EXHIBIT 99.2
ARMSTRONG
DISCLOSURE STATEMENT, DATED __________ ___,
2003, FOR THE THIRD AMENDED PLAN OF REORGANIZATION
OF ARMSTRONG WORLD INDUSTRIES, INC.
THE THIRD 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 THIRD 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 THIRD 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 third 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 3 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......................................................................22
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...........................................33
9. Other Litigation................................................................................35
10. Settlement of Claims............................................................................38
11. Settlement and Release of Intercompany Claims...................................................39
12. Department of Labor Investigation...............................................................39
13. Delisting of Holdings' Common Stock and Certain of AWI's Debt Securities
from the New York Stock Exchange................................................................40
V. The Plan of Reorganization..........................................................................................41
A. Classification and Treatment of Claims and Equity Interests in AWI........................................41
1. Administrative Expenses.........................................................................41
2. Priority Tax Claims.............................................................................44
3. Class 1: Priority Claims.......................................................................45
4. Class 2: Secured Claims........................................................................45
5. Class 3: Convenience Claims....................................................................46
6. Class 4: Asbestos Property Damage Claims.......................................................46
7. Class 5: COLI Claims...........................................................................47
8. Class 6: Unsecured Claims other than Convenience Claims........................................48
9. Class 7: Asbestos Personal Injury Claims.......................................................49
10. Class 8: Environmental Claims..................................................................51
11. Class 9: Affiliate Claims......................................................................51
12. Class 10: Subsidiary Debt Guarantee Claims.....................................................51
13. Class 11: Employee Benefit Claims..............................................................52
14. Class 12: AWWD's Equity Interests in AWI.......................................................52
B. Conditions to Confirmation................................................................................53
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C. Conditions Precedent to the Effective Date under the Plan.................................................55
D. Description of the Reorganization Consideration...........................................................56
E. 144A Offering.............................................................................................59
F. Exit Facility.............................................................................................59
G. Executory Contracts and Unexpired Leases..................................................................59
H. Insurance Policies and Agreements.........................................................................60
I. Indemnification and Reimbursement Obligations.............................................................61
J. Compensation and Benefit Programs.........................................................................62
K. Cancellation of Existing Debt Securities..................................................................64
L. Expiration of the Retention Period........................................................................64
M. Compensation of the Applicable Trustees...................................................................64
N. Listing of the New Common Stock...........................................................................65
O. Corporate Reorganization Actions..........................................................................65
P. Holdings Plan of Liquidation..............................................................................66
Q. Distributions Under the Plan..............................................................................67
1. Distribution Date...............................................................................67
2. Disputed Unsecured Claims Reserve...............................................................68
3. Timing of Distributions under the Plan..........................................................68
4. Fractional Shares...............................................................................69
5. Provisions for Treatment of Disputed Claims.....................................................69
6. Amendments to the Claims Settlement Guidelines..................................................69
7. Distribution of Unclaimed Property..............................................................69
R. Discharge of AWI..........................................................................................69
S. Modification of the Plan..................................................................................70
T. Revocation or Withdrawal of the Plan......................................................................70
U. Rights of Action..........................................................................................70
V. Dissolution of the Committees.............................................................................71
W. Exculpation...............................................................................................71
X. Supplemental Documents....................................................................................71
VI. The Asbestos PI Trust...............................................................................................72
A. General Description of the Asbestos PI Trust..............................................................72
1. Creation and Purposes of the Asbestos PI Trust..................................................72
2. The Asbestos PI Trustees........................................................................72
3. The Trustees' Advisory Committee................................................................73
4. The Future Claimants' Representative............................................................73
5. Transfer of Certain Property to the Asbestos PI Trust...........................................74
6. Ability to Amend Asbestos PI Trust Documents....................................................76
7. Asbestos PI Trust Distribution Procedures.......................................................76
B. The Asbestos PI Insurance Asset...........................................................................87
C. The Asbestos PI Permanent Channeling Injunction...........................................................88
D. Application of the Claims Trading Injunction to Asbestos Personal Injury Claims...........................91
E. Compliance with QSF Regulations...........................................................................91
VII. The Asbestos PD Trust...............................................................................................92
A. Creation of Asbestos PD Trust.............................................................................92
1. General Description of the Asbestos PD Trust....................................................92
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2. The Asbestos PD Trustees........................................................................92
3. Transfer of Certain Property to the Asbestos PD Trust...........................................92
B. Asbestos PD Claims Resolution Procedures..................................................................93
C. Discharge of Asbestos Property Damage Claims..............................................................93
D. Application of the Claims Trading Injunction to Asbestos Property Damage Claims...........................93
VIII. Confirmation and Consummation Procedure.............................................................................94
A. Solicitation of Votes.....................................................................................94
B. The Confirmation Hearing..................................................................................94
C. Confirmation..............................................................................................95
1. Acceptance......................................................................................95
2. Unfair Discrimination and Fair and Equitable Tests..............................................95
3. Feasibility.....................................................................................96
4. Best Interests Test.............................................................................96
D. Consummation..............................................................................................97
IX. Management of Reorganized AWI.......................................................................................98
A. Board of Directors and Management.........................................................................98
1. Composition of the Board of Directors...........................................................98
2. Identity of Officers............................................................................98
B. Compensation of Executive Officers.......................................................................100
C. Incentive Compensation Plans and New Long-Term Incentive Plan............................................100
D. Management Contracts.....................................................................................102
E. Amendment and Restatement of AWI's Articles of Incorporation and By-Laws.................................102
X. Exemptions from Securities Act Registration........................................................................103
A. Stockholder and Registration Rights Agreement............................................................104
B. Issuance of New Warrants................................................................................105
XI. Reorganization Value...............................................................................................106
XII. Risk Factors.......................................................................................................110
A. Overall Risks to Recovery by Holders of Claims...........................................................110
1. Ability to Refinance Certain Indebtedness......................................................110
2. Ownership by the Asbestos PI Trust.............................................................110
3. Dividend Policies..............................................................................110
4. Projected Financial Information................................................................110
5. Value of Consideration to Be Distributed under the Plan........................................111
B. The Asbestos PI Permanent Channeling
Injunction.........................................................................................................111
C. Absence of Public Market for the Plan Notes, New Common Stock and
New Warrants.......................................................................................................111
D. Certain Provisions of AWI's Amended and Restated Articles of Incorporation, Bylaws and
the Pennsylvania Business Corporation Law..........................................................................111
XIII. Certain Federal Income Tax Consequences of the Plan................................................................112
A. Consequences to AWI......................................................................................112
1. Cancellation of Debt...........................................................................112
2. Limitation on NOL Carryforwards and Other Tax Attributes.......................................113
3. Alternative Minimum Tax........................................................................114
4. Treatment of the Asbestos PI Trust and Asbestos PD Trust.......................................114
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B. Consequences to Holders of Unsecured Claims and Convenience Claims.......................................115
1. Gain or Loss - Generally.......................................................................116
2. Treatment of Unsecured Claims that Constitute Securities.......................................116
3. Distributions in Discharge of Accrued but Unpaid Interest......................................117
4. Ownership and Disposition of the Plan Notes....................................................117
5. Disposition of New Common Stock................................................................119
C. Consequences to Holders of Asbestos Personal Injury Claims...............................................119
D. Consequences to Holders of Asbestos Property Damage Claims...............................................119
E. Information Reporting and Withholding....................................................................120
XIV. Alternatives to Confirmation and Consummation of the Plan..........................................................121
A. Liquidation under Chapter 7..............................................................................121
B. Alternative Plan of Reorganization.......................................................................121
XV. Conclusion and Recommendation......................................................................................122
iv
DISCLOSURE STATEMENT, DATED __________ __,
2003, FOR THE THIRD 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 third amended chapter 11 plan of reorganization (the "PLAN")
of AWI, dated April 30, 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 April 21, 2003 (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, 2002, (ii) [Quarterly Report on Form 10-Q for the period
1
ended March 31, 2003], 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
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.
2
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 Indirect PI Trust 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.
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
3
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.
===========================================================================
4
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 each series 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 each series 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 each series of
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 million 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
6
Section V.D.1, entitled, "THE PLAN OF REORGANIZATION -
Description of the Reorganization Consideration - New Common
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.
>> 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
million, 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 $1,650 million, 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 The holder of the Equity Interests in AWI will receive Impaired Yes N/A
Interests in AWI the New Warrants (which will be distributed in accordance
with the Holdings Plan of Liquidation, if approved).
- ---------------------------- ----------------------------------------------------------- ---------------- ------------ -------------
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, or such later date as the Bankruptcy Court
may establish upon request by Reorganized AWI, for cause shown; provided,
however, that in no event shall the Initial Distribution Date be more than
forty-five (45) days after the Effective Date) and on subsequent Distribution
Dates. 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.
9
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, 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
U.S. from worldwide producers is apparent in Armstrong's businesses. Over recent
13
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
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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 March 14, 2003, AWI
filed the First Amended Plan of Reorganization. On April 3, 2003, AWI filed the
Second Amended Plan of Reorganization. On April 30, 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:
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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)
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:
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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)
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:
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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)
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.
21
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
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.
22
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.
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
23
>> 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.
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 21, 2003, the Debtors filed
an amended Schedule F (Unsecured Claims) with the Bankruptcy Court pursuant to
which an additional 435 of these 7,228 Scheduled Claims in the total amount of
approximately $20.8 million have been eliminated (amended to $0.00), and 127 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 20, 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
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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
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
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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.
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
26
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.
(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.
On April 4, 2003, the Bankruptcy Court entered order approving the PD Settlement
Motion. A total of 97 Asbestos Property Damage Claims remain 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
27
Case agreed or until ordered by the court overseeing the Chapter 11 Case or the
court before which the Maertin Coverage Case was pending.
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.
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(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
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
29
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
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.
AWI expects that, from and after the Effective Date, the Asbestos PI Trust will
pursue the Pennsylvania Lawsuit. Consistent with AWI's obligation to cooperate
with the Asbestos PI Trust in connection with, inter alia, the Asbestos PI
Insurance Asset, AWI may be required, however, to remain as a named plaintiff in
the Pennsylvania Lawsuit and pursue recovery from Liberty Mutual at the cost and
expense of the Asbestos PI Trust. Pursuant to the Plan, AWI does not seek to
modify the right of AWI, Reorganized AWI, the Asbestos PI Trust, or Liberty
Mutual to assert claims and defenses in any appropriate forum, including,
without limitation, in the Pennsylvania Action.
