Exhibit 99
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- -----------------------------------------------------
IN RE: )
) Chapter 11
OWENS CORNING, et al., )
) Case No. 00-03837 (JKF)
Debtors )
) Jointly Administered
)
- -----------------------------------------------------
DISCLOSURE STATEMENT WITH RESPECT TO AMENDED JOINT PLAN
OF REORGANIZATION FOR OWENS CORNING AND
ITS AFFILIATED DEBTORS AND DEBTORS-IN-POSSESSION
SAUL EWING LLP SKADDEN, ARPS, SLATE, MEAGHER
Norman L. Pernick (I.D. # 2290) & FLOM LLP
J. Kate Stickles (I.D. # 2917) Ralph Arditi
222 Delaware Avenue D.J. Baker
P.O. Box 1266 Four Times Square
Wilmington, DE 19899-1266 New York, NY 10036-6522
(302) 421-6800 (212) 735-3000
Charles O. Monk, II Special Counsel to Debtors
Irving E. Walker and Debtors-in-Possession
Jay A. Shulman
100 South Charles Street
Baltimore, MD 21201-2773
(410) 332-8600
Attorneys for the Debtors and
Debtors-in-Possession
KAYE SCHOLER LLP CAPLIN & DRYSDALE, CHARTERED
Michael J. Crames Elihu Inselbuch
Andrew A. Kress 399 Park Avenue
Edmund M. Emrich New York, NY 10022
425 Park Avenue (212) 319-7125
New York, NY 10022
(212) 836-8000 Peter Van N. Lockwood
Julie W. Davis
YOUNG, CONAWAY, One Thomas Circle, N.W.
STARGATT & TAYLOR LLP Washington, D.C. 20005
James L. Patton, Jr. (I.D. # 2202) (202) 862-5000
The Brandywine Building
1000 West Street, 17th Floor CAMPBELL & LEVINE
P.O. Box 391 Marla Eskin (I.D. # 2989)
Wilmington, DE 19899-0391 Chase Manhattan Center
(302) 571-6600 15th Floor
1201 Market Street
Attorneys for James J. McMonagle, Wilmington, DE 19899
Legal Representative for Future Claimants (302) 426-1900
Dated as of March 28, 2003
Attorneys for the Official
Committee of Asbestos Claimants
NOTICE WITH RESPECT TO INJUNCTIONS
THE AMENDED JOINT PLAN OF REORGANIZATION FOR OWENS CORNING AND
ITS AFFILIATED DEBTORS AND DEBTORS-IN-POSSESSION (THE "PLAN"),
WHICH IS ATTACHED AS APPENDIX A TO THIS DISCLOSURE STATEMENT,
CONTAINS AN ASBESTOS PERSONAL INJURY PERMANENT CHANNELING
INJUNCTION UNDER 11 U.S.C. ss. 524(g). THE PLAN ALSO CONTAINS AN
INJUNCTION UNDER 11 U.S.C. ss. 105, WHICH CHANNELS ALL ASBESTOS
PROPERTY DAMAGE CLAIMS AGAINST FIBREBOARD CORPORATION, AN
INJUNCTION UNDER 11 U.S.C. ss. 105 WITH RESPECT TO CLAIMS AGAINST THE
HARTFORD ENTITIES AND AN INJUNCTION WITH RESPECT TO CLAIMS AGAINST
RELATED PERSONS OF THE DEBTORS BY HOLDERS OF CLAIMS WHO VOTE IN FAVOR
OF THE PLAN, WHICH ARE INJUNCTIONS 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 EACH OF THESE INJUNCTIONS, SEE THE FOLLOWING
SECTIONS OF THIS DISCLOSURE STATEMENT:
(1) THE ASBESTOS PERSONAL INJURY PERMANENT CHANNELING INJUNCTION:
SECTION VIII.C OF THIS DISCLOSURE STATEMENT ENTITLED "THE ASBESTOS
PERSONAL INJURY TRUST--THE ASBESTOS PERSONAL INJURY PERMANENT
CHANNELING INJUNCTION" AND SECTION 5.14(b) OF THE PLAN;
(2) THE INJUNCTION CHANNELING FB ASBESTOS PROPERTY DAMAGE CLAIMS:
SECTION IX.C OF THIS DISCLOSURE STATEMENT ENTITLED "THE FB ASBESTOS
PROPERTY DAMAGE TRUST-- INJUNCTION CHANNELING FB ASBESTOS PROPERTY
DAMAGE CLAIMS " AND SECTION 3.3(g) OF THE PLAN;
(3) THE INJUNCTION WITH RESPECT TO CLAIMS AGAINST THE HARTFORD
ENTITIES: SECTION VII.J.6 OF THIS DISCLOSURE STATEMENT
ENTITLED "INJUNCTION WITH RESPECT TO CLAIMS AGAINST THE
HARTFORD ENTITIES" AND SECTION 5.13(d) OF THE PLAN; AND
(4) THE INJUNCTION WITH RESPECT TO CLAIMS AGAINST RELATED PERSONS OF THE
DEBTORS BY HOLDERS OF CLAIMS WHO VOTE IN FAVOR OF THE PLAN: SECTION VII.
J.2 OF THIS DISCLOSURE STATEMENT ENTITLED "CERTAIN RELEASES AND
INJUNCTIONS UNDER THE PLAN-- RELEASES BY HOLDERS OF CLAIMS AND INTERESTS"
AND SECTION VII. J.3 ENTITLED "INJUNCTIONS RELATED TO RELEASES" AND
SECTIONS 5.13(b) AND (c) OF THE PLAN.
DISCLAIMER
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS INCLUDED
HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE AMENDED JOINT PLAN OF
REORGANIZATION FOR OWENS CORNING AND ITS AFFILIATED DEBTORS AND
DEBTORS-IN-POSSESSION (THE "PLAN"), FILED BY OWENS CORNING ("OCD") AND THOSE
ENTITIES LISTED ON SCHEDULE I OF THE PLAN (COLLECTIVELY, THE "SUBSIDIARY
DEBTORS" AND, TOGETHER WITH OCD, THE "DEBTORS"), JAMES J. MCMONAGLE, THE LEGAL
REPRESENTATIVE FOR FUTURE CLAIMANTS ("FUTURE CLAIMANTS' REPRESENTATIVE"), AND
THE OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS ("ASBESTOS CLAIMANTS' COMMITTEE")
(THE DEBTORS, THE FUTURE CLAIMANTS' REPRESENTATIVE, AND THE ASBESTOS
CLAIMANTS' COMMITTEE, COLLECTIVELY, THE "PLAN PROPONENTS"). THE INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT MAY NOT BE RELIED UPON FOR ANY PURPOSE
OTHER THAN TO DETERMINE HOW TO VOTE ON THE PLAN. NO PERSON MAY GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS, OTHER THAN THE INFORMATION AND
REPRESENTATIONS CONTAINED IN THIS DISCLOSURE STATEMENT, REGARDING THE PLAN OR
THE SOLICITATION OF ACCEPTANCES OF THE PLAN.
ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE
STATEMENT AND THE PLAN IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE
PLAN. PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT ARE
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN AND THE EXHIBITS AND
SCHEDULES ANNEXED TO THE PLAN AND THIS DISCLOSURE STATEMENT. THE STATEMENTS
CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF,
AND THERE CAN BE NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN WILL BE
CORRECT AT ANY TIME BEFORE OR AFTER THE DATE HEREOF.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH
SECTION 1125 OF THE UNITED STATES BANKRUPTCY CODE, 11 U.S.C. ss.ss. 101-1330
(AS AMENDED, THE "BANKRUPTCY CODE") AND RULE 3016 OF THE FEDERAL RULES OF
BANKRUPTCY PROCEDURE (THE "BANKRUPTCY RULES") AND NOT NECESSARILY IN
ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER NON-BANKRUPTCY LAWS.
EXCEPT WHERE SPECIFICALLY NOTED, THE FINANCIAL INFORMATION CONTAINED
HEREIN HAS NOT BEEN AUDITED BY A CERTIFIED PUBLIC ACCOUNTING FIRM AND HAS NOT
BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
THIS DISCLOSURE STATEMENT HAS NEITHER BEEN APPROVED NOR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR THE SECURITIES
REGULATORS OF ANY STATE, AND NEITHER THE SEC NOR ANY STATE REGULATORS HAS
PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
PERSONS OR ENTITIES TRADING IN OR OTHERWISE PURCHASING, SELLING OR
TRANSFERRING SECURITIES OF OR CLAIMS AGAINST OCD OR ANY OF THE SUBSIDIARY
DEBTORS AND DEBTORS-IN-POSSESSION IN THESE CASES SHOULD EVALUATE THIS
DISCLOSURE STATEMENT AND THE PLAN IN LIGHT OF THE PURPOSE FOR WHICH THEY WERE
PREPARED.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER ACTIONS OR
THREATENED ACTIONS, THIS DISCLOSURE STATEMENT SHALL NOT CONSTITUTE OR BE
CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION OR WAIVER, BUT
RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THIS DISCLOSURE
STATEMENT SHALL NOT BE ADMISSIBLE IN ANY NON-BANKRUPTCY PROCEEDING NOR SHALL
IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES OR OTHER LEGAL
EFFECTS OF THE PLAN AS TO HOLDERS OF CLAIMS AGAINST, OR EQUITY INTERESTS IN,
OCD OR ANY OF THE SUBSIDIARY DEBTORS AND DEBTORS-IN-POSSESSION IN THESE CASES.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE BANKRUPTCY
COURT AT THIS TIME. A HEARING TO CONSIDER THE ADEQUACY OF THIS DISCLOSURE
STATEMENT UNDER SECTION 1125 OF THE BANKRUPTCY CODE HAS BEEN SET BY THE
BANKRUPTCY COURT FOR JUNE 4, 2003 AT 9:00 A.M. AS MAY BE CONTINUED FROM TIME
TO TIME BY THE BANKRUPTCY COURT. THE PLAN PROPONENTS RESERVE THE RIGHT TO
MODIFY OR SUPPLEMENT THIS DISCLOSURE STATEMENT PRIOR TO AND UP TO THE TIME OF
THE CONCLUSION OF SUCH HEARING.
NOTE ON DEFINED TERMS
For purposes of this Disclosure Statement, all capitalized terms not
otherwise defined shall have the meanings ascribed to them in Article I of the
Plan, attached to the Disclosure Statement as Appendix A, except as expressly
provided or unless the context clearly requires otherwise. A Glossary of
Additional Terms is attached to this Disclosure Statement as Appendix A-1.
Whenever the context requires, such meanings shall be equally applicable to
both the singular and plural form of such terms, and the masculine gender
shall include the feminine and the feminine gender shall include the
masculine. Any term used in initially capitalized form in this Disclosure
Statement that is not defined herein but that is used in the Bankruptcy Code
shall have the meaning ascribed to such term in the Bankruptcy Code.
SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS
The treatment of each of the Classes is summarized as follows:
- -----------------------------------------------------------------------------------------------------------------------
CLASS DESCRIPTION TREAT- ESTIMATED ESTIMATED RECOVERY
MENT ALLOWED
CLAIMS
- -----------------------------------------------------------------------------------------------------------------------
Unclassified DIP Facility N/A $0 100%
Claims Claims
- -----------------------------------------------------------------------------------------------------------------------
Unclassified Administrative N/A [to be 100%
Claims Claims inserted at
later date]
- -----------------------------------------------------------------------------------------------------------------------
Unclassified Priority Tax N/A [to be 100%
Claims Claims inserted at
later date]
- -----------------------------------------------------------------------------------------------------------------------
Class 1 Claims Other Priority Unimpaired $0 100%
Claims
- -----------------------------------------------------------------------------------------------------------------------
Class 2A Claims Other Secured Unimpaired [to be 100%
Tax Claims inserted at
later date]
- -----------------------------------------------------------------------------------------------------------------------
Class 2B Claims Other Secured Unimpaired [to be 100%
Claims inserted at
later date]
- -----------------------------------------------------------------------------------------------------------------------
Class 3 Claims Convenience Impaired [to be [to be
Claims inserted at inserted at
later date] later date]
- -----------------------------------------------------------------------------------------------------------------------
Class 4 Claims Bank Holders Impaired [to be inserted [to be inserted
Claims at later date at later date
- -----------------------------------------------------------------------------------------------------------------------
Class 5 Claims Bondholders Impaired [to be inserted [to be inserted
Claims at later date at later date
- -----------------------------------------------------------------------------------------------------------------------
Class 6 Claims General Unsecured Impaired [to be inserted [to be inserted
Claims at later date] at later date
- -----------------------------------------------------------------------------------------------------------------------
Class 7 Claims OC Asbestos Impaired [to be inserted [to be
Personal at later date] inserted at
Injury Claims later date]
- -----------------------------------------------------------------------------------------------------------------------
Class 8 Claims FB Asbestos Impaired [to be [to be
Personal inserted at inserted at
Injury Claims later date] later date]
- -----------------------------------------------------------------------------------------------------------------------
Class 9 Claims FB Asbestos Impaired [to be [to be
Property inserted at inserted at
Damage Claims later date] later date]
- -----------------------------------------------------------------------------------------------------------------------
Class 10 Claims Intercompany Impaired [to be 0%
Claims inserted at
later date]
- -----------------------------------------------------------------------------------------------------------------------
Class 11 Claims OCD Interests Impaired N/A 0%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Class Description Treatment Under Plan
- -----------------------------------------------------------------------------------------------
Unclassified Claims
- -----------------------------------------------------------------------------------------------
DIP Facility Claims The Plan provides for DIP Facility Claims
Estimated Allowed Claims: to be paid in full. On, or as soon as
$0 reasonably practicable after, the latest of
(i) the Facility Claim or (iii) the Initial
Distribution Date, (ii) the date on which a
DIP Facility date on which a DIP Facility
Claim becomes an Allowed DIP Claim becomes
payable pursuant to any agreement between a
Debtor and the holder of such DIP Facility
Claim, each holder of an Allowed DIP
Facility Claim shall receive in full
satisfaction, settlement, release and
discharge of and in exchange for such
Allowed DIP Facility Claim (a) Cash equal
to the unpaid portion of such Allowed DIP
Facility Claim or (b) such other treatment
as the applicable Debtor and such holder
shall have agreed in writing.
- -----------------------------------------------------------------------------------------------
Administrative Claims The Plan generally provides for
Estimated Allowed Claims: Administrative Claims to be paid in full.
[to be inserted at later date] Except as otherwise provided in the Plan
and subject to the requirements of the
Plan, on, or as soon as reasonably
practicable after, the latest of (i) the
Initial Distribution Date, (ii) the date on
which an Administrative Claim becomes an
Allowed Administrative Claim or (iii) the
date on which an Administrative Claim
becomes payable pursuant to any agreement
between a Debtor and the holder of such
Administrative Claim, each holder of an
Allowed Administrative Claim shall receive
in full satisfaction, settlement, release
and discharge of and in exchange for such
Allowed Administrative Claim (a) Cash equal
to the unpaid portion of such Allowed
Administrative Claim or (b) such other
treatment as the applicable Debtor and such
holder shall have agreed in writing;
provided, however, that Allowed
Administrative Claims with respect to
liabilities incurred by a Debtor in the
ordinary course of business during the
Chapter 11 Cases shall be paid in the
ordinary course of business in accordance
with the terms and conditions of any
agreements relating thereto.
- -----------------------------------------------------------------------------------------------
Priority Tax Claims Except to the extent that a holder of an
Estimated Allowed Claims: Allowed Priority Tax Claim has been paid by
[to be inserted at later date] the Debtors prior to the Initial
Distribution Date shall receive in full or
has agreed in writing to a different
treatment, each holder of satisfaction,
settlement, an Allowed Priority Tax Claim
release and discharge of and in exchange
for such Allowed Priority Tax Claim, at the
sole discretion of the Debtors, (i) Cash
equal to the amount of such Allowed
Priority Tax Claim, including any interest
on such Allowed Class 2A Claims required to
be paid pursuant to Section 506(b) of the
Bankruptcy Code, on the later of the
Initial Distribution Date and the date such
Priority Tax Claim becomes an Allowed
Claim, or as soon thereafter as is
practicable, (ii) deferred Cash payments,
having a value as of the Effective Date
equal to such Allowed Priority Tax Claim,
over a period not exceeding six (6) years
after the assessment of the tax on which
such Claim is based as the applicable
Debtor and such holder shall have agreed in
writing, or (iii) such other treatment as
the applicable Debtor and such holder shall
have agreed in writing.
- -----------------------------------------------------------------------------------------------
Unimpaired Classes of Claims
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Class 1 -Other Priority Claims Class 1 consists of all Allowed Claims
Estimated Allowed Claims: entitled to priority pursuant to Section
$0 507(a) of the Bankruptcy Code other than
DIP Facility Claims, Administrative Claims
or Priority Tax Claims.
On, or as soon as reasonably practicable
after, the latest of (i) the Initial
Distribution Date, (ii) the date on which
such Class 1 Claim becomes an Allowed Class
1 Claim, or (iii) the date on which such
Class 1 Claim becomes due and payable
pursuant to any agreement between a Debtor
and a holder of a Class 1 Claim, each holder
of an Allowed Class 1 Claim shall receive in
full satisfaction, settlement, release and
discharge of and in exchange for such
Allowed Class 1 Claim (a) Cash equal to the
unpaid portion of such Allowed Class 1 Claim
or (b) such other treatment as the
applicable Debtor and such holder shall have
agreed in writing. All Allowed Class 1
Claims which are not by their terms due and
payable on or before the Effective Date will
be paid in the ordinary course of business
in accordance with the terms thereof.
Class 1 Claims are Unimpaired. Holders of
Claims in Class 1 will be deemed to have
accepted the Plan, and accordingly are not
entitled to vote to accept or reject the
Plan. Estimated Percentage Recovery: 100%
- -----------------------------------------------------------------------------------------------
Class 2A - Other Secured Tax Class 2A consists of all Claims which
Claims otherwise would be tax claims entitled to
Estimated Allowed Claims: priority under Section 507(a)(8) of the
[to be inserted at later date] Bankruptcy Code, but which are secured by a
valid and unavoidable Encumbrance in or on
any of the Debtors' property (to the extent
of the value of the Claim holder's interest
in the Debtors' property, as determined
pursuant to Section 506 of the Bankruptcy
Code).
Except to the extent that a holder of an
Allowed Other Secured Tax Claim has been
paid by the Debtors prior to the Initial
Distribution Date or has agreed in writing
to a different treatment, each holder of an
Allowed Other Secured Tax Claim shall
receive in full satisfaction, settlement,
release and discharge of and in exchange
for such Allowed Other Secured Tax Claim,
at the sole discretion of the Debtors, (i)
Cash equal to the amount of such Allowed
Other Secured Tax Claim on the later of the
Initial Distribution Date and the date such
Other Secured Tax Claim becomes an Allowed
Claim, or as soon thereafter as is
practicable, (ii) deferred Cash payments,
having a value as of the Effective Date
equal to such Allowed Other Secured Tax
Claim, over a period not exceeding six (6)
years after the assessment of the tax on
which such Claim is based as the applicable
Debtor and such holder shall have agreed in
writing, or (iii) such other treatment as
the applicable Debtor and such holder shall
have agreed in writing.
Each holder of an Allowed Class 2A Claim
shall retain the Encumbrances (or
replacement Encumbrances as may be
contemplated under nonbankruptcy law)
securing its Allowed Class 2A Claim as of
the Effective Date until full and final
payment of such Allowed Class 2A Claim is
made as provided in the Plan, and upon such
full and final payment, such Encumbrances
shall be deemed null and void and shall be
unenforceable for all purposes.
Although for Unsecured Claims, a Claim
becomes Allowed unless objected to by the
Claims Objection Deadline, the Debtors'
failure to object to any Class 2A Claim in
the Chapter 11 Cases will be without
prejudice to the rights of the Debtors or
the Reorganized Debtors to contest or
otherwise defend against such Claim in the
appropriate forum when and if such Claim is
sought to be enforced by the holder of such
Claim. Nothing in the Plan or elsewhere
will preclude the Debtors or Reorganized
Debtors from challenging the validity of
any alleged Encumbrance on any asset of a
Debtor or the value of any collateral
notwithstanding a failure to file an
objection by the Claims Objection Deadline.
Class 2A Claims are Unimpaired. Holders of
Claims in Class 2A will be deemed to have
accepted the Plan, and accordingly are not
entitled to vote to accept or reject the
Plan. Estimated Percentage Recovery: 100%
- -----------------------------------------------------------------------------------------------
Class 2B-Other Secured Claims Class 2B consists of Claims secured by a
Estimated Allowed Claims: valid Encumbrance in or on any of the
[to be inserted at later date] Debtors' property, which is not void or
voidable under the Bankruptcy Code or any
other applicable law, to the extent of the
value of the Claim holder's interest in the
Debtors' property, but excluding the Other
Secured Tax Claims.
On, or as soon as reasonably practicable
after, the latest of (i) the Initial
Distribution Date, (ii) the date on which
such Class 2B Claim becomes an Allowed
Class 2B Claim or (iii) the date on which
such Class 2B Claim becomes due and payable
pursuant to any agreement between a Debtor
and the holder of an Allowed Class 2B
Claim, each holder of an Allowed Class 2B
Claim shall receive in full satisfaction,
settlement, release and discharge of and in
exchange for such Allowed Class 2B Claim,
at the sole discretion of the Debtors, (a)
Cash equal to the unpaid portion of such
Allowed Class 2B Claim, (b) Reinstatement
of the legal equitable and contractual
rights of the holder of such Allowed Class
2B Claim, subject to the provisions of
Article VII of the Plan, or (c) such other
treatment as the applicable Debtor and such
holder shall have agreed in writing.
Although for Unsecured Claims, a Claim
becomes Allowed unless objected to by the
Claims Objection Deadline, the Debtors'
failure to object to any Class 2B Claim in
the Chapter 11 Cases will be without
prejudice to the rights of the Debtors or
the Reorganized Debtors to contest or
otherwise defend against such Claim in the
appropriate forum when and if such Claim is
sought to be enforced by the holder of such
Claim. Nothing in the Plan or elsewhere
will preclude the Debtors or Reorganized
Debtors from challenging the validity of
any alleged Encumbrance on any asset of a
Debtor or the value of any collateral
notwithstanding a failure to file an
objection by the Claims Objection Deadline.
Class 2B Claims are Unimpaired. Holders of
the Claims in Class 2B are deemed to have
accepted the Plan, and accordingly are not
entitled to vote to accept or reject the
Plan. Estimated Percentage Recovery: 100%
- -----------------------------------------------------------------------------------------------
Impaired Classes of Claims
- -----------------------------------------------------------------------------------------------
Class 3 -Convenience Claims Class 3 consists of all Claims against any
Estimated Allowed Claims (after of the Debtors that would otherwise be
adjustment to account for Holders of classified as a Class 6 Claim, which (i) is
Convenience Claims in amounts greater in an amount that is equal to or less than
than $5,000 who elect to opt into $5,000 or (ii) on the Ballot has been
Class 3): reduced to $5,000 by the holder of such
[to be inserted at later date] Claim.
On, or as soon as reasonably practicable
after, the latest of (i) the Initial
Distribution Date, (ii) the date on which
such Class 3 Claim becomes an Allowed Class
3 Claim, or (iii) the date on which such
Class 3 Claim becomes due and payable
pursuant to any agreement between a Debtor
and a holder of a Class 3 Claim, each
holder of an Allowed Class 3 Claim shall
receive in full satisfaction, settlement,
release and discharge of and in exchange
for such Allowed Class 3 Claim (a) Cash
equal to the amount of such Allowed Class 3
Claim or (b) such other treatment as the
applicable Debtor and such holder shall
have agreed in writing.
Any holder of a Claim in Class 6 that
desires treatment of such Claim as a
Convenience Claim shall make such election
on the Ballot to be provided to holders of
Impaired Claims entitled to vote to accept
or reject the Plan 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 the Debtors unless the Voting
Deadline is expressly waived in writing by
the Debtors with respect to any such Claim.
Class 3 Claims are Impaired. Holders of the
Claims in Class 3 are entitled to vote to
accept or reject the Plan. Estimated
Percentage Recovery: [ ]%
- -----------------------------------------------------------------------------------------------
Class 4 -Bank Holders Claims Class 4 consists of Claims held by the Bank
Estimated Allowed Claims: Holders arising under or as a result of the
[to be inserted at later date] Debtors' obligations under the 1997 Credit
Agreement (the "Bank Holders Claims" or
If Class 4 accepts the Plan, this "Class 4 Claims").
amount will be reduced by $400
million for purposes of the Pro-Rata On, or soon as reasonably practicable
distributions to holders of Allowed after, the latest of (i) the Initial
Claims in Classes 4, 5, 6 and 7. Distribution Date, (ii) the date on which
such Class 4 Claim becomes an Allowed Class
4 Claim, or (iii) the date on which such
Class 4 Claim becomes due and payable
pursuant to any agreement between a Debtor
and a holder of a Class 4 Claim, each
holder of an Allowed Class 4 Claim will
receive in full satisfaction, settlement,
release and discharge of and in exchange
for such Allowed Class 4 Claim such
holder's Pro Rata share of either:
(a) if Class 4 accepts the Plan, (1) the
Guarantee Settlement Payment, and (2) the
portion of the Combined Net Distribution
Package equal to the Class 4 Initial
Distribution Percentage; or
(b) if Class 4 rejects the Plan, the
portion of the Combined Distribution
Package equal to the Class 4 Initial
Distribution Percentage.
In addition, on or as soon as reasonably
practicable after the Final Distribution
Date, each holder of an Allowed Class 4
Claim shall receive its Pro Rata share of
the (i) Cash in an amount equal to the
Class 4 Final Distribution Percentage of
Excess Available Cash, (ii) Excess Senior
Notes in an aggregate principal amount
equal to the Class 4 Final Distribution
Percentage of the Excess Senior Notes
Amount, (iii) shares of New OCD Common
Stock in an aggregate number equal to the
Class 4 Final Distribution Percentage of
the Excess New OCD Common Stock, and (iv)
Cash in an amount equal to the Class 4
Final Distribution Percentage of the Excess
Litigation Trust Recoveries.
Class 4 Claims are Impaired. To the extent
and in the manner provided in the Voting
Procedures Order, holders of the Claims in
Class 4 are entitled to vote to accept or
reject the Plan. Estimated Percentage
Recovery: ___%
- -----------------------------------------------------------------------------------------------
Class 5 -Bondholders Claims Class 5 consists of Claims held by the
Estimated Allowed Claims: Bondholders arising under or as a result of
[to be inserted at later date] the Debtors' obligations under the
Pre-petition Bonds (the "Bondholders
Claims" or "Class 5 Claims").
On, or as soon as reasonably practicable
after, the later of (i) the Initial
Distribution Date, (ii) the date on which
such Class 5 Claim becomes an Allowed Class
5 Claim, or (iii) the date on which such
Class 5 Claim becomes due and payable
pursuant to any agreement between a Debtor
and a holder of a Class 5 Claim, each
holder of an Allowed Class 5 Claim will
receive in full satisfaction, settlement,
release and discharge of and in exchange
for such Allowed Class 5 Claim such
holder's Pro Rata share of either:
(a) if Class 4 accepts the Plan, the
portion of the Combined Net Distribution
Package equal to the Class 5 Initial
Distribution Percentage; or
(b) if Class 4 rejects the Plan, the
portion of the Combined Distribution
Package equal to the Class 5 Initial
Distribution Percentage.
In addition, on or as soon as reasonably
practicable after the Final Distribution
Date, each holder of an Allowed Class 5
Claim shall receive its Pro Rata share of
the (i) Cash in an amount equal to the
Class 5 Final Distribution Percentage of
Excess Available Cash, (ii) Excess Senior
Notes in an aggregate principal amount
equal to the Class 5 Final Distribution
Percentage of the Excess Senior Notes
Amount, (iii) shares of New OCD Common
Stock in an aggregate number equal to the
Class 5 Final Distribution Percentage of
the Excess New OCD Common Stock, and (iv)
Cash in an amount equal to the Class 5
Final Distribution Percentage of the Excess
Litigation Trust Recoveries.
Class 5 Claims are Impaired. To the extent
and in the manner provided in the Voting
Procedures Order, holders of the Claims in
Class 5 are entitled to vote to accept or
reject the Plan. Estimated Percentage
Recovery: ___%
- -----------------------------------------------------------------------------------------------
Class 6 - General Unsecured Claims Class 6 consists of those Claims against
Estimated Allowed Claims: the Debtors that are General Unsecured
[to be inserted at later date] Claims, which are Claims against any of the
Debtors that are not a DIP Facility Claim,
an Administrative Claim, a Priority Tax
Claim, an Other Priority Claim, an Other
Secured Tax Claim, an Other Secured Claim,
a Convenience Claim, a Bank Holders Claim,
a Bondholders Claim, an OC Asbestos
Personal Injury Claim, an FB Asbestos
Personal Injury Claim, an FB Asbestos
Property Damage Claim, an Intercompany
Claim or an OCD Interest. General Unsecured
Claims include, without limitation, all
Environmental Claims and OC Asbestos
Property Damage Claims ("General Unsecured
Claims" or "Class 6 Claims").
On, or as soon as reasonably practicable
after, the later of (i) the Initial
Distribution Date, (ii) the date on which
such Class 6 Claim becomes an Allowed Class
6 Claim, or (iii) the date on which such
Class 6 Claim becomes due and payable
pursuant to any agreement between a Debtor
and a holder of a Class 6 Claim, each
holder of an Allowed Class 6 Claim will
receive in full satisfaction, settlement,
release and discharge of and in exchange
for such Allowed Class 6 Claim such
holder's Pro Rata share of either:
(a) if Class 4 accepts the Plan, the
portion of the Combined Net Distribution
Package equal to the Class 6 Initial
Distribution Percentage; or
(b) if Class 4 rejects the Plan, the
portion of the Combined Distribution
Package equal to the Class 6 Initial
Distribution Percentage.
In addition, on or as soon as reasonably
practicable after the Final Distribution
Date, each holder of an Allowed Class 6
Claim shall receive its Pro Rata share of
the (i) Cash in an amount equal to the
Class 6 Final Distribution Percentage of
Excess Available Cash, (ii) Excess Senior
Notes in an aggregate principal amount to
the Class 6 Final Distribution Percentage
of the Excess Senior Notes Amount, (iii)
shares of New OCD Common Stock in an
aggregate number equal to the Class 6 Final
Distribution Percentage of the Excess New
OCD Common Stock, and (iv) Cash in an
amount equal to the Class 6 Final
Distribution Percentage of the Excess
Litigation Trust Recoveries.
Class 6 Claims are Impaired. To the extent
and in the manner provided in the Voting
Procedures Order, holders of the Claims in
Class 6 are entitled to vote to accept or
reject the Plan. Estimated Percentage
Recovery: ___%
- -----------------------------------------------------------------------------------------------
Class 7 -OC Asbestos Personal Injury Class 7 consists of OC Asbestos Personal
Claim Injury Claims ("Class 7 Claims").
Estimated Allowed Claims:
An "OC Asbestos Personal Injury Claim"
[to be inserted at later date] means any present or future right to
payment, claim, remedy, liability or Demand
against any OC Person for death, bodily
injury, or other personal damages (whether
physical, emotional or otherwise), whether
or not such right, claim, remedy, liability
or Demand is reduced to judgment,
liquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal,
equitable, secured, or unsecured, whether
or not the facts of or legal basis for such
right, claim, remedy, liability or Demand
are known or unknown, under any theory of
law, equity, admiralty, or otherwise, to
the extent caused or allegedly caused,
directly or indirectly, by the presence of,
or exposure to asbestos or
asbestos-containing products for which any
OC Person may be legally liable, including,
without limitation, the presence of, or
exposure to, asbestos or
asbestos-containing products that were
manufactured, installed, fabricated, sold,
supplied, produced, distributed, released,
or in any way at any time marketed or
disposed of by any OC Person, including,
without express or implied limitation, any
right, claim, remedy, liability or Demand
for compensatory damages (such as loss of
consortium, wrongful death, survivorship,
proximate, consequential, general and
special damages) and including punitive
damages. OC Asbestos Personal Injury Claims
(i) include OC Indirect Asbestos PI Trust
Claims and Unpaid OC Resolved Asbestos
Personal Injury Claims, but (ii) exclude OC
Resolved Asbestos Personal Injury Claims,
OC Asbestos Property Damage Claims, OC
Indirect Asbestos Property Damage Claims,
workers' compensation claims, FB Asbestos
Personal Injury Claims, FB Indirect
Asbestos PI Trust Claims, FB Asbestos
Property Damage Claims, and FB Indirect
Asbestos Property Damage Claims.
All Class 7 Claims will be channeled to the
Asbestos Personal Injury Trust, and shall
be processed, liquidated and paid pursuant
to the terms and provisions of the Asbestos
Personal Injury Trust Distribution
Procedures and the Asbestos Personal Injury
Trust Agreement. The sole recourse of the
holder of a Class 7 Claim shall be the
Asbestos Personal Injury Trust, and such
holder shall have no right whatsoever at
any time to assert its Claim or Demand
against any Protected Party. Without
limiting the foregoing, on the Effective
Date, all persons shall be permanently and
forever stayed, restrained, and enjoined
from taking any Enjoined Actions for the
purpose of, directly or indirectly,
collecting, recovering, or receiving
payment of, on, or with respect to any
Class 7 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 the
Debtors or Reorganized Debtors and the
Asbestos Personal Injury Trust, which
actions shall be in conformity and
compliance with the provisions of the
Plan.)
The Asbestos Personal Injury Trust will be
funded as follows:
On the Effective Date, or as soon as
practicable after, the Reorganized Debtors
shall irrevocably transfer and assign to
the Asbestos Personal Injury Trust for
allocation to the OC Sub-Account the
following: (i) (a) if Class 4 accepts the
Plan, the portion of the Combined Net
Distribution Package equal to the Class 7
Initial Distribution Percentage; or (b) if
Class 4 rejects the Plan, the portion of
the Combined Distribution Package equal to
the Class 7 Initial Distribution
Percentage, and in addition and in any
event, (ii) the OC Asbestos Personal Injury
Liability Insurance Assets and (iii) the
OCD Insurance Escrow.
On or as soon as reasonably practicable
after the Final Distribution Date, the
Reorganized Debtors shall irrevocably
transfer and assign to the Asbestos
Personal Injury Trust for allocation to the
OC Sub-Account the following: (i) Cash in
an amount equal to the Class 7 Final
Distribution Percentage of Excess Available
Cash, (ii) Excess Senior Notes in an
aggregate principal amount equal to the
Class 7 Final Distribution Percentage of
the Excess Senior Notes Amount, (iii)
shares of New OCD Common Stock in an
aggregate number equal to the Class 7 Final
Distribution Percentage of the Excess New
OCD Common Stock, and (iv) Cash in an
amount equal to the Class 7 Final
Distribution Percentage of the Excess
Litigation Trust Recoveries.
Class 7 Claims are Impaired. To the extent
and in the manner provided in the Voting
Procedures Order, holders of the Claims in
Class 7 are entitled to vote accept or
reject the Plan. Among such conditions to
confirmation is the requirement that at
least 75% of the Holders of Class 7 that
vote on the Plan vote in favor of the Plan.
Estimated Percentage Recovery: ___%
- -----------------------------------------------------------------------------------------------
Class 8 - FB Asbestos Class 8 consists of FB Asbestos Personal
Personal Injury Claims Injury Claims ("Class 8 Claims").
Estimated Allowed Claims:
An "FB Asbestos Personal Injury Claim"
[to be inserted at later date] means any present or future right to
payment, claim, remedy, liability or Demand
against any FB Person for death, bodily
injury, or other personal damages (whether
physical, emotional or otherwise), whether
or not such right, claim, remedy, liability
or Demand is reduced to judgment,
liquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal,
equitable, secured, or unsecured, whether
or not the facts of or legal basis for such
right, claim, remedy, liability or Demand
are known or unknown, under any theory of
law, equity, admiralty, or otherwise, to
the extent caused or allegedly caused,
directly or indirectly, by the presence of,
or exposure to asbestos or
asbestos-containing products for which any
FB Person may be legally liable, including,
without limitation, by the presence of, or
exposure to asbestos or asbestos-containing
products that were manufactured, installed,
fabricated, sold, supplied, produced,
distributed, released, or in any way at any
time marketed or disposed of by any FB
Person, including, without express or
implied limitation, any right, claim,
remedy, liability or Demand for
compensatory damages (such as loss of
consortium, wrongful death, survivorship,
proximate, consequential, general and
special damages) and including punitive
damages. FB Asbestos Personal Injury Claims
(i) include FB Indirect Asbestos PI Trust
Claims and Unpaid FB Resolved Asbestos
Personal Injury Claims, but (ii) exclude FB
Resolved Asbestos Personal Injury Claims,
FB Asbestos Property Damage Claims, FB
Indirect Asbestos Property Damage Claims,
workers' compensation claims, OC Asbestos
Personal Injury Claims, OC Indirect
Asbestos PI Trust Claims, OC Asbestos
Property Damage Claims, and OC Indirect
Asbestos Property Damage Claims.
All Class 8 Claims will be channeled to the
Asbestos Personal Injury Trust, and shall
be processed, liquidated and paid pursuant
to the terms and provisions of the Asbestos
Personal Injury Trust Distribution
Procedures and the Asbestos Personal Injury
Trust Agreement. The sole recourse of the
holder of a Class 8 Claim shall be the
Asbestos Personal Injury Trust, and such
holder shall have no right whatsoever at
any time to assert its Claim or Demand
against any Protected Party. Without
limiting the foregoing, on the Effective
Date, all Persons shall be permanently and
forever stayed, restrained, and enjoined
from taking any Enjoined Actions for the
purpose of, directly or indirectly,
collecting, recovering, or receiving
payment of, on, or with respect to any
Class 8 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 the
Debtors or Reorganized Debtors and the
Asbestos Personal Injury Trust, which
actions shall be in conformity and
compliance with the provisions of the
Plan.)
The Asbestos Personal Injury Trust will be
funded as follows:
On the Effective Date, or as soon as
practicable thereafter, the Reorganized
Debtors will irrevocably transfer and
assign to the Asbestos Personal Injury
Trust for allocation to the FB Sub-Account
the following: (i) the FB Reversions, (ii)
the Committed Claims Account, and (iii) the
FB Sub-Account Settlement Payment. The
Reorganized Debtors will, or will use all
commercially reasonable efforts to, cause
the trustees of the Fibreboard Insurance
Settlement Trust to irrevocably transfer
and assign (i) the Existing Fibreboard
Insurance Settlement Trust Assets, and (ii)
any and all of the Fibreboard Insurance
Settlement Trust's rights in the FB
Reversions, to the Asbestos Personal Injury
Trust, for allocation to the FB
Sub-Account, on the Effective Date or as
soon as practicable thereafter.
The Reorganized Debtors will, or will use
all commercially reasonable efforts to,
cause the trustees of the Fibreboard
Insurance Settlement Trust to irrevocably
transfer and assign (i) the Existing
Fibreboard Insurance Settlement Trust
Assets, and (ii) any and all of the
Fibreboard Insurance Settlement Trust's
rights in the FB Reversions, to the
Asbestos Personal Injury Trust, for
allocation to the FB Sub-Account, on the
Effective Date or as soon as practicable
thereafter. The Reorganized Debtors will
also execute and deliver, or will use all
commercially reasonable efforts to cause
the trustees of the Fibreboard Insurance
Settlement Trust to execute and deliver, to
the Asbestos Personal Injury Trust such
documents as the Asbestos Personal Injury
Trustees reasonably request in connection
with the transfer and assignment of the
Existing Fibreboard Insurance Settlement
Trust Assets and the FB Reversions.
Class 8 Claims are impaired. To the extent
and in the manner provided in the Voting
Procedures Order, holders of the Claims in
Class 8 are entitled to vote to accept or
reject the Plan. Among such conditions to
confirmation is the requirement that at
least 75% of the Holders of Class 8 that
vote on the Plan vote in favor of the Plan.
Estimated Percentage Recovery : ___%
- -----------------------------------------------------------------------------------------------
Class 9 -FB Asbestos Property Damage Class 9 consists of FB Asbestos Property
Claims Damage Claims ("Class 9 Claims").
Estimated Allowed Claims:
[to be inserted at later date] An "FB Asbestos Property Damage Claim"
means any present or future right to
payment, claim, remedy, or liability
against, or debt or obligation of, any FB
Person, whether or not the facts or legal
basis for such right, claim, remedy,
liability, debt or obligation are known or
unknown, under any theory of law, equity,
admiralty, or otherwise for, relating to,
or arising by reason of, directly or
indirectly, damage to property, including,
without limitation, diminution in the value
thereof, or environmental damage or
economic loss related thereto, caused or
allegedly caused, directly or indirectly,
in whole or in part by the presence in
buildings or other systems or structures of
asbestos or asbestos-containing products
for which any FB Person may be legally
liable, including, without limitation, the
presence of, or exposure to, asbestos or
asbestos-containing products that were
manufactured, installed, fabricated, sold,
supplied, produced, distributed, released
or in any way at any time marketed or
disposed of by any FB Person prior to the
Petition Date, or for which any FB Person
is liable due to the acts or omissions of
any FB Person, including, without express
or implied limitation, any right, claim,
remedy, liability against, or debt or
obligation for compensatory damages (such
as proximate, consequential, general and
special damages) and including punitive
damages. FB Asbestos Property Damage Claims
include FB Indirect Asbestos Property
Damage Claims.
All Class 9 Claims will be channeled to the
FB Asbestos Property Damage Trust, and will
be processed, liquidated and paid pursuant
to the terms and provisions of the FB
Asbestos Property Damage Trust Agreement
and the FB Asbestos Property Damage Trust
Distribution Procedures. The sole recourse
of the holder of an Allowed Class 9 Claim
will be the FB Asbestos Property Damage
Trust, and such holder will have no right
whatsoever at any time to assert its Class
9 Claim against any FB Person. Without
limiting the foregoing, on the Effective
Date, all Persons shall be permanently and
forever stayed, restrained, and enjoined
from taking any Enjoined Actions for the
purpose of, directly or indirectly,
collecting, recovering, or receiving
payment of, on, or with respect to any FB
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 the Debtors or
Reorganized Debtors and the FB Asbestos
Property Damage Trust, which actions shall
be in conformity and compliance with the
provisions of the Plan.)
The FB Asbestos Property Damage Trust
will be funded as follows:
On the later of the Effective Date and the
date by which the FB Asbestos Property
Damage Trustee has executed the FB Asbestos
Property Damage Trust Agreement, the
Reorganized Debtors shall transfer and
assign, or cause to be transferred and
assigned, to the FB Asbestos Property
Damage Trust the FB Asbestos Property
Damage Insurance Assets. The FB Asbestos
Property Damage Insurance Assets means
rights to coverage for FB Asbestos Property
Damage Claims under liability insurance
policies issued to Fibreboard and
identified in Schedule XVI to the Plan, to
be filed at least five (5) Business Days
prior to the Objection Deadline. The
foregoing includes, without limitation, (i)
rights under such insurance policies,
rights under settlement agreements made
with respect to such insurance policies,
Insolvent Insurer PD Rights, and Insurance
Guarantee Fund PD Rights; and (ii) the
right, on behalf of the Debtors, to give a
full release of the insurance rights of the
Debtors for FB Asbestos Property Damage
Claims under any such policies or related
agreements, provided that a reciprocal
release of the Debtors in connection with
said policies or agreements is given in
exchange by the insurer or other released
insurance entity and further provided that
any such release shall not encompass rights
with respect to coverage for workers'
compensation claims or with respect to
coverage other than for FB Asbestos
Property Damage Claims.
Class 9 Claims are Impaired. To the extent
and in the manner provided in the Voting
Procedures Order, holders of the Claims in
Class 9 are entitled to vote to accept or
reject the Plan. Estimated Percentage
Recovery: ___%
- -----------------------------------------------------------------------------------------------
Class 10 - Intercompany Claims Class 10 consists of Intercompany Claims
Estimated Allowed Claims: ("Class 10 Claims").
[to be inserted at later date]
An "Intercompany Claim" is any Claim,
including, without limitation, any
Administrative Claim, by a Debtor against
another Debtor, but excluding the Claims
set forth on Schedule XIV to the Plan, as
it may be filed or amended at least five
(5) Business Days prior to the Objection
Deadline.
On the Effective Date, all Intercompany
Claims other than such Claims set forth in
Schedule XIV, to be filed or amended at
least five (5) Business Days prior to the
Objection Deadline, shall be deemed
cancelled and extinguished but solely for
purposes of the Plan. Except as specified
in Schedule XIV, no holder thereof shall be
entitled to, or shall receive or retain any
property or interest in property on account
of, such Intercompany Claim pursuant to the
Plan. Schedule XIV shall indicate the
classification and/or treatment of the
Claims set forth therein.
Class 10 Claims are Impaired. Holders of
Claims in Class 10 will be deemed to have
rejected the Plan, and accordingly are not
entitled to vote to accept or reject the
Plan. Estimated Percentage Recovery: 0%
- -----------------------------------------------------------------------------------------------
Class 11 - OCD Interests Class 11 consists of all OCD Interests
Estimated Allowed Interests: ("Class 11 Claims").
[to be inserted at later date]
"OCD Interests" consist of, (i)
collectively, all Existing OCD Common
Stock, Existing OCD Preferred Stock and
Existing OCD Options, together with any
options, warrants, conversion rights,
rights of first refusal or other rights,
contractual, equitable or otherwise, to
acquire or receive any Existing OCD Common
Stock, Existing OCD Preferred Stock,
Existing OCD Options or other capital stock
in OCD, or any contract subscription,
commitment or agreement pursuant to which
any Person was or could have been entitled
to receive any share of the capital stock
of OCD, or any such option, warrant,
conversion right, right of first refusal or
other right (including, without limitation,
any rights of any 401(k) plan or the
interest of any participant therein), in
each case issued or entered into by, or
otherwise the obligation of, OCD or another
Debtor; and (ii) all shares of Preferred
Stock and Class A Common Stock of Integrex,
together with any options, warrants,
conversion rights, rights of first refusal
or other rights, contractual, equitable or
otherwise, relating to such stock, held by
Blue Ridge Investments, L.L.C. or its
successors and assigns.
On the Effective Date, all of the OCD
Interests outstanding at the Effective Date
will be deemed cancelled and extinguished.
No holder thereof will be entitled to, or
will receive or retain any property or
interest in property on account of, such
OCD Interests.
Class 11 Claims are Impaired. The holders
of the Claims in Class 11 are deemed to
reject the Plan and, accordingly, are not
entitled to vote to accept or reject the
Plan. Estimated Percentage Recovery: 0%
- -----------------------------------------------------------------------------------------------
THE PLAN PROPONENTS BELIEVE THAT THE PLAN PROVIDES THE BEST RECOVERIES
POSSIBLE FOR HOLDERS OF CLAIMS AGAINST THE DEBTORS AND THUS STRONGLY RECOMMEND
THAT YOU VOTE TO ACCEPT THE PLAN.
I. INTRODUCTION
Owens Corning, a Delaware corporation ("OCD"), certain of its direct
and indirect Subsidiaries that are also debtors and debtors-in-possession (the
"Subsidiary Debtors" and, together with OCD, the "Debtors") in the
reorganization cases (the "Chapter 11 Cases") under Chapter 11 of the
Bankruptcy Code ("Chapter 11"), James J. McMonagle, the Legal Representative
for Future Claimants (the "Future Claimants' Representative"), and the
Official Committee of Asbestos Claimants (the "Asbestos Claimants' Committee")
(the Debtors, the Future Claimants' Representative, and the Asbestos
Claimants' Committee, collectively, the "Plan Proponents") submit this
disclosure statement (the "Disclosure Statement") pursuant to Section 1125 of
Title 11 of the United States Code (the "Bankruptcy Code") for use in the
solicitation of votes on the Amended Joint Plan of Reorganization for Owens
Corning and its Affiliated Debtors and Debtors-in-Possession, dated as of
March 28, 2003 (the "Plan"), as it may be further amended from time to time in
accordance with its terms and in accordance with Section 1127 of the
Bankruptcy Code and Federal Rule of Bankruptcy Procedure 3019, proposed by the
Plan Proponents and filed with the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). A copy of the Plan is attached
as Appendix A to this Disclosure Statement.
This Disclosure Statement sets forth certain information regarding
the Debtors' operating and financial history prior to October 5, 2000, the
Petition Date, the reasons for seeking protection and reorganization under
Chapter 11, significant events that have occurred since the Chapter 11 Cases
were commenced, and the anticipated organization, operations and financing of
the Debtors upon emergence from Chapter 11 (the "Reorganized Debtors"). This
Disclosure Statement also describes certain terms and provisions of the Plan,
including certain alternatives to the Plan, certain effects of confirmation of
the Plan, certain risk factors associated with securities to be issued under
the Plan, and the manner in which distributions will be made under the Plan.
In addition, this Disclosure Statement discusses the confirmation process and
the voting procedures that holders of Claims entitled to vote under the Plan
must follow for their votes to be counted.
Unless otherwise noted herein, all dollar amounts provided in this
Disclosure Statement and in the Plan are given in United States dollars.
FOR A DESCRIPTION OF THE PLAN AND VARIOUS RISKS AND OTHER FACTORS
PERTAINING TO THE PLAN, PLEASE SEE SECTION VII OF THIS DISCLOSURE STATEMENT,
ENTITLED "SUMMARY OF THE PLAN OF REORGANIZATION," AND SECTION XV OF THIS
DISCLOSURE STATEMENT, ENTITLED "CERTAIN RISK FACTORS TO BE CONSIDERED."
ALTHOUGH THE PLAN PROPONENTS BELIEVE THAT THE SUMMARIES OF THE PLAN
AND RELATED DOCUMENT SUMMARIES ARE FAIR AND ACCURATE, SUCH SUMMARIES ARE
QUALIFIED TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE TEXT OF SUCH
DOCUMENTS OR STATUTORY PROVISIONS. FACTUAL INFORMATION CONTAINED IN THIS
DISCLOSURE STATEMENT HAS BEEN PROVIDED BY THE DEBTORS' MANAGEMENT, EXCEPT
WHERE OTHERWISE SPECIFICALLY NOTED. THE PLAN PROPONENTS DO NOT WARRANT OR
REPRESENT THAT THE INFORMATION CONTAINED HEREIN, INCLUDING THE FINANCIAL
INFORMATION, IS WITHOUT ANY MATERIAL INACCURACY OR OMISSION.
THE PLAN PROPONENTS BELIEVE THAT THE PLAN WILL ENABLE THE DEBTORS TO
SUCCESSFULLY REORGANIZE AND ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND THAT
ACCEPTANCE OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTORS AND THE HOLDERS
OF CLAIMS AND INTERESTS. THE PLAN PROPONENTS URGE ALL HOLDERS OF CLAIMS WHOSE
VOTES ARE BEING SOLICITED TO VOTE TO ACCEPT THE PLAN.
NOTHING CONTAINED HEREIN SHALL BE DEEMED TO CONSTITUTE AN ADMISSION
OF ANY FACT OR LIABILITY BY ANY PARTY, BE ADMISSIBLE IN ANY NON-BANKRUPTCY
PROCEEDING INVOLVING THE DEBTORS OR ANY OTHER PARTY, OR BE DEEMED CONCLUSIVE
ADVICE ON THE TAX OR OTHER LEGAL EFFECTS OF THE REORGANIZATION AS TO HOLDERS
OF ALLOWED CLAIMS OR INTERESTS. YOU SHOULD CONSULT YOUR PERSONAL COUNSEL OR
TAX ADVISOR ON ANY QUESTIONS OR CONCERNS RESPECTING TAX, SECURITIES, OR OTHER
LEGAL CONSEQUENCES OF THE PLAN.
II. PLAN VOTING INSTRUCTIONS AND PROCEDURES
A. Definitions
All capitalized terms used herein and not otherwise defined herein
have the meanings given to them in the Article I of the Plan, which is
attached hereto as Appendix A, if defined in the Plan, or in the Glossary of
Additional Terms, attached hereto as Appendix A-1, except as expressly
provided or unless the context clearly requires otherwise. Whenever the
context requires, such meanings shall be equally applicable to both the
singular and plural form of such terms, and the masculine gender shall include
the feminine and the feminine gender shall include the masculine. Any term
used in initially capitalized form in this Disclosure Statement that is not
defined herein but that is used in the Bankruptcy Code shall have the meaning
ascribed to such term in the Bankruptcy Code. Additionally, the rules of
construction contained in Section 102 of the Bankruptcy Code apply to the
construction of this Disclosure Statement.
B. Notice to Holders of Claims and Interests
This Disclosure Statement is being transmitted to holders of Impaired
Claims that are entitled under the Bankruptcy Code to vote on the Plan, as
well as other parties. See Section XVII of this Disclosure Statement entitled
"The Solicitation; Voting Procedure" for a description of the Classes of
Claims that are entitled to vote on the Plan. Holders of Interests that do not
receive any distributions under the Plan on account of their Interests are
deemed to have rejected the Plan and are not entitled to vote on the Plan. The
primary purpose of this Disclosure Statement is to provide adequate
information to enable holders of Claims against the Debtors to make a
reasonably informed decision whether to vote to accept or reject the Plan.
Approval by the Bankruptcy Court of this Disclosure Statement means
the Bankruptcy Court has found that this Disclosure Statement contains
information of a kind and in sufficient and adequate detail to enable such
Claim holders to make an informed judgment whether to accept or reject the
Plan. THE BANKRUPTCY COURT'S APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT
CONSTITUTE EITHER A GUARANTEE OF THE ACCURACY OR COMPLETENESS OF THE
INFORMATION CONTAINED HEREIN OR AN ENDORSEMENT OF THE PLAN BY THE BANKRUPTCY
COURT.
IF THE PLAN IS APPROVED BY THE REQUISITE VOTE OF HOLDERS OF CLAIMS
ENTITLED TO VOTE AND IS SUBSEQUENTLY CONFIRMED BY THE BANKRUPTCY COURT, THE
PLAN WILL BIND ALL HOLDERS OF CLAIMS AGAINST, AND INTERESTS IN, THE DEBTORS,
WHETHER OR NOT THEY WERE ENTITLED TO VOTE OR DID VOTE ON THE PLAN AND WHETHER
OR NOT THEY RECEIVE OR RETAIN ANY DISTRIBUTIONS OR PROPERTY UNDER THE PLAN.
THUS ALL HOLDERS OF CLAIMS AGAINST THE DEBTORS ARE ENCOURAGED TO READ THIS
DISCLOSURE STATEMENT AND ITS APPENDICES AND SCHEDULES CAREFULLY AND IN THEIR
ENTIRETY BEFORE DECIDING TO VOTE EITHER TO ACCEPT OR REJECT THE PLAN.
THIS DISCLOSURE STATEMENT IS THE ONLY DOCUMENT AUTHORIZED BY THE
BANKRUPTCY COURT TO BE USED IN CONNECTION WITH THE SOLICITATION OF VOTES TO
ACCEPT OR REJECT THE PLAN. No solicitation of votes may be made except after
distribution of this Disclosure Statement, and no person has been authorized
to distribute any information concerning the Debtors other than the
information contained herein. No such information shall be relied upon in
making a determination to vote to accept or reject the Plan.
CERTAIN OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS
BY ITS NATURE FORWARD LOOKING AND CONTAINS ESTIMATES, ASSUMPTIONS AND
PROJECTIONS THAT MAY BE MATERIALLY DIFFERENT FROM ACTUAL FUTURE RESULTS. Except
with respect to the Pro Forma Financial Projections and Reorganization Balance
Sheet set forth in Appendix B attached hereto and except as otherwise
specifically and expressly stated herein, this Disclosure Statement does not
purport to reflect any events that may occur subsequent to the date hereof and
that may have a material impact on the information contained in this Disclosure
Statement. The Debtors do not undertake any obligation to, and do not intend
to, update the Financial Projections; thus, the Financial Projections will not
reflect the impact of any subsequent events not already accounted for in the
assumptions underlying the Financial Projections. Further, the Debtors do not
anticipate that any amendments or supplements to this Disclosure Statement will
be distributed to reflect such occurrences. Accordingly, the delivery of this
Disclosure Statement shall not under any circumstance imply that the
information herein is correct or complete as of any time subsequent to the date
hereof.
EXCEPT WHERE SPECIFICALLY NOTED, THE FINANCIAL INFORMATION CONTAINED
HEREIN HAS NOT BEEN AUDITED BY A CERTIFIED PUBLIC ACCOUNTING FIRM AND HAS NOT
BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
C. Solicitation Package
Each person entitled to vote to accept or reject this Plan is being
transmitted (1) this Disclosure Statement; (2) the Plan (attached as Appendix
A to this Disclosure Statement); (3) notification of (a) the time by which
Ballots or Master Ballots, as applicable, to accept or reject the Plan must be
submitted, (b) the date, time and place of the hearing to consider
confirmation of the Plan and related matters, and (c) the time for filing
objections to confirmation of the Plan; and (4) a Ballot or Master Ballot, as
applicable (and return envelopes), to be used in voting to accept or reject
the Plan. Any person who receives this Disclosure Statement but does not
receive a Ballot or Master Ballot and who believes that he is entitled to vote
to accept or reject the Plan should contact the Voting Agent at the address or
telephone number set forth in Section XVII of this Disclosure Statement.
D. Voting Procedures, Ballots and Voting Deadline
After carefully reviewing the Plan, this Disclosure Statement and all
related material including, without limitation, the Voting Procedures attached
hereto as Appendix H (the "Voting Procedures"), creditors should indicate
acceptance or rejection of the Plan by voting in favor of or against the Plan
on the enclosed Ballot or Master Ballot and return it in the envelope
provided. Only original Ballots and Master Ballots will be accepted.
Each Ballot and Master Ballot has been coded to reflect the Class of
Claims it represents. Accordingly, in voting to accept or reject the Plan,
only the coded Ballots or Master Ballots accompanying this Disclosure
Statement may be used.
IN ORDER FOR VOTES TO BE COUNTED, BALLOTS AND MASTER BALLOTS MUST BE
PROPERLY COMPLETED AS SET FORTH ABOVE AND IN ACCORDANCE WITH THE VOTING
PROCEDURES AND RECEIVED NO LATER THAN [DATE], AT [TIME] (-_- TIME) (THE
"VOTING DEADLINE") BY ROBERT L. BERGER & ASSOCIATES, L.L.C. (THE "VOTING
AGENT") OR BY INNISFREE M&A INCORPORATED (THE "SPECIAL VOTING AGENT"). NO
STOCK CERTIFICATES OR DEBT INSTRUMENTS OR OTHER INSTRUMENTS OR DOCUMENTS
REPRESENTING CLAIMS OR INTERESTS SHOULD BE RETURNED WITH THE BALLOT OR MASTER
BALLOT.
Questions about (1) the Voting Procedures, (2) the packet of
materials that has been transmitted, (3) the amount of a Claim or (4) requests
for an additional copy of the Plan, this Disclosure Statement or any
appendices or exhibits to such documents (for which a charge may be imposed
unless otherwise specifically provided by Federal Rule of Bankruptcy Procedure
3017(d)) should be directed to:
OWENS CORNING
c/o Robert L. Berger & Associates, L.L.C.
16501 Ventura Blvd., Suite 440
Encino, CA 91436
818-906-8300 (phone)
818-783-2737 (fax)
FOR FURTHER INFORMATION AND INSTRUCTION ON VOTING TO ACCEPT OR REJECT
THE PLAN, SEE SECTION XVII OF THIS DISCLOSURE STATEMENT ENTITLED "THE
SOLICITATION; VOTING PROCEDURE."
E. Confirmation Hearing and Deadline for Objections to Confirmation
Pursuant to Section 1128 of the Bankruptcy Code and Federal Rule of
Bankruptcy Procedure 3017(c), a hearing has been scheduled on confirmation of
the Plan (the "Confirmation Hearing") for__________ __, 2003, at ____ _.m. The
Confirmation Hearing may be adjourned from time to time without further notice
except for the announcement of the adjournment date made at the Confirmation
Hearing or at any subsequent adjourned Confirmation Hearing. Objections to
confirmation of the Plan must be made in writing and must specify in detail
the name and address of the objector, all grounds for the objection, and the
amount and class of the Claim. Any such objection must be filed with the
Bankruptcy Court on or before __________ __, 2003 at ____ _.m. Objections to
confirmation of the Plan are governed by Federal Rule of Bankruptcy Procedure
9014. Additional information regarding the filing of any objections to
confirmation of the Plan is contained in the Notice accompanying this
Disclosure Statement.
III. GENERAL INFORMATION CONCERNING THE DEBTORS
The following information is only a summary and is qualified in its
entirety by reference to OC's Annual Report on Form 10-K for the year ended
December 31, 2002, which is attached to this Disclosure Statement as Appendix
D [This document will be inserted shortly after it is filed with the SEC],
OC's Annual Report on Form 10-K for the year ended December 31, 2001, and OC's
Annual Report on Form 10-K for the year ended December 31, 2000, copies of
which may be obtained, free of charge, through OC's website at
www.owenscorning.com. Readers of this Disclosure Statement are directed to the
full text of those reports for additional information concerning the
historical business and operations of OC.
A. History and Description of Business
1. Introduction
OCD began as a glass fiber joint venture in the 1930's
between Owens-Illinois and Corning Glass. At the end of 1938, the year in
which it was incorporated, OCD reported sales of $2,555,000 and had 632
employees. Today, OCD, along with its approximately 85 direct and indirect
subsidiaries in the United States and throughout the world (collectively, OCD
and its subsidiaries are referred to as "OC" or the "Company") is a global
leading producer of glass fiber materials used in composites and a leading
home building products company. For the year ended December 31, 2002, OC had
over $4.8 billion in sales, approximately 18,000 employees around the world,
and manufacturing, sales and research facilities, including joint venture and
licensee relationships, in more than 30 countries. See Appendices F and G
[which will be provided at a later date], respectively, for charts depicting
OC's corporate structure as of March __, 2003, and the anticipated corporate
structure of the Reorganized Debtors after the Effective Date.
2. General Description of OC's Business
OC operates in two business segments: Building Materials
Systems and Composite Solutions. In 2002, the Building Materials Systems
segment accounted for approximately 73% of OC's total sales, while Composite
Solutions accounted for the remainder. The products and systems provided by
OC's Building Materials Systems segment are used in residential remodeling and
repair, commercial improvement, new residential and commercial construction,
and other related markets. The products and systems offered by OC's Composite
Solutions segment are used in end-use markets such as building construction,
automotive, telecommunications, marine, aerospace, energy, appliance,
packaging and electronics. Many of OC's products are marketed under registered
trademarks, including Propink(R), Advantex(R) and/or the color PINK.
Approximately 65% of OC's sales are related to home
improvement, non-residential markets, sales of composite materials and sales
outside U.S. markets. Approximately 35% of OC's 2002 sales are related to new
U.S. residential construction.
OC also has affiliate companies in a number of countries.
Generally, affiliated companies' sales, earnings and assets are not included
in either operating segment unless OC owns more than 50% of the affiliate and
the ownership is not considered temporary.
As part of OC's strategy to divest non-strategic business, OC sold
the majority of its Engineered Pipe Business during the first quarter of 2001
and sold its 40% interest in Alcopor Owens Corning, its European building
materials joint venture, during the fourth quarter of 2001.
Revenue from external customers, income from operations and total assets
attributable to each of OC's operating segments and geographic regions, as
well as information concerning the dependence of its operating segments on
foreign operations, for each of the years 2002, 2001, and 2000, are contained
in Note 2 to OC's Consolidated Financial Statements, entitled "Segment Data."
See OC's Annual Report on Form 10-K for the year ended December 31, 2002,
which is attached to the Disclosure Statement as Appendix D [This document
will be inserted shortly after it is filed with the SEC], OC's Annual Report
on Form 10-K for the year ended December 31, 2001, and OC's Annual Report on
Form 10-K for the year ended December 31, 2000, copies of which may be
obtained, free of charge, through OC's website at www.owenscorning.com.
(a) Building Materials Systems
Principal Products and Methods of Distribution. Building
Materials Systems operates primarily in North America. It also has a presence
in Latin America and Asia Pacific. Building Materials Systems sells a variety
of products and systems in two major categories: (i) insulating systems,
including thermal and acoustical insulation and air ducts formed from glass
wool fibers and foam insulation, and (ii) exterior systems for the home,
including roofing shingles, vinyl and metal siding and accessories, windows
and doors, cast stone building products and branded housewrap. These products
are used primarily in the home improvement, new residential construction,
manufactured housing and commercial construction markets.
Sales of building insulation systems, roofing shingles and
accessories, housewrap, and vinyl siding are made through home centers,
lumberyards, retailers and distributors. Other channels of distribution for
insulation systems in North America include insulation contractors,
wholesalers, specialty distributors, metal building insulation laminators,
mechanical insulation distributors and fabricators, manufactured housing
producers and appliance, office products and automotive manufacturers. Foam
insulation and related products are sold to distributors and retailers who
resell to residential builders, remodelers and do-it-yourself customers;
commercial and industrial markets through specialty distributors; and, in some
cases, large contractors, particularly in the agricultural and cold storage
markets.
Outside North America, OC has a foam technology facility in
Italy and a majority-owned joint venture foam plant in China and has licensed
others for the manufacture of foam products at locations in Europe, the Middle
East and Asia. OC sells foam products through traditional agents and
distributors.
In Latin America, OC produces and sells building and
mechanical insulation primarily through an affiliate joint venture in Mexico,
as well as exports from U.S. plants. In Asia Pacific, OC sells primarily
mechanical insulation through joint venture businesses, including two majority
owned insulation plants and an insulation fabrication center in China, a
minority owned joint venture in Saudi Arabia, and licensees.
Seasonality. Sales of the Building Materials Systems segment
tend to follow seasonal patterns in the home improvement, remodeling and
renovation, and new construction industries. Sales levels for the segment,
therefore, are typically lower in the winter months.
Major Customers. No customer of the Building Materials
Systems segment accounted for more than 6% of the segment's sales in 2002.
(b) Composite Solutions Segment
Principal Products and Methods of Distribution. Composite
Solutions operates in North America, Europe, Latin America and Asia Pacific,
with affiliates and licensees around the world.
OC is a leading producer of glass fiber materials used in
composites. Composites are made up of two or more components (e.g., plastic
resin and a fiber, traditionally a glass fiber) used in various applications
to replace traditional materials, such as aluminum, wood and steel. OC is
increasingly providing systems that are designed for a specific end-use
application and entail a material, a proprietary process and a fully assembled
part or system. The global composites industry has thousands of end-use
applications. OC has selected strategic markets and end-users in which OC
provides integral solutions, such as the building construction,
transportation, and telecommunications/electronics markets. A large portion of
the business also serves thousands of applications within the consumer,
industrial and infrastructure markets, which include sporting goods and marine
applications. OC sells composite materials to original equipment manufacturers
and boat builders, both directly and through distributors.
Within the building construction market, glass fiber mat is
used to provide fire and mildew resistance in 95% of all asphalt roofing
shingles. OC sells glass fiber and/or mat directly to a small number of major
shingle manufacturers, including its own roofing business. Tubs, showers and
other related internal building components used for both remodeling and new
construction are also major applications of composite materials in the
construction market. These end-use products are some of the first successful
material substitution conversions normally encountered in developing
countries. Glass fiber reinforcements and composite material solutions for
these markets are sold to direct accounts, and also to distributors around the
world, who in turn service thousands of customers.
A significant portion of transportation-related composite
solutions are used in automotive applications. Non-automotive transportation
applications include heavy trucks, rail cars, shipping containers,
refrigerated containers, trailers and commercial ships. Growth continues in
automotive applications, as composite systems create new applications or
displace other materials in existing applications. There are hundreds of
composites applications, including body panels, door modules, integrated
front-end systems, instrument panels, chassis and underbody components and
systems, pick-up truck beds and heat and noise shields. These composite parts
are either produced by original equipment manufacturers or are purchased by
original equipment manufacturers from first-tier suppliers.
Within the telecommunications and electronics markets, glass
fiber composites are used to protect and reinforce fiber optic and copper
cables. OC also produces central strength members for fiber optic cables.
Other end-uses include connectors, circuit breaker boxes, computer housings,
electricians' safety ladders and hundreds of various electro/mechanical
components.
OC sells asphalt products, primarily for industrial and
specialty applications, under the Trumbull brand name. There are three
principal kinds of industrial asphalt: built-up roofing asphalt, used in
commercial flat roof systems to provide waterproofing and adhesion; saturants
or coating asphalt, used to manufacture roofing mats, felts and residential
shingles; and industrial specialty asphalt, used by manufacturers in a variety
of products such as waterproofing systems, adhesives, coatings, dyes and
product extenders, as well as in various automotive applications. There are
several channels of distribution for these products. They are used internally
in the manufacture of residential roofing products and are also sold to other
shingle manufacturers. In addition, asphalt is sold to roofing contractors and
distributors for built-up roofing asphalt systems and to manufacturers in a
variety of other industries, including automotive, chemical, rubber and
construction.
Major Customers. No customer of the Composite Solutions
segment accounted for more than 7% of the segment's sales in 2002.
(c) Business Realignment Preceding Commencement of Chapter 11
Cases
Prior to the commencement of the Chapter 11 Cases, OC
consummated several significant acquisitions and divestitures of non-strategic
businesses and realigned existing businesses.
During the period 1994 through 1996, OC made a number of
acquisitions for its Building Materials Systems segment in the United States
and Europe. The combined purchase price for the acquisitions totaled
approximately $370 million. The largest of these acquisitions was the $110
million acquisition in 1994 of Pilkington Insulation Limited and Kitsons
Insulation Products Limited, the United Kingdom-based insulation manufacturing
and industrial supply businesses of Pilkington PLC.
On June 27, 1997, OC acquired Fibreboard Corporation
("Fibreboard"), a North American manufacturer of vinyl siding and accessories,
as well as manufactured stone. At the time of the acquisition, Fibreboard was
a leading producer of vinyl siding and accessories, with plants in Georgia,
Missouri and North Carolina in the United States, and British Columbia and
Ontario in Canada. Marketing products under the brand names Norandex and
Vytec, Fibreboard also operated more than 130 company-owned distribution
centers in 32 states. The purchase price of the acquisition totaled
approximately $660 million, including assumed debt of $138 million.
On July 28, 1997, OC acquired Amerimark Building Products,
Inc. ("Amerimark") (including its wholly-owned subsidiaries, Wolverine Coil
Coating, Inc. and RBP, Inc.) for a purchase price of approximately $317
million. Amerimark was a specialty building products company serving the
exterior residential housing industry. Major product lines included vinyl
siding, vinyl windows and aluminum accessories for the exterior of the home.
In April 1998, OC completed the sale of its 50% interest in
the Alpha/Owens Corning, L.L.C. joint venture, a manufacturer and marketer of
unsaturated polyester and vinylester resins. OC sold its interest to the joint
venture and Alpha Corporation of Tennessee. OC and Alpha Corporation of
Tennessee had created the joint venture in 1994, combining their existing
resin businesses to form the largest manufacturer of polyester resins in North
America.
In September 1998, OC completed the formation of a joint
venture with a U.S. subsidiary of Groupe Porcher Industries. The joint venture
manufactured and sold yarns and specialty materials. OC contributed two
manufacturing plants and certain proprietary technology to the joint venture,
in return for a 49% interest in the joint venture. The remaining 51% interest
in the joint venture was sold to the Groupe Porcher subsidiary for
approximately $550 million.
In late 1999, certain OC entities, including Fibreboard,
underwent an internal reorganization. On December 15, 1999, OCD approved the
transfer of the assets and liabilities of Cultured Stone Corporation
("Cultured Stone"), a Fibreboard subsidiary, to OCD in exchange for the
transfer by OCD of stock of Amerimark to Fibreboard. Effective December 31,
1999, Cultured Stone and Vytec Sales Corporation, also a Fibreboard
subsidiary, merged with and into Fibreboard. On that same date, Fibreboard
exchanged the Cultured Stone assets and liabilities for the Amerimark stock.
Also on the same date, Fabwel, Inc. ("Fabwel"), a Fibreboard subsidiary, and
the newly acquired Amerimark were merged with and into Norandex, Inc.
("Norandex"), a Fibreboard subsidiary, which then changed its name to Exterior
Systems, Inc. ("Exterior Systems").
During 2000, OC implemented the first phase of a strategic
restructuring program, which continued throughout 2001. On February 2, 2000,
OC completed the sale of the assets of Falcon Foam, a producer of expanded
polystyrene foam insulation in Michigan and California, to Atlas Roofing Corp.
for net proceeds of approximately $50 million. On June 5, 2000, OC completed
the sale of its European building materials business to Alcopor Owens Corning
Holding AG ("Alcopor Owens Corning"), an unconsolidated joint venture between
OC and Alcopor Holding AG, in which OC retained a 40% interest. Proceeds from
the sale, net of OC's $34 million cash infusion into the joint venture, were
$177 million.
3. Acquisitions, Divestitures and Business Realignments During the
Pendency of the Chapter 11 Cases
(a) Business Realignments
Beginning in 2000, and continuing after the filing with the
Bankruptcy Court of voluntary petitions for relief under Chapter 11 made by
OCD and the Subsidiary Debtors (the "Filing"), OC reviewed its cost structures
as a response to the overall slowed economy in both the building materials and
composites industries. As a result of that review, various restructuring
programs were put into place as OC assessed cost structures of certain
businesses and facilities as well as overhead expenditures for the entire
company. One result of such assessments was the determination to exit certain
businesses and consolidate in others, leading to significant restructuring
charges as assets were written down to realizable value or other exit costs
were recognized. In addition, a strategic review of OC's businesses resulted
in additional restructuring charges in 2002.
By Order dated December 9, 2002, OC received Bankruptcy
Court approval for the restructuring of two of OC's joint ventures in China,
namely OC Shanghai and OC Guangzhou. The restructuring involved the extension
of certain debt maturities and the reduction of principal by the China Lenders
(as defined below), who were owed approximately $22 million, which debt was
originally guaranteed by OCD. The restructuring, pursuant to the terms of the
China Standstill Agreement, extended the debt maturities through December 31,
2005, and reduced the principal. In consideration for the proposed maturity
extensions and reduction in principal, OC agreed that the China Lenders have
an Allowed unsecured guaranty Claim against the Estate in the aggregate amount
of $22 million.
(b) Acquisitions
In June 2002, OC received Bankruptcy Court approval to consummate the
restructuring of OC's Indian joint venture, Owens-Corning (India) Limited
("OCIL"), a producer of composite material. As part of the restructuring, OC,
through its wholly-owned subsidiary, IPM Inc. ("IPM") contributed approximately
$3 million of cash into OCIL and agreed to allow a guaranty claim in the amount
of approximately $19 million in its Chapter 11 proceedings in respect of OCIL's
junior debt. In addition, OCIL's senior debt maturities were extended, and its
junior debt was converted to approximately $7 million of redeemable convertible
debentures. Through these restructuring efforts, OC's ownership interest in OCIL
increased from approximately 50% to approximately 60%. OC began consolidating
OCIL on July 1, 2002 when the restructuring was consummated by all of the
parties to the restructuring and approved by the Indian Government.
(c) Divestitures
During the first quarter of 2001, OC completed the sale of
the majority of its interest in Engineered Pipe Systems, Inc. ("EPS"), a
producer of glass-reinforced plastic pipe with operations mostly in Europe.
EPS and Saudi Arabian Amiantit Co. ("Amiantit") had entered into a Stock
Purchase Agreement, dated February 28, 2001, pursuant to which EPS sold to
Amiantit all of the capital stock of its wholly-owned subsidiaries, Flowtite
A/S and Flowtite Technology A/S. Also pursuant to the Stock Purchase
Agreement, Amiantit purchased from Norske EPS BOT A/S, its interest in
Flowtite Botswana Ltd. The purchase price was $2 million. By letter dated May
29, 2001, the Unsecured Creditors' Committee represented to the Debtors that
it had no objection to the Stock Purchase Agreement, or the implementation of
the transactions related to these agreements. Net proceeds from the sale were
$22 million.
OC completed its divestiture of the pipe business with a
sale of certain other operations to Amiantit pursuant to a Stock Purchase
Agreement, dated November 21, 2001. The purchase price for the sale of these
interests was $2.6 million. By letter dated November 29, 2001, the Unsecured
Creditors' Committee represented to the Debtors that it had no objection to
the Stock Purchase Agreement or the implementation of the transactions
provided for under the agreement.
During the fourth quarter of 2001, OC sold its remaining 40%
interest in Alcopor Owens Corning, an unconsolidated joint venture for net
proceeds of $23 million. On October 29, 2001, OC received approval from the
Bankruptcy Court to finalize the transaction, as modified.
B. Financial Structure of the Company at the Petition Date
1. Capitalization
The following table sets forth the consolidated current
liabilities and capitalization of OC as at the dates indicated. The table does
not reflect OC's pre-petition asbestos liability. This information is
qualified in its entirety by, and should be read in connection with, the
Consolidated Financial Statements of OC (including the notes thereto) that are
included in OC's Annual Report on Form 10-K for the year ended December 31,
2002, which is attached to this Disclosure Statement as Appendix D [This
document will be inserted shortly after it is filed with the SEC], as well as
the Consolidated Financial statements of OC included in OC's other reports
filed with the SEC, which may be obtained, free of charge, through OC's
website at www.owenscorning.com.
