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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 SECOND 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
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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 May 23, 2003
Attorneys for the Official
Committee of Asbestos Claimants
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TABLE OF CONTENTS
<Table>
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Page
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PREFATORY SECTIONS
NOTICE WITH RESPECT TO INJUNCTIONS.......................................................................i
DISCLAIMER..............................................................................................ii
NOTE ON DEFINED TERMS...................................................................................iv
SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS.............................................................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........................................11
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....................................................................16
D. ESTABLISHMENT OF FINANCIAL RESERVES FOR ASBESTOS LIABILITY; ESTIMATION OF ASBESTOS LIABILITY...21
V. CHAPTER 11 CASES..................................................................................24
A. EVENTS LEADING TO THE CHAPTER 11 FILINGS.......................................................24
B. THE CHAPTER 11 FILINGS.........................................................................26
C. CONTINUATION OF BUSINESS; STAY OF LITIGATION...................................................26
D. PROFESSIONALS RETAINED IN THE CHAPTER 11 CASES.................................................27
E. "FIRST DAY" AND OTHER ORDERS...................................................................37
F. SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASES.................................................38
G. AVOIDANCE ACTIONS IN THE CHAPTER 11 CASES......................................................74
VI. FUTURE BUSINESS OF THE REORGANIZED DEBTORS........................................................82
A. STRUCTURE AND BUSINESS OF THE REORGANIZED DEBTORS..............................................82
B. BOARD OF DIRECTORS AND MANAGEMENT OF REORGANIZED DEBTORS.......................................82
C. PROJECTED FINANCIAL INFORMATION................................................................92
VII. SUMMARY OF THE PLAN OF REORGANIZATION.............................................................96
A. STRUCTURE OF THE PLAN..........................................................................97
B. SUBSTANTIVE CONSOLIDATION UNDER THE PLAN.......................................................97
C. CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS..........................................100
D. SUMMARY OF DEBT TO BE INCURRED, SECURITIES TO BE ISSUED AND OTHER CONSIDERATION UNDER THE
PLAN; EXECUTION OF RELATED DOCUMENTS................................................................119
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<Table>
E. DISTRIBUTIONS UNDER THE PLAN..................................................................122
F. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.........................................127
G. RESOLUTION AND TREATMENT OF DISPUTED, CONTINGENT, AND UNLIQUIDATED CLAIMS.....................132
H. EXIT FACILITY.................................................................................133
I. CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVENESS OF THE PLAN............................134
J. CERTAIN RELEASES AND INJUNCTIONS UNDER THE PLAN...............................................142
K. SUMMARY OF OTHER PROVISIONS OF THE PLAN.......................................................147
L. EFFECTS OF CONFIRMATION.......................................................................149
M. RETENTION OF JURISDICTION.....................................................................154
N. REVESTING OF ASSETS...........................................................................156
O. RIGHTS OF ACTION..............................................................................156
P. PAYMENT OF STATUTORY FEES.....................................................................157
Q. POST-CONSUMMATION OPERATIONS OF THE DEBTORS...................................................157
VIII. THE ASBESTOS PERSONAL INJURY TRUST...............................................................157
A. GENERAL DESCRIPTION OF THE ASBESTOS PERSONAL INJURY TRUST.....................................158
B. ASBESTOS PERSONAL INJURY CLAIMS RESOLUTION AND DISTRIBUTION PROCEDURES........................162
C. THE ASBESTOS PERSONAL INJURY PERMANENT CHANNELING INJUNCTION..................................179
IX. THE FB ASBESTOS PROPERTY DAMAGE TRUST............................................................180
A. GENERAL DESCRIPTION OF THE FB ASBESTOS PROPERTY DAMAGE TRUST..................................181
B. FB ASBESTOS PROPERTY DAMAGE CLAIMS PROCEDURES.................................................184
C. INJUNCTION CHANNELING FB ASBESTOS PROPERTY DAMAGE CLAIMS......................................187
X. THE LITIGATION TRUST.............................................................................187
A. GENERAL DESCRIPTION OF THE LITIGATION TRUST...................................................187
B. DISTRIBUTIONS OF LITIGATION TRUST RECOVERIES..................................................190
XI. RESTRICTIONS ON TRANSFERS OF CORPORATE SECURITIES AND CERTAIN CLAIMS.............................190
XII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS...............................................190
A. OFFER AND SALE OF NEW OCD SECURITIES PURSUANT TO THE PLAN: BANKRUPTCY CODE EXEMPTION
FROM REGISTRATION REQUIREMENTS......................................................................190
B. SUBSEQUENT TRANSFERS OF NEW OCD SECURITIES....................................................191
XIII. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN...............................193
A. FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS................................................194
B. FEDERAL INCOME TAX CONSEQUENCES TO CLAIM HOLDERS..............................................197
C. IMPORTANCE OF OBTAINING PROFESSIONAL TAX ASSISTANCE...........................................204
XIV. FEASIBILITY OF THE PLAN AND BEST INTERESTS OF CREDITORS..........................................204
A. FEASIBILITY OF THE PLAN.......................................................................204
B. ACCEPTANCE OF THE PLAN........................................................................206
C. BEST INTERESTS TEST...........................................................................207
D. LIQUIDATION ANALYSIS..........................................................................208
E. VALUATION OF THE REORGANIZED DEBTORS..........................................................208
F. APPLICATION OF THE "BEST INTERESTS" OF CREDITORS TEST TO THE LIQUIDATION ANALYSIS AND THE
VALUATION...........................................................................................214
G. CONFIRMATION WITHOUT ACCEPTANCE OF ALL IMPAIRED CLASSES: "CRAMDOWN"...........................215
XV. CERTAIN RISK FACTORS TO BE CONSIDERED............................................................216
A. CERTAIN FACTORS RELATING TO THE CHAPTER 11 PROCEEDINGS........................................216
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B. CERTAIN FACTORS RELATING TO SECURITIES TO BE ISSUED PURSUANT TO THE PLAN......................217
C. CERTAIN FACTORS RELATING TO THE REORGANIZED DEBTORS...........................................217
XVI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN........................................220
A. ALTERNATIVE PLAN(S) OF REORGANIZATION OR LIQUIDATION..........................................221
B. LIQUIDATION UNDER CHAPTER 7 OR CHAPTER 11.....................................................221
XVII. THE SOLICITATION; VOTING PROCEDURE...............................................................222
A. PARTIES IN INTEREST ENTITLED TO VOTE..........................................................223
B. CLASSES IMPAIRED UNDER THE PLAN...............................................................223
C. WAIVERS OF DEFECTS, IRREGULARITIES, ETC.......................................................224
D. WITHDRAWAL OF BALLOTS; REVOCATION.............................................................224
E. FURTHER INFORMATION; ADDITIONAL COPIES........................................................225
XVIII. RECOMMENDATION AND CONCLUSION...................................................................226
</Table>
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NOTICE WITH RESPECT TO INJUNCTIONS
THE SECOND 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. SECTION 524(g). THE PLAN ALSO
CONTAINS AN INJUNCTION UNDER 11 U.S.C. SECTION 105, WHICH CHANNELS ALL ASBESTOS
PROPERTY DAMAGE CLAIMS AGAINST FIBREBOARD CORPORATION, AN INJUNCTION UNDER 11
U.S.C. SECTION 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.
i
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DISCLAIMER
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS INCLUDED HEREIN
FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE SECOND 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. Sections 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.
ii
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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.
iii
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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.
iv
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SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS
The treatment of each of the Classes is summarized as follows:
<Table>
<Caption>
ESTIMATED
ALLOWED
TREAT- CLAIMS
CLASS DESCRIPTION MENT (IN MILLIONS) ESTIMATED RECOVERY
- --------------------- ---------------------------- ------------- ------------------- -----------------------------
Unclassified DIP Facility Claims N/A $0 100%
Claims
Unclassified Administrative Claims N/A $46 100%
Claims
Unclassified Priority Tax Claims N/A $246 to $294 100%
Claims
Class 1 Claims Other Priority Claims Unimpaired $0 100%
Class 2A Claims Other Secured Tax Claims Unimpaired $5 100%
Class 2B Claims Other Secured Claims Unimpaired $6 100%
Class 3 Claims Convenience Claims Impaired $18 100%
Class 4 Claims Bank Holders Claims Impaired $1,480 to $1,577 SEE ATTACHMENT TO THIS CHART
Class 5 Claims Bondholders Claims Impaired $1,335 SEE ATTACHMENT TO THIS CHART
Class 6 Claims General Unsecured Impaired $375 to $741 SEE ATTACHMENT TO THIS CHART
Claims
Class 7 Claims OC Asbestos Personal Impaired SEE ATTACHMENT SEE ATTACHMENT TO THIS CHART
Injury Claims TO THIS CHART
Class 8 Claims FB Asbestos Personal Impaired SEE ATTACHMENT SEE ATTACHMENT TO THIS CHART
Injury Claims TO THIS CHART
Class 9 Claims FB Asbestos Property Impaired $2 to $7 100%
Damage Claims
Class 10 Claims Intercompany Claims Impaired N/A 0%
Class 11 Claims OCD Interests Impaired N/A 0%
</Table>
<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
UNCLASSIFIED CLAIMS
DIP FACILITY CLAIMS The Plan provides for DIP Facility Claims
to be paid in full. On, or as soon as
ESTIMATED ALLOWED CLAIMS: $0 reasonably practicable after, the latest
of (i) the Initial Distribution Date, (ii)
ESTIMATED RECOVERY: 100% 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 (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
Administrative Claims to be paid in full.
Except as otherwise provided in the Plan
and subject to the requirements of
</Table>
v
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<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
ESTIMATED ALLOWED CLAIMS: the Plan, on, or as soon as reasonably
$46 MILLION practicable after, the latest of (i) the
Initial Distribution Date, (ii) the date
ESTIMATED RECOVERY: 100% 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
Allowed Priority Tax Claim has been paid
ESTIMATED ALLOWED CLAIMS: by the Debtors prior to the Initial
$246 MILLION TO $294 MILLION Distribution Date or has agreed in writing
to a different treatment, each holder of
ESTIMATED RECOVERY: 100% 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, 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
entitled to priority pursuant to Section
ESTIMATED ALLOWED CLAIMS: $0 507(a) of the Bankruptcy Code other than
DIP Facility Claims, Administrative Claims
or Priority Tax Claims.
ESTIMATED RECOVERY: 100% 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.
UNIMPAIRED CLASSES OF CLAIMS
CLASS 2A - OTHER SECURED TAX Class 2A consists of all Claims which
CLAIMS otherwise would be tax claims entitled to
priority under Section 507(a)(8) of the
ESTIMATED ALLOWED CLAIMS: Bankruptcy Code, but which are secured by
$5 MILLION a valid and unavoidable Encumbrance in or
on any of the Debtors' property (to the
ESTIMATED RECOVERY: 100% extent of the value of the Claim holder's
interest in the Debtors' property, as
determined pursuant to Section 506 of the
Bankruptcy Code).
</Table>
vi
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<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
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.
CLASS 2B -OTHER SECURED CLAIMS Class 2B consists of Claims secured by a
valid Encumbrance in or on any of the
ESTIMATED ALLOWED CLAIMS: Debtors' property, which is not void or
$6 MILLION 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.
ESTIMATED RECOVERY: 100%
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
</Table>
vii
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<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
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.
IMPAIRED CLASSES OF CLAIMS
CLASS 3 -CONVENIENCE CLAIMS Class 3 consists of all Claims against any
of the Debtors that would otherwise be
ESTIMATED ALLOWED CLAIMS (AFTER classified as a Class 6 Claim, which (i)
ADJUSTMENT TO ACCOUNT FOR is in an amount that is equal to or less
HOLDERS OF CONVENIENCE CLAIMS than $5,000 or (ii) on the Ballot has been
IN AMOUNTS GREATER THAN $5,000 reduced to $5,000 by the holder of such
WHO ELECT TO OPT INTO CLASS 3): Claim.
$18 MILLION
On, or as soon as reasonably practicable
ESTIMATED RECOVERY: 100% 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.
IMPAIRED CLASSES OF CLAIMS
</Table>
viii
<Page>
<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
CLASS 4 -BANK HOLDERS CLAIMS Class 4 consists of Claims held by the
Bank Holders arising under or as a result
ESTIMATED ALLOWED CLAIMS: of the Debtors' obligations under the 1997
$1,480 MILLION TO Credit Agreement (the "BANK HOLDERS
$1,577 MILLION CLAIMS" or "CLASS 4 CLAIMS").
IF CLASS 4 ACCEPTS THE PLAN AND On, or soon as reasonably practicable
THEREBY RECEIVES THE GUARANTEE after, the latest of (i) the Initial
SETTLEMENT PAYMENT, THIS AMOUNT Distribution Date, (ii) the date on which
WILL BE REDUCED BY $400 MILLION such Class 4 Claim becomes an Allowed
FOR PURPOSES OF THE PRO-RATA Class 4 Claim, or (iii) the date on which
DISTRIBUTIONS TO HOLDERS OF such Class 4 Claim becomes due and payable
ALLOWED CLAIMS IN CLASSES 4, 5, pursuant to any agreement between a Debtor
6 AND 7. 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:
ESTIMATED RECOVERY:
SEE ATTACHED CHART (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.
CLASS 5 -BONDHOLDERS CLAIMS Class 5 consists of Claims held by the
Bondholders arising under or as a result
ESTIMATED ALLOWED CLAIMS: of the Debtors' obligations under the
$1,335 MILLION Pre-petition Bonds (the "BONDHOLDERS
CLAIMS" or "CLASS 5 CLAIMS").
ESTIMATED RECOVERY:
SEE ATTACHED CHART 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
</Table>
ix
<Page>
<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
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.
CLASS 6 - GENERAL UNSECURED Class 6 consists of those Claims against
CLAIMS ESTIMATED ALLOWED the Debtors that are General Unsecured
CLAIMS: Claims, which are Claims against any of
the Debtors that are not a DIP Facility
$375 MILLION TO $741 MILLION Claim, an Administrative Claim, a Priority
Tax Claim, an Other Priority Claim, an
ESTIMATED RECOVERY: Other Secured Tax Claim, an Other Secured
SEE ATTACHED CHART 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.
CLASS 7 -OC ASBESTOS PERSONAL Class 7 consists of OC Asbestos Personal
INJURY CLAIM Injury Claims ("CLASS 7 CLAIMS").
ESTIMATED ALLOWED CLAIMS: An "OC ASBESTOS PERSONAL INJURY CLAIM"
SEE ATTACHED CHART means any present or future right to
payment, claim, remedy, liability or
ESTIMATED RECOVERY: Demand against any OC Person for death,
SEE ATTACHED CHART 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
</Table>
x
<Page>
<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
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
</Table>
xi
<Page>
<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
THAT VOTE ON THE PLAN VOTE IN FAVOR OF THE
PLAN.
CLASS 8 - FB ASBESTOS Class 8 consists of FB Asbestos Personal
PERSONAL INJURY CLAIMS Injury Claims ("CLASS 8 CLAIMS").
An "FB ASBESTOS PERSONAL INJURY CLAIM"
ESTIMATED ALLOWED CLAIMS: means any present or future right to
SEE ATTACHED CHART payment, claim, remedy, liability or
Demand against any FB Person for death,
ESTIMATED RECOVERY: bodily injury, or other personal damages
SEE ATTACHED CHART (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.
</Table>
xii
<Page>
<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
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.
CLASS 9 -FB ASBESTOS PROPERTY Class 9 consists of FB Asbestos Property
DAMAGE CLAIMS Damage Claims ("CLASS 9 CLAIMS").
ESTIMATED ALLOWED CLAIMS: An "FB ASBESTOS PROPERTY DAMAGE CLAIM"
$2 MILLION TO $7 MILLION means any present or future right to
payment, claim, remedy, or liability
ESTIMATED RECOVERY: 100% 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.)
</Table>
xiii
<Page>
<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
The 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 ten (10)
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.
CLASS 10 - INTERCOMPANY CLAIMS Class 10 consists of Intercompany Claims
("CLASS 10 CLAIMS").
ESTIMATED ALLOWED CLAIMS: N/A An "INTERCOMPANY CLAIM" is any Claim,
including, without limitation, any
ESTIMATED RECOVERY: 0% Administrative Claim, by a Debtor against
another Debtor or a non-Debtor Subsidiary
against a Debtor, but excluding the Claims
set forth on SCHEDULE XIV to the Plan, as
it may be filed or amended at least ten
(10) 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 ten (10) 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.
CLASS 11 - OCD INTERESTS Class 11 consists of all OCD Interests
("CLASS 11 CLAIMS").
ESTIMATED ALLOWED INTERESTS: "OCD INTERESTS" consist of, (i)
N/A collectively, all Existing OCD Common
Stock, Existing OCD Preferred Stock and
ESTIMATED RECOVERY: 0% 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,
</Table>
xiv
<Page>
<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
OCD or another Debtor; (ii) all MIPS
Interests; and (iii) 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.
</Table>
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.
xv
<Page>
SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS
The calculation of estimated recoveries for Classes 4, 5, 6, 7 and 8 is
dependent upon the determination of the Allowed Claim amounts for Class 7 (OC
Asbestos Personal Injury Claims) and Class 8 (FB Asbestos Personal Injury
Claims). There are also two recovery alternatives, one in which Class 4 accepts
the Plan and receives the Guarantee Settlement Payment and then Classes 4, 5, 6
and 7 share in the Combined Net Distribution Package, and a second in which
Class 4 rejects the Plan, does not receive the Guarantee Settlement Payment and
then Classes 4, 5, 6 and 7 share in the Combined Distribution Package.