(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 the property damage coverage of primary policies
issued to AWI from 1942 to 1981, although slightly less than $7 million of this
30
coverage was issued by a now-insolvent insurer. There is approximately $15
million in remaining excess property damage 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.
Those policies contain exclusions relating to asbestos-related bodily injury
claims. The $345 million in coverage available after 1976 is exclusive of
policies that have been settled and released, of policies that contain
exclusions relating to asbestos-related property-damage claims, and of policies
that were issued by now-insolvent insurance companies. As a result, there are
gaps in coverage in AWI's excess coverage program. Most of the coverage
available to pay Asbestos Property Damage Claims is subject to a final,
non-appealable judgment addressing the coverage available under the policies for
asbestos-related property damage claims. See Armstrong World Industries, Inc. v.
Aetna Casualty and Surety Co., 52 Cal. Rptr. 2d 690 (Cal. Ct. App. 1996).
Travelers contends that certain provisions of the Plan, if adopted and
implemented, would violate Travelers' contractual rights and the contractual
obligations of AWI, thereby adversely impacting and/or voiding any coverage that
might otherwise be available for the payment of Asbestos Property Damage Claims
against AWI. Thus, there is a material risk that confirmation of the Plan itself
could reduce, or eliminate entirely, AWI's projected availability of insurance
proceeds from Travelers for Asbestos Property Damage Claims. (2)
First, Travelers contends that the Plan as presently structured would violate
their contractual rights to pay covered, meritorious claims only as they become
due, not based upon an estimation of such claims. Pursuant to certain provisions
in the Plan, confirmation purportedly may be deemed to constitute an
adjudication of liability against AWI for Asbestos Property Damage Claims in an
amount equal to $2 million, $1 million, or $500,000 if Class 4 votes to accept
the Plan, or an amount to be estimated by the Bankruptcy Court if Class 4 votes
to reject the Plan. To the extent that the Plan contemplates that Travelers may
be called upon to pay, immediately upon confirmation of the Plan, a lump-sum
amount based on an estimate of liability, Travelers contends that any such
attempt to accelerate coverage in such a manner would violate Travelers'
contractual right to pay actual covered claims only as they become due, thereby
adversely impacting and/or voiding coverage otherwise available for Asbestos
Property Damage Claims against AWI.
Second, to the extent the Plan contemplates that any insurance policies issued
by Travelers to AWI can be partially assigned to the Asbestos PD Trust for the
purpose of satisfying any Asbestos Property Damage Claims, Travelers contends
that such a partial assignment would be invalid and would relieve Travelers of
any obligations to provide coverage under such policies. Travelers further
contends that a violation of any anti-assignment restrictions could adversely
impact and/or void coverage otherwise available for Asbestos Property Damage
Claims against AWI.
Third, Travelers contends that the Plan as presently structured would violate
its contractual rights to control and/or associate in the defense, investigation
and settlement of Asbestos Property Damage Claims against AWI. The Plan and the
Asbestos PD Claims Resolution Procedures promulgated thereunder do not permit
Travelers to have any role or involvement in the resolution of Asbestos Property
Damage Claims. Travelers contends that its exclusion from the claims resolution
process under the Plan would constitute a breach of its contractual rights to
control and/or associate in the defense, investigation and settlement of
Asbestos Property Damage Claims against AWI, thereby adversely impacting and/or
voiding any coverage obligations it might otherwise owe to AWI. If Travelers'
contention were to be upheld, confirmation of the Plan could eliminate entirely
AWI's insurance coverage from Travelers for Asbestos Property Damage Claims
determined through the Asbestos PD Claims Resolution Procedures.
Fourth, Travelers contends that the Plan as presently structured would violate
the continuing obligations of AWI that are conditions of coverage, including
without limitation their continuing duty to cooperate with Travelers in the
defense and investigation of Asbestos Property Damage Claims. Moreover, any
failure of AWI and/or the Asbestos PD Trust to cooperate with Travelers in the
defense and investigation of Asbestos PD Claims post-confirmation may further
violateAWI's duty of cooperation with Travelers. A violation of AWI's duty of
cooperation with Travelers could adversely impact and/or void coverage otherwise
available for Asbestos Claims against AWI.
- ----------------------------------
(2) The remaining paragraphs of this section represent contentions of Travelers
with respect to the Plan and do not reflect the views of AWI. AWI disputes
these contentions by Travelers.
31
(E) LIBERTY MUTUAL'S CONTENTIONS REGARDING THE PLAN.
Liberty Mutual asserts that the Disclosure Statement does not disclose the risks
that AWI may have no insurance coverage if it does not prevail in the
Pennsylvania Lawsuit, as described in section IV.C.7(c) of the Disclosure
Statement, or that either AWI's conduct negotiating the terms of the Plan or the
terms of the Plan and its Exhibits, may violate or breach the insurance policies
thereby voiding insurance coverage.
Liberty Mutual also asserts that the Plan and certain of the proposed findings
that are set forth in section 7.16 of the Plan impermissibly alter rights and
obligations under insurance policies issued by Liberty Mutual. Liberty Mutual
asserts that the Plan, the Confirmation Order, and/or the Asbestos PI Permanent
Channeling Injunction must be modified as follows:
1. The Asbestos PI Permanent Channeling Injunction set forth in sections
1.28 of the Plan and 3.2(g), as described in section VI.C of the
Disclosure Statement, and any order confirming the Plan should be
modified to make clear that they are not intended and will not operate
to (a) enjoin Liberty Mutual from raising any and all counterclaims
and defenses to coverage it may have in the Pennsylvania Lawsuit or in
any other forum or proceeding against AWI, Reorganized AWI, the
Asbestos PI Trust, or their respective successors or assigns; (b)
eliminate, alter or otherwise preclude any counterclaims and/or
defense to coverage available under the applicable insurance policies
prior to confirmation, which counterclaims and/or defenses shall
similarly be available to Liberty Mutual after the Effective Date in
the Pennsylvania Lawsuit or any other forum or proceeding against AWI,
Reorganized AWI, the Asbestos PI Trust, or their respective successors
or assigns; (c) discharge, prevent, or preclude Liberty Mutual from
seeking recovery of retrospective premiums, setoffs, deductibles or
other appropriate adjustments it may have from AWI, Reorganized AWI,
the Asbestos PI Trust, or their respective successors and assigns; (d)
limit or reduce the amount of retrospective premiums, setoffs,
deductibles or other appropriate adjustments it may collect from AWI,
Reorganized AWI, the Asbestos PI Trust or their respective successors
and assigns; or (e) preclude or prevent Liberty Mutual from fully
litigating any disputed issues regarding retrospective premiums,
setoffs, deductibles or other appropriate adjustments in the
Pennsylvania Lawsuit or in any forum or proceedings against AWI,
Reorganized AWI, the Asbestos PI Trust, or their respective successors
or assigns.
2. The Plan should state that AWI does not intend to estimate or to seek
any estimation of Asbestos Personal Injury Claims for the purpose of
aggregating and/or accelerating Liberty Mutual's alleged insurance
obligation, either in the Bankruptcy Court, the Asbestos PI Trust or
any other forum or proceeding, including, without limitation, the
Pennsylvania Lawsuit. Moreover, to the extent that any estimation of
Asbestos Personal Injury Claims is undertaken, either by the
Bankruptcy Court, the Asbestos PI Trust, or any other forum or
proceeding, including, without limitation, the Pennsylvania Lawsuit,
such estimation shall in no way bind Liberty Mutual nor shall such
estimation be admissible in any Court or proceeding as to the amount
of AWI's Asbestos Personal Injury Claims or liability therefor.
3. If the Court determines that the insurance policies are executory
contracts which are subject to assumption and assignment, AWI must
meet all of the requirements of section 365 of the Bankruptcy Code.
Accordingly, any assignment by AWI of the insurance policies must be
an assignment of the insurance policies in their entirety, and such
assignment shall in no way (a) affect or preclude Liberty Mutual's
right to contest any such assignment or (b) otherwise alter or limit
Liberty Mutual's rights under the insurance policies. Further, if such
assignment occurs, section 8.5(a) of the Plan, as described in section
V.H of the Disclosure Statement, is clarified to make clear that all
issues relating to the cure of all monetary and non-monetary defaults
under insurance policies issued by Liberty Mutual shall be resolved in
the Pennsylvania Lawsuit.
4. The Plan provision in section 7.16(a)(iv), as described in section V.B
of the Disclosure Statement, relating to the fairness and
reasonableness of the resolution of Asbestos Personal Injury Claims as
set forth in the Asbestos PI Trust, the Asbestos PI Trust Agreement,
the Asbestos PI Trust Distribution Procedures and Articles X and XI of
the Plan shall not bind Liberty Mutual nor preclude Liberty Mutual
32
from asserting its right to control the defense and settlement of
Asbestos Personal Injury Claims or from disputing such resolution as
an obligation voluntarily assumed by AWI without the consent of
Liberty Mutual, in violation of the Policies.
5. The Plan provision set forth in section 7.16(a)(iv), as described in
section V.B of the Disclosure Statement, relating to the Plan and its
Exhibits shall not bind Liberty Mutual nor preclude it from asserting
that the Plan, the Exhibits and the negotiations leading to the Plan
violate and/or breach the applicable insurance policies, including,
without limitation, AWI's obligation or duty to cooperate, Liberty
Mutual's right to control the defense and settlement of claims, AWI's
duty to obtain Liberty Mutual's consent to settle claims or assign the
policies and/or that such violations or breaches preclude coverage for
Asbestos Personal Injury Claims
6. Section III.D.2 of the Disclosure Statement, section 7.16 of the Plan
and any order confirming the Plan shall be amended to provide that (a)
AWI has no obligation or agreement to indemnify ACandS or Armstrong
Contracting and Supply Corporation for Asbestos Personal Injury Claims
arising from the activities of ACandS or Armstrong Contracting and
Supply Corporation; and (b) Liberty Mutual did not provide
comprehensive general liability insurance to ACandS or Armstrong
Contracting and Supply Corporation and assumes no liability for
Asbestos Personal Injury Claims arising from the activities of ACandS
or Armstrong Contracting and Supply Corporation.
7. The Plan provision set forth in section 7.16(xx), as described in
Section V.B.1.(xxvi) of the Disclosure Statement, relating to
reimbursement of the Asbestos PD Trust Funding Obligation from
Reorganized AWI shall not bind Liberty Mutual nor preclude it from
asserting entitlement to such reimbursement, including, but not
limited to, deductibles, premiums, retrospective premiums, or other
charges, nor affect any obligation of Reorganized AWI or the Asbestos
PD Trust under the Policies to provide such reimbursement.