---------------------------------------------------------------------------------------------------
(in millions of dollars)
As of
---------------------------------------------------------------------------------------------------
October 4, 2000 December 31, 2002
---------------------------------------------------------------------------------------------------
Current Liabilities
---------------------------------------------------------------------------------------------------
Accounts Payable and
Accrued Liabilities $ 281 $ 756
---------------------------------------------------------------------------------------------------
Short-term Debt 50 40
---------------------------------------------------------------------------------------------------
Long-term Debt - current portion 10 65
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Long-term Debt 66 71
---------------------------------------------------------------------------------------------------
Other
---------------------------------------------------------------------------------------------------
Other employee benefits liability 322 368
---------------------------------------------------------------------------------------------------
Pension Plan liability 41 500
---------------------------------------------------------------------------------------------------
Other 133 103
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Liabilities Subject to Compromise 3,503 3,362
(excluding Asbestos)
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Company-obligated Securities of Entities 195 200
Holding Solely Parent Debentures-subject to
compromise
---------------------------------------------------------------------------------------------------
Minority Interest 47 49
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Total Liabilities and Minority Interest $ 4,648 $ 5,514
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Stockholders' Equity
---------------------------------------------------------------------------------------------------
Common Stock 6 6
---------------------------------------------------------------------------------------------------
Additional Paid-In Capital 694 690
---------------------------------------------------------------------------------------------------
Deficit (1,876) (4,766)
---------------------------------------------------------------------------------------------------
Accumulated other
comprehensive loss (103) (395)
---------------------------------------------------------------------------------------------------
Other (9) (3)
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Total Stockholders' Equity (1,288) (4,468)
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 3,360 $ 1,046
(excluding Asbestos)
----------------------------------------------- ------------------------- -------------------------
2. Pre-petition Indebtedness
As of the Petition Date, OCD, the Subsidiary Debtors and
certain Non-Debtor Subsidiaries were parties to a Credit Agreement, dated as
of June 26, 1997 (the "Credit Agreement"), with certain banks listed in Annex
A thereto and with Credit Suisse First Boston, as agent for the lenders
signatory thereto. The Credit Agreement initially provided a revolving credit
line of up to $2 billion available in the form of revolving loans. The initial
borrowers under the Credit Agreement were: OCD, European Owens-Corning
Fiberglas S.A., N.V., Owens-Corning S.A., Owens-Corning Canada Inc.,
Owens-Corning UK Holdings Ltd. and Sierra Corp. (and Fibreboard as successor
to Sierra Corp. after the merger of Sierra Corp. with Fibreboard). The Credit
Agreement was amended by Amendment No. 1, dated as of February 20, 1998
("Amendment No. 1"), pursuant to which Owens-Corning Fiberglas (U.K.) Ltd.,
Owens Corning Building Products (U.K.) Ltd., Owens Corning Polyfoam UK Ltd.
and Owens-Corning Isolation France S.A. were added as borrowers under the
credit facility. In addition, Amendment No. 1, among other things, reduced the
maximum amount of the commitment under the credit facility to $1.8 billion.
The Credit Agreement was again amended by Amendment No. 2, dated as of
November 30, 1998, pursuant to which, among other things, certain financial
covenants were modified to accommodate the NSP ("Amendment No. 2", and the
Credit Agreement as amended by Amendment No. 1 and Amendment No. 2, the "1997
Credit Agreement"). The obligations under the 1997 Credit Agreement were
guaranteed by certain Subsidiaries of OCD (collectively, the "Subsidiary
Guarantors"). OCD was a guarantor, in addition to a borrower, under the 1997
Credit Agreement.
At the Petition Date, IPM, Vytec Corporation, Owens-Corning
Fiberglas Sweden Inc., Falcon Foam Corporation, Integrex, Fibreboard, Exterior
Systems, Inc., Owens-Corning Fiberglas Technology Inc., and Soltech, Inc. were
Subsidiary Guarantors of the obligations under the 1997 Credit Agreement. As
of the Petition Date, the principal amount outstanding under the 1997 Credit
Agreement was $1,565,919,519 (including contingent liabilities for undrawn
letters of credit in the amount of $250,919.519). See Section VII.C.3.b(iii)
of this Disclosure Statement for a description of the treatment of the Bank
Holders Claims under the Plan and Section V.F.11 of this Disclosure Statement
entitled "Implementation of Process for Resolution of Inter-Creditor Issues"
and Section V.G. entitled "Avoidance Actions in the Chapter 11 Cases" of this
Disclosure Statement, for a description of certain pending litigation relating
to the Subsidiary Guarantees.
OC's other principal loan indebtedness as of the Petition
Date (excluding intercompany indebtedness) included:
Principal Amount
Outstanding as of
Aggregate Original October 1, 2000
Facility Principal Amount (in millions of dollars)
$550 Million Term Notes (First Series) (7.5%) $300 million $300 million
$550 Million Term Notes (Second Series) (7.7%) $250 million $250 million
$400 Million Debentures (7.5%) $400 million $400 million
$250 Million Notes (7.0%) $250 million $250 million
$150 million in 8.875% Debentures of the $300 $150 million $40 million
Million High Coupon Debentures
$150 million in 9.375% Debentures of the $300 $150 million $7 million
Million High Coupon Debentures
$130 Million DEM Bearer Bonds (7.25%) $130 million $60 million
Collectively, the debt securities listed above are referred
to as the "Pre-petition Bonds". See Section VII.C.3.b(iv) of this Disclosure
Statement for a description of the treatment of Bondholders Claims under the
Plan.
[The Debtors are currently conducting a review to determine
whether other indebtedness of OC should be separately described ]
OC's other indebtedness subject to compromise at the
Petition Date and as of December 31, 2002, consisted of other long-term debt
through 2012 at rates from 6.25% to 13.8% in an aggregate amount of $62
million and $92 million, respectively. For a description of other
indebtedness, see OC's Annual Report on Form 10-K for the year ended December
31, 2002 which is attached to this Disclosure Statement as Appendix D [this
document will be inserted shortly after it is filed with the SEC], OC's Annual
Report on Form 10-K for the year ended December 31, 2001, and OC's Annual
Report on Form 10-K for the year ended December 31, 2000, copies of which may
be obtained, free of charge, through OC's website at www.owenscorning.com.
3. Pre-petition Equity
Prior to the Petition Date, OCD's common stock, par value
$0.10 per share (the "Existing OCD Common Stock") was listed on the New York
Stock Exchange (NYSE) under the ticker symbol "OWC". As of the Petition Date,
OCD had 100 million shares of authorized common stock, of which 55,423,132
shares were outstanding. Effective January 30, 2003, OCD's common stock was
removed from listing and registration on the NYSE for failing to meet certain
continued listing standards of the NYSE. Effective December 19, 2002, OCD's
common stock has been traded on the Over-The-Counter Bulletin Board under the
ticker symbol "OWENQ".
OCD declared and paid regular dividends of $0.75 per share
of Existing OCD Common Stock for each of the first two quarters of 2000. As a
result of the Filing, on October 5, 2000, OCD declared but did not pay the
regular dividend for the third quarter of 2000. See Sections V.G.3.a of this
Disclosure Statement entitled "Dividend Action" for a discussion of certain
actions that have been filed in the Chapter 11 Cases to avoid certain
dividends paid to certain of the Debtors' shareholders and to recover such
dividends for the Debtors' Estates as a fraudulent conveyance.
As of February 28, 2003, there were 6,929 stockholders of
record of the Existing OCD Common Stock.
See Section VII.C.3.b(x) of this Disclosure Statement for a
description of the treatment of the Existing OCD Common Stock under the Plan.
IV. BACKGROUND OF ASBESTOS-ReLATED LITIGATION
A. Pre-Petition Claims Against OCD
Prior to the Petition Date, numerous claims had been asserted against
OCD alleging personal injuries arising from inhalation of asbestos fibers.
Virtually all of these claims arose out of OCD's manufacture, distribution,
sale or installation of an asbestos-containing calcium silicate, high
temperature insulation product, the manufacture and distribution of which was
discontinued in 1972. OCD received approximately 18,000 asbestos personal
injury claims during 2000, approximately 32,000 such claims during 1999 and
approximately 69,000 such claims during 1998.
B. Pre-Petition Claims Against Fibreboard
Prior to 1972, Fibreboard manufactured asbestos-containing products,
including insulation products. Fibreboard has since been named as a defendant in
many thousands of personal injury claims for injuries allegedly caused by
asbestos exposure. Fibreboard received approximately 22,000 asbestos personal
injury claims during 2000.
1. The Fibreboard Insurance Settlement Trust
In an effort to deal with the financial impact of its
existing and future asbestos-related personal liability in the early 1990's,
Fibreboard entered into a settlement agreement with two of its insurers,
ultimately resulting in the creation of a trust (the "Fibreboard Insurance
Settlement Trust"). See Section IV.C.3(c) of this Disclosure Statement
entitled "Insurance Settlement" for a discussion of the Insurance Settlement
entered into by Fibreboard with respect to its asbestos-related liability.
During the fourth quarter of 1999, the Fibreboard Insurance
Settlement Trust was funded with $1.873 billion in proceeds from the
settlement referred to above. The terms of the Fibreboard Insurance Settlement
Trust provided for the funds in the trust to be applied solely to the costs of
resolving pending and future Fibreboard asbestos-related liabilities, whether
incurred as a result of a judgment in litigation or a settlement, or
otherwise.
During 2000 prior to the Petition Date, payments made out of
the Fibreboard Insurance Settlement Trust for asbestos-related claims against
Fibreboard totaled $820 million, including $45 million in defense, claims
processing and administrative expenses. As a result of the Filing, no payments
for such claims have been made from the Fibreboard Insurance Settlement Trust
since the Petition Date.
The assets of the Fibreboard Insurance Settlement Trust are
comprised of marketable securities. The Fibreboard Insurance Settlement Trust
has received a ruling from the United States Internal Revenue Service ("IRS")
that it is a "qualified settlement fund" for federal income tax purposes. At
December 31, 2002, the fair value of assets in the Fibreboard Insurance
Settlement Trust was $1.238 billion. In addition, there are $127 million in
Administrative Deposits held in settlement accounts to pay applicable
Fibreboard asbestos claim settlements. See Section IV.C.4 of this Disclosure
Statement entitled "NSP Administrative Deposits" for a discussion of these
Administrative Deposits.
2. The Committed Claims Account
Fibreboard also has an interest of approximately $30 million
in the balance of the account (the "Committed Claims Account") established by
Fibreboard and Continental Casualty Company ("Continental") pursuant to the
Agreement Between Fibreboard and Continental On Remaining Issues, dated
December 13, 1999, which was the subject of a Stipulation and Agreed Order
Between Debtors and Continental Casualty Company Regarding Status and
Disposition of Funds in Committed Claims Account and Related Matters Under
Buckets Agreement, entered by the Bankruptcy Court on June 27, 2001. Under the
Plan, the Committed Claims Account is being transferred to the FB Sub-Account
of the Asbestos Personal Injury Trust for the benefit of the holders of
Allowed Claims in Class 8, FB Asbestos Personal Injury Claims. See Section
VII.C.3.b(vii) of this Disclosure Statement entitled "Impaired Classes of
Claims--Class 8 - FB Asbestos Personal Injury Claims."
C. National Settlement Program
1. General
Beginning in late 1998, OCD implemented the National
Settlement Program ("NSP") to resolve personal injury asbestos claims through
settlement agreements with individual plaintiffs' law firms (the "NSP
Agreements").
The NSP was intended to better manage the asbestos
liabilities of OCD and to help OCD better predict the timing and amount of
indemnity payments for both pending and future asbestos claims. The number of
law firms participating in the NSP expanded from approximately 50 when the NSP
was established to approximately 120 as of the Petition Date. The NSP
Agreements extended through at least 2008 and provided for the resolution of
existing asbestos claims, including unfiled claims pending with the
participating law firm at the time it entered into an NSP Agreement ("Initial
Claims"). The NSP Agreements also established procedures and fixed payments
for resolving, without litigation, claims against either OCD or Fibreboard, or
both, arising after a participating firm entered into an NSP Agreement
("Future Claims").
Settlement amounts for both Initial Claims and Future Claims
were negotiated with each firm participating in the NSP, and each firm was to
communicate with its respective clients to obtain authority to settle
individual claims. Payments to individual claimants were to vary based on a
number of factors, including the type and severity of disease, age and
occupation. All such payments were subject to delivery of satisfactory
evidence of a qualifying medical condition and exposure to OCD's and/or
Fibreboard's products, delivery of customary releases by each claimant, and
other conditions. Certain claimants settling non-malignancy claims with OCD
and/or Fibreboard were entitled to an agreed pre-determined amount of
additional compensation if they later developed a more severe asbestos-related
medical condition.
As to Future Claims, each participating NSP firm agreed
(consistent with applicable legal requirements) to recommend to its future
clients, based on appropriately exercised professional judgment, to resolve
their asbestos personal injury claims against OCD and/or Fibreboard through an
administrative processing arrangement, rather than litigation. In the case of
Future Claims involving non-malignancy, claimants were required to present
medical evidence of functional impairment, as well as the product exposure
criteria and other requirements set forth above, to be entitled to
compensation.
2. OCD's Experience with the NSP
(a) NSP Claims Against OCD
As of the Petition Date, the NSP covered
approximately 239,000 Initial Claims against OCD, approximately
150,000 of which had satisfied all conditions to final settlement, including
receipt of executed releases, or other resolution (the "Final NSP
Settlements") at an average cost per claim of approximately $9,300. As of the
Petition Date, approximately 89,000 of such Final NSP Settlements had been
paid in full or otherwise resolved, and approximately 61,000 were unpaid in
whole or in part. As of such date, the remaining balance payable under NSP
Agreements in connection with these unpaid Final NSP Settlements was
approximately $510 million. Through the Petition Date, OCD had received
approximately 6,000 Future Claims under the NSP.
(b) Non-NSP Claims Against OCD
As of the Petition Date, approximately 29,000
asbestos personal injury claims were pending against OCD
outside the NSP. This compares to approximately 25,000 such claims pending on
December 31, 1999. The information needed for a critical evaluation of pending
claims, including the nature and severity of disease and definitive
identifying information concerning claimants, typically becomes available only
through the discovery process or as a result of settlement negotiations, which
often occur years after particular claims are filed. As a result, OCD has
limited information about many of such claims.
OCD resolved (by settlement or otherwise)
approximately 10,000 asbestos personal injury claims outside the
NSP during 1998, 5,000 such claims during 1999 and 3,000 such claims during
2000 prior to the Petition Date. The average cost of resolution was
approximately $35,900 per claim for claims resolved during 1998, $34,600 per
claim for claims resolved during 1999, and $44,800 per claim for claims
resolved during 2000 prior to the Petition Date. Generally, these claims were
settled as they were scheduled for trial, and they typically involved more
serious injuries and diseases. Accordingly, OCD does not believe that such
average costs of resolution are representative of the value of the non-NSP
claims then pending against OCD.
(c) Asbestos-Related Payments by OCD
As a result of the Filing, OCD has not made any
asbestos-related payments since the Petition Date except for approximately $20
million paid on its behalf by third parties pursuant to appeal bonds issued
prior to the Petition Date. During 1999 and 2000 (prior to the Petition Date),
OCD made asbestos-related payments falling within four major categories: (1)
settlements in respect of verdicts incurred or claims resolved prior to the
implementation of the NSP; (2) NSP settlements; (3) non-NSP settlements
covering cases not resolved by the NSP; and (4) defense, claims processing and
administrative expenses, as follows:
- --------------------------------------------------------------------------------------------------------------
1999 2000 (through October 4)(1)
(In millions of dollars) (In millions of dollars)
- --------------------------------------------------------------------------------------------------------------
Pre-NSP Settlements $170 $ 51
- --------------------------------------------------------------------------------------------------------------
NSP Settlements 570 538
- --------------------------------------------------------------------------------------------------------------
Non-NSP Settlements 30 42
- --------------------------------------------------------------------------------------------------------------
Defense, Claims Processing and 90 54
Administrative Expenses
- --------------------------------------------------------------------------------------------------------------
Total(2) $860 $685
- ------------------------------------------- ------------------------------ -----------------------------------
_______________________
(1) Since the Petition date, all pre-petition asbestos claims and pending
litigation against the Debtors, including, without limitation, claims
under the NSP, have been automatically stayed.
(2) Amounts shown are before tax and application of insurance recoveries.
Prior to the Petition Date, OCD deposited certain
amounts in settlement accounts to facilitate claims processing under the NSP
("Administrative Deposits"). See Section IV.C.4 of this Disclosure Statement
entitled "NSP Administrative Deposits" for a further discussion of the
settlement accounts.
3. Fibreboard's Experience with the NSP
(a) NSP Claims Against Fibreboard
As described above, OCD acquired Fibreboard in
1997. Fibreboard executed the NSP Agreements and became a participant in the
NSP effective in the fourth quarter of 1999. The NSP Agreements settled
asbestos personal injury claims that had been filed against Fibreboard by
participating plaintiffs' law firms and claims that could have been filed
against Fibreboard by such firms following the lifting, in the third quarter
of 1999, of an injunction which had barred the filing of asbestos personal
injury claims against Fibreboard.
As of the Petition Date, the NSP covered
approximately 206,000 Initial Claims against Fibreboard, approximately 118,000
of which had satisfied all conditions to final settlement, including receipt
of executed releases, or other resolution as Final NSP Settlements at an
average cost per claim of approximately $7,400. As of the Petition Date,
approximately 62,000 of such Final NSP Settlements had been paid in full or
otherwise resolved, and approximately 56,000 were unpaid in whole or in part.
As of such date, the remaining balance payable under NSP Agreements in
connection with these unpaid Final NSP Settlements was approximately $330
million. The NSP Agreements also provided for the resolution of Future Claims
under the NSP against Fibreboard through the administrative processing
arrangement described above. Through the Petition Date, Fibreboard had
received approximately 6,000 Future Claims under the NSP.
(b) Non-NSP Claims Against Fibreboard
As of the Petition Date, approximately 9,000
asbestos personal injury claims were pending against Fibreboard outside the
NSP. This compares to approximately 1,000 such claims pending on December 31,
1999. Fibreboard resolved (by settlement or otherwise) approximately 2,000
asbestos personal injury claims outside the NSP during 2000 prior to the
Petition Date at an average cost of resolution of approximately $45,000 per
claim. Generally, these claims were settled as they were scheduled for trial,
and they typically involved more serious injuries and diseases. Accordingly,
OC does not believe that such average costs of resolution are representative
of the value of the non-NSP claims then pending against Fibreboard.
(c) Insurance Settlement
In 1993, Fibreboard entered into certain settlement
arrangements in an attempt to address the financial impact of its existing and
future asbestos-related personal injury liabilities. One such arrangement was
an insurance settlement (the "Insurance Settlement") between Fibreboard and
two of its insurers, Continental and Pacific Indemnity Company ("Pacific").
Under the terms of the Insurance Settlement, Continental and Pacific were,
among other things, to provide up to $2 billion minus interim settlements,
plus accrued interest, to resolve asbestos personal injury claims pending
against Fibreboard as of August 27, 1993 and all future asbestos personal
injury claims asserted against Fibreboard after such date, including defense
costs. These funds were to be put into the Fibreboard Insurance Settlement
Trust. See Section V.F.6 of this Disclosure Statement entitled "Insurance
Settlement" and OC's Annual Report on Form 10-K for the year ended December
31, 2002, Appendix D, for a further description of the Insurance Settlement.
[This document will be inserted shortly after it is filed with the SEC]
The Insurance Settlement became effective in 1999
and, during the fourth quarter of 1999, Continental and Pacific funded the
Fibreboard Insurance Settlement Trust with $1.873 billion.
(d) Asbestos-Related Payments by Fibreboard
As a result of the Filing, Fibreboard has not made
any asbestos-related payments since the Petition Date. During 2000 (prior to
the Petition Date), gross payments for asbestos-related claims against
Fibreboard, all of which were paid/reimbursed by the Fibreboard Insurance
Settlement Trust, fell within four major categories, as follows:
- -------------------------------------------------------------------------------
2000 (through October 4, 2000)(3)
(In millions of dollars)
- -------------------------------------------------------------------------------
Pre-NSP Settlements $29
- -------------------------------------------------------------------------------
NSP Settlements 705
- -------------------------------------------------------------------------------
Non-NSP Settlements 41
- -------------------------------------------------------------------------------
Defense, Claims Processing and 45
Administrative Expenses
- -------------------------------------------------------------------------------
Total $820
- ----------------------------------------- -------------------------------------
__________________
(3) Only payments through October 4, 2000, are reflected. Since the
Petition date, all pre-petition asbestos claims and pending litigation
against the Debtors, including, without limitation, claims under the
NSP, have been automatically stayed.
The payments for settlements under the NSP include
certain administrative deposits during the reporting period in respect of
Fibreboard claims. Of this, approximately $127 million remains in settlement
accounts and is or will be the subject of litigation to determine if any of
these funds are recoverable by Fibreboard's estate. See Section IV.C.4 of this
Disclosure Statement entitled "NSP Administrative Deposits" for a further
discussion of the settlement accounts.
4. NSP Administrative Deposits
As referred to above, prior to the Petition Date, OCD and
Fibreboard entered into settlement agreements with four law firms including
Baron & Budd, P.C. ("B&B"), whereby OCD and Fibreboard would make certain
Administrative Deposits to facilitate claims processing under the NSP
Agreements. These Administrative Deposits were made to settlement accounts
maintained by such law firms for the benefit of their clients under the NSP
Agreements. Each of the NSP Agreements contemplated that clients of the four
firms, who received written approval from OCD and/or Fibreboard that they
qualified for settlement payments pursuant to the terms of the particular NSP
Agreement, would receive their settlement distribution from the Administrative
Deposits maintained by their law firm.
After the Petition Date, the Debtors did not authorize any
further distributions from the Administrative Deposits. Nonetheless, at least
one law firm made distributions after the Petition Date in the amount of
approximately $11.6 million. At December 31, 2002, approximately $ 106 million
of Administrative Deposits previously made by OCD, and $127 million of
Administrative Deposits previously made by Fibreboard had not been finally
distributed to claimants and are reflected in OCD's consolidated balance sheet
as restricted assets ("Restricted Cash") and have not been subtracted from
OCD's or Fibreboard's reserve for asbestos personal injury claims.
The Administrative Deposits held by B&B have been the
subject of litigation during the Chapter 11 Cases. See Section V.F.7 of this
Disclosure Statement entitled "Baron & Budd Administrative Deposits." The
Debtors are negotiating with the three other law firms holding Administrative
Deposits to resolve disputes relating to the Debtors' rights to the return of
some portion of the Administrative Deposits. If no settlement is reached, the
Debtors will pursue the return of an appropriate portion of the Administrative
Deposits.
D. Establishment of Financial Reserves for Asbestos Liability; Estimation
of Asbestos Liability
1. Financial Statement Reserves for Asbestos Liability
For financial reporting purposes, OC estimates a reserve in
accordance with generally accepted accounting principles to reflect
asbestos-related liabilities that have been asserted or are probable of
assertion, in which liabilities are probable and reasonably estimable. This
reserve in respect of OCD's asbestos-related liabilities was established
initially through a charge to income in 1991 with additional charges to income
of $1.1 billion in 1996, $1.4 billion in 1998, $1.0 billion in 2000 and $1.4
billion in the third quarter of 2002 and as of December 31, 2002, the reserve
in respect of OCD asbestos-related liabilities was approximately $3.6 billion.
Similarly, OC estimates a reserve in respect of Fibreboard's asbestos-related
liabilities and, as of December 31, 2002, the aggregate reserve in respect of
Fibreboard asbestos-related liabilities was approximately $2.3 billion. Thus,
OC's aggregate reserve for potential asbestos-related liability was
approximately $5.9 billion as of December 31, 2002. For additional information
with respect to the establishment and amount of reserves for asbestos-related
liability, see Note 19 of Notes to Consolidated Financial Statements of OC's
Annual Report on Form 10-K for the year ended December 31, 2002, which is set
forth in Appendix D to this Disclosure Statement [This document will be
inserted shortly after it is filed with the SEC].
As OC has discussed in its public filings, any estimate for
financial reporting purposes of its liabilities for pending and expected
future asbestos claims is subject to considerable uncertainty because such
liabilities are influenced by numerous variables that are inherently difficult
to predict. As discussed further below, such uncertainties significantly
increased as a result of the Filing. Prior to the Petition Date, such
variables included, among others, the cost of resolving pending non-NSP
claims; the disease mix and severity of disease of pending NSP claims; the
number, severity of disease, and jurisdiction of claims filed in the future
(especially the number of mesothelioma claims); how many future claimants were
covered by an NSP Agreement; the extent, if any, to which individual claimants
exercised a right to opt out of an NSP Agreement and/or engage counsel not
participating in the NSP; the extent, if any, to which counsel not bound by an
NSP Agreement undertook the representation of asbestos personal injury
plaintiffs against OCD and Fibreboard; the extent, if any, to which OC
exercised its right to terminate one or more of the NSP Agreements due to
excessive opt-outs or for other reasons; and the success in controlling the
costs of resolving future non-NSP claims.
As a result of the Filing, the inherent difficulties and
uncertainties involved in estimating the number and cost of resolution of
present and future asbestos-related claims against OCD and Fibreboard have
significantly increased and will likely have the effect of increasing the
number and ultimate cost of resolution of such claims substantially. This
could result from the following factors:
o The settlement values for specified categories of disease
set forth in the NSP Agreements were established by
arms-length negotiations with the participating law firms in
circumstances very different from those prevailing in the
Chapter 11 Cases. The settlement values available to
individual claimants under the arrangements to be included
in any plan or plans of reorganization may vary
substantially from those contemplated by the NSP Agreements.
Because OC's estimate of liabilities in respect of non-NSP
claims assumed payment of settlement values similar to those
contained in the NSP Agreements, such estimate is subject to
similar uncertainty.
o OC anticipates that the number and estimated aggregate value
of allowed future claims will ultimately be determined
either as a result of negotiations involving the Future
Claimants' Representative and the other interested
constituencies or, if necessary, by the Bankruptcy Court. It
is not possible to predict the outcome of such negotiations,
or Bankruptcy Court determination, at this time.
As a result of the foregoing, the asbestos liability reserve
estimates set forth in OC's consolidated financial statements are subject to
change. In addition, for the reasons stated below, the estimation of the
asbestos liability reserve for financial statement purposes may differ from
the competing estimations of asbestos liability for Plan purposes.
2. Estimation of Asbestos Liability for Plan Purposes
Unlike the estimation of asbestos-related liability for the
purposes of establishing financial statement reserves, which are based upon a
range of probable and reasonably estimable liabilities, the estimation of
asbestos-related liability for the purposes of determining the relative
allocation of plan consideration is based upon an estimation of the number of
Allowed Claims and their value, including future claims. The proposed Plan
provides for two alternative scenarios for creditor recoveries, one of which
specifies an aggregate liability for Asbestos Personal Injury Claims against
OCD and Fibreboard of $16 billion (on a net present value basis, which
includes $10.7 billion in OC Asbestos Personal Injury Claims and $5.3 billion
in FB Asbestos Personal Injury Claims), which amount has not been reduced by
assets specifically dedicated to the payment of these claims, including the
Fibreboard Insurance Settlement Trust. Under the alternative, such liabilities
would be determined by the District Court and Bankruptcy Court as part of the
confirmation hearing on the Plan. Although OC believes that an estimate in
such amount is supportable, it is anticipated that the number and estimated
aggregate value of Asbestos Personal Injury Claims will ultimately be resolved
through negotiations involving the Asbestos Claimants' Committee and the
Future Claimants' Representative and the other interested constituencies or,
if necessary, determined by the District Court and Bankruptcy Court through
litigation. It is not possible to predict the outcome of such negotiations or
litigation at this time.
In connection with establishing the number and estimated
aggregate value of Asbestos Personal Injury Claims, and as a basis for
establishing the alternative scenarios for creditor recoveries, the Debtors, the
Unsecured Creditors' Committee, the Asbestos Claimants' Committee and the Future
Claimants' Representative retained experts to assist them in estimating the
number and value of OC Asbestos Personal Injury Claims and FB Asbestos Personal
Injury Claims. Such estimates are necessary under Section 524(g) of the
Bankruptcy Code, which requires an estimate of the number of claims that will be
filed against the Debtors in the future. These estimates, particularly in light
of the extended length of the forecast period, necessarily result in more
uncertainty than generally holds for estimates of other types of contingent
liability. In addition, to make these estimates, each of the experts must make
certain assumptions, including the propensity of asbestos claimants to file a
claim against the Debtors, the timing and disease severity of those claims, and
the appropriate average settlement value of claims, all of which add to the
uncertainty and can result in significant variations in the final estimates.
Based on facts currently known to it, including positions
that have been articulated by various interested constituencies since the
Petition Date, the Company believes that the estimates included in most or all
such analyses are likely to vary substantially from the amounts of OCD's and
Fibreboard's respective asbestos reserves in prior periods, and are likely to
also vary substantially from one another, for a number of reasons.
First, such analyses will not involve the same type of
estimation process required in connection with the preparation of financial
statements under generally accepted accounting principles. In general, such
accounting principles require accruals with respect to contingent liabilities
(including asbestos liabilities) only to the extent that such liabilities are
both probable and reasonably estimable. With respect to such liabilities that
are probable as to which a reasonable estimate can be made only in terms of a
range (with no point within the range determined to be more probable than any
other point in such range), such accounting principles require only the
accrual of the amount representing the low point in such range.
Moreover, because such analyses are prepared solely for use
in the negotiation of a plan of reorganization, they will naturally reflect
the respective interests of the different constituencies putting them forward.
Certain constituencies, for example, may have an interest in presenting an
analysis that estimates such liability at the highest level that can arguably
be justified; others may have an interest in estimating such liability at the
lowest possible level; while others may have an interest in estimating such
liability at a point between the two extremes, in an effort to achieve
consensus in the negotiation of the plan of reorganization. In addition,
interested constituencies in the Debtors' bankruptcy proceedings may also take
into account the implications of any such analyses prepared for use in the
Debtors' bankruptcy proceedings on their position in one or more of the other
asbestos-related bankruptcy cases pending in the District of Delaware or
elsewhere.
Ultimately, OCD's (and Fibreboard's) total liability for
asbestos claims will be finally determined after a lengthy period of
negotiations and, if necessary, by the Bankruptcy Court, taking into account
numerous factors not present in OCD's (and Fibreboard's) pre-petition
environment. Such factors include the claims of competing creditor groups as
to the appropriate treatment of their Allowed Claims, the size of the total
estimated asbestos liability, the total number of present Asbestos Personal
Injury Claims Allowed, the total amount of future Asbestos Personal Injury
Claims, and the impact of the procedural consolidation before Judge Wolin of
the Chapter 11 Cases of the Debtors with the cases of Armstrong World
Industries, Inc., W.R. Grace & Co., Federal-Mogul Global, Inc., and USG
Corporation on the timing, outcome or other aspects of the Chapter 11 Cases,
including estimates of the number and cost of resolution of asbestos-related
claims.
V. CHAPTER 11 CASES
A. Events Leading to the Chapter 11 Filings
Since the adoption of its NSP in the fourth quarter of 1998, OC's
strategy had been to use that program to avoid the costly and unpredictable
traditional tort system and to quantify the amount of payments to asbestos
claimants and control the timing of those payments to match the Company's
ability to make such payments. The NSP achieved these goals in many respects
and also facilitated the negotiation of the deferral of payments to NSP
participants during 2000 prior to the Filing. As discussed in more detail
below, however, OC's inability to obtain ongoing financing on acceptable
terms, the lack of support for additional payment deferrals, the higher than
anticipated number of asbestos-related claims (which adversely affected the
Company's estimated liquidity needs through 2004), and the deterioration of
OC's operations during 2000, resulted in the decision by OC to seek protection
for the Debtors under Chapter 11 of the Bankruptcy Code.
During the third quarter of 2000, OC met on a number of occasions
with CSFB, as the agent for the lenders under the 1997 Credit Agreement, to
discuss a refinancing of its $1.8 billion credit facility under the 1997
Credit Agreement, which was scheduled to expire in June 2002. OC requested
that the refinancing extend into 2005 and be increased to an amount sufficient
to meet its expected liquidity needs, including the repayment on maturity of
$300 million of debentures in 2005. Following extended negotiations, OC
concluded at the end of the third quarter of 2000 that its lenders would not
be willing to agree to a refinancing that would meet OC's needs. Moreover, OC
concluded that the lenders would require, as a part of any refinancing, that
OC pledge its assets to secure the loans and agree to limits on payments for
asbestos liabilities that would be inconsistent with its anticipated asbestos
payment obligations.
During the course of the third quarter of 2000, support for asbestos
payment deferrals was adversely impacted by several factors. First, as a
result of the downturn in the Company's operations in the third quarter of
2000 (discussed below), OC approached certain NSP firms to request additional
payment deferrals. Based on those discussions, OC determined that it would not
be feasible to obtain additional payment deferrals and that the likely terms
of the refinancing would be unacceptable to the NSP participants. Second, the
executive committee under the NSP and other participants in the NSP declined
to agree to any deferral in payments due from Fibreboard. Finally, several NSP
firms declined to grant the deferrals previously agreed upon in principle and
initiated legal proceedings to enforce the terms of their respective NSP
Agreements.
Prior to the Filing, OC noted several trends which indicated that it
would likely be required to defer asbestos-related payments in excess of
deferrals previously negotiated with law firms participating in the NSP.
First, OC began to see evidence that a higher than anticipated number of new
asbestos-related claims, particularly higher value claims, was being filed by
non-NSP firms, including new firms (where the timing of resolution is
uncertain and the amount and timing of payments may be determined by the
traditional tort system). Second, OC noted a substantial increase in the rate
of claims filed, particularly during September 2000. Approximately 7,800
asbestos-related claims were received by OC (excluding Fibreboard) during the
third quarter of 2000, compared to approximately 3,400 and 4,200 claims
received during the first and second quarters, respectively. While OC believed
that this increase in claims filings represented an acceleration of claims
from future periods as a result of the downgrading of OC's credit rating in
mid-2000, rather than an increase in the total number of asbestos-related
claims to be expected, this trend would have had the effect of accelerating
the related settlement payments and increasing liquidity needs through 2004
and/or the need to negotiate further deferrals of asbestos payments.
OC's results of operations deteriorated significantly in the third
quarter of 2000, with expectations for the quarter declining particularly during
the last half of the period. As a result of, among other factors, the fall in
demand for building materials, elevated energy and raw materials costs and the
inability of OC to fully recapture these costs in price adjustments, OC's
margins and income from operations were significantly reduced. As a result, OC's
ability to service its ongoing asbestos payments and continue to comply with its
pre-petition loan covenants was adversely affected. OC concluded at the end of
the third quarter of 2000 that, unless it used a substantial portion of its cash
to repay a portion of its debt under the 1997 Credit Agreement, OC would be in
violation of the leverage ratio covenant under that agreement. Moreover, in view
of reduced expectations concerning operating results in the fourth quarter of
2000 and beyond, OC concluded that its long-term liquidity needs (driven in
large measure by asbestos payment obligations) could not likely be met by its
cash and available credit under the 1997 Credit Agreement (which was limited by
leverage ratio and other loan covenants).
As a result of the above factors, OC's management determined late in
the third quarter that it was unlikely that OC would be able to meet its
long-term liquidity needs, including agreed and other required asbestos
payments and repayment of debt on maturity. While OC held $378 million of Cash
and cash equivalents at the end of the third quarter of 2000, and OC's
operations (excluding the effects of asbestos) were traditionally profitable
and generated strong positive cash flow, management determined that a Chapter
11 filing in October would be in the best interest of all OC stakeholders.
B. The Chapter 11 Filings
On October 5, 2000, OCD and the Subsidiary Debtors filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code with the
Bankruptcy Court. The cases are being jointly administered as In re Owens
Corning, et al., Case No. 00-03837 (JKF) (the "Chapter 11 Cases"). The
Subsidiary Debtors that also filed for protection under Chapter 11 of the
Bankruptcy Code on the Petition Date are:
CDC Corporation Integrex Testing Systems LLC
Engineered Yarns America, Inc. HOMExperts LLC
Falcon Foam Corporation Jefferson Holdings, Inc.
Integrex Owens-Corning Fiberglas Technology Inc.
Fibreboard Corporation Owens Corning HT, Inc.
Exterior Systems, Inc. Owens-Corning Overseas Holdings, Inc.
Integrex Ventures LLC Owens Corning Remodeling Systems, LLC
Integrex Professional Services LLC Soltech, Inc.
Integrex Supply Chain Solutions LLC
The Subsidiary Debtors include only the Subsidiaries listed above and do not
include any other United States Subsidiaries of OCD or any of OCD's foreign
Subsidiaries (collectively, the "Non-Debtor Subsidiaries"). A list of the
Non-Debtor Subsidiaries may be found in Schedule II to the Plan, attached to
this Disclosure Statement as Appendix A.
C. Continuation of Business; Stay of Litigation
Since the Petition Date, the Debtors have continued to operate their
businesses as debtors-in-possession under the Bankruptcy Code. Pursuant to the
Bankruptcy Code, the Debtors are required to comply with certain statutory
reporting requirements, including the filing of monthly operating reports. As
of the date hereof, the Debtors have complied with such requirements, and
intend to continue to comply with such requirements. The Debtors are
authorized to operate their businesses in the ordinary course of business,
with transactions out of the ordinary course of business requiring Bankruptcy
Court approval. In accordance with the Bankruptcy Code, the Debtors are not
permitted to pay any claims or obligations that arose prior to the Petition
Date unless specifically authorized by the Bankruptcy Court. Similarly,
claimants may not enforce any Claims against the Debtors that arose prior to
the Petition Date unless specifically authorized by the Bankruptcy Court. As
debtors-in-possession, the Debtors have the right, under Section 365 of the
Bankruptcy Code, subject to the Bankruptcy Court's approval, to assume or
reject pre-petition executory contracts and unexpired leases in existence at
the Petition Date. Parties to contracts or leases that are rejected may assert
rejection damages claims as permitted by the Bankruptcy Code. See Section
VII.F of this Disclosure Statement entitled "Treatment of Executory Contracts
and Unexpired Leases".
As a consequence of the Filing, all pending litigation against the
Debtors was stayed automatically by Section 362 of the Bankruptcy Code and,
absent further order of the Bankruptcy Court, no party may take any action to
recover on pre-petition claims against the Debtors.
D. Professionals Retained in the Chapter 11 Cases
1. The Debtors' Professionals
The attorneys and advisors that have been retained by the
Debtors to assist them in the conduct of their Chapter 11 Cases are set forth
below:
Principal Reorganization Counsel to the Debtors:
SAUL EWING LLP
222 Delaware Avenue
Wilmington, Delaware 19899-1266
Special Counsel to the Debtors:
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Four Times Square
New York, New York 10036-6522
Special Reorganization Counsel to the Debtors:
ARNOLD & CARUSO, LTD.
1822 Cherry Street
Toledo, OH 43608
Special Reorganization Counsel to the Debtors:
SHUMAKER, LOOP & KENDRICK, LLP
North Courthouse Square
1000 Jackson
Toledo, Ohio 43624
Special Reorganization Counsel to the Debtors:
BROBECK, PHLEGER & HARRISON, LLP
Spear Street Tower
One Market
San Francisco, California 94105
Special Counsel to the Debtors:
DEBEVOISE & PLIMPTON
919 Third Avenue
New York, New York 10022
Special Counsel to the Debtors:
FORMAN PERRY WATKINS KRUTZ & TARDY, PLLC 1200 One
Jackson Place 188 East Capitol Street Jackson, MS
39225-2608
Special International Counsel to the Debtors:
BINGHAM MCCUTCHEN LLP
One State Street
Hartford, Connecticut 06103
Special Insurance Counsel to the Debtors:
COVINGTON & BURLING
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2401
Auditor, Tax Advisor, Accounting Advisor & Financial
Advisor to the Debtors:
ARTHUR ANDERSEN LLP
33 West Monroe
Chicago, IL 60603
Special Financial Advisor to the Debtors:
PRICEWATERHOUSECOOPERS LLP
203 North LaSalle Street
Chicago, IL 60601
Information Technology Advisor to the Debtors:
CAP GEMINI ERNST & YOUNG US LLC 1200 Skylight
Office Tower 1660 West 2nd Street Cleveland, OH
44113
Financial and Consulting Services to the Debtors:
CRAWFORD FINANCIAL CONSULTING LLC
(d/b/a CRAWFORD & WINIARSKI)
Suite 1500
535 Griswold
Detroit, Michigan 48226
Audit, Accounting, Actuarial and Tax Advisory
Services to the Debtors:
ERNST & YOUNG LLP
555 California Street
San Francisco, CA 94104
Investment Banker and Financial Advisor to the
Debtors:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza , 61st Floor
New York, New York 10020
Investment Banker to the Debtors:
GOLDSMITH AGIO HELMS SECURITIES, INC.
601 Second Avenue South, 46th Floor
Minneapolis, Minnesota 55402
Brobeck, Phleger & Harrison, LLP is winding down its affairs
and no longer performs legal services for the Debtors. OC terminated its use
of Arthur Andersen's services effective June 30, 2002.
2. The Debtors' Ordinary Course Professionals
Separately, throughout the Chapter 11 Cases, the Debtors
have employed certain other professionals to render post-petition services to
the Debtors in the ordinary course of their businesses, pursuant to an order
of the Bankruptcy Court dated November 30, 2000 (the "OCP Order"). The OCP
Order establishes certain standards, guidelines and procedures for the
Debtors' retention and payment of ordinary course professionals during the
Chapter 11 Cases. The OCP Order authorizes the Debtors to employ and
compensate ordinary course professionals without additional approval from the
Bankruptcy Court subject to certain limitations. Among other limitations, the
OCP Order requires the Debtors to obtain approval under Sections 330 and 331
of the Bankruptcy Code if payments to the ordinary course professionals exceed
an average of $35,000 per month for the professionals (with certain
exceptions), and/or if the payments to all ordinary course professionals
exceed a total of $3 million in any given month. In accordance with the terms
of the OCP Order, every two months throughout the Chapter 11 Cases, the
Debtors have submitted (and continue to submit) a statement with the
Bankruptcy Court which reports the name of the ordinary course professionals,
the amounts paid as compensation for services rendered and reimbursement of
expenses incurred by each ordinary course professional during the previous
two-month period, and a general description of the services rendered by each
ordinary course professional.
3. The Appointment of Official Committees
On October 23, 2000, the United States Trustee for the
District of Delaware appointed two creditors' committees, pursuant to Section
1102(a) of the Bankruptcy Code, one representing general unsecured creditors
(as thereafter amended or reconstituted, the "Unsecured Creditors' Committee")
and the other representing asbestos claimants (as thereafter amended or
reconstituted, the "Asbestos Claimants' Committee" and, together with the
Unsecured Creditors' Committee, the "Committees").
(a) Unsecured Creditors' Committee
The Unsecured Creditors' Committee represents
general unsecured creditors of the Debtors, including the Bank Holders, the
Bondholders, trade creditors and holders of Environmental Claims. The current
five members of, and professionals retained by, the Unsecured Creditors'
Committee are set forth below:
Members of the Unsecured Creditors' Committee:
Credit Suisse First Boston
Eleven Madison Avenue
New York, NY 10010-3629
JP Morgan Chase Manhattan Bank
380 Madison Avenue
New York, NY 10017-2513
Barclays Bank, PLC
222 Broadway
New York, NY 10038
John Hancock Life Insurance Company
200 Clarendon Street
Boston, MA 02117
Jackson National Life Insurance Company
225 West Wacker
Suite 1200
Chicago, IL 60606
Counsel to the Unsecured Creditors' Committee:
DAVIS, POLK & WARDWELL
450 Lexington Avenue
New York, NY 10017
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 North Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
Financial Advisors to the Unsecured Creditors'
Committee:
HOULIHAN, LOKEY, HOWARD & ZUKIN, INC.
685 Third Avenue
15th Floor
New York, NY 10017
The Unsecured Creditors' Committee has established two
unofficial sub-committees (the Bank Holders' sub-committee and the
Bondholders' and trade creditors' sub-committee), each of which is represented
by separate counsel and financial advisors.
The Bank Holders' unofficial sub-committee is represented by
the following attorneys and financial advisors:
Counsel to the Bank Holders' Sub-Committee:
KRAMER LEVIN, NAFTALIS & FRANKEL LLP
919 Third Avenue
New York, NY 10022
RICHARDS LAYTON & FINGER, P.A.
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
Financial Advisors to the Bank Holders'
Sub-Committee:
FTI POLICANO & MANZO
622 Third Avenue
New York, NY 10017
On July 16, 2001, the Bankruptcy Court entered an
order authorizing and approving the employment of special counsel for the
Bondholders' and trade creditors' unofficial sub-committee. The Bondholders'
and trade creditors' unofficial sub-committee is represented by the following
attorneys and financial advisors:
Counsel to the Bondholders' and Trade Creditors'
Unofficial Sub-Committee:
ANDERSON KILL & OLICK, P.C.
1251 Avenue of the Americas
New York, NY 10020
WALSH MONZACK AND MONACO, PA
400 Commerce Ctr.
1201 Orange Street
P.O. Box 2031
Wilmington, DE 19899
Financial Advisors to the Bondholders' and Trade
Creditors' Unofficial Sub-Committee:
BDO SEIDMAN
330 Madison Avenue
New York, NY 10017
(b) Asbestos Claimants' Committee
The Asbestos Claimants' Committee represents
persons alleging asbestos-related personal injuries due to exposure to
products manufactured by the Debtors. The current thirteen members of, and
professionals retained by, the Asbestos Claimants' Committee are set forth
below:
Members of the Asbestos Claimants' Committee:
David Fitts
c/o Brayton & Purcell
222 Rush Landing Road
P.O. Box 2109
Novato, CA 94948
Delores Ramsey
c/o Baron & Budd
Attn: Fred Baron, Esquire
The Centrum
3102 Oak Lawn Avenue
Suite 1100
Dallas, TX 75219-4281
Charles Barrett
c/o Weitz & Luxenberg
Attn: Perry Weitz, Esquire
180 Maiden Lane
New York, NY 10038
John Edward Keane
c/o Kelley & Ferraro, LLP
1901 Bond Court Building
1300 E. 9th Street
Cleveland, OH 44114
Mary F. Stone
c/o Hartley & O'Brien
Attn: R. Dean Hartley, Esquire
827 Main Street
Wheeling, WV 26003
Glenn L. Arnott
c/o Goldberg, Perskey, Jennings & White, P.C.
Attn: Mark C. Meyer, Esquire
1030 Fifth Avenue
Pittsburgh, PA 15219
Elmer Richardson
c/o Cumbest, Cumbest, Hunter & McCormick P.A.
Attn: David O. McCormick, Esquire
729 Watts Avenue
P.O. Drawer 1176 Pascagoula, MS 39568
Barbara Casey
c/o Cooney & Conway
Attn: John D. Cooney, Esquire
701 6th Avenue
LaGrange, IL 60425
James Nelson Allen
c/o Glasser & Glasser
Attn: Richard S. Glasser, Esquire
Crown Center Building
6th Floor
580 E. Main Street
Norfolk, VA 23510
Margaret Elizabeth Fitzgerald
c/o Thorton & Naumes, LLP
Attn: Michael P. Thornton, Esquire
100 Summer Street
30th Floor
Boston, MA 02110
Yolanda England
c/o Peter G. Angelos, Esquire
5905 Harford Road
Baltimore, MD 21214
Deborah Jean Johnson
Personal Representative of the Estate of Stephen
Johnson
c/o Bergman Senn Pageler & Frockt
Attn: Matthew Bergman, Esquire
P.O. Box 2010 17530 Vashon Highway SW Vashon, WA
98070
Joyce Salinas
Plaintiff on her own behalf and representative of
John Salinas (deceased)
c/o Kazan, McClain, Eaises, Abrams, Fernandez,
Lyons & Farrise
Attn: Steven Kazan, Esquire
171 Twelfth Street
3rd Floor
Oakland, CA 94607
Counsel for the Asbestos Claimants' Committee:
CAPLIN & DRYSDALE, CHARTERED
399 Park Avenue
New York, NY 10022-4614
CAMPBELL & LEVINE, LLC
Chase Manhattan Centre
1201 N. Market Street
15th Floor
Wilmington, DE 19801
Financial Advisors for the Asbestos Claimants'
Committee:
L. TERSIGNI CONSULTING, P.C. 2001 West Main Street
Suite 220
Stamford, CT 06902
4. Future Claimants' Representative
A key element of the Plan is the Asbestos Personal Injury
Permanent Channeling Injunction, pursuant to which all current and future
personal injury asbestos-related Claims and Demands against the Debtors and
other covered Persons will be channeled to the Asbestos Personal Injury Trust
established to equitably distribute available assets to holders of all such
Allowed Claims and Demands. A channeling injunction is permitted by Section
524(g) of the Bankruptcy Code and may be issued if a number of specific
conditions are met, including the appointment of a legal representative for
the purpose of protecting the rights of persons that might subsequently assert
future Demands against the Debtors. Specifically, Congress and the courts have
recognized the need in Chapter 11 cases involving asbestos claims to protect
and represent the interests of persons who may have claims and/or Demands
against a debtor arising in the future, and have directed bankruptcy courts to
appoint a legal representative (the "Future Claimants' Representative") for
such claimants in cases where a channeling injunction is sought.
Shortly after the commencement of the Chapter 11 Cases, the
Debtors began discussions with the Unsecured Creditors' Committee and the
Asbestos Claimants' Committee, and their respective legal and financial
advisors, to consider the appointment of a Future Claimants' Representative.
Following careful consideration of the potential candidates for Future
Claimants' Representative, the Debtors determined that James J. McMonagle was
well-qualified to represent the interests of any and all persons described in
Section 524(g)(4)(B)(i) of the Bankruptcy Code who may assert Demands against
one or more of the Debtors, and therefore, should be appointed as the Future
Claimants' Representative for such persons in these cases.
On September 28, 2001, the Court appointed James J.
McMonagle, nunc pro tunc to June 12, 2001, as the Future Claimants'
Representative of any and all persons described in Section 524(g)(4)(B)(i) of
the Bankruptcy Code who may assert Demands for asbestos-related personal
injury claims against one or more of the Debtors, including without
limitation, OCD and Fibreboard. The Debtors believe the appointment of the
Future Claimants' Representative has facilitated the negotiation of the Plan
with the Asbestos Claimants' Committee and the Future Claimants'
Representative by assuring that all parties in interest, including the future
claimants, have had a fair opportunity to participate in the process.
The name and address of the Future Claimants'
Representative and the professionals retained by him are set forth below:
Future Claimants' Representative:
James J. McMonagle, Esq.
Vorys Sater Seymour & Pease LLP
2100 One Cleveland Center
1375 E. Ninth Street
Cleveland, OH 44114
Counsel to the Future Claimants' Representative:
KAYE SCHOLER LLP
425 Park Avenue
New York, NY 10022
YOUNG CONAWAY STARGATT & TAYLOR, LLP
The Brandywine Building
1000 West Street, 17th Floor
P.O. Box 391 Wilmington, DE 19899-0391
Financial Advisor to the Future Claimants' Representative:
PETER J. SOLOMON CO.
767 Fifth Avenue, 26th Floor
New York, NY 10153
5. Other Professionals and Advisors
(a) The Claims, Noticing and Balloting Agent
On October 6, 2000, the Bankruptcy Court appointed
Robert L. Berger & Associates, Inc., 16501 Ventura Blvd., Suite 440,
Encino, CA 91436, as the claims, noticing and balloting agent ("Claims
Agent" or "Voting Agent", as the context requires) in the Chapter 11 Cases,
pursuant to 28 U.S.C. ss. 156(c).
(b) Special Voting Agent
On March 19, 2003, the Debtors filed an application
to retain Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New
York, NY 10022, as Special Voting Agent to address notice issues related to
securities.
(c) Fee Auditor
On June 20, 2002, the Bankruptcy Court appointed
Warren H. Smith & Associates, P.C. 900 Jackson Street, 120 Founders Square,
Dallas, Texas 75202, as the Fee Auditor, to act as a special consultant to the
Bankruptcy Court for professional fee and expense review and analysis, nunc
pro tunc to April 29, 2002.
E. "First Day" and Other Orders
On or about October 6, 2000, the Debtors filed a series of motions
seeking relief by virtue of so-called "first day" orders. First day orders are
intended to facilitate the transition between a debtor's pre-petition and
post-petition business operations by approving certain regular business
practices that may not be specifically authorized under the Bankruptcy Code or
as to which the Bankruptcy Code requires prior approval by the Bankruptcy
Court. These orders were designed to allow the Debtors to continue business
operations with minimum disruptions and to ease the strain on the Debtors'
relationships with their employees and other parties. The first day orders
obtained in these cases are typical for large Chapter 11 cases. Set forth
below is a brief summary of the significant first day orders and other orders
relating to motions filed by the Debtors at or near the commencement of the
Chapter 11 Cases. The descriptions of the relief sought or obtained in the
Chapter 11 Cases set forth below and throughout this Disclosure Statement are
summaries only and reference should be made to the actual pleadings and orders
for their complete content.
The first day orders and other orders, entered at or near the
commencement of the Chapter 11 Cases, provide for, among other things:
o the payment of employees' accrued pre-petition wages,
salaries, commissions and reimbursable business expenses;
the continuation of employee benefit plans and programs
post-petition; and the direction for all banks to honor
pre-petition checks for payment of employee obligations;
o the payment of certain pre-petition import obligations
(including customs duties, freight, trucking charges and
brokerage fees), shipping charges and related possessory
liens;
o the payment of certain miscellaneous contractors in
satisfaction of perfected or potential mechanics',
materialmen's or similar liens;
o a prohibition on the Debtors' utility services providers
from discontinuing services on account of outstanding
pre-petition invoices and establishing procedures for
utility providers to seek adequate assurance of the Debtors'
future performance;
o the payment of certain pre-petition tax claims;
o the honoring of certain pre-petition obligations to
customers under various warranty and other customer
programs, and the continuation of warranty and customer
programs post-petition;
o the payment of certain critical pre-petition trade vendors'
claims;
o the joint administration of each of the Debtors' bankruptcy
cases;
o confirming administrative expense treatment for obligations
arising from post-petition delivery of goods, administrative
expense treatment for certain holders of valid reclamation
claims and a prohibition against third parties reclaiming
goods or interfering with delivery of goods to the Debtors;
and
o the extension of time for filing the Debtors' Schedules and
Statement of Financial Affairs (the "SOFAS").
F. Significant Events During the Chapter 11 Cases
In addition to the first day relief sought and received in the
Chapter 11 Cases, the Debtors have sought and received authority with respect
to various matters designed to assist in the administration of the Chapter 11
Cases, to maximize the value of the Debtors' Estates and to provide the
foundation for the Debtors' emergence from Chapter 11. Set forth below is a
brief summary of the principal motions the Debtors have filed, and to which
they have been granted relief by the Bankruptcy Court, during the pendency of
the Chapter 11 Cases.
1. Employee Related Matters
In connection with the filing of the Chapter 11 Cases, the
Debtors obtained orders of the Bankruptcy Court authorizing the Debtors to (a)
pay employees pre-petition wages, salaries and other compensation, (b)
continue certain employee benefit programs, including maintenance of
self-insured workers' compensation programs, (c) adopt a Retention Program and
a supplemental Severance Program (as defined in the Retention and Severance
Motion described below), and (d) modify certain employee retirement benefits
programs to provide limited enhancement to those programs and to bring them
into compliance with certain provisions of the Tax Reform Act of 1986.
On December 22, 2000, the Debtors filed a Motion For Order
Under 11 U.S.C. ss.ss. 105, 363 and 365 Authorizing Continuation or
Implementation of Employee Retention, Emergence, Severance, Incentive, 401(k)
Contribution and Global Awards Programs (the "Retention and Severance
Motion"), which sought approval of various new or existing programs designed
to prevent excessive turnover of key employees during the Chapter 11 Cases. On
January 17, 2001, the Bankruptcy Court entered an order approving in part the
Retention and Severance Motion. Thereafter, on February 16, 2001, the Debtors
filed a Supplement to the Retention and Severance Motion by which the Debtors
sought an order approving and authorizing the continuation, modification and
implementation of certain employee compensation programs. On March 26, 2001,
following certain modifications, the Bankruptcy Court approved the remaining
portion of the Retention and Severance Motion.
Pursuant to the January 17, 2001 and March 26, 2001 orders
approving the Retention and Severance Motion, the Debtors were authorized to
continue or to implement the following programs: (a) an employee retention
program under which the Debtors were authorized to pay retention bonuses at
specified intervals to approximately 236 key employees; (b) a supplemental
employee retention and emergence program, under which certain key employees
are entitled to receive additional bonuses in the event that the Debtors
emerge from bankruptcy by 2004; (c) continuation of the Debtors' existing
employee severance programs consisting of a "Salaried Employee Separation
Allowance Plan," which extends to all salaried employees in the United States
except senior management, as well as individually negotiated severance
agreements; (d) certain of the Debtors' existing incentive-based compensation
programs, consisting of (i) the "Corporate Incentive Plan," which provides for
discretionary performance-based incentive payments to approximately 1,250 of
the Debtors' employees, and (ii) the "Officer Stretch Incentive Plan," an
incentive program for approximately 59 of the Debtors' senior managers and key
employees; (e) certain of the Debtors' existing 401(k)-related employee
programs, consisting of (i) a 401(k) plan, a non-incentive based program
pursuant to which the Debtors make matching contributions for the benefit of a
broad cross-section of the Debtors' employees and (ii) the "Profit Sharing
Contribution Plan", an incentive-based program pursuant to which the Debtors
make additional cash contributions for the benefit of a broad cross-section of
the Debtors' employees in an amount based on objective Company performance
measures; and (f) the Debtors' "Global Awards Program," originally a
stock-based employee incentive program, which, as modified, provides for
additional cash awards to employees based on objective company performance
measures.
On March 5, 2002, the Debtors filed a Motion to Authorize
the Continuance of Employee Compensation Programs. On September 10, 2002, the
Court entered an Order Authorizing Continuation, Modification and
Implementation of Employee Compensation Programs. In addition, the Court
authorized the Debtors to continue the employee compensation programs in the
ordinary course of the Debtors' business without additional court approval,
subject to a specific procedure identified in the motion. Specifically, court
authority is unnecessary to continue the compensation programs; provided,
however, that the Debtors advise the Committees and the Future Claimants'
Representative of the Company's annual Business Plan and annual funding
criteria for the employee compensation programs, including the data necessary
to assess the reasonableness of the Debtors' business judgment as soon as
possible after January 1 in any given year, but under no circumstances later
than February 28. In the event that the Committees and/or the Future
Claimants' Representative do not consent to the Debtors' proposed employee
compensation programs, they are required, within 30 days after receipt of the
annual program review, to provide written notice to the Debtors' counsel of
their specific objections to the proposed employee compensation programs. If
the parties are unable to resolve the objections, the Debtors are required to
file the appropriate pleading with the Bankruptcy Court.
2. Vendor and Customer Issues
Immediately following the commencement of the Chapter 11
Cases, the Debtors received numerous inquiries from their vendors, customers,
and other parties providing services to the Debtors concerning the Debtors'
ability to satisfy debts incurred prior to the Petition Date and their
continuing commitments. The Debtors believe that the maintenance of
relationships with their vendors, customers and other business partners has
been, and will continue to be, a critical factor in the continued viability of
the Debtors' ongoing business operations and the ultimate success of their
rehabilitation effort.
(a) Relief at Commencement of Chapter 11 Cases
In order to enable the Debtors to minimize the
adverse effects of the Chapter 11 Cases, and in their efforts to maintain
relationships and goodwill with certain of their vendors and customers, the
Debtors obtained orders from the Bankruptcy Court that authorized them to:
(i) honor certain pre-petition obligations to
customers under the Debtors' warranty and other customer programs (including
product warranties, cash discounts, rebates, category management, preferred
contractor incentive programs, and customer dispute resolution), and to
continue and maintain such programs on a post-petition basis;
(ii) pay pre-petition claims of contractors
(including mechanics, tradespersons and other contractors) in satisfaction of
perfected or potential mechanics', materialmen's or similar liens or
interests;
(iii) grant administrative expense status to
vendors and suppliers for undisputed obligations arising from pre-petition
purchase orders outstanding as of the Petition Date for products and goods
received by the Debtors on or subsequent to the Petition Date;
(iv) pay vendors and suppliers for post-petition
delivery of goods in the ordinary course of business;
(v) pay critical pre-petition trade claims
(discussed below); and
(vi) grant administrative expense treatment for
certain holders of valid reclamation claims; and prohibit third parties from
reclaiming goods or interfering with the delivery of goods to the Debtors
(discussed below).
(b) Critical Trade Vendors
Recognizing the importance of certain vendors to
the Debtors' businesses, the Debtors included among their "first day" motions
a motion for authorization to pay critical pre-petition trade vendors, which
was granted by an order of the Bankruptcy Court dated October 6, 2000 (the
"Critical Vendor Order"). The Critical Vendor Order authorized, but did not
require, the Debtors to pay the pre-petition claims of certain critical
suppliers of raw and processed materials, goods and services with whom the
Debtors continued to do business and whose materials, goods and services were
essential to the Debtors' business operations. In connection with the Critical
Vendor Order, the Debtors were authorized to pay critical vendors up to an
aggregate cap. In return for receiving payment of these claims, the critical
vendors were required to extend normalized trade credit terms to the Debtors
for the duration of the Chapter 11 Cases. By order dated November 21, 2000,
the Bankruptcy Court supplemented the Critical Vendor Order and granted the
Debtors authority to pay the pre-petition claims of foreign taxing
authorities, foreign landlords and other foreign creditors, as necessary to
facilitate the continued operation of the Debtors' foreign divisions.
The Debtors identified approximately 800 of its
vendors and suppliers as "critical" vendors, many of which were freight
carriers. The Debtors reached settlements with the critical vendors whereby,
in general, the Debtors paid the vendors less than the total pre-petition
amounts owed in satisfaction of claims those vendors may have held against the
Debtors for pre-petition goods or services.
(c) Reclamation Claims
At the commencement of the Chapter 11 Cases, the
Debtors anticipated that many of their vendors and suppliers would attempt to
assert their right to reclaim goods delivered to the Debtors shortly before or
soon after the Petition Date pursuant to Section 546(c) of the Bankruptcy Code
and Section 2-702 of the Uniform Commercial Code. As part of their "first day"
motions, the Debtors sought certain initial relief in connection with the
treatment of reclamation claims, which relief was granted by order dated
October 6, 2000 (the "Initial Reclamation Procedures Order"). The Initial
Reclamation Procedures Order established preliminary reclamation procedures in
order to facilitate the continued operation of the Debtors' businesses, to
prevent distraction of the Debtors' management and professionals and to allow
the Debtors the opportunity to conduct a thorough review and evaluation of the
reclamation claims. Among other things, the Initial Reclamation Procedures
Order provided that vendors would be entitled to administrative expense claims
if and to the extent that the vendor made a valid, written reclamation demand
for the goods at issue, and to the extent that such vendor proved the validity
of its demand. The Initial Reclamation Procedures Order also prohibited
vendors and other third parties from reclaiming or interfering with the
post-petition delivery of goods to the Debtors.
As anticipated, the Debtors received a large number
of reclamation claims - approximately 220 claims, with an aggregate
approximate amount of $34 million, exclusive of claims which did not specify
an amount. The Debtors devoted substantial time and effort in reviewing and
analyzing the claims, in order to determine which claims were valid
reclamation claims.
Between February and September, 2002, the Debtors
filed five separate motions (each of which addressed certain of the 220
reclamation claims), requesting orders approving their proposed allowance
and/or disallowance of the reclamation claims, and approving their proposed
treatment of the allowed reclamation claims (together, the "Reclamation
Motions"). More specifically, in the Reclamation Motions, the Debtors
requested orders (i) granting administrative expense priority status for
reclamation claims to the extent, and in the amounts, the Debtors determined
such claims to be allowable pursuant to the applicable provisions of the
Bankruptcy Code; (ii) denying administrative expense priority status for all
other reclamation claims; and (iii) authorizing the Debtors to pay the Allowed
amount of each valid reclamation claim. The Bankruptcy Court granted the
Reclamation Motions and, upon Court approval of the Debtors' proposed
treatment of the individual reclamation claims, the Debtors were authorized to
pay the Allowed claims.
Approximately sixteen reclamation claimants filed
objections and/or responses to the Reclamation Motions, and many other
reclamation claimants contacted the Debtors concerning the Debtors' proposed
treatment of their claims as described in the Reclamation Motions. Through
discussions, negotiations and/or the exchange of documents and information
between parties, the Debtors reached a consensual resolution with the majority
of these claimants, either by entering a settlement stipulation or by the
Bankruptcy Court's entry of a modified order.
As of the date of this Disclosure Statement, the
vast majority of reclamation claims have been resolved. The Debtors continue
to negotiate with the specific claimants in their efforts to resolve the few
outstanding claims.
(d) Setoffs
Section 553 of the Bankruptcy Code recognizes the
right of setoff of mutual, pre-petition obligations if certain criteria are
met. However, Section 362(a)(7) of the Bankruptcy Code operates as a stay of
the setoff of any debt owing to the debtor that arose pre-petition against any
pre-petition claim against the debtor. Rule 4001 of the Bankruptcy Rules
allows for parties to consensually modify the automatic stay provisions to
allow for setoff in appropriate circumstances.
Throughout the Chapter 11 Cases, the Debtors have
entered a number of stipulations (the "Setoff Stipulations") with various
vendors and suppliers authorizing a modification of the automatic stay to
effectuate the setoff of pre-petition mutual debts. The Debtors determined
that entering the Setoff Stipulations would be in the best interest of the
Debtors' estates and their creditors because, in general, among other reasons,
the setoffs allowed the Debtors to reconcile their books and records without
further dispute, maintain amicable relationships with their customers and
vendors, and continue the free flow of goods and services from their customers
and vendors.
3. Debtor-in-Possession Financing and the DIP Facility
In connection with the Filing, and in order to fund its
on-going business operations during the pendency of the Chapter 11 Cases, the
Debtors, excluding Jefferson Holdings, Inc., obtained a debtor-in-possession
credit facility (the "DIP Facility") from a group of lenders (the "DIP
Lenders") led by Bank of America, N.A., as administrative agent (the "DIP
Agent"). On November 17, 2000, the Bankruptcy Court approved the Final Order
Authorizing Post-Petition Financing on a Superpriority Administrative Claim
Basis Pursuant to 11 U.S.C. ss. 364(c)(1) and Granting Relief from the
Automatic Stay Pursuant to 11 U.S.C. ss. 362 (the "DIP Order"). The DIP Order
authorized, among other things, (a) the Debtors to borrow from the DIP
Lenders, on specified terms and conditions, post-petition financing of up to
$500 million, including revolving loans and letters of credit, pursuant to an
agreement among the Debtors and Lenders; (b) the execution by the Debtors of
notes and other documents requested by the DIP Lenders evidencing the
post-petition financing; and (c) the granting of certain protections to the
DIP Agent and the DIP Lenders including without limitation a superpriority
administrative claim over any and all administrative expenses of the kinds
specified in Sections 503(b), 105, 326, 328, 330, 331, 506(c), 507(a), 546(c),
726 or 1112 of the Bankruptcy Code.
The DIP Facility also provided for unsecured post-petition
financing from the DIP Lenders for general working capital and other general
corporate purposes in an aggregate principal amount not to exceed $500
million. The amount available under the DIP Facility depends on a borrowing
base of qualifying receivables and inventory of the Debtors. Borrowings under
the DIP Facility bear interest at a floating rate equal to LIBOR plus a margin
varying from 0.75% to 2.00%, based upon the average daily outstanding balance.
In addition, a commitment fee is payable on unused portions of the aggregate
commitment amount under the DIP Facility of 0.375% per annum and a letter of
credit fee is payable based on the average daily maximum aggregate amount
available to be drawn under all outstanding letters of credit and certain
other expenses incurred by the DIP Lenders issuing the letters of credit. The
DIP Facility contains covenants, representations and warranties, events of
default, and other terms and conditions typical of credit facilities of a
similar nature.
The DIP Facility was to expire on November 15, 2002 in
accordance with its terms. On October 28, 2002, the DIP Lenders and the
Debtors entered into an amendment to the DIP Facility, approved by the
Bankruptcy Court, pursuant to which, among other things, the maximum available
credit amount under the DIP Facility was reduced at the Debtors' request to
$250 million and its term was extended through November 15, 2004.
The Debtors have never utilized the facility except for
standby letters of credit and similar uses. As of December 31, 2002,
approximately $62 million of availability under this facility was utilized for
standby letters of credit and similar uses. As of the Effective Date, the
Debtors expect to have no outstanding borrowings, but approximately $____
million in outstanding standby letters of credit and similar uses.
Obligations under the DIP Facility have "superpriority"
claim status under Section 364(c)(1) of the Bankruptcy Code, meaning that such
obligations have priority as to repayment over all administrative expenses,
with certain limited exceptions. The claims of the DIP Lenders are subject to
the fees and expenses of the Office of the United States Trustee (under
Section 1930 of Title 28 of the United States Code) and the Clerk of the
Bankruptcy Court, and are also subject to the payment of professional fees and
disbursements (capped at $10 million upon the occurrence of an event of
default under the DIP Facility) incurred by the borrowers under the DIP
Facility and statutory committees approved under the Chapter 11 Cases.
4. Standstill Agreement with the Bank Holders
(a) The Standstill Agreement
Prior to the Petition Date, OCD, as borrower and
guarantor, certain other borrowers and guarantors and Credit Suisse First
Boston, as agent and lender (the "Pre-petition Agent") and approximately
forty-six banks (including their assignees and participants, the "Bank
Holders") entered into the 1997 Credit Agreement. On or about the Petition
Date, certain of the Bank Holders imposed an administrative freeze on funds of
certain Debtors and Non-Debtor Subsidiaries, including foreign Subsidiaries
and Affiliates in the approximate amount of $46 million.
On the Petition Date, the Debtors filed a Verified
Complaint for Declaratory and Injunctive Relief (the "Complaint") against the
Bank Holders, commencing the adversary proceeding entitled Owens Corning, et
al. v. Credit Suisse First Boston, et al., Adv. Pro. No. A-00-1575 (the
"Standstill Adversary Proceeding"). By the Complaint, the Debtors sought to
enjoin the Bank Holders from (i) exercising their purported rights of setoff
under Section 13.06 of the 1997 Credit Agreement against money in bank
accounts of the Debtors and Non-Debtor Subsidiaries held by the Bank Holders;
(ii) declaring any Non-Debtor Subsidiaries in default under any separate
banking agreements as a result of the Filings; (iii) accelerating the payments
under any separate banking agreements as a result of the Filings; (iv)
freezing, impairing or otherwise moving against the funds of Non-Debtor
Subsidiaries that are held by the Bank Holders as a result of the Filings; and
(v) declaring the rights and obligations of the parties under Section 13.06 of
the 1997 Credit Agreement.
Concurrent with the filing of the Complaint, the
Debtors filed a Motion for Temporary Restraining Order and Preliminary
Injunction under Sections 105(a) and 362(a) of the Bankruptcy Code (the "TRO
Motion"). By the TRO Motion, the Debtors requested an order that enjoined (i)
the Bank Holders from calling, canceling, or revoking credit facilities of the
Non-Debtor Subsidiaries solely as a result of the Debtors' seeking relief
under Chapter 11 of the Bankruptcy Code; and (ii) the Bank Holders and their
affiliates from setting off against funds deposited by the Non-Debtor
Subsidiaries in bank accounts at the Bank Holders or their affiliates.
The purpose of the Standstill Adversary Proceeding
and the TRO Motion was to protect the assets of the Non-Debtor Subsidiaries by
preventing their assets from being used to satisfy all or a portion of the
obligations under the 1997 Credit Agreement that had been guaranteed by
certain Non-Debtor Subsidiaries.
On October 10, 2000, with the consent of the Bank
Holders, the Court entered a temporary restraining order ("TRO") enjoining and
restraining the Bank Holders from exercising any enforcement right or remedy
under the 1997 Credit Agreement against any Non-Debtor Subsidiaries, including
any setoff rights, under any other agreement, or under applicable law.
Notwithstanding the injunction, the TRO permitted the Bank Holders to impose
an administrative freeze on any funds in accounts of the designated Non-Debtor
Subsidiaries as of the Petition Date and to refuse to make additional loans or
advances to the Non-Debtor Subsidiaries.
Following negotiations between counsel for the
Debtors and the Bank Holders (except for the China Lenders as discussed
below), and in order to preserve the status quo for the benefit of the
Debtors' bankruptcy estates and their creditors, the Debtors and the Bank
Holders entered into various modifications and extensions of the TRO, which
were approved by the Court.
The Debtors and the Bank Holders continued to
engage in discussions for the purpose of entering into an agreement pursuant
to which the Bank Holders would stand still from exercising certain
enforcement rights and remedies against the Non-Debtor Subsidiaries, waive
certain rights and remedies under the 1997 Credit Agreement and certain credit
facilities with the Non-Debtor Subsidiaries (the "Bilateral Facilities"),
amend the 1997 Credit Agreement to release, discharge and waive all claims
against certain Non-Debtor Subsidiaries, and resolve disputes regarding setoff
rights. On May 30, 2001, after successful negotiations between the Debtors and
the Bank Holders, the Debtors filed the Motion for Order Under 11 U.S.C.
ss.ss. 105(a), 362(a), and Fed. R. Bankr. P. 6004, 7065 and 9019 (I)
Authorizing the Debtors to Enter Into, and to Take All Necessary or
Appropriate Action to Effectuate the Terms of, a Standstill and Waiver
Agreement with Certain Defendants, (II) Terminating the Temporary Restraining
Order Entered with Respect to Certain Defendants, (III) Dismissing this
Adversary Proceeding with Respect to Certain Defendants, (IV) Authorizing the
Debtors to Compromise and Settle Setoff Rights Asserted by the Defendants and
Terminating the Stay of 11 U.S.C. ss. 362(a) with Respect to Certain Setoff
Rights, and (V) Releasing, Discharging, and Waiving Certain Claims of
Defendants (the "Standstill Motion").
The Standstill Motion was approved by Court Order
dated June 19, 2001 (the "Standstill Order"). The Standstill Order, among
other things, authorized the Debtors to enter into the Standstill and Waiver
Agreement among the Debtors, certain Non-Debtor Subsidiaries and the Bank
Holders (the "Standstill Agreement"), authorized the Debtors to settle the
setoff rights asserted by the Bank Holders, released, discharged and waived
certain claims of the Defendants, and dismissed, without prejudice, the
Standstill Adversary Proceeding and terminated the TRO with respect to all the
Defendants except the China Lenders, as defined below.
Pursuant to the terms of the Standstill Agreement,
the Bank Holders agreed not to exercise certain remedies against the
Non-Debtor Subsidiaries during the Specified Period (the "Standstill Period")
in consideration of certain undertakings of the Debtors and Non-Debtor
Subsidiaries, including subjecting certain Non-Debtor Subsidiaries to
affirmative and negative covenants. The Standstill Period would expire on the
earliest to occur of (i) the date of filing of a plan or plans of
reorganization, (ii) a termination due to an event of default under the
Standstill Agreement, or (iii) a date no earlier than October 31, 2002 which
is 45 days after written notice to the Debtors and their counsel by the
Pre-petition Agent that the requisite number of Bank Holders (as determined in
the 1997 Credit Agreement) elected to terminate the Standstill Period.
More specifically, the Standstill Agreement
provides that, during the Standstill Period the Bank Holders are not to
exercise any right or remedy for the enforcement, collection or recovery of
any of the guaranteed obligations under the 1997 Credit Agreement from any of
the Non-Debtor Subsidiaries other than with respect to valid setoff rights in
existence on the Petition Date. In addition, the Standstill Agreement
precludes those Bank Holders that are parties to the Bilateral Facilities from
exercising, as a result of any default under such facilities arising solely
from the commencement of the Chapter 11 Cases (which default is waived during
the Standstill Period), enforcement rights or remedies against such Non-Debtor
Subsidiaries other than with respect to valid setoff rights existing as of the
Petition Date. However, the Bank Holders are not required to make additional
loans or advances under a Bilateral Facility nor are they prevented from
exercising any other rights or remedies available to them under a Bilateral
Facility.
The Standstill Agreement also provided that the
Debtors, the Non-Debtor Subsidiaries and the Bank Holders would provide
information to determine the validity of setoff rights and seek in good faith
to resolve all disputes regarding setoff rights. Pending resolution of the
setoff rights, the TRO remained in effect and all parties' rights with respect
to the setoff issue were preserved.
