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
___________________________)
Related to Docket Nos. 7438, 7999, 8460, and 8461
Hearing Date: August 27, 2003 at 9:00 a.m.
Objection Deadline: August 22, 2003 at 4:00 p.m.
DISCLOSURE STATEMENT WITH RESPECT TO THIRD 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
Jay A. Shulman and Debtors-in-Possession
Edith K. Altice
100 South Charles Street COVINGTON & BURLING
Baltimore, MD 21201-2773 1201 Pennsylvania Avenue, N.W.
(410) 332-8600 Mitchell F. Dolin
Anna P. Engh
Adam H. Isenberg Washington, D.C. 20004-2401
MaryJo Bellew (202) 662-6000
Centre Square West
1500 Market Street, 38th Floor Special Insurance Counsel to Debtors
Philadelphia, PA 19102-2186 and Debtors-in-Possession
(215) 972-7777
Attorneys for the Debtors and
Debtors-in-Possession
KAYE SCHOLER LLP CAPLIN & DRYSDALE, CHARTERED
Michael J. Crames Elihu Inselbuch
Jane W. Parver 399 Park Avenue
Andrew A. Kress New York, NY 10022
Edmund M. Emrich (212) 319-7125
425 Park Avenue
New York, NY 10022 Peter Van N. Lockwood
(212) 836-8000 Julie W. Davis
One Thomas Circle, N.W.
YOUNG, CONAWAY, Washington, D.C. 20005
STARGATT & TAYLOR LLP (202) 862-5000
James L. Patton, Jr. (I.D. # 2202)
Edwin J. Harron (I.D. # 3396) CAMPBELL & LEVINE, LLC
The Brandywine Building Marla Eskin (I.D. # 2989)
1000 West Street, 17th Floor Mark T. Hurford (I.D. # 3299)
P.O. Box 391 800 King Street
Wilmington, DE 19899-0391 Wilmington, DE 19801
(302) 571-6600 (302) 426-1900
Attorneys for James J. McMonagle, Attorneys for the Official
Legal Representative for Future Claimants Committee of Asbestos Claimants
Dated as of August 8, 2003
TABLE OF CONTENTS
Page
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...............................................................17
A. Pre-Petition Claims Against OCD................................................................17
B. Pre-Petition Claims Against Fibreboard.........................................................17
C. National Settlement Program....................................................................18
D. Establishment of Financial Reserves for Asbestos Liability;
Estimation of Asbestos Liability...............................................................23
V. CHAPTER 11 CASES........................................................................................26
A. Events Leading to the Chapter 11 Filings.......................................................26
B. The Chapter 11 Filings.........................................................................27
C. Continuation of Business; Stay of Litigation...................................................28
D. Professionals Retained in the Chapter 11 Cases.................................................28
E. "First Day" and Other Orders...................................................................38
F. Significant Events During the Chapter 11 Cases.................................................39
G. Avoidance Actions In the Chapter 11 Cases......................................................83
VI. FUTURE BUSINESS OF THE REORGANIZED DEBTORS..............................................................91
A. Structure and Business of the Reorganized Debtors..............................................91
B. Board of Directors and Management of Reorganized Debtors.......................................92
C. Terms of Certificate of Incorporation of Reorganized OCD......................................102
D. Projected Financial Information...............................................................103
VII. SUMMARY OF THE PLAN OF REORGANIZATION..................................................................104
A. Structure of the Plan.........................................................................105
B. Substantive Consolidation under the Plan......................................................106
C. Classification and Treatment of Claims and Interests..........................................108
D. Summary of Debt to be Incurred, Securities to be Issued and
Other Consideration Under the Plan; Execution of Related Documents............................127
E. Distributions under the Plan..................................................................130
F. Treatment of Executory Contracts and Unexpired Leases.........................................135
G. Resolution and Treatment of Disputed, Contingent, and Unliquidated
Claims........................................................................................140
H. Exit Facility.................................................................................141
I. Conditions Precedent to Confirmation and Effectiveness of the Plan............................141
J. Certain Releases and Injunctions Under the Plan...............................................148
K. Summary of Other Provisions of the Plan.......................................................154
L. Effects of Confirmation.......................................................................156
M. Retention of Jurisdiction.....................................................................161
N. Revesting of Assets...........................................................................163
O. Rights of Action..............................................................................163
P. Payment of Statutory Fees.....................................................................164