The following chart details five scenarios assuming varying asbestos claim
amounts, ranging from the Company's current asbestos reserve of $5.8 billion to
$24 billion.
<Table>
<Caption>
ESTIMATED AGGREGATE CLAIM AMOUNT
- ----------------------------------------------------------------------------------------------------
CLASS DESCRIPTION A B C D E
- ------------ ----------------------------- --------- --------- ---------- --------- ----------
Class 7 OC Asbestos Personal
Injury Claims 3,564 6,688 10,700 13,375 16,050
Class 8 FB Asbestos Personal
Injury Claims 2,310 3,312 5,300 6,625 7,950
TOTAL $ 5,874 $ 10,000 $ 16,000 $ 20,000 $ 24,000
</Table>
The estimated recovery of each of the Classes assuming Class 4 ACCEPTS the
Plan, for each of the various asbestos claim assumptions, is as follows:
<Table>
<Caption>
ESTIMATED RECOVERY
-----------------------------------------------------
CLASS DESCRIPTION CLAIM* A B C D E
- ------------ ----------------------------- ---------- ---------- ---------- --------- --------- -------
Class 4 Bank Holder Claims $ 1,480 60.2% 49.1% 42.4% 39.8% 38.0%
Class 5 Bond Holder Claims $ 1,335 45.4% 30.2% 21.1% 17.6% 15.1%
Class 6 General Unsecured Claims $ 375 45.4% 30.2% 21.1% 17.6% 15.1%
Class 7 OC Asbestos Personal
Injury Claims See Above 47.9% 31.9% 22.3% 18.6% 15.9%
Class 8 FB Asbestos Personal
Injury Claims See Above 66.3% 46.2% 28.9% 23.1% 19.3%
Class 9 FB Asbestos Property
Damage Claims $ 2 100.0% 100.0% 100.0% 100.0% 100.0%
Class 10 Intercompany Claims $ 0 0.0% 0.0% 0.0% 0.0% 0.0%
Class 11 OCD Interests N/A 0.0% 0.0% 0.0% 0.0% 0.0%
</Table>
* RECOVERY CALCULATIONS BASED UPON LOW-END CLAIM ESTIMATE FOR CLASSES 4, 5, 6
AND 9
The estimated recovery of each of the Classes assuming Class 4 DOES NOT
ACCEPT the Plan, for each of the various asbestos claim assumptions, is as
follows:
xvi
<Page>
<Table>
<Caption>
ESTIMATED RECOVERY
----------------------------------------------------
CLASS DESCRIPTION CLAIM* A B C D E
- ------------ -------------------------- ----------- --------- --------- -------- ---------- -------
Class 4 Bank Holder Claims $ 1,480 48.7% 33.1% 23.4% 19.6% 16.8%
Class 5 Bond Holder Claims $ 1,335 48.7% 33.1% 23.4% 19.6% 16.8%
Class 6 General Unsecured Claims $ 375 48.7% 33.1% 23.4% 19.6% 16.8%
Class 7 OC Asbestos Personal
Injury Claims See Above 51.1% 34.7% 24.6% 20.6% 17.7%
Class 8 FB Asbestos Personal
Injury Claims See Above 66.3% 46.2% 28.9% 23.1% 19.3%
Class 9 FB Asbestos Property
Damage Claims $ 2 100.0% 100.0% 100.0% 100.0% 100.0%
Class 10 Intercompany Claims $ 0 0.0% 0.0% 0.0% 0.0% 0.0%
Class 11 OCD Interests N/A 0.0% 0.0% 0.0% 0.0% 0.0%
</Table>
* RECOVERY CALCULATIONS BASED UPON LOW-END CLAIM ESTIMATE FOR CLASSES 4, 5, 6
AND 9
xvii
<Page>
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
<Page>
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.
2
<Page>
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.
3
<Page>
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)
4
<Page>
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, OC'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 2003, 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. OC'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 2002, MAY ALSO BE OBTAINED BY SENDING A WRITTEN REQUEST. SEE
DIRECTIONS FOR OBTAINING THIS DOCUMENT IN APPENDIX D.
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 [APPENDIX G 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.
5
<Page>
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, OC's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003,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. OC's
Annual Report on Form 10-K for the year ended December 31, 2002, may also be
obtained by sending a written request. SEE directions for obtaining this
document in Appendix D.
(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
6
<Page>
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
7
<Page>
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.
8
<Page>
(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
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<Page>
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
10
<Page>
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, 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. OC's Annual Report on Form 10-K for the year ended
December 31, 2002, may also be obtained by sending a written request. SEE
directions for obtaining this document in Appendix D.
11
<Page>
(in millions of dollars)
<Table>
<Caption>
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
(excluding Asbestos) 3,503 3,362
Company-obligated Securities of Entities
Holding Solely Parent Debentures-subject
to compromise 195 200
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
(excluding Asbestos) $ 3,360 $ 1,046
</Table>
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
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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:
<Table>
<Caption>
AMOUNT OUTSTANDING
(PRINCIPAL AND ACCRUED
AGGREGATE ORIGINAL INTEREST) AS OF
NOTES PRINCIPAL AMOUNT OCTOBER 1, 2000
- ---------------------------------------------- ------------------ --------------------------------
$400 Million Debentures due 2018 (7.5%) $ 400,000,000 $ 405,333,333
($400,000,000 / $5,333,333)
$550 Million Term Notes (First Series) $ 300,000,000 $ 309,625,000
due 2005 (7.500%) ($300,000,000 / $9,625,000)
$550 Million Term Notes (Second Series) $ 250,000,000 $ 258,234,722
due 2008 (7.700%) ($250,000,000 / $8,234,722)
$250 Million Notes due 2009 (7.000%) $ 250,000,000 $ 250,923,611
($250,000,000 / $923,611)
$150 million 8.875% Debentures of the $ 150,000,000 $ 41,269,153
$300 Million High Coupon Debentures due 2002 ($40,045,000 / $1,224,153)
$150 million 9.375% Debentures of the $ 150,000,000 $ 7,213,654
$300 Million High Coupon Debentures due 2012 ($6,988,000 / $225,654)
$130 Million DEM Bearer Bonds $ 130,000,000 $ 62,776,357
due 2000 (7.250%) ($60,572,174 / $2,204,183)
TOTAL $ 1,335,375,830
($1,307,605,174 / $27,770,656)
</Table>
13
<Page>
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.
In May 1995, Owens-Corning Capital LLC, a special purpose Delaware
limited liability company, issued and sold four million shares of 6 1/2 %
Convertible Monthly Income Preferred Securities (the "MIPS") for aggregate gross
proceeds of approximately $200 million. Owens-Corning Capital LLC then lent the
proceeds from the MIPS issuance, together with the proceeds from the issuance of
common limited liability company interests, to OC, which loan was evidenced by
the issuance by OC to OCC of approximately $253 million in aggregate principal
amount of OC's 6.5% Convertible Subordinated Debentures due 2002. As of December
31, 2002, $253,104,600 of these convertible subordinated debentures remained
outstanding. Under the Plan, the term "MIPS Interests" is defined to mean all
Claims directly or indirectly against OCD by the holders of the 6 1/2 %
Convertible Monthly Income Preferred Securities issued by Owens-Corning Capital
L.L.C. or any Person (including any trustee) asserting such Claims derivatively
or otherwise on behalf of such holders, including, without limitation, (i) the
Claims of Owens-Corning Capital L.L.C. for approximately $253 million original
aggregate principal amount arising from OCD's 6.5% Convertible Subordinated
Debentures due 2002, issued pursuant to an indenture dated as of May 10, 1995,
between OCD, Owens-Corning Capital L.L.C. and Harris Trust and Savings Bank, as
trustee, (ii) Claims arising under the guarantee agreement, dated as of May 10,
1995, in respect of such Convertible Subordinated Debentures, executed by OCD as
guarantor, and (iii) the Claim of The Bank of New York, as Special Trustee on
behalf of the holders of the MIPS. Because the rights against OCD under the
Convertible Subordinated Debentures are contractually subordinated to
substantially all other obligations, and since the MIPS are themselves equity
securities, the MIPS Interests are treated as OCD Interests under the Plan and
shall be deemed cancelled and extinguished at the Effective Date. As a result,
the holders of the MIPS Interests shall not receive or retain any property or
interest in property on account of the MIPS Interests. For a discussion of the
treatment of OCD Interests generally, see Section VII.C.3.b(x) of this
Disclosure Statement entitled "Class 11-- OCD Interests."
In 1991, OC formed Owens Corning Funding B.V., a wholly-owned
subsidiary of OCD. Pursuant to an indenture dated as of May 15, 1991, between
Owens Corning Funding B.V., OCD and The Bank of New York, as trustee, Owens
Corning Funding B.V. sold $149,625,000 aggregate principal amount of these
debentures. As of the Petition Date, approximately $42 million of these
debentures remained outstanding. SEE SECTION 1.157 of the Plan defining the
"O.C. Funding B.V. Claim" and SCHEDULE XIV, "Schedule of Exclusions from
Intercompany Claims." Pursuant to the Plan, the O.C. Funding B.V. Claim will be
treated and paid as a Class 6 Claim.
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, OC's Quarterly Report on Form
10-Q for the quarter ended March 31, 2003, OC's Annual
14
<Page>
Report on Form 10-K for the year ended December 31, 2001, OC's Annual Report on
Form 10-K for the year ended December 31, 2000, and OC's Quarterly Report on
Form 10-Q for the quarter ended March 31,2003, copies of which may be obtained,
free of charge, through OC's website at www.owenscorning.com. OC's Annual Report
on Form 10-K for the year ended December 31, 2002, may also be obtained by
sending a written request. SEE directions for obtaining this document in
Appendix D.
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
15
<Page>
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
16
<Page>
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
17
<Page>
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:
<Table>
<Caption>
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
Administrative Expenses 90 54
Total(2) $ 860 $ 685
</Table>
- ----------
(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.
18
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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
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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, (which is available free of
charge from OC's website, www.owenscorning.com), for a further description of
the Insurance Settlement. OC's Annual Report on Form 10-K for the year ended
December 31, 2002, may also be obtained by sending a written request. SEE
directions for obtaining this document in Appendix D.
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:
<Table>
<Caption>
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
Administrative Expenses 45
Total $ 820
</Table>
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
- ----------
(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.
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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 the Notes
to Consolidated Financial Statements set forth in OC's Annual Report on Form
10-K for the year ended December 31, 2002, and Note 8 of the Notes to
Consolidated Financial Statements set forth in OC's Quarterly Report on Form
10-Q for the quarter ended March 31, 2003,copies of which may be obtained, free
of charge, through OC's website at www.owenscorning.com. Copies of OC's Annual
Report on Form 10-K for the year ended December 31, 2002, may also be obtained
by sending a written request in accordance with the directions set forth in
Appendix D.
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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:
- 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.
- 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
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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
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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
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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).
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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
Engineered Yarns America, Inc.
Falcon Foam Corporation
Integrex
Fibreboard Corporation
Exterior Systems, Inc.
Integrex Ventures LLC
Integrex Professional Services LLC
Integrex Supply Chain Solutions LLC
Integrex Testing Systems LLC
HOMExperts LLC
Jefferson Holdings, Inc.
Owens-Corning Fiberglas Technology Inc.
Owens Corning HT, Inc.
Owens-Corning Overseas Holdings, Inc.
Owens Corning Remodeling Systems, LLC
Soltech, Inc.
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
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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
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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:
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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
ASBESTOS PERSONAL INJURY CLAIMS VALUATION CONSULTANTS TO
THE DEBTORS:
Thomas E. Vasquez, Ph.D.
ARPC
420 Lexington Ave.
Suite 1840
New York, NY 10170
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
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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
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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
ASBESTOS PERSONAL INJURY CLAIMS VALUATION CONSULTANTS UNSECURED
CREDITORS' COMMITTEE:
CHAMBERS ASSOCIATES, INC.
805 15th Street, N.W. - Suite 500
Washington, D.C. 20005
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
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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
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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
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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 AND ASBESTOS PERSONAL INJURY CLAIMS VALUATION
CONSULTANTS FOR THE ASBESTOS CLAIMANTS' COMMITTEE:
L. TERSIGNI CONSULTING, P.C.
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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
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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
ASBESTOS PERSONAL INJURY CLAIMS VALUATION CONSULTANTS FOR THE FUTURE
CLAIMANTS' REPRESENTATIVE:
HAMILTON, RABINOVITZ & ALSCHULER, INC.
Francine Rabinovitz, Executive Vice President
6033 West Century Blvd., Suite 890
Los Angeles, California 90045
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. Section
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
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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:
- 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;
- the payment of certain pre-petition import obligations (including
customs duties, freight, trucking charges and brokerage fees),
shipping charges and related possessory liens;
- the payment of certain miscellaneous contractors in satisfaction of
perfected or potential mechanics', materialmen's or similar liens;
- 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;
- the payment of certain pre-petition tax claims;
- 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;
- the payment of certain critical pre-petition trade vendors' claims;
- the joint administration of each of the Debtors' bankruptcy cases;
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- 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
- 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. Sections 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
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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.
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(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
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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
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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. Section 364(c)(1) and Granting Relief from the Automatic Stay
Pursuant to 11 U.S.C. Section 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.
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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 $90 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
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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. Sections 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
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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. Section 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.
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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. Sections 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
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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.
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(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. Sections 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. Section 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.
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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."
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(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'
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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
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
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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 with one such liquidator that is contingent on
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
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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'
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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.
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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 a hearing on the Substantive Consolidation Motion, as
part of the proceedings concerning confirmation of the Plan, which began on
April 8, 2003, and concluded on May 2, 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.
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The hearing on the Substantive Consolidation Motion was 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,
for which no hearing is currently scheduled, was to include the taking of
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.
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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").
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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.
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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.
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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. The
proposed Disclosure Statement was filed on March 28, 2003.
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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. Section 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.
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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 eleven omnibus objections to claims, which have objected to
approximately 1200 Claims, and which seek to disallow or expunge approximately
$1.3 billion 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.
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- 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: $6 million
- Class 3: $18.0 million to $18.5 million
- Class 4: $1,480 million to $1,577 million
- Class 5: $1,335 million
- Class 6: $375 million to $741 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
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- Class 9 $2 million to $7 million
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.
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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.
On remand, the Bankruptcy Court directed the parties to file
supplemental briefs and, following a hearing on April 8, 2003, the Court entered
an Order for the Appointment of an Examiner. The Order directed the United
States Trustee to appoint, subject to the Court's approval, one disinterested
person to serve as an examiner and further ordered that "the examiner is not to
perform any task or take up any duty or in any way perform any work or incur
cost to the estate without further order of the Court." On May 2, 2003, Plant
appealed the order appointing an examiner and on May 5, 2003, Shirley Gore
appealed the order. The Debtors and the Futures Claimants' Representative are
opposing the appeal.
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
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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.
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(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
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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.
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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.
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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. Sections 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. Section 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 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
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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
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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. Section 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
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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.
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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
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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
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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.
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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
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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.
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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.
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(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.
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(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
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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.
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 at least ten (10) Business
Days prior to the date the Disclosure Statement is approved 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.
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1. COMPOSITION OF THE BOARD OF DIRECTORS AS OF DATE OF DISCLOSURE
STATEMENT
The following is a list, as of May 23, 2003, of the names of each of
the Directors of OCD [THE DATE, LIST AND BIOGRAPHIES CONTAINED IN THIS SECTION
WILL BE UPDATED UP TO FIVE (5) BUSINESS DAYS PRIOR TO THE DISCLOSURE STATEMENT
HEARING AND THEREAFTER, WITH THE PERMISSION OF THE BANKRUPTCY COURT].
<Table>
<Caption>
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
Michael H. Thaman Director, Chairman of the Board and Chief Financial
Officer
</Table>
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
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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
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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 Thunderbird
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.
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 May 23, 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
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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].
<Table>
<Caption>
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
Michael H. Thaman Chief Financial Officer
</Table>
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.
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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.
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. In conformity with the requirements of Section 1129 of the Bankruptcy
Code. the identities of the initial Board of Directors will be disclosed prior
to confirmation of the Plan. The Plan Proponents will make this disclosure in a
supplemental schedule to be filed at least ten (10) Business Days prior to the
Objection Deadline.
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
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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 ten (10) 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").
<Table>
<Caption>
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 POSITION(4) YEAR ($) ($) ($)(5) ($)(6) SARS(#)(7) ($) ($)(8)
- --------------------- ---- ------ ----- ------------ ---------- ---------- ------- ------------
</Table>
- ----------
(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
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<Table>
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 and 2001 425,000 1,175,000 517,800
Chief Financial Officer 2000 362,500 404,500 261,900
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 and 2001 350,000 750,000 335,100
Chief Supply Chain and 2000 245,000 286,000 168,100
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 Systems 2000 220,000 140,000 113,400
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
</Table>
- ----------
(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:
<Table>
<Caption>
PERCENTAGE OF EMERGENCE
DATE OF EMERGENCE AMOUNT
-------------------------- ----------------------------
December 31, 2001 125%
June 30, 2002 100%
December 31, 2002 90%
</Table>
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<Table>
June 30, 2003 80%
December 31, 2003 70%
June 30, 2004 60%
December 31, 2004 50%
Thereafter 0%
</Table>
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
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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
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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
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(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, as well
as OC's Quarterly Report on Form 10-Q for the year ended March 31, 2003, 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. OC's
Annual Report on Form 10-K for the year ended December 31, 2002, may also be
obtained by sending a written request. SEE directions for obtaining this
document in Appendix D. 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
PROJECTIONS ARE COMPLETED AND INSERTED INTO THIS DISCLOSURE STATEMENT WHICH
SHALL BE AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE APPROVAL OF THE 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, WHICH SHALL BE AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE APPROVAL
OF THE DISCLOSURE STATEMENT],
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(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, WHICH SHALL BE AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE APPROVAL
OF THE DISCLOSURE STATEMENT].