Pursuant to the Standstill Agreement, OCD made a
payment of $3 million to the Pre-petition Agent for and on behalf of the Bank
Holders executing the Standstill Agreement (the "Participating Lenders") with
each Participating Lender receiving a pro rata share of such fee based on such
Participating Lender's outstanding commitment under the 1997 Credit Agreement.
OCD also paid a fee of $200,000 to each of the Pre-petition Agent and Chase
Manhattan Bank, in their respective capacities as co-chairs of the Bank
Holders' steering committee. OCD was also responsible for payment of certain
fees and expenses of the Bank Holders, subject to certain monetary limits.
On November 25, 2002, the parties to the Standstill
Agreement executed a Stipulation and Order to Amend the Standstill and Waiver
Agreement (the "Standstill Amendment") to, among other things, extend the
Standstill Period, which was approved by the Court on November 25, 2002. The
Standstill Amendment provides, in part, that the extended Standstill Period
will end on the earliest to occur of (i) a termination due to an event of
default specified in the Standstill Amendment, or (ii) the date which is 45
days after written notice of intention to terminate the Standstill Agreement
has been given to OCD or the Pre-petition Agent as provided in the Standstill
Amendment. The Standstill Amendment also provides that the Pre-petition Agent
approved of the first amendment to the DIP Facility and that the fraudulent
conveyance actions filed on or about October 4, 2002 by the Debtors, as
described in more detail below, or the appointment of a limited purpose
trustee or examiner would not constitute an event of default under the
Standstill Agreement.
(b) The China Standstill Agreement
Since the Petition Date, the Debtors also have been
engaged in ongoing negotiations with Standard Chartered Bank ("SCB"), as agent
and co-ordinating arranger for the Loan Facility Agreement, dated March 12,
1998 (the "Revolving Loan Facility") among SCB, Societe Generale ("Soc Gen")
and KBC Bank, N.V. ("KBC" and, together with SCB and Soc Gen, the "China
Lenders"), Owens Corning (China) Investment Company, Ltd. ("OCI"),
Owens-Corning (Guangzhou) Fiberglas Co., Ltd. ("OC Guangzhou"), Owens-Corning
(Shanghai) Fiberglas Co., Ltd. ("OC Shanghai"), as borrowers, and OCD as
guarantor, to effectuate the continued servicing of the Revolving Loan
Facility and to settle certain setoff rights asserted by SCB in the
approximate amount of $7.8 million. Resolution of the issues surrounding the
Revolving Loan Facility was necessary to settle the setoff rights asserted by
SCB and would permit OC to realize future value and profits from OC Guangzhou
and OC Shanghai, which provide valuable production support to OC's global
insulation business and are strategically important to OC's long term business
strategy in China.
Following negotiations, OCD, OC Guangzhou, OC
Shanghai and the China Lenders reached agreement on the key terms of a
Standstill and Amendment Agreement (the "China Standstill Agreement"). On
October 16, 2002, the Debtors filed a motion for an order under 11
U.S.C.ss.ss. 363 and 105, and Fed. R. Bankr. P. 6004 and 9019 authorizing and
approving (i) execution of the China Standstill Agreement by and among OCD, OC
Guangzhou, OC Shanghai, and the China Lenders; (ii) consummation of the
transactions contemplated in the China Standstill Agreement; and (iii)
granting the China Lenders an Allowed, General Unsecured Claim against OCD in
the amount of $22 million conditioned upon the closing of the China Standstill
Agreement (the "China Standstill Motion"). The Court approved the China
Standstill Motion on December 9, 2002.
The China Standstill Agreement became effective and
on January 27, 2003, the Bankruptcy Court entered a Stipulation and Order
terminating the TRO and dismissing the Standstill Adversary Proceeding as
related to the China Lenders.
A portion of the $7.8 million setoff has been
released, a portion has been used to cover outstanding obligations in
connection with letters of credit, and the remaining portion will be released
by SCB upon full payment of the outstanding letter of credit obligations,
which is scheduled to occur approximately June 30, 2003.
(c) Setoff of Bank Accounts
In connection with the consummation of the
Standstill Agreement, the Debtors and the Bank Holders agreed to conduct
discussions in an attempt to reach a consensual resolution with respect to the
Bank Holders' setoff rights against both the Debtors and the Non-Debtor
Subsidiaries. The dispute concerning the Bank Holders' potential setoff rights
centered around the accounts upon which the Bank Holders had placed an
administrative freeze after the commencement of the Chapter 11 Cases (as
described above). In their efforts to reach a resolution, the parties to the
Standstill Agreement exchanged information and documents which enabled them to
stipulate to material facts regarding most of the frozen accounts. These facts
were set forth in a Stipulation Concerning Debtors' Frozen Bank Accounts,
which was filed in the Bankruptcy Court on February 15, 2002.
Contemporaneous with the filing of the factual
stipulation, the Bank Holders filed a motion in the Bankruptcy Court, entitled
Motion of Credit Suisse First Boston, as Agent, for an Order Modifying the
Automatic Stay to Permit Setoff of Frozen Funds (the "Setoff Motion"). By the
Setoff Motion, the Bank Holders requested relief from the automatic stay to
exercise setoff rights against 22 frozen bank accounts of certain Debtors
Non-Debtor Subsidiaries, totaling approximately $35 million. The Debtors, as
well as certain other creditor groups, objected to the Setoff Motion. In their
objection, the Debtors disputed the amount of the Bank Holders' setoff rights
and asserted, among other things, that the Bank Holders were wrongfully
withholding the entire balance of many of the frozen accounts, and that the
Bank Holders did not have valid setoff rights with respect to a substantial
number of the frozen accounts.
After extensive settlement negotiations, the
Debtors and the Bank Holders agreed to settle the Setoff Motion and the
parties' competing claims to the bank accounts at issue, together with certain
other bank accounts not covered by the Setoff Motion, which accounts totaled
$36,779,719.99, plus interest earned after the Petition Date. The parties
executed an agreement for the settlement of the Setoff Motion, the terms of
which authorized the release of specified funds totaling $18,953,325.31 plus
51.532% of the interest accrued on the frozen funds to the Debtors and
permitted the Bank Holders to exercise their setoff rights with respect to the
balance of the frozen funds, $17,826,394.68 plus 48.468% of the accrued
interest. The settlement agreement was approved by order of the Bankruptcy
Court, dated June 20, 2002.
(d) Cash Management System
On October 6, 2000, the Debtors filed a motion for
interim and final orders (i) authorizing (a) the maintenance of certain
existing bank accounts, (b) the continued use of existing business forms, (c)
the use of a modified cash management system and (d) the transfer of funds to
Non-Debtor Subsidiaries and (ii) waiving certain investment and deposit
requirements of Section 345(b) of the Bankruptcy Code (the "Cash Management
Motion"). The Court granted the relief requested in the Cash Management
Motion, as modified by an "Exhibit D-1" (which was introduced into evidence at
the hearing on the Cash Management Motion), by "so ordering" the record, to be
followed by the submission of an agreed-upon form of written order.
On June 19, 2001, the Court approved the
Agreed-Upon Interim Order Under 11 U.S.C. ss.ss. 105, 345(b) and 363 (I)
Authorizing (A) Maintenance of Certain Existing Bank Accounts, (B) Continued
Use of Existing Business Forms, (C) Use of Modified Cash Management System,
and (D) Transfer of Funds to Non-Debtor Subsidiaries; and (II) Waiving, on an
Interim Basis, Investment and Deposit Requirements of 11 U.S.C. ss. 345(b)
(the "Interim CMO").
The Interim CMO originally had an expiration date
of December 18, 2001. On December 17, 2001, the Court entered a Stipulation
and Order which extended the expiration date of the Interim CMO until February
26, 2002. The Debtors and Creditors submitted and the Court approved the final
cash management order (the "Final CMO"), which became effective on February
25, 2002 and is to continue in effect until confirmation of the Plan.
Pursuant to the Final CMO, in accordance with
Sections 105 and 363 of the Bankruptcy Code, the Debtors may (i) designate,
maintain and continue to use all of their respective collection, collateral,
operating, depository, payroll and other accounts existing at the Petition
Date in accordance with existing account agreements, (ii) close any such
accounts, and (iii) treat such accounts as accounts of the Debtors in their
capacity as debtors-in-possession. The Final CMO provides that the Debtors and
Non-Debtor Subsidiaries are permitted to utilize their cash management system
existing prior to the Petition Date.
With certain allowed exceptions, the Final CMO
prohibits the Debtors and Non-Debtor Subsidiaries from transferring funds to
pay pre-petition intercompany indebtedness. However, the Final CMO permits
transfers of funds among Debtors and Non-Debtor Subsidiaries in payment for
goods and services provided to the payor after the Petition Date. The Final
CMO also permits transfers of funds among Debtors and Non-Debtor Subsidiaries
for capital expenditures, working capital and short term liquidity as long as
the transfers are evidenced as loans, within the appropriate monetary limits
and properly recorded on applicable accounts, with additional limits on
transfers of funds to negative net worth Debtors and Non-Debtor Subsidiaries.
The Final CMO permits the Debtors and Non-Debtor Subsidiaries to invest and
deposit funds in accordance with their established deposit and investment
practices as of the Petition Date. The Final CMO also approved eight specific
transactions as exceptions to the limitations set forth in the Final CMO.
5. Unexpired Leases and Executory Contracts
As of the Petition Date, the Debtors were party to thousands
of unexpired leases and executory contracts, including, among others, real
property leases, information technology agreements, equipment leases,
plant-related service agreements, and supply agreements. During the pendency
of the Chapter 11 Cases, the Debtors have evaluated the costs and potential
benefits of these agreements, including the availability of alternate services
and more profitable end-users for its products, all without disrupting core
business operations.
Section 365 of the Bankruptcy Code authorizes a debtor,
subject to approval of the Bankruptcy Court, to assume or reject unexpired
leases and executory contracts. Under the Bankruptcy Code, a debtor has until
confirmation of a plan of reorganization to assume or reject executory
contracts and unexpired leases of residential real property or of personal
property of the debtor. A debtor in a Chapter 11 case ordinarily must assume
or reject unexpired leases of nonresidential real property within sixty (60)
days after commencement of the case. If a debtor fails to assume this type of
lease within the applicable time period, the lease is deemed rejected. The
bankruptcy court may extend the relevant time periods for cause.
(a) Real Property Leases
The Debtors are lessees under approximately 200
unexpired nonresidential real property leases. Most of the unexpired leases
are for space used by the Debtors for conducting the production, warehousing,
distribution, sales, sourcing, accounting and general administrative functions
that comprise the Debtors' businesses. Given the size and complexity of the
Chapter 11 Cases, the Debtors determined that they would be unable to complete
their analysis of all nonresidential real property leases during the time
limitation prescribed in Section 365(d)(4) of the Bankruptcy Code.
Accordingly, the Debtors sought, and the Bankruptcy Court approved, five (5)
extensions of the time by which the Debtors must assume or reject their
unexpired leases of nonresidential real property. The last extension was
granted by the Bankruptcy Court on November 25, 2002, and expires on the
earlier of (i) June 4, 2003 or (ii) the effective date of any confirmed plan
in the Chapter 11 Cases.
Throughout the Chapter 11 Cases, the Debtors were
actively engaged in an ongoing review of the unexpired nonresidential real
property leases to determine whether the rejection or assumption and
assignment of the leases was in the best interest of their respective estates.
Through the end of 2002, the Debtors had rejected approximately seventy (70)
nonresidential real property leases; assumed six (6) nonresidential real
property leases; and assumed and assigned three (3) nonresidential real
property leases. The Debtors continue their review and analysis of their
unexpired nonresidential real property leases.
Generally, all unexpired nonresidential real
property leases that have not previously been assumed or rejected by the
Debtors will be assumed under the Plan, except for those leases specified on
Schedule IV of the Plan, which must be filed at least five (5) days prior to
the Objection Deadline. See Section VII.F of this Disclosure Statement
entitled "Treatment of Executory Contracts and Leases."
(b) Executory Contracts and Unexpired Leases
Since the Petition Date, the Debtors have
instituted an internal process to review all executory contracts and unexpired
leases to evaluate the economic costs and benefits to each of them. Throughout
the Chapter 11 Cases, the Debtors have successfully renegotiated or rejected
numerous leases and executory contracts, resulting in a reduction in fixed
costs. The Debtors also have assumed, assumed as modified, or assumed and
assigned a number of executory contracts and unexpired personal property
leases since the Petition Date. By their review process, the Debtors have
realized significant savings without business interruption.
Generally, all unexpired nonresidential real
property leases that have not previously been assumed or rejected by the
Debtors will be assumed under the Plan, except for those leases specified on
Schedule IV of the Plan, which must be filed at least five (5) days prior to
the Objection Deadline. See Section VII.F of this Disclosure Statement
entitled "Treatment of Executory Contracts and Leases."
The following is a description of the disposition
of certain of the Debtors' executory contracts and unexpired leases throughout
the Chapter 11 Cases:
(i) Enron. In January 2001, the Debtors, with
Bankruptcy Court authority, assumed their various executory contracts with
Enron Energy Services, Inc. and other Enron-related entities. Among other
things, these contracts required Enron to provide to the Debtors certain
commodities and commodity-related services, as well as certain energy, energy
efficiency and consultation services. Among the services provided by Enron
were billing consolidation services, by which Enron would assemble and
consolidate third-party energy bills for presentation to OCD. OCD would make
payment on such bills to Enron, which was contractually obligated to convey
the appropriate portion of such payments to the underlying third party
providers. In connection with the assumption of these contracts, the Debtors
made a cure payment of approximately $20 million to Enron, on account of funds
owed to Enron and/or to third party energy providers. By order dated August
28, 2001, the Debtors obtained Bankruptcy Court approval to amend the
previously-assumed Enron agreements so as to, among other things, expand the
services provided thereunder to additional facilities of the Debtors. On
December 2, 2001, Enron Corp. and certain of its affiliates filed Chapter 11
bankruptcy petitions in the United States Bankruptcy Court for the Southern
District of New York. Prior to Enron Corp.'s bankruptcy filing, the Debtors
sent one or more notices to Enron by which the Debtors terminated their
various contractual agreements with Enron. Enron has asserted significant
post-petition claims against OCD as a result of the foregoing contract
terminations. The parties have engaged in certain settlement discussions
regarding such claims but have not yet reached agreement.
(ii) Xerox Corp. OCD and Xerox Corp. were parties
to a pre-petition services agreement pursuant to which Xerox Corp. was
obligated to operate OCD's global documents management systems, the term of
which expired on December 31, 2001. Prior to the expiration of the agreement,
and after extensive negotiations, OCD and Xerox Corp. entered into a
post-petition document services agreement, which was approved by order of the
Bankruptcy Court dated July 16, 2001. OCD's execution of the post-petition
document services agreement, which replaced the original agreement as of May
21, 2001, was necessary to the Debtors' ongoing business operations. In
accordance with the entry of the post-petition agreement, Xerox Corp. became
entitled to an Allowed General Unsecured Claim against OCD in the approximate
amount of $3 million, and became entitled to assert an additional General
Unsecured Claim against OCD in the approximate amount of $892,000.
(iii) SAP America, Inc. With Bankruptcy Court
approval in June 2001, OCD assumed, with certain modifications, its software
license agreement with SAP America, Inc. Under the agreement, SAP America,
Inc. licenses certain software to OCD, which software is absolutely
fundamental to the Debtors' business operations. Upon the assumption of the
agreement, OCD and SAP America, Inc. agreed to make modifications to the
agreement in order to provide the Debtors with greater operational flexibility
and to facilitate the Debtors' potential divestiture of certain assets and/or
business units. In connection with the assumption of the agreement, OCD made a
cure payment to SAP America, Inc. in the approximate amount of $6.3 million.
In addition, SAP America, Inc. became entitled to an Allowed General Unsecured
Claim against OCD in the approximate amount of $287,000.
(iv) Owens-Corning (India) Limited. In connection
with the restructuring of OCD's Indian joint venture, Owens-Corning (India)
Limited ("OCIL") (discussed in Section III.A.3.b of this Disclosure
Statement), OCD assumed, as amended and restated, several executory contracts
between OCD and OCIL pursuant to which OCD provides OCIL with certain services
and OCIL provides certain products to OCD. Assumption of the agreements, as
modified (which included technology license agreements, a trademark and trade
name license agreement, an alloy services agreement, an offtake contract, a
shareholder agreement and an investment agreement), was part of the overall
restructuring of OCIL, which provided significant benefit to OCD's estate. No
cure payments were owed with respect to the assumption of the agreements. The
Bankruptcy Court authorized OCD's assumption of the agreements by order dated
June 18, 2002.
(v) Miscellaneous executory contracts and unexpired
leases. Since the Petition Date and through the end of January 2003, the
Debtors have filed twelve (12) motions rejecting miscellaneous contracts and
unexpired leases that no longer were required for the Debtors' business
operations, and have filed numerous additional motions to reject specific
contracts and leases, which have resulted in the rejection of such contracts
and unexpired leases.
6. Insurance Settlement
During the 20-year period prior to the initiation of the
Chapter 11 Cases, billions of dollars of insurance proceeds were paid out by
various insurers to directly fund or reimburse OCD for funding the settlement
and defense of asbestos claims. During the pendency of the Chapter 11 Cases,
the Debtors have been involved in litigation, arbitration and negotiation in
which the Debtors have sought to establish asbestos-related coverage rights
under policies that were not previously released in full with respect to
asbestos claims. In the second quarter of 2001, OCD entered into a settlement
agreement with a group of its excess level insurance carriers, resolving a
dispute concerning coverage from such insurers for non-products
asbestos-related personal injury claims. As a result, during the third quarter
of 2001, those carriers funded $55 million into an escrow account to be
released upon the substantial consummation of a plan of reorganization
confirmed by the entry of a final order of the Bankruptcy Court in the Chapter
11 Cases. During the third and fourth quarters of 2001 and the second quarter
of 2002, OCD also received payments of approximately, $5 million, $2 million
and $5 million, respectively, in respect of previously allowed claims from
liquidators of insolvent insurers, and expect to receive significant
additional amount over the next several years in respect of distribution on
asbestos claims previously allowed.
OCD also has other unconfirmed potential coverage rights for
asbestos-related bodily injury claims against solvent excess level carriers
and liquidators and others who now bear responsibility for insolvent carriers.
OCD is actively pursuing insurance recoveries under these remaining excess
policies in litigation, arbitration and otherwise. In October 2001, OCD filed
a lawsuit in Lucas County, Ohio, against ten excess level insurance carriers
for declaratory relief and damages for failure to make payments for asbestos
non-products claims; that lawsuit is in the discovery stages. Under the ADR
procedures of the Wellington Agreement, OCD is seeking recovery for asbestos
non-products claims against one excess carrier and expects to initiate ADRs
against the remaining Wellington insurers with which it has not previously
settled all asbestos products and non-products issues. OCD is also pursuing
litigation against a state guaranty association on account of its
responsibility for asbestos claims that would otherwise have been paid by a
now-insolvent excess insurer. Finally, OCD is continuing to pursue
asbestos-related coverage rights against liquidators of certain of its excess
insurers and recently entered into an agreement in principle with one such
liquidator that is contingent on completed documentation and approval by both
the Bankruptcy Court and the court supervising the liquidation.
In addition, on June 27, 2001, the Court entered an order
approving the stipulation between Fibreboard and Continental, one of
Fibreboard's insurers, resolving disputes relating to Continental's
obligations under a certain settlement agreement and directing funds be
transferred to the Fibreboard Insurance Settlement Trust. Prior to the
Petition Date, Fibreboard and Continental had entered into an agreement (the
"Buckets Agreement") which reapportioned their respective liabilities to
certain asbestos personal injury claimants. The Buckets Agreement provided
for, among other things, the payment of Committed Disputed Presently Settled
Claims and Committed Unsettled Present Claims (collectively, the "Committed
Claims") through a $44 million Committed Claims Account funded by Continental.
Continental and Fibreboard further agreed that any money remaining in the
Committed Claims Account after all Committed Claims have been paid pursuant to
the Buckets Agreement would be transferred to the Fibreboard Insurance
Settlement Trust. The Stipulation approved by the Court provides, among
others, that no funds would be released from the Committed Claims Account
while the Chapter 11 Cases were pending, and that Continental would have a
first priority perfected security interest in the Committed Claims Account
securing its rights under the Buckets Agreement to reimbursement or other
payment in respect of Continental's payments under the Buckets Agreement. As
of the Petition Date, approximately $30 million remained in the Committed
Claims Account. The Plan provides that, pursuant to the Stipulation, the
remaining funds in the Committed Claims Account will be transferred to the FB
Sub-Account of the Asbestos Personal Injury Trust to compensate holders of
Allowed FB Asbestos Personal Injury Claims.
7. Baron & Budd Administrative Deposits
Prior to the Petition Date, B&B was the law firm of record
for various plaintiffs in a number of asbestos-related personal injury
lawsuits against OCD and Fibreboard who were participants in the NSP. Under a
settlement agreement between OCD, Fibreboard and B&B, OCD and Fibreboard were
required to pay Administrative Deposits into settlement accounts to be
maintained by B&B for the benefit of its clients. The settlement agreement
provided for payments to be made in each of 2000, 2001, and 2002. OCD made its
first required payment of approximately $66 million on March 13, 2000 and
Fibreboard made its first required payment of approximately $44 million on
April 6, 2000. Prior to the Petition Date, and after receiving written
approval from OCD and/or Fibreboard, B&B distributed approximately $23 million
from the settlement accounts to its clients pursuant to the terms of the
settlement agreement. Because of the Chapter 11 filings, the Debtors did not
make the 2001 or 2002 payments to B&B and B&B did not make the 2001 or 2002
distributions to plaintiffs.
Under the settlement agreement, B&B was required to invest
the funds held for the plaintiffs and maintain the funds in settlement
accounts. Any income from the funds was designated as Investment Proceeds
under the agreement ("Investment Proceeds") and declared to be the property of
the estate.
After the Petition Date, B&B proposed to distribute the
funds to its various beneficiaries and, on September 12, 2001, filed a motion
with the Bankruptcy Court for an order determining that the automatic stay
does not apply to the undistributed settlement funds made by OCD and
Fibreboard or, in the alternative, terminating the automatic stay. B&B argued
that the settlement payments were not property of the Debtors' Estate because
an enforceable trust had been created and the Debtors did not retain an
equitable interest in the payments.
Numerous objections and/or responses were filed to B&B's
motion, including by the Debtors, the Unsecured Creditors' Committee, the
Asbestos Claimants' Committee, the Future Claimants' Representative and Plant
Insulation Company ("Plant"). In their response, the Debtors disagreed with
B&B's characterization that the settlement agreement created an express trust;
instead, the Debtors argued that the agreement created an escrow account. On
November 15, 2001, B&B filed an amended motion for relief from the stay (if
the automatic stay were applicable), by which it no longer maintained its
position that the settlement agreement was an express trust. Without arguing
whether the funds were held in an express trust or in an escrow account, B&B
asserted that, in either instance, the automatic stay does not apply to B&B's
proposed disbursement of the funds.
After numerous hearings on the pleadings during 2001 and
2002, on June 20, 2002, the Bankruptcy Court issued an order granting B&B's
amended motion in part and denying it in part. The Bankruptcy Court ordered,
among other things, that: (a) the Investment Proceeds (approximately $8
million) were property of OCD and Fibreboard's respective estates and must be
returned to OCD and Fibreboard; (b) as to those plaintiffs who received
written notice of approval for payment pursuant to the agreement from OCD or
Fibreboard, and who had received payment of the first installment of their
settlement prior to the Petition Date (the "Qualifying OC and Fibreboard
Plaintiffs"), B&B, OCD and Fibreboard had met the standards under Texas law to
establish that the requirements of an escrow were fulfilled pre-petition as to
the principal balance; (c) to the extent that the principal balance in the B&B
settlement accounts of the settlement payments by OCD and Fibreboard
represented amounts due under the settlement agreement to the Qualifying OC
and Fibreboard Plaintiffs, then such balance (the "Qualifying OC and
Fibreboard Balance," approximately $70 million) was not property of the
Debtors' estates; (d) the Qualifying OC and Fibreboard Plaintiffs were
entitled to receive the second and third installments of their settlement out
of the Qualifying OC and Fibreboard Balance; and (e) the principal balance
remaining in the B&B settlement account, after deducting the Qualifying OC and
Fibreboard Balance (the "OC and Fibreboard Residual Balance", approximately $6
million) was property of the Debtors' estates and must be returned to OCD
(amounts due under settlement agreements to Qualifying Fibreboard Plaintiffs
would exhaust the remaining principal balance in the Fibreboard settlement
account).
On June 27, 2002, B&B filed a motion to amend the judgment,
requesting that the Bankruptcy Court amend its June 20, 2002 order to clarify
the method of calculating the Investment Proceeds and the OC and Fibreboard
Residual Balance, or, in the alternative, for a new trial. In the motion, B&B
asserted that the Qualifying OC and Fibreboard Plaintiffs were entitled to the
payment of interest from the dates they were to have received their second and
third installments. The Debtors, the Unsecured Creditors' Committee, the
Future Claimants' Representative and Plant each filed objections to B&B's
motion to amend the judgment.
On September 20, 2002, the Bankruptcy Court amended its
order of June 20, 2002 and ordered that the Investment Proceeds earned
subsequent to June 20, 2002 and all interest and other earnings on the
post-June 20, 2002 Investment Proceeds, should be allocated as follows: (i)
the Investment Proceeds on the Qualifying OC and Fibreboard Balance should be
allocated respectively to the Qualifying OC and Fibreboard Plaintiffs; and
(ii) the Investment Proceeds on the OC and Fibreboard Residual Balance should
be payable respectively to OCD and Fibreboard. The Bankruptcy Court further
ordered that the Investment Proceeds, interest and other earnings on the
Qualifying OC and Fibreboard Balance and the OC and Fibreboard Residual
Balance earned prior to June 20, 2002, should be payable respectively to OCD
and Fibreboard.
On October 2, 2002, B&B filed a notice of appeal of the
Bankruptcy Court's September 20, 2002 order. The Future Claimants'
Representative and the Unsecured Creditors' Committee also filed notices of
appeal from the June 20 and September 20, 2002 orders. The appeals have been
consolidated and the parties are proceeding under a briefing schedule
established by the District Court, by order dated December 23, 2002. The Plan
Proponents express no opinion as to the outcome of the appeal.
8. Coordination Between the Debtors, the Committees and the
Future Claimants' Representative
Since their formation, the Committees and the Future
Claimants' Representative have consulted with the Debtors concerning the
administration of the Chapter 11 Cases. The Debtors have kept the Committees
and the Future Claimants' Representative informed concerning their operations
and have sought the concurrence of the Committees and the Future Claimants'
Representative for actions outside the ordinary course of business. The
Asbestos Claimants' Committees and the Future Claimants' Representative
participated actively, together with the Debtors' management and advisors, in
the negotiation and formulation of the Plan.
9. Consolidation of Five Asbestos Bankruptcy Cases Before
Judge Wolin
(a) Asbestos-Related Chapter 11 Cases in Delaware
On November 27, 2001, five asbestos-related Chapter
11 cases pending in the District of Delaware (the Chapter 11 Cases of the
Debtors and the cases of Armstrong World Industries, Inc., W.R. Grace & Co.,
Federal-Mogul Global, Inc., and USG Corporation) were ordered transferred from
the Bankruptcy Court to the United States District Court for the District of
Delaware and were assigned to the Honorable Alfred M. Wolin of the United
States District Court for the District of New Jersey (sitting by designation)
to facilitate development and implementation of a coordinated plan for
management of the cases.
On December 10, 2001, the District Court entered an
order referring these Chapter 11 Cases back to the Bankruptcy Court for
resolution, subject to the District Court's ongoing right to withdraw such
referral with respect to any proceedings or issues.
The case issues were allocated between the District
Court and the Bankruptcy Court as follows:
District Court: Future and present
asbestos claims, valuation and litigation analysis (if the
parties were unable to consensually resolve them in an
agreed-upon time frame); co-defendant asbestos issues;
Section 524(g) trust and trust distribution provisions;
asbestos automatic stay matters; and asbestos bar date
matters.
Bankruptcy Court: Inter-Creditor Issues;
retention, fee application, employee, environmental, cash
management, tax, executory contract and lease matters,
avoidance actions, utilities, asset acquisitions and
dispositions, business operational matters, bank claims and
litigation, intellectual property and licenses, non-asbestos
automatic stay and claims matters, settlements of bonded
asbestos appeals, and NSP settlement escrow issues.
(b) Withdrawal of the Reference
On December 23, 2002, Judge Wolin signed an order
(the "Case Management Order") withdrawing the reference with respect to the
adversary proceeding captioned Owens Corning, et al. v. Credit Suisse First
Boston, et al., No. 02-5829 (the "Bank Holders Action", also referred to by
Judge Wolin as the "Bank Guarantee Adversary") and the Debtors' Motion for
Approval of Substantive Consolidation as Part of Proposed Chapter 11 Plan of
Reorganization (the "Substantive Consolidation Motion"), which was filed on
January 17, 2003. The Court also scheduled hearings on the Substantive
Consolidation Motion and Bank Holders Action, as part of the proceedings
concerning confirmation of the Plan, to commence with consideration of the
Substantive Consolidation Motion (currently scheduled to commence on April 8,
2003), and the Bank Holders Action (currently scheduled to commence on June
15, 2003). Under the the Case Management Order, the Honorable Judith K.
Fitzgerald was appointed settlement judge for the two matters for which the
reference was withdrawn. Professor Francis McGovern was appointed mediator for
those same matters and the parties were directed to appear for mediation. In
addition, the Court appointed William A. Drier, Esquire, as Special Master for
limited purposes related to discovery.
The hearing scheduled on the Substantive
Consolidation Motion will be for the purpose of taking evidence regarding the
positions of the Debtors, the Asbestos Claimants' Committee, the Future
Claimants' Representative, the Unsecured Creditors' Committee, the Designated
Members and CSFB as Agent for the Bank Holders with respect to the Bank
Holders' opposition to the substantive consolidation provisions of the Plan.
The hearing on the Bank Holders Action will include taking evidence regarding
the positions of these parties on the validity, extent and value of the
Subsidiary Guarantees for the purpose of determining any benefits and harms
resulting from the substantive consolidation provisions of the Plan.
(c) The Appointment of Consultants
By order dated December 28, 2001 (the "Consultants
Order"), the District Court ordered that William A. Drier, Esq., David R.
Gross, Esq., C. Judson Hamlin, Esq., John E. Keefe, Esq., and Professor
Francis E. McGovern be designated as court appointed consultants (the "Court
Appointed Consultants") to advise the District Court and to undertake, in
connection with the Chapter 11 Cases of the Debtors and the cases of Armstrong
World Industries, Inc., W.R. Grace & Co., Federal-Mogul Global, Inc., and USG
Corporation, such responsibilities, including by way of example and not
limitation, mediation of disputes, holding case management conferences, and
consultation with counsel, as the District Court may delegate to them
individually. The Consultants Order also provided that the District Court
could, without further notice, appoint any of the Court-Appointed Consultants
to act as a special master ("Special Master") to hear any disputed matter and
to make a report and recommendation to the District Court on the disposition
of such matter. By the same order, the District Court ordered that the fees of
the Court Appointed Consultants and Special Masters are to be borne by the
debtors in such manner and apportionment as the District Court or the
bankruptcy court of each respective case may direct.
(d) The Appointment of a Mediator
Consistent with the terms and purpose of the
Consultants Order, on June 17, 2002, the Debtors filed a motion seeking an
order appointing Professor Francis E. McGovern as mediator ("Mediator") nunc
pro tunc to May 1, 2002, and directing the Mediator to report periodically to
the District Court and Bankruptcy Court during the pendency of the Chapter 11
Cases on the status of the mediation process between the Committees. The
Bankruptcy Court appointed Francis E. McGovern as Mediator, effective May 1,
2002, and ordered that the Mediator report periodically to the District Court
and/or the Bankruptcy Court (as may be determined by the circumstances or by
future orders of either court) on the status of the negotiations between the
parties. The Bankruptcy Court further ordered that the Mediator not serve as
Special Master to hear disputed matters and report to the Bankruptcy Court or
the District Court on any matters on which he previously served as mediator,
or on any matter materially related thereto, and not serve as Mediator on any
disputed matter on which he previously heard and reported to the Bankruptcy
Court or the District Court as a Special Master, or on any matter materially
related thereto.
Pursuant to Judge Wolin's December 23, 2002 order
directing mediation, the Debtors, the Bank Holders, the Committees and the
Future Claimants' Representative reported for mediation.
10. Implementation of Process for Resolution of Inter-Creditor
Issues
Shortly after the Petition Date, the Debtors' counsel began
an extensive review of the facts and circumstances relating to certain
potential inter-creditor issues (the "Inter-Creditor Issues"), including
issues relating to the Guarantees (the "Subsidiary Guarantees") entered into
by the Subsidiary Guarantors under the 1997 Credit Agreement, which include a
number of the Debtors and certain Non-Debtor Subsidiaries. (See Section
V.G.3.c of this Disclosure Statement entitled "Guarantee/Bank Holders Action"
for further discussion of the adversary proceedings filed in the Chapter 11
Cases to avoid and set aside or equitably subordinate the Claims of the Bank
Holders under the Subsidiary Guarantees as fraudulent conveyances.) The
Inter-Creditor Issues include any and all claims, objections, motions,
contested matters, adversary proceedings or any other proceedings involving,
related to or affecting issues of the amount, validity, enforceability or
priority of Claims by the Bank Holders against any of the Debtors or any
Non-Debtor Subsidiary (to the extent the Bankruptcy Court has jurisdiction to
affect the Claims against Non-Debtor Subsidiaries) which is a Subsidiary
Guarantor of the Debtors' obligations to the Bank Holders, including without
limitation: (a) any claims relating to substantive consolidation of the
Debtors; (b) any claims relating to the validity, enforcement or priority of
the Pre-petition Bonds; (c) any claims relating to the validity or
enforceability of a License Agreement, dated as of October 1, 1991, by and
between OCD and OCFT (as amended) and a License Agreement, dated as of April
27, 1999, by and between OCFT and Amerimark; (d) any claims regarding the
amount, validity, enforceability or priority of the Subsidiary Guarantees; (e)
any claims against any direct or indirect Subsidiary of OCD in respect of
OCD's asbestos liability; and (f) any claims as to the amount, validity,
enforceability, priority or avoidability of any intercompany transfers.
The Debtors' counsel advised the various creditor
constituencies that the manner of resolution of Inter-Creditor Issues could
materially impact their respective recoveries. To assist the various creditor
constituencies in their analysis of the Inter-Creditor Issues, the Debtors
proposed a process by which the corporate and financial interrelationships
between the Subsidiary Debtors and the Non-Debtor Subsidiaries could
efficiently be reviewed. The Debtors' goal was to inform the creditor
constituencies about these issues in order to initiate negotiations and thus
avoid a litigated resolution of the complex legal and factual issues, or in
the event that a consensual resolution could not be reached, to provide an
efficient manner for conducting factual discovery.
To facilitate a consensual resolution of the Chapter 11
Cases, in the spring of 2001, the Debtors voluntarily agreed to produce a
documentary record that would aid in this review. During the period between
July 2001 and October 2001, the Debtors produced a large volume of documents
designed to be a compilation of relevant documents that would be useful in
reviewing and investigating each Debtor or Subsidiary Guarantor's corporate
history, major creditor relationships, and significant cash and value
transfers (the "Inter-Creditor Project").
The Debtors established an information and document
depository (the "Information Depository") at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP in New York City. To date, over four hundred-fifty
thousand pages of information and materials have been deposited in the
Information Depository, available to be reviewed by those who entered into a
confidentiality agreement with the Company (the "Participating Parties"),
which confidentiality agreements were necessary to assure the protection of
privileged and confidential material included in the production of documents
to the Information Depository.
In addition to the Information Depository, the Debtors also
created a secure, web-enabled database by which the Participating Parties were
able to access the same documents and materials located in the Information
Depository.
After the initial production of the Debtors' documents and
materials described above, the parties formalized the Inter-Creditor Project.
On September 24, 2001, the Debtors proposed an "Inter-Creditor Stipulation and
Order" which the Bankruptcy Court adopted on such date after hearing from the
various creditor constituencies. The Inter-Creditor Stipulation and Order
delineated a schedule for additional discovery regarding the investigation of
the Inter-Creditor Issues. The Inter-Creditor Stipulation and Order also
directed the Debtors to provide a report to the Court at each omnibus hearing
regarding the status of compliance with the Inter-Creditor Stipulation and
Order.
Pursuant to the Inter-Creditor Stipulation and Order, on
October 20, 2001, the Debtors and the Participating Parties exchanged written
discovery requests. The Debtors searched for documents potentially relevant to
such requests at the Company's headquarters, at its off-site storage facility
in Toledo, Ohio, at its off-site storage facility in Granville, Ohio, and at
the offices of certain of the Debtors' outside professionals. Debtors' counsel
responded to the request for documents.
In addition to the Debtors' production, in December, 2001,
and January, 2002, the Participating Parties commenced document production in
response to the requests received from the other Participating Parties.
In January and February, 2002, the Debtors and the
Participating Parties met to discuss the results of their review and to share
their views regarding the issues. The Debtors and other Participating Parties
identified certain issues and entities for further investigation and
resolution.
On February 19, 2002, the Pre-petition Agent under the 1997
Credit Agreement filed a statement (the "Statement") regarding the resolution
of Inter-Creditor Issues. The Statement requested the implementation of a
process designed to result in the efficient resolution of questions relating
to the value of the Subsidiary Guarantors.
On February 22, 2002, the Debtors filed a Status Report
recommending that the Inter-Creditor Project proceed. More specifically, the
Debtors proposed that they develop proposed factual stipulations and proffer
them to the other Participating Parties pursuant to a specific schedule.
Further, the Debtors urged the continuance of the monthly meetings with the
Participating Parties and the presentation of status reports to the Court.
By order dated March 18, 2002 (the "Inter-Creditor Issues
Order"), the Bankruptcy Court established a schedule for addressing the
resolution of Inter-Creditor Issues. The schedule established the dates on
which the Debtors were to submit to the Participating Parties certain proposed
factual stipulations, generally concerning corporate history and governance,
management and business operations, the financial condition of the entities,
and relationships with Affiliates, the dates on which the Participating
Parties were to provide the Debtors with responses and comments to the
proposed factual stipulations, and the dates of the circulation by the Debtors
of a revised version of the proposed factual stipulations. At a hearing on
June 20, 2002, the Bankruptcy Court authorized the filing of the stipulations
under seal if the parties so desired.
In June 2002, Blue Ridge Investments LLC ("Blue Ridge")
moved, in part, to compel the Debtors to comply with the Inter-Creditor
Stipulation and Order and the Inter-Creditor Issues Order and sought to be
deemed a Participating Party. Following a hearing on Blue Ridge's motion, the
Debtors and Blue Ridge agreed to a consensual resolution of the motion, which
was approved by the Court on August 26, 2002, whereby upon executing a
confidentiality agreement, Blue Ridge was granted full access to the
Information Depository and was also entitled to receive and comment on the
proposed Stipulations of Fact concerning Integrex. Blue Ridge was also
entitled to receipt of the final stipulations of fact concerning OCFT, OCD,
IPM and Fibreboard.
In response to the Inter-Creditor Issues Order, the Debtors
submitted their proposed factual stipulations with respect to OCFT, IPM, OCD,
Integrex, Fibreboard to the Participating Parties; the Participating Parties
responded and commented on the proposed factual stipulations and the Debtors
circulated revised versions of each of the proposed factual stipulations.
Pursuant to the Inter-Creditor Issues Order, with certain
modified deadlines, the Debtors filed, under seal, the following Final
Stipulations:
(1) On November 21, 2002, the Debtors filed, under seal,
Stipulations and Objections to Proposed Stipulations of Fact
Concerning OC, and Document Summaries.
(2) On November 21, 2002, the Debtors filed, under seal,
Stipulations and Objections to Proposed Stipulations of Fact
Concerning Integrex, and Document Summaries.
(3) On December 18, 2002, the Debtors filed, under seal,
Stipulations and Objections to Proposed Stipulations of Fact
Concerning IPM, Inc., and Document Summaries.
(4) On January 7, 2003, the Debtors filed, under seal,
Stipulations and Objections to Proposed Stipulations of Fact
Concerning Fibreboard Corporation.
(5) On January 16, 2003, the Debtors filed, under seal,
Stipulations and Objections to Proposed Stipulations of Fact
Concerning OCFT, and Document Summaries.
At the omnibus hearing on January 27, 2003, the Debtors'
counsel advised the Court that, as a result of the Inter-Creditor Project,
approximately 4,500 proposed stipulations had been filed with the Court.
11. Extension of Exclusive Right to File and Confirm a Plan
Section 1121(b) of the Bankruptcy Code provides for an
initial 120-day period after the Petition Date within which the Debtors have
the exclusive right to file a plan of reorganization in their cases (the
"Exclusive Period"). Section 1121(c) of the Bankruptcy Code further provides
for an initial 180-day period after the Petition Date within which the Debtors
have the exclusive right to solicit and obtain acceptances of a plan filed by
the Debtors during the Exclusive Period (the "Solicitation Period"). Pursuant
to the provisions of Section 1121 of the Bankruptcy Code, the Debtors'
Exclusive Period expired on February 2, 2001, and the Solicitation Period
expired on April 3, 2001.
By motions filed with the Bankruptcy Court, the Debtors
requested several extensions of the Exclusive Period and the Solicitation
Period to afford the Debtors additional time to develop, negotiate and propose
a plan of reorganization. The Bankruptcy Court granted five (5) extensions of
the Exclusive Period and the Solicitation Period, as follows: (i) by order
dated January 17, 2001, the Exclusive Period was extended through August 2,
2001 and the Solicitation Period extended through October 3, 2001; (ii) after
a hearing held before the Bankruptcy Court on August 28, 2001, the Exclusive
Period was extended through February 2, 2002 and the Solicitation Period
extended through April 3, 2002; (iii) by order dated March 18, 2002, the
Exclusive Period was extended through August 30, 2002 and the Solicitation
Period extended through October 31, 2002; (iv) on September 24, 2002, at a
hearing held before the Bankruptcy Court, the Court extended the Exclusive
Period through November 26, 2002 and extended the Solicitation Period through
January 8, 2003; and (v) by supplemental order dated November 25, 2002, the
Exclusive Period was extended through January 10, 2003 and the Solicitation
Period extended through March 14, 2003. In certain instances, certain creditor
groups lodged limited objections and/or responses to the Debtors' request for
extensions.
The most recent order of the Bankruptcy Court, dated
November 25, 2002, extended the Exclusive Period through and including January
10, 2003, and extended the Solicitation Period through and including March 14,
2003, without prejudice to (i) the Debtors' right to seek further extensions
of the Exclusive Period, or (ii) the right of parties-in-interest to seek to
terminate or modify the Exclusive Period. Subsequently, on December 23, 2002,
Judge Wolin signed an order partially withdrawing the reference and directing
that "the period within which the debtors have the exclusive right to file a
plan of reorganization is hereby extended to January 17, 2003, and the debtors
shall file their plan of reorganization on or before that date...."
On January 17, 2003, the Debtors, together with the Asbestos
Claimants' Committee and the Future Claimants' Representative, filed the Plan
within the Exclusive Period. On March 7, 2003, the Debtors filed a motion
seeking extension of the Solicitation Period through September 30, 2003. On
March 13, 2002, the Debtors filed a motion seeking an extension from March 14,
2003, until March 31, 2003 to file a proposed Disclosure Statement.
12. Extension of Time to Remove Actions
The Debtors are parties to numerous judicial and
administrative proceedings currently pending in multiple forums throughout the
country (collectively, the "Actions"). The Actions involve a wide variety of
claims. Pursuant to 28 U.S.C. ss. 1452 and Bankruptcy Rule 9027(a)(2), the
Bankruptcy Court has entered orders extending the time period within which the
Debtors may review Actions and determine whether to remove them to the
District Court or the Bankruptcy Court. The date by which the Debtors must
file notices of removal under Bankruptcy Rule 9027(a)(2)(A) has been extended
through and including the later of (a) thirty (30) days after confirmation of
a plan of reorganization, or (b) thirty (30) days after the entry of an order
terminating the automatic stay with respect to the particular action sought to
be removed.
13. Summary of Claims Process and Bar Dates
(a) Schedules and Statements of Financial Affairs
As part of their "first day" motions, the Debtors
filed a motion requesting additional time to file their SOFAS. Such motion was
granted by order of the Bankruptcy Court dated October 6, 2000, and the
Debtors were granted an extension until December 19, 2000. On November 22,
2000, the Debtors filed separate SOFAS for OCD and each of the 17 Subsidiary
Debtors. Among other things, the SOFAS set forth the Claims of known creditors
against each of the Debtors as of the Petition Date, based upon the Debtors'
books and records.
On November 20, 2001, the Debtors filed Amended and
Restated Schedules of Assets and Liabilities (the "Amended Schedules") for OCD
and each of the 17 Subsidiary Debtors. The Amended Schedules amended and
wholly superseded the Schedules filed by the Debtors in November 2000.
Revisions to the Amended Schedules were filed on January 30, 2002 for certain
of the Debtors.
Exclusive of asbestos-related personal injury and
wrongful death claims, the total amount of liabilities listed in the Debtors'
Amended Schedules was approximately $8,470 million, consisting of $1,460
million of pre-petition bank debt; $1,338 million of pre-petition bond debt;
$190 million of pre-petition trade debt; $10 million of pre-petition tax debt;
and $5,270 million in pre-petition intercompany debt and $212 million in other
pre-petition debt.
(b) General Claims Bar Date and Proofs of Claim
In connection with the Chapter 11 Cases, the
Bankruptcy Court set April 15, 2002 as the last date by which holders of
certain pre-petition Claims against the Debtors were required to file Proofs
of Claim (the "General Bar Date"). The General Bar Date did not apply to
certain claims, including Asbestos Personal Injury Claims other than OC
Indirect Asbestos PI Trust Claims and FB Indirect Asbestos PI Trust Claims.
Pursuant to order of the Bankruptcy Court dated November 27, 2001, any holder
of a Claim that was required to but failed to file a Claim on or before the
General Bar Date was barred from asserting such Claim against any of the
Debtors and will not participate in any distribution in the Chapter 11 Cases
on account of such Claim.
Pursuant to notice procedures approved by the
Bankruptcy Court, the Debtors sent out approximately 204,000 Proofs of Claim
forms and notices of the General Bar Date to known claimants and their
attorneys, and published notice of the General Bar Date twice in the national
and (if applicable) international editions of The New York Times, The Wall
Street Journal and USA Today; once in approximately 250 regional or local
newspapers in the areas in which the Debtors had significant business
operations at the time of publication; and once in approximately 35 trade
publications in the primary lines of business in which the Debtors operate or
formerly operated.
In response to the General Bar Date, approximately
24,000 Proof of Claims, including late-filed claims, were filed with the
Claims Agent and/or Bankruptcy Court, asserting approximately $16.1 billion of
aggregate liabilities. The Debtors are investigating these claims to determine
their validity.
The Debtors have identified approximately 15,000
claims, asserting approximately $8.4 billion of aggregate liabilities, which
they believe should be disallowed by the Bankruptcy Court, primarily because
such claims appear to be duplicate or amended claims or claims that are not
related to any of the Debtors' cases (the "Currently Disputed Claims"). It is
the intention of the Debtors to file objections to these Currently Disputed
Claims. While the Bankruptcy Court will ultimately determine liability
amounts, if any, that will be allowed as part of the Chapter 11 Cases, the
Debtors believe that all or substantially all of these claims will be
disallowed.
As of the date of the filing of this Disclosure
Statement, the Debtors have filed five omnibus objections to claims, which
have objected to approximately 650 Claims, and which seek to disallow or
expunge approximately $953 of asserted claims. Currently Disputed Claims
contained therein have been expunged pursuant to an order of the Bankruptcy
Court or are pending before the Bankruptcy Court.
In addition to the Currently Disputed Claims
described above, the remaining Proof of Claims include approximately 9,000
claims, totaling approximately $7.7 billion, as follows:
- Approximately 2,900 OC Indirect Asbestos PI
Trust Claims and FB Indirect Asbestos PI Trust
Claims, totaling approximately $1.4 billion of
asserted liabilities.
- Approximately 600 OC Asbestos Property Damage
Claims, OC Indirect Asbestos Property Damage
Claims, FB Asbestos Property Damage Claims and
FB Indirect Asbestos Property Damage Claims,
totaling approximately $0.7 billion of asserted
liabilities. The Debtors believe that most of
these claims were submitted with insufficient
documentation. The Debtors expect to vigorously
contest any asserted asbestos-related property
damage claims in the Bankruptcy Court. Based
upon their historic experience in respect of
asbestos-related property damage claims, the
Debtors do not anticipate significant liability
from such claims.
- Approximately 5,500 claims, totaling
approximately $5.6 billion, alleging rights to
payment for financial, environmental, trade and
other matters (the "General Claims"). The
Company has previously recorded approximately
$3.7 billion in liabilities for these claims.
The General Claims with the largest variance
from the recorded amounts are: claims by the
United States Department of Treasury, totaling
approximately $530 million, in connection with
taxes; a contingent claim for approximately $458
million by the Pension Benefit Guaranty
Corporation; claims for contract rejections,
totaling approximately $310 million, of which
approximately $250 million are protective claims
covering contracts which have not yet been
rejected by the Debtors; a $275 million class
action claim involving alleged problems with a
specialty roofing product, which claim the
Debtors do not believe is meritorious based upon
their historic experience with servicing their
warranty program for such product; and
environmental claims, totaling approximately
$244 million.
The Debtors have recorded liability amounts for
those claims that can be reasonably estimated and which they believe are
probable of being allowed by the Bankruptcy Court. At this time, it is
impossible to reasonably estimate the value of all the claims that will
ultimately be allowed by the Bankruptcy Court, due to the uncertainties of the
Chapter 11 process, the in-progress state of the Debtors' investigation of
submitted claims, and the lack of documentation submitted in support of many
claims. The Debtors continue to evaluate claims filed in the Chapter 11 Cases
and will make such adjustments as may be appropriate. Although the Debtors'
review of all Claims filed is anticipated to be completed after the
Confirmation Date, the Debtors estimate, based on their analysis of the Claims
thus far, that the Claims that are likely to become Allowed Claims are as
follows, on a class-by-class basis:
Class 1: The Debtors believe that no unpaid liabilities
exist for this class.
Class 2A: $4.4 million to $5 million
Class 2B: [The Debtors are currently analyzing these claims
and this information will be inserted at a later
date]
Class 3: $18.0 million to $18.5 million
Class 4: $1,480 million to $1,577 million
Class 5: $1,333 million to $1,335 million
Class 6: $402 million to $861 million
Class 7 See Sections IV.D.2 and VII.C.3.b(vi) of this
Disclosure Statement
Class 8 See Sections IV.D.2 and VII.C.3.b(vii) of this
Disclosure Statement
Class 9 [The Debtors are currently analyzing these claims
and this information will be inserted at a later
date]
NOTWITHSTANDING THE DEBTORS' BEST ESTIMATES, THE
ACTUAL AMOUNT OF CLAIMS AGAINST THE DEBTORS THAT ULTIMATELY BECOME ALLOWED
CLAIMS COULD MATERIALLY EXCEED THESE AMOUNTS, AND IN SUCH EVENT, THE ESTIMATED
PERCENTAGE RECOVERIES FOR HOLDERS OF CLAIMS COULD BE MATERIALLY LESS THAN AS
ESTIMATED IN THIS DISCLOSURE STATEMENT.
(c) Asbestos Claims Bar Date and Proofs of Claim
As indicated above, the General Bar Date did not
apply to asbestos-related personal injury and asbestos-related wrongful death
claims, although it did apply to asbestos property damage claims, OC Indirect
Asbestos PI Trust Claims and FB Indirect Asbestos PI Trust Claims. A bar date
for filing Proofs of Claim against the Debtors with respect to these types of
Claims has not been set. Despite this, approximately 2,900 Proofs of Claim,
totaling approximately $2.2 billion, were filed in response to the General Bar
Date on account of asserted asbestos-related personal injury and
asbestos-related wrongful death claims.
14. Plant Insulation Company Motion to Appoint Examiner
On September 28, 2001, Plant filed a motion (the "Plant
Motion") under Section 1104(c)(2) of the Bankruptcy Code for an order
appointing a disinterested examiner to conduct an examination of Fibreboard,
including an investigation as to whether Fibreboard assets were diverted to
pay OCD debts. Plant alleged that funds which were purportedly set aside for
payment of Fibreboard's asbestos liability had been diverted to pay for
certain liability of OCD, or, that when OCD and Fibreboard entered into
various joint settlements for liability, disproportionate liability was
assessed to Fibreboard. Plant argued that the appointment of an examiner was
mandatory pursuant to the provisions of Section 1104(c)(2) of the Bankruptcy
Code, which provides, in part, that "on request of a party in interest...the
court shall order the appointment of an examiner to conduct...an investigation
of the debtor as is appropriate...if...the debtor's fixed, liquidated,
unsecured debts, other than debts for goods, services, or taxes, or owing to
an insider, exceed $5,000,000." Plant argued that an examiner should be
appointed because Fibreboard's fixed, liquidated, unsecured asbestos debts
exceeded $5 million and because there was allegedly reason to believe that
assets of the Fibreboard Insurance Settlement Trust had been diverted to help
pay OCD's asbestos debts.
The Plant Motion was opposed by the Debtors, the Future
Claimants' Representative, the Unsecured Creditors' Committee and the Asbestos
Claimants' Committee, all of which filed an objection and/or response to the
Plant Motion. A fundamental dispute between Plant and the responding parties
was whether Section 1104(c)(2) of the Bankruptcy Code is a mandatory provision
which allegedly requires the Bankruptcy Court to appoint an examiner if the $5
million debt threshold is satisfied, or whether the Court retains discretion
to deny a request for the appointment of an examiner under these
circumstances. The United States Trustee also filed a response to the Plant
Motion, stating its position that if the $5 million debt threshold of Section
1104(c)(2) of the Bankruptcy Code is satisfied, the appointment of an examiner
is mandatory.
Following a hearing, the Bankruptcy Court denied Plant's
motion for the appointment of an examiner without prejudice, by order entered
March 22, 2002.
On March 27, 2002, Plant filed a notice of appeal of the
Bankruptcy Court's order. By order dated December 4, 2002, Judge Wolin granted
Plant's appeal and further ordered that "the Order of the Bankruptcy Court
denying Plant's application for the appointment of an examiner on the ground
that no motion for a trustee had been denied by the Bankruptcy Court is hereby
vacated solely on the ground upon which it was based....." The District Court
remanded the matter to the Bankruptcy Court for further proceedings on Plant's
motion for the appointment of an examiner. The Bankruptcy Court directed the
parties to file supplemental briefs, if any, on March 10, 2003, and a hearing
is scheduled for April 8, 2003.
15. Environmental Claims arising under Environmental Laws
The Debtors have been deemed by the United States
Environmental Protection Agency ("EPA") to be a Potentially Responsible Party
("PRP") with respect to certain third party sites under the Comprehensive
Environmental Response, Compensation and Liability Act ("Superfund"). The
Debtors have also been deemed a PRP under similar state or local laws. In
other instances, other PRPs have made Claims against the Debtors as a PRP for
contribution under such federal, state or local laws or under contractual
agreements.
The Debtors have established reserves for their Superfund
(and similar state, local and private action) contingent liabilities. In
connection with the Filing, the Debtors have initiated a program to identify
and discharge contingent environmental liabilities as part of their Plan.
Under the program, the Debtors sought settlements, subject to approval of the
Bankruptcy Court, with various federal, state and local authorities, as well
as private claimants. The Debtors will continue to review environmental
reserves in light of such program and make such adjustments as may be
appropriate.
The Debtors are involved with environmental investigation or
remediation at a number of other sites at which they have not been designated
a PRP, particularly sites that they formerly owned or operated. Environmental
conditions at currently owned and/or operated sites are being addressed in the
ordinary course of the Debtors' business.
At the General Bar Date, approximately 100 Proofs of Claim
asserting liabilities arising under environmental laws had been filed with the
Bankruptcy Court. Many of such Proofs of Claim did not state a dollar amount.
Many of those that did state an amount assert liabilities beyond which the
Debtors believe they could reasonably be held liable, if any liability exists,
in that (a) they seek recovery of the total costs of cleanup at sites where
numerous parties other than the Debtors were also jointly and severally liable
or (b) they originated from multiple parties potentially liable at the same
site. Claims arising under environmental laws relating to conduct of the
Debtors before the Petition Date consisted of (a) Claims by the EPA against
the Debtors for the costs of environmental investigation and clean up of sites
that may have been contaminated as a result of releases of hazardous
substances by the Debtors, including releases at third-party disposal sites
used by the Debtors; (b) similar Claims by State and local environmental
agencies; (c) Claims by private parties against the Debtors asserting
contribution or indemnification claims with respect to cleanup costs under
statutory law or contractual agreements; and (d) enforcement actions by
federal, state and local environmental authorities with respect to alleged
violations of environmental laws. The Debtors have been involved in
negotiations to resolve as many of these Claims as possible. As of the present
date, nearly half of the Claims have been resolved. In addition, in some cases
where a Proof of Claim has not been filed, but where regulatory authorities
are likely to exercise their police and regulatory authority against the
Debtors with respect to environmental conditions, such as sites currently or
formerly owned by the Debtors, the Debtors have been negotiating with
regulatory authorities regarding environmental investigation and remediation.
(a) Resolved as Allowed Class 6 Claims
(i) EPA Claims
The Debtors have been involved in
negotiations with the EPA to resolve EPA's Claims at most of the sites where
waste materials of the Debtors were disposed before the Petition Date and,
consequently, for which the Debtors may be liable for cleanup and related
costs. The draft Environmental Settlement Agreement between the Debtors and
the EPA quantifies liability at existing known sites as pre-petition Claims,
with respect to some of which the EPA would have an Allowed Class 6 Claim (the
"Liquidated Sites"). The draft Environmental Settlement Agreement with the EPA
also contains a provision that waste disposal sites used by the Debtors before
the Petition Date that are not discovered until after confirmation of the Plan
or where the Debtors' use of the site has been confirmed but an allocable
share of liability cannot yet be determined (known as "Additional Sites") will
be paid by the Reorganized Debtors at the rate of distribution for Allowed
Class 6 Claims. The Environmental Settlement Agreement will also contain work
plans for limited removal actions by the Debtors at two Rhode Island sites.
(ii) State Claims
The Debtors have negotiated an Environmental
Settlement Agreement similar to the Environmental Settlement Agreement with
the EPA, discussed above, with the State of New York, where the Debtors
conducted operations, which agreement covers only that State's costs at sites
that are presently unknown. The Debtors also negotiated settlement agreements
with the Texas Commission on Environmental Quality and the City of Tacoma.
(iii) Private Party Claims
The Debtors have settled various Claims
covering various formerly owned properties (Ashton, Rhode Island, Snyder
Lumber Sites and Gardena, California) or prior waste disposal sites (GBF
Site).
(iv) Enforcement Action Claims
The Debtors have resolved most prepetition
environmental actions, including an Ohio air settlement ($201,633), a Colorado
air settlement ($9,000) and a federal Clean Water settlement ($40,000).
(b) Claims Arising Under Environmental Laws Involving
Formerly owned Properties Resolved as Administrative Claims
The Debtors resolved the following claims: Oregon
Department of Environmental Quality for the former St. Helens Plant ($900,000)
and Industry factory rental for the former Ashton Plant ($75,000).
(c) Unresolved Claims Arising Under Environmental Laws
(i) State Claims
The Debtors have been engaged in extensive
negotiations with the Rhode Island Department of Environmental Management
("RIDEM") regarding its Proof of Claim in the amount of $80 million with
respect to five sites in Rhode Island where alleged releases of hazardous
substances by the Debtors may have contributed to contamination. In an effort
to focus settlement negotiations, the Debtors have recently completed a
limited investigation of environmental conditions at the Dupraw and Mackland
Farms sites and an investigation to identify other parties that used that site
for waste disposal. Discussions with Rhode Island regarding its Proof of Claim
are ongoing.
The Debtors have also been engaged in
extensive negotiations with the New Jersey Department of Environmental
Protection ("NJDEP") regarding its Proof of Claim in the amount of
approximately $74 million, concerning the BEMS landfill in Burlington, a
multi-party waste disposal site used by the Debtors. Ongoing litigation may
continue beyond the Debtors' emergence from bankruptcy.
The Kansas Department of Health and
Environment ("KDHE") has filed a Proof of Claim in the amount of approximately
$1.9 million with respect to remedial costs at a landfill previously operated
by the City of Kansas City and used for disposal by the Debtors and a number
of other parties. The Debtors have been engaged in discussions with KDHE
regarding this Claim and at this point, the Debtors expect that this Claim,
and a related Claim by the Kansas National Guard, may require an estimation
proceeding.
The State of California has filed a Proof
of Claim in the amount of $40 million with respect to costs at two disposal
sites: Operating Industries, Inc. and the GBF landfill. The Debtors believe
that the State's claim is without merit because, in each case, the Debtors
have resolved their liability for cleanup costs through settlements with the
EPA or private parties.
Liabilities arising from environmental
conditions at properties currently owned and operated by the Debtors are not
generally subject to discharge and may need to be satisfied as Administrative
Claims or by the Debtors after emergence from bankruptcy. On that basis, the
Oklahoma Department of Environmental Quality has withdrawn a protective Proof
of Claim regarding site conditions at the Debtors' facility in Oklahoma City,
which the Debtors expect to resolve.
(ii) Private Party Claims
At the request of a Berlin Borough
official, the Debtors and Owens-Illinois agreed to investigate the New Freedom
Rd. Landfill, a former waste site believed to have been used by both companies
in the 1950's. A Proof of Claim in an undetermined amount was filed by
Owens-Illinois regarding cleanup costs which may be incurred.
Several other private parties have filed
Proofs of Claim for alleged contribution obligations with respect to a few
different sites, but none of these claims is for any material amount, even
without taking into account the Debtors' grounds for objecting to them.
The Debtors believe that the following
Claims by private parties arising under environmental laws are without merit,
and the Debtors intend to object to them: a Proof of Claim based on
contribution for cleanup costs with respect to the Dexter Quarry site in the
amount of $5,000,000 by the estate of the former owner/operator; a Proof of
Claim in the amount of $3,000,000 by Akzo Nobel Coatings, Inc. seeking
indemnification for cleanup costs that it incurred with respect to the Mercer
Drum site in Ohio; ; a Proof of Claim by GE Glegg alleging damages for soil
and groundwater contamination in the vicinity of the Debtors' former Guelph,
Ontario plant; a Proof of Claim by Bigge Investors in the amount of $350,000
regarding environmental conditions on property sold to it by the Debtors based
on allegations of fraud in the sale; Proofs of Claim in the amount of
approximately $4,000,000 by Wallace Development/Bezley based on allegations of
fraud in the sale by Debtors of industrial real estate in California; and a
Proof of Claim by Dr. and Mrs. Gregory Pharo alleging diminished value of
their residence due to the nearby presence of Debtors' Aerohaven landfill.
16. IRS Claims
(a) IRS Audit
The Company's federal income tax returns typically are
audited by the IRS in multi-year audit cycles. The audit for the years
1992-1995 was completed in late 2000. Due to the Filing, the IRS also
accelerated and completed the audit for the years ended 1996-1999 by March of
2001. As the result of these audits and unresolved issues from prior audit
cycles, the IRS is asserting claims for approximately $390 million in income
taxes plus interest of approximately $175 million.
Pending audit of the Company's federal income tax return for
the year 2000, the IRS has also filed a protective claim in the amount of
approximately $50 million, covering a tax refund received by the Company for
such year, plus interest.
The United States Department of Treasury has filed Proofs of
Claim, totaling approximately $530 million, in connection with these tax
claims.
In accordance with generally accepted accounting principles,
the Company maintains tax reserves to cover audit issues. While the Company
believes that the existing reserves are appropriate in light of the audit
issues involved, its defenses, its prior experience in resolving audit issues,
and its ability to realize the benefit of certain challenged deductions in
subsequent tax returns if the IRS is successful, there can be no assurance
that such reserves will be sufficient. The Company will continue to review its
tax reserves on a periodic basis and to make such adjustments as may be
appropriate. Any such revision could be material to the Company's consolidated
financial position and results of operations in any given period.
17. Certain Proposed Tax Legislation
On April 4, 2001, the United States House of Representatives
introduced proposed legislation (HR 1412, also known as the Asbestos Tax
Fairness Act) to exempt income earned by qualifying asbestos-related
settlement funds, including qualifying trusts established under Section 524(g)
of the Bankruptcy Code, from federal income tax. The exemption from income tax
would have benefited the Fibreboard Insurance Settlement Trust (described in
Section IV.B.1 of this Disclosure Statement entitled "The Fibreboard Insurance
Settlement Trust") by having the effect of enlarging the corpus of the trust
through tax-free income accumulation. In addition, the legislation would have
allowed asbestos defendants to carry-back net operating losses ("NOLs")
created by asbestos payments to the years in which the products containing
asbestos were produced or distributed (and to each subsequent year) in order
to obtain a refund of federal income taxes paid in those periods. In the case
of OC, this would have entitled the Company to carry-back its NOLs to the
early 1950s. On June 14, 2001, a companion bill identical to HR 1412 was
introduced in the United States Senate (S 1048).
Despite strong bipartisan support for both bills, Congress
did not act on them before it adjourned in late 2002, at which time both bills
lapsed. Consequently, similar legislation will be considered in the current
Congress only if newly introduced.
18. Pension Claims
The Company has several defined benefit pension plans
covering most employees. Under the plans, pension benefits are generally based
on an employee's pay and number of years of service. Company contributions to
these pension plans are determined by an independent actuary to meet or exceed
minimum funding requirements. Plan assets consist primarily of equity
securities with the balance in fixed income investments.
Certain of the Company's pension plans have an accumulated
benefit obligation in excess of the fair value of plan assets. The accumulated
benefit obligation and fair value of plan assets for such plans are $1,115
million and $624 million, respectively, at October 31, 2002. Certain of the
Company's pension plans are not funded. The portion of the total projected
benefit obligation attributable to unfunded plans is approximately $7 million
at October 31, 2002.
The Company also sponsors defined contribution plans
available to substantially all United States employees. Company contributions
reflect a matching of a percentage of employee savings up to a maximum savings
level and certain profit sharing awards. The Company recognized expense of $34
million in 2002.
The Pension Benefit Guaranty Corporation ("PBGC"), an agency
of the United States, filed a Claim on the General Bar Date in the amount of
approximately $458 million, in connection with statutory liability for
unfunded benefit liabilities of the Owens Corning Merged Retirement Plan (the
"Merged Plan"). The Claim states that it is contingent upon termination of the
Merged Plan. The Merged Plan is a tax-qualified defined benefit pension plan
covered by and subject to Title IV of the Employee Retirement Income Security
Act of 1974, as amended, 29 U.S.C. ss.ss. 1301-1462 ("ERISA"). Pursuant to
Title IV, each of the Debtors is a contributing sponsor of the Merged Plan or
a member of a contributing sponsor's controlled group. 29 U.S.C. ss.
1301(a)(13)(14). The Plan specifically provides that OCD and any other of the
Reorganized Debtors whose employees are covered by the Merged Plan shall
assume and continue the Merged Plan, satisfy the minimum funding standards
pursuant to 26 U.S.C. Section 412 and 29 U.S.C. Section 1082, and administer
the Merged Plan in accordance with its terms and the provisions of ERISA.
Further, nothing in the Plan of Reorganization shall be construed in any way
as discharging, releasing or relieving the Debtors or the Debtors' successors,
including the Reorganized Debtors, or any party, in any capacity, from
liability imposed under any law or regulatory provision with respect to the
Merged Plan or PBGC.
OCD is required to comply with ERISA's minimum funding
requirements. Funding is generally in cash but may also be in stock or debt
(in general, not exceeding 10% of the plan's assets). OC has estimated that it
will make cash payments to fund the Merged Plan in the range of $300 million
to $400 million over 2003 and 2004 relating to post-petition service periods.
It is assumed that the 2004 pension payments will be made from cash on hand
and operating cash flow.
As it has done in these Chapter 11 Cases, the PBGC will
generally file a contingent priority claim for the full amount of any such
unfunded minimum funding obligation (although such amount will generally only
enjoy such priority treatment under the Plan to the extent it relates to
post-petition service), which would become a fixed priority claim if the
pension plan were to be terminated. The PBGC will also generally file a
contingent priority claim for the amount of any other underfunding (although
such claim is ultimately treated as an unsecured claim by the Bankruptcy
Court), which would become a fixed unsecured claim if the pension plan were to
be terminated. OCD anticipates that it will satisfy all minimum funding
requirements. As a consequence, for purposes of this Disclosure Statement it
is assumed for purposes of projections of future performance and projected
distributions under the Plan that (1) the Merged Plan will not be terminated,
(2) OCD will make all minimum funding payments and (3) the Pension Plan will
be less than 100% funded at December 31, 2003, and (4) OCD will not be
required to reserve assets in the Plan to adequately fund the Pension Plan,
but will be required to demonstrate its ability to fully fund the Merged Plan
in future periods.
19. Summary of Certain Litigation
(a) John Hancock Litigation
Certain of OCD's current and former directors and
officers, as well as certain underwriters, are named defendants in a class
action lawsuit captioned John Hancock Life Insurance Company, et al. v.
Goldman, Sachs & Co., et al., CA No. 01-10729-RWZ, pending in the United
States District Court for the District of Massachusetts (the "Hancock
Litigation"). The suit, commenced on or about April 30, 2001, is a
securities-related class action on behalf of purchasers of securities pursuant
to, or traceable to, two public offerings by OCD on or about April 30, 1998
and July 22, 1998. None of the Debtors is a defendant in the lawsuit.
On or about April 27, 2001, a complaint was filed
on behalf of purchasers of the $300 million aggregate principal amount of $550
Million Term Notes (First Series) issued by OCD due May 1, 2005 (consisting of
7.5% Term Notes) and the $250 million aggregate principal amount of $550
Million Term Notes (Second Series) issued by OCD due May 1, 2008 (consisting
of 7.7% Term Notes) in offerings occurring on or about April 30, 1998. On or
about July 5, 2001, an amended complaint was filed which added reference to
the $400 million aggregate principal amount of $400 Million Debentures issued
by OCD due August 1, 2018 (consisting of 7.5% Debentures), in an offering
occurring on or about July 23, 1998.
By the amended complaint, the plaintiffs allege,
among other things, that the defendants violated the Securities Act of 1933 in
that the SEC Form S-3 registration statements, including the prospectus and
prospectus supplements, pursuant to which the debt offerings were made
contained untrue and misleading statements of material fact and omitted to
state certain required material facts. In particular, the amended complaint
alleges that the registration statements for the debt securities contained the
following untrue and misleading statements of fact and omissions of material
facts: (a) the representation that the debt securities would "rank equally
with all other unsecured and unsubordinated indebtedness of the Company," (b)
misleading representations concerning OCD's other unsecured indebtedness, (c)
the failure to disclose that certain of OCD's other unsecured and
unsubordinated indebtedness was guaranteed by one or more of OCD's
Subsidiaries, (d) the failure to disclose that OCD had a substantial debt to
one of its Subsidiaries, (e) the failure to disclose the existence of and the
terms of certain promissory notes issued by OCD to one of its Subsidiaries,
and (f) the failure to disclose the existence of and terms of an intellectual
property licensing arrangement between OCD and one of its Subsidiaries. The
amended complaint sought, among other things, an unspecified amount of damages
or, where appropriate, rescission of the plaintiffs' purchases of the
securities.
On November 14, 2001, and November 20, 2001,
respectively, the underwriter defendants and the individual defendants filed
motions to dismiss the amended complaint for failure to state a claim upon
which relief can be granted. The individual defendants argued that the
plaintiffs' action should be dismissed because the information which
plaintiffs claim was omitted either was disclosed in OCD's filings with the
SEC and incorporated by reference into the registration statements, or was not
required to be disclosed under applicable SEC regulations. The individual
defendants further argued that the plaintiffs' action was barred by the
applicable statute of limitations because it was brought more than one year
after the allegedly concealed facts were disclosed in public filings.
On January 28, 2002, the plaintiffs filed a
combined opposition to the underwriter and individual defendants' motions to
dismiss. On March 29, 2002, both the individual defendants and the underwriter
defendants filed reply memorandums in further support of their respective
motions. A hearing was held on the motions to dismiss on April 11, 2002.
On August 26, 2002, the United States District
Court for the District of Massachusetts issued a memorandum of decision,
wherein it determined that dismissal of the amended complaint is inappropriate
because "several questions of fact remain," including: (i) "whether
defendants' statement that the securities would 'rank equally with other
unsecured and unsubordinated obligations of the Company,' was false or
misleading when read in context with the rest of the information provided in
the registration statement;" (ii) "whether the defendants' disclosures about
intercompany licensing agreements and guarantees on other debt by OCD's
subsidiaries were false or misleading with respect to the subordination rights
of securities purchasers;" and (iii) "whether the registration statements
provided plaintiffs with sufficient information to fully understand their
rights relevant to other unsecured creditors." The court further concluded
that, contrary to the defendants' argument, the plaintiffs' claims were not
time-barred. The court, therefore, denied the defendants' motions to dismiss
the amended complaint. The parties are currently involved in discovery
proceedings with respect to this litigation. The named defendants in this
proceeding have each filed contingent indemnification claims with respect to
this litigation against OC pursuant to the General Bar Date process.
Executive Risk Indemnity Inc. ("Executive Risk")
issued to OCD Directors and Officers Liability Insurance Policy No. 8165-4021
for the policy period March 29, 2001 to March 29, 2002 (the "Policy").
Executive Risk received notice under the Policy relating to the Hancock
Litigation and has indicated a willingness to pay on a current basis certain
defense expenses, as that term is used in the Policy, incurred on or after
March 29, 2002 under the Policy, subject to mutual reservations of rights, in
connection with the Hancock Litigation to or on behalf of the insureds. A
proposed Stipulation and Order Among Debtors, Executive Risk Indemnity Inc.,
Norman P. Blake, Jr., Gaston Caperton, Domenico Cecere, Leonard S. Coleman,
Jr., William W. Colville, John H. Dasburg, Landon Hilliard, Glen H. Hiner, Sir
Trevor Holdsworth, Jon M. Huntsman, Jr., Ann Iverson, W. Walker Lewis, Michael
I. Miller, Furman C. Moseley, Jr., W. Ann Reynolds, and Steven J. Strobel was
filed with the Court providing inter alia that, notwithstanding the automatic
stay of 11 U.S.C.ss.362, Executive Risk shall be and hereby is authorized to
make payments under the Policy to or for the benefit of the Insureds for
Defense Expenses incurred in connection with the Hancock Litigation.
(b) Deloitte Litigation
On August 10, 2001, Deloitte Consulting, L.P.
("Deloitte") filed an Administrative Claim (the "Deloitte Administrative
Claim") in the Chapter 11 Cases seeking not less than $2 million, on the
theory that after the Petition Date, the Debtors had converted Deloitte's
contributions to Debtors' HOMExperts home repair and inspection business. On
February 5, 2002, Deloitte filed its adversary complaint against the Debtors,
asserting copyright infringement, conversion, and post-petition use and
benefit, seeking not less than $2 million in damages and/or administrative
expenses (the "Deloitte Adversary Action"). The Debtors vigorously contested
the Deloitte Administrative Claim and the Deloitte Adversary Action and moved
to dismiss the Deloitte Administrative Claim.
The Debtors and Deloitte exchanged discovery
requests, documents and written responses, and commenced depositions. After
considerable negotiations, the Debtors and Deloitte reached a settlement
resolving, without further litigation, all of Deloitte's claims related to
HOMExperts, the Deloitte Administrative Claim, and the Deloitte Adversary
Action. Pursuant to the terms of the settlement, Deloitte was allowed an
administrative expense claim of $350,000 to be paid within 30 days after entry
of the order approving the settlement; Deloitte was allowed an unsecured
pre-petition claim against OCD in the net amount of $400,000 by reason of the
matters asserted in the Deloitte Administrative Claim and the Deloitte
Adversary Action against OCD, Integrex and HOMExperts LLC, which shall be
treated in the Chapter 11 Cases and pursuant to applicable provisions of the
Bankruptcy Code as an Allowed General Unsecured Claim; the Deloitte Adversary
Action was automatically dismissed upon entry of the order approving the
settlement; and Deloitte released the Debtors for all claims resolved under
the settlement.
(c) Tobacco Litigation
OC has spent significant monies to resolve claims
of asbestos claimants whose injuries were caused or exacerbated by cigarette
smoking. OCD and Fibreboard are pursuing litigation against tobacco companies
(discussed below) for restitution/unjust enrichment, fraud, and violations of
state antitrust law to obtain payment of monetary damages (including punitive
damages) for payments made by OCD and Fibreboard to asbestos claimants who
developed smoking-related diseases. There can be no assurance that any such
litigation will go to trial or be successful.