Q. Post-Consummation Operations of the Debtors...................................................164
VIII. THE ASBESTOS PERSONAL INJURY TRUST.....................................................................164
A. General Description of the Asbestos Personal Injury Trust.....................................165
B. Asbestos Personal Injury Trust Distribution Procedures........................................170
C. The Asbestos Personal Injury Permanent Channeling Injunction..................................187
IX. THE FB ASBESTOS PROPERTY DAMAGE TRUST..................................................................188
A. General Description of the FB Asbestos Property Damage Trust..................................189
B. FB Asbestos Property Damage Claims Procedures.................................................192
C. Injunction Channeling FB Asbestos Property Damage Claims......................................195
X. THE LITIGATION TRUST...................................................................................195
A. General Description of the Litigation Trust...................................................195
B. Distributions of Litigation Trust Recoveries..................................................197
XI. REGISTRATION RIGHTS/RESTRICTIONS ON TRANSFERS OF
CORPORATE SECURITIES AND CERTAIN CLAIMS................................................................198
XII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS.....................................................199
A. Offer and Sale of New OCD Securities Pursuant to the Plan:
Bankruptcy Code Exemption from Registration Requirements......................................199
B. Subsequent Transfers of New OCD Securities....................................................200
XIII. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OF THE PLAN............................................................................................202
A. Federal Income Tax Consequences to the Debtors................................................203
B. Federal Income Tax Consequences to Claim Holders..............................................206
C. Importance of Obtaining Professional Tax Assistance...........................................213
XIV. FEASIBILITY OF THE PLAN AND BEST INTERESTS OF CREDITORS................................................213
A. Feasibility of the Plan.......................................................................213
B. Acceptance of the Plan........................................................................215
C. Best Interests Test...........................................................................216
D. Liquidation Analysis..........................................................................217
E. Valuation of the Reorganized Debtors..........................................................217
F. Application of the "Best Interests" of Creditors Test to the Liquidation
Analysis and the Valuation....................................................................224
G. Confirmation Without Acceptance of All Impaired Classes:
"Cramdown"....................................................................................224
XV. CERTAIN RISK FACTORS TO BE CONSIDERED..................................................................225
A. Certain Factors Relating to the Chapter 11 Proceedings........................................225
B. Certain Factors Relating to Securities to be Issued Pursuant to the Plan......................226
C. Certain Factors Relating to the Reorganized Debtors...........................................227
XVI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF
THE PLAN...............................................................................................230
A. Alternative Plan(s) of Reorganization or Liquidation..........................................230
B. Liquidation Under Chapter 7 or Chapter 11.....................................................230
XVII. THE SOLICITATION; VOTING PROCEDURE.....................................................................232
A. Parties in Interest Entitled to Vote..........................................................232
B. Classes Impaired under the Plan...............................................................233
C. Waivers of Defects, Irregularities, etc.......................................................233
D. Withdrawal of Ballots; Revocation.............................................................233
E. Further Information; Additional Copies........................................................234
XVIII. RECOMMENDATION AND CONCLUSION..........................................................................235
NOTICE WITH RESPECT TO INJUNCTIONS
THE THIRD AMENDED JOINT PLAN OF REORGANIZATION FOR OWENS CORNING AND ITS
AFFILIATED DEBTORS AND DEBTORS-IN-POSSESSION (THE "PLAN"), WHICH IS ATTACHED
AS APPENDIX A TO THIS DISCLOSURE STATEMENT, CONTAINS AN ASBESTOS PERSONAL
INJURY PERMANENT CHANNELING INJUNCTION UNDER 11 U.S.C. ss. 524(g). THE PLAN
ALSO CONTAINS AN INJUNCTION UNDER 11 U.S.C. ss. 105, WHICH CHANNELS ALL
ASBESTOS PROPERTY DAMAGE CLAIMS AGAINST FIBREBOARD CORPORATION, AN INJUNCTION
UNDER 11 U.S.C. ss. 105 WITH RESPECT TO CLAIMS AGAINST THE HARTFORD ENTITIES
AND AN INJUNCTION WITH RESPECT TO CLAIMS AGAINST RELATED PERSONS OF THE
DEBTORS BY HOLDERS OF CLAIMS WHO VOTE IN FAVOR OF THE PLAN, WHICH ARE
INJUNCTIONS AGAINST CONDUCT NOT OTHERWISE ENJOINED UNDER THE BANKRUPTCY CODE.
