestos PI Trustees will have been selected
and will have executed the Asbestos PI Trust
Agreement.
>> If Class 4 votes to reject the Plan and the
Asbestos PD Trust is created, all Asbestos PD
Trustees have been selected and will have executed
the Asbestos PD Trust Agreement.
>> A favorable ruling will have been obtained from
the IRS with respect to the qualification of the
Asbestos PI Trust as a "qualified settlement fund"
within the meaning of Treasury Regulation section
1.468B-1, or AWI will have received an opinion of
counsel with respect to the tax status of the
Asbestos PI Trust as a "qualified settlement fund"
reasonably satisfactory to AWI, the Asbestos PI
Claimants' Committee, the Future Claimants'
Representative, and, if Class 6 votes to accept
the Plan, the Unsecured Creditors' Committee.
>> Reorganized AWI will have entered into and will
have credit availability under a credit facility
to provide Reorganized AWI with working capital
(including letters of credit) in an amount
sufficient to meet the needs of Reorganized AWI,
as determined by Reorganized AWI.
52
>> Each of the Exhibits will be in form and substance
acceptable to AWI, the Asbestos PI Claimants'
Committee, the Future Claimants' Representative,
and the Unsecured Creditors' Committee.
Notwithstanding the foregoing, AWI reserves the right in its sole discretion,
with the written consent of the Asbestos PI Claimants' Committee, the Future
Claimants' Representative and, if Class 6 votes to accept the Plan, the
Unsecured Creditors' Committee, to waive the occurrence of any of the foregoing
conditions precedent to the Effective Date or to modify any of such conditions
precedent. Any such written waiver of any such condition precedent may be
effected at any time, without notice, without leave or order of the Bankruptcy
Court or the District Court, and without any formal action other than proceeding
to consummate the Plan. Any actions required to be taken on the Effective Date
will take place and will be deemed to have occurred simultaneously, and no such
action will be deemed to have occurred prior to the taking of any other such
action. If AWI decides that one of the foregoing conditions cannot be satisfied,
and the occurrence of such condition is not waived in writing by each of AWI,
the Asbestos PI Claimants' Committee, the Future Claimants' Representative and,
if required, the Unsecured Creditors' Committee, then AWI will file a notice of
the failure of the Effective Date with the Bankruptcy Court, at which time the
Plan and the Confirmation Order will be deemed null and void.
D. DESCRIPTION OF THE REORGANIZATION CONSIDERATION.
Under the Plan, AWI will issue New Common Stock, Plan Notes (if the 144A
Offering is not completed or does not yield net proceeds at least equal to the
Plan Note Amount), and New Warrants (together, the "PLAN SECURITIES"), together
with Available Cash, as follows:
1. NEW COMMON STOCK.
On the Effective Date, pursuant to the Plan, Reorganized AWI will authorize
approximately 200 million shares of New Common Stock and will issue
approximately 67.5 million shares of New Common Stock without any further action
necessary under applicable law, regulation, rule or order. Each share of New
Common Stock will entitle its holder to one vote. The New Common Stock will be
subject to dilution as a result of future issuances, including shares that are
or may be issued under the Management Incentive Plan (see Section IX.C,
entitled, "MANAGEMENT OF REORGANIZED AWI - Incentive Compensation Plans and New
Long-Term Incentive Plan") or that are issued upon the exercise of New Warrants.
Holders of New Common Stock will have the right to participate proportionately
in any dividends distributed by Reorganized AWI. AWI believes that the Equity
Value of New Common Stock as of the Effective Date, based upon the residual
value of the equity of Reorganized AWI, will be $30.00 per share, prior to any
dilution. See Section XI, entitled, "REORGANIZATION Value." The Equity Value has
been agreed upon by Lazard and the financial consultants for the Asbestos PI
Claimants' Committee, the Future Claimants' Representative, and the Unsecured
Creditors' Committee.
AWI and the Asbestos PI Trust will enter into a Stockholder and Registration
Rights Agreement. See Section X.A., entitled, "EXEMPTIONS FROM SECURITIES ACT
REGISTRATION - Stockholder and Registration Rights Agreement," for a description
of the registration rights of the Asbestos PI Trust with respect to the New
Common Stock.
2. PLAN NOTES.
As more fully described below in Section V.E, entitled, "THE PLAN OF
REORGANIZATION - 144A Offering," AWI will use commercially reasonable efforts to
complete a 144A Offering as soon as practicable between the Effective Date and
the Initial Distribution Date (the "144A OFFERING"). If one or more 144A
Offerings is or are successfully completed, then the aggregate net proceeds from
the 144A Offerings up to the Plan Note Amount (the "144A OFFERING Proceeds")
will be distributed to the holders of Unsecured Claims in Class 6 and to the
Asbestos PI Trust in lieu of notes ("PLAN NOTES") having an aggregate principal
amount equal to the amount of the 144A Offering Proceeds. To the extent the 144A
Offering Proceeds, if any, are less than the Plan Note Amount, Plan Notes will
be issued in an aggregate principal amount equal to the difference between the
Plan Note Amount and the amount of the 144A Offering Proceeds.
53
To the extent Plan Notes are issued, the Plan Notes will be issued by
Reorganized AWI pursuant to an indenture (the "PLAN NOTE INDENTURE"),
substantially in the form of Exhibit "1.101" to the Plan, by and between AWI, as
the issuer, and a trustee selected by AWI prior to the date of the commencement
of the hearing on confirmation of the Plan, which indenture will be qualified
under the Trust Indenture Act of 1939, as amended. To the extent the Plan Notes
are issued, they will be issued on the following terms:
>> The aggregate principal amount of the Plan Notes
will be equal to the Plan Note Amount less the
144A Offering Proceeds. Because AWI estimates that
Available Cash will total $350 million, the Plan
Note Amount is estimated to be $775 million.
>> The Plan Notes will bear interest at a fixed or
floating interest rate based upon U.S. Treasury
Notes or three-month U.S. dollar LIBOR,
respectively, with like maturities plus a spread
determined to be the average corporate spread over
such Treasury Notes or LIBOR for outstanding
issues of comparable maturity and comparably rated
U.S. industrial companies over the 30-day period
ending on the last day of the month immediately
preceding the Effective Date. Interest will be
paid semi-annually on the fixed rate Plan Notes
and quarterly on the floating rate Plan Notes.
>> The maturity of the Plan Notes, as selected by
AWI, will be not less than five years and no more
than 10 years. No principal payments will be
required to be made on the Plan Notes until the
maturity date.
>> The Plan Notes will be callable at par at the
option of AWI, in whole or in part, at any time
during the first six months following the
Effective Date.
>> The Plan Notes will have such other terms,
covenants, and conditions substantially similar to
those contained in indentures for issues of
comparable maturity of comparably rated U.S.
industrial companies and, with respect to any
floating rate tranche, structured in a manner
similar to, and as liquid as, marketable bank
debt.
AWI and the Asbestos PI Trust will enter into a Stockholder and Registration
Rights Agreement, which will give the Asbestos PI Trust registration rights with
respect to the Plan Notes, if they are issued. See Section X.A., entitled,
"EXEMPTIONS FROM SECURITIES ACT REGISTRATION - Stockholder and Registration
Rights Agreement," for a general description of the registration rights of the
Asbestos PI Trust with respect to the Plan Notes, if they are issued.
Based upon these terms and assuming an Effective Date of July 1, 2003, AWI
expects that the three series of Plan Notes, if issued, would have the following
terms:
>> $275 million in Plan Notes having a five-year
maturity with a floating interest rate (which AWI
has assumed will be an annual interest rate of
2.35%). For purposes of the Projected Financial
Information, however, AWI has assumed that this
series of Plan Notes will be swapped back to a
fixed rate and, accordingly, will bear a fixed
annual interest rate of 4.89%.
>> $250 million in Plan Notes having a seven-year
maturity with a fixed annual interest rate of
5.45%.
>> $250 million in Plan Notes having a ten-year
maturity with a fixed annual interest rate of
5.65%.
54
The above interest rates represent AWI's estimate of what the interest rates
would be based upon current conditions. The actual interest rates for the Plan
Notes, which will be determined on the Effective Date, may vary.
3. AVAILABLE CASH.
Under the Plan, AWI also will distribute Available Cash. With the exception of
proceeds from certain insurance policies received after the Effective Date with
respect to Environmental Claims, Available Cash will be calculated on the last
day of the month prior to the month in which the Effective Date occurs.
"AVAILABLE CASH" will be equal to the sum of the following: (a) all cash on hand
of AWI and its subsidiaries as of the last day of the month immediately
preceding the Effective Date less the sum of the following as of such date: (i)
a working capital reserve in the amount of $100 million (or such lesser amount
as AWI, in its sole discretion (after consultation with the Asbestos PI
Claimants' Committee, Unsecured Creditors' Committee, and the Future Claimants'
Representative), determines it requires for working capital purposes), (ii) the
Allowed Amount of Allowed Administrative Expenses, (iii) a reasonable estimate
by AWI of additional Administrative Expenses (such as professional fees and
expenses) that may become Allowed thereafter (other than Administrative Expenses
of the type specified in section 1.8(c)(i) of the Plan) and fees and expenses
payable in connection with any exit facility referred to in section 7.13(h) of
the Plan, (iv) the Allowed Amount of Allowed Priority Tax Claims, (v) a
reasonable estimate by AWI of additional Priority Tax Claims that may become
Allowed thereafter, (vi) the Allowed Amount of all Priority Claims, (vii) a
reasonable estimate of all Priority Claims that may became Allowed thereafter,
(viii) the DIP Credit Facility Claim, (ix) the cash required to make the
distributions for Class 3 (Convenience Claims) for those that are Allowed and a
reasonable estimate by AWI of additional Convenience Claims that may become
Allowed thereafter, (x) any other cash required to be paid or distributed by AWI
pursuant to the Plan (other than in respect of "Available Cash" and in respect
of the Asbestos PD Trust Funding Obligation), and (xi) the amount reasonably
estimated by AWI to be the cost of curing any defaults under the executory
contracts and unexpired leases to be assumed by AWI under the Plan, (b) any
amounts drawn, in AWI's sole discretion, under the working capital facility
referenced in section 7.13(h) of the Plan for the purpose of funding the
Distributions under the Plan, and (c) any proceeds of insurance received and
retained by Reorganized AWI from the Effective Date to the Final Distribution
Date on account of an Allowed Environmental Claim that is treated as an Allowed
Unsecured Claim in accordance with sections 3.2(f) and 3.2(h) of the Plan. Based
upon the assumption that the Effective Date will occur on July 1, 2003 and that
AWI will draw $76 million under its working capital facility, AWI, after
retaining $90 million for working capital purposes, expects to have
approximately $350 million in Available Cash on the Effective Date.
4. NEW WARRANTS.
If the Holdings Plan of Liquidation is approved within one year after the
Effective Date, the existence of AWWD (the current holder of the Equity
Interests in AWI) will be terminated, and Reorganized AWI will issue to Holdings
the New Warrants. The New Warrants will be warrants to purchase the New Common
Stock pursuant to a warrant agreement substantially in the form of Exhibit
"1.96" to the Plan on terms and conditions determined in a manner agreed to by
Lazard and the financial consultants for the Asbestos PI Claimants' Committee,
the Future Claimants' Representative, and the Unsecured Creditors' Committee.
The New Warrants (i) will provide the right to purchase an aggregate of 5% of
the New Common Stock on a fully diluted basis determined as of the Effective
Date (estimated to be 3.6 million shares), (ii) will have an exercise price
equal to 125% of the Equity Value (i.e., $37.50), and (iii) will have a term of
seven years from the Effective Date. AWI expects that the New Warrants will have
a value of $40-50 million, an amount which, if divided by the number of shares
of Holdings outstanding, equals $0.98 to $1.23 per share..
E. 144A OFFERING
AWI will use commercially reasonable efforts to a complete a 144A Offering as
soon as practicable after the Effective Date, but prior to the Initial
Distribution Date.
Any 144A Offering Proceeds from a successfully completed 144A Offering, up to
the Plan Note Amount, will be distributed by AWI to the holders of Unsecured
Claims in Class 6 and to the Asbestos PI Trust pursuant to the Plan. The
distribution of any 144A Offering Proceeds to such Claimants and the Asbestos PI
Trust will reduce the aggregate principal amount of Plan Notes issuable pursuant
to the Plan on a dollar for dollar basis, such that the sum of (x) the aggregate
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principal amount of Plan Notes issued under the Plan plus (y) the amount of 144A
Offering Proceeds will be equal to the Plan Note Amount (assumed herein to be
$775 million).
Accordingly, if the amount of 144A Offering Proceeds distributed is equal to the
Plan Note Amount, AWI will not issue any Plan Notes under the Plan. Similarly,
if a 144A Offering is not completed and no 144A Offering Proceeds are
distributed, the aggregate principal amount of Plan Notes issued under the Plan
will be equal to the Plan Note Amount.
To the extent that 144A Debt Securities are issued in a 144A Offering, such 144A
Debt Securities will have such terms and conditions as AWI and the initial
purchasers will determine in their sole discretion, provided, however, that if
the 144A Offering Proceeds are less than the Plan Note Amount such that AWI also
will issue Plan Notes under the Plan, then AWI may not issue the 144A Debt
Securities without the consent of the Asbestos PI Claimants' Committee, the
Future Claimants' Representative, and, if Class 6 votes to accept the Plan, the
Unsecured Creditors' Committee. The 144A Debt Securities, if issued, will not be
registered under the Securities Act of 1933 and may not be offered or sold in
the United States absent registration or an applicable exemption from
registration requirements.
F. EXIT FACILITY.
The company expects to enter into a $300 million syndicated bank credit facility
at the time of emergence to provide for liquidity through short-term borrowings
for working capital and other general corporate purposes and to permit the
issuance of letters of credit. This credit facility will include covenants and
terms and conditions that are expected to be similar to comparably rated
industrial companies obtaining similarly structured credit facilities at that
time. It is expected that the syndicated credit facility will be unsecured,
multi-year in maturity, and permit borrowings in both U.S. Dollars and Euros,
priced at applicable margins over the lenders' cost of funds. No significant
borrowings are expected immediately post-emergence, but AWI will use the
facility to replace the Letters of Credit issued under the DIP Credit Facility.
In addition, AWI's projections assume that AWI will draw $76 million under the
credit facility to increase "Available Cash" so that Available Cash totals $350
million on the Effective Date. AWI estimates that such borrowing will be repaid
by the end of 2003.
G. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
Any executory contracts or unexpired leases listed on Exhibit "8.1" to the Plan
will be deemed to have been assumed by Reorganized AWI as of the Effective Date,
and the Plan will constitute a motion to assume (and, to extent necessary,
assign) such executory contracts and unexpired leases.
Subject to the occurrence of the Effective Date, entry of the Confirmation Order
by the Clerk of the Bankruptcy Court will constitute approval of such
assumptions pursuant to section 365(a) of the Bankruptcy Code and a finding by
the Bankruptcy Court that each such assumption is in the best interest of AWI,
its estate, and all parties in interest in the Chapter 11 Case. With respect to
each such executory contract or unexpired lease assumed by Reorganized AWI,
unless otherwise determined by the Bankruptcy Court pursuant to a Final Order or
agreed to by the parties thereto prior to the Effective Date, the dollar amount
required to cure any defaults of AWI existing as of the Confirmation Date will
be conclusively presumed to be the amount set forth in Exhibit "8.1" with
respect to such executory contract or unexpired lease. Subject to the occurrence
of the Effective Date, any such cure amount will be treated as an Allowed
Administrative Expense under the Plan, and, upon payment of such Allowed
Administrative Expense, all defaults of AWI existing as of the Confirmation Date
with respect to such executory contract or unexpired lease will be deemed cured.
Any executory contracts or unexpired leases of AWI that either (x) are set forth
on Exhibit "8.2" to the Plan or (y)(i) are not listed on Exhibit "8.1" to the
Plan, (ii) have not been assumed by AWI with the approval of the Bankruptcy
Court, and (iii) are not the subject of pending motions to assume at the
Confirmation Date will be deemed to have been rejected by AWI, the Plan will
constitute a motion to reject such executory contracts and unexpired leases, and
Reorganized AWI will have no liability thereunder except as is specifically
provided in the Plan. Entry of the Confirmation Order by the Clerk of the
Bankruptcy Court will constitute approval of such rejections pursuant to section
365(a) of the Bankruptcy Code and a finding by the Bankruptcy Court that each
56
such rejected executory contract or unexpired lease is burdensome and that the
rejection thereof is in the best interest of AWI, its estate, and all parties in
interest in the Chapter 11 Case. Without limiting the foregoing, any agreement
entered into prior to the Commencement Date by or on behalf of AWI with respect
to the settlement of any Asbestos Personal Injury Claim will be deemed rejected
as of the Effective Date to the extent such settlement agreement is deemed to be
an executory contract within the meaning of section 365(a) of the Bankruptcy
Code.
Claims created by the rejection of executory contracts or unexpired leases
(including, without limitation, the rejection provided in section 8.2 of the
Plan) or the expiration or termination of any executory contract or unexpired
lease prior to the Confirmation Date, other than Asbestos Personal Injury
Claims, must be filed with the Bankruptcy Court and served on AWI no later than
thirty (30) days after (i) in the case of an executory contract or unexpired
lease that was terminated or expired by its terms prior to the Confirmation
Date, the Confirmation Date, (ii) in the case of an executory contract or
unexpired lease rejected by AWI, the entry of the order of the Bankruptcy Court
authorizing such rejection, or (iii) in the case of an executory contract or
unexpired lease that is deemed rejected pursuant to section 8.2 of the Plan, the
Confirmation Date. Notwithstanding the foregoing, Exhibit "8.2" to the Plan sets
forth AWI's value of the rejection claim for each executory contract or
unexpired lease set forth thereon, which claim shall be deemed an Allowed
Unsecured Claim if no proof of claim is timely filed and served in accordance
with the immediately preceding sentence. Any claims for which a rejection claim
is not set forth on Exhibit "8.2" to the Plan and for which a proof of claim is
not filed and served within the time provided herein will be forever barred from
assertion and shall not be enforceable against AWI, its estate, assets,
properties, or interests in property, or Reorganized AWI or its estate, assets,
properties, or interests in property. Unless otherwise ordered by the Bankruptcy
Court, all such Claims (other than Asbestos Personal Injury Claims) that are
timely filed as provided herein will be treated as Unsecured Claims under the
Plan and will be subject to the provisions of Article V of the Plan.
Exhibit "8.4" to the Plan sets forth a list of agreements that were listed on
the Schedules as executory contracts, but which AWI believes should not be
considered executory contracts, either because such agreements were not
executory as of the Commencement Date or because such agreements terminated or
expired, or are expected to have expired. by their terms prior to the Effective
Date. If any such agreements are determined to be executory contracts, AWI or
Reorganized AWI, as the case may be, reserves the right to seek the assumption
or rejection of any such contract, and the time within which AWI or Reorganized
AWI, as the case may be, may seek to assume or reject any such agreements shall
be tolled until twenty (20) Business Days after the date on which an order
determining that any such agreement is an executory contract becomes a Final
Order. Set forth on Exhibit "8.4" to the Plan is the amount that AWI intends to
treat as an Allowed Unsecured Claim for each such agreement. Such amount and the
treatment of each such agreement shall be binding unless, on or before ten (10)
days after the Confirmation Date, the other party to any such agreement either
(i) files a proof of claim (which proof of claim shall be deemed timely filed)
or (ii) files a motion seeking to compel assumption or rejection of such
agreement.
H. INSURANCE POLICIES AND AGREEMENTS.
AWI does not believe that the insurance policies issued to, or insurance
agreements entered into by, AWI prior to the Commencement Date constitute
executory contracts. To the extent that such insurance policies or agreements
are considered to be executory contracts, then, notwithstanding anything
contained in sections 8.1 or 8.2 of the Plan to the contrary, the Plan will
constitute a motion to assume such insurance policies and agreements, and,
subject to the occurrence of the Effective Date, the entry of the Confirmation
Order by the clerk of the Bankruptcy Court will constitute approval of such
assumption pursuant to section 365(a) of the Bankruptcy Code and a finding by
the Bankruptcy Court that each such assumption is in the best interest of AWI,
its estate, and all parties in interest in the Chapter 11 Case. Unless otherwise
determined by the Bankruptcy Court pursuant to a final order or agreed to by the
parties thereto prior to the Effective Date, no payments are required to cure
any defaults of AWI existing as of the Confirmation Date with respect to each
such insurance policy or agreement. To the extent that the Bankruptcy Court
determines otherwise as to any such insurance policy or agreement, AWI reserves
the right to seek rejection of such insurance policy or agreement or other
available relief. In accordance with section 10.1 of the Plan, the rights under
the insurance policies and agreements constituting the Asbestos PI Insurance
Asset will, to the extent necessary, be deemed assigned to the Asbestos PI Trust
as of the Effective Date and, pursuant to section 365 of the Bankruptcy Code,
AWI will have no further liability thereunder from and after the Effective Date.
57
To the extent that any or all of the insurance policies and agreements set forth
on Exhibit "8.5(b)" to the Plan are considered to be executory contracts, then,
notwithstanding anything contained in section 8.1 or 8.2 of the Plan to the
contrary, the Plan will constitute a motion to reject the insurance policies and
agreements set forth on Exhibit "8.5(b)" to the Plan, and the entry of the
Confirmation Order by the clerk of the Bankruptcy Court will constitute approval
of such rejection pursuant to section 365(a) of the Bankruptcy Code and a
finding by the Bankruptcy Court that each such rejected insurance policy or
agreement set forth on Exhibit "8.5(b)" to the Plan is burdensome and that the
rejection thereof is in the best interest of AWI, its estate, and all parties in
interest in the Chapter 11 Case.
Nothing contained in the Plan will constitute a waiver of any claim, right, or
cause of action that AWI, the Asbestos PI Trust, or Reorganized AWI, as the case
may be, may hold against the insurer under any policy of insurance or insurance
agreement.
I. INDEMNIFICATION AND REIMBURSEMENT OBLIGATIONS.
For purposes of the Plan, the obligations of AWI to indemnify and reimburse
persons who are or were directors, officers, or employees of Holdings, AWWD, or
AWI on the Commencement Date or at any time thereafter against and for any
obligations (including, without limitation, fees and expenses incurred by the
board of directors of Holdings, or the members thereof, in connection with the
Chapter 11 Case) pursuant to articles of incorporation, codes of regulations,
bylaws, applicable state law, or specific agreement, or any combination of the
foregoing, will survive confirmation of the Plan, remain unaffected thereby, and
not be discharged in accordance with section 1141 of the Bankruptcy Code,
irrespective of whether indemnification or reimbursement is owed in connection
with an event occurring before, on, or after the Commencement Date. In
furtherance of the foregoing, Reorganized AWI will maintain insurance for the
benefit of such directors, officers, or employees at levels no less favorable
than those existing as of the date of entry of the Confirmation Order for a
period of no less than three years following the Effective Date.
J. COMPENSATION AND BENEFIT PROGRAMS.
Except as set forth in section 8.7(b) and (c) of the Plan, all employment and
severance policies, workers' compensation programs, and all compensation and
benefit plans, policies and programs of AWI applicable to its present and former
employees, officers, and directors, including, without express or implied
limitation, all savings plans, retirement plans, health care plans, disability
plans, severance benefit plans, incentive plans, and life, accidental death, and
dismemberment insurance plans, will be deemed to be, and will be treated as
though they are, executory contracts that are deemed assumed under the Plan, and
AWI's obligations under such plans, policies, and programs will be deemed
assumed pursuant to section 365(a) of the Bankruptcy Code, survive confirmation
of the Plan, remain unaffected thereby, and not be discharged in accordance with
section 1141 of the Bankruptcy Code. Any defaults existing under any of such
plans, policies, and programs shall be cured promptly after they become known by
Reorganized AWI.
Certain employee benefit plans and policies will be terminated or amended on the
Effective Date or earlier. These plans and policies are as follows:
>> The Employment Protection Plan for Salaried
Employees is provided for severance benefits for
salaried employees of AWI in certain
change-in-control situations. Prior to the
Effective Date, such plan will be deemed to have
been terminated, cancelled, and of no further
force and effect, and the participants thereunder
will have no further rights thereunder.
>> The 1993 Long-Term Stock Incentive Plan is an
equity incentive plan used by AWI to issue stock
options and restricted stock to employees. On the
Effective Date, such plan will be deemed
terminated, cancelled, and of no further force and
effect, and the participants thereunder will have
no further rights thereunder; provided that any
and all remaining restrictions on restricted stock
awards under the 1993 Long-Term Stock Incentive
Plan will lapse on the Effective Date to the
58
extent participants do not elect to waive their
right to such awards prior to such date.
>> The 1999 Long-Term Incentive Plan is an equity and
cash performance incentive plan used by AWI to
provide equity and cash bonus incentives to
employees. This plan has been used during the
Chapter 11 Case to make long-term incentive
awards. On the Effective Date, this plan will be
deemed terminated, cancelled, and of no further
force and effect, and the participants thereunder
will have no further rights thereunder; provided
that any and all remaining restrictions on
restricted stock awards under this plan will lapse
on the Effective Date to the extent participants
do not elect to waive their right to such awards
prior to such date. Cash awards granted during the
course of the Chapter 11 Case, however, constitute
Allowed Administrative Expenses, will not be
affected by the termination of this plan, and will
be paid out according to their terms.
>> The Armstrong Holdings Stock Award Plan is an
equity incentive plan under which AWI gave its
employees awards of Holdings common stock. On the
Effective Date, such plan will be deemed
terminated, cancelled, and of no further force and
effect, and the participants thereunder will have
no further rights thereunder; provided that any
and all remaining restrictions on restricted stock
awards under the Armstrong Holdings Stock Award
Plan will lapse on the Effective Date to the
extent participants do not elect to waive their
right to such awards prior to such date.
>> The Armstrong Deferred Compensation Plan is a plan
under which members of Armstrong's management
elected to defer compensation due them from
Armstrong, generally until after their retirement.
No deferrals of compensation have been made under
this plan since the Commencement Date. As of the
Effective Date, balances under this plan are
estimated to total approximately $34 million. The
normal form of payment is an annuity paid over 15
years. Plan participants may request full or
partial single-sum payments. On the Effective
Date, the Armstrong Deferred Compensation Plan
will be modified so that Reorganized AWI, and not
Holdings, will be the nominal sponsor of such plan
and to provide that Reorganized AWI has the right,
in its sole discretion, not to honor single-sum
withdrawal requests. The Armstrong Deferred
Compensation Plan will be assumed, as so amended;
provided, however, as to any party that objects to
such amendment by the deadline for filing
objections to confirmation of the Plan, the
Armstrong Deferred Compensation Plan will be
deemed rejected, and such party will have an
Unsecured Claim for any benefits thereunder in
accordance with section 8.3 of the Plan. In
addition, as of a date immediately prior to the
Effective Date, the Armstrong Deferred
Compensation Plan will be deemed amended to
exclude the occurrence of the Effective Date, the
creation of the Asbestos PI Trust, and the
issuance of the New Common Stock to the Asbestos
PI Trust from triggering a change in control
thereunder.
>> The Severance Pay Plan for Salaried Employees is a
severance plan for salaried employees. On the
Effective Date, such plan will be amended to
provide that, if the participant is in a position
at a grade level of 15 or higher on Reorganized
AWI's organizational management system on the date
of termination, the participant will be eligible
for severance benefits based on two weeks of pay
for each year of service, subject to a minimum of
eight weeks pay and a maximum of 52 weeks pay. On
the Effective Date, the Severance Pay Plan for
Salaried Employees will be assumed, as amended.
59
>> The Retirement Income Plan (Pension) is
Armstrong's qualified defined benefit retirement
plan. Such plan will be amended prior to the
Effective Date in the manner described below and,
as amended, will be assumed as of the Effective
Date:
o to eliminate the Social Security
retirement enhancement that may
become payable due to job loss
following a Change in Control (as
that term is defined in such
benefit plan), and
o to eliminate future accruals of all
other retirement enhancements that
may become payable due to job loss
following a Change in Control to
the fullest extent permitted by
applicable law.
>> The Retirement Benefit Equity Plan is an ERISA
excess pension plan that provides participants
with benefits that otherwise would be denied by
reason of certain Internal Revenue Code
limitations applicable to the qualified Retirement
Income Plan.. As of the Effective Date, accrued
liabilities under this plan are expected to total
approximately $34 million. The normal form of
payment is an annuity. Under the terms of the
Retirement Income Plan, which also impact the
Retirement Benefit Equity Plan, plan participants
are eligible for enhanced pension benefits in the
event of (i) a job loss within two years of a
change in control of Holdings or (ii) termination
of the Retirement Income Plan within five years of
an Extraordinary Event. The Extraordinary Event
involves a more narrowly defined change in control
of Holdings as defined in the Retirement Income
Plan. The Retirement Benefit Equity Plan will be
amended as of any date prior to the Effective Date
designated by AWI in the manner described below
and, as amended, will be assumed as of the
Effective Date:
o to exclude in the definition of
Change in Control (as defined in
the Retirement Benefit Equity Plan)
the occurrence of the Effective
Date, the creation of the Asbestos
PI Trust, and the issuance of the
New Common Stock to the Asbestos PI
Trust,
o to eliminate the Extraordinary
Event provisions as covered under
the Retirement Income Plan,
o to eliminate any and all retirement
enhancements, related to past and
future service, that may become
payable due to job loss following a
Change in Control as covered under
the Retirement Income Plan, and
o to terminate any right or
obligation of Reorganized AWI to
honor single-sum withdrawal
requests;
provided, however, as to any party that objects to such
amendments by the deadline for filing objections to
confirmation of the Plan, such plan will be deemed
rejected, and such party will have an Unsecured Claim for
any benefits thereunder in accordance with section 8.3 of
the Plan.
On the Effective Date, the assumption, rejection, and amendment of the foregoing
plans will be deemed to have occurred as of such date or earlier date specified
in section 8.7 of the Plan, will be authorized, and will be deemed approved in
all respects, and will be in effect from and after the Effective Date or such
other date in each case without requiring further action under applicable law,
regulation, order, or rule, including, without express or implied limitation,
any action by any party or Entity, including any administrative committee of any
plan or the stockholders or directors of AWI or Reorganized AWI. On the
Effective Date or as soon thereafter as is practicable, Reorganized AWI will
restate the plans amended above as provided in section 8.7(c) of the Plan and
60
will communicate such amendments in such manner and as may be required without
any further order of the Bankruptcy Court. Each of the officers of AWI and
Reorganized AWI is authorized, in accordance with his or her authority under the
resolutions of the Board of Directors, to execute, deliver, file, or record such
contracts, instruments, releases, indentures, and other agreements or documents
and take such actions as may be necessary or appropriate to effectuate and
further evidence the terms and conditions of the plan amendments set forth in
section 8.7 of the Plan.
K. CANCELLATION OF EXISTING DEBT SECURITIES.
As of the Effective Date, all notes, agreements, and securities evidencing
Unsecured Claims and the rights of the holders thereof thereunder, will be
cancelled and deemed null and void and of no further force and effect, and the
holders thereof will have no rights, and such instruments will evidence no
rights, except the right to receive the distributions provided for in the Plan.
L. EXPIRATION OF THE RETENTION PERIOD.
Upon the expiration of the Retention Period, all monies or other property held
for distribution by any trustee under any indenture governing any of the
Unsecured Claims will be returned to Reorganized AWI by such trustee, free and
clear of any claim or interest of any nature whatsoever, including, without
express or implied limitation, escheat rights of any governmental unit under
applicable law.
M. COMPENSATION OF THE APPLICABLE TRUSTEES.
Reorganized AWI will pay the Indenture Trustees' Fees and Expenses to the extent
that an Indenture Trustee makes a written request for Indenture Trustees' Fees
and Expenses within thirty (30) days after the Effective Date. Although it will
not be necessary for the Indenture Trustees to apply to the Bankruptcy Court for
approval of the Indenture Trustees' Fees and Expenses, any dispute between
Reorganized AWI and an Indenture Trustee regarding the reasonableness of any
such fees and expenses shall be resolved by the Bankruptcy Court. Each Indenture
Trustee shall be compensated by Reorganized AWI for services rendered from and
after the Effective Date, including the reasonable compensation, disbursements,
and expenses of the agents and legal counsel of such trustee in connection with
the performance after the Effective Date of its duties under this section, and
shall be indemnified by Reorganized AWI for any loss, liability, or expense
incurred by it in connection with the performance of such duties to the same
extent and in the same manner as provided in the related indenture.
N. LISTING OF THE NEW COMMON STOCK.
As soon as practicable after the Effective Date, Reorganized AWI will apply to
have its common stock listed on a national securities exchange or quoted on a
national interdealer quotation system and will use its best efforts to obtain
and maintain such listing or quotation.
O. CORPORATE REORGANIZATION ACTIONS.
On or as soon as practicable after the Effective Date, Reorganized AWI shall
take such actions as may be or become necessary to effectuate the following, all
of which shall be authorized and approved in all respects, in each case without
further action being required under applicable law, regulation, order, or rule
(including, without limitation, any action by the shareholders or directors of
AWI or Reorganized AWI or the Asbestos PI Trust or the Asbestos PI Trustees):
>> AWI will file the Amended and Restated Articles of
Incorporation with the Secretary of State for the
Commonwealth of Pennsylvania.
>> Certain wholly owned, non-operating subsidiaries
of AWI will merge with and into AWI on or as soon
as practicable after the Effective Date.
>> The Existing AWI Common Stock will be cancelled.
61
>> Subject to section 7.4 of the Plan, the Plan Note
Indenture will become effective and, upon such
effectiveness, the Plan Notes will be issued and
delivered in accordance with sections 3.2(f) and
12.8 of the Plan and sections 3.2(g) and 10.1(b)
of the Plan.
>> The New Common Stock will be issued and delivered
in accordance with sections 3.2(f) and 12.8 of the
Plan and sections 3.2(g) and 10.1(b) of the Plan.
>> If the requirement of section 3.2(l) of the Plan
is met, the New Warrants will be issued and
delivered as provided in section 7.25 of the Plan
(and, if applicable, in accordance with section
10.1(b) of the Plan).
>> At AWI's election, AWI will complete the 144A
Offering. See Section V.E, entitled, "THE PLAN OF
REORGANIZATION - 144A Offering."
>> If a 144A Offering is completed, AWI will
distribute the 144A Offering Proceeds in
accordance with the Plan.
>> Reorganized AWI will enter into the New Long-Term
Incentive Plan. See Section IX.C, entitled
"MANAGEMENT OF REORGANIZED AWI - Incentive
Compensation Plans and New Long-Term Incentive
Plan."
The principal assets of the wholly owned non-operating subsidiaries to be merged
with and into Reorganized AWI are equity interests in various foreign operating
subsidiaries and intercompany debt obligations of Reorganized AWI (which as a
result of this transaction will be extinguished). As these subsidiaries are
non-operating, the liabilities of these subsidiaries substantially arise out of
the allocation by AWI and its subsidiaries of certain administrative expenses
and tax liabilities which, for financial reporting purposes, are treated on a
consolidated basis and which will be offset and extinguished in the mergers,
with the exception of certain liabilities of one of the non-operating
subsidiaries, Armstrong Enterprises, Inc ("AEI") described below.
In 1995, AEI sold the stock of a wholly-owned operating subsidiary, Thomasville
Furniture Industries, Inc. ("THOMASVILLE"), to Furniture Brands International,
Inc. ("FURNITURE BRANDS") pursuant to a stock purchase agreement dated as of
November 18, 1995 ("THOMASVILLE SALE AGREEMENT"). Pursuant to the Thomasville
Sale Agreement, AEI agreed to indemnify Furniture Brands against liabilities, if
any, arising out of certain tax and environmental matters. AWI guaranteed the
performance by AEI of its obligations under the Thomasville Sale Agreement.
Furniture Brands has alleged that it holds a claim against AWI and AWI's estate
in an amount of $766,370 with respect to the tax indemnification under the
Thomasville Sale Agreement. AWI intends to object to such claim in the Chapter
11 Case. To date, AWI has paid approximately $3,700,000 on account of the
environmental indemnification obligation under the Thomasville Sale Agreement,
and AWI estimates that the range of future liability with respect to such
obligation will be from approximately $750,000 to $2,880,000. As a result of the
merger of AEI into Reorganized AWI following the Effective Date, any liabilities
of AEI will become liabilities of Reorganized AWI.
P. HOLDINGS PLAN OF LIQUIDATION.
Holdings' board of directors expects to approve, and recommend to Holdings'
shareholders approval of, the Holdings Plan of Liquidation, to be effectuated
subject to the Plan being confirmed by the Bankruptcy Court. Approval of
Holdings' shareholders of the Holdings Plan of Liquidation will be sought
pursuant to a separate proxy statement and proxy, which will be sent to Holdings
shareholders and will further describe the Holdings Plan of Liquidation. If the
Holdings Plan of Liquidation is approved as required, Holdings will be dissolved
and, as soon as practicable, will wind up its business and affairs in accordance
with Pennsylvania law and the Holdings Plan of Liquidation. As part of Holdings'
winding up, its wholly-owned subsidiary, AWWD, will be merged into Holdings or
will dissolve and transfer all of its assets, subject to all of its liabilities,
to Holdings, with the result that Holdings will succeed to the interest in AWI
62
now held directly by AWWD. In addition, all intercompany claims among Holdings,
AWWD, and AWI will be released. See Section IV.C.11., entitled, "THE CHAPTER 11
CASE - Significant Events During the Chapter 11 Case - Settlement and Release of
Intercompany Claims."
In accordance with section 3.2(j) of the Plan, if the requisite approvals of the
board of directors and shareholders of Holdings of the Holdings Plan of
Liquidation are received by the first anniversary of the Effective Date, the New
Warrants will be issued to Holdings, for distribution pursuant to the Holdings
Plan of Liquidation, as soon as is practicable after the later of the Effective
Date or the date of such approval and, if applicable, in accordance with section
10.1(b) of the Plan. In accordance with section 3.2(l) of the Plan, if the
requisite approvals of the board of directors and shareholders of Holdings of
the Holdings Plan of Liquidation are not received by the first anniversary of
the Effective Date, the New Warrants will not be issued. From and after the
Effective Date, other than as provided in the Plan (including, without
limitation, provisions of the Plan relating to the indemnification rights of
Holdings' officers, directors, and employees and the requirement to provide
insurance for the benefit of such persons), Reorganized AWI will have no ongoing
obligations to Holdings or AWWD. Reorganized AWI will, however, bear all costs
and expenses related to the preparation and submission to a vote of Holdings'
shareholders of the Holdings Plan of Liquidation and all other operating
expenses of Holdings and AWWD until the first anniversary of the Effective Date
and, if the requisite approval of the Holdings Plan of Liquidation by Holdings'
shareholders is obtained by the first anniversary of the Effective Date, the
performance and consummation of the Holdings Plan of Liquidation, including any
operating expenses for Holdings and AWWD until their dissolution and liquidation
pursuant to the Holdings Plan of Liquidation. Holdings currently expects,
assuming occurrence of the Effective Date and receipt of the required approvals
of the Holdings Plan of Liquidation, that the New Warrants will be delivered to
Holdings' shareholders as soon as the winding up of Holdings' affairs permits.
As further explained in Section V.D.4 of this Disclosure Statement, entitled,
"THE PLAN OF REORGANIZATION - Description of the Reorganization Consideration -
New Warrants," the New Warrants are expected to have a fair market value of
between $40 and $50 million, an amount which, if divided by the number of shares
of Holdings outstanding, equals $0.98 to $1.23 per share.
IMPORTANT INFORMATION FOR HOLDERS OF
COMMON STOCK OF ARMSTRONG HOLDINGS, INC.
IN CONNECTION WITH THE PROPOSED PLAN, THE BOARD OF DIRECTORS OF
HOLDINGS CONTEMPLATES PROPOSING THE DISSOLUTION AND WINDING-UP OF
HOLDINGS. IN THAT REGARD, HOLDINGS INTENDS TO FILE RELEVANT
MATERIALS WITH THE SEC, INCLUDING A PROXY OR CONSENT SOLICITATION
STATEMENT WITH RESPECT TO APPROVAL BY HOLDINGS' SHAREHOLDERS OF THE
DISSOLUTION OF HOLDINGS AND A PLAN OF LIQUIDATION. BECAUSE THOSE
DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION, STOCKHOLDERS OF
HOLDINGS ARE URGED TO READ THEM, IF AND WHEN THEY BECOME AVAILABLE.
WHEN FILED WITH THE SEC, THEY WILL BE AVAILABLE FOR FREE AT THE
SEC'S WEBSITE, WWW.SEC.GOV. HOLDINGS STOCKHOLDERS WILL RECEIVE
INFORMATION AT AN APPROPRIATE TIME ON HOW TO OBTAIN DOCUMENTS
RELATED TO SUCH MATTERS FOR FREE FROM HOLDINGS. SUCH DOCUMENTS ARE
NOT CURRENTLY AVAILABLE.
DIRECTORS AND EXECUTIVE OFFICERS OF HOLDINGS AND ITS SUBSIDIARIES
MAY BE DEEMED TO BE PARTICIPANTS IN HOLDINGS' SOLICITATION OF
PROXIES OR CONSENTS FROM ITS STOCKHOLDERS IN CONNECTION WITH THIS
MATTER. INFORMATION ABOUT SUCH DIRECTORS AND EXECUTIVE OFFICERS AND
THEIR RESPECTIVE STOCK OWNERSHIP AND OTHER INTERESTS IS SET FORTH
IN HOLDINGS' ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2001. PARTICIPANTS IN HOLDINGS' SOLICITATION MAY ALSO
BE DEEMED TO INCLUDE VARIOUS DIRECTORS, EXECUTIVE OFFICERS AND
OTHER PERSONS:
DIRECTORS: H. Jesse Arnelle, Van C. Campbell, Judith R.
Haberkorn, John A. Krol, Michael D. Lockhart, James E. Marley,
Ruth M. Owades, M. Edward Sellers, and Jerre L. Stead
OFFICERS: Matthew J. Angello, Leonard A. Campanaro, Chan W.
Galbato, Gerard L. Glenn, David E. Gordon, Michael D. Lockhart,
John N. Rigas, William C. Rodruan, Stephen J. Senkowski, Barry M.
Sullivan, and April L. Thornton
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AS OF THE DATE OF THIS COMMUNICATION, NONE OF THESE PARTICIPANTS
INDIVIDUALLY BENEFICIALLY OWNS MORE THAN 1% OF HOLDINGS' COMMON
STOCK. EXCEPT AS DISCLOSED ABOVE, TO THE KNOWLEDGE OF HOLDINGS,
NONE OF THESE PERSONS HAS ANY INTEREST, DIRECT OR INDIRECT, BY
SECURITY HOLDINGS OR OTHERWISE, IN HOLDINGS. STOCKHOLDERS OF
HOLDINGS WILL BE ABLE TO OBTAIN ADDITIONAL INFORMATION REGARDING
THE INTERESTS OF THE PARTICIPANTS BY READING THE PROXY OR CONSENT
SOLICITATION STATEMENT OF HOLDINGS IF AND WHEN IT BECOMES
AVAILABLE.
Q. DISTRIBUTIONS UNDER THE PLAN.
1. DISTRIBUTION DATE.
Each of the following will constitute a Distribution Date: (a) the Initial
Distribution Date, (b) the first Business Day after the end of the months of
March, June, September, and December, commencing with the first such date to
occur more than one hundred eighty (180) days after the Effective Date and until
the second anniversary of the Effective Date, (c) after the second anniversary
of the Effective Date, the first Business Day after the end of the month of
December, and (d) the Final Distribution Date; provided, however, that (i) a
Distribution Date (other than the Initial Distribution Date and the Final
Distribution Date) shall not occur if the aggregate amount of Plan Notes and
Available Cash to be distributed on any Distribution Date is less than one
million dollars ($1,000,000), in which case the amount to be distributed shall
be retained and added to the amount to be distributed on the next Distribution
Date, and (ii) any Unsecured Claim that becomes Allowed less than twenty (20)
Business Days prior to a Distribution Date shall be treated as a Disputed Claim
for the purposes of the Distribution occurring on such Distribution Date and
shall not receive a Distribution until the Distribution Date immediately
succeeding such Distribution Date.
2. DISPUTED UNSECURED CLAIMS RESERVE.
If the Plan Notes are issued under the Plan, on the Initial Distribution Date,
Reorganized AWI will establish the Disputed Unsecured Claims Reserve, pursuant
to which Plan Notes not distributed on the Initial Distribution Date or on any
subsequent Distribution will be issued but held in trust by the Disbursing Agent
pending the resolution of Disputed Claims. In accordance with and subject to the
provisions of sections 3.2(f)(ii), 5.3 and 7.7 of the Plan, any Distribution of
Plan Notes with respect to a Disputed Claim that becomes Allowed will include
interest and other accretions with respect to such Plan Notes, net of the
portion of expenses (including, without limitation, taxes payable by the
Disputed Unsecured Claims Reserve) attributable to such Plan Notes.
3. TIMING OF DISTRIBUTIONS UNDER THE PLAN.
Any Distribution to be made by AWI or Reorganized AWI pursuant to the Plan will
be deemed to have been timely made if made within ten (10) days after the time
therefor specified in the Plan. No interest will accrue or be paid with respect
to any Distribution as a consequence of such Distribution not having been made
on the Effective Date; provided, however, that any Plan Notes distributed from
the Disputed Unsecured Claims Reserve after the Initial Distribution Date will
include accrued interest and any other accretions thereon (net of the portion of
the expenses of the Disputed Unsecured Claims Reserve (including, without
limitation, taxes) attributable to such Plan Notes) from and after the Initial
Distribution Date in accordance with the terms of the Plan Note Indenture, and
New Common Stock issued to holders of Allowed Claims in Class 6 and 8 after the
Effective Date will include all dividends declared and paid and other
distributions made in respect thereto after the Effective Date.
(A) DISTRIBUTIONS WITH RESPECT TO UNSECURED CLAIMS AND
ENVIRONMENTAL CLAIMS.
Distributions with respect to Classes 6 and 8 will only be made on each
Distribution Date; provided, however, that, if a Claim in any of Classes 6 or 8
becomes Allowed subsequent to the Initial Distribution Date, AWI may, in its
sole discretion, make a Distribution with respect to such Claim prior to a
Distribution Date. For purposes of treatment and Distribution under the Plan,
except as provided with respect to treatment of Claims in the voting procedures
approved by the Voting Procedures Order, all Unsecured Claims held by a Creditor
shall be aggregated and treated as a single Claim. At the written request of AWI
or the Disbursing Agent, any Creditor holding multiple Unsecured Claims shall
provide to AWI or the Disbursing Agent, as the case may be, a single address to
which any Distributions shall be sent. At the written request of any Creditor
64
holding multiple Unsecured Claims made to the Disbursing Agent within thirty
(30) days prior to a Distribution Date, such Creditor shall receive an itemized
statement of the Unsecured Claims for which the Distribution is being made.
(B) DISTRIBUTION TO THE ASBESTOS PI TRUST.
The Distribution to the Asbestos PI Trust shall be made on the later of (i) the
date the Asbestos PI Trustees have executed the Asbestos PI Trust Agreement and
(ii) the Effective Date; provided, however, that if AWI intends to complete the
144A Offering, then the Distribution of the 144A Offering Proceeds and/or Plan
Notes to the Asbestos PI Trust shall occur as soon as practicable after the 144A
Offering is completed or Reorganized AWI determines not to complete a 144A
Offering, but in no event shall such Distribution occur after the Initial
Distribution Date..
(C) DISTRIBUTION TO THE ASBESTOS PD TRUST.
If Class 4 votes to accept the Plan and the Asbestos PD Trust is created
pursuant to section 3.2(d)(ii)(x) of the Plan, the Distribution of the Asbestos
PD Trust Funding Obligation will be made on the later of (i) the date the
Asbestos PD Trustees are selected for the Asbestos PD Trust and have executed
the Asbestos PD Trust Agreement and (ii) the Effective Date. If Class 4 votes to
reject the Plan and the Asbestos PD Trust is created pursuant to section
3.2(d)(ii)(x) of the Plan, the Distribution of the Asbestos PD Trust Funding
Obligation will be made on the latest of (x) the date an order of the Bankruptcy
Court estimating the aggregate value of all Asbestos Property Damage Claims
becomes a Final Order, (y) the Effective Date, and (z) the date the Asbestos PD
Trustees have executed the Asbestos PD Trust Agreement.
4. FRACTIONAL SHARES.
No fractional shares of New Common Stock will be distributed, no Plan Notes will
be issued in an amount less than $100, and no cash payments of fractions of
cents will be made. Fractional cents will be rounded to the nearest whole cent
(with 0.5 cent or less to be rounded down). Fractional shares will be rounded to
the nearest whole share (with 0.5 share or less to be rounded down). Plan Notes
in denominations of less than $100 will be rounded to the nearest $100 increment
(with Plan Notes in denominations of $50 or less to be rounded down). No cash
will be paid in lieu of such fractional shares or Plan Notes in increments of
less than $100.
5. PROVISIONS FOR TREATMENT OF DISPUTED CLAIMS.
Reorganized AWI will object to the allowance of Claims filed with the Bankruptcy
Court (other than Asbestos Personal Injury Claims and Asbestos Property Damage
Claims) with respect to which Reorganized AWI disputes liability in whole or in
part. Notwithstanding the foregoing, Reorganized AWI, at its option, may
continue to prosecute objections to Asbestos Property Damage Claims if such
objections are pending as of the Effective Date, and AWI elects, pursuant to
section 3.2(d)(ii)(y) of the Plan, not to create the Asbestos PD Trust. All
objections that are filed and prosecuted by Reorganized AWI as provided in the
Plan will be litigated to Final Order by Reorganized AWI or compromised and
settled in accordance with the Claims Settlement Guidelines. Unless otherwise
provided in the Plan or ordered by the Bankruptcy Court, all objections by
Reorganized AWI to Claims will be served and filed no later than ninety (90)
days after the Effective Date.
Notwithstanding the above, a Distribution will only be made by Reorganized AWI
to the holder of a Disputed Claim when, and to the extent that, such Disputed
Claim becomes Allowed. No interest will be paid on account of Disputed Claims
that later become Allowed except to the extent that payment of interest is
required under section 506(b) of the Bankruptcy Code. No Distribution will be
made with respect to all or any portion of any Disputed Claim pending the entire
resolution thereof in the manner described above.
6. AMENDMENTS TO THE CLAIMS SETTLEMENT GUIDELINES.
On the Effective Date, the Claims Settlement Guidelines will be amended in the
form set forth in Exhibit 1.46 to the Plan. It is expected that such amendment
will eliminate the requirement for approval by the committees for certain claims
settlements, but add the requirement of the consent of a designated
representative of the Creditors' Committee. In addition, the threshold for
65
obtaining Bankruptcy Court approval of certain settlements will be increased so
that Bankruptcy Court approval will only be required for (i) settlements with
Affiliates, (ii) settlements as to which the Creditors' Committee representative
objects, and (iii) settlements where the difference between AWI's scheduled
claim and the allowed claim is greater than $10 million. In addition, the Claims
Settlement Guidelines will be amended to delete the requirement of obtaining any
approval for settlements of Asbestos Property Damage Claims if (x) AWI elects
not to create the Asbestos PD Trust, and (y) any settlement amount will be
funded exclusively from the proceeds of insurance. The Claims Settlement
Guidelines do not and will not address the resolution of Asbestos Personal
Injury Claims, which will be governed exclusively by the Asbestos PI Trust
Agreement and the Asbestos PI Trust Distribution Procedures.
7. DISTRIBUTION OF UNCLAIMED PROPERTY.
Any Distribution under the Plan that is unclaimed after one hundred eighty (180)
days following the date such property is distributed will be deemed not to have
been made and will be transferred to Reorganized AWI, free and clear of any
claims or interests of any entities, including, without express or implied
limitation, any claims or interests of any governmental unit under escheat
principles. This will not affect the discharge of the Claim with respect to
which such Distribution was made, and the holder of such Claim will be forever
barred from enforcing such Claim against Reorganized AWI or Reorganized AWI's
assets, estate, properties, or interests in property.
R. DISCHARGE OF AWI.
The rights provided by the Plan and the treatment of the Claims and Equity
Interests therein will be in exchange for and in complete satisfaction,
discharge, and release of all Claims and Equity Interests of any nature
whatsoever, including any interest accrued thereon from and after the
Commencement Date, against AWI or its estate, properties, or interests in
property. Except as otherwise provided in the Plan, upon the Effective Date all
such Claims and Equity Interests in AWI will be deemed satisfied, discharged,
and released in full. Pursuant to the Plan and the Confirmation Order, all
parties will be precluded from asserting against Reorganized AWI, its
successors, or its or their assets, properties, or interests in property any
other or further Claims or Equity Interests based upon any act or omission,
transaction, or other activity of any kind or nature that occurred prior to the
Confirmation Date. In addition, the Confirmation Order will contain, inter alia,
the Asbestos PI Permanent Channeling Injunction. For a description of the
Asbestos PI Permanent Channeling Injunction, see Section VI.C, entitled "THE
ASBESTOS PI TRUST -- The Asbestos PI Permanent Channeling Injunction." AWI is
not seeking an injunction under section 524(g) of the Bankruptcy Code with
respect to Asbestos Property Damage Claims. Instead, AWI will rely upon the
general discharge and injunction against the assertion of preconfirmation claims
that the Bankruptcy Code makes applicable to all Claims, whatever their nature.
S. MODIFICATION OF THE PLAN.
AWI may, with the written consent of the Future Claimants' Representative, the
Asbestos PI Claimants' Committee, and, if Class 6 has not voted to reject the
Plan at the time of the requested alteration, amendment, or modification, the
Unsecured Creditors' Committee, alter, amend, or modify the Plan under section
1127(a) of the Bankruptcy Code at any time prior to the Confirmation Date so
long as the Plan, as modified, meets the requirements of sections 1122 and 1123
of the Bankruptcy Code. After the Confirmation Date and prior to the Effective
Date, AWI, with the written consent of the Future Claimants' Representative, the
Asbestos PI Claimants' Committee, and, if Class 6 votes to accept the Plan, the
Unsecured Creditors' Committee, may alter, amend, or modify the Plan in
accordance with section 1127(b) of the Bankruptcy Code.
T. REVOCATION OR WITHDRAWAL OF THE PLAN.
The Plan may be revoked or withdrawn prior to the Confirmation Date by AWI, with
the written consent of the Future Claimants' Representative, the Asbestos PI
Claimants' Committee, and, if Class 6 has not voted to reject the Plan at the
time of the requested revocation or withdrawal, the Unsecured Creditors'
Committee, or, after the Confirmation Deadline, by AWI. If the Plan is revoked
or withdrawn prior to the Confirmation Date, then the Plan will be deemed null
and void. In such event, nothing contained in the Plan will be deemed to
constitute a waiver or release of any claims or defenses or any admission or
statement against interest by AWI, the Asbestos PI Claimants' Committee, the
66
Future Claimants' Representative, the Unsecured Creditors' Committee, or any
other Entity or to prejudice in any manner the rights of AWI, the Asbestos PI
Claimants' Committee, the Future Claimants' Representative, the Unsecured
Creditors' Committee, or any Entity in any further proceedings involving AWI.
U. RIGHTS OF ACTION.
Any rights, claims, or causes of action accruing to AWI pursuant to the
Bankruptcy Code or pursuant to any statute or legal theory, including, without
express or implied limitation, any avoidance or recovery actions under sections
544, 545, 547, 548, 549, 550, 551, and 553 of the Bankruptcy Code and (except as
provided in Articles X and XI of the Plan) any rights to, claims, or causes of
action for recovery under any policies of insurance issued to or on behalf of
AWI will remain assets of AWI's estate and, on the Effective Date, will be
transferred to Reorganized AWI. Reorganized AWI will be deemed the appointed
representative to, and may, pursue, litigate, and compromise and settle any such
rights, claims, or causes of action, as appropriate, in accordance with what is
in the best interests of and for the benefit of Reorganized AWI.
On December 6, 2002, the two-year statutory limitations period imposed by
section 546(a) of the Bankruptcy Code during which AWI must commence avoidance
actions expired. Prior to the expiration of such period, AWI conducted a
comprehensive review of its prepetition transactions to determine if AWI should
commence any avoidance actions prior to December 6, 2002. As a result of such
review, the details of which were discussed with counsel to the Unsecured
Creditors' Committee, the Asbestos PI Claimants' Committee, and the Future
Claimants' Representative, AWI determined not to bring any avoidance actions
other than the action against the CCR (see section IV.C.8(b), entitled, "THE
CHAPTER 11 CASE - Significant Events During the Chapter 11 Case - Litigation
Involving the Center for Claims Resolution - CCR Preference Litigation) and a
preference action brought against one of AWI's former suppliers.
V. DISSOLUTION OF THE COMMITTEES.
On the Effective Date, except for the limited purpose of presenting final
applications for fee and expenses, the Future Claimants' Representative, the
Asbestos PI Claimants' Committee, the Asbestos PD Committee and the Unsecured
Creditors' Committee will be released and discharged of and from all further
authority, duties, responsibilities, and obligations relating to and arising
from and in connection with the Chapter 11 Case, and all such committees will be
deemed dissolved, and the Future Claimants' Representative's appointment will
continue to serve through the termination of the Asbestos PI Trust in order to
perform the functions required by the Asbestos PI Trust Agreement; provided,
however, (i) if the Effective Date occurs before the Confirmation Order becomes
a Final Order, the Asbestos PI Claimants' Committee, the Future Claimants'
Representative, and, if Class 6 votes to accept the Plan, the Unsecured
Creditors' Committee may continue to exist and to serve for the purposes of
pursuing any appeal of the Confirmation Order, and (ii) if any adversary
proceeding to which any of the Asbestos PI Claimants' Committee, the Future
Claimants' Representative, or, if Class 6 votes to accept the Plan, the
Unsecured Creditors' Committee is participating is pending as of the Effective
Date, any such committee may continue to exist or the Future Claimants'
Representative may continue to serve for the limited purpose of litigating such
adversary proceeding. The fees and expenses of the Future Claimants'
Representative from and after the Effective Date relating to the role of the
Future Claimants' Representative in the Asbestos PI Trust, pursuant to the
Asbestos PI Trust Agreement and the Asbestos PI Trust Distribution Procedures
(including, without limitation, the fees and expenses of any professionals
retained by the Future Claimants' Representative), will be the sole
responsibility of the Asbestos PI Trust. Notwithstanding the foregoing, if Class
4 votes to accept the Plan, the Asbestos PD Committee will continue to exist
from and after the Effective Date for the sole purpose of the selection of the
Asbestos PD Trustees and the development of the Asbestos PD Claims Resolution
Procedures, but all fees and expenses incurred by the Asbestos PD Committee
(including, without limitation, all fees and expenses of counsel to the Asbestos
PD Committee and other professionals retained by the Asbestos PD Committee) will
be the sole responsibility of the Asbestos PD Trust.
W. EXCULPATION.
None of Reorganized AWI, any of the members of the Asbestos PI Claimants'
Committee, the Future Claimants' Representative, any of the members of the
Unsecured Creditors' Committee, AWWD, Holdings, or any of their officers,
67
directors, employees, or agents will have or incur any liability to any entity
for any act or omission in connection with or arising out of the Chapter 11
Case, including, without limitation, the commencement of the Chapter 11 Case,
the negotiation of the Plan, pursuit of confirmation of the Plan, the
consummation of the Plan, or the administration of the Plan or the property to
be distributed under the Plan, except for gross negligence or willful
misconduct, and in all respects will be entitled to rely upon the advice of
counsel with respect to their duties and responsibilities under, or in
connection with, the Plan.
X. SUPPLEMENTAL DOCUMENTS.
Certain exhibits to the Plan, such as the Asbestos PI Trust Agreement and the
Asbestos PI Trust Distribution Procedures, are included in this Disclosure
Statement as exhibits to the Plan. Other exhibits to the Plan will be contained
in a separate exhibit volume and will be filed with the Clerk of the Bankruptcy
Court by [INSERT DATE], which is not later than the earlier of (i) fifteen (15)
days before the deadline for filing objections to confirmation of the Plan and
(ii) thirty (30) days prior to the Confirmation Hearing. Such exhibit volume may
be inspected in the office of the Clerk of the Bankruptcy Court during normal
court hours and may also be viewed at AWI's Internet site
(www.armstrongplan.com). Claimants and holders of Equity Interests and
shareholders of Holdings may also obtain a copy of the exhibit volume, once
filed, from AWI upon written request to the following address:
Armstrong World Industries, Inc.
Post Office Box 3666
Lancaster, Pennsylvania 17604-3666
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VI. THE ASBESTOS PI TRUST
The following summarizes the terms of the governing documents for the Asbestos
PI Trust. These documents consist of the Asbestos PI Trust Agreement (the
"ASBESTOS PI TRUST AGREEMENT") and The Armstrong World Industries, Inc. Asbestos
Personal Injury Settlement Trust Distribution Procedures (defined in the Plan as
the "ASBESTOS PI TRUST DISTRIBUTION PROCEDURES"). The following is intended only
to be a summary and is qualified in its entirety by reference to the full text
of such documents. In the event of any inconsistency between the provisions of
these documents and the summary contained herein, the terms of such documents
will control. Interested parties should therefore review the Asbestos PI Trust
Agreement and the Asbestos PI Trust Distribution Procedures, copies of which are
attached to the Plan as Exhibits 1.30 and 1.31, respectively.
A. GENERAL DESCRIPTION OF THE ASBESTOS PI TRUST.
1. CREATION AND PURPOSES OF THE ASBESTOS PI TRUST.
Effective as of the later of (i) the date the Asbestos PI Trustees have executed
the Asbestos PI Trust Agreement and (ii) the Effective Date, the Asbestos PI
Trust will be created. The Asbestos PI Trust will be established pursuant to the
Asbestos PI Trust Agreement. The purposes of the Asbestos PI Trust are (a) to
assume all liabilities of AWI, its successors in interest, and its Affiliates
with respect to Asbestos Personal Injury Claims; (b) to use its assets and
income to pay holders of valid Asbestos Personal Injury Claims in accordance
with the Asbestos PI Trust Distribution Procedures in such a way that such
holders are treated fairly, equitably and reasonably in light of the limited
assets available to satisfy such claims; and (c) to comply in all respects with
the requirements for the Asbestos PI Trust that are described in section
524(g)(2)(B)(i) of the Bankruptcy Code.
2. THE ASBESTOS PI TRUSTEES.
On the Confirmation Date, effective as of the Effective Date, the Bankruptcy
Court will appoint the individuals selected jointly by the Asbestos PI
Claimants' Committee and the Future Claimants' Representative (as identified in
Exhibit "7.2" to the Plan), which individuals will be appointed after
consultation with AWI, to serve as the Asbestos PI Trustees for the Asbestos PI
Trust. The Asbestos PI Trustees will serve staggered initial terms of five (5),
four (4), three (3) years and two (2) years from the effective date of the
Asbestos PI Trust Agreement. Thereafter, each term of service will be five
years.
Each Asbestos PI Trustee will serve until the end of the Asbestos PI Trustee's
term, his or her death, resignation or removal, or the termination of the
Asbestos PI Trust. Any Asbestos PI Trustee may be removed by the unanimous vote
of the remaining Asbestos PI Trustees and with the approval of the Bankruptcy
Court in the event he or she becomes unable to discharge his or her duties due
to accident or physical or mental deterioration, or for good cause, including
any substantial failure to comply with the general administration provisions of
the Asbestos PI Trust Agreement. In the event of a vacancy in an Asbestos PI
Trustee position, the remaining Asbestos PI Trustees will consult with the TAC
(see below) and the Future Claimants' Representative concerning appointment of a
successor Asbestos PI Trustee. The vacancy will be filled by the unanimous vote
of the remaining Asbestos PI Trustees unless a majority of the TAC or the Future
Claimants' Representative vetoes the appointment. In that event, the Bankruptcy
Court will make the appointment.
Each Asbestos PI Trustee will be entitled to receive annual compensation for his
or her service, which compensation will be disclosed to the Bankruptcy Court
prior to the Confirmation Hearing, plus a per diem allowance for meetings
attended and out-of-pocket costs and expenses. The Asbestos PI Trustees' annual
and per diem compensation will be reviewed every three years and appropriately
adjusted with the approval of the Bankruptcy Court.
The Asbestos PI Trustees may sit on the Board of Directors of Reorganized AWI,
but they will not receive additional compensation for their service on such
board over and above the compensation they receive as Trustees. The Asbestos PI
Trustees will receive from the Asbestos PI Trust, however, the same per diem
allowance as Reorganized AWI pays its directors for attendance at meetings.
Subject to a number of limitations set forth in the Asbestos PI Trust Agreement,
the Asbestos PI Trustees have the power to take any and all actions that are
necessary to fulfill the purposes of the Asbestos PI Trust and need not obtain
Bankruptcy Court approval to do so.
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3. THE TRUSTEES' ADVISORY COMMITTEE.
The Asbestos PI Trust Agreement provides for the establishment of a Trustees'
Advisory Committee (the "TAC"). The initial members of the TAC will be
identified, and a complete biography for each such initial member will be
provided, to the Bankruptcy Court prior to the Confirmation Hearing.
Each member of the TAC will serve until his or her death, resignation or
removal, or the termination of the Asbestos PI Trust. Any TAC member may be
removed by the remaining TAC members with the approval of the Bankruptcy Court
in the event he or she becomes unable to discharge his or her duties due to
accident or physical or mental deterioration, or for good cause, including any
substantial failure to comply with the general administration provisions of the
Asbestos PI Trust Agreement, or other good cause. In the event of a vacancy
caused by the resignation or term expiration of a TAC member, his or her
successor will be selected by the TAC member who is resigning or whose term is
expiring, unless the remaining members unanimously veto the selection, in which
case the successor will be selected by a unanimous vote of the remaining
members. If the remaining members cannot unanimously agree, the Bankruptcy Court
will appoint the successor. In the event of a vacancy caused by removal or death
of a TAC member, or in the event that a resigning member or retiring member does
not name his or her successor, the remaining members of the TAC by unanimous
vote will name the successor. If the remaining members of the TAC cannot reach
unanimous agreement, the Bankruptcy Court will appoint the successor.
The Asbestos PI Trustees are required to consult with the TAC on the appointment
of successor Asbestos PI Trustees, the general implementation and administration
of the Asbestos PI Trust and the Asbestos PI Trust Distribution Procedures, and
on various other matters required by the Asbestos PI Trust Agreement. The
Asbestos PI Trustees must also obtain the consent of a majority of TAC members
on a variety of matters, including material amendments to the Asbestos PI Trust
Agreement and the Asbestos PI Trust Distribution Procedures, merger or
participation with other claims resolution facilities, and termination of the
Asbestos PI Trust under certain conditions specified in the Asbestos PI Trust
Agreement.
The members of the TAC will be entitled to receive compensation from the
Asbestos PI Trust for their services as TAC members in the form of a reasonable
hourly rate set by the Asbestos PI Trustees for attendance at meetings or other
conduct of Asbestos PI Trust business. The members of the TAC will also be
reimbursed promptly for all reasonable out-of-pocket costs and expenses incurred
in connection with the performance of their duties hereunder. As with the
initial Asbestos PI Trustees, the initial members of the TAC will serve
staggered terms, with five-year terms thereafter. The identity of the
individuals who will serve as the initial TAC members will be disclosed at the
Confirmation Hearing.
4. THE FUTURE CLAIMANTS' REPRESENTATIVE
The Asbestos PI Trust Agreement provides for the appointment of Dean M.
Trafelet, Esq. as the Future Claimants' Representative who will serve in a
fiduciary capacity, representing the interests of the holders of Demands against
the Asbestos PI Trust for the purposes of protecting the rights of such persons.
..
The Future Claimants' Representative will serve until his or her death,
resignation or removal, or the termination of the Asbestos PI Trust. The Future
Claimants' Representative may resign at any time by written notice to the
Asbestos PI Trustees and may be removed by the Bankruptcy Court in the event he
or she becomes unable to discharge his or her duties due to accident or physical
or mental deterioration, or for good cause, including any substantial failure to
comply with the general administration provisions of the Asbestos PI Trust
Agreement. A vacancy in the position of Future Claimants' Representative caused
by resignation will be filled by an individual nominated prior to the effective
date of the resignation by the resigning Future Claimants' Representative. A
vacancy caused by death or removal of the Future Claimants' Representative will
be filled by an individual nominated by the Asbestos PI Trustees, the TAC, or
both. In any case, the nominee will be subject to the approval of the Bankruptcy
Court.
The Asbestos PI Trustees are required to consult with the Future Claimants'
Representative on the appointment of successor Asbestos PI Trustees, the general
implementation and administration of the Asbestos PI Trust and the Asbestos PI
Trust Distribution Procedures, and on various other matters required by the
Asbestos PI Trust Agreement. The Asbestos PI Trustees must also obtain the
consent of the Future Claimants' Representative on a variety of matters,
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including material amendments to the Asbestos PI Trust Agreement and the
Asbestos PI Trust Distribution Procedures, merger or participation with other
claims resolution facilities, and termination of the Asbestos PI Trust under
certain conditions specified in the Asbestos PI Trust Agreement.
The Future Claimants' Representative will be entitled to receive compensation
from the Asbestos PI Trust in the form of payment at the Future Claimants'
Representative's normal hourly rate for services performed and will be
reimbursed by the Asbestos PI Trust for all reasonable out-of-pocket costs and
expenses incurred by the Future Claimants' Representative in connection with the
performance of his or her duties hereunder.
5. TRANSFER OF CERTAIN PROPERTY TO THE ASBESTOS PI TRUST.
(A) TRANSFER OF BOOKS AND RECORDS.
On the Effective Date or as soon thereafter as is practicable, at the sole cost
and expense of the Asbestos PI Trust and in accordance with written instructions
provided to Reorganized AWI by the Asbestos PI Trust, Reorganized AWI will
transfer and assign, or cause to be transferred and assigned, to the Asbestos PI
Trust the books and records of AWI that pertain directly to Asbestos Personal
Injury Claims that have been asserted against AWI. AWI will request that the
Bankruptcy Court, in the Confirmation Order, rule that such transfer does not
result in the destruction or waiver of any applicable privileges pertaining to
such books and records. If the Bankruptcy Court does not so rule, at the option
of the Asbestos PI Trust, Reorganized AWI will, at the sole cost and expense of
the Asbestos PI Trust, retain the books and records and enter into arrangements
to permit the Asbestos PI Trust to have access to such books and records. If the
Asbestos PI Trust does not issue written instructions for the transfer or
retention of such books and records within one hundred eighty (180) days after
the later of the Effective Date and the date by which all the Asbestos PI
Trustees have executed the Asbestos PI Trust Agreement, or if the Asbestos PI
Trust so requests, Reorganized AWI may (and shall, if the Asbestos PI Trust so
requests, but at the sole cost and expense of the Asbestos PI Trust) destroy any
such books and records, and the order of the District Court entered during the
Chapter 11 Case with respect to the retention of books and records shall be
deemed superseded by the Plan.
(B) TRANSFER OF REORGANIZATION CONSIDERATION.
On the later of the Effective Date and the date by which all the Asbestos PI
Trustees have executed the Asbestos PI Trust Agreement, AWI will transfer to the
Asbestos PI Trust the Asbestos PI Insurance Asset and the following assets:
>> 65.57% of the New Common Stock,
>> 65.57% of the first $1.05 billion of (x) up to
$300 million of Available Cash and (y) the Plan
Notes and/or 144A Offering Proceeds,
>> 40% of the first $50 million of Available Cash
remaining after making provision for the
Distribution provided in section 3.2(f)(ii)2 of
the Plan and the funding of the Asbestos PI Trust
in section 10.1(b)(ii) of the Plan,
>> 40% of an amount of Plan Notes and/or 144A
Offering Proceeds equal to the difference (if
positive) of $50 million less the amount of
Available Cash remaining after making provision
for the Distribution provided in section
3.2(f)(ii)2 of the Plan and the funding of the
Asbestos PI Trust in section 10.1(b)(ii) of the
Plan, and
>> 65.57% of the remaining Available Cash and Plan
Notes and/or 144A Offering Proceeds after making
provision for the Distribution provided in
sections 3.2(f)(ii)2, 3.2(f)(ii)3, and 3.2(f)(ii)4
of the Plan and the funding of the Asbestos PI
Trust in sections 10.1(b)(ii), 10.1(b)(iii), and
10.1(b)(iv) of the Plan.
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If, however, AWI intends to complete the 144A Offering, then the Distribution of
the 144A Offering Proceeds and/or Plan Notes to the Asbestos PI Trust will occur
as soon as practicable after the 144A Offering is completed or Reorganized AWI
determines not to complete a 144A Offering, but in no event will such
Distribution occur after the Initial Distribution Date. AWI estimates that the
total value of assets to be distributed by AWI to the Asbestos PI Trust,
excluding the Asbestos PI Insurance Asset, will be approximately $2.1 billion as
of the Effective Date. See Section V.D, entitled, "THE PLAN OF REORGANIZATION -
Description of the Reorganization Consideration," for a description of the New
Common Stock and the Plan Notes and the definition and estimate of Available
Cash.
If Class 6 votes to reject the Plan and the Holdings Plan of Liquidation is
approved by the board of directors and shareholders of Holdings prior to the
first anniversary of the Effective Date, on the later of the date of such
approval and the Effective Date, the New Warrants will be deemed to be issued
with respect to Asbestos Personal Injury Claims, but will automatically, and
without further action by the Asbestos PI Trust or approval of the Asbestos PI
Trustees, be deemed to have been transferred to AWWD.
(C) ASBESTOS PI TRUST TERMINATION PROVISIONS.
The Asbestos PI Trust is irrevocable, but will terminate ninety (90) days after
the first to occur of any of the following events:
>> the Asbestos PI Trustees decide to terminate the
Asbestos PI Trust because (a) they deem it
unlikely that new asbestos claims will be filed
against the Asbestos PI Trust, (b) all Asbestos
Personal Injury Claims duly filed with the
Asbestos PI Trust have been liquidated and paid to
the extent provided in the Asbestos PI Trust
Agreement and the Asbestos PI Trust Distribution
Procedures or disallowed by a final,
non-appealable order, to the extent possible based
upon the funds available through the Plan, and (c)
twelve (12) consecutive months have elapsed during
which no new asbestos claim has been filed with
the Asbestos PI Trust; or
>> if the Asbestos PI Trustees have procured and have
in place irrevocable insurance policies and have
established claims handling agreements and other
necessary arrangements with suitable third parties
adequate to discharge all expected remaining
obligations and expenses of the Asbestos PI Trust
in a manner consistent with the Asbestos PI Trust
Agreement and the Asbestos PI Trust Distribution
Procedures, the date on which the Bankruptcy Court
enters an order approving such insurance and other
arrangements and such order becomes a final order;
or
>> to the extent that any rule against perpetuities
will be deemed applicable to the Asbestos PI
Trust, twenty-one (21) years less ninety-one (91)
days pass after the death of the last survivor of
all of the descendents of the late Joseph P.
Kennedy, Sr., father of the late President John F.
Kennedy, living on the date of the Asbestos PI
Trust Agreement.
On the termination date, after payment of all the Asbestos PI Trust's
liabilities have been provided for, all monies remaining in the Asbestos PI
Trust estate will be given to such organization(s) exempt from federal income
tax under section 501(c)(3) of the Internal Revenue Code, which tax-exempt
organization(s) will be selected by the Asbestos PI Trustees using their
reasonable discretion; provided, however, that (i) if practicable, the
activities of the selected tax-exempt organization(s) will be related to the
treatment of, research on, or the relief of suffering of individuals suffering
from asbestos-related lung disorders, and (ii) the tax-exempt organization(s)
will not bear any relationship to Reorganized Debtors within the meaning of
section 468(d)(3) of the Internal Revenue Code. AWI believes that the likelihood
of any monies remaining in the Asbestos PI Trust after the Asbestos PI Trust
terminates is extremely remote.
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6. ABILITY TO AMEND ASBESTOS PI TRUST DOCUMENTS.
The Asbestos PI Trustees, subject to the TAC's and the Future Claimants'
Representative's consent, may modify or amend certain provisions of the Asbestos
PI Trust Agreement or any document annexed thereto. However, the Asbestos PI
Trust provisions may not be modified or amended in any way that could
jeopardize, impair, or modify the applicability of section 524(g) of the
Bankruptcy Code, the efficacy or enforceability of the injunction entered
thereunder, or the Asbestos PI Trust's qualified settlement fund status under
Section 468B of the Internal Revenue Code.
7. ASBESTOS PI TRUST DISTRIBUTION PROCEDURES.
(A) ASBESTOS PI TRUST GOALS
The Asbestos PI Trustees will implement and administer the Asbestos PI Trust
Distribution Procedures, which are attached to the Plan as Exhibit "1.31." These
procedures will have been adopted after lengthy negotiations between and among
the ACC, the Future Claimants' Representative, and AWI. Nothing approaching full
payment of all Asbestos Personal Injury Claims is possible in light of the value
of the Asbestos Personal Injury Claims that could be filed against the Asbestos
PI Trust, both currently and in the future, and the value of the Asbestos PI
Trust assets.
The goal of the Asbestos PI Trust is to treat all claimants equitably. The
Asbestos PI Trust Distribution Procedures further that goal by setting forth
procedures for processing and paying claims generally on an impartial,
first-in-first-out ("FIFO") basis, with the intention of paying all claimants
over time as equivalent a share as possible of the value of their claims based
on historical values for substantially similar claims in the tort system. To
this end, the Asbestos PI Trust Distribution Procedures establish a schedule of
eight asbestos-related diseases ("DISEASE LEVELS"), all of which have
presumptive medical and exposure requirements ("MEDICAL/EXPOSURE CRITERIA"),
seven of which have specific liquidated values ("SCHEDULED VALUES"), anticipated
average values ("AVERAGE VALUES"), and caps on their liquidated values ("MAXIMUM
VALUES"). The Disease Levels, Medical/Exposure Criteria, Scheduled Values,
Average Values and Maximum Values have all been selected and derived with the
intention of achieving a fair allocation of the Asbestos PI Trust funds as among
claimants suffering from different disease processes in light of the best
available information considering the settlement history of AWI and the rights
claimants would have in the tort system absent the bankruptcy.
(B) DISEASE LEVELS, SCHEDULED VALUES AND MEDICAL/EXPOSURE
CRITERIA SET FORTH IN THE ASBESTOS PI TRUST DISTRIBUTION PROCEDURES
The eight Disease Levels covered by the Asbestos PI Trust Distribution
Procedures, together with the Medical/Exposure Criteria for each and the
Scheduled Values for the seven Disease Levels eligible for Expedited Review, are
set forth below. These Disease Levels, Scheduled Values, and Medical/Exposure
Criteria will apply to all Asbestos PI Trust Voting Claims (as defined in the
Asbestos PI Trust Distribution Procedures) filed with the Asbestos PI Trust on
or before the Initial Asbestos PI Trust's Claims Filing Date (defined below).
Thereafter, with the consent of the TAC and the Future Claimants'
Representative, the Asbestos PI Trustees may add to, change, or eliminate
Disease Levels, Scheduled Values, or Medical/Exposure Criteria; develop
subcategories of Disease Levels, Scheduled Values or Medical/Exposure Criteria;
or determine that a novel or exceptional asbestos personal injury claim is
compensable even though it does not meet the Medical/Exposure Criteria for any
of the then current Disease Levels.
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SCHEDULED
DISEASE LEVEL VALUE MEDICAL/EXPOSURE CRITERIA
- ------------- ----- -------------------------
Mesothelioma (Level VIII) $110,000 (1) Diagnosis of mesothelioma; and
(2) credible evidence of AWI
Exposure.(2)
Lung Cancer 1 (Level (VII) $42,500 (1) Diagnosis of a primary lung
cancer plus evidence of an
underlying Bilateral
Asbestos-Related Nonmalignant
Disease,(3) (2) six months AWI
Exposure prior to December 31, 1982,
(3) Significant Occupational
Exposure(4) to asbestos, and (4)
supporting medical documentation
establishing asbestos exposure as a
contributing factor in causing the
lung cancer in question.
Lung Cancer 2 (Level VI) None (1) Diagnosis of a primary lung
cancer; (2) AWI Exposure prior to
December 31, 1982, and (3)
supporting medical documentation
establishing asbestos exposure as a
contributing factor in causing the
lung cancer in question. (1)
Diagnosis of a primary lung cancer;
(2) AWI Exposure prior to December
31, 1982, and (3) supporting medical
documentation establishing asbestos
exposure as a contributing factor in
causing the lung cancer in question.
Lung Cancer 2 (Level VI) claims are
claims that do not meet the more
stringent medical and/or exposure
requirements of Lung Cancer (Level
VII) claims. All claims in this
Disease Level will be individually
evaluated. The estimated likely
average of the individual evaluation
awards for this category is $15,000,
with such awards capped at $50,000
unless the claim qualified for
Extraordinary Claim treatment.
Level VI claims that show no
evidence of either an underlying
Bilateral Asbestos-Related
Non-malignant Disease or Significant
Occupational Exposure may be
individually evaluated, although it
is not expected that such claims
will be treated as having any
significant value, especially if the
claimant is also a smoker.(5) In any
event, no presumption of validity
will be available for any claims in
this category.
- ------------------------------
(2) As defined in the Asbestos PI Trust Distribution Procedures.
(3) Evidence of "Bilateral Asbestos-Related Nonmalignant Disease" for purposes
of meeting the criteria for establishing Disease Levels I, II, V, and VII is
described in the Asbestos PI Trust Distribution Procedures.
(4) As defined in the Asbestos PI Trust Distribution Procedures.
(5) There is no distinction in the Asbestos PI Trust Distribution Procedures
between non-smokers and smokers for either Lung Cancer (Level VII) or Lung
Cancer (Level VI), although a claimant who meets the more stringent requirements
of Lung Cancer (Level VII) (evidence of an underlying Bilateral Asbestos-Related
Nonmalignant Disease plus Significant Occupational Exposure), and who is also a
Non-Smoker, may wish to have his or her claim individually evaluated by the PI
Trust. In such a case, absent circumstances that would otherwise reduce the
value of the claim, it is anticipated that the liquidated value of the claim
might well exceed the $42,500 Scheduled Value for Lung Cancer (Level VII) shown
above.
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SCHEDULED
DISEASE LEVEL VALUE MEDICAL/EXPOSURE CRITERIA
- ------------- ----- -------------------------
Other Cancer (Level V) $21,500 (1) Diagnosis of a primary
colo-rectal, laryngeal, esophageal,
pharyngeal, or stomach cancer, plus
evidence of an underlying Bilateral
Asbestos-Related Nonmalignant
Disease, (2) six months AWI Exposure
prior to December 31, 1982, (3)
Significant Occupational Exposure to
asbestos, and (4) supporting medical
documentation establishing asbestos
exposure as a contributing factor in
causing the other cancer in
question.
Severe Asbestosis (Level IV) $42,500 (1) Diagnosis of asbestosis with ILO
of 2/1 or greater, or asbestosis
determined by pathological evidence
of asbestos, plus (a) TLC less than
65%, or (b) FVC less than 65% and
FEV1/FVC ratio greater than 65%, (2)
six months AWI Exposure prior to
December 31, 1982, (3) Significant
Occupational Exposure to asbestos,
and (4) supporting medical
documentation establishing asbestos
exposure as a contributing factor in
causing the pulmonary disease in
question.
Asbestos/Pleural Disease
(Level III) $9,700 Diagnosis of asbestosis with ILO of
1/0 or greater or asbestosis
determined by pathology, or
bilateral pleural disease of B2 or
greater, plus (a) TLC less than 80%,
or (b) FVC less than 80% and
FEV1/FVC ratio greater than or equal
to 65%, and (2) six months AWI
Exposure prior to December 31, 1982,
(3) Significant Occupational
Exposure to asbestos, and (4)
supporting medical documentation
establishing asbestos exposure as a
contributing factor in causing the
pulmonary disease in question.
Asbestosis/Pleural Disease
(Level II) $3,700 (1) Diagnosis of a Bilateral
Asbestos-Related Nonmalignant
Disease, and (2) six months AWI
Exposure prior to December 31, 1982,
and (3) five years cumulative
occupational exposure to asbestos.
Other Asbestos Disease
(Level I - Cash
Discount Payment) $400 (1) Diagnosis of a Bilateral
Asbestos- Related Nonmalignant
Disease or an asbestos-related
malignancy other than mesothelioma,
and (2) AWI Exposure prior to
December 31, 1982.
(C) CLAIMS LIQUIDATION PROCEDURES
Asbestos Personal Injury Claims will be processed based on their place in the
FIFO Processing Queue (defined below) to be established pursuant to the Asbestos
PI Trust Distribution Procedures. The Asbestos PI Trust will liquidate all
75
Asbestos Personal Injury Claims that meet the presumptive Medical/Exposure
Criteria of Disease Levels I-V, VII and VIII efficiently and expeditiously under
the Expedited Review Process described below. Claims involving Disease Levels
I-V, VII and VIII that do not meet the presumptive Medical/Exposure Criteria for
the relevant Disease Level may undergo the Asbestos PI Trust's Individual Review
Process described below. In such a case, notwithstanding that the claim does not
meet the presumptive Medical/Exposure Criteria for the relevant Disease Level,
the Asbestos PI Trust can offer the claimant an amount up to the Scheduled Value
of that Disease Level if the Asbestos PI Trust is satisfied that the claimant
has presented a claim that would be cognizable and valid in the tort system.
Claimants holding claims involving Disease Level II through VIII may in addition
or alternatively seek to establish a liquidated value for the claim that is
greater than its Scheduled Value by electing the Asbestos PI Trust's Individual
Review Process. However, the liquidated value of a claim that undergoes the
Asbestos PI Trust's Individual Review Process for valuation purposes may be
determined by the Asbestos PI Trust to be less than its Scheduled Value, and in
any event may not exceed the Maximum Value for the relevant Disease Level,
unless the claim qualifies as an Extraordinary Claim (defined below), in which
case its liquidated value cannot exceed the Maximum Value specified in that
provision for such claims. Level VI (Lung Cancer 2) claims may be liquidated
only pursuant to the Asbestos PI Trust's Individual Review Process.
All unresolved disputes over a claimant's medical condition, exposure history
and/or the liquidated value of the claim will be subject to binding or
non-binding arbitration at the election of the claimant. Asbestos Personal
Injury Claims that are the subject of a dispute with the Asbestos PI Trust that
cannot be resolved by non-binding arbitration may enter the tort system.
However, if and when a claimant obtains a judgment in the tort system, the
judgment will be payable from the Asbestos PI Trust subject to the Payment
Percentage, Maximum Available Payment, and Claims Payment Ratio provisions set
forth below.
(D) PAYMENT PERCENTAGE
After the liquidated value of an Asbestos Personal Injury Claim other than a
claim involving Other Asbestos Disease (Disease Level I - Cash Discount Payment)
is determined by the Asbestos PI Trust, the claimant will receive a pro-rata
share of that value based on a payment percentage (the "PAYMENT PERCENTAGE").
The initial Payment Percentage has been set at ___ percent (___%) (the "INITIAL
PAYMENT PERCENTAGE"), and will apply to all Asbestos PI Trust Voting Claims
accepted as valid by the Asbestos PI Trust, unless adjusted by the Asbestos PI
Trust pursuant to the consent of the TAC and the Future Claimants'
Representative. The term "ASBESTOS PI VOTING TRUST CLAIMS" includes (i)
Pre-Petition Liquidated Claims (defined below); (ii) claims filed against AWI in
the tort system or actually submitted to AWI pursuant to an administrative
settlement agreement prior to the Petition Date; and (iii) all claims filed
against another defendant in the tort system prior to the date (November 4,
2002) the original Plan was filed with the Bankruptcy Court (the "PLAN FILING
DATE"); provided, however, that the claim described in subsection (i), (ii) or
(iii) above actually voted to accept or reject the Plan pursuant to the voting
procedures established by the Bankruptcy Court, and provided further that the
claim was subsequently filed with the Asbestos PI Trust by the Asbestos PI
Trust's Initial Claims Filing Date (defined below). The Initial Payment
Percentage has been calculated on the assumption that the Average Values will be
achieved with respect to existing present claims and projected future claims
involving Disease Levels II - VIII.
The Payment Percentage may be adjusted upwards or downwards from time to time by
the Asbestos PI Trust with the consent of the TAC and the Future Claimants'
Representative to reflect then-current estimates of the Asbestos PI Trust's
assets and its liabilities, as well as then-estimated value of then-pending and
future claims. Because there is uncertainty in the prediction of both the number
and severity of future claims, and the amount of the Asbestos PI Trust's assets,
no guarantee can be made of any Payment Percentage of a Asbestos Personal Injury
Claim's liquidated value other than of an Asbestos PI Trust Voting Claim.
However, in the event of substantial insurance recoveries, the Payment
Percentage may be adjusted upwards and supplemental payments may be made to
claimants who received payments in prior periods based on a lower Payment
Percentage.
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(E) MAXIMUM ANNUAL PAYMENT AND MAXIMUM AVAILABLE PAYMENT
The Asbestos PI Trust will estimate or model the amount of cash flow anticipated
to be necessary over its entire life to ensure that funds will be available to
treat all present and future claimants as similarly as possible. In each year,
the Asbestos PI Trust will be empowered to pay out all of the interest earned
during the year, together with a portion of its principal, calculated so that
the application of Asbestos PI Trust funds over its life will correspond with
the needs created by the anticipated flow of claims (the "MAXIMUM ANNUAL
PAYMENT"). The Asbestos PI Trust's distributions to all claimants for that year
may not exceed the Maximum Annual Payment determined for that year.
In distributing the Maximum Annual Payment, the Asbestos PI Trust will first
allocate the amount in question to outstanding Pre-Petition Liquidated Claims
(defined below) and to liquidated Asbestos Personal Injury Claims involving
Disease Level I (Cash Discount Payment), in proportion to the aggregate value of
each group of claims. The remaining portion of the Maximum Annual Payment (the
"MAXIMUM AVAILABLE PAYMENT"), if any, will then be allocated and used to satisfy
all other liquidated Asbestos Personal Injury Claims, subject to the Claims
Payment Ratio (discussed below).
(F) CLAIMS PAYMENT RATIO
Based upon AWI's claims settlement history and analysis of present and future
claims, a Claims Payment Ratio has been determined which, as of the Effective
Date, will be set at 65% for Category A claims, which consist of Asbestos
Personal Injury Claims involving severe asbestosis and malignancies (Disease
Levels IV - VIII) that were unliquidated as of the Petition Date, and at 35% for
Category B claims, which are Asbestos Personal Injury Claims involving
non-malignant Asbestosis or Pleural Disease (Disease Levels II and III) that
were similarly unliquidated as of the Petition Date. The Claims Payment Ratio
will not apply to any Pre-Petition Liquidated Claims or to any claims for Other
Asbestos Disease (Disease Level I - Cash Discount Payment). In each year, after
the determination of the Maximum Available Payment, 65% of that amount will be
available to pay Category A claims and 35% will be available to pay Category B
claims.
The 65%/35% Claims Payment Ratio will apply to all Asbestos PI Trust Voting
Claims and will not be amended until the fifth anniversary of the Effective
Date. Thereafter, the Claims Payment Ratio will be continued absent
circumstances, such as a significant change in law or medicine, necessitating
amendment to avoid a manifest injustice.
In any event, no amendment to the Claims Payment Ratio may be made without the
consent of the TAC and the Future Claimants' Representative. However, the
Asbestos PI Trustees, with the consent of the TAC and the Future Claimants'
Representative, may offer the option of a reduced Payment Percentage to holders
of claims in either Category A or Category B in return for prompter payment (the
"REDUCED PAYMENT OPTION").
(G) INDEMNITY AND CONTRIBUTION CLAIMS
Asbestos PI Contribution Claims for indemnity and contribution (referred to in
the Asbestos PI Trust Distribution Procedures as "INDIRECT ASBESTOS PERSONAL
INJURY CLAIMS"), if any, will be subject to the same categorization, evaluation,
and payment provisions of this Asbestos PI Trust Distribution Procedures as all
other Asbestos Personal Injury Claims.
(H) ORDERING OF CLAIMS
The Asbestos PI Trust will order claims that are sufficiently complete to be
reviewed for processing purposes on a FIFO basis except as otherwise provided
herein (the "FIFO PROCESSING QUEUE"). For all claims filed on or before the date
six months after the Effective Date (the "INITIAL ASBESTOS PERSONAL INJURY
CLAIMS FILING DATE"), a claimant's position in the FIFO Processing Queue will be
determined as of the earlier of (i) the date prior to the Petition Date (if any)
that the specific claim was either filed against AWI in the tort system or was
actually submitted to AWI pursuant to an administrative settlement agreement;
(ii) the date before the Petition Date that a claim was filed against another
defendant in the tort system if at the time the claim was subject to a tolling
agreement with AWI; (iii) the date after the Petition Date (if any) but before
77
the Effective Date that the claim was filed against another defendant in the
tort system; (iv) the date the claim was filed in the Bankruptcy Court for
purposes of voting on the Plan; or (v) the date after the Effective Date but on
or before the Initial Asbestos Personal Injury Claims Filing Date that the claim
was filed with the Asbestos PI Trust.
Following the Initial Asbestos Personal Injury Claims Filing Date, the
claimant's position in the FIFO Processing Queue will be determined by the date
the claim was filed with the Asbestos PI Trust.
(I) EFFECT OF STATUTES OF LIMITATIONS AND REPOSE
To be eligible for a place in the FIFO Processing Queue, a claim must meet
either (i) for claims first filed in the tort system against AWI prior to the
Petition Date, the applicable federal, state and foreign statute of limitation
and repose that was in effect at the time of the filing of the claim in the tort
system, or (ii) for claims not filed against AWI in the tort system prior to the
Petition Date, the applicable statute of limitation and repose that was in
effect at the time of the filing with the Asbestos PI Trust. However, the
running of the relevant statute of limitation will be tolled for purposes of the
Asbestos PI Trust as of the earliest of (A) the actual filing of the claim
against AWI prior to the Petition Date, whether in the tort system or by
submission of the claim to AWI pursuant to an administrative settlement
agreement; (B) the filing of the claim against another defendant in the tort
system prior to the Petition Date if the claim was tolled against AWI at the
time by an agreement or otherwise; (C) the filing of a claim after the Petition
Date but prior to the Effective Date against another defendant in the tort
system; (D) the filing of the claim for voting purposes in the Chapter 11 Case;
or (E) the filing of a proof of claim with the requisite supporting
documentation with the Asbestos PI Trust after the Effective Date.
If an Asbestos Personal Injury Claim meets any of the tolling provisions
described in the preceding sentence and the claim was not barred by the
applicable statute of limitation at the time of the tolling event, it will be
treated by the Asbestos PI Trust as timely filed if it is actually filed with
the Asbestos PI Trust within three (3) years after the Effective Date. In
addition, any claims that were first diagnosed after the Petition Date,
irrespective of the application of any relevant statute of limitation or repose,
may be filed with the Asbestos PI Trust within three (3) years after the date of
diagnosis or within three (3) years after the Effective Date, whichever occurs
later. However, the processing of any Asbestos Personal Injury Claim by the
Asbestos PI Trust may be deferred at the election of the claimant.
(J) PAYMENT OF CLAIMS
Asbestos Personal Injury Claims that have been liquidated by the Expedited
Review Process (described below), by arbitration or by litigation in the tort
system, will be paid in FIFO order based on the date their liquidation became
final (the "FIFO PAYMENT QUEUE").
(K) RESOLUTION OF PRE-PETITION LIQUIDATED ASBESTOS PERSONAL
INJURY CLAIMS
As soon as practicable after the Effective Date, the Asbestos PI Trust will pay,
upon submission by the claimant of the applicable Asbestos PI Trust proof of
claim form (which will be included in Attachment B to the Asbestos PI Trust
Distribution Procedures) together with all documentation required thereunder,
all Asbestos Personal Injury Claims that were liquidated by (i) a binding
settlement agreement for the particular claim entered into prior to the Petition
Date that is judicially enforceable by the claimant, (ii) a jury verdict or
non-final judgment in the tort system obtained prior to the Petition Date, or
(iii) by a judgment that became final and non-appealable prior to the Petition
Date (collectively "PRE-PETITION LIQUIDATED CLAIMS").
The liquidated value of a Pre-Petition Liquidated Claim will be the unpaid
portion of the amount agreed to in the binding settlement agreement, the unpaid
portion of the amount awarded by the jury verdict or non-final judgment, or the
unpaid portion of the amount of the final judgment, as the case may be, plus
interest, if any, that has accrued on that amount in accordance with the terms
of the agreement, if any, or under applicable state law for settlements or
judgments as of the Petition Date; however, the liquidated value of a
Pre-Petition Liquidated Claim will not include any punitive or exemplary
damages. In the absence of a final order of the Bankruptcy Court determining
whether a settlement agreement is binding and judicially enforceable, a dispute
between the claimant and the Asbestos PI Trust over this issue will be resolved
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pursuant to the same procedures that are provided in the Asbestos PI Trust
Distribution Procedures for resolving the validity and/or liquidated value of an
Asbestos Personal Injury Claim.
Pre-Petition Liquidated Claims will be processed and paid by the Asbestos PI
Trust in accordance with their order in a separate FIFO queue to be established
by the Asbestos PI Trust based on the date the Asbestos PI Trust received a
completed proof of claim form with all required documentation for the particular
claim; provided, however, the amounts payable with respect to such claims will
not be subject to or taken into account in consideration of the Claims Payment
Ratio, but will be subject to the Maximum Annual Payment and Payment Percentage
provisions set forth above.
(L) RESOLUTION OF UNLIQUIDATED ASBESTOS PERSONAL INJURY CLAIMS
Within six months after the establishment of the Asbestos PI Trust, the Asbestos
PI Trustees, with the consent of the TAC and the Future Claimants'
Representative, are required to adopt procedures for reviewing and liquidating
all unliquidated Asbestos Personal Injury Claims, which will include deadlines
for processing such claims. Such procedures will also require claimants seeking
resolution of unliquidated Asbestos Personal Injury Claims must first file a
proof of claim form, together with the required supporting documentation. It is
anticipated that the Asbestos PI Trust will provide an initial response to the
claimant within six months of receiving the proof of claim form.
The proof of claim form will require the claimant to assert his or her claim for
the highest Disease Level for which the claim qualifies at the time of filing.
Irrespective of the Disease Level alleged on the proof of claim form, all claims
will be deemed by the Asbestos PI Trust Distribution Procedures to be a claim
for the highest Disease Level for which the claim qualifies at the time of
filing, and all lower Disease Levels for which the claim may also qualify at the
time of filing or in the future will be treated as subsumed into the higher
Disease Level for both processing and payment purposes.
Upon filing of a valid proof of claim form with the required supporting
documentation, the claimant will be placed in the FIFO Processing Queue in
accordance with the ordering described above, and will advise the Asbestos PI
Trust whether the claim should be liquidated under the Asbestos PI Trust's
Expedited Review Process or, in certain circumstances, the Asbestos PI Trust's
Individual Review Process (both of which are described below).