In October 1998, the Circuit Court for Jefferson
County, Mississippi granted leave to file an amended complaint in an existing
action to add claims by OCD against seven tobacco companies and several other
tobacco industry defendants. The action brought by OCD in the Circuit Court of
Jefferson County, Mississippi is styled Ezell Thomas, et al. v. R.J. Reynolds
Tobacco Company, et al. and Owens Corning v. RJ Reynolds Tobacco Company ,
Docket No. 96-0065. On June 17, 2001, the Jefferson County court entered an
order dismissing OCD's case in response to the defendants' motion for summary
judgment on the basis that OCD's injuries were indirect and thus too remote
under Mississippi law to allow recovery. OCD has appealed such dismissal to
the Supreme Court of Mississippi.
In addition to the Mississippi lawsuit, in December
1997, OCD and Fibreboard brought a lawsuit in the Superior Court of
California, County of Alameda, against the same tobacco companies. That
lawsuit, which is currently pending, is styled Fibreboard Corp., et al. v.
R.J. Reynolds Tobacco Company, et al., Case No. 791919-8. In August 2001, the
defendants filed motions to dismiss OCD's and Fibreboard's claims on the basis
of the decision in the Mississippi lawsuit as well as California law. After a
hearing on these motions on November 20, 2001, the California court denied the
motion to dismiss Fibreboard's claims on the basis of the decision in the
Mississippi lawsuit and otherwise stayed the proceeding pending the outcome of
the Mississippi suit. If OCD and Fibreboard prevail, OCD's and Fibreboard's
recoveries from such lawsuits against the tobacco companies will be
transferred to the Litigation Trust.
(d) Greenburg Class Action Securities Litigation
On or about January 27, 2003, a class action
lawsuit was filed in the United States District Court for the Northern
District of Ohio, Western Division on behalf of certain purchasers of common
stock and preferred stock of OCD during the period from September 20, 1999
through October 5, 2000. The complaint, entitled Robert Greenburg v. Hiner, et
al., No. 03 Civ. 7036 (N.D. Ohio), names five of OCD's current and former
directors and officers as defendants in the suit. None of the Debtors are
named as defendants.
The complaint asserts claims for violation of
Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934. In the
complaint, the plaintiffs allege that the violations stem from the
dissemination of materially false and misleading information by the defendants
during the relevant time period that materially misrepresented OCD's financial
health and performance, thereby causing OCD's stock to trade at
artificially-inflated prices. Among other things, the action seeks to recover
an unspecified amount of damages and/or rescission of the plaintiffs'
purchases of the stock. No answer has yet been filed to the Complaint. Defense
costs with respect to this litigation are covered by OCD's directors' and
officers' insurance policy.
Three substantially similar class actions were
subsequently filed in the United States District Court for the Northern
District of Ohio: an action entitled Nicholas Radosevich v. Hiner, et al.,
Case No. 3-03-07069 (N.D. Ohio) was filed on February 14, 2003; an action
entitled entitled Howard E. Leppla v. Hiner, et al., No. 3-03-07088 (N. D.
Ohio) was filed on March 3, 2003; and an action entitled William Benanchietti
v. Hiner, et al., Case No. 3-03-07116 (N.D. Ohio), filed on March 12, 2003.
(e) New York Packaging Corp.'s Administrative Claim
New York Packaging Corporation ("NYPC"), a supplier
of plastic sheets to certain of the Debtors' manufacturing facilities, filed a
motion for allowance of administrative expense on January 22, 2002. NYPC
claimed that the Debtors owed it approximately $1.4 million in connection with
an unpaid invoice for the purchase order of plastic sheets placed by the
Debtors in or around April 2001. The Debtors filed an objection to the motion
on March 25, 2002, wherein they contended that the invoice was incorrect and
that the Debtors owe NYPC only $7,154 on account of the order. The parties
engaged in discovery and a trial was held before the Bankruptcy Court on
January 21, 2003. As of the filing of this Disclosure Statement, the matter is
pending in the Bankruptcy Court and the outcome is uncertain. The primary
issues before the Court are (i) whether the purchase order contained an
obvious mistake such that the contract should be rescinded or reformed under
New York law; (ii) whether the purchase order should be interpreted
consistently with the parties' prior course of dealing in accordance with the
Uniform Commercial Code; and (iii) whether Section 503 of the Bankruptcy Code
limits NYPC's claim to the actual value to the Debtors' Estates.
G. Avoidance Actions In the Chapter 11 Cases
1. General Background
The Bankruptcy Code creates certain "avoidance actions"
which a debtor-in-possession or a trustee may pursue on behalf of the
bankruptcy estate to recover funds transferred prior to and, in certain
circumstances, after the filing of a debtor's bankruptcy petition. Included
among such avoidance actions are "preferences" and "fraudulent conveyances."
Preferences. Pursuant to the Bankruptcy Code, a debtor may
recover (or "avoid") as "preferential" payments of funds and other transfers
of property that were (a) made to or for the benefit of a creditor, (b) made
while the debtor was insolvent, (c) made on account of pre-existing debts and
(d) made during the ninety (90) days immediately prior to the debtor's
bankruptcy filing, but only to the extent such payment or transfer permitted
the recipient to receive more than it would have received if (i) the transfer
had not been made, (ii) the debtor had been liquidated under Chapter 7 of the
Bankruptcy Code and (iii) the transferee was paid in accordance with
applicable bankruptcy law. The ninety (90) day recovery period is extended to
one year if the recipient of the preferential transfer is an "insider" of the
debtor.
There are various defenses to preference actions. For
example, transfers made in the ordinary course of the debtor's and the
transferee's businesses, and made in accordance with ordinary business terms,
may not be avoidable. Similarly, a transferee that extended credit subsequent
to its receipt of an otherwise preferential transfer (and prior to the
commencement of the debtor's bankruptcy case) for which the transferee was not
repaid, is entitled to an offset/credit against an otherwise avoidable
preference for the amount of such new value provided.
Fraudulent Conveyances. Under Sections 548 and 544 of the
Bankruptcy Code and under various state laws, a debtor may recover, on a
"fraudulent conveyance" theory, transfers of property made while the debtor
was insolvent or which rendered the debtor insolvent if and to the extent the
debtor received less than reasonably equivalent value for such transfer. A
debtor also may be able to recover, as a fraudulent conveyance, transfers made
with the actual intent to hinder, delay or defraud creditors.
2. Description of Avoidance Actions During Chapter 11 Cases
In accordance with their duties as debtors-in-possession,
the Debtors undertook a review to determine the extent to which avoidance
actions existed on behalf of their estates. The Debtors shared the results of
their review with the Committees and the Future Claimants' Representative and
discussed with them what avoidance actions should be commenced. The Debtors,
the Committees and the Future Claimants' Representative generally agreed that
the Debtors would (a) pursue actions against non-key vendors that received
potential preferential transfers in the aggregate amount of $200,000 or more,
to the extent tolling agreements could not be obtained, (b) obtain tolling
agreements with each of their outside professionals that received potentially
preferential payments exceeding $200,000, and (c) obtain tolling agreements
from each of their present and former officers who received more than $200,000
of so-called "CIP" and/or "OSIP" incentive payments in September 2000. With
the exception of three non-key vendors, the Debtors obtained each of the
referenced tolling agreements. The Debtors commenced preference actions
against the three vendors that did not execute tolling agreements, as
described below.
An intercompany tolling agreement was also executed between
and among each of the Debtors and their Non-Debtor Subsidiaries. Such tolling
agreement expires on December 31, 2003.
Because not all parties agreed as to which actions should be
brought or which party should bring certain avoidance actions, the Unsecured
Creditors' Committee, the Future Claimants' Representative and the Bondholders
and trade creditor members of the Unsecured Creditors' Committee (the
"Designated Members") filed motions to prosecute certain avoidance actions
(the "Avoidance Actions") on behalf of the Debtors' estates.
(a) The Future Claimants' Representative's Motion
On September 6, 2002, the Future Claimants'
Representative filed a motion (the "Future Claimants' Motion") for an order
authorizing the Future Claimants' Representative (either alone or in
combination with the other creditor constituencies) to commence certain
avoidance actions on behalf of the Debtors' Estates under Sections 544, 545,
547, 548 and/or 553 of the Bankruptcy Code. The Future Claimants'
Representative sought to bring avoidance actions against, among other parties,
certain (i) trade vendors and outside professionals retained by the Debtors,
and (ii) law firms holding NSP-related funds pursuant to the NSP Agreements.
(b) The Unsecured Creditors' Committee Motion
On September 10, 2002, the Unsecured Creditors'
Committee filed a motion (the "Unsecured Committee Motion") for an order
authorizing it to commence the following avoidance actions on behalf of the
Debtors' Estates:
(i) an action under Sections 547 and 550 of the
Bankruptcy Code seeking the return of approximately $115 million in
preferential transfers made to NSP claimants and their law firms during the 90
days prior to the Petition Date;
(ii) an action under Sections 547 and 550 of the
Bankruptcy Code seeking the return of approximately $290 million in
preferential transfers made to NSP executive committee members and the NSP
claimants represented by those members between approximately March 2000 and
the Petition Date;
(iii) an action under Sections 547 and 550 of the
Bankruptcy Code seeking the return of payments made to the Debtors' officers
and directors within one year prior to the Petition Date (which included
mid-year bonuses based on performance during the first six months of 2000);
(iv) an action under Sections 548, 544 and 550 of
the Bankruptcy Code seeking the return of approximately $700 million in cash
transferred by OCD and/or Fibreboard into the accounts of certain law firms
participating in the NSP; and
(v) an action under Sections 548, 544 and 550 of
the Bankruptcy Code seeking to avoid obligations incurred, and the return of
funds transferred, by OCD pursuant to some or all NSP Agreements which OCD
entered into after January 1, 2000 and agreements entered into earlier but
allegedly converted or accelerated as a result of OCD's financial
difficulties.
On September 17, 2002, the Unsecured Creditors'
Committee filed a joinder and response to the Future Claimants' Motion,
seeking authority to prosecute the claims identified in the Future Claimants'
Motion, either with the Future Claimants' Representative, or independently, if
the Future Claimants' Representative did not prosecute the claims.
The Debtors filed a response to the Unsecured
Committee Motion, in which the Debtors asked the Bankruptcy Court to deny the
motion on several grounds. Among other things, the Debtors stated that they
were actively pursuing tolling agreements with the NSP firms specified in the
Unsecured Committee Motion and, if the Debtors were able to obtain tolling
agreements, the Unsecured Committee Motion would be largely mooted. Further,
the Debtors requested that the Unsecured Committee Motion be denied on
substantive grounds because the Unsecured Creditors' Committee had not met its
burden of establishing that the claims it sought to assert were colorable.
Waters & Kraus LLP ("W&K") also filed a response in
opposition to the Unsecured Committee Motion in which it asserted, among other
things, that (i) it had received funds pursuant to its NSP Agreement from the
Fibreboard Insurance Settlement Trust, and not from OCD, Fibreboard or any
other Debtor; (ii) it did not receive property of the Estate of any Debtor;
(iii) the Unsecured Committee Motion seeking to recover funds remitted to the
asbestos claimants from the Fibreboard Insurance Settlement Trust constituted
a collateral attack on the Fibreboard Insurance Settlement Trust; and (4) W&K
was neither a creditor of any of the Debtors' Estates nor of clients of W&K at
the time the funds were received from the Fibreboard Insurance Settlement
Trust, contrary to the requirements of Section 547 of the Bankruptcy Code.
(c) The Designated Members' Motion
On September 11, 2002, the Designated Members filed
a motion for an order authorizing them to commence the following avoidance
actions on behalf of the Debtors' Estates in addition to the actions sought to
be asserted by the Unsecured Committee's Motion:
(i) a fraudulent conveyance action pursuant to
Section 544 of the Bankruptcy Code to avoid and set aside OCD's acquisition of
Fibreboard's capital stock and related transactions. The Designated Members
sought recovery of the property transferred or the value of such property for
the benefit of the Debtors' estates and for creditors, as well as other
relief, including realignment of the allocation of the purported asbestos
liabilities of the Debtors as between Fibreboard and its pre-acquisition
affiliates, on the one hand, and the rest of the Debtors, on the other;
(ii) a fraudulent conveyance action pursuant to
Section 544 of the Bankruptcy Code to avoid and set aside the claims of the
Bank Holders against the Debtors and their Non-Debtor Subsidiaries under
Subsidiary Guarantees supporting the Pre-petition loans made by the Bank
Holders to certain of the Debtors or, alternatively, to equitably subordinate
such claims; and
(iii) a fraudulent conveyance action pursuant to
Sections 544 and 548 of the Bankruptcy Code to avoid dividends paid to the
Debtors' shareholders between 1996 and 2000, and to recover such dividends for
the Debtors' Estates.
(d) Subsequent Developments Relating to Motions Concerning
Avoidance Actions
On September 20, 2002, several days before the
hearing on the above-described motions and the expiration of the statute of
limitations, the United States Court of Appeals for the Third Circuit (in
Official Comm. v. Chinery (In re Cybergenics Corp.), 304 F.3d 316 (3d Cir.
2002) reh'g en banc granted, op. vacated, 810 F.3d 785 (3d Cir. 2002)
determined that official creditors' committees in Chapter 11 cases cannot
properly bring avoidance actions on behalf of a debtor and that such actions
can only be prosecuted by a debtor-in-possession or trustee (the "Cybergenics
Decision"). The Third Circuit granted an en banc hearing on this issue on
November 18, 2002, and vacated the Cybergenics Decision.
At a hearing held on September 24, 2002, the
Bankruptcy Court, in accordance with the Cybergenics Decision, denied the
motions of the Future Claimants' Representative, the Unsecured Creditors'
Committee and the Designated Members to assert avoidance actions on behalf of
the Debtors' Estates. By Order dated September 25, 2002, the Bankruptcy Court
ordered that the Debtors file by September 27, 2002 a statement as to which
Avoidance Actions they would not commence. It was further ordered that the
Unsecured Creditors' Committee and any other interested party inform the
Bankruptcy Court on October 1, 2002, based on the Debtors' September 27th
statement: (i) whether it believed that the Debtors were unreasonably refusing
to pursue any cause of action; and (ii) whether, as a result, such party
sought the appointment of a trustee with special powers to bring any such
avoidance action on behalf of the Estates.
The Court's September 25, 2002 Order also provided
that, in the event any party believed the Debtors were unreasonably refusing
to commence any Avoidance Action, a hearing would be held on October 3, 2002
to consider whether a "special trustee" should be appointed to commence such
action on behalf of the Estates. The Bankruptcy Court noted that it would not
permit actions to be filed to recover settlement payments made to individual
asbestos claimants on any legal theory. The Bankruptcy Court also required the
Debtors to obtain any tolling agreements by noon on October 3, 2002.
In accordance with the Bankruptcy Court's September
25, 2002 Order, the Debtors sent a letter to the Bankruptcy Court on September
27, 2002 which set forth their view that the alleged Avoidance Actions
identified by the Unsecured Creditors' Committee should not be brought. Such
letter concluded that, if the Bankruptcy Court were to find that the Unsecured
Creditors' Committee's proposed Avoidance Actions stated a colorable claim as
to particular NSP payments, the Debtors would file actions against named NSP
firms that did not sign a tolling agreement.
By Order dated October 2, 2002, the Bankruptcy
Court (i) directed the Debtors to obtain valid and enforceable tolling
agreements from certain specified law firms, (ii) directed the Debtors to
commence an avoidance action against any NSP law firm that had not executed a
tolling agreement, (iii) directed the Debtors to commence appropriate actions
against any asbestos plaintiff as to whom an NSP law firm failed to produce,
prior to the payments, sufficient evidence that the plaintiff had satisfied
the conditions precedent to the payment, unless a tolling agreement had been
obtained, and (iv) canceled the hearing scheduled for October 3, 2002.
3. Commencement of Avoidance Actions
(a) Dividend Action
On October 2, 2002, OC filed a class action
complaint with the Bankruptcy Court pursuant to Sections 105, 544, 548 and 550
of the Bankruptcy Code, Sections 2201(a) and 2202 of Title 28 of the United
States Code and Bankruptcy Rules 7001 and 7023, against certain shareholders
of OCD common stock who each had received at least $100,000 in total dividends
from June 1996 through the Petition Date, seeking the return of up to
approximately $62 million. OC's complaint sought (i) a determination that the
dividend payments constituted fraudulent transfers pursuant to bankruptcy and
state law and were therefore voidable and (ii) the recovery of such transfers,
or the value thereof, together with interest.
(b) Bank of America Action
On October 2, 2002, the Debtors filed a complaint
against Bank of America Corp. with the Bankruptcy Court pursuant to Sections
105, 544 and 550 of the Bankruptcy Code, Sections 2201(a) and 2202 of Title 28
of the United States Code and Federal Rule of Bankruptcy Procedure 7001
seeking (i) a determination that the repayment of approximately $133 million
to Bank of America Corp. relating to the acquisition of Fibreboard was a
fraudulent transfer and was therefore voidable and (ii) recovery of such
transfer or the value thereof, with interest.
(c) Guarantee/Bank Holders Action
On October 3, 2002, the Debtors and certain
Non-Debtors filed a complaint against the Bank Holders with the Bankruptcy
Court entitled Owens Corning, et al. v. Credit Suisse First Boston, et al.,
A-02-5829, (i) to avoid the fraudulent incurrence of the obligations under the
Subsidiary Guarantees; (ii) in the alternative, for declaratory relief to
limit and determine respective amounts of such obligations; (iii) to avoid and
recover preferential transfers; and (iv) to determine the allowed amount of
claims of the Pre-petition Agent and certain lenders party to the 1997 Credit
Agreement. The plaintiffs argued that, given the opinion in Official Committee
of Asbestos Personal Injury Claimants v. Sealed Air Corporation (In re: W.R.
Grace & Co.), 281 B.R. 852 (D. Del. 2002), and the latency periods inherent in
the continuing development of asbestos-related personal injuries, the entities
subject to such asbestos-related claims may have been insolvent far earlier
than previously understood and earlier than the entities themselves reasonably
believed. The plaintiffs accordingly asserted, among other things, that (i)
the Subsidiary Guarantors were insolvent or became insolvent and/or had
unreasonably small capital in relation to their business or the transaction at
the time or as a result of the guaranteed obligations incurred within a year
of the Petition Date; (ii) within a year before the Petition Date, each
Subsidiary Guarantor incurred guaranteed obligations for which they received
less than reasonably equivalent value; and (iii) the obligations at issue
could be avoided under applicable state law, including the Uniform Fraudulent
Conveyance Act and the Uniform Fraudulent Transfer Act. In addition, the
Debtors sought avoidance and recovery of transfers of certain payments made by
OC during the 90-day period prior to the Petition Date to the Pre-petition
Agent as "preferences" under Sections 547 and 550 of the Bankruptcy Code.
(d) Fibreboard Shareholders Action
On October 3, 2002, OCD and Fibreboard filed a
class action complaint with the Bankruptcy Court seeking a determination that
the tender offer and payment by OCD of up to approximately $515 million to
Fibreboard's shareholders, through its wholly-owned subsidiary Sierra
Corporation, for the acquisition of Fibreboard were fraudulent transfers
pursuant to Section 544 of the Bankruptcy Code and applicable state law and
seeking recovery of payments to those shareholders who received $198,000 or
more. OCD and Fibreboard sought to recover these transfers or their value
pursuant to Section 550 of the Bankruptcy Code. In applying the rationale set
out in the Grace decision discussed above, OCD and Fibreboard asserted that
OCD and Sierra Corporation were insolvent at the time of, or were rendered
insolvent by, and/or had unreasonably small assets or capital in relation to
their business or the transaction at the time or as a result of the tender
offer or payment for the acquisition of Fibreboard, and Fibreboard was also
insolvent at that time. OCD and Fibreboard accordingly asserted that the
tender offer and payments at issue were voidable as fraudulent transfers by
OCD and should be avoided pursuant to Section 544 of the Bankruptcy Code and
applicable law, including the Uniform Fraudulent Conveyance Act and the
Uniform Fraudulent Transfer Act.
(e) NSP Actions and Tolling Agreements
The Debtors executed tolling agreements with
approximately 104 of the approximately 115 law firms that entered into NSP or
non-NSP Agreements with the Debtors on behalf of claimants asserting
asbestos-related personal injury or wrongful death claims.
With respect to those law firms that did not sign
tolling agreements, on October 4, 2002, OCD, Fibreboard and Integrex filed 11
complaints with the Bankruptcy Court, pursuant to Sections 544, 548 and 550 of
the Bankruptcy Code, Sections 2201(a) and 2202 of Title 28 of the United
States Code and Federal Rule of Bankruptcy Procedure 7001. These complaints
sought declaratory relief determining, among other things, whether (i) the NSP
Agreement with each respective defendant was a valid agreement enforceable in
accordance with its terms, subject to applicable bankruptcy law; and (ii) the
NSP payments made to each respective defendant were avoidable or recoverable
as fraudulent transfers under applicable state and federal fraudulent
conveyance law.
These complaints were filed as declaratory judgment
actions in order to preserve certain allegations asserted by the Unsecured
Creditors' Committee, which do not reflect the views of the Debtors. In light
of the Cybergenics Decision, the Unsecured Creditors' Committee was named as a
defendant in each of these actions in order to make it a party to permit it to
present its own position on the allegations. In the event that the Bankruptcy
Court determines that the NSP payments made to each respective defendant are
avoidable or recoverable as fraudulent transfers under applicable state and
federal fraudulent conveyance law, one or more claims will exist against each
defendant to avoid and recover some or all of the NSP-related payments at
issue.
(f) Third-Party Preference Actions
The Debtors identified (i) approximately 44
non-affiliated parties that received potential preferences under Section 547
of the Bankruptcy Code, exceeding a threshold amount of $200,000; (ii) 12
present and former officers that received certain incentive payments exceeding
a threshold of $200,000 in the aggregate per officer, in September 2000; (iii)
one director that received a pre-petition pension payment in September 2000;
and (iv) a joint venture affiliate of OC that received approximately $3.8
million in the one-year period prior to the commencement of the Chapter 11
proceedings. The Debtors executed tolling agreements with approximately 54 of
the parties mentioned above, including some present and former officers, the
director and the affiliate of OC. The officers and directors who executed
tolling agreements each received amounts in excess of $200,000 in supplemental
compensation within 90 days of the Petition Date; the Unsecured Creditors'
Committee has alleged that such payments are either preferences or fraudulent
conveyances.
Between September 30, 2002 and October 2, 2002, the
Debtors commenced actions against three vendors who had not executed tolling
agreements, seeking the return of potential preferential funds received by
those parties in an amount totaling approximately $1.2 million.
(g) Turnover Action
On October 2, 2002, the Debtors commenced an action
against The Northern Trust Company, seeking the turnover of approximately
$65,400 that was improperly subjected to an administrative freeze imposed by
the bank in October 2000.
4. Events Subsequent to Filing of Avoidance Actions
On October 16, 2002, the Debtors filed in each of the
Avoidance Actions discussed above a Motion for Order Staying Adversary Actions
Pending Introduction and Confirmation of Plan of Reorganization (the "Stay
Motion"). In the Stay Motion, the Debtors asserted that staying the Avoidance
Actions would (a) permit the Debtors and creditor constituencies to focus
attention and resources on creating a consensual plan of reorganization, (b)
allow the creditor constituencies to participate in the decision regarding
whether and to what extent these claims are litigated and (c) maximize the
efficient use of judicial and Debtor resources. Certain parties filed
objections to the Stay Motion, including, among others, the Designated
Members, and CSFB, as agent for the Bank Holders.
On January 13, 2003, the Bankruptcy Court entered an order
which stayed the Avoidance Actions until January 27, 2003 (with the exception
of service of process). By a supplemental order of the Bankruptcy Court, dated
January 27, 2003, the stay of the Avoidance Actions was further extended until
April 28, 2003 (with the exception of service of process), on which date the
Court indicated that it would consider further extensions of the stay, if
appropriate. No party is required to answer, plead or otherwise respond to any
complaint or counterclaim filed in any of the Avoidance Actions, or respond to
any outstanding motions, pleadings and/or discovery requests, or take any
other action in connection with the Avoidance Actions until May 30, 2003.
Despite the foregoing orders of the Bankruptcy Court staying the Avoidance
Actions, certain defendants have answered or otherwise responded to particular
Avoidance Actions.
(a) The Guarantee/Bank Holders Action
On November 7, 2002, the Designated Members filed a
cross-motion to intervene in the Bank Holders Action, to which CSFB, as agent,
filed an objection.
Pursuant to Judge Wolin's Case Management Order,
dated December 23, 2002, the reference was withdrawn with respect to the Bank
Holders Action. In accordance with the terms of the order, on December 31,
2002, the Designated Members filed an amended motion to intervene and a
proposed complaint, which was amended on January 10, 2003. The Debtors and
certain non-Debtors filed a partial opposition to the amended motion to
intervene. Also on December 31, 2002, the Future Claimants' Representative and
the Asbestos Claimants' Committee filed motions to intervene. On January 10,
2003, CSFB, as agent, filed a motion to dismiss the Bank Holders Action, an
objection to the Designated Members' amended motion to intervene and a
memorandum of law. The Debtors filed a memorandum of law in opposition to
CSFB's motion to dismiss on January 16, 2003.
At the request of the Debtors and in an effort to
limit the number of issues to be presented at trial, on January 20, 2003, the
Future Claimants' Representative filed a notice of withdrawal of certain
counts of its complaint in intervention, but reserved the right to pursue such
claims in the future.
The parties are concurrently performing discovery
with respect to both the Bank Holders Action and the Substantive Consolidation
Motion. The hearing on the Substantive Consolidation Motion is to commence on
April 8, 2003 and the hearing in the Bank Holders Action is scheduled to
commence June 15, 2003.
VI. Future Business of the Reorganized Debtors
A. Structure and Business of the Reorganized Debtors
Following the Effective Date, the Reorganized Debtors intend to
continue to operate their businesses as they have been operated to date, with
the exception of such reorganization, divestitures and other restructurings as
may be contemplated by the Plan. In addition, the Reorganized Debtors reserve
the right, subject to such approvals of their respective boards of directors or
shareholders as shall be required by law, to entertain and implement such
opportunities for acquisitions, divestitures, restructuring or other internal
reorganizations as shall be deemed appropriate under the circumstances. In that
regard, OC intends to implement a restructuring plan which would reorganize OCD
and its Subsidiaries along OC's major business lines. The planning for this
restructuring is in a preliminary stage. It is anticipated that the
restructuring plan which is adopted will be announced prior to the Disclosure
Statement Hearing and will be described in an amendment to the Plan.
B. Board of Directors and Management of Reorganized Debtors
At March 28, 2003, OCD's Board of Directors was composed of twelve
directors, divided into three classes. Each class of directors serves for a
term expiring at the third succeeding annual meeting of stockholders after the
year of election of such class, and until their successors are elected and
qualified. As of March 28, 2003, OCD has not scheduled an annual meeting of
stockholders for 2003 or any subsequent period.
1. Composition of the Board of Directors as of Date of
Disclosure Statement
The following is a list, as of March 28, 2003, of the names
of each of the Directors of OCD [the date, list and biographies contained in
this section will be revised up to five (5) Business Days prior to the
Disclosure Statement Hearing and thereafter, with the permission of the
Bankruptcy Court].
Name Title
Norman P. Blake, Jr. Director
David T. Brown Director, President and Chief Executive
Officer
Gaston Caperton Director
Leonard S. Coleman, Jr. Director
William W. Colville Director
Landon Hilliard Director
Ann Iverson Director
W. Walker Lewis Director
Furman C. Moseley, Jr. Director
W. Ann Reynolds Director
Maura Abeln Smith Director, Senior Vice President
Michael H. Thaman Director, Chairman of the Board and Chief
Financial Officer
Norman P. Blake, Jr. has been a Director since 1992. He is
former Chairman, President and Chief Executive Officer of Comdisco, Inc.,
global technology services, Rosemont, IL. A graduate of Purdue University, Mr.
Blake previously has served as Chief Executive Officer of the United States
Olympic Committee; Chairman, Chief Executive Officer and President of Promus
Hotel Corporation; Chairman, Chief Executive Officer and President of USF&G
Corporation; and Chairman and Chief Executive Officer of Heller International
Corporation of Chicago. Mr. Blake is a member of the Purdue Research
Foundation and Purdue University's President's Council and Dean's Advisory
Council, Krannert Graduate School of Management. He is the recipient of the
degree of Doctor of Economics honoris causa from Purdue University, granted
jointly by the Krannert Graduate School of Management and School of Liberal
Arts. He has also been awarded The Ellis Island Medal of Honor.
David T. Brown has been a Director since January, 2002, and,
since April 18, 2002, has been President and Chief Executive Officer of OCD. A
graduate of Purdue University, Mr. Brown became Executive Vice President and
Chief Operating Officer in January 2001. Previously, he held numerous
leadership positions in sales and marketing at OC, including serving as
President of the Insulating Systems Business beginning in 1998, President of
Building Materials Sales and Distribution beginning in 1996, and President of
the Roofing and Asphalt Business beginning in 1994. Mr. Brown joined OC in
1978 after working for Procter & Gamble, Shearson Hammill and Eli Lilly. Mr.
Brown is a past board member of Asphalt Roofing Manufacturers Association
Executive Committee, National Roofing Contractors Association Advisory Board,
Thermal Insulation Manufacturers Association and Executive Committee of the
North American Insulation Manufacturers Association.
Gaston Caperton has been a Director since 1997. He is
President and Chief Executive Officer of The College Board, a not-for-profit
educational association, New York, NY, Chairman of The Caperton Group, a
business investment and development company, Shepherdstown, WV and former
Governor of the State of West Virginia. A graduate of the University of North
Carolina, Mr. Caperton began his career in a small insurance agency, became
its principal owner and chief operating officer, and led the firm to become
the tenth largest privately-owned insurance brokerage firm in the U.S. He also
has owned a bank and mortgage banking company. Mr. Caperton was elected
Governor of West Virginia in 1988 and 1992. In 1997, Mr. Caperton taught at
Harvard University as a fellow at the John F. Kennedy Institute of Politics.
Prior to beginning his current position in mid-1999, Mr. Caperton also taught
at Columbia University, where he served as Director of the Institute on
Education and Government at Teachers College. Mr. Caperton is a director of
United Bankshares, Inc., Energy Corporation of America, West Virginia Media
Holdings, and Benedum Foundation. He was the 1996 Chair of the Democratic
Governors' Association, and served on the National Governors' Association
executive committee and as a member of the Intergovernmental Policy Advisory
Committee on U.S. Trade. He also was Chairman of the Appalachian Regional
Commission, Southern Regional Education Board, and the Southern Growth Policy
Board.
Leonard S. Coleman, Jr. has been a Director since 1996. He
is Senior Advisor to Major League Baseball, professional sports, New York, NY.
A graduate of Princeton and Harvard Universities, Mr. Coleman became President
of The National League of Professional Baseball Clubs in 1994 after serving as
Executive Director, Market Development of Major League Baseball. He assumed
his current position with Major League Baseball in 1999. Mr. Coleman is a
director of H. J. Heinz Company, the Omnicom Group, New Jersey Resources,
Cendant Corporation, Electronic Arts Inc., Aramark Corporation, and Churchill
Downs Incorporated. He also serves as a director of The Metropolitan Opera,
The Schumann Fund, The Jackie Robinson Foundation and The Children's Defense
Fund.
William W. Colville has been a Director since 1995. He is
now retired and was a former Senior Vice President, General Counsel and
Secretary. A graduate of Yale University and the Columbia University Law
School, Mr. Colville began his career at OC in 1984 as Senior Vice President
and General Counsel. Prior to joining OC, he was President of the Sohio
Processed Minerals Group from 1982 to 1984, and General Counsel of Kennecott
Corporation from 1980 to 1982. Mr. Colville is a director of Nordson
Corporation.
Landon Hilliard has been a Director since 1989. He is a
partner with Brown Brothers Harriman & Co., private bankers, New York, NY. A
graduate of the University of Virginia, Mr. Hilliard began his career at
Morgan Guaranty Trust Company of New York. He joined Brown Brothers Harriman
in 1974 and became a partner in 1979. Mr. Hilliard is a director of Norfolk
Southern Corporation and Western World Insurance Company. He is also Chairman
of the Board of Trustees of the Provident Loan Society of New York and
Secretary of The Economic Club of New York.
Ann Iverson has been a Director since 1996. She is Chairman
of Brooks Sports, Inc., athletic footwear and apparel, Bothell, WA and
President and Chief Executive Officer of International Link, an international
consulting firm, Scottsdale, AZ. Ms. Iverson began her career in retailing and
held various buying and executive positions at retail stores in the U.S.
through 1989, including Bloomingdales, Dayton Hudson, and US Shoe. She then
joined British Home Stores as Director of Merchandising and Operations in
1990; Mothercare as Chief Executive Officer in 1992; Kay-Bee Toy Stores as
President and Chief Executive Officer in 1994; and Laura Ashley Holdings plc.
as Group Chief Executive in 1995. In 1998, she founded and became President
and Chief Executive Officer of International Link. Ms. Iverson is a director
of Candie's, Inc., as well as several privately-held companies. She is also a
member of the Board of Trustees of the Thurderbird School of International
Management, and a member of Financo Global Consulting.
W. Walker Lewis has been a Director since 1993. He is
Chairman of Devon Value Advisers, a financial consulting and investment
banking firm in Greenwich, CT and New York, NY. Previously, Mr. Lewis served
as Senior Advisor to SBC Warburg Dillon Read; Senior Advisor to Marakon
Associates; and Managing Director, Kidder, Peabody & Co., Inc. Prior to April
1994, he was President of Avon U.S. and Executive Vice President, Avon
Products, Inc. Prior to March 1992, Mr. Lewis was Chairman of Mercer
Management Consulting, Inc., a wholly-owned subsidiary of Marsh & McLennan,
which is the successor to Strategic Planning Associates, a management
consulting firm he founded in 1972. He is a graduate of Harvard College, where
he was President and Publisher of the Harvard Lampoon. Mr. Lewis is Chairman
of London Fog Industries, Inc. and a director of Mrs. Fields' Original
Cookies, Inc. He is also a member of the Council on Foreign Relations, the
Washington Institute of Foreign Affairs, and The Harvard Committee on
University Resources.
Furman C. Moseley, Jr. has been a Director since 1983. He is
Chairman of Sasquatch Books, Inc., publishing, Seattle, WA. Mr. Moseley joined
Simpson Paper Company in 1960 and retired in June 1995 as Chairman of that
company and President of Simpson Investment Company. Mr. Moseley is a director
of Eaton Corporation.
W. Ann Reynolds has been a Director since 1993. She is a
Director of the Center for Community Outreach and Development, and a faculty
member of The University of Alabama at Birmingham, Birmingham, AL. A graduate of
Kansas State Teachers College and the University of Iowa, Dr. Reynolds assumed
her current position in 2002. Previously, she was President of The University of
Alabama at Birmingham for five years, Chancellor of City University of New York
for seven years and for eight years Chancellor of the California State
University system. Dr. Reynolds is a director of Humana, Inc., Abbott
Laboratories and Maytag Corporation. She is also a member of the American
Association for the Advancement of Science, the American Association of
Anatomists, the Society for Gynecological Investigation, and the Perinatal
Research Society.
Maura Abeln Smith has been a Director since January, 2002
and since February 2003, has been Senior Vice President of OCD. Ms. Smith has
been named Senior Vice President and General Counsel of International Paper
Co., a paper and forest products company located in Stamford, CT, effective
March 31, 2003, at which time her employment with OC will terminate. Prior to
February, 2003, Ms. Smith also served Chief Restructuring Officer, General
Counsel and Secretary. A graduate of Vassar College, Oxford University, where
she was a Rhodes Scholar, and the University of Miami School of Law, Ms. Smith
joined OC in 1998. Prior to joining OC, Ms. Smith worked at General Electric,
where she served as Vice President and General Counsel at GE Plastics. Before
her career at General Electric, Ms. Smith was a partner in the international
law firm of Baker & McKenzie.
Michael H. Thaman has been a Director since January 2002 and
is Chairman of the Board and Chief Financial Officer of OCD. A graduate of
Princeton University, Mr. Thaman joined OC in 1992. He was elected Chairman of
the Board in April 2002 and became Chief Financial Officer in 2000. Before
assuming his current position, Mr. Thaman held a variety of leadership
positions at OC, including serving as President of the Exterior Systems
Business beginning in 1999 and President of the Engineered Pipe Systems
Business beginning in 1997. Prior to joining OC, Mr. Thaman spent six years as
a strategy consultant at Mercer Management Consulting, including as a Vice
President in their New York office.
2. Identity of Executive Officers as of Date of Disclosure
Statement
The following is a list, as of March 28, 2003, of the names
of the executive officers of OC and the positions held by each such executive
officer at OC [the date, list and biographies contained in this section will
be revised up to five (5) Business Days prior to the Disclosure Statement
Hearing and thereafter, with the permission of the Bankruptcy Court].
Name Title
- ---- -----
Sheree L. Bargabos Vice President and President, Exterior Systems Business
David T. Brown President and Chief Executive Officer
Charles E. Dana Vice President, Corporate Controller and Global Sourcing
Daniel J. Dietzel Vice President and President, Siding Solutions Business
David L. Johns Senior Vice President and Chief Supply Chain and
Information Technology Officer
George E. Kiemle Vice President and President, Insulating Systems Business
Stephen K. Krull Senior Vice President, General Counsel and Secretary
Richard D. Lantz Vice President and President, Composite Solutions Business
Edward Mirra, Jr. Senior Vice President, Human Resources
Maura Abeln Smith Senior Vice President
Michael H. Thaman Chief Financial Officer
Sheree L. Bargabos has been Vice President and President of
Exterior Systems since August 2002. She was formerly Vice President of
Training and Development, Vice President of the Insulating Systems Business,
Vice President and General Manager of the Foam Business, General Manager of
the Foam Business and Sales Leader of the Building Materials Sales and
Distribution, Canada.
David T. Brown has been President and Chief Executive
Officer of OCD since April 2002. He was formerly Executive Vice President and
Chief Operating Officer and has also formerly served as Vice President and
President of the Insulating Systems Business, President of Building Materials
Sales and Distribution. He has also been a Director since January 2002.
Charles E. Dana has been Vice President of Corporate
Controller and Global Sourcing since January 2002. He was formerly Vice
President of the Global Sourcing and eBusiness, Vice President of Owens
Corning Supply Chain Solutions, Vice President of Global Sourcing Management
and Vice President of Planning and Analysis - Composite Systems.
Daniel J. Dietzel has been Vice President and President of
the Siding Solutions Business since July 2002. He was formerly Vice President
of the Distribution-Exterior Systems Business and President of Norandex
Distribution.
David L. Johns has been Senior Vice President and Chief
Supply Chain and Information Technology Officer since April 2001. He was
formerly Senior Vice President, Chief Technology Officer and Chief Information
Officer.
George E. Kiemle has been Vice President and President of
the Insulating Systems Business since February 2001. He was formerly Vice
President of the Manufacturing, Insulating Systems Business.
Stephen K. Krull became Senior Vice President, General
Counsel and Secretary of OCD on February 6, 2003. He was formerly Vice
President of Corporate Communications, Vice President and General Counsel of
Operations, Director, Law, and Senior Counsel, Law.
Richard D. Lantz has been Vice President and President of
the Composite Solutions Business since November 2001. He was formerly Vice
President and President of the Roofing Solutions Business, Vice President and
President of the Systems Thinking Sales and Distribution Business, Vice
President-Marketing of the Insulation Business.
Edward Mirra, Jr. has been Senior Vice President of Human
Resources since July 2000. He was formerly Vice President of Roofing
Operations and Vice President of Trumbull Asphalt.
Maura Abeln Smith has been Senior Vice President of OCD
since February 2003. She was formerly Senior Vice President, Chief
Restructuring Officer, General Counsel and Secretary. She has also been a
Director of OCD since January 2002.
Michael H. Thaman has been Chairman of the Board and Chief
Financial Officer of OCD since April 2002. He was formerly Senior Vice
President and Chief Financial Officer, Vice President and President of the
Exterior Systems Business and Vice President and President of Engineered Pipe
Systems. He has also been a Director since January 2002.
All of the executive officers referenced above, except Ms.
Bargabos, Mr. Dana, Mr. Dietzel, Mr. Kiemle and Mr. Krull, served as
executive officers of OC at or within two years before the Petition Date. In
addition, all such listed executive officers except Ms. Bargabos and Messrs.
Johns, Lantz and Mirra also served as executive officers of one or more
domestic Subsidiaries at or within two years before the Petition Date.
3. Directors and Officers of Reorganized Debtors as of the
Effective Date
As disclosed in the Plan, on the Effective Date, the initial
Board of Directors of Reorganized OCD will consist of twelve (12) members. The
Asbestos Claimants' Committee and the Future Claimants' Representative will
appoint the majority of the initial Board of Directors, while the existing
Board of Directors will appoint the remaining initial directors. In addition,
the initial Board of Directors will include three individuals who will qualify
under the New York Stock Exchange rules and applicable laws as independent
outside directors and who would be eligible to serve on OCD's audit committee
of the Board of Directors, pursuant to the requirements of the SEC. The
initial Board of Directors will also include at least three individuals who
will qualify as independent directors under Section 162(m) of the IRC and will
be eligible to serve on the committee responsible for executive compensation
(the "Compensation Committee").
Neither the Asbestos Claimants' Committee, the Future
Claimants' Representative or the existing Board of Directors has yet appointed
any of the initial directors. It is expected that David T. Brown, the current
Chief Executive Officer of OC, will be one of the members of the initial Board
of Directors. The identities of the initial Board of Directors will be
disclosed in an amendment to the Plan, through the filing of a supplemental
schedule.
The initial terms of the Reorganized OCD board members and
the procedures for filling any vacancy prior to the expiration of a board
member's term will be set forth in the Amended and Restated Certificate of
Incorporation of Reorganized OCD and the Amended and Restated Bylaws of
Reorganized OCD, as approved in the Confirmation Order.
4. Treatment of Director and Officer Indemnification Under
the Plan
The Plan provides that the Debtors will treat indemnity
obligations under their charters, by-laws, statutes or contracts as executory
contracts that will be assumed by the Debtors. As a result, the Debtors will
be obligated in accordance with the terms of their charters, by-laws, statutes
or contracts to indemnify directors and officers for their services, except
that such indemnification will not cover willful misconduct by any director or
officer. However, the Debtors are not obligated to indemnify any director or
officer from liability arising out of an Avoidance Action or for liability in
connection with the Hancock Litigation.
After the Effective Date, the Debtors will indemnify
directors and officers in accordance with the Amended and Restated Certificate
of Incorporation of Reorganized OCD and the Amended and Restated Bylaws of
Reorganized OCD, substantially in the forms of Exhibit A and Exhibit B to the
Plan, to be filed at least five (5) Business Days prior to the Objection
Deadline, and any employment contracts or other agreements with such directors
and officers providing for indemnification.
5. Compensation of Executive Officers
The following table sets forth information concerning
compensation and stock-based awards received by each individual that served as
Chief Executive Officer during 2002 and each of the next four highest paid
executive officers who were serving as executive officers of the Company at the
end of 2002 (these six individuals collectively are referred to as the "Named
Executive Officers").
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
- ----------------------------------------------------------------- ----------------------- -------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Award(s) Options/ Payouts Compensation
Principal Position4 Year ($) ($) ($)5 ($)6 SARs(#)7 ($) ($) 8
- ------------------- ---- ------ ----- ------------ ---------- ----------- ------- ------------
David T. Brown 2002 647,916 1,713,199 15,300
President and Chief 2001 400,000 1,200,000 483,550
Executive Officer 2000 343,750 425,000 245,275
Michael H. Thaman 2002 584,375 1,380,000 15,300
Chairman of the Board 2001 425,000 1,175,000 517,800
and Chief Financial 2000 362,500 404,500 261,900
Officer
Maura Abeln Smith 2002 550,000 1,330,000 15,300
Senior Vice President 2001 500,000 1,160,000 692,717
2000 497,917 705,000 345,090
David L. Johns 2002 363,125 677,000 10,705
Senior Vice President 2001 350,000 750,000 335,100
and Chief Supply Chain 2000 245,000 286,000 168,100
and Information
Technology Officer
George E. Kiemle 2002 266,667 528,800 15,300
Vice President and 2001 245,000 405,000 216,300
President, Insulating 2000 220,000 140,000 113,400
Systems Business
Glen H. Hiner 2002 303,030 909,090 165,413 81,831
Former Chief Executive 2001 1,000,000 3,000,000 267,036 1,361,976
Officer 2000 1,000,000 2,035,600 207,341 697,451
__________________________
4 Prior to April 2002, Mr. Brown served as Executive Vice President and
Chief Operating Officer; prior to January 2001, he served as Vice
President and President, Insulating Systems Business. Prior to April
2002, Mr. Thaman served as Senior Vice President and Chief Financial
Officer; prior to April 2000, he served as Vice President and
President, Exterior Systems Business. Prior to February 2003, Ms.
Smith also served as Chief Restructuring Officer, General Counsel and
Secretary; she assumed the duties of Chief Restructuring Officer in
November 2000. Prior to April 2001, Mr. Johns served as Senior Vice
President and Chief Technology Officer. Prior to February 2001, Mr.
Kiemle served as Vice President, Manufacturing, Insulating Systems
Business. Mr. Hiner retired as Chairman of the Board and Chief
Executive Officer in April 2002.
5 "Other Annual Compensation" includes perquisites and personal
benefits, where such perquisites and personal benefits exceed the
lesser of $50,000 or 10% of the Named Executive Officer's annual
salary and bonus for the year, as well as certain other items of
compensation. For the years shown, none of the Named Executive
Officers received perquisites and/or personal benefits in excess of
the applicable threshold.
6 There were no restricted stock awards to any of the Named Executive
Officers in 2000, 2001, or 2002.
At the end of 2002, Mr. Brown held a total of 11,350 shares of
restricted stock, valued at $4,767; Mr. Thaman held a total of 10,800
shares of restricted stock, valued at $4,536; Ms. Smith held a total
of 13,566 shares of restricted stock, valued at $5,698; Mr. Johns
held a total of 4,200 shares of restricted stock, valued at $1,764;
Mr. Kiemle held a total of 5,075 shares of restricted stock, valued
at $2,132; and Mr. Hiner held no shares of restricted stock. The
value of these aggregate restricted stock holdings was calculated by
multiplying the number of shares held by the closing price of OCD
common stock on December 31, 2002 (as reported on the Over The
Counter Bulletin Board). Dividends are paid by OC on restricted stock
held by the Named Executive Officers if paid on stock generally.
7 No stock options or stock appreciation rights (SARs) were awarded to
any of the Named Executive Officers in 2000, 2001, or 2002.
8 Of Mr. Hiner's number for 2002, $63,333 represents amounts payable
during 2002 pursuant to a post-retirement Release and Non-Competition
Agreement and $3,198 was the present value (based upon the Applicable
Federal Rate from date of payment to earliest date of repayment to
OC) of split-dollar life insurance premiums paid by OC which were
invested on his behalf in 2002. Upon Mr. Hiner's termination of
employment, OC was reimbursed for all such insurance premiums
previously invested on his behalf.
For the year 2002, except as indicated in the preceding paragraph, the
amount shown for each of the Named Executive Officers represents
contributions made by OC to such officer's account in the Owens
Corning Savings Plan during that year.
6. Compensation/Retirement Plans
(a) Senior Leader Emergence Incentive Plan
The Named Officers participate in the Senior Leader
Emergence Incentive Plan. The Senior Leader Emergence Incentive Plan provides
to each participant who remains employed by OC through the Effective Date a
cash payment equal to the "Emergence Amount" as established by the
Compensation Committee. The Emergence Amount for each Named Officer will be
based on the Effective Date and shall be paid as follows:
- ----------------------------------------------------------------------
Percentage of Emergence Amount
Date of Emergence
- ----------------------------------------------------------------------
December 31, 2001 125%
- ----------------------------------------------------------------------
June 30, 2002 100%
- ----------------------------------------------------------------------
December 31, 2002 90%
- ----------------------------------------------------------------------
June 30, 2003 80%
- ----------------------------------------------------------------------
December 31, 2003 70%
- ----------------------------------------------------------------------
June 30, 2004 60%
- ----------------------------------------------------------------------
December 31, 2004 50%
- ----------------------------------------------------------------------
Thereafter 0%
- -------------------------------------- -------------------------------
Under the Senior Leader Emergence Incentive Plan, no payment
will be made to any participant if the Debtors do not emerge from Chapter 11
by December 31, 2004. The Senior Leader Emergence Incentive Plan also provides
for a pro rata payment upon a termination of a Named Officer's employment with
OC after January 1, 2002 and before the Effective Date if the employment is
terminated: (i) by OC other than for "cause," (ii) by reason of death or
disability, or (iii) by reason of retirement at OC's request or with the
consent of the chief executive officer of OC (or, in the case of the chief
executive officer, with the consent of the Compensation Committee).
(b) Retirement Benefits
OC maintains a tax-qualified Cash Balance Plan
covering certain of its salaried and hourly employees in the United States,
including each of the Named Officers, in lieu of the qualified Salaried
Employees' Retirement Plan maintained prior to 1996 ("Prior Plan"), which
provided retirement benefits primarily on the basis of age at retirement,
years of service and average earnings from the highest three consecutive years
of service. In addition, OC has a non-qualified Executive Supplemental Benefit
Plan ("ESBP") to pay eligible employees leaving OC the difference between
the benefits payable under OC's tax-qualified retirement plan and those
benefits which would have been payable except for limitations imposed by the
Internal Revenue Code. Named Officers are eligible to participate in both the
Cash Balance Plan and the ESBP.
Cash Balance Plan - Under the Cash Balance Plan,
each covered employee's earned retirement benefit under the Prior Plan
(including the ESBP) was converted to an opening cash balance. Each year,
eligible employees earn a benefit based on a percentage of such employee's
covered pay. During 2002, the percentage was 2% for covered pay up to 50% of
the Social Security Taxable Wage Base and 4% for covered pay in excess of such
wage base; subject to, and effective upon, Internal Revenue Service approval,
the percentage will be 4% for all subsequent covered pay. For this purpose,
covered pay includes base pay, overtime pay, other wage premium pay and annual
incentive bonuses payable during the year. Accrued benefits earn monthly
interest based on the average interest rate for five-year U.S. treasury
securities. Employees may receive benefit under the Cash Balance Plan as a
lump sum or as a monthly payment when they leave OC.
For employees who were at least age 40 with 10
years of service as of December 31, 1995 ("Grandfathered Employees"),
including Messrs. Brown and Kiemle, the credit percentages applied to covered
pay are increased pursuant to a formula based on age and years of service on
such date. In addition, Grandfathered Employees are entitled to receive the
greater of their benefit under the Prior Plan frozen as of December 31, 2000,
or under the Cash Balance Plan (in each case including the ESBP).
Supplemental Executive Retirement Plan - OC
maintains a Supplemental Executive Retirement Plan ("SERP") covering certain
employees. The SERP provides for a lump sum payment following termination of
employment equal to a multiple of the covered employee's Cash Balance Plan
balance minus an offset equal to the present value of retirement benefits
attributable to prior employment. The applicable multiplier for each covered
employee ranges from 0 to 4 (determined by the covered employee's age when
first employed by OC).
In 1992, OC established a Pension Preservation
Trust for amounts payable under the ESBP as well as under the individual
pension arrangements described above. Each year, the Compensation Committee
determines the participants in and any amounts to be paid with respect to the
Pension Preservation Trust, which may include a portion of benefits earned
under the ESBP and the pension agreements described above. Amounts paid into
the Trust and income from the Trust reduce the pension otherwise payable at
retirement. During 2002, no payments were made to the Trust.
The Compensation Committee continually reviews the
nature of compensation and incentive plans available to officers and key
employees and suggests revisions from time to time as it deems appropriate to
reflect current trends in compensation programs and the needs of OC. To the
extent that any changes in compensation programs are approved and proposed to
be implemented, they will be described in an amendment to this Disclosure
Statement.
7. Management Employment and Severance Agreements
OC has entered into a Key Management Severance Agreement
with each of the Named Officers (the "Severance Agreement"). Under the terms
of the Severance Agreement, if the Named Officer's employment is terminated
without "cause" or if the Named Officer terminates his or her employment due
to "Constructive Termination" (which among other things, following the
occurrence of a "change of control", includes a reduction in base pay or
incentive opportunity) the Named Officer is entitled to a payment in an amount
equal to two times the sum of base salary and annual incentive compensation,
plus continuation of insurance benefits for a period of up to two years and,
in the case of Messrs. Brown and Thaman, a payment equal to the additional
lump sum pension benefit that would have accrued had such individuals been
three years older, with three additional years of service, at the time of
employment termination. Under the terms of the Severance Agreement, the
consummation of the Plan on the Effective Date will constitute a "change of
control" for purposes of the Severance Agreement.
8. Directors' Compensation
Retainer and Meeting Fees - In 2002, OC paid each director
who was not an OC employee an annual retainer of $35,000. Non-employee
Committee Chairmen receive an additional retainer of $4,000 each year. In
addition, OC paid non-employee directors a fee of $1,200 for (a) attendance at
one or more meetings of the Board of Directors on the same day, (b) attendance
at one or more meetings of each Committee of the Board of Directors on the
same day, and (c) for each day's attendance at other functions in which
directors were requested to participate.
Prior to December 2000, a director could elect to defer all
or a portion of his or her annual retainer and meeting fees under the
Directors' Deferred Compensation Plan, in which case his or her account was
credited with the number of shares of common stock that such deferred
compensation could have purchased on the date of payment. The account was also
credited with the number of shares that dividends on previously credited
shares could have purchased on dividend payment dates. Account balances are
payable in cash based on the value of the account, which is determined by the
then fair market value of OC common stock, at the time the participant ceases
to be a director.
Stock Plan for Directors - OC maintains a stockholder
approved Stock Plan for Directors, applicable to each director who is not an
OC employee. The plan provides for two types of grants to each eligible
director: (1) a one-time non-recurring grant of options to each new outside
director to acquire 10,000 shares of common stock at a per share exercise
price of 100 percent of the value of a share of common stock on the date of
grant, and (2) an annual grant of 500 shares of common stock on the fourth
Friday in April.
Initial option grants become exercisable in equal
installments over five years from date of grant, subject to acceleration in
certain events, and generally expire ten years from date of grant. No grant
may be made under the plan after August 20, 2007, and a director may not
receive an annual grant of common stock in the same calendar year he or she
receives an initial option grant. A director entitled to receive an annual
grant may elect to defer receipt of the common stock until he or she leaves
the Board of Directors.
No initial option grants or annual grants were made under
the Plan during 2002. Pursuant to action of the Board of Directors, additional
option grants and annual grants under the Plan were suspended effective April
1, 2002, pending further action by the Board.
C. Projected Financial Information
1. Responsibility For and Purpose of the Financial Projections
Appendix B to this Disclosure Statement sets forth certain
financial information with respect to the projected future operations of OC
("Financial Projections"). As a condition to confirmation of a plan, the
Bankruptcy Code requires, among other things, that the bankruptcy court
determine that the plan is "feasible" (i.e., that confirmation is not likely
to be followed by a liquidation or the need for further financial
reorganization of the debtor) as set forth in Section 1129(a)(11) of the
Bankruptcy Code. In connection with the development of the Plan, and for
purposes of determining whether the Plan satisfies feasibility standards, OC's
management has, through the development of financial projections, analyzed the
ability of OC to meet its obligations under the Plan to maintain sufficient
liquidity and capital resources to conduct its business. The Financial
Projections were also prepared to assist each holder of a claim entitled to
vote under the Plan in determining whether to accept or reject the Plan.
The Financial Projections indicate that the Reorganized
Debtors should have sufficient cash flow to (a) make the payments required under
the Plan, (b) repay and service debt obligations, and (c) maintain operations
on a going-forward basis. Accordingly, the Debtors believe that the Plan
complies with Section 1129(a)(11) of the Bankruptcy Code. The Financial
Projections should be read in conjunction with the assumptions, qualifications
and footnotes to tables containing the projections set forth herein, the
historical consolidated financial information (including the notes and
schedules thereto) and the other information set forth in OC's Annual Report
on Form 10-K for the year ended December 31, 2002 which is attached to this
Disclosure Statement as Appendix D, [This document will be inserted shortly
after it is filed with the SEC], as well as OC's Annual Report on Form 10-K
for the year ended December 31, 2001, and OC's Annual Report on Form 10-K for
the year ended December 31, 2000, copies of which may be obtained, free of
charge, through OC's website at www.owenscorning.com. The Financial
Projections were prepared in good faith based upon assumptions believed to be
reasonable and applied in a manner consistent with past practice. The
Financial Projections are based on assumptions as of ____________. [This date
will be inserted when the Financial Projection are completed and inserted into
this Disclosure Statement.]
The Financial Projections were not prepared with a view
towards complying with the guidelines for prospective financial statements
published by the American Institute of Certified Public Accountants, but to
comply with the disclosure requirement of Section 1125(a) of the Bankruptcy
Code. Neither the Debtors' independent auditors, nor any other independent
accountants, have compiled or examined the accompanying prospective financial
information to determine the reasonableness thereof and, accordingly, have not
expressed an opinion or any other form of assurance with respect thereto.
The accompanying prospective financial information was in
the view of the Debtors' management, was prepared on a reasonable basis,
reflects the best available estimates and judgments at the time made, and
presents, to the best of management's knowledge and belief, the expected
course of action and the respective expected future financial performance of
OC. However, this information is not fact and should not be relied upon as
being necessarily indicative of future results, and readers of this Disclosure
Statement are cautioned not to place undue reliance on the Financial
Projections. Accordingly, the Debtors do not intend, and disclaim any
obligation, to (a) furnish updated projections to holders of Claims or
Interests prior to the Effective Date or to any party after the Effective
Date, (b) include such updated information in any documents that may be
required to be filed with the SEC, or (c) otherwise make such updated
information publicly available. See the Disclaimer set forth below.
2. Summary of Significant Assumptions
The Debtors' management has developed the Financial
Projections to assist holders of Claims and Interests in their evaluation of
the Plan and to analyze its feasibility. The Financial Projections are based
upon a number of significant assumptions described below. Actual operating
results and values may and will vary from those projected [any assumptions in
this section are illustrative and the information herein will be revised and
supplemented when the Financial Projections are completed and inserted into
this Disclosure Statement],
(i) Fiscal Years. OC's fiscal year end is on the
last day of each calendar year. Any reference to "Fiscal" immediately followed
by a specific year means the period ending on December 31 of such year.
(ii) Plan Terms And Consummation. The Financial
Projections assume an Effective Date of December 31, 2003 with Allowed Claims
and Interests treated in accordance with the treatment provided in the Plan
with respect to such Allowed Claims and Interests. Although the Effective Date
under the Plan may not occur until later than December 31, 2003, that date was
selected as an assumed date of effectiveness of the Plan so that there would
be a close proximity between the time in which Lazard Freres & Co. LLC
("Lazard") reviewed materials in forming their valuation and liquidation
analyses and the assumed date of valuation. If the Effective Date does not
occur within the anticipated time frame, this may have an adverse effect on
the respective abilities of OC to achieve the projected results. Further, if
the Effective Date does not occur within the anticipated time frame,
additional bankruptcy-related expenses will be incurred until such time as a
new plan of reorganization is confirmed. These expenses could have a
significant adverse impact on OC's results of operations and cash flows.
(iii) 2003 Income Statement. [this information will
be inserted when the Financial Projections are completed and inserted into
this Disclosure Statement].
(iv) Revenues. [this information will be inserted
when the Financial Projections are completed and inserted into this Disclosure
Statement].
(v) Operating Expenses. [this information will be
inserted when the Financial Projections are completed and inserted into this
Disclosure Statement].
(vi) Selling, General & Administrative Costs. [this
information will be inserted when the Financial Projections are completed and
inserted into this Disclosure Statement].
(vii) Corporate Expense. [this information will be
inserted when the Financial Projections are completed and inserted into this
Disclosure Statement].
(viii) Interest Expense. Interest expense reflects
current and estimated interest rates on various components of debt and
presumes interest rates will not change materially.
(ix) Interest Income. Interest income reflects
current and estimated market rates on cash and cash equivalents and presumes
interest rates will not change materially.
(x) Income Taxes. Income tax expense or benefit as
reflected in the Projected Statements of Operations and the related deferred
tax asset or liability balances on the Balance Sheet and tax payments in the
cash flow statements are based upon certain accounting and tax planning
assumptions, projected net income assuming the current statutory tax rate does
not change throughout the period of the projections and the anticipated
reduction of tax loss carryforwards as a result of effecting the Plan.
(xi) Capital Expenditures. [this information will
be inserted when the Financial Projections are completed and inserted into
this Disclosure Statement].
(xii) Acquisitions. [this information will be
inserted when the Financial Projections are completed and inserted into this
Disclosure Statement].
(xiii) Working Capital. Components of working
capital are projected primarily on the basis of historic patterns applied to
projected levels of operation. It has been assumed that vendor trade terms
remain at normal levels during the Chapter 11 Cases and in the period
thereafter.
(xiv) Fresh Start Accounting. OC would account for
effecting the Plan and the related transactions using the principles of "fresh
start" accounting as required by SOP 90-7 issued by the American Institute of
Certified Public Accountants. Under "fresh start" accounting principles, OC
will determine its post-reorganization value at the Effective Date. This value
will be allocated, based on estimated fair market values, to specific tangible
assets, and OC will record intangible assets equal to the post-reorganization
values in excess of amounts allocable to the relevant identifiable assets. OC
is in the process of further evaluating how the post-reorganization value will
be allocated to its and its Subsidiary Debtors' various assets. It is likely
that the final allocation as well as the depreciation and amortization expense
will differ from the amounts presented herein. The amounts of shareholders'
equity in the fresh start balance sheets are not estimates of the market
values of the New OCD Common Stock after confirmation of the Plan, which
values are subject to many uncertainties and cannot be reasonably estimated at
this time. The Debtors do not make any representation as to the market values,
if any, of the New OCD Common Stock or to be issued pursuant to the Plan.
(xv) Impairment. The Financial Projections assume
that there will be no factors which indicate the impairment of any of the
tangible or intangible fixed assets of the Reorganized Debtors which would
require a charge to income.
(xvi) Restructuring. The Financial Projections
assume that there will be no reorganization, restructuring or further change
in the composition of the Reorganized Debtors, except as set forth in the
Plan.
(xvii) Exchange Rates. The Financial Projections
assume that the various foreign exchange rates underlying the Financial
Projections are held constant throughout the period.
(xviii) Material Change. The Financial Projections
assume that there will be no material changes in the economic, regulatory or
political environments in which the Reorganized Debtors operate.
DISCLAIMER
THE FINANCIAL PROJECTIONS PROVIDED IN THIS DISCLOSURE STATEMENT HAVE
BEEN PREPARED EXCLUSIVELY BY THE DEBTORS' MANAGEMENT. THESE FINANCIAL
PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED
ON A VARIETY OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE
BY MANAGEMENT, MAY NOT BE REALIZED, AND ARE INHERENTLY SUBJECT TO SIGNIFICANT
BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF
WHICH ARE BEYOND THE DEBTORS' CONTROL. NO REPRESENTATIONS CAN BE MADE AS TO
THE ACCURACY OF THESE FINANCIAL PROJECTIONS OR TO OC'S ABILITY TO ACHIEVE THE
PROJECTED RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE. FURTHER,
EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THESE
FINANCIAL PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED OR,
ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE
EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIAL AND POSSIBLY ADVERSE MANNER.
THE FINANCIAL PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTEE OR
OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR. THESE FINANCIAL
PROJECTIONS SHOULD BE CONSIDERED IN CONJUNCTION WITH THE RISK FACTORS SET
FORTH IN SECTION XV OF THIS DISCLOSURE STATEMENT ENTITLED "CERTAIN RISK
FACTORS TO BE CONSIDERED."
VII. SUMMARY OF THE PLAN OF REORGANIZATION
THIS SECTION PROVIDES A SUMMARY OF THE STRUCTURE AND MEANS FOR
IMPLEMENTATION OF THE PLAN, AND OF THE CLASSIFICATION AND TREATMENT OF CLAIMS
AND INTERESTS UNDER THE PLAN, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE PLAN (AS WELL AS THE EXHIBITS THERETO AND DEFINITIONS THEREIN), WHICH IS
ATTACHED TO THIS DISCLOSURE STATEMENT AS APPENDIX A. SEE ALSO, THE GLOSSARY OF
ADDITIONAL TERMS SET FORTH IN APPENDIX A-1 OF THIS DISCLOSURE STATEMENT.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT INCLUDE
SUMMARIES OF THE PROVISIONS CONTAINED IN THE PLAN AND IN DOCUMENTS REFERRED TO
THEREIN. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT DO NOT PURPORT
TO BE PRECISE OR COMPLETE STATEMENTS OF ALL THE TERMS AND PROVISIONS OF THE
PLAN OR DOCUMENTS REFERRED TO THEREIN, AND REFERENCE IS MADE TO THE PLAN AND
TO SUCH DOCUMENTS FOR THE FULL AND COMPLETE STATEMENTS OF SUCH TERMS AND
PROVISIONS.
THE PLAN ITSELF AND THE DOCUMENTS REFERRED TO THEREIN WILL CONTROL
THE ACTUAL TREATMENT OF CLAIMS AGAINST, AND INTERESTS IN, THE DEBTORS UNDER
THE PLAN AND WILL, UPON THE EFFECTIVE DATE, BE BINDING UPON HOLDERS OF CLAIMS
AGAINST, OR INTERESTS IN, THE DEBTORS, THE REORGANIZED DEBTORS AND OTHER
PARTIES IN INTEREST. IN THE EVENT OF ANY CONFLICT BETWEEN THIS DISCLOSURE
STATEMENT AND THE PLAN OR ANY OTHER OPERATIVE DOCUMENT, THE TERMS OF THE PLAN
AND/OR SUCH OTHER OPERATIVE DOCUMENT WILL CONTROL.
A. Structure of the Plan
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under Chapter 11, a debtor is authorized to reorganize its
business for the benefit of its creditors and shareholders. Upon the filing of
a petition for relief under Chapter 11, Section 362 of the Bankruptcy Code
provides for an automatic stay of substantially all acts and proceedings
against the debtor and its property, including all attempts to collect claims
or enforce liens that arose prior to the commencement of the Chapter 11 case.
The consummation of a plan of reorganization is the principal
objective of a Chapter 11 case. A plan of reorganization sets forth the means
for satisfying claims against and interests in a debtor. Confirmation of a
plan of reorganization by the Bankruptcy Court makes the plan binding upon the
debtor, any issuer of securities under the plan, any person or entity
acquiring property under the plan, and any creditor of or equity security
holder in the debtor, whether or not such creditor or equity security holder
(1) is impaired under or has accepted the plan or (2) receives or retains any
property under the plan. Subject to certain limited exceptions and other than
as provided in the plan itself or in the confirmation order, the confirmation
order discharges the debtor from any debt that arose prior to the date of
confirmation of the plan and substitutes therefor the obligations specified
under the confirmed plan, and terminates all rights and interests of equity
security holders.
The terms of the Plan are based upon, among other things, the
Debtors' assessment of their ability to achieve the goals of their Business
Plan, make the distributions contemplated under the Plan and pay certain of
their continuing obligations in the ordinary course of the Reorganized
Debtors' businesses as approved by the Bankruptcy Court. Under the Plan,
Claims against, and Interests in, the Debtors are divided into Classes
according to their relative seniority and other criteria.
If the Plan is confirmed by the Bankruptcy Court and consummated, (1)
the Claims in certain Classes will be reinstated or modified and receive
distributions equal to the full amount of such Claims, (2) the Claims in other
Classes will be modified and receive distributions constituting a partial
recovery on such Claims and (3) the Claims and Interests in other Classes will
receive no recovery on such Claims or Interests. On the Effective Date and at
certain times thereafter, the Reorganized Debtors will distribute cash,
securities, notes or other property in respect of certain Classes of Claims as
provided in the Plan. The Classes of Claims against the Debtors created under
the Plan, the treatment of those Classes under the Plan and the securities and
other property to be distributed under the Plan are described below.
B. Substantive Consolidation under the Plan
Generally, substantive consolidation of the estates of multiple
debtors in a bankruptcy case effectively combines the assets and liabilities
of the multiple debtors for certain purposes under a plan. The effect of
consolidation is the pooling of the assets of and claims against the
consolidated debtors; satisfying liabilities from a common fund; and combining
the creditors of the debtors for purposes of voting on reorganization plans.
The authority of a bankruptcy court to order substantive consolidation is
derived from its general equitable powers under Section 105(a) of the
Bankruptcy Code, which provides that the court may issue orders necessary to
implement the provisions of the Bankruptcy Code, including Section 1123 of the
Bankruptcy Code. As there are no statutorily prescribed standards for
substantive consolidation, judicially developed standards control whether
substantive consolidation should be granted in any given case.
Under the Plan, the Debtors (but not the Fibreboard Insurance
Settlement Trust) will be substantively consolidated for the purposes of
voting, determining which Claims and Interests will be entitled to vote to
accept or reject the Plan, confirming the Plan, the resultant discharge of
Claims and cancellation of Interests and the distribution of consideration to
holders of Allowed Claims. Subject to Section 5.6 of the Plan (concerning
Restructuring Transactions), substantive consolidation under the Plan will not
result in the merger of or the transfer or commingling of any assets of any of
the Debtors or Non-Debtor Subsidiaries. Subject to Section 5.6 of the Plan, all
assets (whether tangible or intangible) will continue to be owned by the
respective Debtors or Non-Debtor Subsidiaries, as the case may be. In that
regard, OC intends to implement a restructuring plan which would reorganize OCD
and its Subsidiaries along OC's major business lines. The planning for this
restructuring is in a preliminary stage. It is anticipated that the
restructuring plan which is adopted will be announced prior to the Disclosure
Statement Hearing and will be described in an amendment to the Plan.
As a result of the substantive consolidation, on the Effective Date,
for purposes set forth in the previous paragraph: (1) all assets and
liabilities of each Subsidiary Debtor (excluding the Fibreboard Insurance
Settlement Trust) will be treated as though they were merged into and with the
assets and liabilities of OCD; (2) except as otherwise provided in the Plan,
no distributions will be made under the Plan on account of Intercompany Claims
among any of the Debtors; and (3) all guaranties of the Debtors of the
obligations of any other Debtor will be deemed eliminated, so that any claim
against any such Debtor and any guaranty thereof executed by any other such
Debtor and any joint or several liability of any of such Debtors will be
deemed to be one obligation of the Debtors with respect to the consolidated
estate. Such substantive consolidation will not (other than for purposes of
the Plan) affect (1) the legal and corporate structures of the Reorganized
Debtors, subject to the right of the Debtors or Reorganized Debtors to effect
the Restructuring Transactions as provided in Section 5.6 of the Plan, (2) the
Intercompany Claims, (3) the Subsidiary Interests or (4) pre- and
post-Petition Date guaranties that are required to be maintained in connection
with executory contracts or unexpired leases that have been or will be assumed
pursuant to the Plan. Thus, the Plan eliminates the separate obligations of
the Subsidiary Debtors arising from the guaranties of the 1997 Credit
Agreement. The Plan, however, provides that the holders of Allowed Class 4
Claims will receive the Guarantee Settlement Payment if Class 4 accepts the
Plan. See Section VII C.3.b.(iii) of this Disclosure Statement entitled "Class
4: Bank Holders Claims").
The holders of Allowed Claims in Class 8 (the FB Asbestos Personal
Injury Claims) will be the only claimants entitled to recover against the
assets of the Fibreboard Insurance Settlement Trust, the FB Reversions, the
Committed Claims Account and the FB Sub-Account Settlement Payment, which will
be transferred to the FB Sub-Account of the Asbestos Personal Injury Trust (as
discussed below). The holders of Allowed Claims in Class 9 (FB Asbestos
Property Damage Claims) will be the only claimants to recover against the FB
Asbestos Property Damage Insurance Assets transferred to the FB Asbestos
Property Damage Trust. At the same time, holders of Allowed Claims in Classes
8 and 9 do not share on a Pro Rata basis with Classes 4, 5, 6 and 7 in the
Combined Distribution Package or Combined Net Distribution Package. See
Section VII C.3.b.(vii) of this Disclosure Statement entitled "Class 8: FB
Asbestos Personal Injury Claims" and Section VII C.3.b.(viii) of this
Disclosure Statement entitled "Class 9: FB Asbestos Property Damage Claims."
The Plan Proponents believe that substantive consolidation under the
Plan provides the mechanism for the prompt emergence from bankruptcy, the
resolution of Claims and distributions to creditors. Failure to substantively
consolidate the Debtors would require the resolution of many issues involving
a large number of intercompany transactions that occurred prior to the
Petition Date which resulted in the shifting of assets, obligations, and costs
among the Debtors. Some of the transactions were not reflected as intercompany
debts. These and other transactions would arguably constitute preferential
transfers or fraudulent conveyances if each Debtor were required to be treated
as a separate entity with separate assets and liabilities. The difficulty,
delay and expense involved in determining issues involving the pre-petition
relationships among the Debtors would be substantial, if not prohibitive, and
would likely delay the resolution of the Chapter 11 Cases for a considerable
time. It is unclear how this process could be undertaken consistent with the
need to preserve the value of the Debtors' operations, a value created through
the operation of the Debtors as an integrated unit. Given the Debtors' unified
management structure, the likely need for separate representation for each
entity if the intercompany transactions require resolution, and the inability
of the Subsidiaries to function on a stand-alone basis, it would be highly
difficult, if not impossible, to propose and confirm a plan or plans providing
for separate payments by each Debtor.
The Plan Proponents also believe the substantive consolidation
proposed under the Plan is warranted, appropriate, fair and equitable under
the criteria established by the courts in ruling on the propriety of
substantive consolidation in other cases. Pursuant to the Case Management
Order, the Debtors filed the Substantive Consolidation Motion, seeking a
determination that the substantive consolidation proposed under the Plan is
permissible under applicable law based upon, among other things, (1) the
substantial identity among OCD and the Subsidiary Debtors, (2) the benefits if
substantive consolidation were granted and the harm if substantive
consolidation were denied, and (3) the lack of any reliance by the Bank
Holders on the separate credit of any of the Subsidiary Debtors who are
guarantors of the 1997 Credit Agreement. The Bank Holders are opposing the
Substantive Consolidation Motion and a hearing on the Substantive
Consolidation Motion is scheduled to commence April 8, 2003. The hearing
scheduled on the Substantive Consolidation Motion is part of the confirmation
proceedings and will be for the purpose of taking evidence regarding the
positions of the Debtors, the Asbestos Claimants' Committee, the Future
Claimants' Representative, the Unsecured Creditors' Committee, the Designated
Members and CSFB as Agent for the Bank Holders with respect to the Bank
Holders' opposition to the substantive consolidation provisions of the Plan.
See Section V.F.10.b of this Disclosure Statement entitled "Withdrawal of
Reference."
The Plan proposes to substantively consolidate only OCD and the
Subsidiary Debtors. At the present time, certain of the guarantors of the
obligations to the Bank Holders under the 1997 Credit Agreement are Non-Debtor
Subsidiaries, namely, IPM, Vytec Corporation and Owens-Corning Fiberglas
Sweden Inc. If the Class of Bank Holders (Class 4) accepts the Plan, then in
consideration of the Guarantee Settlement Payment, these Non-Debtor
Subsidiaries will be released from the obligations arising from their
guaranties of the 1997 Credit Agreement. In the event that Class 4 does not
accept the Plan or if no agreement is reached with the Bank Holders for
release of these Non-Debtor Subsidiaries from their guaranty obligations, OCD
expects to cause these Non-Debtor Subsidiaries to file for relief under
Chapter 11 of the Bankruptcy Code, to join in the proposal of the Plan and to
be substantively consolidated with the current Debtors for the purposes set
forth in the Plan.
C. Classification and Treatment of Claims and Interests
1. General Discussion of Classification
Section 1122 of the Bankruptcy Code provides that a plan of
reorganization must classify the claims and interests of a debtor's creditors
and equity interest holders. In accordance with Section 1122, the Plan
classifies Claims and Interests into various Classes and sets forth the
treatment for each Class. Certain claims are not required to be classified
under Section 1123(a)(1) of the Bankruptcy Code, but are nonetheless treated
under the Plan. These claims are defined as Unclassified Claims and include
DIP Facility Claims, Administrative Claims and Priority Tax Claims.
Section 1122(a) of the Bankruptcy Code requires that a plan
classify claims and interests in the Debtors into classes that contain claims
and interests that are substantially similar to the other claims and interests
in such class. Section 1123(a)(2) requires that a plan specify classes of
claims and interests which are not impaired under the plan. Section 1123(a)(3)
requires a plan to specify the treatment of classes of claims and interests
which are impaired under the plan. Under Section 1124 of the Bankruptcy Code,
a class of claims or interests is deemed to be impaired under a plan unless
(a) the plan leaves unaltered the legal, equitable, and contractual rights to
which such claim or interest entitles the holder thereof or (b)
notwithstanding any legal right to an accelerated payment of such claim or
interest, the plan (i) cures all existing defaults (other than certain
defaults specified in Section 365(b)(2) of the Bankruptcy Code resulting from
the occurrence of events of bankruptcy or the financial condition of the
debtor), (ii) reinstates the maturity of such claim or interest as it existed
before the default, (iii) compensates the holder of the claim or interest for
any damages incurred as a result of any reasonable reliance by such holder on
the contractual provision or applicable law entitling the holder to
accelerate, and (iv) does not otherwise alter the legal, equitable, and
contractual rights to which such claim or interest entitles the holder.