8. The injunction set forth in section 3.2(d) of the Plan, as described
in section VII.C of the Disclosure Statement, shall not eliminate,
alter or otherwise preclude any defense to coverage available to
Liberty Mutual under the applicable insurance policies prior to
confirmation and such defenses shall be available to Liberty Mutual
after the Effective Date.
9. The Disclosure Statement provisions set forth in sections V.A.6 and
V.B.4. relating to estimation of the aggregate amount of Asbestos PD
Claims shall be for the purpose of determining the fairness and
feasibility of the Plan and shall not bind Liberty Mutual nor require
it to accelerate payments to the Asbestos PD Trust.
AWI believes that the provisions of the Plan, including the proposed findings
set forth in section 7.16, are consistent with rights and obligations under the
Liberty Mutual Policies and applicable law and that none of the modifications
that Liberty Mutual has proposed to the Plan, the Confirmation Order, or the
Asbestos PI Channeling Injunction is either necessary or appropriate.
8. LITIGATION INVOLVING THE CENTER FOR CLAIMS RESOLUTION.
The CCR objects to confirmation of the Plan on the ground that its claims have
been misclassified in Class 7 and not treated as Unsecured Claims under Class 6;
i.e., the CCR objects to the characterization of its claims as Indirect PI Trust
Claims. If the CCR's plan confirmation objection is sustained, the Plan may have
to be amended. The Plan may only be amended with the consent of the Unsecured
Creditors' Committee, the Asbestos PI Claimants' Committee, and the Future
Claimants' Representative. In addition, as discussed below, among other claims
now in litigation among the CCR, AWI, and other parties is the CCR's claim that
it is a secured creditor to the extent of certain insurance proceeds it alleges
were assigned to it. To the extent the CCR prevails in its claim as a secured
creditor, there will be a concomitant diminishment of insurance proceeds able to
be transferred to the Asbestos PI Trust for the purpose of payments to claimants
thereto.
33
(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
("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 "Indirect
PI Trust 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.
34
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.
(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
35
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
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,
36
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.
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
37
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").
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.
38
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
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 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 investigating the validity of AWI's use of certain
employee salary deferrals from 1996 to 2000, in the approximate aggregate amount
of $33.4 million, to fund debt payments as provided for by the Armstrong
Employee Stock Ownership Plan (the "ESOP"). AWI is cooperating with the DOL to
address its questions and concerns about the transactions and has made current
and former employees and directors available for interviews. AWI believes that
it fully complied with all applicable laws and regulations governing the ESOP
and that its current and former directors and employees have fully complied with
their obligations. If the DOL asserts a claim with respect to such employee
salary deferrals, it may seek to assert such claim against AWI and certain of
AWI's current and former directors and employees.
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.
AWI believes that (i) any claim against AWI is barred as a result of the DOL's
failure to file a timely proof of claim in the Chapter 11 Case, and (ii) the
DOL's claims are barred in part by applicable statutes of limitation and are
otherwise wholly without merit. In connection with the DOL's investigation of
possible claims against AWI and its current and former employees and directors,
AWI's fiduciary liability insurer is providing a defense (subject to a $250,000
deductible), but has preliminarily reserved its rights with respect to coverage
of any such claims, which are currently unspecified. Moreover, any claims
against any employee or director of AWI or Holdings that served as an officer or
39
director at any time after the Commencement Date would be subject to
indemnification by AWI pursuant to section 8.6 of the Plan. See Section V.I.,
entitled "The Plan of Reorganization - Indemnification and Reimbursement
Obligations."
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.
40
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 March 21, 2003 (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);
41
>> 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 March 21, 2003 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.
(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.
42
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:
43
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.
44
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.
45
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
compensatory damages (such as proximate, consequential, general, and special
46
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
agreements governing or instruments evidencing such Claim, such allowed COLI
47
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) principal amount of each series of 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 each series 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 each series of 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
48
Plan) previously distributed to such holder on account of such Allowed Unsecured
Claim in any Distribution made prior thereto.
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 and/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 Indirect PI
Trust 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
brought directly by a past or present employee of AWI under an applicable
workers' compensation statute 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;
49
>> Claims and Demands relating to asbestos personal injuries under
settlement agreements executed by or on behalf of AWI prior to
the Commencement Date; and
>> Indirect PI Trust Claims, which include the following:
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 principal amount of each series of
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 each series 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 each series of 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, as soon
as practicable after the Effective Date, the New Warrants will be issued with
respect to Asbestos Personal Injury Claims; but the Plan provides that such
claimants have waived on behalf of themselves and the Asbestos PI Trust any
right to the New Warrants, and the New Warrants will be issued by Reorganized
50
AWI, without any action by, or any direction by, the Asbestos PI Trust or the
Asbestos PI Trustees, to AWWD or, if the Holdings Plan of Liquidation has been
approved, to Holdings (as the successor to AWWD under the Holdings Plan of
Liquidation).
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.
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:
51
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
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. The effect of this will be, among other things, that
Reorganized AWI will maintain the Armstrong World Industries Retirement Income
Plan in accordance with the plan document and the Employee Retirement Income
Security Act.
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 has been approved by the
board of directors and shareholders of Holdings as required by the Pennsylvania
BCL prior to the issuance of the New Warrants, 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 has not been approved by
the board of directors and requisite shareholders of Holdings prior to the
issuance of the New Warrants, the distribution of the New Warrants will be made
to AWWD. If Class 6 votes to reject the Plan, however, no distribution will be
52
made under the Plan from AWI's estate in respect of the Equity Interests in AWI,
but, in such event, Reorganized AWI will issue the New Warrants as provided in
section 10.1(b) of the Plan in respect of the Asbestos Personal Injury Claims to
Holdings (assuming that AWWD's existence has been terminated in accordance with
the Holdings Plan of Liquidation or, if not, to AWWD). 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.
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 are a fair, equitable and reasonable
resolution of the liabilities of AWI for Asbestos Personal Injury
Claims and Asbestos Property Damage Claims.
(v) The Plan complies with section 524(g) of the Bankruptcy Code.
(vi) 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.
(vii) 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.
(viii) 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.
(ix) 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.
53
(x) 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.
(xi) 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.
(xii) The actual amounts, numbers and timing of the future demands
referenced in section 7.16(a)(xi) of the Plan cannot be
determined.
(xiii) Pursuit of the demands referenced in section 7.16(a)(xi) 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.
(xiv) 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.
(xv) 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.
(xvi) 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.
(xvii) 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.
(xviii) Class 7 (Asbestos Personal Injury Claims) has voted, by at
least seventy-five percent (75%) of those voting, in favor of the
Plan.
(xix) 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.
(xx) 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.
54
(xxi) 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 prior registration under the Securities Act of 1933,
as amended.
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.
Travelers contends that certain of the conditions to confirmation of the Plan,
including, without limitation, the entry of a Confirmation Order setting forth
findings of fact and conclusions of law that may be relevant to rights and
obligations under AWI's insurance contracts, cannot be satisfied. Travelers
contends that the requested findings of fact and conclusions of law would
violate the Bankruptcy Code and are matters for a separate coverage lawsuit in a
court of competent jurisdiction. Moreover, Travelers contends that the requested
findings of fact and conclusions of law would violate its constitutional rights
to trial by jury and due process of law. Accordingly, Travelers contends that
the Confirmation Order cannot be entered to the extent it contains such findings
of fact and conclusions of law. AWI disputes Travelers' contentions.
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
55
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.
>> 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 the 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
56
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.
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%.
57
>> $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%.
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 prior to the issuance of the New
Warrants, 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; otherwise, the New Warrants will be issued to AWWD. 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.
58
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
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
59
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
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,
60
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. 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.
Some of the insurance policies issued to, or insurance agreements entered into
by, AWI prior to the Commencement Date provide coverage or a source of funding
for Asbestos Personal Injury Claims, Asbestos Property Damage Claims, and other
types of claims. The Plan allocates rights under such policies and agreements to
the entity that will have liability for such claims. The Asbestos PI Insurance
Asset is being transferred to the Asbestos PI Trust. If the Asbestos PD Trust is
created, the Asbestos PD Insurance Asset will be transferred to the Asbestos PD
Trust. Reorganized AWI will retain rights under the policies and agreements with
respect to other types of claims.
The Asbestos PD Insurance Asset consists exclusively of policies that have
separate limits for property damage claims or exclusions for Asbestos Personal
Injury Claims. None of the rights retained by Reorganized AWI will have the
effect of reducing the amount of the Asbestos PI Insurance Asset because the
only coverage that will be available to Reorganized AWI is coverage that does
not reduce any limits applicable to Asbestos Personal Injury Claims.
AWI believes that allocation of rights under the insurance policies and
agreements in accordance with the provisions of the Plan does not require the
consent of its insurers. Many courts have held that rights to proceeds of
insurance policies may be transferred without the consent of the insurers after
the events that trigger coverage under the policies have already occurred. Such
transfers have been approved in the context of the settlement of claims and in
the context of corporate transactions such as the sale of assets. Liberty Mutual
Insurance Company and Travelers Indemnity Company have asserted that any
transfers of rights under the insurance policies and agreements that are made
without their consent are not permitted by the terms of their policies and may
have the effect of voiding coverage. Other insurers may take the same position.
In the event that a court or arbitrator of competent jurisdiction should later
determine that the transfer of insurance rights to the Asbestos PI Trust or the
Asbestos PD Trust is invalid, the Plan provides that Reorganized AWI shall, at
the request of either Trust, pursue such rights on behalf of such Trust at the
expense of such trust, and assign any proceeds to such Trust.
Nothing contained in the Plan will constitute a waiver of any claim, right, or
cause of action that AWI, the Asbestos PI Trust, the Asbestos PD Trust (if
created), 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 four years following the Effective Date.
61
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 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.
62
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.
>> 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:
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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
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,
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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 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.
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. Neither Nitram nor Desseaux is one of the
entities that will merge with AWI, and neither Nitram nor
Desseaux or any of their respective creditors will be affected by
the Plan or its confirmation (except to the extent a creditor
asserts a claim directly against AWI).
>> The Existing AWI Common Stock will be cancelled.
>> 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.
>> 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
65
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
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."