(M) EXPEDITED REVIEW PROCESS
The Asbestos PI Trust's Expedited Review Process ("EXPEDITED REVIEW") is
designed primarily to provide an expeditious, efficient and inexpensive method
for liquidating all claims (except those involving Lung Cancer 2 - Disease Level
VI) where the claim can easily be verified by the Asbestos PI Trust as meeting
the presumptive Medical/Exposure Criteria for the relevant Disease Level.
Expedited Review thus provides claimants with a substantially less burdensome
process for pursuing Asbestos Personal Injury Claims than does the Individual
Review Process. Expedited Review is also intended to provide qualifying
claimants a fixed and certain claims payment.
Thus, claims that undergo Expedited Review and meet the presumptive
Medical/Exposure Criteria for the relevant Disease Level will be paid the
Scheduled Value for such Disease Level. However, except for claims involving
Other Asbestos Disease (Disease Level I), all claims liquidated by Expedited
Review will be subject to the applicable Payment Percentage, the Maximum
Available Payment, and the Claims Payment Ratio limitations set forth above.
Claimants holding claims that cannot be liquidated by Expedited Review because
they do not meet the presumptive Medical/Exposure Criteria for the relevant
Disease Level may elect the Asbestos PI Trust's Individual Review Process.
(N) CLAIMS PROCESSING UNDER EXPEDITED REVIEW
All claimants seeking liquidation of their claims pursuant to Expedited Review
must file the Asbestos PI Trust's proof of claim form provided in Attachment B
to the Asbestos PI Trust Distribution Procedures. As a proof of claim form is
reached in the FIFO Processing Queue, the Asbestos PI Trust will determine
whether the claim described therein meets the Medical/Exposure Criteria for one
of the seven Disease Levels eligible for Expedited Review, and will advise the
79
claimant of its determination. If a Disease Level is determined, the Asbestos PI
Trust will tender to the claimant an offer of payment of the Scheduled Value for
the relevant Disease Level multiplied by the applicable Payment Percentage,
together with a form of release approved by the Asbestos PI Trust.
(O) INDIVIDUAL REVIEW PROCESS
The Asbestos PI Trust's Individual Review Process provides a claimant with an
opportunity for individual consideration and evaluation of an Asbestos Personal
Injury Claim that fails to meet the presumptive Medical/Exposure Criteria for
Disease Levels I - V, VII and VIII. In such a case, the Asbestos PI Trust will
either deny the claim, or, if the Asbestos PI Trust is satisfied that the
claimant has presented a claim that would be cognizable and valid in the tort
system, the Asbestos PI Trust can offer the claimant a liquidated value amount
up to the Scheduled Value for that Disease Level, unless the claim qualifies as
an Extraordinary Claim, in which case its liquidated value cannot exceed the
Maximum Value for such a claim.
Claimants holding Asbestos Personal Injury Claims involving Disease Levels II -
VIII will also be eligible to seek Individual Review of the liquidated value of
their claims, as well as of their medical/exposure evidence. The Individual
Review Process is intended to result in payments equal to the full liquidated
value for each claim multiplied by the Payment Percentage; however, the
liquidated value of any Asbestos Personal Injury Claim that undergoes Individual
Review may be determined to be less than the Scheduled Value the claimant would
have received under Expedited Review. Moreover, the liquidated value for a claim
involving Disease Levels II - VIII will not exceed the Maximum Value for the
relevant Disease Level, unless the claim meets the requirements of an
Extraordinary Claim, in which case its liquidated value cannot exceed the
Maximum Value set forth in that provision for such claims. Because the detailed
examination and valuation process pursuant to Individual Review requires
substantial time and effort, claimants electing to undergo the Individual Review
Process will necessarily be paid the liquidated value of their Asbestos Personal
Injury Claims later than would have been the case had the claimant elected the
Expedited Review Process.
(P) VALUATION FACTORS TO BE CONSIDERED IN INDIVIDUAL REVIEW
The Asbestos PI Trust will liquidate the value of each Asbestos Personal Injury
Claim that undergoes Individual Review based on the historic liquidated values
of other similarly situated claims in the tort system for the same Disease
Level. The Asbestos PI Trust will thus take into consideration the factors that
affect the severity of damages and values within the tort system including, but
not limited to (i) the degree to which the characteristics of a claim differ
from the presumptive Medical/Exposure Criteria for the Disease Level in
question; (ii) factors such as the claimant's age, disability, employment
status, disruption of household, family or recreational activities,
dependencies, special damages, and pain and suffering; (iii) evidence that the
claimant's damages were (or were not) caused by asbestos exposure, including
exposure to an asbestos-containing product for which AWI has legal
responsibility (for example, alternative causes, and the strength of
documentation of injuries); (iv) the industry of exposure; and (v) settlements,
verdicts and the claimant's and other law firms' experience in the claimant's
jurisdiction for similarly situated claims.
(Q) SCHEDULED, AVERAGE AND MAXIMUM VALUES
The Scheduled, Average and Maximum Values for claims involving Severe Asbestosis
(Disease Level IV) and malignancies (Disease Levels V - VIII) are the following:
SCHEDULED DISEASE SCHEDULED AVERAGE VALUE MAXIMUM VALUE
VALUE
Mesothelioma (Level VIII) $110,000 $130,500 $400,000
Lung Cancer (Level VII) $42,500 $43,800 $150,000
Lung Cancer (Level VI) None $15,000 $50,000
Other Cancer (Level V) $21,500 $21,800 $75,000
80
Severe Asbestosis (Level IV) $42,500 $44,300 $140,000
Asbestosis/Pleural Disease (Level $9,700 $10,100 $20,000
III)
Asbestos/Pleural Disease (Level II) $3,700 $4,200 $10,000
Other Asbestos Disease (Level I) $ 400 None None
These Scheduled Values, Average Values and Maximum Values will apply to all
Asbestos PI Trust Voting Claims filed with the Asbestos PI Trust on or before
the Initial Claims Filing Date. Thereafter, the Asbestos PI Trust, with the
consent of the TAC and the Future Claimants' Representative, may change these
valuation amounts for good cause and consistent with other restrictions on the
amendment power.
(R) EXTRAORDINARY AND/OR EXIGENT HARDSHIP CLAIMS
"EXTRAORDINARY CLAIM" means an Asbestos Personal Injury Claim that otherwise
satisfies the Medical Criteria for Disease Levels II - VIII, and that is held by
a claimant whose exposure to asbestos (1) occurred predominately as the result
of working in a manufacturing facility of AWI during a period in which AWI was
manufacturing asbestos-containing products at that facility, or (2) was at least
75% the result of exposure to an asbestos-containing product or to conduct for
which AWI has legal responsibility, and there is little likelihood of a
substantial recovery elsewhere. All such Extraordinary Claims will be presented
for Individual Review and, if valid, will be entitled to an award of up to a
Maximum Value of five (5) times the Scheduled Value for claims qualifying for
Disease Levels II -V, VII and VIII, and five (5) times the Average Value for
claims in Disease Level VI, multiplied by the applicable Payment Percentage. An
Extraordinary Claim, following its liquidation, will be placed in the FIFO Queue
ahead of all other Asbestos Personal Injury Claims except Exigent Hardship
Claims, which will be first in said FIFO Queue, based on its date of
liquidation, subject to the Maximum Available Payment and Claims Payment Ratio
described above.
At any time the Asbestos PI Trust may liquidate and pay certain Asbestos
Personal Injury Claims that qualify as Exigent Hardship Claims. Such claims may
be considered separately by the Asbestos PI Trust no matter what the order of
processing otherwise would have been under this Asbestos PI Trust Distribution
Procedures. An Exigent Hardship Claim, following its liquidation, will be placed
first in the FIFO Payment Queue ahead of all other liquidated Asbestos Personal
Injury Claims, subject to the Maximum Available Payment and Claims Payment Ratio
described above. An Asbestos Personal Injury Claim will qualify for payment as
an Exigent Hardship Claim if the claim meets the Medical/Exposure Criteria for
Severe Asbestosis (Disease Level IV) or an asbestos-related malignancy (Disease
Levels V-VIII), and the Asbestos PI Trust, in its sole discretion, determines
(a) that the claimant needs financial assistance on an immediate basis based on
the claimant's expenses and all sources of available income, and (b) that there
is a causal connection between the claimant's dire financial condition and the
claimant's asbestos-related disease.
(S) SECONDARY EXPOSURE CLAIMS
If a claimant alleges an asbestos-related disease resulting solely from exposure
to an occupationally exposed person, such as a family member, the claimant may
seek Individual Review of his or her claim. In such a case, the claimant will be
required to establish that the occupationally exposed person would have met the
exposure requirements under the Asbestos PI Trust Distribution Procedures that
would have been applicable had that person filed a direct claim against the
Asbestos PI Trust. In addition, the claimant with secondary exposure must
establish that he or she is suffering from one of the eight Disease Levels
above, that his or her own exposure to the occupationally exposed person
occurred within the same time frame as the occupationally exposed person was
exposed to an asbestos-containing product or to conduct for which AWI has legal
81
responsibility, and that such secondary exposure was a cause of the claimed
disease. The proof of claim form included in Attachment B to the Asbestos PI
Trust Distribution Procedures contains an additional section for Secondary
Exposure Claims. All other liquidation and payment rights and limitations under
the Asbestos PI Trust Distribution Procedures will be applicable to such claims.
(T) EVIDENTIARY REQUIREMENTS
(a) MEDICAL EVIDENCE
The Asbestos PI Trust Distribution Procedures require that all diagnoses of a
Disease Level presented to the Asbestos PI Trust be accompanied by either (i) a
statement by the physician providing the diagnosis that at least ten years have
elapsed between the date of first exposure to asbestos or asbestos-containing
products and the diagnosis, or (ii) a history of the claimant's exposure
sufficient to establish a 10-year latency period. A finding by a physician after
the Petition Date that a claimant's disease is "consistent with" or "compatible
with" asbestosis will not alone be treated by the Asbestos PI Trust as a
diagnosis.
Except for claims filed against AWI or another asbestos defendant in the tort
system prior to the Petition Date, all diagnoses of a non-malignant
asbestos-related disease (Disease Levels I-IV) submitted to the Asbestos PI
Trust must be based (i) in the case of a claimant who was living at the time the
claim was filed, upon (A) a physical examination of the claimant by the
physician providing the diagnosis of the asbestos-related disease; (B) an X-ray
reading by a certified B-reader or a CT scan read by a qualified physician
showing bilateral pleural disease or bilateral interstitial fibrosis, and (C)
pulmonary function testing if the claim involves Asbestosis/Pleural Disease
(Level III) or Severe Asbestosis (Level IV), and (ii) in the case of a claimant
who was deceased at the time the claim was filed, upon (A) a physical
examination of the claimant by the physician providing the diagnosis of the
asbestos-related disease, or (B) pathological evidence of the non-malignant
asbestos-related disease, or (C) an X-ray reading by a certified B reader or a
CT scan read by a qualified physician showing bilateral pleural disease or
bilateral interstitial fibrosis.
Except for claims filed against AWI or another asbestos defendant in the tort
system prior to the Petition Date, diagnoses of an asbestos-related malignancy
(Disease Levels V - VIII) submitted to the Asbestos PI Trust must be based upon
either (i) a physical examination of the claimant by the physician providing the
diagnosis of the malignant asbestos-related disease, or (ii) on a diagnosis of
such a malignant Disease Level by a board-certified pathologist.
However, if the holder of an Asbestos Personal Injury Claim has available the
medical evidence described above, or if the holder has filed such medical
evidence with another asbestos-related personal injury settlement trust that
requires such evidence, the Asbestos PI Trust Distribution Procedures require
that the holder provide such medical evidence to the Asbestos PI Trust
notwithstanding any exceptions to the contrary.
(b) CREDIBILITY OF MEDICAL EVIDENCE
The Asbestos PI Trust must have reasonable confidence that the medical evidence
provided in support of the claim is credible and consistent with recognized
medical standards before making any payment to a claimant. The Asbestos PI Trust
may require the submission of X-rays, CT scans, detailed results of pulmonary
function tests, laboratory tests, tissue samples, results of medical examination
or reviews of other medical evidence, and may require that medical evidence
submitted comply with recognized medical standards regarding equipment, testing
methods and procedure to assure that such evidence is reliable. Medical evidence
(i) that is of a kind shown to have been received in evidence by a state or
federal judge at trial, (ii) that is consistent with evidence submitted to AWI
to settle for payment similar disease cases prior to AWI's bankruptcy, or (iii)
a diagnosis by a physician shown to have previously qualified as a medical
expert with respect to the asbestos-related disease in question before a state
or federal judge, is presumed by the Asbestos PI Trust to be reliable, although
the Asbestos PI Trust may seek to rebut the presumption.
In addition, claimants who otherwise meet the requirements of the Asbestos PI
Trust Distribution Procedures for payment of an Asbestos Personal Injury Claim
will be paid by the Asbestos PI Trust irrespective of the results in any
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litigation at anytime between the claimant and any other defendant in the tort
system. However, the Asbestos PI Trust Distribution Procedures contemplate that
any relevant evidence submitted in a proceeding in the tort system, other than
any findings of fact, a verdict, or a judgment, involving another defendant may
be introduced by either the claimant or the Asbestos PI Trust in any Individual
Review proceeding or any Extraordinary Claim proceeding conducted by the
Asbestos PI Trust.
(c) EXPOSURE EVIDENCE
To qualify for any Disease Level the Asbestos PI Trust Distribution Procedures
require that the claimant demonstrate some exposure to an asbestos-containing
product or to conduct for which AWI has legal responsibility. Claims based on
conspiracy theories that involve no such AWI Exposure or conduct are not
compensable under the Procedures. To meet the presumptive exposure requirements
of Expedited Review, the claimant must show (i) for all Disease Levels, AWI
Exposure as defined below prior to December 31, 1982; (ii) for Asbestos/Pleural
Disease Level II, six months AWI Exposure prior to December 31, 1982, plus five
years cumulative occupational asbestos exposure; and (iii) for
Asbestosis/Pleural Disease (Disease Level III), Severe Asbestosis (Disease Level
IV), Other Cancer (Disease Level V) or Lung Cancer 1 (Disease Level VII), the
claimant must show six months AWI Exposure prior to December 31, 1982, plus
Significant Occupational Exposure to asbestos. If the claimant cannot meet the
relevant presumptive exposure requirements for a Disease Level eligible for
Expedited Review, the claimant may seek Individual Review of his or her claim
based on exposure to an asbestos-containing product or to conduct for which AWI
has legal responsibility.
To recover from the Asbestos PI Trust, the claimant must demonstrate meaningful
and credible exposure to asbestos or asbestos-containing products supplied,
specified, manufactured, installed, maintained, or repaired by AWI and/or any
entity, including a AWI contracting unit, for which AWI has legal
responsibility. The meaningful and credible exposure evidence may be established
by an affidavit of the claimant, by an affidavit of a co-worker or the affidavit
of a family member in the case of a deceased claimant (providing the Asbestos PI
Trust finds such evidence reasonably reliable), by invoices, employment,
construction or similar records, or by other credible evidence. The Asbestos PI
Trust may also require submission of other or additional evidence of exposure
when it deems such to be necessary. The specific exposure information required
by the Asbestos PI Trust to process a claim under either Expedited or Individual
Review is set forth on the proof of claim form to be used by the Asbestos PI
Trust, which is attached as Attachment B to the Asbestos PI Trust Distribution
Procedures. The Asbestos PI Trust may also require submission of other or
additional evidence of exposure when it deems such to be necessary.
(U) SECOND DISEASE (MALIGNANCY) CLAIMS
The Asbestos PI Trust Distribution Procedures allow the holder of an Asbestos
Personal Injury Claim involving a non-malignant asbestos-related disease
(Disease Levels I through IV) to assert a new Asbestos Personal Injury Claim
against the Asbestos PI Trust for a malignant disease (Disease Levels V - VIII)
that is subsequently diagnosed. The Asbestos PI Trust will not reduce any
additional payments to which such claimant may be entitled with respect to such
malignant asbestos-related by the amount paid for the non-malignant
asbestos-related disease, provided that the malignant disease had not been
diagnosed at the time the claimant filed his or her original claim involving the
non-malignant disease.
(V) PUNITIVE DAMAGES
In determining the value of any liquidated or unliquidated Asbestos Personal
Injury Claim, punitive or exemplary damages, i.e., damages other than
compensatory damages, will not be considered or allowed, notwithstanding their
availability in the tort system.
(W) INTEREST
Except for an Asbestos Personal Injury Claim involving Other Asbestos Disease
(Disease Level I - Cash Discount Payment) and subject to the limitations set
forth below, the Asbestos PI Trust Distribution Procedures provide that interest
will be paid on all Asbestos Personal Injury Claims with respect to which the
claimant has had to wait a year or more for payment, provided, however, that no
claimant will receive interest for a period in excess of seven (7) years. The
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applicable interest rate is be six percent (6%) simple interest per annum for
the first five (5) years after the Effective Date; thereafter, the Asbestos PI
Trustees have the discretion to change the annual interest rate with the consent
of the TAC and the Future Claimants' Representative.
Interest is payable on the Scheduled Value of any unliquidated Asbestos Personal
Injury Claim that meets the requirements of Disease Levels II -V, VII and VIII,
whether the claim is liquidated under Expedited Review, Individual Review, or by
arbitration. Interest on an unliquidated Asbestos Personal Injury Claim that
meets the requirements of Disease Level VI will be based on the Average Value of
such a claim. Interest on all such unliquidated claims will be measured from the
date of payment back to the earliest of the date that is one year after the date
on which (a) the claim was filed against AWI prior to the Petition Date; (b) the
claim was filed against another defendant in the tort system on or after the
Petition Date but before the Effective Date; or (c) the claim was filed with the
Asbestos PI Trust after the Effective Date.
Interest is also payable on the liquidated value of all Pre-Petition Liquidated
Claims. In the case of Pre-Petition Liquidated Claims liquidated by verdict or
judgment, interest will be measured from the date of payment back to the date
that is one year after the date that the verdict or judgment was entered. In the
case of Pre-Petition Liquidated Claims liquidated by a binding, judicially
enforceable settlement, interest will be measured from the date of payment back
to the date that is one year after the Petition Date.
(X) SUITS IN THE TORT SYSTEM
If the holder of a disputed claim disagrees with the Asbestos PI Trust's
determination regarding the Disease Level of the claim, the claimant's exposure
history or the liquidated value of the claim, and if the holder has first
submitted the claim to non-binding arbitration, the Asbestos PI Trust
Distribution Procedures contemplate that the holder may file a lawsuit in the
claimant's jurisdiction. All defenses (including, with respect to the Asbestos
PI Trust, all defenses which could have been asserted by AWI) will be available
to both sides at trial; however, the Asbestos PI Trust may waive any defense
and/or concede any issue of fact or law. If the claimant was alive at the time
the initial pre-petition complaint was filed or on the date the proof of claim
was filed, the case will be treated as a personal injury case with all personal
injury damages to be considered even if the claimant has died during the
pendency of the claim.
If and when a claimant obtains a judgment in the tort system, the claim will be
placed in the FIFO Payment Queue based on the date on which the judgment became
final. Thereafter, the claimant will receive from the Asbestos PI Trust an
initial payment (subject to the applicable Payment Percentage, the Maximum
Available Payment, and the Claims Payment Ratio provisions set forth above) of
an amount equal to one-hundred percent (100%) of the greater of (i) the Asbestos
PI Trust's last offer to the claimant or (ii) the award that the claimant
declined in non-binding arbitration. The claimant will receive the balance of
the judgment, if any, in five equal installments in years six (6) through ten
(10) following the year of the initial payment (also subject to the applicable
Payment Percentage, the Maximum Available Payment and the Claims Payment Ratio
provisions above).
In the case of non-Extraordinary Claims involving Disease Levels II - VIII, the
total amounts paid with respect to such claims may not exceed the relevant
Maximum Values for such Disease Levels. In the case of Extraordinary Claims, the
total amounts paid with respect to such claims similarly may not exceed the
Maximum Value for such claims. Under no circumstances will interest be paid on
any judgments obtained in the tort system.
B. THE ASBESTOS PI INSURANCE ASSET.
On the later of the Effective Date and the date by which all of the Asbestos PI
Trustees have executed the Asbestos PI Trust Agreement, AWI will transfer to the
Asbestos PI Trust all rights arising under liability insurance policies issued
to AWI with inception dates prior to January 1, 1982 with respect to the
liability for Asbestos Personal Injury Claims (with the exception of AWI's claim
against Liberty Mutual Insurance Company for costs, expenses and fees incurred
in connection with an Alternative Dispute Resolution Proceeding initiated in
1996 under the Agreement Concerning Asbestos Related Claims of June 19, 1985 and
AWI's rights to insurance relating to workers' compensation claims). The
foregoing includes, but is not limited to, rights under insurance policies,
rights under settlement agreements made with respect to such insurance policies,
rights against the estates of insolvent insurers that issued such policies or
84
entered into such settlements, and rights against state insurance guaranty
associations arising out of any such insurance policies issued by insolvent
insurers. The foregoing also includes the right, on behalf of AWI and its
subsidiaries as of the Effective Date, to give a full release of the insurance
rights of AWI and its subsidiaries as of the Effective Date under any such
policy or settlement agreement with the exception of rights to coverage for
Asbestos Property Damage Claims and rights to coverage for the amount that AWI
agreed to pay to plaintiffs in the Maertin Litigation in a settlement agreement
executed November 22, 2000 and rights to coverage with respect to workers'
compensation claims.
C. THE ASBESTOS PI PERMANENT CHANNELING INJUNCTION.
THE CONFIRMATION ORDER WILL CONTAIN, INTER ALIA, THE ASBESTOS PI PERMANENT
CHANNELING INJUNCTION. PURSUANT TO THE ASBESTOS PI PERMANENT CHANNELING
INJUNCTION, ALL ENTITIES WILL BE FOREVER STAYED, RESTRAINED, AND ENJOINED FROM
TAKING CERTAIN ACTIONS SPECIFIED IN THE PLAN AGAINST ANY PI PROTECTED PARTY FOR
THE PURPOSE OF, DIRECTLY OR INDIRECTLY, COLLECTING, RECOVERING, OR RECEIVING
PAYMENT OF, ON, OR WITH RESPECT TO ANY ASBESTOS PERSONAL INJURY CLAIMS, ALL OF
WHICH WILL BE CHANNELED TO THE ASBESTOS PI TRUST FOR RESOLUTION AS SET FORTH IN
THE ASBESTOS PI TRUST DISTRIBUTION PROCEDURES, AGAINST ANY PI PROTECTED PARTY OR
ITS PROPERTY (OTHER THAN ACTIONS BROUGHT TO ENFORCE ANY RIGHT OR OBLIGATION
UNDER THE PLAN, ANY EXHIBITS TO THE PLAN, OR ANY OTHER AGREEMENT OR INSTRUMENT
BETWEEN AWI OR REORGANIZED AWI AND THE ASBESTOS PI TRUST, WHICH ACTIONS WILL BE
IN CONFORMITY AND COMPLIANCE WITH THE PROVISIONS OF THE PLAN). NOTHING CONTAINED
IN THE ASBESTOS PI PERMANENT CHANNELING INJUNCTION WILL BE DEEMED A WAIVER OF
ANY CLAIM, RIGHT, OR CAUSE OF ACTION THAT AWI, REORGANIZED AWI, OR THE ASBESTOS
PI TRUST MAY HAVE AGAINST ANY ENTITY IN CONNECTION WITH OR ARISING OUT OF AN
ASBESTOS PERSONAL INJURY CLAIM.
In 1994, the Bankruptcy Code was amended to add subsections (g) and (h) to
section 524. These subsections confirm the validity of existing injunctions
(such as those used in the chapter 11 cases of Johns-Manville Corporation and
UNR Corporation) similar to the Asbestos PI Permanent Channeling Injunction and
codify a court's authority to issue a permanent injunction in asbestos-related
reorganizations under chapter 11 to supplement the injunctive relief afforded by
section 524. Section 524(g) provides that, if certain specified conditions are
satisfied, a court may issue a supplemental permanent injunction, such as the
Asbestos PI Permanent Channeling Injunction, barring claims and demands against
the reorganized company and certain identified protected parties and channeling
those claims and demands to an independent trust.
Pursuant to the Asbestos PI Permanent Channeling Injunction and the Plan, the
following entities will be "PI PROTECTED PARTIES" and, therefore, protected by
the scope of the Asbestos PI Permanent Channeling Injunction:
>> AWI;
>> Reorganized AWI;
>> Holdings;
>> AWWD;
>> any Affiliate of AWI;
>> Interface Solutions, Inc. and Armacell, LLC, two
prepetition purchasers of assets from AWI, so long
as each such entity and its affiliates (if
appropriate) enters into appropriate stipulations
with AWI releasing any and all indemnification
claims against AWI and AWI's estate and agreeing
not to make any offset from amounts owed to AWI by
such entities on account of any such alleged
indemnification claims;
>> any Entity that, pursuant to the Plan or after the
Effective Date, becomes a direct or indirect
transferee of, or successor to, any assets of AWI,
85
Reorganized AWI, or the Asbestos PI Trust (but
only to the extent that liability is asserted to
exist by reason of it becoming such a transferee
or successor);
>> any Entity that, pursuant to the Plan or after the
Effective Date, makes a loan to Reorganized AWI or
the Asbestos PI Trust or to a successor to, or
transferee of, any assets of AWI, Reorganized AWI,
or the Asbestos PI Trust (but only to the extent
that liability is asserted to exist by reason of
such Entity becoming such a lender or to the
extent any pledge of assets made in connection
with such a loan is sought to be upset or
impaired); or
>> any Entity to the extent he, she, or it is alleged
to be directly or indirectly liable for the
conduct of, Claims against, or Demands on AWI,
Reorganized AWI, or the Asbestos PI Trust on
account of Asbestos Personal Injury Claims by
reason of one or more of the following:
o such Entity's ownership of a financial
interest in AWI or Reorganized AWI, a
past or present affiliate of AWI or
Reorganized AWI (other than ACandS, Inc.
f/k/a Armstrong Contracting and Supply
Corp.), or predecessor in interest of
AWI or Reorganized AWI;
o such Entity's involvement in the
management of AWI, AWWD, Holdings, an
Affiliate, Reorganized AWI, or any
predecessor in interest of AWI or
Reorganized AWI;
o such Entity's service as an officer,
director, or employee of AWI,
Reorganized AWI, AWWD, Holdings, an
Affiliate, any past or present affiliate
of AWI or Reorganized AWI (other than
ACandS, Inc. f/k/a Armstrong Contracting
and Supply Corp.), any predecessor in
interest of AWI or Reorganized AWI, or
any Entity that owns or at any time has
owned a financial interest in AWI or
Reorganized AWI, any past or present
affiliate of AWI or Reorganized AWI
(other than ACandS, Inc. f/k/a Armstrong
Contracting and Supply Corp.), or any
predecessor in interest of AWI or
Reorganized AWI.
o such Entity's provision of insurance to
(a) AWI, (b) Reorganized AWI, (c) any
past or present affiliate of AWI or
Reorganized AWI (other than ACandS, Inc.
f/k/a Armstrong Contracting and Supply
Corp.), (d) any predecessor in interest
of AWI or Reorganized AWI, or (e) any
Entity that owns or at any time has
owned a financial interest in AWI or
Reorganized AWI, any past or present
affiliate of AWI or Reorganized AWI
(other than ACandS, Inc. f/k/a Armstrong
Contracting and Supply Corp.), or any
predecessor in interest of AWI or
Reorganized AWI, but only to the extent
that AWI, Reorganized AWI, or the
Asbestos PI Trust enters into a
settlement with such Entity that is
approved by the Bankruptcy Court and
expressly provides that such Entity
shall be entitled to the protection of
the Asbestos PI Permanent Channeling
Injunction as a Protected Party; or
o such Entity's involvement in a
transaction changing the corporate
structure, or in a loan or other
financial transaction affecting the
financial condition, of AWI, AWWD,
Holdings, an Affiliate, Reorganized AWI,
any past or present affiliate of AWI or
Reorganized AWI, any predecessor in
interest of AWI or Reorganized AWI, or
any Entity that owns or at any time has
owned a financial interest in AWI or
Reorganized AWI, any past or present
affiliate of AWI or Reorganized AWI
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(other than ACandS, Inc. f/k/a Armstrong
Contracting and Supply Corp.), or any
predecessor in interest of AWI or
Reorganized AWI.
Pursuant to the Asbestos PI Permanent Channeling Injunction, the PI Protected
Parties will be protected against any Entity taking any of the following actions
for the purpose of, directly or indirectly, collecting, recovering, or receiving
payment of, on, or with respect to any Asbestos Personal Injury Claims,
including, but not limited to:
>> commencing, conducting, or continuing in any
manner, directly or indirectly, any suit, action,
or other proceeding (including, without express or
implied limitation, a judicial, arbitral,
administrative, or other proceeding) in any forum
against or affecting any PI Protected Party or any
property or interests in property of any PI
Protected Party;
>> enforcing, levying, attaching (including, without
express or implied limitation, any prejudgment
attachment), collecting, or otherwise recovering
by any means or in any manner, whether directly or
indirectly, any judgment, award, decree, or other
order against any PI Protected Party or any
property or interests in property of any PI
Protected Party;
>> creating, perfecting, or otherwise enforcing in
any manner, directly or indirectly, any
Encumbrance against any PI Protected Party or any
property or interests in property of any PI
Protected Party;
>> setting off, seeking reimbursement of,
contribution from, or subrogation against, or
otherwise recouping in any manner, directly or
indirectly, any amount against any liability owed
to any PI Protected Party or any property or
interests in property of any PI Protected Party;
and
>> proceeding in any manner in any place with regard
to any matter that is subject to resolution
pursuant to the Asbestos PI Trust, except in
conformity and compliance therewith.
AWI will seek the issuance of the Asbestos PI Permanent Channeling Injunction
pursuant to section 524(g) and any other applicable provision of the Bankruptcy
Code. To qualify under the statute, a trust must meet certain standards that are
specified in section 524(g). To ensure that the Asbestos PI Trust meets these
standards, AWI has made compliance with them a condition precedent to
confirmation of the Plan. See Section V.B, entitled "THE PLAN OF REORGANIZATION
- -- Conditions to Confirmation."
D. APPLICATION OF THE CLAIMS TRADING INJUNCTION TO ASBESTOS PERSONAL
INJURY CLAIMS.
The Confirmation Order will also contain, inter alia, the Claims Trading
Injunction. PURSUANT TO THE CLAIMS TRADING INJUNCTION, A HOLDER OF AN ASBESTOS
PERSONAL INJURY CLAIM IS STAYED, RESTRAINED, AND ENJOINED FROM, DIRECTLY OR
INDIRECTLY, PURCHASING, SELLING, TRANSFERRING, ASSIGNING, CONVEYING, PLEDGING,
OR OTHERWISE ACQUIRING OR DISPOSING OF SUCH ASBESTOS PERSONAL INJURY CLAIM. The
restrictions on transfer of Asbestos Personal Injury Claims, however, will not
apply to (i) the transfer of an Asbestos Personal Injury Claim to the holder of
an Asbestos PI Contribution Claim solely as a result of such holder's
satisfaction of such Asbestos Personal Injury Claim or (ii) the transfer of an
Asbestos Personal Injury Claim by will or under the laws of descent and
distribution. The Claims Trading Injunction also will provide that any action
taken in violation thereof will be void ab initio.
It is a condition precedent to the Effective Date under the Plan that the Claims
Trading Injunction be in full force and effect. See Section V.C, entitled "THE
PLAN OF REORGANIZATION - Conditions Precedent to the Effective Date under the
Plan."
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E. COMPLIANCE WITH QSF REGULATIONS.
AWI has requested a private letter ruling from the IRS substantially to the
effect that, among other things, the Asbestos PI Trust will be a "qualified
settlement fund" within the meaning of section 468B of the Internal Revenue Code
and the Treasury Regulations thereunder. As a condition to the occurrence of the
Effective Date, AWI must have received either a favorable ruling from the IRS
with respect to the qualification of the Asbestos PI Trust as a "qualified
settlement fund," or an opinion of counsel with respect to the tax status of the
Asbestos PI Trust as a "qualified settlement fund" reasonably satisfactory to
AWI, the Asbestos PI Claimants' Committee, the Future Claimants' Representative,
and, if Class 6 votes to accept the Plan, the Unsecured Creditors' Committee.
Within sixty (60) days before or after the funding of the Asbestos PI Trust (but
not later than February 14th of the following calendar year), AWI or Reorganized
AWI will obtain a Qualified Appraisal of the fair market value of the New Common
Stock transferred (or to be transferred) to the Asbestos PI Trust. Following the
funding of the Asbestos PI Trust and the receipt of the Qualified Appraisal (and
in no event later than February 15th of the calendar year following the funding
of the Asbestos PI Trust), Reorganized AWI will provide a "ss. 1.468B-3
Statement" to the Asbestos PI Trustees in accordance with Treasury Regulations
section 1.468B-3(e).
88
VII. THE ASBESTOS PD TRUST
A. CREATION OF ASBESTOS PD TRUST.
Notwithstanding section 3.2(d)(ii)(x) of the Plan, if, at the time of the
Effective Date, fewer than twenty-five (25) Asbestos Property Damage Claims
remain as Disputed Claims, AWI may elect, in its sole discretion, not to create
an Asbestos PD Trust. In such case, AWI will continue to litigate objections to
Asbestos Property Damage Claims in the Bankruptcy Court, and each holder of an
Allowed Asbestos Property Damage Claim will be paid the Allowed Amount of such
Asbestos Property Damage Claim, in full, in cash, with such payment to be funded
exclusively from the proceeds of insurance available with respect to Asbestos
Property Damage Claims. The following discussion regarding the Asbestos PD Trust
assumes that the Asbestos PD Trust is created pursuant to the Plan.
1. GENERAL DESCRIPTION OF THE ASBESTOS PD TRUST.
Effective as of the later of (i) the date the Asbestos PD Trustees have executed
the Asbestos PD Trust Agreement and (ii) the Effective Date, the Asbestos PD
Trust will be created. Following the funding of the Asbestos PD Trust (and in no
event later than February 15th of the following calendar year), Reorganized AWI
will provide a "ss. 1.468B-3 Statement" to the Asbestos PD Trustees in
accordance with Treasury Regulations section 1.468B-3(e). The purpose of the
Asbestos PD Trust will be to, among other things, (i) direct the processing,
liquidation, and payment of all Asbestos Property Damage Claims in accordance
with the Plan, the Asbestos PD Claims Resolution Procedures, and the
Confirmation Order and (ii) preserve, hold, manage, and maximize the assets of
the Asbestos PD Trust for use in paying and satisfying Asbestos Property Damage
Claims.
2. THE ASBESTOS PD TRUSTEES.
If Class 4 votes to accept the Plan, the Asbestos PD Trustees will be selected
by the Asbestos PD Committee. If Class 4 votes to reject the Plan, a single
individual, who will be identified by AWI before or at the Confirmation Hearing,
will be selected to serve as the Asbestos PD Trustee.
3. TRANSFER OF CERTAIN PROPERTY TO THE ASBESTOS PD TRUST.
(A) TRANSFER OF BOOKS AND RECORDS
On the Effective Date or as soon thereafter as is practicable, Reorganized AWI,
at the sole cost and expense of the Asbestos PD Trust, and in accordance with
written instructions provided to Reorganized AWI by the Asbestos PD Trust, shall
transfer and assign, or cause to be transferred and assigned, to the Asbestos PD
Trust the books and records of AWI (if any) that pertain directly to Asbestos
Property Damage Claims that have been asserted against AWI (except to the extent
that any Asbestos Property Damage Claims are the subject of an objection brought
by AWI and which Reorganized AWI will prosecute in accordance with section 5.1
of the Plan and except to the extent that such books and records have been
produced to the Asbestos PD Committee during the course of the Chapter 11 Case).
AWI will request that the Bankruptcy Court, in the Confirmation Order, rule that
such transfer does not result in the destruction or waiver of any applicable
privileges pertaining to such books and records. If the Bankruptcy Court does
not so rule, at the option of the Asbestos PD Trust, Reorganized AWI will, at
the sole cost and expense of the Asbestos PD Trust, retain the books and records
and enter into arrangements to permit the Asbestos PD Trust to have access to
such books and records. If the Asbestos PD Trust does not issue written
instructions for the transfer or retention of such books and records within one
hundred eighty (180) days after the later of the Effective Date and the date by
which all the Asbestos PD Trustees have executed the Asbestos PD Trust
Agreement, or if the Asbestos PD Trust so requests, Reorganized AWI may (and
shall, if the Asbestos PD Trust so requests, but at the sole cost and expense of
the Asbestos PD Trust) destroy any such books and records, and the order of the
District Court entered during the Chapter 11 Case with respect to the retention
of books and records shall be deemed superseded by the Plan.
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(B) TRANSFER OF ASBESTOS PD TRUST FUNDING OBLIGATION
If Class 4 votes to reject the Plan, on the later of the Effective Date and the
date by which all the Asbestos PD Trustees have executed the Asbestos PD Trust
Agreement, Reorganized AWI shall transfer and assign, or cause to be transferred
and assigned, to the Asbestos PD Trust the Asbestos PD Trust Funding Obligation.
B. ASBESTOS PD CLAIMS RESOLUTION PROCEDURES.
If Class 4 votes to accept the Plan, the Asbestos PD Trustees will develop
procedures governing the allowance and payment of Asbestos Property Damage
Claims. If Class 4 votes to reject the Plan, the Asbestos PD Trustee will be
bound to use the Asbestos PD Claims Resolution Procedures that are attached as
Exhibit "1.17" to the Plan to determine the allowance and payment of Asbestos
Property Damage Claims. Pursuant to the Asbestos PD Claims Resolution Procedures
set forth in Exhibit "1.17" to the Plan, to qualify for compensation, the holder
of an Asbestos Property Damage Claim must submit (i) evidence of asbestos
content of the material for which a claim is made, whether already removed or in
place, and (ii) evidence of friable material releasing fibers into the air in
excess of the OSHA PEL. A holder of an Asbestos Property Damage Contribution
Claim must demonstrate all the evidence that the underlying claimant would be
required to prove, as well as demonstrate that it has made payment to the
claimant in satisfaction of such claimant's claim against AWI.
C. DISCHARGE OF ASBESTOS PROPERTY DAMAGE CLAIMS.
AWI is not seeking an injunction under section 524(g) of the Bankruptcy Code
with respect to Asbestos Property Damage Claims. Instead, AWI will rely upon the
general discharge and injunction against the assertion of preconfirmation claims
that the Bankruptcy Code makes applicable to all Claims, whatever their nature.
D. APPLICATION OF THE CLAIMS TRADING INJUNCTION TO ASBESTOS PROPERTY
DAMAGE CLAIMS.
The Confirmation Order will also contain, inter alia, the Claims Trading
Injunction. PURSUANT TO THE CLAIMS TRADING INJUNCTION A HOLDER OF AN ASBESTOS
PROPERTY DAMAGE CLAIM IS STAYED, RESTRAINED, AND ENJOINED FROM, DIRECTLY OR
INDIRECTLY, PURCHASING, SELLING, TRANSFERRING, ASSIGNING, CONVEYING, PLEDGING,
OR OTHERWISE ACQUIRING OR DISPOSING OF SUCH ASBESTOS PROPERTY DAMAGE CLAIM. The
restrictions on transfer of Asbestos Property Damage Claims, however, will not
apply to (i) the transfer of an Asbestos Property Damage Claim to the holder of
an Asbestos Property Damage Contribution Claim solely as a result of such
holder's satisfaction of such Asbestos Property Damage Claim or (ii) the
transfer of an Asbestos Property Damage Claim by will or under the laws of
descent and distribution. The Claims Trading Injunction also will provide that
any action taken in violation thereof will be void ab initio.
It is a condition precedent to the Effective Date under the Plan that the Claims
Trading Injunction be in full force and effect. See Section V.C, entitled "THE
PLAN OF REORGANIZATION - Conditions Precedent to the Effective Date under the
Plan."
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VIII. CONFIRMATION AND CONSUMMATION PROCEDURE
Under the Bankruptcy Code, the following steps must be taken to confirm the
Plan:
A. SOLICITATION OF VOTES.
In accordance with sections 1126 and 1129 of the Bankruptcy Code, the Claims in
each of Classes 3 (Convenience Claims), 4 (Asbestos Property Damage Claims), 6
(Unsecured Claims other than Convenience Claims), 7 (Asbestos Personal Injury
Claims), 8 (Environmental Claims) and AWWD's Equity Interests in AWI (in Class
12) are impaired, and the holders of Claims in each of such classes are entitled
to vote to accept or reject the Plan in the manner and to the extent set forth
in the Voting Procedures. Pursuant to the Voting Procedures, any Claimant
holding a Claim in an impaired class under the Plan may vote on the Plan so long
as such Claim has not been disallowed and is not the subject of an objection
pending as of the Voting Record Date (the date that is two (2) Business Days
after the entry of the order approving this Disclosure Statement by the
Bankruptcy Court -- ____________). Nevertheless, if a Claim is the subject of
such an objection, the holder thereof may vote if, prior to the Voting Deadline
(_________________), such holder obtains an order of the Bankruptcy Court, or
the Bankruptcy Court approves a stipulation between AWI and such holder, fully
or partially allowing such Claim, whether for all purposes or for voting
purposes only. YOU MUST FILE ANY MOTION SEEKING TO ALLOW A CLAIM FOR VOTING
PURPOSES NO LATER THAN _____________________ (FIFTEEN (15) DAYS AFTER THE
DEADLINE FOR AWI TO COMPLETE ITS MAILING OF SOLICITATION PACKAGES).
Claims in each of Classes 1 (Priority Claims), 2 (Secured Claims), 5 (COLI
Claims), 9 (Affiliate Claims), 10 (Subsidiary Debt Guarantee Claims), and 11
(Employee Benefit Claims) are unimpaired. The holders of Allowed Claims in each
of such classes are conclusively presumed to have accepted the Plan, and the
solicitation of acceptances with respect to each such Class is not required
under section 1126(f) of the Bankruptcy Code. If your Claim is in one of these
classes, you will not be receiving a Ballot.
THE VOTING PROCEDURES SET FORTH DETAILED INSTRUCTIONS CONCERNING THE VOTING OF
ASBESTOS PERSONAL INJURY CLAIMS AND IMPOSE REQUIREMENTS ON ATTORNEYS FOR HOLDERS
OF ASBESTOS PERSONAL INJURY CLAIMS TO NOTIFY TRUMBULL IF THEY ARE NOT AUTHORIZED
TO VOTE ON THE PLAN ON BEHALF OF THE HOLDERS OF ASBESTOS PERSONAL INJURY CLAIMS
WHO THEY REPRESENT. PLEASE REFER TO THE VOTING PROCEDURES, WHICH ARE ATTACHED TO
THIS DISCLOSURE STATEMENT AS EXHIBIT "D," FOR MORE INFORMATION REGARDING THE
VOTING OF ASBESTOS PERSONAL INJURY CLAIMS.
As to classes of claims entitled to vote on a plan, the Bankruptcy Code defines
acceptance of a plan by a class of creditors as acceptance by holders of at
least two-thirds in dollar amount and more than one-half in number of the claims
of that class that have timely voted to accept or reject a plan. Please refer to
the Voting Procedures for special rules concerning the calculation of the amount
of Claims voting in a Class of Claims.
Detailed voting instructions are provided with the Ballot accompanying this
Disclosure Statement and are set forth in the Voting Procedures annexed to this
Disclosure Statement. Claims or Interests in Classes 3 (Convenience Claims), 4
(Asbestos Property Damage Claims), 6 (Unsecured Claims other than Convenience
Claims), 7 (Asbestos Personal Injury Claims), 8 (Environmental Claims), and 12
(Equity Interests) are impaired, and are therefore entitled to vote to accept or
reject the Plan.
B. THE CONFIRMATION HEARING.
The Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a
confirmation hearing. The Confirmation Hearing in respect of the Plan has been
scheduled to commence on __________, at _______ [a.m.] [p.m.], before the
[INSERT COURT AND ADDRESS FOR COURTHOUSE]. The Confirmation Hearing may be
adjourned from time to time by the Bankruptcy Court without further notice,
except for an announcement of the adjourned date made at the Confirmation
Hearing.
Any objection to confirmation must be made in writing and must specify in detail
the name and address of the objector, all grounds of the objection, and the
amount and class of the Claim or number of shares of Holdings common stock held
by the objector. Any such objection must be filed with the Bankruptcy Court and
91
served so that it is received by the Bankruptcy Court and the persons identified
as the Notice Parties in Exhibit "B" to this Disclosure Statement on or before
___________________, at ________ p.m., ___________time. Objections to
confirmation of the Plan are governed by Bankruptcy Rule 9014.
C. CONFIRMATION.
At the Confirmation Hearing, the Bankruptcy Court will confirm the Plan only if
all of the requirements of section 1129 of the Bankruptcy Code are met. Among
the requirements for confirmation of the Plan are that the Plan is (i) accepted
by all impaired classes of claims and equity interests or, if rejected by an
impaired class, that the Plan "does not discriminate unfairly" and is "fair and
equitable" as to such class, (ii) feasible, and (iii) in the "best interests" of
creditors and stockholders that are impaired under the Plan.
1. ACCEPTANCE.
Classes 3, 4, 6, 7, 8, and 12 of the Plan are impaired under the Plan and are
entitled to vote to accept or reject the Plan. Classes 1, 2, 5, 9, 10, and 11
are unimpaired and are conclusively deemed to have voted to accept the Plan. AWI
reserves the right to seek nonconsensual confirmation of the Plan with respect
to any class of Claims that is entitled to vote to accept or reject the Plan if
such class rejects the Plan.
2. UNFAIR DISCRIMINATION AND FAIR AND EQUITABLE TESTS.
To obtain nonconsensual confirmation of the Plan, it must be demonstrated to the
Bankruptcy Court that the Plan "does not discriminate unfairly" and is "fair and
equitable" with respect to each impaired, nonaccepting Class. The Bankruptcy
Code provides the following non-exclusive definition of the phrase "fair and
equitable," as it applies to secured creditors, unsecured creditors, and equity
holders:
(A) SECURED CREDITORS.
With respect to any holder of a secured claim that rejects a plan, the
Bankruptcy Code requires that either (i) each impaired secured creditor retains
its liens securing its secured claim and receives on account of its secured
claim deferred cash payments having a present value equal to the amount of its
allowed secured claim, (ii) each impaired secured creditor realizes the
"indubitable equivalent" of its allowed secured claim, or (iii) the property
securing the claim is sold free and clear of liens with such liens to attach to
the proceeds of the sale and the treatment of such liens on proceeds is provided
in clause (i) or (ii) of this subparagraph. Because all Secured Claims are
unimpaired under the Plan and, therefore, conclusively are deemed to accept the
Plan, this test is inapplicable to the Plan.
(B) UNSECURED CREDITORS.
With respect to any class of unsecured claims that rejects a plan, the
Bankruptcy Code requires that either (i) each impaired unsecured creditor
receives or retains under the plan property of a value equal to the amount of
its allowed claim, or (ii) the holders of claims and interests that are junior
to the claims of the rejecting class of unsecured creditors will not receive or
retain any property under the plan. This test will be applicable if any of Class
3 (Convenience Claims), Class 4 (Asbestos Property Damage Claims), Class 6
(Unsecured Claims other than Convenience Claims), or Class 8 (Environmental
Claims) rejects the Plan.
(C) EQUITY HOLDERS.
With respect to any class of equity interests that rejects a plan, the
Bankruptcy Code requires that either (i) each holder of an equity interest will
receive or retain under the plan property of a value equal to the greatest of
the fixed liquidation preference to which such holder is entitled, the fixed
redemption price to which such holder is entitled, or the value of the interest,
or (ii) the holder of an interest that is junior to the non-accepting class will
not receive or retain any property under the plan. This test will be applicable
if AWWD, the holder of the Equity Interests, rejects the Plan or is deemed to
have rejected the Plan if Class 6 rejects the Plan.
92
AWI believes that the Plan and the treatment of all classes of Claims and Equity
Interests under the Plan satisfy the foregoing requirements for nonconsensual
confirmation of the Plan.
3. FEASIBILITY.
The Bankruptcy Code requires that confirmation of a plan is not likely to be
followed by liquidation or the need for further financial reorganization. For
purposes of determining whether the Plan meets this requirement, AWI has
analyzed its ability to meet its obligations under the Plan. As part of this
analysis, AWI has prepared projections of its financial performance for the
six-month period ending December 31, 2003 and each of the years ending December
31, 2004 through 2007 (the "PROJECTION PERIOD"). These projections, and the
assumptions on which they are based, are included in the Armstrong World
Industries, Inc. Projected Financial Information included in the Financial
Appendix annexed hereto as Exhibit "C" (the "PROJECTED FINANCIAL INFORMATION").
Based upon the Projected Financial Information, AWI believes that Reorganized
AWI will be able to make all payments required pursuant to the Plan, and,
therefore, that confirmation of the Plan is not likely to be followed by
liquidation or the need for further reorganization. AWI further believes that
Reorganized AWI will be able to repay or refinance any and all of the
then-outstanding secured indebtedness under the Plan at or prior to the maturity
of such indebtedness.
The Projected Financial Information consists of the following:
>> Projected Consolidated Balance Sheets of Reorganized AWI
as of July 1, 2003 (which reflects the projected
accounting effects of consummation of the Plan and the
application of "fresh start" accounting principles) and at
December 31 for each of the years from 2004 through 2007
>> Projected Consolidated Statements of Income of Reorganized
AWI for the six-month period ending December 31, 2003 and
each of the years ending December 31, 2004 through 2007
>> Projected Consolidated Statements of Cash Flow of
Reorganized AWI for the six-month period ending December
31, 2003 and each of the years ending December 31, 2004
through 2007
The Projected Financial Information is based upon the assumption that the Plan
will be confirmed and, for projection purposes, that the Effective Date and the
initial distributions take place as of July 1, 2003. Although the Projected
Financial Information is based upon a July 1, 2003, Effective Date, AWI believes
that an actual Effective Date as late as December 31, 2003 would not have any
material adverse effect on the projections.
AWI has prepared the Projected Financial Information based upon certain
assumptions that it believes to be reasonable under the circumstances. Those
assumptions considered to be significant are described in the Projected
Financial Information. The Projected Financial Information has not been examined
or compiled by independent accountants. Many of the assumptions on which the
Projected Financial Information is based are subject to significant
uncertainties. Inevitably, some assumptions will not materialize, and
unanticipated events and circumstances may affect the actual financial results.
Therefore, the actual results achieved throughout the Projection Period may vary
from the projected results, and the variations may be material. All holders of
Claims that are entitled to vote to accept or reject the Plan are urged to
examine carefully all of the assumptions on which the Projected Financial
Information is based in evaluating the Plan.
4. BEST INTERESTS TEST.
With respect to each impaired Class of Claims and Equity Interests, confirmation
of the Plan requires that each holder of a Claim or Equity Interest either (i)
accept the Plan or (ii) receive or retain under the Plan property of a value, as
of the Effective Date, that is not less than the value such holder would receive
or retain if AWI were liquidated under chapter 7 of the Bankruptcy Code. This
requirement is referred to as the "best interests test." To determine what
holders of Claims and Equity Interests of each impaired Class would receive if
AWI were liquidated under chapter 7, the Bankruptcy Court must determine the
dollar amount that would be generated from the liquidation of AWI's assets and
93
properties in the context of a chapter 7 liquidation case. The cash amount that
would be available for satisfaction of Claims (other than Secured Claims) and
Equity Interests would consist of the proceeds resulting from the disposition of
the unencumbered assets of AWI, augmented by the unencumbered cash held by AWI
at the time of the commencement of the liquidation case. Such cash amount would
be reduced by the amount of the costs and expenses of the liquidation and by
such additional administrative and priority claims that may result from the
termination of AWI's businesses and the use of chapter 7 for the purposes of
liquidation.
AWI's costs of liquidation under chapter 7 would include the fees payable to a
trustee in bankruptcy, as well as those that might be payable to attorneys and
other professionals that such a trustee may engage. In addition, claims would
arise by reason of the breach or rejection of obligations incurred and leases
and executory contracts assumed or entered into by AWI during the pendency of
the Chapter 11 Case. The foregoing types of claims and other claims that may
arise in a liquidation case or result from the pending Chapter 11 Case,
including any unpaid expenses incurred by AWI, as debtor in possession, during
the Chapter 11 Case, such as compensation for attorneys, financial advisers, and
accountants, would be paid in full from the liquidation proceeds before the
balance of those proceeds would be made available to pay prepetition Claims.
To determine if the Plan is in the best interests of each impaired class, the
present value of the distributions from the proceeds of the liquidation of AWI's
unencumbered assets and properties, after subtracting the amounts attributable
to the foregoing Claims, are then compared with the value of the property
offered to such classes of Claims and Equity Interests under the Plan.
After considering the effects that chapter 7 liquidation would have on the
ultimate proceeds available for distribution to creditors in the Chapter 11
Case, including (i) the increased costs and expenses of liquidation under
chapter 7 arising from fees payable to a trustee in bankruptcy and professional
advisers to such trustee, (ii) the erosion in value of assets in a chapter 7
case in the context of the expeditious liquidation required under a chapter 7
case and the "forced sale" atmosphere that would prevail, and (iii) the
substantial increases in Claims that would be satisfied on a priority basis or
on a parity with creditors in the Chapter 11 Case, AWI has determined that
confirmation of the Plan will provide each holder of an Allowed Claim or Equity
Interest with a recovery that is not less than such holder would receive
pursuant to a liquidation of AWI under chapter 7 of the Bankruptcy Code.
AWI also believes that the value of any distributions to each class of Allowed
Claims in a chapter 7 case, including all Secured Claims, would be less than the
value of distributions under the Plan because such distributions in a chapter 7
case would not occur for a substantial period of time. It is likely that
distribution of the proceeds of the liquidation could be delayed a number of
years after the completion of such liquidations in order to resolve claims and
prepare for distributions. In the likely event litigation was necessary to
resolve claims asserted in the chapter 7 case, the delay could be prolonged.
AWI's Liquidation Analysis is attached hereto as Exhibit "E" (the "LIQUIDATION
ANALYSIS"). The information set forth in Exhibit "E" provides a summary of the
liquidation values of AWI's assets assuming a chapter 7 liquidation in which a
trustee appointed by the Bankruptcy Court would liquidate the assets of AWI's
estate. Reference should be made to the Liquidation Analysis for a complete
discussion and presentation of the Liquidation Analysis.
Underlying the Liquidation Analysis are a number of estimates and assumptions
that, although considered reasonable by AWI's management, are inherently subject
to significant economic and competitive uncertainties and contingencies beyond
the control of AWI's management. The Liquidation Analysis is also based upon
assumptions with regard to liquidation decisions that are subject to change.
Accordingly, the values reflected may not be realized if AWI were, in fact, to
undergo such a liquidation.
D. CONSUMMATION.
The Plan will be consummated on the Effective Date. For a more detailed
discussion of the conditions precedent to the Plan and the impact of the failure
to meet such conditions, see Section V.C, "THE PLAN OF REORGANIZATION --
Conditions Precedent to the Effective Date under the Plan."
The Plan is to be implemented pursuant to the provisions of the Bankruptcy Code.
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IX. MANAGEMENT OF REORGANIZED AWI
A. BOARD OF DIRECTORS AND MANAGEMENT.
1. COMPOSITION OF THE BOARD OF DIRECTORS.
On the Effective Date, the Board of Directors of Reorganized AWI will consist of
either seven or nine individuals, one of whom is expected to be Michael D.
Lockhart, AWI's chief executive, who will serve as Chairman of the Board as well
as continuing as chief executive. If the Board of Directors consists of seven
individuals, four of the remaining members will be designated jointly by the
Asbestos PI Claimants' Committee and the Future Claimants' Representative, and
two of the remaining members will be designated by the Unsecured Creditors'
Committee. If the Board of Directors consists of nine individuals, five of the
remaining members will be designated jointly by the Asbestos PI Claimants'
Committee and the Future Claimants' Representative, and three of the remaining
members will be designated by the Unsecured Creditors' Committee. The identity
of the members of the Board of Directors of Reorganized AWI will be set forth on
Exhibit "7.22" to the Plan.
Other than Mr. Lockhart, none of the Board members will be members of the
management of Reorganized AWI, and at least a majority of the members will
qualify as independent directors in accordance with the prevailing standards of
the New York Stock Exchange or the NASDAQ Stock Market (depending upon which of
such markets the common stock of Reorganized AWI will be listed for trading upon
after the Effective Date). Each of the initial and future members of the Board
of Directors of Reorganized AWI will serve as such in accordance with the
Amended and Restated Articles of Incorporation and the by-laws of Reorganized
AWI, as amended from time to time, and, while such agreement remains in effect,
the Stockholder and Registration Rights Agreement between Reorganized AWI and
the Asbestos PI Trust in the form of Exhibit 1.115 to the Plan. Under the
organizational documents of Reorganized AWI and the Stockholder and Registration
Rights Agreement, the initial Board members will serve a two-year term, and the
composition of the Board of Directors will be established to satisfy the
corporate governance standards of the stock market on which the common stock of
Reorganized AWI is listed and will include at least one individual who is
recognized as a "financial expert" in accordance with the rules of the SEC and
at least three individuals who qualify as independent directors under section
162(m) of the Internal Revenue Code and are eligible to serve on the committee
of the Board responsible for executive compensation matters.
2. IDENTITY OF OFFICERS.
Armstrong officers immediately prior to the Effective Date will serve as the
officers of Reorganized AWI. Set forth below is the name, age, and position of
each of these executive officers, with a description of each officer's
employment history:
Matthew J. Angello. Age 43; Senior Vice President, Corporate Human
Resources since October 2000. Previously, Mr. Angello was Vice
President, Human Resources, of the Floor Products Operations from
January 1997 to September 2000; he was Vice President and Senior
Director, Human Resources, of The Restaurant Company (food service)
from 1992 to January 1997.
Leonard A. Campanaro. Age 54; Senior Vice President and Chief
Financial Officer since April 2001. Mr. Campanaro previously was
President, Chief Operating Officer and board member of Harsco
Corporation (provider of industrial services and products) from
January 1998 to July 2000. He served at Harsco for over 20 years in a
variety of financial and operations positions, including as Senior
Vice President and Chief Financial Officer from 1992 to 1997, before
assuming the role of President of Harsco.
Chan W. Galbato. Age 39; President and Chief Executive Officer,
Armstrong Floor Products, since July 2001. Previously, Mr. Galbato
was President and Chief Executive Officer of ChoiceParts LLC
(provider of integrated virtual exchange services for auto parts
industry) from June 2000 to June 2001. Mr. Galbato has held senior
management positions at various divisions of General Electric,
including most recently President and Chief Executive Officer of
Coregis (GE Capital insurance company) from February 1999 to June
2000.
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Michael D. Lockhart. Age 53; Chairman of the Board and Chief
Executive Officer. He joined Armstrong in August 2000 and has served
AWI as Director since November 2000 and Chairman of the Board and
President since March 2001. Mr. Lockhart previously served as
Chairman and Chief Executive Officer of General Signal (a diversified
manufacturer) headquartered in Stamford, Connecticut from September
1995 until it was acquired in October 1998. He joined General Signal
as President and Chief Operating Officer in September 1994. From 1981
until 1994, Mr. Lockhart worked for General Electric in various
executive capacities in the GE Credit Corporation (now GE Capital),
GE Transportation Systems and GE Aircraft Engines. He is a member of
the Business Council for the Graduate School of Business at the
University of Chicago.
John N. Rigas. Age 53; Senior Vice President, Secretary, and General
Counsel and Director of AWI since November 2000. Previously, Mr.
Rigas was Deputy General Counsel-Litigation from March 1999 to
November 2000. Mr. Rigas worked for Dow Corning Corporation (a
specialty chemical company) from October 1982 to March 1999, his last
title being Senior Managing Counsel.
Stephen J. Senkowski. Age 50; President and Chief Executive Officer,
Armstrong Building Products Operations, since October 2000.
Previously, Mr. Senkowski was the Senior Vice President, Americas, of
the Building Products Operations from April 2000 to October 2000; he
was the President/Chief Executive Officer of the
Worthington-Armstrong Venture (joint venture) from July 1997 to April
2000 and Vice President, Innovation Process, of the Building Products
Operations from 1994 to July 1997.
April L. Thornton. Age 41; Senior Vice President and Chief Marketing
Officer since April 2001. Previously, Ms. Thornton was Vice
President, Marketing and Sales for Capitol Wire, Inc. (an online
interactive news service) from May 2000 to March 2001; Vice
President, Marketing, of Armstrong's Worldwide Building Products
Operations from September 1997 to May 2000; and Marketing Director,
New Beverage Product Strategy and Development, of the Pepsi Cola
Company (snack food, soft drink and juice) from April 1992 to August
1997.
B. COMPENSATION OF EXECUTIVE OFFICERS.
The following table sets forth all cash compensation paid by AWI to Michael D.
Lockhart, the Chief Executive Officer, and the four other most highly paid
executive officers for the fiscal year ending December 31, 2001.
HOLDINGS
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME SALARY ($) BONUS ($)(6) COMPENSATION ($)(7) OPTIONS/SARS (#) COMPENSATION ($)(8)
---- ---------- ------------ ------------------- ---------------- -------------------
Michael D. Lockhart 845,000 941,188 178,955 100,000 20,276
Chan W. Galbato 234,375 (9) 965,000 99,015 - 18
Stephen J. Senkowski 376,250 387,523 - - 22,098
April L. Thornton 195,985 (10) 460,000 - - 95
Matthew J. Angello 336,250 296,162 - - 21,880
- ---------------------------------
(6) The amounts disclosed for 2001 include payments under the Management
Achievement Plan and, where applicable, signing bonuses and cash retention
payments.
(7) Except for the income related to Mr. Lockhart and Mr. Galbato during 2001,
the aggregate value does not exceed the lesser of $50,000 or 10% of shown salary
and bonus. Mr. Lockhart had relocation income of $83,333 and income related to
personal use of company aircraft of $48,596. Mr. Galbato had relocation income
of $98,092.
(8) Includes the following amount of non-elective contribution by Armstrong to
each individual's Bonus Replacement Retirement Plan account: Michael D. Lockhart
- - $20,000; Stephen J. Senkowski - $19,647; Matthew J. Angello - $19,332.
(9) Mr. Galbato's employment commenced June 25, 2001.
(10) Ms. Thornton had a break in company service from May 23, 2000 to March 30,
2001.
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C. INCENTIVE COMPENSATION PLANS AND NEW LONG-TERM INCENTIVE PLAN.
AWI and the representatives of its principal constituencies have negotiated the
principal terms and conditions of compensation and benefits for executive
management of Reorganized AWI. A summary of certain of the principal terms is
listed below.
Terms of the New Long-Term Incentive Plan. Awards may be made in the
form of grants of shares of stock, restricted stock, stock options,
performance shares, and stock appreciation rights, or cash incentives
in lieu of stock-based awards, in each case pursuant to a New
Long-Term Incentive Plan effective as of the Effective Date. Although
the New Long-Term Incentive Plan will become effective on the
Effective Date without any further action by the Board of Directors
of Reorganized AWI or the shareholders of Reorganized AWI, a majority
of the shareholders of Reorganized AWI must approve the New Long-Term
Incentive Plan in order for such plan to qualify under section 162(m)
of the Internal Revenue Code. Accordingly, AWI intends to request
that the Asbestos PI Trust, as the majority shareholder of
Reorganized AWI, approve the New Long-Term Incentive Plan on or
immediately after the Effective Date.
Initial Awards. Approximately 565,800 shares of restricted stock and
1,697,400 shares of stock options of Reorganized AWI (assuming
issuance of approximately 67.5 million shares of New Common Stock)
will be reserved for awards to employees of Reorganized AWI on the
Effective Date. On the Effective Date, in accordance with
negotiations between AWI and the representatives of its principal
constituencies, initial awards of restricted stock and stock options
will be made to the senior executive officers and a select group of
senior management of Reorganized AWI under the New Long-Term
Incentive Plan. Each such initial award shall be comprised of a
number of shares of restricted stock determined for such employee and
a number of shares of stock options equal to three times the number
of shares of restricted stock (i.e., one-to-three ratio). Pursuant to
the negotiations, the 43 employees selected to receive initial awards
were grouped into six different tiers. Messrs. Lockhart, Galbato, and
Senkowski have been designated as Tier 1 employees, and will each
receive an initial award consisting of 55,200 shares of restricted
stock and 165,600 stock options. Messrs. Angello, Campanaro, and
Rigas were grouped in Tier 2, and will each receive an initial award
consisting of 27,600 shares of restricted stock and 82,800 stock
options. The remaining 37 senior managers will be grouped into four
tiers and will receive a total of 317,400 shares of restricted stock
and 952,200 stock options. The initial award amounts for each of the
37 senior managers will be established prior to the date of the
Confirmation Hearing, and all initial award grants will be approved
upon acceptance of the Plan.
Restricted Stock. The initial awards of restricted stock
will vest in the ordinary course in one-third increments on the
second, third and fourth anniversaries of the Effective Date, subject
to continued employment through the relevant vesting date; provided,
however, that (i) upon retirement or a resignation without "good
reason" (as defined in any applicable individual change in control
agreement or, if none applies, the New Long-Term Incentive Plan), all
then unvested shares of restricted stock will be immediately
forfeited, and (ii) upon a change in control of Reorganized AWI (as
defined in any applicable individual change in control agreement or,
if none applies, the New Long-Term Incentive Plan) or a resignation
for good reason, all then unvested shares of restricted stock shall
vest. The compensation committee of the Board of Directors of
Reorganized AWI will determine the treatment of unvested restricted
stock awards in the event of any other termination. Shares of
restricted stock will be held by Reorganized AWI and will be released
and delivered to the employee as the shares of restricted stock vest.
Stock Options. The initial awards of stock options will
each have a term of ten years and an exercise price per share equal
to the fair market value of a share of common stock of Reorganized
AWI (as determined for purposes of the Plan - i.e., $30.00 per share)
as of the Effective Date. The initial stock options will vest in the
ordinary course in one-third increments on the second, third and
fourth anniversaries of the Effective Date, subject to continued
employment through the relevant vesting date; provided, however, that
(i) upon retirement or a resignation without "good reason" (as
97
defined in any applicable employment or individual change in control
agreement), all then unvested stock options shall be immediately
forfeited, and (ii) upon a change in control of Reorganized AWI (as
defined in any applicable individual change in control agreement or,
if none applies, the New Long-Term Incentive Plan) or a resignation
for good reason, all outstanding stock options will fully vest. The
compensation committee of the Board of Directors of Reorganized AWI
will determine the treatment of unvested stock options in the event
of any other termination unless such treatment is specified in an
employment agreement.
Reserve of Common Stock for Potential Issuance in the
Future. In addition, the New Long-Term Incentive Plan provides that
an additional five percent (5%) of the shares of Reorganized AWI's
common stock on a fully diluted basis will be reserved for potential
issuance (in the form of restricted stock or stock options) in the
future. The issuance of such additional benefits, however, will be at
the sole discretion of the Board of Directors of Reorganized AWI and
the compensation committee of the Board of Directors, and nothing in
the New Long-Term Incentive Plan requires that the Board of Directors
or the compensation committee ever approve such additional benefits.
D. MANAGEMENT CONTRACTS.
On the Effective Date, all employment contracts between AWI and any employee of
AWI who was employed by AWI as of the date immediately preceding the Effective
Date (including, without limitation, any offer letters issued to any such
employees to the extent such offer letters are not superseded by formal
employment contracts) will be deemed assumed by Reorganized AWI. The existing
employment agreement for Mr. Lockhart, the Chief Executive Officer of
Reorganized AWI, previously was assumed by AWI pursuant to an order of the
Bankruptcy Court, and such agreement will continue in effect after the Effective
Date. In addition, AWI entered into an employment agreement with Mr. Galbato
with Bankruptcy Court approval. Also, AWI entered into change in control
severance agreements with certain executives pursuant to Bankruptcy Court
approval, and such agreements will continue in effect after the Effective Date.
E. AMENDMENT AND RESTATEMENT OF AWI'S ARTICLES OF INCORPORATION AND
BY-LAWS.
The Articles of Incorporation of AWI will be amended and restated as of the
Effective Date in substantially the form of the Amended and Restated Articles of
Incorporation attached as Exhibit "1.13" to the Plan, inter alia, (a) to
prohibit the issuance of nonvoting equity securities as required by section
1123(a)(6) of the Bankruptcy Code, subject to further amendment of such Amended
and Restated Articles of Incorporation as permitted by applicable law, and (b)
to authorize 215 million (215,000,000) shares of capital stock of which (i) 200
million (200,000,000) shares will be shares of common stock, (A) of which
approximately 67.5 million (67,500,000) shares will be New Common Stock issued
under the Plan, (B) a portion of which will be reserved for issuance upon
exercise of the New Warrants and (C) the remainder of which will be reserved for
future issuance, and (ii) 15 million (15,000,000) shares will be preferred stock
of Reorganized AWI, with such rights, preferences and privileges as may be
determined by the Board of Directors of Reorganized AWI.
The By-Laws of AWI will be amended and restated as of the Effective Date in
substantially the form of the Amended and Restated By-Laws attached as Exhibit
"1.14" to the Plan.
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X. EXEMPTIONS FROM SECURITIES ACT REGISTRATION
Holders of Allowed Claims in Classes 6 and 8 and AWWD, the holder of the Equity
Interests in Class 12, will receive Plan Securities pursuant to the Plan.
Section 1145 of the Bankruptcy Code provides that the securities registration
requirements of federal and state securities laws do not apply to the offer or
sale of stock, warrants, or other securities by a debtor if (i) the offer or
sale occurs under a plan of reorganization, (ii) the recipients of securities
hold a claim against, an interest in, or claim for administrative expense
against the debtor, and (iii) the securities are issued in exchange for a claim
against or interest in a debtor or are reissued principally in such exchange and
partly for cash and property. In reliance upon this exemption, the issuance of
the Plan Securities on the Effective Date as provided in the Plan generally will
be exempt from the registration requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"). Accordingly, such securities may be resold
without registration under the Securities Act or other federal securities laws
pursuant to an exemption provided by section 4(1) of the Securities Act, unless
the holder is an "underwriter" (see discussion below) with respect to such
securities, as that term is defined in the Bankruptcy Code. In addition, such
securities generally may be resold without registration under state securities
or "blue sky" laws pursuant to various exemptions provided by the respective
laws of the several states. However, recipients of securities issued under the
Plan are advised to consult with their own legal advisors as to the availability
of any such exemption from registration under state law in any given instance
and as to any applicable requirements or conditions to such availability.
Section 1145(b)(1) of the Bankruptcy Code defines "UNDERWRITER" for purposes of
the Securities Act as one who, except with respect to "ordinary trading
transactions" of an entity that is not an "issuer," (i) purchases a claim
against, interest in, or claim for an administrative expense, with a view to
distribution of any security to be received in exchange for the claim or
interest, (ii) offers to sell securities issued under a plan to the holders of
such securities, (iii) offers to buy securities issued under a plan from the
holders of such securities, if the offer to buy is made with a view to
distribution of such securities and under an agreement made in connection with
the plan, the consummation of the plan, or the offer or sale of securities under
the plan, or (iv) is an issuer of the securities within the meaning of section
2(11) of the Securities Act.
The term "ISSUER" is defined in section 2(4) of the Securities Act; however, the
reference contained in section 1145(b)(1)(D) of the Bankruptcy Code to section
2(11) of the Securities Act purports to include as statutory underwriters all
persons who, directly or indirectly, through one or more intermediaries,
control, are controlled by, or are under common control with, an issuer of
securities. "CONTROL" (as defined in Rule 405 under the Securities Act) means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise. Accordingly, an
officer or director of a reorganized debtor or its successor under a plan of
reorganization may be deemed to be a "CONTROL PERSON" of such debtor or
successor, particularly if the management position or directorship is coupled
with ownership of a significant percentage of the reorganized debtor's or its
successor's voting securities. Moreover, the legislative history of section 1145
of the Bankruptcy Code suggests that a creditor who owns ten percent (10%) or
more of the securities of a reorganized debtor may be presumed to be a "control
person." AWI does not believe that any entity other than the Asbestos PI Trust
will be considered a control person of Reorganized AWI.
To the extent that persons deemed to be "underwriters" receive Plan Securities
pursuant to the Plan, resales by such persons would not be exempted by section
1145 of the Bankruptcy Code from registration under the Securities Act or other
applicable law. Entities deemed to be statutory underwriters for purposes of
section 1145 of the Bankruptcy Code may, however, be able, at a future time and
under certain conditions described below, to sell securities without
registration pursuant to the resale provisions of Rule 144 and Rule 144A under
the Securities Act.
Under certain circumstances, holders of Plan Securities deemed to be
"underwriters" may be entitled to resell their securities pursuant to the
limited safe harbor resale provisions of Rule 144. Generally, Rule 144 provides
that, if certain conditions are met (e.g., the availability of current public
information with respect to the issuer, volume of sale limitations, and notice
and manner of sale requirements), specified persons who resell "restricted
securities" or who resell securities which are not restricted but such persons
are "affiliates" of the issuer of the securities sought to be resold, will not
be deemed to be "underwriters" as defined in section 2(11) of the Securities
Act.
99
Pursuant to the Plan, certificates evidencing Plan Securities received by a
holder of ten percent (10%) or more of the outstanding New Common Stock will
bear a legend substantially in the form below in the event that AWI reasonably
believes such holder is an underwriter:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND
MAY NOT BE SOLD, OFFERED FOR SALE, OR OTHERWISE TRANSFERRED
UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR UNLESS COMPANY RECEIVES AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH REGISTRATION OR
QUALIFICATION IS NOT REQUIRED.
Any person or entity that would receive legended securities as provided above
may instead receive certificates evidencing Plan Securities without such legend
if, prior to the Effective Date, such person or entity delivers to Reorganized
AWI (i) an opinion of counsel reasonably satisfactory to Reorganized AWI to the
effect that the Plan Securities to be received by such person or entity are not
subject to the restrictions applicable to "underwriters" under section 1145 of
the Bankruptcy Code and may be sold without registration under the Securities
Act and (ii) a certification that such person or entity is not an "underwriter"
within the meaning of section 1145 of the Bankruptcy Code.
Any holder of a certificate evidencing Plan Securities bearing such legend may
present such certificate to the transfer agent for the shares of Reorganized AWI
for exchange for one or more new certificates not bearing such legend or for
transfer to a new holder without such legend at such time as (i) such shares are
sold pursuant to an effective registration statement under the Securities Act,
or (ii) such holder delivers to Reorganized AWI an opinion of counsel reasonably
satisfactory to Reorganized AWI to the effect that such shares are no longer
subject to the restrictions applicable to "underwriters" under section 1145 of
the Bankruptcy Code and may be sold without registration under the Securities
Act or to the effect that such transfer is exempt from registration under the
Securities Act, in which event the certificate issued to the transferee shall
not bear such legend, unless otherwise specified in such opinion.
Whether or not any particular person would be deemed to be an "underwriter" of
Plan Securities to be issued pursuant to the Plan, or an "affiliate" of
Reorganized AWI, would depend upon various facts and circumstances applicable to
that person. Accordingly, AWI expresses no view as to whether any such person
(other than the Asbestos PI Trust) would be such an "underwriter" or an
"affiliate."
IN VIEW OF THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A
PARTICULAR PERSON MAY BE AN UNDERWRITER OR AN AFFILIATE OF REORGANIZED AWI, AWI
MAKES NO REPRESENTATIONS CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN PLAN
SECURITIES. ACCORDINGLY, AWI RECOMMENDS THAT POTENTIAL RECIPIENTS OF PLAN
SECURITIES CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE
SUCH SECURITIES.
A. STOCKHOLDER AND REGISTRATION RIGHTS AGREEMENT.
Reorganized AWI and the Asbestos PI Trust will enter into an agreement
substantially in the form of Exhibit "1.114" to the Plan (the "STOCKHOLDER AND
REGISTRATION RIGHTS AGREEMENT"), which will provide for (i) rights of minority
shareholders in connection with certain transactions undertaken by the Asbestos
PI Trust, (ii) rights of the Asbestos PI Trust with respect to registrations of
the Plan Notes, if they are issued under the Plan, and (iii) rights of the
Asbestos PI Trust with respect to registrations of the New Common Stock.
1. REGISTRATION RIGHTS OF THE ASBESTOS PI TRUST WITH RESPECT TO THE
PLAN NOTES.
Pursuant to the Stockholder and Registration Rights Agreement, the Asbestos PI
Trust will be granted, among other things, the right to "demand" registrations
of the Plan Notes. The Asbestos PI Trust, however, will not be permitted to
demand registration of less than $100 million in aggregate principal amount of
Plan Notes (or such lesser amount if that the Asbestos PI Trust may hold at such
time), and Reorganized AWI will not be required to effect more than one demand
registration in any nine-month period.
100
The Stockholder and Registration Rights Agreement also will provide that
Reorganized AWI will have the customary right to refuse a demand registration
under certain circumstances and for limited periods of time; that Reorganized
AWI will bear the costs and expenses associated with any registration; and will
include such other customary terms, provisions, representations and warranties
typically contained in registration rights agreements, including indemnification
and contribution rights.
2. REGISTRATION RIGHTS OF THE ASBESTOS PI TRUST WITH RESPECT TO THE
NEW COMMON STOCK.
In addition, pursuant to the Stockholder and Registration Rights Agreement, the
Asbestos PI Trust will be granted registration rights with respect to its shares
of New Common Stock. These registration rights will include the right to
"demand" registrations on terms similar to those for the Plan Notes. In
addition, the Asbestos PI Trust will have the right to unlimited "piggyback"
rights with respect to registrations by Reorganized AWI of its common stock,
subject to customary cutback provisions.
As with the registration rights relating to the Plan Notes, the Stockholder and
Registration Rights Agreement will provide that Reorganized AWI will have the
customary right to refuse a demand registration under certain circumstances and
for limited periods of time; that AWI will bear the costs and expenses
associated with any registration; and include such other customary terms,
provisions, representations and warranties typically contained in registration
rights agreements, including indemnification and contribution rights.
3. MINORITY PROTECTIONS UNDER THE STOCKHOLDER AND REGISTRATION RIGHTS
AGREEMENT.
Pursuant to the Stockholder and Registration Rights Agreement, under certain
circumstances, the holders of the New Common Stock other than the Asbestos PI
Trust will have the right to participate in certain transactions with the
Asbestos PI Trust. These "tagalong" provisions are intended to ensure that the
Asbestos PI Trust does not transfer a substantial block of stock ownership and
obtain a premium for such transfer without affording the minority holders the
right to participate in such transaction.
B. "DEEMED" ISSUANCE OF NEW WARRANTS TO THE ASBESTOS PI TRUST.
If the conditions to issuance of the New Warrants are satisfied and Class 6
votes to reject the Plan, the New Warrants will be deemed to be issued with
respect to Asbestos Personal Injury Claims, although the New Warrants will
automatically and directly be issued to Holdings. Because the Asbestos PI Trust
may be considered an underwriter, this "deemed issuance" of the New Warrants to
the Asbestos PI Trust might be considered to require registration of the New
Warrants prior to their transfer to Holdings. Because the Asbestos PI Trust,
however, will not at any time possess or have the right to control the New
Warrants, AWI will seek a determination in the Confirmation Order that, if Class
6 votes to reject the Plan, the transfer of the New Warrants to the holder of
the Equity Interests will not be subject to registration.
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XI. REORGANIZATION VALUE
AWI has been advised by Lazard, its financial advisor, with respect to the
reorganization value of Reorganized AWI on a going concern basis. Solely for
purposes of the Plan, the estimated range of reorganization value of Reorganized
AWI was assumed to be approximately $2,700 million to $3,300 million (with a
midpoint value of $3,000 million) as of an assumed Effective Date of July 1,
2003. This estimated reorganization value includes $300 million associated with
a tax net operating loss carryforward that is created as part of the Plan.
Lazard's estimate of a range of enterprise values does not constitute an opinion
as to fairness from a financial point of view of the consideration to be
received under the Plan or of the terms and provisions of the Plan.
THE ASSUMED RANGE OF THE REORGANIZATION VALUE, AS OF AN ASSUMED EFFECTIVE DATE
OF JULY 1, 2003, REFLECTS WORK PERFORMED BY LAZARD ON THE BASIS OF INFORMATION
IN RESPECT OF THE BUSINESS AND ASSETS OF AWI AVAILABLE TO LAZARD AS OF DECEMBER
16, 2002. IT SHOULD BE UNDERSTOOD THAT, ALTHOUGH SUBSEQUENT DEVELOPMENTS MAY
AFFECT LAZARD'S CONCLUSIONS, LAZARD DOES NOT HAVE ANY OBLIGATION TO UPDATE,
REVISE OR REAFFIRM ITS ESTIMATE.
Based upon the assumed range of the reorganization value of Reorganized AWI of
between $2,700 million and $3,300 million and an assumed total debt of $924
million (including $775 million aggregate principal amount of Plan Notes, $76
million of debt outstanding under the exit facility, and $73 million in other
reinstated debt), Lazard has employed an imputed estimate of the range of equity
value for Reorganized AWI between $1,780 million and $2,380 million, with a
mid-point value of $2,076 million. Equity to be distributed to the Asbestos PI
Trust and the holder of Unsecured Claims, net of an estimated $40-$50 million
value for the New Warrants, will be in a range between $1,730 million and $2,330
million, with a mid-point value of $2,026 million. Assuming a distribution of
approximately 67.5 million shares of Reorganized AWI Common Stock pursuant to
the Plan, the imputed estimate of the range of Equity Values on a per share
basis for Reorganized AWI is between $25.60 and $34.40 per share, with a
midpoint value of $30.00 per share. The Equity Value of $30.00 on a per share
basis does not give effect to the potentially dilutive impact of any restricted
stock or options to be issued or granted pursuant to New Long-Term Incentive
Plan. See Section IX.C, entitled, "MANAGEMENT OF REORGANIZED AWI - Incentive
Compensation Plans and the New Long-Term Incentive Plan."
The foregoing estimate of the reorganization value of Reorganized AWI is based
on a number of assumptions, including a successful reorganization of AWI's
business and finances in a timely manner, the implementation of Reorganized
AWI's business plan, the achievement of the forecasts reflected in the Projected
Financial Information, access to adequate exit financing, the continuing
leadership of the existing management team, market conditions as of December 16,
2002 continuing through the assumed Effective Date of July 1, 2003, and the Plan
becoming effective in accordance with the estimates and other assumptions
discussed herein.
With respect to the Projected Financial Information prepared by the management
of AWI and included in the Financial Appendix that is Exhibit "C" to this
Disclosure Statement, Lazard assumed that such Projected Financial Information
has been reasonably prepared in good faith and on a basis reflecting the best
currently available estimates and judgments of AWI as to the future operating
and financial performance of Reorganized AWI. Lazard's estimate of a range of
reorganization values assumes that operating results projected by AWI will be
achieved by Reorganized AWI in all material respects, including revenue growth
and improvements in operating margins, earnings and cash flow. Certain of the
results forecast by the management of AWI are materially better than the recent
historical results of operations of AWI. As a result, to the extent that the
estimate of enterprise values is dependent upon Reorganized AWI performing at
the levels set forth in the Projected Financial Information, such analysis must
be considered speculative. If the business performs at levels below those set
forth in the Projected Financial Information, such performance may have a
material impact on the Projected Financial Information and on the estimated
range of values derived therefrom.
IN ESTIMATING THE RANGE OF THE REORGANIZATION VALUE AND EQUITY VALUE OF
REORGANIZED AWI, LAZARD
>> REVIEWED CERTAIN HISTORICAL FINANCIAL INFORMATION OF AWI
FOR RECENT YEARS AND INTERIM PERIODS;
102
>> REVIEWED CERTAIN INTERNAL FINANCIAL AND OPERATING DATA OF
AWI, INCLUDING THE PROJECTED FINANCIAL INFORMATION, WHICH
WAS PREPARED AND PROVIDED TO LAZARD BY AWI'S MANAGEMENT
AND WHICH RELATE TO AWI'S BUSINESS AND ITS PROSPECTS;
>> MET WITH CERTAIN MEMBERS OF SENIOR MANAGEMENT OF AWI TO
DISCUSS AWI'S OPERATIONS AND FUTURE PROSPECTS;
>> REVIEWED PUBLICLY AVAILABLE FINANCIAL DATA AND CONSIDERED
THE MARKET VALUE OF PUBLIC COMPANIES THAT LAZARD DEEMED
GENERALLY COMPARABLE TO THE OPERATING BUSINESS OF AWI;
>> CONSIDERED RELEVANT PRECEDENT TRANSACTIONS IN THE BUILDING
PRODUCTS INDUSTRY;
>> CONSIDERED CERTAIN ECONOMIC AND INDUSTRY INFORMATION
RELEVANT TO THE OPERATING BUSINESS; AND
>> CONDUCTED SUCH OTHER STUDIES, ANALYSIS, INQUIRIES, AND
INVESTIGATIONS AS IT DEEMED APPROPRIATE.
ALTHOUGH LAZARD CONDUCTED A REVIEW AND ANALYSIS OF AWI'S BUSINESS, OPERATING
ASSETS AND LIABILITIES AND REORGANIZED AWI'S BUSINESS PLANS, IT ASSUMED AND
RELIED ON THE ACCURACY AND COMPLETENESS OF ALL FINANCIAL AND OTHER INFORMATION
FURNISHED TO IT BY AWI, AS WELL AS PUBLICLY AVAILABLE INFORMATION. IN ADDITION,
LAZARD DID NOT INDEPENDENTLY VERIFY MANAGEMENT'S PROJECTIONS IN CONNECTION WITH
SUCH ESTIMATES OF THE REORGANIZATION VALUE AND EQUITY VALUE, AND NO INDEPENDENT
VALUATIONS OR APPRAISALS OF AWI WERE SOUGHT OR OBTAINED IN CONNECTION HEREWITH.
ESTIMATES OF THE REORGANIZATION VALUE AND EQUITY VALUE DO NOT PURPORT TO BE
APPRAISALS OR NECESSARILY REFLECT THE VALUES THAT MAY BE REALIZED IF ASSETS ARE
SOLD AS A GOING CONCERN, IN LIQUIDATION, OR OTHERWISE.
IN THE CASE OF REORGANIZED AWI, THE ESTIMATES OF THE REORGANIZATION VALUE
PREPARED BY LAZARD REPRESENT THE HYPOTHETICAL REORGANIZATION VALUE OF
REORGANIZED AWI. SUCH ESTIMATES WERE DEVELOPED SOLELY FOR PURPOSES OF THE
FORMULATION AND NEGOTIATION OF THE PLAN AND THE ANALYSIS OF IMPLIED RELATIVE
RECOVERIES TO CREDITORS THEREUNDER. SUCH ESTIMATES REFLECT COMPUTATIONS OF THE
RANGE OF THE ESTIMATED REORGANIZATION ENTERPRISE VALUE OF REORGANIZED AWI
THROUGH THE APPLICATION OF VARIOUS VALUATION TECHNIQUES AND DO NOT PURPORT TO
REFLECT OR CONSTITUTE APPRAISALS, LIQUIDATION VALUES OR ESTIMATES OF THE ACTUAL
MARKET VALUE THAT MAY BE REALIZED THROUGH THE SALE OF ANY SECURITIES TO BE
ISSUED PURSUANT TO THE PLAN, WHICH MAY BE SIGNIFICANTLY DIFFERENT THAN THE
AMOUNTS SET FORTH HEREIN.
THE VALUE OF AN OPERATING BUSINESS IS SUBJECT TO NUMEROUS UNCERTAINTIES AND
CONTINGENCIES WHICH ARE DIFFICULT TO PREDICT AND WILL FLUCTUATE WITH CHANGES IN
FACTORS AFFECTING THE FINANCIAL CONDITION AND PROSPECTS OF SUCH A BUSINESS. AS A
RESULT, THE ESTIMATE OF THE RANGE OF THE REORGANIZATION ENTERPRISE VALUE OF
REORGANIZED AWI SET FORTH HEREIN IS NOT NECESSARILY INDICATIVE OF ACTUAL
OUTCOMES, WHICH MAY BE SIGNIFICANTLY MORE OR LESS FAVORABLE THAN THOSE SET FORTH
HEREIN. BECAUSE SUCH ESTIMATES ARE INHERENTLY SUBJECT TO UNCERTAINTIES, NEITHER
AWI, LAZARD, NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR THEIR ACCURACY. IN
ADDITION, THE VALUATION OF NEWLY ISSUED SECURITIES IS SUBJECT TO ADDITIONAL
UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT. ACTUAL
MARKET PRICES OF SUCH SECURITIES AT ISSUANCE WILL DEPEND UPON, AMONG OTHER
THINGS, PREVAILING INTEREST RATES, CONDITIONS IN THE FINANCIAL MARKETS, THE
ANTICIPATED INITIAL SECURITIES HOLDINGS OF PREPETITION CREDITORS, SOME OF WHICH
MAY PREFER TO LIQUIDATE THEIR INVESTMENT RATHER THAN HOLD IT ON A LONG-TERM
BASIS, AND OTHER FACTORS WHICH GENERALLY INFLUENCE THE PRICES OF SECURITIES.
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Valuation Methodology Lazard performed a variety of analyses and considered a
variety of factors in preparing the valuation of AWI. While several generally
accepted valuation techniques for estimating AWI's enterprise value were used,
Lazard primarily relied on three methodologies: comparable public company
analysis, discounted cash flow analysis, and precedent transactions analysis.
Lazard placed different weights on each of these analyses and made judgments as
to the relative significance of each analysis in determining AWI's indicated
enterprise value range. Lazard's valuation must be considered as a whole, and
selecting just one methodology or portions of the analyses, without considering
the analyses as a whole, could create a misleading or incomplete conclusion as
to AWI's enterprise value.
In preparing its valuation estimate, Lazard performed a variety of analyses and
considered a variety of factors, some of which are described herein. The
following summary does not purport to be a complete description of the analyses
and factors undertaken to support Lazard's conclusions. The preparation of a
valuation is a complex process involving various determinations as to the most
appropriate analyses and factors to consider, as well as the application of
those analyses and factors under the particular circumstances. As a result, the
process involved in preparing a valuation is not readily summarized.
Comparable Public Company Analysis. A comparable public company
analysis estimates value based on a comparison of the target
company's financial statistics with the financial statistics of
public companies that are similar to the target company. It
establishes a benchmark for asset valuation by deriving the value of
"comparable" assets, standardized using a common variable such as
revenues, earnings, and cash flows. The analysis includes a detailed
multi-year financial comparison of each company's income statement,
balance sheet, and cash flow statement. In addition, each company's
performance, profitability, margins, leverage and business trends are
also examined. Based on these analyses, a number of financial
multiples and ratios are calculated to gauge each company's relative
performance and valuation.
A key factor to this approach is the selection of companies with
relatively similar business and operational characteristics to the
target company. Criteria for selecting comparable companies include,
among other relevant characteristics, similar lines of businesses,
business risks, target market segments, growth prospects, maturity of
businesses, market presence, size, and scale of operations. The
selection of truly comparable companies is often difficult and
subject to interpretation. However, the underlying concept is to
develop a premise for relative value, which, when coupled with other
approaches, presents a foundation for determining firm value.
In performing the Comparable Public Company Analysis, the following
publicly traded companies deemed generally comparable to AWI in some
or all of the factors described above, were selected: American
Woodmark, Black & Decker, Elkcorp, Interface, Masco, Mohawk, and NCI
Building Systems. Lazard excluded several building products
manufacturers that were deemed not comparable because of size,
specific product comparability and/or status of comparable companies
(e.g., currently in a chapter 11). Lazard analyzed the current
trading value for the comparable companies as a multiple of latest
twelve months' revenue, earnings before interest, taxes,
depreciation, and amortization ("EBITDA"), and earnings before
interest and taxes ("EBIT"). These multiples were then applied to
AWI's fiscal year end 2002 financial results (9 months actual and 3
months forecast) to determine the range of enterprise value.
Discounted Cash Flow Approach. The discounted cash flow ("DCF")
valuation methodology relates the value of an asset or business to
the present value of expected future cash flows to be generated by
that asset or business. The DCF methodology is a "forward looking"
approach that discounts the expected future cash flows by a
theoretical or observed discount rate determined by calculating the
average cost of debt and equity for publicly traded companies that
are similar to AWI. The expected future cash flows have two
components: the present value of the projected unlevered after-tax
free cash flows for a determined period and the present value of the
terminal value of cash flows (representing firm value beyond the time
horizon of the projections). Lazard's discounted cash flow valuation
is based on a five-year projection of AWI's operating results. Lazard
discounted the projected cash flows using AWI's estimated weighted
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average cost of capital and calculated the terminal value of AWI
using both EBITDA multiple and perpetual growth methodologies.
This approach relies on the company's ability to project future cash
flows with some degree of accuracy. Because AWI's projections reflect
significant assumptions made by AWI's management concerning
anticipated results, the assumptions and judgments used in the
Projected Financial Information may or may not prove correct and,
therefore, no assurance can be provided that projected results are
attainable or will be realized. Lazard cannot and does not make any
representations or warranties as to the accuracy or completeness of
AWI's projections.
Precedent Transactions Analysis. Precedent transactions analysis
estimates value by examining public merger and acquisition
transactions. An analysis of the disclosed purchase price as a
multiple of various operating statistics reveals industry acquisition
multiples for companies in similar lines of businesses to AWI. These
transaction multiples are calculated based on the purchase price
(including any debt assumed) paid to acquire companies that are
comparable to AWI. Lazard specifically focused on prices paid as a
multiple of Revenue, EBITDA and EBIT in determining a range of values
for AWI. These multiples are then applied to AWI's key operating
statistics to determine the total enterprise value or value to a
potential strategic buyer.
Unlike the comparable public company analysis, the valuation in this
methodology includes a "control" premium, representing the purchase
of a majority or controlling position in a company's assets. Thus,
this methodology generally produces higher valuations than the
comparable public company analysis. Other aspects of value that
manifest itself in a precedent transaction analysis include the
following:
>> Circumstances surrounding a merger transaction
may introduce "diffusive quantitative results"
into the analysis (e.g., an additional premium
may be extracted from a buyer in the case of a
competitive bidding contest).
>> The market environment is not identical for
transactions occurring at different periods of
time.
>> Circumstances pertaining to the financial
position of a company may have an impact on the
resulting purchase price (e.g., a company in
financial distress may receive a lower price
due to perceived weakness in its bargaining
leverage).
As with the comparable company analysis, because no acquisition used
in any analysis is identical to a target transaction, valuation
conclusions cannot be based solely on quantitative results. The
reasons for and circumstances surrounding each acquisition
transaction are specific to such transaction, and there are inherent
differences between the businesses, operations and prospects of each.
Therefore, qualitative judgments must be made concerning the
differences between the characteristics of these transactions and
other factors and issues that could affect the price an acquirer is
willing to pay in an acquisition. The number of completed
transactions for which public data is available also limits this
analysis. Because the precedent transaction analysis explains other
aspects of value besides the inherent value of a company, there are
limitations as to its use in AWI's valuation.
THE ESTIMATES OF THE REORGANIZATION VALUE AND EQUITY VALUE DETERMINED BY LAZARD
REPRESENT ESTIMATED REORGANIZATION VALUES AND DO NOT REFLECT VALUES THAT COULD
BE ATTAINABLE IN PUBLIC OR PRIVATE MARKETS. THE IMPUTED ESTIMATE OF THE RANGE OF
THE REORGANIZATION EQUITY VALUE OF REORGANIZED AWI ASCRIBED IN THE ANALYSIS DOES
NOT PURPORT TO BE AN ESTIMATE OF THE POST-REORGANIZATION MARKET TRADING VALUE.
ANY SUCH TRADING VALUE MAY BE MATERIALLY DIFFERENT FROM THE IMPUTED ESTIMATE OF
THE REORGANIZATION EQUITY VALUE RANGE FOR REORGANIZED AWI ASSOCIATED WITH
LAZARD'S VALUATION ANALYSIS.
105
XII. RISK FACTORS
HOLDERS OF CLAIMS AGAINST AWI SHOULD READ AND CONSIDER CAREFULLY THE FACTORS SET
FORTH BELOW, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS DISCLOSURE
STATEMENT (AND THE DOCUMENTS DELIVERED TOGETHER HEREWITH AND/OR REFERRED TO
HEREIN BY REFERENCE), PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN. THESE RISK
FACTORS SHOULD NOT, HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED
IN CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION. IN ADDITION, HOLDERS OF
CLAIMS AGAINST AWI SHOULD CONSULT AWI'S MOST RECENT ANNUAL REPORT ON FORM 10-K
AND QUARTERLY REPORT ON FORM 10-Q FOR GENERAL RISK FACTORS RELATING TO AWI AND
THE BUSINESS IN WHICH IT OPERATES.
A. OVERALL RISKS TO RECOVERY BY HOLDERS OF CLAIMS.
The ultimate recoveries under the Plan to holders of Claims (other than holders
whose entire Distribution is paid in cash) depend upon the realizable value of
the Plan Notes (if issued) and the New Common Stock, which are subject to a
number of material risks, including, but not limited to, those specified below.
The factors below assume that the Plan is confirmed and that the Effective Date
occurs on or about July 1, 2003. Prior to voting on the Plan, each holder of a
Claim should consider carefully the risk factors specified or referred to below,
including the exhibits annexed hereto, as well as all of the information
contained in the Plan.
1. ABILITY TO REFINANCE CERTAIN INDEBTEDNESS.
Following the Effective Date of the Plan, AWI's working capital borrowings and
letters of credit requirements are anticipated to be funded under a new credit
facility. See Section V.F, entitled, "THE PLAN OF REORGANIZATION - Exit
Facility." Obtaining such a credit facility is a condition precedent to the
Effective Date. There can be no assurance, however, that Reorganized AWI will be
able to obtain financing for such facility to fund future working capital
borrowings and letters of credit, or that financing, if obtained, would be on
terms as favorable to Reorganized AWI. Furthermore, if the Plan Notes are
issued, there can be no assurance that Reorganized AWI will be able to refinance
the Plan Notes upon their maturity should such a need arise.
2. OWNERSHIP BY THE ASBESTOS PI TRUST.
The Asbestos PI Trust will beneficially own more than 65% of the shares of the
New Common Stock to be issued pursuant to the Plan. Accordingly, the Asbestos PI
Trust will be in a position to control the outcome of actions requiring
stockholder approval, including the election of the majority of directors. This
concentration of ownership could also facilitate or hinder a negotiated change
of control of Reorganized AWI, and, consequently, affect the value of the New
Common Stock.