Generally, only holders of claims and interests in impaired classes are
entitled to vote to accept or reject a plan. Under Section 1126, holders of
claims or interests in unimpaired classes are conclusively presumed to accept
the plan and do not vote to accept or reject the plan. A class of claims or
interests that does not receive or retain any property under a plan is deemed
to have rejected the plan and does not vote to accept or reject the plan.
Under the Plan, the following Classes are Unimpaired: Class
1 (Other Priority Claims); Class 2A (Other Secured Tax Claims); and Class 2B
(Other Secured Claims). Under the Plan, the following Classes are Impaired:
Class 3 (Convenience Claims); Class 4 (Bank Holders Claims); Class 5
(Bondholders Claims); Class 6 (General Unsecured Claims); Class 7 (OC Asbestos
Personal Injury Claims); Class 8 (FB Asbestos Personal Injury Claims); Class 9
(FB Asbestos Property Damage Claims); Class 10 (Intercompany Claims); and
Class 11 (OCD Interests). Classes 10 and 11 are deemed to have rejected the
Plan and are not entitled to vote to accept or reject the Plan.
The Debtors believe that separate classification and
treatment of various types of unsecured non-priority claims (the Convenience
Claims, the Bank Holders Claims, the Bondholders Claims, the General Unsecured
Claims, the OC Asbestos Personal Injury Claims, the FB Asbestos Personal
Injury Claims, the FB Asbestos Property Damage Claims and the Intercompany
Claims) is appropriate, fair, and reasonable given the underlying facts and
circumstances. Factors considered by the Debtors with respect to these issues
include: (a) providing separate classification to the Bank Holders and
Bondholders to give separate representation to their divergent interests and
to provide a vehicle for resolving the separate dispute with the Bank Holders
concerning substantive consolidation; (b) a recognition of the special
historic circumstances requiring the different treatment to the OC Asbestos
Personal Injury Claims and the FB Asbestos Personal Injury Claims, including
the limitation of certain assets, such as the Fibreboard Insurance Settlement
Trust, to the satisfaction of claims to which the assets are dedicated; (c)
avoiding the severe impact on all other creditors if the FB Asbestos Personal
Injury Claims are permitted to "spill over" as claims against the consolidated
estate; (d) the need to obtain separate approval of holders of Asbestos
Personal Injury Claims in order to qualify under Section 524(g) of the
Bankruptcy Code to receive the benefits of the Asbestos Personal Injury
Permanent Channeling Injunction; (e) the existence of insurance to pay FB
Asbestos Property Damage Claims; and (f) the desire not to disenfranchise
holders of the certain unsecured claims (such as trade creditors and creditors
with smaller claims) by including such claims in a class with larger unsecured
claims of different types (such as the Bondholders Claims).
The Debtors believe that the Plan has classified all Claims
and Interests in compliance with the provisions of Section 1122 of the
Bankruptcy Code and applicable case law, but it is possible that a holder of a
Claim or Interest may challenge the Debtors' classification of Claims and
Interests or that the Bankruptcy Court may find that a different
classification is required for the Plan to be confirmed. In that event, the
Plan Proponents intend, to the extent permitted by the Bankruptcy Code, the
Plan and the Bankruptcy Court, to consider reasonable modifications of the
classifications under the Plan to permit confirmation and to use the Plan
acceptances received in this solicitation for purposes of obtaining the
approval of the reconstituted Class or Classes of which each accepting holder
ultimately is deemed to be a member. Any such reclassification could adversely
affect the Class in which such holder initially was a member, or any other
Class under the Plan, by changing the composition of such Class and the vote
required of that Class for approval of the Plan.
The amount of any Impaired Claim that ultimately is Allowed
by the Bankruptcy Court may vary from any estimated Allowed amount of such
Claim and, accordingly, the total Claims ultimately Allowed by the Bankruptcy
Court with respect to each Impaired Class of Claims may also vary from any
estimates contained herein with respect to the aggregate Claims in any
Impaired Class. Thus, the value of the property that ultimately will be
received by a particular holder of an Allowed Claim under the Plan may be
affected by the aggregate amount of Claims ultimately Allowed in the
applicable Class.
The classification of Claims and Interests and the nature of
distributions to members of each Class are summarized below. The Debtors
believe that the consideration, if any, provided under the Plan to holders of
Claims and Interests reflects an appropriate resolution of their Claims and
Interests, taking into account the differing nature and priority of such
Claims and Interests and the fair value of the Debtors' assets. In view of the
deemed rejection by Classes 10 and 11, however, as set forth below, the
Debtors will seek confirmation of the Plan pursuant to the "cramdown"
provisions of the Bankruptcy Code. Specifically, Section 1129(b) of the
Bankruptcy Code permits confirmation of a Chapter 11 plan in certain
circumstances even if the plan has not been accepted by all impaired classes
of claims and interests. See Section XIV.G of this Disclosure Statement
entitled "Confirmation Without Acceptance of All Impaired Classes:
`Cramdown'."
Although the Debtors believe that the Plan can be confirmed
under Section 1129(b), there can be no assurance that the Bankruptcy Court or
District Court will find that the requirements have been satisfied.
2. Treatment of Unclassified Claims Under the Plan
(a) DIP Facility Claims
The Plan provides for DIP Facility Claims to be
paid in full. On, or as soon as reasonably practicable after, the latest of
(i) the Initial Distribution Date, (ii) the date on which a DIP Facility Claim
becomes an Allowed DIP Facility Claim or (iii) the date on which a DIP
Facility Claim becomes payable pursuant to any agreement between a Debtor and
the holder of such DIP Facility Claim, each holder of an Allowed DIP Facility
Claim shall receive in full satisfaction, settlement, release and discharge of
and in exchange for such Allowed DIP Facility Claim (x) Cash equal to the
unpaid portion of such Allowed DIP Facility Claim or (y) such other treatment
as the applicable Debtor and such holder shall have agreed in writing.
The Debtors estimate that there will be no
aggregate Allowed DIP Facility Claims that have not previously been paid
pursuant to an order of the Bankruptcy Court as of the Effective Date. See
Section III.B.2 of this Disclosure Statement entitled "Pre-petition
Indebtedness."
(b) Administrative Claims
The Plan generally provides for Administrative
Claims to be paid in full. Except as otherwise provided in and subject to the
requirements of the Plan, on, or as soon as reasonably practicable after, the
latest of (i) the Initial Distribution Date, (ii) the date on which an
Administrative Claim becomes an Allowed Administrative Claim or (iii) the date
on which an Administrative Claim becomes payable pursuant to any agreement
between a Debtor and the holder of such Administrative Claim, each holder of
an Allowed Administrative Claim shall receive in full satisfaction,
settlement, release and discharge of and in exchange for such Allowed
Administrative Claim (a) Cash equal to the unpaid portion of such Allowed
Administrative Claim or (b) such other treatment as the applicable Debtor and
such holder shall have agreed in writing; provided, however, that Allowed
Administrative Claims with respect to liabilities incurred by a Debtor in the
ordinary course of business during the Chapter 11 Cases shall be paid in the
ordinary course of business in accordance with the terms and conditions of any
agreements relating thereto. All payments to professionals in connection with
the Chapter 11 Cases for compensation and reimbursement of expenses and all
payments to reimburse expenses of members of the Unsecured Creditors'
Committee and the Asbestos Claimants' Committee will be made in accordance
with the procedures established by the Bankruptcy Code and the Bankruptcy
Rules and will be subject to approval of the Bankruptcy Court as being
reasonable.
The Debtors estimate that the aggregate Allowed
Administrative Claims that have not previously been paid pursuant to an order
of the Bankruptcy Court (which will be primarily comprised of professional
fees) will be approximately $25 million as of the Effective Date.
(c) Priority Tax Claims
Priority Tax Claims are required under the
Bankruptcy Code to be paid in full within the time period specified by Section
1129(a)(9)(C), unless the taxing authority has agreed to a different
treatment. Under the Plan, except to the extent that a holder of an Allowed
Priority Tax Claim has been paid by the Debtors prior to the Initial
Distribution Date or has agreed in writing to a different treatment, each
holder of an Allowed Priority Tax Claim shall receive in full satisfaction,
settlement, release and discharge of and in exchange for such Allowed Priority
Tax Claim, at the sole discretion of the Debtors, (i) Cash equal to the amount
of such Allowed Priority Tax Claim on the later of the Initial Distribution
Date and the date such Priority Tax Claim becomes an Allowed Claim, or as soon
thereafter as is practicable, (ii) deferred Cash payments, having a value as
of the Effective Date equal to such Allowed Priority Tax Claim, over a period
not exceeding six (6) years after the assessment of the tax on which such
Claim is based as the applicable Debtor and such holder shall have agreed in
writing, or (iii) such other treatment as the applicable Debtor and such
holder shall have agreed in writing.
The Debtors estimate that aggregate Allowed
Priority Tax Claims that have not previously been paid pursuant to an order of
the Bankruptcy Court will be between approximately $___ million and $___
million. See Section V.F.16 of this Disclosure Statement, entitled "IRS
Audit."
3. Treatment of Classified Claims and Interests Under the Plan
(a) Unimpaired Classes of Claims
(i) Class 1: Other Priority Claims
Class 1 consists of all Allowed Claims entitled to
priority pursuant to Section 507(a) of the Bankruptcy Code other than DIP
Facility Claims, Administrative Claims or Priority Tax Claims. The allowed
priority claims are generally required to be paid in full on the Effective
Date, subject to certain exceptions set forth in Sections 1129(a)(9)(A) and
(B). Under the Plan, on, or as soon as reasonably practicable after, the
latest of (i) the Initial Distribution Date, (ii) the date on which such Class
1 Claim becomes an Allowed Class 1 Claim, or (iii) the date on which such
Class 1 Claim becomes due and payable pursuant to any agreement between a
Debtor and a holder of a Class 1 Claim, each holder of an Allowed Class 1
Claim shall receive in full satisfaction, settlement, release and discharge of
and in exchange for such Allowed Class 1 Claim (a) Cash equal to the unpaid
portion of such Allowed Class 1 Claim or (b) such other treatment as the
applicable Debtor and such holder shall have agreed in writing. All Allowed
Class 1 Claims which are not by their terms due and payable on or before the
Effective Date will be paid in the ordinary course of business in accordance
with the terms thereof.
Because the Debtors received orders from the
Bankruptcy Court which allowed them to satisfy their pre-petition wage claims
and employee benefit obligations during the Chapter 11 Cases, the Debtors
believe there will be no Allowed Other Priority Claims. Class 1 Claims are
Unimpaired and holders of the Claims in Class 1 are therefore deemed to have
accepted the Plan and are not entitled to vote to accept or reject the Plan.
(ii) Class 2A: Other Secured Tax Claims
Class 2A consists of all Claims which otherwise
would be tax claims entitled to priority under Section 507(a)(8) of the
Bankruptcy Code, but which are secured by a valid and unavoidable Encumbrance
in or on any of the Debtors' property (to the extent of the value of the Claim
holder's interest in the Debtors' property, as determined pursuant to Section
506 of the Bankruptcy Code). Except to the extent that a holder of an Allowed
Other Secured Tax Claim has been paid by the Debtors prior to the Initial
Distribution Date or has agreed in writing to a different treatment, each
holder of an Allowed Other Secured Tax Claim shall receive in full
satisfaction, settlement, release and discharge of and in exchange for such
Allowed Other Secured Tax Claim, at the sole discretion of the Debtors, (i)
Cash equal to the amount of such Allowed Other Secured Tax Claim on the later
of the Initial Distribution Date and the date such Other Secured Tax Claim
becomes an Allowed Claim, or as soon thereafter as is practicable, (ii)
deferred Cash payments, having a value as of the Effective Date equal to such
Allowed Other Secured Tax Claim, over a period not exceeding six (6) years
after the assessment of the tax on which such Claim is based as the applicable
Debtor and such holder shall have agreed in writing, or (iii) such other
treatment as the applicable Debtor and such holder shall have agreed in
writing. Each holder of an Allowed Class 2A Claim shall retain the
Encumbrances (or replacement Encumbrances as may be contemplated under
nonbankruptcy law) securing its Allowed Class 2A Claim as of the Effective
Date until full and final payment of such Allowed Class 2A Claim is made as
provided in the Plan and, upon such full and final payment, such Encumbrances
shall be deemed null and void and shall be unenforceable for all purposes.
Although for Unsecured Claims, a Claim becomes Allowed unless objected to by
the Claims Objection Deadline, the Debtors' failure to object to any Class 2A
Claim in the Chapter 11 Cases will be without prejudice to the rights of the
Debtors or the Reorganized Debtors to contest or otherwise defend against such
Claim in the appropriate forum when and if such Claim is sought to be enforced
by the holder of such Claim. Furthermore, nothing in the Plan or elsewhere
will preclude the Debtors or Reorganized Debtors from challenging the validity
of any alleged Encumbrance on any asset of a Debtor or the value of any
collateral notwithstanding a failure to file an objection by the Claims
Objection Deadline.
The Debtors estimate that aggregate
Allowed Other Secured Tax Claims that have not previously been
paid pursuant to an order of the Bankruptcy Court will be between
approximately $4.4 million and $5.0 million. Class 2A Claims are Unimpaired
and holders of the Claims in Class 2A are therefore deemed to have accepted
the Plan and are not entitled to vote to accept or reject the Plan.
(iii) Class 2B: Other Secured Claims
Class 2B consists of Claims secured by a
valid Encumbrance in or on any of the Debtors' property, which is not void or
voidable under the Bankruptcy Code or any other applicable law, to the extent
of the value of the Claim holder's interest in the Debtors' property, but
excluding the Other Secured Tax Claims. On, or as soon as reasonably
practicable after, the latest of (i) the Initial Distribution Date, (ii) the
date on which such Class 2B Claim becomes an Allowed Class 2B Claim or (iii)
the date on which such Class 2B Claim becomes due and payable pursuant to any
agreement between a Debtor and the holder of an Allowed Class 2B Claim, each
holder of an Allowed Class 2B Claim shall receive in full satisfaction,
settlement, release and discharge of and in exchange for such Allowed Class 2B
Claim, at the sole discretion of the Debtors, (a) Cash equal to the unpaid
portion of such Allowed Class 2B Claim, (b) Reinstatement of the legal,
equitable and contractual rights of the holder of such Allowed Class 2B Claim,
subject to the provisions of Article VII of the Plan, or (c) such other
treatment as the applicable Debtor and such holder shall have agreed in
writing. Although for Unsecured Claims, a Claim becomes Allowed unless
objected to by the Claims Objection Deadline, the Debtors' failure to object
to any Class 2B Claim in the Chapter 11 Cases will be without prejudice to the
rights of the Debtors or the Reorganized Debtors to contest or otherwise
defend against such Claim in the appropriate forum when and if such Claim is
sought to be enforced by the holder of such Claim. Furthermore, nothing in the
Plan or elsewhere will preclude the Debtors or Reorganized Debtors from
challenging the validity of any alleged Encumbrance on any asset of a Debtor
or the value of any collateral notwithstanding a failure to file an objection
by the Claims Objection Deadline.
The Debtors estimate that aggregate Allowed Other
Secured Claims that have not previously been paid pursuant to an order of the
Bankruptcy Court will be between approximately __ million and $__ million.
Class 2B Claims are Unimpaired and holders of the Claims in Class 2B are
therefore deemed to have accepted the Plan and are not entitled to vote to
accept or reject the Plan.
(b) Impaired Classes of Claims
(i) Class 3: Convenience Claims
Class 3 consists of all Claims against any
of the Debtors that would otherwise be classified as a Class 6 Claim, which
(i) is in an amount that is equal to or less than $5,000 or (ii) on the Ballot
has been reduced to $5,000 by the holder of such Claim. On, or as soon as
reasonably practicable after, the latest of (i) the Initial Distribution Date,
or (ii) the date on which such Class 3 Claim becomes an Allowed Class 3 Claim,
or (iii) the date on which such Class 3 Claim becomes due and payable pursuant
to any agreement between a Debtor and a holder of a Class 3 Claim, each holder
of an Allowed Class 3 Claim shall receive in full satisfaction, settlement,
release and discharge of and in exchange for such Allowed Class 3 Claim (a)
Cash equal to the amount of such Allowed Class 3 Claim or (b) such other
treatment as the applicable Debtor and such holder shall have agreed in
writing.
Any holder of a Claim in Class 6 that
desires treatment of such Claim as a Convenience Claim shall make such
election on the Ballot to be provided to holders of Impaired Claims entitled
to vote to accept or reject the Plan and return such Ballot to the address
specified therein on or before the Voting Deadline. See Section XVII of this
Disclosure Statement entitled "The Solicitation; Voting Procedure". Any
election made after the Voting Deadline shall not be binding on the Debtors
unless the Voting Deadline is expressly waived in writing by the Debtors with
respect to any such Claim.
The Debtors estimate that Allowed
Convenience Claims (after adjustment to account for the holders of Convenience
Claims in amounts greater than $5,000 who have elected to opt into Class 3)
will aggregate between approximately $18.0 million and $18.5 million. Class 3
Claims are Impaired and, to the extent and in the manner provided in the
Voting Procedures Order, holders of the Claims in Class 3 shall be entitled to
vote to accept or reject the Plan.
(ii) General Description of Certain Terms of the
Plan Applicable to the Treatment of Classes 4, 5, 6, and 7
The primary source of distributions under
the Plan to Classes 4, 5, 6 and 7 is a combination of Available Cash, Senior
Notes and shares of New OCD Common Stock, in which holders in such Classes
share on a Pro Rata basis. Additionally, Classes 4, 5, 6 and 7 will share in
the Litigation Trust Recoveries.
In the Plan, the Plan Proponents offer to
resolve the dispute over substantive consolidation with the Bank Holders by
providing the holders of Class 4 Claims, in the event Class 4 accepts the
Plan, with the Guarantee Settlement Payment, in addition to Class 4's Pro Rata
share distribution of the combination of Available Cash, Senior Notes, New OCD
Common Stock and Litigation Trust Recoveries. The Guarantee Settlement Payment
is an "off the top" payment of $400 Million to Class 4 consisting of (i) Cash
in the amount of $20 million; (ii) Senior Notes in an aggregate principal
amount equal to the sum of $180 million; and (iii) 8 million shares of New OCD
Common Stock having an aggregate value of $200 million. The Allowed Class 4
Claim is then reduced by the Guarantee Settlement Payment for the purposes of
the other distributions to Class 4 and the distributions to Classes 5, 6 and
7. The pool of Available Cash, Senior Notes and New OCD Common Stock in which
Classes 4, 5, 6 and 7 will share on a Pro Rata basis will therefore change
based on whether Class 4 accepts the Plan and receives the Guarantee
Settlement Payment. If Class 4 accepts the Plan, the pool of such assets would
be reduced by the Guarantee Settlement Payment. In such event, after Class 4
receives the Guarantee Settlement Payment, Classes 4, 5, 6 and 7 would share
in the Combined Net Distribution Package (as defined below). If Class 4 does
not accept the Plan, the separate claims of the holders of the Class 4 Claims
arising from the guaranties of the 1997 Credit Agreement would be eliminated
by the substantive consolidation and such Holders would not receive the
Guarantee Settlement Payment. Class 4 is expected to object to the
confirmation of the Plan and the substantive consolidation provided for in the
Plan. Under these circumstances, the pool of assets in which Classes 4, 5, 6
and 7 of the Asbestos Personal Injury Trust would share on a Pro Rata basis
would not be reduced by the Guarantee Settlement Payment and holders of
Allowed Claims in Classes 4, 5, 6 and 7 would share in the Combined
Distribution Package (as defined below).
The Combined Net Distribution Package
consists of (i) Available Cash less (a) $20 million to be paid to Class 4 as
part of the Guarantee Settlement Payment and (b) $7 million to be paid to the
FB Sub-Account of the Asbestos Personal Injury Trust for the benefit of Class
8 as part of the FB Sub-Account Settlement Payment, (ii) Senior Notes in the
aggregate principal amount of $1,400 million, less the sum of (a) the amount
of any deferred portion of the Allowed Priority Tax Claims, (b) Senior Notes
in the aggregate principal amount of $180 million as the Senior Notes
component of the Guarantee Settlement Payment and (c) Senior Notes in the
aggregate principal amount of $63 million as the Senior Notes component of the
FB Sub-Account Settlement Payment, (iii) 76 million shares of New OCD Common
Stock, with an estimated value of $1,900 million, less the sum of (a) 8
million shares of New OCD Common Stock, with an estimated value of $200
million, as the New OCD Common Stock component of the Guarantee Settlement
Payment and (b) 2.8 million shares of New OCD Common Stock, with an estimated
value of $70 million, as the New OCD Common Stock component of the FB
Sub-Account Settlement Payment and (iv) the Litigation Trust Recoveries. For a
discussion of the FB-Sub-Account Settlement Payment, see Section
VII.C.3.b(vii) entitled "Class 8: FB Asbestos Personal Injury Claims." For a
discussion of the estimated value of the New OCD Common Stock, see Section
XIV.E entitled "Valuation of the Reorganized Debtors."
The Combined Distribution Package consists
of (i) Available Cash less $7 million to be paid to the FB Sub-Account of the
Asbestos Personal Injury Trust for the benefit of Class 8 as part of the FB
Sub-Account Settlement Payment, (ii) Senior Notes in the aggregate principal
amount of $1,400 million, less the sum of (a) the amount of any deferred
portion of the Allowed Priority Tax Claims and (b) Senior Notes in the
aggregate principal amount of $63 million as the Senior Notes component of the
FB Sub-Account Settlement Payment, (iii) 76 million shares of New OCD Common
Stock, with an estimated value of $1,900 million, less 2.8 million shares,
with an estimated value of $70 million, as the as the New OCD Common Stock
component of the FB Sub-Account Settlement Payment and (iv) the Litigation
Trust Recoveries.
The distributions to Classes 4, 5, 6 and 7
will occur in two phases, with a first distribution on the Initial
Distribution Date and a second one on the Final Distribution Date. The initial
distribution excludes any distribution to holders of Disputed Claims (Claims
which have not yet become Allowed Claims or Disallowed Claims) in Classes 4, 5
and 6. Such distributions on account of Disputed Claims will be held in a
Disputed Distribution Reserve pending resolution thereof. See Section VII.G.2
of this Disclosure Statement entitled "Disputed Distribution Reserve." After
all Disputed Claims in Classes 4, 5 and 6 have been Allowed or Disallowed and
the amounts of Allowed Claims in these Classes are determined, the reserves on
account of the Disallowed Claims will be distributed to the holders of Allowed
Claims in Classes 4, 5, 6 and 7 on the Final Distribution Date.
The unique nature of Asbestos Personal
Injury Claims, which include both Claims and Demands, requires a different
approach for allocating the Pro Rata share of distributions to the OC
Sub-Account of the Asbestos Personal Injury Trust for the benefit of Class 7.
Because the identity of claimants and amounts of claims may not be
ascertainable for years (or perhaps decades), a process for establishing
reserves for disputed Asbestos Personal Injury Claims, reducing such reserves
for the benefit of all creditors upon reductions in the amounts of predicted
claims or increasing such reserves in the event of increases in predicted
claims, would be largely impractical. As a result, allocation of the portion
of the Combined Net Distribution Package or Combined Distribution Package
allocated for the OC Sub-Account of the Asbestos Personal Injury Trust is
based on the Class 7 Aggregate Amount, a projection of the anticipated amount
of OC Asbestos Personal Injury Claims calculated as follows (i) if Class 4
accepts the Plan, the amount of $10.7 billion, less the OCD Insurance Escrow
and the OC Asbestos Personal Injury Liability Insurance Assets or (ii) if
Class 4 rejects the Plan, an amount equal to the present value of OC Asbestos
Personal Injury Claims, as shall be estimated by the Bankruptcy Court or the
District Court at the Confirmation Hearing, less the OCD Insurance Escrow and
the OC Asbestos Personal Injury Liability Insurance Assets, as shall be
estimated by the Bankruptcy Court or the District Court at the Confirmation
Hearing.
Because Classes 8 and 9 are limited to
recovery from specific assets, the Class 8 Aggregate Amount and the total
Allowed Claims in Class 9 do not affect the distributions to the other Classes
of Claims.
(iii) Class 4: Bank Holders Claims
Class 4 consists of Claims held by the
Bank Holders arising under or as a result of the Debtors' obligations under
the 1997 Credit Agreement (the "Bank Holders Claims" or "Class 4 Claims").
On, or as soon as reasonably practicable
after, the latest of (i) the Initial Distribution Date, (ii) the date on which
such Class 4 Claim becomes an Allowed Class 4 Claim, or (iii) the date on
which such Class 4 Claim becomes due and payable pursuant to any agreement
between a Debtor and a holder of a Class 4 Claim, each holder of an Allowed
Class 4 Claim will receive in full satisfaction, settlement, release and
discharge of and in exchange for such Allowed Class 4 Claim such holder's Pro
Rata share of either:
(a) if Class 4 accepts the Plan, (1)
the Guarantee Settlement Payment, and (2) the portion of the Combined Net
Distribution Package equal to the Class 4 Initial Distribution Percentage; or
(b) if Class 4 rejects the Plan, the
portion of the Combined Distribution Package equal to the Class 4 Initial
Distribution Percentage.
In addition, on or as soon as reasonably
practicable after the Final Distribution Date, each holder of an Allowed Class
4 claim shall receive its Pro Rata share of the (i) Cash in an amount equal to
the Class 4 Final Distribution Percentage of Excess Available Cash, (ii)
Excess Senior Notes in an aggregate principal amount equal to the Class 4
Final Distribution Percentage of the Excess Senior Notes Amount, (iii) shares
of New OCD Common Stock in an aggregate number equal to the Class 4 Final
Distribution Percentage of the Excess New OCD Common Stock, and (iv) Cash in
an amount equal to the Class 4 Final Distribution Percentage of the Excess
Litigation Trust Recoveries.
The Debtors estimate that aggregate
Allowed Class 4 Claims that have not previously been paid pursuant to an order
of the Bankruptcy Court will be between approximately $1,480 million to $1,577
million. If Class 4 accepts the Plan, this amount will be reduced by $400
million for purposes of the Pro Rata distributions to holders of Allowed
Claims in Classes 4, 5, 6 and 7. Class 4 Claims are Impaired and, to the
extent and in the manner provided in the Voting Procedures Order, holders of
the Claims in Class 4 shall be entitled to vote to accept or reject the Plan.
(iv) Class 5: Bondholders Claims
Class 5 consists of Claims held by the
Bondholders arising under or as a result of the Debtors' obligations under the
Pre-petition Bonds (the "Bondholders Claims" or "Class 5 Claims").
On, or as soon as reasonably practicable
after, the later of (i) the Initial Distribution Date, (ii) the date on which
such Class 5 Claim becomes an Allowed Class 5 Claim, or (iii) the date on
which such Class 5 Claim becomes due and payable pursuant to any agreement
between a Debtor and a holder of a Class 5 Claim, each holder of an Allowed
Class 5 Claim will receive in full satisfaction, settlement, release and
discharge of and in exchange for such Allowed Class 5 Claim such holder's Pro
Rata share of either:
(a) if Class 4 accepts the Plan, the
portion of the Combined Net Distribution Package equal to the Class 5 Initial
Distribution Percentage; or
(b) if Class 4 rejects the Plan, the
portion of the Combined Distribution Package equal to
the Class 5 Initial Distribution Percentage.
In addition, on or as soon as reasonably
practicable after the Final Distribution Date, each holder of an Allowed Class
5 Claim shall receive its Pro Rata share of the (i) Cash in an amount equal to
the Class 5 Final Distribution Percentage of Excess Available Cash, (ii)
Excess Senior Notes in an aggregate principal amount equal to the Class 5
Final Distribution Percentage of the Excess Senior Notes Amount, (iii) shares
of New OCD Common Stock in an aggregate number equal to the Class 5 Final
Distribution Percentage of the Excess New OCD Common Stock, and (iv) Cash in
an amount equal to the Class 5 Final Distribution Percentage of the Excess
Litigation Trust Recoveries.
The Debtors estimate that aggregate
Allowed Bondholders Claims that have not previously been paid pursuant to an
order of the Bankruptcy Court will be between approximately $1,333 million and
$1,335 million. Class 5 Claims are Impaired and, to the extent and in the
manner provided in the Voting Procedures Order, holders of the Claims in Class
5 shall be entitled to vote to accept or reject the Plan.
(v) Class 6: General Unsecured Claims
Class 6 consists of those Claims against
the Debtors that are General Unsecured Claims, which are Claims against any of
the Debtors that are not a DIP Facility Claim, an Administrative Claim, a
Priority Tax Claim, an Other Priority Claim, an Other Secured Tax Claim, an
Other Secured Claim, a Convenience Claim, a Bank Holders Claim, a Bondholders
Claim, an OC Asbestos Personal Injury Claim, an FB Asbestos Personal Injury
Claim, an FB Asbestos Property Damage Claim, an Intercompany Claim or an OCD
Interest. General Unsecured Claims include, without limitation, all
Environmental Claims and OC Asbestos Property Damage Claims ("General
Unsecured Claims" or "Class 6 Claims").
On, or as soon as reasonably practicable
after, the later of (i) the Initial Distribution Date, (ii) the date on which
such Class 6 Claim becomes an Allowed Class 6 Claim, or (iii) the date on
which such Class 6 Claim becomes due and payable pursuant to any agreement
between a Debtor and a holder of a Class 6 Claim, each holder of an Allowed
Class 6 Claim will receive in full satisfaction, settlement, release and
discharge of and in exchange for such Allowed Class 6 Claim such holder's Pro
Rata share of either:
(a) if Class 4 accepts the Plan, the
portion of the Combined Net Distribution Package equal to the Class 6 Initial
Distribution Percentage; or
(b) if Class 4 rejects the Plan, the
portion of the Combined Distribution Package equal to the Class 6 Initial
Distribution Percentage.
In addition, on or as soon as reasonably
practicable after the Final Distribution Date, each holder of an Allowed Class
6 Claim shall receive its Pro Rata share of the (i) Cash in an amount equal to
the Class 6 Final Distribution Percentage of Excess Available Cash, (ii)
Excess Senior Notes in an aggregate principal amount to the Class 6 Final
Distribution Percentage of the Excess Senior Notes Amount, (iii) shares of New
OCD Common Stock in an aggregate number equal to the Class 6 Final
Distribution Percentage of the Excess New OCD Common Stock, and (iv) Cash in
an amount equal to the Class 6 Final Distribution Percentage of the Excess
Litigation Trust Recoveries.
The Debtors estimate that aggregate
Allowed Class 6 Claims that have not previously been paid pursuant to an order
of the Bankruptcy Court will be between approximately $402 million and $861
million.
OC Asbestos Property Damage Claims are
Class 6 Claims. Holders of OC Asbestos Property Damage Claims were required to
file Proofs of Claim by the April 15, 2002 General Bar Date. OCD received over
300 property damage Proofs of Claim. Of these, approximately 65 claims
asserted aggregate damages of approximately $730 million, including the Claim
of the State of Louisiana in the amount of $582 million. The remaining claims
did not provide a claimed amount and provided almost no documentation to
support their claim or to allow the Debtors to estimate the value of their
claim. The Debtors filed a motion for a case management order requesting that
property damage claimants be required to provide the Debtors with basic
supporting evidence to enable the Debtors to value their claims. Given the
lack of information on these claims at this time, the Debtors are unable to
estimate the likely amount of Allowed OC Asbestos Property Damage Claims.
Based on a review of their records, the
Debtors believes that the number and value of these claims are completely out
of proportion with its historical experience. As of the Petition Date, only
six property damage cases were pending against OCD, four of which had been
dormant for more than five years. Prior to the Petition Date, OCD had resolved
93% of all property damage claims against it for $0 per claim. The Debtors
also note that in other asbestos bankruptcies in which hundreds of property
damage claims were filed, such claims were resolved for substantially less
than the claimed amounts. For example, Eagle-Picher Industries received 1,000
property damage proofs of claim asserting $11.5 billion and its plan of
reorganization provided only $3 million to resolve such claims. More recently,
Armstrong World Industries settled 360 property damage claims (four of which
alone asserted claims in excess of $200 million), for $2 million. Of these
settled claims, 144 were also filed against the Debtors.
Class 6 Claims are Impaired and, to the
extent and in the manner provided in the Voting Procedures Order, holders of
the Claims in Class 6 shall be entitled to vote to accept or reject the Plan.
(vi) Class 7: OC Asbestos Personal Injury Claims
Class 7 consists of OC Asbestos Personal
Injury Claims ("Class 7 Claims"). An "OC Asbestos Personal Injury Claim" means
any present or future right to payment, claim, remedy, liability or Demand
against any OC Person for death, bodily injury, or other personal damages
(whether physical, emotional or otherwise), whether or not such right, claim,
remedy, liability or Demand is reduced to judgment, liquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured, whether or not the facts of or legal basis for such
right, claim, remedy, liability or Demand are known or unknown, under any
theory of law, equity, admiralty, or otherwise, to the extent caused or
allegedly caused, directly or indirectly, by the presence of, or exposure to
asbestos or asbestos-containing products for which any OC Person may be
legally liable, including, without limitation, the presence of, or exposure
to, asbestos or asbestos-containing products that were manufactured,
installed, fabricated, sold, supplied, produced, distributed, released, or in
any way at any time marketed or disposed of by any OC Person, including,
without express or implied limitation, any right, claim, remedy, liability or
Demand for compensatory damages (such as loss of consortium, wrongful death,
survivorship, proximate, consequential, general and special damages) and
including punitive damages. OC Asbestos Personal Injury Claims (i) include OC
Indirect Asbestos PI Trust Claims and Unpaid OC Resolved Asbestos Personal
Injury Claims, but (ii) exclude OC Resolved Asbestos Personal Injury Claims,
OC Asbestos Property Damage Claims, OC Indirect Asbestos Property Damage
Claims, workers' compensation claims, FB Asbestos Personal Injury Claims, FB
Indirect Asbestos PI Trust Claims, FB Asbestos Property Damage Claims, and FB
Indirect Asbestos Property Damage Claims.
ALL CLASS 7 CLAIMS SHALL BE CHANNELED TO
THE ASBESTOS PERSONAL INJURY TRUST, AND SHALL BE PROCESSED, LIQUIDATED AND
PAID PURSUANT TO THE TERMS AND PROVISIONS OF THE ASBESTOS PERSONAL INJURY
TRUST DISTRIBUTION PROCEDURES AND THE ASBESTOS PERSONAL INJURY TRUST
AGREEMENT. SEE SECTION VIII.C. OF THIS DISCLOSURE STATEMENT ENTITLED "THE
ASBESTOS PERSONAL INJURY PERMANENT CHANNELING INJUNCTION." THE SOLE RECOURSE
OF THE HOLDER OF A CLASS 7 CLAIM SHALL BE THE ASBESTOS PERSONAL INJURY TRUST,
AND SUCH HOLDER SHALL HAVE NO RIGHT WHATSOEVER AT ANY TIME TO ASSERT ITS CLAIM
OR DEMAND AGAINST ANY PROTECTED PARTY. WITHOUT LIMITING THE FOREGOING, ON THE
EFFECTIVE DATE, ALL PERSONS SHALL BE PERMANENTLY AND FOREVER STAYED,
RESTRAINED, AND ENJOINED FROM TAKING ANY ENJOINED ACTIONS FOR THE PURPOSE OF,
DIRECTLY OR INDIRECTLY, COLLECTING, RECOVERING, OR RECEIVING PAYMENT OF, ON,
OR WITH RESPECT TO ANY CLASS 7 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 THE DEBTORS OR REORGANIZED DEBTORS AND THE
ASBESTOS PERSONAL INJURY TRUST, WHICH ACTIONS SHALL BE IN CONFORMITY AND
COMPLIANCE WITH THE PROVISIONS OF THE PLAN).
The Asbestos Personal Injury Trust will be
funded as follows:
On the Effective Date, or as soon as
practicable thereafter, the Reorganized Debtors shall irrevocably transfer and
assign to the Asbestos Personal Injury Trust for allocation to the OC
Sub-Account the following: (i) (a) if Class 4 accepts the Plan, the portion of
the Combined Net Distribution Package equal to the Class 7 Initial
Distribution Percentage; or (b) if Class 4 rejects the Plan, the portion of
the Combined Distribution Package equal to the Class 7 Initial Distribution
Percentage, and in addition and in any event, (ii) the OC Asbestos Personal
Injury Liability Insurance Assets and (iii) the OCD Insurance Escrow.
On or as soon as reasonably practicable
after the Final Distribution Date, the Reorganized Debtors shall irrevocably
transfer and assign to the Asbestos Personal Injury Trust for allocation to
the OC Sub-Account the following: (i) Cash in an amount equal to the Class 7
Final Distribution Percentage of Excess Available Cash, (ii) Excess Senior
Notes in an aggregate principal amount equal to the Class 7 Final Distribution
Percentage of the Excess Senior Notes Amount, (iii) shares of New OCD Common
Stock in an aggregate number equal to the Class 7 Final Distribution
Percentage of the Excess New OCD Common Stock, and (iv) Cash in an amount
equal to the Class 7 Final Distribution Percentage of the Excess Litigation
Trust Recoveries.
If all voting Classes accept the Plan, the
proposed Plan provides for a Class 7 Aggregate Amount of $10.7 billion. See
Section IV.D.2 entitled "Estimation of Asbestos Liability for Plan Purposes"
and Section VII.C.3.b(ii) entitled "General Description of Certain Terms of
the Plan Applicable to the Treatment of Classes 4, 5, 6, and 7" for a further
discussion of the estimation of OC Asbestos Personal Injury Claims if all
voting Classes accept the Plan and a discussion of the estimation of OC
Asbestos Personal Injury Claims if all voting Classes do not accept the Plan.
Class 7 Claims are Impaired and, to the
extent and in the manner provided in the Voting Procedures Order, holders of
the Claims in Class 7 are entitled to vote to accept or reject the Plan. Among
such conditions to confirmation is the requirement that at least 75% of the
holders of Class 7 that vote on the Plan vote in favor of the Plan.
(vii) Class 8: FB Asbestos Personal Injury Claims
Class 8 consists of FB Asbestos Personal
Injury Claims ("Class 8 Claims"). An "FB Asbestos Personal Injury Claim" means
any present or future right to payment, claim, remedy, liability or Demand
against any FB Person for death, bodily injury, or other personal damages
(whether physical, emotional or otherwise), whether or not such right, claim,
remedy, liability or Demand is reduced to judgment, liquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured, whether or not the facts of or legal basis for such
right, claim, remedy, liability or Demand are known or unknown, under any
theory of law, equity, admiralty, or otherwise, to the extent caused or
allegedly caused, directly or indirectly, by the presence of, or exposure to
asbestos or asbestos-containing products that for which any FB Person may be
legally liable, including, without limitation, the presence of, or exposure
to, asbestos or asbestos-containing products that were manufactured,
installed, fabricated, sold, supplied, produced, distributed, released, or in
any way at any time marketed or disposed of by any FB Person, including,
without express or implied limitation, any right, claim, remedy, liability or
Demand for compensatory damages (such as loss of consortium, wrongful death,
survivorship, proximate, consequential, general and special damages) and
including punitive damages. FB Asbestos Personal Injury Claims (i) include FB
Indirect Asbestos PI Trust Claims and Unpaid FB Resolved Asbestos Personal
Injury Claims, but (ii) exclude FB Resolved Asbestos Personal Injury Claims,
FB Asbestos Property Damage Claims, FB Indirect Asbestos Property Damage
Claims, workers' compensation claims, OC Asbestos Personal Injury Claims, OC
Indirect Asbestos PI Trust Claims, OC Asbestos Property Damage Claims, and OC
Indirect Asbestos Property Damage Claims.
ALL CLASS 8 CLAIMS SHALL BE CHANNELED TO
THE ASBESTOS PERSONAL INJURY TRUST, AND SHALL BE PROCESSED, LIQUIDATED AND
PAID PURSUANT TO THE TERMS AND PROVISIONS OF THE ASBESTOS PERSONAL INJURY
TRUST DISTRIBUTION PROCEDURES AND THE ASBESTOS PERSONAL INJURY TRUST
AGREEMENT. SEE SECTION VIII.C. OF THIS DISCLOSURE STATEMENT ENTITLED "THE
ASBESTOS PERSONAL INJURY PERMANENT CHANNELING INJUNCTION." THE SOLE RECOURSE
OF THE HOLDER OF A CLASS 8 CLAIM SHALL BE THE ASBESTOS PERSONAL INJURY TRUST,
AND SUCH HOLDER SHALL HAVE NO RIGHT WHATSOEVER AT ANY TIME TO ASSERT ITS CLAIM
OR DEMAND AGAINST ANY PROTECTED PARTY. WITHOUT LIMITING THE FOREGOING, ON THE
EFFECTIVE DATE, ALL PERSONS SHALL BE PERMANENTLY AND FOREVER STAYED,
RESTRAINED, AND ENJOINED FROM TAKING ANY ENJOINED ACTIONS FOR THE PURPOSE OF,
DIRECTLY OR INDIRECTLY, COLLECTING, RECOVERING, OR RECEIVING PAYMENT OF, ON,
OR WITH RESPECT TO ANY CLASS 8 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 THE DEBTORS OR REORGANIZED DEBTORS AND THE
ASBESTOS PERSONAL INJURY TRUST, WHICH ACTIONS SHALL BE IN CONFORMITY AND
COMPLIANCE WITH THE PROVISIONS OF THE PLAN).
On the Effective Date, or as soon as
practicable thereafter, the Reorganized Debtors shall irrevocably transfer and
assign to the Asbestos Personal Injury Trust for allocation to the FB
Sub-Account the following: (i) the FB Reversions, (ii) the Committed Claims
Account, and (iii) the FB Sub-Account Settlement Payment. The Reorganized
Debtors will, or will use all commercially reasonable efforts to, cause the
trustees of the Fibreboard Insurance Settlement Trust to irrevocably transfer
and assign (i) the Existing Fibreboard Insurance Settlement Trust Assets, and
(ii) any and all of the Fibreboard Insurance Settlement Trust's rights in the
FB Reversions, to the Asbestos Personal Injury Trust, for allocation to the FB
Sub-Account, on the Effective Date or as soon as practicable thereafter.
The Reorganized Debtors will also execute
and deliver, or will use all commercially reasonable efforts to cause the
trustees of the Fibreboard Insurance Settlement Trust to execute and deliver,
to the Asbestos Personal Injury Trust such documents as the Asbestos Personal
Injury Trustees reasonably request in connection with the transfer and
assignment of the Existing Fibreboard Insurance Settlement Trust Assets and
the FB Reversions.
The Reorganized Debtors will, or will use
all commercially reasonable efforts to, cause the trustees of the Fibreboard
Insurance Settlement Trust to irrevocably transfer and assign (i) the Existing
Fibreboard Insurance Settlement Trust Assets, and (ii) any and all of the
Fibreboard Insurance Settlement Trust's rights in the FB Reversions, to the
Asbestos Personal Injury Trust, for allocation to the FB Sub-Account, on the
Effective Date or as soon as practicable thereafter. The Reorganized Debtors
will also execute and deliver, or will use all commercially reasonable efforts
to cause the trustees of the Fibreboard Insurance Settlement Trust to execute
and deliver, to the Asbestos Personal Injury Trust such documents as the
Asbestos Personal Injury Trustees reasonably request in connection with the
transfer and assignment of the Existing Fibreboard Insurance Settlement Trust
Assets and the FB Reversions. For a discussion of the Fibreboard Insurance
Settlement Trust, see Section IV.B.1 of this Disclosure Statement entitled
"The Fibreboard Insurance Settlement Trust."
The FB Sub-Account Settlement Payment is
$140 million. It consists of the following: (a) $7 million in Cash, (b) Senior
Notes in the aggregate principal amount of $63 million; and (c) $2.8 million
shares of New OCD Common Stock, with an estimated value of $70 million.
The FB Sub-Account Settlement Payment is a
payment for the benefit of the holders of FB Asbestos Personal Injury Claims
in resolution of a number of issues and after consideration of several
factors. Although the Plan Proponents believe that substantive consolidation
is justified by the facts of this case and applicable law, the strict
application of principles of substantive consolidation would enable the
holders of FB Asbestos Personal Injury Claims to receive distributions against
the assets of the consolidated OCD estate. These distributions from OCD, when
combined with the specific assets dedicated for payment of FB Asbestos
Personal Injury Claims, would provide these claimants a substantially greater
recovery than other creditors, including the holders of OC Asbestos Personal
Injury Claims. Based on the reasonable expectations of the holders of FB
Asbestos Personal Injury Claims at a time just prior to the acquisition of
Fibreboard, this disparity in recoveries could be viewed as a windfall.
Permitting the unpaid portion of FB Asbestos Personal Injury Claims to "spill
over" against the consolidated OCD estate would have a significant detrimental
effect on distributions to other creditors. On the other hand, limiting the FB
Asbestos Personal Injury Claims to Existing Fibreboard Insurance Settlement
Trust Assets, the FB Reversions and the Committed Claims Account arguably
would be unfair to holders of these Claims and Demands. Prior to the
acquisition of Fibreboard by OCD, additional assets were available to pay
these claims, but the subsequent corporate restructuring, asset swaps, and
guaranties of the 1997 Credit Agreement left Fibreboard without any material
assets to pay FB Asbestos Personal Injury Claims other than the Existing
Fibreboard Insurance Settlement Trust Assets, the FB Reversions and the
Committed Claims Account. These transactions comprise part of the factual
basis for substantive consolidation under the Plan. Thus, the FB Sub-Account
Settlement Payment represents a settlement and compromise of any right of FB
Asbestos Personal Injury Claims to "spill over" against the consolidated OCD
estate.
The Plan Proponents believe the FB
Sub-Account Settlement Payment represents a fair and equitable resolution of
all issues concerning the source of payment to the holders of FB Asbestos
Personal Injury Claims and the agreement for these Holders not to participate
in the substantive consolidation.
If all voting Classes accept the Plan, the
proposed Plan provides for a Class 8 Aggregate Amount of $5.3 billion. See
Section IV.D.2 entitled "Estimation of Asbestos Liability for Plan Purposes"
and Section VII.C.3.b(ii) entitled "General Description of Certain Terms of
the Plan Applicable to the Treatment of Classes 4, 5, 6, and 7" for a further
discussion of the estimation of FB Asbestos Personal Injury Claims if all
voting Classes accept the Plan and a discussion of the estimation of FB
Asbestos Personal Injury Claims if all voting Classes do not accept the Plan.
Class 8 Claims are Impaired and, to the
extent and in the manner provided in the Voting Procedures Order, holders of
the Claims in Class 8 are entitled to vote to accept or reject the Plan. Among
such conditions to confirmation is the requirement that at least 75% of the
holders of Class 8 that vote on the Plan vote in favor of the Plan.
(viii) Class 9: FB Asbestos Property Damage Claims
Class 9 consists of FB Asbestos Property
Damage Claims ("Class 9 Claims"). An "FB Asbestos Property Damage Claim" means
any present or future right to payment, claim, remedy, or liability against,
or debt or obligation of, any FB Person, whether or not the facts or legal
basis for such right, claim, remedy, liability, debt or obligation are known
or unknown, under any theory of law, equity, admiralty, or otherwise for,
relating to, or arising by reason of, directly or indirectly, damage to
property, including, without limitation, diminution in the value thereof, or
environmental damage or economic loss related thereto, caused or allegedly
caused, directly or indirectly, in whole or in part by the presence in
buildings or other systems or structures of asbestos or asbestos-containing
products for which any FB Person may be legally liable, including, without
limitation, the presence of, or exposure to, asbestos or asbestos-containing
products that were manufactured, installed, fabricated, sold, supplied,
produced, distributed, released or in any way at any time marketed or disposed
of by any FB Person prior to the Petition Date, or for which any FB Person is
liable due to the acts or omissions of any FB Person, including, without
express or implied limitation, any right, claim, remedy, liability against, or
debt or obligation for compensatory damages (such as proximate, consequential,
general and special damages) and including punitive damages. FB Asbestos
Property Damage Claims include FB Indirect Asbestos Property Damage Claims.
ALL CLASS 9 CLAIMS SHALL BE CHANNELED TO
THE FB ASBESTOS PROPERTY DAMAGE TRUST, AND SHALL BE PROCESSED, LIQUIDATED AND
PAID PURSUANT TO THE TERMS AND PROVISIONS OF THE FB ASBESTOS PROPERTY DAMAGE
TRUST AGREEMENT AND THE FB ASBESTOS PROPERTY DAMAGE TRUST DISTRIBUTION
PROCEDURES. THE FB ASBESTOS PROPERTY DAMAGE TRUST WILL BE FUNDED IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 11.3 OF THE PLAN. THE SOLE RECOURSE OF THE
HOLDER OF AN ALLOWED CLASS 9 CLAIM SHALL BE THE FB ASBESTOS PROPERTY DAMAGE
TRUST, AND SUCH HOLDER SHALL HAVE NO RIGHT WHATSOEVER AT ANY TIME TO ASSERT
ITS CLASS 9 CLAIM AGAINST ANY FB PERSON. WITHOUT LIMITING THE FOREGOING, ON
THE EFFECTIVE DATE, ALL PERSONS SHALL BE PERMANENTLY AND FOREVER STAYED,
RESTRAINED, AND ENJOINED FROM TAKING ANY ENJOINED ACTIONS FOR THE PURPOSE OF,
DIRECTLY OR INDIRECTLY, COLLECTING, RECOVERING, OR RECEIVING PAYMENT OF, ON,
OR WITH RESPECT TO ANY FB 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 THE DEBTORS OR REORGANIZED
DEBTORS AND THE FB ASBESTOS PROPERTY DAMAGE TRUST, WHICH ACTIONS SHALL BE IN
CONFORMITY AND COMPLIANCE WITH THE PROVISIONS HEREOF).
On the later of the Effective Date and the
date by which the FB Asbestos Property Damage Trustee has executed the FB
Asbestos Property Damage Trust Agreement, the Reorganized Debtors shall
transfer and assign, or cause to be transferred and assigned, to the FB
Asbestos Property Damage Trust the FB Asbestos Property Damage Insurance
Assets. The FB Asbestos Property Damage Insurance Assets means rights to
coverage for FB Asbestos Property Damage Claims under liability insurance
policies issued to Fibreboard and identified in Schedule XVI to the Plan, to
be filed at least five (5) Business Days prior to the Objection Deadline. The
foregoing includes, without limitation, (i) rights under such insurance
policies, rights under settlement agreements made with respect to such
insurance policies, Insolvent Insurer PD Rights, and Insurance Guarantee Fund
PD Rights; and (ii) the right, on behalf of the Debtors, to give a full
release of the insurance rights of the Debtors for FB Asbestos Property Damage
Claims under any such policies or related agreements, provided that a
reciprocal release of the Debtors in connection with said policies or
agreements is given in exchange by the insurer or other released insurance
entity and further provided that any such release shall not encompass rights
with respect to coverage for workers' compensation claims or with respect to
coverage other than for FB Asbestos Property Damage Claims.
Holders of FB Asbestos Property Damage
Claims were required to file Proofs of Claim by the General Bar Date.
Fibreboard received over 275 property damage Proofs of Claim, 26 of which
collectively asserted damages in excess of $592 million. One of these claims
was filed by the State of Louisiana in the amount of $582 million. The State
of Louisiana also filed a claim in the same amount against OCD, but the
Debtors understand that the State of Louisiana believes it has a single claim
against the Debtors in the aggregate amount of $582 million. The Bankruptcy
Court dismissed 11 of these claims after the Debtors filed objections. The
remaining claims did not state a claimed amount and provided almost no
documentation to support their claim or to enable Fibreboard to estimate the
value of their claims. The Debtors filed a motion for a case management order
requesting that property damage claimants be required to provide the Debtors
with basic supporting evidence to enable the Debtors to value their claims.
Given the lack of information on these claims at this time, Fibreboard is
unable to estimate the likely amount of Allowed FB Asbestos Property Damage
Claims.
[The Debtors are currently analyzing the
FB Asbestos Property Damage Claims for and the insurance coverage for such
claims and will insert additional information in this section at a later date]
Based on a review of its records,
Fibreboard believes that the number and value of these claims are completely
out of proportion with its historical experience. As of the Petition Date,
only six property damage cases were pending against Fibreboard, four of which
had been dormant for more than five years. Prior to the Petition Date,
Fibreboard had resolved 92% of all property damage claims against it for $0
per claim. Fibreboard also notes that in other asbestos bankruptcies in which
hundreds of property damage claims were filed, such claims were resolved for
substantially less than the claimed amounts. For example, Eagle-Picher
Industries received 1,000 property damage proofs of claim asserting $11.5
billion and its plan of reorganization provided only $3 million to resolve
such claims. More recently, Armstrong World Industries settled 360 property
damage claims (four of which alone asserted claims in excess of $200 million),
for $2 million. Of these settled claims, 144 were also asserted against
Fibreboard.
Class 9 Claims are Impaired and, to the
extent and in the manner provided in the Voting Procedures Order, holders of
the Claims in Class 9 shall be entitled to vote to accept or reject the Plan.
(ix) Class 10: Intercompany Claims
Class 10 consists of Intercompany Claims
("Class 10 Claims"). An "Intercompany Claim" is any Claim, including, without
limitation, any Administrative Claim, by a Debtor against another Debtor, but
excluding the Claims set forth on Schedule XIV to the Plan, as it may be filed
or amended at least five (5) Business Days prior to the Objection Deadline.
Under the Plan, on the Effective Date, all Intercompany Claims other than such
Claims set forth in Schedule XIV, to be filed or amended at least five (5)
Business Days prior to the Objection Deadline, shall be deemed cancelled and
extinguished but solely for purposes of the Plan. Schedule XIV shall indicate
the classification and/or treatment of the Claims set forth therein. Except as
specified on Schedule XIV, no holder thereof shall be entitled to, or shall
receive or retain any property or interest in property on account of, such
Intercompany Claim pursuant to the Plan. The Plan Proponents reserve the
option to preserve a Claim by a Debtor against another Debtor to the extent
that extinguishing such Claim under the Plan has a detrimental effect on the
Debtors.
Class 10 Claims are Impaired. The holders
of the Claims in Class 10 are deemed to reject the Plan and, accordingly, are
not entitled to vote to accept or reject the Plan.
(x) Class 11: OCD Interests
Class 11 consists of all OCD Interests
("Class 11 Claims"). "OCD Interests" consist of (i) collectively, all Existing
OCD Common Stock, Existing OCD Preferred Stock and Existing OCD Options,
together with any options, warrants, conversion rights, rights of first
refusal or other rights, contractual, equitable or otherwise, to acquire or
receive any Existing OCD Common Stock, Existing OCD Preferred Stock, Existing
OCD Options or other capital stock in OCD, or any contract subscription,
commitment or agreement pursuant to which any Person was or could have been
entitled to receive any share of the capital stock of OCD, or any such option,
warrant, conversion right, right of first refusal or other right (including,
without limitation, any rights of any 401(k) plan or the interest of any
participant therein), in each case issued or entered into by, or otherwise the
obligation of, OCD or another Debtor; and (ii) all shares of Preferred Stock
and Class A Common Stock of Integrex, together with any options, warrants,
conversion rights, rights of first refusal or other rights, contractual,
equitable or otherwise, relating to such stock, held by Blue Ridge
Investments, L.L.C. or its successors and assigns.
On the Effective Date, all of the OCD
Interests outstanding at the Effective Date shall be deemed cancelled and
extinguished. No holder thereof shall be entitled to, or shall receive or
retain any property or interest in property on account of, such OCD Interests.
Class 11 Interests are Impaired. The
holders of the Claims in Class 11 are deemed to reject the Plan and,
accordingly, are not entitled to vote to accept or reject the Plan.
D. Summary of Debt to be Incurred, Securities to be Issued and
Other Consideration Under the Plan; Execution of Related Documents
The Plan provides that the holders of Allowed Claims in Classes 4, 5,
6, 7 and 8 will receive consideration in the form of a combination of (1)
Cash, (2) Senior Notes, (3) shares of New OCD Common Stock and (4) the
Litigation Trust Recoveries. Class 7 will receive additional distributions
consisting of the OC Asbestos Personal Injury Liability Insurance Assets and
the OCD Insurance Escrow. Class 8 will receive additional distributions
consisting of Existing Fibreboard Insurance Settlement Trust Assets, the FB
Reversions and the Committed Claims Account.
The following discussion summarizes certain provisions of securities
and other consideration to be distributed pursuant to the Plan. These
summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, all provisions of the instruments pursuant to
which such securities are to be issued, forms of which are attached as
Exhibits to the Plan.
1. Cash
As of the date of the Disclosure Statement, the total amount
of cash that will be available to fund the cash component of distributions
under the Plan has not yet been determined. The sources of the cash that will
be used to fund that cash component will include the following:
(a) Restricted Cash, OCD Reversions and FB Reversions
Restricted Cash consists of the administrative
deposits (together with earnings thereon) made by OCD (OCD Restricted Cash)
and Fibreboard (FB Restricted Cash) which were deposited in settlement
accounts in respect of Asbestos Personal Injury Claims to facilitate claims
processing under the NSP remaining in those settlement accounts as of five (5)
Business Days prior to the Effective Date. As discussed above, there has been
litigation commenced with respect to funds in the settlement accounts. See
Section IV.E.7 of this Disclosure Statement entitled "Baron & Budd
Administrative Deposits" and Section V.G.3.e of this Disclosure Statement
entitled "NSP Actions and Tolling Agreements."
To the extent that the Bankruptcy Court authorizes
such Restricted Cash to be used to conclude OC Resolved Asbestos Personal
Injury Claims or FB Resolved Asbestos Personal Injury Claims, such funds will
continue to be used for those purposes. OC Resolved Asbestos Personal Injury
Claims and FB Resolved Asbestos Personal Injury Claims are Asbestos Personal
Injury Claims with respect to which (i) the holder of such Claim (a) is
represented by an attorney of record who has entered into an enforceable NSP
Agreement with OC or Fibreboard, respectively, and (b) has satisfied all of
the preconditions to payment under the applicable NSP Agreement prior to the
Petition Date (including, without limitation, the submission of information
about the Claim holder's exposure and injury as well as the delivery of a
properly executed release relating to such Claim) and (ii) such Claims are
eligible to be paid from settlement accounts in respect of FB Asbestos
Personal Injury Claims, to facilitate claims processing under the NSP,
including settlement accounts maintained by (a) Baron & Budd, P.C., (b) Foster
& Sear, LLP, (c) W&K, or (d) Weitz & Luxenberg, and such monies are available
to pay such claims and have not been or are not avoided and recovered for the
benefit of the Debtors' Estates or the Fibreboard Insurance Settlement Trust.
OCD Reversions are such amounts as may from time to
time be released from the settlement accounts in respect of OC Asbestos
Personal Injury Claims and returned to OCD. If released to OCD so that it
would be shown as cash or cash equivalents on a consolidated balance sheet of
OC as of the last day of the month prior to the month in which the Effective
Date occurs, such OCD Reversions would become Available Cash. OCD Restricted
Cash which is released as a result of an Avoidance Action becomes a Litigation
Trust Asset. FB Reversions are such amounts as may from time to time be
released from the settlement accounts in respect of FB Asbestos Personal
Injury Claims and returned to the Fibreboard Insurance Settlement Trust or FB
Sub-Account of the Asbestos Personal Injury Trust, whichever is applicable. FB
Reversions shall include any recoveries, including any recoveries on account
of Avoidance Actions, of those funds previously paid from the Fibreboard
Insurance Settlement Trust.
(b) Available Cash
Available Cash means Cash in the amount of the sum
of (i) all Cash that would be shown as cash or cash equivalents on a
consolidated balance sheet of OC as of the last day of the month prior to the
month in which the Effective Date occurs, prepared in accordance with United
States generally accepted accounting principles consistent with the past
practices of OC, and (ii) the OCD Reversions to the extent set forth in the
immediately preceding paragraph, and excluding (a) the OCD Insurance Escrow,
(b) the aggregate amount of Cash to be distributed to holders of Unclassified
Claims, Unimpaired Claims and Allowed Class 3 Claims, (c) Restricted Cash, (d)
the Existing Fibreboard Insurance Settlement Trust Assets, (e) the FB
Reversions, (f) the Litigation Trust Assets, and (g) necessary reserves for
working capital and pension contributions as determined by the Debtors and
approved by the other Plan Proponents.
Based upon the assumptions used in preparing the
Financial Projections included in Appendix B of this Disclosure Statement and
assuming that the Effective Date will occur on December 31, 2003, and after
reserving $400 million for working capital and pension contribution purposes,
the Debtors expect that approximately $205 million of cash will be Available
Cash for distribution in accordance with the provision of the Plan.
2. Senior Notes
The Senior Notes component of the distributions under the
Plan will consist of an issue of unsecured unsubordinated debt securities in
the aggregate principal amount of $1,400 million less the sum of (a) the
aggregate principal amount of the debt to the IRS which is an Allowed Priority
Tax Claim and (b) the amount of, if any, to be drawn under the Exit Facility
at the Effective Date. The principal terms and conditions of the Senior Notes
are set forth in the preliminary term sheet set forth as Appendix E to this
Disclosure Statement [which will be inserted in this Disclosure Statement at a
later date]. The Senior Notes may be issued in one or more series, each of
which may have different terms, maturities and interest rates. While the
specific terms of the Senior Notes will be established in consultation with
OC's financial advisors closer to the Effective Date, the terms are expected
to be similar to the terms of unsubordinated obligations issued by comparably
rated industrial companies at that time, including the following: (a)
interest, payable semi-annually, at a fixed rate based upon U.S. Treasury
Notes with like maturities plus a spread determined to be the average
corporate spread over the Treasury Notes for outstanding issues of comparable
maturities 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 and (b) a maturity, as selected by the Debtors, no less than five years
and no more than 10 years, with no principal payments made on the Senior Notes
until the maturity date.
3. New OCD Common Stock
The common stock component of the distributions under the
Plan will consist of newly issued shares of New OCD Common Stock. As of the
Effective Date, the authorized capital stock of Reorganized OCD will consist
of 200 million shares of New OCD Common Stock, par value $0.10 per share. The
Amended and Restated Certificate of Incorporation of Reorganized OCD will
provide, in accordance with Section 1123(a)(6) of the Bankruptcy Code, that
Reorganized OCD shall not have authority to issue any nonvoting equity
securities. As of the Effective Date, after giving effect to the distributions
under the Plan, 76 million shares of New OCD Common Stock will be issued and
outstanding.
All shares of New OCD Common Stock will be identical and
will entitle the holders thereof to the same rights and privileges and, except
as otherwise required by law, on all matters submitted for a vote of OCD's
stockholders, the holders of New OCD Common Stock will be entitled to one
vote, in person or by proxy, for each share of New OCD Common Stock owned. The
New OCD Common Stock will be subject to dilution as a result of future
issuances, including shares that are or may be issued under any stock-based
management incentive plans. Holders of New OCD Common Stock will be entitled
to receive such dividends, if any, as may be declared from time to time by the
Board of Directors of Reorganized OCD in its discretion from funds legally
available therefore. When and as dividends or other distributions are paid,
whether payable in Cash, in property or in securities of Reorganized OCD, the
holders of New OCD Common Stock will be entitled to share equally, share for
share, in such dividends or other distributions. In the event of any
liquidation, dissolution or winding up of the affairs of Reorganized OCD,
whether voluntary or involuntary or otherwise, the holders of New OCD Common
Stock will be entitled to share, Pro Rata, in any property available for
distribution after satisfaction of all other claims.
Holders of the shares of New OCD Common Stock will have no
preemptive or other subscription rights and there will be no conversion rights
or redemption or sinking fund provisions with respect to such shares. All of
the shares of New OCD Common Stock that will be issued as of the Effective
Date will be fully paid and nonassessable.
OC will determine the equity value of the New OCD Common
Stock as of the Effective Date, based upon the residual value of the equity of
Reorganized OCD, with the assistance of its financial advisors and the
financial advisors for the other Plan Proponents. See Section XIV of the
Disclosure Statement entitled "Feasibility of the Plan and Best Interests of
Creditors."
4. Litigation Trust Recoveries
As part of the distributions to be made under the Plan, the
holders of Allowed Claims in Classes 4, 5, and 6 and the OC Sub-Account of the
Asbestos Personal Injury Trust for the benefit of holders of Allowed Claims in
Class 7 will receive a proportionate interest in Litigation Trust Recoveries, if
any. [The proposed Litigation Trust Agreement has not been finalized and this
section will be amended or supplemented when this document is finalized] The
Litigation Trust Recoveries will be distributed to holders of the Allowed Claims
in each of Classes 4, 5, and 6 (with appropriate reserves of Litigation Trust
Recoveries for holders of Disputed Claims in each of such Classes) and to the OC
Sub-Account of the Asbestos Personal Injury Trust for the benefit of Class 7
Claims, in each case, in accordance with the formulas described in Section VII
C.3.b.(ii)-(vi) of this Disclosure Statement. See Section X entitled "The
Litigation Trust" for a summary of the terms of the Litigation Trust Agreement.
E. Distributions under the Plan
1. The Disbursing Agent
The Disbursing Agent or, in the case of the Bondholders
Claims, the appropriate Pre-petition Indenture Trustee, shall make all
distributions required under the Plan, except to holders of Asbestos Personal
Injury Claims and FB Asbestos Property Damage Claims. Asbestos Personal Injury
Claims shall be satisfied in accordance with the distribution procedures
described in the Asbestos Personal Injury Trust Agreement and the Asbestos
Personal Injury Trust Distribution Procedures. FB Asbestos Property Damage
Claims shall be satisfied in accordance with the distribution procedures
described in the FB Asbestos Property Damage Trust Agreement and the FB
Asbestos Property Damage Trust Distribution Procedures.
The Reorganized OCD or any other Person designated by the
Plan Proponents, shall serve as a disbursing agent under the Plan. If the
Disbursing Agent is an independent third party designated to serve in such
capacity, such Disbursing Agent will be entitled to receive, without further
Bankruptcy Court approval, reasonable compensation for distribution services
rendered pursuant to the Plan as well as reimbursement of reasonable
out-of-pocket expenses incurred in connection with rendering such services
from the Reorganized Debtors on terms acceptable to the Reorganized Debtors.
No Disbursing Agent will be required to give any bond or surety or other
security for the performance of its duties unless otherwise ordered by the
Bankruptcy Court.
2. Distributions for Claims Allowed as of the Initial
Distribution Date
Except as otherwise provided in the Plan or as ordered by
the Bankruptcy Court, distributions to be made on account of Claims that are
Allowed Claims as of the Initial Distribution Date shall be made on, or as
soon as practicable after, the Initial Distribution Date, which means with
respect to holders of Allowed Class 1, 2A, 2B, 3, 4, 5, and 6 Claims, a date
that is not later than thirty (30) days after the Effective Date.
Distributions on account of (a) Class 7 and 8 Claims shall be made in
accordance with the terms or conditions of the Asbestos Personal Injury Trust
Agreement and the Asbestos Personal Injury Trust Distribution Procedures (see
Section VIII of this Disclosure Statement entitled "The Asbestos Personal
Injury Trust"), and (b) Class 9 Claims shall be made in accordance with the
terms or conditions of the FB Asbestos Property Damage Trust Agreement and the
FB Asbestos Property Damage Trust Distribution Procedures (see Section IX of
this Disclosure Statement entitled "The FB Asbestos Property Damage Trust").
Distributions on account of Claims that first become Allowed Claims after the
Initial Distribution Date shall be made pursuant to Section 9.4 of the Plan,
as described in Section VII. G.3 of this Disclosure Statement entitled
"Distributions on Account of Disputed Claims Once They are Allowed".
Notwithstanding the date on which any distribution of New OCD Securities is
actually made to a holder of a Claim that is an Allowed Claim on the Initial
Distribution Date, as of the date of the distribution such holder shall be
deemed to have the rights of a holder of such securities distributed as of the
Initial Distribution Date.
"Allowed" means:
(a) with respect to any Claim, other than an Administrative
Claim, an Asbestos Personal Injury Claim or an FB Asbestos Property Damage
Claim, proof of which was filed within the applicable period of limitation
fixed in accordance with Federal Rule of Bankruptcy Procedure 3003(c)(3) by
the Bankruptcy Court, (i) as to which no objection to the allowance thereof
has been interposed on or before the Initial Distribution Date and as to which
the Debtors have not sent a notice to the holder of such Claim by the Initial
Distribution Date that the Claim in under review for possible objection, or
(ii) as to which no objection is filed within the applicable period of
limitation fixed by the Plan, the Bankruptcy Code, the Federal Rules of
Bankruptcy Procedure or a Final Order of the Bankruptcy Court, to the extent
asserted in the proof of such Claim or (iii) as to which an objection has been
interposed, to the extent that such Claim has been allowed in whole or in part
by a Final Order of the Bankruptcy Court;
(b) with respect to any Claim, other than an Administrative
Claim, an Asbestos Personal Injury Claim or an FB Asbestos Property Damage
Claim, as to which no Proof of Claim was filed within the applicable period of
limitation fixed by the Plan, the Bankruptcy Code, the Federal Rules of
Bankruptcy Procedure or a Final Order of the Bankruptcy Court, to the extent
that such Claim has been listed by one of the Debtors in its SOFAS as
liquidated in amount and not disputed or contingent and (i) as to which no
objection to the allowance thereof has been interposed on or before the
Initial Distribution Date and as to which the Debtors have not sent a notice
to the holder of such Claim by the Initial Distribution Date that the Claim in
under review for possible objection, or (ii) 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 Federal Rules of
Bankruptcy Procedure or a Final Order of the Bankruptcy Court or (iii) as to
which an objection has been interposed, to the extent that such Claim has been
allowed in whole or in part by a Final Order of the Bankruptcy Court;
(c) with respect to any other Claim that is asserted to
constitute an Administrative Claim, other than 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,
(a) that represents an actual or necessary expense of preserving the Estate or
operating the business of the Debtors, to the extent that such Claim is
reflected as a postpetition liability of any of the Debtors on the Debtors'
books and records as of the Effective Date, or (b) that the Debtors dispute,
to the extent that such Claim 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;
(d) with respect to any other Claim that is asserted to
constitute an Administrative Claim 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,
to the extent that such Claim is allowed by a Final Order of the Bankruptcy
Court under Section 330 of the Bankruptcy Code;
(e) 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 Personal Injury Trust Agreement and the
Asbestos Personal Injury Trust Distribution Procedures; or
(f) with respect to any FB Asbestos Property Damage 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, such Claim
to the extent that it is Allowed in accordance with the procedures established
pursuant to the FB Asbestos Property Damage Trust Agreement and the FB
Asbestos Property Damage Trust Distribution Procedures.
3. Interest on Claims
Unless otherwise specifically provided for in the Plan, the
Confirmation Order, or the Asbestos Personal Injury Trust Distribution
Procedures, or required by applicable bankruptcy law, post-petition interest
shall not accrue or be paid on Claims, and no holder of a Claim shall be
entitled to interest accruing on or after the Petition Date on any Claim.
Interest shall not accrue or be paid upon any Disputed Claim in respect of the
period from the Petition Date to the date a final distribution is made thereon
if and after such Disputed Claim becomes an Allowed Claim.
4. Record Date for Distributions to Holders of Bank Holders
Claims and Bondholders Claims
At the close of business on the Distribution Record Date,
the transfer records for the Bank Holders Claims and Bondholders Claims will
be closed, and there shall be no further changes in the record holders of Bank
Holders Claims or Bondholders Claims. None of the Reorganized Debtors, the
Disbursing Agent, if any, CSFB, as agent for the Bank Holders nor the
applicable Pre-petition Indenture Trustee under the Pre-petition Bond
Indenture for the Bondholders will have any obligation to recognize any
transfer of Allowed Bank Holders Claims or Allowed Bondholders Claims, as
applicable, occurring after the Distribution Record Date, and they will be
entitled instead to recognize and deal for all purposes hereunder with only
those record holders as of the close of business on the Distribution Record
Date.
5. Delivery of Distributions
(a) General
Distributions to holders of Allowed Claims in
Classes 1, 2A, 2B, 3, 4, 5 and 6 shall be made by the Disbursing Agent or the
applicable Pre-petition Indenture Trustee, as the case may be. If any holder's
distribution is returned as undeliverable, no further distributions to such
holder shall be made until the Disbursing Agent (or the Pre-petition Indenture
Trustee as applicable) is notified of such holder's then current address, at
which time all missed distributions shall be made to such holder without
interest. Amounts in respect of undeliverable distributions made by the
Disbursing Agent (or the Pre-petition Indenture Trustee as applicable) shall
be returned to the Reorganized Debtors until such distributions are claimed.
All the claims for undeliverable distributions made by the Disbursing Agent or
the Pre-petition Indenture Trustee, as the case may be, must be made on or
before the first (1st) anniversary of the Effective Date, after which date all
unclaimed property shall revert to the Reorganized Debtors free of any
restrictions thereon and the claim of any holder or successor to such holder
with respect to such property shall be discharged and forever barred,
notwithstanding any federal or state escheat laws to the contrary. Nothing
contained in the Plan shall require the Debtors, the Reorganized Debtors, any
Disbursing Agent, the Administrative Agent for the Bank Holders or any
Pre-petition Indenture Trustee to attempt to locate any holder of an Allowed
Claim.
Cash payments made pursuant to the Plan will be in
United States funds by means agreed to by the payor and the payee, including
by check or wire transfer, or, in the absence of an agreement, such
commercially reasonable manner as the payor shall determine in its sole
discretion.
(b) Fractional New OCD Common Stock; Other Distributions
(i) No fractional shares of New OCD Common Stock
will be issued or distributed under the Plan. If any distribution pursuant to
the Plan would otherwise result in the issuance of New OCD Common Stock that
is not a whole number, the actual distribution of shares of such stock shall
be rounded to the next higher or lower whole number as follows: (a) fractions
of greater than one-half (1/2) shall be rounded to the next higher whole
number, and (b) fractions of one-half (1/2) or less shall be rounded to the
next lower whole number. The total number of shares of New OCD Common Stock
and the Senior Notes to be distributed pursuant to the Plan shall be adjusted
as necessary to account for the rounding provided for herein.
(ii) No consideration shall be provided in lieu of
fractional shares that are rounded down. The Senior Notes will only be issued
with a principal amount in multiples of $1,000 or integral multiples thereof.
The principal amount of the Senior Notes that would have been distributed in
amounts of other than $1,000 shall be rounded as follows: (a) amounts equal to
or less than $500 shall be reduced to $0.00 and (b) amounts greater than $500
shall be increased to $1,000.
(iii) The payment of fractions of dollars shall not
be made. Whenever any payment of a fraction of a dollar under the Plan would
otherwise be called for, the actual payment made shall reflect a rounding of
the fraction to the nearest whole dollar (up and down), with half dollars
rounded down.
(iv) The Disbursing Agent, or any agent or
servicer, as the case may be, shall not make any payment of less than thirty
dollars ($30.00) with respect to any Claim.
(c) Surrender of Pre-petition Bonds
(i) Manner of Surrender of the Pre-petition
Bonds
Except as provided in connection with
lost, stolen, mutilated or destroyed Pre-petition Bonds, each holder of an
Allowed Claim evidenced by a Pre-petition Bond shall tender such Pre-petition
Bond to the respective Pre-petition Indenture Trustee in accordance with
written instructions to be provided in a letter of transmittal to such holders
by the Pre-petition Indenture Trustee as promptly as practicable following the
Effective Date. Such letter of transmittal shall specify that delivery of such
Pre-petition Bonds will be effected, and risk of loss and title thereto will
pass, only upon the proper delivery of such Pre-petition Bonds with the letter
of transmittal in accordance with such instructions. Such letter of
transmittal shall also include, among other provisions, customary provisions
with respect to the authority of the holder of the applicable note or
Pre-petition Bonds to act and the authenticity of any signatures required on
the letter of transmittal. All surrendered Pre-petition Bonds shall be marked
as cancelled and delivered by the respective Pre-petition Indenture Trustee to
the Reorganized Debtors.
(ii) Lost, Mutilated or Destroyed Pre-petition
Bonds
In addition to any requirements under the
applicable certificate or articles of incorporation or bylaws of the
applicable Debtor, any holder of indebtedness or obligation of a Debtor
evidenced by a Pre-petition Bond that has been lost, stolen, mutilated or
destroyed shall, in lieu of surrendering the Pre-petition Bond, deliver to the
Pre-petition Indenture Trustee (a) evidence satisfactory to the Pre-petition
Indenture Trustee of the loss, theft, mutilation or destruction; and (b) such
indemnity as may be required by the Pre-petition Indenture Trustee to hold the
Pre-petition Indenture Trustee harmless from any damages, liabilities or costs
incurred in treating such individual as a holder of a Pre-petition Bond.