If the requisite approvals of the board of directors and shareholders of
Holdings of the Holdings Plan of Liquidation are received prior to the issuance
of the New Warrants, 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. If the requisite approvals of
the board of directors and shareholders of Holdings of the Holdings Plan of
Liquidation have not been received by that time, the New Warrants will be issued
to AWWD. 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 during the interim period in which
such approval is sought (and, if necessary, for a reasonable transition period
thereafter) and, if the requisite approval of the Holdings Plan of Liquidation
by Holdings' shareholders is obtained, all expenses of administering the
performance and consummation of the Holdings Plan of Liquidation, including any
taxes incurred by Holdings in connection therewith. 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.
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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 SOLICITATION STATEMENT
WITH RESPECT TO APPROVAL BY HOLDINGS' SHAREHOLDERS OF A PLAN OF
DISSOLUTION, WINDING UP AND DISTRIBUTION FOR HOLDINGS. 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.
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, 2002. 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
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.
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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
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 Reorganized 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.
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4. FRACTIONAL SHARES.
No fractional shares of New Common Stock will be distributed, no Plan Notes will
be issued in an amount less than $1,000, 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 $1,000 will be rounded to the nearest $1,000
increment (with Plan Notes in denominations of $500 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 $1,000.
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
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
69
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 only, 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 only 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
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
70
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, any of the members of the Asbestos PD Committee,
AWWD, Holdings, or any of their officers, 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. Two of the initial Asbestos PI Trustees will each
serve two-year terms. At the end of that two-year period, the number of Asbestos
PI Trustees will be reduced from five (5) to three (3). The remaining three (3)
initial Asbestos PI Trustees, after consultation with the TAC and the Future
Claimants' Representative, will then decide who among their number will serve
the remainder of the three (3), four (4), and five (5) year terms. 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
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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.
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.
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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,
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) principal amount of each series of 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 each series 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 each series of 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.
74
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, as soon as practicable after the Effective
Date, the New Warrants will be issued by Reorganized AWI on account of the
Asbestos Personal Injury Claims; but the Plan provides that such claimants have
waived on behalf of themselves and the Asbestos PI Trust any right to the New
Warrants, and the New Warrants will be issued by Reorganized AWI, without any
action by, or any direction by, the Asbestos PI Trust or the Asbestos PI
Trustees, to AWWD or to Holdings, as the successor to AWWD consistent with the
provisions of section 7.25 of the Plan regarding the dissolution and winding up
of Holdings.
(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)
75
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.
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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DISEASE LEVEL SCHEDULED VALUE MEDICAL/EXPOSURE CRITERIA
Mesothelioma (Level VIII) $110,000 (1) Diagnosis of mesothelioma; and (2) credible
evidence of AWI Exposure.(3)
Lung Cancer 1 (Level (VII) $42,500 (1) Diagnosis of a primary lung cancer plus evidence of
an underlying Bilateral Asbestos-Related Nonmalignant
Disease,(4) (2) six months AWI Exposure prior to December
31, 1982, (3) Significant Occupational Exposure (5) 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.
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 w
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 Significa
Occupational Exposure may be individually evaluated, although
is not expected that such claims will be treated as having any
significant value, especially if the claimant is also a smoker.(6)
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
- -----------------------------------------
(3) As defined in the Asbestos PI Trust Distribution Procedures.
(4) 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.
(5) As defined in the Asbestos PI Trust Distribution Procedures.
(6) 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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DISEASE LEVEL SCHEDULED VALUE MEDICAL/EXPOSURE CRITERIA
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 $9,700
(Level III) 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 $3,700 (1) Diagnosis of a Bilateral Asbestos-Related Nonmalignant
Disease, and (2) (Level II) 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
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
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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 Commencement 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.
(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
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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 Commencement 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 Commencement 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
Indirect PI Trust 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 Commencement 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 Commencement 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 Commencement
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; 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.
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(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
Commencement 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 Commencement 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 Commencement 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 Commencement Date if the claim was tolled against AWI at the
time by an agreement or otherwise; (C) the filing of a claim after the
Commencement 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 Commencement 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
Commencement Date that is judicially enforceable by the claimant, (ii) a jury
verdict or non-final judgment in the tort system obtained prior to the
Commencement Date, or (iii) by a judgment that became final and non-appealable
prior to the Commencement 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 Commencement 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
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
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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 to 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
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.
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(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
Severe Asbestosis (Level IV) $42,500 $44,300 $140,000
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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
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
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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 histoy of the claimant's exposure
sufficient to establish a 10-year latency period. A finding by a physician after
the Petitrion Date (7) 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 Commencement 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 Commencement 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)
- -----------------------------------
(7)Because certain of the claimants obtained their medical evidence years ago in
connection with filing Asbestos Personal Injury Claims against AWI and/or other
defendants in the tort system before the Commencement Date, and did so to meet
then applicable evidentiary requirements that are different from those provided
in the Asbestos PI Trust Distribution Procedures, certain minor exceptions are
made for them from the medical evidentiary requirements required from all other
present and future claimants in order to be more fair to them and not to require
that they duplicate existing medical evidence and/or the costs of obtaining such
evidence. These exceptions will not cause any significant economic impact upon
the allocation of the funds of the Asbestos PI Trust as between present and
future claimants.
85
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
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.
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(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
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 Commencement Date; (b)
the claim was filed against another defendant in the tort system on or after the
Commencement 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 Commencement 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
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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
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.
IT IS THE INTENT OF THE PROVISIONS OF THE PLAN RELATING TO TREATMENT OF ASBESTOS
PERSONAL INJURY CLAIMS TO CHANNEL ALL SUCH CLAIMS (EXCEPT WORKERS' COMPENSATION
CLAIMS), REGARDLESS OF THEORY OF RECOVERY, AND REGARDLESS OF HOW THE CLAIM
ARISES, I.E., DIRECTLY OR INDIRECTLY, TO THE ASBESTOS PI TRUST. FOR EXAMPLE,
REGARDLESS OF WHETHER A CLAIM ARISES BY VIRTUE OF A PRODUCT LIABILITY THEORY OF
RECOVERY, A PREMISES LIABILITY THEORY OF RECOVERY, A CONTRACT THEORY OF RECOVERY
OR ANY OTHER THEORY OF RECOVERY, IF IT RELATES TO A PERSONAL INJURY (INCLUDING
MEDICAL MONITORING, FEAR OF INJURY, EMOTIONAL DISTRESS, LOSS OF CONSORTIUM OR
ANY OTHER INJURY OF OR RELATING TO A PERSON) IT WILL BE CHANNELED TO THE
ASBESTOS PI TRUST.
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;
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>> 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, 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
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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 (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."
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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 Indirect PI Trust 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."
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).
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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."
E. ASBESTOS PROPERTY DAMAGE INSURANCE COVERAGE RISK FACTORS
As discussed above at Section IV.C.7(d), entitled, "THE CHAPTER 11 CASE -
Significant Events During the Chapter 11 Case - Insurance Coverage Issues -
Insurance Coverage for Asbestos Property Damage Claims," Travelers contends that
the treatment of AWI's insurance contracts and the structure of the Asbestos PD
Trust, among other contemplated provisions of the Plan, would violate Travelers'
contractual rights and the contractual obligations of AWI, thereby adversely
impacting and/or voiding any coverage that might otherwise be available for
Asbestos Property Damage Claims against AWI. Thus, Travelers contends that there
is a significant risk that coverage for the Asbestos Property Damage Claims may
be vitiated by confirmation of the Plan. AWI disputes these contentions.
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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
94
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.
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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
96
dollar amount that would be generated from the liquidation of AWI's assets and
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 outside 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.
98
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.
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B. COMPENSATION OF EXECUTIVE OFFICERS.
The following table shows the compensation received by the Chief Executive
Officer and the four other highest paid individuals who served as executive
officers during 2002.
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------
---------------------------------------------
Awards Payout
------------------------------ -------------
Holdings Holdings
Restricted Securities LTIP All Other
Other Annual Stock Awards Underlying Payouts Compensation
Name Salary ($) Bonus ($) (8) Compensation ($)(9) ($) (10) Options/SARs(#) ($) (11) ($) (12)
- --------------------------- ------------ ------------ ------------------- -------------- --------------- ------------- ------------
Michael D. Lockhart 860,000 1,055,000 82,477 ----- ----- 2,241,000 25,776
- --------------------------- ------------ ------------ ------------------- -------------- --------------- ------------- ------------
C. W. Galbato 450,000 723,400 ----- ----- ----- 747,000 24,776
- --------------------------- ------------ ------------ ------------------- -------------- --------------- ------------- ------------
S. J. Senkowski 385,000 634,500 ----- ----- ----- 721,000 27,588
- --------------------------- ------------ ------------ ------------------- -------------- --------------- ------------- ------------
J. N. Rigas 330,000 640,875 ----- ----- ----- 355,350 25,776
- --------------------------- ------------ ------------ ------------------- -------------- --------------- ------------- ------------
M. J. Angello 340,000 474,700 ----- ----- ----- 310,254 27,778
- --------------------------- ------------ ------------ ------------------- -------------- --------------- ------------- ------------
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
- ---------------------------------
(8) The amounts disclosed for 2002 include payments under the Management
Achievement Plan and, where applicable, cash retention payments.
(9) Except for the income related to Mr. Lockhart during 2002, the aggregate
value does not exceed the lesser of $50,000 or 10% of shown salary and bonus.
Mr. Lockhart had income of $42,162 related to the personal use of the company
aircraft and related tax assistance of $37,053.
(10) The number and value of restricted stock held by each executive as of
January 31, 2003 is as follows: M. D. Lockhart - 100,000 ($66,000); S.J.
Senkowski - 668 ($441); M. J. Angello - 2,160 ($1,426).
(11) Payout for the 2001 Long-Term Cash Incentive Award
(12) The amounts disclosed for 2002 include:
a) Non-elective contribution by AWI to each individual's Bonus
Replacement Retirement Plan account: M. D. Lockhart - $20,000; C. W.
Galbato - $20,000; S. J. Senkowski - $20,000; J. N. Rigas - $20,000;
M. J. Angello - $20,000.
b) Match Account contributions under the Retirement Savings and Stock
Ownership Plan; M.D. Lockhart - $5,500; C.W. Galbato - $4,656; S.J.
Senkowski - $5,340; J. N. Rigas - $5,500; M. J. Angello - $5,500.
c) Taxable income related to company-paid life insurance benefits: M. D.