(iv) REVENUES. [THIS INFORMATION WILL BE INSERTED WHEN THE
FINANCIAL PROJECTIONS ARE COMPLETED AND INSERTED INTO THIS DISCLOSURE STATEMENT,
WHICH SHALL BE AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE APPROVAL OF THE
DISCLOSURE STATEMENT].
(v) OPERATING EXPENSES. [THIS INFORMATION WILL BE INSERTED
WHEN THE FINANCIAL PROJECTIONS ARE COMPLETED AND INSERTED INTO THIS DISCLOSURE
STATEMENT, WHICH SHALL BE AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE APPROVAL
OF THE DISCLOSURE STATEMENT].
(vi) SELLING, GENERAL & ADMINISTRATIVE COSTS. [THIS
INFORMATION WILL BE INSERTED WHEN THE FINANCIAL PROJECTIONS ARE COMPLETED AND
INSERTED INTO THIS DISCLOSURE STATEMENT, WHICH SHALL BE AT LEAST TEN (10)
BUSINESS DAYS PRIOR TO THE APPROVAL OF THE DISCLOSURE STATEMENT].
(vii) CORPORATE EXPENSE. [THIS INFORMATION WILL BE INSERTED
WHEN THE FINANCIAL PROJECTIONS ARE COMPLETED AND INSERTED INTO THIS DISCLOSURE
STATEMENT, WHICH SHALL BE AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE APPROVAL
OF THE 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
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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, WHICH SHALL BE AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE APPROVAL
OF THE DISCLOSURE STATEMENT].
(xii) ACQUISITIONS. [THIS INFORMATION WILL BE INSERTED WHEN THE
FINANCIAL PROJECTIONS ARE COMPLETED AND INSERTED INTO THIS DISCLOSURE STATEMENT,
WHICH SHALL BE AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE APPROVAL OF THE
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.
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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
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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
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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 at least ten (10) Business Days prior to the approval
of the Disclosure Statement 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").
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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
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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. Since the Combined Distribution Package and the
Combined Net Distribution Package already include the value of these non-Debtor
Subsidiaries, no amendment to the Plan (other than revising the list of
Subsidiary Debtors) would result from such filing.
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
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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
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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."
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(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 and Cure amounts)
will be approximately $46 million as of the Effective Date, of which $25 million
is estimated to be professional fees, $20 million is estimated to be Cure
amounts, and $1 million miscellaneous other Claims.
(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
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approximately $246 million and $294 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
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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 approximately $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 $6 million. Class 2B Claims are Unimpaired
and holders of the Claims
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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
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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.
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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:
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(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
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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 $1,335 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 $375 million and $741 million.
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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. On January 7, 2003, the
Debtors filed a motion for an order establishing case management procedures for
asbestos-related property damage claims requesting that property damage
claimants be required to provide the Debtors with basic supporting evidence to
enable the Debtors to value their claims. On March 31, 2003, the Court entered
an Order Establishing Case Management Procedures for Asbestos-Related Property
Damage Claims (the "Asbestos-Related Property Damage Case Management Order")
which provides, in part, that each holder of an OC Asbestos Property Damage
Claim is required to provide the Debtors with certain supporting evidence within
120 days of the date of the Order to enable the Debtors to value their claims.
Based on a review of their records, the Debtors believes
that the number and value of these claims are 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.
Given the lack of information on these claims at this
time, the Debtors cannot estimate the likely amount of Allowed OC Asbestos
Property Damage Claims with certainty, but believe that such claims will likely
be allowed in the aggregate range between $1 million and $5 million. THIS
ESTIMATED AMOUNT MAY BE REVISED BASED ON THE DEBTORS' ANALYSIS OF THE
INFORMATION PROVIDED PURSUANT TO THE ASBESTOS-RELATED PROPERTY DAMAGE CASE
MANAGEMENT ORDER.
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
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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.
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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.
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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.
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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.
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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).
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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 ten (10) 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. On March 31, 2003, the Court entered Asbestos-Related
Property Damage Case Management Order which provides, in part, that each holder
of an FB Asbestos Property Damage Claim is required to provide the Debtors with
certain supporting evidence within 120 days of the date of the Order to enable
the Debtors to value their claims.
Based on a review of its records, Fibreboard believes
that the number and value of these claims are 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.
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Given the lack of information on these claims at this
time, the Debtors cannot estimate the likely amount of Allowed FB Asbestos
Property Damage Claims with certainty, but believe that such claims will likely
be allowed in the aggregate range between $2 million and $7 million. THIS
ESTIMATED AMOUNT MAY BE REVISED BASED ON THE DEBTORS' ANALYSIS OF THE
INFORMATION PROVIDED PURSUANT TO THE ASBESTOS-RELATED PROPERTY DAMAGE CASE
MANAGEMENT ORDER. The Debtors believe that FB has insurance coverage sufficient
to pay FB Asbestos Property Damage Claims.
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 or a non-Debtor
Subsidiary against a Debtor, but excluding the Claims set forth on SCHEDULE XIV
to the Plan, as it may be filed or amended at least ten (10) 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 ten (10) 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; (ii) all MIPS Interests; and (iii) 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,
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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 on the Effective Date to fund the cash component of
distributions under the Plan has been estimated at $302 million. 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."
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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 the Disclosure Statement and assuming that
the Effective Date will occur on December 31, 2003, the Debtors expect that
approximately $302 million of cash will be Available Cash for distribution in
accordance with the provision of the Plan (such estimate has been utilized for
purposes of calculating estimated recoveries). This estimate of Available Cash
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assumes cash of $772 million as of the Effective Date and excludes (i) a reserve
of $400 million for working capital and pension contribution purposes, and (ii)
$70 million in the aggregate for distributions to holders of Unclassified
Claims, Unimpaired Claims and Allowed Class 3 Claims.
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. 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,
excpected to be no less than five years and no more than 10 years, with no
sinking fund or other required 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
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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 will receive a proportionate interest in Litigation Trust
Recoveries, if any. 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, 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
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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
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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
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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. A "PRE-PETITION INDENTURE
TRUSTEE" means collectively, the Persons serving from time to time as trustees
or paying agents under the Pre-petition Bond Indentures, pursuant to the terms
of the applicable Pre-Petition Bond Indentures and the Persons serving from time
to time as trustees under any prepetition industrial revenue bonds. 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
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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 or prepetition industrial revenue
bonds, each holder of an Allowed Claim evidenced by a Pre-petition Bond or
prepetition industrial revenue bond shall tender such Pre-petition Bond or
prepetition industrial revenue 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 or prepetition industrial
revenue bonds will be effected, and risk of loss and title thereto will pass,
only upon the proper delivery of such Pre-petition Bonds or prepetition
industrial revenue 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 or prepetition industrial revenue
bonds to act and the authenticity of any signatures required on the letter of
transmittal. All surrendered Pre-petition Bonds or prepetition industrial
revenue 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 or
Prepetition Industrial Revenue 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 or prepetition industrial revenue bond that has been lost, stolen,
mutilated or destroyed shall, in lieu of surrendering the Pre-petition Bond or
prepetition industrial revenue 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
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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
or prepetition industrial revenue bond.
(iii) Failure to Surrender Cancelled Pre-petition Bonds
or Prepetition Industrial Revenue Bonds
Any holder of a Pre-petition Bond or prepetition
industrial revenue bond that fails to surrender or be deemed to have surrendered
such Pre-petition Bond or prepetition industrial revenue bond before the first
(1st) anniversary of the Effective Date shall have its Claim for a distribution
on account of such Pre-petition Bond or prepetition industrial revenue 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 or
Prepetition Industrial Revenue 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 or
prepetition industrial revenue bond is received by the appropriate Pre-petition
Indenture Trustee, or the unavailability of such Pre-petition Bond or
prepetition industrial revenue 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
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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 ten (10) 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
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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 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
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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.
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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 ten
(10) 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,
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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.
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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.
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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.
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(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.
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(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.
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(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.
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(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 ten
(10) 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
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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
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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:
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(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.
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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
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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 ten (10) 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 ten (10) Business
Days prior to the approval of the Disclosure Statement, as it may be amended up
to ten (10) 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
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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,
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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.
Section 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.
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"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:
<Table>
<Caption>
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
</Table>
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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.
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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 and Class 6, 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 ten (10) Business Days prior to the Objection Deadline.
5. ADMINISTRATIVE CLAIMS BAR DATE
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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
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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
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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 ten (10) Business Days prior to the Objection
Deadline; (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
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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 ten (10) 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, liquidators of insolvent insurance
companies, and state guaranty associations, including, without limitation, those
insurance companies, liquidators, and guaranty associations to the extent set
forth in SCHEDULE VII, to be filed no later than five (5) Business Days prior to
the Disclosure Statement Hearing, as it may be amended up to ten (10) 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, liquidator, or guaranty association 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 or other 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 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
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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
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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,
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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;
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(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
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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 at least ten (10) days prior to the date the Disclosure Statement is
approved and will be described in an amendment to the Plan.
VIII. THE ASBESTOS PERSONAL INJURY TRUST
The following summarizes the terms of the governing documents for the
Asbestos Personal Injury Trust. These documents consist of the Asbestos Personal
Injury Trust Agreement and the Asbestos Personal Injury Trust Distribution
Procedures. The following is intended only to be a summary and is qualified in
its entirety by reference to the full text of such documents. In the event of
any inconsistency between the provisions of these documents and the summary
contained herein, the terms of such documents will control. Interested parties
should therefore review the Asbestos Personal Injury Trust Agreement and the
Asbestos Personal Injury Trust Distribution Procedures, copies of which are
attached to the Plan as Exhibits D and D-1, respectively.
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[THE ATTACHED ASBESTOS PERSONAL INJURY TRUST AGREEMENT AND ASBESTOS
PERSONAL INJURY TRUST DISTRIBUTION PROCEDURES ARE IN DRAFT FORM AND ARE NOT
COMPLETE. THEY ARE IN THE PROCESS OF BEING REVIEWED BY THE ASBESTOS CLAIMANTS'
COMMITTEE AND THE FUTURE CLAIMANTS' REPRESENTATIVE, AND HAVE NOT BEEN APPROVED
BY EITHER OF THEM OR BY THE DEBTORS. ALL RIGHTS WITH RESPECT TO THESE DOCUMENTS
AND EACH OF THE PROVISIONS THEREOF ARE FULLY RESERVED.]
A. GENERAL DESCRIPTION OF THE ASBESTOS PERSONAL INJURY TRUST
1. PURPOSES OF THE PI TRUST
The Asbestos Personal Injury Trust will be established pursuant to the
Asbestos Personal Injury Trust Agreement. The purposes of the Asbestos Personal
Injury Trust are (a) to assume all liabilities of the Debtors, their successors
in interest, and certain of their Affiliates with respect to OC and Fibreboard
Asbestos Personal Injury Claims; (b) to use its assets and income to pay holders
of valid OC and Fibreboard Asbestos Personal Injury Claims in accordance with
the Asbestos Personal Injury Trust Distribution Procedures in such a way that
such holders are treated fairly, equitably and reasonably in light of the
limited assets available to satisfy such claims; and (c) to comply in all
respects with the requirements for the Asbestos Personal Injury Trust that are
described in section 524(g)(2)(B)(i) of the Bankruptcy Code.
2. THE TRUSTEES
The individuals who will serve as The initial Trustees of the Asbestos
Personal Injury Trust will be identified, and a complete biography for each
initial Trustee will be provided, to the Bankruptcy Court prior to the
Confirmation Hearing. The Trustees will serve staggered initial terms of five
(5), four (4) and three (3) years from the effective date of the Asbestos
Personal Injury Trust Agreement. Thereafter each Trustee will serve a five-year
term.
Each Trustee will serve until the end of the Trustee's term, his or
her death, resignation or removal, or the termination of the Asbestos Personal
Injury Trust. Any Trustee may be removed by the unanimous vote of the remaining
Trustees and with the approval of the Bankruptcy Court, in the event he or she
becomes unable to discharge his or her duties due to accident or physical or
mental deterioration, or for good cause, including any substantial failure to
comply with the general administration provisions of the Asbestos Personal
Injury Trust Agreement. In the event of a vacancy in a Trustee position, the
remaining Trustees will consult with the Trust Advisory Committee and the Future
Claimants' Representative concerning appointment of a successor Trustee. The
vacancy will be filled by the unanimous vote of the remaining Trustees unless a
majority of the TAC or the Future Claimants' Representative vetoes the
appointment. In that event, the Bankruptcy Court will make the appointment.
Each Trustee will be entitled to receive annual compensation for his
or her service, which compensation will be disclosed to the Bankruptcy Court
prior to the Confirmation Hearing, plus a per diem allowance for meetings
attended and out-of-pocket costs and expenses.
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The Trustees' annual and per diem compensation will be reviewed every three
years and appropriately adjusted with the approval of the Bankruptcy Court.
The Trustees may sit on the Board of Directors of the Reorganized
Debtors, but they will not receive additional compensation for their service on
such board over and above the compensation they receive as Trustees. The
Trustees will receive from the Asbestos Personal Injury Trust, however, the same
per diem allowance as the Reorganized Debtors pay their directors for attendance
at meetings. Subject to a number of limitations set forth in the Asbestos
Personal Injury Trust Agreement, the Trustees have the power to take any and all
actions that are necessary to fulfill the purposes of the Asbestos Personal
Injury Trust and need not obtain Bankruptcy Court approval to do so.
3. THE TRUST ADVISORY COMMITTEE
The Asbestos Personal Injury Trust Agreement provides for the
establishment of a Trust Advisory Committee. The initial members of the TAC will
be identified, and a complete biography for each such initial member will be
provided, to the Bankruptcy Court prior to the Confirmation Hearing. The members
of the TAC will serve until his or her death, resignation or removal, or the
termination of the Asbestos Personal Injury Trust. Any TAC member may be removed
by the remaining TAC members with the approval of the Bankruptcy Court in the
event he or she becomes unable to discharge his or her duties due to accident or
physical or mental deterioration, or for good cause, including any substantial
failure to comply with the general administration provisions of the Asbestos
Personal Injury Trust Agreement.
In the event of a vacancy caused by the resignation of a TAC member,
his or her successor will be selected by the TAC member who is resigning, unless
the remaining members unanimously veto the selection, in which case, the
successor will be selected by a unanimous vote of the remaining members. If the
remaining members cannot unanimously agree, the Bankruptcy Court will appoint
the successor. In the event of a vacancy caused by removal or death of a TAC
member, or in the event that a resigning member or retiring member does not name
his or her successor, the remaining members of the TAC by unanimous vote will
name the successor. If the remaining members of the TAC cannot reach unanimous
agreement, the Bankruptcy Court will appoint the successor.
The Trustees are required to consult with the TAC on the appointment
of successor Trustees, the general implementation and administration of the
Asbestos Personal Injury Trust and the Asbestos Personal Injury Trust
Distribution Procedures, and on various other matters required by the Asbestos
Personal Injury Trust Agreement. The Trustees must also obtain the consent of a
majority of TAC members on a variety of matters, including material amendments
to the Asbestos Personal Injury Trust Agreement and the Asbestos Personal Injury
Trust Distribution Procedures, merger or participation with other claims
resolution facilities, and termination of the Asbestos Personal Injury Trust
under certain conditions specified in the Asbestos Personal Injury Trust
Agreement.
The members of the TAC will be entitled to receive compensation from
the Asbestos Personal Injury Trust for their services as TAC members in the form
of a per diem allowance for attendance at meetings or other conduct of Asbestos
Personal Injury Trust business
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in the same amount as the per diem paid the Trustees for carrying out Asbestos
Personal Injury Trust business. The members of the TAC will also be reimbursed
promptly for all reasonable out-of-pocket costs and expenses incurred in
connection with the performance of their duties hereunder.
4. THE FUTURE CLAIMANTS' REPRESENTATIVE
The Asbestos Personal Injury Trust Agreement provides for the
appointment of a Future Claimants' Representative, James J. McMonagle, Esq., who
will serve in a fiduciary capacity, representing the interests of the holders of
Demands against the Asbestos Personal Injury Trust for the purposes of
protecting the rights of such persons.
The Future Claimants' Representative will serve until his death,
resignation or removal, or the termination of the Asbestos Personal Injury
Trust. The Future Claimants' Representative may resign at any time by written
notice to the Trustees and may be removed by the Bankruptcy Court in the event
he becomes unable to discharge his duties due to accident or physical or mental
deterioration, or for good cause, including any substantial failure to comply
with the general administration provisions of the Asbestos Personal Injury Trust
Agreement.
A vacancy in the position of Future Claimants' Representative caused
by resignation will be filled by an individual nominated prior to the effective
date of the resignation by the resigning Future Claimants' Representative. A
vacancy caused by death or removal of the Future Claimants' Representative will
be filled by an individual nominated by the Trustees, the TAC, or both. In any
case, the nominee will be subject to the approval of the Bankruptcy Court.