(iii) Failure to Surrender Cancelled Pre-petition
Bonds
Any holder of a Pre-petition Bond that
fails to surrender or be deemed to have surrendered such Pre-petition Bond
before the first (1st) anniversary of the Effective Date shall have its Claim
for a distribution on account of such Pre-petition Bond discharged and shall
be forever barred from asserting any such Claim against any Reorganized Debtor
or their respective property.
(iv) Distributions upon Receipt of Pre-petition
Bonds
No distribution of property under the Plan
shall be made to or on behalf of any such holders unless and until such
Pre-petition Bond is received by the appropriate Pre-petition Indenture
Trustee, or the unavailability of such Pre-petition Bond is established to the
reasonable satisfaction of the appropriate Pre-petition Indenture Trustee or
such requirement is waived by the Reorganized Debtors.
(d) Withholding and Reporting Requirements
For distributions under the Plan, the
Disbursing Agent shall, to the extent applicable, comply with all tax
withholding and backup withholding and reporting requirements imposed by any
federal, state, provincial, local or foreign taxing authority, and all
distributions thereunder shall be subject to any such withholding and
reporting requirements. The Disbursing Agent shall be authorized to take any
and all actions that may be necessary or appropriate to comply with such
withholding and reporting requirements.
(e) Setoffs
The Reorganized Debtors may, but shall not
be required to, set off against any Claim and the payments or other
distributions to be made pursuant to the Plan in respect of such Claim, claims
of any nature whatsoever that the Debtors or Reorganized Debtors may have
against the holder of such Claim; provided, however, that neither the failure
to do so nor the allowance of any Claim hereunder shall constitute a waiver or
release by the Reorganized Debtors of any such claim that the Debtors or
Reorganized Debtors may have against such holder.
F. Treatment of Executory Contracts and Unexpired Leases
1. Assumption and Rejection of Executory Contracts and Unexpired
Leases
Under Section 365 of the Bankruptcy Code, the Debtors have
the right, subject to Bankruptcy Court approval, to assume or reject any
executory contracts or unexpired leases. If the Debtors reject an executory
contract or unexpired lease that was entered into before the Petition Date,
the contract or lease will be treated as if it had been breached on the date
immediately preceding the Petition Date, and the other party to the agreement
will have a Class 6 Claim for damages incurred as a result of the rejection.
In the case of rejection of employment severance agreements and real property
leases, damages are subject to certain limitations imposed by Sections 365 and
502 of the Bankruptcy Code.
(a) Assumed Contracts and Leases
Except as otherwise provided in the Plan, or in any
contract, instrument, release, indenture or other agreement or document
entered into in connection with the Plan, as of the Effective Date, each
Debtor shall be deemed to have assumed each executory contract and unexpired
lease to which it is a party, unless such contract or lease (i) was previously
assumed or rejected by such Debtor, (ii) previously expired or terminated
pursuant to its own terms, (iii) is the subject of a motion pending before the
Bankruptcy Court as of the Confirmation Date to assume or reject such contract
or lease or (iv) is listed on Schedule IV, to be filed at least five (5)
Business Days prior to the Objection Deadline, as being an executory contract
or unexpired lease to be rejected; provided, however, that the Plan Proponents
reserve the right, at any time prior to the Confirmation Date, to amend
Schedule IV to the Plan to add or delete any unexpired lease or executory
contract. The Confirmation Order shall constitute an order of the Bankruptcy
Court under Section 365 of the Bankruptcy Code approving the contract and
lease assumptions described above, as of the Effective Date.
Each executory contract and unexpired lease that is
assumed and relates to the use, ability to acquire, or occupancy of real
property shall include (i) all modifications, amendments, supplements,
restatements or other agreements made directly or indirectly by any agreement,
instrument or other document that in any manner affect such executory contract
or unexpired lease and (ii) all executory contracts or unexpired leases
appurtenant to the premises, including all easements, licenses, permits,
rights, privileges, immunities, options, rights of first refusal, powers,
uses, usufructs, reciprocal easement agreements, vaults, tunnel or bridge
agreements or franchises and any other interests in real estate or rights in
rem related to such premises, unless any of the foregoing agreements has been
rejected pursuant to an order of the Bankruptcy Court.
Except to the extent previously assumed or rejected
by an order of the Bankruptcy Court, on or before the Confirmation Date, all
employment and severance practices and policies and all compensation and
benefit plans, policies and programs of the Debtors applicable to their
directors, officers or employees, including, without limitation, all savings
plans, retirement plans, health care plans, severance benefit plans, incentive
plans, workers' compensation programs and life, disability or other insurance
plans and programs subject to Sections 1114 and 1129(a)(13) of the Bankruptcy
Code, entered into before or after the Petition Date and not since terminated,
shall be deemed to be and shall be treated as though they are executory
contracts under the Plan that are assumed pursuant to Section 365(b)(2) of the
Bankruptcy Code, except for (i) executory contracts or plans specifically
rejected pursuant to the Plan and (ii) executory contracts or plans as have
been previously rejected, are the subject of a motion to reject or have been
specifically waived by the beneficiary of any plans or contracts; provided,
however, that the debtors may pay "retiree benefits" (as defined in Section
1114(a) of the Bankruptcy Code).
Certain employee benefit plans will be terminated
or amended on the Effective Date or earlier, as follows:
(i) The Stock Performance Plan, the 1995 Stock Plan
and the 1987 Stock Plan for Directors, each of which is an equity incentive
plan providing for grants of equity-based awards, including stock options and
restricted stock, will be deemed terminated, cancelled and of no further force
and effect, and the participants thereunder will have no further rights under
such plans;
(ii) [The Debtors are reviewing their employee
benefit plan and the description on other benefit plans to be terminated or
amended, if any, may be inserted at a later date.]
(b) Payments Related to Assumption of Contracts and
Leases
Any monetary amounts by which each executory
contract and unexpired lease to be assumed pursuant to the Plan is in default
will be satisfied, under Section 365(b)(1) of the Bankruptcy Code, at the
option of the applicable Debtor party to the contract or lease or the assignee
of such Debtor assuming such contract or lease, by Cure. If there is a dispute
regarding (i) the nature or amount of any Cure, (ii) the ability of a
Reorganized Debtor or any assignee to provide "adequate assurance of future
performance" (within the meaning of Section 365 of the Bankruptcy Code) under
the contract or lease to be assumed or (iii) any other matter pertaining to
assumption, Cure will occur following the entry of a Final Order of the
Bankruptcy Court resolving the dispute and approving the assumption or
assumption and assignment, as the case may be. The Confirmation Order shall
contain provisions for notices of proposed assumptions and proposed Cure
amounts to be sent to applicable third parties and for procedures for
objecting thereto and resolution of disputes by the Bankruptcy Court. If the
no proposed Cure amount is proposed by the Debtors, it shall be presumed that
the Debtors are asserting that no Cure amount is required to be paid under
Section 365(b)(1) of the Bankruptcy Code.
The Debtors estimate that the aggregate amount to
be paid as Cure associated with the assumption of executory contracts, that
have not been previously paid pursuant to an order of the Bankruptcy Court,
will be between $20 million and $25 million.
(c) Rejected Contracts and Leases
On the Effective Date, each executory contract and
unexpired lease that is listed on Schedule IV to the Plan, shall be rejected
pursuant to Section 365 of the Bankruptcy Code. Each contract or lease listed
on Schedule IV to the Plan shall be rejected only to the extent that any such
contract or lease constitutes an executory contract or unexpired lease. The
Plan Proponents reserve their right, at any time prior to the Confirmation
Date, to amend Schedule IV to the Plan to delete any unexpired lease or
executory contract therefrom or add any unexpired lease or executory contract
thereto. To the extent that an executory contract or unexpired lease (i) is
not listed on Schedule IV to the Plan, (ii) has not been previously rejected
or (iii) is not subject to a motion to reject at the time of the Confirmation
Date, such executory contract or unexpired lease shall be deemed assumed.
Listing a contract or lease on Schedule IV to the Plan shall not constitute an
admission by a Debtor nor a Reorganized Debtor that such contract or lease is
an executory contract or unexpired lease or that such Debtor or Reorganized
Debtor has any liability thereunder. Without limiting the foregoing, any
agreement entered into prior to the Petition Date by or on behalf of the
Debtors with a holder of an Asbestos Personal Injury Claim with respect to the
settlement of any OC Asbestos Personal Injury Claim or FB 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. The Confirmation Order shall
constitute an order of the Bankruptcy Court approving such rejections as of
the Effective Date, pursuant to Section 365 of the Bankruptcy Code.
The Debtors estimate that the total aggregate
allowed amount of claims resulting from rejecting executory contracts and
unexpired leases that have not been paid pursuant to Order of the Bankruptcy
Court will be between $46 and $87 million.
(d) Rejection Damages Bar Date
If the rejection by a Debtor, pursuant to the Plan
or otherwise, of an executory contract or unexpired lease results in a Claim,
then such Claim shall be forever barred and shall not be enforceable against
any Debtor or Reorganized Debtor, or the properties of any of them, unless a
Proof of Claim is filed with the clerk of the Bankruptcy Court and served upon
counsel to the Debtors, counsel to the Unsecured Creditors' Committee and
counsel to the Asbestos Claimants' Committee, within thirty (30) days after
service of the earlier of (i) notice of the Confirmation Order or (ii) other
notice that the executory contract or unexpired lease has been rejected.
(e) Insurance Policies and Agreements
The Plan contains separate provisions with respect
to insurance policies and agreements. The Debtors do not believe that the
insurance policies issued to, or insurance agreements entered into by, the
Debtors prior to the Petition Date constitute executory contracts. To the
extent that such insurance policies or agreements are considered to be
executory contracts, then 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 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 each Debtor, its Estate, and all parties in interest in the
Chapter 11 Cases. 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 the Debtors existing as
of the Confirmation Date with respect to each such insurance policy or
agreement. To the extent that the Bankruptcy Court determines otherwise as to
any such insurance policy or agreement, the Debtors reserve the right to seek
rejection of such insurance policy or agreement or other available relief.
Nonetheless, the Debtors may elect to reject
certain insurance policies and agreements to the extent they are determined to
be executory contracts. To the extent that any or all of the insurance
policies and agreements set forth on Schedule XI to the Plan, to be filed no
later than five (5) Business Days prior to the Objection Deadline, are
considered to be executory contracts, then, notwithstanding anything contained
in Section 7.1 or 7.3 of the Plan to the contrary, the Plan shall constitute a
motion to reject the insurance policies and agreements set forth on Schedule
XI to the Plan, and the entry of the Confirmation Order by the clerk of the
Bankruptcy Court shall constitute approval of such rejection pursuant to
Section 365(a) of the Bankruptcy Code and a finding by the Bankruptcy Court
that each such rejected insurance policy or agreement set forth on Schedule XI
to the Plan is burdensome and that the rejection thereof is in the best
interest of each Debtor, its Estate, and all parties in interest in the
Chapter 11 Cases.
The rights under the insurance policies and
agreements constituting (i) the OC Asbestos Personal Injury Liability
Insurance Assets shall, to the extent necessary, be deemed assigned to the OC
Sub-Account of the Asbestos Personal Injury Trust as of the Effective Date and
(ii) the FB Asbestos Property Damage Insurance Assets shall, to the extent
necessary, be deemed assigned to the FB Asbestos Property Damage Trust as of
the Effective Date, and, pursuant to Section 365 of the Bankruptcy Code, the
Debtors shall have no further liability thereunder from and after June 18,
2001.
Nothing contained in the Plan shall constitute a
waiver of any claim, right, or cause of action that the Debtors, the Asbestos
Personal Injury Trust, the FB Asbestos Property Damage Trust, or the
Reorganized Debtors, as the case may be, may hold against the insurer under
any policy of insurance or insurance agreement.
(f) Indemnification Obligations and Agreements Concerning
Obligations to Indemnify
Indemnification Obligations shall be deemed to be,
and shall be treated as though they are, executory contracts that are assumed
pursuant to Section 365 of the Bankruptcy Code under the Plan and such
obligations shall survive confirmation of the Plan, remain unaffected by the
Plan and shall not be discharged or impaired by the Plan, irrespective of
whether indemnification or reimbursement obligation is owed in connection with
an event occurring before or after the Petition Date.
"Indemnification Obligations" mean any legally
enforceable obligations of any of the Debtors under their charters, by-laws,
contracts assumed by them pursuant to Section 365 of the Bankruptcy Code, or
statute, to indemnify, reimburse or provide contribution to any or all persons
who may serve or who have served at any time as directors, officers,
employees, agents, professionals or advisors of such Debtor, or who at the
request of any of the Debtors served as directors, officers, employees,
agents, professionals or advisors of another corporation (including
Subsidiaries of the Debtors) or of any partnership, joint venture, trust or
other enterprise, and any directors, officers, employees, agents,
professionals or advisors of any of the Debtors who at the request of such
Debtor may serve or have served as agents or fiduciaries of an employee
benefit plan of such Debtor or any of its Subsidiaries, from and against any
of the expenses, liabilities or other matters arising under or in or covered
by applicable law, provided that the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee, agent,
professional or advisor or in any other capacity while serving as a director,
officer, employee, agent, professional or advisor, and provided that such
obligations shall not cover willful misconduct. Notwithstanding anything to
the contrary herein, Indemnification Obligations shall not include any
obligations of the Debtors to pay or reimburse any party in connection with
(i) funds recovered or to be recovered from such party pursuant to an
Avoidance Action, or (ii) claims arising out of or in connection with the case
of John Hancock Life Insurance Co., et al. v. Goldman, Sachs & Co., et al., in
the United States District Court for the District of Massachusetts, C.A. No.
01-10729-RWZ.
Except as otherwise provided in this Plan,
indemnification obligations that are not Indemnification Obligations hereof
shall be deemed to be, and shall be treated as though they are, executory
contracts that are rejected pursuant to Section 365 of the Bankruptcy Code as
of the Effective Date. The Plan does provide the Debtor the right to honor
certain distributorship indemnification claims. See Section 14.10 the Plan
G. Resolution and Treatment of Disputed, Contingent, and Unliquidated
Claims
1. Objections
Unless otherwise ordered by the Bankruptcy Court, only the
Debtors, the Reorganized Debtors or the Disbursing Agent shall have the
authority to file objections to settle, compromise, withdraw or litigate
objections to Claims, other than with respect to (a) the applications for the
allowance of compensation and reimbursement of expenses of professionals under
Section 330 of the Bankruptcy Code, (b) Asbestos Personal Injury Claims (which
Claims and Demands shall be governed solely in accordance with the procedures
established pursuant to the Asbestos Personal Injury Trust Agreement and the
Asbestos Personal Injury Trust Distribution Procedures), and (c) FB Asbestos
Property Damage Claims (which Claims shall be governed solely in accordance
with the procedures established pursuant to the FB Asbestos Property Damage
Trust Agreement and the FB Asbestos Property Damage Trust Distribution
Procedures, respectively). From and after the Confirmation Date, the
Reorganized Debtors or the Disbursing Agent may settle or compromise any
Disputed Claim (any Class 1, Class 2A, Class 2B, Class 3, Class 4, Class 5, or
Class 6 Claim, or any portion thereof, that is neither an Allowed Claim nor a
Disallowed Claim) without approval of the Bankruptcy Court.
All objections to Claims, other than Asbestos Personal
Injury Claims and FB Asbestos Property Damage Claims, must be filed and served
on the holders of such Claims by the Claims Objection Deadline. Nothing
contained herein, however, shall limit the Debtors' or Reorganized Debtors'
right to object to any Claims, other than Asbestos Personal Injury Claims and
FB Asbestos Property Damage Claims filed or amended after the Claims Objection
Deadline, which day shall be one hundred and eighty (180) days after the
Effective Date, unless extended by order of the Bankruptcy Court prior to such
date. If an objection has not been filed to a Proof of Claim or a scheduled
Claim, other than Asbestos Personal Injury Claims and FB Asbestos Property
Damage Claims, by the Claims Objection Deadline, the Claim to which the Proof
of Claim or scheduled Claim relates will be treated as an Allowed Claim if
such Claim has not been Allowed earlier.
Notwithstanding any other provision in this Plan, no
payments or distributions shall be made with respect to all or any portion of
a Disputed Claim unless and until all objections to such Disputed Claim have
been settled or withdrawn or have been determined by Final Order, and the
Disputed Claim, or some portion thereof, has become an Allowed Claim.
2. Disputed Distribution Reserve
The Disbursing Agent shall establish appropriate reserves
for Disputed Claims by withholding the lesser of (i) 100% of distributions to
which holders of Disputed Claims would be entitled under the Plan if such
Disputed Claims were Allowed Claims, or (ii) such other amount as may be
approved by the Bankruptcy Court. On, or as soon as practicable after, the
Initial Distribution Date, the Reorganized Debtors shall transmit to the
Disbursing Agent, and the Disbursing Agent shall reserve for the account of
each holder of a Disputed Claim, (a) Cash, Senior Notes, New OCD Common Stock,
or such other property which would otherwise be distributable to such holder
on such date in accordance with the Plan were such Disputed Claim an Allowed
Claim on such date, in the Face Amount thereof, or (b) Cash, Senior Notes, New
OCD Common Stock, or such other property of a lesser value as such holder and
the Reorganized Debtors may agree. Cash, Senior Notes, New OCD Common Stock,
or such other property reserved under the Plan shall be set aside and
segregated by Class of Claims and, in the case of Cash, Cash dividends or Cash
payments in respect thereof, to the extent practicable, held by the Disbursing
Agent in an interest bearing escrow fund (which may be a single account for
each Class, provided that separate book entries for each Claim are maintained
by the Disbursing Agent) to be established and maintained by the Disbursing
Agent pending resolution of such Disputed Claims.
3. Distributions on Account of Disputed Claims Once They are
Allowed
On each Quarterly Distribution Date (the calendar quarters
ending in March, June, September and December), the Reorganized Debtors shall
make payments and distributions from the reserve established for Disputed
Claims to each holder of a Disputed Claim that has become an Allowed Claim
during the preceding calendar quarter. After the date that the order or
judgment of the Bankruptcy Court allowing such Claim becomes a Final Order,
the Reorganized Debtors shall distribute to the holder of such Claim any
property in the reserve established for Disputed Claims that would have been
distributed to the holder of such claim had such Claim been an Allowed Claim,
pursuant to the provisions of Article III governing the applicable Class.
Holders of such Claims that are ultimately Allowed will also be entitled to
receive, on the basis of the amount ultimately Allowed, the amount of any
dividends or other distributions received on account of the property in
reserve between the Effective Date and the date such distribution is made to
such holder of a Claim.
H. Exit Facility
The Debtors anticipate that they will obtain new bank financing on
the Effective Date (the "Exit Facility") for general working capital and
corporate purposes, in such amounts and on such terms as are satisfactory to
the Debtors and the Plan Proponents. The Debtors have not yet ascertained the
amount or the terms of the Exit Facility.
I. Conditions Precedent to Confirmation and Effectiveness of the Plan
1. Conditions to Confirmation Relating to the Asbestos Permanent
Channeling Injunction
The Plan will not be confirmed, and the Confirmation Order
will not be entered, until and unless the Confirmation Conditions set forth
below have been satisfied or waived by the Plan Proponents. These Confirmation
Conditions are designed to, inter alia, ensure that the Asbestos Personal
Injury Permanent Channeling Injunction will be effective, binding and
enforceable and will be based on the following general findings of the
Bankruptcy Court, each of which will be contained in the Confirmation Order in
form and substance acceptable to the Plan Proponents. The following are
conditions to the Plan which relate to Asbestos Personal Injury Claims and the
Asbestos Personal Injury Permanent Channeling Injunction, although such
conditions may be relevant to the FB Asbestos Property Damage Claims and the
FB Asbestos Property Damage Trust.
(a) The Asbestos Personal Injury Permanent Channeling
Injunction is to be implemented in connection with the Asbestos Personal
Injury Trust and the Plan.
(b) At the time of the order for relief with respect to OC
and Fibreboard, OC and Fibreboard had been named as defendants in personal
injury, wrongful death or property damage actions seeking recovery for damages
allegedly caused by the presence of, or exposure to, asbestos or
asbestos-containing products.
(c) The Asbestos Personal Injury Trust, as of the Effective
Date, will assume the liabilities of all of the OC Persons with respect to OC
Asbestos Personal Injury Claims and, upon such assumption, the Reorganized
Debtors and the OC Persons shall have no liability for any OC Asbestos
Personal Injury Claims.
(d) The Asbestos Personal Injury Trust, as of the Effective
Date, will assume the liabilities of all of the FB Persons with respect to FB
Asbestos Personal Injury Claims and, upon such assumption, the Reorganized
Debtors and the FB Persons shall have no liability for any FB Asbestos
Personal Injury Claims.
(e) The OC Sub-Account of the Asbestos Personal Injury Trust
is to be funded in whole or in part with Cash, Senior Notes, New OCD Common
Stock, the OCD Insurance Escrow, the OC Asbestos Personal Injury Liability
Insurance Assets, distributable proceeds of the Litigation Trust Assets, and
by the obligation of Reorganized OCD to make future payments, including
dividends.
(f) The FB Sub-Account of the Asbestos Personal Injury Trust
is to be funded in whole or in part with the Existing Fibreboard Insurance
Settlement Trust Assets, the FB Reversions, the Committed Claims Account, and
the FB Sub-Account Settlement Payment.
(g) The Asbestos Personal Injury Trust is to own, upon the
Initial Distribution Date, a majority of the voting shares of Reorganized OCD.
(h) In light of the benefits provided, or to be provided, to
the Asbestos Personal Injury Trust on behalf of each Protected Party, the
Asbestos Personal Injury Permanent Channeling Injunction is fair and equitable
with respect to the persons that might subsequently assert Asbestos Personal
Injury Claims against any Protected Party.
(i) Reorganized OCD and Reorganized Fibreboard are likely to
be subject to substantial Demands for payment arising out of the same or
similar conduct or events that gave rise to (a) OC Asbestos Personal Injury
Claims and (b) FB Asbestos Personal Injury Claims, respectively, that are
addressed by the Asbestos Personal Injury Permanent Channeling Injunction.
(j) The actual amounts, numbers, and timing of such Demands
cannot be determined.
(k) Pursuit of such Demands outside the procedures
prescribed by the Plan is likely to threaten the Plan's purpose to deal
equitably with Claims and Demands.
(l) The terms of the Asbestos Personal Injury Permanent
Channeling Injunction, including any provisions barring actions against the
Protected Parties pursuant to Section 524(g)(4)(A) of the Bankruptcy Code, are
set forth in the Plan and in any disclosure statement supporting the Plan.
(m) The Plan establishes, in Classes 7 and 8, separate
Classes of claimants whose Claims are to be addressed by the Asbestos Personal
Injury Trust.
(n) Class 7 and Class 8 claimants have each voted, by at
least 75 percent (75%) of those voting, in favor of the Plan.
(o) Pursuant to court orders or otherwise, the Asbestos
Personal Injury 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
Demands, or other comparable mechanisms, that provide reasonable assurance
that the Asbestos Personal Injury Trust will value, and be in a financial
position to pay, present Claims and Demands that involve similar Claims in
substantially the same manner.
(p) The Future Claimants' Representative was appointed as
part of the proceedings leading to the issuance of the Asbestos Personal
Injury 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 Personal Injury Permanent Channeling Injunction and
channeled to and assumed by the Asbestos Personal Injury Trust. The Future
Claimants' Representative has in all respects fulfilled his duties,
responsibilities, and obligations as the future representative in accordance
with Section 524(g) of the Bankruptcy Code.
(q) Identifying or describing each Protected Party in the
Asbestos Personal Injury Permanent Channeling Injunction is fair and equitable
with respect to persons that might subsequently assert Demands against each
such Protected Party, in light of the benefits provided, or to be provided, to
the Asbestos Personal Injury Trust by or on behalf of any such Protected
Party.
(r) The Plan complies in all respects with Section 524(g) of
the Bankruptcy Code.
(s) The Asbestos Personal Injury Trust is to use its assets
and income to pay Asbestos Personal Injury Claims.
(t) With respect to any Asbestos Personal Injury Claim that
is Allowed by the Asbestos Personal Injury Trust in accordance with the
Asbestos Personal Injury Trust Agreement and the Asbestos Personal Injury
Trust Distribution Procedures, such allowance shall establish the amount of
legal liability against the Asbestos Personal Injury Trust in the Allowed
amount of such Asbestos Personal Injury Claim.
(u) The Plan and its Exhibits constitute a fair, equitable,
and reasonable resolution of the liabilities of the Debtors for Asbestos
Personal Injury Claims.
(v) The Plan and its Exhibits, and the negotiations that led
up to them, do not violate any obligation of the Debtors or breach any
applicable insurance policy, agreement or contract of the Debtors, including,
without limitation, obligations or duties to cooperate under any insurance
policies, contracts or agreements, any management of claims provisions in any
applicable insurance policies or agreements or contracts pertaining thereto,
or any consent-to-assignment provisions of any applicable insurance policies,
contracts or agreements, or any consent-to-settlement provisions of any
applicable insurance policies, agreement or contract of the Debtors, and the
discharge and release of Claims as provided herein shall neither diminish nor
impair the enforceability of any such insurance policies, contracts or
agreements.
(w) The Debtors do not need the consent of their insurers to
transfer the OC Asbestos Personal Injury Liability Insurance Assets to the OC
Sub-Account of the Asbestos Personal Injury Trust. Alternatively, the Debtors'
insurers have an obligation not to withhold consent to such transfer
unreasonably, and the refusal to consent to such transfer under the
circumstances would be unreasonable.
(x) The Plan and its Exhibits do not materially increase any
insurer's risk of providing coverage for asbestos-related liabilities under
the relevant insurance policies, settlement agreements, and/or contracts with
respect thereto as compared to the risk that otherwise was being borne by the
insurers prior to the Effective Date.
(y) Upon confirmation and consummation of the Plan,
including the effectuation of the transfer of the OC Asbestos Personal Injury
Liability Insurance Assets, the OC Sub-Account of the Asbestos Personal Injury
Trust shall have access to insurance coverage and/or insurance payments
pursuant to the transfer of the OC Asbestos Personal Injury Liability
Insurance Assets so that the proceeds of such insurance may be used to defend,
resolve, and satisfy (subject to any applicable policy limits) the Asbestos
Personal Injury Trust's obligations to defend, resolve and satisfy Asbestos
Personal Injury Claims, and no insurer shall have any insurance coverage
defense based on the Plan, the transfer of the OC Asbestos Personal Injury
Liability Insurance Assets, the Asbestos Personal Injury Trust Agreement, or
the Asbestos Personal Injury Trust Distribution Procedures or allowance of
claims thereunder, or the negotiations that produced any of the foregoing.
(z) All insurers of the Debtors affording insurance coverage
that is the subject of the OC Asbestos Personal Injury Liability Insurance
Assets and all insurers of the Debtors whose policies provide coverage for the
FB Asbestos Property Damage Claims have been given notice and an opportunity
to be heard on matters relating to the Plan and its Exhibits, and are bound by
the Plan and its Exhibits and the findings of fact and conclusions of law set
forth in the Confirmation Order.
(aa) If an Impaired Class of Claims votes to reject the
Plan, the sum of the Class 7 Aggregate Amount and the Class 8 Aggregate Amount
as determined by the Bankruptcy Court and the District Court shall be an
amount not less than $16 billion prior to the deductions of (i) the OCD
Insurance Escrow, (ii) the OC Asbestos Personal Injury Liability Insurance
Assets, (iii) the Existing Fibreboard Insurance Settlement Trust Assets, (iv)
the FB Reversions and (v) the Committed Claims Account.
(bb) Class 6 Claims shall be Allowed or estimated in such
maximum aggregate amount as the Plan Proponents shall agree and have filed at
least five (5) Business Days prior to the Objection Deadline.
2. Conditions to Confirmation Relating to the FB Asbestos
Property Damage Trust
The following are conditions to the Plan which relate to the
FB Asbestos Property Damage Claims and the FB Asbestos Property Damage Trust:
(a) With respect to any FB Asbestos Property Damage Claim
that is Allowed in accordance with the FB Asbestos Property Damage Trust
Agreement and the FB Asbestos Property Damage Trust Distribution Procedures by
the Bankruptcy Court, other court of competent jurisdiction or otherwise, such
allowance shall establish the amount of legal liability against the FB
Asbestos Property Damage Trust in the Allowed amount of such FB Asbestos
Property Damage Claim.
(b) Upon confirmation and consummation of the Plan,
including the effectuation of the transfer of the FB Asbestos Property Damage
Insurance Assets, the FB Asbestos Property Damage Trust shall have access to
insurance coverage and/or insurance payments pursuant to the transfer of the
FB Asbestos Property Damage Insurance Assets so that the proceeds of such
insurance may be used to defend, resolve, and satisfy (subject to any
applicable policy limits) the FB Asbestos Property Damage Trust's obligations
to defend, resolve and satisfy FB Asbestos Property Damage Claims, and no
insurer shall have any insurance coverage defense based on the Plan, the
transfer of the FB Asbestos Property Damage Insurance Assets, the FB Asbestos
Property Damage Trust Agreement, or the FB Asbestos Property Damage Trust
Distribution Procedures or allowance of claims thereunder, or the negotiations
that produced any of the foregoing.
3. General Conditions to Confirmation.
In addition to the foregoing conditions expressly stated in
the Plan, including those which are also included in Section 524(g) of the
Bankruptcy Code as conditions to the issuance of a channeling injunction, in
order to confirm the Plan, the Bankruptcy Court or the District Court must
determine at the Confirmation Hearing whether the requirements for
confirmation set forth in Section 1129 of the Bankruptcy Code have been
satisfied. Such requirements include determinations with respect to the
following:
(a) The Plan complies with the applicable provisions of the
Bankruptcy Code.
(b) The Debtors have complied with the applicable provisions
of the Bankruptcy Code.
(c) The Plan has been proposed in good faith and not by any
means forbidden by law.
(d) Any payment made or promised by the Debtors or by a
person issuing securities or acquiring property under the Plan for services or
for costs and expenses in, or in connection with, the Chapter 11 Cases, or in
connection with the Plan and incident to the Chapter 11 Cases, has been
disclosed to the Bankruptcy Court, and any such payment made before
confirmation of the Plan is reasonable or, if such payment is to be fixed
after confirmation of the Plan, such payment is subject to the approval of the
Bankruptcy Court as reasonable.
(e) The Debtors have disclosed (i) the identity and
affiliations of (x) any individual proposed to serve, after confirmation of
the Plan, as a director, officer or voting trustee of the Reorganized Debtors,
(y) any Affiliate of the Debtors participating in a joint plan with the
Debtors, or (z) any successor to the Debtors under the Plan (and the
appointment to, or continuance in, such office of such individual(s) is
consistent with the interests of Claims and Interest holders and with public
policy), and (ii) the identity of any insider that will be employed or
retained by the Reorganized Debtors and the nature of any compensation for
such insider.
(f) With respect to each Class of Claims or Interests, each
holder of an Impaired Claim or Impaired Interest either has accepted the Plan
or will receive or retain under the Plan on account of the Claims or Interests
held by such entity, property of a value, as of the Effective Date, that is
not less than the amount that such entity would receive or retain if the
Debtors were liquidated on such date under Chapter 7 of the Bankruptcy Code.
See Section XIV of this Disclosure Statement entitled "Best Interests Test."
(g) The Plan provides that Administrative Claims and DIP
Facility Claims will be paid in full on the Effective Date and that Priority
Tax Claims will receive on account of such Claims the treatment required by
1129(a)(9)(C) of the Bankruptcy Code. (See Section VII.C.2.c of this
Disclosure Statement entitled "Treatment of Unclassified Claims Under the Plan
- -Priority Tax Claims."
(h) If a Class of Claims is Impaired under the Plan, at
least one Class of Impaired Claims has accepted the Plan, determined without
including any acceptance of the Plan by insiders holding Claims in such Class.
(i) Confirmation of the Plan is not likely to be followed by
the liquidation, or the need for further financial reorganization, of the
Debtors or any successor to the Debtors under the Plan, unless such
liquidation or reorganization is proposed in the Plan. See Section XIV.A of
this Disclosure Statement entitled "Feasibility of the Plan."
(j) All fees payable under Section 1930 of Title 28 have
been paid or the Plan provides for the payment of all such fees on the
Effective Date.
(k) The Plan provides for the continuation after the
Effective Date of all retiree benefits, if any, at the level established
pursuant to Sections 1114(e)(1)(B) or 1114(g) of the Bankruptcy Code at any
time prior to the Confirmation Date, for the duration of the period the
Debtors have obligated themselves to provide such benefits.
The Debtors believe that, upon receipt of the votes required
to confirm the Plan, the Plan will satisfy all the statutory requirements of
Chapter 11 of the Bankruptcy Code, that the Debtors have complied or will have
complied with all of the requirements of Chapter 11, and that the Plan has
been proposed and submitted to the Bankruptcy Court in good faith.
4. Conditions to the Effective Date
The following are conditions precedent to the occurrence of
the Effective Date, each of which may be satisfied or waived in accordance
with Section 12.3 of the Plan:
(a) The Confirmation Order shall have been entered, shall
have become a Final Order, and shall be in form and substance reasonably
satisfactory to the Plan Proponents.
(b) The Asbestos Personal Injury Permanent Channeling
Injunction shall be in full force and effect.
(c) All agreements or other instruments which are exhibits
to the Plan shall be in form and substance reasonably acceptable to the Plan
Proponents and shall have been executed and delivered.
(d) All actions, documents and agreements necessary to
implement the Plan shall have been effected or executed.
(e) The Asbestos Personal Injury Trustees shall have
accepted their appointment as Asbestos Personal Injury Trustees and shall have
executed the Asbestos Personal Injury Trust Agreement.
(f) The individuals designated to serve as members of the
TAC shall have accepted their appointment as TAC members.
(g) The Future Claimants' Representative shall have agreed
to continue to serve in such capacity following the Confirmation Date.
(h) The Private Letter Ruling (PLR) with respect to the
qualification of the trust formed pursuant to Section 524(g) of the Bankruptcy
Code described therein as a "qualified settlement fund" within the meaning of
Treasury Regulations Section 1.468B-1, et seq., promulgated under Section 468B
of the Internal Revenue Code of 1986, as amended ("IRC"), shall not have been
cancelled, withdrawn or revoked and shall remain in full force and effect.
Alternatively, the Reorganized Debtors shall have received an opinion of
counsel with respect to the tax status of the Asbestos Personal Injury Trust
as a "qualified settlement fund" reasonably satisfactory to the Plan
Proponents, and, (i) if Class 4 accepts the Plan, the Bank Holders, and/or
(ii) if Class 6 accepts the Plan, the Unsecured Creditors' Committee.
(i) The FB Asbestos Property Damage Trustee shall have
accepted his or her appointment as FB Asbestos Property Damage Trustee and
shall have executed the FB Asbestos Property Damage Trust Agreement.
(j) The Reorganized Debtors shall have entered into and
shall have credit availability under the Exit Facility in an amount sufficient
to meet the needs of Reorganized Debtors, as determined by the Plan
Proponents.
(k) Each of the Exhibits shall be in form and substance
acceptable to the Plan Proponents.
(l) The Existing Fibreboard Insurance Settlement Trust
Assets will be irrevocably assigned and transferred on the Effective Date to
the Asbestos Personal Injury Trust, for allocation to the FB Sub-Account, or
the Existing Fibreboard Insurance Settlement Trust Assets will be treated in
accordance with Section 10.5 of the Plan.
5. Waiver of Conditions to the Effective Date
Under the Plan, the Plan Proponents reserve, in their sole
discretion, the right, with the written consent of (a) if Class 4 accepts the
Plan, the Bank Holders, and/or (b) if Classes 4, 5 and 6 all 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, 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 the Plan Proponents decide that one of
the foregoing conditions cannot be satisfied, and the occurrence of such
condition is not waived in the manner set forth above, then the Plan
Proponents 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.
J. Certain Releases and Injunctions Under the Plan
This section of the Disclosure Statement contains a discussion of
certain releases and injunctions under the Plan. The following releases and
injunctions are described in this Disclosure Statement: (1) an injunction of
Enjoined Actions against the Debtors (See Section VII.J.2 of this Disclosure
Statement entitled "Releases by Holders of Claims and Interests"); (2) the
Debtors' discharge and the discharge injunction (See Section VII.L.2 of this
Disclosure Statement entitled "Discharge of the Debtors"); (3) the Asbestos
Personal Injury Permanent Channeling Injunction (See Section VII.L.4 of this
Disclosure Statement entitled "The Asbestos Personal Injury Permanent
Channeling Injunction"); (4) the injunction related to FB Asbestos Property
Damage Claims (See Section IX.C of this Disclosure Statement entitled
"Injunction Channeling Fb Asbestos Property Damage Claims"); and (5) an
injunction with respect to claims against the Hartford Entities (See Section
VII.J.6 of this Disclosure Statement entitled "Injunction with Respect to
Claims Against the Hartford Entities").
1. Debtors' Releases of Claims
Effective as of the Confirmation Date, but subject to the
occurrence of the Effective Date, for good and valuable consideration, to the
fullest extent permissible under applicable law, each of the Debtors and
Reorganized Debtors and their respective Estates and each of their respective
Related Persons will be deemed to completely and forever release, waive, void,
extinguish and discharge all Released Actions (other than the rights to
enforce the Plan and any right or obligation under the Plan, and the
securities, contracts, instruments, releases, indentures and other agreements
or documents delivered thereunder or contemplated thereby) that may be
asserted by or on behalf of the Debtors or Reorganized Debtors or their
respective Estates or each of their respective Related Persons against (a) the
Released Parties, (b) the Pre-petition Indenture Trustees, (c) the DIP Agent
and the holders of DIP Facility Claims and (d) the Persons who are Related
Persons of Persons listed in clauses (b) - (c) above.
The "Related Persons" means, with respect to any Person,
such Person's predecessors, successors and assigns (whether by operation of
law or otherwise) and their respective present and former Affiliates and each
of their respective present and former members, partners, equity-holders,
officers, directors, employees, representatives, advisors, attorneys, agents
and professionals, acting in such capacity, and any Person claiming by or
through any of them.
"Released Actions" means all Claims, obligations, suits,
judgments, damages, debts, rights, causes of action and liabilities, and all
Interests and rights of an equity security holder, whatsoever, whether
liquidated or unliquidated, fixed or contingent, matured or unmatured, known
or unknown, foreseen or unforeseen, then existing or thereafter arising, in
law, equity or otherwise that are based in whole or part on any act, omission,
transaction, event or other circumstance taking place or existing on or prior
to the Effective Date in connection with or related to the Debtors and
Reorganized Debtors and their respective Estates, the Chapter 11 Cases or the
Plan, except for the (a) Tobacco Causes of Action, (b) the Avoidance Actions
listed on Schedule XV to the Plan as it may be amended up to five (5) Business
Days prior to the Objection Deadline, (c) the claims against CSFB and/or the
Bank Holders in the Bank Holders Action, (d) the Material Rights of Action
listed on Schedule XV to the Plan, and (e) Asbestos Personal Injury Claims.
Released Actions includes the release of all Claims, obligations, suits,
judgments, damages, debts, rights, causes of action and liabilities against
the Debtors and the Non-Debtor Subsidiaries arising from the 1997 Credit
Agreement or the guaranties of the 1997 Credit Agreement.
"Released Parties" means (a) the Unsecured Creditors'
Committee and its present and former members, representatives, advisors,
attorneys, agents and professionals, acting in such capacity, (b) the Asbestos
Claimants' Committee and its present and former members, representatives,
advisors, attorneys, agents and professionals, acting in such capacity, (c)
the Future Claimants' Representative and his present and former
representatives, advisors, attorneys, agents and professionals, acting in such
capacity, (d) the respective Related Persons of the Debtors and the
Reorganized Debtors and their respective Estates as of the Petition Date and
thereafter and (e) the present and former officers and directors of the
Debtors and Reorganized Debtors; except in each case for the Persons listed on
Schedule III, to be filed no later than the filing of the Disclosure
Statement, as it may be amended up to five (5) Business Days prior to the
Objection Deadline, against which Claims, obligations, suits, judgments,
damages, Demands, debts, rights, causes of action, liabilities, Interests and
other rights of an equity security holder shall not be released under the
Plan.
The Plan also provides for the exculpation of various
parties with respect to their actions during the Chapter 11 Cases and their
efforts to have the Plan confirmed. See Section VII.L.5 of this Disclosure
Statement entitled "Exculpation and Limitation of Liability; Indemnity."
2. Releases by Holders of Claims and Interests
Effective as of the Confirmation Date, but subject to the
occurrence of the Effective Date, for good and valuable consideration, to the
fullest extent permissible under applicable law, each Person that has held,
currently holds or may hold a Claim or other obligation, suit, judgment,
damages, debt, right, cause of action or liability that is discharged or an
Interest or other right of an equity security holder that is terminated, and
each of their respective Related Persons will be deemed to completely and
forever release, waive, void, extinguish and discharge all Released Actions
(other than the rights to enforce the Debtors' or the Reorganized Debtors'
obligations under the Plan, and any right or obligation of such holder under
the Plan, and the securities, contracts, instruments, releases, indentures and
other agreements or documents delivered thereunder or contemplated thereby)
that otherwise may be asserted against the Claimant Released Parties.
"Claimant Released Parties" means (a) the Debtors, the
Reorganized Debtors and their respective predecessors, successors and assigns
(whether by operation of law or otherwise) and their respective present and
former Affiliates as of the Petition Date or thereafter, and additionally (b)
if the Person granting the release votes in favor of the Plan, the Released
Parties. The terms "Released Parties" and "Related Persons" are defined in the
previous section of this Disclosure Statement.
UNDER THE ABOVE-DESCRIBED PROVISIONS OF THE PLAN, PARTIES
WHO VOTE IN FAVOR OF THE PLAN AGREE AND ARE DEEMED TO RELEASE CERTAIN CLAIMS
AGAINST PARTIES WHO ARE NOT DEBTORS IN THESE CHAPTER 11 CASES, INCLUDING
AFFILIATED OFFICERS AND DIRECTORS BASED IN WHOLE OR IN PART ON ANY ACT,
OMISSION, TRANSACTION, EVENT OR OTHER CIRCUMSTANCE TAKING PLACE OR EXISTING ON
OR PRIOR TO THE EFFECTIVE DATE IN CONNECTION WITH OR RELATED TO THE DEBTORS
AND REORGANIZED DEBTORS AND THEIR RESPECTIVE ESTATES, THE CHAPTER 11 CASES OR
THE PLAN. PARTIES WHO RELEASE SUCH CLAIMS PURSUANT TO THE PLAN ARE SUBJECT TO
AN INJUNCTION AGAINST ASSERTING SUCH CLAIMS, AS DESCRIBED BELOW.
3. Injunctions Related to Releases
EXCEPT AS OTHERWISE PROVIDED HEREIN OR IN THE CONFIRMATION
ORDER, AS OF THE CONFIRMATION DATE, BUT SUBJECT TO THE OCCURRENCE OF THE
EFFECTIVE DATE, EACH PERSON THAT HAS HELD, CURRENTLY HOLDS OR MAY HOLD A CLAIM
THAT IS RELEASED PURSUANT TO THIS SECTION 5.13 OF THE PLAN (DESCRIBED IN THE
PREVIOUS SECTION) OR OTHER OBLIGATION, SUIT, JUDGMENT, DAMAGES, DEBT, RIGHT,
CAUSE OF ACTION, LIABILITY, INTEREST OR OTHER RIGHT OF AN EQUITY SECURITY
HOLDER RELEASED PURSUANT TO SECTION 5.13 OF THE PLAN, AND EACH OTHER PARTY IN
INTEREST AND EACH OF THEIR RESPECTIVE RELATED PERSONS ARE PERMANENTLY, FOREVER
AND COMPLETELY STAYED, RESTRAINED, PROHIBITED AND ENJOINED FROM TAKING ANY OF
THE FOLLOWING ACTIONS, WHETHER DIRECTLY OR INDIRECTLY, DERIVATIVELY OR
OTHERWISE ON ACCOUNT OF OR BASED ON THE SUBJECT MATTER OF ANY SUCH RELEASED
CLAIMS OR OTHER RELEASED OBLIGATIONS, SUITS, JUDGMENTS, DAMAGES, DEBTS,
RIGHTS, CAUSES OF ACTION OR LIABILITIES OR INTERESTS OR OTHER RIGHTS OF AN
EQUITY SECURITY HOLDER: (I) COMMENCING, CONDUCTING OR CONTINUING IN ANY
MANNER, DIRECTLY OR INDIRECTLY, ANY SUIT, ACTION OR OTHER PROCEEDING
(INCLUDING, WITHOUT LIMITATION, TO ANY JUDICIAL, ARBITRAL, ADMINISTRATIVE OR
OTHER PROCEEDING) IN ANY FORUM; (II) ENFORCING, ATTACHING (INCLUDING, WITHOUT
LIMITATION, ANY PREJUDGMENT ATTACHMENT), COLLECTING, OR IN ANY WAY SEEKING TO
RECOVER ANY JUDGMENT, AWARD, DECREE, OR OTHER ORDER; (III) CREATING,
PERFECTING OR IN ANY WAY ENFORCING IN ANY MANNER, DIRECTLY OR INDIRECTLY, ANY
ENCUMBRANCE; (IV) SETTING OFF, SEEKING REIMBURSEMENT OR CONTRIBUTIONS FROM, OR
SUBROGATION AGAINST, OR OTHERWISE RECOUPING IN ANY MANNER, DIRECTLY OR
INDIRECTLY, ANY AMOUNT AGAINST ANY LIABILITY OR OBLIGATION OWED TO ANY PERSON
RELEASED UNDER SECTION 5.13(A) OR SECTION 5.13(B), AS APPLICABLE; AND (V)
COMMENCING OR CONTINUING IN ANY MANNER, IN ANY PLACE OF ANY ACTION, WHICH IN
ANY SUCH CASE DOES NOT COMPLY WITH OR IS INCONSISTENT WITH THE PROVISIONS OF
THE PLAN.
4. Deemed Consent
BY VOTING TO ACCEPT THE PLAN, EACH HOLDER OF A CLAIM WILL BE
DEEMED, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, TO HAVE
SPECIFICALLY CONSENTED TO THE RELEASES AND INJUNCTIONS AS DESCRIBED ABOVE.
5. No Waiver
The releases described above shall not, however, limit,
abridge or otherwise affect the rights of the Reorganized Debtors to enforce,
sue on, settle or compromise the rights, claims and other matters retained by
the Reorganized Debtors pursuant to the Plan.
6. Injunction With Respect to Claims Against the Hartford
Entities
OCD has entered into a Settlement Agreement between it and
the Hartford Financial Services Group, Inc., dated June 18, 2001, and approved
by the Bankruptcy Court by Order dated July 16, 2001. Pursuant to the
Settlement Agreement, the Debtors propose the following injunction under the
Plan:
EXCEPT AS TO ANY RIGHTS WITH RESPECT TO WHICH THE DEBTORS
EXPLICITLY DECLINED TO GIVE A RELEASE TO THE HARTFORD ENTITIES PURSUANT TO
SECTION VI OF THE HARTFORD SETTLEMENT AGREEMENT, EFFECTIVE AS OF THE
CONFIRMATION DATE, BUT SUBJECT TO THE OCCURRENCE OF THE EFFECTIVE DATE, FOR
GOOD AND VALUABLE CONSIDERATION, PURSUANT TO SECTION 105(A) OF THE BANKRUPTCY
CODE, TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, EACH PERSON THAT
HAS HELD, CURRENTLY HOLDS OR MAY HOLD A CLAIM SHALL BE PERMANENTLY ENJOINED
PURSUANT TO 11 U.S.C. ss.105(A) FROM TAKING ANY ACTION OR SEEKING ANY RECOVERY
AGAINST OR FROM ANY OF THE HARTFORD ENTITIES THAT SEEKS TO ENFORCE ANY RIGHTS
UNDER, THROUGH OR RELATED TO THE HARTFORD POLICIES.
"Hartford Entities" means (a) the Hartford Financial
Services Group, Inc., Excess Insurance Company, Ltd., Fencourt Reinsurance
Company, Ltd., First State Insurance Company, Hartford Accident and Indemnity
Company, Hartford Casualty Insurance Company, Hartford Fire Insurance Company,
Hartford Insurance Company of Canada, Hartford Insurance Company of Illinois,
Hartford Insurance Company of the Midwest, Hartford Insurance Company of the
Southeast, Hartford Insurance, Ltd. (Bermuda), Hartford Lloyds Insurance
Company, Hartford Underwriters Insurance Company (formerly New York
Underwriters Insurance Company), New England Insurance Company, New England
Reinsurance Corporation, Nutmeg Insurance Company, Pacific Insurance Company,
Ltd., Property and Casualty Insurance Company of Hartford, Sentinel Insurance
Company, Ltd., Trumbull Insurance Company, and Twin City Fire Insurance
Company; as well as (b) all of their respective predecessors, successors,
assigns, subsidiaries, affiliates, holding companies (if any), parent
companies (if any), merged companies and acquired companies, exclusive of any
former asset, affiliate, or member company of Reliance Group Holdings, Inc.;
and (c) all of the respective employees, officials, agents, attorneys,
representatives, officers, and directors, in their capacity as such, of the
entities encompassed by clauses (a) and (b).
"Hartford Policies" means the following policies issued to
OCD:
- ------------------------ ------------------------------ -----------------------
Issuer Policy Period Policy Number
- ------------------------ ------------------------------ -----------------------
First State 06/18/74 to 10/22/74 921434
- ------------------------ ------------------------------ -----------------------
10/22/74 to 10/22/75 921434
- ------------------------ ------------------------------ -----------------------
10/22/75 to 10/22/76 921434
- ------------------------ ------------------------------ -----------------------
10/22/76 to 10/22/77 923542
- ------------------------ ------------------------------ -----------------------
10/22/77 to 9/01/78 925625
- ------------------------ ------------------------------ -----------------------
09/01/78 to 09/01/79 926735
- ------------------------ ------------------------------ -----------------------
03/08/79 to 09/01/79 927953
- ------------------------ ------------------------------ -----------------------
09/01/82 to 09/01/83 934962
- ------------------------ ------------------------------ -----------------------
Twin City 09/01/82 to 09/01/83 TXX111365
- ------------------------ ------------------------------ -----------------------
Excess 09/01/79 to 09/01/80 EL 10300 (EL 10-87)
- ------------------------ ------------------------------ -----------------------
First State 09/01/82 to 09/01/83 933186
- ------------------------ ------------------------------ -----------------------
09/01/83 to 09/01/84 EU 935321
- ------------------------ ------------------------------ -----------------------
09/01/83 to 09/01/84 EU 935324
- ------------------------ ------------------------------ -----------------------
10/31/79 to 11/29/82 GC802752
- ------------------------ ------------------------------ -----------------------
04/01/81 to 04/01/84 GC802770
- ------------------------ ------------------------------ -----------------------
05/01/88 to 05/01/89 GC009556
- ------------------------ ------------------------------ -----------------------
05/01/89 to 05/01/90 GC010810
- ------------------------ ------------------------------ -----------------------
Hartford 12/01/74 to 12/01/75 57 IC 620122
- ------------------------ ------------------------------ -----------------------
Pacific 05/01/93 to 05/01/94 ZG 0001003
- ------------------------ ------------------------------ -----------------------
04/01/94 to 04/01/95 ZG 0002864
- ------------------------ ------------------------------ -----------------------
05/01/95 to 05/01/96 ZG 0004839
- ------------------------ ------------------------------ -----------------------
05/01/96 to 05/01/97 ZG 0006912
- ------------------------ ------------------------------ -----------------------
05/01/97 to 05/01/98 ZG 0008946
- ------------------------ ------------------------------ -----------------------
Twin City 09/01/83 to 09/01/84 TXX 102719
- ------------------------ ------------------------------ -----------------------
The term "Hartford Policies" also includes all insurance
policies other than the above-listed policies ("Unknown Policies"), that were
issued prior to January 1, 2001, by and in the name of one of the specifically
named Hartford Entities, either to OCD or that insure OCD, including all known
and unknown primary, umbrella, excess, or other insurance policies, contracts,
and/or agreements of any nature, type, or kind (including but not limited to:
all comprehensive general liability policies; general liability policies;
casualty policies; environmental liability policies; environmental impairment
policies; difference in conditions policies; directors' and officers'
liability policies; errors and omissions liability policies; contractual
liability policies; automobile liability policies; products liability
policies; and workers' compensation policies). Notwithstanding any of the
foregoing and for the avoidance of any doubt, Unknown Policies shall not
include: (a) policies issued by one of the specifically named Hartford
Entities to Persons other than OCD or the Debtors (except to the extent of the
interest of OCD in such policies); (b) policies issued to Persons that become
Affiliates of OCD or Reorganized OCD after June 18, 2001; (c) policies issued
or subscribed by Excess Insurance Company Ltd. that are subject to a May 15,
1999 settlement agreement between OCD and London Market Insurers; (d) First
State policy number EU 935321 to the extent that it provides coverage for
products/completed operations claims other than asbestos claims; and (e)
policies issued to or insuring Fibreboard.
K. Summary of Other Provisions of the Plan
1. Dissolution of the Creditors' Committees and Termination of
Futures Claimants' Representative
(a) Creditors' Committees
Under the Plan, on the Effective Date, each of the
Unsecured Creditors' Committee and the Asbestos Claimants' Committee will
dissolve and their respective members will be released and discharged from all
duties and obligations arising from or related to the Chapter 11 Cases, except
for the purpose of completing any matters, including, without limitation,
litigation or negotiations, pending as of the Effective Date. The
professionals retained by each of the Unsecured Creditors' Committee and the
Asbestos Claimants' Committee and the respective members thereof will not be
entitled to compensation or reimbursement of expenses for any services
rendered after the Effective Date, except (i) as authorized in the preceding
sentence or (ii) to the extent such services are rendered in connection with
the hearing on final allowances of compensation pursuant to Section 330 of the
Bankruptcy Code.
(b) Futures Claimants' Representative
On the Effective Date, the existence of the Future
Claimants' Representative and his rights to ongoing reimbursement of expenses
and the rights of his professionals to ongoing compensation and reimbursement
of expenses shall continue after the Effective Date only for (i) the purposes
set forth in the Asbestos Personal Injury Trust Agreement and the annexes
thereto and (ii) the purposes of completing any matters, including, without
limitation, litigation or negotiations, pending as of the Effective Date, and
shall otherwise terminate on the Effective Date.
2. Cancellation of Debt and Debt Agreements
On the Effective Date, (a) the Debt shall be cancelled and
extinguished and (b) the obligations of the Debtors, CFSB as agent for the
Bank Holders and the Pre-petition Indenture Trustees under the Debt Agreements
shall be discharged. Notwithstanding the foregoing, each of the Pre-petition
Bond Indentures shall continue in effect solely for the purposes of (x)
allowing the Pre-petition Indenture Trustee to make distributions to holders
of Allowed Class 5 Claims pursuant to the Plan and (y) permitting the
Pre-petition Indenture Trustee to maintain any rights or liens it may have for
fees, costs and expenses under its indenture or other agreement, but the
foregoing shall not result in any expense or liability to any Reorganized
Debtor other than as expressly provided for in the Plan.
No Reorganized Debtor shall have any obligations to any
Pre-petition Indenture Trustee, agent or service (or to any disbursing agent
replacing a Pre-petition Indenture Trustee, agent or service) for any fees,
costs or expenses, except as expressly provided in the Plan. Except as
provided in any contract, instrument or other agreement or document entered
into or delivered in connection with the Plan, on the Effective Date and
immediately following the completion of distributions to holders of Claims in
Class 5, the Pre-petition Indenture Trustees shall be released from all
duties, without any further action on the part of the Debtors or Reorganized
Debtors.
3. Cancellation of OCD Interests
As of the Effective Date, by virtue of the Plan, and without
any action necessary on the part of the holders thereof or any corporate
action, except as specified in the Plan, all of the OCD Interests outstanding
at the Effective Date shall be cancelled, extinguished and retired, and no
consideration will be paid or delivered with respect thereto. Holders of OCD
Interests shall not be required to surrender their certificates or other
instruments evidencing ownership of such OCD Interests.
4. Certificates of Incorporation and Bylaws
The certificate or articles of incorporation and bylaws of
each Debtor will be amended as necessary to satisfy the provisions of the Plan
and the Bankruptcy Code and will include, among other things, pursuant to
Section 1123(a)(6) of the Bankruptcy Code, a provision prohibiting the
issuance of non-voting equity securities, but only to the extent required by
Section 1123(a)(6) of the Bankruptcy Code. The Amended and Restated
Certificate of Incorporation of Reorganized OCD and the Amended and Restated
Bylaws of Reorganized OCD will also include provisions (a) creating the New
OCD Common Stock, (b) stating any restrictions on the transfer of the New OCD
Common Stock, and (c), to the extent necessary or appropriate, effectuating
the provisions of the Plan. The Amended and Restated Certificate of
Incorporation of Reorganized OCD and the Amended and Restated Bylaws of
Reorganized OCD shall be in substantially the forms of Exhibit A and Exhibit B
to the Plan, to be filed at least five (5) Business Days prior to the
Objection Deadline.
5. Administrative Claims Bar Date
All requests for payment of an Administrative Claim (other
than Administrative Claims incurred within the ordinary course of business
excepted from filing under Section 3.1 of the Plan and final requests for
compensation or reimbursement of the fees of any professional employed in the
Chapter 11 Cases pursuant to Section 327 or 1103 of the Bankruptcy Code or
otherwise, including the professionals seeking compensation or reimbursement
of costs and expenses relating to services performed after the Petition Date
and prior to and including the Effective Date in connection with the Chapter
11 Cases, pursuant to Sections 327, 328, 330, 331, 503(b) or 1103 of the
Bankruptcy Code for services rendered to the Debtors, the Unsecured Creditors'
Committee, the Asbestos Claimants' Committee, the Future Claimants'
Representative, the advisors to the Bank Holders' sub-committee and the
advisors to the Bondholders' and trade creditors' sub-committee prior to the
Effective Date and Claims for making a substantial contribution under Section
503(b)(4) of the Bankruptcy Code (collectively, "Professional Fee Claims"))
must be filed with the Bankruptcy Court and served on counsel for the Debtors
not later than forty-five (45) days after the Effective Date. Unless the
Debtors object to an Administrative Claim within forty-five (45) days after
receipt, such Administrative Claim shall be deemed Allowed in the amount
requested. In the event that the Debtors object to an Administrative Claim,
the Bankruptcy Court shall determine the Allowed amount of such Administrative
Claim. Notwithstanding the foregoing, no request for payment of an
Administrative Claim need be filed with respect to an Administrative Claim
which is paid or payable by a Debtor in the ordinary course of business.
6. Professional Fee Claims
All Professional Fee Claims must be filed and served on the
Reorganized Debtors and their counsel not later than sixty (60) days after the
Effective Date, unless otherwise ordered by the Bankruptcy Court. Objections
to applications of such professionals or other entities for compensation or
reimbursement of expenses must be filed and served on the Reorganized Debtors
and their counsel and the requesting professional or other entity not later
than sixty (60) days (or such longer period as may be allowed by order of the
Bankruptcy Court) after the date on which the applicable application for
compensation or reimbursement was served.
7. Continuation of Certain Orders
Notwithstanding anything in the Plan to the contrary, the
Debtors will continue to pay any Claims authorized to be paid by an order of
the Bankruptcy Court during the Chapter 11 Cases, pursuant to the terms and
conditions of any such order.
L. Effects of Confirmation
1. Binding Effect
The Plan will be binding upon and inure to the benefit of
each of the Debtors and Reorganized Debtors and their respective Estates and
each of their respective Related Persons and any Person claiming by or through
them, and any Person that has held, currently holds or may hold a Claim or
other obligation, suit, judgment, damages, Demand, debt, right, cause of
action or liability or Interest or any right of an equity security holder,
against or in the Debtors whether or not such Person will receive or retain
any property or interest in property under the Plan and each of their
respective successors and assigns; in each case, including, without
limitation, all parties-in-interest in the Chapter 11 Cases.
2. Discharge of the Debtors
(a) Except as otherwise provided in the Plan or in
the Confirmation Order, all consideration distributed under the Plan and the
treatment of the Claims thereunder will be in exchange for, and in complete
satisfaction, settlement, discharge, and release of, all Claims or other
obligations, suits, judgments, damages, debts, Demands, rights, causes of
action or liabilities, or Interests or other rights of an equity security
holder, relating to the Debtors or the Reorganized Debtors or their respective
Estates, and regardless of whether any property will have been distributed or
retained pursuant to the Plan on account of such Claims or other obligations,
suits, judgments, damages, debts, rights, causes of action or liabilities
(other than Demands), or Interests or other rights of an equity security
holder, and upon the Effective Date, the Debtors and the Reorganized Debtors
shall (i) be deemed discharged under Section 1141(d)(1)(A) of the Bankruptcy
Code and released from any and all Claims or other obligations, suits,
judgments, damages, debts, rights, causes of action or liabilities or
Interests or other rights of an equity security holder of any nature
whatsoever, including, without limitation, liabilities that arose before the
Confirmation Date, and all debts of the kind specified in Sections 502(g),
502(h) or 502(i) of the Bankruptcy Code, whether or not (a) a Proof of Claim
based upon such debt is filed or deemed filed under Section 501 of the
Bankruptcy Code, (b) a Claim based upon such debt is Allowed under Section 502
of the Bankruptcy Code, or (c) the holder of a Claim based upon such debt
voted to accept the Plan and (ii) terminate all rights and interests of
holders of OCD Interests.
(b) As of the Confirmation Date, except as otherwise
provided herein or in the Confirmation Order, all Persons shall be precluded
from asserting against the Debtors or the Reorganized Debtors or their
respective Related Persons any other or further Claims or other obligations,
suits, judgments, damages, debts, rights, causes of action or liabilities or
Interests or other rights of an equity security holder relating to the Debtors
or the Reorganized Debtors or their respective Estates based upon any act,
omission, transaction or other activity of any nature that occurred prior to
the Confirmation Date. In accordance with the foregoing, except as otherwise
provided herein or in the Confirmation Order, the Confirmation Order shall be
a judicial determination of discharge of all such Claims or other obligations,
suits, judgments, damages, debts, rights, causes of action or liabilities or
Interests or other rights of an equity security holder against the Debtors or
the Reorganized Debtors or their respective Estates and termination of all OCD
Interests, pursuant to Sections 524 and 1141 of the Bankruptcy Code, and such
discharge shall void any judgment obtained against the Debtors or the
Reorganized Debtors or their respective Estates at any time, to the extent
that such judgment relates to a discharged Claim or terminated OCD Interest.
3. Permanent Injunctions Related to the Discharge
Except as provided in the Plan or the Confirmation Order, as
of the Confirmation Date, but subject to the occurrence of the Effective Date,
all Persons and any Person claiming by or through them, that have held,
currently hold or may hold a Claim or other obligation, suit, judgment,
damages, debt, right, cause of action or liability (other than a Demand) that
is discharged or an Interest or other right of an equity security holder that
is terminated pursuant to the terms of the Plan will be permanently, forever
and completely stayed, restrained, prohibited and enjoined from taking any
Enjoined Action against any of the Released Parties or Claimant Released
Parties whether directly or indirectly, derivatively or otherwise for the
purpose of, directly or indirectly, collecting, recovering or receiving
payment of, on or with respect to any such discharged Claim or other
obligation, suit, judgment, damages, debt, right, cause of action or
liability, or terminated Interest or right of an equity security holder on
account of, or based on the subject matter of, any such discharged Claims,
obligations, suits, judgments, damages, debts, rights, causes of action or
liabilities or terminated Interests or rights of an equity security holder.
4. Asbestos Personal Injury Permanent Channeling Injunction
The Confirmation Order will establish, among other things,
the Asbestos Personal Injury Permanent Channeling Injunction. Pursuant to
Section 524(g) of the Bankruptcy Code and pursuant to and in conjunction with
the Confirmation Order, all Persons will be permanently, forever and
completely stayed, restrained, prohibited and enjoined from taking any
Enjoined Action, or proceeding in any manner in any place with regard to any
matter that is subject to resolution pursuant to the Asbestos Personal Injury
Trust Agreement, including, without limitation, with respect to any Resolved
Asbestos Personal Injury Claim, except in conformity and compliance therewith,
against any Protected Party or property or interests in property of any
Protected Party, whether directly or indirectly, derivatively or otherwise,
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 pursuant to the provisions of the Asbestos Personal Injury
Trust Agreement or to enforce the provisions of the Plan).
"Protected Party" means any of the following: (a) any Debtor
and its Related Persons, but solely to the extent set forth on Schedule X to
the Plan, as it may be amended up to five (5) Business Days prior to the
Disclosure Statement Hearing; (b) any Reorganized Debtor and its Related
Persons, but solely to the extent set forth on Schedule X; (c) any Person
that, pursuant to the Plan or after the Effective Date becomes a direct or
indirect transferee of, or successor to, any assets of any of the Debtors, the
Reorganized Debtors, or the Asbestos Personal Injury Trust (but only to the
extent that liability is asserted to exist by reason of such Person's becoming
or being such a transferee or successor); (d) any Person that, pursuant to the
Plan or after the Effective Date, makes a loan to any of the Reorganized
Debtors or the Asbestos Personal Injury Trust or to a successor to, or
transferee of, any assets of any of the Debtors, the Reorganized Debtors, or
the Asbestos Personal Injury Trust (but only to the extent that liability is
asserted to exist by reason of such Person's becoming or being 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); (e) any Person to the extent such Person is
alleged to be directly or indirectly liable for the conduct of, Claims
against, or Demands on any of the Debtors, the Reorganized Debtors, or the
Asbestos Personal Injury Trust on account of Asbestos Personal Injury Claims
by reason of one or more of the following: (i) such Person's ownership of a
financial interest in any of the Debtors or Reorganized Debtors, a past or
present Affiliate of any of the Debtors or the Reorganized Debtors, or
predecessor in interest of any of the Debtors or the Reorganized Debtors, but
solely to the extent set forth on Schedule X, (ii) such Person's involvement
in the management of any of the Debtors or the Reorganized Debtors or any
predecessor in interest of any of the Debtors or the Reorganized Debtors, but
solely to the extent set forth on Schedule X, or (iii) such Person's service
as an officer, director, or employee of any of the Debtors, the Reorganized
Debtors or any Interested Party; (f) any past, present or future purchaser or
other transferee of the assets or business, in whole or in part, or all of the
outstanding capital stock, of any one or more of the Debtors, Reorganized
Debtors, or past or present Affiliates of the Debtors or Reorganized Debtors,
however effectuated, by operation of law or otherwise, and any Related Person
of such purchaser or transferee, including such Persons set forth in Schedule
VI to the Plan, as it may be amended up to five (5) Business days prior to the
Objection Deadline, but only to the extent that liability is asserted to exist
by reason of such Person becoming or being such a purchaser, transferee or
successor; (g) the Hartford Entities, to the extent set forth in the Hartford
Settlement Agreement, with respect to the liability for any Asbestos Personal
Injury Claims that arise out of or in connection with the Hartford Policies;
and (h) such other insurance companies, including, without limitation, those
insurance companies to the extent set forth on Schedule VII to the Plan, as it
may be amended up to five (5) Business days prior to the Objection Deadline,
and with respect to liability for any Asbestos Personal Injury Claims, but
only if and to the extent that any such insurance company has entered into a
settlement agreement with one or more of the Debtors with respect to liability
for Asbestos Personal Injury Claims prior to the Effective Date, or such later
date to which the Plan Proponents may agree, and such agreement expressly
provides for the payment by any such Person of insurance proceeds and either
the comprehensive release of such Person's further liability for Asbestos
Personal Injury Claims or such Person's entitlement to the protection of the
Asbestos Personal Injury Permanent Channeling Injunction in the Chapter 11
Cases as a Protected Party.
"Enjoined Action" means (a) the commencement, conduct, or
continuation in any manner, directly or indirectly (including an action
directly against a provider of insurance), of any suit, action or other
proceeding (including, without limitation, any judicial, arbitral,
administrative or other proceeding) in any forum; (b) the enforcement,
attachment (including, without limitation, any prejudgment attachment),
collection or seeking to recover any judgment, award, decree, or other order;
(c) the creation, perfection or enforcement in any manner, directly or
indirectly, of any Encumbrance; (d) the setting off, seeking reimbursement of,
contribution from, or subrogation against, or other recoupment in any manner,
directly or indirectly, of any amount against any liability owed to any
Protected Parties; and (e) the commencement or continuation, in any manner, in
any place, of any action which, in any such case, does not comply with or is
inconsistent with the provisions of the Plan.
ALL CLASS 7 CLAIMS SHALL BE CHANNELED TO THE ASBESTOS
PERSONAL INJURY TRUST, AND SHALL BE PROCESSED, LIQUIDATED AND PAID PURSUANT OF
THE TERMS AND PROVISIONS OF THE ASBESTOS PERSONAL INJURY TRUST DISTRIBUTION
PROCEDURES AND THE ASBESTOS PERSONAL INJURY TRUST AGREEMENT. THE ASBESTOS
PERSONAL INJURY TRUST WILL BE FUNDED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 10.3 OF THE PLAN. THE SOLE RECOURSE OF THE HOLDER OF A CLASS 7 CLAIM
SHALL BE THE ASBESTOS PERSONAL INJURY TRUST, AND SUCH HOLDER SHALL HAVE NO
RIGHT WHATSOEVER AT ANY TIME TO ASSERT ITS CLAIM OR DEMAND AGAINST ANY
PROTECTED PARTY. WITHOUT LIMITING THE FOREGOING, ON THE EFFECTIVE DATE, ALL
PERSONS SHALL BE PERMANENTLY AND FOREVER STAYED, RESTRAINED, AND ENJOINED FROM
TAKING ANY ENJOINED ACTIONS FOR THE PURPOSE OF, DIRECTLY OR INDIRECTLY,
COLLECTING, RECOVERING, OR RECEIVING PAYMENT OF, ON, OR WITH RESPECT TO ANY
CLASS 7 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 THE DEBTORS OR REORGANIZED DEBTORS AND THE ASBESTOS PERSONAL INJURY
TRUST, WHICH ACTIONS SHALL BE IN CONFORMITY AND COMPLIANCE WITH THE PROVISIONS
THEREOF).
ALL CLASS 8 CLAIMS SHALL BE CHANNELED TO THE ASBESTOS
PERSONAL INJURY TRUST, AND SHALL BE PROCESSED, LIQUIDATED AND PAID PURSUANT TO
THE TERMS AND PROVISIONS OF THE ASBESTOS PERSONAL INJURY TRUST DISTRIBUTION
PROCEDURES AND THE ASBESTOS PERSONAL INJURY TRUST AGREEMENT. THE ASBESTOS
PERSONAL INJURY TRUST WILL BE FUNDED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 10.3 OF THE PLAN. THE SOLE RECOURSE OF THE HOLDER OF A CLASS 8 CLAIM
SHALL BE THE ASBESTOS PERSONAL INJURY TRUST, AND SUCH HOLDER SHALL HAVE NO
RIGHT WHATSOEVER AT ANY TIME TO ASSERT ITS CLAIM OR DEMAND AGAINST ANY
PROTECTED PARTY. WITHOUT LIMITING THE FOREGOING, ON THE EFFECTIVE DATE, ALL
PERSONS SHALL BE PERMANENTLY AND FOREVER STAYED, RESTRAINED, AND ENJOINED FROM
TAKING ANY ENJOINED ACTIONS FOR THE PURPOSE OF, DIRECTLY OR INDIRECTLY,
COLLECTING, RECOVERING, OR RECEIVING PAYMENT OF, ON, OR WITH RESPECT TO ANY
CLASS 8 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 THE DEBTORS OR REORGANIZED DEBTORS AND THE ASBESTOS PERSONAL INJURY
TRUST, WHICH ACTIONS SHALL BE IN CONFORMITY AND COMPLIANCE WITH THE PROVISIONS
THEREOF).
Nothing contained in the Asbestos Personal Injury Permanent
Channeling Injunction shall be deemed a waiver of any claim, right or cause of
action that the Debtors, the Reorganized Debtors or the Asbestos Personal
Injury Trust may have against any Person 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 the Debtors, the
Reorganized Debtors, the Asbestos Personal Injury Trust, or the Litigation
Trust.
For a description of the Asbestos Personal Injury Trust, the
Asbestos Personal Injury Trust Agreement, and the Asbestos Personal Injury
Trust Distribution Procedures, see Section VII of this Disclosure Statement.
5. Exculpation and Limitation of Liability; Indemnity
No Claimant Released Party shall have or incur any liability
to any Person that has held, currently holds or may hold a Claim or other
obligation, suit, judgment, damages, Demand, debt, right, cause of action or
liability or Interest or other right of an equity security holder, or any
other party in interest, or any Person claiming by or through them, or any of
their respective Related Persons, for any act or omission in connection with,
relating to, or arising out of, the Chapter 11 Cases, formulating, negotiating
or implementing the Plan, the solicitation of acceptances of the Plan, the
pursuit of confirmation of the Plan, the 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 willful misconduct or gross
negligence, and, in all respects shall be entitled to reasonably rely upon the
advice of counsel with respect to their duties and responsibilities under the
Plan.
Notwithstanding any other provision herein, no Person that
has held, currently holds or may hold a Claim or other obligation, suit,
judgment, damages, Demand, debt, right, cause of action or liability or
Interest or other right of an equity security holder, no person claiming by or
through them, nor any of their respective Related Persons, shall have any
right of action against any Claimant Released Party for any act or omission in
connection with, relating to, or arising out of, the Chapter 11 Cases,
formulating, negotiating or implementing the Plan, solicitation of acceptances
of the Plan, the pursuit of confirmation of the Plan, the consummation of the
Plan, the confirmation of the Plan or the administration of the Plan or the
property to be distributed under the Plan, except for willful misconduct or
gross negligence.
The foregoing exculpation and limitation on liability shall
not, however, limit, abridge or otherwise affect the rights of the Reorganized
Debtors to enforce, sue on, settle or compromise the rights, claims and other
matters retained by the Reorganized Debtors pursuant to Section 5.10 of the
Plan.
M. Retention of Jurisdiction
Pursuant to Sections 105(a) and 1142 of the Bankruptcy Code, and
notwithstanding entry of the Confirmation Order and occurrence of the
Effective Date, the District Court, together with the Bankruptcy Court to the
extent of any reference made to it by the District Court and the Reference
Order, will retain exclusive jurisdiction over all matters arising out of, and
related to, the Chapter 11 Cases and the Plan, including, among other things,
jurisdiction to:
(a) interpret, enforce, and administer the terms of the Asbestos
Personal Injury Trust Agreement (including all annexes and exhibits thereto),
and the restrictions on transfer of New OCD Common Stock and Asbestos Personal
Injury Claims contained in the Amended and Restated Certificate of
Incorporation of Reorganized OCD and the Confirmation Order;
(b) allow, disallow, determine, liquidate, classify, estimate or
establish the priority or secured or unsecured status of any Claim (other than
an Asbestos Personal Injury Claim and an FB Asbestos Property Damage Claim) or
Interest not otherwise Allowed under the Plan, including the resolution of any
request for payment of any Administrative Claim and the resolution of any
objections to the allowance or priority of Claims or Interests;
(c) hear and determine all applications for compensation and
reimbursement of expenses of professionals under the Plan or under Sections
330, 331, 503(b), 1103 and 1129(a)(4) of the Bankruptcy Code; provided,
however, that from and after the Effective Date, the payment of the fees and
expenses of the retained professionals of the Reorganized Debtors shall be
made in the ordinary course of business and shall not be subject to the
approval of the Bankruptcy Court;
(d) hear and determine all matters with respect to the assumption or
rejection of any executory contract or unexpired lease to which a Debtor is a
party or with respect to which a Debtor may be liable, including, if
necessary, the nature or amount of any required Cure or the liquidation or
allowance of any Claims arising therefrom;
(e) effectuate performance of and payments under the provisions
herein;
(f) hear and determine any and all adversary proceedings, motions,
applications, and contested or litigated matters arising out of, under, or
related to, the Chapter 11 Cases;
(g) enter such orders as may be necessary or appropriate to execute,
implement, or consummate the provisions herein and all contracts, instruments,
releases, and other agreements or documents created in connection with the
Plan, the Disclosure Statement or the Confirmation Order;
(h) hear and determine disputes arising in connection with the
interpretation, implementation, consummation, or enforcement of the Plan,
including disputes arising under agreements, documents or instruments executed
in connection with the Plan;
(i) consider any modifications of the Plan, cure any defect or
omission, or reconcile any inconsistency in any order of the Bankruptcy Court,
including, without limitation, the Confirmation Order;
(j) issue injunctions, enter and implement other orders, or take such
other actions as may be necessary or appropriate to restrain interference by
any entity with implementation, consummation, or enforcement of the Plan or
the Confirmation Order;
(k) enter and implement such orders as may be necessary or
appropriate if the Confirmation Order is for any reason reversed, stayed,
revoked, modified or vacated;
(l) hear and determine any matters arising in connection with or
relating to the Plan, the Disclosure Statement, the Confirmation Order or any
contract, instrument, release or other agreement or document created in
connection with the Plan, the Disclosure Statement or the Confirmation Order;
(m) enforce all orders, judgments, injunctions, releases,
exculpations, indemnifications and rulings entered in connection with the
Chapter 11 Cases;
(n) except as otherwise limited herein, recover all assets of the
Debtors and property of the Debtors' Estates, wherever located;
(o) hear and determine matters concerning state, local and federal
taxes in accordance with Sections 346, 505 and 1146 of the Bankruptcy Code;
(p) hear and determine all disputes involving the existence, nature
or scope of the Debtors' discharge;
(q) hear and determine such other matters as may be provided in or
that may arise in connection with the Plan, the Confirmation Order, the Claims
Trading Injunction, the Asbestos Personal Injury Permanent Channeling
Injunction, or as may be authorized under, or not inconsistent with,
provisions of the Bankruptcy Code;
(r) enter a final decree closing the Chapter 11 Cases; and
(s) to hear and determine all objections to the termination of the
Asbestos Personal Injury Trust and/or the FB Asbestos Property Damage Trust.