3. DIVIDEND POLICIES.
AWI cannot anticipate whether Reorganized AWI will pay any dividends on the New
Common Stock in the foreseeable future. In addition, the covenants in certain
debt instruments to which Reorganized AWI will be a party may limit the ability
of Reorganized AWI to pay dividends.
4. PROJECTED FINANCIAL INFORMATION.
The Projected Financial Information is dependent upon numerous assumptions,
including confirmation and consummation of the Plan in accordance with its
terms, the anticipated future performance of Reorganized AWI, conditions in the
industries in which Reorganized AWI operates, certain assumptions with respect
to competitors of Reorganized AWI, general business and economic conditions, and
other matters, many of which are beyond the control of AWI. In addition,
unanticipated events and circumstances occurring subsequent to the preparation
of the Projected Financial Information may affect the actual financial results
of Reorganized AWI. Although AWI believes that the projections are reasonable
and attainable, some or all of the estimates will vary, and variations between
the actual financial results and those projected may be material. The Projected
Financial Information also assumes that Reorganized AWI will be rated
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"investment grade" (BBB- or better) by the Rating Agencies. If Reorganized AWI
is rated BB+ or lower by the Rating Agencies, the interest rate payable on the
Plan Notes (if issued) or any other debt incurred by Reorganized AWI will be
higher, and AWI's cash flow will be adversely affected.
5. VALUE OF CONSIDERATION TO BE DISTRIBUTED UNDER THE PLAN.
In estimating the value of distributions under the Plan, AWI has assumed that
(i) cash has a value equal to its face amount, (ii) the Plan Notes have a value
equal to their face amount, (iii) the New Warrants have an aggregate value of
$40-50 million, or $11.10 to $13.90 per New Warrant (with a midpoint of $12.50
per warrant), and (iv) the New Common Stock will have an aggregate value of
approximately $2.026 billion, or $30.00 a share. There is no assurance that such
assumed values can be obtained.
B. THE ASBESTOS PI PERMANENT CHANNELING INJUNCTION.
The Asbestos PI Permanent Channeling Injunction, which, inter alia, bars the
assertion of "future" Asbestos Personal Injury Claims against AWI and the other
PI Protected Parties, is the cornerstone of the Plan. As described in Section
VI.C, entitled "THE ASBESTOS PI TRUST -- The Asbestos PI Permanent Channeling
Injunction," in 1994 the United States Congress added subsections (g) and (h) to
section 524 of the Bankruptcy Code in order to confirm the authority of the
Bankruptcy Court, subject to the conditions specified therein, to issue
injunctions such as the Asbestos PI Permanent Channeling Injunction with respect
to present and future asbestos-related personal injury claims and demands.
Although the Plan, the Asbestos PI Trust Agreement, and the Asbestos PI Trust
Distribution Procedures all have been drafted with the intention of complying
with section 524(g)-(h) of the Bankruptcy Code, and satisfaction of the
conditions imposed by section 524(g)-(h) is a condition precedent to
confirmation of the Plan, there is no guarantee that the validity and
enforceability of the Asbestos PI Permanent Channeling Injunction or section
524(g)-(h) or the application of the Asbestos PI Permanent Channeling Injunction
to Asbestos Personal Injury Claims will not be challenged, either before or
after confirmation of the Plan. Although AWI believes adequate bases exist for
the courts to uphold section 524(g)-(h) and the Asbestos PI Permanent Channeling
Injunction, there can be no assurance that, in the future, courts might not
invalidate all or a portion of section 524(g)-(h) or the Asbestos PI Permanent
Channeling Injunction.
C. ABSENCE OF PUBLIC MARKET FOR THE PLAN NOTES, NEW COMMON STOCK AND
NEW WARRANTS.
There can be no assurance that the Plan Notes, New Common Stock and/or New
Warrants will be listed or traded on an established trading market. As a result,
there can be no assurance that the secondary markets for the Plan Notes, New
Common Stock and New Warrants will be liquid.
D. CERTAIN PROVISIONS OF AWI'S AMENDED AND RESTATED ARTICLES OF
INCORPORATION, BYLAWS AND THE PENNSYLVANIA BUSINESS CORPORATION LAW.
AWI's Amended and Restated Articles of Incorporation and Bylaws, as well as the
Pennsylvania BCL, contain provisions that may have the effect of delaying,
deterring or preventing a change in control of AWI.
107
XIII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion summarizes certain federal income tax consequences of
the implementation of the Plan to AWI and to certain holders of Claims. The
following summary does not discuss the federal income tax consequences to (i)
holders whose Claims are entitled to reinstatement or payment in full in cash or
are otherwise unimpaired under the Plan (such as an Administrative Expense
Creditor and holders of Priority Claims, Secured Claims, COLI Claims, Affiliate
Claims, and Subsidiary Debt Guarantee Claims), (ii) holders of Environmental
Claims (the distributions to which will be governed by their respective
settlement agreements), or (iii) holders of Equity Interests.
The following summary is based on the Internal Revenue Code of 1986, as amended
(the "INTERNAL REVENUE CODE"), Treasury Regulations promulgated thereunder,
judicial decisions and published administrative rules and pronouncements of the
Internal Revenue Service ("IRS") as in effect on the date hereof. Changes in
such rules or new interpretations thereof may have retroactive effect and could
significantly affect the federal income tax consequences described below.
The federal income tax consequences of the Plan are complex and are subject to
significant uncertainties. AWI has not requested an opinion of counsel with
respect to any of the tax aspects of the Plan and, other than as involves the
Asbestos PI Trust and the Asbestos PD Trust, does not currently intend to seek a
ruling from the IRS concerning any of the tax aspects of the Plan. However,
there is no assurance that a ruling, even though requested, will be obtained. In
addition, this summary does not address foreign, state or local tax consequences
of the Plan, nor does it purport to address the federal income tax consequences
of the Plan to special classes of taxpayers (such as foreign taxpayers,
broker-dealers, banks, mutual funds, insurance companies, financial
institutions, small business investment companies, regulated investment
companies, tax-exempt organizations, and investors in pass-through entities).
ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS
FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING
AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES PERTAINING TO A HOLDER OF A
CLAIM. ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR THE
FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE TO THEM UNDER THE
PLAN.
A. CONSEQUENCES TO AWI.
For federal income tax purposes, AWI is a member of an affiliated group of
corporations of which Holdings is the common parent (the "HOLDINGS GROUP") and
joins in the filing of a consolidated federal income tax return. The Holdings
Group does not currently have a consolidated net operating loss ("NOL")
carryforward. However, as discussed below, AWI expects to incur a substantial
NOL (a portion of which would be carried back to obtain a refund of taxes paid
in prior years) for the taxable year that includes the Effective Date as a
result of the funding of the Asbestos PI Trust on the Effective Date. See
Exhibit C, Financial Appendix, which assumes that the Asbestos PI Trust is
funded on the Effective Date in accordance with sections 7.9(b) and 7.17(e) of
the Plan. Although the Plan provides that the execution of the Asbestos PI Trust
Agreement is an express condition to the effectiveness of the Plan, this
condition (like all Effective Date conditions) can be waived by AWI with the
written consent of the Asbestos PI Claimants' Committee, the Future Claimants'
Representative, and if Class 6 accepts the Plan, the Unsecured Creditors'
Committee. If waived, the funding of the Asbestos PI Trust would not occur until
after the Effective Date in a subsequent taxable year, with the result that the
amount of the tax refund obtainable by AWI would be significantly reduced.
Accordingly, the following discussion assumes that AWI does not waive this
condition.
AWI also has substantial tax basis in its assets. As discussed below, any NOLs
of AWI will be reduced as a result of the implementation of the Plan, and the
tax basis of AWI's depreciable assets also may be reduced.
1. CANCELLATION OF DEBT.
The Internal Revenue Code provides that a debtor in a bankruptcy case must
reduce certain of its tax attributes - such as NOLs, excess tax credits and tax
basis in assets - by the amount of any cancellation of debt ("COD"). COD is the
108
amount by which the indebtedness discharged exceeds any consideration given in
exchange therefor, subject to certain statutory or judicial exceptions that can
apply to limit the amount of COD (such as where the payment of the cancelled
debt would have given rise to a tax deduction). Where a debtor joins in the
filing of a consolidated federal income tax return, it is unclear whether the
reduction in NOLs and other consolidated tax attributes occurs on a group basis
or instead on a separate company basis (although, in the present case, only AWI
is expected to have any NOLs to reduce). To the extent the amount of COD exceeds
the tax attributes available for reduction, the excess COD is simply forgiven.
If advantageous, a debtor can elect to reduce the basis of depreciable property
prior to any reduction in its NOLs or other tax attributes.
As a result of the discharge of Claims pursuant to the Plan, AWI likely will
realize substantial COD. The extent of such COD and the resulting tax attribute
reduction will depend, in part, on the value of the New Common Stock. Based on
the estimated reorganization value of Reorganized AWI (see Section XI, entitled
"REORGANIZATION VALUE," above), AWI expects to incur approximately $550 million
of COD with a corresponding reduction in its NOL for the taxable year (or, at
Reorganized AWI's election, the tax basis of its depreciable assets).
2. LIMITATION ON NOL CARRYFORWARDS AND OTHER TAX ATTRIBUTES.
Following the implementation of the Plan, the availability of the remaining
portion of any NOLs and possibly certain other tax attributes of AWI allocable
to periods prior to the Effective Date to offset future taxable income will be
subject to the limitations imposed by Section 382 of the Internal Revenue Code.
(A) GENERAL LIMITATION.
Under Section 382, if a corporation undergoes an "ownership change," the amount
of its pre-change losses that may be utilized to offset future taxable income
is, in general, subject to an annual limitation. Such limitation also may apply
to certain losses or deductions which are "built-in" (i.e., economically accrued
but unrecognized) as of the date of the ownership change that are subsequently
recognized. The issuance of the New Common Stock pursuant to the Plan will
constitute an ownership change of AWI.
In general, the amount of the annual limitation to which a corporation would be
subject is equal to the product of (i) the fair market value of the stock of the
corporation immediately before the ownership change (with certain adjustments)
multiplied by (ii) the "long-term tax-exempt rate" in effect for the month in
which the ownership change occurs (4.61% for ownership changes occurring in
March 2003). For a corporation in bankruptcy that undergoes the ownership change
pursuant to a confirmed plan, the stock value generally is determined
immediately after (rather than before) the ownership change, and certain
adjustments that ordinarily would apply do not apply.
Any unused limitation may be carried forward, thereby increasing the annual
limitation in the subsequent taxable year. However, if the corporation does not
continue its historic business or use a significant portion of its assets in a
new business for two years after the ownership change, the annual limitation
resulting from the ownership change is zero.
If a loss corporation has a "net unrealized built-in loss" at the time of an
ownership change (taking into account most assets and items of "built-in" income
and deductions), then any built-in losses recognized during the following five
years (up to the amount of the original net built-in loss) generally will be
treated as pre-change losses and similarly will be subject to the annual
limitation. Conversely, if the loss corporation has a "net unrealized built-in
gain" at the time of an ownership change, any built-in gains recognized during
the following five years (up to the amount of the original net built-in gain)
generally will increase the annual limitation in the year recognized, such that
the loss corporation would be permitted to use its pre-change losses (including
recognized built-in losses) against such built-in gain income in addition to its
regular annual allowance. In general, a loss corporation's net unrealized
built-in gain or loss will be deemed to be zero unless it is greater than the
lesser of (i) $10 million or (ii) 15% of the fair market value of its assets
(with certain adjustments) before the ownership change. In a consolidated return
context, the determination of whether a loss corporation is in a net unrealized
built-in gain or built-in loss position is sometimes made on a consolidated
group (or subgroup) basis. Subject to certain interpretational issues, AWI
anticipates that it will be in a net unrealized built-in gain position on the
Effective Date.
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(B) SPECIAL BANKRUPTCY EXCEPTION.
An exception to the foregoing annual limitation rules generally applies where
the shareholders and/or qualified (so-called "old and cold") creditors of a
debtor receive or retain, in respect of their claims or equity interests, at
least 50% of the vote and value of the stock of the reorganized debtor (or a
controlling corporation if also in bankruptcy) pursuant to a confirmed chapter
11 plan. Under this exception, a debtor's pre-change losses are not limited on
an annual basis but, instead, are reduced by the amount of any interest
deductions claimed during the three taxable years preceding the date of the
reorganization, in respect of the debt converted into stock in the
reorganization. Moreover, if this exception applies, any further ownership
change of the debtor within a two-year period after the consummation of the
chapter 11 plan will preclude the debtor's utilization of any NOLs and other
losses existing at the time of the subsequent ownership change against future
taxable income.
AWI anticipates that the receipt of New Common Stock by the holders of Allowed
Unsecured Claims and the Asbestos PI Trust will qualify for this exception.
Reorganized AWI may, if it so desires, elect not to have this exception apply
and instead remain subject to the annual limitation described above. Such
election would have to be made in Reorganized AWI's federal income tax return
for the taxable year in which the Effective Date occurs. Because the Asbestos PI
Trust will hold a majority of the New Common Stock and may choose to dispose of
all or a significant portion of such stock within two years of the Effective
Date, the projections in the Financial Appendix (Exhibit C) conservatively
assume that AWI will elect not to have this exception apply due to the
possibility of another ownership change occurring within two years.
3. ALTERNATIVE MINIMUM TAX.
In general, an alternative minimum tax ("AMT") is imposed on a corporation's
alternative minimum taxable income at a 20% rate to the extent that such tax
exceeds the corporation's regular federal income tax. For purposes of computing
taxable income for AMT purposes, certain tax deductions and other beneficial
allowances are modified or eliminated. For example, a corporation is generally
not allowed to offset more than 90% of its taxable income for AMT purposes by
available NOL carryforwards. However, recent legislation provides for a
temporary waiver of this limitation for AMT NOL carrybacks originating in years
ending in 2001 or 2002, or NOL carryforwards to the 2001 and 2002 tax years.
In addition, if a corporation undergoes an "ownership change" within the meaning
of Section 382 and is in a net unrealized built-in loss position on the date of
the ownership change, the corporation's aggregate tax basis in its assets would
be reduced for certain AMT purposes to reflect the fair market value of such
assets as of the change date. The application of this provision is unaffected by
whether the special bankruptcy exception to the annual limitation (and built-in
gain and loss) rules of Section 382 applies. As indicated above, AWI anticipates
that it will be in a net unrealized built-in gain position on the Effective
Date.
Any AMT that a corporation pays generally will be allowed as a nonrefundable
credit against its regular federal income tax liability in future taxable years
when the corporation is no longer subject to the AMT.
4. TREATMENT OF THE ASBESTOS PI TRUST AND ASBESTOS PD TRUST.
The Asbestos PI Trust and the Asbestos PD Trust are each intended to be a
"qualified settlement fund" within the meaning of Treasury Regulation section
1.468B-1 et seq. In accordance with the Plan, AWI has requested a ruling from
the IRS confirming such treatment with respect to the Asbestos PI Trust.
Moreover, it is a condition to the effectiveness of the Plan (waivable by AWI,
with appropriate consents) that a favorable ruling be obtained from the IRS with
respect to the qualification of the Asbestos PI Trust as a "qualified settlement
fund" or that AWI have received an opinion of counsel with respect to the tax
status of the trust reasonably satisfactory to AWI, the Asbestos PI Claimants'
Committee, the Future Claimants' Representative, and if Class 6 approves the
Plan, the Unsecured Creditors' Committee.
Assuming the Asbestos PI Trust is treated as a qualified settlement fund, AWI
generally would be entitled to a current federal income tax deduction for all
transfers of cash, stock and other property (other than notes) to the Asbestos
PI Trust to the same extent it would have been entitled to a deduction if such
amounts had been paid directly to the holder of an Asbestos Personal Injury
110
Claim. AWI expects to transfer to the Asbestos PI Trust its share of the cash
(other than any 144A Offering Proceeds) and the New Common Stock components of
the Reorganization Consideration on the Effective Date. Accordingly, AWI expects
to obtain a substantial tax deduction upon the funding of the Asbestos PI Trust
on the Effective Date and, consequently, to have a substantial NOL for such
taxable year (which, as discussed above, would be reduced by reason of the
discharge of debt under the Plan and would be subject to limitation under
Internal Revenue Code section 382). Reorganized AWI would only be entitled to a
deduction with respect to any Plan Notes contributed to the Asbestos PI Trust as
and when payments are made on such notes and, with respect to the Asbestos PI
Trust's share of any 144A Offering Proceeds distributable in lieu of Plan Notes,
at the time such proceeds are actually transferred to the Asbestos PI Trust. In
addition, AWI generally will not be entitled to a deduction to the extent that
the Asbestos PI Trust is funded through insurance proceeds or the transfer of
AWI's rights under various insurance policies.
Because the Plan contemplates that the Asbestos PD Trust will be funded entirely
from insurance proceeds or the transfer of AWI's rights under various insurance
policies, AWI generally will not be entitled to a deduction with respect to the
funding of the Asbestos PD Trust.
As a qualified settlement fund, the Asbestos PI Trust and the Asbestos PD Trust
will each be subject to a separate entity level tax at the maximum rate
applicable to trusts and estates (currently 38.6%). In determining the taxable
income of each trust, (a) any amounts transferred by AWI or Reorganized AWI to
the trust (other than with respect to the accrual of interest on the Plan Notes
or distributions with respect to the New Common Stock) will be excluded from the
trust's income; (b) any sale, exchange or distribution of property by the trust
generally will result in the recognition of gain or loss in an amount equal to
the difference between the fair market value of the property on the date of
disposition and the adjusted tax basis of the trust in such property, and (c)
administrative costs (including state and local taxes) incurred by the trust
will be deductible. In general, the adjusted tax basis of property received by
the Asbestos PI Trust pursuant to the Plan will be its fair market value at the
time of such receipt.
B. CONSEQUENCES TO HOLDERS OF UNSECURED CLAIMS AND CONVENIENCE
CLAIMS.
Pursuant to the Plan, in satisfaction and discharge of their Allowed Claims,
holders of Allowed Unsecured Claims (other than Convenience Claims) will receive
a combination of cash, New Common Stock and Plan Notes (if issued), and holders
of Convenience Claims will receive solely cash. In addition to their initial
distribution on or about the Effective Date, holders of Allowed Unsecured Claims
(other than Convenience Claims) may receive an additional distribution in the
event (i) there is additional cash available for distribution as a result of
subsequent insurance recoveries received by AWI with respect to Allowed
Environmental Claims or (ii) any Disputed Unsecured Claim (other than a
Convenience Claim) is subsequently disallowed or allowed in a lesser amount than
the Disputed Claim Amount.
The federal income tax consequences of the Plan to a holder of an Unsecured
Claim (other than a Convenience Claim) depend, in part, on whether such Claim
and all or part of any Plan Notes issued under the Plan received by a holder of
an Unsecured Claim constitute "securities" for federal income tax purposes. The
term "security" is not defined in the Internal Revenue Code or the Treasury
Regulations promulgated thereunder and has not been clearly defined by judicial
decisions. The determination of whether a particular debt constitutes a
"security" depends on an overall evaluation of the nature of the debt. One of
the most significant factors considered in determining whether a particular debt
is a security is its original term. In general, debt obligations issued with a
maturity at issuance of five years or less (e.g., trade debt and revolving
credit obligations) do not constitute securities, whereas debt obligations with
a maturity at issuance of ten years or more constitute securities. The maturity
of the Plan Notes, if issued, has not yet been established, but will be at least
five years and no more than ten years. Each holder of a Claim is urged to
consult its tax advisor regarding the status of its Claim and the Plan Notes as
"securities" for federal income tax purposes.
1. GAIN OR LOSS - GENERALLY.
In general, each holder of an Allowed Unsecured Claim (including a Convenience
Claim) that is not a "security" for federal income tax purposes will recognize
gain or loss in an amount equal to the difference between (i) the sum of the
amount of any cash, the "issue price" of any Plan Notes (which is intended to be
their face amount) and the fair market value of any New Common Stock received in
111
satisfaction of its Claim (other than in respect of any Claim for accrued but
unpaid interest, and excluding any portion required to be treated as imputed
interest due to the post-Effective Date distribution of such consideration) and
(ii) the holder's adjusted tax basis in its Claim (other than any Claim for
accrued but unpaid interest). For a discussion of the federal income tax
consequences of any Claim for accrued interest, see "Distributions in Discharge
of Accrued but Unpaid Interest" below. For a discussion of the potential tax
consequences to holders of Unsecured Claims (other than Convenience Claims) that
constitute "securities" for federal income tax purposes, see "Treatment of
Unsecured Claims that Constitute Securities" below.
Due to the possibility that a holder of an Allowed Claim may receive additional
distributions subsequent to the Effective Date, the imputed interest provisions
of the Internal Revenue Code may apply to treat a portion of such later
distributions to such holders as imputed interest. In addition, it is possible
that any loss realized, and a portion of any gain realized, by a holder in
satisfaction of an Allowed Unsecured Claim may be deferred until all subsequent
distributions with respect to such Claim are determinable. Holders are urged to
consult their tax advisors regarding the possibility of deferral and the ability
to elect out of the installment method of reporting any gain realized in respect
of their Claims.
Where gain or loss is recognized by a holder in respect of its Claim, the
character of such gain or loss as long-term or short-term capital gain or loss
or as ordinary income or loss will be determined by a number of factors,
including the tax status of the holder, whether the Claim constitutes a capital
asset in the hands of the holder and how long it has been held, whether the
Claim was acquired at a market discount, and whether and to what extent the
holder had previously claimed a bad debt deduction. A holder that purchased its
Claim from a prior holder at a market discount may be subject to the market
discount rules of the Internal Revenue Code. Under those rules, assuming that
the holder has made no election to amortize the market discount into income on a
current basis with respect to any market discount instrument, any gain
recognized on the exchange of such Claim (subject to a de minimis rule)
generally would be characterized as ordinary income to the extent of the accrued
market discount on such Claim as of the date of the exchange.
In general, a holder's tax basis in any Plan Notes received will equal the issue
price of such notes, a holder's tax basis in any New Common Stock received will
equal the fair market value of such stock, and the holding period for such notes
and stock generally will begin the day following the Effective Date.
2. TREATMENT OF UNSECURED CLAIMS THAT CONSTITUTE SECURITIES.
In the event that a holder's Allowed Unsecured Claim constitutes a "security"
for federal income tax purposes, the exchange of such Claim partially for New
Common Stock will be treated as a "recapitalization" for federal income tax
purposes. Accordingly, the holder of such Claim generally (i) will not be
entitled to recognize any loss upon the exchange of such Claim, but (ii) will be
required to recognize gain (computed as described in the preceding section), if
any, to the extent of any consideration received other than stock or
"securities" (excluding any consideration received in respect of any Claim for
accrued but unpaid interest, or required to be treated as imputed interest due
to the post-Effective Date distribution of such consideration). As discussed
above, holders are urged to consult their tax advisor regarding the possible
characterization of the Plan Notes as "securities" for federal income tax
purposes.
The character and timing of such gain, and the potential applicability of the
imputed interest rules, would be determined in accordance with the principles
discussed in the preceding section. For a discussion of the U.S. federal income
tax consequences of any Claim for accrued interest, see "Distributions in
Discharge of Accrued but Unpaid Interest" below.
In general, a holder's aggregate tax basis in any New Common Stock and, if
treated as securities, any Plan Notes received in satisfaction of an Unsecured
Claim that constitutes a security for federal income tax purposes will equal the
holder's aggregate tax basis in such Claim (including any Claim for accrued but
unpaid interest), increased by any gain recognized or interest income received
in respect of such Claim and decreased by any consideration received other than
stock or securities, and any deductions claimed in respect of any previously
accrued interest. Such tax basis will be allocable among such stock and notes
based on their relative fair market value. In general, the holder's holding
period for such stock and notes will include the holder's holding period for its
Claim, except to the extent such stock or notes were received in respect of a
Claim for accrued but unpaid interest.
112
In general, the holder's tax basis in any Plan Notes received that do not
constitute securities will equal the issue price of such notes, and the holding
period for such notes generally will begin the day following the Effective Date.
3. DISTRIBUTIONS IN DISCHARGE OF ACCRUED BUT UNPAID INTEREST.
Pursuant to the Plan, distributions to any holder of an Allowed Unsecured Claim
will be allocated first to the original principal portion of such Claim as
determined for federal income tax purposes, and then, to the extent the
consideration exceeds such amount, to the portion of such Claim representing
accrued but unpaid interest. However, there is no assurance that the IRS would
respect such allocation for federal income tax purposes.
In general, to the extent that an amount received (cash, stock or notes) by a
holder of debt is received in satisfaction of interest accrued during its
holding period, such amount will be taxable to the holder as interest income (if
not previously included in the holder's gross income). Conversely, a holder
generally recognizes a deductible loss to the extent any accrued interest
claimed or amortized original issue discount ("OID") was previously included in
its gross income and is not paid in full. However, the IRS has privately ruled
that a holder of a security, in an otherwise tax-free exchange, could not claim
a current deduction with respect to any unpaid OID. Accordingly, it is also
unclear whether, by analogy, a holder of a Claim with previously included OID
that is not paid in full would be required to recognize a capital loss, rather
than an ordinary loss. Each holder is urged to consult its tax advisor regarding
the allocation of consideration and the deductibility of unpaid interest for
federal income tax purposes.
4. OWNERSHIP AND DISPOSITION OF THE PLAN NOTES.
(A) INTEREST AND ORIGINAL ISSUE DISCOUNT ON THE PLAN NOTES.
If they are issued, the Plan Notes will bear interest at a fixed or floating
rate and provide for at least the annual payment of all stated interest. Such
stated interest generally will be includable in income by a holder in accordance
with the holder's regular method of accounting..
In addition, under certain circumstances, the Plan Notes may be treated as
issued with OID. In general, a debt instrument is treated as having OID to the
extent its "stated redemption price at maturity" (in this case, the stated
principal amount of the Plan Notes) exceeds its "issue price" by more than by a
de minimis amount.
The "issue price" of the Plan Notes will depend upon whether they are traded on
an "established securities market" during the sixty (60) day period ending
thirty (30) days after the Effective Date. Pursuant to Treasury Regulations, an
"established securities market" need not be a formal market. It is sufficient
that the notes appear on a system of general circulation (including a computer
listing disseminated to subscribing brokers, dealers or traders) that provides a
reasonable basis to determine fair market value by disseminating either recent
price quotations or actual prices of recent sales transactions, or that price
quotations for such notes are readily available from dealers, brokers or
traders.
It is anticipated that the Plan Notes will be traded on an established
securities market, and that the "issue price" of such Plan Notes will be their
fair market value. Because the interest rate on the Plan Notes will be fixed at
a rate that is intended to be a rate at which the Plan Notes will trade at par,
AWI expects that the fair market value will equal (or be very close to) their
stated principal amount. If the Plan Notes are not traded on an established
securities market, the issue price of the Plan Notes automatically will be their
stated principal amount if, as is also expected, the stated interest rate is
greater than the applicable federal rate for obligations of similar maturity in
effect on the Confirmation Date. Accordingly, in either case, AWI does not
expect the Plan Notes to be issued with significant OID, if any.
If the Plan Notes are issued with OID, each holder generally will be required to
accrue the OID in respect of the Plan Notes received and include such amount in
gross income as interest over the term of such notes based on the constant yield
method. Accordingly, each holder generally will be required to include amounts
in gross income in advance of the payment of cash in respect of such income. A
holder's tax basis in a New Note will be increased by the amount of any OID
included in income and reduced by any cash received (other than payments of
stated interest) made with respect to such note.
113
With respect to holders of Disputed Claims allowed after the Effective Date, any
New Note received will have been outstanding since the Effective Date. Such
holders should consider their federal income tax consequences accordingly.
(B) ACQUISITION AND BOND PREMIUM.
If a holder of an Unsecured Claim has a tax basis in any of the Plan Notes
received that exceeds the issue price (or the "adjusted issue price" in the case
of a Disputed Claim allowed subsequent to the Effective Date) of such note, but
is less than or equal to the unpaid principal amount of such notes, the amount
of OID includable in the holder's gross income generally is reduced in each
period in proportion to the percentage of the OID represented by the excess
basis. Alternatively, if a holder treats all stated interest as OID, such holder
may elect to recompute the OID accruals by treating its acquisition as a
purchase at original issue and applying the constant yield method. Such an
election may not be revoked without the consent of the IRS.
If a holder has a tax basis in any of the Plan Notes received that exceeds the
unpaid principal amount of such notes (i.e., a "bond premium"), the holder will
not include any of the OID in income. Moreover, a holder may elect to deduct any
bond premium over the period from its acquisition of such note to the maturity
date of such note (or, if it results in a smaller amount of amortizable bond
premium, until an earlier call date), but not in excess of the stated interest.
If such bond premium is amortized, the amount of stated interest on any New Note
that must be included in the holder's gross income for each period ending on an
interest payment date or at the maturity date, as the case may be, will (except
as Treasury Regulations may otherwise provide) be reduced by the portion of bond
premium allocable to such period based on the note's yield to maturity. The
holder's tax basis in its New Note will be reduced by a like amount. If such an
election to amortize bond premium is not made, a holder will receive a tax
benefit from the premium only in computing such holder's gain or loss upon the
sale or other taxable disposition of the New Note, or upon the full or partial
payment of principal.
An election to amortize bond premium will apply to amortizable bond premium on
all notes and other bonds the interest on which is includable in the holder's
gross income and that are held at, or acquired after, the beginning of the
holder's taxable year as to which the election is made. The election may be
revoked only with the consent of the IRS.
(C) MARKET DISCOUNT.
Any holder of a Claim that has a tax basis in any Plan Notes received less than
the issue price (or the "adjusted issue price" in the case of a Disputed Claim
allowed subsequent to the Effective Date) of such notes generally will be
subject to the market discount rules of the Internal Revenue Code (unless such
difference is less than a de minimis amount). In addition, as discussed below, a
holder who acquired its Claim at a market discount and that receives its Plan
Notes as part of a tax-free exchange may be required to carry over to such
notes, as well as any New Common Stock received, any accrued market discount
with respect to its Claim to the extent not previously included in income.
Under the market discount rules, a holder is required to treat any principal
payment on, or any gain recognized on the sale, exchange, retirement or other
disposition of, a New Note as ordinary income to the extent of the market
discount that has not previously been included in income and is treated as
having accrued on such note at the time of such payment or disposition. A holder
could be required to defer the deduction of a portion of the interest expense on
any indebtedness incurred or maintained to purchase or to carry a market
discount note, unless an election is made to include all market discount in
income as it accrues. Such an election would apply to all bonds acquired by the
holder on or after the first day of the first taxable year to which such
election applies, and may not be revoked without the consent of the IRS.
Any market discount will be considered to accrue on a straight-line basis during
the period from the date of acquisition of such Plan Notes to the maturity date
of the notes, unless the holder irrevocably elects to compute the accrual on a
constant yield basis. This election can be made on a note-by-note basis.
114
The Treasury Department is expected to promulgate regulations that will provide
that any accrued market discount not treated as ordinary income upon a tax-free
exchange of market discount bonds would carry over to the nonrecognition
property (such as a "recapitalization") received in the exchange. If such
regulations are promulgated and applicable to the Plan (and, likely, even
without the issuance of regulations), any holder of an Unsecured Claim that
constitutes a "security" for federal income tax purposes would carry over any
accrued market discount incurred in respect of such Claim to any New Common
Stock and, if treated as a security for federal income tax purposes, any Plan
Notes received for such Claim pursuant to the Plan (presumably allocated on the
basis of relative fair market value), such that any gain recognized by the
holder upon a subsequent disposition of such stock or notes also would be
treated as ordinary income to the extent of any such accrued market discount not
previously included in income.
5. DISPOSITION OF NEW COMMON STOCK.
Any gain recognized by a holder upon a subsequent sale or other taxable
disposition of any New Common Stock received pursuant to the Plan (or any stock
or property received for it in a later tax-free exchange) will be treated as
ordinary income to the extent of (i) any bad debt deductions (or additions to a
bad debt reserve) claimed with respect to its Claim and any ordinary loss
deductions incurred upon satisfaction of its Claim, less any income (other than
interest income) recognized by the holder upon satisfaction of its Claim, and
(ii) with respect to a cash-basis holder, any amounts which would have been
included in its gross income if the holder's Claim had been satisfied in full
but which was not included by reason of the cash method of accounting.
In addition, as discussed in the preceding section, a holder that receives its
New Common Stock in exchange for an Unsecured Claim that constitutes a security
for federal income tax purposes may be required to treat all or a portion of any
gain recognized as ordinary income under the market discount provisions of the
Internal Revenue Code.
C. CONSEQUENCES TO HOLDERS OF ASBESTOS PERSONAL INJURY CLAIMS.
Each Allowed Asbestos Personal Injury Claim will be liquidated and satisfied in
cash solely from the Asbestos PI Trust, in accordance with the Asbestos PI Trust
Distribution Procedures. The federal income tax treatment of a receipt of
payments by a holder of such Claim generally will depend upon the nature of the
Claim. Because the amounts received by a holder of an Allowed Asbestos Personal
Injury Claim (other than an Asbestos PI Contribution Claim) generally will be
attributable to, and compensation for, such holder's personal physical injuries
or sickness, within the meaning of section 104 of the Internal Revenue Code, any
such amounts received by the holder should be nontaxable. Each holder of an
Asbestos Personal Injury Claim should consult his or her own tax advisors as to
the proper tax treatment of any amounts received with respect to such Claim.
D. CONSEQUENCES TO HOLDERS OF ASBESTOS PROPERTY DAMAGE CLAIMS.
Each Allowed Asbestos Property Damage Claim will be liquidated and satisfied in
cash solely from the Asbestos PD Trust, in accordance with the Asbestos PD
Claims Resolution Procedures (if the Asbestos PD Trust is created) or in
accordance with bankruptcy and applicable non-bankruptcy law. The federal income
tax treatment of a receipt of payments by a holder of such Claim generally will
depend upon the nature of the Claim. If any amount received by such holder with
respect to such Claim is used to restore damaged property to its original
condition, such amount generally should be nontaxable to the holder. However,
any amount received in respect of property that has been destroyed and will not
be replaced by the holder generally should be treated as received in respect of
a sale or exchange of such property and may give rise to gain or loss generally
equal to the difference between (i) such amount and (ii) the adjusted tax basis
of the holder in the destroyed property. To the extent the amount received is
used to replace destroyed property, or a part thereof, with similar property,
the holder may be able to avoid recognizing gain under section 1033 of the
Internal Revenue Code (governing involuntary conversions). Because the tax
treatment of any amount received by a holder under the Plan will depend on facts
peculiar to each holder, all holders of Asbestos Property Damage Claims should
consult their own tax advisors as to the proper tax treatment of such receipts.
115
E. INFORMATION REPORTING AND WITHHOLDING.
All distributions to holders of Allowed Claims under the Plan are subject to any
applicable withholding (including employment tax withholding). Under federal
income tax law, interest, dividends, and other reportable payments may, under
certain circumstances, be subject to "backup withholding" at the then applicable
rate (currently 30%). Backup withholding generally applies if the holder (a)
fails to furnish its social security number or other taxpayer identification
number ("TIN"), (b) furnishes an incorrect TIN, (c) fails properly to report
interest or dividends, or (d) under certain circumstances, fails to provide a
certified statement, signed under penalty of perjury, that the TIN provided is
its correct number and that it is not subject to backup withholding. Backup
withholding is not an additional tax but merely an advance payment, which may be
refunded to the extent it results in an overpayment of tax. Certain persons are
exempt from backup withholding, including, in certain circumstances,
corporations and financial institutions.
THE FOREGOING SUMMARY HAS BEEN PROVIDED FOR INFORMATIONAL
PURPOSES ONLY. ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR
TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL, AND
OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN.
RECENTLY EFFECTIVE TREASURY REGULATIONS GENERALLY REQUIRE DISCLOSURE
BY A TAXPAYER ON ITS FEDERAL INCOME TAX RETURN OF CERTAIN TYPES OF
TRANSACTIONS IN WHICH THE TAXPAYER PARTICIPATED ON OR AFTER JANUARY
1, 2003, INCLUDING, AMONG OTHER TYPES OF TRANSACTIONS, THE FOLLOWING:
(1) A TRANSACTION OFFERED UNDER "CONDITIONS OF CONFIDENTIALITY;" (2)
A TRANSACTION WHERE THE TAXPAYER WAS PROVIDED CONTRACTUAL PROTECTION
FOR A REFUND OF FEES IF THE INTENDED TAX CONSEQUENCES OF THE
TRANSACTION ARE NOT SUSTAINED; (3) A TRANSACTION THE RESULTS OF WHICH
RESULTS IN THE TAXPAYER CLAIMING A LOSS IN EXCESS OF SPECIFIED
THRESHOLDS; AND (4) A TRANSACTION IN WHICH THE TAXPAYER'S FEDERAL
INCOME TAX TREATMENT DIFFERS BY MORE THAN A SPECIFIED THRESHOLD IN
ANY TAX YEAR FROM ITS TREATMENT FOR FINANCIAL REPORTING PURPOSES.
THESE CATEGORIES ARE VERY BROAD; HOWEVER, THERE ARE NUMEROUS
EXCEPTIONS. ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR TAX
ADVISORS REGARDING THESE REGULATIONS AND WHETHER THE TRANSACTIONS
CONTEMPLATED BY THE PLAN WOULD BE SUBJECT TO THESE REGULATIONS.
116
XIV. ALTERNATIVES TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
If the Plan is not confirmed and consummated, AWI's alternatives include (i)
liquidation under chapter 7 of the Bankruptcy Code and (ii) the preparation and
presentation of an alternative plan of reorganization.
A. LIQUIDATION UNDER CHAPTER 7.
If no chapter 11 plan can be confirmed, the Chapter 11 Case may be converted to
a case under chapter 7 of the Bankruptcy Code in which a trustee would be
elected or appointed to liquidate AWI's assets. A discussion of the effect that
a chapter 7 liquidation would have on the recovery of holders of Claims is set
forth in Section VIII.C.4, entitled "CONFIRMATION AND CONSUMMATION PROCEDURE --
Confirmation -- Best Interests Test." In performing the liquidation analysis,
AWI has assumed that all holders of Asbestos Personal Injury Claims (whether
presently known or unknown) will be determined to have "claims" that are
entitled to share in the proceeds from any such liquidation. AWI believes that
liquidation under chapter 7 would result in (i) smaller distributions being made
to creditors than those provided for in the Plan because of the additional
administrative expenses involved in the appointment of a trustee and attorneys
and other professionals to assist such trustee, (ii) additional expenses and
claims, some of which would be entitled to priority, which would be generated
during the liquidation and from the rejection of unexpired leases and executory
contracts in connection with the cessation of AWI's operations, and (iii) the
failure to realize the greater, going concern value of all of AWI's assets.
B. ALTERNATIVE PLAN OF REORGANIZATION.
If the Plan is not confirmed, AWI or any other party in interest could attempt
to formulate a different plan of reorganization. Such a plan might involve
either a reorganization and continuation of AWI's businesses or an orderly
liquidation of its assets. During the negotiations prior to the filing of the
Plan, AWI explored various alternatives to the Plan.
AWI believes that the Plan enables AWI to emerge from chapter 11 successfully
and expeditiously, preserves its businesses, and allows Claimants to realize the
highest recoveries under the circumstances. In a liquidation under chapter 11 of
the Bankruptcy Code, the assets of AWI would be sold in an orderly fashion over
a more extended period of time than in a liquidation under chapter 7, and a
trustee need not be appointed. Accordingly, creditors would receive greater
recoveries than in a chapter 7 liquidation. Although a chapter 11 liquidation is
preferable to a chapter 7 liquidation, AWI believes that a liquidation under
chapter 11 is a much less attractive alternative to Claimants than the Plan
because a greater return is provided for in the Plan to Claimants. In any
liquidation, Claimants will be paid their distribution in cash, whereas, under
the Plan, some Claimants will receive a part of their distribution in New Common
Stock and Plan Notes (if issued).
117
XV. CONCLUSION AND RECOMMENDATION
The Asbestos PD Committee objects to the treatment of Asbestos Property Damage
Claims in the Plan and urges holders of Asbestos Property Damage Claims to vote
to reject the Plan. AWI, the Asbestos PI Claimants' Committee, the Future
Claimants' Representative, and the Unsecured Creditors' Committee, however, all
believe that confirmation and implementation of the Plan is preferable to any of
the alternatives described above because it will provide the greatest recoveries
to holders of Claims. In addition, other alternatives would involve significant
delay, uncertainty, and substantial additional administrative costs. WE URGE
HOLDERS OF IMPAIRED CLAIMS ENTITLED TO VOTE ON THE PLAN TO VOTE TO ACCEPT THE
PLAN AND TO EVIDENCE SUCH ACCEPTANCE BY RETURNING THEIR BALLOTS TO THE ADDRESS
SET FORTH THEREON SO THAT THEY WILL BE RECEIVED NO LATER THAN 5:00 P.M., EASTERN
TIME, ON ___________.
Dated: March 14, 2003
Respectfully submitted,
ARMSTRONG WORLD INDUSTRIES, INC.
118
INDEX
144A OFFERING...............................................53 CENTURY PROOF OF CLAIM......................................29
144A OFFERING PROCEEDS......................................53 CENTURY SETTLEMENT AGREEMENT................................28
2001 INSTALLMENT PAYMENT....................................29 CENTURY TRUST...............................................29
ACANDS......................................................14 CHAPTER 11 CASE.............................................18
ADMINISTRATIVE EXPENSE BAR DATE.............................37 CLAIMANT.....................................................1
ADMINISTRATIVE EXPENSE BAR DATE ORDER.......................37 CLAIMANTS....................................................1
ADMINISTRATIVE EXPENSES.....................................37 CLAIMS SETTLEMENT ORDER.....................................35
ADR.........................................................29 COD........................................................108
AEI.........................................................62 COLI CLAIMS.................................................43
AGENT.......................................................22 COMMENCEMENT DATE...........................................18
AMENDED MARKLEY CLASS PROOF OF CLAIM........................35 COMMITMENT..................................................22
AMT........................................................110 COMMITTEES..................................................19
ARMSTRONG/MARKLEY DEFENDANTS................................34 CONFIRMATION HEARING.........................................1
ASBESTOS PD COMMITTEE.......................................19 CONSOLIDATED CCR PROCEEDINGS................................31
ASBESTOS PD PLAINTIFFS......................................26 CONTROL.....................................................99
ASBESTOS PD TRUST............................................5 CONTROL PERSON..............................................99
ASBESTOS PERSONAL INJURY CLAIM..............................45 CONVENIENCE CLAIM........................................5, 42
ASBESTOS PI CLAIMANTS' COMMITTEE.............................i CREDIT AGREEMENT............................................22
ASBESTOS PI TRUST............................................5 CRITICAL VENDORS............................................21
ASBESTOS PI TRUST AGREEMENT.................................69 CUSTOMS CLAIM...............................................41
ASBESTOS PI TRUST DISTRIBUTION PROCEDURES...................69 DCF........................................................104
ASBESTOS PI VOTING TRUST CLAIMS.............................76 DEBT SECURITIES..............................................2
ASBESTOS PROPERTY DAMAGE CLAIM..............................42 DESSEAUX....................................................18
AVERAGE VALUES..............................................73 DIP CREDIT FACILITY.........................................22
AWI..........................................................i DIP CREDIT FACILITY CLAIM...................................39
AWP.........................................................47 DISEASE LEVELS..............................................73
AWWD.........................................................i DOL.........................................................36
BANKRUPTCY CODE..............................................1 EBIT.......................................................104
BANKRUPTCY COURT.............................................1 EBITDA.....................................................104
BANKRUPTCY COURT MOTION TO TRANSFER.........................34 EFFECTIVE DATE...............................................9
BAR DATE....................................................23 EMC.........................................................32
BAR DATE NOTICE.............................................23 EMC ADVERSARY PROCEEDING....................................32
BAR DATE ORDER..............................................23 EMC SETTLEMENT AGREEMENT....................................32
BARNES......................................................33 EMC SETTLEMENT AMOUNT.......................................32
BARNES CASE.................................................33 EMPLOYEE RETENTION PROGRAM..................................21
BARNES CLAIM................................................33 ENVIRONMENTAL CLAIMS........................................47
BARNES COMPLAINT............................................33 EPA.........................................................47
BARNES MOTION TO TRANSFER...................................34 ESOP........................................................36
BARNES OBJECTION............................................33 EXCLUSIVE PERIODS...........................................23
BARNES PLAINTIFFS...........................................33 EXPEDITED REVIEW............................................79
CCR.........................................................30 EXTRAORDINARY CLAIM.........................................81
CCR MEMBERS.................................................30 FIFO........................................................73
CCR PREFERENCE CLAIM........................................31 FIFO PAYMENT QUEUE..........................................78
CENTURY.....................................................28 FIFO PROCESSING QUEUE.......................................77
CENTURY ADVERSARY PROCEEDING................................29 FURNITURE BRANDS............................................62
CENTURY ANSWER..............................................29 FUTURE CLAIMANTS' REPRESENTATIVE.............................i
CENTURY COMPLAINT...........................................29 HOLDINGS.....................................................1
CENTURY MOTION TO COMPEL....................................29 HOLDINGS GROUP.............................................108
CENTURY MOTION TO DISMISS...................................29 INDIRECT ASBESTOS PERSONAL INJURY CLAIMS....................77
CENTURY MOTION TO DISMISS COUNTERCLAIM......................29 INDIVIDUAL DEFENDANTS.......................................34
CENTURY POLICIES............................................28 INDIVIDUAL MARKLEY PROOFS OF CLAIM..........................34
1
INITIAL ASBESTOS PERSONAL INJURY CLAIMS FILING DATE.........77 OCF.........................................................17
INITIAL PAYMENT PERCENTAGE..................................76 OID........................................................113
INNISFREE....................................................2 OMNIBUS CLAIMS MOTION.......................................24
INSURANCE AND TRUST PROCEEDS................................32 ORDER DENYING THE MOTION TO EXTEND..........................25
INSURERS....................................................27 OTCBB.......................................................36
INSURERS' APPEAL............................................28 PA DOR......................................................40
INSURERS' RESPONSE..........................................28 PAYMENT PERCENTAGE..........................................76
INTERNAL REVENUE CODE......................................108 PD SETTLEMENT AGREEMENT.....................................27
INTERNATIONAL...............................................28 PD SETTLEMENT AMOUNT........................................27
IRS........................................................108 PD SETTLEMENT MOTION........................................27
ISSUER......................................................99 PENNSYLVANIA BCL............................................14
JPMORGAN CHASE..............................................22 PENNSYLVANIA DISTRICT COURT.................................34
KEY EMPLOYEES...............................................21 PENNSYLVANIA LAWSUIT........................................29
LAZARD......................................................18 PI PROTECTED PARTIES........................................85
LENDERS.....................................................22 PLAN.........................................................i
LETTERS OF CREDIT...........................................22 PLAN FILING DATE............................................76
LIBERTY MUTUAL..............................................29 PLAN NOTE AMOUNT.............................................6
LIBERTY MUTUAL'S STAY RELIEF MOTION.........................30 PLAN NOTE INDENTURE.........................................54
LIQUIDATION ANALYSIS........................................94 PLAN NOTES..................................................53
LOCAL RULES.................................................24 PLAN SECURITIES.............................................53
MAERTIN APPEAL..............................................28 POSTPETITION MAERTIN ACTION.................................28
MAERTIN COVERAGE CASE.......................................27 PRE-PETITION LIQUIDATED CLAIMS..............................78
MAERTIN FRAUD CLAIMS........................................28 PREPETITION NEW JERSEY ACTION...............................33
MAERTIN INSURANCE POLICIES..................................27 PRODUCT I.D. ORDER..........................................26
MAERTIN INSURANCE PROCEEDS..................................28 PROJECTED FINANCIAL INFORMATION.............................93
MAERTIN PLAINTIFFS..........................................27 PROJECTION PERIOD...........................................93
MAERTIN SETTLEMENT AGREEMENTS...............................27 RATING AGENCIES.............................................17
MAERTIN SETTLEMENT AMOUNT...................................27 REDUCED PAYMENT OPTION......................................77
MAERTIN STAY PENDING APPEAL MOTION..........................28 REORGANIZATION CONSIDERATION................................37
MAERTIN STAY PENDING APPEAL ORDER...........................28 RETIREMENT COMMITTEE........................................34
MAERTIN STAY PENDING APPEAL STIPULATION.....................28 RSSOP.......................................................34
MAERTIN STAY RELIEF MOTION..................................28 SAFECO......................................................30
MAERTIN STAY RELIEF ORDER...................................28 SAFECO BOND.................................................31
MARKLEY CLASS...............................................34 SAFECO/CCR ADVERSARY PROCEEDING.............................31
MARKLEY CLASS COMPLAINTS....................................34 SCHEDULED CLAIMS............................................24
MARKLEY CLASS MEMBERS.......................................34 SCHEDULED VALUES............................................73
MARKLEY CLASS PLAINTIFFS....................................34 SCHEDULES...................................................23
MARKLEY CLASS PROOF OF CLAIM................................34 SEC..........................................................2
MARKLEY DEFENDANTS..........................................34 SECURED CLAIMS..............................................41
MARKLEY PLAN OF DISTRIBUTION................................35 SECURITIES ACT..............................................99
MARKLEY PROOFS OF CLAIM.....................................34 SETTLED CLAIMS..............................................27
MARKLEY SETTLEMENT..........................................35 SIS.........................................................34
MARKLEY SETTLEMENT FUNDS....................................35 SOLUTIA.....................................................33
MAXIMUM ANNUAL PAYMENT......................................77 STOCKHOLDER AND REGISTRATION RIGHTS AGREEMENT..............100
MAXIMUM AVAILABLE PAYMENT...................................77 SUBSIDIARY DEBT GUARANTEE CLAIM.............................47
MAXIMUM VALUES..............................................73 TAC.........................................................70
MEDICAL/EXPOSURE CRITERIA...................................73 THIRD PARTY COMPLAINT.......................................33
MELLON......................................................34 THOMASVILLE.................................................62
MONSANTO....................................................33 THOMASVILLE SALE AGREEMENT..................................62
MOTION TO DISMISS...........................................28 TRUMBULL.....................................................4
MOTION TO EXTEND............................................25 U.S. TRUSTEE................................................19
NCC.........................................................14 UNDERWRITER.................................................99
NEW JERSEY DISTRICT COURT...................................33 UNSECURED CREDITORS' COMMITTEE...............................i
NITRAM......................................................18 VOTING DEADLINE..............................................2
NOL........................................................108 VOTING PROCEDURES............................................1
WELLINGTON AGREEMENT........................................29
2
EXHIBIT "A"
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- ---------------------------------------------------- x
In re : Chapter 11 Case No.
:
ARMSTRONG WORLD INDUSTRIES, : 00-4471 (RJN)
INC., et al., :
:
Debtors. : (Jointly Administered)
- ---------------------------------------------------- x
FIRST AMENDED PLAN OF REORGANIZATION
OF ARMSTRONG WORLD INDUSTRIES, INC.
This plan of reorganization provides for the issuance of an
Asbestos PI Permanent Channeling Injunction and a Claims
Trading Injunction. See sections 1.24 (definition of
"Asbestos Personal Injury Claim"), 1.28 (definition of
"Asbestos PI Permanent Channeling Injunction"), 1.98
(definition of "PI Protected Party"), and 3.2(g)(ii)
(Treatment of Asbestos Personal Injury Claims under the
Plan) for details relating to the Asbestos PI Permanent
Channeling Injunction and sections 1.24 (definition of
"Asbestos Personal Injury Claim"), 1.33 (definition of
"Asbestos Property Damage Claim"), and 1.47 (definition of
"Claims Trading Injunction") for details regarding the
Claims Trading Injunction.
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS..........................................................................................1
A. Defined Terms........................................................................................1
1.1 144A Debt Securities.......................................................................1
1.2 144A Offering..............................................................................1
1.3 144A Offering Proceeds.....................................................................1
1.4 Administrative Bar Date Order..............................................................1
1.5 Administrative Expense.....................................................................1
1.6 Administrative Expense Creditor............................................................2
1.7 Administrative Expense Objection Deadline..................................................2
1.8 Affiliate..................................................................................2
1.9 Affiliate Claims...........................................................................2
1.10 Agent Bank.................................................................................2
1.11 Allowed....................................................................................2
1.12 Allowed Amount.............................................................................3
1.13 Amended and Restated Articles of Incorporation.............................................3
1.14 Amended and Restated By-Laws...............................................................4
1.15 Articles of Incorporation..................................................................4
1.16 Asbestos PD Bar Date.......................................................................4
1.17 Asbestos PD Claims Resolution Procedures...................................................4
1.18 Asbestos PD Committee......................................................................4
1.19 Asbestos PD Insurance Asset................................................................4
1.20 Asbestos PD Trust..........................................................................4
1.21 Asbestos PD Trust Agreement................................................................4
1.22 Asbestos PD Trust Funding Obligation.......................................................4
1.23 Asbestos PD Trustees.......................................................................5
1.24 Asbestos Personal Injury Claim.............................................................5
1.25 Asbestos PI Claimants' Committee...........................................................5
1.26 Asbestos PI Contribution Claim.............................................................5
1.27 Asbestos PI Insurance Asset................................................................5
1.28 Asbestos PI Permanent Channeling Injunction................................................6
1.29 Asbestos PI Trust..........................................................................7
1.30 Asbestos PI Trust Agreement................................................................7
i
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PAGE
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1.31 Asbestos PI Trust Distribution Procedures..................................................7
1.32 Asbestos PI Trustees.......................................................................7
1.33 Asbestos Property Damage Claim.............................................................7
1.34 Asbestos Property Damage Contribution Claim................................................7
1.35 Available Cash.............................................................................8
1.36 AWWD.......................................................................................8
1.37 AWI........................................................................................8
1.38 Ballot.....................................................................................8
1.39 Bankruptcy Code............................................................................8
1.40 Bankruptcy Court...........................................................................8
1.41 Bankruptcy Rules...........................................................................8
1.42 Board of Directors.........................................................................8
1.43 Business Day...............................................................................8
1.44 Chapter 11 Case............................................................................9
1.45 Claim......................................................................................9
1.46 Claims Settlement Guidelines...............................................................9
1.47 Claims Trading Injunction..................................................................9
1.48 Class......................................................................................9
1.49 COLI Claims................................................................................9
1.50 Commencement Date..........................................................................9
1.51 Confirmation Date..........................................................................9
1.52 Confirmation Deadline......................................................................9
1.53 Confirmation Order.........................................................................9
1.54 Contingent Claim..........................................................................10
1.55 Convenience Claim.........................................................................10
1.56 Creditor..................................................................................10
1.57 Debtor....................................................................................10
1.58 Debtor in Possession......................................................................10
1.59 Debt Security Claim.......................................................................10
1.60 Demand....................................................................................10
1.61 DIP Credit Facility.......................................................................10
1.62 DIP Credit Facility Claim.................................................................10
ii
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(CONTINUED)
PAGE
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1.63 DIP Lenders...............................................................................10
1.64 Disallowed Claim..........................................................................10
1.65 Disbursing Agent..........................................................................11
1.66 Disputed Claim............................................................................11
1.67 Disputed Claim Amount.....................................................................11
1.68 Disputed Unsecured Claims Reserve.........................................................11
1.69 Distribution..............................................................................11
1.70 Distribution Date.........................................................................11
1.71 District Court............................................................................11
1.72 DTC.......................................................................................11
1.73 Employee Benefit Claim....................................................................11
1.74 Effective Date............................................................................12
1.75 Encumbrance...............................................................................12
1.76 Entity....................................................................................12
1.77 Environmental Claim.......................................................................12
1.78 Equity Interest...........................................................................12
1.79 Equity Value..............................................................................12
1.80 Estimated Amount..........................................................................12
1.81 Existing AWI Common Stock.................................................................12
1.82 Final Distribution Date...................................................................12
1.83 Final Order...............................................................................12
1.84 Future Claimants' Representative..........................................................13
1.85 Holdings..................................................................................13
1.86 Holdings Plan of Liquidation..............................................................13
1.87 Indentures................................................................................13
1.88 Indenture Trustees........................................................................13
1.89 Indenture Trustees' Fees and Expenses.....................................................13
1.90 Initial Distribution Date.................................................................13
1.91 Internal Revenue Code.....................................................................13
1.92 IRS.......................................................................................13
1.93 Lazard....................................................................................14
1.94 New Common Stock..........................................................................14
iii
TABLE OF CONTENTS
(CONTINUED)
PAGE
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1.95 New Long-Term Incentive Plan..............................................................14
1.96 New Warrants..............................................................................14
1.97 Pennsylvania BCL..........................................................................14
1.98 PI Protected Party........................................................................14
1.99 Plan......................................................................................16
1.100 Plan Note Amount..........................................................................16
1.101 Plan Note Indenture.......................................................................16
1.102 Plan Notes................................................................................16
1.103 Priority Claim............................................................................16
1.104 Priority Tax Claim........................................................................16
1.105 Pro Rata Share............................................................................16
1.106 Qualified Appraisal.......................................................................16
1.107 Record Date...............................................................................16
1.108 Reorganized AWI...........................................................................16
1.109 Reorganization Consideration..............................................................16
1.110 Retention Period..........................................................................17
1.111 Schedules.................................................................................17
1.112 SEC.......................................................................................17
1.113 Secured Claim.............................................................................17
1.114 Stockholder and Registration Rights Agreement.............................................17
1.115 Subsidiary Debt Guarantee Claim...........................................................17
1.116 Treasury Regulations......................................................................17
1.117 Unliquidated Claim........................................................................17
1.118 Unsecured Claim...........................................................................17
1.119 Unsecured Creditors' Committee............................................................17
1.120 Voting Deadline...........................................................................17
1.121 Voting Procedures Order...................................................................18
B. Other Terms.........................................................................................18
C. Exhibits............................................................................................18
ARTICLE II PROVISIONS FOR PAYMENT OF ADMINISTRATIVE EXPENSES AND PRIORITY TAX CLAIMS...........................18
2.1 Payment of Allowed Administrative Expenses................................................18
2.2 Compensation and Reimbursement Claims.....................................................18
iv
TABLE OF CONTENTS
(CONTINUED)
PAGE
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2.3 DIP Credit Facility Claim.................................................................19
2.4 Priority Tax Claims.......................................................................19
ARTICLE III CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS.........................................19
3.1 Summary...................................................................................19
3.2 Classification and Treatment..............................................................21
ARTICLE IV MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE PLAN.................................................28
4.1 Modification of the Plan..................................................................28
4.2 Revocation or Withdrawal..................................................................29
4.3 Amendment of Plan Documents...............................................................29
ARTICLE V PROVISIONS FOR TREATMENT OF DISPUTED CLAIMS.........................................................29
5.1 Objections to Claims; Prosecution of Disputed Claims......................................29
5.2 Claims Settlement Guidelines..............................................................29
5.3 Distributions on Account of Disputed Claims...............................................29
5.4 Disputed Unsecured Claims Reserve.........................................................30
5.5 Tax Treatment of Disputed Unsecured Claims Reserve........................................30
ARTICLE VI ACCEPTANCE OR REJECTION OF THE PLAN.................................................................30
6.1 Impaired Classes to Vote..................................................................30
6.2 Acceptance by Class of Claims.............................................................30
6.3 Nonconsensual Confirmation................................................................30
ARTICLE VII IMPLEMENTATION OF THE PLAN..........................................................................31
7.1 Creation of Asbestos PI Trust.............................................................31
7.2 Appointment of Asbestos PI Trustees.......................................................31
7.3 Creation of Asbestos PD Trust.............................................................31
7.4 144A Offering.............................................................................31
7.5 Amendment of Articles of Incorporation....................................................31
7.6 Amendment of By-Laws.....................................................................32
7.7 Stockholder and Registration Rights Agreement.............................................32
7.8 Distributions under the Plan..............................................................32
7.9 Timing of Distributions under the Plan....................................................32
7.10 Disbursing Agent..........................................................................33
7.11 Record Date...............................................................................33
v
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(CONTINUED)
PAGE
----
7.12 Distributions to Holders of Debt Security Claims Administered by the Indenture Trustees...33
7.13 Manner of Payment under the Plan..........................................................34
7.14 Hart-Scott-Rodino Compliance..............................................................34
7.15 Fractional Shares or Other Distributions..................................................34
7.16 Occurrence of the Confirmation Date.......................................................34
7.17 Occurrence of the Effective Date..........................................................38
7.18 Cancellation of Existing Debt Securities..................................................39
7.19 Expiration of the Retention Period........................................................39
7.20 Compensation of the Applicable Indenture Trustees.........................................40
7.21 Distribution of Unclaimed Property........................................................40
7.22 Management of Reorganized AWI.............................................................40
7.23 Listing of Reorganized AWI Common Stock...................................................40
7.24 Corporate Reorganization Actions..........................................................40
7.25 Holdings Plan of Liquidation..............................................................41
7.26 Compliance with QSF Regulations...........................................................41
7.27 Effectuating Documents and Further Transactions...........................................42
7.28 Allocation of Plan Distributions Between Principal and Interest...........................42
ARTICLE VIII EXECUTORY CONTRACTS AND UNEXPIRED LEASES............................................................42
8.1 Assumption of Executory Contracts and Unexpired Leases....................................42
8.2 Rejection of Executory Contracts and Unexpired Leases.....................................43
8.3 Claims Arising from Rejection, Termination or Expiration..................................43
8.4 Previously Scheduled Contracts............................................................43
8.5 Insurance Policies and Agreements.........................................................44
8.6 Indemnification and Reimbursement Obligations.............................................44
8.7 Compensation and Benefit Programs.........................................................45
8.8 Management Agreements.....................................................................47
ARTICLE IX RETENTION OF JURISDICTION...........................................................................47
ARTICLE X TRANSFERS OF PROPERTY TO AND ASSUMPTION OF CERTAIN LIABILITIES BY THE ASBESTOS PI TRUST.............49
10.1 Transfer of Certain Property to the Asbestos PI Trust.....................................49
10.2 Assumption of Certain Liabilities by the Asbestos PI Trust................................50
10.3 Cooperation with Respect to Insurance Matters.............................................50
vi
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
10.4 Authority of AWI..........................................................................51
ARTICLE XI ASBESTOS PROPERTY DAMAGE CLAIMS.....................................................................51
11.1 Transfer of Certain Property to the Asbestos PD Trust.....................................51
11.4 Assumption of Certain Liabilities by the Asbestos PD Trust................................52
11.5 Cooperation with Respect to Insurance Matters.............................................52
11.6 Authority of AWI..........................................................................52
ARTICLE XII MISCELLANEOUS PROVISIONS............................................................................53
12.1 Payment of Statutory Fees.................................................................53
12.2 Discharge of AWI..........................................................................53
12.3 Rights of Action..........................................................................53
12.4 Third Party Agreements....................................................................53
12.5 Dissolution of Committees.................................................................53
12.6 Exculpation...............................................................................54
12.7 Title to Assets; Discharge of Liabilities.................................................54
12.8 Surrender and Cancellation of Instruments.................................................54
12.9 Notices...................................................................................55
12.10 Headings..................................................................................56
12.11 Severability..............................................................................56
12.12 Governing Law.............................................................................56
12.13 Compliance with Tax Requirements..........................................................56
12.14 Exemption from Transfer Taxes.............................................................56
12.15 Expedited Determination of Postpetition Taxes.............................................56
vii
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- ---------------------------------------------------X
IN RE : CHAPTER 11 CASE NO.
:
ARMSTRONG WORLD INDUSTRIES, : 00-4471 (RJN)
INC., ET AL., :
:
DEBTORS. : (JOINTLY ADMINISTERED)
- ---------------------------------------------------X
FIRST AMENDED PLAN OF REORGANIZATION
OF ARMSTRONG WORLD INDUSTRIES, INC.
Armstrong World Industries, Inc. hereby proposes the following
plan of reorganization:
ARTICLE I
DEFINITIONS
A. DEFINED TERMS. As used herein, the following terms shall have
the respective meanings specified below, unless the context otherwise requires:
1.1 144A Debt Securities: Debt securities issued by Reorganized
AWI in a 144A Offering, having terms and conditions as determined by AWI and the
initial purchasers in their sole discretion; provided, however, that if the 144A
Offering Proceeds are less than the Plan Note Amount, then AWI may not issue the
144A Debt Securities without the consent of the Asbestos PI Claimants'
Committee, the Future Claimants' Representative, and, if Class 6 votes to accept
the Plan, the Unsecured Creditors' Committee.
1.2 144A Offering: One or more private offerings of 144A Debt
Securities, pursuant to Rule 144A and/or Regulation S under the Securities Act
of 1933, through initial purchasers to institutional and other investors,
completed on or after the Effective Date but prior to the Initial Distribution
Date.
1.3 144A Offering Proceeds: The amount of the aggregate net cash
proceeds of any 144A Offerings.
1.4 Administrative Bar Date Order: An order of the Bankruptcy
Court setting a deadline for the filing of certain Administrative Expenses.
1.5 Administrative Expense: Any Claim constituting a cost or
expense of administration in the Chapter 11 Case under section 503 of the
Bankruptcy Code, including, without express or implied limitation, any actual
and necessary costs and expenses of preserving the estate of AWI, any expenses
of professionals under sections 330 and 331 of the Bankruptcy Code, any actual
and necessary costs and expenses of operating the businesses of AWI, any
indebtedness or obligations incurred or assumed by AWI, as debtor in possession,
in connection with the conduct of its business or for the acquisition or lease
of property or the rendition of services, any allowed compensation or
reimbursement of expenses under section 503(b)(2)-(5) of the Bankruptcy Code,
and any fees or charges assessed against the estate of AWI under section 1930,
chapter 123, title 28, United States Code.
1.6 Administrative Expense Creditor: Any Creditor entitled to
payment of an Administrative Expense.
1.7 Administrative Expense Objection Deadline: The first Business
Day that is thirty (30) days after the Effective Date, as such date may be
extended from time to time by order of the Bankruptcy Court.
1.8 Affiliate: Any Entity, other than (a) an Entity in which AWI
has less than a fifty percent (50%) direct or indirect interest, (b) AWWD, or
(c) Holdings, that is an "affiliate" of AWI, as of the date immediately
preceding the Effective Date, within the meaning of section 101(2) of the
Bankruptcy Code.
1.9 Affiliate Claims: All Claims against AWI held by an
Affiliate.
1.10 Agent Bank: The JPMorgan Chase Bank, or such other Entity
acting as agent under the DIP Credit Facility from time to time.
1.11 Allowed:
(a) With respect to any Claim (other than an Administrative
Expense, Asbestos Property Damage Claim or Asbestos Personal Injury Claim),
proof of which was filed within the applicable period of limitation fixed in
accordance with Bankruptcy Rule 3003(c)(3) by the Bankruptcy Court, (i) as to
which no objection to the allowance thereof has been interposed within the
applicable period of limitation fixed by the Plan, the Bankruptcy Code, the
Bankruptcy Rules, or a Final Order of the Bankruptcy Court, such Claim to the
extent asserted in the proof of such Claim, or (ii) as to which an objection has
been interposed, such Claim to the extent that it has been allowed in whole or
in part by a Final Order of the Bankruptcy Court or by an agreement with AWI or
Reorganized AWI, as the case may be, in accordance with the Claims Settlement
Guidelines as in effect at the time of such agreement.
(b) With respect to any Claim (other than an Administrative
Expense or Asbestos Personal Injury Claim), as to which no proof of claim was
filed within the applicable period of limitation fixed by the Plan, the
Bankruptcy Code, the Bankruptcy Rules, or a Final Order of the Bankruptcy Court,
such Claim to the extent that it has been listed by AWI in its Schedules as
liquidated in amount and not disputed or contingent.
(c) With respect to any Claim that is asserted to constitute an
Administrative Expense
(i) that represents an actual or necessary expense of
preserving the estate or operating the business of AWI for
payment of goods, services, wages, or benefits or for credit
extended to AWI, as debtor in possession, any such Claim to the
extent that such claim is reflected as a postpetition liability
of AWI on AWI's books and records as of the Effective Date;
(ii) in an action against AWI pending as of the Confirmation
Date or not required to be filed against AWI pursuant to the
Administrative Bar Date Order, any such Claim to the extent (x)
2
it is allowed by a Final Order of a court of competent
jurisdiction or by agreement between Reorganized AWI and the
holder of such Administrative Expense, and (y) if AWI disputes
that such claim is a cost or expense of administration under
sections 503(b) and 507(a)(1) of the Bankruptcy Code, to the
extent the Bankruptcy Court determines by a Final Order that it
constitutes a cost or expense of administration under sections
503(b) and 507(a)(1) of the Bankruptcy Code;
(iii) timely filed in accordance with the Administrative Bar
Date Order, any such Claim to the extent (i) no objection is
interposed by the Administrative Expense Objection Deadline or
(ii) if an objection is interposed by the Administrative Expense
Objection Deadline, is allowed in whole or in part by a Final
Order of the Bankruptcy Court and only to the extent that such
allowed portion is deemed, pursuant to a Final Order of the
Bankruptcy Court, to constitute a cost or expense of
administration under sections 503(b) and 507(a)(1) of the
Bankruptcy Code; or
(iv) that represents a Claim of a professional person
employed under section 327 or 1103 of the Bankruptcy Code that is
required to apply to the Bankruptcy Court for the allowance of
compensation and reimbursement of expenses pursuant to section
330 of the Bankruptcy Code or an Administrative Expense arising
under section 503(b)(2), 503(b)(3), 503(b)(4), 503(b)(5), or
503(b)(6) of the Bankruptcy Code, such Claim to the extent it is
allowed by a Final Order of the Bankruptcy Court.
(d) With respect to any Asbestos Personal Injury Claim, such
Claim to the extent that it is Allowed in accordance with the procedures
established pursuant to the Asbestos PI Trust Agreement and the Asbestos PI
Trust Distribution Procedures. Pursuant to the Confirmation Order, an Allowed
Claim, with respect to any Asbestos Personal Injury Claim, shall establish the
amount of legal liability against the Asbestos PI Trust in the amount of the
liquidated value of such Claim, as determined in accordance with the Asbestos PI
Trust Distribution Procedures.
(e) With respect to any Asbestos Property Damage Claim, proof of
which was filed by the Asbestos PD Bar Date, such Claim to the extent that it is
allowed by an order of the Bankruptcy Court prior to the Effective Date or is
allowed in accordance with the Asbestos PD Claims Resolution Procedures and such
other procedures as may be established in connection with the Asbestos PD Trust.
Pursuant to the Confirmation Order, an Allowed Claim, with respect to any
Asbestos Property Damage Claim, shall establish the amount of legal liability
against the Asbestos PD Trust in the allowed amount of such Claim, as determined
by an order of the Bankruptcy Court allowing such Claim prior to the Effective
Date or in accordance with the Asbestos PD Claims Resolution Procedures.
1.12 Allowed Amount: The lesser of (a) the dollar amount of an
Allowed Claim or (b) the Estimated Amount of such Claim. Unless otherwise
specified herein, in the Asbestos PI Trust Distribution Procedures or by Final
Order of the Bankruptcy Court, the Allowed Amount of an Allowed Claim shall not
include interest accruing on such Allowed Claim from and after the Commencement
Date.
1.13 Amended and Restated Articles of Incorporation: The Articles
of Incorporation of Reorganized AWI, to be amended and restated in accordance
with section 7.1 hereof, in substantially the form of Exhibit 1.13 to the Plan.
3
1.14 Amended and Restated By-Laws: The By-Laws of Reorganized
AWI, to be amended and restated in accordance with section 7.5 hereof, in
substantially the form of Exhibit 1.14 to the Plan.
1.15 Articles of Incorporation: The Articles of Incorporation of
AWI, as such Articles of Incorporation may be amended by the Amended and
Restated Articles of Incorporation or otherwise.
1.16 Asbestos PD Bar Date: March 20, 2002.
1.17 Asbestos PD Claims Resolution Procedures: The procedures to
be used for the allowance of Asbestos Property Damage Claims that have not
become Allowed or Disallowed Claims as of the Effective Date. If Class 4 votes
to accept the Plan, the Asbestos PD Claims Resolution Procedures will be
developed by the Asbestos PD Committee. If Class 4 rejects the Plan, the
Asbestos PD Claims Resolution Procedures will be substantially in the form
annexed hereto as Exhibit 1.17.
1.18 Asbestos PD Committee: The Asbestos Property Damage
Committee, consisting of Entities appointed as members in the Chapter 11 Case by
the United States Trustee for the District of Delaware and their duly appointed
successors, if any, as the same may be reconstituted from time to time.
1.19 Asbestos PD Insurance Asset: All rights arising under
liability insurance policies issued to AWI with inception dates prior to January
1, 1982 with respect to the liability for Asbestos Property Damage Claims
channeled to, and assumed by, the Asbestos PD Trust pursuant to Article XI of
the Plan and the Asbestos PD Trust Agreement, subject to a maximum total limit
equal to the aggregate value of Asbestos PD Claims, as estimated by the
Bankruptcy Court, applicable solely to settlement payments or judgments (but not
to defense costs). The foregoing includes, but is not limited to, rights under
insurance policies, rights under settlement agreements made with respect to such
insurance policies, rights against the estates of insolvent insurers that issued
such policies or entered into such settlements, and rights against state
insurance guaranty associations arising out of any such insurance policies
issued by insolvent insurers.
1.20 Asbestos PD Trust: The trust established by AWI in
accordance with the Asbestos PD Trust Agreement.
1.21 Asbestos PD Trust Agreement: That certain AWI Asbestos
Property Damage Settlement Trust Agreement, executed by AWI and the Asbestos PD
Trustees, substantially in the form of Exhibit 1.21 to the Plan.
1.22 Asbestos PD Trust Funding Obligation: If Class 4 votes to
accept the Plan, $2 million (which will be funded solely from insurance proceeds
as provided in section 11.2 of the Plan and which will be reduced to $1 million
if fewer than ten (10) but more than five (5) Asbestos Property Damage Claims
constitute Disputed Claims as of the Effective Date or reduced to $500,000 if
fewer than five (5) Asbestos Property Damage Claims constitute Disputed Claims
as of the Effective Date) or, if Class 4 votes to reject the Plan, the Asbestos
PD Insurance Asset having a value equal to the aggregate value of all Asbestos
Property Damage Claims that remain Disputed Claims as estimated by the
Bankruptcy Court.
4
1.23 Asbestos PD Trustees: Collectively, the Entities confirmed
by the Bankruptcy Court to serve as trustees of the Asbestos PD Trust, pursuant
to the terms of the Asbestos PD Trust Agreement, or as subsequently may be
appointed pursuant to the provisions of the Asbestos PD Trust Agreement.
1.24 ASBESTOS PERSONAL INJURY CLAIM: ANY CLAIM OR REMEDY,
LIABILITY, OR DEMAND AGAINST AWI NOW EXISTING OR HEREAFTER ARISING, WHETHER OR
NOT SUCH CLAIM, REMEDY, LIABILITY, OR DEMAND IS REDUCED TO JUDGMENT, LIQUIDATED,
UNLIQUIDATED, FIXED, CONTINGENT, MATURED, UNMATURED, DISPUTED, UNDISPUTED,
LEGAL, EQUITABLE, SECURED, OR UNSECURED, WHETHER OR NOT THE FACTS OF OR LEGAL
BASES THEREFOR ARE KNOWN OR UNKNOWN, UNDER ANY THEORY OF LAW, EQUITY, ADMIRALTY,
OR OTHERWISE, FOR DEATH, BODILY INJURY, SICKNESS, DISEASE, OR OTHER PERSONAL
INJURIES (WHETHER PHYSICAL, EMOTIONAL, OR OTHERWISE) TO THE EXTENT CAUSED OR
ALLEGEDLY CAUSED, DIRECTLY OR INDIRECTLY, BY THE PRESENCE OF OR EXPOSURE
(WHETHER PRIOR TO OR AFTER THE COMMENCEMENT DATE) TO ASBESTOS OR
ASBESTOS-CONTAINING PRODUCTS THAT WAS OR WERE INSTALLED, MANUFACTURED, SOLD,
SUPPLIED, PRODUCED, DISTRIBUTED, RELEASED, OR MARKETED BY AWI OR AN ENTITY FOR
WHOSE PRODUCTS OR OPERATIONS AWI ALLEGEDLY HAS LIABILITY OR FOR WHICH AWI IS
OTHERWISE LIABLE, INCLUDING, WITHOUT EXPRESS OR IMPLIED LIMITATION, ANY CLAIM,
REMEDY, LIABILITY, OR DEMAND FOR COMPENSATORY DAMAGES (SUCH AS LOSS OF
CONSORTIUM, WRONGFUL DEATH, SURVIVORSHIP, PROXIMATE, CONSEQUENTIAL, GENERAL, AND
SPECIAL DAMAGES) AND PUNITIVE DAMAGES, AND ANY CLAIM, REMEDY, LIABILITY OR
DEMAND FOR REIMBURSEMENT, INDEMNIFICATION, SUBROGATION AND CONTRIBUTION
(INCLUDING, WITHOUT LIMITATION, ANY ASBESTOS PI CONTRIBUTION CLAIM), AND ANY
CLAIM UNDER ANY SETTLEMENT ENTERED INTO BY OR ON BEHALF OF AWI PRIOR TO THE
COMMENCEMENT DATE RELATING TO AN ASBESTOS PERSONAL INJURY CLAIM. AN ASBESTOS
PROPERTY DAMAGE CLAIM OR A WORKERS' COMPENSATION CLAIM AGAINST AWI SHALL NOT
CONSTITUTE AN ASBESTOS PERSONAL INJURY CLAIM.
1.25 Asbestos PI Claimants' Committee: The Official Committee of
Asbestos Claimants, consisting of Entities appointed as members in the Chapter
11 Case by the United States Trustee for the District of Delaware and their duly
appointed successors, if any, as the same may be reconstituted from time to
time.
1.26 Asbestos PI Contribution Claim: Any Claim or remedy,
liability, or Demand against AWI now existing or hereafter arising, whether or
not such Claim, remedy, liability, or Demand is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured, whether or not the facts of or legal
bases for such Claim, remedy, liability, or Demand are known or unknown, that is
(x) (i) held by (A) any Entity (other than a director or officer entitled to
indemnification pursuant to section 8.6 of the Plan) who has been, is, or may be
a defendant in an action seeking damages for death, bodily injury, sickness,
disease, or other personal injuries (whether physical, emotional, or otherwise)
to the extent caused or allegedly caused, directly or indirectly, by exposure to
asbestos or asbestos-containing products or (B) any assignee or transferee of
such Entity and (ii) on account of alleged liability of AWI for reimbursement,
indemnification, subrogation, or contribution of any portion of any damages such
Entity has paid or may pay to the plaintiff in such action or (y) held by any
Entity that is seeking reimbursement, indemnification, subrogation, or
contribution from AWI with respect to any surety bond, letter of credit or other
financial assurance issued by any Entity on account of, or with respect to,
Asbestos Personal Injury Claims.
1.27 Asbestos PI Insurance Asset: All rights arising under
liability insurance policies issued to AWI with inception dates prior to January
1, 1982 with respect to the liability for Asbestos Personal Injury Claims (with
the exception of AWI's claim against Liberty Mutual Insurance Company for costs,
expenses and fees incurred in connection with an Alternative Dispute Resolution
5
Proceeding initiated in 1996 under the Agreement Concerning Asbestos Related
Claims of June 19, 1985, AWI's claim against Century Indemnity Company for
payments due and owing to AWI before February 2003 under a settlement agreement
dated February 8, 2000, together with applicable interest to the date of
payment, and AWI's rights to insurance relating to workers' compensation
claims). The foregoing includes, but is not limited to, rights under insurance
policies, rights under settlement agreements made with respect to such insurance
policies (with the exception of AWI's claim against Century Indemnity Company
for amounts, including, without limitation, interest, due and owing under a
settlement agreement dated February 8, 2000), rights against the estates of
insolvent insurers that issued such policies or entered into such settlements,
and rights against state insurance guaranty associations arising out of any such
insurance policies issued by insolvent insurers. The foregoing also includes the
right, on behalf of AWI and its subsidiaries as of the Effective Date, to give a
full release of the insurance rights of AWI and its subsidiaries as of the
Effective Date under any such policy or settlement agreement with the exception
of rights to coverage for Asbestos Property Damage Claims and rights to coverage
for the amount that AWI agreed to pay to plaintiffs in Maertin et al. v.
Armstrong World Industries, Inc. et al., No. 95-CV-20849 (JBS) (D.N.J.) in a
settlement agreement executed November 22, 2000 and rights to coverage with
respect to workers' compensation claims.
1.28 ASBESTOS PI PERMANENT CHANNELING INJUNCTION: AN ORDER OR
ORDERS OF THE DISTRICT COURT IN ACCORDANCE WITH, AND PURSUANT TO, SECTION 524(G)
OF THE BANKRUPTCY CODE PERMANENTLY AND FOREVER STAYING, RESTRAINING, AND
ENJOINING ANY ENTITY FROM TAKING ANY OF THE FOLLOWING ACTIONS FOR THE PURPOSE
OF, DIRECTLY OR INDIRECTLY, COLLECTING, RECOVERING, OR RECEIVING PAYMENT OF, ON,
OR WITH RESPECT TO ANY ASBESTOS PERSONAL INJURY CLAIMS, ALL OF WHICH SHALL BE
CHANNELED TO THE ASBESTOS PI TRUST FOR RESOLUTION AS SET FORTH IN THE ASBESTOS
PI TRUST DISTRIBUTION PROCEDURES (OTHER THAN ACTIONS BROUGHT TO ENFORCE ANY
RIGHT OR OBLIGATION UNDER THE PLAN, ANY EXHIBITS TO THE PLAN, OR ANY OTHER
AGREEMENT OR INSTRUMENT BETWEEN AWI OR REORGANIZED AWI AND THE ASBESTOS PI
TRUST, WHICH ACTIONS SHALL BE IN CONFORMITY AND COMPLIANCE WITH THE PROVISIONS
HEREOF), INCLUDING, BUT NOT LIMITED TO:
(a) COMMENCING, CONDUCTING, OR CONTINUING IN ANY MANNER, DIRECTLY
OR INDIRECTLY, ANY SUIT, ACTION, OR OTHER PROCEEDING (INCLUDING, WITHOUT EXPRESS
OR IMPLIED LIMITATION, A JUDICIAL, ARBITRAL, ADMINISTRATIVE, OR OTHER
PROCEEDING) IN ANY FORUM AGAINST OR AFFECTING ANY PI PROTECTED PARTY OR ANY
PROPERTY OR INTERESTS IN PROPERTY OF ANY PI PROTECTED PARTY;
(b) ENFORCING, LEVYING, ATTACHING (INCLUDING, WITHOUT EXPRESS OR
IMPLIED LIMITATION, ANY PREJUDGMENT ATTACHMENT), COLLECTING, OR OTHERWISE
RECOVERING BY ANY MEANS OR IN ANY MANNER, WHETHER DIRECTLY OR INDIRECTLY, ANY
JUDGMENT, AWARD, DECREE, OR OTHER ORDER AGAINST ANY PI PROTECTED PARTY OR ANY
PROPERTY OR INTERESTS IN PROPERTY OF ANY PI PROTECTED PARTY;
(c) CREATING, PERFECTING, OR OTHERWISE ENFORCING IN ANY MANNER,
DIRECTLY OR INDIRECTLY, ANY ENCUMBRANCE AGAINST ANY PI PROTECTED PARTY OR ANY
PROPERTY OR INTERESTS IN PROPERTY OF ANY PI PROTECTED PARTY;
(d) SETTING OFF, SEEKING REIMBURSEMENT OF, CONTRIBUTION FROM, OR
SUBROGATION AGAINST, OR OTHERWISE RECOUPING IN ANY MANNER, DIRECTLY OR
INDIRECTLY, ANY AMOUNT AGAINST ANY LIABILITY OWED TO ANY PI PROTECTED PARTY OR
ANY PROPERTY OR INTERESTS IN PROPERTY OF ANY PI PROTECTED PARTY; AND
6
(e) PROCEEDING IN ANY MANNER IN ANY PLACE WITH REGARD TO ANY
MATTER THAT IS SUBJECT TO RESOLUTION PURSUANT TO THE ASBESTOS PI TRUST, EXCEPT
IN CONFORMITY AND COMPLIANCE THEREWITH.
1.29 Asbestos PI Trust: The trust established by AWI in
accordance with the Asbestos PI Trust Agreement.
1.30 Asbestos PI Trust Agreement: That certain AWI Asbestos
Personal Injury Settlement Trust Agreement, executed by AWI and the Asbestos PI
Trustees, substantially in the form of Exhibit 1.30 to the Plan.
1.31 Asbestos PI Trust Distribution Procedures: The AWI Asbestos
Personal Injury Settlement Trust Distribution Procedures to be implemented by
the Asbestos PI Trustees pursuant to the terms and conditions of the Plan and
the Asbestos PI Trust Agreement to process, liquidate, and pay Asbestos Personal
Injury Claims, substantially in the form of Exhibit 1.31 to the Plan.
1.32 Asbestos PI Trustees: Collectively, the persons confirmed by
the Bankruptcy Court to serve as trustees of the Asbestos PI Trust, pursuant to
the terms of the Asbestos PI Trust Agreement, or as subsequently may be
appointed pursuant to the terms of the Asbestos PI Trust Agreement.
1.33 Asbestos Property Damage Claim: Any Claim or remedy or
liability against AWI, whether or not such Claim, remedy, or liability is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured,
whether or not the facts of or legal bases therefor are known or unknown, under
any theory of law, equity, admiralty, or otherwise, for damages for property
damage, including but not limited to, the cost of inspecting, maintaining,
encapsulating, repairing, decontaminating, removing or disposing of asbestos or
asbestos-containing products in buildings, other structures, or other property
arising from the installation in, presence in or removal from buildings or other
structures of asbestos or asbestos-containing products that was or were
installed, manufactured, sold, supplied, produced, distributed, released or
marketed by AWI prior to the Commencement Date, or for which AWI is allegedly
liable, including, without express or implied limitation, any such Claims,
remedies and liabilities for compensatory damages (such as proximate,
consequential, general, and special damages) and punitive damages, and any
Claim, remedy or liability for reimbursement, indemnification, subrogation and
contribution, including, without limitation, any Asbestos Property Damage
Contribution Claim. Asbestos Property Damage Claims shall not include Asbestos
Personal Injury Claims.
1.34 Asbestos Property Damage Contribution Claim: Any Claim or
remedy or liability against AWI, whether or not such Claim, remedy or liability
is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured,
whether or not the facts of or legal bases for such Claim, remedy or liability
are known or unknown, that is (i) held by (A) any Entity (other than a director
or officer entitled to indemnification pursuant to section 8.6 of the Plan) who
has been, is, or may be a defendant in an action seeking damages for property
damage, including but not limited to, the cost of inspecting, maintaining,
encapsulating, repairing, decontaminating, removing or disposing of asbestos or
asbestos-containing products in buildings, other structures, or other property,
or (B) any assignee or transferee of such Entity, and (ii) on account of alleged
liability by AWI for reimbursement, indemnification, subrogation, or
contribution of any portion of any damages such Entity has paid or may pay to
the plaintiff in such action.
7
1.35 Available Cash: The sum of the following: (a) all cash on
hand of AWI and its subsidiaries as of the last day of the month immediately
preceding the Effective Date less the sum of the following as of such date: (i)
One Hundred Million and 00/100 Dollars ($100,000,000.00) or such lesser amount
as AWI, in its sole discretion (after consultation with the Asbestos PI
Claimants' Committee, Unsecured Creditors' Committee, and the Future Claimants'
Representative), determines it requires for working capital purposes, (ii) the
Allowed Amount of Allowed Administrative Expenses, (iii) a reasonable estimate
by AWI of additional Administrative Expenses (such as professional fees and
expenses) that may become Allowed thereafter (other than Administrative Expenses
of the type specified in section 1.11(c)(i) of the Plan) and fees and expenses
payable in connection with any exit facility referred to in section 7.17(h) of
the Plan, (iv) the Allowed Amount of Allowed Priority Tax Claims, (v) a
reasonable estimate by AWI of additional Priority Tax Claims that may become
Allowed thereafter, (vi) the Allowed Amount of all Priority Claims, (vii) a
reasonable estimate of all Priority Claims that may became Allowed thereafter,
(viii) the DIP Credit Facility Claim, (ix) the cash required to make the
distributions for Class 3 (Convenience Claims) for those that are Allowed and a
reasonable estimate by AWI of additional Convenience Claims that may become
Allowed thereafter, (x) any other cash required to be paid or distributed by AWI
pursuant to the Plan (other than in respect of "Available Cash" and in respect
of the Asbestos PD Trust Funding Obligation), and (xi) the amount reasonably
estimated by AWI to be the cost of curing any defaults under the executory
contracts and unexpired leases to be assumed by AWI under the Plan, (b) any
amounts drawn, in AWI's sole discretion, under the working capital facility
referenced in section 7.17(h) of the Plan for the purpose of funding the
Distributions under the Plan, and (c) any proceeds of insurance received and
retained by Reorganized AWI from the Effective Date to the Final Distribution
Date on account of an Allowed Environmental Claim that is treated as an Allowed
Unsecured Claim in accordance with sections 3.2(f) and 3.2(h) of the Plan.
1.36 AWWD: Armstrong Worldwide, Inc., a Delaware corporation.
1.37 AWI: Armstrong World Industries, Inc., a Pennsylvania
corporation.
1.38 Ballot: The form or forms distributed to holders of impaired
Claims and Equity Interests on which is to be indicated the acceptance or
rejection of the Plan.
1.39 Bankruptcy Code: The Bankruptcy Reform Act of 1978, as
amended, and as codified in title 11 of the United States Code, as applicable to
the Chapter 11 Case.
1.40 Bankruptcy Court: The United States District Court for the
District of Delaware, having jurisdiction over the Chapter 11 Case and, to the
extent of any reference made pursuant to section 157 of title 28 of the United
States Code, the unit of such District Court constituted pursuant to section 151
of title 28 of the United States Code.
1.41 Bankruptcy Rules: The Federal Rules of Bankruptcy Procedure,
as amended, as applicable to the Chapter 11 Case, including the Local Rules of
the Bankruptcy Court.
1.42 Board of Directors: The Board of Directors of AWI or
Reorganized AWI, as it may exist from time to time.
1.43 Business Day: Any day on which commercial banks are required
to be open for business in New York, New York.
8
1.44 Chapter 11 Case: The chapter 11 case of AWI pending in the
Bankruptcy Court as In re Armstrong World Industries, Inc., et al., Case No.
00-4471 (RJN) (Jointly Administered).
1.45 Claim: (a) A "claim," as defined in section 101(5) of the
Bankruptcy Code, against AWI, as debtor or Debtor in Possession, whether or not
asserted, whether or not the facts of or legal bases therefor are known or
unknown, and specifically including, without express or implied limitation, any
rights under sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, any
claim of a derivative nature, any potential or unmatured contract claims, and
any other Contingent Claim, and (b) any Environmental Claim, whether or not it
constitutes a "claim" under section 101(5) of the Bankruptcy Code, but in either
case, not including a Demand.
1.46 Claims Settlement Guidelines: The settlement guidelines and
authority contained in that certain Order Granting Motion of the Debtors for
Order Pursuant to Section 105(a) of the Bankruptcy Code and Bankruptcy Rule
9019(b) Authorizing the Establishment of Procedures to Settle Certain
Prepetition Claims Against the Debtors' Estates dated May 31, 2002, as amended
by the amendments set forth in Exhibit 1.46 to the Plan.
1.47 CLAIMS TRADING INJUNCTION: AN ORDER OR ORDERS OF THE
BANKRUPTCY COURT PERMANENTLY AND FOREVER STAYING, RESTRAINING, AND ENJOINING ANY
ENTITY FROM, DIRECTLY OR INDIRECTLY, PURCHASING, SELLING, TRANSFERRING,
ASSIGNING, CONVEYING, PLEDGING, OR OTHERWISE ACQUIRING OR DISPOSING OF ANY
ASBESTOS PERSONAL INJURY CLAIM OR ASBESTOS PROPERTY DAMAGE CLAIM; PROVIDED,
HOWEVER, THAT THE FOREGOING SHALL NOT APPLY TO (I) THE TRANSFER OF AN ASBESTOS
PERSONAL INJURY CLAIM OR ASBESTOS PROPERTY DAMAGE CLAIM TO THE HOLDER OF AN
ASBESTOS PI CONTRIBUTION CLAIM OR ASBESTOS PROPERTY DAMAGE CONTRIBUTION CLAIM,
AS THE CASE MAY BE, SOLELY AS A RESULT OF SUCH HOLDER'S SATISFACTION OF SUCH
ASBESTOS PERSONAL INJURY CLAIM OR ASBESTOS PROPERTY DAMAGE CONTRIBUTION CLAIM,
AS THE CASE MAY BE, OR (II) THE TRANSFER OF AN ASBESTOS PERSONAL INJURY CLAIM OR
ASBESTOS PROPERTY DAMAGE CLAIM BY WILL OR UNDER THE LAWS OF DESCENT AND
DISTRIBUTION. ANY SUCH ORDER OR ORDERS ALSO WILL PROVIDE THAT ANY ACTION TAKEN
IN VIOLATION THEREOF WILL BE VOID AB INITIO.
1.48 Class: Any group of Claims or Equity Interests classified by
the Plan pursuant to section 1122(a)(1) of the Bankruptcy Code.
1.49 COLI Claims: All amounts due to Pacific Life Insurance
Company for loans made by Pacific Life Insurance Company to AWI against (and
collateralized by) certain life insurance policies for which AWI is the holder
and beneficiary and for which certain of AWI's employees are insureds.
1.50 Commencement Date: December 6, 2000.
1.51 Confirmation Date: The date on which the Confirmation Order
is entered by the Clerk of the Bankruptcy Court.
1.52 Confirmation Deadline: The date that is two hundred seventy
(270) days after the filing of the Plan with the Bankruptcy Court or such later
date as AWI, the Asbestos PI Claimants' Committee, the Future Claimants'
Representative, and the Unsecured Creditors' Committee may agree in writing.
1.53 Confirmation Order: The order or orders of the Bankruptcy
Court confirming the Plan in accordance with the provisions of chapter 11 of the
9
Bankruptcy Code, which will contain, inter alia, the Asbestos PI Permanent
Channeling Injunction and the Claims Trading Injunction.
1.54 Contingent Claim: Any Claim (other than an Asbestos Personal
Injury Claim), the liability for which attaches or is dependent upon the
occurrence or happening, or is triggered by, an event, which event has not yet
occurred, happened, or been triggered, as of the date on which such Claim is
sought to be estimated or an objection to such Claim is filed, whether or not
such event is within the actual or presumed contemplation of the holder of such
Claim and whether or not a relationship between the holder of such Claim and AWI
now or hereafter exists or previously existed.
1.55 Convenience Claim: As to each holder of an Unsecured Claim,
other than a Debt Security Claim, (a) an Unsecured Claim held by such holder in
an Allowed Amount of Ten Thousand and 00/100 Dollars ($10,000.00) or less or (b)
an Unsecured Claim of such holder the Allowed Amount of which has been reduced
to Ten Thousand and 00/100 Dollars ($10,000.00) by the election of the holder
thereof, as provided on the Ballot.
1.56 Creditor: Any Entity that holds a Claim against AWI as
Debtor or Debtor in Possession.
1.57 Debtor: AWI.
1.58 Debtor in Possession: AWI in its capacity as a debtor in
possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.
1.59 Debt Security Claim: Any Unsecured Claim represented by a
series of notes or debt securities issued pursuant to an indenture, bank credit
agreement, or a note purchase agreement prior to the Commencement Date or any
guarantee by AWI of any obligations of another Entity under any series of notes
or debt securities issued pursuant to an indenture, bank credit agreement, or a
note purchase agreement prior to the Commencement Date.
1.60 Demand: A demand for payment, present or future, that (i)
was not a Claim during the Chapter 11 Case; (ii) arises out of the same or
similar conduct or events that gave rise to the Claims addressed by the Asbestos
PI Permanent Channeling Injunction; and (iii) pursuant to the Plan, is to be
paid by the Asbestos PI Trust.
1.61 DIP Credit Facility: Revolving Credit and Guaranty Agreement
dated as of December 6, 2000 among Armstrong World Industries, Inc., a
Pennsylvania corporation, and its subsidiaries, Nitram Liquidators, Inc., a
Delaware corporation, and Desseaux Corporation of North America, a Delaware
corporation, the banks party thereto, and the Agent Bank, as amended, modified
or supplemented from time to time.
1.62 DIP Credit Facility Claim: Collectively, all Claims of the
DIP Lenders arising under the DIP Credit Facility.
1.63 DIP Lenders: The financial institutions party to the DIP
Credit Facility.
1.64 Disallowed Claim: A Claim that is disallowed in its entirety
by an order of the Bankruptcy Court or such other court of competent
jurisdiction or that is disallowed in its entirety pursuant to the Asbestos PI
Trust Distribution Procedures or the Asbestos PD Claims Resolution Procedures,
as the case may be.
10
1.65 Disbursing Agent: Any Entity in its capacity as a disbursing
agent under section 7.10 hereof.
1.66 Disputed Claim: A Claim (other than an Asbestos Personal
Injury Claim) that is neither an Allowed Claim nor a Disallowed Claim.
1.67 Disputed Claim Amount: The Estimated Amount of a Disputed
Claim, or, if no Estimated Amount exists, the amount set forth in the proof of
claim relating to such Disputed Claim as the liquidated amount of such Disputed
Claim.
1.68 Disputed Unsecured Claims Reserve: The trust established
pursuant to section 5.4 of the Plan to hold the portion of Plan Notes reserved
for Distribution pending the resolution of Disputed Claims in Class 6 of the
Plan.
1.69 Distribution: The payment or distribution under the Plan of
property or interests in property to the holders of Allowed Claims (other than
Asbestos Personal Injury Claims and Asbestos Property Damage Claims), the holder
of the Equity Interest, and to the Asbestos PI Trust and the Asbestos PD Trust.
1.70 Distribution Date: (a) The Initial Distribution Date, (b)
the first Business Day after the end of the months of March, June, September,
and December, commencing with the first such date to occur more than one hundred
eighty (180) days after the Effective Date and until the second anniversary of
the Effective Date, (c) after the second anniversary of the Effective Date, the
first Business Day after the end of the month of December, and (d) the Final
Distribution Date; provided, however, that (i) a Distribution Date (other than
the Initial Distribution Date and the Final Distribution Date) shall not occur
if the aggregate amount of Plan Notes and/or 144A Offering Proceeds and
Available Cash to be distributed on any Distribution Date is less than One
Million and 00/100 Dollars ($1,000,000.00), in which case the amount to be
distributed shall be retained and added to the amount to be distributed on the
next Distribution Date, and (ii) any Unsecured Claim that becomes Allowed less
than twenty (20) Business Days prior to a Distribution Date shall be treated as
a Disputed Claim for the purposes of the Distribution occurring on such
Distribution Date and shall not receive a Distribution until the Distribution
Date immediately succeeding such Distribution Date.