The Trustees are required to consult with the Future Claimants'
Representative on the appointment of successor Trustees, the general
implementation and administration of the Asbestos Personal Injury Trust and the
Asbestos Personal Injury Trust Distribution Procedures, and on various other
matters required by the Asbestos Personal Injury Trust Agreement. The Trustees
must also obtain the consent of the Future Claimants' Representative on a
variety of matters, including material amendments to the Asbestos Personal
Injury Trust Agreement and the Asbestos Personal Injury Trust Distribution
Procedures, merger or participation with other claims resolution facilities, and
termination of the Asbestos Personal Injury Trust under certain conditions
specified in the Asbestos Personal Injury Trust Agreement.
The Future Claimants' Representative will be entitled to receive
compensation from the Asbestos Personal Injury Trust in the form of payment at
the Future Claimants' Representative's normal hourly rate for services performed
and will be reimbursed by the Asbestos Personal Injury Trust for all reasonable
out-of-pocket costs and expenses incurred by the Future Claimants'
Representative in connection with the performance of his duties hereunder.
5. TRANSFER OF ASSETS TO THE PI TRUST
On the Effective Date and on the Final Distribution Date, or as soon
thereafter as is practicable, the Asbestos Personal Injury Trust will receive
the consideration described in Section 10.3 of the Plan.
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6. ESTABLISHMENT OF THE OC SUB-ACCOUNT AND THE FIBREBOARD SUB-ACCOUNT
On the Effective Date or as soon thereafter as is practicable, the
Asbestos Personal Injury Trust will establish two Sub-Accounts, the OC
Sub-Account and the Fibreboard Sub-Account, and will transfer to the OC
Sub-Account the consideration described in Section 10.3(a) of the Plan, and will
transfer to the Fibreboard Sub-Account the consideration described in
Section 10.3(b) of the Plan.
All OC Asbestos Personal Injury Claims (which includes OC Indirect
Asbestos Personal Injury Claims and Unpaid OC Resolved Asbestos Personal Injury
Claims) and all OC Resolved Asbestos Personal Injury Claims shall be payable
from the assets of the OC Sub-Account. All Fibreboard Asbestos Personal Injury
Claims (which include Fibreboard Indirect Asbestos Personal Injury Claims and
Unpaid Fibreboard Resolved Asbestos Personal Injury Claims) and all Fibreboard
Resolved Asbestos Personal Injury Claims shall be payable from the assets of the
Fibreboard Sub-Account. In all cases, such payments shall be made pursuant to
the terms of the Asbestos Personal Injury Trust Distribution Procedures.
7. ASBESTOS PERSONAL INJURY TRUST TERMINATION PROVISIONS
The Asbestos Personal Injury Trust is irrevocable, but will terminate
ninety (90) days after the first to occur of any of the following events:
- the Trustees decide to terminate the Asbestos Personal Injury Trust
because (a) they deem it unlikely that new asbestos claims will be
filed against the Asbestos Personal Injury Trust, (b) all OC and
Fibreboard 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 (c) twelve (12)
consecutive months have elapsed during which no new asbestos claim has
been filed with the Asbestos Personal Injury Trust; or
- if the Trustees have procured and have in place irrevocable insurance
policies and have established claims handling agreements and other
necessary arrangements with suitable third parties adequate to
discharge all expected remaining obligations and expenses of the
Asbestos Personal Injury Trust in a manner consistent with this
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
- to the extent that any rule against perpetuities will be deemed
applicable to the Asbestos Personal Injury Trust, twenty-one (21)
years less ninety-one (91) days pass after the death of the last
survivor of all of the descendents of the late Joseph P. Kennedy, Sr.,
father of the late President John F. Kennedy, living on the date
hereof.
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On the termination date, after payment of all the Asbestos Personal
Injury Trust's liabilities have been provided for, all monies remaining in the
Asbestos Personal Injury Trust estate will be given to such organization(s)
exempt from federal income tax under section 501(c)(3) of the Internal Revenue
Code, which tax-exempt organization(s) will be selected by the Trustees using
their reasonable discretion; provided, however, that (i) if practicable, the
activities of the selected tax-exempt organization(s) will be related to the
treatment of, research on, or the relief of suffering of individuals suffering
from asbestos-related lung disorders, and (ii) the tax-exempt organization(s)
will not bear any relationship to Reorganized Debtors within the meaning of
section 468(d)(3) of the Internal Revenue Code. The Plan Proponents believe that
the likelihood of any monies remaining in the Asbestos Personal Injury Trust
after the Asbestos Personal Injury Trust terminates is extremely remote.
8. AMENDMENT OF THE ASBESTOS PERSONAL INJURY TRUST DOCUMENTS
The Trustees, subject to the TAC's and the Future Claimants'
Representative's consent, may modify or amend certain provisions of the Asbestos
Personal Injury Trust Agreement or any document annexed thereto. However, the
Asbestos Personal Injury Trust provisions may not be modified or amended in any
way that could jeopardize, impair, or modify the applicability of section 524(g)
of the Bankruptcy Code, the efficacy or enforceability of the injunction entered
thereunder, or the Asbestos Personal Injury Trust's qualified settlement fund
status under Section 468B of the Internal Revenue Code.
B. ASBESTOS PERSONAL INJURY CLAIMS RESOLUTION AND DISTRIBUTION PROCEDURES
1. ASBESTOS PERSONAL INJURY TRUST GOALS
The Trustees will implement and administer the Asbestos Personal
Injury Trust Distribution Procedures, which are attached to the Plan as
Exhibit D-1. These procedures have been adopted after lengthy negotiations
between and among the ACC, the Future Claimants' Representative and the Debtors.
Nothing approaching full payment of all OC and Fibreboard Asbestos Personal
Injury Claims is possible in light of the value of all such claims that could be
filed against the Asbestos Personal Injury Trust, both currently and in the
future, and the value of the Asbestos Personal Injury Trust assets.
The goal of the Asbestos Personal Injury Trust is to treat all
claimants equitably. The Asbestos Personal Injury Trust Distribution Procedures
further that goal by setting forth procedures for processing and paying claims
generally on an impartial, first-in-first-out ("FIFO") basis, with the intention
of paying all claimants over time as equivalent a share as possible of the value
of their claims based on historical values for substantially similar claims in
the tort system.(9)
- ----------
(9) As used in this TDP, the phrase "in the tort system" shall include only
claims asserted by way of litigation and not claims asserted against a
trust established pursuant to section 524(g) and/or section 105 of the
Bankruptcy Code or any other applicable law.
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To this end, the Asbestos Personal Injury Trust Distribution
Procedures establish for both OC Asbestos Personal Injury Claims and Fibreboard
Asbestos Personal Injury Claims a schedule of eight asbestos-related diseases
("Disease Levels"), all of which have presumptive medical and exposure
requirements ("Medical/Exposure Criteria"). The Asbestos Personal Injury Trust
Distribution Procedures also establishes two separate schedules with liquidated
values ("Scheduled Values"), anticipated average values ("Average Values"), and
caps on liquidated values ("Maximum Values") for the various Disease Levels.
These separate schedules or matrices of values are applicable to OC and
Fibreboard Asbestos Personal Injury Claims, respectively.
The Disease Levels, Medical/Exposure Criteria, Scheduled Values,
Average Values and Maximum Values have all been selected and derived with the
intention of achieving a fair allocation of the Asbestos Personal Injury Trust
funds among claimants suffering from different disease processes in light of the
best available information considering the settlement history of OC or
Fibreboard and the rights claimants would have in the tort system absent the
bankruptcy.
A claimant may assert separate claims against the OC Sub-Account and
the Fibreboard Sub-Account based on separate exposures to asbestos or
asbestos-containing products manufactured or distributed by OC and Fibreboard,
respectively ("Multiple Exposure Claims"); however, all such Multiple Exposure
Claims must be filed by the claimant at the same time. To the extent a
Sub-Account has separate liabilities to a claimant based on multiple exposure,
the Sub-Account shall pay the claimant its several share of the liquidated value
of the separate claim or claims for which it is liable, subject to applicable
Payment Percentage, Maximum Annual Payment and Claims Payment Ratio limitations
described below. Under no circumstances, however, shall any claimant receive
more than the full liquidated value of his or her claim.
2. DISEASE LEVELS, SCHEDULED VALUES AND MEDICAL/EXPOSURE CRITERIA SET
FORTH IN THE ASBESTOS PERSONAL INJURY TRUST DISTRIBUTION PROCEDURES
The eight Disease Levels covered by the Asbestos Personal Injury Trust
Distribution Procedures, together with the Medical/Exposure Criteria for each
and the Scheduled Values for the seven Disease Levels eligible for Expedited
Review, are set forth below. These Disease Levels, Scheduled Values, and
Medical/Exposure Criteria will apply to all OC and Fibreboard Asbestos Personal
Injury Trust Voting Claims filed with the Asbestos Personal Injury Trust on or
before the Initial Asbestos Personal Injury Trust's Claims Filing Date (defined
below).
Thereafter, with the consent of the TAC and the Future Claimants'
Representative, the Trustees may add to, change, or eliminate Disease Levels,
Scheduled Values, or Medical/Exposure Criteria; develop subcategories of Disease
Levels, Scheduled Values or Medical/Exposure Criteria; or determine that a novel
or exceptional asbestos personal injury claim is compensable even though it does
not meet the Medical/Exposure Criteria for any of the then current Disease
Levels.
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<Table>
<Caption>
DISEASE LEVEL SCHEDULED VALUE MEDICAL/EXPOSURE CRITERIA
- ------------- --------------- -------------------------
Mesothelioma (Level VIII) [To be provided] (1) Diagnosis of mesothelioma; and (2)
credible evidence of OC or FB Exposure.(10)
Lung Cancer 1 (Level (VII) [To be provided] (1) Diagnosis of a primary lung cancer plus
evidence of an underlying Bilateral
Asbestos-Related Nonmalignant Disease,(11) (2)
six months OC or FB Exposure prior to December
31, 1982, (3) Significant Occupational
Exposure(12) to asbestos, and (4) supporting
medical documentation establishing asbestos
exposure as a contributing factor in causing
the lung cancer in question.
</Table>
- ----------
(10) As defined in the Asbestos Personal Injury Trust Distribution Procedures.
(11) Evidence of "Bilateral Asbestos-Related Nonmalignant Disease" for
purposes of meeting the criteria for establishing Disease Levels I, II,
V, and VII is described in the Asbestos Personal Injury Trust
Distribution Procedures.
(12) As defined in the Asbestos Personal Injury Trust Distribution Procedures.
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<Table>
<Caption>
DISEASE LEVEL SCHEDULED VALUE MEDICAL/EXPOSURE CRITERIA
- ------------- --------------- -------------------------
Lung Cancer 2 (Level VI) None (1) Diagnosis of a primary lung cancer; (2) OC
or FB Exposure prior to December 31, 1982, and
(3) supporting medical documentation
establishing asbestos exposure as a
contributing factor in causing the lung cancer
in question. Lung Cancer 2 (Level VI) claims
are claims that do not meet the more stringent
medical and/or exposure requirements of Lung
Cancer (Level VII) claims. All claims in this
Disease Level will be individually evaluated.
The estimated likely average of the individual
evaluation awards for this category is [To be
provided], with such awards capped at [To be
provided] unless the claim qualifies for
Extraordinary Claim treatment.
Level VI claims that show no evidence of
either an underlying Bilateral Asbestos-Related
Non-malignant Disease or Significant Occupational
Exposure may be individually evaluated, although
it is not expected that such claims will be
treated as having any significant value,
especially if the claimant is also a smoker.(13)
In any event, no presumption of validity will be
available for any claims in this category.
</Table>
- ----------
(13) There is no distinction in the Asbestos Personal Injury Trust
Distribution Procedures between non-smokers and smokers for either Lung
Cancer (Level VII) or Lung Cancer (Level VI), although a claimant who
meets the more stringent requirements of Lung Cancer (Level VII)
(evidence of an underlying Bilateral Asbestos-Related Nonmalignant
Disease plus Significant Occupational Exposure), and who is also a
Non-Smoker, may wish to have his or her claim individually evaluated by
the PI Trust. In such a case, absent circumstances that would otherwise
reduce the value of the claim, it is anticipated that the liquidated
value of the claim might well exceed the [To be provided] Scheduled
Value for Lung Cancer (Level VII) shown above.
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<Table>
<Caption>
DISEASE LEVEL SCHEDULED VALUE MEDICAL/EXPOSURE CRITERIA
- ------------- --------------- -------------------------
Other Cancer (Level V) [To be provided] (1) Diagnosis of a primary colo-rectal,
laryngeal, esophageal, pharyngeal, or stomach
cancer, plus evidence of an underlying
Bilateral Asbestos-Related Nonmalignant
Disease, (2) six months OC or FB Exposure
prior to December 31, 1982, (3) Significant
Occupational Exposure to asbestos, and (4)
supporting medical documentation establishing
asbestos exposure as a contributing factor in
causing the other cancer in question.
Severe Asbestosis (Level IV) [To be provided] (1) Diagnosis of asbestosis with ILO of 2/1 or
greater, or asbestosis determined by
pathological evidence of asbestos, plus (a)
TLC less than 65%, or (b) FVC less than 65%
and FEV1/FVC ratio greater than 65%, (2) six
months OC or FB Exposure prior to December 31,
1982, (3) Significant Occupational Exposure to
asbestos, and (4) supporting medical
documentation establishing asbestos exposure
as a contributing factor in causing the
pulmonary disease in question.
Asbestos/Pleural Disease [To be provided] Diagnosis of asbestosis with ILO of 1/0 or
(Level III) greater or asbestosis determined by pathology,
or bilateral pleural disease of B2 or greater,
plus (a) TLC less than 80%, or (b) FVC less
than 80% and FEV1/FVC ratio greater than or
equal to 65%, and (2) six months OC or FB
Exposure prior to December 31, 1982, (3)
Significant Occupational Exposure to asbestos,
and (4) supporting medical documentation
establishing asbestos exposure as a contributing
factor in causing the pulmonary disease in
question.
Asbestosis/Pleural Disease [To be provided] (1) Diagnosis of a Bilateral Asbestos-Related
(Level II) Nonmalignant Disease, and (2) six months OC or
FB Exposure prior to December 31, 1982, and (3)
five years cumulative occupational exposure to
asbestos.
</Table>
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<Table>
<Caption>
DISEASE LEVEL SCHEDULED VALUE MEDICAL/EXPOSURE CRITERIA
- ------------- --------------- -------------------------
Other Asbestos Disease (Level I - [To be provided] (1) Diagnosis of a Bilateral Asbestos- Related
Cash Discount Payment) Nonmalignant Disease or an asbestos-related
malignancy other than mesothelioma, and (2) OC
or FB Exposure prior to December 31, 1982.
</Table>
3. CLAIMS LIQUIDATION PROCEDURES
OC and Fibreboard Asbestos Personal Injury Claims will be processed
based on their place in the FIFO Processing Queue (defined below) to be
established pursuant to the Asbestos Personal Injury Trust Distribution
Procedures. The Asbestos Personal Injury Trust will liquidate all Asbestos
Personal Injury Claims that meet the presumptive Medical/Exposure Criteria of
Disease Levels I-V, VII and VIII efficiently and expeditiously under the
Expedited Review described below.
Claims involving Disease Levels I-V, VII and VIII that do not meet the
presumptive Medical/Exposure Criteria for the relevant Disease Level may undergo
the Asbestos Personal Injury Trust's Individual Review Process described below.
In such a case, notwithstanding that the claim does not meet the presumptive
Medical/Exposure Criteria for the relevant Disease Level, the Asbestos Personal
Injury Trust can offer the claimant an amount up to the Scheduled Value of that
Disease Level if the Asbestos Personal Injury Trust is satisfied that the
claimant has presented a claim that would be cognizable and valid in the tort
system.
OC and Fibreboard claimants holding claims involving Disease Levels
II-VIII may in addition or alternatively seek to establish a liquidated value
for the claim that is greater than its Scheduled Value by electing the Asbestos
Personal Injury Trust's Individual Review Process. However, the liquidated value
of a more serious Disease Level II-VIII claim that undergoes the Asbestos
Personal Injury Trust's Individual Review Process for valuation purposes may be
determined by the Asbestos Personal Injury Trust to be less than its Scheduled
Value, and in any event may not exceed the Maximum Value for the relevant
Disease Level, unless the claim qualifies as an Extraordinary Claim (defined
below), in which case its liquidated value cannot exceed the Maximum Value
specified in that provision for such claims. Level VI (Lung Cancer 2) claims may
be liquidated only pursuant to the Asbestos Personal Injury Trust's Individual
Review Process.
All unresolved disputes over a claimant's medical condition, exposure
history and/or the liquidated value of the claim will be subject to binding or
non-binding arbitration at the election of the claimant. OC and Fibreboard
Asbestos Personal Injury Claims that are the subject of a dispute with the
Asbestos Personal Injury Trust that cannot be resolved by non-binding
arbitration may enter the tort system. However, if and when a claimant obtains a
judgment in the tort system, the judgment will be payable from the Asbestos
Personal Injury Trust subject to the Payment Percentage, Maximum Available
Payment, and Claims Payment Ratio provisions set forth below.
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4. PAYMENT PERCENTAGE
After the liquidated value of an OC or Fibreboard Asbestos Personal
Injury Claim other than a claim involving Other Asbestos Disease (Disease
Level I - Cash Discount Payment) is determined by the Asbestos Personal Injury
Trust, the claimant will receive a pro-rata share of that value based on a
payment percentage (the "Payment Percentage").