FOR A DESCRIPTION OF THE ACTS TO BE ENJOINED AND THE IDENTITY OF THE ENTITIES
THAT WOULD BE SUBJECT TO EACH OF THESE INJUNCTIONS, SEE THE FOLLOWING SECTIONS
OF THIS DISCLOSURE STATEMENT:
(1) THE ASBESTOS PERSONAL INJURY PERMANENT CHANNELING INJUNCTION: SECTION
VIII.C OF THIS DISCLOSURE STATEMENT ENTITLED "THE ASBESTOS PERSONAL INJURY
TRUST--THE ASBESTOS PERSONAL INJURY PERMANENT CHANNELING INJUNCTION" AND
SECTION 5.14(b) OF THE PLAN;
(2) THE INJUNCTION CHANNELING FB ASBESTOS PROPERTY DAMAGE CLAIMS: SECTION IX.C
OF THIS DISCLOSURE STATEMENT ENTITLED "THE FB ASBESTOS PROPERTY DAMAGE TRUST--
INJUNCTION CHANNELING FB ASBESTOS PROPERTY DAMAGE CLAIMS " AND SECTION 3.3(g)
OF THE PLAN;
(3) THE INJUNCTION WITH RESPECT TO CLAIMS AGAINST THE HARTFORD ENTITIES:
SECTION VII.J.6 OF THIS DISCLOSURE STATEMENT ENTITLED "INJUNCTION WITH RESPECT
TO CLAIMS AGAINST THE HARTFORD ENTITIES" AND SECTION 5.13(d) OF THE PLAN; AND
(4)THE INJUNCTION WITH RESPECT TO CLAIMS AGAINST RELATED PERSONS OF THE
DEBTORS BY HOLDERS OF CLAIMS WHO VOTE IN FAVOR OF THE PLAN: SECTION VII. J.2
OF THIS DISCLOSURE STATEMENT ENTITLED "CERTAIN RELEASES AND INJUNCTIONS UNDER
THE PLAN -- RELEASES BY HOLDERS OF CLAIMS AND INTERESTS" AND SECTION VII. J.3
ENTITLED "INJUNCTIONS RELATED TO RELEASES" AND SECTIONS 5.13(b) AND (c) OF THE
PLAN.
DISCLAIMER
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS INCLUDED
HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE THIRD AMENDED JOINT PLAN
OF REORGANIZATION FOR OWENS CORNING AND ITS AFFILIATED DEBTORS AND
DEBTORS-IN-POSSESSION (THE "PLAN"), FILED BY OWENS CORNING ("OCD") AND THOSE
ENTITIES LISTED ON SCHEDULE I OF THE PLAN (COLLECTIVELY, THE "SUBSIDIARY
DEBTORS" AND, TOGETHER WITH OCD, THE "DEBTORS"), JAMES J. MCMONAGLE, THE LEGAL
REPRESENTATIVE FOR FUTURE CLAIMANTS ("FUTURE CLAIMANTS' REPRESENTATIVE"), AND
THE OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS ("ASBESTOS CLAIMANTS' COMMITTEE")
(THE DEBTORS, THE FUTURE CLAIMANTS' REPRESENTATIVE, AND THE ASBESTOS
CLAIMANTS' COMMITTEE, COLLECTIVELY, THE "PLAN PROPONENTS"). THE INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT MAY NOT BE RELIED UPON FOR ANY PURPOSE
OTHER THAN TO DETERMINE HOW TO VOTE ON THE PLAN. NO PERSON MAY GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS, OTHER THAN THE INFORMATION AND
REPRESENTATIONS CONTAINED IN THIS DISCLOSURE STATEMENT, REGARDING THE PLAN OR
THE SOLICITATION OF ACCEPTANCES OF THE PLAN.
ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE
STATEMENT AND THE PLAN IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE
PLAN. PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT ARE
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN AND THE EXHIBITS AND
SCHEDULES ANNEXED TO THE PLAN AND THIS DISCLOSURE STATEMENT. THE STATEMENTS
CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF,
AND THERE CAN BE NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN WILL BE
CORRECT AT ANY TIME BEFORE OR AFTER THE DATE HEREOF.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH
SECTION 1125 OF THE UNITED STATES BANKRUPTCY CODE, 11 U.S.C. ss.ss. 101-1330
(AS AMENDED, THE "BANKRUPTCY CODE") AND RULE 3016 OF THE FEDERAL RULES OF
BANKRUPTCY PROCEDURE (THE "BANKRUPTCY RULES") AND NOT NECESSARILY IN
ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER NON-BANKRUPTCY LAWS.
EXCEPT WHERE SPECIFICALLY NOTED, THE FINANCIAL INFORMATION CONTAINED
HEREIN HAS NOT BEEN AUDITED BY A CERTIFIED PUBLIC ACCOUNTING FIRM AND HAS NOT
BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
THIS DISCLOSURE STATEMENT HAS NEITHER BEEN APPROVED NOR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR THE SECURITIES
REGULATORS OF ANY STATE, AND NEITHER THE SEC NOR ANY STATE REGULATORS HAS
PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
PERSONS OR ENTITIES TRADING IN OR OTHERWISE PURCHASING, SELLING OR
TRANSFERRING SECURITIES OF OR CLAIMS AGAINST OCD OR ANY OF THE SUBSIDIARY
DEBTORS AND DEBTORS-IN-POSSESSION IN THESE CASES SHOULD EVALUATE THIS
DISCLOSURE STATEMENT AND THE PLAN IN LIGHT OF THE PURPOSE FOR WHICH THEY WERE
PREPARED.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER ACTIONS OR
THREATENED ACTIONS, THIS DISCLOSURE STATEMENT SHALL NOT CONSTITUTE OR BE
CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION OR WAIVER, BUT
RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THIS DISCLOSURE
STATEMENT SHALL NOT BE ADMISSIBLE IN ANY NON-BANKRUPTCY PROCEEDING NOR SHALL
IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES OR OTHER LEGAL
EFFECTS OF THE PLAN AS TO HOLDERS OF CLAIMS AGAINST, OR EQUITY INTERESTS IN,
OCD OR ANY OF THE SUBSIDIARY DEBTORS AND DEBTORS-IN-POSSESSION IN THESE CASES.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE BANKRUPTCY
COURT AT THIS TIME. A HEARING TO CONSIDER THE ADEQUACY OF THIS DISCLOSURE
STATEMENT UNDER SECTION 1125 OF THE BANKRUPTCY CODE HAS BEEN SET BY THE
BANKRUPTCY COURT FOR AUGUST 27, 2003 AT 9:00 A.M. AS MAY BE CONTINUED FROM
TIME TO TIME BY THE BANKRUPTCY COURT. THE PLAN PROPONENTS RESERVE THE RIGHT TO
MODIFY OR SUPPLEMENT THIS DISCLOSURE STATEMENT PRIOR TO AND UP TO THE TIME OF
THE CONCLUSION OF SUCH HEARING.
NOTE ON DEFINED TERMS
For purposes of this Disclosure Statement, all capitalized terms not
otherwise defined shall have the meanings ascribed to them in Article I of the
Plan, attached to the Disclosure Statement as Appendix A, except as expressly
provided or unless the context clearly requires otherwise. A Glossary of
Additional Terms is attached to this Disclosure Statement as Appendix A-1.
Whenever the context requires, such meanings shall be equally applicable to
both the singular and plural form of such terms, and the masculine gender
shall include the feminine and the feminine gender shall include the
masculine. Any term used in initially capitalized form in this Disclosure
Statement that is not defined herein but that is used in the Bankruptcy Code
shall have the meaning ascribed to such term in the Bankruptcy Code.
SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS
The treatment of each of the Classes is summarized as follows:
- --------------------- ---------------------------- ------------- -------------------- --------------------------------
CLASS DESCRIPTION TREAT- ESTIMATED ESTIMATED RECOVERY
MENT ALLOWED
CLAIMS
(in millions)
- --------------------- ---------------------------- ------------- -------------------- --------------------------------
Unclassified DIP Facility Claims N/A $0 100%
Claims
- --------------------- ---------------------------- ------------- -------------------- --------------------------------
Unclassified Administrative Claims N/A $46 100%
Claims
- --------------------- ---------------------------- ------------- -------------------- --------------------------------
Unclassified Priority Tax Claims N/A Up to $135 100%
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 $1,472 to $1,577 See attachment to this Chart
- --------------------- ---------------------------- ------------- -------------------- --------------------------------
Class 5 Claims Bondholders Claims Impaired $1,389 See attachment to this Chart
- --------------------- ---------------------------- ------------- -------------------- --------------------------------
Class 6 Claims General Unsecured Claims Impaired $323 to $687 See attachment to this Chart
- --------------------- ---------------------------- ------------- -------------------- --------------------------------
Class 7 Claims OC Asbestos Personal Impaired See attachment to See attachment to this Chart
Injury Claims this Chart
- --------------------- ---------------------------- ------------- -------------------- --------------------------------
Class 8 Claims FB Asbestos Personal Impaired See attachment to See attachment to this Chart
Injury Claims 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 Subordinated Claims Impaired N/A 0%
- --------------------- ---------------------------- ------------- -------------------- --------------------------------
Class 12 Interests OCD Interests Impaired N/A 0%
- --------------------- ---------------------------- ------------- -------------------- --------------------------------
- ---------------------------------------------- -----------------------------------------------------------------------
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 reasonably practicable after, the latest of (i) the
Estimated Allowed Claims: $0 Initial Distribution Date, (ii) the date on which a DIP Facility
Claim becomes an Allowed DIP Facility Claim or (iii) the date on
Estimated Recovery: 100% 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
Estimated Allowed Claims: requirements of the Plan, on, or as soon as reasonably practicable
$46 million after, the latest of (i) the Initial Distribution Date, (ii) the date
on which an Administrative Claim becomes an Allowed Administrative
Estimated Recovery: 100% 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 by the Debtors prior to the Initial Distribution Date
Estimated Allowed Claims: or has agreed in writing to a different treatment, each holder of an
Up to $135 million Allowed Priority Tax Claim shall receive in full satisfaction,
settlement, release and discharge of and in exchange for such Allowed
Estimated Recovery: 100% 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 507(a) of the Bankruptcy Code other than
Estimated Allowed Claims: $0 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 otherwise would be tax claims
Claims entitled to priority under Section 507(a)(8) of the Bankruptcy
Code, but which are secured by a valid and unavoidable Encumbrance in
Estimated Allowed Claims: or on any of the Debtors' property (to the extent of the value of the
$5 million Claim holder's interest in the Debtors' property, as determined
pursuant to Section 506 of the Bankruptcy Code).
Estimated Recovery: 100% 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 Description Treatment Under Plan
- ---------------------------------------------- -----------------------------------------------------------------------
- ---------------------------------------------- -----------------------------------------------------------------------
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
Estimated Allowed Claims: Bankruptcy Code or any other applicable law, to the extent of the
$6 million 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 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 classified as a Class 6 Claim, which (i) is in an amount
Estimated Allowed Claims (after that is equal to or less than $5,000 or (ii) on the Ballot has been
adjustment to account for Holders reduced to $5,000 by the holder of such Claim.
of Convenience Claims in amounts
greater than $5,000 who elect to On, or as soon as reasonably practicable after, the latest of (i) the
opt Initial Distribution Date, (ii) the date on which such Class 3 Claim becomes
into Class 3): an Allowed Class 3 Claim, or (iii) the date on which such Class 3 Claim
$18 million 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
Estimated Recovery: 100% 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
- ---------------------------------------------- -----------------------------------------------------------------------
- ---------------------------------------------- -----------------------------------------------------------------------
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
Estimated Allowed Claims: Agreement (the "Bank Holders Claims" or "Class 4 Claims").