1.71 District Court: The United States District Court for the
District of Delaware having jurisdiction over the Chapter 11 Case.
1.72 DTC: Depository Trust Company.
1.73 Employee Benefit Claim: Any Claim of a current or former
employee of AWI, a current or former employee of any current or former
subsidiary of AWI, or of the Pension Benefit Guaranty Corporation, for benefits
payable or arising under any of the plans being assumed pursuant to section
8.7(a) of the Plan; provided, however, that any Claim for damages or other
relief arising from any termination of any plans pursuant to section 8.7(b) of
the Plan, any "rejection" of any plans as to any party that objects to any
amendment under section 8.7(c) of the Plan, based upon any alleged breach by AWI
of its responsibilities or duties under any plan specified in section 8.7(a) of
the Plan (other than any obligation to pay the benefits arising thereunder, as
modified), or related to the allegations made by the plaintiffs in those certain
two class action complaints asserting various federal law claims under ERISA
filed in the United States District Court for the Eastern District of
Pennsylvania by Dean A. Markley, Michael Resetar, and Lori Shearer shall be
deemed an Unsecured Claim.
11
1.74 Effective Date: The first Business Day of the month
immediately following the date by which all of the conditions precedent to the
effectiveness of the Plan specified in Section 7.17 have been satisfied or
waived or, if a stay of the Confirmation Order is in effect on such date, the
first Business Day of the month immediately following the date of the
expiration, dissolution, or lifting of such stay.
1.75 Encumbrance: With respect to any asset, any mortgage, lien,
pledge, charge, security interest, assignment, or encumbrance of any kind or
nature in respect of such asset (including, without express or implied
limitation, any conditional sale or other title retention agreement, any
security agreement, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
1.76 Entity: An individual, corporation, partnership, limited
liability company, association, joint stock company, joint venture, estate,
trust, unincorporated organization, or government or any political subdivision
thereof, or other person or entity.
1.77 Environmental Claim: Any Claim as to which the treatment
thereof is set forth in an agreement by and between AWI and any party asserting
a Claim against AWI relating to alleged contamination under the federal or state
environmental laws or regulations, pursuant to which agreement all or a portion
of such Claim (to the extent and subject to the limitations imposed by such
agreement) may be asserted by the holder thereof after the Effective Date, to
the extent that such agreement is approved and authorized by a Final Order of
the Bankruptcy Court or otherwise in accordance with the Claims Settlement
Guidelines.
1.78 Equity Interest: Any interest in AWI represented by shares
of Existing AWI Common Stock.
1.79 Equity Value: For purposes of calculating the exercise price
on the New Warrants, the value of each share of New Common Stock as of the
Effective Date, based upon the residual value of the equity of Reorganized AWI,
as agreed among Lazard and the financial consultants for the Asbestos PI
Claimants' Committee, the Future Claimants' Representative, and the Unsecured
Creditors' Committee and as set forth in the disclosure statement approved by
the Bankruptcy Court.
1.80 Estimated Amount: The estimated dollar value of an
Unliquidated Claim, Disputed Claim, or Contingent Claim pursuant to section
502(c) of the Bankruptcy Code.
1.81 Existing AWI Common Stock: Common stock, par value of $0.01
per share, of AWI, authorized pursuant to the Articles of Incorporation as in
effect immediately prior to the Effective Date.
1.82 Final Distribution Date: A date on or after the Initial
Distribution Date and after all Disputed Claims (other than Asbestos Personal
Injury Claims and Asbestos Property Damage Claims) have become either Allowed
Claims or Disallowed Claims that is selected by Reorganized AWI in its
discretion but, in any event, is no later than thirty (30) days thereafter, or
such later date as the Bankruptcy Court may establish, upon request by
Reorganized AWI, for cause shown.
1.83 Final Order: An order as to which the time to appeal,
petition for certiorari, or move for reargument or rehearing has expired and as
to which no appeal, petition for certiorari, or other proceedings for reargument
or rehearing shall then be pending or as to which any right to appeal, petition
12
for certiorari, reargue, or rehear shall have been waived in writing in form and
substance satisfactory to AWI or Reorganized AWI, as the case may be, and its
counsel or, in the event that an appeal, writ of certiorari, or reargument or
rehearing thereof has been sought, such order shall have been affirmed by the
highest court to which such order was appealed, or certiorari has been denied or
from which reargument or rehearing was sought, and the time to take any further
appeal, petition for certiorari or move for reargument or rehearing shall have
expired.
1.84 Future Claimants' Representative: Dean M. Trafelet, the
Legal Representative for Future Claimants appointed pursuant to the order dated
on or about March 1, 2002.
1.85 Holdings: Armstrong Holdings, Inc., a Pennsylvania
corporation.
1.86 Holdings Plan of Liquidation: The dissolution of Holdings as
approved by its Board of Directors and shareholders as required by Sections
1972, 1973 and 1974 of the Pennsylvania BCL and the liquidation and winding up
of the business and affairs of Holdings (and, as part thereof, the dissolution
and winding up, or other termination of the corporate existence, of AWWD) in
accordance with a plan of liquidation and winding up approved by the Board of
Directors and shareholders of Holdings as may be required by Subchapter F or H
of Chapter 19 of the Pennsylvania BCL or such other plan and manner of
liquidation and winding up as is consistent with the terms of the Plan and
permitted by law.
1.87 Indentures: The indenture agreements between the Indenture
Trustees and AWI relating to the Debt Security Claims.
1.88 Indenture Trustees: Bank One Trust Company, N.A., as
indenture trustee for the holders of AWI's 9 3/4% Debentures due 2008 and for
the holders of the 8 3/4%-9% Medium Term Notes, and Wells Fargo Minnesota, N.A.,
as indenture trustee for the holders of AWI's 6.35% Senior Notes due 2003, 6
1/2% Senior Notes due 2005, 7.45% Senior Notes due 2029, and the 7.45% Senior
Quarterly Interest Bonds due 2038.
1.89 Indenture Trustees' Fees and Expenses: All the fees and
expenses, including the reasonable fees and expenses of their attorneys,
incurred by the Indenture Trustees under their respective indentures from the
Commencement Date to the Effective Date, up to a maximum of Twenty-Five Thousand
and 00/100 Dollars ($25,000.00) for the Indenture Trustee for each series of
Debt Security Claims for which it acts as Indenture Trustee.
1.90 Initial Distribution Date: A date on or after the Effective
Date that is selected by Reorganized AWI in its discretion but, in any event, is
within fifteen (15) days after the Effective Date, or such later date as the
Bankruptcy Court may establish upon request by Reorganized AWI, for cause shown.
1.91 Internal Revenue Code: The Internal Revenue Code of 1986, as
amended from time to time, and any applicable rulings, Treasury Regulations,
judicial decisions, and notices, announcements, and other releases of the United
States Treasury Department or the IRS.
1.92 IRS: The United States Internal Revenue Service.
13
1.93 Lazard: Lazard Freres & Co. LLC, or such other investment
bank or financial advisor retained by AWI.
1.94 New Common Stock: Common stock, par value $0.01 per share,
of Reorganized AWI which is to be authorized and issued pursuant to the Plan and
subject to dilution for equity to be issued under the New Long-Term Incentive
Plan and for the New Warrants.
1.95 New Long-Term Incentive Plan: The Management Incentive Plan,
substantially in the form of Exhibit 1.95 to the Plan.
1.96 New Warrants: Warrants to purchase the New Common Stock
pursuant to a warrant agreement substantially in the form of Exhibit 1.96 to the
Plan on terms and conditions determined in a manner agreed to by Lazard and the
financial consultants for the Asbestos PI Claimants' Committee, the Future
Claimants' Representative, and the Unsecured Creditors' Committee; provided,
however, that such New Warrants (a) shall comprise 5% of the New Common Stock on
a fully diluted basis determined as of the Effective Date, (b) shall have an
exercise price equal to 125% of the Equity Value, and (iii) shall have a term of
seven years from the Effective Date.
1.97 Pennsylvania BCL: Pennsylvania Business Corporation Law of
1988, as amended from time to time and as applicable to the events described in
the Plan.
1.98 PI PROTECTED PARTY: ANY OF THE FOLLOWING PARTIES:
(a) AWI;
(b) REORGANIZED AWI;
(c) HOLDINGS;
(d) AWWD;
(e) ANY AFFILIATE;
(f) INTERFACE SOLUTIONS, INC., A CORPORATION ORGANIZED UNDER THE
LAWS OF PENNSYLVANIA, OR ARMACELL LLC, A LIMITED LIABILITY COMPANY ORGANIZED
UNDER THE LAWS OF DELAWARE, BUT ONLY TO THE EXTENT THAT EITHER SUCH ENTITY IS
ALLEGED TO BE DIRECTLY OR INDIRECTLY LIABLE FOR THE CONDUCT OF, CLAIMS AGAINST,
OR DEMANDS ON AWI, REORGANIZED AWI, OR THE ASBESTOS PI TRUST ON ACCOUNT OF
ASBESTOS PERSONAL INJURY CLAIMS;
(g) ANY ENTITY THAT, PURSUANT TO THE PLAN OR AFTER THE EFFECTIVE
DATE, BECOMES A DIRECT OR INDIRECT TRANSFEREE OF, OR SUCCESSOR TO, ANY ASSETS OF
AWI, REORGANIZED AWI, OR THE ASBESTOS PI TRUST (BUT ONLY TO THE EXTENT THAT
LIABILITY IS ASSERTED TO EXIST BY REASON OF IT BECOMING SUCH A TRANSFEREE OR
SUCCESSOR);
(h) ANY ENTITY THAT, PURSUANT TO THE PLAN OR AFTER THE EFFECTIVE
DATE, MAKES A LOAN TO REORGANIZED AWI OR THE ASBESTOS PI TRUST OR TO A SUCCESSOR
TO, OR TRANSFEREE OF, ANY ASSETS OF AWI, REORGANIZED AWI OR THE ASBESTOS PI
TRUST (BUT ONLY TO THE EXTENT THAT LIABILITY IS ASSERTED TO EXIST BY REASON OF
SUCH ENTITY BECOMING SUCH A LENDER OR TO THE EXTENT ANY PLEDGE OF ASSETS MADE IN
14
CONNECTION WITH SUCH A LOAN IS SOUGHT TO BE UPSET OR IMPAIRED); OR
(i) ANY ENTITY TO THE EXTENT HE, SHE, OR IT IS ALLEGED TO BE
DIRECTLY OR INDIRECTLY LIABLE FOR THE CONDUCT OF, CLAIMS AGAINST, OR DEMANDS ON
AWI, REORGANIZED AWI OR THE ASBESTOS PI TRUST ON ACCOUNT OF ASBESTOS PERSONAL
INJURY CLAIMS BY REASON OF ONE OR MORE OF THE FOLLOWING:
(i) SUCH ENTITY'S OWNERSHIP OF A FINANCIAL INTEREST IN AWI,
REORGANIZED AWI, A PAST OR PRESENT AFFILIATE OF AWI OR
REORGANIZED AWI (OTHER THAN ACANDS, INC. F/K/A ARMSTRONG
CONTRACTING AND SUPPLY CORP.), OR A PREDECESSOR IN INTEREST OF
AWI, OR REORGANIZED AWI;
(ii) SUCH ENTITY'S INVOLVEMENT IN THE MANAGEMENT OF AWI,
AWWD, HOLDINGS, AN AFFILIATE, REORGANIZED AWI, OR ANY PREDECESSOR
IN INTEREST OF AWI, OR REORGANIZED AWI;
(iii) SUCH ENTITY'S SERVICE AS AN OFFICER, DIRECTOR, OR
EMPLOYEE OF AWI, REORGANIZED AWI, AWWD, HOLDINGS, AN AFFILIATE,
ANY PAST OR PRESENT AFFILIATE OF AWI OR REORGANIZED AWI (OTHER
THAN ACANDS, INC. F/K/A ARMSTRONG CONTRACTING AND SUPPLY CORP.),
ANY PREDECESSOR IN INTEREST OF AWI OR REORGANIZED AWI, OR ANY
ENTITY THAT OWNS OR AT ANY TIME HAS OWNED A FINANCIAL INTEREST IN
AWI OR REORGANIZED AWI, ANY PAST OR PRESENT AFFILIATE OF AWI OR
REORGANIZED AWI (OTHER THAN ACANDS, INC. F/K/A ARMSTRONG
CONTRACTING AND SUPPLY CORP.), OR ANY PREDECESSOR IN INTEREST OF
AWI OR REORGANIZED AWI.
(iv) SUCH ENTITY'S PROVISION OF INSURANCE TO (A) AWI, (B)
REORGANIZED AWI, (C) ANY PAST OR PRESENT AFFILIATE OF AWI OR
REORGANIZED AWI (OTHER THAN ACANDS, INC. F/K/A ARMSTRONG
CONTRACTING AND SUPPLY CORP.), (D) ANY PREDECESSOR IN INTEREST OF
AWI OR REORGANIZED AWI; OR (E) ANY ENTITY THAT OWNS OR AT ANY
TIME HAS OWNED A FINANCIAL INTEREST IN AWI OR REORGANIZED AWI,
ANY PAST OR PRESENT AFFILIATE OF AWI OR REORGANIZED AWI (OTHER
THAN ACANDS, INC. F/K/A ARMSTRONG CONTRACTING AND SUPPLY CORP.),
OR ANY PREDECESSOR IN INTEREST OF AWI OR REORGANIZED AWI, BUT
ONLY TO THE EXTENT THAT AWI, REORGANIZED AWI, OR THE ASBESTOS PI
TRUST ENTERS INTO A SETTLEMENT WITH SUCH ENTITY THAT IS APPROVED
BY THE BANKRUPTCY COURT AND EXPRESSLY PROVIDES THAT SUCH ENTITY
SHALL BE ENTITLED TO THE PROTECTION OF THE ASBESTOS PI PERMANENT
CHANNELING INJUNCTION AS A PI PROTECTED PARTY; OR
(v) SUCH ENTITY'S INVOLVEMENT IN A TRANSACTION CHANGING THE
CORPORATE STRUCTURE, OR IN A LOAN OR OTHER FINANCIAL TRANSACTION
AFFECTING THE FINANCIAL CONDITION, OF AWI, AWWD, HOLDINGS, AN
AFFILIATE, REORGANIZED AWI, ANY PAST OR PRESENT AFFILIATE OF AWI
OR REORGANIZED AWI (OTHER THAN AC AND S, INC. F/K/A ARMSTRONG
CONTRACTING AND SUPPLY CORP.), ANY PREDECESSOR IN INTEREST OF AWI
OR REORGANIZED AWI, OR ANY ENTITY THAT OWNS OR AT ANY TIME HAS
OWNED A FINANCIAL INTEREST IN AWI OR REORGANIZED AWI, ANY PAST OR
PRESENT AFFILIATE OF AWI OR REORGANIZED AWI (OTHER THAN ACANDS,
INC. F/K/A ARMSTRONG CONTRACTING AND SUPPLY CORP.), OR ANY
PREDECESSOR IN INTEREST OF AWI OR REORGANIZED AWI;
15
1.99 Plan: This plan of reorganization, either in its present
form or as it may be amended, supplemented, or otherwise modified from time to
time, and the exhibits and schedules to the foregoing, as the same may be in
effect at the time such reference becomes operative.
1.100 Plan Note Amount: An amount equal to the greater of (x)
$1.125 billion less the amount of Available Cash and (y) $775 million.
1.101 Plan Note Indenture: An indenture, substantially in the
form of Exhibit 1.101 to the Plan, by and between AWI, as the issuer, and a
trustee selected by AWI prior to the date of the commencement of the hearing on
confirmation of the Plan, pursuant to which the Plan Notes will be issued, which
will be qualified under the Trust Indenture Act of 1939, as amended.
1.102 Plan Notes: Unsecured notes issued pursuant to the Plan
Note Indenture (a) in an aggregate principal amount equal to the Plan Note
Amount less the 144A Offering Proceeds, (b) bearing a fixed or floating interest
rate based upon U.S. Treasury Notes or three-month U.S dollar LIBOR,
respectively, with like maturities plus a spread determined to be the average
corporate spread over such Treasury Notes or LIBOR for outstanding issues of
comparable maturity and comparably rated U.S. industrial companies over the
30-day period ending on the last day of the month immediately preceding the
Effective Date, (c) with a maturity, as selected by AWI, of not less than five
years, but not more than ten years and no principal payments required to be paid
prior to the maturity date, (d) callable at par at the option of Reorganized
AWI, in whole or in part, at any time during the first six months following the
Effective Date, and (e) having such other terms, covenants, and conditions
substantially similar to those contained in indentures for issues of comparable
maturity of comparably rated U.S. industrial companies and, with respect to any
floating rate tranche, structured in a manner similar to, and as liquid as,
marketable bank debt.
1.103 Priority Claim: Any Claim to the extent such claim is
entitled to priority in right of payment under section 507(a) of the Bankruptcy
Code, other than an Administrative Expense, DIP Credit Facility Claim, or
Priority Tax Claim.
1.104 Priority Tax Claim: A Claim against AWI that is of a kind
specified in section 507(a)(8) of the Bankruptcy Code.
1.105 Pro Rata Share: Means the ratio (expressed as a percentage)
of the amount of an Allowed Claim in a Class to the aggregate amount of all
Allowed Claims plus the Disputed Claim Amount of all Disputed Claims in the same
Class.
1.106 Qualified Appraisal: A "qualified appraisal" within the
meaning of Treasury Regulations section 1.468B-3(b)(3).
1.107 Record Date: The first Business Day that is five (5) days
from and after the Confirmation Date.
1.108 Reorganized AWI: AWI, as reorganized as of the Effective
Date in accordance with this Plan, or any successors in interest thereto, from
and after the Effective Date.
1.109 Reorganization Consideration: Collectively, the Available
Cash, the Plan Notes and/or the 144A Offering Proceeds, the New Common Stock,
and the New Warrants.
16
1.110 Retention Period: Five (5) years from and after the
Effective Date, or such shorter period as the Bankruptcy Court may set.
1.111 Schedules: The schedules of assets and liabilities and the
statements of financial affairs filed by AWI with the Bankruptcy Court, as
required by section 521 of the Bankruptcy Code and the Official Bankruptcy Forms
of the Bankruptcy Rules, as such schedules and statements have been and may be
amended by AWI from time to time in accordance with Bankruptcy Rule 1009.
1.112 SEC: The United States Securities and Exchange Commission.
1.113 Secured Claim: Any Claim against AWI to the extent of the
value of any interest in property of the estate of AWI securing such Claim,
except for the DIP Credit Facility Claim and the COLI Claims.
1.114 Stockholder and Registration Rights Agreement: The
Stockholder and Registration Rights Agreement to be entered into by Reorganized
AWI and the Asbestos PI Trustees on behalf of the Asbestos PI Trust, pursuant to
section 7.7 hereof, in substantially the same form of Exhibit 1.114 to the Plan.
1.115 Subsidiary Debt Guarantee Claim: Any Claim against AWI
arising from the guaranty by AWI of an obligation of one or more Entities that
are subsidiaries of AWI as of the date immediately preceding the Effective Date
so long as such obligation has not been accelerated or declared in default prior
to the Effective Date (and such acceleration has not been rescinded or such
default waived), other than any Claim relating to any obligations of Nitram
Liquidators, Inc. or Desseaux Corporation of North America and other than any
Claim relating to obligations arising from the sale or disposition of the
business, operations, or assets of any Entity.
1.116 Treasury Regulations: Regulations (including temporary and
proposed) promulgated under the Internal Revenue Code by the United States
Treasury Department, as amended from time to time.
1.117 Unliquidated Claim: Any Claim (other than an Asbestos
Personal Injury Claim), the amount of liability for which has not been fixed,
whether pursuant to agreement, applicable law, or otherwise, as of the date on
which such Claim is sought to be estimated.
1.118 Unsecured Claim: Any Claim other an Administrative Expense,
Subsidiary Debt Guarantee Claim, a COLI Claim, a Priority Tax Claim, a Priority
Claim, an Asbestos Personal Injury Claim, an Asbestos Property Damage Claim, an
Environmental Claim (except to the extent provided in section 3.2(h)(ii) of the
Plan), an Affiliate Claim, an Employee Benefit Claim, or a Secured Claim.
Unsecured Claims include Debt Security Claims administered by the Indenture
Trustees.
1.119 Unsecured Creditors' Committee: The Official Unsecured
Creditors' Committee, consisting of Entities appointed as members in the Chapter
11 Case by the United States Trustee for the District of Delaware in accordance
with section 1102(a) of the Bankruptcy Code and their duly appointed successors,
if any, as the same may be reconstituted from time to time.
1.120 Voting Deadline: The date set by the Bankruptcy Court by
which all completed ballots must be received.
17
1.121 Voting Procedures Order: An order of the Bankruptcy Court
approving procedures relating to the solicitation and tabulation of votes with
respect to the Plan.
B. OTHER TERMS. Wherever from the context it appears appropriate,
each term stated in either the singular or the plural shall include the singular
and the plural, and pronouns stated in the masculine, feminine, or neuter gender
shall include the masculine, the feminine, and the neuter. The words "herein,"
"hereof," "hereto," "hereunder," and others of similar import refer to the Plan
as a whole and not to any particular section, subsection, or clause contained in
the Plan. An initially capitalized term used herein that is not defined herein
shall have the meaning ascribed to such term, if any, in the Bankruptcy Code,
unless the context shall otherwise require.
C. EXHIBITS. All Exhibits to the Plan shall be contained in a
separate Exhibit Volume, which shall be filed with the Clerk of the Bankruptcy
Court not later than the earlier of (i) thirty (30) days prior to the
commencement of the hearing on confirmation of the Plan and (ii) fifteen (15)
days prior to the deadline for filing objections to confirmation of the Plan.
Such Exhibits may be inspected in the office of the Clerk of the Bankruptcy
Court during normal hours of operation of the Bankruptcy Court. Such Exhibits
shall also be available for download from the following website:
www.armstrongplan.com. Holders of Claims or shareholders of Holdings may also
obtain a copy of such Exhibit Volume, once filed, from AWI by a written request
sent to the following address:
Armstrong World Industries, Inc.
Post Office Box 3666
Lancaster, Pennsylvania 17604-3666
ARTICLE II
PROVISIONS FOR PAYMENT OF ADMINISTRATIVE EXPENSES
AND PRIORITY TAX CLAIMS
2.1 Payment of Allowed Administrative Expenses. The Allowed
Amount of each Administrative Expense that is Allowed as of the Effective Date
shall be paid in full, in cash, on the Effective Date; provided, however, that
Administrative Expenses of the type specified in section 1.11(c)(i) of the Plan
shall be assumed and paid by Reorganized AWI in accordance with the terms and
conditions of the particular transactions and any agreements relating thereto.
Each Administrative Expense of the type specified in section 1.11(c)(ii) or
1.11(c)(iii) of the Plan shall be paid the Allowed Amount of such Administrative
Expense in full, in cash, as soon as practicable after such Administrative
Expense is Allowed.
2.2 Compensation and Reimbursement Claims. The Bankruptcy Court
shall fix in the Confirmation Order a date for the filing of, and a date to hear
and determine, all applications for final allowances of compensation or
reimbursement of expenses under section 330 of the Bankruptcy Code or
applications for allowance of Administrative Expenses arising under section
503(b)(2), 503(b)(3), 503(b)(4), 503(b)(5), or 503(b)(6) of the Bankruptcy Code.
The Allowed Amount of all Administrative Expenses arising under section 330,
331, 503(b)(2), 503(b)(3), 503(b)(4), 503(b)(5), or 503(b)(6) of the Bankruptcy
Code shall be paid in full, in cash, (a) upon the later of (i) the Effective
Date and (ii) the date upon which any such Administrative Expense becomes
Allowed or (b) at such later date or upon such other terms as may be mutually
agreed upon between each such Administrative Expense Creditor and Reorganized
AWI.
18
2.3 DIP Credit Facility Claim. On the Effective Date, the DIP
Credit Facility Claim shall be paid in full, in cash. Unless otherwise agreed by
the DIP Lenders, to the extent that any letters of credit issued pursuant to the
DIP Credit Facility remain outstanding on the Effective Date, AWI will pay to
the Agent Bank, for the ratable benefit of the DIP Lenders, cash in an amount
equal to the face amount of such letters of credit, which shall be held by the
Agent Bank for the repayment of all amounts due in respect of such letters of
credit.
2.4 Priority Tax Claims. Each holder of an Allowed Priority Tax
Claim shall be paid the Allowed Amount of its Allowed Priority Tax Claim either
(a) in full, in cash, on the latest of (i) the Effective Date, (ii) the date
such Allowed Priority Tax Claim becomes Allowed, and (iii) the date such Allowed
Priority Tax Claim is payable under applicable non-bankruptcy law or (b) upon
such other terms as may be mutually agreed upon between each holder of a
Priority Tax Claim and Reorganized AWI.
ARTICLE III
CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS
3.1 Summary. Claims and Equity Interests are classified for all
purposes, including, without express or implied limitation, voting,
confirmation, and distribution pursuant to the Plan, as follows:
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
ENTITLED
CLASS TREATMENT STATUS TO VOTE?
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 1: Priority Claims Paid in full, in cash, on the later of the Effective Date Unimpaired No
or as soon as practicable after such Priority Claim
becomes Allowed.
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 2: Secured Claims Reinstated - Any defaults related to Secured Claims will Unimpaired No
be cured.
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 3: Convenience Payment of 75% of Allowed Amount of Convenience Claim, in Impaired Yes
Claims cash, on later of the Effective Date or as soon as
practicable after such Convenience Claim becomes Allowed.
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 4: Asbestos All Asbestos Property Damage Claims will be channeled to Impaired Yes
Property Damage Claims the Asbestos PD Trust, which will be funded exclusively
with the Asbestos PD Trust Funding Obligation;
provided, however, if fewer than 25 Disputed
Asbestos Property Damage Claims remain outstanding
as of the Effective Date, AWI may elect, in its
sole discretion, not to channel Asbestos Property
Damage Claims to the Asbestos PD Trust, but to
litigate the merits of each Disputed Asbestos
Property Damage Claim before the Bankruptcy Court
and pay the Allowed Amount of each such Asbestos
Property Damage Claim in full, in cash, from the
proceeds of insurance.
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
19
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 5: COLI Claims Reinstated - Any defaults related to
the COLI Claims will Unimpaired No be cured. Unimpaired No
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 6: Unsecured Claims Each holder of an Allowed Unsecured Claim will receive Impaired Yes
other than Convenience its Pro Rata Share of (i) 34.43% of the New Common
Claims Stock, (ii) 34.43% of the first $1.05 billion
of (x) up to $300 million of Available Cash and (y)
the principal amount of Plan Notes and/or 144A Offering
Proceeds,(iii) 60% of the next $50 million of the
remaining Available Cash, (iv) 60% of the remaining
amount of Plan Notes and/or 144A Offering Proceeds
to the extent that Available Cash in (iii) is less than
$50 million, and (v) 34.43% of the remaining Available
Cash and Plan Notes and/or 144A Offering Proceeds.
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 7: Asbestos All Asbestos Personal Injury Claims will be channeled to Impaired Yes
Personal Injury Claims the Asbestos PI Trust, which will be funded pursuant to
section 10.1 of the Plan.
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 8: Environmental Each Environmental Claim will be treated as an Allowed Impaired Yes
Claims Unsecured Claim to the extent it becomes Allowed prior to
any Distribution Date. Other treatment determined as
applicable under the relevant settlement agreement.
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 9: Affiliate Claims Reinstated Unimpaired No
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 10: Subsidiary Debt Reinstated Unimpaired No
Guarantee Claims
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 11: Employee Reinstated Unimpaired No
Benefit Claims
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
20
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 12: Equity Interests If the Holdings Plan of Liquidation is approved by the Impaired Yes.
board of directors and requisite shareholders of Holdings
prior to the first anniversary of the Effective Date, the
holder of the Equity Interests in AWI will receive the
New Warrants (which will be distributed in accordance
with the Holdings Plan of Liquidation). If such approval
is not obtained prior to the first anniversary of the
Effective Date, the holder of the Equity Interests in AWI
will not receive any distribution, and no New Warrants
will be issued..
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
3.2 Classification and Treatment.
(a) CLASS 1. PRIORITY CLAIMS.
(i) Classification: Class 1 consists of all Allowed Priority
Claims.
(ii) Treatment: Each holder of an Allowed Priority Claim
shall be paid the Allowed Amount of its Allowed Priority Claim,
in full, in cash, on the later of the Effective Date and as soon
as practicable after the date such Priority Claim becomes
Allowed.
(iii) Status: Class 1 is not impaired. The holders of the
Claims in Class 1 are deemed to accept the Plan and, accordingly,
are not entitled to vote to accept or reject the Plan.
(b) CLASS 2. SECURED CLAIMS.
(i) Classification: Class 2 consists of all Allowed Secured
Claims. Although placed in one class for purposes of convenience,
each Allowed Secured Claim shall be treated as though in a
separate class for all purposes under the Plan.
(ii) Treatment: At the option of AWI and in accordance with
section 1124 of the Bankruptcy Code, each Allowed Secured Claim
shall be treated in one of the following ways:
1. The legal, equitable and contractual rights to which
such Allowed Secured Claim entitles the holder of such Claim
shall be unaltered.
or
2. Notwithstanding any contractual provision or
applicable law that entitles the holder of an Allowed
Secured Claim to demand or receive payment of such Claim
21
prior to the stated maturity of such Claim from and after
the occurrence of a default under the agreements governing
or instruments evidencing such Claim, such Claim shall be
reinstated, and AWI shall (i) cure all defaults that
occurred before or from and after the Commencement Date
(other than defaults of a kind specified in section
365(b)(2) of the Bankruptcy Code), (ii) reinstate the
maturity of such Claim as such maturity existed prior to the
occurrence of such default, (iii) compensate the holder of
such Claim for any damages incurred as a consequence of any
reasonable reliance by such holder on such contractual
provision or such applicable law, and (iv) not otherwise
alter the legal, equitable, or contractual rights to which
the holder of such Claim is entitled.
(iii) Status: Class 2 is not impaired. The holders of the
Claims in Class 2 are deemed to accept the Plan and, accordingly,
are not entitled to vote to accept or reject the Plan.
(c) CLASS 3. CONVENIENCE CLAIMS.
(i) Classification: Class 3 consists of all Allowed
Convenience Claims.
(ii) Treatment: Each holder of an Allowed Convenience Claim
shall be paid 75% of the Allowed Amount of its Allowed
Convenience Claim, in cash, on the later of the Effective Date
and as soon as practicable after such Convenience Claim becomes
Allowed.
(iii) Election: Any holder of an Unsecured Claim in an
amount equal to or less than Ten Thousand and 00/100 Dollars
($10,000.00) and which otherwise constitutes a Convenience Claim
automatically shall be treated as a Convenience Claim. Any holder
of any other Unsecured Claim that desires treatment of such Claim
as a Convenience Claim shall make such election on the Ballot to
be provided to holders of Unsecured Claims in Class 6 and return
such Ballot to the address specified therein on or before the
Voting Deadline. Any election made after the Voting Deadline
shall not be binding on AWI unless the Voting Deadline is
expressly waived in writing by AWI with respect to any such
Claim.
(iv) Status: Class 3 is impaired. To the extent and in the
manner provided in the Voting Procedures Order, the holders of
the Claims in Class 3 are entitled to vote to accept or reject
the Plan.
(d) CLASS 4. ASBESTOS PROPERTY DAMAGE CLAIMS.
(i) Classification: Class 4 consists of all Allowed Asbestos
Property Damage Claims.
(ii) Treatment: (x) Except as provided in section
3.2(d)(ii)(y) of the Plan, all Allowed Asbestos Property Damage
Claims shall be determined and paid pursuant to the terms,
provisions, and procedures of the Asbestos PD Trust and the
Asbestos PD Trust Agreement and the Asbestos PD Claims Resolution
22
Procedures. The Asbestos PD Trust will be funded in accordance
with the provisions of sections 11.2 and 11.3 of the Plan. The
sole recourse of the holder of an Allowed Asbestos Property
Damage Claim shall be the Asbestos PD Trust, and such holder
shall have no right whatsoever at any time to assert its Asbestos
Property Damage Claim against Reorganized AWI. Without limiting
the foregoing, on the Effective Date, all entities shall be
permanently and forever stayed, restrained, and enjoined from
taking any of the following actions for the purpose of, directly
or indirectly, collecting, recovering, or receiving payment of,
on, or with respect to any Asbestos Property Damage Claims (other
than actions brought to enforce any right or obligation under the
Plan, any Exhibits to the Plan, or any other agreement or
instrument between AWI or Reorganized AWI and the Asbestos PD
Trust, which actions shall be in conformity and compliance with
the provisions hereof):
1. commencing, conducting, or continuing in any manner,
directly or indirectly, any suit, action, or other
proceeding (including, without express or implied
limitation, a judicial, arbitral, administrative, or other
proceeding) in any forum against or affecting Reorganized
AWI, any property or interests in property of Reorganized
AWI, the Asbestos PI Trust, or any property or interests in
property of the Asbestos PI Trust;
2. enforcing, levying, attaching (including, without
express or implied limitation, any prejudgment attachment),
collecting, or otherwise recovering by any means or in any
manner, whether directly or indirectly, any judgment, award,
decree, or other order against Reorganized AWI, any property
or interests in property of Reorganized AWI, the Asbestos PI
Trust, or any property or interests in property of the
Asbestos PI Trust;
3. creating, perfecting, or otherwise enforcing in any
manner, directly or indirectly, any Encumbrance against
Reorganized AWI, any property or interests in property of
Reorganized AWI, the Asbestos PI Trust, or any property or
interests in property of the Asbestos PI Trust;
4. setting off, seeking reimbursement of, contribution
from, or subrogation against, or otherwise recouping in any
manner, directly or indirectly, any amount against any
liability owed to Reorganized AWI, any property or interests
in property of Reorganized AWI, the Asbestos PI Trust, or
any property or interests in property of the Asbestos PI
Trust; and
5. proceeding in any manner in any place with regard to
any matter that is subject to resolution pursuant to the
Asbestos PD Trust Agreement, except in conformity and
compliance therewith.
(y) Notwithstanding section 3.2(d)(ii)(x) of the Plan, if, at the
time of the Effective Date, fewer than twenty-five (25) Asbestos Property Damage
Claims remain as Disputed Claims, AWI may elect, in its sole discretion, not to
create an Asbestos PD Trust. In such case, AWI will continue to litigate
objections to Asbestos Property Damage Claims in the Bankruptcy Court, and each
holder of an Allowed Asbestos Property Damage Claim shall be paid the Allowed
23
Amount of such Asbestos Property Damage Claim, in full, in cash, with such
payment to be funded exclusively from the proceeds of insurance available with
respect to Asbestos Property Damage Claims.
(iii) Selection of Trustees for the Asbestos PD Trust: If
Class 4 votes to accept the Plan and the Asbestos PD Trust is
created pursuant to section 3.2(d)(ii)(x) of the Plan, the
Asbestos PD Trustees shall be selected by the Asbestos PD
Committee. If Class 4 votes to reject the Plan and the Asbestos
PD Trust is created pursuant to section 3.2(d)(ii)(x) of the
Plan, AWI will select the Asbestos PD Trustees, by notice filed
with the Bankruptcy Court on or before ten (10) days prior to the
date of the commencement of the hearing on confirmation of the
Plan.
(iv) Claims Resolution Procedures: If the Asbestos PD Trust
is created pursuant to section 3.2(d)(ii)(x) of the Plan, the
Asbestos PD Claims Resolution Procedures will govern and control
in all respects the allowance and payment of Asbestos Property
Damage Claims. Otherwise, the allowance of Asbestos Property
Damage Claims shall be governed by applicable bankruptcy and
non-bankruptcy law.
(v) Status: Class 4 is impaired. To the extent and in the
manner provided in the Voting Procedures Order, the holders of
the Claims in Class 4 are entitled to vote to accept or reject
the Plan.
(e) CLASS 5. COLI CLAIMS.
(i) Classification: Class 5 consists of all Allowed COLI
Claims.
(ii) Treatment: In accordance with section 1124 of the
Bankruptcy Code, notwithstanding any contractual provision or
applicable law that entitles the holder of an Allowed COLI Claim
to demand or receive payment of such Claim prior to the stated
maturity of such Claim from and after the occurrence of a default
under the agreements governing or instruments evidencing such
Claim, such Claim shall be reinstated, and AWI shall (i) cure all
defaults that occurred before or from and after the Commencement
Date (other than defaults of a kind specified in section
365(b)(2) of the Bankruptcy Code), (ii) reinstate the maturity of
such Claim as such maturity existed prior to the occurrence of
such default, (iii) compensate the holder of such Claim for any
damages incurred as a consequence of any reasonable reliance by
such holder on such contractual provision or such applicable law,
and (iv) not otherwise alter the legal, equitable, or contractual
rights to which the holder of such Claim is entitled.
(iii) Status: Class 5 is not impaired. The holders of the
Claims in Class 5 are deemed to accept the Plan and, accordingly,
are not entitled to vote to accept or reject the Plan.
(f) CLASS 6. UNSECURED CLAIMS OTHER THAN CONVENIENCE CLAIMS.
(i) Classification: Class 6 consists of Unsecured Claims
other than Convenience Claims.
24
(ii) Treatment: Each holder of an Allowed Unsecured Claim in
Class 6 will receive on each Distribution Date its Pro Rata Share
of the following elements of Reorganization Consideration:
1. 34.43% of the New Common Stock,
2. 34.43% of the first $1.05 billion of (x) up to $300
million of Available Cash and (y) the Plan Notes and/or 144A
Offering Proceeds,
3. 60% of the first $50 million of the amount of
Available Cash remaining after making provision for the
Distribution provided in section 3.2(f)(ii)2 of the Plan and
the funding of the Asbestos PI Trust in section 10.1(b)(ii)
of the Plan,
4. 60% of the amount of Plan Notes and/or 144A Offering
Proceeds equal to the difference (if positive) of $50
million less the amount of Available Cash remaining after
making provision for the Distribution provided in section
3.2(f)(ii)2 of the Plan and the funding of the Asbestos PI
Trust in section 10.1(b)(ii) of the Plan, and
5. 34.43% of the remaining Available Cash and Plan
Notes and/or 144A Offering Proceeds after making provision
for the Distribution provided in sections 3.2(f)(ii)2,
3.2(f)(ii)3, and 3.2(f)(ii)4 of the Plan and the funding of
the Asbestos PI Trust in sections 10.1(b)(ii), 10.1(b)(iii)
and 10.1(b)(iv) of the Plan.
In any Distribution made to the holder of an Allowed
Unsecured Claim, there shall be deducted from such
Distribution the amount of each element of the
Reorganization Consideration (computed as provided in this
section 3.2(f)(ii)) previously distributed to such holder on
account of such Allowed Unsecured Claim in any Distribution
made prior thereto.
(iii) Interest: Interest shall neither accrue nor be payable
from and after the Commencement Date with respect to Allowed
Unsecured Claims.
(iv) Status: Class 6 is impaired. To the extent and in the
manner provided in the Voting Procedures Order, the holders of
the Claims in Class 6 are entitled to vote to accept or reject
the Plan.
(g) CLASS 7. ASBESTOS PERSONAL INJURY CLAIMS.
(i) Classification: Class 7 consists of all Asbestos
Personal Injury Claims.
(ii) Treatment: All Asbestos Personal Injury Claims shall be
determined and paid pursuant to the terms, provisions, and
procedures of the Asbestos PI Trust, the Asbestos PI Trust
Distribution Procedures, and the Asbestos PI Trust Agreement. The
Asbestos PI Trust will be funded in accordance with the
provisions of section 10.1 of the Plan. The sole recourse of the
holder of an Asbestos Personal Injury Claim shall be the Asbestos
PI Trust, and such holder shall have no right whatsoever at any
time to assert its Asbestos Personal Injury Claim against any PI
25
Protected Party. WITHOUT LIMITING THE FOREGOING, ON THE EFFECTIVE
DATE, ALL ENTITIES SHALL BE PERMANENTLY AND FOREVER STAYED,
RESTRAINED, AND ENJOINED FROM TAKING ANY OF THE FOLLOWING ACTIONS
FOR THE PURPOSE OF, DIRECTLY OR INDIRECTLY, COLLECTING,
RECOVERING, OR RECEIVING PAYMENT OF, ON, OR WITH RESPECT TO ANY
ASBESTOS PERSONAL INJURY CLAIM (OTHER THAN ACTIONS BROUGHT TO
ENFORCE ANY RIGHT OR OBLIGATION UNDER THE PLAN, ANY EXHIBITS TO
THE PLAN, OR ANY OTHER AGREEMENT OR INSTRUMENT BETWEEN AWI OR
REORGANIZED AWI AND THE ASBESTOS PI TRUST, WHICH ACTIONS SHALL BE
IN CONFORMITY AND COMPLIANCE WITH THE PROVISIONS HEREOF):
1. COMMENCING, CONDUCTING, OR CONTINUING IN ANY MANNER,
DIRECTLY OR INDIRECTLY, ANY SUIT, ACTION, OR OTHER
PROCEEDING (INCLUDING, WITHOUT EXPRESS OR IMPLIED
LIMITATION, A JUDICIAL, ARBITRAL, ADMINISTRATIVE, OR OTHER
PROCEEDING) IN ANY FORUM AGAINST OR AFFECTING ANY PI
PROTECTED PARTY OR ANY PROPERTY OR INTERESTS IN PROPERTY OF
ANY PI PROTECTED PARTY;
2. ENFORCING, LEVYING, ATTACHING (INCLUDING, WITHOUT
EXPRESS OR IMPLIED LIMITATION, ANY PREJUDGMENT ATTACHMENT),
COLLECTING, OR OTHERWISE RECOVERING BY ANY MEANS OR IN ANY
MANNER, WHETHER DIRECTLY OR INDIRECTLY, ANY JUDGMENT, AWARD,
DECREE, OR OTHER ORDER AGAINST ANY PI PROTECTED PARTY OR ANY
PROPERTY OR INTERESTS IN PROPERTY OF ANY PI PROTECTED PARTY;
3. CREATING, PERFECTING, OR OTHERWISE ENFORCING IN ANY
MANNER, DIRECTLY OR INDIRECTLY, ANY ENCUMBRANCE AGAINST ANY
PI PROTECTED PARTY OR ANY PROPERTY OR INTERESTS IN PROPERTY
OF ANY PI PROTECTED PARTY;
4. SETTING OFF, SEEKING REIMBURSEMENT OF, CONTRIBUTION
FROM, OR SUBROGATION AGAINST, OR OTHERWISE RECOUPING IN ANY
MANNER, DIRECTLY OR INDIRECTLY, ANY AMOUNT AGAINST ANY
LIABILITY OWED TO ANY PI PROTECTED PARTY OR ANY PROPERTY OR
INTERESTS IN PROPERTY OF ANY PI PROTECTED PARTY; AND
5. PROCEEDING IN ANY MANNER IN ANY PLACE WITH REGARD TO
ANY MATTER THAT IS SUBJECT TO RESOLUTION PURSUANT TO THE
ASBESTOS PI TRUST AGREEMENT, EXCEPT IN CONFORMITY AND
COMPLIANCE THEREWITH.
Nothing contained herein shall constitute or be deemed a
waiver of any claim, right, or cause of action that AWI,
Reorganized AWI, or the Asbestos PI Trust may have against
any Entity in connection with or arising out of an Asbestos
Personal Injury Claim, and the injunction shall not apply to
the assertion of any such claim, right, or cause of action
by AWI, Reorganized AWI, or the Asbestos PI Trust.
(iii) Status: Class 7 is impaired. To the extent and in the
manner provided in the Voting Procedures Order, the holders of
the Claims in Class 7 are entitled to vote to accept or reject
the Plan.
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(h) CLASS 8. ENVIRONMENTAL CLAIMS.
(i) Classification: Class 8 consists of all Environmental
Claims.
(ii) Treatment: Each holder of an Environmental Claim shall
be entitled to treatment of its Environmental Claim and receive
such consideration as is provided in the settlement agreement
applicable to such Environmental Claim. Without limiting the
provisions of such settlement agreement, to the extent any
portion of an Environmental Claim becomes Allowed prior to any
Distribution Date, such Environmental Claim shall be deemed to
constitute, and will be treated as, an Allowed Unsecured Claim
under Class 6 of the Plan. The sole recourse of the holders of
Environmental Claims shall be in accordance with the rights of
such holders set forth in such settlement agreement. Nothing
contained herein or in any settlement agreement relating to an
Environmental Claim shall constitute or be deemed a waiver of any
claim, right, or cause of action that AWI or Reorganized AWI may
have against any Entity that is not a party to such settlement
agreement.
(iii) Status: Class 8 is impaired. To the extent and in the
manner provided in the Voting Procedures Order, the holders of
the Claims in Class 8 are entitled to vote to accept or reject
the Plan.
(i) CLASS 9. AFFILIATE CLAIMS.
(i) Classification: Class 9 consists of Affiliate Claims.
(ii) Treatment: In accordance with section 1124 of the
Bankruptcy Code, the legal, equitable, and contractual rights to
which such Allowed Affiliate Claims entitle the holder of any
such Claims shall be unaltered.
(iii) Status. Class 9 is unimpaired. The holders of the
Claims in Class 9 are deemed to accept the Plan and, accordingly,
are not entitled to vote to accept or reject the Plan.
(j) CLASS 10. SUBSIDIARY DEBT GUARANTEE CLAIMS.
(i) Classification: Class 10 consists of all Subsidiary Debt
Guarantee Claims.
(ii) Treatment: In accordance with section 1124 of the
Bankruptcy Code, each Subsidiary Debt Guarantee Claim shall be
reinstated.
(iii) Status: Class 10 is not impaired. The holders of
Claims in Class 10 are deemed to accept the Plan and,
accordingly, are not entitled to vote to accept or reject the
Plan.
(k) CLASS 11. EMPLOYEE BENEFIT CLAIMS.
(i) Classification: Class 11 consists of all Employee
Benefit Claims.
27
(ii) Treatment: In accordance with section 1124 of the
Bankruptcy Code, each Employee Benefit Claim shall be reinstated.
(iii) Status: Class 11 is not impaired. The holders of
Claims in Class 11 are deemed to accept the Plan and,
accordingly, are not entitled to vote to accept or reject the
Plan.
(l) CLASS 12. EQUITY INTERESTS.
(i) Classification: Class 12 consists of Equity Interests.
(ii) Treatment: If the Holdings Plan of Liquidation receives
the requisite approvals of the Board of Directors and
shareholders of Holdings prior to the first anniversary of the
Effective Date, Reorganized AWI shall issue the New Warrants in
respect of the Equity Interests in AWI as provided in section
7.25 hereof; provided, however, that, if Class 6 votes to reject
the Plan, no distribution shall be made under the Plan from AWI's
estate in respect of the Equity Interests in AWI but, in such
event (and assuming the required approvals of the Board of
Directors and shareholders of Holdings of the Holdings Plan of
Liquidation have been received by the first anniversary of the
Effective Date), Reorganized AWI shall issue the New Warrants as
provided in section 7.25 hereof in respect of the Asbestos
Personal Injury Claims and in accordance with section 10.1(b)
hereof. If the Holdings Plan of Liquidation does not receive the
requisite approvals of the Board of Directors and shareholders of
Holdings by the first anniversary of the Effective Date, no
distribution shall be made under the Plan in respect of the
Equity Interests in AWI, and no New Warrants shall be issued. On
the Effective Date, the certificates that previously evidenced
ownership of Existing AWI Common Stock shall be cancelled and
shall be null and void, the holder(s) thereof shall no longer
have any rights in respect of the Equity Interests in AWI, and
such certificates shall not evidence any rights under the Plan.
(iii) Status: Class 12 is impaired. To the extent and in the
manner provided in the Voting Procedures Order, the holder of the
Equity Interests in Class 12 is entitled to vote to accept or
reject the Plan; provided, however, if Class 6 votes to reject
the Plan, Class 12 shall be deemed to have rejected the Plan.
3.3 In the event of a controversy as to whether any class of
Claims or Equity Interests is impaired under the Plan, the Bankruptcy Court
shall, after notice and a hearing, determine such controversy prior to the
Confirmation Date.
ARTICLE IV
MODIFICATION, REVOCATION, OR WITHDRAWAL OF THE PLAN
4.1 Modification of the Plan. AWI may, with the written consent
of the Future Claimants' Representative, the Asbestos PI Claimants' Committee,
and, if Class 6 has not voted to reject the Plan at the time of the requested
alteration, amendment, or modification, the Unsecured Creditors' Committee,
alter, amend, or modify the Plan under section 1127(a) of the Bankruptcy Code at
any time prior to the Confirmation Date so long as the Plan, as modified, meets
28
the requirements of sections 1122 and 1123 of the Bankruptcy Code. After the
Confirmation Date and prior to the Effective Date, AWI, with the written consent
of the Future Claimants' Representative, the Asbestos PI Claimants' Committee,
and, if Class 6 votes to accept the Plan, the Unsecured Creditors' Committee,
may alter, amend, or modify the Plan in accordance with section 1127(b) of the
Bankruptcy Code.
4.2 Revocation or Withdrawal.
(a) Right to Revoke. The Plan may be revoked or withdrawn prior
to the Confirmation Date by AWI, with the written consent of the Future
Claimants' Representative, the Asbestos PI Claimants' Committee, and, if Class 6
has not voted to reject the Plan at the time of the requested revocation or
withdrawal, the Unsecured Creditors' Committee, or, after the Confirmation
Deadline, by AWI.
(b) Effect of Withdrawal or Revocation. If the Plan is revoked or
withdrawn prior to the Confirmation Date, then the Plan shall be deemed null and
void. In such event, nothing contained herein shall be deemed to constitute a
waiver or release of any claims or defenses or any admission or statement
against interest by AWI, the Asbestos PI Claimants' Committee, the Future
Claimants' Representative, the Unsecured Creditors' Committee, or any other
Entity or to prejudice in any manner the rights of AWI, the Asbestos PI
Claimants' Committee, the Future Claimants' Representative, the Unsecured
Creditors' Committee, or any Entity in any further proceedings involving AWI.
4.3 Amendment of Plan Documents. From and after the Effective
Date, the authority to amend, modify, or supplement the Exhibits to the Plan and
any documents attached to such Exhibits shall be as provided in such Exhibits
and their respective attachments.
ARTICLE V
PROVISIONS FOR TREATMENT OF DISPUTED CLAIMS
5.1 Objections to Claims; Prosecution of Disputed Claims.
Reorganized AWI shall object to the allowance of Claims filed with the
Bankruptcy Court (other than Asbestos Personal Injury Claims and Asbestos
Property Damage Claims) with respect to which Reorganized AWI disputes liability
in whole or in part. Notwithstanding the foregoing, Reorganized AWI, at its
option, may continue to prosecute objections to Asbestos Property Damage Claims
if such objections are pending as of the Effective Date, and AWI elects,
pursuant to section 3.2(d)(ii)(y) of the Plan, not to create the Asbestos PD
Trust. All objections that are filed and prosecuted by Reorganized AWI as
provided herein shall be litigated to Final Order by Reorganized AWI or
compromised and settled in accordance with the Claims Settlement Guidelines.
Unless otherwise provided herein or ordered by the Bankruptcy Court, all
objections by Reorganized AWI to Claims shall be served and filed no later than
ninety (90) days after the Effective Date.
5.2 Claims Settlement Guidelines. The Confirmation Order shall
approve the amendment to the Claims Settlement Guidelines, as set forth in
Exhibit 1.46 to the Plan.
5.3 Distributions on Account of Disputed Claims. Notwithstanding
section 3.2 hereof, a Distribution shall only be made by Reorganized AWI to the
holder of a Disputed Claim when, and to the extent that, such Disputed Claim
becomes Allowed. No interest shall be paid on account of Disputed Claims that
later become Allowed except to the extent that payment of interest is required
29
under section 506(b) of the Bankruptcy Code. No Distribution shall be made with
respect to all or any portion of any Disputed Claim pending the entire
resolution thereof in the manner prescribed by section 5.1 hereof.
5.4 Disputed Unsecured Claims Reserve. On the Initial
Distribution Date, if the Plan Notes are issued, Reorganized AWI will establish
the Disputed Unsecured Claims Reserve, pursuant to which Plan Notes not
distributed on the Initial Distribution Date or on any subsequent Distribution
will be issued but held in trust by the Disbursing Agent pending the resolution
of Disputed Claims. In accordance with and subject to the provisions of sections
3.2(f)(ii), 5.3, and 7.9 of the Plan, any Distribution of Plan Notes with
respect to a Disputed Claim that becomes Allowed shall include interest and
other accretions with respect to such Plan Notes, net of the portion of expenses
(including, without limitation, taxes payable by the Disputed Unsecured Claims
Reserve) attributable to such Plan Notes.
5.5 Tax Treatment of Disputed Unsecured Claims Reserve.
(a) Subject to definitive guidance from the IRS or a court of
competent jurisdiction to the contrary (including the receipt by the Disbursing
Agent of a private letter ruling if the Disbursing Agent so requests one, or the
receipt of an adverse determination by the IRS upon audit if not contested by
the Disbursing Agent), the Disbursing Agent shall (i) treat the Disputed
Unsecured Claims Reserve established to hold Plan Notes and any earnings with
respect thereto as a discrete trust for federal income tax purposes, consisting
of separate and independent shares to be established in respect of each Disputed
Claim in Class 6, in accordance with the trust provisions of the Tax Code
(sections 641 et seq.), and (ii) to the extent permitted by applicable law,
report consistently with the foregoing for state and local income tax purposes.
All parties (including Reorganized AWI and all holders of Claims in Class 6)
shall report, for tax purposes, consistently with such treatment.
(b) The Disbursing Agent may request an expedited determination
of taxes under section 505(b) of the Bankruptcy Code for all tax returns filed
for, or on behalf of, the Disputed Unsecured Claims Reserve for all taxable
periods through the termination of such reserve.
ARTICLE VI
ACCEPTANCE OR REJECTION OF THE PLAN
6.1 Impaired Classes to Vote. Each holder of a Claim in an
impaired Class of Claims shall be entitled to vote to accept or reject the Plan
to the extent and in the manner provided by the Voting Procedures Order.
6.2 Acceptance by Class of Claims. Acceptance of the Plan by any
impaired Class of Claims shall be determined in accordance with the Voting
Procedures Order.
6.3 Nonconsensual Confirmation. In the event that any impaired
Class of Claims shall fail to accept the Plan in accordance with section 1129(a)
of the Bankruptcy Code, AWI reserves the right to (a) request that the
Bankruptcy Court confirm the Plan in accordance with section 1129(b) of the
Bankruptcy Code with respect to such non-accepting Class, in which case the Plan
shall constitute a motion for such relief, or (b) amend the Plan in accordance
with section 4.1 hereof.
30
ARTICLE VII
IMPLEMENTATION OF THE PLAN
7.1 Creation of Asbestos PI Trust. Effective as of the later of
(i) the date the Asbestos PI Trustees have executed the Asbestos PI Trust
Agreement and (ii) the Effective Date, the Asbestos PI Trust shall be created.
The Asbestos PI Trust is intended to be a "qualified settlement fund" within the
meaning of section 468B of the Internal Revenue Code. The purpose of the
Asbestos PI Trust shall be to, among other things, (a) direct the processing,
liquidation, and payment of all Asbestos Personal Injury Claims in accordance
with the Plan, the Asbestos PI Trust Distribution Procedures, and the
Confirmation Order and (b) preserve, hold, manage, and maximize the assets of
the Asbestos PI Trust for use in paying and satisfying Asbestos Personal Injury
Claims.
7.2 Appointment of Asbestos PI Trustees. On the Confirmation
Date, effective as of the Effective Date, the Bankruptcy Court shall appoint the
individuals selected jointly by the Asbestos PI Claimants' Committee and the
Future Claimants' Representative (as identified in Exhibit 7.2 to the Plan),
which individuals shall be appointed after consultation with AWI, to serve as
the Asbestos PI Trustees for the Asbestos PI Trust.
7.3 Creation of Asbestos PD Trust. Subject to section
3.2(d)(ii)(y) of the Plan, effective as of the later of (i) the date the
Asbestos PD Trustees have executed the Asbestos PD Trust Agreement and (ii) the
Effective Date, the Asbestos PD Trust shall be created. The Asbestos PD Trust is
intended to be a "qualified settlement fund" within the meaning of section 468B
of the Internal Revenue Code. The purpose of the Asbestos PD Trust shall be to,
among other things, (a) direct the processing, liquidation, and payment of all
Asbestos Property Damage Claims in accordance with the Plan, the Asbestos PD
Claims Resolution Procedures, and the Confirmation Order and (b) preserve, hold,
manage, and maximize the assets of the Asbestos PD Trust for use in paying and
satisfying Asbestos Property Damage Claims.
7.4 144A Offering. AWI will use reasonable efforts to effect the
144A Offering on or as soon as practicable after the Effective Date such that
the 144A Offering yields net proceeds in an amount at least equal to the Plan
Note Amount, in which case the Plan Notes will not be issued under the Plan. AWI
will not complete a 144A Offering that yields net proceeds less than the amount
of the Plan Note Amount without the consent of the Asbestos PI Claimants'
Committee, the Future Claimants' Representative, and, if Class 6 votes to accept
the Plan, the Unsecured Creditors' Committee. If a 144A Offering is completed,
but yields net proceeds less than the Plan Note Amount, then Reorganized AWI
will issue Plan Notes in an aggregate amount equal to the Plan Note Amount less
the net proceeds of the 144A Offering.
7.5 Amendment of Articles of Incorporation. The Articles of
Incorporation shall be amended and restated as of the Effective Date in
substantially the form of the Amended and Restated Articles of Incorporation,
inter alia, (a) to prohibit the issuance of nonvoting equity securities as
required by section 1123(a)(6) of the Bankruptcy Code, subject to further
amendment of such Amended and Restated Articles of Incorporation as permitted by
applicable law, and (b) to authorize 215 million (215,000,000) shares of capital
stock of which (i) 200 million (200,000,000) shares will be shares of common
stock, and (ii) 15 million shares will be preferred stock of Reorganized AWI,
with such rights, preferences and privileges as may be determined by the Board
of Directors. Pursuant to the Plan, of the 200 million shares of common stock
(A) sixty to seventy million (60,000,000-70,000,000) shares shall be New Common
Stock issued under the Plan, (B) an amount equal to 5% of the New Common Stock
31
on a fully diluted basis determined as of the Effective Date shall be reserved
for issuance upon exercise of the New Warrants, and (C) a portion shall be
reserved for issuance under the New Long-Term Incentive Plan, and (D) the
remainder shall be reserved for future issuance.
7.6 Amendment of By-Laws. The By-Laws of AWI shall be amended and
restated as of the Effective Date in substantially the form of the Amended and
Restated By-Laws.
7.7 Stockholder and Registration Rights Agreement: On the
Effective Date, AWI and the Asbestos PI Trust shall enter into the Stockholder
and Registration Rights Agreement, which will provide, among other things, for
the registration by Reorganized AWI of shares of New Common Stock and Plan Notes
owned by the Asbestos PI Trust for public sale in certain circumstances, will
provide for rights of others to participate in certain sales of New Common Stock
and Plan Notes by the Asbestos PI Trust, and will establish certain requirements
for amendment of provisions of the Amended and Restated Articles of
Incorporation and the Amended and Restated Bylaws.
7.8 Distributions under the Plan. Whenever any Distribution to be
made under this Plan shall be due on a day other than a Business Day, such
Distribution shall instead be made, without interest, on the immediately
succeeding Business Day, but shall be deemed to have been made on the date due.
7.9 Timing of Distributions under the Plan. Any Distribution to
be made by AWI or Reorganized AWI pursuant to the Plan shall be deemed to have
been timely made if made within ten (10) days after the time therefore specified
in the Plan. No interest shall accrue or be paid with respect to any
Distribution as a consequence of such Distribution not having been made on the
Effective Date; provided, however, that any Plan Notes distributed from the
Disputed Unsecured Claims Reserve after the Initial Distribution Date shall
include accrued interest and any other accretions thereon (net of the portion of
the expenses of the Disputed Unsecured Claims Reserve (including, without
limitation, taxes) attributable to such Plan Notes) from and after the Initial
Distribution Date in accordance with the terms of the Plan Note Indenture, and
New Common Stock issued to holders of Allowed Claims in Classes 6 and 8 after
the Effective Date shall include all dividends declared and paid and other
distributions made in respect thereto after the Effective Date.
(a) Distributions with Respect to Unsecured Claims and
Environmental Claims. Distributions with respect to Classes 6 and 8 shall only
be made on each Distribution Date; provided, however, that, if a Claim in any of
Classes 6 or 8 becomes Allowed subsequent to the Initial Distribution Date, AWI
may, in its sole discretion, make a Distribution with respect to such Claim
prior to a Distribution Date. For purposes of treatment and Distribution under
the Plan, except as provided with respect to treatment of Claims in the voting
procedures approved by the Voting Procedures Order, all Unsecured Claims held by
a Creditor shall be aggregated and treated as a single Claim. At the written
request of AWI or the Disbursing Agent, any Creditor holding multiple Unsecured
Claims shall provide to AWI or the Disbursing Agent, as the case may be, a
single address to which any Distributions shall be sent. At the written request
of any Creditor holding multiple Unsecured Claims made to the Disbursing Agent
within thirty (30) days prior to a Distribution Date, such Creditor shall
receive an itemized statement of the Unsecured Claims for which the Distribution
is being made.
(b) Distribution to the Asbestos PI Trust. The Distribution to
the Asbestos PI Trust shall be made on the later of (a) the date the Asbestos PI
Trustees have executed the Asbestos PI Trust Agreement and (b) the Effective
32
Date; provided, however, that if AWI intends to complete the 144A Offering, then
the Distribution of the 144A Offering Proceeds and/or Plan Notes to the Asbestos
PI Trust shall occur as soon as practicable after the 144A Offering is completed
or Reorganized AWI determines not to complete a 144A Offering, but in no event
shall such Distribution occur after the Initial Distribution Date.
(c) Distribution to the Asbestos PD Trust. If Class 4 votes to
accept the Plan and the Asbestos PD Trust is created pursuant to section
3.2(d)(ii)(x) of the Plan, the Distribution of the Asbestos PD Trust Funding
Obligation will be made on the later of (i) the date the Asbestos PD Trustees
are selected for the Asbestos PD Trust and have executed the Asbestos PD Trust
Agreement and (ii) the Effective Date. If Class 4 votes to reject the Plan and
the Asbestos PD Trust is created pursuant to section 3.2(d)(ii)(x) of the Plan,
the Distribution of the Asbestos PD Trust Funding Obligation will be made on the
latest of (x) the date an order of the Bankruptcy Court estimating the aggregate
value of all Asbestos Property Damage Claims becomes a Final Order, (y) the
Effective Date, and (z) the date the Asbestos PD Trustees have executed the
Asbestos PD Trust Agreement.
7.10 Disbursing Agent. All distributions under the Plan shall be
made by Reorganized AWI as Disbursing Agent or such other entity designated by
Reorganized AWI as a Disbursing Agent. The Disbursing Agent shall not be
required to give any bond or surety or other security for the performance of its
duties unless otherwise ordered by the Bankruptcy Court, and, in the event that
a Disbursing Agent is so otherwise ordered, all costs and expenses of procuring
any such bond or surety shall be borne by Reorganized AWI. Distributions on
account of Debt Security Claims shall be made to the Indenture Trustee under the
applicable Indenture for subsequent distribution to the holders of the Debt
Security Claims, and upon such Distribution to the Indenture Trustees, AWI and
Reorganized AWI shall have no further obligations with respect thereto.
7.11 Record Date. Except as and to the extent otherwise required
by customary procedures of the DTC with respect to Debt Security Claims, as of
the close of business on the Record Date, the various transfer and claims
registers for each of the classes of Claims as maintained by AWI, its respective
agents, or the Indenture Trustees shall be deemed closed, and there shall be no
further changes in the record holders of any of the Claims. AWI and Reorganized
AWI shall have no obligation to recognize any transfer of the Claims occurring
after the close of business on the Record Date. AWI, Reorganized AWI, the
Disbursing Agent, and the Indenture Trustees shall be entitled to recognize and
deal hereunder only with those record holders stated on the transfer ledgers as
of the close of business on the Record Date, to the extent applicable.
7.12 Distributions to Holders of Debt Security Claims
Administered by the Indenture Trustees.
(a) Distributions to holders of Debt Security Claims administered
by the Indenture Trustees will be made on each Distribution Date by means of
book-entry exchange through the facilities of the DTC in accordance with the
customary practices of the DTC, as and to the extent practicable. In connection
with such book-entry exchange, each Indenture Trustee will deliver instructions
to the DTC directing the DTC to effect distributions on a pro rata basis of the
elements of Reorganization Consideration as provided under the Plan with respect
to the Debt Security Claims upon which such Indenture Trustee acts as trustee.
(b) The Indenture Trustees providing services related to
Distributions pursuant to the Plan will receive from Reorganized AWI reasonable
33
compensation for such services and reimbursement of reasonable out-of-pocket
expenses incurred in connection with such services in an amount pursuant to the
procedures set forth in section 7.20 herein.
7.13 Manner of Payment under the Plan. Unless the Entity
receiving a payment agrees otherwise, any payment in cash to be made by AWI or
Reorganized AWI shall be made, at the election of AWI or Reorganized AWI (as the
case may be), by check drawn on a domestic bank or by wire transfer from a
domestic bank.
7.14 Hart-Scott-Rodino Compliance. Any shares of New Common Stock
to be distributed under the Plan to any Entity required to file a Premerger
Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvement
Act of 1976, as amended, shall not be distributed until the notification and
waiting periods applicable under such Act to such Entity shall have expired or
been terminated.
7.15 Fractional Shares or Other Distributions. Notwithstanding
anything to the contrary contained herein, no fractional shares of New Common
Stock shall be distributed, no Plan Notes will be issued in an amount less than
$100, and no cash payments of fractions of cents will be made. Fractional cents
shall be rounded to the nearest whole cent (with .5 cent or less to be rounded
down). Fractional shares shall be rounded to the nearest whole share (with .5
share or less to be rounded down). Plan Notes in denominations of less than $100
shall be rounded to the nearest $100 increment (with Plan Notes in denominations
of $50 or less to be rounded down). No cash will be paid in lieu of such
fractional shares or Plan Notes in increments of less than $100.
7.16 Occurrence of the Confirmation Date. The following shall
constitute conditions to confirmation of the Plan:
(a) The Bankruptcy Court makes the following findings, each of
which shall be contained in the Confirmation Order:
(i) With respect to any Asbestos Personal Injury Claim that
is Allowed by the Asbestos PI Trust in accordance with the
Asbestos PI Trust Agreement and the Asbestos PI Trust
Distribution Procedures, such allowance shall establish the
amount of legal liability against the Asbestos PI Trust in the
amount of the liquidated value of such Claim, as determined in
accordance with the Asbestos PI Trust Distribution Procedures.
(ii) With respect to any Asbestos Property Damage Claim that
is Allowed by the Asbestos PD Trust in accordance with the
Asbestos PD Trust Agreement and the Asbestos PD Trust Claims
Resolution Procedures or is Allowed by a Final Order of the
Bankruptcy Court, such allowance shall establish the amount of
legal liability against the Asbestos PD Trust in the allowed
amount of such Claim, as determined in accordance with the
Asbestos PD Claims Resolution Procedures or such Bankruptcy Court
order, as the case may be.
(iii) The Asbestos PI Permanent Channeling Injunction is to
be implemented in connection with the Plan and the Asbestos PI
Trust.
(iv) The Plan and its Exhibits, including but not limited to
the transfer of the Asbestos PI Insurance Asset to the Asbestos
PI Trust, the Asbestos PI Trust Agreement, the Asbestos PI Trust
34
Distribution Procedures, and Articles X and XI of the Plan, are a
fair, equitable, and reasonable resolution of the liabilities of
AWI for Asbestos Personal Injury Claims and Asbestos Property
Damage Claims. The Plan and its Exhibits, and the negotiations
that led up to them, do not violate any obligation of AWI or
breach any applicable insurance policy, agreement or contract of
AWI, including, without limitation, obligations or duties to
cooperate under any insurance policies, contracts or agreements,
any management of claims provisions in any applicable insurance
policies or agreements or contracts pertaining thereto, or any
consent-to-assignment provisions of any applicable insurance
policies, contracts or agreements, or any consent-to-settlement
provisions of any applicable insurance policies, agreement or
contract of AWI, and AWI's discharge and release of Claims as
provided herein shall neither diminish nor impair the
enforceability of any such insurance policies, contracts or
agreements.
(v) AWI does not need the consent of its insurers to
transfer the Asbestos PI Insurance Asset to the Asbestos PI
Trust. In the alternative, AWI's insurers have an obligation not
to withhold consent to such transfer unreasonably, and the
refusal to consent to such transfer under the circumstances would
be unreasonable.
(vi) If Class 4 does not accept the Plan, AWI does not need
the consent of its insurers to transfer the Asbestos PD Insurance
Asset to the Asbestos PD Trust. In the alternative, AWI's
insurers have an obligation not to withhold consent to such
transfer unreasonably, and the refusal to consent to the transfer
under the circumstances would be unreasonable.
(vii) The Plan and its Exhibits, including but not limited
to the transfer of the Asbestos PI Insurance Asset to the
Asbestos PI Trust, the Asbestos PI Trust Agreement, the Asbestos
PI Trust Distribution Procedures, and Articles X and XI of the
Plan, do not materially increase any insurer's risk of providing
coverage for asbestos-related liabilities under the relevant
insurance policies, settlement agreements, and/or contracts with
respect thereto as compared to the risk that otherwise was being
borne by the insurers prior to the Effective Date.
(viii) Upon confirmation and consummation of the Plan,
including the effectuation of the transfer of the Asbestos PI
Insurance Asset, the Asbestos PI Trust shall have access to
insurance coverage and/or insurance payments pursuant to the
transfer of the Asbestos PI Insurance Asset so that the proceeds
of such insurance may be used to defend, resolve, and satisfy
(subject to any applicable policy limits) the Asbestos PI Trust's
obligations to defend, resolve and satisfy Asbestos Personal
Injury Claims, and no insurer shall have any insurance coverage
defense based on the Plan, the transfer of the Asbestos PI
Insurance Asset, the Asbestos PI Trust Agreement, or the Asbestos
PI Trust Distribution Procedures or allowance of claims
thereunder, or the negotiations that produced any of the
foregoing.
(ix) If Class 4 votes to reject the Plan and the Asbestos PD
Trust is established pursuant to section 3.2(d)(ii)(x) of the
Plan, upon confirmation and consummation of the Plan, including
the effectuation of the transfer of the Asbestos PD Insurance
Asset, the Asbestos PD Trust shall have access to insurance
35
coverage and/or insurance payments pursuant to the transfer of
the Asbestos PD Insurance Asset so that the proceeds of such
insurance may be used to defend, resolve, and satisfy (subject to
any applicable policy limits) the Asbestos PD Trust's obligations
to defend, resolve and satisfy Asbestos Property Injury Claims,
and no insurer shall have any insurance coverage defense based on
the Plan, the transfer of the Asbestos PD Insurance Asset, the
Asbestos PD Trust Agreement, or the Asbestos PD Claims Resolution
Procedures or allowance of claims thereunder, or the negotiations
that produced any of the foregoing.
(x) All insurers of AWI affording insurance coverage that is
the subject of the Asbestos PI Insurance Asset and all insurers
of AWI whose policies provide coverage for the Asbestos Property
Damage Claims addressed in Article XI of the Plan have been given
notice and an opportunity to be heard on matters relating to the
Plan and its Exhibits, and are bound by the Plan and its Exhibits
and the findings of fact and conclusions of law set forth in the
Confirmation Order.
(xi) The Plan complies with section 524(g) of the Bankruptcy
Code.
(xii) In light of the benefits provided, or to be provided,
to the Asbestos PI Trust on behalf of each PI Protected Party,
the Asbestos PI Permanent Channeling Injunction is fair and
equitable with respect to the persons that might subsequently
assert Asbestos Personal Injury Claims against any PI Protected
Party.
(xiii) At the time of the order for relief with respect to
AWI, AWI had been named as a defendant in personal injury,
wrongful death, and property damage actions seeking recovery for
damages allegedly caused by the presence of, or exposure to,
asbestos or asbestos-containing products.
(xiv) The Asbestos PI Trust, as of the Effective Date, will
assume the liabilities of AWI with respect to all Asbestos
Personal Injury Claims and, upon such assumption, Reorganized AWI
shall have no liability for any Asbestos Personal Injury Claim.
(xv) The Asbestos PI Trust is to be funded in whole or in
part by securities of Reorganized AWI and by the obligation of
Reorganized AWI to make future payments, including dividends.
(xvi) The Asbestos PI Trust is to own, or by the exercise of
rights granted under the Plan would be entitled to own if
specified contingencies occur, a majority of the voting shares of
AWI.
(xvii) AWI is likely to be subject to substantial future
Demands for payment arising out of the same or similar conduct or
events that gave rise to the Claims that are addressed by the
Asbestos PI Permanent Channeling Injunction.
(xviii) The actual amounts, numbers, and timing of the
future Demands referenced in section 7.16(a)(xvii) of the Plan
cannot be determined.
36
(xix) Pursuit of the Demands referenced in section
7.16(a)(xvii) of the Plan outside the procedures prescribed by
the Plan is likely to threaten the Plan's purpose to deal
equitably with Claims and future Demands.
(xx) The terms of the Asbestos PI Permanent Channeling
Injunction, including any provisions barring actions against
third parties pursuant to section 524(g)(4)(A) of the Bankruptcy
Code, are set out in the Plan and in any disclosure statement
supporting the Plan.
(xxi) The Plan establishes, in Class 7 (Asbestos Personal
Injury Claims), a separate class of the claimants whose Claims
are to be addressed by the Asbestos PI Trust.
(xxii) The Future Claimants' Representative was appointed as
part of the proceedings leading to issuance of the Asbestos PI
Permanent Channeling Injunction for the purpose of protecting the
rights of persons that might subsequently assert unknown Asbestos
Personal Injury Claims and Demands that are addressed in the
Asbestos PI Permanent Channeling Injunction and transferred to
the Asbestos PI Trust. The Future Claimants' Representative has
fulfilled his duties, responsibilities, and obligations as the
future representative in accordance with section 524(g) of the
Bankruptcy Code.
(xxiii) Identifying each PI Protected Party in the Asbestos
PI Permanent Channeling Injunction is fair and equitable with
respect to persons that might subsequently assert Demands against
each such PI Protected Party, in light of the benefits provided,
or to be provided, to the Asbestos PI Trust by or on behalf of
any such PI Protected Party.
(xxiv) Class 7 (Asbestos Personal Injury Claims) has voted,
by at least 75 percent (75%) of those voting, in favor of the
Plan.
(xxv) Pursuant to court orders or otherwise, the Asbestos PI
Trust will operate through mechanisms such as structured,
periodic, or supplemental payments, pro rata distributions,
matrices, or periodic review of estimates of the numbers and
values of Asbestos Personal Injury Claims and Demands, or other
comparable mechanisms, that provide reasonable assurance that the
Asbestos PI Trust will value, and be in a financial position to
pay, Asbestos Personal Injury Claims and Demands that involve
similar Claims in substantially the same manner.
(xxvi) If Class 4 votes to accept the Plan and the Asbestos
PD Trust is established pursuant to section 3.2(d)(ii)(x) of the
Plan, Travelers Indemnity Company, Travelers Casualty and Surety
Company, and Liberty Mutual Insurance Company (collectively) are
obligated under insurance policies that they issued to AWI with
inception dates prior to January 1, 1982 to distribute on the
Initial Distribution Date cash in the amount equal to the
Asbestos PD Trust Funding Obligation to the Asbestos PD Trust,
and are not entitled to obtain reimbursement of all or any part
of that amount from Reorganized AWI, including, but not limited
to, reimbursement under insurance policy provisions relating to
deductibles, premiums, retrospective premiums, or other charges.
37
(xxvii) If Class 6 votes to reject the Plan, the transfer of
the New Warrants to the holder of the Equity Interests will not
be subject to registration.
(b) Class 7 (Asbestos Personal Injury Claims) has voted, by at
least 75 percent (75%) of those voting, in favor of the Plan.
(c) The Confirmation Order shall be, in form and substance,
acceptable to the Asbestos PI Claimants' Committee, the Future Claimants'
Representative, and, if Class 6 votes to the accept the Plan, the Unsecured
Creditors' Committee.
(d) If Class 4 does not vote to accept the Plan and the Asbestos
PD Trust is established pursuant to section 3.2(d)(ii)(x) of the Plan, the
Bankruptcy Court has entered an Order estimating the aggregate value of all
Asbestos Property Damage Claims and determining that such value is not greater
than the amount of the insurance available to pay such claims under Section 11.3
of the Plan.
The Plan shall not be confirmed and the Confirmation Order shall not be entered
until and unless each of the foregoing conditions to confirmation is either
satisfied or waived in writing by each of AWE, the Asbestos PI Claimants'
Committee, the Future Claimants' Representative, and the Unsecured Creditors'
Committee.
7.17 Occurrence of the Effective Date. The "effective date of the
plan," as used in section 1129 of the Bankruptcy Code, shall not occur, and the
Plan shall be of no force and effect, until the Effective Date. The occurrence
of the Effective Date is subject to satisfaction of the following conditions
precedent:
(a) The Confirmation Order has become a Final Order.
(b) The Bankruptcy Court and/or the District Court, as required,
shall have entered the Asbestos PI Permanent Channeling Injunction (which may be
included in the Confirmation Order), which shall contain terms satisfactory to
AWI, the Asbestos PI Claimants' Committee, the Future Claimants' Representative,
and, if Class 6 votes to accept the Plan, the Unsecured Creditors' Committee.
(c) The Confirmation Order, the Claims Trading Injunction and the
Asbestos PI Permanent Channeling Injunction shall be in full force and effect.
(d) No proceedings to estimate any Claims shall be pending.
(e) All Asbestos PI Trustees shall have been selected and shall
have executed the Asbestos PI Trust Agreement.
(f) If Class 4 votes to reject the Plan, all Asbestos PD Trustees
shall have been selected and shall have executed the Asbestos PD Trust
Agreement.
(g) A favorable ruling shall have been obtained from the IRS with
respect to the qualification of the Asbestos PI Trust as a "qualified settlement
fund" within the meaning of Treasury Regulation section 1.468B-1, or AWI shall
have received an opinion of counsel with respect to the tax status of the
Asbestos PI Trust as a "qualified settlement fund" reasonably satisfactory to
AWI, the Asbestos PI Claimants' Committee, the Future Claimants' Representative,
and, if Class 6 votes to accept the Plan, the Unsecured Creditors' Committee.
38
(h) Reorganized AWI shall have entered into and shall have credit
availability under a credit facility to provide Reorganized AWI with working
capital (including letters of credit) in an amount sufficient to meet the needs
of Reorganized AWI, as determined by Reorganized AWI.
(i) Each of the Exhibits shall be in form and substance
acceptable to AWI, the Asbestos PI Claimants' Committee, the Future Claimants'
Representative, and the Unsecured Creditors' Committee.
Notwithstanding the foregoing, AWI reserves, in its sole discretion, the right,
with the written consent of the Asbestos PI Claimants' Committee, the Future
Claimants' Representative, and, if Class 6 votes to accept the Plan, the
Unsecured Creditors' Committee, to waive the occurrence of any of the foregoing
conditions precedent to the Effective Date or to modify any of such conditions
precedent. Any such written waiver of a condition precedent set forth in this
section may be effected at any time, without notice, without leave or order of
the Bankruptcy Court or the District Court, and without any formal action other
than proceeding to consummate the Plan. Any actions required to be taken on the
Effective Date shall take place and shall be deemed to have occurred
simultaneously, and no such action shall be deemed to have occurred prior to the
taking of any other such action. If AWI decides that one of the foregoing
conditions cannot be satisfied, and the occurrence of such condition is not
waived in writing by each of AWI, the Asbestos PI Claimants' Committee, the
Future Claimants' Representative, and, if required, the Unsecured Creditors'
Committee, then AWI shall file a notice of the failure of the Effective Date
with the Bankruptcy Court, at which time the Plan and the Confirmation Order
shall be deemed null and void.
7.18 Cancellation of Existing Debt Securities.
(a) As of the Effective Date, all notes, agreements, and
securities evidencing Unsecured Claims and the rights of the holders thereof
thereunder shall be cancelled and deemed null and void and of no further force
and effect, and the holders thereof shall have no rights, and such instruments
shall evidence no rights, except the right to receive the Distributions provided
herein.
(b) Notwithstanding any other provisions in the Plan, each
Indenture or other agreement that governs the rights of a holder of a Debt
Security Claim that is administered by an Indenture Trustee shall continue in
effect solely for the purposes of permitting the applicable Indenture Trustee
thereunder (i) to make distributions to such holder pursuant to the terms of the
applicable Indenture; (ii) maintain any rights and liens it may have for any
unpaid fees, costs, expenses, and indemnification under such Indenture or other
agreement, provided, however, such rights and liens are limited to the
Distributions, if any, to such holders; and (iii) to be paid by such holders or
reimbursed for such prepetition and postpetition fees, costs, expenses, and
indemnification (to the extent not paid as an Administrative Expense or
otherwise) from the Distributions, if any, to such holders (until payment in
full of such fees, costs, expenses or indemnification) on the terms and
conditions set forth by the respective Indenture, other agreement, or applicable
law.
7.19 Expiration of the Retention Period. Upon the expiration of
the Retention Period, all monies or other property held for distribution by any
trustee under any indenture governing any of the Unsecured Claims shall be
returned to Reorganized AWI by such trustee, free and clear of any claim or
interest of any nature whatsoever, including, without express or implied
limitation, escheat rights of any governmental unit under applicable law.
39
7.20 Compensation of the Applicable Indenture Trustees.
Reorganized AWI will pay the Indenture Trustees' Fees and Expenses to the extent
that an Indenture Trustee makes a written request for Indenture Trustees' Fees
and Expenses within thirty (30) days after the Effective Date. Although it will
not be necessary for the Indenture Trustees to apply to the Bankruptcy Court for
approval of the Indenture Trustees' Fees and Expenses, any dispute between
Reorganized AWI and an Indenture Trustee regarding the reasonableness of any
such fees and expenses shall be resolved by the Bankruptcy Court. Each Indenture
Trustee shall be compensated by Reorganized AWI for services rendered from and
after the Effective Date, including the reasonable compensation, disbursements,
and expenses of the agents and legal counsel of such trustee in connection with
the performance after the Effective Date of its duties under this section, and
shall be indemnified by Reorganized AWI for any loss, liability, or expense
incurred by it in connection with the performance of such duties to the same
extent and in the same manner as provided in the related indenture.
7.21 Distribution of Unclaimed Property. Any Distribution under
the Plan that is unclaimed after one hundred eighty (180) days following the
date such property is distributed shall be deemed not to have been made and
shall be transferred to Reorganized AWI, free and clear of any claims or
interests of any Entities, including, without express or implied limitation, any
claims or interests of any governmental unit under escheat principles. Nothing
contained herein shall affect the discharge of the Claim with respect to which
such Distribution was made, and the holder of such Claim shall be forever barred
from enforcing such Claim against Reorganized AWI or Reorganized AWI's assets,
estate, properties, or interests in property.
7.22 Management of Reorganized AWI. On the Effective Date, the
Board of Directors shall consist of at least three individuals who at that time
qualify under New York Stock Exchange rules and applicable laws as independent,
outside directors, and are eligible to serve on the audit committee of the Board
of Directors, as an SEC-reporting public company, and at least three individuals
who qualify as independent directors under section 162(m) of the Internal
Revenue Code eligible to serve on the committee of the Board of Directors of
Reorganized AWI responsible for matters of executive compensation. Each of the
members of such Board of Directors shall be identified on Exhibit 7.22 to the
Plan and shall serve in accordance with the Amended and Restated Articles of
Incorporation, the Amended and Restated By-Laws, and the Stockholder and
Registration Rights Agreement. The officers of AWI immediately prior to the
Effective Date shall serve as the officers of Reorganized AWI in accordance with
the terms of any employment agreements pursuant to section 8.8 of the Plan and
the requirements of applicable nonbankruptcy law.
7.23 Listing of Reorganized AWI Common Stock. Reorganized AWI
shall use its best efforts to obtain, as of or as soon as practicable after the
Effective Date, the listing of its common stock for trading on the New York
Stock Exchange or for quotation in the NASDAQ Stock Market and, for so long as
there are at least 300 holders of shares of its common stock, to continue the
listing of its common stock for trading on either of such markets.
7.24 Corporate Reorganization Actions. On or as soon as
practicable after the Effective Date, Reorganized AWI shall take such actions as
may be or become necessary to effectuate the following, all of which shall be
authorized and approved in all respects, in each case without further action
being required under applicable law, regulation, order, or rule (including,
without limitation, any action by the shareholders or directors of AWI or
Reorganized AWI or the Asbestos PI Trust or the Asbestos PI Trustees):
40
(a) AWI will file the Amended and Restated Articles of
Incorporation with the Secretary of State for the Commonwealth of Pennsylvania.
(b) Certain wholly owned, non-operating subsidiaries of AWI will
merge with and into AWI on or as soon as practicable after the Effective Date.
(c) The Existing AWI Common Stock will be cancelled.
(d) Subject to section 7.4 hereof, the Plan Note Indenture will
become effective and, upon such effectiveness, the Plan Notes will be issued and
delivered in accordance with sections 3.2(f) and 12.8 hereof and sections 3.2(g)
and 10.1(b) hereof; the New Common Stock will be issued and delivered in
accordance with sections 3.2(f) and 12.8 hereof and sections 3.2(g) and 10.1(b)
hereof; and, if the requirement of section 3.2(l) hereof is met, the New
Warrants will be issued and delivered as provided in section 7.25 hereof (and,
if applicable, in accordance with section 10.1(b) hereof), in each case such
issuance and delivery to be subject to the other provisions of ARTICLE VII of
the Plan regarding the conditions to and manner of delivery of Plan Notes, New
Common Stock and New Warrants.
(e) Reorganized AWI may consummate the 144A Offering.
(f) Reorganized AWI will enter into the working capital facility
referenced in section 7.17 of the Plan.
(g) Reorganized AWI will enter into the New Long-Term Incentive
Plan.
7.25 Holdings Plan of Liquidation. If the requisite approvals of
the Board of Directors and shareholders of Holdings of the Holdings Plan of
Liquidation are received by the first anniversary of the Effective Date, the New
Warrants will be issued to Holdings, for distribution pursuant to the Holdings
Plan of Liquidation, as soon as is practicable after the later of the Effective
Date or the date of such approval and, if applicable, in accordance with section
10.1(b) hereof. In accordance with section 3.2(l) hereof, if the requisite
approvals of the Board of Directors and shareholders of Holdings of the Holdings
Plan of Liquidation are not received by to the first anniversary of the
Effective Date, the New Warrants shall not be issued. From and after the
Effective Date, other than as provided in the Plan (including, without
limitation, provisions of the Plan relating to the indemnification rights of
Holdings' officers, directors, and employees and the requirement to provide
insurance for the benefit of such persons), Reorganized AWI shall have no
ongoing obligations to Holdings or AWWD; provided, however, that Reorganized AWI
shall bear all costs and expenses related to the preparation and submission to a
vote of Holdings' shareholders of the Holdings Plan of Liquidation and all other
operating expenses of Holdings and AWWD until the first anniversary of the
Effective Date and, if the requisite approval of the Holdings Plan of
Liquidation by Holdings' shareholders is obtained by the first anniversary of
the Effective Date, the performance and consummation of the Holdings Plan of
Liquidation, including any operating expenses for Holdings and AWWD until their
dissolution and liquidation pursuant to the Holdings Plan of Liquidation.
7.26 Compliance with QSF Regulations.
(a) Tax Status of Asbestos PI Trust. AWI shall timely seek a
private letter ruling from the IRS substantially to the effect that, among other
things, the Asbestos PI Trust shall be a "qualified settlement fund" within the
meaning of section 468B of the Internal Revenue Code and the Treasury
Regulations thereunder.
41
(b) Qualified Appraisal. Within sixty (60) days before or after
the funding of the Asbestos PI Trust (but not later than February 14th of the
following calendar year), AWI or Reorganized AWI shall obtain a Qualified
Appraisal of the fair market value of the New Common Stock transferred (or to be
transferred) to the Asbestos PI Trust.
(c) Delivery of Statement of Transfers. Following the funding of
the Asbestos PI Trust and the receipt of the Qualified Appraisal (and in no
event later than February 15th of the calendar year following the funding of the
Asbestos PI Trust), Reorganized AWI shall provide a "ss. 1.468B-3 Statement" to
the Asbestos PI Trustees in accordance with Treasury Regulations section
1.468B-3(e). Similarly, following the funding of the Asbestos PD Trust (and in
no event later than February 15th of the following calendar year), Reorganized
AWI shall provide a "ss. 1.468B-3 Statement" to the Asbestos PD Trustees in
accordance with Treasury Regulations section 1.468B-3(e).
7.27 Effectuating Documents and Further Transactions. Each of the
officers of AWI and Reorganized AWI is authorized, in accordance with his or her
authority under the resolutions of the Board of Directors, to execute, deliver,
file, or record such contracts, instruments, releases, indentures, and other
agreements or documents and take such actions as may be necessary or appropriate
to effectuate and further evidence the terms and conditions of the Plan and any
notes or securities issued pursuant to the Plan.
7.28 Allocation of Plan Distributions Between Principal and
Interest. To the extent that any Allowed Unsecured Claim or Allowed Convenience
Claim entitled to a Distribution under the Plan is comprised of indebtedness and
accrued but unpaid interest thereon, such Distribution shall be allocated to the
principal amount of the Claim (as determined for federal income tax purposes)
first and then, to the extent the consideration exceeds the principal amount of
the Claim, to accrued but unpaid interest.
ARTICLE VIII
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
8.1 Assumption of Executory Contracts and Unexpired Leases. Any
executory contracts or unexpired leases listed on Exhibit 8.1 to the Plan shall
be deemed to have been assumed by Reorganized AWI as of the Effective Date, and
the Plan shall constitute a motion to assume such executory contracts and
unexpired leases. Subject to the occurrence of the Effective Date, entry of the
Confirmation Order by the Clerk of the Bankruptcy Court shall constitute
approval of such assumptions pursuant to section 365(a) of the Bankruptcy Code
and a finding by the Bankruptcy Court that each such assumption is in the best
interest of AWI, its estate, and all parties in interest in the Chapter 11 Case.
With respect to each such executory contract or unexpired lease assumed by
Reorganized AWI, unless otherwise determined by the Bankruptcy Court pursuant to
a Final Order or agreed to by the parties thereto prior to the Effective Date,
the dollar amount required to cure any defaults of AWI existing as of the
Confirmation Date shall be conclusively presumed to be the amount set forth in
Exhibit 8.1 with respect to such executory contract or unexpired lease. Subject
to the occurrence of the Effective Date, any such cure amount shall be treated
as an Allowed Administrative Expense under the Plan, and, upon payment of such
Allowed Administrative Expense, all defaults of AWI existing as of the
Confirmation Date with respect to such executory contract or unexpired lease
shall be deemed cured.
42
8.2 Rejection of Executory Contracts and Unexpired Leases. Any
executory contracts or unexpired leases of AWI that either (x) are set forth on
Exhibit 8.2 to the Plan or (y)(i) are not listed on Exhibit 8.1 to the Plan,
(ii) have not been assumed by AWI with the approval of the Bankruptcy Court, and
(iii) are not the subject of pending motions to assume at the Confirmation Date
shall be deemed to have been rejected by AWI, the Plan shall constitute a motion
to reject such executory contracts and unexpired leases, and Reorganized AWI
shall have no liability thereunder except as is specifically provided in the
Plan. Entry of the Confirmation Order by the Clerk of the Bankruptcy Court shall
constitute approval of such rejections pursuant to section 365(a) of the
Bankruptcy Code and a finding by the Bankruptcy Court that each such rejected
executory contract or unexpired lease is burdensome and that the rejection
thereof is in the best interest of AWI, its estate, and all parties in interest
in the Chapter 11 Case. Without limiting the foregoing, any agreement entered
into prior to the Commencement Date by or on behalf of AWI with respect to the
settlement of any Asbestos Personal Injury Claim shall be deemed rejected as of
the Effective Date to the extent such settlement agreement is deemed to be an
executory contract within the meaning of section 365(a) of the Bankruptcy Code.
8.3 Claims Arising from Rejection, Termination or Expiration.
Claims created by the rejection of executory contracts or unexpired leases
(including, without limitation, the rejection provided in section 8.2 of the
Plan) or the expiration or termination of any executory contract or unexpired
lease prior to the Confirmation Date, other than Asbestos Personal Injury
Claims, must be filed with the Bankruptcy Court and served on AWI no later than
thirty (30) days after (i) in the case of an executory contract or unexpired
lease that was terminated or expired by its terms prior to the Confirmation
Date, the Confirmation Date, (ii) in the case of an executory contract or
unexpired lease rejected by AWI, the entry of the order of the Bankruptcy Court
authorizing such rejection, or (iii) in the case of an executory contract or
unexpired lease that is deemed rejected pursuant to section 8.2 of the Plan, the
Confirmation Date. Notwithstanding the foregoing, Exhibit 8.2 to the Plan sets
forth AWI's value of the rejection claim for each executory contract or
unexpired lease set forth thereon, which claim shall be deemed an Allowed
Unsecured Claim if no proof of claim is timely filed and served in accordance
with the immediately preceding sentence. Any Claims for which a rejection claim
is not set forth on Exhibit 8.2 to the Plan and for which a proof of claim is
not filed and served within the time provided herein will be forever barred from
assertion and shall not be enforceable against AWI, its estate, assets,
properties, or interests in property, or Reorganized AWI or its estate, assets,
properties, or interests in property. Unless otherwise ordered by the Bankruptcy
Court, all such Claims (other than Asbestos Personal Injury Claims) that are
timely filed as provided herein shall be treated as Unsecured Claims under the
Plan and shall be subject to the provisions of Article V of the Plan.
8.4 Previously Scheduled Contracts. Exhibit 8.4 to the Plan sets
forth a list of agreements that were listed on the Schedules as executory
contracts, but which AWI believes should not be considered executory contracts
(either because they were not executory contracts as of the Commencement Date or
because they have expired or terminated in accordance with their terms prior to
the Effective Date). If any such agreements are determined to be executory
contracts, AWI or Reorganized AWI, as the case may be, reserves the right to
seek the assumption or rejection of any such contract, and the time within which
AWI or Reorganized AWI, as the case may be, may seek to assume or reject any
such agreements shall be tolled until twenty (20) Business Days after the date
on which an order determining that any such agreement is an executory contract
becomes a Final Order. Set forth on Exhibit 8.4 to the Plan is the amount that
AWI intends to treat as an Allowed Unsecured Claim for each such agreement. Such
amount and the treatment of each such agreement shall be binding unless, on or
before ten (10) days after the Confirmation Date, the other party to any such
agreement either (i) files a proof of claim (which proof of claim shall be
43
deemed timely filed) or (ii) files a motion seeking to compel assumption or
rejection of such agreement.
8.5 Insurance Policies and Agreements.
(a) Assumed Insurance Policies and Agreements. AWI does not
believe that the insurance policies issued to, or insurance agreements entered
into by, AWI prior to the Commencement Date constitute executory contracts. To
the extent that such insurance policies or agreements are considered to be
executory contracts, then, notwithstanding anything contained in sections 8.1 or
8.2 of the Plan to the contrary, the Plan shall constitute a motion to assume
such insurance policies and agreements, and, subject to the occurrence of the
Effective Date, the entry of the Confirmation Order by the Clerk of the
Bankruptcy Court shall constitute approval of such assumption pursuant to
section 365(a) of the Bankruptcy Code and a finding by the Bankruptcy Court that
each such assumption is in the best interest of AWI, its estate, and all parties
in interest in the Chapter 11 Case. Unless otherwise determined by the
Bankruptcy Court pursuant to a Final Order or agreed to by the parties thereto
prior to the Effective Date, no payments are required to cure any defaults of
AWI existing as of the Confirmation Date with respect to each such insurance
policy or agreement. To the extent that the Bankruptcy Court determines
otherwise as to any such insurance policy or agreement, AWI reserves the right
to seek rejection of such insurance policy or agreement or other available
relief. In accordance with section 10.1 hereof, the rights under the insurance
policies and agreements constituting the Asbestos PI Insurance Asset shall, to
the extent necessary, be deemed assigned to the Asbestos PI Trust as of the
Effective Date and, pursuant to section 365 of the Bankruptcy Code, AWI shall
have no further liability thereunder from and after the Effective Date.
(b) Rejected Insurance Policies and Agreements. To the extent
that any or all of the insurance policies and agreements set forth on Exhibit
8.5(b) to the Plan are considered to be executory contracts, then,
notwithstanding anything contained in section 8.1 or 8.2 of the Plan to the
contrary, the Plan shall constitute a motion to reject the insurance policies
and agreements set forth on Exhibit 8.5(b) to the Plan, and the entry of the
Confirmation Order by the Clerk of the Bankruptcy Court shall constitute
approval of such rejection pursuant to section 365(a) of the Bankruptcy Code and
a finding by the Bankruptcy Court that each such rejected insurance policy or
agreement set forth on Exhibit 8.5(b) to the Plan is burdensome and that the
rejection thereof is in the best interest of AWI, its estate, and all parties in
interest in the Chapter 11 Case.
(c) Reservation of Rights. Nothing contained in the Plan,
including this section 8.5, shall constitute a waiver of any claim, right, or
cause of action that AWI, the Asbestos PI Trust, or Reorganized AWI, as the case
may be, may hold against the insurer under any policy of insurance or insurance
agreement.
8.6 Indemnification and Reimbursement Obligations. For purposes
of the Plan, the obligations of AWI to indemnify and reimburse persons who are
or were directors, officers, or employees of Holdings, AWWD, or AWI on the
Commencement Date or at any time thereafter against and for any obligations
(including, without limitation, fees and expenses incurred by the board of
directors of Holdings, or the members thereof, in connection with the Chapter 11
Case) pursuant to articles of incorporation, codes of regulations, bylaws,
applicable state law, or specific agreement, or any combination of the
foregoing, shall survive confirmation of the Plan, remain unaffected thereby,
and not be discharged in accordance with section 1141 of the Bankruptcy Code,
irrespective of whether indemnification or reimbursement is owed in connection
with an event occurring before, on, or after the Commencement Date. In
furtherance of the foregoing, Reorganized AWI shall maintain insurance for the
44
benefit of such directors, officers, or employees at levels no less favorable
than those existing as of the date of entry of the Confirmation Order for a
period of no less than three years following the Effective Date.