The initial Payment Percentage has been set at ___ percent (___%) (the
"Initial Payment Percentage"), and will apply to all OC and Fibreboard Asbestos
Personal Injury Trust Voting Claims accepted as valid by the Asbestos Personal
Injury Trust, unless adjusted by the Asbestos Personal Injury Trust with the
consent of the TAC and the Future Claimants' Representative. The term "Asbestos
Personal Injury Trust Voting Claims" includes (i) Unpaid OC and Fibreboard
Resolved Asbestos Personal Injury Claims (as defined in the Plan and described);
(ii) claims filed against OC or Fibreboard in the tort system or actually
submitted to OC or Fibreboard pursuant to an administrative settlement agreement
prior to the Petition Date; and (iii) all claims filed against another defendant
in the tort system prior to the date the Plan was filed with the Bankruptcy
Court (the "Plan Filing Date"); provided, however, that the claim described in
subsection (i), (ii) or (iii) above actually voted to accept or reject the Plan
pursuant to the voting procedures established by the Bankruptcy Court, and
provided further that the claim was subsequently filed with the Asbestos
Personal Injury Trust by the Asbestos Personal Injury Trust's Initial Claims
Filing Date (defined below). The Initial Payment Percentage has been calculated
on the assumption that the Average Values will be achieved with respect to
existing present claims and projected future claims involving Disease Levels IV
- - VIII.
The Payment Percentage may be adjusted upwards or downwards from time
to time by the Asbestos Personal Injury Trust with the consent of the TAC and
the Future Claimants' Representative to reflect then-current estimates of the
Asbestos Personal Injury Trust's assets and its liabilities, as well as
then-estimated values of then-pending and future claims. If the Payment
Percentage is increased over time, claimants whose claims were liquidated and
paid in prior periods under the Asbestos Personal Injury Trust Distribution
Procedures will not receive additional payments. Because there is uncertainty in
the prediction of both the number and severity of future claims, and the amount
of the Asbestos Personal Injury Trust's assets, no guarantee can be made of any
Payment Percentage of a Asbestos Personal Injury Claim's liquidated value other
than other than the Initial Payment Percentage of an Asbestos Personal Injury
Trust Voting Claim.
5. MAXIMUM ANNUAL PAYMENT AND MAXIMUM AVAILABLE PAYMENT
The Asbestos Personal Injury Trust will estimate or model the amount
of cash flow anticipated to be necessary over its entire life to ensure that
funds will be available to treat all present and future claimants as similarly
as possible. In each year, the Asbestos Personal Injury Trust will be empowered
to pay out all of the interest earned during the year, together with a portion
of its principal, calculated so that the application of Asbestos Personal Injury
Trust funds over its life will correspond with the needs created by the
anticipated flow of claims (the "Maximum Annual Payment"). The Asbestos Personal
Injury Trust's distributions to all claimants for that year may not exceed the
Maximum Annual Payment determined for that year.
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In distributing the Maximum Annual Payment, the Asbestos Personal
Injury Trust will first allocate the amount in question to outstanding Unpaid OC
and Fibreboard Resolved Asbestos Personal Injury Claims and to liquidated OC and
Fibreboard Asbestos Personal Injury Claims involving Disease Level I (Cash
Discount Payment), in proportion to the aggregate value of each group of claims.
The remaining portion of the Maximum Annual Payment (the "Maximum Available
Payment"), if any, will then be allocated and used to satisfy all other
liquidated OC and Fibreboard Asbestos Personal Injury Claims, subject to the
Claims Payment Ratio (discussed below).
6. CLAIMS PAYMENT RATIO
Based upon OC's and Fibreboard's claims settlement history and
analysis of present and future claims, a Claims Payment Ratio has been
determined which, as of the Effective Date, will be set at ___ percent (___%)
for Category A claims, which consist of OC and Fibreboard Asbestos Personal
Injury Claims involving severe asbestosis and malignancies (Disease Levels IV -
VIII) that were unliquidated as of the Petition Date, and at ___ percent (___%)
for Category B claims, which are OC and Fibreboard Asbestos Personal Injury
Claims involving non-malignant Asbestosis or Pleural Disease (Disease Levels II
and III) that were similarly unliquidated as of the Petition Date. The Claims
Payment Ratio will not apply to any Unpaid OC or Fibreboard Resolved Asbestos
Personal Injury Claims or to any claims for Other Asbestos Disease (Disease
Level I - Cash Discount Payment). In each year, after the determination of the
Maximum Available Payment, ___ percent (___%) of that amount will be available
to pay Category A claims and ___ percent (___%) will be available to pay
Category B claims.
The ___%/____% Claims Payment Ratio will apply to all OC and
Fibreboard Asbestos Personal Injury Trust Voting Claims and will not be amended
until the fifth anniversary of the Effective Date. Thereafter, the Claims
Payment Ratio will be continued absent circumstances, such as a significant
change in law or medicine, necessitating an amendment to avoid a manifest
injustice.
In any event, no amendment to the Claims Payment Ratio may be made
without the consent of the TAC and the Future Claimants' Representative.
However, the Trustees, with the consent of the TAC and the Future Claimants'
Representative, may offer the option of a reduced Payment Percentage to holders
of claims in either Category A or Category B in return for prompter payment (the
"Reduced Payment Option").
7. INDEMNITY AND CONTRIBUTION CLAIMS
OC and Fibreboard Indirect Asbestos Personal Injury Claims for
indemnity and contribution, if any, will be subject to the same categorization,
evaluation, and payment provisions of these Asbestos Personal Injury Trust
Distribution Procedures as all other OC and Fibreboard Asbestos Personal Injury
Claims.
8. ORDERING OF CLAIMS
The Asbestos Personal Injury Trust will order claims that are
sufficiently complete to be reviewed for processing purposes on a FIFO basis
except as otherwise provided
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herein (the "FIFO Processing Queue"). For all claims filed on or before the date
six months after the Effective Date (the "Initial Asbestos Personal Injury
Claims Filing Date"), a claimant's position in the FIFO Processing Queue will be
determined as of the earlier of (i) the date prior to the Petition Date (if any)
that the specific claim was either filed against OC or Fibreboard in the tort
system or was actually submitted to OC or Fibreboard pursuant to an
administrative settlement agreement; (ii) the date before the Petition Date that
a claim was filed against another defendant in the tort system if at the time
the claim was subject to a tolling agreement with OC or Fibreboard; (iii) the
date after the Petition Date (if any) but before the Effective Date that the
claim was filed against another defendant in the tort system; (iv) the date the
claimant filed a ballot in the Bankruptcy Court pursuant to the voting
procedures approved by the Court in this Chapter 11 proceeding; or (v) the date
after the Effective Date but on or before the Initial Asbestos Personal Injury
Claims Filing Date that the claim was filed with the Asbestos Personal Injury
Trust.
Following the Initial Asbestos Personal Injury Claims Filing Date, the
claimant's position in the FIFO Processing Queue will be determined by the date
the claim was filed with the Asbestos Personal Injury Trust.
9. EFFECT OF STATUTES OF LIMITATIONS AND REPOSE
To be eligible for a place in the FIFO Processing Queue, a claim must
meet either (i) for claims first filed in the tort system against OC or
Fibreboard prior to the Petition Date, the applicable federal, state and foreign
statute of limitation and repose that was in effect at the time of the filing of
the claim in the tort system, or (ii) for claims not filed against OC or
Fibreboard in the tort system prior to the Petition Date, the applicable statute
of limitation and repose that was in effect at the time of the filing with the
Asbestos Personal Injury Trust. However, the running of the relevant statute of
limitation will be tolled for purposes of the Asbestos Personal Injury Trust as
of the earliest of (A) the actual filing of the claim against OC or Fibreboard
prior to the Petition Date, whether in the tort system or by submission of the
claim to OC or Fibreboard pursuant to an administrative settlement agreement;
(B) the filing of the claim against another defendant in the tort system prior
to the Petition Date if the claim was tolled against OC or Fibreboard at the
time by an agreement or otherwise; (C) the filing of a claim after the Petition
Date but prior to the Effective Date against another defendant in the tort
system; (D) the filing of the claim for voting purposes in this Chapter 11
proceeding; or (E) the filing of a proof of claim with the requisite supporting
documentation with the Asbestos Personal Injury Trust after the Effective Date.
If an OC or Fibreboard Asbestos Personal Injury Claim meets any of the
tolling provisions described in the preceding sentence and the claim was not
barred by the applicable statute of limitation at the time of the tolling event,
it will be treated by the Asbestos Personal Injury Trust as timely filed if it
is actually filed with the Asbestos Personal Injury Trust within three (3) years
after the Effective Date. In addition, any claims that were first diagnosed
after the Petition Date, irrespective of the application of any relevant statute
of limitation or repose, may be filed with the Asbestos Personal Injury Trust
within three (3) years after the date of diagnosis or within three (3) years
after the Effective Date, whichever occurs later. However, the processing of any
OC or Fibreboard Asbestos Personal Injury Claim by the Asbestos Personal Injury
Trust may be deferred at the election of the claimant.
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10. PAYMENT OF CLAIMS
Asbestos Personal Injury Claims that have been liquidated by the
Expedited Review (described below), by arbitration or by litigation in the tort
system, will be paid in FIFO order based on the date their liquidation became
final (the "FIFO Payment Queue").
11. RESOLUTION OF UNPAID OC AND FIBREBOARD RESOLVED ASBESTOS PERSONAL
INJURY CLAIMS
As soon as practicable after the Effective Date, the Asbestos Personal
Injury Trust will pay, upon submission by the claimant of the applicable
Asbestos Personal Injury Trust proof of claim form (included in Attachment B to
the Asbestos Personal Injury Trust Distribution Procedures) together with all
documentation required thereunder, all Unpaid OC and Fibreboard Resolved
Asbestos Personal Injury Claims as defined in the Plan.
The liquidated value of an Unpaid OC or Fibreboard Resolved Asbestos
Personal Injury Claims will not include any punitive or exemplary damages. In
the absence of a Final Order of the Bankruptcy Court determining whether an OC
or Fibreboard Asbestos Personal Injury Claim is an Unpaid OC or Fibreboard
Resolved Asbestos Personal Injury Claim, a dispute between the claimant and the
Asbestos Personal Injury Trust over this issue will be resolved pursuant to the
same procedures that are provided in the Asbestos Personal Injury Trust
Distribution Procedures for resolving the validity and/or liquidated value of an
OC or Fibreboard Asbestos Personal Injury Claim.
Unpaid OC and Fibreboard Resolved Asbestos Personal Injury Claims will
be processed and paid by the Asbestos Personal Injury Trust in accordance with
their order in a separate FIFO queue to be established by the Asbestos Personal
Injury Trust based on the date the Asbestos Personal Injury Trust received a
completed proof of claim form with all required documentation for the particular
claim; provided, however, the amounts payable with respect to such claims will
not be subject to or taken into account in consideration of the Claims Payment
Ratio, but will be subject to the Maximum Annual Payment and Payment Percentage
provisions set forth above.
12. RESOLUTION OF UNRESOLVED OC AND FIBREBOARD ASBESTOS PERSONAL INJURY
CLAIMS
Within six months after the establishment of the Asbestos Personal
Injury Trust, the Trustees, with the consent of the TAC and the Future
Claimants' Representative, are required to adopt procedures for reviewing and
liquidating all unresolved Asbestos Personal Injury Claims, which will include
deadlines for processing such claims. Such procedures will also require that
claimants seeking resolution of unresolved Asbestos Personal Injury Claims must
first file a proof of claim form, together with the required supporting
documentation. It is anticipated that the Asbestos Personal Injury Trust will
provide an initial response to the claimant within six months of receiving the
proof of claim form.
The proof of claim form will require the claimant to assert his or her
claim for the highest Disease Level for which the claim qualifies at the time of
filing. Irrespective of the Disease Level alleged on the proof of claim form,
all claims will be deemed by the Asbestos
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Personal Injury Trust Distribution Procedures to be a claim for the highest
Disease Level for which the claim qualifies at the time of filing, and all lower
Disease Levels for which the claim may also qualify at the time of filing or in
the future will be treated as subsumed into the higher Disease Level for both
processing and payment purposes.
Upon filing of a valid proof of claim form with the required
supporting documentation, the claimant will be placed in the FIFO Processing
Queue in accordance with the ordering described above, and will advise the
Asbestos Personal Injury Trust whether the claim should be liquidated under the
Asbestos Personal Injury Trust's Expedited Review Process or, in certain
circumstances, the Asbestos Personal Injury Trust's Individual Review Process
(both of which are described below).
13. EXPEDITED REVIEW
The Asbestos Personal Injury Trust's Expedited Review Process
("Expedited Review") is designed primarily to provide an expeditious, efficient
and inexpensive method for liquidating all claims (except those involving Lung
Cancer 2 - Disease Level VI) where the claim can easily be verified by the
Asbestos Personal Injury Trust as meeting the presumptive Medical/Exposure
Criteria for the relevant Disease Level. Expedited Review thus provides
claimants with a substantially less burdensome process for pursuing Asbestos
Personal Injury Claims than does the Individual Review Process. Expedited Review
is also intended to provide qualifying claimants a fixed and certain claims
payment.
Thus, claims that undergo Expedited Review and meet the presumptive
Medical/Exposure Criteria for the relevant Disease Level will be paid the
Scheduled Value for such Disease Level. However, except for claims involving
Other Asbestos Disease (Disease Level I), all claims liquidated by Expedited
Review will be subject to the applicable Payment Percentage, the Maximum
Available Payment, and the Claims Payment Ratio limitations set forth above.
Claimants holding claims that cannot be liquidated by Expedited Review because
they do not meet the presumptive Medical/Exposure Criteria for the relevant
Disease Level may elect the Asbestos Personal Injury Trust's Individual Review
Process.
14. CLAIMS PROCESSING UNDER EXPEDITED REVIEW
All claimants seeking liquidation of their claims pursuant to
Expedited Review must file the Asbestos Personal Injury Trust's proof of claim
form provided in Attachment B to the Asbestos Personal Injury Trust Distribution
Procedures. As a proof of claim form is reached in the FIFO Processing Queue,
the Asbestos Personal Injury Trust will determine whether the claim described
therein meets the Medical/Exposure Criteria for one of the seven Disease Levels
eligible for Expedited Review, and will advise the claimant of its
determination. If a Disease Level is determined, the Asbestos Personal Injury
Trust will tender to the claimant an offer of payment of the Scheduled Value for
the relevant Disease Level multiplied by the applicable Payment Percentage,
together with a form of release approved by the Asbestos Personal Injury Trust.
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15. INDIVIDUAL REVIEW PROCESS
The Asbestos Personal Injury Trust's Individual Review Process
provides a claimant with an opportunity for individual consideration and
evaluation of an OC or Fibreboard Asbestos Personal Injury Claim that fails to
meet the presumptive Medical/Exposure Criteria for Disease Levels I - V, VII and
VIII. In such a case, the Asbestos Personal Injury Trust will either deny the
claim, or, if the Asbestos Personal Injury Trust is satisfied that the claimant
has presented a claim that would be cognizable and valid in the tort system, the
Asbestos Personal Injury Trust can offer the claimant a liquidated value amount
up to the Scheduled Value for that Disease Level, unless the claim qualifies as
an Extraordinary Claim, in which case its liquidated value cannot exceed the
Maximum Value for such a claim.
Claimants holding claims involving Disease Levels II - VIII will also
be eligible to seek Individual Review of the liquidated value of their claims,
as well as of their medical/exposure evidence. The Individual Review Process is
intended to result in payments equal to the full liquidated value for each claim
multiplied by the Payment Percentage; however, the liquidated value of any OC or
Fibreboard Asbestos Personal Injury Claim that undergoes Individual Review may
be determined to be less than the Scheduled Value the claimant would have
received under Expedited Review. Moreover, the liquidated value for a claim
involving Disease Levels II - VIII may not exceed the Maximum Value for the
relevant Disease Level, unless the claim meets the requirements of an
Extraordinary Claim, in which case its liquidated value cannot exceed the
Maximum Value set forth in that provision for such claims. Because the detailed
examination and valuation process pursuant to Individual Review requires
substantial time and effort, claimants electing to undergo the Individual Review
Process will necessarily be paid the liquidated value of their OC or Fibreboard
Asbestos Personal Injury Claims later than would have been the case had the
claimant elected the Expedited Review.
16. VALUATION FACTORS TO BE CONSIDERED IN INDIVIDUAL REVIEW
The Asbestos Personal Injury Trust will liquidate the value of each OC
or Fibreboard Asbestos Personal Injury Claim that undergoes Individual Review
based on the historic liquidated values of other similarly situated claims in
the tort system for the same Disease Level. The Asbestos Personal Injury Trust
will thus take into consideration the factors that affect the severity of
damages and values within the tort system including, but not limited to (i) the
degree to which the characteristics of a claim differ from the presumptive
Medical/Exposure Criteria for the Disease Level in question; (ii) factors such
as the claimant's age, disability, employment status, disruption of household,
family or recreational activities, dependencies, special damages, and pain and
suffering; (iii) evidence that the claimant's damages were (or were not) caused
by asbestos exposure, including exposure to an asbestos-containing product or to
conduct for which OC or Fibreboard has legal responsibility prior to December
31, 1982, (for example, alternative causes, and the strength of documentation of
injuries); (iv) the industry of exposure; and (v) settlements, verdicts and the
claimant's and other law firms' experience in the claimant's jurisdiction for
similarly situated claims.