Notwithstanding entry of the Confirmation Order and/or the occurrence
of the Effective Date, the reference to the Bankruptcy Court pursuant to the
Reference Order shall continue, but subject to any modifications or
withdrawals of the reference specified in the Confirmation Order, Reference
Order, Case Management Order or other Order of the District Court; provided,
however, that nothing in the Plan, the Reference Order or other Order shall
affect the procedures established pursuant to the Asbestos Personal Injury
Trust Agreement, the Asbestos Personal Injury Trust Distribution Procedures,
the FB Asbestos Property Damage Trust Agreement and the FB Asbestos Property
Damage Trust Distribution Procedures.
N. Revesting of Assets
Pursuant to Section 1141(b) of the Bankruptcy Code, all property of
the respective Estate of each Debtor, together with any property of each
Debtor that is not property of its Estate and that is not specifically
disposed of pursuant to the Plan, shall revest in the applicable Reorganized
Debtor on the Effective Date. Thereafter, the Reorganized Debtors may operate
their businesses and may use, acquire and dispose of property free of any
restrictions of the Bankruptcy Code, the Bankruptcy Rules and the Bankruptcy
Court. As of the Effective Date, all property of each Reorganized Debtor shall
be free and clear of all Encumbrances, Claims and Interests, except as
specifically provided in the Plan or the Confirmation Order. Without limiting
the generality of the foregoing, each Reorganized Debtor may, without
application to or approval by the Bankruptcy Court, pay fees that it incurs
after the Effective Date for professional services and expenses.
O. Rights of Action
Except as otherwise provided in the Plan or the Confirmation Order,
or in any contract, instrument, release, indenture or other agreement entered
into in connection with the Plan, in accordance with Section 1123(b) of the
Bankruptcy Code, the Reorganized Debtors shall retain and may enforce, sue on,
settle or compromise (or decline to do any of the foregoing) all rights,
claims, causes of action, suits or proceedings accruing to the Debtors or the
Estates pursuant to the Bankruptcy Code or pursuant to any statute or legal
theory, including, without limitation, any avoidance or recovery actions under
Sections 544, 545, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code and
any suits or proceedings for recovery under any policies of insurance issued
to or on behalf of the Debtors. Except to the extent such rights, title and
interest in the Litigation Trust Assets are transferred and assigned to the
Litigation Trust, the Reorganized Debtors shall be deemed the appointed
representative to, and may pursue, litigate, compromise and settle any such
rights, claims, causes of action, suits or proceedings as appropriate, in
accordance with the best interests of the Reorganized Debtors or their
respective successors who hold such rights. The Reorganized Debtors will
transfer and assign, or cause to be transferred and assigned, all their right,
title and interest in and to the Litigation Trust Assets to the Litigation
Trust in accordance with Section 5.8 of the Plan, or, if deemed necessary, any
right, title and interest in and to Litigation Trust Assets shall be pursued
in the name of the Debtors or the Reorganized Debtors for the benefit of the
Litigation Trust. Notwithstanding anything in the Plan to the contrary, the
Debtors, upon such transfer and assignment, shall forgo any interest they may
have in the Litigation Trust Assets, except with respect to the Litigation
Trust Reimbursement Obligation.
P. Payment of Statutory Fees
Under the Plan, all fees payable pursuant to Section 1930 of Title 28
of the United States Code, as determined by the Bankruptcy Court at the
Confirmation Hearing, will be paid on or before the Effective Date. After the
Effective Date, the Reorganized Debtors shall pay all required fees pursuant
to Section 1930 of Title 28 of the United States Code or any other statutory
requirement and comply with all statutory reporting requirements.
Q. Post-Consummation Operations of the Debtors
1. Continued Corporate Existence and Restructuring Transactions
Following confirmation and consummation of the Plan, but subject to
the right of the Debtors or Reorganized Debtors to effect the Restructuring
Transactions as provided in Section 5.6 of the Plan, the Reorganized Debtors
will be authorized to continue to exist as separate corporate entities in
accordance with the laws of their respective states of incorporation and
pursuant to their respective certificates or articles of incorporation and
bylaws in effect at the Effective Date. In that regard, OC intends to implement
a restructuring plan which would reorganize OCD and its Subsidiaries along OC's
major business lines. The planning for this restructuring is in a preliminary
stage. It is anticipated that the restructuring plan which is adopted will be
announced prior to the Disclosure Statement Hearing Date and will be described
in an amendment to the Plan.
VIII. THE ASBESTOS PERSONAL INJURY TRUST
[The proposed Asbestos Personal Injury Trust Agreement and the Asbestos
Personal Injury Trust Distribution Procedures have not been finalized and this
section will be revised and/or supplemented when these documents are
finalized]
A. General Description of the Asbestos Personal Injury Trust
The following summarizes certain terms of the Asbestos Personal
Injury Trust Agreement (including the purpose of the Asbestos Personal Injury
Trust, the powers and appointment of the Asbestos Personal Injury Trustees and
the Trustees' Advisory Committee, the transfer of certain property to the
Asbestos Personal Injury Trust and the termination provisions thereof), the
Asbestos Personal Injury Trust Distribution Procedures and the Asbestos
Personal Injury Permanent Channeling Injunction. It is intended only to be a
summary, and interested parties should review the Asbestos Personal Injury
Trust Agreement. The following summary is qualified in its entirety by such
documents.
1. Creation of the Asbestos Personal Injury Trust
The Asbestos Personal Injury Trust will be created effective
as of the later of (a) the date the Asbestos Personal Injury Trustees have
executed the Asbestos Personal Injury Trust Agreement and (b) the Effective
Date. The Asbestos Personal Injury Trust is intended to be a "qualified
settlement fund" within the meaning of Section 468B of the Internal Revenue
Code. Pursuant to the Asbestos Personal Injury Trust Agreement, the Asbestos
Personal Injury Trust will have two separate sub-accounts: the OC Sub-Account
and the FB Sub-Account. The purpose of the Asbestos Personal Injury Trust will
be to, among other things, (a) process, liquidate, and pay all Asbestos
Personal Injury Claims in accordance with the Plan, the Asbestos Personal
Injury Trust Distribution Procedures, and the Confirmation Order and (b)
preserve, hold, manage, and maximize the assets of the Asbestos Personal
Injury Trust (including both the OC Sub-Account and the FB Sub-Account) for
use in paying and satisfying Asbestos Personal Injury Claims. The Asbestos
Personal Injury Trust is intended to comply in all respects with the
requirements set forth in Section 524(g)(2)(B)(i) of the Bankruptcy Code.
2. The Trustees
The Asbestos Claimants' Committee and the Future Claimants'
Representative (as identified in the Asbestos Personal Injury Trust
Agreement), will jointly select individuals to serve as the Asbestos Personal
Injury Trustees for the Asbestos Personal Injury Trust. Those individuals will
be appointed to such position by the Bankruptcy Court, effective as of the
Effective Date.
3. The Trustees' Advisory Committee
The Asbestos Personal Injury Trust Agreement provides for
the establishment of a Trustees' Advisory Committee (the "TAC") with which the
Asbestos Personal Injury Trustees are required to consult, and the consent of
which is required, on certain matters under the Asbestos Personal Injury Trust
Agreement. As with the initial Asbestos Personal Injury 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. Transfer of Certain Property to the Asbestos Personal Injury
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 Personal Injury
Trust and in accordance with written instructions provided to the Reorganized
Debtors by the Asbestos Personal Injury Trust, the Reorganized Debtors will
transfer and assign, and will use all commercially reasonable efforts to cause
the trustees of the Fibreboard Insurance Settlement Trust to transfer and
assign, to the Asbestos Personal Injury Trust all books and records of the
Debtors and the Fibreboard Insurance Settlement Trust that pertain directly to
Asbestos Personal Injury Claims that have been asserted against the Debtors
and/or the Fibreboard Insurance Settlement Trust. The Debtors will request
that the Bankruptcy Court, in the Confirmation Order, rule that such transfers
shall not result in the invalidation or waiver of any applicable privileges
pertaining to such books and records. If the Bankruptcy Court does not so
rule, the Debtors and the trustees of the Asbestos Personal Injury Trust will
make mutually agreeable arrangements to provide access to such books and
records while retaining the protection of any such applicable privilege.
(b) Transfer of the Plan Consideration to the OC
Sub-Account of the Asbestos Personal Injury Trust
On the Effective Date, or as soon as practicable
thereafter, the Reorganized Debtors shall irrevocably transfer and assign to
the Asbestos Personal Injury Trust for allocation to the OC Sub-Account the
following: (i) (a) if Class 4 accepts the Plan, the portion of the Combined
Net Distribution Package equal to the Class 7 Initial Distribution Percentage;
or (b) if Class 4 rejects the Plan, the portion of the Combined Distribution
Package equal to the Class 7 Initial Distribution Percentage, and in addition
and in any event, (ii) the OC Asbestos Personal Injury Liability Insurance
Assets and (iii) the OCD Insurance Escrow.
On or as soon as reasonably practicable after the
Final Distribution Date, the Reorganized Debtors shall irrevocably transfer
and assign to the Asbestos Personal Injury Trust for allocation to the OC
Sub-Account the following: (i) Cash in an amount equal to the Class 7 Final
Distribution Percentage of Excess Available Cash, (ii) Excess Senior Notes in
an aggregate principal amount equal to the Class 7 Final Distribution
Percentage of the Excess Senior Notes Amount, (iii) shares of New OCD Common
Stock in an aggregate number equal to the Class 7 Final Distribution
Percentage of the Excess New OCD Common Stock, and (iv) Cash in an amount
equal to the Class 7 Final Distribution Percentage of the Excess Litigation
Trust Recoveries.
The Reorganized Debtors will also execute and
deliver to the Asbestos Personal Injury Trust such documents as the Asbestos
Personal Injury Trustees reasonably request to issue the Distributable Shares
to be distributed to the Asbestos Personal Injury Trust in the name of the
Asbestos Personal Injury Trust or a nominee and transfer and assign to the
Asbestos Personal Injury Trust all other assets which constitute the assets of
the Asbestos Personal Injury Trust.
(c) Transfer of the Plan Consideration to the FB
Sub-Account of the Asbestos Personal Injury Trust
On the Effective Date, or as soon as practicable
thereafter, the Reorganized Debtors shall irrevocably transfer and assign to
the Asbestos Personal Injury Trust for allocation to the FB Sub-Account the
following: (i) the FB Reversions, (ii) the Committed Claims Account, and (iii)
the FB Sub-Account Settlement Payment.
The Reorganized Debtors will, or will use all
commercially reasonable efforts to, cause the trustees of the Fibreboard
Insurance Settlement Trust to irrevocably transfer and assign (i) the Existing
Fibreboard Insurance Settlement Trust Assets, and (ii) any and all of the
Fibreboard Insurance Settlement Trust's rights in the FB Reversions, to the
Asbestos Personal Injury Trust, for allocation to the FB Sub-Account, on the
Effective Date or as soon as practicable thereafter.
The Reorganized Debtors will also execute and
deliver, or will use all commercially reasonable efforts to cause the trustees
of the Fibreboard Insurance Settlement Trust to execute and deliver, to the
Asbestos Personal Injury Trust such documents as the Asbestos Personal Injury
Trustees reasonably request in connection with the transfer and assignment of
the Existing Fibreboard Insurance Settlement Trust Assets and the FB
Reversions.
(d) The Asbestos Personal Injury Trust Termination
Provisions
The Asbestos Personal Injury Trust will terminate
automatically 90 days after the first to occur of the following events:
(i) the Asbestos Personal Injury Trustees decide to
terminate the Asbestos Personal Injury Trust because (i) they deem it unlikely
that new Asbestos Personal Injury Claims will be filed against the Asbestos
Personal Injury Trust, (ii) all Asbestos Personal Injury Claims duly filed
with the Asbestos Personal Injury Trust have been liquidated and paid to the
extent provided in the Asbestos Personal Injury Trust Agreement and the
Asbestos Personal Injury Trust Distribution Procedures or disallowed by a
final, non-appealable order, to the extent possible based upon the funds
available through the Plan, and (iii) twelve consecutive months have elapsed
during which no new Asbestos Personal Injury Claim has been filed with the
Asbestos Personal Injury Trust; or
(ii) if the Asbestos Personal Injury 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 Personal Injury Trust in a manner consistent with the
Asbestos Personal Injury Trust Agreement and the Asbestos Personal Injury
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
(iii) to the extent that any rule against
perpetuities is deemed applicable to the Asbestos Personal Injury Trust, 21
years less 91 days pass after the death of the last survivor of all of the
descendants of the late Joseph P. Kennedy, Sr., father of the late President
John F. Kennedy, living on the date hereof.
5. Ability to Amend Asbestos Personal Injury Trust Documents.
[The proposed Asbestos Personal Injury Trust Agreement and the Asbestos
Personal Injury Trust Distribution Procedures have not been finalized and this
section will be inserted when these documents are finalized]
B. Asbestos Personal Injury Trust Distribution Procedures
[The proposed Asbestos Personal Injury Trust Agreement and the
Asbestos Personal Injury Trust Distribution Procedures have not been
finalized and this section will be inserted when these documents are
finalized]
C. The Asbestos Personal Injury Permanent Channeling Injunction
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 Personal Injury
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 Personal
Injury 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 Personal Injury Permanent Channeling
Injunction and the Plan, the following entities will be "Protected Parties"
and, therefore, protected by the scope of the Asbestos Personal Injury
Permanent Channeling Injunction: [This section will be revised and
supplemented after continued review of information necessary to file Schedules
VI, VIII and X to the Plan]
Pursuant to the Asbestos Personal Injury Permanent Channeling
Injunction, Protected Parties will be protected against "Enjoined Actions":
(i) the commencement, conduct, or continuation in any manner, directly or
indirectly (including an action directly against a provider of insurance), of
any suit, action or other proceeding (including, without limitation, any
judicial, arbitral, administrative or other proceeding) in any forum; (ii) the
enforcement, attachment (including, without limitation, any prejudgment
attachment), collection or seeking to recover any judgment, award, decree, or
other order; (iii) the creation, perfection or enforcement in any manner,
directly or indirectly, of any Encumbrance, (iv) the setting off, seeking
reimbursement of, contribution from, or subrogation against, or other
recoupment in any manner, directly or indirectly, of any amount against any
liability owed to any Protected Parties, and (v) the commencement or
continuation, in any manner, in any place, of any action which, in any such
case, does not comply with or is inconsistent with the provisions of the Plan.
PURSUANT TO THE PLAN, SECTION 524(g) OF THE BANKRUPTCY CODE, AND
PURSUANT TO AND IN CONJUNCTION WITH THE CONFIRMATION ORDER, ALL PERSONS WILL
BE PERMANENTLY, FOREVER AND COMPLETELY STAYED, RESTRAINED, PROHIBITED AND
ENJOINED FROM TAKING ANY ENJOINED ACTION OR PROCEEDING IN ANY MANNER IN ANY
PLACE WITH REGARD TO ANY MATTER THAT IS SUBJECT TO RESOLUTION PURSUANT TO THE
ASBESTOS PERSONAL INJURY TRUST AGREEMENT, INCLUDING, WITHOUT LIMITATION, WITH
RESPECT TO ANY RESOLVED ASBESTOS PERSONAL INJURY CLAIM, EXCEPT IN CONFORMITY
AND COMPLIANCE THEREWITH, AGAINST ANY PROTECTED PARTY OR PROPERTY OR INTERESTS
IN PROPERTY OF ANY PROTECTED PARTY, WHETHER DIRECTLY OR INDIRECTLY,
DERIVATIVELY OR OTHERWISE, 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 PURSUANT TO THE PROVISIONS OF THE
ASBESTOS PERSONAL INJURY TRUST AGREEMENT OR TO ENFORCE THE PROVISIONS OF THE
PLAN).
IX. THE FB ASBESTOS PROPERTY DAMAGE TRUST
[The proposed FB Asbestos Property Damage Trust Agreement and the FB Asbestos
Property Damage Trust Distribution Procedures have not been finalized and this
section will amended or supplemented when these documents are finalized]
The following summarizes certain terms of the FB Asbestos Property
Damage Trust Agreement (including the purpose of the FB Asbestos Property
Damage Trust , the powers and appointment of the FB Asbestos Property Damage
Trustee, the transfer of certain property to the FB Asbestos Property Damage
Trust and the termination provisions thereof) and the FB Asbestos Property
Damage Trust Distribution Procedures. It is intended only to be a summary, and
interested parties should review the FB Asbestos Property Damage Trust
Agreement and the FB Asbestos Property Damage Trust Distribution Procedures.
The following summary is qualified in its entirety by such documents.
A. General Description of the FB Asbestos Property Damage Trust
1. Purposes of the FB Asbestos Property Damage Trust
The FB Asbestos Property Damage Trust will be established
pursuant to the FB Asbestos Property Damage Settlement Trust Agreement ("FB
Asbestos Property Damage Trust Agreement"), a copy of which will be attached
to the Plan as Exhibit E. In accordance with Section 1.93 of the Plan, and
Exhibit E to the Plan will be filed with the Clerk of the Bankruptcy Court at
least five (5) Business Days prior to the Objection Deadline.
The purpose of the FB Asbestos Property Damage Trust is to
assume any and all liabilities of Fibreboard or its Affiliates, with respect
to any and all FB Asbestos Property Damage Claims, and to use the assets of
the FB Asbestos Property Damage Trust and income to promptly pay holders of
Allowed FB Asbestos Property Damage Claims.
2. Transfer of Certain Property to and Assumption of Certain
Liabilities by the FB Asbestos Property Damage Trust.
On the later of the Effective Date and the date by which the
FB Asbestos Property Damage Trustee has executed the FB Asbestos Property
Damage Trust Agreement, the Reorganized Debtors shall transfer and assign, or
cause the FB Asbestos Property Damage Insurance Assets to be transferred and
assigned to the FB Asbestos Property Damage Trust . The FB Asbestos Property
Damage Insurance Assets include, without limitation, the following agreements
that provide coverage in place for FB Asbestos Property Damage Claims up to
certain limits in a specified sequence: (1) Settlement Agreement dated on or
around January 1, 1993 between Fibreboard and American Home Assurance Company,
Granite State Insurance Company, Insurance Company of the State of
Pennsylvania, Lexington Insurance Company, and New Hampshire Insurance
Company; (2) Settlement Agreement dated on or around October 31, 1994 between
Fibreboard and CIGNA Specialty Insurance Company, Central National Insurance
Company of Omaha, Century Indemnity Company, CIGNA Property and Casualty
Insurance Company, and Insurance Company of North America; (3) Settlement
Agreement dated on or around August 7, 1997 between Fibreboard and New England
Insurance Company. The FB Asbestos Property Damage Insurance Assets include,
without limitation, the following agreements that provide coverage in place
for FB Asbestos Property Damage Claims up to certain limits in a specified
sequence: (1) Settlement Agreement dated on or around January 1, 1993 between
Fibreboard and American Home Assurance Company, Granite State Insurance
Company, Insurance Company of the State of Pennsylvania, Lexington Insurance
Company, and New Hampshire Insurance Company; (2) Settlement Agreement dated
on or around October 31, 1994 between Fibreboard and CIGNA Specialty Insurance
Company, Central National Insurance Company of Omaha, Century Indemnity
Company, CIGNA Property and Casualty Insurance Company, and Insurance Company
of North America; (3) Settlement Agreement dated on or around August 7, 1997
between Fibreboard and New England Insurance Company.
On the Effective Date, or as soon thereafter as is
practicable, at the sole cost and expense of the FB Asbestos Property Damage
Trust and in accordance with written instructions provided to the Reorganized
Debtors by the FB Asbestos Property Damage Trust, the Reorganized Debtors will
transfer and assign to the FB Asbestos Property Damage Trust copies of all
books and records of the Debtors that pertain directly to FB Asbestos Property
Damage Claims that have been asserted against the Debtors and/or the
Fibreboard Insurance Settlement Trust. The Debtors will request that the
Bankruptcy Court, in the Confirmation Order, rule that such transfers shall
not result in the invalidation or waiver of any applicable privileges
pertaining to such books and records.
In consideration for the property transferred to the FB
Asbestos Property Damage Trust, and in furtherance of the purposes of the FB
Asbestos Property Damage Trust and the Plan, the FB Asbestos Property Damage
Trust shall assume all liability and responsibility for all FB Asbestos
Property Damage Claims, and the Reorganized Debtors shall have no further
financial or other responsibility or liability therefor. The FB Asbestos
Property Damage 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 FB Asbestos Property Damage
Insurance Assets as a result of FB Asbestos Property Damage Claims,
asbestos-related property damage claims against Persons insured under policies
included in the FB Asbestos Property Damage Insurance Assets by reason of
vendors' endorsements, or under the indemnity provisions of settlement
agreements that the Debtors made with any insurers prior to the Confirmation
Date to the extent that those indemnity provisions relate to FB Asbestos
Property Damage Claims, and the Reorganized Debtors shall have no further
financial or other responsibility or liability for any of the foregoing;
provided, however, that such liability of the FB Asbestos Property Damage
Trust shall be limited to the extent of the benefits of such Trust, as
reasonably determined by the Trustee of such Trust, so that the FB Asbestos
Property Damage Trust may elect to terminate such liability in the event that
the Trustee determines the benefits of maintaining the insurance policies are
no longer worth the costs.
The Reorganized Debtors shall cooperate with the FB Asbestos
Property Damage 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 FB Asbestos
Property Damage Insurance Assets to the FB Asbestos Property Damage Trust. By
way of enumeration and not of limitation, the Reorganized Debtors shall be
obligated (a) to provide the FB Asbestos Property Damage Trust with copies of
insurance policies and settlement agreements included within or relating to
the FB Asbestos Property Damage Insurance Assets; (b) to provide the FB
Asbestos Property Damage Trust with information necessary or helpful to the FB
Asbestos Property Damage Trust in connection with its efforts to obtain
insurance coverage for FB Asbestos Property Damage Claims; and (c) to execute
further assignments or allow the FB Asbestos Property Damage Trust to pursue
claims relating to the FB Asbestos Property Damage Insurance Assets in its
name (subject to appropriate disclosure of the fact that the FB Asbestos
Property Damage 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 FB
Asbestos Property Damage Trust to obtain insurance coverage under the FB
Asbestos Property Damage Insurance Assets for FB Asbestos Property Damages
Claims. The FB Asbestos Property Damage Trust shall be obligated to compensate
the Reorganized Debtors for costs reasonably incurred in connection with
providing assistance to the FB Asbestos Property Damage Trust, including
without limitation, out-of-pocket costs and expenses, consultant fees, and
attorneys' fees.
On the Confirmation Date, the Debtors will be empowered and
authorized to take or cause to be taken, prior to the Effective Date, all
actions necessary to enable them to implement effectively the provisions of
the Plan and the FB Asbestos Property Damage Trust Agreement.
3. The FB Asbestos Property Damage Trustee
(a) Appointment of the FB Asbestos Property Damage
Trustee
On the Confirmation Date, effective as of the
Effective Date, the Bankruptcy Court shall confirm the appointment of the
individual selected by the Debtors to serve as the FB Asbestos Property Damage
Trustee of the FB Asbestos Property Damage Trust .
[The proposed FB Asbestos Property Damage Trust
Agreement and the FB Asbestos Property Damage Trust Distribution Procedures
have not been finalized and this information will be inserted when these
documents are finalized]
(b) FB Asbestos Property Damage Trustee's Powers and
Duties
The FB Asbestos Property Damage Trustee will act as
a fiduciary to the FB Asbestos Property Damage Trust in accordance with the
provisions of the FB Asbestos Property Damage Trust Agreement and the Plan.
The FB Asbestos Property Damage Trustee will be obligated, among other things,
at all times, to administer the FB Asbestos Property Damage Trust and the FB
Asbestos Property Damage Trust Assets in a manner consistent with the FB
Asbestos Property Damage Trust Agreement and the FB Asbestos Property Damage
Trust Distribution Procedures Procedures. Subject to any limitations set forth
in the FB Asbestos Property Damage Trust Agreement, the FB Asbestos Property
Damage Trustee shall have the power to take any and all such actions as in the
judgment of the FB Asbestos Property Damage Trustee that are necessary or
proper to fulfill the purposes of the FB Asbestos Property Damage Trust .
(c) FB Asbestos Property Damage Trustee's Compensation
[The proposed FB Asbestos Property Damage Trust
Agreement and the FB Asbestos Property Damage Trust Distribution Procedures have
not been finalized and this information will be inserted when these documents
are finalized]
The FB Asbestos Property Damage Trustee will be
entitled to receive initial compensation of $_______ per annum plus a per diem
allowance for meetings attended of $_____, as well as out-of-pocket costs and
expenses. The FB Asbestos Property Damage Trustee's per annum compensation may
only be increased annually at the rate of the Consumer Price Index - All
Cities. Any increase in excess of such an adjustment based on the Consumer
Price Index may be made only with the Bankruptcy Court's approval.
4. FB Asbestos Property Damage Trust Termination Provisions
The FB Asbestos Property Damage Trust is irrevocable, but
will terminate ninety (90) days after the first day any of the following
events occurs:
(i) the FB Asbestos Property Damage Trustee, in
his or her sole discretion, decides to terminate the FB Asbestos Property
Damage Trust because (a) all duly filed FB Asbestos Property Damage Claims
have been liquidated and satisfied and two years have elapsed since the
Effective Date, (b) the FB Asbestos Property Damage Trustee determines that it
is unlikely that any new claims will be filed against the FB Asbestos Property
Damage Trust;
(ii) a final order of the Bankruptcy Court is
obtained approving the FB Asbestos Property Damage Trustee's procurement of
irrevocable insurance policies and establishment of claims handling agreements
with suitable third parties adequate to discharge all expected remaining FB
Asbestos Property Damage Trust obligations and expenses of the FB Asbestos
Property Damage Trust in a manner consistent with the FB Asbestos Property
Damage Trust Agreement and the FB Asbestos Property Damage Trust Distribution
Procedures;
(iii) in the judgment of the FB Asbestos Property Damage
Trustee , with the consent of the Property Damage Advisory Committee ("PDAC"),
the continued administration of the FB Asbestos Property Damage Trust is
uneconomic or inimical to the best interests of the persons holding FB
Asbestos Property Damage Claims, and the termination will not expose
Fibreboard, its Affiliates or any other Reorganized Debtor or any successor to
any increased or undue risk of having claims asserted against it or them or in
any way jeopardize the validity or the enforceability of the injunction
channeling FB Asbestos Property Damage Claims; or
(iv) 21 years less 91 days pass after the death of the last
survivor of all of the descendants of George Herbert Walker Bush of Texas,
living on the date of the establishment of the FB Asbestos Property Damage
Trust.
After payment of all the FB Asbestos Property Damage Trust's
liabilities have been provided for, and after the FB Asbestos Property Damage
Trust terminates, any monies remaining in the FB Asbestos Property Damage
Trust shall be transferred to charitable organizations that are exempt from
federal income tax under Section 501(c)(3) of the IRC. These tax-exempt
organizations shall be selected by the FB Asbestos Property Damage Trustee ,
but shall be unrelated to FB and Reorganized OCD and, if practicable, shall be
related to the treatment of asbestos-caused disorders. The Plan Proponents
believe that the likelihood of any monies remaining in the FB Asbestos
Property Damage Trust after the FB Asbestos Property Damage Trust terminates
is extremely remote.
B. FB Asbestos Property Damage Claims Procedures
The FB Asbestos Property Damage Trust Distribution Procedures provide the
exclusive means of processing, liquidating, paying and satisfying all FB
Asbestos Property Damage Claims as provided in and required by the Plan and
the FB Asbestos Property Damage Trust Agreement. The FB Asbestos Property
Damage Trust Distribution Procedures are designed to provide fair, prompt
payment to holders of Allowed FB Asbestos Property Damage Claims and to
provide a low transaction cost method of effectuating the resolution of FB
Asbestos Property Damage Claims. The FB Asbestos Property Damage Trustee will
implement and administer the FB Asbestos Property Damage Claims Procedures,
which are attached to the Plan as Exhibit E. [The proposed FB Asbestos
Property Damage Trust Agreement and the FB Asbestos Property Damage Trust
Distribution Procedures have not been finalized and this section will amended
or supplemented when these documents are finalized]
C. Injunction Channeling FB Asbestos Property Damage Claims
ALL CLASS 9 CLAIMS SHALL BE CHANNELED TO THE FB ASBESTOS PROPERTY
DAMAGE TRUST, AND SHALL BE PROCESSED, LIQUIDATED AND PAID PURSUANT TO THE
TERMS AND PROVISIONS OF THE FB ASBESTOS PROPERTY DAMAGE TRUST AGREEMENT AND
THE FB ASBESTOS PROPERTY DAMAGE TRUST DISTRIBUTION PROCEDURES. THE FB ASBESTOS
PROPERTY DAMAGE TRUST WILL BE FUNDED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 11.3 OF THE PLAN. THE SOLE RECOURSE OF THE HOLDER OF AN ALLOWED CLASS
9 CLAIM SHALL BE THE FB ASBESTOS PROPERTY DAMAGE TRUST, AND SUCH HOLDER SHALL
HAVE NO RIGHT WHATSOEVER AT ANY TIME TO ASSERT ITS CLASS 9 CLAIM AGAINST ANY
FB PERSON. WITHOUT LIMITING THE FOREGOING, ON THE EFFECTIVE DATE, ALL PERSONS
SHALL BE PERMANENTLY AND FOREVER STAYED, RESTRAINED, AND ENJOINED FROM TAKING
ANY ENJOINED ACTIONS FOR THE PURPOSE OF, DIRECTLY OR INDIRECTLY, COLLECTING,
RECOVERING, OR RECEIVING PAYMENT OF, ON, OR WITH RESPECT TO ANY FB 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 THE DEBTORS OR REORGANIZED DEBTORS AND THE FB ASBESTOS
PROPERTY DAMAGE TRUST, WHICH ACTIONS SHALL BE IN CONFORMITY AND COMPLIANCE
WITH THE PROVISIONS HEREOF).
X. THE LITIGATION TRUST
[The proposed Litigation Trust Agreement has not been finalized and this
section will amended or supplemented when this document is finalized]
A. General Description of the Litigation Trust
1. Creation of the Litigation Trust
Effective on the Effective Date, the Litigation Trust will
be created pursuant to the Litigation Trust Agreement, substantially in the
form of Exhibit C to the Plan. For federal income tax purposes, it is intended
that the Litigation Trust be classified as a liquidating trust under Section
301.7701-4 of the Treasury Regulations and that such trust is treated as owned
by its beneficiaries. Accordingly, for federal income tax purposes, it is
intended that the beneficiaries be treated as if they had received a
distribution of an undivided interest in the Litigation Trust Assets and then
contributed such interests to the Litigation Trust. The purpose of the
Litigation Trust is, among other things, to (a) hold, preserve, manage and
maximize the value of the Litigation Trust Assets for distribution, including
without limitation, to pursue the Potential Tax Refunds and litigate, settle
or otherwise resolve the Tobacco Causes of Action, the Avoidance Actions and
the Material Rights of Action transferred to the Litigation Trust; (b)
liquidate the Litigation Trust Assets; and (c) distribute the Litigation Trust
Recoveries to the holders of Claims as described in the Plan and the
Litigation Trust Agreement. The Litigation Trustee will engage in the
foregoing actions with no objective to engage in the conduct of a trade or
business.
2. The Trustee
The Litigation Trustee for the Litigation Trust will be
designated by the Plan Proponents, subject to the approval of the Bankruptcy
Court. The Plan Proponents expect to file a notice on or prior to the
Disclosure Statement Hearing designating the Person whom they have selected as
Litigation Trustee and seeking approval of such designation at the
Confirmation Hearing. Any dispute regarding the designation of the Litigation
Trustee will be resolved by the Bankruptcy Court. If approved by the
Bankruptcy Court, the Person so designated will become the Litigation Trustee
on the Effective Date and will have the duties, responsibilities, rights and
obligations set forth in the Litigation Trust Agreement.
The Litigation Trustee will have full authority to take any
steps necessary to administer the Litigation Trust Agreement, including,
without limitation, the duty and obligation to liquidate Litigation Trust
Assets, to make distributions therefrom to the Disbursing Agent for
disbursement to holders of Allowed Claims in Classes 4, 5 and 6 and the
Asbestos Personal Injury Trust for allocation to the OC Sub-Account, to pursue
and settle any of the rights and claims with respect to the Litigation Trust
Assets, to retain such professionals as it may deem necessary to aid in the
performance of its responsibilities and to be responsible for filing all
federal, state and local tax returns of the Litigation Trust.
3. The Trustee's Advisory Committee
[The proposed Litigation Trust Agreement has not been finalized and this
section will be amended or supplemented when this document is finalized]
4. Funding of the Litigation Trust
The Debtors will deliver $500,000, or such other amount upon
which the Plan Proponents may agree no later than five (5) Business Days prior
to the Objection Deadline (the "Litigation Trust Initial Deposit"), to the
Litigation Trustee on the Effective Date. The Litigation Trustee will use the
Litigation Trust Initial Deposit consistent with the purpose of the Litigation
Trust and subject to the terms and conditions of the Plan and the Litigation
Trust Agreement.
5. Transfer of Certain Assets to the Litigation Trust
On the Effective Date, the Debtors will irrevocably transfer
the Litigation Trust Assets (except such assets as have been previously
settled) to the Litigation Trust, for and on behalf of each of Class 4, 5 and
6 and the Asbestos Personal Injury Trust for allocation to the OC Sub-Account.
The Litigation Trust Assets are comprised of (a) the Litigation Trust Initial
Deposit, (b) all of the Debtors' right, title and interest in and to the
Potential Tax Refunds, (c) all of the Debtors' rights and standing to object
to, litigate, settle and otherwise resolve (i) the Tobacco Causes of Action,
(ii) the Avoidance Actions, (iii) the Material Rights of Action, and (d) any
and all proceeds of the foregoing and interest actually earned. Litigation
Trust Assets will not include the FB Reversions, the proceeds of which, when
recovered, will be transferred to the FB Sub-Account of the Asbestos Personal
Injury Trust for the benefit of Class 8 only.
Material Rights of Action means all rights, claims, causes
of action, suits or proceedings accruing to the Debtors or any assets or other
property of the Debtors pursuant to the Bankruptcy Code or pursuant to any
statute or legal theory which, if determined in favor of the Debtors or the
Estates, would reasonably be expected to result in a recovery in excess of
$200,000, but excluding Commercial Claims. Commercial Claims, excluded from
the definition of Material Rights of Action and therefore not included in the
Litigation Trust Assets, means rights, claims, causes of action, suits or
proceedings for the collection of debts owed to any of the Debtors from
purchasers of goods and services from Debtor or to collect sums from vendors,
suppliers or other parties for breaches of contract in commercial
relationships with any of the Debtors or to recover money based on such other
commercial relationship of a Debtor that arise in the ordinary course of
business. Commercial Claims does not include Avoidance Actions or any other
rights, claims, causes of action, suits or proceedings created by Title 11 of
the United States Code
6. Cooperation of the Debtors
[[The proposed Litigation Trust Agreement has not been finalized and this
section will be amended or supplemented when this document is finalized]
7. Litigation Trust Termination Provisions
[The proposed Litigation Trust Agreement has not been
finalized and this section will be amended or supplemented when this document
is finalized]
B. Distributions of Litigation Trust Recoveries
[The proposed Litigation Trust Agreement has not been
finalized and this section will be amended or supplemented when this document
is finalized]
XI. RESTRICTIONS ON TRANSFERS OF CORPORATE SECURITIES AND CERTAIN CLAIMS
[The Plan Proponents will discuss whether it is necessary or appropriate to
implement restrictions on the transfer of securities to protect net
operating losses and other tax attributes. The resolution of this issue
will be addressed in the future in proposed
revisions to the Disclosure Statement.]
XII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS
It is not currently expected that any registration statement will be
filed under the Securities Act or any state securities laws with respect to
the issuance or distribution of the New OCD Securities under the Plan or their
subsequent transfer or resale. The Debtors believe that, subject to certain
exceptions described below, various provisions of the Securities Act, the
Bankruptcy Code and state securities laws exempt from federal and state
securities registration requirements (a) the offer and the sale of such
securities pursuant to the Plan and (b) subsequent transfers of such
securities.
A. Offer and Sale of New OCD Securities Pursuant to the Plan: Bankruptcy
Code Exemption from Registration Requirements
Holders of Allowed Claims in Classes 4, 5 and 6 and the Asbestos
Personal Injury Trust will receive New OCD Securities pursuant to the Plan.
Section 1145(a)(1) of the Bankruptcy Code provides that the registration
requirements of federal and state securities laws do not apply to the offer or
sale of securities under a plan of reorganization if three principal
requirements are satisfied: (1) the securities must be issued "under a plan"
of reorganization by the debtor or its successor under a plan or by an
affiliate participating in a joint plan of reorganization with the debtor; (2)
the recipients of the securities must hold a pre-petition or administrative
expense claim against the debtor or an interest in the debtor; and (3) the
securities must be issued entirely in exchange for the recipient's claim
against or interest in the debtor, or "principally" in such exchange and
"partly" for cash or property. In reliance upon this exemption, the Debtors
believe that the offer and sale of the New OCD Securities under the Plan will
be exempt from registration under the Securities Act and state securities
laws. In addition, the Debtors will seek to obtain, as part of the
Confirmation Order, a provision confirming such exemption. 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
under the Bankruptcy Code. 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.
B. Subsequent Transfers of New OCD Securities
Section 1145(b) of the Bankruptcy Code defines the term "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," (1)
purchases a claim against, interest in, or claim for an administrative expense
in the case concerning, the debtor, if such purchase is with a view to
distributing any security received in exchange for such a claim or interest;
(2) offers to sell securities offered or sold under a plan for the holders of
such securities; (3) offers to buy securities offered or sold under the plan
from the holders of such securities, if the offer to buy is: (a) with a view
to distribution of such securities; and (b) under an agreement made in
connection with the plan, with the consummation of the plan, or with the offer
or sale of securities under the plan; or (4) is an "issuer" with respect to
the securities, as the term "issuer" is defined in 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 such term is defined in Rule 405 of
Regulation C under the Securities Act) means the possession, direct or
indirect, of the power to direct or cause the direction of the 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," particularly if such management position is coupled with the
ownership of a significant percentage of the debtor's (or successor's) voting
securities. Moreover, the legislative history of Section 1145 of the
Bankruptcy Code suggests that a creditor who owns at least 10% of the
securities of a reorganized debtor may be presumed to be a "control person."
To the extent that persons deemed to be "underwriters" receive New
OCD 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. Such persons would not be permitted to
resell such New OCD Securities unless such securities were registered under
the Securities Act or an exemption from such registration requirements were
available. 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.
Rule 144A provides a non-exclusive safe harbor exemption from the
registration requirements of the Securities Act for resales to certain
"qualified institutional buyers" of securities that are "restricted securities
"within the meaning of the Securities Act, irrespective of whether the seller
of such securities purchased his, her or its securities under the provisions
of Rule 144A. Under Rule 144A, a "qualified institutional buyer" is defined to
include, among other persons (e.g., "dealers" registered as such pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and "banks" as defined in Section 3(a)(2) of the Securities Act), any
entity that purchases securities for its own account or for the account of
another qualified institutional buyer and that (in the aggregate) owns and
invests on a discretionary basis at least $100 million in the securities of
unaffiliated issuers. Subject to certain qualifications, Rule 144A does not
exempt the offer or sale of securities that, at the time of their issuance,
were securities of the same class of securities then listed on a national
securities exchange (registered under Section 6 of the Exchange Act) or quoted
in a U.S. automated interdealer quotation system (e.g., Nasdaq). For so long
as none of the New OCD Securities to be issued under the Plan are not also
listed or quoted as described above, holders of New OCD Securities who are
deemed to be "underwriters" within the meaning of Section 1145(b)(1) of the
Bankruptcy Code or who may be otherwise deemed to be "affiliates" or "control
persons" of Reorganized OCD within the meaning of Rule 405 of Regulation C
under the Securities Act, and holders of securities whose securities will be
"restricted securities" within the meaning of the Securities Act should,
assuming that all other conditions of Rule 144A are met, be entitled to avail
themselves of the safe harbor resale provisions thereof.
To the extent that Rule 144A is unavailable, such holders 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 that are not restricted but such persons are
"affiliates" of the issuer, will not be deemed to be "underwriters" as defined
in Section 2(11) of the Securities Act.
Pursuant to the Plan, certificates evidencing New OCD Securities
received by a holder of 10% or more of the outstanding New OCD Common Stock
(which will include the Asbestos Personal Injury Trust) will bear a legend
substantially in the form below:
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 THE
COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT
THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
Whether or not any particular person would be deemed to be an
"underwriter" of New OCD Securities to be issued pursuant to the Plan, or an
"affiliate" of Reorganized OCD, would depend upon various facts and
circumstances applicable to that person. Accordingly, OCD expresses no view as
to whether any such person would be such an "underwriter" or "affiliate."
THE FOREGOING SUMMARY DISCUSSION IS GENERAL IN NATURE AND HAS BEEN
INCLUDED IN THIS DISCLOSURE STATEMENT SOLELY FOR INFORMATIONAL PURPOSES. THE
DEBTORS MAKE NO REPRESENTATIONS CONCERNING, AND DO NOT HEREBY PROVIDE ANY
OPINION OR ADVICE WITH RESPECT TO, THE SECURITIES LAW AND BANKRUPTCY LAW
MATTERS DESCRIBED ABOVE. IN LIGHT OF THE COMPLEX AND SUBJECTIVE INTERPRETIVE
NATURE OF WHETHER A PARTICULAR RECIPIENT OF NEW DEBT SECURITIES OR NEW OCD
COMMON STOCK MAY BE DEEMED TO BE AN "UNDERWRITER" WITHIN THE MEANING OF
SECTION 1145(B)(1) OF THE BANKRUPTCY CODE AND/OR AN "AFFILIATE" OR "CONTROL
PERSON" UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND, CONSEQUENTLY,
THE UNCERTAINTY CONCERNING THE AVAILABILITY OF EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND EQUIVALENT STATE
SECURITIES AND "BLUE SKY" LAWS, OCD ENCOURAGES EACH CLAIMANT TO CONSIDER
CAREFULLY AND CONSULT WITH HIS, HER, OR ITS OWN LEGAL ADVISORS WITH RESPECT TO
SUCH (AND ANY RELATED) MATTERS.
XIII. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion is a summary of certain United States
federal income tax aspects of the Plan, for general information purposes only,
and should not be relied upon for purposes of determining the specific tax
consequences of the Plan with respect to a particular holder of a Claim. This
discussion does not purport to be a complete analysis or listing of all
potential tax considerations.
This discussion is based on existing provisions of the IRC, existing
and proposed Treasury Regulations promulgated thereunder, and current
administrative rulings and court decisions. Legislative, judicial, or
administrative changes or interpretations enacted or promulgated after the
date hereof could alter or modify the analyses set forth below with respect to
the United States federal income tax consequences of the Plan. Any such
changes or interpretations may be retroactive and could significantly affect
the United States federal income tax consequences of the Plan.
Except as discussed in Sections A.1, A.2 and B.2 below, no ruling has
been requested or obtained from the IRS with respect to any tax aspects of the
Plan and no opinion of counsel has been sought or obtained with respect
thereto. No representations or assurances are being made to the holders of
Claims with respect to the United States federal income tax consequences
described herein.
Each holder of a Claim affected by the Plan is strongly urged to
consult its tax advisor regarding the specific tax consequences of the
transactions described herein and in the Plan.
A. Federal Income Tax Consequences to the Debtors
1. Cancellation of Indebtedness Income
Under the IRC, a taxpayer generally must recognize income
from the cancellation of debt ("COD income") to the extent that its
indebtedness is discharged during the taxable year. Section 108(a)(1)(A) of
the IRC provides an exception to this rule where a taxpayer is in bankruptcy
and where the discharge is granted, or is effected pursuant to a plan
approved, by the bankruptcy court. This exception is subject to the conditions
imposed by Section 108(b) of the IRC, which requires that the COD income be
applied to reduce certain tax attributes of the taxpayer, in the following
order: NOLs, general business and minimum tax credit carryforwards, capital
loss carryforwards, the basis of the taxpayer's assets, and finally, foreign
tax credit tax carryforwards (collectively, "Tax Attributes"). Section
108(b)(5) of the IRC permits a taxpayer to elect to first apply the reduction
to the basis of the taxpayer's depreciable assets, with any remaining balance
applied to the taxpayer's other Tax Attributes in the order stated above.
Section 108(e)(2) of the IRC provides a further exception to the realization
of COD income to the extent that the taxpayer's satisfaction of the debt would
have given rise to a deduction for federal income tax purposes. The effect of
Section 108(e)(2) of the IRC, where applicable, is to allow a taxpayer to
discharge indebtedness without recognizing income and to avoid any reduction
of its Tax Attributes.
As a result of the application of Section 108(a)(1)(A) of
the IRC, the Debtors generally will not recognize COD income from the
discharge of indebtedness pursuant to the Plan; however, certain Tax
Attributes of the Debtors may be reduced or eliminated. The Debtors have not
yet determined whether they will make the election under Section 108(b)(5) of
the IRC to apply any required attribute reduction first to the basis of the
Debtors' depreciable property, with any excess next applied to reduce their
NOLs, and then to reduce the Debtors' other Tax Attributes. To the extent that
the discharge meets the criteria of Section 108(e)(2) of the IRC, no COD
income will be recognized and no reduction of Tax Attributes will occur. The
Debtors received a private letter ruling from the IRS on July 23, 2002 (the
"PLR") that, among other rulings, confirms that the discharge of indebtedness
arising from settlement of OC Asbestos Personal Injury Claims, other than OC
Indirect Asbestos PI Trust Claims, will satisfy the requirements of Section
108(e)(2) of the IRC and, therefore, will not result in any reduction of the
Debtors' Tax Attributes. It is also expected that the settlement of certain
claims in Class 6 (on account of OC Asbestos Property Damage Claims) and
claims in Class 7 (on account of OC Indirect Asbestos PI Trust Claims), Class
8 (FB Asbestos Personal Injury Claims) and Class 9 (FB Asbestos Property
Damage Claims), all of which should give rise to deductions for federal income
tax purposes, should satisfy the requirements of Section 108(e)(2) of the IRC.
Although not free from doubt, based on existing authorities,
the Debtors believe that any reduction in Tax Attributes other than NOLs
generally will occur on a separate company basis even though the Debtors file
a consolidated federal income tax return. The IRS has recently taken the
position, however, that with respect to NOLs, a consolidated filing group's
consolidated NOLs must be reduced, irrespective of the source of those losses.
The current IRS position as to how the attribute reduction rules should
operate in the case of other Tax Attributes of consolidated group members is
unclear. Any required attribute reduction will take place after the Debtors
have determined their taxable income, and any federal income tax liability,
for the taxable year in which the Effective Date occurs.
2. Net Operating Losses and Other Attributes
Following the Effective Date, the Debtors may have NOLs. The
Debtors currently have approximately $_______ of NOLs, and the Debtors will
generate NOLs on the Effective Date to the extent that the Debtors have
generated deductions for federal income tax purposes that are not offset by
income and/or gain and are not eliminated by the attribute reduction rules of
Section 108(b) of the IRC discussed above. In this regard, the IRS has
confirmed in the PLR that, provided certain conditions are satisfied (which
conditions the Debtors expect to satisfy), including the obtaining of a
"Qualified Appraisal" as defined in Treasury Regulation ss.1.468B-3(b)(3), the
Debtors will be entitled to a current deduction for all transfers of Cash,
property other than indebtedness of the Debtors, and New OCD Common Stock to
the OC Sub-Account of the Asbestos Personal Injury Trust for OC Asbestos
Personal Injury Claims other than OC Indirect Asbestos PI Trust Claims. It is
also expected that the Debtors will be entitled to a current deduction for
transfers of Cash, property other than indebtedness of the Debtors, and New
OCD Common Stock to the OC Sub-Account of the Asbestos Personal Injury Trust
in respect of OC Indirect Asbestos PI Trust Claims and the FB Sub-Account of
the Asbestos Personal Injury Trust for Class 7 Claims (on account of OC
Indirect Asbestos PI Trust Claims) and Class 8 Claims (FB Asbestos Personal
Injury Claims). The amount of the aggregate deduction to which the Debtors
will be entitled will equal the sum of the Cash and the fair market value of
the other property (excluding any indebtedness of the Debtors) and New OCD
Common Stock transferred to the Asbestos Personal Injury Trust to satisfy such
OC Asbestos Personal Injury Claims and FB Asbestos Personal Injury Claims. It
should be noted, however, that no deduction for transfers to the Asbestos
Personal Injury Trust will be allowed to the extent that the transferred
amounts represent amounts received from the settlement of insurance claims,
which amounts were not included in the Debtors' gross income. Accordingly, the
Debtors will not be entitled to a deduction for transfers to the Asbestos
Personal Injury Trust to satisfy claims in Class 8 (FB Asbestos Personal
Injury Claims) to the extent such transfers are of insurance proceeds,
including any transfer of Existing Fibreboard Insurance Settlement Trust
Assets. After applying the foregoing deduction against the income and gain of
the Debtors recognized during the taxable year in which the Effective Date
occurs, the Debtors anticipate that their NOLs will increase. As explained
above, however, the Debtors' NOLs and other Tax Attributes may be reduced or
eliminated as of the beginning of the taxable year following the year in which
the Effective Date occurs as a result of the COD income expected to be
realized on implementation of the Plan. Accordingly, there can be no assurance
that Reorganized OCD will have NOLs following the year in which the Plan is
implemented.
As a general rule, an NOL incurred by a taxpayer during a
taxable year can be carried back and deducted from its taxable income
generated within the two preceding taxable years and the remainder carried
forward and deducted from the taxable income of the 20 succeeding taxable
years. NOLs attributable to certain tort liability losses, however, may be
carried back for ten years. Pursuant to the PLR, the transfer of Cash and
other property (excluding any indebtedness of the Debtors) and the issuance of
New OCD Common Stock to the OC Sub-Account of the Asbestos Personal Injury
Trust with respect to OC Asbestos Personal Injury Claim will generate
deductions that relate to a qualifying tort liability and, therefore, any
resulting NOLs will be eligible to be carried back for ten years. In addition,
any deductions generated from the transfer of Cash and other property
(excluding any indebtedness of the Debtors) and the issuance of New OCD Common
Stock to the FB Sub-Account of the Asbestos Personal Injury Trust for claims
in Class 8 (FB Asbestos Personal Injury Claims) should also relate to a
qualifying tort liability, and, therefore, any resulting NOLs should be
eligible to be carried back for ten years. However, the Debtors have not
realized significant amounts of taxable income during the previous ten year
period, and, accordingly, there can be no certainty that Reorganized OCD would
be entitled to material amounts of tax refunds in respect of that period.
With respect to any NOLs of the Debtors remaining after
confirmation of the Plan and any required attribute reduction, Section 382 of
the IRC contains certain rules limiting the ability of corporate taxpayers to
utilize NOLs when there has been an "ownership change" (the "Annual Section
382 Limitation"). An "ownership change" generally is defined as a more than 50
percentage point change in ownership of the value of the stock of a "loss
corporation" (a corporation with NOLs) that takes place during the three year
period ending on the date on which such change in ownership is tested. The
Debtors will undergo an ownership change on the Effective Date.
As a general rule, the Annual Section 382 Limitation equals
the product of the value of the stock of the loss corporation (with certain
adjustments) immediately before the ownership change and the applicable
"long-term tax-exempt rate," a rate published monthly by the Treasury
Department (4.61% for ownership changes that occur during March of 2003). Any
unused portion of the Annual Section 382 Limitation generally is available for
use in subsequent years. The Annual Section 382 Limitation is increased in the
case of a corporation that has net unrealized built-in gains, i.e., gains
economically accrued but unrecognized at the time of the ownership change, in
excess of a threshold amount. Such a corporation can use NOLs in excess of its
Annual Section 382 Limitation to the extent that it realizes those net
unrealized built-in gains for United States federal income tax purposes in the
five years following the ownership change. A correlative rule applies to a
corporation that has net unrealized built in losses, i.e., losses economically
accrued but unrecognized as of the date of the ownership change in excess of a
threshold amount. Such a corporation's ability to deduct its built-in losses
(in addition to its NOLs) following an ownership change is limited. If a loss
corporation does not continue its historic business or use a significant
portion of its assets as a new business for two years after the ownership
change, the Annual Section 382 Limitation is zero.
Section 382(l)(5) of the IRC provides an exception to the
application of the Annual Section 382 Limitation when a corporation is under
the jurisdiction of a court in a Title 11 case (the "Bankruptcy Exception").
The Bankruptcy Exception provides that where an ownership change occurs
pursuant to a bankruptcy reorganization or similar proceeding, the Annual
Section 382 Limitation will not apply if the pre-change shareholders and/or
"qualified creditors" (as defined by applicable Treasury Regulations) own at
least 50 percent of the stock of the reorganized corporation immediately after
the ownership change. However, under the Bankruptcy Exception, a corporation's
pre-change losses and excess credits that may be carried over to a post-change
year must be reduced to the extent attributable to any interest paid or
accrued on certain debt converted to stock in the reorganization. In addition,
if the Bankruptcy Exception applies, a second ownership change of the
corporation within a two-year period will cause the corporation to forfeit all
of its unused NOLs that were incurred prior to the date of the second
ownership change. If a corporation qualifies for the Bankruptcy Exception, the
use of its NOLs will be governed by that exception unless the corporation
affirmatively elects out.
If a corporation that is eligible for the Bankruptcy
Exception elects out of that provision, a special rule under Section 382 will
apply in calculating the Annual Section 382 Limitation. Under this special
rule, the limitation will be calculated by reference to the lesser of the
value of the corporation's stock (with certain adjustments) immediately after
the ownership change (as opposed to immediately before the ownership change,
as discussed above) or the value of the Debtor's assets (determined without
regard to liabilities) immediately before the ownership change.
The PLR generally holds that Reorganized OCD's ability to
use its NOLs following confirmation of the Plan will be governed by the
Bankruptcy Exception. As noted above, if the Debtors do rely upon the
Bankruptcy Exception, a second ownership change within two years of the
Effective Date will cause Reorganized OCD to forfeit any NOLs incurred prior
to the date of the second ownership change. [The Plan Proponents will discuss
whether it is necessary or appropriate to implement restrictions on the
transfer of securities to protect net operating losses and other tax
attributes. The resolution of this issue will be addressed in the future in
proposed revisions to the Disclosure Statement.] If the Debtors choose to
elect out of the Bankruptcy Exception, Reorganized OCD's use of its NOLs will
be subject to the Annual Section 382 Limitation following confirmation of the
Plan, calculated under the special bankruptcy rule described above.
3. Accrued Interest
To the extent that the consideration issued to holders of
Claims pursuant to the Plan is attributable to accrued but unpaid interest,
the Debtors should be entitled to interest deductions in the amount of such
accrued interest, but only to the extent the Debtors have not already deducted
such amount. The Debtors should not have COD income from the discharge of any
accrued but unpaid interest pursuant to the Plan to the extent that the
payment of such interest would have given rise to a deduction pursuant to
Section 108(e)(2) of the IRC discussed above.
4. Federal Alternative Minimum Tax
A corporation may incur alternative minimum tax liability
even where NOL carryovers and other tax attributes are sufficient to eliminate
its taxable income as computed under the regular corporate income tax. It is
possible that Reorganized OCD will be liable for the alternative minimum tax.
B. Federal Income Tax Consequences to Claim Holders
The United States federal income tax consequences to a Claim
holder of the transactions contemplated by the Plan will depend upon a number
of factors. For purposes of the following discussion, a "United States Person"
is any person or entity (1) who is a citizen or resident of the United States,
(2) that is a corporation or partnership created or organized in or under the
laws of the United States or any state thereof, (3) that is an estate, the
income of which is subject to United States federal income taxation regardless
of its source or (4) that is a trust (a) the administration over which a
United States person can exercise primary supervision and all of the
substantial decisions of which one or more United States persons have the
authority to control; or (b) that has elected to be treated as a United States
Person for United States federal income tax purposes. In the case of a
partnership, the tax treatment of its partners will depend on the status of
the partner and the activities of the partnership. United States persons who
are partners in a partnership should consult their tax advisors. A "Non-United
States Person" is any person or entity that is not a United States Person. The
general United States federal income tax consequences to Claim holders that
are Non-United States Persons are discussed below under Section XI.B.2 of this
Disclosure Statement.
The United States federal income tax consequences to holders
of Claims that are United States Persons and the character and amount of
income, gain or loss recognized as a consequence of the Plan and the
distributions provided for thereby will depend upon, among other things, (1)
the manner in which a holder acquired a Claim; (2) the length of time the
Claim has been held; (3) whether the Claim was acquired at a discount; (4)
whether the holder has taken a bad debt deduction with respect to the Claim
(or any portion thereof) in the current or prior years; (5) whether the holder
has previously included in income accrued but unpaid interest with respect to
the Claim; (6) the method of tax accounting of the holder; (7) whether the
Claim is an installment obligation for United States federal income tax
purposes; and (8) whether the Claim constitutes a "security" for United States
federal income tax purposes. The definition of the term "security" for United
States federal income tax purposes is discussed under the heading "Definition
of a Security," below. Certain holders of Claims (such as foreign persons, S
corporations, regulated investment companies, insurance companies, financial
institutions, small business investment companies, broker-dealers and
tax-exempt organizations) may be subject to special rules not addressed in
this summary of United States federal income tax consequences. There also may
be state, local, and/or foreign income or other tax considerations or United
States federal estate and gift tax considerations applicable to holders of
Claims, which are not addressed herein. Each holder of a Claim should consult
its tax advisor for information that may be relevant to its particular
situation and circumstances and for advice concerning the particular tax
consequences to it of the transactions contemplated by the Plan.
1. United States Federal Income Tax Consequences
(a) General
A holder of a Claim who receives Cash or other
consideration in satisfaction of its claims may recognize ordinary income or
loss to the extent that any portion of such consideration is characterized as
accrued interest. A holder of a Claim who did not previously include in income
accrued but unpaid interest attributable to its Claim, and who surrenders its
Claim pursuant to the Plan, will be treated as having received interest income
to the extent that any consideration received is characterized for United
States federal income tax purposes as interest, regardless of whether the
holder of the Claim realizes an overall gain or loss as a result of
surrendering its Claim. A holder of a Claim who previously included in its
income accrued but unpaid interest attributable to its Claim should recognize
an ordinary loss to the extent that such accrued but unpaid interest is not
satisfied, regardless of whether the holder of the Claim realizes an overall
gain or loss as a result of surrendering its Claim. Although the manner in
which consideration is to be allocated between accrued interest and principal
for these purposes is unclear under present law, the Debtors intend,
consistent with the Plan, to allocate the consideration paid pursuant to the
Plan with respect to a Claim, first to the principal amount of such Claim as
determined for United States federal income tax purposes and then to accrued
interest, if any, with respect to such Claim. Accordingly, in cases where a
holder of a Claim receives less than the principal amount of its Claim, the
Debtors intend to allocate the full amount of consideration transferred to
such holder to the principal amount of such obligation and to take the
position that no amount of the consideration to be received by such holder is
attributable to accrued interest. There is no assurance that such allocation
will be respected by the IRS for federal income tax purposes.
A holder of a Claim that receives Senior Notes will
generally be required to include interest on the Senior Notes in income in
accordance with such holder's regular method of tax accounting. If, however,
the Senior Notes are treated as issued with original issue discount for United
States federal income tax purposes, a holder of Senior Notes will be required
to include in income the amount of such original issue discount over the term
of the Senior Notes based on the constant yield method. In such case, a holder
will be required to include amounts in income before they are received. A
holder's tax basis in a Senior Note will be increased by the amount of
original issue discount included in income and reduced by the amount of cash
(other than payments of stated interest) received with respect to the Senior
Note.
If not otherwise so required, a holder of a Claim
that receives New OCD Common Stock in exchange for his Claim will be required
to treat gain recognized on a subsequent sale or other taxable disposition of
the New OCD Common Stock as ordinary income to the extent of (i) any bad debt
deductions taken with respect to the Claim and any ordinary loss deductions
incurred upon satisfaction of the Claim, less any income (other than interest
income) recognized by the holder upon satisfaction of its Claim, and (ii) any
amounts which would have been included in a holder's gross income if the
holder's Claim had been satisfied in full, but which was not included in
income because of the application of the cash method of accounting.
(b) Holders of Class 4, Class 5 and Class 6 Claims
(Bank Holders, Bondholders and General Unsecured Claims)
The holders of the Class 4, Class 5 and Class 6
Claims will realize gain or loss for United States federal income tax purposes
as a result of the consummation of the Plan equal to the difference between
their adjusted tax bases in their Claims immediately prior to the Effective
Date and the sum of (i) the amount of Cash, (ii) the "issue price" of the
Senior Notes and (iii) the fair market value of the New OCD Common Stock they
received.
The "issue price" of the Senior Notes is generally
expected to equal the principal amount thereof if they are not "publicly
traded" or their fair market value on the Effective Date if they are "publicly
traded." For these purposes, a debt instrument generally is treated as
"publicly traded" if, at any time during the 60 day period ending 30 days
after the issue date, (i) the debt is listed on a national securities exchange
or quoted on an interdealer quotation system sponsored by a national
securities association, (ii) it appears 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 (including rates, yields or other
pricing information) of one or more identified brokers, dealers or traders or
actual prices (including rates, yields or other pricing information) of recent
sales transactions or (iii) if, in certain circumstances, price quotations are
readily available from dealers, brokers or traders.
If the Class 4, Class 5 and/or Class 6 Claims do
not constitute "securities" for United States federal income tax purposes,
then the exchange of Class 4, Class 5 or Class 6 Claims, as the case may be,
will be a taxable transaction, and holders of such Claims will be required to
recognize the full amount of their gain or loss realized on the exchange. The
initial tax basis of the holders of Class 4, Class 5 or Class 6 Claims in the
property that they received in exchange for their Class 4, Class 5 or Class 6
Claims, respectively, should equal the fair market value of such property.
Such tax basis would be allocated among the items of property received based
on the relative fair market values of such items of property on the Effective
Date. The holder's holding period in property received in the exchange would
commence on the day after the Effective Date.
If the Class 4, Class 5 and/or Class 6 Claims
constitute "securities" for United States federal income tax purposes, then
the exchange of Class 4, Class 5 or Class 6 Claims, respectively, will be
treated as a "recapitalization" for United States federal income tax purposes.
In such case, holders of Class 4, Class 5 or Class 6 Claims who realize a loss
on the transaction will not be permitted to recognize such loss.
If the exchange of Class 4, Class 5 and Class 6
Claims, respectively, is a recapitalization and the Senior Notes constitute
"securities" for United States federal income tax purposes, Holders who
realize gain on the exchange will be required to recognize the lesser of (i)
the amount of gain realized, which will likely be determined by substituting
the principal amount of the Senior Notes for their issue price, and (ii) the
amount of Cash received. The initial tax basis of the holders of Class 4,
Class 5 and Class 6 Claims in the property received by them in the exchange
should equal the sum of (i) their adjusted tax bases in the Class 4, Class 5
and Class 6 Claims, respectively, and (ii) the amount of gain recognized by
them on the exchange, reduced by the amount of Cash received by them in the
exchange. Such basis will be allocated between the Senior Notes and the New
OCD Common Stock received based on their relative fair market values. A
holder's holding period in the New OCD Common Stock and Senior Notes will
include the holding period in the Class 4, Class 5 or Class 6 Claim
surrendered.
If the exchange of Class 4, Class 5 and Class 6
Claims, respectively, is a recapitalization and the Senior Notes do not
constitute "securities" for United States federal income tax purposes, Holders
who realize gain on the exchange will be required to recognize the lesser of
(i) the amount of gain realized and (ii) the sum of the fair market value of
the Senior Notes and the amount of Cash received. The initial tax basis of the
holders of Class 4, Class 5 and Class 6 Claims in the property received by
them in the exchange should equal the sum of (i) their adjusted tax bases in
the Class 4, Class 5 and Class 6 Claims, respectively, and (ii) the amount of
gain recognized by them on the exchange, reduced by the amount of Cash
received by them in the exchange. Such basis will be allocated first, to the
Senior Notes, to the extent of their fair market value, and, thereafter, to
the New OCD Common Stock. A holder's holding period in the New OCD Common
Stock received will include the holding period in the Class 4, Class 5 or
Class 6 Claim surrendered. A holder's holding period in the Senior Notes will
commence on the day after the Effective Date.
There is no authority that directly addresses the
treatment of the receipt of the right to receive a portion of the Excess
Available Cash, Excess Senior Notes Amount, Excess New OCD Common Stock and
Excess Litigation Trust Recoveries (the "Excess Recoveries"). Holders of Class
4, Class 5 and Class 6 Claims that receive such rights may be permitted to
claim that the fair market value of those rights is speculative as of the
Effective Date and that the receipt of such rights should be subject to "open
transaction" treatment and taken into account only when such amounts are
actually determined. In such case, however, a holder of a Class 4, Class 5 or
Class 6 Claim that realizes a loss may not be permitted to recognize such loss
until the amount of the Excess Recoveries to be distributed to such holder is
finally determined.
For a discussion of the consequences of the receipt
of an interest in the Litigation Trust, see Section B.3, below.
The Debtors intend to treat the Disputed
Distribution Reserve as a grantor trust for United States federal income tax
purposes. Accordingly, it is intended that each holder of a Disputed Claim
will be treated as if such holder had received a distribution of Cash and
property in exchange for its Claim and then contributed such cash and property
to the Disputed Distribution Reserve. If such treatment is respected, a holder
of a Disputed Claim will be subject to United States federal income tax on its
proportionate share of any income earned with regard to the assets in the
Disputed Distribution Reserve. There can, however, be no assurance that the
IRS will agree with such treatment.
(c) Holders of Class 7 and Class 8 Claims (OC Asbestos
Personal Injury and FB Asbestos Personal Injury Claims)
To the extent that payments from the Asbestos
Personal Injury Trust to holders of OC Asbestos Personal Injury Claims and FB
Asbestos Personal Injury Claims represent damages on account of personal
physical injuries of such holders, such holders should not recognize gross
income under Section 104 of the IRC, except to the extent that such payments
are attributable to medical expense deductions allowed under Section 213 of
the IRC for a prior taxable year.
(d) Holders of Class 9 Claims (FB Asbestos Property
Damage Claims)
The fair market value of any payments from the FB
Asbestos Property Damage Trust to holders of FB Asbestos Property Damage
Claims will be taxable to such holders to the extent of the excess of such
fair market value over the amount, if any, of losses with regard to FB
Asbestos Property Damage Claims not previously deducted for United States
federal income tax purposes by the holder. Holders of FB Asbestos Property
Damage Claims that have not previously deducted losses with regard to such
Claims for United States federal income tax purposes will recognize losses
equal to the difference between the amount of loss not previously deducted and
the fair market value of any payments received.
(e) Market Discount
The market discount provisions of the IRC may apply
to holders of certain Claims. In general, a debt obligation that is acquired
by a holder in the secondary market is a "market discount bond" as to that
holder if its stated redemption price at maturity (or, in the case of a debt
obligation having original issue discount, its adjusted issue price) exceeds,
by more than a statutory de minimis amount, the tax basis of the debt
obligation in the holder's hands immediately after its acquisition. If a
holder of a Claim has accrued market discount with respect to such Claims and
such holder realizes gain upon the exchange of its Claims for property
pursuant to the Plan, such holder may be required to include as ordinary
income the amount of such holder's accrued market discount to the extent of
such realized gain. A holder of a Claim who realizes loss on such exchange
generally will not be required to include the amount of any such market
discount in income. A holder of a Claim who receives Senior Notes in an
exchange pursuant to the Plan that constitutes a "recapitalization" for United
States federal income tax purposes may not be required immediately to include
in income the accrued market discount to the extent such accrued market
discount is allocable to the Senior Notes. In this event, such portion of the
accrued market discount should carry over to the Senior Notes. Holders of
Claims who have accrued market discount with respect to their claims should
consult their tax advisors as to the application of the market discount rules
to them in view of their particular circumstances.
(f) Definition of "Security"
Whether an instrument constitutes a "security" for
United States federal income tax purposes is determined based on all of the
facts and circumstances. Certain authorities have held that one factor to be
considered is the length of the initial term of the debt instrument. These
authorities have indicated that an initial term of less than five years is
evidence that the instrument is not a security, whereas an initial term of ten
years or more is evidence that it is a security. There are numerous other
factors that could be taken into account in determining whether a debt
instrument is a security, including, but not limited to, whether repayment is
secured, the level of creditworthiness of the obligor, whether or not the
instrument is subordinated, whether the holders have the right to vote or
otherwise participate in the management of the obligor, whether the instrument
is convertible into an equity interest, whether payments of interest are
fixed, variable or contingent and whether such payments are made on a current
basis or are accrued.
(g) Non-United States Persons
A holder of a Claim against a Debtor that is a
Non-United States Person generally will not be subject to United States
federal income tax with respect to property (including money) received in
exchange for such Claim pursuant to the Plan, unless (i) such Claim holder is
engaged in a trade or business in the United States to which income, gain or
loss from the exchange is "effectively connected" for United States federal
income tax purposes, or (ii) if such Claim holder is an individual, such Claim
holder is present in the United States for 183 days or more during the taxable
year of the exchange and certain other requirements are met.
(h) Information Reporting and Backup Withholding
Certain payments, including the payments with
respect to Claims pursuant to the Plan, may be subject to information
reporting by the payor (the relevant Debtor) to the IRS. Moreover, such
reportable payments may be subject to backup withholding (currently at a rate
of 30%) under certain circumstances. Backup withholding is not an additional
tax. Amounts withheld under the backup withholding rules may be credited
against a holder's United States federal income tax liability, and a holder
may obtain a refund of any excess amounts withheld under the backup
withholding rules by filing an appropriate claim for refund with the IRS
(generally, a United States federal income tax return).
2. Taxation of the Asbestos Personal Injury Trust
The PLR that the Debtors received from the IRS holds that
the trust formed pursuant to Section 524(g) of the Bankruptcy Code described
therein will constitute a "qualified settlement fund" within the meaning of
Section 468B of the IRC and the Treasury regulations promulgated thereunder.
Fibreboard also received a private letter ruling from the IRS that the
Fibreboard Insurance Settlement Trust constitutes a "qualified settlement
fund" within the meaning of Section 468B of the IRC and the Treasury
regulations promulgated thereunder. The receipt of property, including Cash,
Senior Notes and New OCD Common Stock by the OC Sub-Account or the FB
Sub-Account of the Asbestos Personal Injury Trust from the Debtors will not
constitute taxable income to the Asbestos Personal Injury Trust, the adjusted
tax basis of the assets transferred by the Debtors to the Asbestos Personal
Injury Trust will be the fair market value of those assets at the time of
receipt, and the Asbestos Personal Injury Trust will be taxed on modified
gross income as defined within the Treasury regulations (generally at the
highest rate applicable to estates and trusts). The transfer of Existing
Fibreboard Insurance Settlement Trust Assets to the FB Sub-Account of the
Asbestos Personal Injury Trust should not result in net taxable income to the
Debtors or the Asbestos Personal Injury Trust.
3. The Litigation Trust
For federal income tax purposes, it is intended that the
Litigation Trust be classified as a liquidating trust under Section 301.7701-4
of the Treasury Regulations and that such trust be treated as owned by its
beneficiaries. Accordingly, for federal income tax purposes, it is intended
that the beneficiaries be treated as if they had received a taxable
distribution of an undivided interest in the Litigation Trust Assets,
including Cash, and then contributed such interests to the Litigation Trust.
There can be no assurance that the IRS will respect the foregoing treatment.
For example, the IRS may characterize the Litigation Trust as a grantor trust
for the benefit of the Debtors or otherwise as owned by and taxable to the
Debtors. Alternatively, the IRS could characterize the Litigation Trust as a
so-called "complex trust" subject to a separate entity level tax on its
earnings, except to the extent that such earnings are distributed during the
taxable year. Moreover, because of the possibility that the amounts of
consideration received by a holder of a Class 4, Class 5 or Class 6 Claim may
increase or decrease, depending on whether the Litigation Trust is treated as
a grantor trust, the holder could be prevented from recognizing a loss until
the time at which all of the Litigation Trust Assets have been distributed.
Beneficiaries of the Litigation Trust are urged to consult
their tax advisors regarding the potential United States federal income tax
treatment of the Litigation Trust and the consequences to them of such
treatment (including the effect on the computation of a holder's gain or loss
in respect of its Claim, the subsequent taxation of any distribution from the
Litigation Trust, and the possibility of taxable income without a
corresponding receipt of Cash or property with which to satisfy the tax
liability).
C. Importance of Obtaining Professional Tax Assistance
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN
INCOME TAX CONSEQUENCES OF THE PLAN AND IS NOT A SUBSTITUTE FOR CAREFUL TAX
PLANNING WITH A TAX PROFESSIONAL. THE ABOVE DISCUSSION IS FOR INFORMATIONAL
PURPOSES ONLY AND IS NOT TAX ADVICE. THE TAX CONSEQUENCES ARE IN MANY CASES
UNCERTAIN AND MAY VARY DEPENDING ON A CLAIM HOLDER'S PARTICULAR CIRCUMSTANCES.
ACCORDINGLY, CLAIM HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE
UNITED STATES FEDERAL, STATE AND LOCAL, AND APPLICABLE FOREIGN INCOME AND
OTHER TAX CONSEQUENCES OF THE PLAN.
XIV. FEASIBILITY OF THE PLAN AND BEST INTERESTS OF CREDITORS
A. Feasibility of the Plan
In connection with confirmation of the Plan, the Bankruptcy Court
will have to determine that the Plan is feasible pursuant to Section
1129(a)(11) of the Bankruptcy Code, which means that the confirmation of the
Plan is not likely to be followed by the liquidation or the need for further
financial reorganization of the Debtors.
To support their belief in the feasibility of the Plan, the Debtors
have relied, among other things, upon the Financial Projections, which are
annexed to this Disclosure Statement as Appendix B.
The Financial Projections indicate that the Reorganized Debtors
should have sufficient cash flow to pay and service their debt obligations,
including the Exit Facility, and to fund their operations as contemplated by
the Business Plan. Accordingly, the Debtors believe that the Plan complies
with the financial feasibility standard of Section 1129(a)(11) of the
Bankruptcy Code.
The Financial Projections were not prepared with a view toward
compliance with the published guidelines of the American Institute of
Certified Public Accountants or any other regulatory or professional agency or
body or generally accepted accounting principles. Furthermore, the Debtors'
independent certified public accountants have not compiled or examined the
Financial Projections and accordingly do not express any opinion or any other
form of assurance with respect thereto and assume no responsibility for the
Financial Projections.
The Financial Projections assume that (1) the Plan will be confirmed
and consummated in accordance with its terms, (2) there will be no material
change in legislation or regulations, or the administration thereof, including
environmental legislation or regulations, that will have an unexpected effect
on the operations of the Reorganized Debtors, (3) there will be no change in
United States generally accepted accounting principles that will have a
material effect on the reported financial results of the Reorganized Debtors,
and (4) there will be no material contingent or unliquidated litigation or
indemnity claims applicable to the Reorganized Debtors. To the extent that the
assumptions inherent in the Financial Projections are based upon future
business decisions and objectives, they are subject to change. In addition,
although they are presented with numerical specificity and are considered
reasonable by the Debtors when taken as a whole, the assumptions and estimates
underlying the Financial Projections are subject to significant business,
economic and competitive uncertainties and contingencies, many of which will
be beyond the control of the Reorganized Debtors. Accordingly, the Financial
Projections are speculative in nature. It should be expected that some or all
of the assumptions in the Financial Projections will not be realized and that
actual results will vary from the Financial Projections, which variations may
be material and may increase over time. The Financial Projections should
therefore not be regarded as a representation by the Debtors or any other
person that the results set forth in the Financial Projections will be
achieved. In light of the foregoing, readers are cautioned not to place undue
reliance on the Financial Projections. The Financial Projections should be
read together with the information in Section __ of this Disclosure Statement
entitled __________, which summarizes the Business Plan and certain
assumptions underlying the Financial Projections, as well as Section ___ of
the Disclosure Statement entitled "Certain Factors to be Considered," which
sets forth important factors that could cause actual results to differ from
those in the Financial Projections.