8.7 Compensation and Benefit Programs. Except as set forth below
in sections 8.7(b) and 8.7(c) of the Plan, all employment and severance
policies, workers' compensation programs, and all compensation and benefit
plans, policies and programs of AWI applicable to its present and former
employees, officers, and directors, including, without express or implied
limitation, all savings plans, retirement plans, health care plans, disability
plans, severance benefit plans, incentive plans, and life, accidental death, and
dismemberment insurance plans, shall be deemed to be, and shall be treated as
though they are, executory contracts that are deemed assumed under the Plan, and
AWI's obligations under such plans, policies, and programs shall be deemed
assumed pursuant to section 365(a) of the Bankruptcy Code, survive confirmation
of the Plan, remain unaffected thereby, and not be discharged in accordance with
section 1141 of the Bankruptcy Code. Any defaults existing under any of such
plans, policies, and programs shall be cured promptly after they become known by
Reorganized AWI.
(b) Notwithstanding section 8.7(a) of the Plan, on the Effective
Date (unless an earlier date is specified herein),
(i) the Employment Protection Plan for Salaried Employees
will be deemed to have been terminated, cancelled, and of no
further force and effect prior to the Effective Date, and the
participants thereunder shall have no further rights thereunder;
(ii) the 1993 Long-Term Stock Incentive Plan will be deemed
terminated, cancelled, and of no further force and effect, and
the participants thereunder shall have no further rights
thereunder; provided that any and all remaining restrictions on
restricted stock awards under the 1993 Long-Term Stock Incentive
Plan will lapse on the Effective Date to the extent participants
do not elect to waive their right to such awards prior to such
date;
(iii) the 1999 Long-Term Incentive Plan will be deemed
terminated, cancelled, and of no further force and effect, and
the participants thereunder shall have no further rights
thereunder; provided that any and all remaining restrictions on
restricted stock awards under the 1999 Long-Term Incentive Plan
will lapse on the Effective Date to the extent participants do
not elect to waive their right to such awards prior to such date;
and
(iv) the Armstrong Holdings Stock Award Plan will be deemed
terminated, cancelled, and of no further force and effect, and
the participants thereunder shall have no further rights
thereunder; provided that any and all remaining restrictions on
restricted stock awards under the Armstrong Holdings Stock Award
Plan will lapse on the Effective Date to the extent participants
do not elect to waive their right to such awards prior to such
date.
(c) Notwithstanding section 8.7(a) of the Plan, on the Effective
Date (unless an earlier date is specified herein),
(i) the Armstrong Deferred Compensation Plan will be
modified so that Reorganized AWI, and not Holdings, will be the
sponsor of such plan and to provide that Reorganized AWI has the
right, in its sole discretion, not to honor single-sum withdrawal
45
requests, and the Armstrong Deferred Compensation Plan will be
assumed, as amended; provided, however, as to any party that
objects to such amendment by the deadline for filing objections
to confirmation of the Plan, the Armstrong Deferred Compensation
Plan will be deemed rejected, and such party will have an
Unsecured Claim for any benefits thereunder in accordance with
section 8.3 of the Plan, and, as of any date immediately prior to
the Effective Date designated by Holdings, the Armstrong Deferred
Compensation Plan will be deemed amended to exclude the
occurrence of the Effective Date, the creation of the Asbestos PI
Trust, and the issuance of the New Common Stock to the Asbestos
PI Trust from triggering a change in control thereunder;
(ii) the Severance Pay Plan for Salaried Employees will be
amended as of the Effective Date as follows: If the participant
is in a position at a grade level of 15 or higher on Reorganized
AWI's organizational management system on the date of
termination, the participant will be eligible for severance
benefits based on two weeks of pay for each year of service,
subject to a minimum of 8 weeks pay and a maximum of 52 weeks
pay, and the Severance Pay Plan for Salaried Employees will be
assumed, as amended;
(iii) the Retirement Income Plan (Pension) will be amended
prior to the Effective Date in the manner described below and, as
amended, will be assumed as of the Effective Date:
1. to eliminate the Social Security retirement
enhancement that may become payable due to job loss
following a Change in Control (as defined in the Retirement
Income Plan (Pension)), and
2. to eliminate future accruals of all other retirement
enhancements that may become payable due to job loss
following a Change in Control to the fullest extent
permitted by applicable law; and
(iv) the Retirement Benefit Equity Plan will be amended as
of any date prior to the Effective Date designated by AWI in the
manner described below and, as amended, will be assumed as of the
Effective Date:
1. to exclude in the definition of Change in Control
(as defined in the Retirement Benefit Equity Plan) the
occurrence of the Effective Date, the creation of the
Asbestos PI Trust, and the issuance of the New Common Stock
to the Asbestos PI Trust,
2. to eliminate the Extraordinary Event provisions as
covered under the Retirement Income Plan,
3. to eliminate any and all retirement enhancements,
related to past and future service, that may become payable
due to job loss following a Change in Control as covered
under the Retirement Income Plan, and
4. to terminate any right or obligation of Reorganized
AWI to honor single-sum withdrawal requests;
46
provided, however, as to any party that objects to such
amendments by the deadline for filing objections to
confirmation of the Plan, such plan will be deemed
rejected, and such party will have an Unsecured Claim for
any benefits thereunder in accordance with section 8.3 of
the Plan.
(d) On the Effective Date, the assumption, rejection, and
amendment of the foregoing plans provided in this section 8.7 shall be deemed to
have occurred as of such date or earlier date specified in such section, shall
be authorized, and shall be deemed approved in all respects, and shall be in
effect from and after the Effective Date or such other date in each case without
requiring further action under applicable law, regulation, order, or rule,
including, without express or implied limitation, any action by any party or
Entity, including any administrative committee of any plan or the stockholders
or directors of AWI or Reorganized AWI. On the Effective Date or as soon
thereafter as is practicable, Reorganized AWI shall restate the plans amended
above as provided in section 8.7(c) and shall communicate such amendments in
such manner and as may be required without any further order of the Bankruptcy
Court. Each of the officers of AWI and Reorganized AWI is authorized, in
accordance with his or her authority under the resolutions of the Board of
Directors, to execute, deliver, file, or record such contracts, instruments,
releases, indentures, and other agreements or documents and take such actions as
may be necessary or appropriate to effectuate and further evidence the terms and
conditions of the plan amendments set forth in this section of the Plan.
8.8 Management Agreements. On the Effective Date, all employment
contracts between AWI and any employee of AWI who was employed by AWI as of the
date immediately preceding the Effective Date (including, without limitation,
any offer letters issued to any such employees to the extent such offer letters
are not superseded by formal employment contracts) shall be deemed assumed by
Reorganized AWI. In addition, Reorganized AWI shall enter into new employment
contracts with those persons listed on Exhibit 8.8-A substantially in the form
of Exhibit 8.8-B to the Plan, which employment contracts shall be deemed
authorized without any further approval of the Board of Directors of AWI or
Reorganized AWI and automatically shall become effective on the Effective Date.
ARTICLE IX
RETENTION OF JURISDICTION
Pursuant to sections 105(a) and 1142 of the Bankruptcy
Code, the Bankruptcy Court shall retain and shall have exclusive jurisdiction
over any matter (a) arising under the Bankruptcy Code, (b) arising in or related
to the Chapter 11 Case or the Plan, or (c) to perform any of the following
actions:
9.1 To interpret, enforce, and administer the terms of the
Asbestos PI Trust Agreement (including all annexes and exhibits thereto), the
Asbestos PD Trust Agreement (including all annexes and exhibits thereto), and
the restrictions on transfer of Asbestos Personal Injury Claims and Asbestos
Property Damage Claims contained in the Confirmation Order.
9.2 To hear and determine any and all motions or applications
pending on the Confirmation Date (or thereafter if a contract listed on Exhibit
8.4 of the Plan is thereafter determined to be executory, and AWI is required to
assume or reject it) for the assumption and/or assignment or rejection of
executory contracts or unexpired leases to which AWI is a party or with respect
to which AWI may be liable, and to hear and determine any and all Claims
47
resulting therefrom or from the expiration or termination prior to the
Confirmation Date of any executory contract or unexpired lease;
9.3 To determine any and all adversary proceedings, applications,
motions, and contested or litigated matters that may be pending on the Effective
Date or that, pursuant to the Plan, may be instituted by Reorganized AWI after
the Effective Date, including, without express or implied limitation, any claims
to avoid any preferences, fraudulent transfers, or other voidable transfers, or
otherwise to recover assets for the benefit of AWI's estate;
9.4 To hear and determine any objections to the allowance of
Claims arising prior to the Effective Date (other than Asbestos Personal Injury
Claims), whether filed, asserted, or made before or after the Effective Date,
including, without express or implied limitation, to hear and determine any
objections to the classification of any Claim and to allow or disallow any
Disputed Claim in whole or in part;
9.5 To issue such orders in aid of execution of the Plan to the
extent authorized or contemplated by section 1142 of the Bankruptcy Code;
9.6 To consider any modifications of the Plan, remedy any defect
or omission, or reconcile any inconsistency in any order of the Bankruptcy
Court, including, without express or implied limitation, the Confirmation Order;
9.7 To hear and determine all applications for allowances of
compensation and reimbursement of expenses of professionals under sections 330
and 331 of the Bankruptcy Code and any other fees and expenses authorized to be
paid or reimbursed under the Plan;
9.8 To hear and determine all controversies, suits, and disputes
that may relate to, impact upon, or arise in connection with the Plan (and all
Exhibits to the Plan) or its interpretation, implementation, enforcement, or
consummation;
9.9 To the extent that Bankruptcy Court approval is required, to
consider and act on the compromise and settlement of any Claim (other than an
Asbestos Personal Injury Claim) or cause of action by or against AWI's estate;
9.10 To determine such other matters that may be set forth in the
Plan, the Confirmation Order, the Claims Trading Injunction, or the Asbestos PI
Permanent Channeling Injunction, or that may arise in connection with the Plan,
the Confirmation Order, the Claims Trading Injunction, or the Asbestos PI
Permanent Channeling Injunction;
9.11 To hear and determine any proceeding that involves the
validity, application, construction, enforceability, or modification of the
Claims Trading Injunction or the Asbestos PI Permanent Channeling Injunction or
of the application of section 524(g) of the Bankruptcy Code to the Asbestos PI
Permanent Channeling Injunction;
9.12 To hear and determine matters concerning state, local, and
federal taxes, fines, penalties, or additions to taxes for which AWI, as Debtor
or Debtor in Possession, or the Disputed Unsecured Claims Reserve may be liable,
directly or indirectly, in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code (including any request for expedited determination under section
505(b) of the Bankruptcy Code);
9.13 To enter an order or final decree closing the Chapter 11
Case; and
48
9.14 To hear and determine all objections to the termination of
the Asbestos PI Trust.
To the extent that the Bankruptcy Court is not permitted under applicable law to
preside over any of the foregoing matters, the reference to the "Bankruptcy
Court" in this ARTICLE IX shall be deemed to be replaced by the "District
Court." Notwithstanding anything in this ARTICLE IX to the contrary, (i) the
allowance of Asbestos Personal Injury Claims and the forum in which such
allowance will be determined will be governed by and in accordance with the
Asbestos PI Trust Distribution Procedures and the Asbestos PI Trust Agreement;
(ii) disputes concerning Asbestos Property Damage Claims shall be resolved in
the Bankruptcy Court in accordance with ARTICLE XI of the Plan; and (iii) the
Bankruptcy Court and/or the District Court shall have concurrent rather than
exclusive jurisdiction with respect to (x) disputes relating to rights under
insurance policies issued to AWI that are included in the Asbestos PI Insurance
Asset or the Asbestos PD Insurance Asset, (y) disputes relating to AWI's claim
for costs, expenses and fees incurred in connection with an Alternative Dispute
Resolution Proceeding initiated in 1996, as referenced in section 1.27 of the
Plan, and (z) disputes relating to AWI's rights to insurance with respect to
workers' compensation claims.
ARTICLE X
TRANSFERS OF PROPERTY TO AND ASSUMPTION OF
CERTAIN LIABILITIES BY THE ASBESTOS PI TRUST
10.1 Transfer of Certain Property to the Asbestos PI Trust.
(a) Transfer of Books and Records. On the Effective Date or as
soon thereafter as is practicable, at the sole cost and expense of the Asbestos
PI Trust and in accordance with written instructions provided to Reorganized AWI
by the Asbestos PI Trust, Reorganized AWI shall transfer and assign, or cause to
be transferred and assigned, to the Asbestos PI Trust the books and records of
AWI that pertain directly to Asbestos Personal Injury Claims that have been
asserted against AWI. AWI will request that the Bankruptcy Court, in the
Confirmation Order, rule that such transfer does not result in the destruction
or waiver of any applicable privileges pertaining to such books and records. If
the Bankruptcy Court does not so rule, at the option of the Asbestos PI Trust,
Reorganized AWI will, at the sole cost and expense of the Asbestos PI Trust,
retain the books and records and enter into arrangements to permit the Asbestos
PI Trust to have access to such books and records. If the Asbestos PI Trust does
not issue written instructions for the transfer or retention of such books and
records within one hundred eighty (180) days after the later of the Effective
Date and the date by which all the Asbestos PI Trustees have executed the
Asbestos PI Trust Agreement, or if the Asbestos PI Trust so requests,
Reorganized AWI may (and shall, if the Asbestos PI Trust so requests, but at the
sole cost and expense of the Asbestos PI Trust) destroy any such books and
records, and the order of the District Court entered during the Chapter 11 Case
with respect to the retention of books and records shall be deemed superseded by
this section of the Plan.
(b) Transfer of Plan Consideration. On the later of the Effective
Date and the date by which all the Asbestos PI Trustees have executed the
Asbestos PI Trust Agreement, AWI shall transfer to the Asbestos PI Trust the
Asbestos PI Insurance Asset and the following assets:
(i) 65.57% of the New Common Stock,
49
(ii) 65.57% of the first $1.05 billion of (x) up to $300
million of Available Cash and (y) the Plan Notes and/or 144A
Offering Proceeds,
(iii) 40% of the first $50 million of Available Cash
remaining after making provision for the Distribution provided in
section 3.2(f)(ii)2 of the Plan and the funding of the Asbestos
PI Trust in section 10.1(b)(ii) of the Plan,
(iv) 40% of an amount of Plan Notes and/or 144A Offering
Proceeds equal to the difference (if positive) of $50 million
less the amount of Available Cash remaining after making
provision for the Distribution provided in section 3.2(f)(ii)2 of
the Plan and the funding of the Asbestos PI Trust in section
10.1(b)(ii) of the Plan, and
(v) 65.57% of the remaining Available Cash and Plan Notes
and/or 144A Offering Proceeds after making provision for the
Distribution provided in sections 3.2(f)(ii)2, 3.2(f)(ii)3, and
3.2(f)(ii)4 of the Plan and the funding of the Asbestos PI Trust
in sections 10.1(b)(ii), 10.1(b)(iii), and 10.1(b)(iv) of the
Plan.
Notwithstanding the foregoing, if AWI intends to complete a 144A Offering and
the 144A Offering has not been completed as of the time for the Distribution to
the Asbestos PI Trust specified herein, then the Distribution of the Plan Notes
and/or 144A Offering Proceeds to the Asbestos PI Trust shall be made as soon as
practicable after the 144A Offering is completed or Reorganized AWI determines
not to complete a 144A Offering, but in no event shall such Distribution occur
after the Initial Distribution Date. In addition, if the Holdings Plan of
Liquidation is approved by board of directors and shareholders of Holdings prior
to the first anniversary of the Effective Date, but Class 6 has not voted to
approve the Plan, the Asbestos PI Trust shall automatically (and without any
action by the Asbestos PI Trust or the Asbestos PI Trustees being required
therefor) be deemed to have consented to and accepted, and directed, the
issuance and delivery by Reorganized AWI of the New Warrants to Holdings as
provided by section 7.25 of the Plan.
10.2 Assumption of Certain Liabilities by the Asbestos PI Trust.
In consideration for the property transferred to the Asbestos PI Trust pursuant
to section 10.1 hereof and in furtherance of the purposes of the Asbestos PI
Trust and the Plan, the Asbestos PI Trust shall assume all liability and
responsibility for all Asbestos Personal Injury Claims, and Reorganized AWI
shall have no further financial or other responsibility or liability therefor.
The Asbestos PI Trust shall also assume all liability for premiums, deductibles,
retrospective premium adjustments, security or collateral arrangements, or any
other charges, costs, fees, or expenses (if any) that become due to any insurer
in connection with the Asbestos PI Insurance Asset as a result of Asbestos
Personal Injury Claims, asbestos-related personal injury claims against Entities
insured under policies included in the Asbestos PI Insurance Asset by reason of
vendor's endorsements, or under the indemnity provisions of settlement
agreements that AWI made with various insurers prior to the Commencement Date to
the extent that those indemnity provisions relate to Asbestos Personal Injury
Claims, and Reorganized AWI shall have no further financial or other
responsibility or liability for any of the foregoing.
10.3 Cooperation with Respect to Insurance Matters. Reorganized
AWI shall cooperate with the Asbestos PI Trust and use commercially reasonable
efforts to take or cause to be taken all appropriate actions and to do or cause
to be done all things necessary or appropriate to effectuate the transfer of the
Asbestos PI Insurance Asset to the Asbestos PI Trust. By way of enumeration and
not of limitation, Reorganized AWI shall be obligated (i) to provide the
50
Asbestos PI Trust with copies of insurance policies and settlement agreements
included within or relating to the Asbestos PI Insurance Asset; (ii) to provide
the Asbestos PI Trust with information necessary or helpful to the Asbestos PI
Trust in connection with its efforts to obtain insurance coverage for Asbestos
Personal Injury Claims: and (iii) to execute further assignments or allow the
Asbestos PI Trust to pursue claims relating to the Asbestos PI Insurance Asset
in its name (subject to appropriate disclosure of the fact that the Asbestos PI
Trust is doing so and the reasons why it is doing so), including by means of
arbitration, alternative dispute resolution proceedings or litigation, to the
extent necessary or helpful to the efforts of the Asbestos PI Trust to obtain
insurance coverage under the Asbestos PI Insurance Asset for Asbestos Personal
Injury Claims. The Asbestos PI Trust shall be obligated to compensate
Reorganized AWI for costs reasonably incurred in connection with providing
assistance to the Asbestos PI Trust pursuant to this section 10.3, including,
but not limited to, out-of-pocket costs and expenses, consultant fees, and
attorneys' fees.
10.4 Authority of AWI. Effective on the Confirmation Date, AWI
shall be empowered and authorized to take or cause to be taken, prior to the
Effective Date, all actions necessary to enable it to implement effectively the
provisions of the Plan and the Asbestos PI Trust Agreement.
ARTICLE XI
ASBESTOS PROPERTY DAMAGE CLAIMS
11.1 Transfer of Certain Property to the Asbestos PD Trust.
Transfer of Books and Records. On the Effective Date or as soon thereafter as is
practicable, if the Asbestos PD Trust is created pursuant to section
3.2(d)(ii)(x) of the Plan. Reorganized AWI, at the sole cost and expense of the
Asbestos PD Trust, and in accordance with written instructions provided to
Reorganized AWI by the Asbestos PD Trust, shall transfer and assign, or cause to
be transferred and assigned, to the Asbestos PD Trust the books and records of
AWI (if any) that pertain directly to Asbestos Property Damage Claims that have
been asserted against AWI (except to the extent that such books and records have
been produced to the Asbestos PD Committee during the course of the Chapter 11
Case). AWI will request that the Bankruptcy Court, in the Confirmation Order,
rule that any such transfer does not result in the destruction or waiver of any
applicable privileges pertaining to such books and records. If the Bankruptcy
Court does not so rule, at the option of the Asbestos PD Trust, Reorganized AWI
will, at the sole cost and expense of the Asbestos PD Trust, retain the books
and records and enter into arrangements to permit the Asbestos PD Trust to have
access to such books and records. If the Asbestos PD Trust is created and does
not issue written instructions for the transfer or retention of such books and
records within one hundred eighty (180) days after the later of the Effective
Date and the date by which all the Asbestos PD Trustees have executed the
Asbestos PD Trust Agreement, or if the Asbestos PD Trust so requests,
Reorganized AWI may (and shall, if the Asbestos PD Trust so requests, but at the
sole cost and expense of the Asbestos PD Trust) destroy any such books and
records, and the order of the District Court entered during the Chapter 11 Case
with respect to the retention of books and records shall be deemed superseded by
this section of the Plan.
11.2 Transfer of Certain Property to the Asbestos PD Trust -
Class 4 Acceptance. If Class 4 votes to accept the Plan and the Asbestos PD
Trust is created pursuant to section 3.2(d)(ii)(x) of the Plan, Travelers
Casualty and Surety Company, Travelers Indemnity Company, and Liberty Mutual
Insurance Company (collectively) shall distribute to the Asbestos PD Trust cash
in an amount equal to the Asbestos PD Trust Funding Obligation, and Reorganized
51
AWI shall have no further financial or other responsibility for Asbestos
Property Damage Claims. Such distribution is conditioned upon the entry of, and
shall be made pursuant to, the Confirmation Order.
11.3 Transfer of Certain Property For Asbestos PD Claims - Class
4 Rejection. If Class 4 votes to reject the Plan and the Asbestos PD Trust is
created pursuant to section 3.2(d)(ii)(x) of the Plan, on the later of the
Effective Date and the date by which all the Asbestos PD Trustees have executed
the Asbestos PD Trust Agreement, Reorganized AWI shall transfer and assign, or
cause to be transferred and assigned, to the Asbestos PD Trust the Asbestos PD
Trust Funding Obligation.
11.4 Assumption of Certain Liabilities by the Asbestos PD Trust.
In consideration for the property transferred to the Asbestos PD Trust pursuant
to sections 11.2 and 11.3 hereof and in furtherance of the purposes of the
Asbestos PD Trust and the Plan, if the Asbestos PD Trust is created pursuant to
section 3.2(d)(ii)(x) of the Plan, the Asbestos PD Trust shall assume all
liability and responsibility for all Asbestos Property Damage Claims, and
Reorganized AWI shall have no further financial or other responsibility or
liability therefor. If Class 4 votes to reject the Plan and the Asbestos PD
Trust is created pursuant to section 3.2(d)(ii)(x) of the Plan, the Asbestos PD
Trust shall also assume all liability for premiums, deductibles, retrospective
premium adjustments, security or collateral arrangements, or any other charges,
costs, fees, or expenses (if any) that become due to any insurer in connection
with the Asbestos PD Insurance Asset as a result of Asbestos Property Damage
Claims, asbestos-related property damage claims against Entities insured under
policies included in the Asbestos PD Insurance Asset by reason of vendor's
endorsements, or under the indemnity provisions of settlement agreements that
AWI made with various insurers prior to the Commencement Date to the extent that
those indemnity provisions relate to Asbestos Property Damage Claims, and
Reorganized AWI and the AWI Progeny shall have no further financial or other
responsibility or liability for any of the foregoing.
11.5 Cooperation with Respect to Insurance Matters. If Class 4
votes to reject the Plan and the Asbestos PD Trust is created pursuant to
section 3.2(d)(ii)(x) of the Plan, Reorganized AWI shall cooperate with the
Asbestos PD Trust and use commercially reasonable efforts to take or cause to be
taken all appropriate actions and to do or cause to be done all things necessary
or appropriate to effectuate the transfer of the Asbestos PD Insurance Asset to
the Asbestos PD Trust. By way of enumeration and not of limitation, Reorganized
AWI shall be obligated (i) to provide the Asbestos PD Trust with copies of
insurance policies and settlement agreements included within or relating to the
Asbestos PD Insurance Asset; (ii) to provide the Asbestos PD Trust with
information necessary or helpful to the Asbestos PD Trust in connection with its
efforts to obtain insurance coverage for Asbestos Property Damage Claims; and
(iii) to execute further assignments or allow the Asbestos PD Trust to pursue
claims relating to the Asbestos PD Insurance Asset in its name (subject to
appropriate disclosure of the fact that the Asbestos PD Trust is doing so and
the reasons why it is doing so), including by means of arbitration, alternative
dispute resolution proceedings or litigation, to the extent necessary or helpful
to the efforts of the Asbestos PD Trust to obtain insurance coverage under the
Asbestos PD Insurance Asset for Asbestos Property Damages Claims. The Asbestos
PD Trust shall be obligated to compensate Reorganized AWI for costs reasonably
incurred in connection with providing assistance to the Asbestos PD Trust
pursuant to this section 11.5, including but not limited to, out-of-pocket costs
and expenses, consultant fees, and attorneys' fees.
11.6 Authority of AWI. Effective on the Confirmation Date, AWI
shall be empowered and authorized to take or cause to be taken, prior to the
52
Effective Date, all actions necessary to enable it to implement effectively the
provisions of the Plan and the Asbestos PD Trust Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Payment of Statutory Fees. All fees payable pursuant to
section 1930 of title 28 of the United States Code, as determined by the
Bankruptcy Court at the hearing on confirmation of the Plan, shall be paid by
AWI on or before the Effective Date.
12.2 Discharge of AWI. The rights afforded in the Plan and the
treatment of all Claims and Equity Interests herein shall be in exchange for and
in complete satisfaction, discharge, and release of all Claims and Equity
Interests of any nature whatsoever, including any interest accrued thereon from
and after the Commencement Date, against AWI, or its estate, assets, properties,
or interests in property. Except as otherwise provided herein, on the Effective
Date, all Claims against and Equity Interests in AWI shall be satisfied,
discharged, and released in full. Reorganized AWI shall not be responsible for
any obligations of AWI except those expressly assumed by Reorganized AWI in the
Plan. All Entities shall be precluded and forever barred from asserting against
AWI, Reorganized AWI, their successors or assigns, or their assets, properties,
or interests in property any other or further Claims based upon any act or
omission, transaction, or other activity of any kind or nature that occurred
prior to the Effective Date, whether or not the facts of or legal bases therefor
were known or existed prior to the Effective Date.
12.3 Rights of Action. Any rights, claims, or causes of action
accruing to AWI pursuant to the Bankruptcy Code or pursuant to any statute or
legal theory, including, without express or implied limitation, any avoidance or
recovery actions under sections 544, 545, 547, 548, 549, 550, 551, and 553 of
the Bankruptcy Code and (except as provided in Articles X and XI hereof) any
rights to, claims or causes of action for recovery under any policies of
insurance issued to or on behalf of AWI shall remain assets of AWI's estate and,
on the Effective Date, shall be transferred to Reorganized AWI. Reorganized AWI
shall be deemed the appointed representative to, and may, pursue, litigate, and
compromise and settle any such rights, claims, or causes of action, as
appropriate, in accordance with what is in the best interests of and for the
benefit of Reorganized AWI.
12.4 Third Party Agreements. The Distributions to the various
classes of Claims hereunder shall not affect the right of any Entity to levy,
garnish, attach, or employ any other legal process with respect to such
Distributions by reason of any claimed subordination rights or otherwise. All of
such rights and any agreements relating thereto shall remain in full force and
effect.
12.5 Dissolution of Committees. On the Effective Date, the Future
Claimants' Representative, the Asbestos PI Claimants' Committee, the Asbestos PD
Committee, and the Unsecured Creditors' Committee shall thereupon be released
and discharged of and from all further authority, duties, responsibilities, and
obligations relating to and arising from and in connection with the Chapter 11
Case, and, except for the limited purpose of presenting final applications for
fee and expenses, all such committees shall be deemed dissolved, and the Future
Claimants' Representative shall continue to serve through the termination of the
Asbestos PI Trust in order to perform the functions required by the Asbestos PI
Trust Agreement; provided, however, (i) if the Effective Date occurs before the
Confirmation Order becomes a Final Order, the Asbestos PI Claimants' Committee,
53
the Future Claimants' Representative, and, if Class 6 votes to accept the Plan,
the Unsecured Creditors' Committee may continue to exist and to serve for the
purposes of pursuing any appeal of the Confirmation Order, and (ii) if any
adversary proceeding to which any of the Asbestos PI Claimants' Committee, the
Future Claimants' Representative, or, if Class 6 votes to accept the Plan, the
Unsecured Creditors' Committee is participating is pending as of the Effective
Date, any such committee may continue to exist or the Future Claimants'
Representative may continue to serve for the limited purpose of litigating such
adversary proceeding. The fees and expenses of the Future Claimants'
Representative from and after the Effective Date relating to the role of the
Future Claimants' Representative in the Asbestos PI Trust, pursuant to the
Asbestos PI Trust Agreement and the Asbestos PI Trust Distribution Procedures
(including, without limitation, the fees and expenses of any professionals
retained by the Future Claimants' Representative), shall be the sole
responsibility of the Asbestos PI Trust. Notwithstanding the foregoing, if Class
4 votes to accept the Plan, the Asbestos PD Committee shall continue to exist
from and after the Effective Date for the sole purpose of the selection of the
Asbestos PD Trustees and the development of the Asbestos PD Claims Resolution
Procedures, but all fees and expenses incurred by the Asbestos PD Committee
(including, without limitation, all fees and expenses of counsel to the Asbestos
PD Committee and other professionals retained by the Asbestos PD Committee)
shall be the sole responsibility of the Asbestos PD Trust.
12.6 Exculpation. None of Reorganized AWI, any of the members of
the Asbestos PI Claimants' Committee, the Future Claimants' Representative, any
of the members of the Unsecured Creditors' Committee, AWWD, Holdings, or any of
their officers, directors, employees, or agents shall have or incur any
liability to any Entity for any act or omission in connection with or arising
out of the Chapter 11 Case, including, without limitation, the commencement of
the Chapter 11 Case, the negotiation of the Plan, pursuit of confirmation of the
Plan, the consummation of the Plan, or the administration of the Plan or the
property to be distributed under the Plan, except for gross negligence or
willful misconduct, and in all respects shall be entitled to rely upon the
advice of counsel with respect to their duties and responsibilities under, or in
connection with, the Plan.
12.7 Title to Assets; Discharge of Liabilities. Except as
otherwise provided in the Plan, on the Effective Date, title to all assets and
properties and interests in property dealt with by the Plan shall vest in
Reorganized AWI free and clear of all Claims, Equity Interests, Encumbrances,
and other interests, and the Confirmation Order shall be a judicial
determination of discharge of the liabilities of AWI arising prior to the
Effective Date, except as may be otherwise provided in the Plan.
12.8 Surrender and Cancellation of Instruments. Except as
otherwise provided in section 7.12 of the Plan with respect to Debt Security
Claims issued under the Indentures, and in addition to the provisions of section
3.2(f) hereof, each holder of a promissory note or other instrument evidencing
an Unsecured Claim shall surrender such promissory note or instrument to
Reorganized AWI, and Reorganized AWI shall distribute or cause to be distributed
to the holder thereof the appropriate Distribution hereunder. At the option of
Reorganized AWI (in its sole and absolute discretion), no Distribution hereunder
shall be made to or on behalf of any holder of such Unsecured Claim unless and
until such promissory note or instrument is received or the unavailability of
such note or instrument is reasonably established to the satisfaction of
Reorganized AWI. In accordance with section 1143 of the Bankruptcy Code, any
such holder of such a Claim that fails to surrender or cause to be surrendered
such promissory note or instrument or to execute and deliver an affidavit of
loss and indemnity reasonably satisfactory to Reorganized AWI and, in the event
that Reorganized AWI requests, furnish a bond in form and substance (including,
54
without limitation, amount) reasonably satisfactory to Reorganized AWI within
the Retention Period shall be deemed to have forfeited all rights, claims, and
interests and shall not participate in any Distribution hereunder.
12.9 Notices. Any notices, requests, and demands required or
permitted to be provided under the Plan, in order to be effective, shall be in
writing (including, without express or implied limitation, by facsimile
transmission), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when actually delivered or, in the case of
notice by facsimile transmission, when received and telephonically confirmed,
addressed as follows:
If to AWI: Armstrong World Industries, Inc.
Corporate Center
Post Office Box 3666
Lancaster, Pennsylvania 17604-3666
Attention: General Counsel
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen Karotkin, Esq.
Telecopier: (212) 310-8007
Telephone Confirmation: (212) 310-8888
If to the Asbestos PI
Claimants' Committee: Caplin & Drysdale
399 Park Avenue
New York, New York 10022
Attention: Elihu Inselbuch, Esq.
Telecopier: (212) 644-6755
Telephone Confirmation: (212) 319-7125
If to the Future Claimants'
Representative: Dean M. Trafelet, Esq.
9130 Wild Lane
Baileys Harbor, Wisconsin 54292
Telecopier: (920) 839-9438
Telephone Confirmation: (920) 839-1485
and
Kaye Scholer LLP
425 Park Avenue
New York, New York 10022
Telecopier: (212) 836-7157
Telephone Confirmation: (212) 836-8781
Attention: Michael J. Crames, Esq.
55
If to the Unsecured Creditors'
Committee:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopier: (212) 757-3990
Telephone Confirmation: (212) 373-3000
Attention: Andrew N. Rosenberg, Esq.
12.10 Headings. The headings used in the Plan are inserted for
convenience only and neither constitute a portion of the Plan nor in any manner
affect the construction of the provisions of the Plan.
12.11 Severability. At the unanimous option of AWI, the Asbestos
PI Trust, the Future Claimant's Representative, and the Unsecured Creditors'
Committee, each acting in its or his sole discretion, any provision of the Plan,
the Claims Trading Injunction, the Confirmation Order, the Asbestos PI Permanent
Channeling Injunction, or any of the Exhibits to the Plan that is prohibited,
unenforceable, or invalid shall, as to any jurisdiction in which such provision
is prohibited, unenforceable, or invalidated, be ineffective to the extent of
such prohibition, unenforceability, or invalidation without invalidating the
remaining provisions of the Plan, the Claims Trading Injunction, the
Confirmation Order, the Asbestos PI Permanent Channeling Injunction, and the
Exhibits to the Plan or affecting the validity or enforceability of such
provisions in any other jurisdiction.
12.12 Governing Law. Unless a rule of law or procedure is
supplied by federal law (including the Bankruptcy Code and Bankruptcy Rules) or
by Pennsylvania corporate law, the laws of the State of Delaware, without giving
effect to the conflicts of laws principles thereof, shall govern the
construction of the Plan and any agreements, documents, and instruments executed
in connection with the Plan, except as otherwise expressly provided in such
instruments, agreements or documents.
12.13 Compliance with Tax Requirements. In connection with the
Plan, AWI and the Disbursing Agent will comply with all withholding and
reporting requirements imposed by federal, state and local taxing authorities,
and all distributions hereunder shall be subject to such withholding and
reporting requirements.
12.14 Exemption from Transfer Taxes. Pursuant to section 1146(c)
of the Bankruptcy Code, the issuance, transfer, or exchange of notes or equity
securities under the Plan, the creation of any mortgage, deed of trust, or other
security interest, the making or assignment of any lease or sublease, or the
making or delivery of any deed or other instrument of transfer under, in
furtherance of, or in connection with the Plan, including, without express or
implied limitation, any liens granted in connection with the exit finance
facility referred to in section 7.17(h) hereof, shall not be subject to any
sales and use, stamp, real estate transfer, mortgage recording, or other similar
tax.
12.15 Expedited Determination of Postpetition Taxes. AWI and
Reorganized AWI are authorized (but not required) to request an expedited
determination of taxes under section 505(b) of the Bankruptcy Code for all tax
56
returns filed for, or on behalf of, AWI for all taxable periods (or portions
thereof) from the Commencement Date through (and including) the Effective Date.
57
Dated: Wilmington, Delaware
March 14, 2003
Respectfully submitted,
ARMSTRONG WORLD INDUSTRIES, INC.
By: /s John N. Rigas
--------------------------------------------
Name: John N. Rigas
Title: Senior Vice President, Secretary, and
General Counsel
WEIL, GOTSHAL & MANGES LLP
Co-Attorneys for Armstrong World
Industries, Inc., et al.
Chapter 11 Debtor in Possession
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
and
RICHARDS, LAYTON & FINGER
Co-Attorneys for Armstrong World
Industries, Inc., et al.
Chapter 11 Debtor in Possession
One Rodney Square
P.O. Box 551 Wilmington, Delaware 19899
(302) 658-6541
58
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- ---------------------------------------------------- x
In re : Chapter 11 Case No.
:
ARMSTRONG WORLD INDUSTRIES, : 00-4471 (RJN)
INC., et al., :
:
Debtors. : (Jointly Administered)
- ---------------------------------------------------- x
Exhibit List
Exhibit 1.13: Amended and Restated Articles of Incorporation (to be included
in Exhibit Volume)
Exhibit 1.14: Amended and Restated By-Laws (to be included in Exhibit Volume)
Exhibit 1.17: Asbestos PD Claims Resolution Procedures (attached)
Exhibit 1.21: Asbestos PD Trust Agreement (attached)
Exhibit 1.30: Asbestos PI Trust Agreement (attached)
Exhibit 1.31: Asbestos PI Trust Distribution Procedures (attached)
Exhibit 1.46: Claims Settlement Guidelines (to be included in Exhibit Volume)
Exhibit 1.95: New Long-Term Incentive Plan (to be included in Exhibit Volume)
Exhibit 1.101: Plan Note Indenture (to be included in Exhibit Volume)
Exhibit 1.96: New Warrants (to be included in Exhibit Volume)
Exhibit 1.114: Stockholder and Registration Rights Agreement (to be included
in Exhibit Volume)
Exhibit 7.2: Individuals Appointed as Asbestos PI Trustees (to be included
in Exhibit Volume)
Exhibit 7.22: Board of Directors of Reorganized AWI (to be included in Exhibit
Volume)
Exhibit 8.1: Assumed Executory Contracts and Unexpired Leases (to be attached
prior to distribution of solicitation packages)
Exhibit 8.2: Rejected Executory Contracts and Unexpired Leases (to be
attached prior to distribution of solicitation packages)
Exhibit 8.4: Previously Listed Executory Contracts No Longer Considered
Executory Contracts (to be attached prior to distribution of
solicitation packages)
Exhibit 8.5(b): Rejected Insurance Policies (to be attached prior to
distribution of solicitation packages)
Exhibit 8.8: Management Agreements (to be included in Exhibit Volume)
Exhibit 8.8-A: Identity of Persons Entering into Management
Agreements (to be included in Exhibit Volume)
Exhibit 8.8-B: Form of Management Agreement (to be included in
Exhibit Volume)
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re )
)
)
ARMSTRONG WORLD INDUSTRIES, ) Chapter 11
INC., et al, ) Case No. 00-4471 (RJN)
) (Jointly Administered)
Debtors )
- ------------------------------------)
EXHIBIT 1.17
FORM OF ASBESTOS PROPERTY
DAMAGE CLAIMS RESOLUTION PROCEDURES
Exhibit 1.17 - 1
ASBESTOS PROPERTY DAMAGE CLAIMS RESOLUTION PROCEDURES
1. DEFINITIONS AND INTERPRETATION
1.1 The following terms and phrases shall have the following meanings:
"ACBM" shall mean the asbestos-containing
building material that the Claimant
alleges constitutes material
manufactured, sold and/or
distributed by Armstrong and
includes asphalt asbestos-containing
floor tile, vinyl asbestos floor
tile, sheet vinyl with Hydrocord
backing, asbestos-containing
flooring adhesive, Armaspray or LT
Cork insulation, and that contains
more than 1 percent chrysotile
asbestos only as determined by
polarized light microscopy.
"ACCREDITED MANAGEMENT
PLANNER" shall mean a person accredited as a
"management planner" in accordance
with the requirements of Appendix C
to Subpart E of 40 C.F.R. Part 763.
"ACCREDITED MANAGEMENT
PLANNER REPORT" shall mean a signed, written report
of an Accredited Management Planner,
which includes: (i) the name,
address, state of accreditation, and
accreditation number of the Planner;
(ii) the date of the inspection of
the ACBM for which a Claim is made;
(iii) separately, for each
Homogeneous Area of ACBM for which a
Claim is made, (a) its location, (b)
the type of the ACBM (e.g., vinyl
asbestos floor tile), (c) the total
quantity of ACBM (in square or
linear feet), (d) whether the ACBM
for which a Claim is made is in a
friable condition, (e) a 4" x 6"
color photograph of the ACBM that
clearly and accurately depicts
physical condition, dimension (e.g.,
9" x 9"), color and pattern; (iv) a
statement that the Required Bulk
Samples have been collected and
submitted for asbestos fiber content
analysis to an Accredited
Laboratory.
"ACCREDITED LABORATORY" shall mean a laboratory accredited
to analyze bulk samples of suspected
ACBM for asbestos fiber content
pursuant to the National Institute
of Standards and Technology National
Voluntary Laboratory Accreditation
Program for Asbestos Bulk Sample
Analysis by polarized light
microscopy test method. A list of
laboratories accredited under this
program appears on NVLAP's web site,
www.ts.nist.gov., or can be obtained
by calling NVLAP at (301) 975-4016.
"ACCREDITED LABORATORY REPORT" shall mean a signed, written report
by an Accredited Laboratory,
pursuant to which the Accredited
Laboratory (i) certifies (a) it has
received the Required Bulk Samples
identified in the Accredited
Management Planner Report and (b)
has analyzed the Required Bulk
Samples and (ii) certifies that the
Required Bulk Samples contain
greater than 1 percent chrysotile
asbestos only. The Accredited
Laboratory Report shall contain such
other details of the results and the
procedures used to adequately
explain the analyses of the Required
Bulk Samples referenced therein.
"APPLICABLE JURISDICTION" shall mean the jurisdiction of the
Exhibit 1.17 - 2
state in which the building that is
the subject of the Claim is located.
"ARMSTRONG" shall mean Armstrong World
Industries, Inc.
"ASBESTOS PD TRUST" shall mean the trust established in
accordance with the Armstrong World
Industries, Inc. Asbestos Property
Damage Settlement Trust Agreement,
substantially in the form of Exhibit
"1.21" to the Plan.
"ASBESTOS PD TRUSTEE" shall have the same meaning as such
term is defined in the Plan.
"BANKRUPTCY COURT" shall mean the United States
Bankruptcy Court for the District of
Delaware.
"CHAPTER 11 CASES" shall mean the cases of Armstrong
World Industries, Inc. and its
affiliates under chapter 11 of title
11 of the United States Code,
pending in the Bankruptcy Court
under the case number 00-4471.
"CLAIM" shall mean any "Asbestos Property
Damage Claim," as such term is
defined in the Plan.
"CLAIMANT" shall mean an entity asserting a
Claim.
"CLAIM INFORMATION DEADLINE" shall mean the date that is one
hundred eighty (180) days after the
Effective Date.
"CLAIM INFORMATION FORM" shall mean the Claim Information
Form in the form annexed hereto as
Exhibit 1.
"COMPENSATION MODEL" shall mean the Compensation Model
criteria set forth in section 5
hereof.
"EFFECTIVE DATE" shall have the same meaning as
provided in the Plan.
"FRIABLE" shall mean material that when dry,
may be crumbled, pulverized, or
reduced to powder by hand pressure.
"HOMOGENOUS AREA" shall mean an area (e.g., room or
corridor) in which the ACBM, (i) in
the case of floor covering material,
is uniform in terms of appearance
(e.g., dimension, color and pattern)
and (ii) in the case of all other
ACBM, is uniform in terms of its
constituents as determined by bulk
sample analysis by an Accredited
Laboratory.
"NOMINAL VALUE" shall mean the nominal value of a
Claim determined in accordance with
section 4.3.
"NOTICE OF DECISION" shall mean a notice of decision
served by the Asbestos PD Trustee on
a Claimant pursuant to section 6
hereof in the form annexed hereto as
Exhibit 2.
"NOTICE OF DECISION TO DENY
CLAIM" shall mean a notice of decision to
deny a claim or any part thereof
served by the Asbestos PD Trustee in
Exhibit 1.17 - 3
the form annexed hereto as Exhibit
3.
"NOTICE OF RECONSIDERATION" shall mean a notice of
reconsideration served by a Claimant
on the Asbestos PD Trustee pursuant
to section 7 hereof in the form
annexed hereto as Exhibit 4.
"OSHA PEL" shall mean the permissible exposure
limit of 0.1 asbestos fibers per
cubic centimeter (f/cc) as
collected, analyzed and reported
pursuant to NIOSH Method 7400.
"PLAN" shall mean the Plan of
Reorganization of Armstrong, as
confirmed in the Chapter 11 Cases.
"REQUIRED BULK SAMPLES" shall mean the following with
respect to the suspected ACBM for
which a Claim is made: (i) three
bulk samples shall be collected from
each Homogeneous Area that is 1,000
ft2 or less; (ii) five bulk samples
shall be collected from each
Homogenous Area that is greater than
1,000 ft2 but less than 5,000 ft2;
(iii) seven bulk samples shall be
collected from each Homogeneous Area
that is greater than 5,000 ft2.
"QUALIFICATION CRITERIA" shall mean the criteria set forth in
section 4.2, which must be satisfied
before a Claim may be allowed.
"TRUSTEE" shall mean, collectively, the
trustee(s) of the Asbestos PD Trust.
1.2 The headings and title of this document are for convenience only and
are not to be construed as part of the operative provisions of this
document or as defining or limiting in any way the scope or intent of
the provisions of this document.
1.3 References in this document to any section shall include all sections
in such section.
1.4 All references in this document to the singular shall include the
plural, where applicable.
1.5 Exhibits referred to in this document are hereby incorporated into
and made a part of this document.
1.6 The terms and provisions of this document shall be interpreted in
accordance with and governed by applicable federal law and the laws
of the State of Delaware without giving effect to the doctrine of
conflict of laws.
2. ORGANIZATION
2.1 These procedures shall be the exclusive method for the evaluation and
settlement of Claims.
2.2 The Asbestos PD Trust may at any time following the Claims
Information Deadline, and at the sole discretion of the Trustee, by
written notice to each Claimant that has filed a Claim Information
Form, extend any of the dates established in these procedures within
which a Claimant may or shall take an action. The Asbestos PD Trust
may only shorten any of the dates within which a Claimant may or
shall take an action or extend the time within which the Asbestos PD
Trust may or shall take an action by consent of the Claimant(s)
affected or by order of the Bankruptcy Court.
3. CLAIM INFORMATION FORM
3.1 On or before the date that is ninety (90) days after the Effective
Date, the Asbestos PD Trust shall mail to each Claimant that has
filed a proof of claim in the Chapter 11 Cases that has not
Exhibit 1.17 - 4
previously been disallowed or withdrawn, a copy of these Asbestos
Property Damage Claims Resolution Procedures and a Claim Information
Form.
3.2 Each Claimant shall complete and serve the Claim Information Form so
that it is received at the address specified on the Claim Information
Form on or before the Claims Information Deadline.
3.3 The Claimant shall complete a separate Claim Information Form for
each building and associated ACBM for which a Claim is made. Each
Claim Information Form shall state separately for each building the
following information:
3.3.1 the name, address and use of the building;
3.3.2 the date on which the Claimant first became aware of the
presence of the ACBM;
3.3.3 the date on which each type of ACBM was installed;
3.3.4 separately for each Homogenous Area, the type of ACBM
(e.g., vinyl asbestos floor tile) and its specific
location (room or other designated area within the
building);
3.3.5 separately for each Homogeneous Area of ACBM that remains
in place, the quantity thereof (in square feet for
flooring products or in linear feet for insulation or
other products), the scheduled date of its removal and the
estimated or contracted cost of its removal;
3.3.6 separately for each Homogeneous Area of ACBM that has been
removed, the quantity thereof (in square feet for flooring
products or in linear feet for insulation or other
products), the date of its removal and the actual total
cost of its removal.
3.4 The Claimant shall submit with each Claim Information Form the
following documentary evidence:
3.4.1 a copy of all documentary evidence of the date of
installation of the ACBM;
3.4.2 a copy of all documentary evidence of the date on which
the Claimant first became aware of the presence of the
ACBM;
3.4.3 an Accredited Laboratory Report;
3.4.4 with respect to a building in which the ACBM remains in
place, an Accredited Management Planner Report in which it
is stated that the ACBM for which a Claim is made is in a
friable condition and is the source of asbestos fibers
released into the air in excess of the OSHA PEL as
determined by the average of a minimum of three area air
samples per Homogeneous Area;
3.4.5 for ACBM that remains in place, a copy of all documentary
evidence of the schedule for its removal and the estimated
or contracted cost of its removal;
3.4.6 with respect to a building in which the ACBM has been
removed, evidence that such ACBM was in a friable
condition and was the source of asbestos fibers released
into the air in excess of the OSHA PEL prior to its
removal;
3.4.7 for removed ACBM, a copy of all documentary evidence of
the actual cost of its removal.
3.4.8 Failure to provide the information required under sections
3.4.1 though 3.4.7 is sufficient grounds for the Asbestos
PD Trustee to deny a claim or any part thereof.
3.5 A Claim seeking contribution, in addition to fulfilling the
requirements of sections 3.3 and 3.4, shall be accompanied by all
documentation evidencing payment for which the Claim is made.
Exhibit 1.17 - 5
4. ASSESSMENT OF CLAIMS
4.1 Each Claim shall be reviewed for compliance with the Qualification
Criteria and its Nominal Value shall be determined in accordance with
the Compensation Model.
4.2 QUALIFICATION CRITERIA
4.2.1 In order to be allowed, a Claim must satisfy the following
Qualification Criteria:
4.2.1.1 The Claimant properly filed a proof of claim
corresponding to the ACBM for which the Claim
is made in the Chapter 11 Cases on or before
the Asbestos PD Bar Date, March 20, 2002,
except to the extent that the Bankruptcy Court
has ordered that the Claimant be permitted to
file such proof of claim untimely, and the
Claimant has, in fact, filed its proof of claim
within the time specified by the Bankruptcy
Court;
4.2.1.2 The Claim has not previously been disallowed by
an order of the Bankruptcy Court;
4.2.1.3 The Claim is not time-barred under the statute
of limitations or statute of repose of the
Applicable Jurisdiction;
4.2.1.4 The Claim is not otherwise barred by the law of
the Applicable Jurisdiction; and
4.2.1.5 The Claimant timely served a Claim Information
Form providing the information required by
section 3.3 and the documentary evidence
required by section 3.4 hereof.
4.2.1.6 Failure to satisfy any of the Qualification
Criteria of section 4.2 is sufficient grounds
for the Asbestos PD Trustee to deny a Claim or
any part thereof.
4.3 NOMINAL VALUE
4.3.1 The Nominal Value of each Claim will be calculated by the
Asbestos PD Trust with reference to the quantity of
friable ACBM that remains in place or that has been
removed from each Homogeneous Area for which a Claim is
made, applying the criteria set forth in the Compensation
Model.
5. COMPENSATION MODEL
5.1 The following criteria shall be applied to the quantity of the ACBM
in each Homogenous Area for which a Claim is made in order to
determine its Nominal Value:
5.2 For asbestos-containing asphalt floor tile and associated adhesive
installed prior to December 31, 1973 and removed no later than
December 6, 2000, 10% of the total incremental difference between the
actual cost of removal on a per square foot basis and $4.00 per
square foot multiplied by the total number of square feet of ACBM
satisfying the Qualification Criteria; for such material that remains
in place after December 6, 2000, 5% of the total incremental
difference between the actual cost of removal on a per square foot
basis and $4.00 per square foot multiplied by the total number of
square feet of ACBM satisfying the Qualification Criteria.
5.3 For vinyl asbestos floor tile, sheet vinyl with Hydrocord backing and
associated adhesive installed prior to December 31, 1983 and removed
no later than December 6, 2000, 10% of the total incremental
difference between the actual cost of removal on a per square foot
basis and $4.00 per square foot multiplied by the total number of
square feet of ACBM satisfying the Qualification Criteria; for such
material that remains in place after December 6, 2000, 5% of the
total incremental difference between the actual cost of removal on a
per square foot basis and $4.00 per square foot multiplied by the
total number of square feet of ACBM satisfying the Qualification
Criteria.
Exhibit 1.17 - 6
5.4 With respect to ACBM identified in sections 5.2 and 5.3, the maximum
incremental difference upon which Nominal Value is calculated shall
be $4.00.
5.5 For all other ACBM for which a Claim is made, Nominal Value shall be
no greater than 5% of the actual cost of removal.
6. NOTICE OF DECISION
6.1 The Asbestos PD Trustee shall, within the later of (i) if the
Asbestos PD Trustee moves to disallow a Claim or any part thereof and
the Bankruptcy Court enters an order denying such motion as to such
Claim, thirty (30) days after entry of such order, or (ii) one
hundred eighty (180) days after the Claims Information Deadline,
serve on each Claimant a Notice of Decision with respect to each
Claim stating the extent to which the Claim has been accepted.
6.2 The Notice of Decision shall state the Nominal Value of the Claim.
6.3 The Notice of Decision will specify the date by which a Notice of
Reconsideration must be filed in accordance with the provisions of
section 7.1.
7. NOTICE OF RECONSIDERATION
7.1 Any Claimant dissatisfied with the decision in the Notice of Decision
may serve on the Asbestos PD Trust a Notice of Reconsideration within
thirty (30) days after service of the Notice of Decision. Failure to
timely serve on the Asbestos PD Trust a Notice of Reconsideration
shall be deemed a consent to the Notice of Decision, and the Claimant
shall be deemed to have waived any right to seek further review of
its Claim.
7.2 The Notice of Reconsideration must identify specifically the basis
for reconsideration, stating the reason(s) for seeking
reconsideration and include all supporting documentation.
7.3 The Asbestos PD Trustee may in his discretion confer with the
Claimant's designated representative in an effort to reach agreement
on the Nominal Value of the Claim. The Asbestos PD Trustee may agree
upon an Adjusted Nominal Value of a Claim but shall have no
obligation to do so.
8. NOTICE OF DECISION TO DENY CLAIM
8.1 Following receipt of a Claim Information Form, the Asbestos PD
Trustee may notify the affected Claimant's designated representative
of his decision to deny the Claim or any part thereof. A Notice of
Decision To Deny Claim shall be in the form of Exhibit 3 and shall be
served on the Claimant's designated representative.
8.2 Claimant shall be required within 30 days after service of the Notice
of Decision to Deny Claim to:
8.2.1 produce for deposition the person or persons most
knowledgeable with respect to (i) the information provided
on the Claim Notification Form and all related documentary
evidence and (ii) the decision to manage in place and/or
remove the ACBM for which a Claim is made; and
8.2.2 provide any other information the Asbestos PD Trustee
considers relevant to determining the factual basis of the
Claim or any part thereof.
8.3 Following review and consideration of information gathered pursuant
to sections 8.2.1 and 8.2.2, the Asbestos PD Trustee may file a
motion with the Bankruptcy Court requesting a hearing to disallow a
Claim or any part thereof. Upon the filing of such motion, notice
thereof shall be served upon the Claimant's designated
representative. Disallowance of a Claim based upon failure to meet
any of the Qualification Criteria shall be made by the Bankruptcy
Court, after notice to the affected Claimant's designated
representative and a hearing thereon.
Exhibit 1.17 - 7
9. NOTICES
9.1 All notices and other communications made or served under these
Asbestos Property Damage Claims Resolution Procedures shall be in
writing and shall be deemed to have been duly served on the date of
delivery. If delivered by hand or by express delivery service, or on
the third business day after the deposit into an authorized United
States mail depository, if mailed by First Class Mail, postage
prepaid. Notices to the Asbestos PD Trust shall be addressed as
follows:
Armstrong World Industries, Inc. Asbestos Property Damage Trust
2500 Columbia Avenue
P. O. Box 3001 Lancaster, PA 17604
Notices to a Claimant shall be addressed as specified in the Claim
Information Form.
Exhibit 1.17 - 8
EXHIBIT LIST
(Exhibits to this document will
be included in the Exhibit Volume to be filed pursuant
to Article I, Section C. of the Plan)
Exhibit 1: Claim Information Form
Exhibit 2: Notice of Decision
Exhibit 3: Notice of Decision to Deny Claim
Exhibit 4: Notice of Reconsideration
Exhibit 1.17 - 9
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re )
)
)
ARMSTRONG WORLD INDUSTRIES, ) Chapter 11
INC., et al, ) Case No. 00-4471 (RJN)
) (Jointly Administered)
Debtors )
- ---------------------------------)
EXHIBIT 1.21
FORM OF ARMSTRONG WORLD INDUSTRIES, INC. ASBESTOS
PROPERTY DAMAGE SETTLEMENT TRUST AGREEMENT
Exhibit 1.21 - 1
TABLE OF CONTENTS
Page
ARTICLE I ..............................................................................2
1.1 Creation and Name..................................................................2
1.2 Purpose............................................................................2
1.3 Transfer of Assets.................................................................2
1.4 Acceptance of Assets and Assumption of Liabilities.................................3
ARTICLE II ..............................................................................3
2.1 Powers.............................................................................3
2.2 General Administration.............................................................5
2.3 Claims Administration..............................................................6
ARTICLE III ..............................................................................6
3.1 Accounts...........................................................................6
3.2 Investments........................................................................6
3.3 Source of Payments.................................................................7
ARTICLE IV ..............................................................................7
4.1 Number.............................................................................7
4.2 Term of Service....................................................................7
4.3 Appointment of a Successor Trustee.................................................8
4.4 Liability of Trustee, Officers and Employees.......................................8
4.5 Compensation and Expenses of the Trustee...........................................8
4.6 Indemnification of Trustee and Additional Indemnitees..............................9
4.7 Trustee's Lien.....................................................................9
4.8 Trustee's Employment of Experts....................................................9
4.9 Trustee's Independence.............................................................9
4.10 Bond...............................................................................9
ARTICLE V ..............................................................................9
5.1 Irrevocability.....................................................................9
5.2 Termination........................................................................9
5.3 Amendments........................................................................10
5.4 Severability......................................................................10
5.5 Notices...........................................................................10
5.6 Successors and Assigns............................................................11
5.7 Limitation on Claim Interests for Securities Laws Purposes........................11
5.8 Entire Agreement; No Waiver.......................................................11
i
5.9 Headings..........................................................................11
5.10 Governing Law.....................................................................11
5.11 Settlor Representative and Cooperation............................................12
5.12 Dispute Resolution................................................................12
5.13 Enforcement and Administration....................................................12
5.14 Effectiveness.....................................................................12
5.15 Counterpart Signatures............................................................12
ii
ARMSTRONG WORLD INDUSTRIES, INC. ASBESTOS
PROPERTY DAMAGE SETTLEMENT TRUST AGREEMENT
This Armstrong World Industries, Inc. Asbestos Property
Damage Settlement Trust Agreement (the "ASBESTOS PD TRUST AGREEMENT"), dated the
date set forth on the signature page hereof and effective as of the Effective
Date, is entered into by Armstrong World Industries, Inc. ("AWI," the "SETTLOR,"
or the "DEBTOR"), the debtor and debtor in possession in Case No. 00-4471 (AJN)
in the United States Bankruptcy Court for the District of Delaware (the
"BANKRUPTCY COURT"), as Settlor, and the Trustee (the "TRUSTEE" identified on
the signature page hereof and appointed upon confirmation of the Armstrong World
Industries, Inc. First Amended Plan of Reorganization under Chapter 11 of the
United States Bankruptcy Code, filed on March 14, 2003 (as amended, modified, or
supplemented from time to time, the "PLAN"). All capitalized terms not otherwise
defined herein shall have their respective meanings as set forth in the Plan,
and such definitions are incorporated herein by reference. All capitalized terms
not defined herein or defined in the Plan, but defined in the Bankruptcy Code or
Bankruptcy Rules, shall have the meanings ascribed to them by the Bankruptcy
Code and Bankruptcy Rules, and such definitions are incorporated herein by
reference.
WHEREAS, on December 6, 2000, AWI filed a voluntary
petition for relief under chapter 11 of the Bankruptcy Code with the Bankruptcy
Court; and
WHEREAS, on ________________, 2003, an order confirming the
Plan was entered; and
WHEREAS, the Plan provides, inter alia, for the creation of
the Armstrong World Industries, Inc. Asbestos Property Damage Settlement Trust
(the "ASBESTOS PD TRUST"); and
WHEREAS, pursuant to the Plan, the Asbestos PD Trust is to
use its assets and income to resolve all Asbestos Property Damage Claims; and
WHEREAS, the Asbestos PD Trust is intended to qualify as a
"qualified settlement fund" within the meaning of section 1.468B-1 et seq. of
the Treasury Regulations promulgated under section 468B of the Internal Revenue
Code.
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE I
AGREEMENT OF TRUST
1.1 CREATION AND NAME. AWI as Settlor hereby creates a
trust known as the "Armstrong World Industries, Inc. Asbestos Property Damage
Settlement Trust," which is the Asbestos PD Trust provided for and referred to
in the Plan. The Trustee may transact the business and affairs of the Asbestos
PD Trust in the name of the Asbestos PD Trust.
1.2 PURPOSE. The purpose of the Asbestos PD Trust is to
assume the liabilities of AWI, its predecessors and successors in interest, for
all Asbestos Property Damage Claims, to pursue recoveries from the Asbestos PD
Insurance Asset (if Class 4 voted to reject the Plan), and to use the Asbestos
PD Trust's assets and income to pay the holders of all valid Asbestos Property
Damage Claims in accordance with this Asbestos PD Trust Agreement and the
Asbestos PD Claims Resolution Procedures.
1.3 TRANSFER OF ASSETS. Pursuant to the Plan, the assets
described in section 11.1 and section 11.2 or 11.3 (as applicable) of the Plan
(the "ASBESTOS PD TRUST ASSETS") have been transferred and assigned to the
Asbestos PD Trust to settle and discharge all Asbestos Property Damage Claims.
AWI, Reorganized AWI, and any other transferors shall also execute and deliver
such documents to the Asbestos PD Trust as the Trustee may reasonably request to
Exhibit 1.21 - 2
transfer and assign the Asbestos PD Trust Assets to the Asbestos PD Trust.
1.4 ACCEPTANCE OF ASSETS AND ASSUMPTION OF LIABILITIES
(a) In furtherance of the purposes of the Asbestos PD
Trust, the Trustee, on behalf of the Asbestos PD Trust, hereby expressly accepts
the transfer and assignment to the Asbestos PD Trust of the Asbestos PD Trust
Assets in the time and manner as contemplated in the Plan.
(b) In furtherance of the purposes of the Asbestos PD
Trust, the Trustee, on behalf of the Asbestos PD Trust, expressly assumes all
liability for all Asbestos Property Damage Claims. Except as otherwise provided
in this Asbestos PD Trust Agreement and the Asbestos PD Claims Resolution
Procedures, the Asbestos PD Trust shall have all defenses, cross-claims,
offsets, and recoupments, as well as rights of indemnification, contribution,
subrogation, and similar rights, regarding such claims that AWI or Reorganized
AWI has or would have had under applicable law. Regardless of the foregoing,
however, a claimant must meet otherwise applicable federal, state and foreign
statutes of limitations and repose, except that a claimant may establish that
such statutes were tolled pursuant to a prepetition settlement agreement with
AWI, or otherwise by operation of law.
(c) No provision herein or in the Asbestos PD Claims
Resolution Procedures shall be construed to mandate any actions that would
contravene the Asbestos PD Trust's compliance with the requirements of a
qualified settlement fund within the meaning of section 1.468B-1 et seq. of the
Treasury Regulations promulgated under section 468B of the IRC.
(d) AWI and Reorganized AWI shall be entitled to
indemnification from the Asbestos PD Trust for any expenses, costs, and fees
(including attorneys' fees and costs, but excluding any such expenses, costs,
and fees incurred prior to the Effective Date), judgments, settlements, or other
liabilities arising from or incurred in connection with any action related to
Asbestos Property Damage Claims, including, but not limited to, indemnification
or contribution for such claims prosecuted against Reorganized AWI.
(e) Nothing in this Asbestos PD Trust Agreement shall be
construed in any way to limit the scope, enforceability, or effectiveness of the
discharge provided to AWI under the Plan pursuant to section 1141 of the
Bankruptcy Code.
ARTICLE II
POWERS AND TRUST ADMINISTRATION
2.1 POWERS.
(a) The Trustee is and shall act as the fiduciary to the
Asbestos PD Trust in accordance with the provisions of this Asbestos PD Trust
Agreement and the Plan. The Trustee shall, at all times, administer the Asbestos
PD Trust and the Asbestos PD Trust Assets in accordance with the purposes set
forth in Section 1.2 above. Subject to the limitations set forth in this
Asbestos PD Trust Agreement, the Trustee shall have the power to take any and
all actions that, in the judgment of the Trustee, are necessary or proper to
fulfill the purposes of the Asbestos PD Trust, including, without limitation,
each power expressly granted in this Section 2.1, any power reasonably
incidental thereto, and any trust power now or hereafter permitted under the
laws of the State of Delaware.
(b) Except as required by applicable law or otherwise
specified herein, the Trustee need not obtain the order or approval of any court
in the exercise of any power or discretion conferred hereunder.
Exhibit 1.21 - 3
(c) Without limiting the generality of Section 2.1(a)
above, and except as limited below, the Trustee shall have the power to:
(A) receive and hold the Asbestos PD Trust Assets and
exercise all rights with respect thereto;
(B) invest the monies held from time to time by the
Asbestos PD Trust;
(C) sell, transfer, or exchange any or all of the Asbestos
PD Trust Assets at such prices and upon such terms as the Trustee may
consider proper, consistent with the other terms of this Asbestos PD
Trust Agreement;
(D) enter into leasing and financing agreements with third
parties to the extent such agreements are reasonably necessary to
permit the Asbestos PD Trust to operate;
(E) pay liabilities and expenses of the Asbestos PD Trust,
including, but not limited to, Asbestos PD Trust expenses;
(F) establish such funds, reserves and accounts within the
Asbestos PD Trust estate as deemed by the Trustee to be useful in
carrying out the purposes of the Asbestos PD Trust;
(G) sue and be sued and participate, as a party or
otherwise, in any judicial, administrative, arbitrative, or other
proceeding;
(H) establish, supervise and administer the Asbestos PD
Trust in accordance with the Asbestos PD Claims Resolution Procedures
and the terms thereof;
(I) appoint such officers and hire such employees and
engage such legal, financial, accounting, investment, auditing, and
other consultants and agents as the business of the Asbestos PD Trust
requires and delegate to such persons such powers and authorities as
the fiduciary duties of the Trustee permit and as the Trustee, in his
or her discretion, deems advisable or necessary in order to carry out
the terms of this Asbestos PD Trust;
(J) pay employees, legal, financial, accounting,
investment, auditing, and other consultants, advisors, and agents,
including those engaged by the Asbestos PD Trust in connection with
its alternative dispute resolution activities or litigation-related
activities, reasonable compensation;
(K) compensate the Trustee as provided below, and his or
her employees, legal, financial, accounting, investment and other
advisors, consultants, independent contractors, and agents, and
reimburse the Trustee all reasonable out-of-pocket costs and expenses
incurred by such persons in connection with the performance of their
duties hereunder;
(L) execute and deliver such instruments as the Trustee
considers proper in administering the Asbestos PD Trust;
(M) enter into such other arrangements with third parties
as are deemed by the Trustee to be useful in carrying out the
purposes of the Asbestos PD Trust, provided such arrangements do not
Exhibit 1.21 - 4
conflict with any other provision of this Asbestos PD Trust
Agreement;
(N) in accordance with Section 4.6(b) below, defend,
indemnify and hold harmless (and purchase insurance indemnifying) the
Trustee, the officers and employees of the Asbestos PD Trust, and any
agents, advisors and consultants of the Asbestos PD Trust (the
"ADDITIONAL INDEMNITEES"), to the fullest extent that a corporation
or trust organized under the law of the Asbestos PD Trust's situs is
from time to time entitled to indemnify and/or insure its directors,
trustees, officers, employees, agents, advisors and representatives;
(O) delegate any or all of the authority herein conferred
with respect to the investment of all or any portion of the Asbestos
PD Trust Assets to any one or more reputable individuals or
recognized institutional investment advisors or investment managers
without liability for any action taken or omission made because of
any such delegation, except as provided in Section 4.4 below;
(P) make, pursue (by arbitration, litigation or
otherwise), collect, compromise or settle, in the name of the
Asbestos PD Trust or the name of Reorganized AWI, any claim, right,
action, or cause of action included in the Asbestos PD Trust Assets,
including, but not limited to, insurance recoveries, before any
relevant forum or court of competent jurisdiction; provided that
settlement of actions before the Bankruptcy Court require the
approval of the Bankruptcy Court after notice to Reorganized AWI and
all remaining holders of Asbestos Property Damage Claims.
(d) The Trustee shall not have the power to guarantee any
debt of other persons.
2.2 GENERAL ADMINISTRATION.
(a) Subject to the approval of the Bankruptcy Court after
notice to Reorganized AWI and all remaining holders of Asbestos Property Damage
Claims, the Trustee may adopt bylaws that are not inconsistent with the terms of
this Asbestos PD Trust Agreement to govern the affairs of the Asbestos PD Trust
(the "Asbestos PD Trust Bylaws"). In the event of an inconsistency between the
Asbestos PD Trust Bylaws and this Asbestos PD Trust Agreement, the Asbestos PD
Trust Agreement shall govern. In the event of an inconsistency between the Plan
and the Asbestos PD Trust Agreement, the Plan shall govern.
(b) The Trustee shall (i) timely file such income tax and
other returns and statements and shall timely pay all taxes required to be paid,
(ii) comply with all withholding obligations, as required under the applicable
provisions of the IRC and of any state law and the regulations promulgated
thereunder, (iii) meet without limitation all requirements necessary to qualify
and maintain qualification of the Asbestos PD Trust as a qualified settlement
fund within the meaning of section 1.468B-1 et seq. of the Treasury Regulations
promulgated under section 468B of the IRC, and (iv) take no action that could
cause the Asbestos PD Trust to fail to qualify as a qualified settlement fund
within the meaning of section 1.468B-1 et seq. of the Treasury Regulations
promulgated under section 468B of the IRC.
(c) The Trustee shall timely account to the Bankruptcy
Court as follows:
(A) The Trustee shall cause to be prepared and filed with
the Bankruptcy Court, as soon as available, and in any event within
one hundred and twenty (120) days following the end of each fiscal
year, an annual report containing financial statements of the
Asbestos PD Trust (including, without limitation, a balance sheet of
the Asbestos PD Trust as of the end of such fiscal year and a
statement of operations for such fiscal year) audited by a firm of
independent certified public accountants selected by the Trustees and
Exhibit 1.21 - 5
accompanied by an opinion of such firm as to the conformity of the
financial statements with generally accepted accounting principles.
(B) Simultaneously with the filing of each set of
financial statements referred to in Article 2.2(c)(i) above, the
Trustee shall cause to be prepared and filed with the Bankruptcy
Court a report containing a summary regarding the claims disposed of
during the period covered by the financial statements.
(C) All materials required to be filed with the Bankruptcy
Court by this Section 2.2(c) shall be available for inspection by the
public in accordance with procedures established by the Bankruptcy
Court and shall be filed with the Office of the United States Trustee
for the District of Delaware, and shall be sent by first class mail,
postage prepaid, to Reorganized AWI and each remaining holder of
Asbestos Property Damage Claims.
(d) The Trustee shall be required to obtain the approval of
the Bankruptcy Court, after notice to Reorganized AWI and all holders of any
remaining Asbestos Property Damage Claims, in addition to any other instances
elsewhere enumerated, in order to do any of the following:
(A) to terminate the Asbestos PD Trust pursuant to Section
5.2 below;
(B) to settle the liability of any insurer under any
insurance policy or legal action related thereto with respect to the
Asbestos PD Insurance Asset; provided, however, that the Asbestos PD
Trust will give Reorganized AWI prior written notice of any such
settlement; or
(C) to take structural or other actions to minimize any
tax on the Asbestos PD Trust Assets.
2.3 CLAIMS ADMINISTRATION. The Trustee shall promptly
proceed to implement the Asbestos PD Claims Resolution Procedures.
ARTICLE III
ACCOUNTS, INVESTMENTS, AND PAYMENTS
3.1 ACCOUNTS. The Trustee may, from time to time, create
such accounts and reserves within the Asbestos PD Trust estate as he or she may
deem necessary, prudent, or useful in order to provide for the payment of
expenses and payment of Asbestos Property Damage Claims and may, with respect to
any such account or reserve, restrict the use of monies therein.
3.2 INVESTMENTS. Investment of monies held in the Asbestos
PD Trust shall be administered in the manner in which individuals of ordinary
prudence, discretion, and judgment would act in the management of their own
affairs, subject to the following limitations and provisions:
(a) The Asbestos PD Trust shall not hold, directly or
indirectly, more than 5% of the equity in any entity or business enterprise or
acquire, directly or indirectly, equity in any entity or business enterprise if,
immediately following such acquisition, the Asbestos PD Trust would hold more
than 5% of the equity in such entity or business enterprise.
(b) The Asbestos PD Trust shall not acquire or hold any
long-term debt securities unless (i) such securities are rated "Baa" or higher
by Moody's, "BBB" or higher by Standard & Poor's ("S&P's"), or have been given
an equivalent investment grade rating by another nationally recognized
Exhibit 1.21 - 6
statistical rating agency, or (ii) have been issued or fully guaranteed as to
principal and interest by the United States of America or any agency or
instrumentality thereof.
(c) The Asbestos PD Trust shall not acquire or hold for
longer than ninety (90) days any commercial paper unless such commercial paper
is rated "Prime-1" or higher by Moody's or "A-1" or higher by S&P's or has been
given an equivalent rating by another nationally recognized statistical rating
agency.
(d) The Asbestos PD Trust shall not acquire or hold any
common or preferred stock or convertible securities unless such stock or
securities are rated "A" or high by Moody's or "A" or higher by S&P's or have
been given an equivalent investment grade rating by another nationally
recognized statistical rating agency.
(e) The Asbestos PD Trust shall not acquire any debt
securities or other instruments issued by any entity (other than debt securities
or other instruments issued or fully guaranteed as to principal and interest by
the United States of America or any agency or instrumentality thereof) if,
following such acquisition, the aggregate market value of all debt securities
and instruments issued by such entity held by the Asbestos PD Trust would exceed
2% of the aggregate value of the Asbestos PD Trust estate. The Asbestos PD Trust
shall not hold any debt securities or other instruments issued by any entity
(other than debt securities or other instruments issued or fully guaranteed as
to principal and interest by the United States of America or any agency or
instrumentality thereof and other than debt securities) to the extent that the
aggregate market value of all securities and instruments issued by such entity
held by the Asbestos PD Trust would exceed 5% of the aggregate value of the
Asbestos PD Trust Assets.
(f) The Asbestos PD Trust shall not acquire or hold any
certificates of deposit unless all publicly held, long-term debt securities, if
any, of the financial institution issuing the certificate of deposit and the
holding company, if any, of which such financial institution is a subsidiary,
meet the standards set forth in Section 3.2(b) above.
(g) The Asbestos PD Trust shall not acquire or hold any
repurchase obligations unless, in the opinion of the Trustee, they are
adequately collateralized.
(h) The Asbestos PD Trust shall not acquire or hold any
options.
3.3 SOURCE OF PAYMENTS. All Asbestos PD Trust expenses and
payments and all liabilities with respect to Asbestos Property Damage Claims
shall be payable solely by the Trustees out of the Asbestos PD Trust Assets.
Neither AWI, Reorganized AWI, their subsidiaries, any successor in interest, the
present or former directors, officers, employees or agents of AWI, Reorganized
AWI, nor the Trustee, or any of their respective officers, agents, advisors, or
employees shall be liable for the payment of any Asbestos PD Trust expense or
any other liability of the Asbestos PD Trust.
ARTICLE IV
TRUSTEE
4.1 NUMBER. There shall be one (1) Trustee. The initial
Trustee shall be the person named on the signature page hereof.
4.2 TERM OF SERVICE.
(a) The Trustee shall serve from the Effective Date until
the earliest of (i) his or her death, (ii) the effective date of his or her
resignation pursuant to Section 4.2(b) below, (iii) his or her removal pursuant
to Section 4.2(c) below, and (iv) the termination of the Asbestos PD Trust
pursuant to Section 5.2 below.
Exhibit 1.21 - 7
(b) A Trustee may resign at any time by written notice to
the holders of the remaining Asbestos Property Damage Claims and Reorganized
AWI. Such notice shall specify a date when such resignation shall take place,
which shall not be earlier than the date of the appointment of a successor
trustee, where practicable.
(c) A Trustee may be removed by an order of the Bankruptcy
Court in the event that he or she becomes unable to discharge his or her duties
hereunder due to accident or physical or mental deterioration, or for other good
cause. "Good cause" shall be deemed to include, without limitation, any
substantial failure to comply with the general administration provisions of
Section 2.2 above, or a consistent pattern of neglect and failure to perform or
participate in performing the duties of the Trustee hereunder. Such removal
shall take effect at such time as the Bankruptcy Court shall determine.
4.3 APPOINTMENT OF A SUCCESSOR TRUSTEE.
(a) In the event of a vacancy in the position of Trustee,
Reorganized AWI shall nominate a successor Trustee (the "SUCCESSOR PD TRUSTEE").
The appointment of the Successor PD Trustee shall be subject to the approval of
the Bankruptcy Court, after notice to the remaining holders of Asbestos Property
Damage Claims.
(b) Immediately upon the appointment of any Successor PD
Trustee, all rights, titles, duties, powers and authority of the predecessor
Trustee hereunder shall be vested in, and undertaken by, the Successor PD
Trustee without any further act. No Successor PD Trustee shall be liable
personally for any act or omission of his or her predecessor Trustees.
(c) Each Successor PD Trustee shall serve until the
earliest of (i) his or her death, (ii) the effective date of his or her
resignation pursuant to Section 4.2(b) above, (iii) his or her removal pursuant
to Section 4.2(c) above, or (iv) the termination of the Asbestos PD Trust
pursuant to Section 5.2 below.
4.4 LIABILITY OF TRUSTEE, OFFICERS AND EMPLOYEES. The
Trustee and the individuals identified as Additional Indemnitees in Section
2.1(c)(N) above shall not be liable to the Asbestos PD Trust, to any entity
holding an Asbestos Property Damage Claim, or to any other person, except for
such individual's own breach of trust committed in bad faith or willful
misappropriation. In addition, the Trustee and the Additional Indemnitees shall
not be liable for any act or omission of any other Trustee or Additional
Indemnitee unless such person acted with bad faith in the selection or retention
of such other Trustee or Additional Indemnitee.
4.5 COMPENSATION AND EXPENSES OF THE TRUSTEE.
(a) The Trustee shall receive compensation from the
Asbestos PD Trust for his or her services as a Trustee in the amount of
$_____________ per annum, plus a per diem allowance for business performed in
the amount of $__________. The Trustee may provide for partial payment of per
diem amounts on a proportional basis for activities of less than a full day's
duration. The per annum and per diem compensation payable to the Trustee
hereunder shall be reviewed every three (3) years and appropriately adjusted for
changes in the cost of living. Any other changes in compensation of the Trustee
shall be made subject to the approval of the Bankruptcy Court after notice to
Reorganized AWI and the holders of remaining Asbestos Property Damage Claims.
(b) The Asbestos PD Trust will promptly reimburse the
Trustee for all reasonable out-of-pocket costs and expenses incurred by the
Trustee in connection with the performance of his or her duties hereunder.
(c) The Asbestos PD Trust shall include a description of
the amounts paid under this Section 4.5 in the accounts to be filed with the
Bankruptcy Court pursuant to Section 2.2(c)(A) above.
Exhibit 1.21 - 8
4.6 INDEMNIFICATION OF TRUSTEE AND ADDITIONAL INDEMNITEES.
(a) The Asbestos PD Trust shall indemnify and defend the
Trustee, as well as the Additional Indemnitees, in the performance of their
duties hereunder to the fullest extent that a corporation or trust organized
under the laws of the Asbestos PD Trust's situs is from time to time entitled to
indemnify and defend such persons against any and all liabilities, expenses,
claims, damages or losses incurred by them in the performance of their duties.
Notwithstanding the foregoing, the Trustee and the Additional Indemnitees shall
not be indemnified or defended in any way for any liability, expense, claim,
damage, or loss for which he or she is ultimately liable under Section 4.4
above.
(b) Reasonable expenses, costs and fees (including
attorneys' fees and costs) incurred by or on behalf of a Trustee or an
Additional Indemnitee in connection with any action, suit, or proceeding,
whether civil, administrative or arbitrative from which he or she is indemnified
by the Asbestos PD Trust pursuant to Section 4.6(a) above, shall be paid by the
Asbestos PD Trust in advance of the final disposition thereof upon receipt of an
undertaking, by or on behalf of the Trustee or Additional Indemnitee, to repay
such amount in the event that it shall be determined ultimately by final order
that such Trustee or Additional Indemnitee is not entitled to be indemnified by
the Asbestos PD Trust.
(c) The Trustee may purchase and maintain reasonable
amounts and types of insurance on behalf of an individual who is or was a
Trustee or Additional Indemnitee including against liability asserted against or
incurred by such individual in that capacity or arising from his or her status
as a Trustee, officer, employee, agent or other representative.
4.7 TRUSTEE'S LIEN. The Trustee and the Additional
Indemnitees shall have a first priority lien upon the Asbestos PD Trust Assets
to secure the payment of any amounts payable to them pursuant to Section 4.6
above.
4.8 TRUSTEE'S EMPLOYMENT OF EXPERTS. The Trustee may, but
shall not be required to, retain and/or consult with counsel, accountants,
appraisers, auditors, and other parties deemed by the Trustee to be qualified as
experts on the matters submitted to him or her, and the written opinion of or
information provided by any such parties on any matters submitted to them by the
Trustee shall be full and complete authorization and protection in respect of
any action taken or not taken by the Trustee hereunder in good faith and in
accordance with the written opinion of or information provided by any such
party.
4.9 TRUSTEE'S INDEPENDENCE. The Trustee shall not, during
the term of his or her service, hold a financial interest in, act as attorney or
agent for, or serve as any other professional for Reorganized AWI. The Trustee
shall not act as an attorney for any person who holds an Asbestos Property
Damage Claim.
4.10 BOND. The Trustee shall not be required to post any
bond or other form of surety or security unless otherwise ordered by the
Bankruptcy Court.
ARTICLE V
GENERAL PROVISIONS
5.1 IRREVOCABILITY. The Asbestos PD Trust is irrevocable.
5.2 TERMINATION.
(a) The Asbestos PD Trust shall automatically terminate on
the date ninety (90) days after the first to occur of the following events:
Exhibit 1.21 - 9
(A) the Trustee decides to terminate the Asbestos PD Trust
because all Asbestos Property Damage Claims have been liquidated and
paid to the extent provided in this Asbestos PD Trust Agreement and
the Asbestos PD Claims Resolution Procedures or disallowed by a
final, non-appealable order; or
(B) if the Trustee has procured and has in place
irrevocable insurance policies and has established claims handling
agreements and other necessary arrangements with suitable third
parties adequate to discharge all expected remaining obligations and
expenses of the Asbestos PD Trust in a manner consistent with this
Asbestos PD Trust Agreement and the Asbestos PD Claims Resolution
Procedures, the date on which the Bankruptcy Court enters an order
approving such insurance and other arrangements and such order
becomes a final order; or
(C) to the extent that any rule against perpetuities shall
be deemed applicable to the Asbestos PD Trust, twenty-one (21) years
less ninety-one (91) days pass after the death of the last survivor
of all of the descendants of the late Joseph P. Kennedy, Sr., father
of the late President John F. Kennedy, living on the date hereof.
(b) On the Termination Date, after payment of all the
Asbestos PD Trust's liabilities has been provided for, all monies remaining in
the Asbestos PD Trust estate shall be given to organization(s) exempt from
federal income tax under section 501(c)(3) of the Internal Revenue Code, which
tax-exempt organization(s) shall be selected by the Trustee using his or her
reasonable discretion; provided, however, that the tax-exempt organization(s)
shall not bear any relationship to Reorganized AWI within the meaning of section
468B(d)(3) of the Internal Revenue Code. Notwithstanding any contrary provision
of the Plan and related documents, this Section 5.2(b) cannot be modified or
amended.
(c) On the Termination Date, after satisfaction of all
Asbestos Property Damage Claims, any rights to any remaining Asbestos PD
Insurance Asset shall revert to Reorganized AWI.
5.3 AMENDMENTS. The Trustee, with the approval of the
Bankruptcy Court after notice to Reorganized AWI and the remaining holders of
Asbestos Property Damage Claims, may modify or amend this Asbestos PD Trust
Agreement and the Asbestos PD Trust Bylaws. Any modification or amendment made
pursuant to this Section 5.3 must be done in writing.
5.4 SEVERABILITY. Should any provision in this Asbestos PD
Trust Agreement be determined to be unenforceable, such determination shall in
no way limit or affect the enforceability and operative effect of any and all
other provisions of this Asbestos PD Trust Agreement.
5.5 NOTICES. Notices to entities asserting Asbestos
Property Damage Claims shall be given by first class mail, postage prepaid, at
the address or addresses for further information provided for such entity in the
proof of claim filed by such holder of an Asbestos Property Damage Claim, or
such corrected address as may be provided by such holder in writing to the
Trustee.
(a) Any notices or other communications required or
permitted hereunder to the following parties shall be in writing and delivered
at the addresses designated below, or sent by telex, telecopy or facsimile
pursuant to the instructions listed below, or mailed by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows, or to
such other address or addresses as may hereafter be furnished in writing to each
of the other parties listed below in compliance with the terms hereof.
To the Asbestos PD Trust through the Trustee:
To Reorganized AWI:
Exhibit 1.21 - 10
Armstrong World Industries, Inc.
Corporate Center
Post Office Box 3666
Lancaster, Pennsylvania 17604-3666
Attention: General Counsel
Telecopier:
Telephone Confirmation:
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen Karotkin, Esq.
Telecopier: (212) 310-8007
Telephone Confirmation: (212) 310-8888
(b) All such notices and communications if mailed shall be
effective when physically delivered at the designated addresses or, if
electronically transmitted, when the communication is received at the designated
addresses and confirmed by the recipient by return transmission.
5.6 SUCCESSORS AND ASSIGNS. The provisions of this Asbestos
PD Trust Agreement shall be binding upon and inure to the benefit of AWI, the
Asbestos PD Trust, the Trustee, and Reorganized AWI, and their respective
successors and assigns, except that neither AWI, the Asbestos PD Trust, the
Trustee nor Reorganized AWI may assign or otherwise transfer any of its, or
their, rights or obligations under this Asbestos PD Trust Agreement except, in
the case of the Asbestos PD Trust and the Trustee, as contemplated by Section
2.1 above.
5.7 LIMITATION ON CLAIM INTERESTS FOR SECURITIES LAWS
PURPOSES. Asbestos Property Damage Claims, and any interests therein, (a) shall
not be assigned, conveyed, hypothecated, pledged or otherwise transferred,
voluntarily or involuntarily, directly or indirectly, except by will or under
the laws of descent and distribution; (b) shall not be evidenced by a
certificate or other instrument; (c) shall not possess any voting rights with
respect to the Asbestos PD Trust; and (d) shall not be entitled to receive any
dividends or interest; provided, however, that clause (a) of this Section 5.7
shall not apply to the holder of a claim that is subrogated to an Asbestos
Property Damage Claim as a result of its satisfaction of such Asbestos Property
Damage Claim.
5.8 ENTIRE AGREEMENT; NO WAIVER. The entire agreement of
the parties relating to the subject matter of this Asbestos PD Trust Agreement
is contained herein and in the documents referred to herein, and this Asbestos
PD Trust Agreement and such documents supersede any prior oral or written
agreements concerning the subject matter hereof. No failure to exercise or delay
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any further exercise thereof or of any other right,
power or privilege. The rights and remedies herein provided are cumulative and
are not exclusive of rights under law or in equity.
5.9 HEADINGS. The headings used in this Asbestos PD Trust
Agreement are inserted for convenience only and do not constitute a portion of
this Asbestos PD Trust Agreement, nor in any manner affect the construction of
the provisions of this Asbestos PD Trust Agreement.
5.10 GOVERNING LAW. This Asbestos PD Trust Agreement shall
be governed by, and construed in accordance with, the laws of the State of
Delaware, without regard to Delaware conflict of law principles.
Exhibit 1.21 - 11
5.11 SETTLOR REPRESENTATIVE AND COOPERATION. AWI is hereby
irrevocably designated as the Settlor, and it is hereby authorized to take any
action required of the Settlor in connection with the Asbestos PD Trust
Agreement. AWI agrees to cooperate in implementing the goals and objectives of
this Asbestos PD Trust.
5.12 DISPUTE RESOLUTION. Any disputes that arise under this
Asbestos PD Trust Agreement or under the Asbestos PD Claims Resolution
Procedures shall be resolved by submission of the matter to an alternative
dispute resolution ("ADR") process mutually agreeable to the parties involved.
Should any party to the ADR process be dissatisfied with the outcome of such
process, that party may apply to the Bankruptcy Court for a judicial
determination of the matter. Should the dispute not be resolved by ADR process
within thirty (30) days after submission, the parties are relieved of the
requirement to pursue ADR prior to application to the Bankruptcy Court.
5.13 ENFORCEMENT AND ADMINISTRATION. The provisions of this
Asbestos PD Trust Agreement and the Asbestos PD Claims Resolution Procedures
attached hereto shall be enforced by the Bankruptcy Court pursuant to the Plan.
The parties hereby further acknowledge and agree that the Bankruptcy Court shall
have exclusive jurisdiction over the settlement of the accounts of the Trustee
and over any disputes hereunder not resolved by alternative dispute resolution
in accordance with Section 5.13 above.
5.14 EFFECTIVENESS. This Asbestos PD Trust Agreement shall
not become effective until it has been executed and delivered by all the parties
hereto.
5.15 COUNTERPART SIGNATURES. This Asbestos PD Trust
Agreement may be executed in any number of counterparts, each of which shall
constitute an original, but such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Asbestos
PD Trust Agreement this _____ day of ________________________, _______.
ARMSTRONG WORLD INDUSTRIES, INC., SETTLOR, BY
Name:
---------------------------------
Title:
--------------------------------
TRUSTEE
Name:
--------------------------------
Exhibit 1.21 - 12
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re )
)
)
ARMSTRONG WORLD INDUSTRIES, ) Chapter 11
INC., et al., ) Case No. 00-4471 (RJN)
) (Jointly Administered)
Debtors )
- ---------------------------------)
Exhibit 1.30
FORM OF ASBESTOS PI TRUST AGREEMENT
ARMSTRONG WORLD INDUSTRIES, INC.
ASBESTOS PERSONAL INJURY SETTLEMENT TRUST AGREEMENT
This Armstrong World Industries, Inc. Asbestos Personal
Injury Settlement Trust Agreement ("PI TRUST Agreement"), dated the date set
forth on the signature page hereof and effective as of the Effective Date, is
entered into by Armstrong World Industries, Inc. ("AWI," the "SETTLOR," or the
"DEBTOR"), the Debtor and debtor-in-possession in Case No. 00-4471 (RJN) in the
United States Bankruptcy Court for the District of Delaware as Settlor; the
Legal Representative for Asbestos-Related Future Claimants ("FUTURE CLAIMANTS'
REPRESENTATIVE"); the Official Committee of Asbestos Creditors ("ACC"); and the
Trustees ("TRUSTEES") and the members of the PI Trust Advisory Committee ("TAC")
identified on the signature page hereof and appointed at Confirmation pursuant
to Armstrong World Industries, Inc. First Amended Plan of Reorganization under
Chapter 11 of the United States Bankruptcy Code, dated March 14, 2003 ("PLAN"),
as such Plan may be amended, modified or supplemented from time to time. All
capitalized terms not otherwise defined herein shall have their respective
meanings as set forth in the Plan, and such definitions are incorporated herein
by reference. All capitalized terms not defined herein or defined in the Plan,
but defined in the Bankruptcy Code or Rules, shall have the meanings ascribed to
them by the Bankruptcy Code and Rules, and such definitions are incorporated
herein by reference.
WHEREAS, at the time of the entry of the order for relief
in the Chapter 11 case, AWI was named as a defendant in actions involving
personal injury ("PI") or death claims caused by exposure to asbestos-containing
products for which AWI, its predecessors, successors and assigns have legal
liability ("ASBESTOS PERSONAL INJURY CLAIMS" as defined in the Plan); and
WHEREAS, AWI has reorganized under the provisions of
Chapter 11 of the Bankruptcy Code in a case pending in the United States
Bankruptcy Court for the District of Delaware, known as In re Armstrong World
Industries, Inc., Debtor, Case No. 00-4471 (RJN); and
WHEREAS, the Plan has been confirmed by the Bankruptcy
Court; and
WHEREAS, the Plan provides, inter alia, for the creation of
the Armstrong World Industries, Inc. Asbestos Personal Injury Settlement Trust
("PI TRUST"); and
WHEREAS, pursuant to the Plan, the PI Trust is to use its
assets and income to satisfy all Asbestos Personal Injury Claims; and
WHEREAS, it is the intent of AWI, the Trustees, the ACC,
the TAC, and the Future Claimants' Representative that the PI Trust be
administered, maintained, and operated at all times through mechanisms that
provide reasonable assurance that the PI Trust will satisfy all Asbestos
Personal Injury Claims pursuant to the AWI Corporation Asbestos Personal Injury
Trust Distribution Procedures ("TDP") that are attached hereto as Exhibit 1 in
substantially the same manner, and in strict compliance with the terms of this
PI Trust Agreement; and
WHEREAS, pursuant to the Plan, the PI Trust is intended to
qualify as a "qualified settlement fund" within the meaning of section 1.468B-1
et seq. of the Treasury Regulations promulgated under section 468B of the
Internal Revenue Code ("IRC"); and
WHEREAS, the Bankruptcy Court has determined that the PI
Trust and the Plan satisfy all the prerequisites for an injunction pursuant to
section 524(g) of the Bankruptcy Code, and such injunction has been entered in
connection with the Confirmation Order;
NOW, THEREFORE, it is hereby agreed as follows:
Exhibit 1.30 - 1
SECTION 1
AGREEMENT OF TRUST
1.1 CREATION AND NAME. AWI as Settlor hereby creates a
trust known as the "Armstrong World Industries, Inc. Asbestos Personal Injury
Settlement Trust," which is the PI Trust provided for and referred to in the
Plan. The Trustees of the PI Trust may transact the business and affairs of the
PI Trust in the name of the PI Trust.
1.2 PURPOSE. The purpose of the PI Trust is to assume the
liabilities of AWI, its predecessors and successors in interest, for all
Asbestos Personal Injury Claims (as defined in the Plan), and to use the PI
Trust's assets and income to pay the holders of all Asbestos Personal Injury
Claims in accordance with this PI Trust Agreement and the TDP in such a way that
such holders of Asbestos Personal Injury Claims are treated fairly, equitably
and reasonably in light of the limited assets available to satisfy such claims,
and to otherwise comply in all respects with the requirements of a trust set
forth in section 524(g)(2)(B) of the Bankruptcy Code.
1.3 TRANSFER OF ASSETS. Pursuant to the Plan, the PI Trust
Share (as defined in the Plan) has been transferred and assigned to the PI Trust
to settle and discharge all Asbestos Personal Injury Claims. Pursuant to the
Plan, AWI, its successors in interest thereto, from and after the Effective Date
("REORGANIZED AWI") and others may also transfer and assign additional assets to
the PI Trust from time to time (the "PI TRUST ASSETS"). In all events, the PI
Trust Assets will be transferred to the PI Trust free and clear of any liens or
other claims by AWI, Reorganized AWI, any creditor, or other entity. AWI,
Reorganized AWI, and any other transferors shall also execute and deliver such
documents to the PI Trust as the Trustees reasonably request to transfer and
assign the PI Trust Assets to the PI Trust.
1.4 ACCEPTANCE OF ASSETS AND ASSUMPTION OF LIABILITIES
(a) In furtherance of the purposes of the PI Trust, the
Trustees, on behalf of the PI Trust, hereby expressly accept the transfer and
assignment to the PI Trust of the PI Trust Assets in the time and manner
contemplated in the Plan.
(b) In furtherance of the purposes of the PI Trust, the
Trustees, on behalf of the PI Trust, expressly assume all liability for all
Asbestos Personal Injury Claims. Except as otherwise provided in this PI Trust
Agreement and the TDP, the PI Trust shall have all defenses, cross-claims,
offsets, and recoupments, as well as rights of indemnification, contribution,
subrogation, and similar rights, regarding such claims that AWI or Reorganized
AWI has or would have had under applicable law. Regardless of the foregoing,
however, a claimant must meet otherwise applicable federal, state and foreign
statutes of limitations and repose, except as otherwise provided in Section
5.1(a)(2) of the TDP.
(c) No provision herein or in the TDP shall be construed to
mandate distributions on any claims or other actions that would contravene the
PI Trust's compliance with the requirements of a qualified settlement fund
within the meaning of section 1.468B-1 et seq. of the Treasury Regulations
promulgated under section 468B of the IRC.
(d) AWI and Reorganized AWI shall be entitled to
indemnification from the PI Trust for any expenses, costs, and fees (including
attorneys' fees and costs, but excluding any such expenses, costs, and fees
incurred prior to the Effective Date), judgments, settlements, or other
liabilities arising from or incurred in connection with any action related to
Asbestos Personal Injury Claims, including, but not limited to, indemnification
or contribution for such claims prosecuted against Reorganized AWI.
(e) Nothing in this PI Trust Agreement shall be construed
in any way to limit the scope, enforceability, or effectiveness of the Section
524(g) injunction issued in connection with the Plan or the PI Trust's
assumption of all liability for Asbestos Personal Injury Claims, subject to the
provisions of Section 1.4(b) above.
Exhibit 1.30 - 2
SECTION 2
POWERS AND TRUST ADMINISTRATION
2.1 POWERS.
(a) The Trustees are and shall act as the fiduciaries to
the PI Trust in accordance with the provisions of this PI Trust Agreement and
the Plan. The Trustees shall, at all times, administer the PI Trust and the PI
Trust Assets in accordance with the purposes set forth in Section 1.2 above.
Subject to the limitations set forth in this PI Trust Agreement, the Trustees
shall have the power to take any and all actions that, in the judgment of the
Trustees, are necessary or proper to fulfill the purposes of the PI Trust,
including, without limitation, each power expressly granted in this Section 2.1,
any power reasonably incidental thereto, and any trust power now or hereafter
permitted under the laws of the State of Delaware.
(b) Except as required by applicable law or otherwise
specified herein, the Trustees need not obtain the order or approval of any
court in the exercise of any power or discretion conferred hereunder.