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17. SCHEDULED, AVERAGE AND MAXIMUM VALUES
The Scheduled, Average and Maximum Values for claims involving Disease
Levels I - VIII are the following:
<Table>
<Caption>
SCHEDULED DISEASE SCHEDULED VALUE AVERAGE VALUE MAXIMUM VALUE
- ----------------- --------------- ------------- -------------
Mesothelioma (Level VIII) [to be provided] [to be provided] [to be provided]
Lung Cancer (Level VII) [to be provided] [to be provided] [to be provided]
Lung Cancer (Level VI) None [to be provided] [to be provided]
Other Cancer (Level V) [to be provided] [to be provided] [to be provided]
Severe Asbestosis (Level IV) [to be provided] [to be provided] [to be provided]
Asbestos/Pleural Disease
Level III [to be provided] [to be provided] [to be provided]
Asbestos/Pleural Disease
Level II [to be provided] [to be provided] [to be provided]
Other Asbestos Disease (Cash
Discount Payment) Level I [to be provided] None None
</Table>
These Scheduled Values, Average Values and Maximum Values will apply
to all OC and Fibreboard Asbestos Personal Injury Trust Voting Claims filed with
the Asbestos Personal Injury Trust on or before the Initial Claims Filing Date.
Thereafter, the Asbestos Personal Injury Trust, with the consent of the TAC and
the Future Claimants' Representative, may change these valuation amounts for
good cause and consistent with other restrictions on the amendment power.
18. EXTRAORDINARY AND/OR EXIGENT HARDSHIP CLAIMS
"Extraordinary Claim" means an OC or Fibreboard Asbestos Personal
Injury Claim that otherwise satisfies the Medical Criteria for Disease Levels IV
- - VIII, and that is held by a claimant whose exposure to asbestos was at least
75% the result of exposure to an asbestos-containing product or to conduct for
which OC or Fibreboard has legal responsibility, and there is little likelihood
of a substantial recovery elsewhere. All such Extraordinary Claims will be
presented for Individual Review and, if valid, will be entitled to an award of
up to a Maximum Value of five (5) times the Scheduled Value for claims
qualifying for Disease Levels I -V, VII and VIII, and five (5) times the Average
Value for claims in Disease Level VI, multiplied by the applicable Payment
Percentage. An Extraordinary Claim, following its liquidation, will be placed in
the FIFO Queue ahead of all other OC and Fibreboard Asbestos Personal Injury
Claims except Exigent Hardship Claims, which will be first in said FIFO Queue,
based on its date of
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liquidation, subject to the Maximum Available Payment and Claims Payment Ratio
described above.
At any time the Asbestos Personal Injury Trust may liquidate and pay
certain OC or Fibreboard Asbestos Personal Injury Claims that qualify as Exigent
Hardship Claims. Such claims may be considered separately by the Asbestos
Personal Injury Trust no matter what the order of processing otherwise would
have been under the Asbestos Personal Injury Trust Distribution Procedures. An
Exigent Hardship Claim, following its liquidation, will be placed first in the
FIFO Payment Queue ahead of all other liquidated OC or Fibreboard Asbestos
Personal Injury Claims, subject to the Maximum Available Payment and Claims
Payment Ratio described above.
An OC or Fibreboard Asbestos Personal Injury Claim will qualify for
payment as an Exigent Hardship Claim if the claim meets the Medical/Exposure
Criteria for Severe Asbestosis (Disease Level IV) or an asbestos-related
malignancy (Disease Levels V-VIII), and the Asbestos Personal Injury Trust, in
its sole discretion, determines (a) that the claimant needs financial assistance
on an immediate basis based on the claimant's expenses and all sources of
available income, and (b) that there is a causal connection between the
claimant's dire financial condition and the claimant's asbestos-related disease.
19. SECONDARY EXPOSURE CLAIMS
If a claimant alleges an asbestos-related disease resulting solely
from exposure to an occupationally exposed person, such as a family member, the
claimant may seek Individual Review of his or her claim. In such a case, the
claimant will be required to establish that the occupationally exposed person
would have met the exposure requirements under the Asbestos Personal Injury
Trust Distribution Procedures that would have been applicable had that person
filed a direct claim against the Asbestos Personal Injury Trust. In addition,
the claimant with secondary exposure must establish that he or she is suffering
from one of the eight Disease Levels above, that his or her own exposure to the
occupationally exposed person occurred within the same time frame as the
occupationally exposed person was exposed to an asbestos-containing product or
to conduct for which OC or Fibreboard has legal responsibility, and that such
secondary exposure was a cause of the claimed disease. The proof of claim form
included in Attachment B to the Asbestos Personal Injury Trust Distribution
Procedures contains an additional section for Secondary Exposure Claims. All
other liquidation and payment rights and limitations under the Asbestos Personal
Injury Trust Distribution Procedures will be applicable to such claims.
20. EVIDENTIARY REQUIREMENTS
(a) MEDICAL EVIDENCE
The Asbestos Personal Injury Trust Distribution Procedures require
that all diagnoses of a Disease Level presented to the Asbestos Personal Injury
Trust be accompanied by either (i) a statement by the physician providing the
diagnosis that at least 10 years have elapsed between the date of first exposure
to asbestos or asbestos-containing products and the diagnosis,
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or (ii) a history of the claimant's exposure sufficient to establish a 10-year
latency period. A finding by a physician after the Petition Date that a
claimant's disease is "consistent with" or "compatible with" asbestosis will not
alone be treated by the Asbestos Personal Injury Trust as a diagnosis.
Except for claims filed against OC or Fibreboard or another asbestos
defendant in the tort system prior to the Petition Date, all diagnoses of a
non-malignant asbestos-related disease (Disease Levels I-IV) submitted to the
Asbestos Personal Injury Trust must be based (i) in the case of a claimant who
was living at the time the claim was filed, upon (A) a physical examination of
the claimant by the physician providing the diagnosis of the asbestos-related
disease; (B) an X-ray reading by a certified B-reader or a CT scan read by a
qualified physician or pathology showing bilateral pleural disease or bilateral
interstitial fibrosis, or (C) pulmonary function testing if the claim involves
Asbestosis/Pleural Disease (Level III) or Severe Asbestosis (Level IV), or (ii)
in the case of a claimant who was deceased at the time the claim was filed, upon
(A) a physical examination of the claimant by the physician providing the
diagnosis of the asbestos-related disease, or (B) pathological evidence of the
non-malignant asbestos-related disease, or (C) an X-ray reading by a certified B
reader or a CT scan read by a qualified physician showing bilateral pleural
disease or bilateral interstitial fibrosis.
Except for claims filed against OC or Fibreboard or another asbestos
defendant in the tort system prior to the Petition Date, diagnoses of an
asbestos-related malignancy (Disease Levels V - VIII) submitted to the Asbestos
Personal Injury Trust must be based upon either (i) a physical examination of
the claimant by the physician providing the diagnosis of the asbestos-related
disease, or (ii) on a diagnosis of such a malignant Disease Level by a
board-certified pathologist.
If the holder of an OC or Fibreboard Asbestos Personal Injury Claim
has available the medical evidence described above, or if the holder has filed
such medical evidence with another asbestos-related personal injury settlement
trust that requires such evidence, the Asbestos Personal Injury Trust
Distribution Procedures require that the holder provide such medical evidence to
the Asbestos Personal Injury Trust notwithstanding any exceptions to the
contrary.
21. CREDIBILITY OF MEDICAL EVIDENCE
The Asbestos Personal Injury Trust must have reasonable confidence
that the medical evidence provided in support of the claim is credible and
consistent with recognized medical standards before making any payment to a
claimant. The Asbestos Personal Injury Trust may require the submission of
X-rays, CT scans, detailed results of pulmonary function tests, laboratory
tests, tissue samples, results of medical examination or reviews of other
medical evidence, and may require that medical evidence submitted comply with
recognized medical standards regarding equipment, testing methods and procedure
to assure that such evidence is reliable. Medical evidence (i) that is of a kind
shown to have been received in evidence by a state or federal judge at trial,
(ii) that is consistent with evidence submitted to OC or Fibreboard to settle
for payment similar disease cases prior to OC or Fibreboard's bankruptcy, or
(iii) a diagnosis by a physician shown to have previously qualified as a medical
expert with respect to the asbestos-related disease in question before a state
or federal judge, is presumed by the
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Asbestos Personal Injury Trust to be reliable, although the Asbestos Personal
Injury Trust may seek to rebut the presumption.
In addition, claimants who otherwise meet the requirements of the
Asbestos Personal Injury Trust Distribution Procedures for payment of an OC or
Fibreboard Asbestos Personal Injury Claim will be paid by the Asbestos Personal
Injury Trust irrespective of the results in any litigation at anytime between
the claimant and any other defendant in the tort system. However, the Asbestos
Personal Injury Trust Distribution Procedures contemplate that any relevant
evidence submitted in a proceeding in the tort system, other than any findings
of fact, a verdict, or a judgment, involving another defendant may be introduced
by either the claimant or the Asbestos Personal Injury Trust in any Individual
Review proceeding or any Extraordinary Claim proceeding conducted by the
Asbestos Personal Injury Trust.
22. EXPOSURE EVIDENCE
To qualify for any Disease Level the Asbestos Personal Injury Trust
Distribution Procedures require that the claimant demonstrate some exposure to
an OC or Fibreboard asbestos-containing product or to conduct for which OC or
Fibreboard has legal responsibility. Claims based on conspiracy theories that
involve no such OC or FB Exposure or conduct are not compensable under the
Procedures. To meet the presumptive exposure requirements of Expedited Review,
the claimant must show (i) for all Disease Levels, OC or FB Exposure as defined
below prior to December 31, 1982; (ii) for Asbestos/Pleural Disease Level II,
six months OC or FB Exposure prior to December 31, 1982, plus five years
cumulative occupational asbestos exposure; and (iii) for Asbestosis/Pleural
Disease (Disease Level III), Severe Asbestosis (Disease Level IV), Other Cancer
(Disease Level V) or Lung Cancer 1 (Disease Level VII), the claimant must show
six months OC or FB Exposure prior to December 31, 1982, plus Significant
Occupational Exposure to asbestos. If the claimant cannot meet the relevant
presumptive exposure requirements for a Disease Level eligible for Expedited
Review, the claimant may seek Individual Review of his or her claim based on
exposure to an asbestos-containing product or to conduct for which OC or
Fibreboard has legal responsibility.
To recover from the Asbestos Personal Injury Trust, the claimant must
demonstrate meaningful and credible exposure to asbestos or asbestos-containing
products for which OC or Fibreboard has legal responsibility. For these
purposes, the Asbestos Personal Injury Trust will consider meaningful and
credible evidence, including an affidavit of the claimant, by an affidavit of a
co-worker or the affidavit of a family member in the case of a deceased claimant
(providing the Asbestos Personal Injury Trust finds such evidence reasonably
reliable), by invoices, employment, construction or similar records, or by other
credible evidence. The Asbestos Personal Injury Trust may also require
submission of other or additional evidence of exposure when it deems such to be
necessary. The specific exposure information required by the Asbestos Personal
Injury Trust to process a claim under either Expedited or Individual Review is
set forth on the proof of claim form to be used by the Asbestos Personal Injury
Trust, which is attached as Attachment B to the Asbestos Personal Injury Trust
Distribution Procedures. The Asbestos Personal Injury Trust may also require
submission of other or additional evidence of exposure when it deems such to be
necessary.
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23. SECOND DISEASE (MALIGNANCY) CLAIMS
The Asbestos Personal Injury Trust Distribution Procedures allow the
holder of an OC or Fibreboard Asbestos Personal Injury Claim involving a
non-malignant asbestos-related disease (Disease Levels I through IV) to assert a
new OC or Fibreboard Asbestos Personal Injury Claim against the Asbestos
Personal Injury Trust for a malignant disease (Disease Levels V - VIII) that is
subsequently diagnosed. The Asbestos Personal Injury Trust will not reduce any
additional payments to which such claimant may be entitled with respect to such
malignant asbestos-related disease by the amount paid for the non-malignant
asbestos-related disease, provided that the malignant disease had not been
diagnosed at the time the claimant filed his or her original claim involving the
non-malignant disease.
24. PUNITIVE DAMAGES
In determining the value of any OC or Fibreboard Asbestos Personal
Injury Claim, punitive or exemplary damages, i.e., damages other than
compensatory damages, will not be considered or allowed, notwithstanding their
availability in the tort system.
25. INTEREST
Except for an OC or Fibreboard Asbestos Personal Injury Claim
involving Other Asbestos Diseases (Disease Level I - Cash Discount Payment) and
subject to the limitations set forth below, the Asbestos Personal Injury Trust
Distribution Procedures provide that interest will be paid on all OC and
Fibreboard Asbestos Personal Injury Claims with respect to which the claimant
has had to wait a year or more for payment, provided, however, that no claimant
will receive interest for a period in excess of seven (7) years. The applicable
interest rate is to be six percent (6%) simple interest per annum for the first
five (5) years after the Effective Date; thereafter, the Trustees have the
discretion to change the annual interest rate with the consent of the TAC and
the Future Claimants' Representative.
Interest is payable on the Scheduled Value of any unresolved OC or
Fibreboard Asbestos Personal Injury Claim that meets the requirements of Disease
Levels II -V, VII and VIII, whether the claim is liquidated under Expedited
Review, Individual Review, or by arbitration. Interest on an unresolved OC or
Fibreboard Asbestos Personal Injury Claim that meets the requirements of Disease
Level VI will be based on the Average Value of such a claim. Interest on all
such unresolved claims will be measured from the date of payment back to the
earliest of the date that is one year after the date on which (a) the claim was
filed against OC or Fibreboard prior to the Petition Date; (b) the claim was
filed against another defendant in the tort system on or after the Petition Date
but before the Effective Date; (c) the claim was filed with the Bankruptcy Court
during the pendency of these Chapter 11 proceedings; or (d) the claim was filed
with the Asbestos Personal Injury Trust after the Effective Date.
Interest is also payable on the liquidated value of all Unpaid OC or
Fibreboard Resolved Asbestos Personal Injury Claims. In the case of such claims
liquidated by verdict or judgment, interest will be measured from the date of
payment back to the date that is one year after the date that the verdict or
judgment was entered. In the case of such claims liquidated by a
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binding, judicially enforceable settlement, interest will be measured from the
date of payment back to the date that is one year after the Petition Date.
26. SUITS IN THE TORT SYSTEM
If the holder of a disputed claim disagrees with the Asbestos Personal
Injury Trust's determination regarding the Disease Level of the claim, the
claimant's exposure history or the liquidated value of the claim, and if the
holder has first submitted the claim to non-binding arbitration, the Asbestos
Personal Injury Trust Distribution Procedures contemplate that the holder may
file a lawsuit in the claimant's jurisdiction. All defenses (including, with
respect to the Asbestos Personal Injury Trust, all defenses which could have
been asserted by OC or Fibreboard) will be available to both sides at trial;
however, the Asbestos Personal Injury Trust may waive any defense and/or concede
any issue of fact or law. If the claimant was alive at the time the initial
pre-petition complaint was filed or on the date the proof of claim was filed,
the case will be treated as a personal injury case with all personal injury
damages to be considered even if the claimant has died during the pendency of
the claim.
If and when a claimant obtains a judgment in the tort system, the
claim will be placed in the FIFO Payment Queue based on the date on which the
judgment became final. Thereafter, the claimant will receive from the Asbestos
Personal Injury Trust an initial payment (subject to the applicable Payment
Percentage, the Maximum Available Payment, and the Claims Payment Ratio
provisions set forth above) of an amount equal to one-hundred percent (100%) of
the greater of (i) the Asbestos Personal Injury Trust's last offer to the
claimant or (ii) the award that the claimant declined in non-binding
arbitration. The claimant will receive the balance of the judgment, if any, in
five equal installments in years six (6) through ten (10) following the year of
the initial payment (also subject to the applicable Payment Percentage, the
Maximum Available Payment and the Claims Payment Ratio provisions above).
In the case of non-Extraordinary Claims involving Disease Levels II -
VIII, the total amounts paid with respect to such claims may not exceed the
Maximum Values for such Disease Levels. In the case of Extraordinary Claims, the
total amounts paid with respect to such claims may not exceed the Maximum Value
for such claims. Under no circumstances will interest be paid on any judgments
obtained in the tort system.
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
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Pursuant to the Asbestos Personal Injury Permanent Channeling Injunction
and the Plan, the entities listed or described in SCHEDULES VI, VIII and X to
the Plan, attached to this Disclosure Statement as Appendix A, will be
"PROTECTED PARTIES" and, therefore, protected by the scope of the Asbestos
Personal Injury Permanent Channeling Injunction.
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 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.
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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 ten (10)
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
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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.
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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.
(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 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:
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(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 ("PD
ADVISORY COMMITTEE"), 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.
On the Termination Date, after payment of all the FB Property Damage
Trust's liabilities have been provided for, the remaining FB Asbestos Property
Damage Insurance Assets shall be transferred and assigned to Reorganized OC; all
monies, if any, remaining in the FB Property Damage Trust estate shall be
transferred to charitable organization(s) exempt from federal income tax under
Section 501 (c)(3) of the Internal Revenue Code, which tax-exempt
organization(s) shall be selected by the Trustee using his or her reasonable
discretion; provided, however, that (i) if practicable, the tax-exempt
organization(s) shall be related to the treatment of, research, or the relief of
suffering of individuals suffering from asbestos-related disorders, and (ii) the
tax-exempt organization(s) shall not bear any relationship to FB or its
Affiliates within the meaning of Section 468(d)(3) of the Internal Revenue Code.
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
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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-1.
1. PROPERTY DAMAGE ADVISORY COMMITTEE
The FB Asbestos Property Damage Trust Distribution Procedures provide
for a PD ADVISORY COMMITTEE composed of three persons selected by the Trustees.