OC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files periodic
reports and other information with the SEC relating to its business, financial
statements and other matters. Such filings will not include projected
financial information. The Debtors do not intend to update or otherwise revise
the Financial Projections, including any revisions to reflect events or
circumstances existing or arising after the date of this Disclosure Statement
or to reflect the occurrence of unanticipated events, even if any or all of
the underlying assumptions do not come to fruition. Furthermore, the Debtors
do not intend to update or revise the Financial Projections to reflect changes
in general economic or industry conditions.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995: The Financial Projections contain statements which constitute
"forward-looking statements" within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. "Forward-looking statements" in the Financial
Projections include the intent, belief or current expectations of OC and
members of its management team with respect to the timing, completion and
scope of the current restructuring, reorganization plan, Business Plan, bank
financing, and debt and equity market conditions and OC's future liquidity, as
well as the assumptions up on which such statements are based. While OC
believes that the expectations are based on reasonable assumptions within the
bounds of its knowledge of its business and operations, parties in interest
are cautioned that any such forward-looking statements are not guarantees of
future performance, and involve risks and uncertainties, and that actual
results may differ materially from those contemplated by such forward-looking
statements. Important factors currently known to management that could cause
actual results to differ materially from those contemplated by the
forward-looking statements in the Financial Projections include, but are not
limited to, further adverse developments with respect to the liquidity
position of OC or operations of the various businesses of OC, adverse
developments in the bank financing or public or private markets for debt or
equity securities of OCD, adverse developments in the timing or results of the
implementation of the Business Plan (including the time line to emerge from
Chapter 11), the difficulty in controlling industry costs and integrating new
operations, the ability of the OC to realize the anticipated general and
administrative expense savings and overhead reductions contemplated in the
Financial Projections, the ability of OC to maintain profitability of their
operations, the level and nature of any restructuring and other one-time
charges, the difficulty in estimating costs relating to exiting certain
markets and consolidating and closing certain operations, and the possible
negative effects of a change in applicable legislation.
B. Acceptance of the Plan
As a condition to confirmation, the Bankruptcy Code requires that
each Class of Impaired Claims vote to accept the Plan, except under certain
circumstances.
Section 1126(c) of the Bankruptcy Code defines acceptance of a plan
by a class of impaired claims as acceptance by holders of at least two thirds
(2/3) in dollar amount and more than one half (50%) in number of claims in
that class, but for that purpose counts only those who actually vote to accept
or to reject the plan. Thus, each of Classes 3, 4, 5, 6, 7, 8 and 9 will have
voted to accept the Plan only if two-thirds (2/3) in dollar amount and a
majority in number actually voting in each Class cast their Ballots in favor
of acceptance. Holders of Claims who fail to vote are not counted as either
accepting or rejecting the Plan.
In order to satisfy the requirements of Section
524(g)(2)(B)(II)(IV)(bb) of the Bankruptcy Code, seventy-five (75%) percent of
each of Classes 7 and 8, covering the respective holders of the OC Asbestos
Personal Injury Claims and FB Asbestos Personal Injury Claims actually voting
must vote in favor of the Plan in order for the Reorganized Debtors to obtain
the benefits of Section 524(g) of the Bankruptcy Code.
The Voting Procedures provide certain special rules concerning the
calculation of the amount of Claims voting in a Class of Claims (for further
information regarding voting procedures see Section XVII of this Disclosure
Statement entitled "The Solicitation; Voting Procedure.") The following
special rules concerning calculation of the amount of Claims are for
illustrative purposes.
A Ballot will not be counted if a Claim has been disallowed or an
objection is pending to the Claim as of the _____________, and the claimant
has not obtained, on or before the Voting Deadline, a Bankruptcy Court order
allowing such Claim, either in whole or in part, for all purposes or for
voting purposes only.
IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY
COMPLETED AS SET FORTH ABOVE AND IN ACCORDANCE WITH THE VOTING PROCEDURES ON
THE BALLOT AND RECEIVED NO LATER THAN THE VOTING DEADLINE BY THE VOTING AGENT.
DO NOT RETURN ANY STOCK CERTIFICATES OR DEBT INSTRUMENTS WITH YOUR BALLOT. In
addition, a vote may be disregarded if the Bankruptcy Court determines, after
notice and a hearing, that such acceptance or rejection was not solicited or
procured in good faith or in accordance with the provisions of the Bankruptcy
Code.
C. Best Interests Test
As noted above, even if a plan is accepted by the holders of each
class of claims and interests, the Bankruptcy Code requires a bankruptcy court
to determine that the plan is in the best interests of all holders of claims
or interests that are impaired by the plan and that have not accepted the
plan. The "best interests" test, as set forth in Section 1129(a)(7) of the
Bankruptcy Code, requires a bankruptcy court to find either that all members
of an impaired class of claims or interests have accepted the plan or that the
plan will provide a member who has not accepted the plan with a recovery of
property of a value, as of the effective date of the plan, that is not less
than the amount that such holder would recover if the debtor were liquidated
under Chapter 7 of the Bankruptcy Code.
To calculate the probable distribution to holders of each impaired
class of claims and interests if the Debtors were liquidated under Chapter 7,
a bankruptcy court must first determine the aggregate dollar amount that would
be generated from a debtor's assets if its Chapter 11 cases were converted to
Chapter 7 cases under the Bankruptcy Code. This "liquidation value" would
consist primarily of the proceeds from a forced sale of the debtor's assets by
a Chapter 7 trustee.
The amount of liquidation value available to unsecured creditors
would be reduced by, first, the claims of secured creditors to the extent of
the value of their collateral, and, second, by the costs and expenses of
liquidation, as well as by other administrative expenses and costs of both the
Chapter 7 cases and the Chapter 11 cases. Costs of liquidation under Chapter 7
of the Bankruptcy Code would include the compensation of a trustee, as well as
of counsel and other professionals retained by the trustee, asset disposition
expenses, all unpaid expenses incurred by the debtor in its Chapter 11 cases
(such as compensation of attorneys, financial advisors and accountants) that
are allowed in the Chapter 7 cases, litigation costs, and claims arising from
the operations of the debtor during the pendency of the Chapter 11 cases. The
liquidation itself would trigger certain priority payments that otherwise
would be due in the ordinary course of business. Those priority claims would
be paid in full from the liquidation proceeds before the balance would be made
available to pay general claims or to make any distribution in respect of
equity interests. The liquidation would also prompt the rejection of a large
number of executory contracts and unexpired leases and thereby significantly
enlarge the total pool of unsecured claims by reason of resulting rejection
claims.
Once the court ascertains the recoveries in liquidation of secured
creditors and priority claimants, it must determine the probable distribution
to general unsecured creditors and equity security holders from the remaining
available proceeds in liquidation. If such probable distribution has a value
greater than the distributions to be received by such creditors and equity
security holders under the plan, then the plan is not in the best interests of
creditors and equity security holders.
D. Liquidation Analysis
[The analysis in this section of the Disclosure Statement is
preliminary and subject to possible revision as the Debtors and Lazard
complete their analysis]
In order to determine the amount of liquidation value available to
creditors, the Debtors, with the assistance of their financial advisor, Lazard,
prepared a liquidation analysis, annexed hereto as Appendix C (the "Liquidation
Analysis") [Appendix C will be inserted at a later date], which concludes
that in a Chapter 7 liquidation, holders of Allowed Claims in Classes 3, 4, 5,
6, 7, 8 and 9 would receive less than under the Plan. This conclusion is
premised upon the assumptions set forth in Appendix C hereto, which the Debtors
and Lazard believe are reasonable.
Notwithstanding the foregoing, the Debtors believe that any
liquidation analysis with respect to the Debtors is inherently speculative.
The liquidation analysis for the Debtors necessarily contains estimates of the
net proceeds that would be received from a sale of assets and/or business
units, as well as the amount of Claims that will ultimately become Allowed
Claims. Claims estimates are based solely upon the Debtors' incomplete review
of any Claims filed and the Debtors' books and records. No Order or finding
has been entered by the Bankruptcy Court estimating or otherwise fixing the
amount of Claims at the projected amounts of Allowed Claims set forth in the
liquidation analysis. In preparing the liquidation analysis, the Debtors have
projected an amount of Allowed Claims that is at the lowest end of a range of
reasonableness such that, for purposes of the liquidation analysis, the
largest possible Chapter 7 liquidation dividend to holders of Allowed Claims
can be assessed. The estimate of the amount of Allowed Claims set forth in the
liquidation analysis should not be relied on for any other purpose, including,
without limitation, any determination of the value of any distribution to be
made on account of Allowed Claims under the Plan. The estimate of Allowed
Claims is based upon different assumptions and formula for different purposes
than the estimates of Allowed Claims set forth in other sections of this
Disclosure Statement.
E. Valuation of the Reorganized Debtors
[The analysis in this section of the Disclosure Statement is preliminary and
subject to possible revision as the Debtors and Lazard complete their
analysis]
1. Overview
In conjunction with the Plan, the Debtors determined that it
was necessary to estimate the post-confirmation enterprise value of the
Reorganized Debtors (which consists of the aggregate enterprise value of
Reorganized OCD and its direct and indirect Subsidiaries, including both
Debtor and Non-Debtor Subsidiaries). The Debtors have been advised by Lazard,
their financial advisor, with respect to the reorganization value of the
Reorganized Debtors on a going concern basis. The estimated range of
reorganization value of the Reorganized Debtors was assumed to be
approximately $3.2 billion to $3.6 billion (with a mid-point estimate of $3.4
billion) as of an assumed Effective Date of December 31, 2003. This estimated
reorganization value does not currently include any additional value
associated with a net operating loss tax carryforward that is created as part
of the Plan [but may be modified to include such value if warranted]. Lazard's
estimate of reorganization value 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 DECEMBER 31, 2003, REFLECTS WORK PERFORMED BY LAZARD
ON THE BASIS OF INFORMATION IN RESPECT OF THE BUSINESS AND ASSETS OF THE
DEBTORS AVAILABLE TO LAZARD AS OF FEBRUARY 28, 2003. 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
the Reorganized Debtors of between $3.2 billion and $3.6 billion, an assumed
total debt of $1.5 billion (including $100 million of existing debt, $1.15
billion of Senior Notes and $250 million of the aggregate principal amount of
the debt to the IRS assumed for purposes of the analysis to be an Allowed
Priority Tax Claim, Lazard imputed an estimated range of equity values for the
Reorganized Debtors of between $1.7 billion and $2.1 billion, with a point
estimate of $[1.9] billion. Assuming a distribution of 76.0 million shares of
New OCD Common Stock pursuant to the Plan, the imputed estimate of the range
of equity values on a per share basis is between $22.37 and $27.63 per share
(with a mid-point estimate of $25.00 per share). The equity value of $25.00
per share does not give effect to the potentially dilutive impact of any
restricted stock or options to be issued or granted pursuant to a new
management incentive plan.
With respect to the Financial Projections prepared by the
management of the Debtors and included as Appendix B [This document has not
been completed and will be inserted at a later date] to this Disclosure
Statement, Lazard assumed that such Financial Projections have been reasonably
prepared in good faith and on a basis reflecting the best currently available
estimates and judgments of the Debtors as to the future operating and
financial performance of the Reorganized Debtors. Lazard's estimate of a range
of reorganization values assumes that operating results projected by the
Debtors will be achieved by the Reorganized Debtors 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 the Debtors
are better than the recent historical results of operations of the Debtors. As
a result, to the extent that the estimate of enterprise values is dependent
upon the Reorganized Debtors performing at the levels set forth in the
Financial Projections, such analysis must be considered speculative. If the
business performs at levels below those set forth in the Financial
Projections, such performance may have a material impact on the estimated
range of values.
In estimating the range of the reorganization value and
equity value of the Reorganized Debtors, Lazard (a) reviewed certain
historical financial information of OC for recent years and interim periods;
(b) reviewed certain internal financial and operating data of OC, including
the Financial Projections as described in Section VI.C.2 of this Disclosure
Statement, which data was prepared and provided to Lazard by the management of
OC and which relate to OC's business and its prospects; (c) met with certain
members of senior management of OC to discuss OC's operations and future
prospects; (d) reviewed publicly available financial data and considered the
market value of public companies that Lazard deemed generally comparable to
the operating business of OC; (e) considered relevant precedent transactions
in the building products industry; (f) considered certain economic and
industry information relevant to the operating business; and (g) conducted
such other studies, analysis, inquiries, and investigations as it deemed
appropriate. Although Lazard conducted a review and analysis of OC's business,
operating assets and liabilities and the Reorganized Debtors' business plan,
it assumed and relied on the accuracy and completeness of all financial and
other information furnished to it by OC, 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 OC were sought or obtained in connection herewith. In the case
of the Reorganized Debtors, the estimates of the reorganization value prepared
by Lazard represent the hypothetical reorganization value of the Reorganized
Debtors. 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 value of the Reorganized Debtors 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 the Reorganized Debtors 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 OC, 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 pre-petition creditors, some of whom 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.
2. Additional Assumptions Regarding the Reorganized Debtors
[The analysis in this section of the Disclosure Statement is preliminary and
subject to possible revision as the Debtors and Lazard complete their
analysis]
With respect to the valuation of the Reorganized Debtors, in
addition to the foregoing, Lazard has relied upon the following assumptions:
o the Reorganized Debtors' enterprise valuation consists of
the aggregate enterprise value of Reorganized OCD and its
direct and indirect Subsidiaries, including the Non-Debtor
Subsidiaries.
o The reorganization value range indicated represents the
"enterprise value" of the Reorganized Debtors, and assumes
the pro forma debt levels (as set forth in the Financial
Projections) adjusted for ownership percentages in order to
calculate a range of equity value.
o The Debtors will emerge from Chapter 11 on or about December
31, 2003.
o The projections for the Reorganized Debtors are predicated
upon the assumption that OC will be able to obtain all
necessary financing, as described herein, and that no asset
sales other than those contemplated to be consummated by the
Company prior to the Effective Date, or assumed in the
Financial Projections, will be required to meet the
Reorganized Debtors' ongoing financial requirements. Lazard
makes no representations as to whether the Company will
obtain financing or consummate such asset sales or as to the
terms upon which such financing may be obtained or such
asset sales may be consummated.
o The present senior management of OC will continue following
consummation of the Plan, and general financial and market
conditions as of the assumed Effective Date of the Plan will
not differ materially from those conditions prevailing as of
the date of this Disclosure Statement.
Lazard's valuation represents a hypothetical value that reflects the
estimated intrinsic value of the Company derived through the application of
various valuation techniques. Such analysis does not purport to represent
valuation levels which would be achieved in, or assigned by, the public markets
for debt and equity securities or private markets for corporations. Estimates of
enterprise value do not purport to be appraisals or necessarily reflect the
values which may be realized if assets are sold as a going concern, in
liquidation, or otherwise.
Lazard relied on the accuracy and reasonableness of the
projections and the underlying assumptions as prepared by the Debtors.
Lazard's valuation assumes that operating results projected by the Debtors
will be achieved in all material respects, including new work booked revenue
growth, improvements in operating margins, earnings and cash flow, improvement
in techniques for managing working capital, expenses and other elements. To
the extent that the valuation is dependent upon the Debtors' achievement of
the projections, the valuation must be considered speculative.
3. Valuation Methodology
The following is a brief summary of certain financial
analyses performed by Lazard to arrive at its estimation of the reorganization
value of the Reorganized Debtors. Lazard performed certain procedures,
including each of the financial analyses described below, and reviewed the
assumptions with the management of OC on which such analyses were based and
other factors, including the projected financial results of the Reorganized
Debtors. Lazard's estimate of reorganization value must be considered as a
whole and selecting just one methodology or portions of the analysis, without
considering the analysis as a whole, could create a misleading or incomplete
conclusion as to enterprise value.
(a) Discounted Cash Flow Analysis
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 the Debtors. This approach has two components: the present
value of the projected un-levered 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).
As the estimated cash flows, estimated discount
rate and expected capital structure of the Reorganized Debtors are used to
derive a potential value, an analysis of the results of such an estimate is
not purely mathematical, but instead involves complex considerations and
judgments concerning potential variances in the projected financial and
operating characteristics of the Reorganized Debtors, as well as other factors
that could affect the future prospects and cost of capital considerations for
the Reorganized Debtors.
The DCF calculation was performed based on
un-levered after-tax free cash flows for the projection period 2004 to 2012,
discounted to the Effective Date of December 31, 2003. Lazard utilized
management's detailed financial projections for the period 2004 and 2005 as
the primary input. Management assisted Lazard with the development of
projections for the extended period of 2006 to 2012. Beginning with earnings
before interest and taxes ("EBIT"), the analysis taxes this figure at an
assumed rate of 40% to calculate an un-levered net income figure. The analysis
then adds back the non-cash operating expense of depreciation and
amortization. In addition, other factors affecting free cash flow are taken
into account, such as the change in working capital and capital expenditures,
all of which do not affect the income statement and therefore require separate
adjustments in the calculation.
In performing the calculation, Lazard made
assumptions for the weighted average cost of capital (the "Discount Rate"),
which is used to value future cash flows based on the riskiness of the
projections, and the EBITDA exit multiple, which is used to determine the
future value of the enterprise after the end of the projected period. In
determining the Discount Rate, Lazard estimated the cost of equity and the
after-tax cost debt for the Debtors, and applied a weighting of 45% debt and
55% equity. The weighting was determined based upon target leverage ratios
which Lazard believes would correlate to an investment grade credit rating of
"BBB/Baa" by the independent rating agencies.
Lazard estimated the cost of equity based on the
Capital Asset Pricing Module which assumes that the required equity return is
a function of the risk-free cost of capital and the correlation ("Beta") of a
publicly traded stock's performance to the return on the broader market.
Lazard used Betas from comparable companies on an un-levered basis to
determine a composite un-levered Beta. Also included in the calculation of the
cost of equity was an implementation risk premium of 1.5% to reflect the
non-systemic risk associated with the changes in the business model which are
being implemented as part of management's turnaround plan. In estimating the
Debtors cost of debt, Lazard considered a number of factors including the
likely interest associated with the Reorganized Debtors' post-emergence
financing, the expected term of such financing, and the effective yield for
publicly traded debt securities for comparable companies in the industry.
Lazard's DCF valuation was based upon a range of Discount Rates between 9% and
11%, with a mid-point of 10%. In determining an EBITDA exit multiple, Lazard
relied upon various analyses including a review of current and historical
EBITDA trading multiples for the Debtor and comparable companies operating in
the building products sector. Lazard's terminal value was based upon a range
of EBITDA multiples between 5.0x and 6.0x, with a mid-point of 5.5x. Lazard
believes that this range of EBITDA multiples is consistent with the observed
multiples for companies similar to the debtor who operate in cyclical industry
sectors and represents a mid-cycle multiple.
(b) Publicly Traded Company Analysis
A publicly traded 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. The analysis establishes a benchmark for asset valuation by deriving
the value of "comparable" assets, standardized using a common variable such as
revenue, EBIT, and EBITDA. 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 for the
analysis include, among other relevant characteristics, similar lines of
businesses, business risks, growth prospects, maturity of businesses, market
presence, size, and scale of operations. The selection of truly comparable
companies is often difficult and subject to limitations due to sample size and
the availability of meaningful market-based information. 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 ("Peer Group") deemed
generally comparable to the Debtors in one or more of the factors described
above, were selected: American Woodmark, Black & Decker, CRH, Elkcorp,
Georgia-Pacific, Griffon, James Hardie, Masco, NCI Building Systems, Owens
Illinois, PPG Industries, and Sherwin Williams. 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 primarily observed valuation ratios as a
function of enterprise value of each company as indicated by the book value of
debt less cash plus the equity market capitalization. While Lazard observed
multiples according to revenue, EBIT and EBITDA, the most emphasis was placed
on multiples of EBIT and EBITDA. These multiples were then applied to the
Debtors' fiscal year end 2002 and fiscal year end 2003 forecasted financial
results to determine the range of reorganization values. [The analysis in this
section of the Disclosure Statement is currently being updated and reviewed by
the Debtors and Lazard] Lazard's application of these multiples to the
Debtors' financial results took into account a variety of factors, both
quantitative and qualitative, in an effort to consider the relative valuation
which the Debtors would command given the availability of alternative
investments. It should be noted that these multiples are based upon historical
profitability metrics which could generally be described as representing a
"trough" of the business cycle. As a result, the observed multiples are
generally higher than historical averages.
(c) Precedent Transactions Analysis
Precedent transactions analysis estimates value by
examining public merger and acquisition transactions. An analysis of a
company's transaction value as a multiple of various operating statistics
provides industry-wide valuation multiples for companies in similar lines of
businesses to the Debtors. These transaction multiples were calculated based
on the purchase price (including any debt assumed) paid to acquire companies
that are comparable to the Debtors. These multiples were then applied to the
Reorganized Debtors' key operating statistics, to determine the total
enterprise value or value to a potential strategic buyer. Lazard evaluated
each of these multiples and made judgments as to their relative significance
in determining the Reorganized Debtors range of reorganization value.
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:
(i) Circumstances surrounding a merger transaction
may introduce "noise" into the analysis (e.g., an additional premium may be
extracted from a buyer in the case of a competitive bidding contest);
(ii) The market environment is not identical for
transactions occurring at different periods of time;
(iii) 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 over the prior two years 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 the Reorganized Debtors' valuation.
The summary set forth above does not purport to be
a complete description of the analyses performed by Lazard. The preparation of
an estimate involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods in
the particular circumstances and, therefore, such an estimate is not readily
susceptible to summary description. In performing their analyses, Lazard and
the Debtors made numerous assumptions with respect to industry performance,
business and economic conditions and other matters. The analyses performed by
Lazard are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses.
F. Application of the "Best Interests" of Creditors Test to the
Liquidation Analysis and the Valuation
It is impossible to determine with any specificity the value each
creditor will receive as a percentage of its Allowed Claim. This difficulty in
estimating the value of recoveries is due to, among other things, the lack of
any public market for the New OCD Common Stock.
Notwithstanding the difficulty in quantifying recoveries to holders
of Allowed Claims with precision, the Debtors believe that the financial
disclosures and projections contained herein imply a greater or equal recovery
to holders of Claims in Impaired Classes than the recovery available in a
Chapter 7 liquidation. As set forth below, the Debtors have set forth an
estimate of the comparative distributions between a Chapter 7 liquidation and
the Plan.
Accordingly, the Debtors believe that the "best interests" test of
Section 1129 of the Bankruptcy Code is satisfied.
G. Confirmation Without Acceptance of All Impaired Classes: "Cramdown"
The Debtors will request confirmation of the Plan, as it may be
modified from time to time, under Section 1129(a) of the Bankruptcy Code, and
have reserved the right to modify the Plan to the extent, if any, that
confirmation pursuant to Section 1129(b) of the Bankruptcy Code requires
modification.
Section 1129(b) of the Bankruptcy Code provides that a plan can be
confirmed even if it is not accepted by all impaired classes of claims and
interests, as long as at least one impaired class of claims has accepted the
plan. The Bankruptcy Court may confirm a plan notwithstanding the rejection or
deemed rejection of an impaired class of claims or interests if the plan "does
not discriminate unfairly" and is "fair and equitable" as to each impaired
class that has rejected, or is deemed to have rejected, the plan.
A plan does not discriminate unfairly within the meaning of the
Bankruptcy Code if a rejecting impaired class is treated equally with respect
to other classes of equal rank. The Bankruptcy Code establishes different
standards for what is "fair and equitable" for holders of unsecured claims,
and equity interests.
A plan is fair and equitable as to a class of unsecured claims that
rejects the plan if, among other things, the plan provides (1) that each
holder of a claim in the rejecting class will receive or retain on account of
its claim property that has a value, as of the effective date of the Plan,
equal to the allowed amount of the claim or (2) that no holder of a claim that
is junior to the claims of the rejecting class will receive or retain under
the plan any property on account of such junior claim.
With respect to equity interests, a plan is fair and equitable as to
a class of equity interests that rejects the plan if, among other things, the
plan provides (1) that each holder of an equity interest in the rejecting
class will receive or retain on account of such interest property that has a
value, as of the effective date of the plan, equal to the greatest of the
allowed amount of any fixed liquidation preference to which such holder is
entitled, any fixed redemption price to which such holder is entitled, or the
value of such interest; and (2) that the holder of any interest that is junior
to the interest of such class will not receive under the plan any property on
account of such junior interest.
The Debtors believe that the Plan may be confirmed pursuant to the
above-described "cramdown" provisions, over the dissent of certain Classes of
Claims and Interests, including Class 10 and Class 11 (which are deemed to
have rejected the Plan) in view of the treatment proposed for such Classes. In
addition, the Debtors do not believe that the Plan unfairly discriminates
against any Class who may vote to reject the Plan.
XV. CERTAIN RISK FACTORS TO BE CONSIDERED
A. Certain Factors Relating to the Chapter 11 Proceedings
1. There can be no assurance that the Plan will be consummated
as proposed.
The Plan sets forth a method, determined by negotiation
between OC and certain of its creditor constituencies, for resolving Claims
and reorganizing the Debtors. However, the Plan has not been approved by all
of the Debtors' creditor constituencies and, as a result, there remains
significant uncertainty as to whether the proposed resolution of Claims as
described herein (including the amount and form of recoveries) will be
effected. Although it is possible under applicable bankruptcy law to approve
and confirm a plan of reorganization over the objection of various creditor
groups, no assurance can be given that such a resolution will be achievable in
this instance. Claimants who object to the terms of the Plan may be expected
to challenge it in court proceedings and there can be no assurance that any
such proceedings will be resolved favorably to the Debtors or that such
proceedings, or further negotiations, will not result in significant changes
to the terms of the Plan, including the amount and form of recoveries.
The proposed relative amounts of recovery by holders of
Claims and Interests is the result of negotiation among various of the
constituencies of claimants with the Company, as well as the application of
legal principles regarding ranking of Claims and Interests, and other matters.
While the Company believes that the overall treatment of Claims and Interests
under the Plan is fair and reasonable, not all Claims and Interests are
treated equally, and certain Claims and Interests receive no distributions
pursuant to the Plan.
The ultimate recoveries under the Plan to holders of Claims
(other than holders whose entire Distribution is paid in Cash under the Plan)
depend upon the realizable value of the Senior Notes and the New OCD Common
Stock, which are subject to a number of material risks, including, but not
limited to, those specified below under the caption "Certain Factors Relating
to Securities to be issued under the Plan." In addition, changes to the terms
of the Plan, including to the form and amount of recoveries, may significantly
affect the nature of recoveries, or may make further distinctions between the
recoveries applicable to different classes of creditors.
2. Even if holders of Claims vote to approve the Plan, there
can be no assurance that the Plan will be confirmed by the
Bankruptcy Court and consummated.
Even if all Impaired Classes entitled to vote in fact vote
in favor of the Plan and, with respect to any Impaired Class deemed to have
rejected the Plan, the requirements for "cramdown" are met, the Bankruptcy
Court, which as a court of equity may exercise substantial discretion, may
choose not to confirm the Plan. Section 1129 of the Bankruptcy Code requires,
among other things, a showing that confirmation of the Plan will not be
followed by liquidation or the need for further financial reorganization of
the Debtors (see Section XII.A of this Disclosure Statement), and that the
value of distributions to dissenting holders of Claims and Interests may not
be less than the value such holders would receive if the Debtors were
liquidated under Chapter 7 of the Bankruptcy Code. See Section XII.C of this
Disclosure Statement. Although the Debtors believe that the Plan will meet
such tests, there can be no assurance that the Bankruptcy Court will reach the
same conclusion. See Appendix D annexed hereto for a liquidation analysis of
the Debtors.
The Plan provides for certain conditions that must be
fulfilled prior to confirmation of the Plan and the Effective Date. As of the
date of this Disclosure Statement, there can be no assurance that any or all
of the conditions in the Plan will be met (or waived), that other conditions
to consummation, if any, will be satisfied, or that supervening factors will
not prevent the Plan from being consummated. Accordingly, even if the Plan is
confirmed by the Bankruptcy Court, there can be no assurance that the Plan
will be consummated. If a liquidation or protracted reorganization were to
occur, there is a substantial risk that the value of the Debtors' enterprise
would be substantially eroded to the detriment of all stakeholders.
B. Certain Factors Relating to Securities to be Issued Pursuant to the
Plan
1. There is presently no public market for the securities to
be issued pursuant to the Plan.
The Senior Notes and the shares of New OCD Common Stock that
will be issued pursuant to the Plan are securities for which there is
currently no market. While the Debtors may apply to list the Senior Notes or
the New OCD Common Stock, or both, on a securities exchange, or to have them
included in an interdealer quotation system, no determination to do so has
been made. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Senior Notes or the shares of New OCD Common
Stock. If a trading market does not develop or is not maintained, holders of
Senior Notes or shares of New OCD Common Stock may experience difficulty in
reselling such securities or may be unable to sell them at all. Even if such
market were to exist, such securities could trade at prices higher or lower
than the value attributed to such securities in connection with their
distribution under the Plan, depending upon many factors, including, without
limitation, prevailing interest rates, markets for similar securities,
industry conditions and the performance of, and investor expectations for, the
Reorganized Debtors. In addition, some persons who receive Senior Notes and
shares of New OCD Common Stock may prefer to liquidate their investment in the
near term rather than hold such securities on a long-term basis. Accordingly,
any market for such securities may be volatile, at least for an initial period
following the Effective Date, and may be depressed until the market has had
time to absorb any such sales and to observe the performance of the
Reorganized Debtors.
2. Certain recipients of Senior Notes and shares of New OCD
Common Stock may be restricted in their ability to dispose
of such securities.
[The Plan Proponents will discuss whether it is necessary or appropriate to
implement restrictions on the transfer of securities to protect net operating
losses and other tax attributes. The resolution of this issue will be
addressed in the future in proposed revisions to the Disclosure Statement.]
C. Certain Factors Relating to the Reorganized Debtors
1. The Asbestos Personal Injury Trust will own a majority of
the outstanding shares of New OCD Common Stock and will
thereby be able to control Reorganized OCD.
The Asbestos Personal Injury Trust will beneficially own
more than 50% of the issued and outstanding shares of New OCD Common Stock.
Accordingly, the Asbestos Personal Injury Trust will have significant control
over Reorganized OCD and have the power to elect the majority of the
Reorganized OCD directors, and, by virtue of its ability to elect a majority
of directors, to appoint new management and approve any action requiring the
approval of the holders of New OCD Common Stock, including adopting amendments
to the Amended and Restated Certificate of Incorporation and approving mergers
or sales of all or substantially all of Reorganized OCD's assets. This
concentration of ownership could also facilitate or hinder a negotiated change
of control of Reorganized OCD, and, consequently, could have an impact upon
the value of the New OCD Common Stock. There can be no assurance that the
interests of the Asbestos Personal Injury Trust will not conflict with the
interests of Reorganized OCD's other stakeholders.
2. The financial projections are inherently uncertain.
The Financial Projections set forth in Appendix B hereto
cover the Debtors' projected future operations through fiscal 2008. The
Financial Projections contain statements which constitute "forward-looking
statements" within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. "Forward-looking statements" in the Financial
Projections include the intent, belief or current expectations of OC and
members of its management team with respect to the timing and completion of
the implementation of the Plan, the feasibility of the Business Plan, the
availability of bank and other financing, the conditions of the debt and
equity markets, the state of general business and economic conditions, and
OC's future liquidity, as well as the assumptions upon which such statements
are based. While OC believes that these expectations are based on reasonable
assumptions within the bounds of its knowledge of its business and operations,
parties in interest are cautioned that any such forward-looking statements are
not guaranties of future performance, and involve risks and uncertainties, and
that actual results are likely to differ materially from those contemplated by
such forward-looking statements.
Important factors currently known to OC's management that
could cause actual results to differ materially from those contemplated by the
forward-looking statements in the Financial Projections include, but are not
limited to, adverse developments with respect to the liquidity position of OC
or operations of the various businesses of OC, adverse developments in the
bank financing or public or private markets for debt or equity securities of
OCD, adverse developments in the timing or results of the implementation of
the Business Plan (including the time to emerge from Chapter 11), the
difficulty in controlling industry costs and integrating new operations, the
ability of the OC to realize the anticipated general and administrative
expense savings and overhead reductions contemplated in the Financial
Projections, the ability of OC to maintain profitability of their operations,
the level and nature of any restructuring and other one-time charges, the
difficulty in estimating costs relating to exiting certain markets and
consolidating and closing certain operations, and the possible negative
effects of a change in applicable legislation. See Section V.3 of this
Disclosure Statement.
3. There can be no assurance that the Reorganized Debtors will
be able to refinance certain indebtedness.
Following the Effective Date of the Plan, the Debtors'
working capital needs and letter of credit requirements are anticipated to be
funded under the new Exit Facility. See Section VII.H of this Disclosure
Statement. Obtaining the Exit Facility is a condition precedent to the
Effective Date. There can be no assurance, however, that the Reorganized
Debtors will be able to obtain replacement financing for such facility to fund
future working capital needs and letters of credit, or that replacement
financing, if obtained, would be on terms equally as favorable to the
Reorganized Debtors. Furthermore, there can be no assurance that the
Reorganized Debtors will be able to refinance the Senior Notes upon their
maturity, should such a need arise.
4. Retention of key management and technical personnel may be
important to the future performance of the Reorganized
Debtors.
Many aspects of the business of the Debtors require
personnel with significant experience or technical expertise. In addition, the
past business performance of the Debtors has been achieved, in part, by the
skills of key management personnel who possess very particular knowledge and
expertise relating to the Debtors' business. There can be no assurance that
such personnel can be retained or, that if any such personnel do not continue
in the employ of the Reorganized Debtors, that the Reorganized Debtors will be
able to replace such key personnel.
5. There can be no assurance that Reorganized OCD will pay
dividends.
The Debtors cannot anticipate whether Reorganized OCD will
pay any dividends on the New OCD Common Stock in the foreseeable future. In
addition, restrictive covenants in certain debt instruments to which
Reorganized OCD will be a party, including the Exit Facility, may limit the
ability of Reorganized OCD to pay dividends.
6. The Reorganized Debtors are subject to environmental
regulation and failure to comply with environmental
regulation could harm its business.
The Reorganized Debtors will remain subject to a variety of
environmental laws and regulations governing, among other things, discharges
to air and water, the handling, storage, and disposal of hazardous or solid
waste materials, and may also be required to undertake the remediation of
contamination associated with releases of hazardous substances. Such laws and
regulations and the risk of attendant litigation can cause significant delays
and add significantly to the cost of operations. Violations of these
environmental laws and regulations could subject the Reorganized Debtors and
their management to civil and criminal penalties and other liabilities based
on their post-petition conduct. There can be no assurance that such laws and
regulations will not become more stringent, or more stringently implemented,
in the future.
Various federal, state and local environmental laws and
regulations, as well as common law, may impose liability for property damage
and costs of investigation and cleanup of hazardous or toxic substances on
property currently or previously owned by the Debtors or arising out of the
Debtors' waste management activities. Such laws may impose responsibility and
liability without regard to knowledge of or causation of the presence of the
contaminants, and the liability under such laws is joint and several. The
Debtors have potential liabilities associated with their past waste disposal
activities and with their current and prior ownership of certain property. In
general, the Debtors believe that the likely amount of such liabilities will
not be material, because the Debtors may have a valid defense to liability
with respect to a given site or the Debtors should only be responsible for a
small percentage of the total cleanup costs with respect to a given site.
However, because liability under such laws is joint and several, no assurances
can be given that the Reorganized Debtors will not eventually be responsible
for all or a substantial portion of the liabilities associated with one or
more of these sites, which liabilities could be material either individually
or in the aggregate.
7. The IRS may challenge OC's reserves as insufficient and any
revision to these reserves may adversely affect OC's
financial position.
In accordance with generally accepted accounting principles,
OC maintains tax reserves to cover audit issues. While OC believes that the
existing reserves are appropriate in light of the audit issues involved, its
defenses, its prior experience in resolving audit issues, and its ability to
realize certain challenged deductions in subsequent tax returns if the IRS
were successful, there can be no assurance that such reserves will be
sufficient. OC will continue to review its tax reserves on a periodic basis
and make such adjustments as may be appropriate. Any such revision could be
material to OC's consolidated financial position and results of operations in
any given period.
8. The performance of OC's business reflects the impact of
business cycles.
Sales of OC's products are correlated to business activity
in the new construction and remodeling markets, which are highly sensitive to
national and regional economic conditions. From time to time, the construction
industry has been adversely affected in various parts of the country by
unfavorable economic conditions, low use of manufacturing capacity, high
vacancy rates, changes in tax laws affecting the real estate industry, high
interest rates and the unavailability of financing. In addition, sales of OC's
products may be adversely affected by weakness in demand within particular
customer groups or a recession in the general construction industry or in
particular geographic regions. OC cannot predict the timing or severity of
future economic or industry downturns. Any economic downturn, particularly in
states where many of OC's sales are made, could have a material adverse effect
on its results of operations and financial condition.
9. Particular risks involving international operations may
affect the performance of the Reorganized Debtors.
OC pursues project opportunities throughout the world
through foreign and domestic subsidiaries as well as agreements with foreign
joint-venture partners. These foreign operations are subject to special risks,
including: uncertain political and economic environments, potential
incompatibility with foreign joint-venture partners, foreign currency controls
and fluctuations, war and military operations, civil disturbances and labor
strikes.
XVI. ALTERNATIVES TO CONFIRMATION AND
CONSUMMATION OF THE PLAN
The Debtors believe that the Plan affords holders of Claims the
potential for the greatest realization on the Debtors' assets and, therefore,
is in the best interests of such holders.
If, however, the requisite acceptances are not received, or the Plan
is not subsequently confirmed and consummated, the theoretical alternatives
include: (a) formulation of an alternative plan or plans of reorganization, or
(b) liquidation of the Debtors under Chapter 7 or 11 of the Bankruptcy Code.
A. Alternative Plan(s) of Reorganization or Liquidation
If the requisite acceptances are not received by the Voting Deadline
or if the Plan is not confirmed, the Debtors (or, if the Debtors' exclusive
periods in which to file and solicit acceptances of a plan of reorganization
have expired, any other party-in-interest) could attempt to formulate and
propose a different plan or plans of reorganization. Such a plan or plan(s)
might involve either a reorganization and continuation of the Debtors'
businesses or an orderly liquidation of the Debtors' assets.
With respect to an alternative plan, the Debtors have explored
various alternatives in connection with the formulation and development of the
Plan. The Debtors believe that the Plan enables the holders of Claims against
the Debtors to realize the greatest possible value under the circumstances,
and that, as compared to any alternative plan of reorganization, the Plan has
the greatest chance to be confirmed and consummated.
B. Liquidation Under Chapter 7 or Chapter 11
[The analysis in this section of the Disclosure Statement is preliminary and
subject to possible revision as the Debtors and Lazard complete their
analysis]
If no plan is confirmed, the Chapter 11 Cases may be converted to
cases under Chapter 7 of the Bankruptcy Code, pursuant to which a trustee
would be elected or appointed to liquidate the Debtors' assets for
distribution to claimants in accordance with the priorities established by the
Bankruptcy Code. It is impossible to predict precisely how the proceeds of the
liquidation would be distributed to the respective holders of Claims against
or Interests in the Debtors.
The Debtors believe that in a liquidation under Chapter 7, before
claimants receive any distribution, additional administrative expenses arising
from the appointment of a trustee or trustees and attorneys, accountants and
other professionals to assist such trustees would cause a substantial
diminution in the value of the Debtors' Estates. The assets available for
distribution to claimants would be reduced by such additional expenses and by
Claims, some of which would be entitled to priority, arising by reason of the
liquidation and from the rejection of leases and other executory contracts in
connection with the cessation of operations and the failure to realize the
greater going concern value of the Debtors' Estates.
The Debtors could also be liquidated pursuant to the provisions of a
Chapter 11 plan of reorganization. In a liquidation under Chapter 11, the
Debtors' assets could be sold in an orderly fashion over a more extended
period of time than in a liquidation under Chapter 7. Thus, a Chapter 11
liquidation might result in larger recoveries than in a Chapter 7 liquidation,
but the delay in distributions could result in lower present values received
and higher administrative costs. Because a trustee is not required in a
Chapter 11 case, expenses for professional fees could be lower than in a
Chapter 7 case, in which a trustee must be appointed. Any distribution to the
holders of Claims under a Chapter 11 liquidation plan probably would be
delayed substantially. Moreover, without the support of the holders of
Asbestos Personal Injury Claims, the purchaser or purchasers of assets from
the Debtors would not be assured the protection from liability for
asbestos-related claims available under Section 524(g) of the Bankruptcy Code,
thus potentially diminishing the value of such assets in a sale under Chapter
11.
The Debtors believe that any alternative liquidation under Chapter
11, if feasible at all, is a much less attractive alternative to creditors
than the Plan. THE COMPANY BELIEVES THAT THE PLAN AFFORDS SUBSTANTIALLY
GREATER BENEFITS TO CREDITORS THAN WOULD A LIQUIDATION UNDER CHAPTER 7 OR
CHAPTER 11 OF THE BANKRUPTCY CODE.
The Liquidation Analysis, prepared by the Debtors with the assistance
of Lazard, is premised upon a liquidation in a Chapter 7 case. In the
analysis, the Debtors have taken into account the nature, status, and
underlying value of their assets, the ultimate realizable value of such
assets, and the extent to which the assets are subject to liens and security
interests.
The likely form of any liquidation would be the sale of individual
assets. Based on this analysis, it is likely that a liquidation of the
Debtors' assets would produce less value for distribution to creditors than
that recoverable in each instance under the Plan. In the Debtors' opinion, the
recoveries projected to be available in liquidation are not likely to afford
holders of Claims as great a realization potential as does the Plan.
XVII. THE SOLICITATION; VOTING PROCEDURE
The Bankruptcy Court may confirm the Plan only if it determines that
the Plan complies with the technical requirements of Chapter 11 of the
Bankruptcy Code and that the disclosures by the Debtors concerning the Plan
have been adequate and have included information concerning all payments made
or to be made in connection with the Plan and the Chapter 11 Cases. In
addition, the Bankruptcy Court must determine that the Plan has been proposed
in good faith and not by any means forbidden by law and, under Rule 3020(b)(2)
of the Bankruptcy Rules, it may do so without receiving evidence if no
objection is timely filed.
In particular, the Bankruptcy Code requires the Bankruptcy Court to
find, among other things, that (a) the Plan has been accepted by the requisite
votes of the Classes of Impaired Claims unless approval will be sought under
Section 1129(b) of the Bankruptcy Code despite the dissent of one or more such
classes, which will be the case under the Plan, (b) the Plan is "feasible,"
which means that there is a reasonable probability that confirmation of the
Plan will not be followed by liquidation or the need for further financial
reorganization, and (c) the Plan is in the "best interests" of all holders of
Claims and Interests, which means that such holders will receive at least as
much under the Plan as they would receive in a liquidation under Chapter 7 of
the Bankruptcy Code. The Bankruptcy Court must find that all conditions
mentioned above are met before it can confirm the Plan. Thus, even if all
Classes of Impaired Claims and Interests accept the Plan by the requisite
votes, the Bankruptcy Court must make an independent finding that the Plan
conforms to the requirements of the Bankruptcy Code, that the Plan is
feasible, and that the Plan is in the best interests of the holders of Claims
against, and Interests in, the Debtors. These statutory conditions to
confirmation are discussed above.
By Order dated __________ (the "Voting Procedures Order") , the Court
has approved certain Voting Procedures which govern, among other things, the
manner in which votes on the Plan will be solicited and Ballots and Master
Ballots on the Plan tabulated. A copy of the Voting Procedures is attached
hereto as Appendix H. For further information regarding Voting Procedures and
rules concerning the calculation of the amount of Claims voting in a Class of
Claims, see Section XIV.B of this Disclosure Statement entitled "Feasibility
of the Plan and Best Interests of Creditors-Acceptance of the Plan."
A. Parties in Interest Entitled to Vote
Under Section 1124 of the Bankruptcy Code, a class of claims or
interests is deemed to be impaired under a Plan unless (1) the Plan leaves
unaltered the legal, equitable, and contractual rights to which such claim or
interest entitles the holder thereof or (2) notwithstanding any legal right to
an accelerated payment of such claim or interest, the plan cures all existing
defaults (other than defaults resulting from the occurrence of events of
bankruptcy) and reinstates the maturity of such claim or interest as it
existed before the default.
In general, a holder of a claim or interest may vote to accept or to
reject a plan if (1) the claim or interest is allowed, which means generally
that no party in interest has objected to such claim or interest, and (2) the
claim or interest is impaired by the plan. If the holder of an impaired claim
or interest will not receive or retain any distribution under the plan in
respect of such claim or interest, the Bankruptcy Code deems such holder to
have rejected the plan. If the claim or interest is not impaired, the
Bankruptcy Code deems that the holder of such claim or interest has accepted
the plan and the plan proponent need not solicit such holder's vote.
The holder of a Claim against a Debtor that is Impaired under the
Plan is entitled to vote to accept or reject the Plan if (i) the Plan provides
a distribution in respect to such Claim and (ii) (a) the Claim has been
Scheduled by the Debtors (and such claim is not Scheduled at zero or as
disputed, contingent, or unliquidated) or (b) it has filed a Proof of Claim on
or before the bar date applicable to such holder, pursuant to Sections 502(a)
and 1126(a) of the Bankruptcy Code and Bankruptcy Rules 3003 and 3018. Any
Claim as to which an objection has been timely filed and has not been
withdrawn or dismissed or denied by Final Order is not entitled to vote unless
the Bankruptcy Court, pursuant to Federal Rule of Bankruptcy Procedure
3018(a), upon application of the holder of the Claim with respect to which
there has been objection, temporarily allows the Claim in an amount that the
Bankruptcy Court deems proper for the purpose of accepting or rejecting the
Plan.
A vote may be disregarded if the Bankruptcy Court determines,
pursuant to Section 1126(e) of the Bankruptcy Code, that it was not solicited
or procured in good faith or in accordance with the provisions of the
Bankruptcy Code. The Voting Procedures Order also sets forth assumptions and
procedures for tabulating Ballots that are not completed fully or correctly.
B. Classes Impaired under the Plan
Classes 3, 4, 5, 6, 7, 8, and 9 are entitled to vote to accept or
reject the Plan. By operation of law, each Unimpaired Class of Claims is
deemed to have accepted the Plan and, therefore, is not entitled to vote to
accept or reject the Plan. The Plan provides that the holders of Intercompany
Claims in Class 10 and OCD Interests in Class 11 will not receive any
distributions of property or retain any interest in the Debtors. By operation
of law, Classes 10 and 11, therefore, are deemed to have rejected the Plan and
therefore are not entitled to vote to accept or reject the Plan.
C. Waivers of Defects, Irregularities, etc.
Unless otherwise directed by the Bankruptcy Court, all questions as
to the validity, form, eligibility (including time of receipt), acceptance,
and revocation or withdrawal of Ballots or Master Ballots will be determined
by the Voting Agent or the Special Voting Agent, as applicable, and the
Debtors in accordance with the Voting Procedures in their sole discretion,
which determination will be final and binding. The Debtors also reserve the
right to reject any and all Ballots and Master Ballots not in proper form, the
acceptance of which would, in the opinion of the Debtors or their counsel, be
unlawful. The Debtors further reserve the right to waive any defects or
irregularities or conditions of delivery as to any particular Ballot or Master
Ballot.
D. Withdrawal of Ballots; Revocation
Any party who has delivered a valid Ballot or Master Ballot for the
acceptance or rejection of the Plan may withdraw such acceptance or rejection
by delivering a written notice of withdrawal to the Voting Agent or Special
Voting Agent, as applicable, at any time prior to the Voting Deadline in
accordance with the Voting Procedures. The Debtors intend to consult with the
Voting Agent or Special Voting Agent to determine whether any withdrawals of
Ballots or Master Ballots were received and whether the requisite acceptances
of the Plan have been received. As stated above, the Debtors expressly reserve
the absolute right to contest the validity of any such withdrawals of Ballots
and Master Ballots.
E. Further Information; Additional Copies
If you have any questions about (1) the Voting Procedures for voting
your Claim or Interest or with respect to the packet of materials that you
have received or (2) the amount of your Claim, or if you wish to obtain, at
your own expense, unless otherwise specifically required by Federal Rule of
Bankruptcy Procedure 3017(d), an additional copy of the Plan, this Disclosure
Statement or any appendices or Exhibits to such documents, please contact:
OWENS CORNING
c/o Robert L. Berger & Associates, L.L.C.
16501 Ventura Blvd., Suite 440
Encino, CA 91436
818-906-8300 (phone)
818-783-2737 (fax)
XVIII. RECOMMENDATION AND CONCLUSION
For all of the reasons set forth in this Disclosure Statement, the
Plan Proponents believe that confirmation and consummation of the Plan is
preferable to all other alternatives. Consequently, the Plan Proponents urge
all holders of Classes 3, 4, 5, 6, 7, 8, and 9 Allowed Claims to vote to
ACCEPT the Plan, and to complete and return their Ballots or Master Ballots so
that they will be RECEIVED by the Voting Agent or Special Voting Agent, as
applicable, on or before 4:00 p.m. prevailing Eastern Time on the Voting
Deadline.
Dated: March 28, 2003
OWENS CORNING, et al.
(for itself and on behalf of the
Subsidiary Debtors)
/s/ Stephen K. Krull
By:_______________________________
Name: Stephen K. Krull
Title: Senior Vice President,
General Counsel and Secretary
SAUL EWING LLP SKADDEN, ARPS, SLATE, MEAGHER
Norman L. Pernick (I.D. # 2290) & FLOM LLP
222 Delaware Avenue Ralph Arditi
P.O. Box 1266 D.J. Baker
Wilmington, DE 19899-1266 Four Times Square
(302) 421-6800 New York, NY 10036-6522
(212) 735-3000
Charles O. Monk, II
Irving E. Walker Special Counsel to Debtors
Jay A. Shulman and Debtors-in-Possession
100 South Charles Street
Baltimore, MD 21201-2773
(410) 332-8600
Attorneys for the Debtors and
Debtors-in-Possession
KAYE SCHOLER LLP CAPLIN & DRYSDALE, CHARTERED
Michael J. Crames Elihu Inselbuch
Andrew A. Kress 399 Park Avenue
Edmund M. Emrich New York, NY 10022
425 Park Avenue (212) 319-7125
New York, NY 10022
(212) 836-8000 Peter
Van N. Lockwood
Julie W. Davis
YOUNG, CONAWAY, One Thomas Circle, N.W.
STARGATT & TAYLOR LLP Washington, D.C. 20005
James L. Patton, Jr. (I.D. # 2202) (202) 862-5000
The Brandywine Building
1000 West Street, 17th Floor CAMPBELL & LEVINE
P.O. Box 391 Marla Eskin (I.D. # 2989)
Wilmington, DE 19899-0391 Chase Manhattan Center
(302) 571-6600 15th Floor
1201 Market Street
Attorneys for James J. McMonagle, Wilmington, DE 19899
Legal Representative for Future Claimants (302) 426-1900
Attorneys for the Official
Committee of Asbestos Claimants
TABLE OF APPENDICES
Appendix Name
Appendix A Amended Joint Plan of Reorganization of Owens Corning
and its Affiliated Debtors and Debtors-in-Possession,
dated as of March 28, 2003
Appendix A-1 Glossary of Additional Terms
Appendix B Pro Forma Financial Projections and
Reorganization Balance Sheet [This document has not
been completed and will be inserted at a later
date]
Appendix C Liquidation Analysis [This document has not been
completed and will be inserted at a later date]
Appendix D Owens Corning Annual Report on Form 10-K for the
period ending December 31,2002 [This document will
be inserted shortly after it is filed with the SEC]
Appendix E Principal Terms and Conditions of Senior Notes
[These terms have not been finalized and will be
inserted at a later date]
Appendix F Current Corporate Structure of Company [This document
has not been completed and will be inserted at a
later date]
Appendix G Proposed Corporate Structure of the Reorganized
Debtors [The proposed corporate structure has not
been finalized and will be inserted at a later
date]
Appendix H Voting Procedures [This Document will be inserted
when approved by the Court]
APPENDIX A
Amended Joint Plan of Reorganization of Owens Corning and its Affiliated
Debtors and Debtors-in-Possession, dated as of March 28, 2003
[See Exhibit 2 to the Current Report on Form 8-K, filed by Owens Corning on
March 28, 2003]
APPENDIX A-1
GLOSSARY OF ADDITIONAL TERMS
"Additional Sites" means, in connection with the draft Environmental
Settlement Agreement between the Debtors and the EPA, those waste disposal
sites used by the Debtors before the Petition Date that are not discovered
until after confirmation of the Plan or where the Debtors' use of the site has
been confirmed but an allocable share of liability cannot yet be determined.
"Administrative Deposits" means those amounts deposited by OCD and Fibreboard
prior to the Petition date in settlement accounts to facilitate claims
processing under the NSP.
"Annual Section 382 Limitation" means certain rules under Section 382 of the
IRC limiting the ability of corporate taxpayers to utilize NOLs when there has
been an "ownership change."
"Armstrong" means Armstrong World Industries, Inc.
"B&B" means Baron & Budd, P.C., a law firm which was a participant in the NSP.
"Bankruptcy Exception" means the exception to the application of the Annual
Section 382 Limitation provided for in Section 382(l)(5) of the IRC when a
corporation is under the jurisdiction of a court in a Title 11 case.
"Cash Management Motion" means the motion filed by the Debtors on October 6,
2000 for interim and final orders (1) authorizing (a) the maintenance of
certain existing bank accounts, (b) the continued use of existing business
forms, (c) the use of a modified cash management system and (d) the transfer
of funds to Non-Debtor Subsidiaries and (2) waiving certain investment and
deposit requirements of Section 345(b) of the Bankruptcy Code.
"Case Management Order" means the order of the Honorable Alfred M. Wolin of
the United States District Court for the District of New Jersey (sitting by
designation), dated December 23, 2002, which, among other things, withdrew the
reference with respect to the Bank Holders Action and the Substantive
Consolidation Motion.
"China Lenders" means KBC Bank, N.V., Standard Chartered Bank and Societe
Generale.
"China Standstill Agreement" means the Standstill and Amendment Agreement
entered into between OCD, Owens-Corning (Guangzhou) Fiberglas Co., Ltd.,
Owens-Corning (Shanghai) Fiberglas Co., Ltd. and the China Lenders, of which
the Bankruptcy Court authorized execution on December 9, 2002.
"Claims Agent" means Robert L. Berger & Associates, L.L.C., appointed by the
Bankruptcy Court pursuant to 28 U.S.C. ss. 156(c).
"Clean Water Act" means The Federal Water Pollution Control Act, 33 U.S.C.S.
ss.ss. 1251 et seq.
"Company" means OCD and its Subsidiaries.
"Consultants Order" means the order of the District Court, dated December 28,
2001, appointing the Court Appointed Consultants.
"Continental" means Continental Casualty Company.
"Court Appointed Consultants" means William A. Drier, Esq., David R. Gross,
Esq., C. Judson Hamlin, Esq., John E. Keefe, Esq., and Professor Francis E.
McGovern, being the consultants appointed by the District Court to advise the
District Court and to undertake certain duties in connection with the Chapter
11 cases of the Debtors and the cases of Armstrong World Industries, Inc.,
W.R. Grace & Co., Federal-Mogul Global, Inc. and USG Corporation.
"Critical Vendor Order" means the order of the Bankruptcy Court, dated October
6, 2000, which authorized, but did not require, the Debtors to pay the
pre-petition claims of certain critical suppliers of raw and processed
materials, goods and services with whom the Debtors continued to do business
and whose material, goods and services were essential to the Debtors' business
operations.
"Currently Disputed Claims" means those Proofs of Claim that the Debtors have
identified which they believe should be disallowed by the Bankruptcy Court,
primarily because such claims appear to be duplicate or amended claims or
claims that are not related to any of the Debtors' cases.
"Designated Members" means the Bondholders and trade creditor members of the
Unsecured Creditors' Committee.
"DIP Order" means the Final Order Authorizing Post-Petition Financing on a
Superpriority Administrative Claim Basis Pursuant to 11 U.S.C. ss. 364(c)(1)
and Granting Relief from the Automatic Stay Pursuant to 11 U.S.C. ss. 362,
approved by the Bankruptcy Court on November 17, 2000, which, among other
things, authorized the Debtors to obtain the DIP Facility from the DIP
Lenders.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
29 U.S.C. ss.ss. 1301-1462.
"Excess Recoveries" means Excess Available Cash, Excess Senior Notes Amount,
Excess New OCD Common Stock and Excess Litigation Trust Recoveries.
"Exclusive Period" means the period during which the Debtors have the
exclusive right to file a plan of reorganization under Section 1121(b) of the
Bankruptcy Code.
"Fee Auditor" means Warren H. Smith & Associates, P.C., appointed by the
Bankruptcy Court to act as a special consultant to the Court for professional
fee and expense review and analysis.
"Final CMO" means the final cash management order approved by the Bankruptcy
Court, which became effective on February 25, 2002 and is to continue in
effect until confirmation of the Plan.
"Final NSP Settlements" means the approximately 150,000 Initial Claims which,
as of the Petition Date, had satisfied all conditions to final settlement,
including receipt of executed releases, or other resolution.
"Financial Projections" means certain financial information with respect to the
projected future operations of OC, attached as Appendix B to the Disclosure
Statement.
"Future Claimants' Motion" means the motion filed by the Future Claimants'
Representative on September 6, 2002, for an order authorizing the Future
Claimants' Representative (either alone or in combination with other creditor
constituencies) to commence certain avoidance actions on behalf of the
Debtors' Estates under Sections 544, 545, 547, 548 and/or 553 of the
Bankruptcy Code.
"General Bar Date" means April 15, 2002, as the date set by the Bankruptcy
Court as the last date by which holders of certain pre-petition Claims against
the Debtors were required to file Proofs of Claim.
"General Claims" means the approximately 5,500 claims, totaling approximately
$5.6 billion, alleging rights to payment for financial, environmental, trade
and other matters.
"Hancock Litigation" means the securities-related class action lawsuit pending
in the United States District Court for the District of Massachusetts,
commenced on or about April 30, 2001, on behalf of purchasers of certain
securities against certain of OCD's current and former directors and officers,
as well as certain underwriters, and captioned John Hancock Life Insurance
Company, et al. v. Goldman, Sachs & Co., et al., CA No. 01-10729-RWZ.
"Initial Claims" means those claims relating to existing asbestos claims,
including unfiled claims pending with the law firm participating in the NSP at
the time it entered into an NSP Agreement, which claims were resolved pursuant
to the NSP Agreement.
"Information Depository" means the information and document depository
established by the Debtors at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP in New York City in connection with the Inter-creditor Project.
"Insurance Settlement" means the insurance settlement entered into in 1993 by
Fibreboard, Continental Casualty Company and Pacific Indemnity Company, which
became effective in 1999.
"Integrex" means Integrex, a Delaware corporation, which is a Debtor and a
Subsidiary Guarantor.
"Inter-creditor Issues" means potential inter-creditor issues, including any
and all claims, objections, motions, contested matters, adversary proceedings
or any other proceedings involving, related to or affecting issues of the
amount, validity, enforceability or priority of Claims by the Bank Holders
against any of the Debtors or any Non-Debtor Subsidiary (to the extent the
Bankruptcy Court has jurisdiction to affect the Claims against Non-Debtor
Subsidiaries) which is a Subsidiary Guarantor of the Debtors' obligations to
the Bank Holders, including without limitation: (1) any claims relating to
substantive consolidation of the Debtors; (2) any claims relating to the
validity, enforcement or priority of the Pre-petition Bonds; (3) any claims
relating to the validity or enforceability of a License Agreement, dated as
October 1, 1991, by and between OCD and OCFT (as amended) and a License
Agreement, dated as of April 27, 1999, by and between OCFT and Amerimark
Building Products, Inc.; (4) any claims regarding the amount, validity,
enforceability or priority of the Subsidiary Guarantees; (5) any claims
against any direct or indirect Subsidiary of OCD in respect of OCD's asbestos
liability; and (6) any claims as to the amount, validity, enforceability,
priority or avoidability of any intercompany transfers.
"Inter-creditor Issues Order" means the order of the Bankruptcy Court, dated
March 18, 2002, which established a schedule for addressing the resolution of
Inter-Creditor Issues.
"Inter-creditor Project" means the Debtors' voluntary production of a
documentary record designed to be a compilation of relevant documents that
would be useful in reviewing and investigating each Debtor or Subsidiary
Guarantor's corporate history, major creditor relationships, and significant
cash and value transfers in connection with the analysis of the Inter-Creditor
Issues.
"Investment Proceeds" means any investment income from the funds in settlement
accounts maintained by B&B pursuant to a certain settlement agreement between
OCD, Fibreboard and B&B which required OCD and Fibreboard to pay
Administrative Deposits into such settlement accounts.
"Lazard" means Lazard Freres & Co. LLC, the investment banker and financial
advisor to the Debtors.
"Liquidated Sites" means the existing known sites at which waste materials of
the Debtors were disposed before the Petition Date, for which the draft
Environmental Settlement Agreement between the Debtors and the EPA quantifies
liability as Pre-petition Claims, with respect to some of which the EPA would
have an Allowed Class 6 Claim.
"Liquidation Analysis" means the analysis prepared by Lazard and attached to
the Disclosure Statement as Appendix C, subject in all respects to the
assumptions set forth in Appendix D attached to the Disclosure Statement,
describing the value that would be received by holders of Allowed Claims in
Classes 3, 4, 5, 6, 7, 8 and 9 if the Debtors were liquidated under Chapter 7
of the Bankruptcy Code as of the Effective Date.
"Mediator" means Professor Francis E. McGovern, appointed as mediator for
certain purposes by the Bankruptcy Court, effective May 1, 2002, and appointed
as mediator pursuant to the Case Management Order for the Bank Holders Action
and Substantive Consolidation Motion.
"Merged Plan" means the Owens Corning Merged Retirement Plan.
"NOLs" means net operating losses.
"Non-NSP Agreement" means an agreement, other than an NSP Agreement, between
one or more of the Debtors and one or more holders or representatives of
Asbestos Personal Injury Claims.
"Non-United States Person" is any person or entity that is not a United States
Person.
"OC and Fibreboard Residual Balance" means the principal balance remaining in
the B&B settlement account, after deducting the Qualifying OC and Fibreboard
Balance.
"OCFT" means Owens-Corning Fiberglas Technology Inc.
"OCIL" means Owens-Corning (India) Limited.
"Pacific" means Pacific Indemnity Company.
"Participating Lenders" means those Bank Holders that executed the Standstill
Agreement.
"Participating Parties" means those parties who, having entered into a
confidentiality agreement with the Company to assure the protection of
privileged and confidential material included in the production of documents
to the Information Depository, were provided access to the materials in the
Information Depository.
"PBGC" means the Pension Benefit Guaranty Corporation, an agency of the United
States.
"Plant" means Plant Insulation Company.
"Plant Motion" means the motion, filed by Plant on September 28, 2001, for an
order appointing a disinterested examiner to conduct an examination of
Fibreboard, including an investigation as to whether Fibreboard assets were
diverted to pay OCD debts.
"Pre-petition Agent" means Credit Suisse First Boston, the agent for the Bank
Holders under the 1997 Credit Agreement.
"Professional Fee Claims" means those final requests for compensation or
reimbursement of the fees of any professional employed in the Chapter 11 Cases
pursuant to Sections 327 or 1103 of the Bankruptcy Code or otherwise, as
described in Section VII.K.5 of the Disclosure Statement and Section 14.1 of
the Plan.
"PRP" means a Potentially Responsible Party, as such term is defined in the
Superfund.
"Qualifying OC and Fibreboard Balance" means the principal balance of the
settlement payments made by OCD and Fibreboard to B&B, representing amounts
due to the Qualifying OC and Fibreboard Plaintiffs under a certain settlement
agreement between OCD, Fibreboard and B&B.
"Qualifying OC and Fibreboard Plaintiffs" means those plaintiffs under the NSP
who received written notice of approval for payment from OCD or Fibreboard
prior to the Petition Date pursuant to a certain settlement agreement between
OCD, Fibreboard and B&B, and who received payment of the first installment of
their settlement prior to the Petition Date.
"Revolving Loan Facility" means the Loan Facility Agreement, dated March 12,
1998, among the China Lenders, Owens Corning (China) Investment Company, Ltd.,
Owens-Corning (Guangzhou) Fiberglas Co., Ltd., Owens-Corning (Shanghai)
Fiberglas Co., Ltd., as borrowers, and OCD as guarantor.
"SCB" means Standard Chartered Bank, the agent and coordinating arranger for
the Revolving Loan Facility.
"SEC" means the United States Securities and Exchange Commission.
"Setoff Motion" means the motion filed in the Bankruptcy Court by the Bank
Holders on February 15, 2002, entitled Motion of Credit Suisse First Boston,
as Agent, for an Order Modifying the Automatic Stay to Permit Setoff of Frozen
Funds, whereby the Bank Holders requested relief from the automatic stay to
exercise setoff rights against 22 frozen bank accounts of certain Debtors and
Non-Debtor Subsidiaries, totaling approximately $35 million.
"Site Participation Agreement" means the pre-petition agreement pursuant to
which the Debtors were obligated for a percentage of the environmental
clean-up costs incurred by the Holliday Remediation Task Force at the
Doepke-Holliday disposal site in Johnson County, Kansas.
"Solicitation Period" means the period during which the Debtors have the
exclusive right to solicit and obtain acceptances of a plan of reorganization
filed by the Debtors during the Exclusive Period under Section 1121(c) of the
Bankruptcy Code.
"Special Voting Agent" means Innisfree M&A Incorporated, whom the Debtors have
sought to retain to address notice issues related to securities.
"Standstill Adversary Proceeding" means the adversary proceeding commenced by
the Debtors on the Petition Date in the Bankruptcy Court against the Bank
Holders (entitled Owens Corning, et al. v. Credit Suisse First Boston, et al.,
Adv. Proc. No. A-00-1575) to enjoin the Bank Holders from, among other things,
exercising certain rights and remedies under the 1997 Credit Agreement.
"Standstill Agreement" means that certain Standstill and Waiver Agreement
entered into among the Debtors, certain Non-Debtor Subsidiaries and the Bank
Holders party to the 1997 Credit Agreement.
"Standstill Amendment" means the Stipulation and Order to Amend the Standstill
and Waiver Agreement, approved by the Bankruptcy Court on November 25, 2002,
which amended the Standstill Agreement.
"Standstill Order" means the order of the Bankruptcy Court, dated June 19,
2001, which, among other things, authorized the Debtors to enter into the
Standstill Agreement and dismissed, without prejudice, the Standstill
Adversary Proceeding.
"Subsidiary Guarantees" means the obligations that were incurred by the
Subsidiary Guarantors under the 1997 Credit Agreement.
"Subsidiary Guarantors" means the Subsidiaries of OCD that guaranteed the
obligations under the 1997 Credit Agreement.
"Substantive Consolidation Motion" means the Debtors' Motion for Approval of
Substantive Consolidation as Part of Proposed Chapter 11 Plan of
Reorganization, which was filed on January 17, 2003.
"Superfund" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, commonly referred to as the Superfund Act,
42 U.S.C. ss. 9601 et seq.
"Tax Attributes" means, collectively, NOLs, general business and minimum tax
credit carryforwards, capital loss carryforwards, the basis of the taxpayer's
assets and foreign tax credit tax carryforwards.
"Treasury Regulations" means those certain proposed, temporary and final
regulations promulgated by the U.S. Treasury Department under the IRC.
"Unsecured Committee Motion" means the motion filed by the Unsecured
Creditors' Committee on September 10, 2002, for an order authorizing it to
commence certain avoidance actions on behalf of the Debtors' Estates.
"United States Person" means, for purposes of federal income tax consequences
to Claim holders, any person or entity (1) who is a citizen or resident of the
United States, (2) that is a corporation or partnership created or organized
in or under the laws of the United States or any state thereof, (3) that is an
estate, the income of which is subject to United States federal income
taxation regardless of its source or (4) that is a trust (a) the
administration over which a United States person can exercise primary
supervision and all of the substantial decisions of which one or more United
States persons have the authority to control; or (b) that has elected to be
treated as a United States Person for United States federal income tax
purposes.
"Voting Agent" means Robert L. Berger & Associates, L.L.C., appointed by the
Bankruptcy Court pursuant to 28 U.S.C. ss. 156(c).
"W&K" means Waters & Kraus, LLP, a law firm participating in the NSP, which
filed a response in opposition to the Unsecured Committee Motion.
APPENDIX B
Pro Forma Financial Projections and Reorganization Balance Sheet
[This document has not been completed and will be inserted at a later date]
APPENDIX C
Liquidation Analysis
[This document has not been completed and will be inserted at a later date]
APPENDIX D
Owens Corning Annual Report on Form 10-K for the period ending December 31,2002
[This document will be inserted shortly after it is filed with the SEC]
APPENDIX E
Principal Terms and Conditions of Senior Notes
[These terms have not been finalized and will be inserted at a later date]
APPENDIX F
Current Corporate Structure of Company
[This document has not been completed and will be inserted at a later date]
APPENDIX G
Proposed Corporate Structure of the Reorganized Debtors
[The proposed corporate structure has not been finalized and
will be inserted at a later date]
APPENDIX H
Voting Procedures
[This Document will be inserted when approved by the Court]
TABLE OF CONTENTS
Page
PREFATORY SECTIONS
NOTICE WITH RESPECT TO INJUNCTIONS..........................................i
DISCLAIMER.................................................................ii
NOTE ON DEFINED TERMS......................................................iv
SUMMARY OF DISTRIBUTIONS....................................................v
I. INTRODUCTION..........................................................1
II. PLAN VOTING INSTRUCTIONS AND PROCEDURES...............................2
A. DEFINITIONS........................................................2
B. NOTICE TO HOLDERS OF CLAIMS AND INTERESTS..........................2
C. SOLICITATION PACKAGE...............................................4
D. VOTING PROCEDURES, BALLOTS AND VOTING DEADLINE.....................4
E. CONFIRMATION HEARING AND DEADLINE FOR OBJECTIONS TO
CONFIRMATION.......................................................5
III. GENERAL INFORMATION CONCERNING THE DEBTORS............................5
A. HISTORY AND DESCRIPTION OF BUSINESS................................5
B. FINANCIAL STRUCTURE OF THE COMPANY AT THE PETITION DATE...........12
IV. BACKGROUND OF ASBESTOS-ReLATED LITIGATION............................15
A. PRE-PETITION CLAIMS AGAINST OCD...................................15
B. PRE-PETITION CLAIMS AGAINST FIBREBOARD............................15
C. NATIONAL SETTLEMENT PROGRAM.......................................17
D. ESTABLISHMENT OF FINANCIAL RESERVES FOR ASBESTOS LIABILITY;
ESTIMATION OF ASBESTOS LIABILITY..................................21
V. CHAPTER 11 CASES.....................................................25
A. EVENTS LEADING TO THE CHAPTER 11 FILINGS..........................25
B. THE CHAPTER 11 FILINGS............................................26
C. CONTINUATION OF BUSINESS; STAY OF LITIGATION......................27
D. PROFESSIONALS RETAINED IN THE CHAPTER 11 CASES....................27
E. "FIRST DAY" AND OTHER ORDERS......................................37
F. SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASES....................39
G. AVOIDANCE ACTIONS IN THE CHAPTER 11 CASES.........................78
VI. Future Business of the Reorganized Debtors...........................86
A. STRUCTURE AND BUSINESS OF THE REORGANIZED DEBTORS.................86
B. BOARD OF DIRECTORS AND MANAGEMENT OF REORGANIZED DEBTORS..........87
C. PROJECTED FINANCIAL INFORMATION...................................97
VII. SUMMARY OF THE PLAN OF REORGANIZATION...............................101
A. STRUCTURE OF THE PLAN............................................102
B. SUBSTANTIVE CONSOLIDATION UNDER THE PLAN.........................103
C. CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS.............105
D. SUMMARY OF DEBT TO BE INCURRED, SECURITIES TO BE ISSUED AND
OTHER CONSIDERATION UNDER THE PLAN; EXECUTION OF RELATED
DOCUMENTS........................................................125
E. DISTRIBUTIONS UNDER THE PLAN.....................................129
F. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES............134
G. RESOLUTION AND TREATMENT OF DISPUTED, CONTINGENT, AND
UNLIQUIDATED CLAIMS..............................................138
H. EXIT FACILITY....................................................140
I. CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVENESS OF
THE PLAN.........................................................140
J. CERTAIN RELEASES AND INJUNCTIONS UNDER THE PLAN..................148
K. SUMMARY OF OTHER PROVISIONS OF THE PLAN..........................153
L. EFFECTS OF CONFIRMATION..........................................156
M. RETENTION OF JURISDICTION........................................161
N. REVESTING OF ASSETS..............................................163
O. RIGHTS OF ACTION.................................................163
P. PAYMENT OF STATUTORY FEES........................................164
Q. POST-CONSUMMATION OPERATIONS OF THE DEBTORS......................164
VIII. THE ASBESTOS PERSONAL INJURY TRUST..................................164
A. GENERAL DESCRIPTION OF THE ASBESTOS PERSONAL INJURY TRUST........164
B. ASBESTOS PERSONAL INJURY TRUST DISTRIBUTION PROCEDURES...........168
C. THE ASBESTOS PERSONAL INJURY PERMANENT CHANNELING INJUNCTION.....168
IX. THE FB ASBESTOS PROPERTY DAMAGE TRUST...............................169
A. GENERAL DESCRIPTION OF THE FB ASBESTOS PROPERTY DAMAGE TRUST.....169
B. FB ASBESTOS PROPERTY DAMAGE CLAIMS PROCEDURES....................173
C. INJUNCTION CHANNELING FB ASBESTOS PROPERTY DAMAGE CLAIMS.........173
X. THE LITIGATION TRUST................................................174
A. GENERAL DESCRIPTION OF THE LITIGATION TRUST......................174
B. DISTRIBUTIONS OF LITIGATION TRUST RECOVERIES.....................176
XI. RESTRICTIONS ON TRANSFERS OF CORPORATE SECURITIES AND CERTAIN
CLAIMS..............................................................176
XII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS..................176
A. OFFER AND SALE OF NEW OCD SECURITIES PURSUANT TO THE PLAN:
BANKRUPTCY CODE EXEMPTION FROM REGISTRATION REQUIREMENTS.........177
B. SUBSEQUENT TRANSFERS OF NEW OCD SECURITIES.......................177
XIII. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
THE PLAN............................................................180
A. FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS...................180
B. FEDERAL INCOME TAX CONSEQUENCES TO CLAIM HOLDERS.................184
C. IMPORTANCE OF OBTAINING PROFESSIONAL TAX ASSISTANCE..............191
XIV. FEASIBILITY OF THE PLAN AND BEST INTERESTS OF CREDITORS.............191
A. FEASIBILITY OF THE PLAN..........................................191
B. ACCEPTANCE OF THE PLAN...........................................193
C. BEST INTERESTS TEST..............................................194
D. LIQUIDATION ANALYSIS.............................................195
E. VALUATION OF THE REORGANIZED DEBTORS.............................196
F. APPLICATION OF THE "BEST INTERESTS" OF CREDITORS TEST TO THE
LIQUIDATION ANALYSIS AND THE VALUATION...........................203
G. CONFIRMATION WITHOUT ACCEPTANCE OF ALL IMPAIRED CLASSES:
"CRAMDOWN".......................................................203
XV. CERTAIN RISK FACTORS TO BE CONSIDERED...............................204
A. CERTAIN FACTORS RELATING TO THE CHAPTER 11 PROCEEDINGS...........204
B. CERTAIN FACTORS RELATING TO SECURITIES TO BE ISSUED PURSUANT
TO THE PLAN......................................................206
C. CERTAIN FACTORS RELATING TO THE REORGANIZED DEBTORS..............206
XVI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN..........210
A. ALTERNATIVE PLAN(S) OF REORGANIZATION OR LIQUIDATION.............210
B. LIQUIDATION UNDER CHAPTER 7 OR CHAPTER 11........................210
XVII. THE SOLICITATION; VOTING PROCEDURE..................................211
A. PARTIES IN INTEREST ENTITLED TO VOTE.............................212
B. CLASSES IMPAIRED UNDER THE PLAN..................................213
C. WAIVERS OF DEFECTS, IRREGULARITIES, ETC..........................213
D. WITHDRAWAL OF BALLOTS; REVOCATION................................213
E. FURTHER INFORMATION; ADDITIONAL COPIES...........................214
XVIII.RECOMMENDATION AND CONCLUSION.......................................215