(c) Without limiting the generality of Section 2.1(a)
above, and except as limited below, the Trustees shall have the power to:
(i) receive and hold the PI Trust Assets, vote
the Reorganized AWI common stock, and exercise all rights with
respect to, and sell, any securities issued by Reorganized AWI that
are included in the PI Trust Assets, subject to any restrictions set
forth in the Restated Certificate of Reorganized AWI;
(ii) invest the monies held from time to time by
the PI Trust;
(iii) sell, transfer, or exchange any or all of
the PI Trust Assets at such prices and upon such terms as the
Trustees may consider proper, consistent with the other terms of this
PI Trust Agreement;
(iv) enter into leasing and financing agreements
with third parties to the extent such agreements are reasonably
necessary to permit the PI Trust to operate;
(v) pay liabilities and expenses of the PI Trust,
including, but not limited to, PI Trust expenses;
(vi) establish such funds, reserves and accounts
within the PI Trust estate, as deemed by the Trustees to be useful in
carrying out the purposes of the PI Trust;
(vii) sue and be sued and participate, as a party
or otherwise, in any judicial, administrative, arbitrative, or other
proceeding;
(viii) establish, supervise and administer the PI
Trust in accordance with the TDP and the terms thereof;
(ix) appoint such officers and hire such
employees and engage such legal, financial, accounting, investment,
auditing and forecasting, and other consultants and agents as the
business of the PI Trust requires, and delegate to such persons such
powers and authorities as the fiduciary duties of the Trustees permit
and as the Trustees, in their discretion, deem advisable or necessary
in order to carry out the terms of this PI Trust;
(x) pay employees, legal, financial, accounting,
investment, auditing, and forecasting, and other consultants,
advisors, and agents, including those engaged by the PI Trust in
connection with its alternative dispute resolution activities,
reasonable compensation;
(xi) compensate the Trustees, the TAC members,
and the Future Claimants' Representative as provided below, and their
employees, legal, financial, accounting, investment and other
advisors, consultants, independent contractors, and agents, and
reimburse the Trustees, the TAC members and the Future Claimants'
Exhibit 1.30 - 3
Representative all reasonable out-of-pocket costs and expenses
incurred by such persons in connection with the performance of their
duties hereunder;
(xii) execute and deliver such instruments as
the Trustees consider proper in administering the PI Trust;
(xiii) enter into such other arrangements with
third parties as are deemed by the Trustees to be useful in carrying
out the purposes of the PI Trust, provided such arrangements do not
conflict with any other provision of this PI Trust Agreement;
(xiv) in accordance with Section 4.6 below,
defend, indemnify and hold harmless (and purchase insurance
indemnifying) (A) the Trustees and (B) the TAC, the Future Claimants'
Representative, the officers and employees of the PI Trust, and any
agents, advisors and consultants of the PI Trust, the TAC or the
Future Claimants' Representative (the "ADDITIONAL INDEMNITEES"), to
the fullest extent that a corporation or trust organized under the
law of the PI Trust's situs is from time to time entitled to
indemnify and/or insure its directors, trustees, officers, employees,
agents, advisors and representatives;
(xv) delegate any or all of the authority herein
conferred with respect to the investment of all or any portion of the
PI Trust Assets to any one or more reputable individuals or
recognized institutional investment advisors or investment managers
without liability for any action taken or omission made because of
any such delegation, except as provided in Section 4.4 below;
(xvi) consult with Reorganized AWI, the TAC and
the Future Claimants' Representative at such times and with respect
to such issues relating to the conduct of the PI Trust as the
Trustees consider desirable; and
(xvii) make, pursue (by litigation or otherwise),
collect, compromise or settle, in the name of the PI Trust or the
name of Reorganized AWI, any claim, right, action, or cause of action
included in the PI Trust Assets including, but not limited to,
insurance recoveries, before any court of competent jurisdiction;
provided that settlement of actions before the Bankruptcy Court
require the approval of the Bankruptcy Court after notice to
Reorganized AWI.
(d) The Trustees shall not have the power to guarantee any
debt of other persons.
(e) The Trustees shall give the TAC, the Future Claimants'
Representative and Reorganized AWI prompt notice of any act performed or taken
pursuant to Sections 2.1(c)(i), (iii), (vii), or (xv) above, and any act
proposed to be performed or taken pursuant to Section 2.2(f) below.
2.2 GENERAL ADMINISTRATION.
(a) The Trustees shall adopt and act in accordance with the
PI Trust Bylaws. To the extent not inconsistent with the terms of this PI Trust
Agreement, the PI Trust Bylaws shall govern the affairs of the PI Trust. In the
event of an inconsistency between the PI Trust Bylaws and this PI Trust
Agreement, the PI Trust Agreement shall govern.
(b) The Trustees shall (i) timely file such income tax and
other returns and statements and shall timely pay all taxes required to be paid,
(ii) comply with all withholding obligations, as required under the applicable
provisions of the IRC and of any state law and the regulations promulgated
thereunder, (iii) meet without limitation all requirements necessary to qualify
and maintain qualification of the PI Trust as a qualified settlement fund within
the meaning of section 1.468B-1 et seq. of the Treasury Regulations promulgated
under section 468B of the IRC, and (iv) take no action that could cause the PI
Trust to fail to qualify as a qualified settlement fund within the meaning of
section 1.468B-1 et seq. of the Treasury Regulations promulgated under section
468B of the IRC.
(c) The Trustees shall timely account to the Bankruptcy
Court as follows:
Exhibit 1.30 - 4
(i) The Trustees shall cause to be prepared and
filed with the Bankruptcy Court, as soon as available, and in any
event within one hundred and twenty (120) days following the end of
each fiscal year, an annual report containing financial statements of
the PI Trust (including, without limitation, a balance sheet of the
PI Trust as of the end of such fiscal year and a statement of
operations for such fiscal year) audited by a firm of independent
certified public accountants selected by the Trustees and accompanied
by an opinion of such firm as to the fairness of the financial
statements' presentation of the cash and investments available for
the payment of claims and as to the conformity of the financial
statements with generally accepted accounting principles. The
Trustees shall provide a copy of such report to the TAC, the Future
Claimants' Representative, and Reorganized AWI when such reports are
filed with the Bankruptcy Court.
(ii) Simultaneously with delivery of each set of
financial statements referred to in Article 2.2(c)(i) above, the
Trustees shall cause to be prepared and filed with the Bankruptcy
Court a report containing a summary regarding the number and type of
claims disposed of during the period covered by the financial
statements. The Trustees shall provide a copy of such report to the
TAC, the Future Claimants' Representatives, and Reorganized AWI when
such report is filed.
(iii) All materials required to be filed with the
Bankruptcy Court by this Section 2.2(c) shall be available for
inspection by the public in accordance with procedures established by
the Bankruptcy Court and shall be filed with the Office of the United
States Trustee for the District of Delaware.
(d) The Trustees shall cause to be prepared as soon as
practicable prior to the commencement of each fiscal year a budget and cash flow
projections covering such fiscal year and the succeeding four fiscal years. The
budget and cash flow projections shall include determining the Maximum Annual
Payment pursuant to Section 2.4 of the TDP, and the Asbestos Personal Injury
Claims Payment Ratio pursuant to Section 2.5 of the TDP. The Trustees shall
provide a copy of the budget and cash flow projections to the TAC and the Future
Claimants' Representative.
(e) The Trustees shall consult with the TAC and the Future
Claimants' Representative (i) on the general implementation and administration
of the PI Trust; (ii) on the general implementation and administration of the
TDP; and (iii) on such other matters as may be required under this PI Trust
Agreement and the TDP.
(f) The Trustees shall be required to obtain the consent of
the TAC and the Future Claimants' Representative pursuant to the Consent Process
set forth in Section 5.7(b) and 6.6(b) below, in addition to any other instances
elsewhere enumerated, in order:
(i) to change the Claims Payment Ratio described in
Section 2.5 of the TDP in the event that the
requirements for such a change as set forth in
said provision have been met;
(ii) to change the Scheduled Diseases, Disease
Levels and/or Medical/Exposure Criteria set
forth in Section 5.3(a)(3) of the TDP, and/or
the Maximum Values set forth in Section
5.3(b)(4) and Section 5.4(a) of the TDP;
(iii) to change the Payment Percentage described in
Section 2.3 of the TDP as provided in Section
4.2 of the TDP;
(iv) to establish and/or to change the Claims
Materials to be provided holders of Asbestos
Personal Injury Claims under Section 6.1 of the
TDP;
(v) to require that claimants provide additional
kinds of medical and/or exposure evidence
pursuant to Section 7.1 of the TDP;
Exhibit 1.30 - 5
(vi) to change the form of release to be provided
pursuant to Section 7.8 of the TDP;
(vii) to terminate the PI Trust pursuant to Section
7.2 below;
(viii) to settle the liability of any insurer under
any insurance policy or legal action related
thereto;
(ix) to change the compensation of the members of
the TAC, the Future Claimants' Representative
or Trustees, other than to reflect
cost-of-living increases or changes approved by
the Bankruptcy Court as otherwise provided
herein;
(x) to take structural or other actions to minimize
any tax on the PI Trust Assets; or
(xi) to amend the PI Trust Bylaws in accordance with
the terms thereof;
(xii) to amend any provision of this PI Trust
Agreement or the TDP in accordance with the
terms thereof;
(xiii) to appoint members of the Board of Directors of
the Reorganized Debtor; or
(xiv) to merge any asbestos claims resolution
organization formed by the PI Trust with
another asbestos claims resolution organization
that is not specifically created by this PI
Trust Agreement or the TDP, or to contract with
another asbestos claims resolution organization
or other entity that is not specifically
created by this PI Trust Agreement or the TDP,
or permit any other party to join in any
asbestos claims resolution organization that is
formed by the PI Trust pursuant to the PI Trust
Agreement or the TDP; provided that such
merger, contract or joinder shall not (a)
subject Reorganized AWI or any successors in
interest thereto, to any risk of having any PI
Trust Claim asserted against it or them, or (b)
otherwise jeopardize the validity or
enforceability of the section 524(g)
injunction; and provided further that the terms
of such merger will require the surviving
organization to make decisions about the
allowability and value of claims in accordance
with Section 2.1 of the TDP which requires that
such decisions be based on the provisions of
the TDP.
(g) The Trustees shall meet with the TAC and the Future
Claimants' Representative no less often than quarterly. The Trustees shall meet
in the interim with the TAC and the Future Claimants' Representative when so
requested by either.
(h) The Trustees, upon notice from either the TAC or the
Future Claimants' Representative, if practicable in view of pending business,
shall at their next meeting with the TAC or the Future Claimants' Representative
consider issues submitted by the TAC or the Future Claimants' Representative.
(i) Periodically, but not less often than once a year, the
Trustees shall make available to claimants and other interested parties the
number of claims by disease levels that have been resolved both by individual
review and by arbitration, as well as by trial, indicating the amounts of the
awards and the averages of the awards by jurisdiction pursuant to Section 7.10
of the TDP.
Exhibit 1.30 - 6
2.3 CLAIMS ADMINISTRATION.
The Trustees shall promptly proceed to implement the TDP.
SECTION 3
ACCOUNTS, INVESTMENTS, AND PAYMENTS
3.1 ACCOUNTS. The Trustees may, from time to time, create
such accounts and reserves within the PI Trust estate as they may deem
necessary, prudent, or useful in order to provide for the payment of expenses
and payment of Asbestos Personal Injury Claims and may, with respect to any such
account or reserve, restrict the use of monies therein.
3.2 INVESTMENTS. Investment of monies held in the PI Trust
shall be administered in the manner in which individuals of ordinary prudence,
discretion, and judgment would act in the management of their own affairs,
subject to the following limitations and provisions:
(a) The PI Trust shall not acquire, directly or indirectly,
equity in any entity (other than Reorganized AWI or any successor to Reorganized
AWI) or business enterprise if, immediately following such acquisition, the PI
Trust would hold more than 5% of the equity in such entity or business
enterprise. The PI Trust shall not hold, directly or indirectly, more than 10%
of the equity in any entity (other than Reorganized AWI or any successor to
Reorganized AWI) or business enterprise.
(b) The PI Trust shall not acquire or hold any long-term
debt securities unless (i) such securities are PI Trust Assets under the Plan,
(ii) such securities are rated "Baa" or higher by Moody's, "BBB" or higher by
Standard & Poor's ("S&P'S"), or have been given an equivalent investment grade
rating by another nationally recognized statistical rating agency, or (iii) have
been issued or fully guaranteed as to principal and interest by the United
States of America or any agency or instrumentality thereof.
(c) The PI Trust shall not acquire or hold for longer than
ninety (90) days any commercial paper unless such commercial paper is rated
"Prime-1" or higher by Moody's or "A-1" or higher by S&P's or has been given an
equivalent rating by another nationally recognized statistical rating agency.
(d) Excluding any securities by the Debtor or Reorganized
AWI, the PI Trust shall not acquire or hold any common or preferred stock or
convertible securities unless such stock or securities are rated "A" or high by
Moody's or "A" or higher by S&P's or have been given an equivalent investment
grade rating by another nationally recognized statistical rating agency.
(e) The PI Trust shall not acquire any debt securities or
other instruments issued by any entity (other than debt securities or other
instruments issued or fully guaranteed as to principal and interest by the
United States of America or any agency or instrumentality thereof) if, following
such acquisition, the aggregate market value of all debt securities and
instruments issued by such entity held by the PI Trust would exceed 2% of the
aggregate value of the PI Trust estate. The PI Trust shall not hold any debt
securities or other instruments issued by any entity (other than debt securities
or other instruments issued or fully guaranteed as to principal and interest by
the United States of America or any agency or instrumentality thereof and other
than debt securities or other instruments of Reorganized AWI or any successor to
Reorganized AWI) to the extent that the aggregate market value of all securities
and instruments issued by such entity held by the PI Trust would exceed 5% of
the aggregate value of the PI Trust Assets.
(f) The PI Trust shall not acquire or hold any certificates
of deposit unless all publicly held, long-term debt securities, if any, of the
financial institution issuing the certificate of deposit and the holding
company, if any, of which such financial institution is a subsidiary, meet the
standards set forth in Section 3.2(b) above.
Exhibit 1.30 - 7
(g) The PI Trust may acquire and hold any securities or
instruments issued y Reorganized AWI or any successor to Reorganized AWI, or
obtained as proceeds of litigation or otherwise to resolve disputes, without
regard to the limitations set forth in Subsections (a)-(f) above.
(h) The PI Trust shall not acquire or hold any repurchase
obligations unless, in the opinion of the Trustees, they are adequately
collateralized. (i) The PI Trust shall not acquire or hold any options.
3.3 SOURCE OF PAYMENTS. All PI Trust expenses and payments
and all liabilities with respect to claims shall be payable solely by the
Trustees out of the PI Trust Assets. Neither AWI, Reorganized AWI, their
subsidiaries, any successor in interest, the present or former directors,
officers, employees or agents of AWI, Reorganized AWI, nor the Trustees, the TAC
or Future Claimants' Representative, or any of their officers, agents, advisors,
or employees shall be liable for the payment of any PI Trust expense or any
other liability of the PI Trust.
SECTION 4
TRUSTEES
4.1 NUMBER. There shall be five (5) Trustees. The initial
Trustees shall be those persons named on the signature page hereof.
4.2 TERM OF SERVICE.
(a) The five initial Trustees named pursuant to Article 4.1
above shall each serve an initial two (2) year term. At the expiration of these
initial two (2) year terms, the number of Trustees shall be reduced from five
(5) to three (3). At that time, the five initial Trustees, after consultation
with the TAC and the Future Claimants' Representative, shall decide which three
individuals among their number shall continue to serve, and the three (3)
Trustees so selected shall then serve staggered terms of three (3), four (4) and
five (5) years each. Thereafter, each Trustee's term of service shall be five
(5) years. The initial Trustees shall serve from the Effective Date until the
earlier of (i) the end of his or her term, (ii) his or her death, (iii) his or
her resignation pursuant to Section 4.2(b) below, (iv) his or her removal
pursuant to Section 4.2(c) below, or (v) the termination of the PI Trust
pursuant to Section 7.2 below.
(b) A PI Trustee may resign at any time by written notice
to the remaining Trustees, the TAC and the Future Claimants' Representative.
Such notice shall specify a date when such resignation shall take place, which
shall not be less than 90 days after the date such notice is given, where
practicable.
(c) A Trustee may be removed by unanimous vote of the
remaining Trustees in the event that he or she becomes unable to discharge his
or her duties hereunder due to accident or physical or mental deterioration, or
for other good cause. Good cause shall be deemed to include, without limitation,
any substantial failure to comply with the general administration provisions of
Section 2.2 above, a consistent pattern of neglect and failure to perform or
participate in performing the duties of the Trustees hereunder, or repeated
non-attendance at scheduled meetings. Such removal shall require the approval of
the Bankruptcy Court and shall take effect at such time as the Bankruptcy Court
shall determine.
4.3 APPOINTMENT OF SUCCESSOR TRUSTEES.
(a) In the event of a vacancy in the position of PI
Trustee, whether by term expiration, resignation or removal, the remaining
Trustees shall consult with the TAC and the Future Claimants' Representative
concerning appointment of a successor PI Trustee. The vacancy shall be filled by
the unanimous vote of the remaining Trustees unless a majority of the TAC or the
Future Claimants' Representative vetoes the appointment. In the event that the
remaining Trustees cannot agree on a Successor PI Trustee, or a majority of the
TAC or the Future Claimants' Representative vetoes the appointment of a
successor PI Trustee, the Bankruptcy Court shall make the appointment. Nothing
shall prevent the reappointment of a PI Trustee for an additional term or terms.
Exhibit 1.30 - 8
(b) Immediately upon the appointment of any Successor PI
Trustee, all rights, titles, duties, powers and authority of the predecessor PI
Trustee hereunder shall be vested in, and undertaken by, the Successor PI
Trustee without any further act. No Successor PI Trustee shall be liable
personally for any act or omission of his or her predecessor Trustees.
(c) Each Successor PI Trustee shall serve until the earlier
of (i) the end of a full term of five (5) years if the predecessor PI Trustee
completed his or her term, (ii) the end of the remainder of the term of the PI
Trustee whom he or she is replacing if said predecessor PI Trustee did not
complete said term, (iii) his or her death, (iv) his or her resignation pursuant
to Section 4.2(b) above, (v) his or her removal pursuant to Section 4.2(c)
above, or (vi) the termination of the PI Trust pursuant to Section 7.2 below.
4.4 LIABILITY OF TRUSTEES, OFFICERS AND EMPLOYEES. The
Trustees and the individuals identified as Additional Indemnitees in Section
2.1(c)(xiv) above shall not be liable to the PI Trust, to any individual holding
an asbestos claim, or to any other person, except for such individual's own
breach of trust committed in bad faith or willful misappropriation. In addition,
the Trustees and the Additional Indemnitees shall not be liable for any act or
omission of any other Trustee or Additional Indemnitee unless such person acted
with bad faith in the selection or retention of such other Trustee or Additional
Indemnitee.
4.5 COMPENSATION AND EXPENSES OF TRUSTEES.
(a) The Trustees shall receive compensation from the PI
Trust for their services as Trustees in the amount of $_____________ per annum,
plus a per diem allowance for meetings or other PI Trust business performed in
the amount of $__________. For purposes of the per diem allowance, PI Trust
business includes, but is not limited to, attendance at meetings of Reorganized
AWI's Board of Directors. For purposes of section 7.4 below, the Trustees shall
determine the scope and duration of activities that constitute a meeting and, if
the Trustees elect to provide for payment for activities of less than a full
day's duration, may provide for partial payment of per diem amounts on a
proportional basis for activities of less than a full day's duration. The per
annum and per diem compensation payable to the Trustees hereunder shall be
reviewed every three (3) years and appropriately adjusted for changes in the
cost of living. Any other changes in compensation of the Trustees shall be made
subject to the approval of the Bankruptcy Court.
(b) The PI Trust will promptly reimburse the Trustees for
all reasonable out-of-pocket costs and expenses incurred by the Trustees in
connection with the performance of their duties hereunder.
(c) The PI Trust shall include a description of the amounts
paid under this Section 4.5 in the accounts to be filed with the Bankruptcy
Court and provided to the TAC, the Future Claimants' Representative, and
Reorganized AWI pursuant to Section 2.2(c)(i).
4.6 INDEMNIFICATION OF TRUSTEES AND ADDITIONAL INDEMNITEES.
(a) The PI Trust shall indemnify and defend the Trustees,
as well as the Additional Indemnitees in the performance of their duties
hereunder to the fullest extent that a corporation or trust organized under the
laws of the PI Trust's situs is from time to time entitled to indemnify and
defend such persons against any and all liabilities, expenses, claims, damages
or losses incurred by them in the performance of their duties. Notwithstanding
the foregoing, the Trustees and the Additional Indemnitees shall not be
indemnified or defended in any way for any liability, expense, claim, damage, or
loss for which he or she is ultimately liable under Section 4.4 above.
(b) Reasonable expenses, costs and fees (including
attorneys' fees and costs) incurred by or on behalf of a PI Trustee or
Additional Indemnitee in connection with any action, suit, or proceeding,
whether civil, administrative or arbitrative from which they are indemnified by
the PI Trust pursuant to Section 4.6(a) above, shall be paid by the PI Trust in
advance of the final disposition thereof upon receipt of an undertaking, by or
on behalf of the Trustees or Additional Indemnitee, to repay such amount in the
Exhibit 1.30 - 9
event that it shall be determined ultimately by final order that such PI Trustee
or Additional Indemnitee is not entitled to be indemnified by the PI Trust.
(c) The Trustees may purchase and maintain reasonable
amounts and types of insurance on behalf of an individual who is or was a PI
Trustee or Additional Indemnitee including against liability asserted against or
incurred by such individual in that capacity or arising from his or her status
as a PI Trustee, TAC member, Future Claimants' Representative, officer,
employee, agent or other representative.
4.7 TRUSTEES' LIEN. The Trustees and the Additional
Indemnitees shall have a first priority lien upon the PI Trust Assets to secure
the payment of any amounts payable to them pursuant to Section 4.6 above.
4.8 TRUSTEES' EMPLOYMENT OF EXPERTS. The Trustees may, but
shall not be required to, retain and/or consult with counsel, accountants,
appraisers, auditors and forecasters, and other parties deemed by the Trustees
to be qualified as experts on the matters submitted to them, and the written
opinion of or information provided by any such parties on any matters submitted
to them by the Trustees shall be full and complete authorization and protection
in respect of any action taken or not taken by the Trustees hereunder in good
faith and in accordance with the written opinion of or information provided by
any such party.
4.9 TRUSTEES' INDEPENDENCE. The Trustees shall not, during
the term of their service, hold a financial interest in, act as attorney or
agent for, or serve as any other professional for Reorganized AWI.
Notwithstanding the foregoing, any PI Trustee may serve, without any additional
compensation other than the per diem compensation to be paid by the PI Trust
pursuant to Section 4.5(a) above, as a director of Reorganized AWI. No PI
Trustee shall act as an attorney for any person who holds an asbestos claim.
4.10 BOND. The Trustees shall not be required to post any
bond or other form of surety or security unless otherwise ordered by the
Bankruptcy Court.
SECTION 5
TRUST ADVISORY COMMITTEE
5.1 MEMBERS. The TAC shall consist of five (5) members, who
shall initially be the persons named on the signature page hereof.
5.2 DUTIES. The members of the TAC shall serve in a
fiduciary capacity representing all holders of present Asbestos Personal Injury
Claims. The Trustees must consult with the TAC on matters identified in Section
2.2(e) above and in other provisions herein, and must obtain the consent of the
TAC on matters identified in Section 2.2(f) above. Where provided in the TDP,
certain other actions by the Trustees are also subject to the consent of the
TAC.
5.3 TERM OF OFFICE.
(a) Each member of the TAC shall serve until the earlier of
(i) his or her death, (ii) his or her resignation pursuant to Section 5.3(b)
below, (iii) his or her removal pursuant to Section 5.3(c) below, or (iv) the
termination of the PI Trust pursuant to Section 7.2 below.
(b) A member of the TAC may resign at any time by written
notice to the other members of the TAC, the Trustees and the Future Claimants'
Representative. Such notice shall specify a date when such resignation shall
take effect, which shall not be less than ninety (90) days after the date such
notice is given, where practicable.
(c) A member of the TAC may be removed in the event that he
or she becomes unable to discharge his or her duties hereunder due to accident,
physical deterioration, mental incompetence, or a consistent pattern of neglect
and failure to perform or to participate in performing the duties of such member
hereunder, such as repeated non-attendance at scheduled meetings, or for other
Exhibit 1.30 - 10
good cause. Such removal shall be made at the recommendation of the remaining
members of the TAC with the approval of the Bankruptcy Court.
5.4 APPOINTMENT OF SUCCESSOR.
(a) In the event of a vacancy caused by the resignation of
a TAC member, his or her successor shall be selected by the TAC member who is
resigning, unless the remaining members unanimously veto the selection, in which
case, the successor shall be selected by a unanimous vote of the remaining
members. If the remaining members cannot unanimously agree, the Bankruptcy Court
shall appoint the successor. In the event of a vacancy caused by removal or
death of a TAC member, or in the event that a resigning or retiring member does
not name his or her successor, the remaining members of the TAC by unanimous
vote shall name the successor. If the remaining members of the TAC cannot reach
unanimous agreement, the Bankruptcy Court shall appoint the successor.
(b) Each successor TAC member shall serve until the earlier
of (i) his or her death, (ii) his or her resignation pursuant to Section 5.3(b)
above, (iii) his or her removal pursuant to Section 5.3(c) above, or (iv) the
termination of the PI Trust pursuant to Section 7.2 below.
5.5 TAC'S EMPLOYMENT OF PROFESSIONALS.
(a) The TAC may but is not required to retain and/or
consult counsel, accountants, appraisers, auditors, forecasters, experts, and
financial and investment advisors, and such other parties deemed by the TAC to
be qualified as experts on matters submitted to the TAC (the "PROFESSIONALS").
The TAC and its Professionals shall at all times have complete access to the PI
Trust's officers, employees and agents, as well as to the Professionals retained
by the PI Trust, and shall also have complete access to all information
generated by them or otherwise available to the PI Trust or the Trustees. In the
absence of gross negligence, the written opinion of or information provided by
any Professional deemed by the TAC to be qualified as an expert on the
particular matter submitted to the TAC shall be full and complete authorization
and protection in support of any action taken or not taken by the TAC in good
faith and in accordance with the written opinion of or information provided by
the Professional.
(b) The Trust shall promptly reimburse, or pay directly if
so instructed, the TAC for all reasonable fees and costs associated with the
TAC's employment of legal counsel pursuant to this provision in connection with
the TAC's performance of its duties hereunder. The Trust shall also promptly
reimburse, or pay directly if so instructed, the TAC for all reasonable fees and
costs associated with the TAC's employment of any other Professional pursuant to
this provision in connection with the TAC's performance of its duties hereunder;
provided, however, that (i) the TAC has first submitted to the Trust a written
request for such reimbursement setting forth the reasons (A) why the TAC desires
to employ such Professional, and (B) why the TAC cannot rely on Professionals
retained by the Trust to meet the need of the TAC for such expertise or advice,
and (ii) the Trust has approved the TAC's request for reimbursement in writing.
If the Trust agrees to pay for the TAC Professional, such reimbursement shall be
treated as a Trust expense. If the Trust declines to pay for the TAC
Professional, it must set forth its reasons in writing. If the TAC still desires
to employ such Professional at Trust expense, the TAC and/or the Trustees shall
resolve their dispute pursuant to Section 7.13 below.
Exhibit 1.30 - 11
5.6 COMPENSATION AND EXPENSES OF TAC. The members of the
TAC shall receive compensation from the PI Trust for their services as TAC
members in the form of a reasonable hourly rate set by the Trustees for
attendance at meetings or other conduct of PI Trust business. The members of the
TAC shall also be reimbursed promptly for all reasonable out-of-pocket costs and
expenses incurred in connection with the performance of their duties hereunder.
Such reimbursement or direct payment shall be deemed a PI Trust expense. The PI
Trust shall include a description of the amounts paid under this Section 5.6 in
the accounts to be filed with the Bankruptcy Court and provided to the Trustees,
the Future Claimants' Representative, and Reorganized AWI pursuant to Section
2.2(c)(i).
5.7 PROCEDURES FOR CONSULTATION WITH AND OBTAINING THE
CONSENT OF THE TAC.
(A) CONSULTATION PROCESS.
(i) In the event the Trustees are required to
consult with the TAC pursuant to Section 2.2(e)
above or on other matters as provided herein,
the Trustees shall provide the TAC with written
advance notice of the matter under
consideration, and with all relevant
information concerning the matter as is
reasonably practicable under the circumstances.
The Trustees shall also provide the TAC with
such reasonable access to Professionals and
other experts retained by the PI Trust and its
staff (if any) as the TAC may reasonably
request during the time that the Trustees are
considering such matter, and shall also provide
the TAC the opportunity, at reasonable times
and for reasonable periods of time, to discuss
and comment on such matter with the Trustees.
(ii) The Trustees shall take into consideration the
time required for the TAC, if its members so
wish, to engage and consult with its own
independent financial or investment advisors as
to such matter.
(B) CONSENT PROCESS.
(i) In the event the Trustees are required to
obtain the consent of the TAC pursuant to
Section 2.2(f) above, the Trustees shall
provide the TAC with a written notice stating
that their consent is being sought pursuant to
that provision, describing in detail the nature
and scope of the action the Trustees propose to
take, and explaining in detail the reasons why
the Trustees desire to take such action. The
Trustees shall provide the TAC as much relevant
additional information concerning the proposed
action as is reasonably practicable under the
circumstances. The Trustees shall also provide
the TAC with such reasonable access to
Professionals and other experts retained by the
PI Trust and its staff (if any) as the TAC may
reasonably request during the time that the
Trustees are considering such action, and shall
also provide the TAC the opportunity, at
reasonable times and for reasonable periods of
time, to discuss and comment on such action
with the Trustees.
(ii) The TAC must consider in good faith and in a
timely fashion any request for its consent by
the Trustees, and must in any event advise the
Trustees in writing of its consent or its
objection to the proposed action within 30 days
of receiving the original request for consent
from the Trustees. The TAC may not withhold its
consent unreasonably. If the TAC decides to
withhold its consent, it must explain in detail
its objections to the proposed action. If the
TAC does not advise the Trustees in writing of
Exhibit 1.30 - 12
its consent or its objections to the action
within 30 days of receiving notice regarding
such request, the TAC's consent to the proposed
actions shall be deemed to have been
affirmatively granted.
(iii) If, after following the procedures specified in
this Section 5.7(b), the TAC continues to
object to the proposed action and to withhold
its consent to the proposed action, the
Trustees and/or the TAC shall resolve their
dispute pursuant to Section 7.13. However, the
burden of proof with respect to the validity of
the TAC's objection and withholding of its
consent shall be on the TAC.
SECTION 6
THE FUTURE CLAIMANTS' REPRESENTATIVE
6.1 DUTIES. The initial Future Claimants' Representative
shall be the individual identified on the signature pages hereto, namely Dean M.
Trafalet, Esquire. He shall serve in a fiduciary capacity, representing the
interests of the holders of future Asbestos Personal Injury Claims for the
purpose of protecting the rights of such persons. The Trustees must consult with
the Future Claimants' Representative on matters identified in Section 2.2(e)
above and on certain other matters provided herein, and must obtain the consent
of the Future Claimants' Representative on matters identified in Section 2.2(f)
above. Where provided in the TDP, certain other actions by the Trustees are also
subject to the consent of the Future Claimants' Representative.
6.2 TERM OF OFFICE.
(a) The Future Claimants' Representative shall serve until
the earlier of (i) his or her death, (ii) his or her resignation pursuant to
Section 6.2(b) below, (iii) his or her removal pursuant to Section 6.2(c) below,
or (iv) the termination of the PI Trust pursuant to Section 7.2 below.
(b) The Future Claimants' Representative may resign at any
time by written notice to the Trustees. Such notice shall specify a date when
such resignation shall take effect, which shall not be less than ninety (90)
days after the date such notice is given, where practicable.
(c) The Future Claimants' Representative may be removed by
the Bankruptcy Court in the event he or she becomes unable to discharge his or
her duties hereunder due to accident, physical deterioration, mental
incompetence, or a consistent pattern of neglect and failure to perform or to
participate in performing the duties hereunder, such as repeated non-attendance
at scheduled meetings, or for other good cause.
6.3 APPOINTMENT OF SUCCESSOR. A vacancy caused by
resignation shall be filled with an individual nominated prior to the effective
date of the resignation by the resigning Future Claimants' Representative, and a
vacancy caused by death or removal of the Future Claimants' Representative shall
be filled with an individual nominated by the Trustees, the TAC or both. In any
case, the nominee shall be subject to the approval of the Court.
6.4 FUTURE CLAIMANTS' REPRESENTATIVE'S EMPLOYMENT OF
PROFESSIONALS.
(a) The Future Claimants' Representative may but is not
required to retain and/or consult counsel, accountants, appraisers, auditors,
forecasters, experts, and financial and investment advisors, and such other
parties deemed by the Future Claimants' Representative to be qualified as
experts on matters submitted to the Future Claimants' Representative (the
"PROFESSIONALS"). The Future Claimants' Representative and his or her experts
shall at all times have complete access to the PI Trust's officers, employees
and agents, as well as to the Professionals retained by the PI Trust, and shall
also have complete access to all information generated by them or otherwise
available to the PI Trust or the Trustees. In the absence of gross negligence,
the written opinion of or information provided by any Professional deemed by the
Future Claimants' Representative to be qualified as an expert on the particular
matter submitted to the Future Claimants' Representative shall be full and
Exhibit 1.30 - 13
complete authorization and protection in support of any action taken or not
taken by the Future Claimants' Representative in good faith and in accordance
with the written opinion of or information provided by the Professional.
(b) The Trust shall promptly reimburse, or pay directly if
so instructed, the Future Claimants' Representative for all reasonable fees and
costs associated with the Future Claimants' Representative's employment of legal
counsel pursuant to this provision in connection with the Future Claimants'
Representative's performance of his or her duties hereunder. The Trust shall
also promptly reimburse, or pay directly if so instructed, the Future Claimants'
Representative for all reasonable fees and costs associated with the Future
Claimants' Representative's employment of any other Professionals pursuant to
this provision in connection with the Future Claimants' Representative's
performance of his or her duties hereunder; provided, however, that (i) the
Future Claimants' Representative has first submitted to the Trust a written
request for such reimbursement setting forth the reasons (A) why the Future
Claimants' Representative desires to employ the Professional, and (B) why the
Future Claimants' Representative cannot rely on Professionals retained by the
Trust to meet the need of the Future Claimants' Representative for such
expertise or advice, and (ii) the Trust has approved the Future Claimants'
Representative's request for reimbursement in writing. If the Trust agrees to
pay for the Future Claimants' Representative's Professional, such reimbursement
shall be treated as a Trust Expense. If the Trust declines to pay for the Future
Claimants' Representative's Professional, it must set forth its reasons in
writing. If the Future Claimants' Representative still desires to employ the
Professional at Trust expense, the Future Claimants' Representative and/or the
Trustees shall resolve their dispute pursuant to Section 7.13 below.
6.5 COMPENSATION AND EXPENSES OF THE FUTURE CLAIMANTS'
REPRESENTATIVE. The Future Claimants' Representative shall receive compensation
from the PI Trust in the form of the Future Claimants' Representative's normal
hourly rate for services performed. The PI Trust will promptly reimburse the
Future Claimants' Representative for all reasonable out-of-pocket costs and
expenses incurred by the Future Claimants' Representative in connection with the
performance of his or her duties hereunder. Such reimbursement or direct payment
shall be deemed a PI Trust expense. The PI Trust shall include a description of
the amounts paid under this Section 6.5 in the accounts to be filed with the
Bankruptcy Court and provided to the Trustees, the Future Claimants'
Representative, and Reorganized AWI pursuant to Section 2.2(c)(i).
6.6 PROCEDURES FOR CONSULTATION WITH AND OBTAINING THE
CONSENT OF THE FUTURE CLAIMANTS REPRESENTATIVE.
(a) CONSULTATION PROCESS.
(i) In the event the Trustees are required to
consult with the Future Claimants'
Representative pursuant to Section 2.2(e) above
or on any other matters specified herein, the
Trustees shall provide the Future Claimants'
Representative with written advance notice of
the matter under consideration, and with all
relevant information concerning the matter as
is reasonably practicable under the
circumstances. The Trustees shall also provide
the Future Claimants' Representative with such
reasonable access to Professionals and other
experts retained by the PI Trust and its staff
(if any) as the Future Claimants'
Representative may reasonably request during
the time that the Trustees are considering such
matter, and shall also provide the Future
Claimants' Representative the opportunity, at
reasonable times and for reasonable periods of
time, to discuss and comment on such matter
with the Trustees.
(ii) The Trustees shall take into consideration the
time required for the Future Claimants'
Representative, if he or she so wishes, to
Exhibit 1.30 - 14
engage and consult with his or her own
independent financial or investment advisors as
to such matter.
(b) CONSENT PROCESS.
(i) In the event the Trustees are required to
obtain the consent of the Future Claimants'
Representative pursuant to Section 2.2(f)
above, the Trustees shall provide the Future
Claimants' Representative with a written notice
stating that his or her consent is being sought
pursuant to that provision, describing in
detail the nature and scope of the action the
Trustees propose to take, and explaining in
detail the reasons why the Trustees desire to
take such action. The Trustees shall provide
the Future Claimants' Representative as much
relevant additional information concerning the
proposed action as is reasonably practicable
under the circumstances. The Trustees shall
also provide the Future Claimants'
Representative with such reasonable access to
Professional and other experts retained by the
PI Trust and its staff (if any) as the Future
Claimants' Representative may reasonably
request during the time that the Trustees are
considering such action, and shall also provide
the Future Claimants' Representative the
opportunity, at reasonable times and for
reasonable periods of time, to discuss and
comment on such action with the Trustees.
(ii) The Future Claimants' Representative must
consider in good faith and in a timely fashion
any request for his or her consent by the
Trustees, and must in any event advise the
Trustees in writing of his or her consent or
objection to the proposed action within 30 days
of receiving the original request for consent
from the Trustees. The Future Claimants'
Representative may not withhold his or her
consent unreasonably. If the Future Claimants'
Representative decides to withhold consent, he
or she must explain in detail his or her
objections to the proposed action. If the
Future Claimants' Representative does not
advise the Trustees in writing of his or her
consent or objections to the proposed action
within 30 days of receiving the notice from the
Trustees regarding such consent, the Future
Claimants' Representative's consent shall be
deemed to have been affirmatively granted.
(iii) If, after following the procedures specified in
this Section 5.7(b), the Future Claimants'
Representative continues to object to the
proposed action and to withhold its consent to
the proposed action, the Trustees and/or the
Future Claimants' Representative shall resolve
their dispute pursuant to Section 7.13.
However, the burden of proof with respect to
the validity of the Future Claimants'
Representative's objection and withholding of
his or her consent shall be on the Future
Claimants' Representative.
Exhibit 1.30 - 15
SECTION 7
GENERAL PROVISIONS
7.1 IRREVOCABILITY. The PI Trust is irrevocable.
7.2 TERMINATION.
(a) The PI Trust shall automatically terminate on the date
ninety (90) days after the first to occur of the following events:
(i) the Trustees decide to terminate the PI Trust
because (A) they deem it unlikely that new
asbestos claims will be filed against the PI
Trust, (B) all Asbestos Personal Injury Claims
duly filed with the PI Trust have been
liquidated and paid to the extent provided in
this PI Trust Agreement and the TDP or
disallowed by a final, non-appealable order, to
the extent possible based upon the funds
available through the Plan, and (C) twelve (12)
consecutive months have elapsed during which no
new asbestos claim has been filed with the PI
Trust; or
(ii) if the Trustees have procured and have in place
irrevocable insurance policies and have
established claims handling agreements and
other necessary arrangements with suitable
third parties adequate to discharge all
expected remaining obligations and expenses of
the PI Trust in a manner consistent with this
PI Trust Agreement and the TDP, the date on
which the Bankruptcy Court enters an order
approving such insurance and other arrangements
and such order becomes a final order; or
(iii) to the extent that any rule against
perpetuities shall be deemed applicable to the
PI Trust, twenty-one (21) years less ninety-one
(91) days pass after the death of the last
survivor of all of the descendants of the late
Joseph P. Kennedy, Sr., father of the late
President John F. Kennedy, living on the date
hereof.
(b) On the Termination Date, after payment of all the PI
Trust's liabilities have been provided for, all monies remaining in the PI Trust
estate shall be given to such organization(s) exempt from federal income tax
under section 501(c)(3) of the Internal Revenue Code, which tax-exempt
organization(s) shall be selected by the Trustees using their reasonable
discretion; provided, however, that (i) if practicable, the activities of the
selected tax-exempt organization(s) shall be related to the treatment of,
research on, or the relief of suffering of individuals suffering from asbestos
related lung disorders, and (ii) the tax-exempt organization(s) shall not bear
any relationship to Reorganized AWI within the meaning of section 468B(d)(3) of
the Internal Revenue Code. Notwithstanding any contrary provision of the Plan
and related documents, this Section 7.2(b) cannot be modified or amended.
7.3 AMENDMENTS. The Trustees, after consultation with the
TAC and the Future Claimants' Representative, and subject to the unanimous
consent of the TAC and the Future Claimants' Representative, may modify or amend
this PI Trust Agreement and the PI Trust By-laws. The Trustees, after
consultation with the TAC and the Future Claimants' Representative, and subject
to the consent of the TAC and the Future Claimants' Representative, may modify
or amend the TDP; provided, however, that no amendment to the TDP shall be
inconsistent with the provisions limiting amendments to that document provided
therein, and in particular the provisions limiting amendment of the Claims
Payment Ratio set forth in Section 2.5 of the TDP and of the Payment Percentage
set forth in Section 4.2 of the TDP. Any modification or amendment made pursuant
to this Article must be done in writing. Notwithstanding anything contained in
this PI Trust Agreement to the contrary, neither this PI Trust Agreement, the PI
Trust Bylaws, the TDP, nor any document annexed to the foregoing shall be
Exhibit 1.30 - 16
modified or amended in any way that could jeopardize, impair, or modify the
applicability of section 524(g) of the Bankruptcy Code, the efficacy or
enforceability of the injunction entered thereunder, or the PI Trust's qualified
settlement fund status under Section 468B of the Internal Revenue Code.
7.4 MEETINGS. The Trustees, the TAC, and the Future
Claimants' Representative, shall be deemed to have attended a meeting in the
event such person spends a substantial portion of the day conferring, in person
or by telephone conference call, on PI Trust matters with the TAC, the Future
Claimants' Representative, or Trustees, as applicable. A Trustee shall also be
deemed to have attended a meeting in the event he or she spends a substantial
portion of the day engaging in activities related to Reorganized AWI, including
attendance at its Board of Directors meetings. The Trustees, the TAC and the
Future Claimants' Representative shall have complete discretion to determine
whether a meeting, as described herein, occurred for purposes of Sections 4.5,
5.6, and 6.5 above.
7.5 SEVERABILITY. Should any provision in this PI Trust
Agreement be determined to be unenforceable, such determination shall in no way
limit or affect the enforceability and operative effect of any and all other
provisions of this PI Trust Agreement.
7.6 NOTICES. Notices to persons asserting claims shall be
given by first class mail, postage prepaid, at the address of such person, or,
where applicable, such person's legal representative, in each case as provided
on such person's claim form submitted to the PI Trust with respect to his or her
PI Trust Claim.
(a) Any notices or other communications required or
permitted hereunder to the following parties shall be in writing and delivered
at the addresses designated below, or sent by telex, telecopy or facsimile
pursuant to the instructions listed below, or mailed by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows, or to
such other address or addresses as may hereafter be furnished in writing to each
of the other parties listed below in compliance with the terms hereof.
To the PI Trust through the Trustees:
To the TAC:
To the Future Claimants' Representative:
To Reorganized AWI:
(b) All such notices and communications if mailed shall be
effective when physically delivered at the designated addresses or, if
electronically transmitted, when the communication is received at the designated
addresses and confirmed by the recipient by return transmission.
Exhibit 1.30 - 17
7.7 SUCCESSORS AND ASSIGNS. The provisions of this PI Trust
Agreement shall be binding upon and inure to the benefit of AWI, the PI Trust,
the Trustees and Reorganized AWI, and their respective successors and assigns,
except that neither AWI, the PI Trust, the Trustees nor Reorganized AWI may
assign or otherwise transfer any of its, or their, rights or obligations under
this PI Trust Agreement except, in the case of the PI Trust and the Trustees, as
contemplated by Section 2.1 above.
7.8 LIMITATION ON CLAIM INTERESTS FOR SECURITIES LAWS
PURPOSES. Asbestos Personal Injury Claims, and any interests therein (a) shall
not be assigned, conveyed, hypothecated, pledged or otherwise transferred,
voluntarily or involuntarily, directly or indirectly, except by will or under
the laws of descent and distribution; (b) shall not be evidenced by a
certificate or other instrument; (c) shall not possess any voting rights; and
(d) shall not be entitled to receive any dividends or interest; provided,
however, that clause (a) of this Section 7.8 shall not apply to the holder of a
claim that is subrogated to a PI Trust Claim as a result of its satisfaction of
such PI Trust Claim.
7.9 ENTIRE AGREEMENT; NO WAIVER. The entire agreement of
the parties relating to the subject matter of this PI Trust Agreement is
contained herein and in the documents referred to herein, and this PI Trust
Agreement and such documents supersede any prior oral or written agreements
concerning the subject matter hereof. No failure to exercise or delay in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any further exercise thereof or of any other right,
power or privilege. The rights and remedies herein provided are cumulative and
are not exclusive of rights under law or in equity.
7.10 HEADINGS. The headings used in this PI Trust Agreement
are inserted for convenience only and do not constitute a portion of this PI
Trust Agreement, nor in any manner affect the construction of the provisions of
this PI Trust Agreement.
7.11 GOVERNING LAW. This PI Trust Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Delaware, without regard to Delaware conflict of law principles.
7.12 SETTLOR REPRESENTATIVE AND COOPERATION. AWI is hereby
irrevocably designated as the Settlor, and it is hereby authorized to take any
action required of the Settlor in connection with the PI Trust Agreement. AWI
agrees to cooperate in implementing the goals and objectives of this PI Trust.
7.13 DISPUTE RESOLUTION. Any disputes that arise under this
PI Trust Agreement or under the TDP shall be resolved by submission of the
matter to an alternative dispute resolution ("ADR") process mutually agreeable
to the parties involved. Should any party to the ADR process be dissatisfied
with the decision of the arbitrator(s), that party may apply to the Bankruptcy
Court for a judicial determination of the matter. In either case, if the dispute
arose pursuant to the consent provision set forth in Section 5.7(b) (in the case
of the TAC) or Section 6.6(b) (in the case of the Future Claimants'
Representative), the burden of proof shall be on the party or parties who
withheld consent to show that the objection was valid. Should the dispute not be
resolved by ADR process within thirty (30) days after submission, the parties
are relieved of the requirement to pursue ADR prior to application to the
Bankruptcy Court. Notwithstanding anything else herein contained, to the extent
any provision of this PI Trust Agreement is inconsistent with any provision of
the Plan or the TDP, the Plan or the TDP shall control.
7.14 ENFORCEMENT AND ADMINISTRATION. The provisions of this
PI Trust Agreement and the TDP attached hereto shall be enforced by the
Bankruptcy Court pursuant to the Plan. The parties hereby further acknowledge
and agree that the Bankruptcy Court shall have exclusive jurisdiction over the
settlement of the accounts of the Trustees and over any disputes hereunder not
resolved by alternative dispute resolution in accordance with Section 7.13
above.
Exhibit 1.30 - 18
7.15 EFFECTIVENESS. This PI Trust Agreement shall not
become effective until it has been executed and delivered by all the parties
hereto.
7.16 COUNTERPART SIGNATURES. This PI Trust Agreement may be
executed in any number of counterparts, each of which shall constitute an
original, but such counterparts shall together constitute but one and the same
instrument.
Exhibit 1.30 - 19
IN WITNESS WHEREOF, the parties have executed this PI Trust
Agreement this _____ day of
------------------------, -------.
ARMSTRONG WORLD INDUSTRIES, INC., SETTLOR, BY
Name:
----------------------------------------
Title:
---------------------------------------
TRUSTEES
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---------------------------------------------
---------------------------------------------
---------------------------------------------
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Exhibit 1.30 - 20
ASBESTOS CLAIMANTS' COMMITTEE
By:_____________________________________
TRUST ADVISORY COMMITTEE
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---------------------------------------------
---------------------------------------------
---------------------------------------------
FUTURE CLAIMANTS' REPRESENTATIVE
---------------------------------------------
Dean M. Trafalet, Esq.
Exhibit 1.30 - 21
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re )
)
)
ARMSTRONG WORLD INDUSTRIES, ) Chapter 11
INC., et al., ) Case No. 00-4471 (RJN)
) (Jointly Administered)
Debtors )
- ------------------------------------)
EXHIBIT 1.31
FORM OF ARMSTRONG WORLD INDUSTRIES, INC.
ASBESTOS PERSONAL INJURY SETTLEMENT TRUST
DISTRIBUTION PROCEDURES
ARMSTRONG WORLD INDUSTRIES, INC.
ASBESTOS PERSONAL INJURY SETTLEMENT TRUST DISTRIBUTION PROCEDURES
The Armstrong World Industries, Inc. Asbestos Personal Injury Settlement Trust
Distribution Procedures ("TDP") contained herein provide for resolving all
Asbestos Personal Injury Claims (as that term is defined in the Armstrong World
Industries, Inc. Plan of Reorganization ("PLAN")) caused by exposure to
asbestos-containing products for which Armstrong World Industries, Inc. ("AWI")
and its predecessors, successors, and assigns have legal responsibility
(hereinafter for all purposes of this TDP referred to as "PI TRUST CLAIMS"), as
provided in and required by the Plan and by the Armstrong World Industries, Inc.
Asbestos Personal Injury Settlement Trust Agreement ("PI TRUST AGREEMENT"). The
Plan and PI Trust Agreement establish the Armstrong World Industries, Inc.
Asbestos Personal Injury Settlement Trust ("PI TRUST"). The Trustees of the PI
Trust ("TRUSTEES") shall implement and administer this TDP in accordance with
the PI Trust Agreement. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Plan and the PI Trust Agreement.
SECTION I
INTRODUCTION
1.1 PURPOSE. This TDP has been adopted pursuant to the PI Trust
Agreement. It is designed to provide fair and equitable treatment for all PI
Trust Claims that may presently exist or may arise in the future in
substantially the same manner.
1.2 INTERPRETATION. Nothing in this TDP shall be deemed to create a
substantive right for any claimant.
SECTION II
OVERVIEW
2.1 PI TRUST GOALS. The goal of the PI Trust is to treat all
claimants equitably. This TDP furthers that goal by setting forth procedures for
processing and paying claims generally on an impartial, first-in-first-out
("FIFO") basis, with the intention of paying all claimants over time as
equivalent a share as possible of the value of their claims based on historical
values for substantially similar claims in the tort system. To this end, the TDP
establishes a schedule of eight asbestos-related diseases ("DISEASE LEVELS"),
all of which have presumptive medical and exposure requirements
("MEDICAL/EXPOSURE CRITERIA"), and seven of which have specific liquidated
values ("SCHEDULED VALUES"), anticipated average values ("AVERAGE VALUES") and
caps on their liquidated values ("MAXIMUM VALUES"). The Disease Levels,
Medical/Exposure Criteria, Scheduled Values, Average Values and Maximum Values,
which are set forth in Sections 5.3 and 5.4 below, have all been selected and
derived with the intention of achieving a fair allocation of the PI Trust funds
as among claimants suffering from different disease processes in light of the
best available information considering the settlement history of AWI and the
rights claimants would have in the tort system absent the bankruptcy.
2.2 CLAIMS LIQUIDATION PROCEDURES. PI Trust Claims shall be processed
based on their place in the FIFO Processing Queue to be established pursuant to
Section 5.1(a) below. The PI Trust shall take all reasonable steps to resolve PI
Trust Claims as efficiently and expeditiously as possible at each stage of
claims processing and arbitration. To this end, the PI Trust, in its sole
discretion, may conduct settlement discussions with claimants' representatives
of more than one claim at a time, provided that the claimants' respective
positions in the FIFO Processing Queue are maintained and each claim is
individually evaluated pursuant to the valuation factors set forth in Section
5.3(b)(2) below. The PI Trust shall also make every effort to resolve each year
at least that number of PI Trust Claims required to exhaust the Maximum Annual
Payment and the Maximum Available Payment for Category A and Category B claims,
as those terms are defined below.
The PI Trust shall liquidate all PI Trust Claims that meet the presumptive
Medical/Exposure Criteria of Disease Levels I - V, VII and VIII under the
Expedited Review Process described in Section 5.3(a) below. Claims involving
Disease Levels I - V, VII and VIII that do not meet the presumptive
Medical/Exposure Criteria for the relevant Disease Level may undergo the PI
Exhibit 1.31 - 1
Trust's Individual Review Process described in Section 5.3(b) below. In such a
case, notwithstanding that the claim does not meet the presumptive
Medical/Exposure Criteria for the relevant Disease Level, the PI Trust can offer
the claimant an amount up to the Scheduled Value of that Disease Level if the PI
Trust is satisfied that the claimant has presented a claim that would be
cognizable and valid in the tort system.
PI Trust Claims involving Disease Levels II - VIII may in addition or
alternatively seek to establish a liquidated value for the claim that is greater
than its Scheduled Value by electing the PI Trust's Individual Review Process.
However, the liquidated value of a PI Trust Claim that undergoes the Individual
Review Process for valuation purposes may be determined to be less than its
Scheduled Value, and in any event shall not exceed the Maximum Value for the
relevant Disease Level set forth in Section 5.3(b)(4) below, unless the claim
qualifies as an Extraordinary Claim as defined in Section 5.4(a) below, in which
case its liquidated value cannot exceed the Maximum Value specified in that
provision for such claims. Level VI (Lung Cancer 2) claims may be liquidated
only pursuant to the PI Trust's Individual Review Process.
Based upon AWI's claims settlement history in light of applicable tort law, and
current projections of present and future unliquidated claims, the Scheduled
Values and Maximum Values set forth in Section 5.3(b)(4) have been established
for each of the Disease Levels that are eligible for Individual Review of their
liquidated values, with the expectation that the combination of settlements at
the Scheduled Values and those resulting from the Individual Review Process will
result in the Average Values also set forth in that provision.
All unresolved disputes over a claimant's medical condition, exposure history
and/or the liquidated value of the claim shall be subject to binding or
non-binding arbitration as set forth in Section 5.10 below, at the election of
the claimant, under procedures that are provided in Attachment A hereto. PI
Trust Claims that are the subject of a dispute with the PI Trust that cannot be
resolved by non-binding arbitration may enter the tort system as provided in
Sections 5.11 and 7.6 below. However, if and when a claimant obtains a judgment
in the tort system, the judgment will be payable (subject to the Payment
Percentage, Maximum Available Payment, and Claims Payment Ratio provisions set
forth below) as provided in Section 7.7 below.
2.3 APPLICATION OF THE PAYMENT PERCENTAGE. After the liquidated value
of a PI Trust Claim other than a claim involving Other Asbestos Disease (Disease
Level I - Cash Discount Payment), as defined in Section 5.3(a)(3) below, is
determined pursuant to the procedures set forth herein for Expedited Review,
Individual Review, arbitration, or litigation in the tort system, the claimant
will ultimately receive a pro-rata share of that value based on a Payment
Percentage described in Section 4.2 below. The Initial Payment Percentage has
been set at ___ percent (___%), and shall apply to all PI Trust Voting Claims
accepted as valid by the PI Trust, unless adjusted by the PI Trust pursuant to
the consent of the PI Trust Advisory Committee ("TAC") and the Legal
Representative for Future Asbestos Claimants ("FUTURE CLAIMANTS'
REPRESENTATIVE") (who are described in Section 3.1 below) pursuant to Section
4.2 below. The term "PI VOTING TRUST CLAIMS" includes (i) Pre-Petition
Liquidated Claims as defined in Section 5.2(a) below; (ii) claims filed against
AWI in the tort system or actually submitted to AWI pursuant to an
administrative settlement agreement prior to the Petition Date of December 6,
2000; and (iii) all claims filed against another defendant in the tort system
prior to the date the Plan was filed with the Bankruptcy Court (November 1, 2002
(the "PLAN FILING DATE")), provided, however, that the holder of a claim
described in subsection (i), (ii) or (iii) above actually voted to accept or
reject the Plan pursuant to the voting procedures established by the Bankruptcy
Court, and provided further that the claim was subsequently filed with the PI
Trust pursuant to Section 6.1 below by the Initial Claims Filing Date defined in
Section 5.1(a) below. The Initial Payment Percentage has been calculated on the
assumption that the Average Values set forth in Section 5.3(b)(4) below will be
achieved with respect to existing present claims and projected future claims
involving Disease Levels II - VIII.
The Payment Percentage may be adjusted upwards or downwards from time to time by
the PI Trust with the consent of the TAC and the Future Claimants'
Representative to reflect then-current estimates of the PI Trust's assets and
its liabilities, as well as the then-estimated value of pending and future
claims. However, any adjustment to the Initial Payment Percentage shall be made
only pursuant to Section 4.2 below. If the Payment Percentage is increased over
time, claimants whose claims were liquidated and paid in prior periods under the
TDP will not receive additional payments, except as provided in Section 4.2
below relating to circumstances in which the PI Trust has received a substantial
recovery of insurance proceeds. Because there is uncertainty in the prediction
of both the number and severity of future claims, and the amount of the PI
Trust's assets, no guarantee can be made of any Payment Percentage of a PI Trust
Claim's liquidated value, other than of a PI Trust Voting Claim.
2.4 PI TRUST'S DETERMINATION OF THE MAXIMUM ANNUAL PAYMENT AND
MAXIMUM AVAILABLE PAYMENT. The PI Trust shall estimate or model the amount of
cash flow anticipated to be necessary over its entire life to ensure that funds
will be available to treat all present and future claimants as similarly as
possible. In each year, the PI Trust will be empowered to pay out all of the
interest earned during the year, together with a portion of its principal,
Exhibit 1.31 - 2
calculated so that the application of PI Trust funds over its life shall
correspond with the needs created by the anticipated flow of claims (the
"MAXIMUM ANNUAL PAYMENT"), taking into account the Payment Percentage provisions
set forth in Sections 2.3 above and 4.2 below. The PI Trust's distributions to
all claimants for that year shall not exceed the Maximum Annual Payment
determined for that year.
In distributing the Maximum Annual Payment, the PI Trust shall first allocate
the amount in question to outstanding Pre-Petition Liquidated Claims and to
liquidated PI Trust Claims involving Disease Level I (Cash Discount Payment), in
proportion to the aggregate value of each group of claims. The remaining portion
of the Maximum Annual Payment (the "MAXIMUM AVAILABLE PAYMENT"), if any, shall
then be allocated and used to satisfy all other liquidated PI Trust Claims,
subject to the Claims Payment Ratio set forth in Section 2.5 below. In the event
there are insufficient funds in any year to pay the total number of outstanding
Pre-Petition Liquidated Claims and/or previously liquidated Disease Level I
Claims, the available funds allocated to that group of claims shall be paid to
the maximum extent to claimants in the particular group based on their place in
their respective FIFO Payment Queue. Claims in either group for which there are
insufficient funds shall be carried over to the next year and placed at the head
of their FIFO Payment Queue.
2.5 CLAIMS PAYMENT RATIO. Based upon AWI's claims settlement history
and analysis of present and future claims, a Claims Payment Ratio has been
determined which, as of the Effective Date, has been set at 65% for Category A
claims, which consist of PI Trust Claims involving severe asbestosis and
malignancies (Disease Levels IV - VIII) that were unliquidated as of the
Petition Date, and at 35% for Category B claims, which are PI Trust Claims
involving non-malignant Asbestosis or Pleural Disease (Disease Levels II and
III) that were similarly unliquidated as of the Petition Date. The Claims
Payment Ratio shall not apply to any Pre-Petition Liquidated Claims or to any
claims for Other Asbestos Disease (Disease Level I - Cash Discount Payment). In
each year, after the determination of the Maximum Available Payment described in
Section 2.4 above, 65% of that amount will be available to pay Category A claims
and 35% will be available to pay Category B claims that have been liquidated
since the Petition Date.
In the event there are insufficient funds in any year to pay the liquidated
claims within either or both of the Categories, the available funds allocated to
the particular Category shall be paid to the maximum extent to claimants in that
Category based on their place in the FIFO Payment Queue described in Section
5.1(c) below, which will be based upon the date of claim liquidation. Claims for
which there are insufficient funds allocated to the relevant Category shall be
carried over to the next year where they will be placed at the head of the FIFO
Payment Queue. If there are excess funds in either or both Categories, because
there is an insufficient amount of liquidated claims to exhaust the respective
Maximum Available Payment amount for that Category, then the excess funds for
either or both Categories will be rolled over and remain dedicated to the
respective Category to which they were originally allocated.
The 65%/35% Claims Payment Ratio and its rollover provision shall apply to all
PI Trust Voting Claims as defined in Section 2.3 above, and shall not be amended
until the fifth anniversary of the Effective Date. Thereafter, both the Claims
Payment Ratio and its rollover provision shall be continued absent
circumstances, such as a significant change in law or medicine, necessitating
amendment to avoid a manifest injustice. However, the accumulation, rollover and
subsequent delay of claims resulting from the application of the Claims Payment
Ratio, shall not, in and of itself, constitute such circumstances. Nor may an
increase in the numbers of Category B claims beyond those predicted or expected
be considered as a factor in deciding whether to reduce the percentage allocated
to Category A claims.
In considering whether to make any amendments to the Claims Payment Ratio and/or
its rollover provisions, the Trustees shall consider the reasons for which the
Claims Payment Ratio and its rollover provisions were adopted, the settlement
history that gave rise to its calculation, and the foreseeability or lack of
foreseeability of the reasons why there would be any need to make an amendment.
In that regard, the Trustees should keep in mind the interplay between the
Payment Percentage and the Claims Payment Ratio as it affects the net cash
actually paid to claimants.
In any event, no amendment to the Claims Payment Ratio may be made without the
consent of the TAC and the Future Claimants' Representative pursuant to the
consent process set forth in Sections 5.7(b) and 6.6(b) of the PI Trust
Agreement. However, the Trustees, with the consent of the TAC and the Future
Claimants' Representative, may offer the option of a reduced Payment Percentage
to holders of claims in either Category A or Category B in return for prompter
payment (the "REDUCED PAYMENT OPTION").
Exhibit 1.31 - 3
2.6 INDEMNITY AND CONTRIBUTION CLAIMS. As set forth in Section 5.5
below, PI Trust Claims for indemnity and contribution ("INDIRECT PI TRUST
CLAIMS"), if any, shall be subject to the same categorization, evaluation, and
payment provisions of this TDP as all other PI Trust Claims.
SECTION III
TDP ADMINISTRATION
3.1 PI TRUST ADVISORY COMMITTEE AND FUTURE CLAIMANTS' REPRESENTATIVE.
Pursuant to the Plan and the PI Trust Agreement, the PI Trust and this TDP shall
be administered by the Trustees in consultation with the TAC, which represents
the interests of holders of present PI Trust Claims, and the Future Claimants'
Representative, who represents the interests of holders of PI Trust Claims that
will be asserted in the future. The Trustees shall obtain the consent of the TAC
and the Future Claimants' Representative on any amendments to these Procedures
pursuant to Section 8.1 below, and on such other matters as are otherwise
required below and in Section 2.2(f) of the PI Trust Agreement. The Trustees
shall also consult with the TAC and the Future Claimants' Representative on such
matters as are provided below and in Section 2.2(e) of the PI Trust Agreement.
The initial members of the TAC and the initial Future Claimants' Representative
are identified in the PI Trust Agreement.
3.2 CONSENT AND CONSULTATION PROCEDURES. In those circumstances in
which consultation or consent is required, the Trustees will provide written
notice to the TAC and the Future Claimants' Representative of the specific
amendment or other action that is proposed. The Trustees will not implement such
amendment nor take such action unless and until the parties have engaged in the
Consultation Process described in Sections 5.7(a) and 6.6(a), or the Consent
Process described in Sections 5.7(b) and 6.6(b) of the PI Trust Agreement,
respectively.
SECTION IV
PAYMENT PERCENTAGE; PERIODIC ESTIMATES
4.1 UNCERTAINTY OF AWI'S PERSONAL INJURY ASBESTOS LIABILITIES. As
discussed above, there is inherent uncertainty regarding AWI's total
asbestos-related tort liabilities, as well as the total value of the assets
available to the PI Trust to pay PI Trust Claims. Consequently, there is
inherent uncertainty regarding the amounts that holders of PI Trust Claims will
receive. To seek to ensure substantially equivalent treatment of all present and
future PI Trust Claims, the Trustees must determine from time to time the
percentage of full liquidated value that holders of present and future PI Trust
Claims will be likely to receive, i.e, the "Payment Percentage" described in
Section 2.3 above and Section 4.2 below.
4.2 COMPUTATION OF PAYMENT PERCENTAGE. As provided in Section 2.3
above, the Initial Payment Percentage shall be __ percent (___%), and shall
apply to all PI Trust Voting Claims as defined in Section 2.3 above, unless the
Trustees, with the consent of the TAC and the Future Claimants' Representative,
determine that the Initial Payment Percentage should be changed to assure that
the PI Trust will be in a financial position to pay holders of unliquidated
and/or unpaid PI Trust Voting Claims and present and future PI Trust Claims in
substantially the same manner.
In making any such adjustment, the Trustees, the TAC and the Future Claimants'
Representative shall take into account the fact that the holders of PI Trust
Voting Claims voted on the Plan relying on the findings of experts that the
Initial Payment Percentage represented a reasonably reliable estimate of the PI
Trust's total assets and liabilities over its life based on the best information
available at the time, and shall thus give due consideration to the expectations
of PI Trust Voting Claimants that the Initial Payment Percentage would be
applied to their PI Trust Claims.
Except with respect to PI Trust Voting Claims to which the Initial Payment
Percentage applies, the Payment Percentage shall be subject to change pursuant
to the terms of this TDP and the PI Trust Agreement if the Trustees determine
that an adjustment is required. No less frequently than once every three years,
commencing with the first day of January occurring after the Plan is
consummated, the Trustees shall reconsider the then applicable Payment
Percentage to assure that it is based on accurate, current information and may,
after such reconsideration, change the Payment Percentage if necessary with the
consent of the TAC and the Future Claimants' Representative. The Trustees shall
Exhibit 1.31 - 4
also reconsider the then applicable Payment Percentage at shorter intervals if
they deem such reconsideration to be appropriate or if requested to do so by the
TAC or the Future Claimants' Representative.
The Trustees must base their determination of the Payment Percentage on current
estimates of the number, types, and values of present and future PI Trust
Claims, the value of the assets then available to the PI Trust for their
payment, all anticipated administrative and legal expenses, and any other
material matters that are reasonably likely to affect the sufficiency of funds
to pay a comparable percentage of full value to all holders of PI Trust Claims.
When making these determinations, the Trustees shall exercise common sense and
flexibly evaluate all relevant factors. The Payment Percentage applicable to
Category A or Category B claims may not be reduced to alleviate delays in
payments of claims in the other Category; both Categories of claims shall
receive the same Payment Percentage, but the payment may be deferred as needed,
and a Reduced Payment Option may be instituted as described in Section 2.5
above.
The uncertainty surrounding the amount of the PI Trust's future assets is due in
significant part to the fact that the estimates of those assets do not take into
account the possibility that the PI Trust may receive substantial additional
funds from successful recoveries of insurance proceeds that have been assigned
to the PI Trust with respect to which the coverage is presently in dispute or
the solvency of the carrier is in doubt. If the PI Trust successfully resolves
an insurance coverage dispute or otherwise receives a substantial recovery of
insurance proceeds, the PI Trust will use those proceeds first to maintain the
Payment Percentage then in effect. If the insurance recovery exceeds the amount
estimated to be reasonably necessary to maintain the Payment Percentage then in
effect, the PI Trust, with the consent of the TAC and the Future Claimants'
Representative, shall adjust the Payment Percentage upward to reflect the
increase in available assets, and shall also make supplemental payments to
claimants who previously liquidated their claims against the PI Trust and
received payments based on a lower Payment Percentage. The amount of any such
supplemental payment shall be the liquidated value of the claim in question
times the newly adjusted Payment Percentage, less all amounts previously paid
the claimant with respect to the claim.
4.3 APPLICABILITY OF THE PAYMENT PERCENTAGE. No holder of a PI Trust
Voting Claim, other than a PI Trust Claim for Other Asbestos Disease (Disease
Level I - Cash Discount Payment) as defined in Section 5.3(a)(3) below shall
receive a payment that exceeds the Initial Payment Percentage times the
liquidated value of the claim. Except as otherwise provided in Section 5.1(c)
below for PI Trust Claims involving deceased or incompetent claimants for which
approval of the PI Trust's offer by a court or through a probate procESS is
required, no holder of any other PI Trust Claim, other than a PI Trust Claim for
Other Asbestos Disease (Disease Level I - Cash Discount Payment), shall receive
a payment that exceeds the liquidated value of the claim times the Payment
Percentage in effect at the time of payment. PI Trust Claims involving Other
Asbestos Disease (Disease Level I - Cash Discount Payment) shall not be subject
to the Payment Percentage, but shall instead be paid the full amount of their
Scheduled Value as set forth in Section 5.3(a)(3) below.
If a redetermination of the Payment Percentage has been proposed in writing by
the Trustees to the TAC and the Future Claimants' Representative but has not yet
been adopted, the claimant shall receive the lower of the current Payment
Percentage or the proposed Payment Percentage. However, if the proposed Payment
Percentage was the lower amount but was not subsequently adopted, the claimant
shall thereafter receive the difference between the lower proposed amount and
the higher current amount. Conversely, if the proposed Payment Percentage was
the higher amount and was subsequently adopted, the claimant shall thereafter
receive the difference between the lower current amount and the higher adopted
amount.
SECTION V
RESOLUTION OF PI TRUST CLAIMS.
5.1 ORDERING, PROCESSING AND PAYMENT OF CLAIMS.
5.1(A) ORDERING OF CLAIMS.
5.1(A)(1) ESTABLISHMENT OF THE FIFO PROCESSING QUEUE. The PI Trust
will order claims that are sufficiently complete to be reviewed for processing
purposes on a FIFO basis except as otherwise provided herein (the "FIFO
PROCESSING QUEUE"). For all claims filed on or before the date six months after
the Effective Date (the "INITIAL CLAIMS FILING Date"), a claimant's position in
the FIFO Processing Queue shall be determined as of the earlier of (i) the date
prior to the Petition Date (if any) that the specific claim was either filed
against AWI in the tort system or was actually submitted to AWI pursuant to an
administrative settlement agreement; (ii) the date before the Petition Date that
a claim was filed against another defendant in the tort system if at the time
Exhibit 1.31 - 5
the claim was subject to a tolling agreement with AWI; (iii) the date after the
Petition Date (if any) but before the Effective Date that the claim was filed
against another defendant in the tort system; (iv) the date the claim was filed
in the Bankruptcy Court for purposes of voting on the Plan in accordance with
the voting procedures adopted by the Court; or (v) the date after the Effective
Date but on or before the Initial Claims Filing Date that the claim was filed
with the PI Trust.
Following the Initial Claims Filing Date, the claimant's position in the FIFO
Processing Queue shall be determined by the date the claim was filed with the PI
Trust. If any claims are filed on the same date, the claimant's position in the
FIFO Processing Queue shall be determined by the date of the diagnosis of the
claimant's asbestos-related disease. If any claims are filed and diagnosed on
the same date, the claimant's position in the FIFO Processing Queue shall be
determined by the date of the claimant's birth, with older claimants given
priority over younger claimants.
5.1(A)(2) EFFECT OF STATUTES OF LIMITATIONS AND REPOSE. To be
eligible for a place in the FIFO Processing Queue, a claim must meet either (i)
for claims first filed in the tort system against AWI prior to the Petition
Date, the applicable federal, state and foreign statute of limitation and repose
that was in effect at the time of the filing of the claim in the tort system, or
(ii) for claims that were not filed against AWI in the tort system prior to the
Petition Date, the applicable statute of limitation and repose that was in
effect at the time of the filing with the PI Trust. However, the running of the
relevant statute of limitation shall be tolled as of the earliest of (A) the
actual filing of the claim against AWI prior to the Petition Date, whether in
the tort system or by submission of the claim to AWI pursuant to an
administrative settlement agreement; (B) the filing of the claim against another
defendant in the tort system prior to the Petition Date if the claim was tolled
against AWI at the time by an agreement or otherwise; (C) the filing of a claim
after the Petition Date but prior to the Effective Date against another
defendant in the tort system; (D) the filing of the claim for voting purposes in
this Chapter 11 proceeding; or (E) the filing of a proof of claim with the
requisite supporting documentation with the PI Trust after the Effective Date.
If a PI Trust Claim meets any of the tolling provisions described in the
preceding sentence and the claim was not barred by the applicable statute of
limitation at the time of the tolling event, it will be treated as timely filed
if it is actually filed with the PI Trust within three (3) years after the
Effective Date. In addition, any claims that were first diagnosed after the
Petition Date, irrespective of the application of any relevant statute of
limitation or repose, may be filed with the PI Trust within three (3) years
after the date of diagnosis or within three (3) years after the Effective Date,
whichever occurs later. However, the processing of any PI Trust Claim by the PI
Trust may be deferred at the election of the claimant pursuant to Section 6.3
below.
5.1(B) PROCESSING OF CLAIMS. As a general practice, the PI Trust will
review its claims files on a regular basis and notify all claimants whose claims
are likely to come up in the FIFO Processing Queue in the near future. However,
claims that were not filed (i) against AWI in the tort system or actually
submitted to AWI pursuant to an administrative settlement agreement prior to the
Petition Date, or (ii) against another defendant in the tort system prior to the
Plan Filing Date, shall not be processed until after the Initial Claims Filing
Date.
5.1(C) PAYMENT OF CLAIMS. PI Trust Claims that have been liquidated
by the Expedited Review Process as provided in Section 5.3(a) below, by the
Individual Review Process as provided in Section 5.3(b) below, by arbitration as
provided in Section 5.10 below, or by litigation in the tort system provided in
Section 5.11 below, shall be paid in FIFO order based on the date their
liquidation became final (the "FIFO PAYMENT QUEUE"), all such payments being
subject to the applicable Payment Percentage, the Maximum Available Payment, and
the Claims Payment Ratio, except as otherwise provided herein.
Where the claimant is deceased or incompetent, and the settlement and payment of
his or her claim must be approved by a court of competent jurisdiction or
through a probate process prior to acceptance of the claim by the claimant's
representative, an offer made by the PI Trust on the claim shall remain open so
long as proceedings before that court or in that probate process remain pending,
provided that the PI Trust has been furnished with evidence that the settlement
offer has been submitted to such court or probate process for approval. If the
offer is ultimately approved by the court or through the probate process and
accepted by the claimant's representative, the PI Trust shall pay the claim in
the amount so offered, multiplied by the Payment Percentage in effect at the
time the offer was first made.
If any claims are liquidated on the same date, the claimant's position in the
FIFO Payment Queue shall be determined by the date of the diagnosis of the
claimant's asbestos-related disease. If any claims are liquidated on the same
Exhibit 1.31 - 6
date and the respective claimants' asbestos-related diseases were diagnosed on
the same date, the position of those claimants in the FIFO Payment Queue shall
be determined by the PI Trust based on the dates of the claimants' birth, with
older claimants given priority over younger claimants.
5.2 RESOLUTION OF PRE-PETITION LIQUIDATED PI TRUST CLAIMS.
5.2(A) PROCESSING AND PAYMENT. As soon as practicable after the
Effective Date, the PI Trust shall pay, upon submission by the claimant of the
applicable PI Trust proof of claim form (included in Attachment B) together with
all documentation required thereunder, all PI Trust Claims that were liquidated
by (i) a binding settlement agreement for the particular claim entered into
prior to the Petition Date that is judicially enforceable by the claimant, (ii)
a jury verdict or non-final judgment in the tort system obtained prior to the
Petition Date, or (iii) by a judgment that became final and non-appealable prior
to the Petition Date (collectively "PRE-PETITION LIQUIDATED CLAIMS").
The liquidated value of a Pre-Petition Liquidated Claim shall be the unpaid
portion of the amount agreed to in the binding settlement agreement, the unpaid
portion of the amount awarded by the jury verdict or non-final judgment, or the
unpaid portion of the amount of the final judgment, as the case may be, plus
interest, if any, that has accrued on that amount in accordance with the terms
of the agreement, if any, or under applicable state law for settlements or
judgments as of the Petition Date; however, pursuant to Section 7.4 below, the
liquidated value of a Pre-Petition Liquidated Claim shall not include any
punitive or exemplary damages. In the absence of a final order of the Bankruptcy
Court determining whether a settlement agreement is binding and judicially
enforceable, a dispute between the claimant and the PI Trust over this issue
shall be resolved pursuant to the same procedures in this TDP that are provided
for resolving the validity and/or liquidated value of a PI Trust Claim (i.e.,
arbitration and litigation in the tort system as set forth in Sections 5.10 and
5.11 below).
Pre-Petition Liquidated Claims shall be processed and paid in accordance with
their order in a separate FIFO queue to be established by the PI Trust based on
the date the PI Trust received a completed proof of claim form with all required
documentation for the particular claim; provided, however, the amounts payable
with respect to such claims shall not be subject to or taken into account in
consideration of the Claims Payment Ratio, but shall be subject to the Maximum
Annual Payment and Payment Percentage provisions set forth above. If any
Pre-Petition Liquidated Claims were filed on the same date, the claimants'
position in the FIFO queue for such claims shall be determined by the date on
which the claim was liquidated. If any Pre-Petition Liquidated Claims were both
filed and liquidated on the same dates, the position of those claimants in the
FIFO queue shall be determined by the dates of the claimants' birth, with older
claimants given priority over younger claimants.
5.2(B) MARSHALLING OF SECURITY. Holders of Pre-Petition Liquidated
Claims that are secured by letters of credit, appeal bonds, or other security or
sureties shall first exhaust their rights against any applicable security or
surety before making a claim against the PI Trust. Only in the event that such
security or surety is insufficient to pay the Pre-Petition Liquidated Claim in
full shall the deficiency be processed and paid as a Pre-Petition Liquidated
Claim.
5.3 RESOLUTION OF UNLIQUIDATED PI TRUST CLAIMS. Within six months
after the establishment of the PI Trust, the Trustees with the consent of the
TAC and the Future Claimants' Representative shall adopt procedures for
reviewing and liquidating all unliquidated PI Trust Claims, which shall include
deadlines for processing such claims. Such procedures shall also require
claimants seeking resolution of unliquidated PI Trust claims to first file a
proof of claim form, together with the required supporting documentation, in
accordance with the provisions of Sections 6.1 and 6.2 below. It is anticipated
that the PI Trust shall provide an initial response to the claimant within six
months of receiving the proof of claim form.
The proof of claim form shall require the claimant to assert his or her claim
for the highest Disease Level for which the claim qualifies at the time of
filing. Irrespective of the Disease Level alleged on the proof of claim form,
all claims shall be deemed to be a claim for the highest Disease Level for which
the claim qualifies at the time of filing, and all lower Disease Levels for
which the claim may also qualify at the time of filing or in the future shall be
treated as subsumed into the higher Disease Level for both processing and
payment purposes.
Upon filing of a valid proof of claim form with the required supporting
documentation, the claimant shall be placed in the FIFO Processing Queue in
accordance with the ordering criteria described in Section 5.1(a) above, and
shall advise the PI Trust whether the claim should be liquidated under the PI
Trust's Expedited Review Process described in Section 5.3(a) below or, in
certain circumstances, the PI Trust's Individual Review Process described in
Section 5.3(b) below.
Exhibit 1.31 - 7
5.3(A) EXPEDITED REVIEW PROCESS.
5.3(A)(1) IN GENERAL. The PI Trust's Expedited Review Process is
designed primarily to provide an expeditious, efficient and inexpensive method
for liquidating all claims (except those involving Lung Cancer 2 - Disease Level
VI) where the claim can easily be verified by the PI Trust as meeting the
presumptive Medical/Exposure Criteria for the relevant Disease Level. Expedited
Review thus provides claimants with a substantially less burdensome process for
pursuing PI Trust Claims than does the Individual Review Process described in
Section 5.3(b) below. Expedited Review is also intended to provide qualifying
claimants a fixed and certain claims payment.
Thus, claims that undergo Expedited Review and meet the presumptive
Medical/Exposure Criteria for the relevant Disease Level shall be paid the
Scheduled Value for such Disease Level set forth in Section 5.3(a)(3) below.
However, except for claims involving Other Asbestos Disease (Disease Level I),
all claims liquidated by Expedited Review shall be subject to the applicable
Payment Percentage, the Maximum Available Payment, and the Claims Payment Ratio
limitations set forth above. Claimants holding claims that cannot be liquidated
by Expedited Review because they do not meet the presumptive Medical/Exposure
Criteria for the relevant Disease Level may elect the PI Trust's Individual
Review Process set forth in Section 5.3(b) below.
5.3(A)(2) CLAIMS PROCESSING UNDER EXPEDITED REVIEW. All claimants
seeking liquidation of their claims pursuant to Expedited Review shall file the
PI Trust's proof of claim form provided in Attachment B hereto. As a proof of
claim form is reached in the FIFO Processing Queue, the PI Trust shall determine
whether the claim described therein meets the Medical/Exposure Criteria for one
of the seven Disease Levels eligible for Expedited Review, and shall advise the
claimant of its determination. If a Disease Level is determined, the PI Trust
shall tender to the claimant an offer of payment of the Scheduled Value (as
adjusted by the applicable Payment Percentage) for the relevant Disease Level
multiplied by the applicable Payment Percentage, together with a form of release
approved by the PI Trust. If the claimant accepts the Scheduled Value and
returns the release properly executed, the claim shall be placed in the FIFO
Payment Queue, following which the Trust shall disburse payment subject to the
limitations of the Maximum Available Payment and Claims Payment Ratio, if any.
5.3(A)(3) DISEASE LEVELS, SCHEDULED VALUES AND MEDICAL/EXPOSURE
CRITERIA. The eight Disease Levels covered by this TDP, together with the
Medical/Exposure Criteria for each and the Scheduled Values for the seven
Disease Levels eligible for Expedited Review, are set forth below. These Disease
Levels, Scheduled Values, and Medical/Exposure Criteria shall apply to all PI
Trust Voting Claims filed with the PI Trust on or before the Initial Claims
Filing Date provided in Section 5.1 above. Thereafter, with the consent of the
TAC and the Future Claimants' Representative, the Trustees may add to, change or
eliminate Disease Levels, Scheduled Values, or Medical/Exposure Criteria;
develop subcategories of Disease Levels, Scheduled Values or Medical/Exposure
Criteria; or determine that a novel or exceptional asbestos personal injury
claim is compensable even though it does not meet the Medical/Exposure Criteria
for any of the then current Disease Levels.
SCHEDULED
DISEASE LEVEL VALUE MEDICAL/EXPOSURE CRITERIA
- ------------- ----- -------------------------
Mesothelioma (Level VIII) $110,000 (1) Diagnosis(1) of mesothelioma;
and (2) credible evidence of AWI
Exposure (as defined in Section
5.7(b)(3) below).
Lung Cancer 1 (Level VII) $ 42,500 (1) Diagnosis of a primary lung
cancer plus evidence of an
underlying Bilateral
Asbestos-Related Nonmalignant
Disease(2), (2) six months AWI
Exposure prior to December 31, 1982,
- ----------------------------------
(1) The requirements for a diagnosis of an asbestos-related disease that may be
compensated under the provisions of this TDP are set forth in Section 5.7 below.
(2) Evidence of "Bilateral Asbestos-Related Nonmalignant Disease" for purposes
of meeting the criteria for establishing Disease Levels I, II, V, and VII, means
a report submitted by a qualified physician stating that the claimant has or had
an X-ray reading of 1/0 or higher on the ILO scale or CT scan read by a
qualified physician showing bilateral pleural plaques, bilateral pleural
thickening, or bilateral pleural calcification (or, solely for claims filed
Exhibit 1.31 - 8
(3) Significant Occupational
Exposure to asbestos (as defined in
Section 5.7(b)(2) below), and (4)
supporting medical documentation
establishing asbestos exposure as a
contributing factor in causing the
lung cancer in question.
Lung Cancer 2 (Level VI) None (1) Diagnosis of a primary lung
cancer; (2) AWI Exposure prior to
December 31, 1982, and (3)
supporting medical documentation
establishing asbestos exposure as a
contributing factor in causing the
lung cancer in question.
Lung Cancer 2 (Level VI) claims are
claims that do not meet the more
stringent medical and/or exposure
requirements of Lung Cancer (Level
VII) claims. All claims in this
Disease Level will be individually
evaluated. The estimated likely
average of the individual evaluation
awards for this category is $15,000,
with such awards capped at $50,000,
unless the claim qualifies for
Extraordinary Claim treatment (as
described in Section 5.4(a) below).
Level VI claims that show no
evidence of either an underlying
Bilateral Asbestos-Related
Non-malignant Disease or Significant
Occupational Exposure may be
individually evaluated, although it
is not expected that such claims
will be treated as having any
significant value, especially if the
claimant is also a Smoker. (3) In
any event, no presumption of
validity will be available for any
claims in this category.
Other Cancer (Level V) $ 21,500 (1) Diagnosis of a primary
colo-rectal, laryngeal, esophageal,
pharyngeal, or stomach cancer, plus
evidence of an underlying Bilateral
Asbestos-Related Nonmalignant
Disease, (2) six months AWI Exposure
prior to December 31, 1982, (3)
Significant Occupational Exposure to
asbestos, and (4) supporting medical
documentation establishing asbestos
exposure as a contributing factor in
causing the other cancer in
question.
- -----------------------------
against AWI or another asbestos defendant in the tort system prior to the
Petition Date, if an ILO reading is not available, a chest x-ray reading or CT
scan read by a qualified physician showing bilateral interstitial fibrosis,
bilateral interstitial markings, bilateral pleural plaques, bilateral pleural
thickening, or bilateral pleural calcification consistent with, or compatible
with, a diagnosis of asbestos-related disease).
(3) There is no distinction between Non-Smokers and Smokers for either Lung
Cancer (Level VII) or Lung Cancer (Level VI), although a claimant who meets the
more stringent requirements of Lung Cancer (Level VII) (evidence of an
underlying Bilateral Asbestos-Related Nonmalignant Disease plus Significant
Occupational Exposure), and who is also a Non-Smoker, may wish to have his or
her claim individually evaluated by the PI Trust. In such a case, absent
circumstances that would otherwise reduce the value of the claim, it is
anticipated that the liquidated value of the claim might well exceed the $42,500
Scheduled Value for Lung Cancer 1 (Level VII) shown above. "Non-Smoker" means a
claimant who either (a) never smoked or (b) has not smoked during any portion of
the twelve (12) years immediately prior to the diagnosis of the lung cancer.
Exhibit 1.31 - 9
Severe Asbestosis (Level IV) $ 42,500 (1) Diagnosis of asbestosis with ILO
of 2/1 or greater, or asbestosis
determined by pathological evidence
of asbestos (4), plus (a)TLC less
than 65%, or (b) FVC less than 65%
and FEV1/FVC ratio greater than 65%,
(2) six months AWI Exposure prior to
December 31, 1982, (3) Significant
Occupational Exposure to asbestos,
and (4) supporting medical
documentation establishing asbestos
exposure as a contributing factor in
causing the pulmonary disease in
question.
Asbestosis/
Pleural Disease (Level III) $ 9,700 (1) Diagnosis of asbestosis with ILO
of 1/0 or greater or asbestosis
determined by pathology, or
bilateral pleural disease of B2 or
greater, plus (a) TLC less than 80%,
or (b) FVC less than 80% and
FEV1/FVC ratio greater than or equal
to 65%, and (2) six months AWI
Exposure prior to December 31, 1982,
(3) Significant Occupational
Exposure to asbestos, and (4)
supporting medical documentation
establishing asbestos exposure as a
contributing factor in causing the
pulmonary disease in question.
Asbestosis/
Pleural Disease (Level II) $ 3,700 (1) Diagnosis of a Bilateral
Asbestos-Related Nonmalignant
Disease, and (2) six months AWI
Exposure prior to December 31, 1982,
and (3) five years cumulative
occupational exposure to asbestos.
Other Asbestos Disease (Level I -
Cash Discount Payment) $ 400 (1) Diagnosis of a Bilateral
Asbestos- Related Nonmalignant
Disease or an asbestos-related
malignancy other than mesothelioma,
and (2) AWI Exposure prior to
December 31, 1982.
5.3(B) INDIVIDUAL REVIEW PROCESS
5.3(B)(1) IN GENERAL.
5.3(B)(1)(A) REVIEW OF MEDICAL/EXPOSURE CRITERIA. The PI Trust's
Individual Review Process provides a claimant with an opportunity for individual
consideration and evaluation of a PI Trust Claim that fails to meet the
presumptive Medical/Exposure Criteria for Disease Levels I - V, and VII-VIII. In
such a case, the PI Trust shall either deny the claim, or, if the PI Trust is
satisfied that the claimant has presented a claim that would be cognizable and
valid in the tort system, the PI Trust can offer the claimant a liquidated value
amount up to the Scheduled Value for that Disease Level, unless the claim
qualifies as an Extraordinary Claim as defined in Section 5.4(a) below, in which
case its liquidated value cannot exceed the Maximum Value for such a claim.
5.3(B)(1)(B) REVIEW OF LIQUIDATED VALUE. Claimants holding claims
involving Disease Levels II - VIII shall also be eligible to seek Individual
Review of the liquidated value of their claims, as well as of their
medical/exposure evidence. The Individual Review Process is intended to result
in payments equal to the full liquidated value for each claim multiplied by the
Payment Percentage; however, the liquidated value of any PI Trust Claim that
- -------------------------------
(4) Proof of asbestosis may be based on the pathological grading system for
asbestosis described in the Special Issue of the Archives of Pathology and
Laboratory Medicine, "Asbestos-associated Diseases," Vol. 106, No. 11, App. 3
(October 8, 1982).
Exhibit 1.31 - 10
undergoes Individual Review may be determined to be less than the Scheduled
Value the claimant would have received under Expedited Review. Moreover, the
liquidated value for a claim involving Disease Levels II - VIII shall not exceed
the Maximum Value for the relevant Disease Level set forth in Section 5.3(b)(4)
below, unless the claim meets the requirements of an Extraordinary Claim
described in Section 5.4(a) below, in which case its liquidated value cannot
exceed the Maximum Value set forth in that provision for such claims. Because
the detailed examination and valuation process pursuant to Individual Review
requires substantial time and effort, claimants electing to undergo the
Individual Review Process will necessarily be paid the liquidated value of their
PI Trust Claims later than would have been the case had the claimant elected the
Expedited Review Process.
5.3(B)(2) VALUATION FACTORS TO BE CONSIDERED IN INDIVIDUAL REVIEW.
The PI Trust shall liquidate the value of each PI Trust Claim that undergoes
Individual Review based on the historic liquidated values of other similarly
situated claims in the tort system for the same Disease Level. The PI Trust will
thus take into consideration the factors that affect the severity of damages and
values within the tort system including, but not limited to (i) the degree to
which the characteristics of a claim differ from the presumptive
Medical/Exposure Criteria for the Disease Level in question; (ii) factors such
as the claimant's age, disability, employment status, disruption of household,
family or recreational activities, dependencies, special damages, and pain and
suffering; (iii) evidence that the claimant's damages were (or were not) caused
by asbestos exposure, including exposure to an asbestos-containing product for
which AWI has legal responsibility prior to December 31, 1982 (for example,
alternative causes, and the strength of documentation of injuries; (iv) the
industry of exposure; and (v) settlements, verdicts, and the claimant's and
other law firms' experience in the Claimant's Jurisdiction for similarly
situated claims.
For these purposes, the "CLAIMANT'S JURISDICTION" is the jurisdiction in which
the claim was filed (if at all) against AWI in the tort system prior to the
Petition Date. If the claim was not filed against AWI in the tort system prior
to the Petition Date, the claimant may elect as the Claimant's Jurisdiction
either (i) the jurisdiction in which the claimant resides at the time of
diagnosis or when the claim is filed with the PI Trust; or (ii) a jurisdiction
in which the claimant experienced exposure to an asbestos-containing product for
which AWI has legal responsibility.
5.3(B)(3) PROCESSING AND PAYMENT LIMITATIONS FOR CLAIMS INVOLVING
DISEASE LEVELS III AND II. The PI Trust shall administer Individual Review for
Disease Levels III and II so that Individual Review does not reduce payments to
claimants electing the Scheduled Value for such PI Trust Claims under Expedited
Review. As one means of implementing this requirement, the following shall apply
for Disease Levels III and II claims:
5.3(B)(3)(A) DISEASE LEVEL III CLAIMS. No more than 8 percent of
Disease Level III claims paid in any year shall be PI Trust Claims allowed under
Individual Review, and the total payments to such Disease Level III claims
allowed under Individual Review shall be no more than 12 percent of payments to
all Disease Level III claimants during any year.
5.3(B)(3)(B) DISEASE LEVEL II CLAIMS. No more than 15 percent of
Disease Level II claims paid in any year shall be PI Trust Claims allowed under
Individual Review, and the total payments to such Disease Level II claims
allowed under Individual Review shall be no more than 25 percent of payments to
all Disease Level II claimants during any year.
5.3(B)(4) SCHEDULED, AVERAGE AND MAXIMUM VALUES. The Scheduled,
Average and Maximum Values for the Disease Levels compensable under this TDP are
the following:
SCHEDULED DISEASE SCHEDULED VALUE AVERAGE VALUE MAXIMUM VALUE
- ----------------- --------------- ------------- -------------
Mesothelioma (Level VIII) $110,000 $130,500 $400,000
Lung Cancer1 (Level VII) $ 42,500 $ 43,800 $150,000
Lung Cancer 2 (Level VI) None $ 15,000 $ 50,000
Other Cancer (Level V) $ 21,500 $ 21,800 $ 75,000
Severe Asbestosis (Level IV) $ 42,500 $ 44,300 $140,000
Exhibit 1.31 - 11
Asbestosis/Pleural Disease
(Level III) $ 9,700 $ 10,100 $ 20,000
Asbestosis/Pleural Disease
(Level II) $ 3,700 $ 4,200 $ 10,000
Other Asbestos Disease
Cash Discount Payment
(Level I) $ 400 None None
These Scheduled Values, Average Values and Maximum Values shall apply to all PI
Trust Voting Claims filed with the PI Trust on or before the Initial Claims
Filing Date as provided in Section 5.1 above. Thereafter, the PI Trust, with the
consent of the TAC and the Future Claimants' Representative pursuant to Sections
5.7(b) and 6.6(b) of the PI Trust Agreement, may change these valuation amounts
for good cause and consistent with other restrictions on the amendment power.
5.4 CATEGORIZING CLAIMS AS EXTRAORDINARY AND/OR EXIGENT HARDSHIP
5.4(A) EXTRAORDINARY CLAIMS. "EXTRAORDINARY CLAIM" means a PI Trust
Claim that otherwise satisfies the Medical Criteria for Disease Levels II -
VIII, and that is held by a claimant whose exposure to asbestos (i) occurred
predominately as the result of working in a manufacturing facility of AWI during
a period in which AWI was manufacturing asbestos-containing products at that
facility, or (ii) was at least 75% the result of exposure to asbestos-containing
product for which AWI has legal responsibility, and there is little likelihood
of a substantial recovery elsewhere. All such Extraordinary Claims shall be
presented for Individual Review and, if valid, shall be entitled to an award of
up to a Maximum Value of five (5) times the Scheduled Value for claims
qualifying for Disease Levels II - V, VII and VIII, and five (5) times the
Average Value for claims in Disease Level VI, multiplied by the applicable
Payment Percentage. An Extraordinary Claim, following its liquidation, shall be
placed in the Trust's FIFO Queue ahead of all other PI Trust Claims except
Exigent Hardship Claims, which shall be first in said Queue, based on its date
of liquidation and shall be subject to the Maximum Available Payment and Claims
Payment Ratio described above.
5.4(B) EXIGENT HARDSHIP CLAIMS. At any time the PI Trust may
liquidate and pay certain PI Trust Claims that qualify as Exigent Hardship
Claims as defined below. Such claims may be considered separately no matter what
the order of processing otherwise would have been under this TDP. An Exigent
Hardship Claim, following its liquidation, shall be placed first in the FIFO
Payment Queue ahead of all other liquidated PI Trust Claims, and shall be
subject to the Maximum Available Payment and Claims Payment Ratio described
above. A PI Trust Claim qualifies for payment as an Exigent Hardship Claim if
the claim meets the Medical/Exposure Criteria for Severe Asbestosis (Disease
Level IV) or an asbestos-related malignancy (Disease Levels V-VIII), and the PI
Trust, in its sole discretion, determines (i) that the claimant needs financial
assistance on an immediate basis based on the claimant's expenses and all
sources of available income, and (ii) that there is a causal connection between
the claimant's dire financial condition and the claimant's asbestos-related
disease.
5.5 SECONDARY EXPOSURE CLAIMS. If a claimant alleges an
asbestos-related disease resulting solely from exposure to an occupationally
exposed person, such as a family member, the claimant may seek Individual Review
of his or her claim pursuant to Section 5.3(b) above. In such a case, the
claimant must establish that the occupationally exposed person would have met
the exposure requirements under this TDP that would have been applicable had
that person filed a direct claim against the PI Trust. In addition, the claimant
with secondary exposure must establish that he or she is suffering from one of
the eight Disease Levels described in Section 5.3(a)(3) above, that his or her
own exposure to the occupationally exposed person occurred within the same time
frame as the occupationally exposed person was exposed to asbestos products
produced by AWI, and that such secondary exposure was a cause of the claimed
disease. The proof of claim form included in Attachment B hereto contains an
additional section for Secondary Exposure Claims. All other liquidation and
payment rights and limitations under this TDP shall be applicable to such
claims.
5.6 INDIRECT PI TRUST CLAIMS. Indirect PI Trust Claims, as defined by
the Plan that are asserted against the PI Trust based upon theories of
contribution or indemnification under applicable law, may not be processed or
Exhibit 1.31 - 12
paid by the PI Trust unless (a) such claim satisfied the requirements of the Bar
Date established by the Bankruptcy Court for such claims, if applicable, and is
not otherwise discharged by Section 502(e) of the Code, and (b) the holder of
such claim (the "INDIRECT CLAIMANT") establishes to the satisfaction of the
Trustees that (i) the Indirect Claimant has paid in full the liability and
obligations of the Trust to the individual claimant to whom the PI Trust would
otherwise have had a liability or obligation under these Procedures (the "DIRECT
CLAIMANT"), (ii) the Direct Claimant and the Indirect Claimant have forever
released the Trust from all liability to the Direct Claimant, and (iii) the
claim is not otherwise barred by a statute of limitation or repose or by other
applicable law. In no event shall any Indirect Claimant have any rights against
the PI Trust superior to the rights of the related Direct Claimant against the
PI Trust, including any rights with respect to the timing, amount or manner of
payment. In addition, no Indirect Claim may be liquidated and paid in an amount
that exceeds what the Indirect Claimant has actually paid the related Direct
Claimant.