Lockhart - $276; C. W. Galbato - $120; J. N. Rigas - $276.
d) Present value costs of AWI's portion of 2002 premiums for split-dollar
life insurance: S. J. Senkowski - $2,248 and M. J. Angello - $2,278.
100
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
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
101
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.
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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.
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. The
Asbestos PI Claimants' Committee and the Future Claimants' Representative have
requested other provisions in the Stockholder and Registration Rights Agreement
to protect the rights of the Asbestos PI Trust, which currently are under
discussion.
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
with respect to the Plan Notes. The Asbestos PI Trust, however, will not be
permitted to demand registration of less than $100 million in aggregate
104
principal amount of Plan Notes (or such lesser amount if that the Asbestos PI
Trust may hold at such time), and, subject to any obligation of Reorganized AWI
to file a shelf registration statement with respect to the Plan Notes,
Reorganized AWI will not be required to effect more than one demand registration
in any nine-month period.
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 and unlimited "piggyback" rights with respect to
registrations by Reorganized AWI of its common stock.
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 Reorganized 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
without affording the minority holders the right to participate in such
transaction.
B. ISSUANCE OF NEW WARRANTS.
If Class 6 votes to reject the Plan, the New Warrants will be issued by
Reorganized AWI with respect to the Asbestos Personal Injury Claims, but the
Plan provides that such claimants have waived on behalf of themselves and the
Asbestos PI Trust any right to the New Warrants and that Reorganized AWI will
issue the New Warrants, without any action by, or any direction by, the Asbestos
PI Trust or the Asbestos PI Trustees, to Holdings (as the successor to AWWD
under the Holdings Plan of Liquidation) or to AWWD (if the Holdings Plan of
Liquidation has not been approved by the time of the issuance of the New
Warrants). AWI will seek a determination in the Confirmation Order that the
issuance of the New Warrants by Reorganized AWI to Holdings or AWWD, as
applicable, in accordance with the provisions of the Plan will not be subject to
registration under the Securities Act, inasmuch as Reorganized AWI will be
issuing the New Warrants directly to the holder of AWI's equity under the Plan.
105
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;
106
>> 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.
107
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
108
is based on a five-year projection of AWI's operating results. Lazard
discounted the projected cash flows using AWI's estimated weighted
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.
109
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
110
Financial Information also assumes that Reorganized AWI will be rated
"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.
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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
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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 (4.58% for ownership changes occurring in May
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. Although not entirely clear, it appears that the
application of this provision would be unaffected by whether AWI qualifies for
the special bankruptcy exception to the annual limitation (and built-in gain and
loss) rules of Section 382 discussed in the preceding section. 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. AWI
also has requested a confirmatory ruling with respect to the Asbestos PD Trust
(if created). 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.
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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
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.
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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
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
116
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.
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.
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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.
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.
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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.
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 Indirect PI Trust 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
119
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.
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.
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) certain transactions that
result 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. Holders are urged to consult their tax advisors
regarding these regulations and whether the transactions contemplated by the
Plan would be subject to these regulations and require disclosure on the
holders' tax returns.
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.
120
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).
121
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: __________________, 2003
Respectfully submitted,
ARMSTRONG WORLD INDUSTRIES, INC
122
INDEX
-----
144A OFFERING...............................................56
144A OFFERING PROCEEDS......................................57
2001 INSTALLMENT PAYMENT....................................29
ACANDS......................................................14
ADMINISTRATIVE EXPENSE BAR DATE.............................41
ADMINISTRATIVE EXPENSE BAR DATE ORDER.......................41
ADMINISTRATIVE EXPENSES.....................................41
ADR.........................................................29
AEI.........................................................66
AGENT.......................................................22
AMENDED MARKLEY CLASS PROOF OF CLAIM........................38
AMT........................................................114
ARMSTRONG/MARKLEY DEFENDANTS................................37
ASBESTOS PD COMMITTEE.......................................19
ASBESTOS PD PLAINTIFFS......................................26
ASBESTOS PD TRUST............................................5
ASBESTOS PERSONAL INJURY CLAIM..............................49
ASBESTOS PI CLAIMANTS' COMMITTEE.............................i
ASBESTOS PI TRUST............................................5
ASBESTOS PI TRUST AGREEMENT.................................72
ASBESTOS PI TRUST DISTRIBUTION PROCEDURES...................72
ASBESTOS PI VOTING TRUST CLAIMS.............................79
ASBESTOS PROPERTY DAMAGE CLAIM..............................46
AVERAGE VALUES..............................................76
AWI..........................................................i
AWP.........................................................52
AWWD.........................................................i
BANKRUPTCY CODE..............................................1
BANKRUPTCY COURT.............................................1
BANKRUPTCY COURT MOTION TO TRANSFER.........................37
BAR DATE....................................................23
BAR DATE NOTICE.............................................23
BAR DATE ORDER..............................................23
BARNES......................................................36
BARNES CASE.................................................36
BARNES CLAIM................................................36
BARNES COMPLAINT............................................36
BARNES MOTION TO TRANSFER...................................37
BARNES OBJECTION............................................36
BARNES PLAINTIFFS...........................................36
CCR.........................................................34
CCR MEMBERS.................................................34
CCR PREFERENCE CLAIM........................................34
CENTURY.....................................................29
CENTURY ADVERSARY PROCEEDING................................29
CENTURY ANSWER..............................................29
CENTURY COMPLAINT...........................................29
CENTURY MOTION TO COMPEL....................................29
CENTURY MOTION TO DISMISS...................................29
CENTURY MOTION TO DISMISS COUNTERCLAIM......................29
CENTURY POLICIES............................................29
CENTURY PROOF OF CLAIM......................................29
CENTURY SETTLEMENT AGREEMENT................................29
CENTURY TRUST...............................................29
CHAPTER 11 CASE.............................................18
CLAIMANT.....................................................1
CLAIMANTS....................................................1
CLAIMS SETTLEMENT ORDER.....................................38
COD........................................................112
COLI CLAIMS.................................................47
COMMENCEMENT DATE...........................................18
COMMITMENT..................................................22
COMMITTEES..................................................19
CONFIRMATION HEARING.........................................1
CONSOLIDATED CCR PROCEEDINGS................................34
CONTROL....................................................103
CONTROL PERSON.............................................103
CONVENIENCE CLAIM........................................5, 46
CREDIT AGREEMENT............................................22
CRITICAL VENDORS............................................22
CUSTOMS CLAIM...............................................45
DCF........................................................108
DEBT SECURITIES..............................................2
DESSEAUX....................................................18
DIP CREDIT FACILITY.........................................22
DIP CREDIT FACILITY CLAIM...................................43
DISEASE LEVELS..............................................76
DOL.........................................................39
EBIT.......................................................108
EBITDA.....................................................108
EFFECTIVE DATE...............................................9
EMC.........................................................35
EMC ADVERSARY PROCEEDING....................................35
EMC SETTLEMENT AGREEMENT....................................35
EMC SETTLEMENT AMOUNT.......................................35
EMPLOYEE RETENTION PROGRAM..................................21
ENVIRONMENTAL CLAIMS........................................51
EPA.........................................................51
ESOP........................................................39
EXCLUSIVE PERIODS...........................................23
EXPEDITED REVIEW............................................82
EXTRAORDINARY CLAIM.........................................84
FIFO........................................................76
FIFO PAYMENT QUEUE..........................................81
FIFO PROCESSING QUEUE.......................................80
FURNITURE BRANDS............................................66
FUTURE CLAIMANTS' REPRESENTATIVE.............................i
HOLDINGS.....................................................1
HOLDINGS GROUP.............................................112
INDIRECT ASBESTOS PERSONAL INJURY CLAIMS....................80
INDIVIDUAL DEFENDANTS.......................................37
INDIVIDUAL MARKLEY PROOFS OF CLAIM..........................38
1
INITIAL ASBESTOS PERSONAL INJURY CLAIMS FILING DATE.........80
INITIAL PAYMENT PERCENTAGE..................................79
INNISFREE....................................................2
INSURANCE AND TRUST PROCEEDS................................35
INSURERS....................................................27
INSURERS' APPEAL............................................28
INSURERS' RESPONSE..........................................28
INTERNAL REVENUE CODE......................................112
INTERNATIONAL...............................................28
IRS........................................................112
ISSUER.....................................................103
JPMORGAN CHASE..............................................22
KEY EMPLOYEES...............................................21
LAZARD......................................................19
LENDERS.....................................................22
LETTERS OF CREDIT...........................................22
LIBERTY MUTUAL..............................................29
LIBERTY MUTUAL'S STAY RELIEF MOTION.........................30
LIQUIDATION ANALYSIS........................................97
LOCAL RULES.................................................24
MAERTIN APPEAL..............................................28
MAERTIN COVERAGE CASE.......................................27
MAERTIN FRAUD CLAIMS........................................28
MAERTIN INSURANCE POLICIES..................................27
MAERTIN INSURANCE PROCEEDS..................................28
MAERTIN PLAINTIFFS..........................................27
MAERTIN SETTLEMENT AGREEMENTS...............................27
MAERTIN SETTLEMENT AMOUNT...................................27
MAERTIN STAY PENDING APPEAL MOTION..........................28
MAERTIN STAY PENDING APPEAL ORDER...........................28
MAERTIN STAY PENDING APPEAL STIPULATION.....................28
MAERTIN STAY RELIEF MOTION..................................28
MAERTIN STAY RELIEF ORDER...................................28
MARKLEY CLASS...............................................37
MARKLEY CLASS COMPLAINTS....................................37
MARKLEY CLASS MEMBERS.......................................37
MARKLEY CLASS PLAINTIFFS....................................37
MARKLEY CLASS PROOF OF CLAIM................................37
MARKLEY DEFENDANTS..........................................37
MARKLEY PLAN OF DISTRIBUTION................................38
MARKLEY PROOFS OF CLAIM.....................................38
MARKLEY SETTLEMENT..........................................38
MARKLEY SETTLEMENT FUNDS....................................38
MAXIMUM ANNUAL PAYMENT......................................80
MAXIMUM AVAILABLE PAYMENT...................................80
MAXIMUM VALUES..............................................76
MEDICAL/EXPOSURE CRITERIA...................................76
MELLON......................................................37
MONSANTO....................................................36
MOTION TO DISMISS...........................................28
MOTION TO EXTEND............................................25
NCC.........................................................14
NEW JERSEY DISTRICT COURT...................................36
NITRAM......................................................18
NOL........................................................112
OCF.........................................................17
OID........................................................117
OMNIBUS CLAIMS MOTION.......................................25
ORDER DENYING THE MOTION TO EXTEND..........................26
OTCBB.......................................................40
PA DOR......................................................44
PAYMENT PERCENTAGE..........................................79
PD SETTLEMENT AGREEMENT.....................................27
PD SETTLEMENT AMOUNT........................................27
PD SETTLEMENT MOTION........................................27
PENNSYLVANIA BCL............................................14
PENNSYLVANIA DISTRICT COURT.................................37
PENNSYLVANIA LAWSUIT........................................30
PI PROTECTED PARTIES........................................88
PLAN.........................................................i
PLAN FILING DATE............................................79
PLAN NOTE AMOUNT.............................................6
PLAN NOTE INDENTURE.........................................57
PLAN NOTES..................................................57
PLAN SECURITIES.............................................56
POSTPETITION MAERTIN ACTION.................................28
PRE-PETITION LIQUIDATED CLAIMS..............................81
PREPETITION NEW JERSEY ACTION...............................36
PRODUCT I.D. ORDER..........................................27
PROJECTED FINANCIAL INFORMATION.............................96
PROJECTION PERIOD...........................................96
RATING AGENCIES.............................................17
REDUCED PAYMENT OPTION......................................80
REORGANIZATION CONSIDERATION................................41
RETIREMENT COMMITTEE........................................37
RSSOP.......................................................37
SAFECO......................................................34
SAFECO BOND.................................................34
SAFECO/CCR ADVERSARY PROCEEDING.............................34
SCHEDULED CLAIMS............................................24
SCHEDULED VALUES............................................76
SCHEDULES...................................................23
SEC..........................................................2
SECURED CLAIMS..............................................45
SECURITIES ACT.............................................103
SETTLED CLAIMS..............................................27
SIS.........................................................37
SOLUTIA.....................................................36
STOCKHOLDER AND REGISTRATION RIGHTS AGREEMENT..............104
SUBSIDIARY DEBT GUARANTEE CLAIM.............................51
TAC.........................................................73
THIRD PARTY COMPLAINT.......................................36
THOMASVILLE.................................................66
THOMASVILLE SALE AGREEMENT..................................66
TRUMBULL.....................................................4
U.S. TRUSTEE................................................19
UNDERWRITER................................................103
UNSECURED CREDITORS' COMMITTEE...............................i
VOTING DEADLINE..............................................2
VOTING PROCEDURES............................................1
WELLINGTON AGREEMENT........................................29
B
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
THIRD 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"),
1.27 (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"), 1.32
(DEFINITION OF "ASBESTOS PROPERTY DAMAGE CLAIM"), AND 1.46 (DEFINITION
OF "CLAIMS TRADING INJUNCTION") FOR DETAILS REGARDING THE CLAIMS
TRADING INJUNCTION.