The Trustee shall participate and consult with the PD Advisory Committee on all
major policy and administrative decisions affecting, and the interpretation and
implementation of, the FB Asbestos Property Damage Trust Distribution
Procedures.
2. CLAIMS CATEGORIES
The FB Asbestos Property Damage Trust Distribution Procedures provide
for two categories of claims, Category 1 Claims, based on a percentage of actual
incurred Abatement Costs or documented anticipated Abatement Costs and Category
2 Claims, to be paid on a formula based on the linear square footage of
asbestos-related products referred to "Discounted Payable Costs" in the FB
Asbestos Property Damage Trust Distribution Procedures. All claimants must
provide Convincing Evidence of a legally viable cause of action and that the
asbestos containing product for which the Claim is submitted is a Fibreboard
asbestos-containing product, and Category 1 Claims, only, must also provide
Convincing Evidence of compensable injury and damages. "Convincing Evidence"
means sufficient evidence to be a preponderance of the evidence.
Pursuant to the FB Asbestos Property Damage Trust Distribution
Procedures, the Trustee is required to disallow any Asbestos Property Damage
Claim under the following conditions: (a) if the Claimant did not file a timely
Proof of Claim within the meaning of the Bankruptcy Code and Bankruptcy Rules,
such determination shall be made consistent with Section 3.3(c) of the Trust
Agreement requiring the Trustee to enforce the Bankruptcy Court's bar date
orders; (b) if the Claimant did not file a required Claim form within twelve
months of the Effective Date; (c) if there has been a prior judicial
determination or stipulation that the asbestos containing product for which the
FB Asbestos Property Damage Claim was filed is not a Fibreboard
asbestos-containing product; (d) if there is Convincing Evidence that Fibreboard
would have been able to obtain summary judgment on the ground that the claim
would have been barred as a matter of law or factually time-barred under the
laws of the applicable jurisdiction if considered on the Petition Date, unless
such claim has been revived or reinstated by reason of legislative enactment in
the applicable jurisdiction, provided, however, there is a presumption that
Pre-Existing Claims are not factually time-barred; or (e) if there has been a
prior adjudication by Final Order (as defined in the Plan) that a FB Asbestos
Property Damage Claim has been time-barred and may not be brought in any other
jurisdiction or otherwise revived by the holder of such Claim. . "Pre-Existing
Claims" means those claims on behalf of a claimant who prior to the General Bar
Date filed or intervened in a lawsuit in a court of general jurisdiction against
Fibreboard.
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3. REQUIRED DOCUMENTATION AND CLAIMS PROCESSING
The FB Asbestos Property Damage Trust Distribution Procedures require
that all FB Asbestos Property Damage Claims be submitted within twelve (12)
months of the Effective Date. Category 1 Claims must submit a completed Claim
form and supporting documentation including, copies of all bulk sample analysis
results and/or records thereof, Convincing Evidence that the asbestos-containing
product that is the subject of the Claim is a Fibreboard asbestos-containing
product, and Convincing Evidence supporting a Claim for Abatement Costs.
"Abatement Costs" means the reasonable and customary costs of the removal,
enclosure, encapsulation or repair of asbestos containing products, including,
by way of example, costs for the abatement itself, design, consultant and
laboratory fees and costs in connection with the abatement, and, except for
abatement upon demolition, the reasonable costs of replacement, as allowed in
these Property Damage Claims Procedures, of the asbestos containing products
with a non-asbestos containing product. Category 2 Claims must submit a
completed Claim form and Convincing Evidence that the asbestos-containing
product that is the subject of the Claim is a Fibreboard asbestos-containing
product. Claims shall be processed on a first-in-first-out ("FIFO") basis. The
facility for the administration of these Claims will notify the Claimant in
writing by mail of its determination of the Allowed amount of the Claim within
120 days of receipt of all necessary documentation.
4. PAYMENT OF ASBESTOS PROPERTY DAMAGE CLAIMS
The FB Asbestos Property Damage Trust is funded with the FB Asbestos
Property Damage Insurance Assets, consisting primarily of rights to insurance
recoveries under liability insurance policies issued to Fibreboard for FB
Asbestos Property Damage Claims and identified in Schedule XVI to the Plan. Upon
receiving all of the recoveries from these assets, or 5 years from the Effective
Date, whichever occurs first, the Trustee shall determine the amounts to be paid
to holders of Allowed Claims based on the total amount of recoveries available
at that time. Allowed Category 1 Claims shall be paid based on the following
calculations: (a) the Trustee shall subtract the total Allowed amount of all
Allowed Category 2 Claims from the available recoveries to determine the
available recoveries remaining to compensate holders of Allowed Category 1
Claims; (b) the Trustee, in consultation with the PD Advisory Committee, shall
then determine the payment percentage to be used to pay holders of Allowed
Category 1 Claims based on the remaining available recoveries; (c) holders of
Allowed Category 1 Claims shall then receive payment calculated on the basis of
the payment percentage multiplied by the Allowed amount of their Claim. Allowed
Category 2 Claims shall be paid their Discounted Payable Costs calculated in
accordance with the formula contained in FB Asbestos Property Damage Trust
Distribution Procedures; except that, if the remaining available recoveries are
insufficient to pay holders of Allowed Category 1 Claims at least as much as
they would have received had they submitted their Claims as Category 2 Claims,
then all of the holders of Allowed FB Asbestos Property Damage Claims,
regardless of claim category, shall receive their pro rata share of all
available recoveries. Because the FB Asbestos Property Damage Insurance Assets
are estimated by the Debtors to exceed all Allowed FB Asbestos Property Damage
Claims, the Debtors believe that recoveries will sufficient to pay these Claims
in the amount Allowed.
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5. RECONSIDERATION OF CLAIMS
The FB Asbestos Property Damage Trust Distribution Procedures permit
claimants, within 60 days of receiving notice of the Allowed amount of their
claim, to request reconsideration of the determined amount of their claim. On
reconsideration, the Claim will be reviewed de novo within 90 days by a panel
consisting of two claims analysts and one otherwise disinterested member of the
PD Advisory Committee. After receipt of the final determination on
reconsideration, a Claimant again has 60 days to request reconsideration of its
Claim, this time through binding arbitration.
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
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
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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,
transfer, sell, dispose of or otherwise resolve or compromise the 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 to the OC
Sub-Account of the Asbestos Personal Injury Trust, 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. 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 ten (10) Business Days rior 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.
4. 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
OC Sub-Account of the Asbestos Personal Injury Trust. The Litigation Trust
Assets are comprised of (a) the Litigation Trust Initial Deposit, (b) the
Potential Tax Refunds, if and when recovered by the Debtors (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,
including interest actually earned thereon. Litigation Trust Assets will not
include
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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 any Debtor 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, causes of action, suits or
proceedings (whether arising out of contract, tort or otherwise) accruing to any
Debtor for the payment and collection of money or other consideration or the
enforcement of rights and remedies in connection with, resulting from or arising
out of any commercial transaction with any of the Debtors or the performance of
services by or for any of the Debtors. "Commercial Claims" shall include,
without limitation, claims arising from damage or alleged damage to property of
any Debtor, or personal injuries sustained by any employee, contractor or other
business agent of any Debtor (other than Asbestos Personal Injury Claims) in any
case resulting from or arising out of the conduct of business by such Debtor,
the collection of debts owed to any Debtor from purchasers of goods and services
from any Debtor or the collection of money or other consideration from vendors,
suppliers or other parties for breaches of contract in commercial relationships
with any of the Debtors or the recovery of 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
5. COOPERATION OF THE DEBTORS
The Reorganized Debtors will make available, upon reasonable terms,
its personnel, books and records to representatives of the Litigation Trust in
order to enable the Litigation Trustee to perform its duties under the
Litigation Trust Agreement. In addition, the Litigation Trustee will enter into
a confidentiality agreement with the Reorganized Debtors for the purpose of
maintaining the confidentiality of and retaining any applicable privilege of any
information provided by the Reorganized Debtors.
6. LITIGATION TRUST TERMINATION PROVISIONS
The Bankruptcy Court (or the District Court in the event that the
District Court modifies the Reference Order to retain jurisdiction over the
Litigation Trust) will approve the termination of the Litigation Trust after the
Litigation Trust has distributed all of the Litigation Trust Assets, provided
that the Litigation Trust terminates no later than [ ] years from the date of
the Litigation Trust's creation. The parties may extend the Litigation Trust's
termination date for one or more terms, subject to the approval of the
Bankruptcy Court (or the District Court in the event that the District Court
modifies the Reference Order to retain jurisdiction over the Litigation Trust)
that the extension is necessary for the Litigation Trust's liquidating purpose.
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B. DISTRIBUTIONS OF LITIGATION TRUST RECOVERIES
The Litigation Trustee shall apply Litigation Trust Recoveries as
follows: (a) first, to pay Litigation Trust Expenses; (b) second, to pay the
Litigation Trust Reimbursement Obligation until the Litigation Trust
Reimbursement Obligation is paid in full; (c) third, to the Disbursing Agent for
any further remaining disbursement amounts (i) to holders of Allowed Claims in
each of Classes 4, 5 and 6 in accordance with Sections 3.3(b), 3.3(c) and
3.3(d), respectively of the Plan; and (ii) to the Asbestos Personal Injury Trust
for distribution in accordance with Section 3.3(e) of the Plan. The Litigation
Trustee will distribute Litigation Trust Recoveries to the Disbursing Agent as
soon as practicable after receiving the Litigation Trust Recoveries, except the
Litigation Trustee may withhold any distribution, or any portion thereof, if it
reasonably believes it is necessary to pay Litigation Trust Expenses or the
Litigation Trust Reimbursement Obligation, or if the aggregate proceeds and
income available for distribution is insufficient.
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
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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.
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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
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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.
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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
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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 Section 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
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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
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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
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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
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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
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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,
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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.
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(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.
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(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.
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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
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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 VI of this Disclosure Statement entitled "Future Business of the
Reorganized Debtors," which summarizes the Business Plan and certain assumptions
underlying the Financial Projections, as well as Section XV of the Disclosure
Statement entitled "Certain Risk 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
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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
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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.
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D. LIQUIDATION 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"), 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
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
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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 WILL BE FILED AT LEAST
TEN (10) BUSINESS DAYS PRIOR TO THE APPROVAL OF THE DISCLOSURE STATEMENT] 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
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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
With respect to the valuation of the Reorganized Debtors, in addition
to the foregoing, Lazard has relied upon the following assumptions:
- 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.
- 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.
- The Debtors will emerge from Chapter 11 on or about December 31, 2003.
- 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
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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.
- 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.
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.
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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 Model 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
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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. 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.
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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
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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.
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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
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assurance that the Bankruptcy Court will reach the same conclusion. SEE Appendix
C 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
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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.
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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,
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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
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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
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
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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.
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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
223
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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.
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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)
225
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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: May 23, 2003
OWENS CORNING, ET AL.
(for itself and on behalf of the
Subsidiary Debtors)
By: /s/ Stephen K. Krull
-------------------------------
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
226
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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
227
<Table>
<Caption>
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
May 23, 2003
Appendix A-1 Glossary of Additional Terms
Appendix B Pro Forma Financial Projections and Reorganization Balance Sheet
[THIS DOCUMENT WILL BE FILED AT LEAST TEN (10) BUSINESS DAYS
PRIOR TO THE APPROVAL OF THE DISCLOSURE STATEMENT]
Appendix C Liquidation Analysis
Appendix D Owens Corning Annual Report on Form 10-K for the period ending
December 31,2002. NOTE: THIS DOCUMENT IS AVAILABLE, FREE OF
CHARGE, THROUGH OC'S WEBSITE AT www.owenscorning.com. COPIES MAY
ALSO BE OBTAINED BY WRITTEN REQUEST. SEE THE DIRECTIONS SET FORTH
AT APPENDIX D.
Appendix E Principal Terms and Conditions of Senior Notes
Appendix F Current Corporate Structure of Company
Appendix G Proposed Corporate Structure of the Reorganized Debtors [THE
RESTRUCTURING TRANSACTIONS WILL BE FILED AT LEAST TEN (10)
BUSINESS DAYS PRIOR TO THE APPROVAL OF THE DISCLOSURE STATEMENT,
AND MAY BE AMENDED UP TO TEN (10) BUSINESS DAYS PRIOR TO THE
OBJECTION DEADLINE]
Appendix H Voting Procedures [THIS DOCUMENT WILL BE INSERTED UPON
APPROVAL OF VOTING PROCEDURES]
</Table>
<Page>
APPENDIX A
AMENDED JOINT PLAN OF REORGANIZATION OF OWENS CORNING AND ITS AFFILIATED DEBTORS
AND DEBTORS-IN-POSSESSION, DATED AS OF MAY 23, 2003
[see Exhibit 2 to the Current Report on Form 8-K,
filed by Owens Corning on May 27, 2003]
<Page>
APPENDIX A-1
GLOSSARY OF ADDITIONAL TERMS
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.
<Page>
APPENDIX B
PRO FORMA FINANCIAL PROJECTIONS AND REORGANIZATION BALANCE SHEET
[THIS DOCUMENT WILL BE FILED AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE
APPROVAL OF THE DISCLOSURE STATEMENT]
<Page>
APPENDIX C
LIQUIDATION ANALYSIS
<Page>
APPENDIX C
LIQUIDATION ANALYSIS
Pursuant to section 1129(a)(7) of the Bankruptcy Code (often called the
"Best Interests Test"), each holder of an impaired Claim or equity Interest must
either (a) accept the Plan or (b) receive or retain under the Plan property of a
value, as of the Plan's Effective Date, that is not less than the value such
non-accepting holder would receive or retain if the Debtors were to be
liquidated under Chapter 7 of the Bankruptcy Code on the Effective Date. In
determining whether the Best Interests Test has been met, the first step is to
determine the dollar amount that would be generated from a hypothetical
liquidation of the Debtors' assets in Chapter 7. For purposes of this
liquidation analysis, the value of the Non-Debtor Subsidiaries is incorporated
in the value of the operating businesses, as described below. The gross amount
of cash available would be the sum of the proceeds from the disposition of the
Debtors' assets and the cash held by the Debtors at the commencement of their
Chapter 7 cases. Such amount then would be reduced by the costs and expenses of
the liquidation. Prior to determining whether the Best Interests Test has been
met, further reductions would be required to eliminate cash and asset
liquidation proceeds that would be applied to secured claims and amounts
necessary to satisfy Administrative, Tax, and Priority Claims that are senior to
General Unsecured Claims, including any incremental Administrative Claims that
may result from the termination of the Debtors' business and the liquidation of
their assets. Any remaining cash would be available for distribution to general
unsecured creditors and shareholders in accordance with the distribution
hierarchy established by section 726 of the Bankruptcy Code.
The Liquidation Analysis below reflects the estimated cash proceeds, net of
liquidation-related costs that would be available to the Debtors' creditors if
they were to be liquidated in Chapter 7 cases. Underlying the Liquidation
Analysis are a number of estimates and assumptions regarding liquidation
proceeds that, although developed and considered reasonable by management and
Lazard, are inherently subject to significant business, economic and competitive
uncertainties and contingencies beyond the control of the Company and its
management. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE VALUES REFLECTED IN
THE LIQUIDATION ANALYSIS WOULD BE REALIZED IF THE DEBTORS (TOGETHER WITH THE
NON-DEBTOR SUBSIDIARIES) WERE, IN FACT, TO UNDERGO SUCH A LIQUIDATION, AND
ACTUAL RESULTS COULD VARY MATERIALLY FROM THOSE SHOWN HERE.
The Liquidation Analysis was prepared by Lazard with the assistance of
management and the Debtors' other advisors, and assumes that the Debtors cases
would convert to Chapter 7 as of December 31, 2003. The Liquidation Analysis
also assumes that the liquidation of the Debtors would commence under the
direction of a Court-appointed Chapter 7 trustee and continue for 24 months,
during which time all of the Company's major assets would be sold and the cash
proceeds, net of liquidation-related costs, would be distributed to creditors.
<Page>
The following Liquidation Analysis should be read in conjunction with the
accompanying notes.
IMPORTANT CONSIDERATIONS AND ASSUMPTIONS
1. SUBSTANTIVE CONSOLIDATION OF THE DEBTORS. For purposes of the Plan
(See Section VII (B) of the Disclosure Statement), the Liquidation Analysis has
been prepared assuming the substantive consolidation of the various Debtors. The
assets and liabilities of each of the Debtors (but not the Fibreboard Insurance
Settlement Trust) are treated for this analysis as if they were merged.
2. TREATMENT OF THE NON-DEBTOR SUBSIDIARIES. For purposes of the Plan,
the Liquidation Analysis has been prepared assuming that certain of the
Non-Debtor Subsidiaries (IPM, Vytec Corp., and Owens-Corning Fiberglas Sweden
Inc.) file for relief under Chapter 11 of the Bankruptcy Code, and their cases
are converted to Chapter 7. Accordingly, the assets and liabilities of each of
these Non-Debtor Subsidiaries are treated for this analysis as if they were
merged with the Debtors. More specifically, IPM is a Delaware holding company
that owns the common stock of a substantial portion of the foreign Non-Debtor
Subsidiaries with manufacturing operations. For purposes of this Liquidation
Analysis, the value attributable to the foreign Non-Debtor Subsidiaries was
assumed to reside with the Debtors.