The PI Trust shall not pay any Indirect Claimant unless and until the Indirect
Claimant's aggregate liability for the Direct Claimant's claim has been fixed,
liquidated and paid fully by the Indirect Claimant by settlement (with an
appropriate full release in favor of the PI Trust) or a Final Order (as defined
in the Plan) provided that such claim is valid under the applicable state law.
In any case where the Indirect Claimant has satisfied the claim of a Direct
Claimant against the PI Trust under applicable law by way of a settlement, the
Indirect Claimant shall obtain for the benefit of the PI Trust a release in form
and substance satisfactory to the Trustees. The Trustees may develop and approve
a separate proof of claim form for such Indirect PI Trust Claims.
Indirect PI Trust Claims that have not been disallowed, discharged, or otherwise
resolved by prior order of the Court shall be processed in accordance with
procedures to be developed and implemented by the Trustees, which procedures (a)
shall determine the validity, allowability and enforceability of such claims;
and (b) shall otherwise provide the same liquidation and payment procedures and
rights to the holders of such claims as the PI Trust would have afforded the
holders of the underlying valid PI Trust Claims.
5.7 EVIDENTIARY REQUIREMENTS
5.7(A) MEDICAL EVIDENCE.
5.7(A)(1) IN GENERAL. All diagnoses of a Disease Level shall be
accompanied by either (i) a statement by the physician providing the diagnosis
that at least 10 years have elapsed between the date of first exposure to
asbestos or asbestos-containing products and the diagnosis, or (ii) a history of
the claimant's exposure sufficient to establish a 10-year latency period. A
finding by a physician after the Petition Date that a claimant's disease is
"consistent with" or "compatible with" asbestosis will not alone be treated by
the PI Trust as a diagnosis.
5.7(A)(1)(A). DISEASE LEVELS I-IV. Except for claims filed against
AWI or another asbestos defendant in the tort system prior to the Petition Date,
all diagnoses of a non-malignant asbestos-related disease (Disease Levels I-IV)
shall be based (i) in the case of a claimant who was living at the time the
claim was filed, upon (A) a physical examination of the claimant by the
physician providing the diagnosis of the asbestos-related disease; (B) an X-ray
reading by a certified B-reader or a CT scan read by a qualified physician
showing bilateral pleural disease or bilateral interstitial fibrosis, and (C)
pulmonary function testing(5) if the claim involves Asbestosis/Pleural Disease
(Level III) or Severe Asbestosis (Level IV)(6), and (ii) in the case of a
claimant who was deceased at the time the claim was filed, upon (A) a physical
examination of the claimant by the physician providing the diagnosis of the
asbestos-related disease, or (B) pathological evidence of the non-malignant
asbestos-related disease, or (C) an X-ray reading by a certified B reader or a
CT scan read by a qualified physician showing bilateral pleural disease or
bilateral interstitial fibrosis.
- ------------------------------
(5) "PULMONARY FUNCTION TESTING" shall mean spirometry testing that is in
material compliance with the quality criteria established by the American
Thoracic Society ("ATS") and is performed on equipment which is in material
compliance with ATS standards for technical quality and calibration.
(6) All diagnoses of Asbestos/Pleural Disease (Disease Levels II and III) not
based on pathology shall be presumed to be based on findings of bilateral
asbestosis or pleural disease, and all diagnoses of Mesothelioma (Disease Level
VIII) shall be presumed to be based on findings that the disease involves a
malignancy. However, the PI Trust may rebut such presumptions.
Exhibit 1.31 - 13
5.7(A)(1)(B). DISEASE LEVELS V-VIII. Except for claims filed against
AWI or another asbestos defendant in the tort system prior to the Petition Date,
diagnoses of an asbestos-related malignancy (Disease Levels V - VIII) shall be
based upon either (i) a physical examination of the claimant by the physician
providing the diagnosis of the malignant asbestos-related disease, or (ii) on a
diagnosis of such a malignant Disease Level by a board-certified pathologist.
5.7(A)(1)(C). TREATMENT OF CERTAIN PRE-PETITION CLAIMS. If the holder
of a PI Trust Claim has available the medical evidence described in Sections
5.7(a)(1)(A) and 5.7(a)(1)(B), or if the holder has filed such medical evidence
with another asbestos-related personal injury settlement trust that requires
such evidence, the holder shall provide such medical evidence to the PI Trust
notwithstanding the exceptions in Sections 5.7(a)(1)(A) and 5.7(a)(1)(B).
5.7(A)(2) CREDIBILITY OF MEDICAL EVIDENCE. Before making any payment
to a claimant, the PI Trust must have reasonable confidence that the medical
evidence provided in support of the claim is credible and consistent with
recognized medical standards. The PI Trust may require the submission of X-rays,
CT scans, detailed results of pulmonary function tests, laboratory tests, tissue
samples, results of medical examination or reviews of other medical evidence,
and may require that medical evidence submitted comply with recognized medical
standards regarding equipment, testing methods and procedure to assure that such
evidence is reliable. Medical evidence (i) that is of a kind shown to have been
received in evidence by a state or federal judge at trial, (ii) that is
consistent with evidence submitted to AWI to settle for payment similar disease
cases prior to AWI's bankruptcy, or (iii) a diagnosis by a physician shown to
have previously qualified as a medical expert with respect to the
asbestos-related disease in question before a state or federal judge, is
presumptively reliable, although the PI Trust may seek to rebut the presumption.
In addition, claimants who otherwise meet the requirements of this TDP for
payment of a PI Trust Claim shall be paid irrespective of the results in any
litigation at anytime between the claimant and any other defendant in the tort
system. However, any relevant evidence submitted in a proceeding in the tort
system involving another defendant, other than any findings of fact, a verdict,
or a judgment, may be introduced by either the claimant or the PI Trust in any
Individual Review proceeding conducted pursuant to 5.3(b) or any Extraordinary
Claim proceeding conducted pursuant to 5.4(a).
5.7(B) EXPOSURE EVIDENCE
5.7(B)(1) IN GENERAL. As set forth in Section 5.3(a)(3) above, to
qualify for any Disease Level, the claimant must demonstrate a minimum exposure
to an asbestos-containing product manufactured or distributed by AWI. Claims
based on conspiracy theories that involve no exposure to an asbestos-containing
product produced by AWI are not compensable under this TDP. To meet the
presumptive exposure requirements of Expedited Review set forth in Section
5.3(a)(3) above, the claimant must show (i) for all Disease Levels, AWI Exposure
as defined in Section 5.7(b)(3) below prior to December 31, 1982; (ii) for
Asbestos/Pleural Disease Level II, six months AWI Exposure prior to December 31,
1982, plus five years cumulative occupational asbestos exposure; and (iii) for
Asbestosis/Pleural Disease (Disease Level III), Severe Asbestosis (Disease Level
IV), Other Cancer (Disease Level V) or Lung Cancer 1 (Disease Level VII), the
claimant must show six months AWI Exposure prior to December 31, 1982, plus
Significant Occupational Exposure to asbestos as defined below. If the claimant
cannot meet the relevant presumptive exposure requirements for a Disease Level
eligible for Expedited Review, the claimant may seek Individual Review of his or
her claim based on exposure to an asbestos-containing product manufactured or
distributed by AWI.
5.7(B)(2) SIGNIFICANT OCCUPATIONAL EXPOSURE. "SIGNIFICANT
OCCUPATIONAL EXPOSURE" means employment for a cumulative period of at least five
years, with a minimum of two years prior to December 31, 1982, in an industry
and an occupation in which the claimant (a) handled raw asbestos fibers on a
regular basis; (b) fabricated asbestos-containing products so that the claimant
in the fabrication process was exposed on a regular basis to raw asbestos
fibers; (c) altered, repaired or otherwise worked with an asbestos-containing
product such that the claimant was exposed on a regular basis to asbestos
fibers; or (d) was employed in an industry and occupation such that the claimant
worked on a regular basis in close proximity to workers engaged in the
activities described in (a), (b) and/or (c).
5.7(B)(3) AWI EXPOSURE. The claimant must demonstrate meaningful and
credible exposure prior to December 31, 1982, to asbestos or asbestos-containing
products supplied, specified, manufactured, installed, maintained, or repaired
by AWI and/or any entity, including an AWI contracting unit, for which AWI has
Exhibit 1.31 - 14
legal responsibility. That meaningful and credible exposure evidence may be
established by an affidavit of the claimant, by an affidavit of a co-worker or
the affidavit of a family member in the case of a deceased claimant (providing
the PI Trust finds such evidence reasonably reliable), by invoices, employment,
construction or similar records, or by other credible evidence. The specific
exposure information required by the PI Trust to process a claim under either
Expedited or Individual Review is set forth on the proof of claim form to be
used by the PI Trust, which is attached as Attachment B hereto. The PI Trust can
also require submission of other or additional evidence of exposure when it
deems such to be necessary.
5.7 CLAIMS AUDIT PROGRAM. The PI Trust with the consent of the TAC
and the Futures Claimants' Representative may develop methods for auditing the
reliability of medical evidence, including additional reading of x-rays, CT
scans and verification of pulmonary function tests, as well as the reliability
of evidence of exposure to asbestos, including exposure to asbestos-containing
products manufactured or distributed by AWI prior to December 31, 1982. In the
event that the PI Trust reasonably determines that any individual or entity has
engaged in a pattern or practice of providing unreliable medical evidence to the
Trust, it may decline to accept additional evidence from such provider in the
future.
Further, in the event that an audit reveals that fraudulent information has been
provided to the PI Trust, the PI Trust may penalize any claimant or claimant's
attorney by disallowing the PI Trust Claim or by other means including, but not
limited to, requiring the source of the fraudulent information to pay the costs
associated with the audit and any future audit or audits, reordering the
priority of payment of all affected claimants' PI Trust Claims, raising the
level of scrutiny of additional information submitted from the same source or
sources, refusing to accept additional evidence from the same source or sources,
seeking the prosecution of the claimant or claimant's attorney for presenting a
fraudulent claim in violation of 18 U.S.C. ss.152, and seeking sanctions from
the Bankruptcy Court.
5.9 SECOND DISEASE (MALIGNANCY) CLAIMS. The holder of a PI Trust
Claim involving a non-malignant asbestos-related disease (Disease Levels I
through IV) may assert a new PI Trust Claim against the PI Trust for a malignant
disease (Disease Levels V - VIII) that is subsequently diagnosed. Any additional
payments to which such claimant may be entitled with respect to such malignant
asbestos-related disease shall not be reduced by the amount paid for the
non-malignant asbestos-related disease, provided that the malignant disease had
not been diagnosed by the time the claimant was paid with respect to his or her
original claim involving the non-malignant disease.
5.10 ARBITRATION.
5.10(A) ESTABLISHMENT OF ARBITRATION PROCEDURES. The PI Trust, with
the consent of the TAC and the Future Claimants' Representative, shall institute
binding and non-binding arbitration procedures in accordance with the
Arbitration Rules included in Attachment A hereto for resolving disputes
concerning whether a Pre-Petition settlement agreement with AWI is binding and
judicially enforceable in the absence of a final order of the Bankruptcy Court
determining the issue, whether the PI Trust's outright rejection or denial of a
claim was proper, or whether the claimant's medical condition or exposure
history meets the requirements of this TDP for purposes of categorizing a claim
involving Disease Levels I - VIII. Binding and non-binding arbitration shall
also be available for resolving disputes over the liquidated value of a claim
involving Disease Levels II - VIII.
In all arbitrations, the arbitrator shall consider the same medical and exposure
evidentiary requirements that are set forth in Section 5.7 above. In the case of
an arbitration involving the liquidated value of a claim involving Disease
Levels II - VIII, the arbitrator shall consider the same valuation factors that
are set forth in Section 5.3(b)(2) above. With respect to all claims eligible
for arbitration, the claimant, but not the PI Trust, may elect either
non-binding or binding arbitration. The Arbitration Rules set forth in
Attachment A hereto may be modified by the PI Trust with the consent of the TAC
and the Future Claimants' Representative. Such amendments may include adoption
of mediation procedures as well as establishment of an Extraordinary Claims
Panel to review such claims pursuant to Section 5.4(a) above.
5.10(B) CLAIMS ELIGIBLE FOR ARBITRATION. In order to be eligible for
arbitration, the claimant must first complete the Individual Review Process with
respect to the disputed issue. Individual Review will be treated as completed
for these purposes when the claim has been individually reviewed by the PI
Trust, the PI Trust has made an offer on the claim, the claimant has rejected
the liquidated value resulting from the Individual Review, and the claimant has
notified the PI Trust of the rejection in writing.
5.10(C) LIMITATIONS ON AND PAYMENT OF ARBITRATION AWARDS. In the case
of a non-Extraordinary Claim involving Disease Levels II - VIII, the arbitrator
shall not return an award in excess of the Maximum Value for the appropriate
Exhibit 1.31 - 15
Disease Level as set forth in Section 5.3(a)(4) above, and for an Extraordinary
Claim involving one of those Disease Levels, the arbitrator shall not return an
award greater than the Maximum Extraordinary Value for such a claim as set forth
in Section 5.4(a) above. A claimant who submits to arbitration and who accepts
the arbitral award will receive payments in the same manner as one who accepts
the Trust's original valuation of the claim.
5.11 LITIGATION. Claimants who elect non-binding arbitration and then
reject their arbitral awards retain the right to institute a lawsuit in the tort
system against the PI Trust pursuant to Section 7.6 below. However, a claimant
shall be eligible for payment of a judgment for monetary damages obtained in the
tort system from the PI Trust's available cash only as provided in Section 7.7
below.
SECTION VI
CLAIMS MATERIALS
6.1 CLAIMS MATERIALS. The PI Trust shall prepare suitable and
efficient claims materials ("CLAIMS MATERIALS") for all PI Trust Claims, and
shall provide such Claims Materials upon a written request for such materials to
the PI Trust. The proof of claim form to be submitted to the PI Trust shall
require the claimant to assert the highest Disease Level for which the claim
qualifies at the time of filing. The proof of claim form shall also include a
certification by the claimant or his or her attorney sufficient to meet the
requirements of Rule 11(b) of the Federal Rules of Civil Procedure. A copy of
the proof of claim form to be used by the PI Trust for Pre-Petition Liquidated
Claims and unliquidated PI Trust Claims is included in Attachment B hereto. The
proof of claim form may be changed by the PI Trust with the consent of the TAC
and the Future Claimants' Representative.
6.2 CONTENT OF CLAIMS MATERIALS. The Claims Materials shall include a
copy of this TDP, such instructions as the Trustees shall approve, and a
detailed proof of claim form. If feasible, the forms used by the PI Trust to
obtain claims information shall be the same or substantially similar to those
used by other asbestos claims resolution organizations. Instead of collecting
some or all of the claims information from a claimant or the claimant's
attorney, the PI Trust may also obtain such information from electronic data
bases maintained by any other asbestos claims resolution organization. However,
the PI Trust shall inform the claimant that it plans to obtain information as
available from such other organizations and may do so unless the claimant
objects in writing or provides such information directly to the PI Trust. If
requested by the claimant, the PI Trust shall accept information provided
electronically. The claimant may, but will not be required to, provide the PI
Trust with evidence of recovery from other asbestos defendants and claims
resolution organizations.
6.3 WITHDRAWAL OR DEFERRAL OF CLAIMS. A claimant can withdraw a PI
Trust Claim at any time upon written notice to the PI Trust and file another
such claim subsequently without affecting the status of the claim for statute of
limitations purposes, but any such claim filed after withdrawal shall be given a
place in the FIFO Processing Queue based on the date of such subsequent filing.
A claimant can also request that the processing of his or her PI Trust Claim by
the PI Trust be deferred for a period not to exceed three (3) years without
affecting the status of the claim for statute of limitation purposes, in which
case the claimant shall also retain his or her original place in the FIFO
Processing Queue. Except for PI Trust Claims held by representatives of deceased
or incompetent claimants for which court or probate approval of the PI Trust's
offer is required, or a PI Trust Claim for which deferral status has been
granted, a claim will be deemed to have been withdrawn if the claimant neither
accepts, rejects, nor initiates arbitration within six months of the PI Trust's
offer of payment or rejection of the claim. Upon written request and good cause,
the PI Trust may extend either the deferral or withdrawal period for an
additional six months.
6.4 FILING REQUIREMENTS AND FEES. The Trustees shall have the
discretion to determine, with the consent of the TAC and the Futures
Representative, (a) whether a claimant must have previously filed a PI Trust
Claim in the tort system to be eligible to file the claim with the PI Trust and
(b) whether a filing fee should be required for any PI Trust claims.
SECTION VII
GENERAL GUIDELINES FOR LIQUIDATING AND PAYING CLAIMS
7.1 SHOWING REQUIRED. To establish a valid PI Trust Claim, a claimant
must meet the requirements set forth in this TDP. The PI Trust may require the
submission of X-rays, CT scans, laboratory tests, medical examinations or
Exhibit 1.31 - 16
reviews, other medical evidence, or any other evidence to support or verify the
claim, and may further require that medical evidence submitted comply with
recognized medical standards regarding equipment, testing methods, and
procedures to assure that such evidence is reliable.
7.2 COSTS CONSIDERED. Notwithstanding any provisions of this TDP to
the contrary, the Trustees shall always give appropriate consideration to the
cost of investigating and uncovering invalid PI Trust Claims so that the payment
of valid PI Trust Claims is not further impaired by such processes with respect
to issues related to the validity of the medical evidence supporting a PI Trust
Claim. The Trustees shall also have the latitude to make judgments regarding the
amount of transaction costs to be expended by the PI Trust so that valid PI
Trust Claims are not unduly further impaired by the costs of additional
investigation. Nothing herein shall prevent the Trustees, in appropriate
circumstances, from contesting the validity of any claim against the PI Trust
whatever the costs, or to decline to accept medical evidence from sources that
the Trustees have determined to be unreliable pursuant to the Claims Audit
Program described in Section 5.7 above.
7.3 DISCRETION TO VARY THE ORDER AND AMOUNTS OF PAYMENTS IN EVENT OF
LIMITED LIQUIDITY. Consistent with the provisions hereof and subject to the FIFO
Processing and Liquidation Queues, the Maximum Annual Payment, the Maximum
Available Payment and the Claims Payment Ratio requirements set forth above, the
Trustees shall proceed as quickly as possible to liquidate valid PI Trust
Claims, and shall make payments to holders of such claims in accordance with
this TDP promptly as funds become available and as claims are liquidated, while
maintaining sufficient resources to pay future valid claims in substantially the
same manner.
Because the PI Trust's income over time remains uncertain, and decisions about
payments must be based on estimates that cannot be done precisely, they may have
to be revised in light of experiences over time, and there can be no guarantee
of any specific level of payment to claimants. However, the Trustees shall use
their best efforts to treat similar claims in substantially the same manner,
consistent with their duties as Trustees, the purposes of the PI Trust, the
established allocation of funds to claims in Categories A and B, and the
practical limitations imposed by the inability to predict the future with
precision. In the event that the PI Trust faces temporary periods of limited
liquidity, the Trustees may, with the consent of the TAC and the Future
Claimants' Representative, suspend the normal order of payment and may
temporarily limit or suspend payments altogether, and may offer a Reduced
Payment Option as described in Section 2.5 above.
7.4 PUNITIVE DAMAGES. In determining the value of any liquidated or
unliquidated PI Trust Claim, punitive or exemplary damages, i.e., damages other
than compensatory damages, shall not be considered or allowed, notwithstanding
their availability in the tort system.
7.5 INTEREST.
7.5(A) IN GENERAL. Except for PI Trust Claim involving Other Asbestos
Disease (Disease Level I - Cash Discount Payment) and subject to the limitations
set forth below, interest shall be paid on all PI Trust Claims with respect to
which the claimant has had to wait a year or more for payment, provided,
however, that no claimant shall receive interest for a period in excess of seven
(7) years. The applicable interest rate shall be six percent (6%) simple
interest per annum for the first five (5) years after the Effective Date;
thereafter, the PI Trust shall have the discretion to change the annual interest
rate with the consent of the TAC and the Future Claimants' Representative.
7.5(B) UNLIQUIDATED PI TRUST CLAIMS. Interest shall be payable on the
Scheduled Value of any unliquidated PI Trust Claim that meets the requirements
of Disease Levels II - V, VII and VIII, whether the claim is liquidated under
Expedited Review, Individual Review, or by arbitration. Interest on an
unliquidated PI Trust Claim that meets the requirements of Disease Level VI
shall be based on the Average Value of such a claim. Interest on all such
unliquidated claims shall be measured from the date of payment back to the
earliest of the date that is one year after the date on which (a) the claim was
filed against AWI prior to the Petition Date; (b) the claim was filed against
another defendant in the tort system on or after the Petition Date but before
the Effective Date; or (c) the claim was filed with the PI Trust after the
Effective Date.
7.5(C) LIQUIDATED PRE-PETITION CLAIMS. Interest shall also be payable
on the liquidated value of all Pre-Petition Liquidated Claims described in
Section 5.2(a) above. In the case of Pre-Petition Liquidated Claims liquidated
by verdict or judgment, interest shall be measured from the date of payment back
to the date that is one year after the date that the verdict or judgment was
entered. In the case of Pre-Petition Liquidated Claims liquidated by a binding,
Exhibit 1.31 - 17
judicially enforceable settlement, interest shall be measured from the date of
payment back to the date that is one year after the Petition Date.
7.6 SUITS IN THE TORT SYSTEM. If the holder of a disputed claim
disagrees with the PI Trust's determination regarding the Disease Level of the
claim, the claimant's exposure history or the liquidated value of the claim, and
if the holder has first submitted the claim to non-binding arbitration as
provided in Section 5.10 above, the holder may file a lawsuit in the Claimant's
Jurisdiction as defined in Section 5.3(b)(2) above. Any such lawsuit must be
filed by the claimant in her or her own right and name and not as a member or
representative of a class, and no such lawsuit may be consolidated with any
other lawsuit. All defenses (including, with respect to the PI Trust, all
defenses which could have been asserted by AWI) shall be available to both sides
at trial; however, the PI Trust may waive any defense and/or concede any issue
of fact or law. If the claimant was alive at the time the initial pre-petition
complaint was filed or on the date the Proof of Claim was filed, the case will
be treated as a personal injury case with all personal injury damages to be
considered even if the claimant has died during the pendency of the claim.
7.7 PAYMENT OF JUDGMENTS FOR MONEY DAMAGES. If and when a claimant
obtains a judgment in the tort system, the claim shall be placed in the FIFO
Payment Queue based on the date on which the judgment became final. Thereafter,
the claimant shall receive from the PI Trust an initial payment (subject to the
applicable Payment Percentage, the Maximum Available Payment, and the Claims
Payment Ratio provisions set forth above) of an amount equal to one-hundred
percent (100%) of the greater of (i) the PI Trust's last offer to the claimant
or (ii) the award that the claimant declined in non-binding arbitration. The
claimant shall receive the balance of the judgment, if any, in five equal
installments in years six (6) through ten (10) following the year of the initial
payment (also subject to the applicable Payment Percentage, the Maximum
Available Payment and the Claims Payment Ratio provisions set forth above).
In the case of non-Extraordinary claims involving Disease Levels II - VIII, the
total amounts paid with respect to such claims shall not exceed the Maximum
Values for such Disease Levels set forth in Section 5.3(b)(4). In the case of
Extraordinary Claims, the total amounts paid with respect to such claims shall
not exceed the Maximum Value for such claims set forth in Section 5.4(a) above.
Under no circumstances shall interest be paid pursuant to Section 7.5 or under
any statute on any judgments obtained in the tort system.
7.8 RELEASES. The Trustees shall have the discretion to determine the
form and substance of the releases to be provided to the PI Trust in order to
maximize recovery for claimants against other tortfeasors without increasing the
risk or amount of claims for indemnification or contribution from the PI Trust.
As a condition to making any payment to a claimant, the PI Trust shall obtain a
general, partial, or limited release as appropriate in accordance with the
applicable state or other law. If allowed by state law, the endorsing of a check
or draft for payment by or on behalf of a claimant shall constitute such a
release.
7.9 THIRD-PARTY SERVICES. Nothing in this TDP shall preclude the PI
Trust from contracting with another asbestos claims resolution organization to
provide services to the PI Trust so long as decisions about the categorization
and liquidated value of PI Trust Claims are based on the relevant provisions of
this TDP, including the Disease Levels, Scheduled Values, Average Values,
Maximum Values, and Medical/Exposure Criteria set forth above.
7.10 PI TRUST DISCLOSURE OF INFORMATION. Periodically, but not less
often than once a year, the Trust shall make available to claimants and other
interested parties, the number of claims by disease levels that have been
resolved both by the Individual Review Process and by arbitration as well as by
litigation in the tort system indicating the amounts of the awards and the
averages of the awards by jurisdiction.
SECTION VIII
MISCELLANEOUS
8.1 AMENDMENTS. Except as otherwise provided herein, the Trustees may
amend, modify, delete, or add to any provisions of this TDP (including, without
limitation, amendments to conform this TDP to advances in scientific or medical
knowledge or other changes in circumstances), provided they first obtain the
consent of the TAC and the Future Claimants' Representative pursuant to the
Consent Process set forth in Sections 5.7(b) and 6.6(b) of the PI Trust
Exhibit 1.31 - 18
Agreement, except that the right to amend the Claims Payment Ratio is governed
by the restrictions in Section 2.5 above, and the right to adjust the Payment
Percentage is governed by Section 4.2 above.
8.2 SEVERABILITY. Should any provision contained in this TDP be
determined to be unenforceable, such determination shall in no way limit or
affect the enforceability and operative effect of any and all other provisions
of this TDP. Should any provision contained in this TDP be determined to be
inconsistent with or contrary to AWI obligations to any insurance company
providing insurance coverage to AWI in respect of claims for personal injury
based on exposure to asbestos-containing products manufactured or produced by
AWI, the PI Trust with the consent of the TAC and the Future Claimants'
Representative, may amend this TDP and/or the PI Trust Agreement to make the
provisions of either or both documents consistent with the duties and
obligations of AWI to said insurance company.
8.3 GOVERNING LAW. Except for purposes of determining the liquidated
value of any PI Trust Claim, administration of this TDP shall be governed by,
and construed in accordance with, the laws of the State of Delaware. The law
governing the liquidation of PI Trust Claims in the case of Individual Review,
arbitration or litigation in the tort system shall be the law of the Claimant's
Jurisdiction as described in Section 5.3(b)(2) above.
Exhibit 1.31 - 19
EXHIBIT "B"
(PROPOSED)
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- ------------------------------------------x
IN RE :
: CHAPTER 11 CASE NO.
ARMSTRONG WORLD INDUSTRIES, :
INC., ET AL., : 00-4471 (RJN)
:
DEBTORS. : (JOINTLY ADMINISTERED)
- ------------------------------------------x
ORDER (I) APPROVING THE DISCLOSURE
STATEMENT AND (II) ESTABLISHING NOTICE AND
OBJECTION PROCEDURES FOR CONFIRMATION OF THE PLAN
Upon consideration of the proposed disclosure statement,
dated March 14, 2003 (as the same has been amended upon the filing of written
modifications with the United States Bankruptcy Court for the District of
Delaware (the "Court") or as announced at the hearings conducted by the Court on
February 28, 2003 and April 4, 2003 (collectively, the "Hearing"), the
"Disclosure Statement") of Armstrong World Industries, Inc., as debtor and
debtor in possession ("AWI"), with respect to AWI's First Amended Plan of
Reorganization, dated March 14, 2003 (as the same has been or may be amended,
the "Plan"); and upon the record of the Hearing and all of the proceedings had
before the Court; [and any objections to the Disclosure Statement having been
withdrawn, overruled by the Court, or rendered moot by reason of modifications
made to the Disclosure Statement and/or the Plan]; and it appearing that the
Court has jurisdiction over this matter; and due and sufficient notice of the
filing of the Disclosure Statement, the Hearing, and this order as proposed
having been provided, and it appearing that no other or further notice need be
provided; and just cause existing for the relief granted herein;
THE COURT HEREBY FINDS AS FOLLOWS:
I. The Disclosure Statement contains adequate information
within the meaning of section 1125 of title 11 of the United States Code (the
"Bankruptcy Code").
II. Actual notice of the Hearing was provided to all
creditors who timely filed a proof of claim, all creditors listed in the
Schedules as having a noncontingent, liquidated, and undisputed claim, all
holders of AWI's debt securities, the holder of AWI's equity securities, all
parties who have filed notices of appearance in this chapter 11 case pursuant to
Bankruptcy Rule 2002, all parties on AWI's Core Group Service List and All
Notices List in this case pursuant to the Court's Order Establishing Case
Management Procedures and Hearing Schedule, dated February 11, 2002, the
Securities and Exchange Commission, and the Internal Revenue Service and such
notice constitutes sufficient notice to all interested parties.
III. Notice of the Hearing was published once in the
weekday edition of the national editions of The New York Times, The Wall Street
Journal, and USA Today at least one month prior to the Hearing, and the form and
manner of such notice by publication constituted sufficient notice to all
unknown creditors and parties in interest consistent with principles of due
process.
IV. The form and manner of notice of the time set for
filing objections to, and the time, date, and place of the Hearing to consider
the approval of the Disclosure Statement was adequate and comports with due
process.
V. The procedures set forth below regarding notice and the
form of notice to be included in the solicitation packages annexed hereto as
Exhibit "A" (the "Confirmation Hearing Notice") to all creditors of the time,
date, and place of the hearing to confirm the Plan (as such hearing may be
continued from time to time in accordance with this order, the "Confirmation
Hearing") are adequate, comply with Rules 2002 and 3017 of the Federal Rules of
Bankruptcy Procedure (the "Bankruptcy Rules"), and constitute sufficient notice
to all interested parties.
VI. The manner of notice provided for in this order to be
given by publication to all unknown holders of Asbestos Personal Injury Claims
(as such term is defined in the Plan) and the form of such notice in the form
annexed hereto as Exhibit "B" (the "Asbestos Publication Notice") regarding the
deadline for voting on, and objecting to confirmation of, the Plan and other
information relating to the solicitation of votes on the Plan are adequate,
comply with Bankruptcy Rules 2002 and 3017, and constitute sufficient notice to
all unknown holders of Asbestos Personal Injury Claims consistent with
principles of due process.
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VII. The manner of notice provided for in this order to be
given by publication of the time, date, and place of the Confirmation Hearing,
the deadline for voting on, and objecting to confirmation of, the Plan, as well
as other procedures relating to the Confirmation Hearing and the solicitation of
votes on the Plan and the form of notice in the form annexed hereto as Exhibit
"C" (the "Confirmation Hearing Publication Notice") are adequate, comply with
Bankruptcy Rules 2002 and 3017, and constitute sufficient notice to all unknown
creditors and parties in interest consistent with principles of due process.
VIII. The notice of the Asbestos PI Permanent Channeling
Injunction and the Claims Trading Injunction (as such terms are defined in the
Plan) set forth in the Confirmation Hearing Notice and the Confirmation Hearing
Publication Notice complies with Bankruptcy Rule 2002(c)(3) as such notices
include in conspicuous language statements that the Plan proposes the
injunctions, briefly describe the nature of the injunctions, and identify the
entities subject to the injunctions.
IX. The period during which AWI may solicit votes on the
Plan is a reasonable time for creditors and equity security holders to make an
informed decision to accept or reject the Plan.
NOW, THEREFORE, IT IS:
ORDERED that, in accordance with section 1125 of the
Bankruptcy Code and Bankruptcy Rule 3017(b), the Disclosure Statement is
APPROVED in all respects; and it is further
ORDERED that the Confirmation Hearing will commence at
[_:__] _.m. Eastern Time on [____ __], 2003, at the [____], Courtroom [__],
[____], [____, ____ __], or as soon thereafter as counsel may be heard with
Bankruptcy Judge Randall J. Newsome and District Judge Alfred M. Wolin presiding
jointly over the Confirmation Hearing; provided, however, that the Confirmation
Hearing may be continued from time to time by the Court or AWI without further
notice to any party in interest except an announcement made at the Confirmation
Hearing; and it is further
ORDERED that objections, if any, to confirmation of the
Plan or proposed modifications to the Plan must (i) be in writing, (ii) state
the name and address of the objecting party and the nature of the claim or
interest of such party, (iii) state with particularity the basis and nature of
each objection to confirmation of the Plan or proposed modification to the Plan,
and (iv) be filed, together with proof of service, with the Court and served so
that they are actually received no later than 4:00 p.m. Wilmington, Delaware
B-3
time on [____ __], 2003 by the Clerk of the Court and each of the following
parties: (a) the attorneys for AWI, Weil, Gotshal & Manges LLP, 767 Fifth
Avenue, New York, New York 10153 (Attn: Stephen Karotkin, Esq.) and Richards,
Layton & Finger, P.A., One Rodney Square, P.O. Box 551, Wilmington, Delaware
19899 (Attn: Mark D. Collins, Esq.); (b) the attorneys for the agent for AWI's
prepetition bank lenders (the "Prepetition Lenders"), Duane, Morris, LLP, 1
Riverfront Plaza, 2nd Floor, Newark, NJ 07102 (Attn: William S. Katchen, Esq.)
and Duane, Morris, LLP, 1100 North Market Street, Suite 1200, Wilmington,
Delaware 19801 (Attn: Michael R. Lastowski, Esq.); (c) the attorneys for AWI's
postpetition lenders (the "DIP Lenders"), Morgan, Lewis & Bockius LLP, 101 Park
Avenue, New York, New York 10178 (Attn: Robert Scheibe, Esq.) and Klett Rooney
Lieber & Schorling PC, The Brandywine Building, 1000 West Street Suite 1410,
P.O. Box 1397, Wilmington, Delaware 19899 (Attn: Terry Currier, Esq.); (d) the
attorneys for the Official Committee of Unsecured Creditors (the "Unsecured
Creditors' Committee"), Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of
the Americas, New York, New York 10019 (Attn: Andrew N. Rosenberg, Esq.) and
Cozen & O'Connor, Chase Manhattan Center, Suite 1400, 1201 North Market Street,
Wilmington, Delaware 19801 (Attn: Mark E. Felger, Esq.); (e) the attorneys for
the Official Committee of Asbestos Claimants (the "Asbestos Personal Injury
Claimants' Committee"), Caplin & Drysdale, Chartered, 399 Park Avenue, 36th
Floor, New York, New York 10022 (Attn: Elihu Inselhuch, Esq.), Caplin &
Drysdale, Chartered, One Thomas Circle, Suite 1100, Washington D.C. 20005 (Attn:
Peter Van N. Lockwood, Esq.), and Campbell & Levine, 1201 Market Street, 15th
Floor, Wilmington, Delaware 19801 (Attn: Aileen Maguire, Esq.); (f) the
attorneys for the Official Committee of Asbestos Property Damage Claimants (the
"Asbestos Property Damage Claimants' Committee"), Klehr, Harrison, Harvey,
Branzburg & Ellers, 919 Market Street, Suite 1000, Wilmington Delaware 19801
(Attn: Joanne B. Wills, Esq.); (g) the attorneys for the legal representative
for AWI's future asbestos personal injury claimants (the "Future Claimants'
Representative," and together with the Unsecured Creditors' Committee, the
Asbestos Personal Injury Claimants' Committee, and the Asbestos Property Damage
Claimants' Committee, the "Committees"), Kaye Scholer, LLP, 425 Park Avenue, New
York, New York 10022 (Attn: Michael J. Crames, Esq.) and Young Conaway Stargatt
& Taylor, LLP, The Brandywine Building, 17th Floor, 1000 West Street,
B-4
Wilmington, Delaware 19801 (Attn: James L. Patton, Jr., Esq.); and (h) the
United States Trustee for the District of Delaware (the "U.S. Trustee"), 844
King Street, Suite 2313, Lockbox 35, Wilmington, Delaware 19801 (Attn: Frank
Perch, Esq.) (collectively, the "Notice Parties"); and it is further
ORDERED that objections to confirmation of the Plan not
timely filed and served in the manner set forth above shall not be considered
and shall be overruled; and it is further
ORDERED that AWI, the DIP Lenders, the Prepetition Lenders,
and the Committees may file and serve replies, if any, to any objections to
confirmation or proposed modifications to the Plan, and such replies shall be
filed and served so that such replies are actually received by no later than
4:00 p.m., Wilmington, Delaware time on [____ __], 2003 by the Court, the
objecting party, and each of the Notice Parties; and it is further
ORDERED that the Voting Deadline, as such term is defined
in the Plan and used in the Voting Procedures approved by an order of the Court
dated [____], 2003, will be 5:00 p.m., Wilmington, Delaware time on [____],
2003; and it is further
ORDERED that the equity securityholders of Armstrong
Holdings, Inc. shall have standing to file objections to confirmation of the
Plan; and it is further
ORDERED that AWI is hereby authorized and directed to mail
or cause to be mailed by first-class mail within thirty (30) days after entry of
this order a Solicitation Package (as such terms is defined in the Voting
Procedures) to all entities as provided in the Voting Procedures; and it is
further
ORDERED that, within thirty (30) days after entry of this
order, AWI also shall mail Solicitation Packages to (i) the U.S. Trustee, (ii)
the attorneys for the agent for the Prepetition Lenders, (iii) the attorneys for
the agent for the DIP Lenders, (iv) the attorneys for the Committees, (v) all
persons or entities that have filed a request for notice pursuant to Bankruptcy
Rule 2002 in AWI's chapter 11 case, (vi) the Securities and Exchange Commission,
and (vii) the Internal Revenue Service; and it is further
ORDERED that, with respect to addresses from which notices
of the hearing to approve the Disclosure Statement were returned to AWI as
undeliverable by the United States Postal Service, AWI is excused from mailing
Solicitation Packages to those entities listed at such addresses unless AWI is
provided with accurate addresses for such entities prior to [____], 2003, such
B-5
entities shall be deemed unknown creditors for notice purposes, and failure to
mail Solicitation Packages to such entities will not constitute inadequate
notice of the Confirmation Hearing and the Voting Deadline; and it is further
ORDERED that AWI shall publish the Asbestos Publication
Notice once in each of the publications set forth on Exhibit "D" hereto on a
date not less than thirty (30) calendar days prior to the Confirmation Hearing;
and it is further
ORDERED that AWI shall publish the Confirmation Hearing
Publication Notice not less than thirty (30) calendar days prior to the
Confirmation Hearing (i) twice in the weekday edition of the national editions
of The New York Times, The Wall Street Journal, and USA Today, (ii) once in each
of the trade publications set forth on Exhibit "E" hereto, and (iii) once in
each of the newspapers set forth on Exhibit "F" hereto; and it is further
ORDERED that the provision of notice in accordance with the
procedures set forth in this order and the Voting Procedures shall be deemed
good and sufficient notice of the Confirmation Hearing, the time fixed for
filing objections to confirmation, or proposing modifications to, the Plan, and
the Voting Deadline; and it is further
ORDERED that AWI is authorized to make nonsubstantive
changes to the Disclosure Statement, the Plan, and related documents without
further order of the Court, including, without limitation, changes to correct
typographical and grammatical errors and to make conforming changes among the
Disclosure Statement, the Plan, and any other related materials prior to their
mailing to parties in interest; and it is further
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ORDERED that AWI is authorized to take or refrain from
taking any action necessary or appropriate to implement the terms of and the
relief granted in this order without seeking further order of the Court.
Dated: Wilmington, Delaware
April __, 2003
----------------------------------------
THE HONORABLE RANDALL J. NEWSOME
UNITED STATES BANKRUPTCY JUDGE
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EXHIBIT A
[Mailing Notice]
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- ------------------------------------------x
IN RE :
: CHAPTER 11 CASE NO.
ARMSTRONG WORLD INDUSTRIES, :
INC., ET AL., : 00-4471 (RJN)
:
DEBTORS. : (JOINTLY ADMINISTERED)
- ------------------------------------------x
NOTICE OF (I) APPROVAL OF DISCLOSURE STATEMENT;
(II) ESTABLISHMENT OF A RECORD DATE FOR VOTING
PURPOSES; (III) HEARING TO CONSIDER
CONFIRMATION OF THE PLAN; (IV) PROCEDURES FOR
OBJECTING TO CONFIRMATION OF THE PLAN; AND
(V) PROCEDURES AND DEADLINE FOR VOTING ON THE PLAN
PLEASE TAKE NOTICE THAT:
1. By order dated __________ __, 2003 (the "Order"), the
United States Bankruptcy Court for the District of Delaware (the "Court")
approved the Disclosure Statement, dated March 14, 2003 (as may be amended, the
"Disclosure Statement") for the First Amended Plan of Reorganization of
Armstrong World Industries, Inc., filed by Armstrong World Industries, Inc.
("AWI"), dated March 14, 2003 (as may be amended, the "Plan") as providing
adequate information for holders of claims against or interests in AWI to make a
decision as to whether to accept or reject the Plan. The Disclosure Statement
and the Plan are contained in the separate, bound document that accompanies this
notice.
2. In addition, the Court entered an order (the "Voting
Procedures Order") establishing voting procedures in connection with the Plan
(the "Voting Procedures"). The Voting Procedures, which are contained in Exhibit
"D" to the Disclosure Statement, (i) contain special balloting instructions and
solicitation and tabulation procedures, (ii) establish a record date for voting
purposes only, (iii) provide special procedures for voting Asbestos Personal
Injury Claims,(1) (iv) set forth special procedures relating to the voting of
Debt Securities, and (v) require certain Claim holders who wish to vote on the
Plan and whose Claims are the subject of an objection or who wish to vote their
Claim in a different amount, to file a motion with the Court, in accordance with
the Voting Procedures, requesting temporary allowance of such Claim for voting
purposes in an amount deemed proper by the Court. CREDITORS, ESPECIALLY HOLDERS
OF ASBESTOS PERSONAL INJURY CLAIMS AND THEIR ATTORNEYS, SHOULD REVIEW THE VOTING
PROCEDURES CAREFULLY.
3. The Order establishes the deadline by which votes to
accept or reject the Plan must be ACTUALLY RECEIVED by the Voting Agent
(Trumbull Services, LLC) (or for holders of Debt Securities only, the Special
Voting Agent (Innisfree M&A Incorporated)) as _______ __, 200_ at 5:00 p.m
(Wilmington, Delaware time) (THE "VOTING DEADLINE").
4. THE PLAN PROPOSES TWO INJUNCTIONS: (I) AN ASBESTOS PI
PERMANENT CHANNELING INJUNCTION AND (II) A CLAIMS TRADING INJUNCTION.
- --------------------------
(1) Capitalized terms used herein but not defined herein have the meanings
ascribed to such terms in the Disclosure Statement and the Voting Procedures.
5. THE ASBESTOS PI PERMANENT CHANNELING INJUNCTION IS AN
INJUNCTION UNDER SECTION 524(G) OF THE BANKRUPTCY CODE, APPLICABLE TO ALL
PERSONS AND ENTITIES, THAT RESULTS IN THE PERMANENT CHANNELING OF ALL ASBESTOS
PERSONAL INJURY CLAIMS AGAINST ANY PI PROTECTED PARTY TO A NEW TRUST FOR
RESOLUTION AND PAYMENT. PURSUANT TO THE ASBESTOS PI PERMANENT CHANNELING
INJUNCTION AND THE PLAN, THE FOLLOWING ENTITIES WILL BE PI PROTECTED PARTIES
AND, THEREFORE, PROTECTED BY THE SCOPE OF THE INJUNCTION:
o AWI;
o Reorganized AWI;
o Holdings;
o AWWD;
o any Affiliate;
o Interface Solutions, Inc., a corporation organized under the laws of
Pennsylvania, or Armacell LLC, a limited liability company organized under
the laws of Delaware, but only to the extent that either such Entity is
alleged to be directly or indirectly liable for the conduct of, Claims
against, or Demands on AWI, or the Asbestos PI Trust on account of
Asbestos Personal Injury Claims;
o any distributor of AWI's asbestos-containing flooring products, but only
to the extent that such Entity is alleged to be directly or indirectly
liable for the conduct of, Claims against, or Demands on AWI, Reorganized
AWI, or the Asbestos PI Trust on account of Asbestos Personal Injury
Claims;
o any Entity that, pursuant to the Plan or after the Effective Date, becomes
a direct or indirect transferee of, or successor to, any assets of AWI,
Reorganized AWI, or the Asbestos PI Trust (but only to the extent that
liability is asserted to exist by reason of it becoming such a transferee
or successor);
o any Entity that, pursuant to the Plan or after the Effective Date, makes a
loan to Reorganized AWI, or the Asbestos PI Trust or to a successor to, or
transferee of, any assets of AWI, Reorganized AWI, or the Asbestos PI
Trust (but only to the extent that liability is asserted to exist by
reason of such Entity becoming such a lender or to the extent any pledge
of assets made in connection with such a loan is sought to be upset or
impaired); or
o any Entity to the extent he, she, or it is alleged to be directly or
indirectly liable for the conduct of, Claims against, or Demands on AWI,
Reorganized AWI, or the Asbestos PI Trust on account of Asbestos Personal
Injury Claims by reason of one or more of the following:
o such Entity's ownership of a financial interest in AWI or
Reorganized AWI, a past or present affiliate of AWI or Reorganized
AWI (other than ACandS, Inc. f/k/a Armstrong Contracting and Supply
Corp.), or predecessor in interest of AWI or Reorganized AWI;
o such Entity's involvement in the management of AWI, AWWD, Holdings,
an Affiliate, Reorganized AWI, or any predecessor in interest of AWI
or Reorganized AWI;
o such Entity's service as an officer, director, or employee of AWI,
Reorganized AWI, AWWD, Holdings, an Affiliate, any past or present
affiliate of AWI or Reorganized AWI (other than ACandS, Inc. f/k/a
Armstrong Contracting and Supply Corp.), any predecessor in interest
of AWI or Reorganized AWI, or any Entity that owns or at any time
has owned a financial interest in AWI or Reorganized AWI, any past
or present affiliate of AWI or Reorganized AWI (other than ACandS,
Inc. f/k/a Armstrong Contracting and Supply Corp.), or any
predecessor in interest of AWI or Reorganized AWI.
o such Entity's provision of insurance to (a) AWI, (b) Reorganized
AWI, (c) any past or present affiliate of AWI or Reorganized AWI
(other than ACandS, Inc. f/k/a Armstrong Contracting and Supply
Corp.), (d) any predecessor in interest of AWI or Reorganized AWI,
or (e) any Entity that owns or at any time has owned a financial
interest in AWI or Reorganized AWI, any past or present affiliate of
AWI or Reorganized AWI (other than ACandS, Inc. f/k/a Armstrong
Contracting and Supply Corp.) or any predecessor in interest of AWI
or Reorganized AWI, but only to the extent that AWI, Reorganized
AWI, or the Asbestos PI Trust enters into a settlement with such
Entity that is approved by the Bankruptcy Court and expressly
provides that such Entity shall be entitled to the protection of the
Asbestos PI Permanent Channeling Injunction as a PI Protected Party;
or
o such Entity's involvement in a transaction changing the corporate
structure, or in a loan or other financial transaction affecting the
financial condition, of AWI, AWWD, Holdings, an Affiliate,
Reorganized AWI, any past or present affiliate of AWI or Reorganized
AWI, any predecessor in interest of AWI or Reorganized AWI, or any
Entity that owns or at any time has owned a financial interest in
AWI or Reorganized AWI, any past or present affiliate of AWI or
Reorganized AWI (other than ACandS, Inc. f/k/a Armstrong Contracting
and Supply Corp.), or any predecessor in interest of AWI or
Reorganized AWI.
6. THE CLAIMS TRADING INJUNCTION IS AN INJUNCTION THAT
PROHIBITS THE TRANSFER (WITH CERTAIN EXCEPTIONS) OF ASBESTOS PROPERTY DAMAGE
CLAIMS OR ASBESTOS PERSONAL INJURY CLAIMS AFTER THE EFFECTIVE DATE OF THE PLAN.
SEE SECTION 1.47 OF THE PLAN FOR A DETAILED DESCRIPTION OF THE CLAIMS TRADING
INJUNCTION.
7. A hearing (the "Confirmation Hearing") to consider the
confirmation of the Plan will be held at _:__ _.m. (Eastern Time) on _________
__, 2003, before the Honorable Randall J. Newsome and the Honorable Alfred M.
Wolin, sitting jointly, in __________. The Confirmation Hearing may be continued
from time to time without further notice other than the announcement by AWI of
the adjourned date(s) at the Confirmation Hearing or any continued hearing, and
the Plan may be modified, if necessary, pursuant to 11 U.S.C. ss. 1127 prior to,
during, or as a result of the Confirmation Hearing, without further notice to
interested parties other than by filing such modifications with the Court prior
to the Confirmation Hearing or announcing any such modifications at the
Confirmation Hearing.
8. In accordance with the Voting Procedures, Solicitation
Packages, including copies of the Plan and Disclosure Statement, will be mailed
to all known creditors, except to individual holders of Asbestos Personal Injury
Claims who are represented by counsel known to AWI. Holders of Claims, other
than individual holders of Asbestos Personal Injury Claims who are represented
by known counsel, that are entitled to vote on the Plan will receive ballots and
instructions for voting in the Solicitation Packages. Individual holders of
Asbestos Personal Injury Claims who are represented by known counsel may receive
a copy of the Disclosure Statement and a ballot from their counsel and may
authorize their counsel to vote their Claims. To the extent counsel is not
authorized to vote their claims, individual holders of Asbestos Personal Injury
Claims will be sent Solicitation Packages directly once counsel provides their
names and addresses to AWI. Individual holders of Asbestos Personal Injury
Claims or attorneys for the holders of Asbestos Personal Injury Claims also may
receive a Solicitation Package by calling the Special Voting Agent toll-free at
(877) 750-2689. Such materials also may be viewed at and downloaded from AWI's
website, www.armstrongplan.com.
9. Shareholders of Armstrong Holdings, Inc. do not have a
direct interest in AWI and, therefore, are not entitled to vote on the Plan.
Shareholders will be receiving, however, a Disclosure Statement and, pursuant to
the Order, are entitled to file objections to confirmation of the Plan.
10. In addition, unless otherwise set forth in the
objection, Claims that are the subject of an objection are not entitled to vote
on the Plan and, therefore, did not receive a Ballot in their Solicitation
Packages. Holders of claims that are wholly unliquidated, contingent, and/or
undetermined will receive a Ballot entitling such holder to vote in the amount
of $1. If you disagree with AWI's classification of, or objection to, your Claim
and believe that you should be entitled to vote on the Plan, then you must (i)
have timely filed a proof of Claim by the applicable Bar Date and (ii) serve on
AWI's counsel at the addresses set forth in paragraph 12(b) of this notice and
file with the Court a motion for an order pursuant to Rule 3018(a) of the
Federal Rules of Bankruptcy Procedure (a "Claimant's Voting Motion") temporarily
allowing such Claim in a different amount or in a different class for purposes
of voting to accept or reject the Plan. Pursuant to the Voting Procedures Order,
all Claimant's Voting Motions must be filed on or before the fifteenth (15th)
day after the deadline by which AWI must have served the Solicitation Packages
([INSERT DATE]). In accordance with Bankruptcy Rule 3018, as to any creditor
filing a Claimant's Voting Motion, such creditor's Ballot will not be counted
unless temporarily allowed by the Court for voting purposes, after notice and a
hearing. Creditors may contact the Voting Agent toll-free at (877) 866-0655 to
receive a Ballot for any Claim for which a proof of claim and a Claimant's
Voting Motion have been timely filed. Claimant's Voting Motions that are not
timely filed and served in the manner as set forth above shall not be
considered.
11. If you hold a Claim against AWI as of _________ __,
2003, the Record Date as established in the Voting Procedures Order, and are
entitled to vote to accept or reject the Plan, you have received with this
Notice a Ballot and voting instructions appropriate for your Claim. For your
vote to accept or reject the Plan to be counted, a Ballot (or a Master Ballot,
in the case of a Master Ballot submitted by (i) a law firm on behalf of multiple
holders of Asbestos Personal Injury Claims or (ii) a Debt Nominee on behalf of
beneficial owners of Debt Securities) to accept or reject the Plan must be
ACTUALLY RECEIVED by the Voting Agent (or, solely for Debt Securities, the
Special Voting Agent) by the Voting Deadline. In accordance with the Voting
Procedures, all Ballots other than Ballots for holders of Debt Securities are to
be returned by mail to Armstrong World Industries, Inc., c/o Trumbull Services,
LLC, P.O. Box 1117, Windsor, CT 06095. Ballots other than Ballots for holders of
Debt Securities may also be returned by hand delivery or overnight courier to
the Voting Agent, Trumbull Services, LLC, 4 Griffin Road North, Windsor, CT
06095 (Attn: Armstrong World Industries, Inc.). All Ballots for holders of Debt
Securities (including record holder Ballots, Master Ballots, and prevalidated
owner Ballots), except those beneficial owner Ballots that are to be returned to
the Debt Nominees, are to be returned to the Special Voting Agent, Innisfree M&A
Incorporated, 501 Madison Avenue, 20th Floor, New York, New York 10022 (Attn:
Armstrong World Industries, Inc.).
12. Objections to the confirmation of, or proposed
modifications to, the Plan, if any, must (i) be in writing, (ii) state the name
and address of the objecting party and the nature of the claim or interest of
such party, (iii) state with particularity the basis and nature of any objection
or proposed modification, and (iv) be filed, together with proof of service,
with the Court and served so that they are ACTUALLY RECEIVED no later than 4:00
p.m. (Wilmington, Delaware time) on _________ __, 2003 (THE "OBJECTION
DEADLINE") by all of the following parties:
a) the Clerk, 824 Market Street, Fifth Floor, Wilmington, Delaware
19801;
b) the attorneys for AWI, Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
New York, New York 10153 (Attn: Stephen Karotkin, Esq.) and Richards,
Layton & Finger, P.A., One Rodney Square, P.O. Box 551, Wilmington,
Delaware 19899 (Attn: Mark D. Collins, Esq.);
c) the attorneys for the agent for AWI's prepetition bank lenders (the
"Prepetition Lenders"), Duane, Morris, LLP, 1 Riverfront Plaza, 2nd
Floor, Newark, NJ 07102 (Attn: William S. Katchen, Esq.) and Duane,
Morris, LLP, 1100 North Market Street, Suite 1200, Wilmington,
Delaware 19801 (Attn: Michael R. Lastowski, Esq.);
d) the attorneys for AWI's postpetition lenders (the "DIP Lenders"),
Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York
10178 (Attn: Robert Scheibe, Esq.) and Klett Rooney Lieber &
Schorling PC, The Brandywine Building, 1000 West Street Suite 1410,
P.O. Box 1397, Wilmington, Delaware 19899 (Attn: Terry Currier,
Esq.);
e) the attorneys for the Official Committee of Unsecured Creditors (the
"Creditors' Committee"), Paul, Weiss, Rifkind, Wharton & Garrison,
1285 Avenue of the Americas, New York, New York 10019 (Attn: Andrew
N. Rosenberg, Esq.) and Cozen & O'Connor, Chase Manhattan Center,
Suite 1400, 1201 North Market Street, Wilmington, Delaware 19801
(Attn: Mark E. Felger, Esq.);
f) the attorneys for the Official Committee of Asbestos Claimants (the
"Asbestos PI Claimants' Committee"), Caplin & Drysdale, Chartered,
399 Park Avenue, 36th Floor, New York, New York 10022 (Attn: Elihu
Inselhuch, Esq.), Caplin & Drysdale, Chartered, One Thomas Circle,
Suite 1100, Washington D.C. 20005 (Attn: Peter Van N. Lockwood,
Esq.), and Campbell & Levine, 1201 Market Street, 15th Floor,
Wilmington, Delaware 19801 (Attn: Aileen Maguire, Esq.);
g) the attorneys for the Official Committee of Asbestos Property Damage
Claimants (the "Asbestos PD Committee"), Klehr, Harrison, Harvey,
Branzburg & Ellers, 919 Market Street, Suite 1000, Wilmington
Delaware 19801 (Attn: Joanne B. Wills, Esq.);
h) the attorneys for the Future Claimants' Representative (together with
the Creditors' Committee, the Asbestos PI Claimants' Committee, and
the Asbestos PD Committee, the "Committees"), Kaye Scholer LLP, 425
Park Avenue, New York, New York 10022 (Attn: Michael J. Crames, Esq.)
and Young, Conway, Stargatt & Taylor, LLP, The Brandywine Building,
1000 West Street, 17th Floor, Wilmington Delaware 19801 (Attn: James
L. Patton, Jr., Esq.); and
i) the United States Trustee for the District of Delaware, 844 King
Street, Suite 2313, Lockbox 35, Wilmington, Delaware 19801
(Attn: Frank Perch, Esq.).
Objections not timely filed and served in the manner set forth above shall not
be considered and shall be overruled. AWI, the DIP Lenders, the Prepetition
Lenders, and the Committees may serve replies to such objections and proposed
modifications by no later than [_________ __], 2003.
13. Any holder of a Claim that (i) is scheduled in AWI's
schedules of assets and liabilities dated January 30, 2001, or any amendment
thereof at zero or in an unknown amount or as disputed, contingent, or
unliquidated, and is not the subject of a timely filed proof of claim or a proof
of claim deemed timely filed with the Court pursuant to either the Bankruptcy
Code or any order of the Court or otherwise deemed timely filed under applicable
law, or (ii) other than an Asbestos Personal Injury Claim, is not scheduled and
is not the subject of a timely filed proof of claim or a proof of claim deemed
timely filed with the Court pursuant to either the Bankruptcy Code or any order
of the Court or otherwise deemed timely filed under applicable law, shall not be
treated as a creditor with respect to such Claim for purposes of (a) receiving
notices regarding, or distributions under, the Plan, or (b) voting on the Plan.
14. Any party in interest wishing to obtain (i) information
about the Voting Procedures or (ii) copies of the Disclosure Statement, the
Plan, or the Voting Procedures Order (a) should telephone AWI's Special Voting
Agent, Innisfree M&A Incorporated, toll-free at (877) 750-2689, or (b) may view
such documents at AWI's website, at www.armstrongplan.com. All documents that
are filed with the Court may be reviewed during regular business hours (8:30
a.m. to 4:00 p.m. weekdays, except legal holidays) at the United States
Bankruptcy Court for the District of Delaware, Marine Midland Plaza, 824 Market
Street, Wilmington, Delaware 19801.
RICHARDS, LAYTON & FINGER, P.A. WEIL, GOTSHAL & MANGES LLP
One Rodney Square 767 Fifth Avenue
P.O. Box 551 New York, New York 10153
Wilmington, Delaware 19899 Stephen Karotkin
Mark D. Collins (No. 2981) Debra A. Dandeneau
Rebecca Booth (No. 4031)
ATTORNEYS FOR THE DEBTOR AND DEBTOR IN POSSESSION
EXHIBIT B
[Asbestos Personal Injury Notice]
ARMSTRONG WORLD INDUSTRIES, INC. BANKRUPTCY
NOTICE TO HOLDERS OF ASBESTOS PERSONAL
INJURY CLAIMS OF VOTING DEADLINE AND OTHER
INFORMATION RELATING TO THE SOLICITATION OF VOTES TO
ACCEPT OR REJECT THE PLAN OF REORGANIZATION
OF ARMSTRONG WORLD INDUSTRIES, INC.
On [____ __], 2003, the United States Bankruptcy Court for
the District of Delaware (the "Court") entered an order approving the Disclosure
Statement, dated March 14, 2003 (as may be amended, the "Disclosure Statement"),
for the First Amended Plan of Reorganization of Armstrong World Industries,
Inc., dated March 14, 2003 (as may be amended, the "Plan"), as providing
adequate information for holders of claims against or interests in AWI to make a
decision as to whether to accept or reject the Plan.
In addition, the Court entered an order establishing voting
procedures (the "Voting Procedures") for creditors to vote on the Plan.
SPECIAL VOTING PROCEDURES FOR ASBESTOS PERSONAL INJURY CLAIMS
The Voting Procedures contain special procedures for
distributing the Plan, the Disclosure Statement, and certain related documents
(a "Solicitation Package") to holders of Asbestos Personal Injury Claims and for
the voting on the Plan on behalf of holders of Asbestos Personal Injury Claims.
Under the Voting Procedures, a single Solicitation Package will be mailed to
each attorney known by AWI to represent or potentially represent individuals who
may hold or assert Asbestos Personal Injury Claims. SOLICITATION PACKAGES AND A
BALLOT TO VOTE ON THE PLAN WILL NOT BE SENT TO INDIVIDUAL HOLDERS OF ASBESTOS
PERSONAL INJURY CLAIMS, EXCEPT TO THE EXTENT (I) AN INDIVIDUAL REQUESTS A
SOLICITATION PACKAGE, (II) A PROOF OF AN ASBESTOS PERSONAL INJURY CLAIM HAS BEEN
SIGNED AND FILED BY AN INDIVIDUAL PRIOR TO THE VOTING RECORD DATE ESTABLISHED BY
ORDER OF THE COURT, OR (III) AN ATTORNEY TIMELY ADVISES AWI'S VOTING AGENT,
TRUMBULL SERVICES, LLC (THE "VOTING AGENT"), OF THE NAMES AND ADDRESSES OF
INDIVIDUALS WHO HOLD OR MAY ASSERT ASBESTOS PERSONAL INJURY CLAIMS WHO SHOULD
RECEIVE THEIR OWN SOLICITATION PACKAGE. An attorney may also choose to transmit
a Solicitation Package to his or her clients directly.
If you would like to directly obtain a copy of the Plan,
Disclosure Statement, or notice of the hearing to consider confirmation of the
Plan and the procedures relating thereto, please call Innisfree M&A Incorporated
toll-free at (877) 750-2689, 9:00 AM - 6:00 PM, Eastern Time, Monday through
Friday. You may also review such documents on AWI's website,
www.armstrongplan.com. You may also wish to contact your attorney.
Under the Voting Procedures, attorneys for holders of
Asbestos Personal Injury Claims may vote on the Plan on behalf of their clients
if they are authorized by their clients to do so. If you are unsure whether your
attorney is authorized to vote on the Plan on your behalf, please contact your
attorney.
DEADLINE FOR VOTING ON THE PLAN
All ballots on the Plan must be actually received by the
Voting Agent by 5:00 P.M., WILMINGTON, DELAWARE TIME, ON [_____ __,] 2003 (the
"Voting Deadline"). Ballots may be received by the Voting Agent by mail at
Armstrong World Industries, Inc., c/o Trumbull Services, LLC, P.O. Box 1117,
Windsor, CT 06095, or by hand delivery or overnight courier at Trumbull
Services, LLC, 4 Griffin Road North, Windsor, CT 06095 (Attn: Armstrong World
Industries, Inc.). Ballots will not be accepted by the Voting Agent by facsimile
or electronic transmission.
EFFECT OF NOT VOTING ON THE PLAN
This notice is only for purposes of notifying you of your
right to vote on the Plan and receive a Disclosure Statement if you wish. You
are NOT required to file a proof of claim with the Bankruptcy Court at this
time.
The deadline for the receipt of ballots by the Voting Agent
is [____], 2003, at 5:00 p.m., Wilmington, Delaware time. Any holder of an
Asbestos Personal Injury Claim who does not submit a ballot that is received by
the Voting Agent by the Voting Deadline will not be entitled to have his or her
vote tabulated by the Voting Agent. However, any individual who holds an
Asbestos Personal Injury Claim but who does not submit a ballot that is received
by the Voting Agent by the Voting Deadline will not forfeit or lose his or her
Asbestos Personal Injury Claim. Such holders will still be able to file a claim
at a later date against the Asbestos Personal Injury Trust, which will be
established pursuant to the Plan.
While it is not required that a holder of an Asbestos
Personal Injury Claim vote on the Plan, it is important that all holders of
Asbestos Personal Injury Claims do cast votes to accept or reject the Plan. The
Plan requires that at least 75% of the holders of Asbestos Personal Injury
Claims who vote on the Plan vote in favor of the Plan. Moreover, the names and
addresses of all holders of Asbestos Personal Injury Claims or their lawyers, as
applicable, who vote on the Plan will be forwarded to the Asbestos Personal
Injury Trust so that claimants can later be notified of the opportunity and
procedures to file an Asbestos Personal Injury Claim against the Asbestos
Personal Injury Trust. Therefore, it is important for all holders of Asbestos
Personal Injury Claims (or their attorney, if authorized) to vote on the Plan.
INJUNCTIONS PROPOSED TO BE ISSUED UNDER THE PLAN.
The Plan proposes two injunctions: (i) an Asbestos PI
Permanent Channeling Injunction and (ii) a Claims Trading Injunction. The
Asbestos PI Permanent Channeling Injunction is an injunction under section
524(g) of the Bankruptcy Code, applicable to all persons and entities, that
results in the permanent channeling of all Asbestos Personal Injury Claims
against any PI Protected Party to a new trust for resolution and payment. The
Claims Trading Injunction is an injunction that prohibits the transfer (with
certain exceptions) of Asbestos Property Damage Claims or Asbestos Personal
Injury Claims after the Effective Date of the Plan. See the Plan and the
Disclosure Statement for the specific terms and conditions of the Asbestos PI
Permanent Channeling Injunction and the Claims Trading Injunction.
QUESTIONS OR ADDITIONAL INFORMATION
If you have any questions about the ballot or any part of
the voting process, call Innisfree M&A Incorporated toll-free at (877) 750-2689,
9:00 a.m. - 6:00 p.m., Eastern Time, Monday through Friday. You may also wish to
contact your attorney.
EXHIBIT C
[Plication Hearing Notice]
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- -------------------------------------x
IN RE :
: CHAPTER 11 CASE NO.
ARMSTRONG WORLD INDUSTRIES, :
INC., ET AL., : 00-4471 (RJN)
:
DEBTORS. : (JOINTLY ADMINISTERED)
- -------------------------------------x
NOTICE OF (I) APPROVAL OF DISCLOSURE STATEMENT;
(II) ESTABLISHMENT OF A RECORD DATE FOR
VOTING PURPOSES; (III) HEARING TO CONSIDER
CONFIRMATION OF THE PLAN; (IV) PROCEDURES FOR
OBJECTING TO CONFIRMATION OF THE PLAN; AND
(V) PROCEDURES AND DEADLINE FOR VOTING ON THE PLAN
PLEASE TAKE NOTICE THAT:
1. By order dated __________ __, 2003 (the "Order"), the
United States Bankruptcy Court for the District of Delaware (the "Court")
approved the Disclosure Statement, dated March 14, 2003 (as may be amended, the
"Disclosure Statement") for the First Amended Plan of Reorganization of
Armstrong World Industries, Inc., filed by Armstrong World Industries, Inc.
("AWI"), dated March 14, 2003 (as may be amended, the "Plan") as providing
adequate information for holders of claims against or interests in AWI to make a
decision as to whether to accept or reject the Plan.
2. In addition, the Court entered an order (the "Voting
Procedures Order") establishing voting procedures in connection with the Plan
(the "Voting Procedures"). Capitalized terms used but not defined in this notice
have the meanings ascribed to such terms in the Disclosure Statement and the
Voting Procedures. The Voting Procedures, which are contained in Exhibit "D" to
the Disclosure Statement, (i) contain special balloting instructions and
solicitation and tabulation procedures, (ii) establish a record date for voting
purposes only, (iii) provide special procedures for voting Asbestos Personal
Injury Claims, (iv) set forth special procedures relating to the voting of Debt
Securities, and (v) require certain Claim holders who wish to vote on the Plan
and whose Claims are the subject of an objection or who wish to vote their Claim
in a different amount, to file a motion with the Court, in accordance with the
Voting Procedures, requesting temporary allowance of such Claim for voting
purposes in an amount deemed proper by the COURT. CREDITORS, ESPECIALLY HOLDERS
OF ASBESTOS PERSONAL INJURY CLAIMS AND THEIR ATTORNEYS, SHOULD REVIEW THE VOTING
PROCEDURES CAREFULLY.
3. The Order establishes the deadline by which votes to
accept or reject the Plan must be ACTUALLY RECEIVED by the Voting Agent
(Trumbull Services, LLC) (or for holders of Debt Securities only, the Special
Voting Agent (Innisfree M&A Incorporated)) as _______ __, 2003 at 5:00 p.m.
(Wilmington, Delaware time) (THE "VOTING DEADLINE").
4. THE PLAN PROPOSES TWO INJUNCTIONS: (I) AN ASBESTOS PI
PERMANENT CHANNELING INJUNCTION AND (II) A CLAIMS TRADING INJUNCTION. THE
ASBESTOS PI PERMANENT CHANNELING INJUNCTION IS AN INJUNCTION UNDER SECTION
524(G) OF THE BANKRUPTCY CODE, APPLICABLE TO ALL PERSONS AND ENTITIES, THAT
RESULTS IN THE PERMANENT CHANNELING OF ALL ASBESTOS PERSONAL INJURY CLAIMS
AGAINST ANY PI PROTECTED PARTY TO A NEW TRUST FOR RESOLUTION AND PAYMENT. THE
CLAIMS TRADING INJUNCTION IS AN INJUNCTION THAT PROHIBITS THE TRANSFER (WITH
CERTAIN EXCEPTIONS) OF ASBESTOS PROPERTY DAMAGE CLAIMS OR ASBESTOS PERSONAL
INJURY CLAIMS AFTER THE EFFECTIVE DATE OF THE PLAN. SEE THE PLAN AND THE
DISCLOSURE STATEMENT FOR THE SPECIFIC TERMS AND CONDITIONS OF THE ASBESTOS PI
PERMANENT CHANNELING INJUNCTION AND THE CLAIMS TRADING INJUNCTION.
5. A hearing (the "Confirmation Hearing") to consider the
confirmation of the Plan will be held at _:__ _.m. (Eastern Time) on _________
__, 2003, before the Honorable Randall J. Newsome and the Honorable Alfred M.
Wolin, sitting jointly, in__. The Confirmation Hearing may be continued from
time to time without further notice other than the announcement by AWI of the
adjourned date(s) at the Confirmation Hearing or any continued hearing, and the
Plan may be modified, if necessary, pursuant to 11 U.S.C. ss. 1127 prior to,
during, or as a result of the Confirmation Hearing, without further notice to
interested parties other than by filing such modifications with the Court prior
to the Confirmation Hearing or announcing any such modifications at the
Confirmation Hearing.
6. In accordance with the Voting Procedures, Solicitation
Packages, including copies of the Plan and Disclosure Statement, will be mailed
to all known creditors, except to individual holders of Asbestos Personal Injury
Claims who are represented by counsel known to AWI. Holders of Claims, other
than individual holders of Asbestos Personal Injury Claims who are represented
by known counsel, that are entitled to vote on the Plan will receive ballots and
instructions for voting in the Solicitation Packages. Individual holders of
Asbestos Personal Injury Claims who are represented by known counsel may receive
a copy of the Disclosure Statement and a ballot from their counsel and may
authorize their counsel to vote their Claims. To the extent counsel is not
authorized to vote their claims, individual holders of Asbestos Personal Injury
Claims will be sent Solicitation Packages directly once counsel provides their
names and addresses to AWI. Individual holders of Asbestos Personal Injury
Claims or attorneys for the holders of Asbestos Personal Injury Claims also may
receive a Solicitation Package by calling the Special Voting Agent toll-free at
(877) 750-2689. Such materials also may be viewed at and downloaded from AWI's
website, www.armstrongplan.com.
7. Shareholders of Armstrong Holdings, Inc. do not have a
direct interest in AWI and, therefore, are not entitled to vote on the Plan.
Shareholders will be receiving, however, a Disclosure Statement and, pursuant to
the Order, are entitled to file objections to confirmation of the Plan.
8. Any holder of a Claim that AWI believes, in accordance
with the Voting Procedures Order, is entitled to vote to accept or reject the
Plan, has been mailed a Ballot and voting instructions appropriate for such
Claim. The Record Date for determining creditors entitled to vote on the Plan is
____ __, 2003. For any vote to accept or reject the Plan to be counted, a Ballot
(or a Master Ballot, in the case of a Master Ballot submitted by (i) a law firm
on behalf of multiple holders of Asbestos Personal Injury Claims or (ii) a Debt
Nominee on behalf of beneficial owners of Debt Securities) to accept or reject
the Plan must be ACTUALLY RECEIVED by the Voting Agent (or, solely for Debt
Securities, the Special Voting Agent) by the Voting Deadline. In accordance with
the Voting Procedures, all Ballots other than Ballots for holders of Debt
Securities are to be returned by mail to Armstrong World Industries, Inc., c/o
Trumbull Services, LLC, P.O. Box 1117, Windsor, CT 06095. Ballots other than
Ballots for holders of Debt Securities may also be returned by hand delivery or
overnight courier to the Voting Agent, Trumbull Services, LLC, 4 Griffin Road
North, Windsor, CT 06095 (Attn: Armstrong World Industries, Inc.). All Ballots
for holders of Debt Securities (including record holder Ballots, Master Ballots,
and prevalidated owner Ballots), except those beneficial owner Ballots that are
to be returned to the Debt Nominees, are to be returned to the Special Voting
Agent, Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York, New
York 10022 (Attn: Armstrong World Industries, Inc.).
9. Objections to the confirmation of, or proposed
modifications to, the Plan, if any, must (i) be in writing, (ii) state the name
and address of the objecting party and the nature of the claim or interest of
such party, (iii) state with particularity the basis and nature of any objection
or proposed modification, and (iv) be filed, together with proof of service,
with the Court and served so that they are ACTUALLY RECEIVED no later than 4:00
p.m. (Wilmington, Delaware time) on _________ __, 2003 (THE "OBJECTION
DEADLINE") by all of the following parties: (a) the Clerk, 824 Market Street,
Fifth Floor, Wilmington, Delaware 19801; (b) the attorneys for AWI, Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153 (Attn: Stephen
Karotkin, Esq.) and Richards, Layton & Finger, P.A., One Rodney Square, P.O. Box
551, Wilmington, Delaware 19899 (Attn: Mark D. Collins, Esq.); (c) the attorneys
for the agent for AWI's prepetition bank lenders, Duane, Morris, LLP, 1
Riverfront Plaza, 2nd Floor, Newark, NJ 07102 (Attn: William S. Katchen, Esq.)
and Duane, Morris, LLP, 1100 North Market Street, Suite 1200, Wilmington,
Delaware 19801 (Attn: Michael R. Lastowski, Esq.); (d) the attorneys for AWI's
postpetition lenders, Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York,
New York 10178 (Attn: Robert Scheibe, Esq.) and Klett Rooney Lieber & Schorling
PC, The Brandywine Building, 1000 West Street Suite 1410, P.O. Box 1397,
Wilmington, Delaware 19899 (Attn: Terry Currier, Esq.); (e) the attorneys for
the Official Committee of Unsecured Creditors, Paul, Weiss, Rifkind, Wharton &
Garrison, 1285 Avenue of the Americas, New York, New York 10019 (Attn: Andrew N.
Rosenberg, Esq.) and Cozen & O'Connor, Chase Manhattan Center, Suite 1400, 1201
North Market Street, Wilmington, Delaware 19801 (Attn: Mark E. Felger, Esq.);
(f) the attorneys for the Official Committee of Asbestos Claimants, Caplin &
Drysdale, Chartered, 399 Park Avenue, 36th Floor, New York, New York 10022
(Attn: Elihu Inselhuch, Esq.), Caplin & Drysdale, Chartered, One Thomas Circle,
Suite 1100, Washington D.C. 20005 (Attn: Peter Van N. Lockwood, Esq.), and
Campbell & Levine, 1201 Market Street, 15th Floor, Wilmington, Delaware 19801
(Attn: Aileen Maguire, Esq.); (g) the attorneys for the Official Committee of
Asbestos Property Damage Claimants, Klehr, Harrison, Harvey, Branzburg & Ellers,
919 Market Street, Suite 1000, Wilmington Delaware 19801 (Attn: Joanne B. Wills,
Esq.); (h) the attorneys for the Future Claimants' Representative, Kaye Scholer
LLP, 425 Park Avenue, New York, New York 10022 (Attn: Michael J. Crames, Esq.)
and Young, Conway, Stargatt & Taylor, LLP, The Brandywine Building, 1000 West
Street, 17th Floor, Wilmington Delaware 19801 (Attn: James L. Patton, Jr.,
Esq.); and (i) the United States Trustee for the District of Delaware, 844 King
Street, Suite 2313, Lockbox 35, Wilmington, Delaware 19801 (Attn: Frank Perch,
Esq.). Objections not timely filed and served in the manner set forth above
shall not be considered and shall be overruled.
10. Any holder of a Claim that (i) is scheduled in AWI's
schedules of assets and liabilities dated January 30, 2001, or any amendment
thereof at zero or in an unknown amount or as disputed, contingent, or
unliquidated, and is not the subject of a timely filed proof of claim or a proof
of claim deemed timely filed with the Court pursuant to either the Bankruptcy
Code or any order of the Court or otherwise deemed timely filed under applicable
law, or (ii) other than an Asbestos Personal Injury Claim, is not scheduled and
is not the subject of a timely filed proof of claim or a proof of claim deemed
timely filed with the Court pursuant to either the Bankruptcy Code or any order
of the Court or otherwise deemed timely filed under applicable law, shall not be
treated as a creditor with respect to such Claim for purposes of (a) receiving
notices regarding, or distributions under, the Plan, or (b) voting on the Plan.
11. Any party in interest wishing to obtain (i) information
about the Voting Procedures or (ii) copies of the Disclosure Statement, the
Plan, or the Voting Procedures Order (a) should telephone AWI's Special Voting
Agent, Innisfree M&A Incorporated, toll-free at (877) 750-2689, or (b) may view
such documents at AWI's website, at www.armstrongplan.com. All documents that
are filed with the Court may be reviewed during regular business hours (8:30
a.m. to 4:00 p.m. weekdays, except legal holidays) at the United States
Bankruptcy Court for the District of Delaware, Marine Midland Plaza, 824 Market
Street, Wilmington, Delaware 19801.
RICHARDS, LAYTON & FINGER, P.A. WEIL, GOTSHAL & MANGES LLP
One Rodney Square 767 Fifth Avenue
P.O. Box 551 New York, New York 10153
Wilmington, Delaware 19899 Stephen Karotkin
Mark D. Collins (No. 2981) Debra A. Dandeneau
Rebecca Booth (No. 4031)
ATTORNEYS FOR THE DEBTOR AND DEBTOR IN POSSESSION
EXHIBIT D
ASBESTOS PUBLICATION NOTICE TRADE PUBLICATIONS
Subject to modification before AWI commences its solicitation process, the
Asbestos Publication Notice will be published in one time insertions in the
following publications, so long as an issue of such publication will be printed
and mailed prior to thirty days prior to the Confirmation Hearing:
--------------------------------------------
PUBLICATION
============================================
Field & Stream
--------------------------------------------
Parade
--------------------------------------------
Reader's Digest
--------------------------------------------
Sports Illustrated
--------------------------------------------
USA Weekend
--------------------------------------------
EXHIBIT E
TRADE PUBLICATIONS
-------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA NAME NEXT AVAILABLE ISSUE DATE* MAIL DATE SPACE CLOSE MATERIALS CLOSE
====================================================================================================================================
A H A News April 28, 2003 April 28, 2003 April 14, 2003 April 14, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
BOMA May May 2, 2003 April 4, 2003 April 11, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Building Operating Management June June 20, 2003 May 1, 2003 May 1, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Buildings June June 1, 2003 May 1, 2003 March 1, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Business Officer June June 3, 2003 April 15, 2003 April 30, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Chronicle of Higher Education May 2, 2003 May 2, 2003 April 21, 2003 April 21, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
College Planning & Management May May 20, 2003 April 4, 2003 April 11, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Property News May 16, 2003 May 16, 2003 April 10, 2003 April 17, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Facilities Manager July/August July 20, 2003 May 23, 2003 May 30, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Facility Management Journal July/August July 1, 2003 June 2, 2003 June 10, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Facility Manager July/August July 1, 2003 May 16, 2003 June 6, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
FacilityCare May/June May 1, 2003 April 22, 2003 April 29, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Governing June June 1, 2003 April 23, 2003 April 30, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Government Executive June June 1, 2003 May 1, 2003 May 7, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Health Facilities Management June June 1, 2003 May 1, 2003 May 1, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Journal of Property Management July/August July 10, 2003 June 2, 2003 June 9, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
National Real Estate Investor May May 1, 2003 April 4, 2003 April 4, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Nation's Cities Weekly May 12, 2003 May 12, 2003 April 21, 2003 April 28, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
School Administrator June May 27, 2003 April 15, 2003 April 25, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
State Government News June/July June 6, 2003 April 25, 2003 May 1, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
University Business June May 27, 2003 May 1, 2003 May 8, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
* Based upon entry of order approving disclosure statement on April 4, 2003
** Many of the publications listed above publish infrequently and have early
deadlines for the submission of advertising. Therefore, the availability of the
publications will be dependent upon the actual date on which the order approving
the disclosure statement is entered and whether an issue of such publication
will be printed and mailed prior to thirty days prior to the Confirmation
Hearing.
EXHIBIT F
REGIONAL NEWSPAPERS
- ------------------------------------------------
Mobile Register
- ------------------------------------------------
Daily News
- ------------------------------------------------
LA Times
- ------------------------------------------------
Pensacola News Journal
- ------------------------------------------------
Macon Telegraph
- ------------------------------------------------
Kankakee Daily Journal
- ------------------------------------------------
Baltimore Sun
- ------------------------------------------------
Jackson Clarion Ledger
- ------------------------------------------------
Columbus Dispatch
- ------------------------------------------------
Stillwater Newspress
- ------------------------------------------------
Portland Oregonian
- ------------------------------------------------
Beaver County Times
- ------------------------------------------------
Lancaster Intelligencer
- ------------------------------------------------
Williamsport Sun-Gazette
- ------------------------------------------------
EXHIBIT "C"
PROJECTED FINANCIAL INFORMATION
ARMSTRONG WORLD INDUSTRIES, INC.
For purposes of developing the Plan of Reorganization (as such plan may be
amended or modified, the "PLAN") for Armstrong World Industries, Inc. ("AWI")1
and evaluating its feasibility, the following financial projections were
prepared. These financial projections reflect AWI's estimate of its expected
consolidated financial position, results of operations, and cash flows.
Accordingly, the projections reflect AWI's judgment, as of the date of this
Disclosure Statement, of expected future operating and business conditions,
which are subject to change.
All estimates and assumptions shown within the projections were developed by
AWI. The assumptions disclosed herein are those that AWI believes to be
significant to the projections. Although AWI is of the opinion that these
assumptions are reasonable under the circumstances, such assumptions are subject
to significant uncertainties, such as change in demand of public and private
commercial and residential building construction and renovation, laws and
regulations, foreign currency and interest rates, inflation, or other related
factors affecting AWI's businesses. Despite AWI's efforts to foresee and plan
for the effects of changes in these circumstances, AWI cannot predict their
impact with certainty. Consequently, actual financial results could vary
significantly from projected results.
THE PROJECTED FINANCIAL INFORMATION SHOULD NOT BE REGARDED AS A REPRESENTATION
OR WARRANTY BY AWI OR ANY OTHER PERSON AS TO THE ACCURACY OF THE PROJECTED
FINANCIAL INFORMATION OR THAT ANY PROJECTIONS SET FORTH HEREIN WILL BE REALIZED.
The Projected Financial Information was prepared by AWI; it has not been audited
or reviewed by independent accountants. The significant assumptions used in the
preparation of the Projected Financial Information are stated below.
THE PROJECTED FINANCIAL INFORMATION, INCLUDING THE UNDERLYING ASSUMPTIONS,
SHOULD BE CAREFULLY REVIEWED IN EVALUATING THE PLAN.
It is projected that AWI will emerge from chapter 11 on July 1, 2003 (the
"EFFECTIVE DATE"). The reorganization will be accounted for in accordance with
the American Institute of Certified Public Accountants' Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7").
The following Projected Financial Information is included herein:
>> Projected Consolidated Balance Sheets of Reorganized Armstrong
World Industries as of the Effective Date (which reflects the
projected accounting effects of the Plan's consummation and of
"fresh start" accounting as promulgated by SOP 90-7) and at
December 31 for each of the years from 2003 through 2007.
>> Projected Consolidated Statements of Income of Reorganized
Armstrong World Industries for each of the six month period ending
December 31, 2003, and each of the years ending December 31, 2004
through 2007.
- ----------------------
1 Any capitalized term used but not defined in this Exhibit "C" will have the
meaning ascribed to such term in the Plan.
C-1
>> Projected Consolidated Statements of Cash Flow of Reorganized
Armstrong World Industries for each of the six month period ending
December 31, 2003, and each of the years ending December 31, 2004
through 2007.
The Projected Financial Information has been prepared on the basis of generally
accepted accounting principles consistent with those currently utilized by
Armstrong World Industries in the preparation of its consolidated financial
statements except as noted in the following assumptions. The projections should
be read in conjunction with the significant assumptions, qualifications and
notes set forth below and with the audited consolidated financial statements for
the fiscal year ended December 31, 2001 contained in the 2001 Form 10-K. (Note:
The company anticipates filing its 2002 Form 10-K in March, 2003. Because this
document will contain important information, users of this document are
encouraged to read it, when it becomes available. It will be available free from
the company's website or from the SEC at www.sec.gov).
WHILE AWI BELIEVES THE ASSUMPTIONS UNDERLYING THE PROJECTED FINANCIAL
INFORMATION, WHEN CONSIDERED ON AN OVERALL BASIS, ARE
REASONABLE IN LIGHT OF CURRENT CIRCUMSTANCES AND EXPECTATIONS, NO ASSURANCE CAN
BE GIVEN THAT ANY PROJECTIONS WILL BE REALIZED.
A. GENERAL ASSUMPTIONS
The forecast was created on a basis of combined business unit operations using
segmental data for the business reporting entities, which include domestic and
international affiliates of AWI which are not in chapter 11.
The Business Plan assumes certain specific economic and business conditions for
2003, with general assumptions based upon future macroeconomic indicators,
historic growth and estimated directions of specific markets thereafter which
were available in late 2002. AWI has not incorporated the impact of any recent
revisions to the macroeconomic assumptions because it believes there is a high
degree of volatility inherent in the recent revisions, the duration and extent
of which is uncertain, including the destabilizing effect of international
political tensions existing during the first quarter of 2003.
ECONOMIC CONDITIONS
NORTH AMERICA
Plans have been built around a moderate economic recovery, with an assumption of
3.1% Real GDP improvement in 2003 and similar sustained modest growth for the
duration of the forecasted period.
In the residential market, housing starts and single-family sales are projected
to remain strong, but are expected to fall 2-3% in 2003 from record levels in
2002. The forecast assumes that home affordability, climbing in recent years,
will continue to enable ownership, which has grown from 64% to 68% over the
previous decade. In support of this assumption, interest rates are expected to
rise 0.5-0.7% in 2003, but will remain near historically low levels in the
forecasted period, continuing to fuel personal and commercial investment.
Recovery in the commercial markets is anticipated to be slower than the growth
in residential, but some renewed confidence by commercial developers is expected
to take hold in 2003 as the economy rebounds and vacancy rates, which rose
significantly in 2002, fall. Moderate growth in commercial should persist in
2004-2007, driven by a stronger economy and low interest rates. Similar trends
are anticipated in the U.S. retail segment.
C-2
EUROPE
Armstrong competes in most countries throughout Western Europe. In general, much
like the United States, Western Europe has seen lower interest rates support the
housing market while helping to keep the continent from sliding into a
significant economic recession. There are concerns that home affordability is
becoming an economic strain, and, in some areas, there is a general softening of
demand. Discretionary spending on "other housing spending" is also being fueled
by interest rates.
For purposes of this forecast, it is assumed that a moderate (1-2%) economic
recovery in Europe will take place in 2003, with similar moderate growth in the
periods forecasted. This growth will vary by region, with some countries (U.K.,
Russia, and Poland) growing more quickly than others in the Eurozone.
ASIA
The expected strong growth of the Chinese market (7.0% GDP in 2003) is expected
to lead economic expansion in the area. The forecast assumes that, due to
relatively low interest rates, low inflation, and continued manufacturing
expansion by U.S. and European firms in the area, economic growth is anticipated
to continue in the mid-single digits for the foreseeable future, though this
will vary by country. Some countries, such as Japan and Korea, are expected to
experience more moderate growth.
FOREIGN EXCHANGE
The projected figures include the results of AWI's international operations,
which pursue sales in over 75 countries throughout the world. The most
significant currencies relating to these operations are the Canadian Dollar,
British Pound, Euro and Swiss Franc. Constant rates of exchange for these
currencies have been used to translate results into US dollars for these
projections, as follows (US Dollar = 1 foreign currency unit):
Canadian Dollar $0.6407
British Pound $1.5479
Euro $0.986
Swiss Franc $0.6712
Although these rates are likely to fluctuate in value against the US Dollar over
time, such changes may not occur with all currencies simultaneously. As an
indication of the sensitivity of the projections to exchange rate changes, the
Company has estimated that a simultaneous 5% change in all of the above rates
would impact the translation of 2003 projected results into US Dollars as
follows:
Cash & Cash Equivalents as of 6/30/03 $2.5 million
Non-filed entity debt $2.5 million
Net sales for 6 months to 12/31/2003 $18 million
Operating income for 6 months to 12/31/2003 $1 million
Because the Company hedges most of its known transactional foreign currency
exposures for periods of up to one year, any additional impact resulting from
exchange rate changes on such economic exposures is not expected to be material.
COMPETITIVE POSITION- FLOORS
AMERICAS
Over the past 10 years ending 2001, the floor coverings market has grown at a
Compound Average Growth Rate (CAGR) of 5.6%. Growth has varied for the category
types, with customer preference, new product designs, and technology changing
the product offering mix and sales results. The Company participates in three of
these primary product lines - resilient (vinyl), hardwood, and laminates.
Experience varies by product:
U.S. FLOOR COVERING SALES 1992-2001
1992 2001
($12.4B SALES) ($20.2B SALES)
Carpet 71% Carpet 65%
Vinyl 12% Ceramic 10%
Ceramic 9% Hardwood 9%
Hardwood 5% Vinyl 8%
Rubber 3% Laminates 4%
Rubber 4%
Segment sales experience and future expectations in the forecast vary by
product:
WOOD: [historic 10-year CAGR 12%]
Wood floors have gained significant share of the floor covering
segments, growing from 5% to 9% of total share. The Company, selling
under the product names Bruce(R), Robbins(R) and Hartco(R),
participates in a highly competitive landscape of traditional wood
floor and new entry manufacturers. The sales expectations in the
forecast are based on assumptions that the wood floor market will
continue to take some share away from other types of floor covering
surfaces. However, as more suppliers enter the marketplace,
price-point pressure will grow. The Company plans on offsetting this
pressure through superior new product offerings at continuously
improving service levels.
LAMINATE: [historic 10 year CAGR 25+%]
The fastest growing market in all of Americas flooring is laminates,
and the Company, by some estimates, is #2 in market size for this
product. The growing competition in this relatively small market has
increased pricing pressure significantly. The product is expected to
continue to grow sales in the high single-digit range, with
technology and price the largest determinates on margin growth. The
Company does not manufacture laminate flooring. Instead, the Company
enters into long-term contracts with third party manufacturers for
supply of this product.
RESILIENT: [historic 10 year CAGR 2%]
While shrinking as a percentage of total floor offerings,
resilient/vinyl sales have grown based upon the overall growth of the
industry. The forecast assumes that the markets will remain flat in
resilient as wood and laminates take share, mainly from carpet. The
Company plans on improving product market share by improved
performance with key distributors and customers and continuously
improving product design offerings and services.
EUROPE
The Company competes in two distinct Flooring markets in Europe, each with its
own market demands, supply conditions, and competitive landscapes.
Sports Flooring/Textile is served by the Armstrong Desso business and
concentrates primarily on customers throughout Europe, though a small amount of
sales also occurs in North America. The sports flooring/textile market in Europe
C-4
is forecasted to be flat over the forecast period, with a series of highly
fragmented manufacturers challenged by excess capacity for the foreseeable
future. Sales and margin growth assumptions are consistent with the Company's
continued commitment to pursuing market leadership and cost productivity in this
flat environment.
Resilient Floors are also facing a flat to declining market during the course of
the forecast. The resilient market is characterized as highly fragmented, with
excess capacity further depressing market prices. Product preferences on style
differ significantly by country, further fragmenting the market. For the period
forecasted, AWI is assuming no growth in Western Europe, but growth
possibilities in Eastern Europe. Germany, the Company's largest volume region,
is expected to remain in its economic stagnation at least through 2003.
The Company will grow revenues and margins by focusing efforts in key targeted
market segments and pursuing productivity in manufacturing to drive profit
improvement.
COMPETITIVE POSITION- BUILDING PRODUCTS
AMERICAS
The Commercial Ceiling business is expected to be virtually flat in 2003, as
current office vacancies will defer much new construction. Expectations
incorporated in the forecast are for growth of 1.5-2.0% for the duration of the
projected period. Retail sales are expected to grow to match residential demand.
Similar to Floors, new product development, styling, price, and services
continue to drive market share for products in the Americas. New product
developments, especially in alternative material ceilings such as wood and
metal, are increasing customer options and competition.
EUROPE
As in the U.S., the commercial markets in Europe are expected to grow, but at a
slower rate than GDP due to current vacancies. In addition, sales growth will
differ by region, with slight improvements in Western Europe following two years
of decline, and moderate growth in Russia and Eastern Europe.
The Company is the leading branded commercial mineral fiber supplier in Western
Europe. As pressure is increasingly being placed on traditional mineral fiber by
metal and soft ceiling entries, the Company expects to grow its metal ceilings
business in Europe.
ASIA
The rapidly growing Chinese industrialization, coupled with preparations for the
2008 Olympics, should continue to attract investment over the projected period.
Other countries in the region should also experience growth, especially South
Asia. There is strong competition in the region from drywall ceilings,
competition that is fueled by excess capacity and low installed pricing, which
makes the product attractive versus other ceiling applications.
COMPETITIVE POSITION- CABINETS
The market for cabinets in the U.S. is expected to rise 4% in 2003, as
remodeling activities from strong home resale levels in 2001-2003 continue to
drive demand. From 2004 onwards, however, a moderate (1-2%/year) contraction in
the market is anticipated as home resale markets slow and the remodeling
activities decline due to slightly increasing interest rates and increased
financing costs. The Company contends that share can be gained through improving
customer delivery performance, providing superior product quality, and
introducing new product styles and offerings.
C-5
PRICING/INFLATION
Inflation on sales price differs by business, depending on the industry and
geography in which it competes, the competitive platform that exists, new
products that may be introduced, and the expected demands of the customer. In
general, the forecasts assume little to no gain in sales price due to the
competitive nature of the businesses.
Inflation on costs other than raw materials is generally assumed to be in line
with CPI (U.S.) and other country equivalent calculations of price increase.
Inflation pressures are expected to be moderate (<2% in the U.S. and 2-4% in
most other countries) in 2003 and the duration of the forecast.
Salary increases are assumed to trend in line with inflation and job
availability (unemployment) figures. Where available, contracted wage increases
are included in the forecast. Otherwise, similar assumptions on CPI and
unemployment are utilized for manufacturing labor cost inflation assumptions.
Principal raw material assumptions differ by business and by product line. Raw
materials purchases include the following:
WOOD:
Inflation of 4% in 2003 is forecast to normalize pricing from current
depressed levels, with 2% increases expected annually from 2004
through 2007.
PVC/PLASTICIZERS
In the U.S. operations, materials are expected to be 3% higher in
2003, with increases expected to trend with overall CPI for 2004
through 2007. Europe expectations are similar for 2003, but increases
thereafter are expected to be nominal.
NATURAL GAS
Market prices for natural gas are expected to be stable over the
forecast period, as the market pursues supply/demand equilibrium. In
addition, the Company utilizes a formal hedging system to moderate
against exposure to large short-term price swings.
SELLING, GENERAL, ADMINISTRATIVE AND OTHER EXPENSE
Selling, general, administrative and other expenses are forecasted in the
individual business entities based upon their expectations of delivering quality
products to the customer while attaining productivity within the operations to
improve operating margin. Growth and decline outlooks in each business entity
are based upon the individual needs of the specific business unit.
In addition, corporate support costs are assessed to the businesses. Cost
assessments are based upon a level of effort; generally a calculation based on
measurements such as employee headcount per group, man hours per group, invoices
processed or materials procured per group. Corporate support costs cover
services for accounting, treasury, tax, human resources, communications, legal,
safety, shared services, and other corporate officer services.
B. DISTRIBUTIONS UNDER THE PLAN
Cash, debt securities and common stock of Reorganized AWI will be distributed
pursuant to the Plan.
C-6
The Asbestos PI Trust and the holders of Allowed Unsecured Claims will share in
the Plan consideration, made up of the following components:
>> Available Cash
>> New Notes, and
>> Substantially all of the outstanding common stock of Reorganized
AWI
ASSET DISTRIBUTIONS
AWI expects to distribute cash and certain other assets on or after the
Effective Date as follows:
>> Assuming the class of Asbestos Property Damage Claims votes to
accept the Plan, $2 million (funded exclusively with proceeds from
insurance) will be used to fund the Asbestos PD Trust, which will
be responsible for satisfying Asbestos Property Damage Claims.
>> Approximately $350 million of cash will be distributed to the
Asbestos PI Trust and to holders of Allowed Unsecured Claims.
>> Approximately $174 million in book value of insurance assets will
be distributed to the Asbestos PI Trust.
DEBT SECURITIES
Debt securities, as described below, will be issued on the Effective
Date:
AWI will issue three series of new unsecured notes in the principal
amounts of $275 million, $250 million, and $250 million, which will
mature five, seven, and ten years, respectively, after the Effective
Date. COMMON STOCK
Common Stock of Reorganized AWI will also be issued pursuant to the
Plan. Based on, among other things, its analysis of the Projected
Financial Information, the market value of securities of other
companies serving similar markets and their capitalization rates,
AWI's financial advisors, Lazard Freres & Co. LLC, have calculated
the Reorganization Value of Reorganized AWI to be $3,000 million.
Refer to Section XI, entitled, "REORGANIZATION VALUE," of the
Disclosure Statement for a description of the assumptions made and
caveats thereto.
SHARE OF DISTRIBUTION
Refer to Section V, entitled, "THE PLAN OF REORGANIZATION," of the Disclosure
Statement for a description of the distributions to be made to various classes
of creditor.
OTHER LIABILITIES
AWI will reinstate approximately $38 million of liabilities, including loans
against Company Owned Life Insurance ("COLI") for certain retired and current
executives.
C-7
C. OTHER SPECIFIC ASSUMPTIONS
CASH
It is assumed that interest of 1.3% will be earned on surplus cash balances. A
revolving credit facility is assumed to be necessary to enable Reorganized AWI
to fund part of the distributions under the Plan and, if necessary, working
capital and operating needs. For these purposes, approximately $76 million in
borrowings will be required as of the Effective Date under this facility, and
repayments of these borrowings will be made no later than December 2003.
Interest is calculated accordingly at a rate of 2.3 % per annum on these
borrowings based upon an assumed drawdown period of 6 months.