$1,472 million to $1,577 million
On, or soon as reasonably practicable after, the latest of (i) the
Estimated Recovery: Initial Distribution Date, (ii) the date on which such Class 4 Claim
See Attached Chart 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 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 man-ner 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 of the Debtors' obligations under the Pre-petition Bonds
Estimated Allowed Claims: (the "Bondholders Claims" or "Class 5 Claims").
$1,389 million
On, or as soon as reasonably practicable after, the later of (i) the
Estimated Recovery: Initial Distribution Date, (ii) the date on which such Class 5 Claim
See Attached Chart 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 the portion of the Combined Distribution
Package equal to the Class 5 Initial Distribution Percentage.
In addition, on or as soon as reasonably practicable after the Final
Distribution Date, each holder of an Allowed Class 5 Claim shall receive
its Pro Rata share of the (i) Cash in an amount equal to the Class 5
Final Distribution Percentage of Excess Available Cash, (ii) Excess
Senior Notes in an aggregate principal amount equal to the Class 5 Final
Distribution Percentage of the Excess Senior Notes Amount, (iii) shares
of New OCD Common Stock in an aggregate number equal to the Class 5
Final Distribution Percentage of the Excess New OCD Common Stock, and
(iv) Cash in an amount equal to the Class 5 Final Distribution
Percentage of the Excess Litigation Trust Recoveries.
Holders of Class 5 Bond Holder Claims may have their distributions under
the Plan reduced to the extent Pre-petition Indenture Trustees exercise
any applicable rights under the Pre-petition Bond Indentures to recover
their costs and/or expenses from the distributions to be paid to Holders
of Class 5 Bond Holder Claims under the Plan. Any payment of such costs
or expenses will commensurately reduce the recovery realized under the
Plan by holders of Class 5 Bond Holder Claims.
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 the Debtors that are General
Claims Unsecured Claims, which are Claims against any of the Debtors that
Estimated Allowed Claims: are not a DIP Facility Claim, an Administrative Claim, a Priority Tax
$323 million to $687 million Claim, an Other Priority Claim, an Other Secured Tax Claim, an Other
Secured Claim, a Convenience Claim, a Bank Holders Claim, a
Estimated Recovery: Bondholders Claim, an OC Asbestos Personal Injury Claim, an FB
See Attached Chart 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 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 Claims ("Class 7 Claims").
Injury Claim
Estimated Allowed Claims: An "OC Asbestos Personal Injury Claim" means any present or future
See Attached Chart right to payment, claim, remedy, liability or Demand against any OC
Person for death, bodily injury, or other personal damages (whether
Estimated Recovery: physical, emotional or otherwise), whether or not such right, claim,
See Attached Chart remedy, liability or Demand is reduced to judgment, liquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured, whether or not the facts of or legal basis for
such right, claim, remedy, liability or Demand are known or unknown,
under any theory of law, equity, admiralty, or otherwise, to the extent
caused or allegedly caused, directly or indirectly, by the presence of,
or exposure to asbestos or asbestos-containing products for which any OC
Person may be legally liable, including, without limitation, the
presence of, or exposure to, asbestos or asbestos-containing products
that were manufactured, installed, fabricated, sold, supplied, produced,
distributed, released, or in any way at any time marketed or disposed of
by any OC Person, including, without express or implied limitation, any
right, claim, remedy, liability or Demand for compensatory damages (such
as loss of consortium, wrongful death, survivorship, proximate,
consequential, general and special damages) and including punitive
damages. OC Asbestos Personal Injury Claims (i) include OC Indirect
Asbestos PI Trust Claims and Unpaid OC Resolved Asbestos Personal Injury
Claims, but (ii) exclude OC Resolved Asbestos Personal Injury Claims, OC
Asbestos Property Damage Claims, OC Indirect Asbestos Property Damage
Claims, workers' compensation claims, FB Asbestos Personal Injury
Claims, FB Indirect Asbestos PI Trust Claims, FB Asbestos Property
Damage Claims, and FB Indirect Asbestos Property Damage Claims.