TABLE OF CONTENTS
PAGE
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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 Insurance Asset................................................................5
1.27 Asbestos PI Permanent Channeling Injunction................................................6
1.28 Asbestos PI Trust..........................................................................6
1.29 Asbestos PI Trust Agreement................................................................6
1.30 Asbestos PI Trust Distribution Procedures..................................................6
i
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PAGE
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1.31 Asbestos PI Trustees.......................................................................7
1.32 Asbestos Property Damage Claim.............................................................7
1.33 Asbestos Property Damage Contribution Claim................................................7
1.34 Available Cash.............................................................................7
1.35 AWWD.......................................................................................8
1.36 AWI........................................................................................8
1.37 Ballot.....................................................................................8
1.38 Bankruptcy Code............................................................................8
1.39 Bankruptcy Court...........................................................................8
1.40 Bankruptcy Rules...........................................................................8
1.41 Board of Directors.........................................................................8
1.42 Business Day...............................................................................8
1.43 Chapter 11 Case............................................................................8
1.44 Claim......................................................................................8
1.45 Claims Settlement Guidelines...............................................................9
1.46 Claims Trading Injunction..................................................................9
1.47 Class......................................................................................9
1.48 COLI Claims................................................................................9
1.49 Commencement Date..........................................................................9
1.50 Confirmation Date..........................................................................9
1.51 Confirmation Deadline......................................................................9
1.52 Confirmation Order.........................................................................9
1.53 Contingent Claim...........................................................................9
1.54 Convenience Claim.........................................................................10
1.55 Creditor..................................................................................10
1.56 Debtor....................................................................................10
1.57 Debtor in Possession......................................................................10
1.58 Debt Security Claim.......................................................................10
1.59 Demand....................................................................................10
1.60 DIP Credit Facility.......................................................................10
1.61 DIP Credit Facility Claim.................................................................10
1.62 DIP Lenders...............................................................................10
ii
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(CONTINUED)
PAGE
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1.63 Disallowed Claim..........................................................................10
1.64 Disbursing Agent..........................................................................10
1.65 Disputed Claim............................................................................10
1.66 Disputed Claim Amount.....................................................................10
1.67 Disputed Unsecured Claims Reserve.........................................................11
1.68 Distribution..............................................................................11
1.69 Distribution Date.........................................................................11
1.70 District Court............................................................................11
1.71 DTC.......................................................................................11
1.72 Employee Benefit Claim....................................................................11
1.73 Effective Date............................................................................11
1.74 Encumbrance...............................................................................11
1.75 Entity....................................................................................12
1.76 Environmental Claim.......................................................................12
1.77 Equity Interest...........................................................................12
1.78 Equity Value..............................................................................12
1.79 Estimated Amount..........................................................................12
1.80 Existing AWI Common Stock.................................................................12
1.81 Final Distribution Date...................................................................12
1.82 Final Order...............................................................................12
1.83 Future Claimants' Representative..........................................................13
1.84 Holdings..................................................................................13
1.85 Holdings Plan of Liquidation..............................................................13
1.86 Indentures................................................................................13
1.87 Indenture Trustees........................................................................13
1.88 Indenture Trustees' Fees and Expenses.....................................................13
1.89 Indirect PI Trust Claim...................................................................13
1.90 Initial Distribution Date.................................................................13
1.91 Internal Revenue Code.....................................................................14
1.92 IRS.......................................................................................14
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.......................................................................17
1.107 Record Date...............................................................................17
1.108 Reorganized AWI...........................................................................17
1.109 Reorganization Consideration..............................................................17
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............................................................18
1.120 Voting Deadline...........................................................................18
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.....................................................19
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.........................................................29
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..........................................................................30
7.1 Creation of Asbestos PI Trust.............................................................30
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.....................................................................31
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
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7.12 Distributions to Holders of Debt Security Claims Administered
by the Indenture Trustees.................................................................33
7.13 Manner of Payment under the Plan..........................................................33
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..........................................................37
7.18 Cancellation of Existing Debt Securities..................................................38
7.19 Expiration of the Retention Period........................................................38
7.20 Compensation of the Applicable Indenture Trustees.........................................38
7.21 Distribution of Unclaimed Property........................................................38
7.22 Management of Reorganized AWI.............................................................39
7.23 Listing of Reorganized AWI Common Stock...................................................39
7.24 Corporate Reorganization Actions..........................................................39
7.25 Holdings Transactions.....................................................................40
7.26 Compliance with QSF Regulations...........................................................40
7.27 Effectuating Documents and Further Transactions...........................................40
7.28 Allocation of Plan Distributions Between Principal and Interest...........................41
ARTICLE VIII EXECUTORY CONTRACTS AND UNEXPIRED LEASES............................................................41
8.1 Assumption of Executory Contracts and Unexpired Leases....................................41
8.2 Rejection of Executory Contracts and Unexpired Leases.....................................41
8.3 Claims Arising from Rejection, Termination or Expiration..................................41
8.4 Previously Scheduled Contracts............................................................42
8.5 Insurance Policies and Agreements.........................................................42
8.6 Indemnification and Reimbursement Obligations.............................................43
8.7 Compensation and Benefit Programs.........................................................43
8.8 Management Agreements.....................................................................45
ARTICLE IX RETENTION OF JURISDICTION...........................................................................46
ARTICLE X TRANSFERS OF PROPERTY TO AND ASSUMPTION OF CERTAIN LIABILITIES BY THE ASBESTOS PI TRUST.............47
10.1 Transfer of Certain Property to the Asbestos PI Trust.....................................47
10.2 Assumption of Certain Liabilities by the Asbestos PI Trust................................49
10.3 Cooperation with Respect to Insurance Matters.............................................49
vi
TABLE OF CONTENTS
(CONTINUED)
PAGE
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10.4 Authority of AWI..........................................................................49
ARTICLE XI ASBESTOS PROPERTY DAMAGE CLAIMS.....................................................................50
11.1 Transfer of Certain Property to the Asbestos PD Trust.....................................50
11.4 Assumption of Certain Liabilities by the Asbestos PD Trust................................50
11.5 Cooperation with Respect to Insurance Matters.............................................51
11.6 Authority of AWI..........................................................................51
ARTICLE XII MISCELLANEOUS PROVISIONS............................................................................51
12.1 Payment of Statutory Fees.................................................................51
12.2 Discharge of AWI..........................................................................51
12.3 Rights of Action..........................................................................52
12.4 Third Party Agreements....................................................................52
12.5 Dissolution of Committees.................................................................52
12.6 Exculpation...............................................................................53
12.7 Title to Assets; Discharge of Liabilities.................................................53
12.8 Surrender and Cancellation of Instruments.................................................53
12.9 Notices...................................................................................53
12.10 Headings..................................................................................55
12.11 Severability..............................................................................55
12.12 Governing Law.............................................................................55
12.13 Compliance with Tax Requirements..........................................................55
12.14 Exemption from Transfer Taxes.............................................................55
12.15 Expedited Determination of Postpetition Taxes.............................................55
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
THIRD 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, with such modifications to such Exhibit as may
be ordered by the Bankruptcy Court.
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 INDIRECT PI TRUST 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 BROUGHT DIRECTLY BY A
PAST OR PRESENT EMPLOYEE OF AWI UNDER AN APPLICABLE WORKERS' COMPENSATION
STATUTE 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 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
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
5
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.
1.27 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
(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.
1.28 Asbestos PI Trust: The trust established by AWI in
accordance with the Asbestos PI Trust Agreement.
1.29 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 1.29 to the Plan.
1.30 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
6
the Asbestos PI Trust Agreement to process, liquidate, and pay Asbestos Personal
Injury Claims, substantially in the form of Exhibit 1.30 to the Plan.