Reorganized AWI will retain $129.2 million in cash for ongoing business needs
and certain expenses pursuant to the Plan, as follows: Approximately $27 million
will be paid for certain Administrative Expenses, $8 million will be distributed
with respect to Allowed Convenience Claims and cure costs with respect to
assumed executory contracts, and $4 million will be paid for new debt financing
costs.
PROPERTY, PLANT AND EQUIPMENT
To adjust net property, plant and equipment to an estimate of its fair value in
accordance with SOP 90-7, AWI plans to review its property, plant and equipment
and has hired American Appraisals to obtain appraisals to determine what
revisions, if any, should be made to these asset values. Since the appraisal
process is not yet complete, a $150 million increase is an estimate used for
purposes of the projections. The actual adjustment at the Effective Date could
be higher or lower. Any adjustment to this allocation would have no impact on
cash flow but would impact the projected statement of income.
For purposes of this projection, the fair value adjustment of the property,
plant and equipment is being amortized over eleven years, which approximates the
estimated useful remaining life of the assets. However, actual amortization
periods used at the Effective Date could be shorter or longer based on the
outcome of the appraisal process.
PENSION AND POST-RETIREMENT BENEFIT OBLIGATIONS
In accordance with SOP 90-7, asset and liability accounts representing pension
assets and obligations and post-retirement benefit obligations are adjusted to
reflect projected actuarial valuations of these assets and liabilities as of the
Effective Date. The key assumptions used to project the actuarial valuations are
as follows:
- -------------------------------------------- ------------------------------ ----------------------------------------------------
ASSUMPTIONS 2003 2004 AND BEYOND
- -------------------------------------------- ------------------------------ ----------------------------------------------------
Discount rate 6.50% 6.75%
- -------------------------------------------- -----------------------------------------------------------------------------------
Mortality assumptions Retirement Plan (RP2000) Table, provided by the Society of Actuaries, updated to
2003
- -------------------------------------------- ------------------------------ ----------------------------------------------------
Return on assets (pension) 8.00% 8.00%
- -------------------------------------------- ------------------------------ ----------------------------------------------------
Health care cost trend rate (post 11% 10% for 2004
retirement benefit) 9% for 2005
8% for 2006
7% for 2007
6% for 2008 and beyond
- -------------------------------------------- ------------------------------ ----------------------------------------------------
INVENTORIES
In accordance with SOP 90-7, inventories are adjusted to recognize the estimated
manufacturing profit in finished goods and work in process. In addition,
existing LIFO inventory reserves are eliminated as of the Effective Date.
C-8
REORGANIZATION GOODWILL
In accordance with SOP 90-7, the reorganization value in excess of amounts
allocable to identifiable assets is an intangible asset. This item has no tax or
cash flow implications.
DEBT
One tranche of the New Notes is expected to bear interest on a floating basis
related to the three month U.S. Dollar LIBOR, and the two fixed rate tranches
will bear fixed interest coupons based upon U.S. Treasury notes with like
maturities. The floating rate tranche will include a spread (which will be set
for the tenor on the notes) determined to be the average corporate spread over
three month LIBOR for recently issued syndicated bank credit facilities of
comparable size and maturity and comparably rated U.S. companies over the 30-day
period ending on the last day of the month immediately preceding the Effective
Date The coupon rates for the fixed income tranches will include a spread
determined to be the average corporate spread over such Treasury Notes for
outstanding issues of comparable maturity and comparably rated U.S companies
over the 30-day period ending on the last day of the month immediately preceding
the Effective Date.
For the purposes of this forecast, it is assumed that Reorganized AWI will issue
New Notes on the following terms:
>> $275 million, five year floating rate note with interest
at 2.35% per annum. However, for the purposes of this
forecast, it is assumed that this tranche will be swapped
back to fixed rate and accordingly will bear a fixed
interest rate of 4.89% per annum for its five year tenor.
>> $250 million, seven year fixed rate note with interest at
5.45% per annum
>> $250 million, ten year fixed rate note with interest at
5.65 % per annum
All New Notes are assumed to be publicly tradable, unsecured and have bullet
maturities with full repayments of principal to be made at the respective 5, 7
and 10-year anniversaries of the Effective Date and to have interest paid
quarterly in the case of the floating rate note and semi-annually in the case of
the fixed rate notes, unless otherwise specified.
The above interest rates are based on the assumption that Reorganized AWI will
be rated "investment grade" (BBB- or better) by the credit rating agencies. If
Reorganized AWI is rated BB+ or lower by the credit rating agencies, depending
on credit market conditions at the time of emergence, a BB+ or lower credit
rating could cause annual interest expense to increase by approximately $20
million for each of the years in the forecast.
In addition, Reorganized AWI has agreed on a "reasonable efforts basis" to place
$775 Million of debt in the public debt markets under a Rule 144 A private
placement prior to the Effective Date and, if successful, the Asbestos PI Trust
and the holders of Allowed Unsecured Claims would receive $775 million in cash
in lieu of the New Notes on the Effective Date. Reorganized AWI would incur
incremental fees estimated at $5 Million to place such debt in the public debt
markets. Should Reorganized AWI be rated "investment grade" (BBB- or better) by
the credit rating agencies, the interest costs of the debt so raised in the
public markets should approximate the interest costs of the New Notes indicated
above. Similarly, if Reorganized AWI is rated BB+ or lower by the credit rating
agencies the initial costs of issuing the publicly placed notes would increase
from an estimated $5 Million to $15 Million, and the coupon rates would increase
significantly. Funding of either of these amounts may come from available cash
or additional borrowings not reflected in this forecast.
C-9
INCOME TAXES
As described more fully in Section XIV of the Disclosure Statement, entitled
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN," it is expected that
Reorganized AWI will receive tax deductions for cash and the value of stock
distributed to the Asbestos PI Trust upon such distribution. With respect to
debt securities distributed to the Asbestos PI Trust, deductions are received as
the debt securities are repaid. These deductions will result in substantial tax
net operating losses. The tax net operating losses will be reduced by the amount
of debt (excluding asbestos liabilities) and certain other prepetition
liabilities cancelled in the reorganization.
An income tax receivable of $57.2 million will result from the carryback of tax
net operating losses to years in which income is available and the Company
elects for carryback. Assuming the Effective Date is July 1, 2003, $57.2 million
should be received by June 30, 2004. This assumes that the Asbestos PI Trust is
funded on the Effective Date. If funding occurs after the Effective Date, the
income tax receivable would be eliminated and would be offset by an increase in
deferred income tax assets.
A deferred income tax asset results from tax net operating losses and deferred
deductions available to offset income tax payments in future years. Foreign tax
credit carryforwards have been ignored, since it is expected that they will
expire unutilized. For purposes of these projections, it is assumed that all
other tax benefits are available upon the Effective Date and that no valuation
allowance is necessary.
A statutory federal income tax rate of 35% is assumed throughout the projection
period. The differences between the statutory and the effective tax rates for
the projection period are due primarily to foreign and state income taxes.
The current portion of income taxes payable set forth in the consolidated
balance sheets is based on the assumption that payment generally occurs before
the end of the calendar year.
LIABILITIES SUBJECT TO COMPROMISE
Liabilities subject to compromise will be discharged at the Effective Date.
C-10
ARMSTRONG WORLD INDUSTRIES, INC. AND SUBSIDIARIES
PROJECTED CONSOLIDATED BALANCE SHEETS
($ IN MILLIONS- UNAUDITED)
-------------------------------------------------------------------------
Pro Forma July 1, 2003
-------------------------------------------------------------------------
Pre-emergence POR Reorganization
Assets Balance Sheet Adjustments Balance Sheet
------
Current assets:
Cash and cash equivalents $ 403.3 $ (274.1)(1,8) $ 129.2
Accounts receivable less allowance 383.0 - 383.0
Inventories 447.4 72.7 (2) 520.1
Income Tax Benefit 14.7 57.2 (3) 71.9
Other current assets 66.1 (8.0)(5) 58.1
----------------------------------------- ------------
Total current assets 1,314.5 (152.2) 1,162.3
Property, plant, and equipment, net 1,269.4 150.0 (4) 1,419.4
Insurance for asbestos related liabilities 166.1 (166.1)(5) -
Prepaid pension costs 437.4 (246.3)(6) 191.1
Investment in affiliates 47.2 - 47.2
Goodwill, net 222.1 (222.1)(7) -
Excess Reorganization Value - 805.6 (7) 805.6
Other intangibles, net 86.3 - 86.3
Income Tax Benefit 869.5 (412.4)(3) 457.1
Other noncurrent assets 113.5 (1.0)(6) 112.5
----------------------------------------- ------------
Total assets $ 4,526.0 $ (244.5) $ 4,281.5
========================================= ============
Liabilities & Shareholders' Equity
Current liabilities:
Short-term debt $ 11.6 $ - $ 11.6
Current installments of long-term debt 6.3 - 6.3
Accounts payable and accrued expenses 363.4 - 363.4
Income taxes 30.6 - 30.6
----------------------------------------- ------------
Total current liabilities 411.9 - 411.9
Liabilities subject to compromise 4,861.1 (4,861.1)(8) -
Long-term debt 30.7 - 30.7
Restructured Debt - 775.0 (8) 775.0
Exit Revolver - 75.9 (8) 75.9
Postretirement and post employment benefit liabilities 258.8 169.5 (6) 428.3
Pension benefit liabilities 179.6 62.3 (6) 241.9
Other long-term liabilities 77.0 37.5 (9) 114.5
Deferred income taxes 20.8 96.5 (10) 117.3
Minority interest in subsidiaries 9.7 - 9.7
----------------------------------------- ------------
Total liabilities 5,849.6 (3,644.4) 2,205.2
Shareholders' equity:
Equity pre/post emergence (1,323.6) 3,399.9 2,076.3
Additional changes in APIC for restricted stock
Retained earnings -
----------------------------------------- ------------
Total shareholders' equity (1,323.6) 3,399.9 2,076.3
Total liabilities and shareholders' equity $ 4,526.0 $ (244.5) $ 4,281.5
========================================= ============
C-11 A
** TABLE CONTINUED **
-----------------------------------------------------------------------
Reorganized Projected at
-----------------------------------------------------------------------
December 31,
-----------------------------------------------------------------------
Assets 2003 2004 2005 2006 2007
------
Current assets:
Cash and cash equivalents $ 135.8 $ 348.2 $ 559.6 $ 810.6 $ 1,090.2
Accounts receivable less allowance 339.4 366.3 384.3 403.3 422.5
Inventories 485.4 490.8 498.9 512.2 522.1
Income Tax Benefit 71.9 14.7 14.7 14.7 14.7
Other current assets 58.9 59.5 59.5 59.6 59.8
-----------------------------------------------------------------------
Total current assets 1,091.4 1,279.5 1,517.0 1,800.4 2,109.3
Property, plant, and equipment, net 1,418.7 1,401.4 1,390.3 1,372.5 1,354.6
Insurance for asbestos related liabilities - - - - -
Prepaid pension costs 198.5 213.3 227.7 241.5 254.8
Investment in affiliates 49.5 53.7 59.4 64.9 70.8
Goodwill, net - - - - -
Excess Reorganization Value 805.6 805.6 805.6 805.6 805.6
Other intangibles, net 84.9 79.5 72.2 66.3 60.4
Income Tax Benefit 438.9 402.6 366.2 329.9 293.6
Other noncurrent assets 114.7 122.6 129.9 137.4 145.3
-----------------------------------------------------------------------
Total assets $ 4,202.2 $ 4,358.2 $ 4,568.3 $ 4,818.5 $ 5,094.4
=======================================================================
Liabilities & Shareholders' Equity
Current liabilities:
Short-term debt $ 11.6 $ 11.6 $ 11.6 $ 11.6 $ 11.6
Current installments of long-term debt 6.3 6.3 6.3 6.3 6.3
Accounts payable and accrued expenses 336.9 339.6 352.2 363.7 373.1
Income taxes 32.1 32.1 32.1 32.1 32.1
-----------------------------------------------------------------------
Total current liabilities 386.9 389.6 402.2 413.7 423.1
Liabilities subject to compromise - - - - -
Long-term debt 26.4 19.6 13.9 9.7 8.4
Restructured Debt 775.0 775.0 775.0 775.0 775.0
Exit Revolver - - - - -
Postretirement and post employment benefit liabilities 428.1 425.2 421.5 417.0 412.7
Pension benefit liabilities 242.9 244.6 246.5 248.2 250.0
Other long-term liabilities 106.8 111.6 112.8 113.9 114.8
Deferred income taxes 113.9 131.9 152.4 175.0 197.6
Minority interest in subsidiaries 10.6 12.9 15.3 18.0 20.8
-----------------------------------------------------------------------
Total liabilities 2,090.6 2,110.4 2,139.6 2,170.5 2,202.4
Shareholders' equity:
Equity pre/post emergence 2,076.3 2,076.3 2,076.3 2,076.3 2,076.3
Additional changes in APIC for restricted stock 5.6 11.2 16.8
Retained earnings 35.3 171.5 346.8 560.5 798.9
-----------------------------------------------------------------------
Total shareholders' equity 2,111.6 2,247.8 2,428.7 2,648.0 2,892.0
Total liabilities and shareholders' equity $ 4,202.2 $ 4,358.2 $ 4,568.3 $ 4,818.5 $ 5,094.4
=======================================================================
** TABLE COMPLETE **
C-11 B
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONCERNING "POR
ADJUSTMENTS".
1. Cash projected to be paid as of the Effective Date includes $350 million to
the Asbestos PI Trust and the holders of Allowed Unsecured Claims paid out of
cash and cash equivalent balances and drawings under the Revolving Credit
Facility. The remaining cash and cash equivalent balance of $129.2 million will
be used for distributions and payments with respect to Allowed Convenience
Claims, cure amounts under assumed executory contracts, Exit Financing Costs,
and certain Administrative Expenses, as well as operating cash needs estimated
in this projection to be $90 million
2. To adjust inventory to its approximate fair value through the elimination of
the LIFO reserve ($52.6 million) and recognition of the estimated manufacturing
profit in finished goods inventory ($20.1 million). Following the Effective
Date, inventory will continue to be calculated on the LIFO method for both book
and tax purposes, where permitted.
3. Armstrong will receive tax deductions for cash, debt and the value of equity
securities contributed to the Asbestos PI Trust. An income tax receivable of
$57.2 million will result from carryback of losses to years with available
income. Deferred income tax assets of $457.1 million result from deferred
deductions available to offset income tax payment in future periods. For
purposes of these projections, it is assumed that all tax benefits, other than
foreign tax credit carryforwards, are available upon the Effective Date and no
valuation allowance is necessary. Foreign tax carryforwards were ignored because
they are expected to expire unutilized.
4. To adjust net property, plant and equipment to an estimate of its fair value
in accordance with the fresh start accounting provisions of SOP 90-7. Since the
appraisal process is not yet complete, $150 million is an estimate used for
purposes of these projections.
5. To record the transfer, at book value, of certain insurance related assets to
the Asbestos PI Trust.
6. To record the fair value of the benefit plans as of the Effective Date, in
accordance with SOP 90-7 and FAS 106, 112, and 87.
7. In accordance with the fresh start accounting provisions SOP 90-7, existing
goodwill is eliminated and excess reorganization value is recorded for amounts
in excess of value allocable to identifiable assets.
8. To record the discharge of Liabilities Subject to Compromise through the
distribution pursuant to the Plan of debt securities, common stock, and the cash
previously mentioned in Note 1.
o Armstrong will issue five, seven and ten year notes in the
aggregate principal amount of $775 million.
o Reorganized AWI has an estimated equity value of $2,076.3
million. New Common Stock of Reorganized AWI will be
issued with an estimated value of $2,026.3 million after
deducting $50.0 million of value for the New Warrants and
before dilution from the equity incentive plan. The
Existing AWI Common Stock will be cancelled, and the
holder thereof will receive New Warrants with an expected
fair value of approximately $40-$50 million.
o Restricted stock awards granted at the Effective Date are
expensed over the term of the award based on the fair
value of the stock at the date of grant. As the restricted
stock vests, the fair value is credited to equity as a
component of Additional Paid In Capital.
C-12
9. To record liabilities reinstated on the books of Reorganized AWI.
10. To the extent that the above adjustments give rise to temporary book/tax
differences, deferred taxation has been provided on these amounts at statutory
rates of income tax.
INCOME STATEMENT IMPACT
SOP 90-7 adjustments impact the consolidated statement of income as follows:
1. Manufacturing profit in inventory as part of the finished goods inventory
adjustment to fair value. Disposal of this inventory based on estimated sales is
projected to increase cost of sales by approximately $20 million in the second
half of 2003.
2. The fair value adjustment of the property, plant and equipment is being
amortized over eleven years, unfavorably impacting the P&L by $6.8 million in
the second half of 2003 and $13.6 million per year thereafter.
3. Projected reorganization expense incurred after the Effective Date in the
amount of $9.2 million in 2003 and $2.0 million in 2004 has been included in the
determination of Operating Income.
C-13
ARMSTRONG WORLD INDUSTRIES, INC. AND SUBSIDIARIES
PROJECTED CONSOLIDATED INCOME STATEMENT
($ IN MILLIONS - UNAUDITED)
---------------------------------------------------------------------------
Reorganized Projected at
December 31,
---------------------------------------------------------------------------
2H 2003 2004 2005 2006 2007
------- ---- ---- ---- ----
Net Sales $ 1,677.8 $ 3,536.6 $ 3,712.8 $ 3,888.0 $ 4,068.6
Cost of Goods Sold 1,203.4 2,492.0 2,601.7 2,708.7 2,829.8
Depreciation 79.8 137.1 136.6 137.0 136.8
---------------------------------------------------------------------------
Gross Profit 394.6 907.5 974.5 1,042.3 1,102.0
SGA 304.0 645.6 660.7 674.3 699.8
Amortization 8.2 17.9 18.8 17.4 17.4
Equity in earnings from affiliates (10.9) (21.2) (24.0) (24.9) (25.8)
Post Confirmation Reorganization Expense 9.2 2.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Operating income (loss) $ 84.1 $ 263.2 $ 319.0 $ 375.5 $ 410.6
Interest expense 25.0 48.9 48.7 48.4 48.3
Other (income) expense (2.9) (3.1) (5.9) (8.9) (12.4)
Minority interest 0.9 2.3 2.6 2.8 2.9
Reorganization expense 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Earnings before income taxes $ 61.1 $ 215.1 $ 273.6 $ 333.2 $ 371.8
Income tax expense 25.8 78.9 98.3 119.5 133.4
---------------------------------------------------------------------------
Net earnings from Continued Operations $ 35.3 $ 136.2 $ 175.3 $ 213.7 $ 238.4
===========================================================================
SEGMENTAL DATA
2H 2003 2004 2005 2006 2007
------- ---- ---- ---- ----
Net Sales
Resilient Floor $ 613.4 $ 1,288.8 $ 1,331.7 $ 1,374.9 $ 1,424.1
Wood Floor 380.6 792.4 821.8 844.2 866.8
Textile & Sports Floor 133.7 266.1 271.4 276.8 282.3
Eliminations (2.1) (9.4) (9.8) (10.3) (10.8)
---------------------------------------------------------------------------
Total Floor $ 1,125.6 $ 2,337.9 $ 2,415.1 $ 2,485.6 $ 2,562.4
Building Products 435.1 926.9 977.3 1,013.3 1,040.2
Cabinets 117.1 271.8 320.4 389.1 466.0
---------------------------------------------------------------------------
Total Company $ 1,677.8 $ 3,536.6 $ 3,712.8 $ 3,888.0 $ 4,068.6
===========================================================================
Operating Income
Resilient Floor $ 55.1 $ 107.8 $ 120.5 $ 137.4 $ 148.8
Wood Floor 29.8 66.2 76.1 85.3 92.3
Textile & Sports Floor 0.8 14.0 18.0 22.0 25.0
---------------------------------------------------------------------------
Total Floor $ 85.7 $ 188.0 $ 214.6 $ 244.7 $ 266.1
Building Products 55.2 127.4 146.2 155.4 159.4
Cabinets 5.5 16.8 25.8 41.8 53.6
Corporate/other (including Fresh Start adjustments) (62.3) (69.0) (67.6) (66.4) (68.5)
---------------------------------------------------------------------------
Total Company $ 84.1 $ 263.2 $ 319.0 $ 375.5 $ 410.6
===========================================================================
C-14
ARMSTRONG WORLD INDUSTRIES, INC. AND SUBSIDIARIES
PROJECTED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN MILLIONS - UNAUDITED)
---------------------------------------------------------------
Reorganized Projected at
December 31,
---------------------------------------------------------------
2H 2003 2004 2005 2006 2007
------- ---- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 35.3 $ 136.2 $ 175.3 $ 213.7 $ 238.4
Depreciation and amortization 88.0 155.0 155.4 154.4 154.2
Deferred income taxes (3.4) 18.0 20.5 22.6 22.5
Equity (earnings) change in affiliates (10.9) (21.2) (24.0) (24.9) (25.8)
(Increase) decrease in receivables 43.6 (26.9) (18.0) (19.0) (19.2)
(Increase) decrease in inventories 34.7 (5.4) (8.1) (13.3) (9.9)
(Increase) decrease in other current assets (0.8) 56.6 0.0 (0.1) (0.2)
(Increase) decrease in other noncurrent assets 8.7 13.6 14.6 15.0 15.1
Increase (decrease) in accounts payable and accrued expenses (26.5) 2.7 18.2 17.1 15.0
Increase (decrease) in income taxes payable 1.6 0.0 0.0 0.0 0.0
Increase (decrease) in other long-term liabilities (7.0) 3.7 (0.7) (1.7) (1.6)
Other, including foreign exchange translation 1.1 2.2 2.6 2.9 2.9
impact on operating assets --------------------------------------------------------------
NET CASH PROVIDED (USED BY) OPERATING ACTIVITIES $ 164.4 $ 334.5 $ 335.8 $ 366.7 $ 391.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (86.1) (132.3) (137.0) (130.8) (130.4)
Distributions of equity affiliates 8.6 17.0 18.3 19.4 19.9
--------------------------------------------------------------
NET CASH PROVIDED (USED FOR) INVESTING ACTIVITIES $ (77.5) $ (115.3) $ (118.7) $ (111.4) $ (110.5)
CASH FLOWS FROM FINANCING ACTIVITIES:
Total Debt (non-revolver) (4.4) (6.8) (5.7) (4.3) (1.3)
Total Revolver (75.9) 0.0 0.0 0.0 0.0
--------------------------------------------------------------
NET CASH PROVIDED (USED FOR) FINANCING ACTIVITIES $ (80.3) $ (6.8) $ (5.7) $ (4.3) $ (1.3)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 6.6 $ 212.4 $ 211.4 $ 251.0 $ 279.6
Cash and cash equivalents at beginning of period $ 129.2 $ 135.8 $ 348.2 $ 559.6 $ 810.6
Cash and cash equivalents at end of period $ 135.8 $ 348.2 $ 559.6 $ 810.6 $ 1,090.2
===============================================================
C-15
IMPORTANT INFORMATION FOR HOLDERS OF
COMMON STOCK OF ARMSTRONG HOLDINGS, INC.
In connection with the proposed Plan , the Board of Directors of Armstrong
Holdings, Inc. ("AHI") contemplates proposing the dissolution and winding-up of
AHI. In that regard, AHI intends to file relevant materials with the U.S.
Securities and Exchange Commission ("SEC"), including a proxy or consent
solicitation statement with respect to approval by AHI's shareholders of the
dissolution of AHI and a plan of liquidation. Because those documents will
contain important information, stockholders of AHI are urged to read them, if
and when they become available. When filed with the SEC, they will be available
for free at the SEC's website, www.sec.gov. AHI stockholders will receive
information at an appropriate time on how to obtain documents related to such
matters for free from AHI. Such documents are not currently available.
Directors and executive officers of AHI and its subsidiaries may be deemed to be
participants in AHI's solicitation of proxies or consents from its stockholders
in connection with this matter. Information about such directors and executive
officers and their respective stock ownership and other interests is set forth
in AHI's Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
Participants in AHI's solicitation may also be deemed to include various
directors, executive officers and other persons:
DIRECTORS: H. Jesse Arnelle, Van C. Campbell, Judith R. Haberkorn, John A. Krol,
Michael D. Lockhart, James E. Marley, Ruth M. Owades, M. Edward
Sellers, Jerre L. Stead
OFFICERS: Matthew J. Angello, Leonard A. Campanaro, Chan W. Galbato, Gerard L.
Glenn, David E. Gordon, Michael D. Lockhart, John N. Rigas, William
C. Rodruan, Stephen J. Senkowski, Barry M. Sullivan, April L.
Thornton
As of the date of this communication, none of these participants individually
beneficially owns more than 1% of AHI's common stock. Except as disclosed above,
to the knowledge of AHI, none of these persons has any interest, direct or
indirect, by security holdings or otherwise, in AHI. Stockholders will be able
to obtain additional information regarding the interests of the participants by
reading the proxy or consent solicitation statement of AHI if and when it
becomes available.
C-16
EXHIBIT "D"
ARMSTRONG WORLD INDUSTRIES, INC.
BALLOT SOLICITATION AND TABULATION PROCEDURES
---------------------------------------------
1. Definitions:..............................................................................................................1
a. "Asbestos Publication Notice"..................................................................................1
b. "Bankruptcy Court".............................................................................................1
c. "Claims Settlement Guidelines".................................................................................1
d. "Confirmation Hearing".........................................................................................1
e. "Debt Nominees"................................................................................................1
f. "Depository"...................................................................................................1
g. "Disclosure Statement".........................................................................................1
h. "Disclosure Statement Order"...................................................................................1
i. "Debt Securities"..............................................................................................1
j. "Debt Securities Trustee"......................................................................................1
k. "Equity Nominees"..............................................................................................1
l. "Equity Securities Transfer Agents"............................................................................2
m. "General Bar Date Order".......................................................................................2
n. "Holdings Equity Securities"...................................................................................2
o. "Lenders"......................................................................................................2
p. "Master Ballot"................................................................................................2
q. "Plan".........................................................................................................2
r. "Publication Notice"...........................................................................................2
s. "Record Amount"................................................................................................2
t. "Solicitation Package".........................................................................................2
u. "Special Voting Agent".........................................................................................2
v. "Voting Agent".................................................................................................2
w. "Voting Deadline"..............................................................................................3
x. "Voting Record Date"...........................................................................................3
2. PublicationNotices........................................................................................................3
a. Publication Notice.............................................................................................3
b. Asbestos Publication Notice....................................................................................3
3. Distribution of Solicitation Packages.....................................................................................3
a. Scheduled Claims...............................................................................................3
b. Filed Claims...................................................................................................3
c. Asbestos Personal Injury Claims................................................................................4
d. Parties to Executory Contracts and Unexpired Leases............................................................4
e. Determination of Holders of Record.............................................................................4
f. Lender Claims..................................................................................................4
g. Debt Securities and Holdings Equity Securities.................................................................4
h. Equity Interests...............................................................................................4
i. Other Parties..................................................................................................6
4. Special Procedures Relating to Asbestos Personal Injury Claims............................................................6
a. Distribution of Solicitation Packages..........................................................................6
b. Calculation of Votes With Respect to Asbestos Personal Injury Claims...........................................8
c. Completion and Return of Master Ballots by Attorneys for Holders of Asbestos Personal Injury Claims............9
5. Return of Ballots.........................................................................................................11
a. Claimants that Are Entitled to Vote............................................................................11
b. Authority to Complete and Execute Ballots......................................................................12
c. Place to Send Completed Ballots................................................................................12
d. Deadline for Receiving Completed Ballots.......................................................................12
6. Tabulation of Ballots.....................................................................................................12
a. Determination of Amount of Claims Voted.................................................................12
b. Determination of Number of Claims Voted by Beneficial Owners of Debt Securities.........................15
c. Aggregation of Multiple Unsecured Claims (other than Debt
Securities) for Voting, Classification, and Treatment under
the Plan................................................................................................15
d. Ballot Excluded.........................................................................................16
e. General Voting Procedures and Standard Assumptions......................................................16
D-ii
(PROPOSED)
ARMSTRONG WORLD INDUSTRIES, INC.
BALLOT SOLICITATION AND TABULATION PROCEDURES
---------------------------------------------
The following procedures (the "Voting Procedures") are adopted with respect to
(a) the distribution of Ballot solicitation materials with respect to the Plan
(as hereinafter defined) and (b) the return and tabulation of Ballots and Master
Ballots.
1. DEFINITIONS:
A. "ASBESTOS PUBLICATION NOTICE" means a published notice of (a) the
approval of the Disclosure Statement and the scheduling of the
Confirmation Hearing and (b) the procedure for holders of Asbestos
Personal Injury Claims to obtain a Solicitation Package in a form
approved by the Bankruptcy Court in the Disclosure Statement
Order.
B. "BANKRUPTCY COURT" means the United States Bankruptcy Court for
the District of Delaware.
C. "CLAIMS SETTLEMENT GUIDELINES" means the settlement guidelines and
authority contained in that certain Order Granting Motion of the
Debtors for Order Pursuant to Section 105(a) of the Bankruptcy
Code and Bankruptcy Rule 9019(b) Authorizing the Establishment of
Procedures to Settle Certain Prepetition Claims Against the
Debtors' Estates dated May 31, 2002.
D. "CONFIRMATION HEARING" means the hearing on the confirmation of
the Plan, as such hearing may be adjourned from time to time.
E. "DEBT NOMINEES" means institutional holders of record of Debt
Securities who hold Debt Securities in "street name" on behalf of
beneficial owners or otherwise represent such beneficial holders.
F. "DEPOSITORY" means the Depository Trust Company in the United
States, and Euroclear and Clearstream or other similar entity
outside the United States.
G. "DISCLOSURE STATEMENT" means the disclosure statement in
connection with the Plan, as approved by the Bankruptcy Court in
the Disclosure Statement Order.
H. "DISCLOSURE STATEMENT ORDER" means the Order of the Bankruptcy
Court approving the Disclosure Statement.
I. "DEBT SECURITIES" means the debt securities of AWI that are either
fully registered or registered as to principal only. Debt
Securities does not include Claims arising under or in connection
with that certain Credit Agreement, dated October 29, 1998, among
AWI, JPMorgan Chase Bank, as agent, and the Lenders.
J. "DEBT SECURITIES TRUSTEE" means the indenture trustee for any
issue of debt securities of AWI as to which all or some of such
debt securities constitute Debt Securities.
K. "EQUITY NOMINEES" means institutional holders of record of
Holdings Equity Securities who hold Holdings Equity Securities in
"street name" on behalf of beneficial owners or otherwise
represent such beneficial owners.
D-2
L. "EQUITY SECURITIES TRANSFER AGENTS" means the transfer agent for
any issue of Holdings Equity Securities.
M. "GENERAL BAR DATE ORDER" means the order of the Bankruptcy Court,
dated April 18, 2001, which fixed the deadline for filing proofs
of claim against AWI's estate for all claims other than Asbestos
Personal Injury Claims and Asbestos Property Damage Claims.
N. "HOLDINGS EQUITY SECURITIES" means any equity securities issued by
Armstrong Holdings, Inc.
O. "LENDERS" means the lenders under that certain Credit Agreement,
dated October 29, 1998, among AWI, JPMorgan Chase Bank, as agent,
and the lenders party thereto.
P. "MASTER BALLOT" means a Ballot (a) filed on behalf of one or more
beneficial owners of Debt Securities in accordance with the
procedures set forth in section 3.f of these Voting Procedures or
(b) filed on behalf of one or more holders of Asbestos Personal
Injury Claims pursuant to section 4.c of these Voting Procedures.
Q. "PLAN" means the Plan of Reorganization of Armstrong World
Industries, Inc. dated November 4, 2002, as may be amended.
R. "PUBLICATION NOTICE" means a published notice of (a) the approval
of the Disclosure Statement and the scheduling of the Confirmation
Hearing and (b) the procedure for holders of Claims to obtain a
Solicitation Package in a form approved by the Bankruptcy Court in
the Disclosure Statement Order.
S. "RECORD AMOUNT" means the amount shown on the records of the Debt
Securities Trustees and the Debt Nominees (as confirmed by record
and depositary listings) as of the Voting Record Date.
T. "SOLICITATION PACKAGE" means, and will consist of, all of the
following:
i. Notice of the Confirmation Hearing and related matters,
substantially in a form approved by the Bankruptcy Court,
setting forth, inter alia, the time fixed for filing
acceptances and rejections to the Plan, the time fixed for
filing objections to confirmation of the Plan, and the date
and time of the Confirmation Hearing.
ii. Disclosure Statement Order.
iii. Disclosure Statement (with the Plan attached as an exhibit
thereto).
iv. Order approving the Voting Procedures described herein.
v. For Entities entitled to vote, appropriate Ballots and
voting instructions.
vi. For Entities entitled to vote, pre-addressed, postage-paid,
return envelopes.
vii. Any other materials ordered by the Bankruptcy Court to be
included as part of the Solicitation Package.
U. "SPECIAL VOTING AGENT" means with respect to Debt Securities and
Holdings Equity Securities, Innisfree M&A Incorporated, or such
other firm that may be retained by AWI to act as the solicitation
and tabulation agent with respect to the Plan.
V. "VOTING AGENT" means with respect to the holder of the Equity
Interests and all holders of Claims entitled to vote on the Plan
other than the holders of Debt Securities, Trumbull Services, LLC,
D-2
or such other firm that may be retained by AWI to act as the
solicitation and tabulation agent with respect to the Plan.
W. "VOTING DEADLINE" means the date that is established by the
Bankruptcy Court as the deadline for the return of Ballots on the
Plan.
X. "VOTING RECORD DATE" means the date that is two (2) Business Days
after the date of the Disclosure Statement Order.
Any capitalized term used but not defined herein shall have the meaning
ascribed to such term in the Plan.
2. PUBLICATION NOTICES:
A. PUBLICATION NOTICE:
AWI will cause the Publication Notice to be published (i) twice in
the weekday edition of the national editions of The New York
Times, The Wall Street Journal, and USA Today, (ii) once, in each
of the trade publications as set forth in the Disclosure Statement
Order, and (iii) once, in each of the newspapers set forth on
Exhibit "A" hereto on a date not less than thirty (30) calendar
days prior to the Confirmation Hearing.
B. ASBESTOS PUBLICATION NOTICE:
AWI will cause the Asbestos Publication Notice to be published
once in each of the publications set forth on Exhibit "B" hereto
on a date not less than thirty (30) calendar days prior to the
Confirmation Hearing.
3. DISTRIBUTION OF SOLICITATION PACKAGES:
A. SCHEDULED CLAIMS:
The Voting Agent will cause a Solicitation Package to be
served upon each holder of a Claim against AWI listed in
the Schedules as of the Voting Record Date as liquidated,
undisputed, and noncontingent (other than holders of Debt
Securities) and with a claim amount in excess of $0.00.
B. FILED CLAIMS:
The Voting Agent will cause a Solicitation Package to be
served upon each holder of a Claim represented by a proof
of claim filed against AWI that has not been withdrawn or
disallowed or expunged by an order of the Bankruptcy Court
entered on or before the Voting Record Date, other than a
proof of claim asserting (a) Claims under, or evidenced by,
any Debt Securities and (b) Asbestos Personal Injury
Claims, which claims shall be dealt with as described
below. If the relevant proof of claim does not indicate the
appropriate classification of a Claim, and such
classification cannot be determined from the Schedules,
such Claim shall be treated as an Unsecured Claim. Each
holder of an Asbestos Property Damage Claim that timely
filed a proof of claim that has not been withdrawn,
expunged, or disallowed by the Voting Record Date will be
sent a Solicitation Package and, if no objection to such
Asbestos Property Damage Claim is pending as of the Voting
Record Date, a Ballot.
D-3
C. ASBESTOS PERSONAL INJURY CLAIMS:
The Voting Agent will cause Solicitation Packages to be served
with respect to Asbestos Personal Injury Claims in the manner
described in section 4.a hereof.
D. PARTIES TO EXECUTORY CONTRACTS AND UNEXPIRED LEASES:
(i) Each Entity that is listed on the Schedules as a party to an
executory contract or an unexpired lease with AWI, irrespective of
whether, pursuant to section 365(a) of the Bankruptcy Code, such
contract is, in fact, an "executory contract" or such lease is, in
fact, an "unexpired lease," and (ii) any other Entity listed as a
party to any contract listed on Exhibit 8.2, Exhibit 8.4, or
Exhibit 8.5(b) to the Plan will receive a Solicitation Package.
E. DETERMINATION OF HOLDERS OF RECORD:
Except with respect to Asbestos Personal Injury Claims, Claims
under, or evidenced by, any Debt Securities, or Holdings Equity
Securities, the Solicitation Package will be served upon the
Entity that holds a Claim or the Equity Interests as of the Voting
Record Date, and AWI will have no obligation to cause a
Solicitation Package to be served upon any subsequent holder of
such Claim (as evidenced by any notice of assignment of such Claim
entered on the Bankruptcy Court's docket or that only becomes
effective after the Voting Record Date or otherwise) or Equity
Interest.
F. LENDER CLAIMS
JPMorgan Chase Bank, as agent, will provide, within [five (5)
business days of the entry of the order approving these Voting
Procedures], the Voting Agent with a list of the names, addresses,
and holdings of the Lenders as of the Voting Record Date. The
Voting Agent will cause a Solicitation Package to be served upon
each holder of a Claim held by a Lender as of the Voting Record
Date. The Lenders shall then return the Ballots to the Voting
Agent by the Voting Deadline.
G. DEBT SECURITIES AND HOLDINGS EQUITY SECURITIES:
To all holders of Debt Securities and Holdings Equity Securities,
according to the following procedures:
(I) LIST OF RECORD HOLDERS:
Pursuant to Bankruptcy Rules 1007(i) and 3017(e), within
five (5) Business Days after the Voting Record Date, the
Debt Securities Trustees and Equity Securities Transfer
Agents shall provide to the Special Voting Agent (a) a copy
of the list of the names, addresses, and holdings of the
holders of Debt Securities or Holdings Equity Securities,
as applicable, as of the Voting Record Date, (b) a set of
mailing labels for such holders, and (c) such other
information as the Special Voting Agent deems reasonably
necessary to perform its duties hereunder. Upon request by
the Special Voting Agent, the Debt Securities Trustees and
Equity Securities Transfer Agents shall provide additional
sets of mailing labels. The Special Voting Agent shall use
such lists, mailing labels, and other information only for
purposes consistent with these Voting Procedures.
(II) DETERMINATION OF NUMBER OF BENEFICIAL OWNERS:
As soon as practicable after the entry of the Disclosure
Statement Order, the Special Voting Agent shall attempt to
contact the institutional holders of record of the Debt
Securities and Holdings Equity Securities to determine
whether such holders hold as Debt Nominees or Equity
D-4
Nominees and to ascertain the number of beneficial owners
of such Debt Securities or Holdings Equity Securities
holding through each such Debt Nominee or Equity Nominee.
(III) DISTRIBUTION TO RECORD HOLDERS OTHER THAN DEBT NOMINEES AND
EQUITY NOMINEES:
The Special Voting Agent will cause to be served upon each
registered record holder (other than Debt Nominees and
Equity Nominees), as of the Voting Record Date, of any Debt
Securities or Holdings Equity Securities, a Solicitation
Package.
(IV) DISTRIBUTION TO DEBT NOMINEES AND EQUITY NOMINEES:
For Debt Securities and Holdings Equity Securities, the
Special Voting Agent will cause to be served upon each Debt
Nominee and Equity Nominee materials comprising
Solicitation Packages, in sufficient numbers estimated to
allow dissemination of Solicitation Packages to each of the
beneficial owners of Debt Securities and Holdings Equity
Securities for which it serves, together with a copy of
these Voting Procedures, and with instructions to each such
Debt Nominee and Equity Nominee to (i) contact the Special
Voting Agent for additional sets of Solicitation Packages,
if necessary, and (ii) promptly (within five (5) Business
Days after receipt of the Solicitation Packages) distribute
the Solicitation Packages to the beneficial owners for
which it serves. Upon request by a Debt or Equity
Securities Nominee, the Special Voting Agent shall send any
such Entity a Solicitation Package.
(1) DEBT NOMINEES' OPTIONS FOR OBTAINING VOTES:
Debt Nominees will have two options for obtaining the votes
of beneficial owners of Debt Securities, consistent with
customary practices for obtaining the votes of securities
held in street name:
(a) The Debt Nominee may "prevalidate" the
individual Ballot contained in the
Solicitation Package and then forward the
Solicitation Package to the beneficial owner
of the Debt Securities for voting within five
(5) Business Days after the receipt by such
Debt Nominee of the Solicitation Package,
with the beneficial owner then returning the
individual Ballot directly to the Special
Voting Agent in the return envelope to be
provided in the Solicitation Package. A Debt
Nominee "prevalidates" a beneficial owner's
Ballot by indicating thereon the record
holder of the Debt Securities voted, the
amount of Debt Securities held by the
beneficial owner, and the appropriate account
numbers through which the beneficial owner's
holdings are derived. The beneficial owner
shall return the "prevalidated" Ballot to the
Special Voting Agent.
(b) The Debt Nominee may forward the Solicitation
Package to the beneficial owner of the Debt
Securities for voting along with a return
envelope provided by and addressed to the
Debt Nominee, with the beneficial owner then
returning the individual Ballot to the Debt
Nominee. In such case, the Debt Nominee will
summarize the votes of its respective
beneficial owners on a Master Ballot that
will be provided to the Debt Nominee
separately by the Special Voting Agent, in
accordance with any instructions set forth in
the instructions to the Master Ballot, and
then return the Master Ballot to the Special
Voting Agent. THE DEBT NOMINEE SHOULD ADVISE
THE BENEFICIAL OWNERS TO RETURN THEIR
INDIVIDUAL BALLOTS TO THE DEBT NOMINEE BY A
DATE CALCULATED BY THE DEBT NOMINEE TO ALLOW
IT TO PREPARE AND RETURN THE MASTER BALLOT TO
THE SPECIAL VOTING AGENT SO THAT THE MASTER
BALLOT IS ACTUALLY RECEIVED BY THE SPECIAL
VOTING AGENT BY THE VOTING DEADLINE.
(c) Debt Nominees that elect to use the Master
Ballot voting process are required to retain
the Ballots cast by their respective
beneficial owners for inspection for one (1)
year following the Voting Deadline, unless
otherwise instructed in writing by AWI or
ordered by the Bankruptcy Court. Each Debt
Nominee that elects to "prevalidate" Ballots
must maintain a list of those beneficial
owners as of the Voting Record Date to whom
Ballots were sent for one (1) year following
the Voting Deadline, unless otherwise
instructed in writing by AWI or ordered by
the Bankruptcy Court.
(2) REIMBURSEMENT OF EXPENSES:
AWI will, upon written request, reimburse Debt Securities
Trustees, Debt Nominees, Equity Securities Transfer Agents,
and Equity Nominees, or any of their agents, for their
reasonable, actual, and necessary out-of-pocket expenses
incurred in performing the tasks described above, and will
utilize the guidelines of the New York Stock Exchange in
approving such requests.
H. EQUITY INTERESTS:
The Voting Agent will cause a Solicitation Package to be served
upon the holder of record of the Equity Interests in AWI.
I. OTHER PARTIES:
The Voting Agent will cause a Solicitation Package to be served
upon the Securities and Exchange Commission, the Office of the
United States Trustee for the District of Delaware, the attorneys
for the agent for the AWI's prepetition bank lenders, the
attorneys for the Debtors' postpetition bank lenders, the
attorneys for the Unsecured Creditors' Committee, the attorneys
for the Asbestos PI Claimants' Committee, the attorneys for the
Asbestos Property Damage Committee, the attorneys for the Future
Claimants' Representative, and on each party that filed a notice
of appearance with the Bankruptcy Court and has not withdrawn such
notice of appearance as of the Voting Record Date.
4. SPECIAL PROCEDURES RELATING TO ASBESTOS PERSONAL INJURY CLAIMS:
A. DISTRIBUTION OF SOLICITATION PACKAGES:
The Voting Agent will cause Solicitation Packages to be served
with respect to Asbestos Personal Injury Claims as follows:
(I) TO ATTORNEYS REPRESENTING INDIVIDUAL HOLDERS OF ASBESTOS
PERSONAL INJURY CLAIMS:
(1) A single Solicitation Package will be served upon
each attorney known by AWI (as reflected in
information furnished to AWI by the Center for
Claims Resolution and as contained in any lists of
attorneys furnished to AWI on or before the entry of
the Disclosure Statement Order) to represent or
potentially represent individuals who may hold or
assert Asbestos Personal Injury Claims. SOLICITATION
PACKAGES WILL NOT BE SERVED UPON THE INDIVIDUAL
HOLDERS OF ASBESTOS PERSONAL INJURY CLAIMS, EXCEPT
TO THE EXTENT (I) AN INDIVIDUAL HOLDER OF AN
ASBESTOS PERSONAL INJURY CLAIM REQUESTS A
SOLICITATION PACKAGE, (II) A PROOF OF ASBESTOS
D-6
PERSONAL INJURY CLAIM IS SIGNED AND FILED BY AN
INDIVIDUAL HOLDER OF AN ASBESTOS PERSONAL INJURY
CLAIM PRIOR TO THE VOTING RECORD DATE, OR (III) AN
ATTORNEY TIMELY ADVISES THE VOTING AGENT, PURSUANT
TO SECTION 4.A(I)(2) HEREOF, OF THE NAMES AND
ADDRESSES OF INDIVIDUALS WHO HOLD OR MAY ASSERT
ASBESTOS PERSONAL INJURY CLAIMS WHO SHOULD RECEIVE
THEIR OWN SOLICITATION PACKAGES. The Solicitation
Package to be sent to each attorney will contain a
separate copy of excerpts of these Voting Procedures
pertaining directly to Asbestos Personal Injury
Claims and a Master Ballot (as described more fully
below) for the computation of votes on the Plan.
(2) If an attorney who receives a Solicitation Package
either (i) is unable to certify with respect to any
holder of an Asbestos Personal Injury Claim
represented by such attorney that such attorney has
the authority to vote on the Plan on behalf of such
holder (see section 4.c(ii) hereof) or (ii) wishes
any holder of an Asbestos Personal Injury Claim
represented by such attorney to cast his or her own
Ballot on the Plan, such attorney shall, within ten
(10) Business Days after the mailing of the
Solicitation Package, furnish the Voting Agent with
the name and address of each such holder.
(II) TO INDIVIDUALS WHO HOLD OR ASSERT ASBESTOS PERSONAL INJURY
CLAIMS:
(1) TRANSMITTAL BY THE VOTING AGENT: If (x) an
individual who holds or asserts an Asbestos Personal
Injury Claim requests a Solicitation Package either
by written or telephonic notice to the Voting Agent,
or (y) an attorney who represents or purports to
represent the holder of an Asbestos Personal Injury
Claim furnishes names and addresses of individuals
in accordance with section 4.a(i)(2) hereof to the
Voting Agent, then the Voting Agent will cause to be
mailed a Solicitation Package, together with a
Ballot, directly to each such individual who holds
or asserts an Asbestos Personal Injury Claim as to
which it has received names and addresses within
five (5) Business Days after receiving an individual
request for a Solicitation Package or names and
addresses of individual holders of Asbestos Personal
injury Claims from any attorneys. If an individual
who holds or asserts an Asbestos Personal Injury
Claim signs and files a proof of Asbestos Personal
Injury Claim prior to the Voting Record Date, then
the Voting Agent will cause to be mailed a
Solicitation Package, together with a Ballot,
directly to each such individual by the deadline for
mailing Solicitation Packages to holders of Claims
other than Asbestos Personal Injury Claims
established by the Bankruptcy Court in the
Disclosure Statement Order.
(2) TRANSMITTAL BY AN ATTORNEY: An attorney may choose
to transmit the Solicitation Packages to his or her
clients directly. If an attorney chooses to transmit
the Solicitation Packages to his or her clients
directly, such attorney must, within ten (10)
Business Days after the mailing of the Solicitation
Package, furnish a written request to the Voting
Agent for a specified amount of Solicitation
Packages and individual Ballots, which will be
provided to such attorney within five (5) Business
Days after receipt of such written request. AWI will
reimburse such attorney for the actual postage
incurred by the attorney. Attorneys seeking
reimbursement shall submit reasonable evidence of
postage expenses incurred in order to obtain such
reimbursement.
(III) TO HOLDERS OF ASBESTOS PI CONTRIBUTION CLAIMS:
The Voting Agent will cause a Solicitation Package to be served
upon each holder of an Asbestos PI Contribution Claim that has not
been withdrawn or disallowed or expunged by an order of the
Bankruptcy Court entered on or before the Voting Record Date.
D-7
B. CALCULATION OF VOTES WITH RESPECT TO ASBESTOS PERSONAL INJURY CLAIMS:
(I) INDIVIDUAL HOLDERS OF ASBESTOS PERSONAL INJURY CLAIMS:
Each holder of an Asbestos Personal Injury Claim (other than an
Asbestos PI Contribution Claim) will have a single vote in an
amount that will be based upon the type of disease that forms the
basis for such holder's asserted Asbestos Personal Injury Claim.
The amount of an Asbestos Personal Injury Claim, for voting
purposes only, is as follows:
(1) If the basis for the Asbestos Personal Injury Claim is
alleged to be "MESOTHELIOMA" (according to the criteria set
forth in the Asbestos PI Trust Distribution Procedures,
which criteria will be described in the instructions on the
Ballot), then each holder of an Asbestos Personal Injury
Claim of this type shall vote its Asbestos Personal Injury
Claim in an amount equal to the Liquidated Value for
"mesothelioma" set forth in the Asbestos PI Trust
Distribution Procedures (which Liquidated Value will be set
forth in the instructions on the Ballot).
(2) If the basis for the Asbestos Personal Injury Claim is
alleged to be "LUNG CANCER 1" (according to the criteria
set forth in the Asbestos PI Trust Distribution Procedures,
which criteria will be described in the instructions on the
Ballot), then each holder of an Asbestos Personal Injury
Claim of this type shall vote its Asbestos Personal Injury
Claim in an amount equal to the Liquidated Value for "lung
cancer 1" set forth in the Asbestos PI Trust Distribution
Procedures (which Liquidated Value will be set forth in the
instructions on the Ballot).
(3) If the basis for the Asbestos Personal Injury Claim is
alleged to be "LUNG CANCER 2" (according to the criteria
set forth in the Asbestos PI Trust Distribution Procedures,
which criteria will be described in the instructions on the
Ballot), then each holder of an Asbestos Personal Injury
Claim of this type shall vote its Asbestos Personal Injury
Claim in an amount equal to the Liquidated Value for "lung
cancer 2" set forth in the Asbestos PI Trust Distribution
Procedures (which Liquidated Value will be set forth in the
instructions on the Ballot).
(4) If the basis for the Asbestos Personal Injury Claim is
alleged to be "OTHER CANCER" (according to the criteria set
forth in the Asbestos PI Trust Distribution Procedures,
which criteria will be described in the instructions on the
Ballot), then each holder of an Asbestos Personal Injury
Claim of this type shall vote its Asbestos Personal Injury
Claim in an amount equal to the Liquidated Value for "other
cancer" set forth in the Asbestos PI Trust Distribution
Procedures (which Liquidated Value will be set forth in the
instructions on the Ballot).
(5) If the basis for the Asbestos Personal Injury Claim is
"SEVERE ASBESTOSIS" (according to the criteria set forth in
the Asbestos PI Trust Distribution Procedures, which
criteria will be described in the instructions on the
Ballot), then each holder of an Asbestos Personal Injury
Claim of this type shall vote its Asbestos Personal Injury
Claim in an amount equal to the Liquidated Value for
"severe asbestosis" set forth in the Asbestos PI Trust
Distribution Procedures (which Liquidated Value will be set
forth in the instructions on the Ballot).
(6) If the basis for the Asbestos Personal Injury Claim is
"ASBESTOSIS/PLEURAL DISEASE (LEVEL III)" (according to the
criteria set forth in the Asbestos PI Trust Distribution
Procedures, which criteria will be described in the
instructions on the Ballot), then each holder of an
Asbestos Personal Injury Claim of this type shall vote its
Asbestos Personal Injury Claim in an amount equal to the
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Liquidated Value for "asbestos/pleural disease (level III)"
set forth in the Asbestos PI Trust Distribution Procedures
(which Liquidated Value will be set forth in the
instructions on the Ballot).
(7) If the basis for the Asbestos Personal Injury Claim is
"ASBESTOSIS/PLEURAL DISEASE (LEVEL II)" (according to the
criteria set forth in the Asbestos PI Trust Distribution
Procedures, which criteria will be described in the
instructions on the Ballot), then each holder of an
Asbestos Personal Injury Claim of this type shall vote its
Asbestos Personal Injury Claim in an amount equal to the
Liquidated Value for "asbestosis/pleural disease (level
II)" set forth in the Asbestos PI Trust Distribution
Procedures (which Liquidated Value will be set forth in the
instructions on the Ballot).
(8) If the basis for the Asbestos Personal Injury Claim is
"OTHER ASBESTOSIS DISEASE" (according to the criteria set
forth in the Asbestos PI Trust Distribution Procedures,
which criteria will be described in the instructions on the
Ballot), then each holder of an Asbestos Personal Injury
Claim of this type shall vote its Asbestos Personal Injury
Claim in an amount equal to the Liquidated Value for "other
asbestosis disease" set forth in the Asbestos PI Trust
Distribution Procedures (which Liquidated Value will be set
forth in the instructions on the Ballot).
The designation of the disease category by the holder of an
Asbestos Personal Injury Claim or his or her attorney will be for
voting purposes only and will not be binding upon the holder, AWI,
the Asbestos PI Trust or any other Entity for any purpose other
than for voting on the Plan.
(II) ASBESTOS PI CONTRIBUTION CLAIMS:
With respect to the tabulation of Ballots for all Asbestos PI
Contribution Claims entitled to vote on the Plan, the amount to be
used to tabulate acceptance or rejection of the Plan will be as
follows: If, prior to the Voting Deadline, (i) the Bankruptcy
Court enters an order fully or partially allowing a Claim, whether
for all purposes or for voting purposes only, (ii) a Claim is
fully or partially allowed for all purposes in accordance with the
Claims Settlement Guidelines, or (iii) AWI and the holder of a
Claim agree to fully or partially allow such Claim for voting
purposes only and no objection to such allowance is received by
AWI within seven (7) calendar days after service by first-class
mail of notice of such agreement to the parties on the All Notices
List (as such term is defined in the Order Establishing Case
Management Procedures and Hearing Schedule, entered on February
11, 2002), the amount allowed thereunder. Otherwise, each holder
of an Asbestos PI Contribution Claim entitled to vote will receive
one vote in the amount of $100.00.
C. COMPLETION AND RETURN OF MASTER BALLOTS BY ATTORNEYS FOR HOLDERS OF
ASBESTOS PERSONAL INJURY CLAIMS:
Attorneys who represent individual holders of Asbestos Personal Injury
Claims shall be permitted to cast Ballots for such holders, but only to
the extent such attorneys have the authority from their clients to do so.
Each attorney voting on behalf of the individuals who hold or assert
Asbestos Personal Injury Claims who it represents and on whose behalf he
or she has authority to vote shall complete a Master Ballot, which will
set forth the votes cast by such attorney on behalf of any such clients.
The following procedures will govern the completion and return of a
Master Ballot:
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(I) SUMMARIZING VOTES ON THE MASTER BALLOT:
(1) The Master Ballot shall contain the following options for
voting, one of which shall be marked by the attorney:
(a) "All claimants listed on the exhibit accompanying
this Ballot ACCEPT the Plan."
(b) "All claimants listed on the exhibit accompanying
this Ballot REJECT the Plan."
(c) "All claimants listed on the exhibit accompanying
this Ballot ACCEPT the Plan, except as marked on
such exhibit."
(d) "All claimants listed on the exhibit accompanying
this Ballot REJECT the Plan, except as marked on
such exhibit."
(2) The attorney completing the Master Ballot also will have to
complete the following summary of votes on the Plan for
each disease category of Asbestos Personal Injury Claims
for which the attorney is voting on the Plan:
(a) "Of the claimants listed in the MESOTHELIOMA disease
category on the exhibit accompany this Ballot, _____
number of claimants vote to ACCEPT the Plan, and
______ number of claimants vote to REJECT the Plan."
(b) "Of the claimants listed in the LUNG CANCER 1
disease category on the exhibit accompany this
Ballot, _____ number of claimants vote to ACCEPT the
Plan, and ______ number of claimants vote to REJECT
the Plan."
(c) "Of the claimants listed in the LUNG CANCER 2
disease category on the exhibit accompany this
Ballot, _____ number of claimants vote to ACCEPT the
Plan, and ______ number of claimants vote to REJECT
the Plan."
(d) "Of the claimants listed in the OTHER CANCER disease
category on the exhibit accompany this Ballot, _____
number of claimants vote to ACCEPT the Plan, and
______ number of claimants vote to REJECT the Plan."
(e) "Of the claimants listed in the SEVERE ASBESTOSIS
disease category on the exhibit accompany this
Ballot, _____ number of claimants vote to ACCEPT the
Plan, and ______ number of claimants vote to REJECT
the Plan."
(f) "Of the claimants listed in the ASBESTOSIS/PLEURAL
DISEASE (LEVEL III) disease category on the exhibit
accompany this Ballot, _____ number of claimants
vote to ACCEPT the Plan, and ______ number of
claimants vote to REJECT the Plan."
(g) "Of the claimants listed in the OTHER
ASBESTOSIS/PLEURAL DISEASE (LEVEL II) disease
category on the exhibit accompany this Ballot, _____
number of claimants vote to ACCEPT the Plan, and
______ number of claimants vote to REJECT the Plan."
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(h) "Of the claimants listed in the OTHER ASBESTOSIS
DISEASE disease category on the exhibit accompany
this Ballot, _____ number of claimants vote to
ACCEPT the Plan, and ______ number of claimants vote
to REJECT the Plan."
(II) CERTIFICATION BY ATTORNEY OF AUTHORITY TO VOTE:
(1) The Master Ballot will contain certifications to be
completed by the attorney preparing and signing the Master
Ballot pursuant to which such attorney will certify that
such attorney (i) has the authority to cast a Ballot on the
Plan on behalf of the holders of each of the Asbestos
Personal Injury Claims listed on the exhibit attached to
the Master Ballot, and (ii) has the authority to represent
the disease category indicated with respect to each holder
of an Asbestos Personal Injury Claim listed on the exhibit
attached to the Master Ballot, which disease category is
true and correct.
(2) If the attorney is unable to make such certifications on
behalf of any holder of an Asbestos Personal Injury Claim
whom he or she represents, the attorney may not cast a vote
on behalf of such claimant and must timely send the
information relating to the names and addresses of its
clients for whom he or she may not vote to the Voting Agent
in accordance with section 4.a(i)(2) hereof.
(III) SUMMARY SHEET EXHIBIT TO THE MASTER BALLOT:
(1) Each attorney shall prepare a summary sheet in the form
attached to the Master Ballot. This summary sheet will
become an exhibit to the Master Ballot and will list each
individual holder of an Asbestos Personal Injury Claim
represented by such attorney and on whose behalf the
attorney is voting on the Plan by name, social security
number, and disease type (i.e., mesothelioma, lung cancer
1, etc.). If any exceptions to the vote are noted pursuant
to section 4.b(i)(4) or section 4.c(i)(1)(d) hereof, the
attorney shall note such exceptions on the summary sheet.
(2) The entire summary sheet must be attached as an exhibit to
the Master Ballot, and the completed Master Ballot and
exhibit must be returned to the Voting Agent in accordance
with section 5.c(i) of these Voting Procedures.
5. RETURN OF BALLOTS:
A. CLAIMANTS THAT ARE ENTITLED TO VOTE:
Except as provided herein with respect to Asbestos Personal Injury
Claims and Debt Securities, each claimant that has a Claim (i) for
which a Claim amount may be determined pursuant to section 6.a
hereof as of the Voting Deadline, (ii) which Claim is not treated
as unimpaired under the Plan, (iii) which Claim is not in a class
that is deemed to have rejected the Plan, and (iv) which Claim is
not the subject of an objection that is pending as of the Voting
Record Date unless an order is entered by the Bankruptcy Court
allowing such Claim by the Voting Deadline, is entitled to vote to
accept or reject the Plan. Notwithstanding the immediately
preceding sentence, holders of Asbestos Property Damage Claims
that provided to AWI's counsel by February 10, 2003 information
responsive to the Bankruptcy Court's order on product
identification shall be entitled to vote on the Plan unless (i)
any such holder waives its right to vote on the Plan pursuant to a
settlement agreement entered into with AWI and approved by the
Bankruptcy Court prior to the Voting Deadline, or (ii) such
Asbestos Property Damage Claim is disallowed prior to the Voting
Deadline. The assignee of a transferred and assigned Claim
(whether a filed or scheduled Claim) shall be permitted to vote
such Claim only if the transfer and assignment has been noted on
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the Bankruptcy Court's docket and is effective pursuant to
Bankruptcy Rule 3001(e) as of the close of business on the Voting
Record Date.
B. AUTHORITY TO COMPLETE AND EXECUTE BALLOTS:
If a Ballot is signed by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation, or any other
Entity acting in a fiduciary or representative capacity, such
person must indicate such capacity when signing. The authority of
the signatory of each Ballot to complete and execute the Ballot
shall be presumed, but each such signatory shall certify, by
executing the Ballot, that he or she has such authority and shall
provide evidence of such authority upon request of the Voting
Agent or Special Voting Agent.
C. PLACE TO SEND COMPLETED BALLOTS:
(I) VOTING AGENT:
All Ballots other than Ballots for holders of Debt Securities,
should be returned by mail to Trumbull Services, LLC, Attn:
Armstrong World Industries, Inc., P.O. Box 1117, Windsor, CT
06095. Ballots may also be sent by hand delivery or overnight
courier to Armstrong World Industries, Inc., c/o Trumbull
Services, LLC, 4 Griffin Road North, Windsor, CT 06095.
(II) SPECIAL VOTING AGENT:
All Ballots for holders of Debt Securities (including, record
holder Ballots, Master Ballots for Debt Securities, and
"prevalidated" beneficial owner Ballots), except those beneficial
owner Ballots that are to be returned to the Debt Nominees, should
be returned by mail, hand delivery, or overnight courier to
Innisfree M&A Incorporated, 501 Madison Avenue, 20th floor, New
York, New York 10022 (Attn: Armstrong World Industries, Inc.).
D. DEADLINE FOR RECEIVING COMPLETED BALLOTS:
(I) All Ballots must be ACTUALLY RECEIVED by the Voting Agent
(Trumbull Services, LLC) or the Special Voting Agent
(Innisfree M&A Incorporated), as applicable, by 5:00 p.m.,
New York, New York, time, by the Voting Deadline. Such
Ballots may be received by the Voting Agent or Special
Voting Agent at the applicable address set forth on the
return envelope. Neither the Voting Agent nor the Special
Voting Agent will accept Ballots submitted by facsimile or
electronic transmission. The Voting Agent and the Special
Voting Agent will date and time-stamp all Ballots when
received. In addition, the Voting Agent and Special Voting
Agent will make a photocopy of all such Ballots received
(including all Ballots forwarded to either by the other
Agent) and will retain a copy of such Ballots for a period
of one (1) year after the Effective Date of the Plan,
unless otherwise instructed by AWI, in writing, or
otherwise ordered by the Bankruptcy Court.
6. TABULATION OF BALLOTS:
A. DETERMINATION OF AMOUNT OF CLAIMS VOTED:
(I) DEBT SECURITIES:
With respect to the tabulation of Ballots cast by record holders
and beneficial owners of Debt Securities, for purposes of voting,
the amount that will be used to tabulate acceptance or rejection
of the Plan will be the Record Amount. The following additional
D-12
rules will apply to the tabulation of Ballots cast by record
holders and beneficial owners of Debt Securities:
(1) Votes cast by beneficial owners holding Debt Securities
through a Debt Nominee will be applied against the
positions held by such entities in the applicable Debt
Securities as of the Voting Record Date, as evidenced by
the record and depository listings. Votes submitted by a
Debt Nominee, whether pursuant to a Master Ballot or
prevalidated Ballots, will not be counted in excess of the
Record Amount of Debt Securities held by such Debt Nominee.
(2) To the extent that conflicting votes or "overvotes" are
submitted by a Debt Nominee, whether pursuant to a Master
Ballot or prevalidated Ballots, the Special Voting Agent
will attempt to resolve the conflict or overvote prior to
the preparation of the vote certification.
(3) To the extent that overvotes on a Master Ballot or
prevalidated Ballots are not reconcilable prior to the
preparation of the vote certification, the Special Voting
Agent will apply the votes to accept and to reject the Plan
in the same proportion as the votes to accept and reject
the Plan submitted on the Master Ballot or prevalidated
Ballots that contained the overvote, but only to the extent
of the Debt Nominee's position in the applicable Debt
Security.
(4) Multiple Master Ballots may be completed by a single Debt
Nominee and delivered to the Special Voting Agent. Votes
reflected by multiple Master Ballots will be counted,
except to the extent that they are duplicative of other
Master Ballots. If two or more Master Ballots are
inconsistent, the latest Master Ballot received prior to
the Voting Deadline will, to the extent of such
inconsistency, supersede and revoke any prior Master
Ballot.
(5) For purposes of tabulating votes, each registered record
holder or beneficial owner of a Debt Security will be
deemed to have voted the full amount of its Claim relating
to such Debt Security.
(II) CLAIMS OTHER THAN DEBT SECURITIES, ASBESTOS PROPERTY DAMAGE
CLAIMS, ASBESTOS PERSONAL INJURY CLAIMS, AND ENVIRONMENTAL CLAIMS:
With respect to the tabulation of Ballots for all Claims other
than (a) Debt Securities, (b) Asbestos Property Damage Claims, (c)
Asbestos Personal Injury Claims, and (d) Environmental Claims, for
purposes of voting, the amount to be used to tabulate acceptance
or rejection of the Plan is as follows (in order of priority):
(1) If, prior to the Voting Deadline, (i) the Bankruptcy Court
enters an order fully or partially allowing a Claim,
whether for all purposes or for voting purposes only, (ii)
a Claim is fully or partially allowed for all purposes in
accordance with the Claims Settlement Guidelines, or (iii)
AWI and the holder of a Claim agree to fully or partially
allow such Claim for voting purposes only and no objection
to such allowance is received by AWI within seven (7)
calendar days after service by first-class mail of notice
of such agreement to the parties on the All Notices List
(as such term is defined in the Order Establishing Case
Management Procedures and Hearing Schedule, entered on
February 11, 2002), the amount allowed thereunder.
(2) The liquidated amount specified in a proof of claim timely
filed in accordance with the General Bar Date Order, so
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long as such Claim has not been disallowed or expunged by
the Bankruptcy Court and is not the subject of an objection
pending as of the Voting Record Date.
(3) The Claim amount listed in the Schedules as unliquidated,
undisputed, and noncontingent.
(4) If a claim is recorded in the Schedules or on a proof of
claim as unliquidated, contingent and/or undetermined only
in part, the holder of the claim shall be entitled to vote
that portion of the claim that is liquidated, noncontingent
and undisputed in the liquidated, noncontingent and
undisputed amount, subject to any limitations set forth
herein and unless otherwise ordered by the Court.
(5) Wholly Unliquidated, Contingent, and/or Undetermined
Claims:
(a) If a proof of claim has been timely filed in
accordance with the General Bar Date Order and such
Claim is wholly unliquidated, contingent, and/or
undetermined, the claim amount, for voting purposes
only, shall be $1.00 so long as such Claim has not
been disallowed or expunged by the Court and is not
the subject of an objection pending as of the Voting
Record Date.
(b) CLAIMANT'S VOTING MOTION: The Confirmation Hearing
Notice will include a summary description of the
"one dollar, one vote" procedure with respect to
holders of filed Claims (other than Asbestos
Personal Injury Claims) that are wholly
unliquidated, contingent, and/or undetermined as
described in section 6.a(ii)(5)(a) above. The
Confirmation Hearing Notice will further state that
any claimant wishing to have its Claim allowed for
voting purposes in a greater amount must serve on
AWI and file with the Bankruptcy Court, on or before
the fifteenth (15th) day after the deadline by which
AWI must have served the Solicitation Packages, a
motion for an order pursuant to Bankruptcy Rule
3018(a) temporarily allowing such claim in a
different amount for purposes of voting (a
"CLAIMANT'S VOTING MOTION"). A Claimant's Voting
Motion must set forth with particularity the amount
and classification of which such claimant believes
its Claim should be allowed for voting purposes, and
the evidence in support of that belief.
(III) ASBESTOS PROPERTY DAMAGE CLAIMS:
With respect to the tabulation of Ballots for all Asbestos
Property Damage Claims entitled to vote on the Plan, the amount to
be used to tabulate acceptance or rejection of the Plan will be as
follows:
If, prior to the Voting Deadline, (i) the Bankruptcy Court enters
an order fully or partially allowing a Claim, whether for all
purposes or for voting purposes only, (ii) a Claim is fully or
partially allowed for all purposes in accordance with the Claims
Settlement Guidelines, or (iii) AWI and the holder of a Claim
agree to fully or partially allow such Claim for voting purposes
only and no objection to such allowance is received by AWI within
seven (7) calendar days after service by first-class mail of
notice of such agreement to the parties on the All Notices List
(as such term is defined in the Order Establishing Case Management
Procedures and Hearing Schedule, entered on February 11, 2002),
the amount allowed thereunder. Otherwise, for voting purposes
only, the amount to be used to tabulate acceptance or rejection of
the Plan will be $100.00 for each Asbestos Property Damage Claim
entitled to vote on the Plan.
D-14
(IV) ASBESTOS PERSONAL INJURY CLAIMS:
With respect to the tabulation of Ballots for all Asbestos
Personal Injury Claims, for voting purposes only, the amount to be
used to tabulate acceptance or rejection of the Plan will be as
described in section 4.b hereof.
(V) ENVIRONMENTAL CLAIMS:
With respect to the tabulation of Ballots for Environmental
Claims, for voting purposes only, the amount to be used to
tabulate acceptance or rejection of the Plan will be the amount of
the liquidated claim set forth under the applicable environmental
settlement agreement, or, if such settlement agreement has not
become effective as of the Voting Record Date, $100.00.
Any holder of a Claim that is not entitled to vote because its Claim is
the subject of an objection pending before the Bankruptcy Court, or is
entitled to vote but seeks to challenge the amount of the allowed amount
of the Claim for voting purposes, may file a Claimant's Voting Motion. A
Claimant's Voting Motion must be filed by a holder of a Claim on or
before the fifteenth (15th) calendar day after the deadline by which AWI
must have served the Solicitation Packages. As to any creditor filing
such a motion, such creditor's Ballot will not be counted unless
temporarily allowed by the Court for voting purposes, after notice and a
hearing.
B. DETERMINATION OF NUMBER OF CLAIMS VOTED BY BENEFICIAL OWNERS OF DEBT
SECURITIES:
Each beneficial owner of Debt Securities is entitled to one (1) vote on
account of its holdings of Debt Securities.
C. AGGREGATION OF MULTIPLE UNSECURED CLAIMS (OTHER THAN DEBT SECURITIES) FOR
VOTING, CLASSIFICATION, AND TREATMENT UNDER THE PLAN:
(I) SPECIFIC RULES RELATING TO ENTITIES WITH MULTIPLE CLAIMS:
For purposes of voting, classification, and treatment under the
Plan, except as provided in section 6.c(ii) hereof, each Entity
that holds or has filed more than one (1) Unsecured Claim (other
than an Unsecured Claim under a Debt Security) against AWI shall
be treated as if such Entity has only one (1) Unsecured Claim
against AWI, the Unsecured Claims (other than Unsecured Claims
under Debt Securities) filed by such Entity shall be aggregated,
and the total dollar amount of such Entity's Unsecured Claims
(other than Unsecured Claims under Debt Securities) against AWI
shall be the sum of the aggregated Unsecured Claims of such
Entity.
(II) SPECIFIC RULES RELATING TO TRANSFERS OF UNSECURED CLAIMS OTHER
THAN DEBT SECURITIES:
For purposes of voting, classification, and treatment under the
Plan, other than with respect to Debt Securities, the number and
amount of Unsecured Claims held by an Entity to which any
Unsecured Claim (other than a Debt Security) is transferred and
which transfer is effective pursuant to Bankruptcy Rule 3001(e) no
later than the close of business on the Voting Record Date shall
be determined based upon the identity of the original holder of
such Unsecured Claim and whether any Unsecured Claims held by the
Entity entitled to vote as of the Voting Record Date would be
aggregated pursuant to section 6.c(i) hereof if they were held by
the original holder thereof as of the Voting Record Date.
D-15
D. BALLOTS EXCLUDED:
A Ballot will not be counted if any of the following applies to such
Ballot:
(I) The holder submitting the Ballot is not entitled to vote, pursuant
to section 5.a hereof.
(II) The Ballot is not ACTUALLY RECEIVED by the Voting Agent or the
Special Voting Agent, as the case may be, in the manner set forth
in section 5.c hereof by the Voting Deadline unless AWI shall have
granted in writing an extension of the Voting Deadline with
respect to such Ballot.
(III) The Ballot is returned to the Voting Agent or Special Voting
Agent, as the case may be, indicating acceptance or rejection of
the Plan but is unsigned.
(IV) The Ballot is postmarked prior to the deadline for submission of
Ballots but is received afterward.
(V) The Ballot is illegible or contains insufficient information to
permit the identification of the claimant.
(VI) The Ballot is transmitted to the Voting Agent or Special Voting
Agent, as the case may be, by facsimile or other electronic means.
(VII) The Ballot is submitted in a form that is not the appropriate
Ballot for such claim.
(VIII) A Ballot that is not completed - including, without limitation, a
Master Ballot with respect to an Asbestos Personal Injury Claim on
which the attorney fails to make the required certification.
E. GENERAL VOTING PROCEDURES AND STANDARD ASSUMPTIONS:
In addition, the following voting procedures and standard assumptions
will be used in tabulating Ballots.
(I) A creditor may not split his, her, or its vote. Accordingly,
except as provided in section 6.c(ii) hereof, (a) each creditor
shall have a single vote within a particular class, (b) the full
amount of all such creditor's claims (calculated in accordance
with these procedures) within a particular class shall be deemed
to have been voted either to accept or reject a Plan, and (c) any
Ballot that partially rejects and partially accepts the Plan shall
not be counted. Notwithstanding the foregoing, each beneficial
owner of a Debt Security as of the Voting Record Date shall be
entitled to a single vote for each issue of Debt Securities held
either directly as a registered holder or held through a Debt
Nominee.
(II) The Voting Agent or the Special Voting Agent, in its discretion,
may contact voters to cure any defects in the Ballots or Master
Ballots.
(III) Any voter that delivers a valid Ballot or Master Ballot may
withdraw his, her, or its vote by delivering a written notice of
withdrawal to the Voting Agent or Special Voting Agent before the
Voting Deadline. To be valid, the notice of withdrawal must (a) be
signed by the party who signed the Ballot or Master Ballot to be
revoked and (b) be received by the Voting Agent or the Special
Voting Agent before the Voting Deadline. AWI may contest the
validity of any withdrawals.
(IV) If multiple Ballots are received from different holders purporting
to hold the same Claim, in the absence of contrary information
establishing which claimant held such Claim as of the Voting
D-16
Deadline or, in the case of Debt Securities, the Voting Record
Date, the latest-dated Ballot that is received prior to the Voting
Deadline will be the Ballot that is counted.
(V) If multiple Ballots are received from a holder of a Claim and
someone purporting to be his, her, or its attorney or agent, the
Ballot received from the holder of the Claim will be the Ballot
that is counted, and the vote of the purported attorney or agent
will not be counted.
(VI) There shall be a rebuttable presumption that any claimant who
submits a properly completed superseding Ballot or withdrawal of
Ballot on or before the Voting Deadline has sufficient cause,
within the meaning of Bankruptcy Rule 3018(a), to change or
withdraw such claimant's acceptance or rejection of the Plan.
(VII) A Ballot that is completed, but on which the claimant did not note
whether to accept or reject the Plan, shall not be counted as a
vote to accept or reject the Plan.
(VIII) If no votes to accept or reject the Plan are received with respect
to a particular class, other than the class consisting of Asbestos
Property Damage Claims, such class will be deemed to have accepted
the Plan. If no votes to accept or reject the Plan are received
with respect to Asbestos Property Damage Claims, the class
consisting of Asbestos Property Damage Claims will be deemed to
have rejected the Plan.
(IX) If multiple Ballots are received from a holder of a Claim for the
same Claim, the latest-dated Ballot that is received prior to the
Voting Deadline shall be the Ballot that is counted as vote to
accept or reject the Plan.
D-17
EXHIBIT A
NEWSPAPERS
----------------------------------------------------
REGIONAL NEWSPAPERS
----------------------------------------------------
Mobile Register
----------------------------------------------------
Daily News
----------------------------------------------------
LA Times
----------------------------------------------------
Pensacola News Journal
----------------------------------------------------
Macon Telegraph
----------------------------------------------------
Kankakee Daily Journal
----------------------------------------------------
Baltimore Sun
----------------------------------------------------
Jackson Clarion Ledger
----------------------------------------------------
Columbus Dispatch
----------------------------------------------------
Stillwater Newspress
----------------------------------------------------
Portland Oregonian
----------------------------------------------------
Beaver County Times
----------------------------------------------------
Lancaster Intelligencer
----------------------------------------------------
Williamsport Sun-Gazette
----------------------------------------------------
D-iii
EXHIBIT B
ASBESTOS PUBLICATION NOTICE TRADE PUBLICATIONS
Subject to modification before AWI commences its solicitation process, the
Asbestos Publication Notice will be published in one time insertions in the
following publications, so long as an issue of such publication will be printed
and mailed prior to thirty days prior to the Confirmation Hearing:
- --------------------------------------------------------------------------------
PUBLICATION
================================================================================
Field & Stream
- --------------------------------------------------------------------------------
Parade
- --------------------------------------------------------------------------------
Reader's Digest
- --------------------------------------------------------------------------------
Sports Illustrated
- --------------------------------------------------------------------------------
USA Weekend
- --------------------------------------------------------------------------------
D-iv
EXHIBIT "E"
ARMSTRONG WORLD INDUSTRIES, INC.
LIQUIDATION ANALYSIS
STATEMENT OF ASSETS
($ in thousands)
BOOK VALUE AS OF HYPOTHETICAL ESTIMATED
SEPTEMBER 30, 2002 PERCENTAGE LIQUIDATION
(NOTE A) RECOVERY VALUE
Note (Unaudited) (Unaudited)
------------------------- ---------- ---------------
[1] [2] [1] * [2] = [3]
Debtor Entity
Cash and Cash Equivalents B $205,925 100% $205,925
Accounts and notes receivable C 151,415 78% 117,993
Inventory D 84,379 62% 52,354
Income Taxes 118,900 0% 0
Deferred Taxes 46,800 0% 0
Other Current Assets E 20,050 16% 3,235
Property, Plant and Equipment, Net F 647,468 11% 69,480
Other Intangibles G 49,288 NM 100,000
Other Non-Current Assets H 488,349 19% 95,120
Other Investments I 41,900 NM 101,000
------------- ---------------
Total Assets $1,854,475 $745,108
Orderly Liquidation Value of Non-Debtor Entities J $841,950
---------------
Assets and Other Items Available for Distribution $1,587,058
---------------
Costs Associated with Liquidation: K
Corporate Payroll/Overhead Costs during Liquidation (141,750)
Chapter 7 Trustee Fees (22,353)
Chapter 7 Professional Fees (2,700)
Fees associated with Orderly Liquidation of Non-Debtor Entities (25,259)
---------------
Costs Associated with Liquidation ($192,062)
---------------
Net Estimated Liquidation Proceeds Available for Distribution $1,394,996
===============
DISTRIBUTION ANALYSIS SUMMARY
($ in thousands) ESTIMATED ESTIMATED
Allowable Liquidation
Claims Value
------------------------- -------------------------
Net Estimated Proceeds Available for Distribution $1,394,996
Less Secured Claims (Note L):
Other $116
-------------------------
Total Secured Claims $116
Net Estimated Liquidation Proceeds Available After Secured Claims $1,394,880
Less Chapter 11 Administrative and Priority Claims (Note M):
Drawn Letters of Credit $40,000
Post-Petition Account Payable 62,924
Post-Petition Accrued Expenses 37,332
Administrative Expense Claims 6,900
Priority Claims (filed) 0
Priority Tax Claims (filed) 30
Professional Fees 18,200
-------------------------
Total Administrative and Priority Claims $165,386
Proceeds Available to Unsecured Claims $1,229,494
Less Unsecured Claims with Debtor entities (Note N):
Asbestos PI Liability Claim $3,078,432
Prepetition Account Payable 53,400
Prepetition Accrued Expenses 56,100
Filer Debt at Face Value 1,400,700
ESOP Loan Guarantee 145,900
Est. Executory Contract Damage Claims 21,900
Other Claims Estimated 15,000
Debtor's Pre-petition L/C Balance 26,500
-------------------------
Total Unsecured Claims and Estimated Present and
Future Asbestos Personal Injury Claims $4,797,932
Net Estimated Deficiency to Unsecured Claims ($3,568,438)
=========================
Hypothetical Recovery (%) 25.6%
=========================
NOTES TO LIQUIDATION ANALYSIS
AWI believes that the Plan meets the "best interest of creditors" test of
section 1129(a)(7) of the Bankruptcy Code. AWI believes that the members of each
impaired class will receive at least as much as they would if a chapter 7
liquidation was performed for AWI. The analysis is summarized below.
The Liquidation Analysis reflects the estimated cash proceeds, net of
liquidation-related costs, that would be realized if AWI were to be liquidated
in accordance with chapter 7 of the Bankruptcy Code. Underlying the Liquidation
Analysis are a number of estimates and assumptions that, although developed and
considered reasonable by AWI's management and Lazard, are inherently subject to
significant business, economic and competitive uncertainties and contingencies
beyond the control of AWI and its management, and upon assumptions with respect
to the liquidation decisions that could be subject to change. ACCORDINGLY, THERE
CAN BE NO ASSURANCE THAT THE VALUES REFLECTED IN THE LIQUIDATION ANALYSIS WOULD
BE REALIZED IF AWI WERE, IN FACT, TO UNDERGO SUCH A LIQUIDATION, AND ACTUAL
RESULTS COULD VARY MATERIALLY FROM THOSE SHOWN HERE.
The Liquidation Analysis was prepared by AWI's management with the assistance of
Lazard, based on AWI's balance sheet as of the end of the Third Quarter of 2002,
and on the assumption that in a chapter 7 liquidation, AWI would cease
operations on June 30, 2003. The Liquidation Analysis assumes that the actual
September 30, 2002 balance sheet, on which the analysis is based, is a proxy for
the June 30, 2003 balance sheet. It is also assumed that the liquidation of AWI
would commence under the direction of a Court-appointed trustee and continue for
nine months, during which time all of AWI's major assets would either be sold or
conveyed to the respective lien holders, and the cash proceeds, net of
liquidation-related costs, would then be distributed to creditors, including
holders of Asbestos Personal Injury Claims. Although some assets might be
liquidated in less than nine months, other assets would be more difficult to
collect or sell, thus requiring a liquidation period substantially longer than
nine months. The liquidation period would allow for the collection of
receivables, sale of assets, and wind-down of daily operations. For certain
assets, estimates of the liquidation proceeds were made for each asset
individually. For other assets, liquidation values were assessed for general
classes of assets by estimating the percentage recoveries that a trustee might
achieve through their disposition. The Liquidation Analysis was performed by
liquidating debtor assets and assuming an orderly liquidation on a going concern
basis for the non-debtor assets and assumes that liquidation proceeds would be
distributed in accordance with Bankruptcy Code sections 726 and 1129(b). The
Liquidation Analysis assumes that there are no proceeds from recoveries of any
potential preferences, fraudulent conveyances, or other causes of action.
FOOTNOTES TO LIQUIDATION ANALYSIS
A summary of the assumptions used by Lazard and AWI's management in preparing
the liquidation analysis is set forth below.
NOTE A - Book Values as of September 30, 2002
Unless stated otherwise, the book values used in this Liquidation Analysis are
the unaudited book values as of September 30, 2002 of AWI only and are assumed
to be representative of AWI's assets and liabilities as of June 30, 2003. The
balances exclude investments in affiliates, investments in subsidiaries, and
amounts due from subsidiary companies totaling $4,288.8 million, as well as the
consolidated assets of non-filed subsidiaries. These assets are valued in Note J
below.
NOTE B - Cash and Cash Equivalents
The Liquidation Analysis assumes that operations during the liquidation period
would not generate additional cash available for distribution except for net
proceeds from the disposition of non-cash assets. It is assumed that cash and
cash equivalents of approximately $206 million held in corporate accounts would
be 100% collectible. Other cash, located at non-debtor subsidiaries, is
comprised of minimum operating cash and an estimated $47.5 million of excess
cash, which has been allocated to the orderly liquidation value of the
non-debtor entities.
E-3
NOTE C - Accounts Receivable
The accounts receivable assumes that a chapter 7 trustee would retain a staff to
process the collection of outstanding accounts receivable. Proceeds from the
collection of trade accounts receivable were estimated using the same
methodology as the borrowing base certificate prepared on June 30, 2002 for the
DIP Agent. This borrowing base certificate methodology was applied to the
September 30, 2002 balance sheet values. The result is assumed to be an estimate
of the amount of proceeds that would be available to a secured lender in the
event of a liquidation as it is generally deemed adequate to cover the amount of
the funds advanced based on the anticipated collections. Based on the borrowing
base certificate, certain ineligible items were subtracted, and a discount based
on the borrowing base advance rate was applied to the net receivables amount.
Accounts and notes receivable have been discounted to approximately 78% of their
book value as a result of the application of this methodology.
NOTE D - Inventory
Inventories are comprised of raw materials, work-in-process and finished goods.
Proceeds from the collection of inventories were estimated using the same
methodology as the borrowing base certificate prepared on June 30, 2002 for the
DIP Agent. This borrowing base certificate methodology was applied to the
September 30, 2002 balance sheet. Raw materials inventory is generally assumed
to be commodity materials and is assumed to be recoverable at 15% of eligible
raw materials. It is assumed that the work-in-process inventory will be sold at
25% of eligible work in process. The amount of the finished goods inventory
recovery is estimated at 60% of eligible finished goods. This methodology
resulted in an overall inventory recovery as a percentage of net book value of
62%. The liquidation of AWI's substantial investment in inventory will require
the expenditure of significant funds, including the costs of retaining a sales
force and operating the distribution centers during the liquidation period.
These costs are discussed in Note K --Costs Associated with Liquidation.
NOTE E - Other Current Assets
Other current assets include prepaid marketing and promotion expenses, prepaid
sundry expenses, prepaid taxes, prepaid insurance, and other miscellaneous
current assets. Prepaid insurance is assumed to have an 80% recovery rate, the
liquidation value of prepaid sundry expenses is assumed to have a 50% recovery
rate, and prepaid marketing and promotions, and prepaid taxes are assumed to
have a 0% recovery rate. All other current assets are assumed to have no
recovery. This methodology resulted in an overall other current asset recovery
as a percentage of net book value of 16%.
NOTE F - Property, Plant & Equipment, Net
Property, Plant & Equipment includes owned land, buildings, machinery and
equipment. The recovery rates for property, plant and equipment were determined
by assumptions of AWI's management. Using this valuation, Property, Plant &
Equipment was deemed to have a liquidation value of approximately 11% of its
book value.
NOTE G - Other Intangibles
Other intangibles include the AWI brand name and the net amortized value of
computer software. Based on a forecast of potential future royalty fees and
related administrative costs, and taking into account AWI's own business plan,
the liquidation value of the AWI brand name is estimated to be approximately
$100 million. The net amortized value of computer software is assumed to have no
recovery in a chapter 7 liquidation.
NOTE H - Other Non-Current Assets
Other non-current assets include the pension fund surplus, the trust established
in connection with the Thomasville deferred compensation plan, an environmental
receivable, and a reserve. The assumed value of the pension fund at liquidation
is based upon an analysis conducted by Hewitt Associates. This value is based on
estimating the after-tax value of the surplus between the value of the pension
plan assets and the cost to purchase the annuity contracts from an insurance
company.
E-4
NOTE I - Other Investments
Other investments include an investment in Interface Solutions, Inc. ("ISI") and
an investment in the WAVE joint venture. The investment in ISI is assumed to
have a value of $1 million in a liquidation, and the WAVE joint venture is
assumed to have a value of $100 million in a liquidation analysis based on the
capitalized value of the historical dividend stream in perpetuity.
NOTE J - Orderly Liquidation Value of Non-Debtor Entities
Orderly Liquidation Value of non-debtor business units includes Armstrong Wood
Products, Armstrong European Resilient Flooring (ADE), European Building
Products, Textile and Sports Flooring, and Pacific Rim Building Products; net of
debt of $71.5 million, plus excess cash of $47.5 million as of October 31, 2002.
The entities were valued using the same comparable company multiple methodology
as used in determining the Reorganization Value. An additional 25% discount was
applied to the multiples to reflect the orderly liquidation versus a full
marketing and sales process of a going concern.
NOTE K - Costs Associated with Liquidation
Corporate payroll and operating costs during liquidation are based upon the
assumption that corporate functions would be required to oversee the liquidation
process. Corporate payroll/overhead costs of $141.8 million are calculated using
the pay and benefits ($27 million/month) for 100% of employees of AWI for three
months, for 50% of employees of AWI for three months, and for 25% of employees
of AWI for three months.
Chapter 7 Trustee Fees include those fees associated with the appointment of a
chapter 7 trustee in accordance with Section 326 of the Bankruptcy Code. Trustee
fees are estimated based on historical experience in other similar cases and are
calculated at 3% of the total cash generated during the liquidation.
Chapter 7 Professional Fees include legal and accounting fees incurred during
the nine-month liquidation period. Monthly professional fees are assumed to be
$300,000 per month during the beginning of the chapter 7 liquidation and will
last for nine months.
In addition, a fee of 3% was assumed to reflect the cost relating to the sale of
non-debtor entities.
The costs of administering a chapter 7 liquidation are estimated as follows:
Corporate payroll/Overhead Costs $141.8 million
Trustee Fees $22.3 million
Professional Fees $2.7 million
Wind-down Costs $25.3 million
Total $192.0 million
NOTE L - Secured Creditor Claims
For purposes of the Liquidation Analysis, AWI's management believes that the
only significant secured claims are related to capital lease obligations,
utility and mechanic's liens, and the St. Helen's debt. AWI's management
believes that the COLI claims will be satisfied by the insurance policies to the
extent these policies have value.
NOTE M - Administrative and Priority Claims
Administrative and priority claims include postpetition trade payables and
accrued expenses, priority tax claims and other claims. Postpetition accrued
expenses include estimates of additional administrative and priority claims in a
chapter 7 case.
NOTE N - Prepetition Unsecured Claims and Present and Future Asbestos Personal
Injury Claims
For purposes of the Liquidation Analysis, AWI's management has assumed that
unsecured claims will consist of Asbestos Personal Injury Claims (net of
insurance at book value), and all other Unsecured Claims, including prepetition
accounts payable, prepetition accrued expenses, subordinated claims, and
unsecured claims. AWI's management has assumed that future, unknown Asbestos
Personal Injury Claims either will be treated as "claims" under section 101(5)
of the Bankruptcy Code or will receive some allocation of value from the
liquidation of AWI's assets to enable payment of such claims. Unsecured claims
do not represent net intercompany claims against AWI of $420.1 million, and, if
such claims were included and paid pari passu with other unsecured claims, the
percentage recovery for creditors would be lower.
E-5
EXHIBIT "F"
SUBSIDIARIES OF ARMSTRONG WORLD INDUSTRIES, INC.
AWI'S DIRECTLY OWNED DIRECT SUBSIDIARIES JURISDICTION OF INCORPORATION
Armstrong Cork Finance Corporation Delaware
Armstrong Enterprises, Inc. Vermont
Armstrong Foundation (non-profit) Pennsylvania
Armstrong Holdings Canada, Inc. Delaware
Armstrong Realty Group, Inc. Pennsylvania
Armstrong Ventures, Inc. Delaware
Armstrong Wood Products, Inc. ("AWP") Delaware
Armstrong World Industries Asia, Inc. Nevada
Armstrong World Industries (Delaware) Inc. Delaware
Armstrong World Industries (India) Inc. Nevada
Armstrong World Industries Latin America, Inc. Nevada
Armstrong.com Holding Company Delaware
AWI Licensing Company Delaware
A W I (NEVADA), INC. Nevada
Charleswater Products, Inc. Delaware
Chemline Industries, Inc. Delaware
Desseaux Corporation of North America Delaware
IWF, Inc. Nevada
Natural Plastic Research Institute Delaware
Nitram Liquidators, Inc. Delaware
Worthington Armstrong Venture
(50%-owned unincorporated affiliate) ("WAVE")
AWI'S DIRECTLY OWNED FOREIGN SUBSIDIARIES JURISDICTION OF INCORPORATION
AIPB SPRL Belgium
Armstrong (Floor) Holdings, B.V. Netherlands
Armstrong (Floor) Holdings Ltd. United Kingdom
Armstrong (Japan) K.K. (IN LIQUIDATION) Japan
Armstrong (Singapore) Pte. Ltd. Singapore
Armstrong (U.K.) Investments United Kingdom
Armstrong Architectural Products S.L. Spain
Armstrong Building Products United Kingdom
Armstrong Building Products B.V. Netherlands
Armstrong Building Products Company (Shanghai) Ltd. PRC
Armstrong Building Products G.m.b.H. Germany
Armstrong Building Products S.A. France
Armstrong Building Products S.r.l. Italy
Armstrong DLW AG ("DLW") Germany
Armstrong Europa G.m.b.H. Germany
Armstrong Europe Services United Kingdom
Armstrong FSC, Ltd. Bermuda
Armstrong Floor Products Europe Ltd. United Kingdom
Armstrong Floor Products Europe Ltd. (Rep Office) Spain
Armstrong Floor Products Europe S.a.r.l. France
Armstrong Metal Ceilings Limited United Kingdom
Armstrong Metalldecken Holding AG ("AWI METALLDECKEN") Switzerland
Armstrong World do Brasil Ltda. Brazil
Armstrong World Industries (Australia) Pty. Ltd. Australia
Armstrong World Industries (China) Ltd. PRC
Armstrong World Industries (H.K.) Limited Hong Kong
Armstrong World Industries (India) Private Limited India
Armstrong World Industries (Thailand) Ltd. Thailand
Armstrong World Industries AB Sweden
Armstrong World Industries Canada Ltd. Canada
Armstrong World Industries Holding G.m.b.H. Germany
Armstrong World Industries Ltd. United Kingdom
Armstrong World Industries Mauritius Mauritius
Armstrong World Industries Pty. Ltd. Australia
Armstrong World Industries de Mexico, S.A. de C.V. Mexico
Liberty Commercial Services Ltd. Bermuda
AWP'S DOMESTIC SUBSIDIARIES JURISDICTION OF INCORPORATION
Bruce Hardwood Flooring LLC Delaware
Hartco Flooring Company Tennessee
Robbins Hardwood Flooring, Inc. Delaware
Triangle Pacific International LLC Delaware
Worldwide Kitchens, Inc. Delaware
AWP'S FOREIGN SUBSIDIARIES JURISDICTION OF INCORPORATION
Bruce Hardwood Floors Mexico, S.A. de C.V. Mexico
Servitec Mexico, S.A. de C.V. Mexico
Bruce Hardwood Floors (UK) Limited United Kingdom
Bruce Chile Distribuidora Limitada Chile
DLW'S DOMESTIC SUBSIDIARIES JURISDICTION OF INCORPORATION
DDSS North America, Inc. Delaware
Desso (U.S.A.) Inc. Pennsylvania
DLW'S FOREIGN SUBSIDIARIES JURISDICTION OF INCORPORATION
"Marka" Bodenbelags-Vertriebs-GmbH Germany
Armstrong DLW Belgium N.V. Belgium
Armstrong DLW Licensing GmbH Germany
Birla-DLW Ltd. India
DLW (Schweiz) AG Switzerland
DLW Austria Gesellschaft m.b.H. Austria
DLW Beteiligungs GmbH Germany
DLW Bodenbelags GmbH Germany
DLW Financial Services Finanzierungsvermittlungs-GmbH Germany
DLW Floorings Ltd. (LIQUIDATION IN PROCESS/PLANNED) United Kingdom
DLW France S.a.r.l. France
DLW Iberica S.A. Spain
DLW Italia S.p.A. (PLANNED NAME CHANGE IN 04/03) Italy
DLW Nederland B.V. Netherlands
DLW Norge A/S Norway
DLW Scandinavia A/S Denmark
DLW Versicherungs-und Werbevermittlungs-GmbH Germany
DLW vybaveni interieru s.r.o. Czech Republic
Desso Asia Pacific Pte. Ltd. Singapore
Desso Australia Pty. Ltd. Australia
Desso Belgie Belgium
Desso Dendermonde Belgium
Desso DLW Sports Systems Belgium
Desso DLW Sports Systems B.V. Netherlands
Desso DLW Sports Systems GmbH Germany
Desso DLW Sports Systems Limited United Kingdom
Desso DLW Sports Systems S.A. Spain
Desso DLW Sports Systems S.a.r.l. France
F-2
Desso DLW Sports Systems Srl. Italy
Desso DLW Textil GmbH Germany
Desso Danmark A/S Denmark
Desso Esco Espana S.A. Spain
Desso Esco Italia S.p.A. Italy
Desso Esco (UK) Limited United Kingdom
Desso France SAS France
Desso Home B.V. Netherlands
Desso Limited United Kingdom
Desso Oss B.V. Netherlands
Desso Ltd. United Kingdom
Desso Waalwijk B.V. Netherlands
Indol Grundstucks-Verwaltungs Gesellschaft mbH & Co. OHG Germany
Roder GmbH Sitzmobelwerke Germany
Tapijtfabriek H. Desseaux N.V. Netherlands
AWI METALLDECKEN'S DOMESTIC SUBSIDIARIES JURISDICTION OF INCORPORATION
Gema Metal Ceilings, Inc. Delaware
AWI METALLDECKEN'S FOREIGN SUBSIDIARIES JURISDICTION OF INCORPORATION
Argenta Ltd. Hong Kong
Argenta Pte. Ltd. Singapore
Armstrong Metalldecken AG Switzerland
Armstrong Metalldecken GmbH Austria
Armstrong Metalldecken Management und Beratung AG Switzerland
Gema Metal Ceilings (Asia-Pacific) Pte. Ltd. Singapore
Gema Yapi Elemanlari Ticaret AS Turkey
Phonex-Gema AG Switzerland
WAVE'S FOREIGN SUBSIDIARIES
Perfiles y Techos, S.L. (known as Peytesa) Spain
Worthington Armstrong Metal Products Co. (Shanghai) Ltd. PRC
Worthington Armstrong UK Limited United Kingdom
Worthington Armstrong Venture Europe S.A. France
F-3