3. DISTRESSED SALE OF THE DEBTORS AS A BULK SALE. Unlike the typical
company in Chapter 7, the Debtors are profitable enterprises with significant
liquidity resources. For the year ended December 31, 2002, the Debtors
(collectively, excluding the Non-Debtors) generated $226 million of EBITDA
(earnings before interest, taxes, depreciation and amortization - also excludes
restructuring expenses and asbestos charges) and had unrestricted cash of
approximately $622 million. A traditional liquidation of the Debtors, assuming a
cessation of operations, would be unprecedented and would destroy value that
would otherwise be available to creditors.
For purposes of the Liquidation Analysis, Lazard assumed that the Chapter
7 Trustee would seek to maximize the liquidation value of the Debtors' estates
through one or more bulk sales of the Debtors' assets. Under this assumption,
operations would continue and the Chapter 7 Trustee would likely capture some
"going-concern" value in excess of the liquidation value of the Debtors' assets
on a stand-alone basis. Lazard assumed that the assets would be marketed and
sold within a period of six months.
The conversion of these cases to Chapter 7 and the forced sale of the
Debtors' assets in one or more bulk sales by the Chapter 7 Trustee would likely
result in the Debtors' and Non-Debtors' businesses being sold at a significant
discount to their inherent value absent the bankruptcy proceedings. It is
probable that the sudden pendency of these bulk sales would have adverse effects
on employee morale, customer willingness to order goods, and vendor willingness
to ship supplies and extend trade credit. The likely result would be a
deterioration in near-term financial performance of the Debtors and a
corresponding decline in value.
<Page>
In addition, although it is assumed that the Bankruptcy Court would enter
an order that the assets would be sold "free and clear" of all asbestos
liabilities, because of uncertainties surrounding the use of a Section 524(g)
channeling injunction outside of Chapter 11, many likely purchasers would either
avoid bidding or do so at a reduced level. The risk of continued asbestos
liabilities would be of particular concern to likely strategic purchasers who
could not easily insulate themselves from future asbestos liabilities.
4. EXECUTION RISK OF A LIQUIDATION. A liquidation of the Debtors would be
unprecedented in scale and scope. The assets of the Debtors include billions of
dollars worth of manufacturing assets which utilize proprietary technology and
are strategically placed worldwide to create an integrated product sourcing
matrix. The assets are located throughout the world, cross many national
borders, and would be subject to the laws of numerous states within the United
States and numerous foreign jurisdictions. Given the complexity of such an
undertaking, the Debtors believe significant execution risk exists if a
liquidation were actually pursued. The Debtors are not aware of any successful
liquidation of similar magnitude or complexity.
5. WIND-DOWN COSTS AND LENGTH OF LIQUIDATION PROCESS. The Debtors have
assumed that the bulk sales would be concluded within a six month period. The
Debtors have also assumed that the Chapter 7 Trustee would need an additional
eighteen months to complete the liquidation process, resolve litigation and
determine a mechanism for distributing liquidation proceeds to thousands of
asbestos plaintiffs, both known and unknown. There can be no assurances that all
assets would be completely liquidated during this time period.
<Page>
OWENS CORNING
HYPOTHETICAL LIQUIDATION PROCEEDS
<Table>
<Caption>
VALUE
-----------------------------------
($ IN MILLIONS)
LOW HIGH NOTE
--------------- --------------- ---------------
LIQUIDATION
ASSETS
Operating Businesses Before Distressed Sale Discount $ 3,200 $ 3,600 A
Less: Distressed Sale Discount (33%) (1,056) (1,188) B
Operating Businesses, Net 2,144 2,142
Plus: Unrestricted Cash 722 722 C
Less: Debt Obligations at Non-Debtor Subsidiaries (100) (100) D
Liquidation Value of Assets 2,766 3,034
CLAIMS AND EXPENSES PRIOR TO UNSECURED CLAIMS
Chapter 7 Trustee Fee 21 24 E
Chapter 7 Trustee Professional Expenses 51 54 F
Administrative Claims 96 96 G
Priority Tax Claims 246 246 H
Secured Claims 11 11 I
--------------- ---------------
Total Claims and Expenses 426 431
--------------- ---------------
Proceeds Available to Unsecured Creditors $ 2,340 $ 2,603
=============== ===============
RECOVERIES UNDER CHAPTER 7 LIQUIDATION
UNSECURED CLAIMS
Convenience Claims $ - $ - J
Bank Claims 1,480 1,480 K
Bond Claims 1,335 1,335 L
General Unsecured Claims 943 943 M
OC Asbestos Personal Injury Claims 10,532 10,532 N
FB Asbestos Personal Injury Claims 3,908 3,908 O
--------------- ---------------
Total Unsecured Claims $ 18,198 $ 18,198
%Recovery to Unsecured Creditors 13% 14%
EQUITY INTERESTS
Proceeds Available to Equity Interests $ 0 $ 0 P
%Recovery to Equity Interests 0% 0%
</Table>
<Page>
NOTES TO LIQUIDATION ANALYSIS
A. OPERATING BUSINESSES BEFORE DISTRESSED SALE DISCOUNT
"Operating Businesses" is defined to include all assets of the Debtors and
the Non-Debtor Subsidiaries required to operate in the normal course. The value
of the Operating Businesses includes the net working capital associated with the
businesses. Net working capital would include the receivables, inventories,
post-petition accrued expenses, and post-petition accounts payable of the
Debtors and Non-Debtor Subsidiaries. It is assumed that $50 million of
post-petition liabilities would not be assumed by the buyer(s) and would be
treated as Administrative Claims. It is assumed that a buyer would be
responsible for providing seasonal working capital financing.
The value of the Operating Businesses was determined by Lazard in
conjunction with the formulation of the Plan (See Section XIV.E entiltled
"Valuation of the Reorganized Debtors"). Lazard determined that the likely
reorganization value of the Reorganized Debtors was between $3.2 billion and
$3.6 billion. Accordingly, these values have been utilized as the low and high
range of "Value of Operating Businesses Before Distressed Sale Discount".
B. DISTRESSED SALE DISCOUNT
As discussed above, the conversion of these cases to Chapter 7 and the
forced sale of the Debtors' assets in one or more bulk sales by the Chapter 7
Trustee would adversely affect the value of the Debtors' businesses. Factors
adversely affecting value could include:
- Companies sold out of bankruptcy are often sold at a discount. Buyers
who would otherwise be interested in acquiring a business are often
reluctant to purchase assets out of a bankruptcy estate due to a
perceived taint of bankruptcy, as well as the constraints likely to be
imposed by a court-supervised auction (for example, limited or no
exclusivity, limitations on breakup fees and expense reimbursements,
etc.). The result would be lower demand and lower prices for the
Debtors' assets.
- The conversion of these cases to Chapter 7 and the pressure to convert
the businesses to cash would likely necessitate a shorter marketing and
due diligence period than is customary. The forced nature of the sale
and expedited sale process could be expected to adversely impact value.
- The sudden pendency of these bulk sales would have adverse effects on
employee morale, customer willingness to order goods, and vendor
willingness to ship supplies and extend trade credit. The likely result
would be a deterioration in near-term financial performance of the
Debtors and a corresponding decline in value.
- Although it is assumed that the Bankruptcy Court would enter an order
that the assets would be sold "free and clear" of all asbestos
liabilities, because of uncertainties
<Page>
surrounding the use of a Section 524(g) channeling injunction outside
of Chapter 11, many likely purchasers would either avoid bidding or do
so at a reduced level. The risk of continued asbestos liabilities
would be of particular concern to likely strategic purchasers who
could not easily insulate themselves from future asbestos liabilities.
Accordingly, for purposes of computing the hypothetical liquidation
proceeds, Lazard assumed that the realized liquidation values would reflect a
discount of 33% from the values that would exist in the absence of a forced sale
pursuant to Chapter 7. The precise discount factor to attribute to the factors
described above represents Lazard's best judgment in the face of complex
uncertainties and in the absence of comparables. The discounts that would result
if the sales were actually made in Chapter 7 would vary from business to
business and, in the aggregate, could result in a discount percentage which
could be larger or smaller than 33%.
C. UNRESTRICTED CASH
Unrestricted cash is assumed to total $722 million at December 31, 2003, of
which $200 million represents cash from Non-Debtor Subsidiaries. Cash held at
the Non-Debtor Subsidiaries of approximately $250 million less a $50 million
allowance is assumed to be distributed upstream to OC. A 20% allowance has been
made for potential offsets, limitations or taxes related to the repatriation of
cash held outside of the United States.
It is assumed that during the six month liquidation period, the Debtors'
operations break-even on a cash flow basis. The adverse impact of the conversion
to Chapter 7 and the resulting deterioration in employee morale and customer
support lead to a deterioration in profitability.
Administrative Deposits of $110 million held by law firms on behalf of
Owens Corning asbestos plaintiffs are assumed to be not recoverable by the
Chapter 7 Trustee and reduces Class 7 claims. Administrative Deposits of $130
million held by law firms on behalf of Fibreboard asbestos plaintiffs are
assumed to be not recoverable by the Chapter 7 Trustee and reduces Class 8
claims. The Fibreboard Insurance Settlement Trust with funds totaling $1.262
billion is assumed to be not an asset of the Debtors' estates and is used to
reduce Class 8 claims.
D. DEBT OBLIGATIONS AT NON-DEBTOR SUBSIDIARIES
Approximately $100 million of debt obligations owed by foreign Non-Debtor
Subsidiaries are assumed to be repaid in full prior to the sale of the assets
held by these Non-Debtor Subsidiaries. Accordingly, the liquidation proceeds
from the Operating Business are reduced by the $100 million of debt obligations.
It is assumed that third party trade payables will be assumed by the buyer(s).
E. CHAPTER 7 TRUSTEE FEES
Compensation for the Chapter 7 Trustee will be limited to fee guidelines in
section 326 of the Bankruptcy Code. For purposes of this analysis, management
has assumed trustee fees of 1.0% of the proceeds recovered from non-cash assets
in the liquidation.
<Page>
F. CHAPTER 7 TRUSTEE PROFESSIONAL EXPENSES
Compensation for the Chapter 7 Trustee's counsel and other legal,
accounting, and professional advice during the Chapter 7 proceedings is
estimated to be approximately $30 million ($3 million a month for six months, $1
million a month for six months, and $0.5 million for twelve months). In
addition, it is assumed that the Chapter 7 Trustee will retain investment
bankers to assist with the disposition of the operating businesses. Compensation
would be expected to total 1.0% of the proceeds recovered from non-cash assets.
G. ADMINISTRATIVE CLAIMS
Administrative Claims are assumed to include (i) an estimated $46 million
of professional fees and cure costs as detailed in the Plan, and (ii) an
estimated $50 million of claims related to post-petition liabilities that
buyer(s) might be expected to not assume pursuant to an acquisition.
H. PRIORITY TAX CLAIMS
Priority Tax Claims are assumed to be $246 million, equal to the amount
included in the Plan.
I. SECURED TAX AND OTHER CLAIMS
Secured Claims are assumed to be $11 million, equal to the amount included
in the Plan.
J. CONVENIENCE CLAIMS
There are assumed to be no Convenience Claims in the Chapter 7 liquidation.
The $18 million of convenience claims in the Plan are assumed to be General
Unsecured Claims in the event of a chapter 7 liquidation.
K. BANK CLAIMS
Bank holders are assumed to have an allowed claim of $1.480 billion in a
Chapter 7 liquidation, with no recovery related to their guarantees or
post-petition accrued interest.
L. BOND CLAIMS
Bond holders are assumed to have an allowed claim of $1.335 billion, equal
to the amount included in the Plan.
M. GENERAL UNSECURED CLAIMS
<Page>
General Unsecured Claimants are assumed to have an allowed claim of $943
million, including (i) $375 million of General Unsecured Claims in the Chapter
11 cases, (ii) $18 million of Convenience Claims, (iii) an additional claim from
the PBGC estimated at $450 million (similar to the proof of claim filed in these
cases) in connection with the assumed termination of the Debtors' pension plans,
and (iv) an additional claim estimated at $100 million related to the rejection
of certain executory contracts and operating leases that a buyer(s) would likely
be expected to not assume pursuant to an acquisition.
N. OC ASBESTOS PERSONAL INJURY CLAIMS
For the purpose of this liquidation analysis, the OC Asbestos Personal
Injury Claimants are assumed to assert a claim of $10.7 billion. As these
claimants are assumed to receive Restricted Cash of $110 million and the OCD
Insurance Escrow and the OC Asbestos Personal Injury Liability Insurance Assets
of $58 million, the net claim asserted in a Chapter 7 proceeding would be
$10.532 billion.
O. FB ASBESTOS PERSONAL INJURY CLAIMS
For the purpose of this liquidation analysis, the FB Asbestos Personal
Injury Claimants are assumed to assert a claim of $5.3 billion and to receive
the entire Fibreboard Insurance Settlement Trust (assumed to be $1.262 billion)
and the $130 million of FB Restricted Cash. The remaining claim of $3.908
billion is assumed to be asserted as a general unsecured deficiency claim.
<Page>
APPENDIX D
OWENS CORNING ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDING DECEMBER 31,2002
ALTHOUGH THIS DOCUMENT IS INCORPORATED BY REFERENCE AS PART OF THE DISCLOSURE
STATEMENT, THE PLAN PROPONENTS WILL NOT ATTACH THIS DOCUMENT TO THE COPIES OF
THE DISCLOSURE STATEMENT THAT WILL BE MAILED TO CREDITORS ALONG WITH
THEIR BALLOTS. COPIES OF THIS DOCUMENT MAY BE OBTAINED, FREE OF
CHARGE, THROUGH OC'S WEBSITE AT www.owenscorning.com OR BY SENDING
A WRITTEN REQUEST, INCLUDING BY TELECOPY OR E-MAIL TO:
OWENS CORNING
C/O ROBERT L. BERGER & ASSOCIATES, L.L.C.
16501 VENTURA BLVD., SUITE 440
ENCINO, CA 91436
818-783-2737 (FAX)
alex@bergerassociates.com
THIS DOCUMENT MAY ALSO BE OBTAINED AT THE SECURITIES AND EXCHANGE COMMISSION'S
"EDGAR" WEBSITE AT www.sec.gov/edgar.shtml.
<Page>
APPENDIX E
PRINCIPAL TERMS AND CONDITIONS OF SENIOR NOTES
<Page>
APPENDIX E
PRINCIPAL TERMS OF SENIOR NOTES
THE FOLLOWING IS A GENERAL DESCRIPTION OF THE PRINCIPAL TERMS OF THE SENIOR
NOTES THAT WOULD BE ISSUED BY REORGANIZED OC. THESE ARE INDICATIVE TERMS ONLY,
AND THE ACTUAL TERMS OF THE SENIOR NOTES WILL DEPEND UPON THE CREDIT RATING
ASSIGNED TO THE SENIOR NOTES, PREVAILING MARKET CONDITIONS AT THE TIME OF
ISSUANCE, AND OTHER FACTORS. THE DEFINITIVE TERMS OF THE SENIOR NOTES WILL NOT
BE DETERMINED UNTIL SHORTLY BEFORE THE CONFIRMATION OF THE PLAN.
AMOUNT: $1.4 billion in aggregate, subject to adjustment in
accordance with thE Plan.
SECURITIES: Senior unsecured notes of Reorganized OC, issued in up to
three (3) series, with maturities to be determined by the
Company prior to the Effective Date.
The Company anticipates that the maturities will be no
less than five and no more than ten years, with the
actuaL maturities depending upon market conditions for
securities of this type and rating prevailing at the
time of issuance.
INDENTURE TRUSTEE: To be designated by the Company.
INTEREST RATE: Interest rates to be determined (the rates will be
set prior to the Effective Date so that the securities
trade at or near par). Interest will be payable in cash
semi-annually in arrears on the basis of a 360 day year.
SECURITY/PRIORITY: The Senior Notes will be unsecured senior obligations of
Reorganized OC. The Company anticipates that the Senior
Notes will rank pari passu with a new revolving credit
facility and any refinancing thereof.
MANDATORY REDEMPTION: Upon a change of control, to be defined, Reorganized OC
will be obligated to offer to repurchase the Senior Notes
at 101% of principal amount plus accrued and unpaid
interest to the date of repurchase.
OPTIONAL REDEMPTION: The Senior Notes will be redeemable by Reorganized OC on
terms and at prices determined at the time of issuance in
accordance with prevailing market conditions for
securities of this type and rating. In addition, at any
time prior to the third anniversary of the issuance date,
Reorganized OC may redeem up to 35% of the aggregate
principal amount of the Senior Notes at a fixed
redemption price with the net cash proceeds of an
<Page>
equity offering.
SINKING FUND: None.
RATING: The Senior Notes will be rated by a nationally recognized
rating agency prior to issuance. The Company anticipates
that the Senior Notes will be rated "investment grade" by
the rating agencies.
COVENANTS; The Senior Notes will contain customary covenants in
REPRESENTATIONS: accordance with market convention for similarly rated
securities.
CLOSING DATE: The Effective Date of the Plan.
2
<Page>
APPENDIX F
CURRENT CORPORATE STRUCTURE OF COMPANY
<Page>
APPENDIX G
PROPOSED CORPORATE STRUCTURE OF THE REORGANIZED DEBTORS
[THE RESTRUCTURING TRANSACTIONS WILL BE FILED AT LEAST TEN (10) BUSINESS DAYS
PRIOR TO THE APPROVAL OF THE DISCLOSURE STATEMENT, AND MAY BE AMENDED UP TO TEN
(10) BUSINESS DAYS PRIOR TO THE OBJECTION DEADLINE]
<Page>
APPENDIX H
VOTING PROCEDURES
[THIS DOCUMENT WILL BE INSERTED WHEN THE VOTING PROCEDURES ARE APPROVED BY THE
COURT]