1.31 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.
1.32 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.
1.33 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.
1.34 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,
7
(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.
1.35 AWWD: Armstrong Worldwide, Inc., a Delaware corporation.
1.36 AWI: Armstrong World Industries, Inc., a Pennsylvania
corporation.
1.37 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.
1.38 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.
1.39 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.
1.40 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.
1.41 Board of Directors: The Board of Directors of AWI or
Reorganized AWI, as it may exist from time to time.
1.42 Business Day: Any day on which commercial banks are required
to be open for business in New York, New York.
1.43 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).
1.44 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.
8
1.45 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 1.45 to the Plan.
1.46 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
INDIRECT PI TRUST 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.
1.47 Class: Any group of Claims or Equity Interests classified by
the Plan pursuant to section 1122(a)(1) of the Bankruptcy Code.
1.48 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.
1.49 Commencement Date: December 6, 2000.
1.50 Confirmation Date: The date on which the Confirmation Order
is entered by the Clerk of the Bankruptcy Court.
1.51 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.
1.52 Confirmation Order: The order or orders of the Bankruptcy
Court confirming the Plan in accordance with the provisions of chapter 11 of the
Bankruptcy Code, which will contain, inter alia, the Asbestos PI Permanent
Channeling Injunction and the Claims Trading Injunction.
1.53 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.
9
1.54 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.
1.55 Creditor: Any Entity that holds a Claim against AWI as
Debtor or Debtor in Possession.
1.56 Debtor: AWI.
1.57 Debtor in Possession: AWI in its capacity as a debtor in
possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.
1.58 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.
1.59 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.
1.60 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.
1.61 DIP Credit Facility Claim: Collectively, all Claims of the
DIP Lenders arising under the DIP Credit Facility.
1.62 DIP Lenders: The financial institutions party to the DIP
Credit Facility.
1.63 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.
1.64 Disbursing Agent: Any Entity in its capacity as a disbursing
agent under section 7.10 hereof.
1.65 Disputed Claim: A Claim (other than an Asbestos Personal
Injury Claim) that is neither an Allowed Claim nor a Disallowed Claim.
1.66 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.
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1.67 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.
1.68 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.
1.69 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. 1.70 District Court: The
United States District Court for the District of Delaware having jurisdiction
over the Chapter 11 Case.
1.71 DTC: Depository Trust Company.
1.72 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.
1.73 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.
1.74 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
11
security agreement, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
1.75 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.
1.76 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.
1.77 Equity Interest: Any interest in AWI represented by shares
of Existing AWI Common Stock.
1.78 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.
1.79 Estimated Amount: The estimated dollar value of an
Unliquidated Claim, Disputed Claim, or Contingent Claim pursuant to section
502(c) of the Bankruptcy Code.
1.80 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.
1.81 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.
1.82 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
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.
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1.83 Future Claimants' Representative: Dean M. Trafelet, the
Legal Representative for Future Claimants appointed pursuant to the order dated
on or about March 1, 2002.
1.84 Holdings: Armstrong Holdings, Inc., a Pennsylvania
corporation.
1.85 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 (which plan may provide for the
distribution by Holdings of the New Warrants to Holdings' shareholders), or such
other plan and manner of dissolution, liquidation and winding up of Holdings as
is consistent with the terms of the Plan and permitted by law.
1.86 Indentures: The indenture agreements between the Indenture
Trustees and AWI relating to the Debt Security Claims.
1.87 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.
1.88 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.
1.89 Indirect PI Trust 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.
1.90 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
13
Bankruptcy Court may establish upon request by Reorganized AWI, for cause shown;
provided, however, that in no event shall the Initial Distribution Date be more
than forty-five (45) days after the Effective Date.
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.
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;
14
(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
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
15
(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;
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.
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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.
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
17
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.
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
18
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.
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 or as soon as practicable Unimpaired No
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.
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
19
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
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.
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 5: COLI Claims Reinstated - Any defaults related to
the COLI Claims will be cured. Unimpaired No
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 6: Unsecured Claims Each holder of an Allowed Unsecured Claim will receive Impaired Yes
other than Convience other than its Pro Rata Share of (i) 34.43% of the
Claims 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 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
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
20
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 10: Subsidiary Debt Reinstated Unimpaired No
Guarantee Claims
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 11: Employee Reinstated Unimpaired No
Benefit Claims
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
CLASS 12: Equity Interests The holder of the Equity Interests in AWI will receive Impaired Yes
the New Warrants (which will be distributed in accordance
with the Holdings Plan of Liquidation, if the Holdings
Plan of Liquidation is approved).
- ---------------------------- ----------------------------------------------------------- ----------------- -------------------
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
prior to the stated maturity of such Claim from and after
21
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
Procedures. The Asbestos PD Trust will be funded in accordance
22
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
Amount of such Asbestos Property Damage Claim, in full, in cash, with such
23
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
25
time to assert its Asbestos Personal Injury Claim against any PI
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.
(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.
26
(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: On or as soon as practicable after 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, 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. 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 only, 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 only alter, amend, or modify the Plan in accordance
with section 1127(b) of the Bankruptcy Code.
28
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 1.45 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
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
29
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.
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
30
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
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.
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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
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
32
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
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.
33
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
$1,000, 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 $1,000 shall be rounded to the nearest $1,000 increment (with Plan Notes in
denominations of $500 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 $1,000.
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 are a fair, equitable, and
reasonable resolution of the liabilities of AWI for Asbestos
Personal Injury Claims and Asbestos Property Damage Claims.
(v) The Plan complies with section 524(g) of the Bankruptcy
Code.
(vi) 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
34
assert Asbestos Personal Injury Claims against any PI Protected
Party.
(vii) 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.
(viii) 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.
(ix) 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.
(x) 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.
(xi) 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.
(xii) The actual amounts, numbers, and timing of the future
Demands referenced in section 7.16(a)(xi) of the Plan cannot be
determined.
(xiii) Pursuit of the Demands referenced in section
7.16(a)(xi) 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.
(xiv) 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.
(xv) 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.
(xvi) 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.
35
(xvii) 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.
(xviii) Class 7 (Asbestos Personal Injury Claims) has voted,
by at least 75 percent (75%) of those voting, in favor of the
Plan.
(xix) 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.
(xx) 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.
(xxi) 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 prior registration under the Securities Act of
1933, as amended.
(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.
36
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.
(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
37
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.
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
38
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 the prevailing standards of the New York Stock Exchange or the
NASDAQ Stock Market (depending upon on which of such markets the common stock of
Reorganized AWI will be listed for trading purposes upon the Effective Date) 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 outside 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):
(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 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.
39
(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 Transactions. On or as soon as is practicable after
the Effective Date and, if applicable, in accordance with section 10.1(b)
hereof, the New Warrants will be issued to the holder of the Equity Interests,
which will be Holdings if the Holdings Plan of Liquidation has been approved on
or before such date. 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 (i) all costs and expenses related to
the preparation and submission to a vote of Holdings' shareholders of the
Holdings Plan of Liquidation, which shall be undertaken as soon as reasonably
practicable, and (ii) all other operating expenses of Holdings and AWWD until
the time of such vote (and for a reasonable time thereafter to permit an orderly
transition on the administration of Holdings' affairs), and (iii) if the
requisite approval of the Holdings Plan of Liquidation is obtained, all costs
and expenses of administering the performance and consummation of the Holdings
Plan of Liquidation, including any taxes incurred by Holdings in connection
therewith.
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.
(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.
40
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.
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
41
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
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. 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.
42
(b) 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, the Asbestos PD Trust (if
created), 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
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 four 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
43
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
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:
44
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;
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.
45
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
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;
46
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
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 1.26 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
47
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,
(ii) 65.57% of the first $1.05 billion of (x) up to
$300 million of Available Cash and (y) principal amount of
each series of 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 each series 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 each
series of 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 Class 6 has voted to reject
the Plan, the New Warrants shall be issued by Reorganized AWI on account of the
Asbestos Personal Injury Claims; however, such claimants have waived on behalf
of themselves and the Asbestos PI Trust any right to the New Warrants. The New
Warrants shall be issued by Reorganized AWI to AWWD (or to Holdings as the
successor to AWWD under the Holdings Plan of Liquidation), consistent with
48
section 7.25 hereof (and shall never be issued or delivered to the Asbestos PI
Trust), without any action being required of, or any direction by, the Asbestos
PI Trust or the Asbestos PI Trustees in such regard.
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
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. To the extent that the transfer of the Asbestos PI Insurance
Asset to the Asbestos PI Trust is determined to be invalid by a court or
arbitrator of competent jurisdiction, upon the request of the Asbestos PI Trust,
Reorganized AWI shall (i) pursue any rights to the Asbestos PI Insurance Asset
for the benefit of, and to the fullest extent required by, the Asbestos PI
Trust, and (ii) immediately transfer any amounts recovered under or on account
of the Asbestos PI Insurance Asset to the Asbestos PI Trust. 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 or in
pursuing recovery for the benefit of 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.
49
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
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
50
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. To the extent
that the transfer of the Asbestos PD Insurance Asset to the Asbestos PD Trust is
determined to be invalid by a court or arbitrator of competent jurisdiction,
upon the request of the Asbestos PD Trust, Reorganized AWI shall (i) pursue any
rights to the Asbestos PD Insurance Asset for the benefit of, and to the fullest
extent required by, the Asbestos PD Trust, and (ii) immediately transfer any
amounts recovered under or on account of the Asbestos PD Insurance Asset to the
Asbestos PD Trust. 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 or in pursuing recovery for the benefit of
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
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
51
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,
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
52
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, any members of the
Asbestos PD 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,
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:
53
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.
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.
54
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
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.
55
Dated: Wilmington, Delaware
April 30, 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
56
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 1.29: Asbestos PI Trust Agreement (attached)
Exhibit 1.30: Asbestos PI Trust Distribution Procedures (attached)
Exhibit 1.45: 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 8.8: 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)
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, (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, April 4,
2003 and May 2, 2003 (collectively, the "Hearing"), the "Disclosure Statement")
of Armstrong World Industries, Inc., as debtor and debtor in possession ("AWI"),
with respect to AWI's Third Amended Plan of Reorganization, dated April 30, 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 held on February 28, 2003 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 such 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.
B-2
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 notices 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 comply 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 time on
B-3
[____ __], 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, Wilmington, Delaware 19801
B-4
(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 April
21, 2003, will be 5:00 p.m., Wilmington, Delaware time on [____], 2003; and it
is further
ORDERED that, at least five (5) Business Days prior to the
Confirmation Hearing, AWI shall cause to be filed with the Court a certification
of the tabulation of the Ballots by the Voting Agent, which tabulation shall (i)
set forth the amount and number of Claims and Equity Interests in each class
entitled to vote on the Plan voting to accept and voting to reject the Plan;
(ii) with respect to Asbestos Personal Injury Claims, set forth the amount of
votes to accept and to reject the Plan separately for each disease category set
forth in the Voting Procedures; (iii) list, by class, any Ballots excluded from
tabulation pursuant to section 6.d. of the Voting Procedures; and (iv) set forth
a list of all claimants that the Voting Agent contacted to cure defects pursuant
to section 6.e.(ii) of the Voting Procedures; 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 (a) notwithstanding the Voting Procedures, the Holdings
Record Date, as such term is defined in the Voting Procedures, will be May 19,
2003 or such later date as the Board of Directors of Armstrong Holdings, Inc.
may set, and (b) AWI is hereby authorized and directed to cause a Solicitation
Package, as such term is defined in the Voting Procedures, to be served on the
B-5
equity securityholders of Armstrong Holdings, Inc. by no later than the earlier
of (i) the deadline for distribution of the proxy solicitation materials
relating to the Holdings Plan of Liquidation, as such term is defined in the
Plan, and (ii) thirty (30) days prior to the Voting Deadline; and it is further
ORDERED that AWI is hereby authorized and directed to mail or cause
to be mailed by first-class mail by no later than [May 23, 2003] (or, with
respect to equity securityholders of Armstrong Holdings Inc., such later date as
provided in the immediately preceding paragraph), a Solicitation Package 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
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 Voting Deadline; and it is further
ORDERED that AWI shall publish the Confirmation Hearing Publication
Notice not less than thirty (30) calendar days prior to the Voting Deadline (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
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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
B-7
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
May __, 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 _________ __, 2003 (as may be amended,
the "Disclosure Statement") for the Third Amended Plan of Reorganization of
Armstrong World Industries, Inc., filed by Armstrong World Industries, Inc.
("AWI"), dated April 30, 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 _______ __, 2003 (as may be amended, the "Disclosure
Statement"), for the Third Amended Plan of Reorganization of Armstrong World
Industries, Inc., dated April 30, 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 _________ __, 2003 (as may be amended,
the "Disclosure Statement") for the Third Amended Plan of Reorganization of
Armstrong World Industries, Inc., filed by Armstrong World Industries, Inc.
("AWI"), dated April 30, 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 Voting Deadline:
--------------------------------------------
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 June 2, 2003 June 2, 2003 May 15, 2003 May 15, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
BOMA July July 1, 2003 May 16, 2003 June 2, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Building Operating Management June 5, 2003 June 5, 2003 May 1, 2003 May 1, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Buildings June 5, 2003 June 5, 2003 May 1, 2003 May 1, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Business Officer July July 3, 2003 May 15, 2003 May 30, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Chronicle of Higher Education May 23, 2003 May 23, 2003 May 5, 2003 May 12, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
College Planning & Management June June 20, 2003 May 2, 2003 May 9, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Property News June 16, 2003 June 16, 2003 May 15, 2003 May 22, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Facilities Manager July/August July 1, 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 July/August July 1, 2003 June 24, 2003 July 1, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Governing July July 1, 2003 May 22, 2003 May 29, 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 June June 1, 2003 May 5, 2003 May 5, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
Nation's Cities Weekly May 26, 2003 May 26, 2003 May 5, 2003 May 12, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
School Administrator August July 29, 2003 June 13, 2003 June 20, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
State Government News August August 1, 2003 June 26, 2003 July 2, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
University Business June May 27, 2003 May 1, 2003 May 8, 2003
- -----------------------------------------------------------------------------------------------------------------------------------
* Based upon entry of order approving disclosure statement on May 2, 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 Voting Deadline.
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 solicitation
statement with respect to approval by AHI's shareholders of a plan of
dissolution, winding up, and distribution for AHI. 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, 2002.
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 of AHI 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. "Holdings Record Date".....................................................................................2
p. "Lenders"..................................................................................................2
q. "Master Ballot"............................................................................................2
r. "Plan".....................................................................................................2
s. "Publication Notice".......................................................................................2
t. "Record Amount"............................................................................................2
u. "Solicitation Package".....................................................................................2
v. "Special Voting Agent".....................................................................................2
w. "Voting Agent".............................................................................................3
x. "Voting Deadline"..........................................................................................3
y. "Voting Record Date".......................................................................................3
2. Publication Notices..................................................................................................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...........................................................................................6
i. Other Parties..............................................................................................6
4. Special Procedures Relating to Asbestos Personal Injury Claims.......................................................7
a. Distribution of Solicitation Packages......................................................................7
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...........................................................................10
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...............................................................................................13
a. Determination of Amount of Claims Voted...................................................................13
b. Determination of Number of Claims Voted by Beneficial Owners of Debt Securities...........................16
c. Aggregation of Multiple Unsecured Claims (other than Debt
Securities) for Voting, Classification, and Treatment under
the Plan 16
d. Ballots Excluded..........................................................................................16
e. General Voting Procedures and Standard Assumptions........................................................17
D-ii
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.
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. "HOLDINGS RECORD DATE" means the earlier of (i) the date selected by
the Board of Directors of Armstrong Holdings, Inc. as the record date
for the voting of Holdings Equity Securities on the Holdings Plan of
Liquidation and (ii) May 9, 2003.
P. "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.
Q. "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.
R. "PLAN" means the Plan of Reorganization of Armstrong World Industries,
Inc. dated November 4, 2002, as may be amended.
S. "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.
T. "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.
U. "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.
V. "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.
W. "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, or such
D-2
other firm that may be retained by AWI to act as the solicitation and
tabulation agent with respect to the Plan.
X. "VOTING DEADLINE" means the date that is established by the Bankruptcy
Court as the deadline for the return of Ballots on the Plan.
Y. "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 date of the Disclosure Statement Order, 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 or the Holdings Record
Date, as the case may be, 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 as of the Voting
Record Date, or Holdings Equity Securities as of the Holdings
Record Date, as applicable, (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 to determine whether such holders hold as Debt
Nominees and to ascertain the number of beneficial owners of such
D-4
Debt Securities holding through each such Debt Nominee. As soon
as practicable after the Holdings Record Date has been
determined, the Special Voting Agent shall attempt to contact the
institutional holders of record of the Equity Securities to
determine whether such holders hold as Equity Nominees and to
ascertain the number of beneficial owners of such Equity
Securities holding through each such 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), as of the
Voting Record Date, of any Debt Securities, a Solicitation
Package within the time provided by the Disclosure Statement
Order. The Special Voting Agent will cause to be served upon each
registered holder (other than Equity Nominees), as of the
Holdings Record Date, of any Holdings Equity Securities, a
Solicitation Package, no later than the earlier of (i) the
deadline for distribution of the proxy solicitation materials
relating to the Holdings Plan of Liquidation and (ii) ten (10)
Business Days after the Holdings Record Date.
(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. For Debt Securities, the Special
Voting Agent will cause such materials to be served within the
time provided by the Disclosure Statement Order. For Equity
Securities, the Special Voting Agent will cause such materials to
be served no later than the earlier of (i) the deadline for
distribution of the proxy solicitation materials relating to the
Holdings Plan of Liquidation and (ii) ten (10) Business Days
after the Holdings Record Date.
(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.
D-5
(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.
D-6
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
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.
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(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 INDIRECT PI TRUST CLAIMS:
The Voting Agent will cause a Solicitation Package to be served
upon each holder of an Indirect PI Trust 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.
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
Indirect PI Trust 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 Average Value for
"mesothelioma" set forth in the Asbestos PI Trust
Distribution Procedures (which Average 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 Average Value for "lung
cancer 1" set forth in the Asbestos PI Trust Distribution
Procedures (which Average 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
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Claim in an amount equal to the Average Value for "lung
cancer 2" set forth in the Asbestos PI Trust Distribution
Procedures (which Average 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 Average Value for "other
cancer" set forth in the Asbestos PI Trust Distribution
Procedures (which Average 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 Average Value for "severe
asbestosis" set forth in the Asbestos PI Trust Distribution
Procedures (which Average 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 Average
Value for "asbestos/pleural disease (level III)" set forth
in the Asbestos PI Trust Distribution Procedures (which
Average 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 Average
Value for "asbestosis/pleural disease (level II)" set forth
in the Asbestos PI Trust Distribution Procedures (which
Average Value will be set forth in the instructions on the
Ballot).
(8) If the basis for the Asbestos Personal Injury Claim is
"OTHER ASBESTOS 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 Scheduled Value for "other
asbestos disease" set forth in the Asbestos PI Trust
Distribution Procedures (which Scheduled 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) INDIRECT PI TRUST CLAIMS:
With respect to the tabulation of Ballots for all Indirect PI
Trust 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,
D-9
entered on February 11, 2002), the amount allowed thereunder.
Otherwise, each holder of an Indirect PI Trust 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:
(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."
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(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."
(h) "Of the claimants listed in the OTHER ASBESTOS 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:
D-11
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 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
D-12
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
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):
D-13
(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 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 (in order of priority):
D-14
(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 prior to the Asbestos PD Bar Date.
(3) If a proof of claim has been timely filed prior to the
Asbestos PD Bar Date and there is no liquidated amount
specified therein or such Claim is wholly unliquidated,
contingent, and/or undetermined, the claim amount, for
voting purposes only, shall be $100.00.
(4) If, prior to the Confirmation Hearing, the Bankruptcy Court
enters a final order approving a settlement between AWI and
the holder of an Asbestos Property Damage Claim, the vote of
such holder of an Asbestos Property Damage Claim will not be
counted.
The amount used to tabulate votes to accept or reject the Plan
with respect to Asbestos Property Damage Claims will be for
voting purposes only and will not be binding upon the holder, the
Asbestos PD Trust or any other Entity for any purpose other than
voting on the Plan.
(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.
D-15
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. 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.
D-16
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 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 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 Voting Deadline:
-----------------------------------------------------------------------------
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. The Abestos Personal Injury
Claimants' Committee and the Future Claimants' Representative believe that the
actual value of Abestos Personal Injury Claims would be higher than the assumed
value used in the liquidation analysis.
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