All Class 7 Claims will be channeled to the Asbestos Personal Injury
Trust, and shall be processed, liquidated and paid pursuant to the terms
and provisions of the Asbestos Personal Injury Trust Distribution
Procedures and the Asbestos Personal Injury Trust Agreement. The sole
recourse of the holder of a Class 7 Claim shall be the Asbestos Personal
Injury Trust, and such holder shall have no right whatsoever at any time
to assert its Claim or Demand against any Protected Party. Without
limiting the foregoing, on the Effective Date, all persons shall be
permanently and forever stayed, restrained, and enjoined from taking any
Enjoined Actions for the purpose of, directly or indirectly, collecting,
recovering, or receiving payment of, on, or with respect to any Class 7
Claim (other than actions brought to enforce any right or obligation
under the Plan, any Exhibits to the Plan, or any other agreement or
instrument between the Debtors or Reorganized Debtors and the Asbestos
Personal Injury Trust, which actions shall be in conformity and
compliance with the provisions of the Plan.)
The Asbestos Personal Injury Trust will be funded as follows:
On the Effective Date, or as soon as practicable after, the Reorganized
Debtors shall irrevocably transfer and assign to the Asbestos Personal
Injury Trust for allocation to the OC Sub-Account the following: (i) the
portion of the Combined Distribution Package equal to the Class 7
Initial Distribution Percentage, (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 Claims that vote on the Plan vote in favor of the Plan.
- ---------------------------------------------- -----------------------------------------------------------------------
Class 8 - FB Asbestos Class 8 consists of FB Asbestos Personal Injury Claims ("Class 8
Personal Injury Claims Claims").
Estimated Allowed Claims: An "FB Asbestos Personal Injury Claim" means any present or future
See Attached Chart right to payment, claim, remedy, liability or Demand against any FB
Person for death, bodily injury, or other personal damages (whether
Estimated Recovery: physical, emotional or otherwise), whether or not such right, claim,
See Attached Chart remedy, liability or Demand is reduced to judgment, liquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured, or unsecured, whether or not the facts of or legal
basis for such right, claim, remedy, liability or Demand are known or
unknown, under any theory of law, equity, admiralty, or otherwise, to
the extent caused or allegedly caused, directly or indirectly, by the
presence of, or exposure to asbestos or asbestos-containing products for
which any FB Person may be legally liable, including, without
limitation, by the presence of, or exposure to asbestos or
asbestos-containing products that were manufactured, installed,
fabricated, sold, supplied, produced, distributed, released, or in any
way at any time marketed or disposed of by any FB Person, including,
without express or implied limitation, any right, claim, remedy,
liability or Demand for compensatory damages (such as loss of
consortium, wrongful death, survivorship, proximate, consequential,
general and special damages) and including punitive damages. FB Asbestos
Personal Injury Claims (i) include FB Indirect Asbestos PI Trust Claims
and Unpaid FB Resolved Asbestos Personal Injury Claims, but (ii) exclude
FB Resolved Asbestos Personal Injury Claims, FB Asbestos Property Damage
Claims, FB Indirect Asbestos Property Damage Claims, workers'
compensation claims, OC Asbestos Personal Injury Claims, OC Indirect
Asbestos PI Trust Claims, OC Asbestos Property Damage Claims, and OC
Indirect Asbestos Property Damage Claims.
All Class 8 Claims will be channeled to the Asbestos Personal Injury
Trust, and shall be processed, liquidated and paid pursuant to the terms
and provisions of the Asbestos Personal Injury Trust Distribution
Procedures and the Asbestos Personal Injury Trust Agreement. The sole
recourse of the holder of a Class 8 Claim shall be the Asbestos Personal
Injury Trust, and such holder shall have no right whatsoever at any time
to assert its Claim or Demand against any Protected Party. Without
limiting the foregoing, on the Effective Date, all Persons shall be
permanently and forever stayed, restrained, and enjoined from taking any
Enjoined Actions for the purpose of, directly or indirectly, collecting,
recovering, or receiving payment of, on, or with respect to any Class 8
Claim (other than actions brought to enforce any right or obligation
under the Plan, any Exhibits to the Plan, or any other agreement or
instrument between the Debtors or Reorganized Debtors and the Asbestos
Personal Injury Trust, which actions shall be in conformity and
compliance with the provisions of the Plan.)
The Asbestos Personal Injury Trust will be funded as follows:
On the Effective Date, or as soon as practicable thereafter, the
Reorganized Debtors will irrevocably transfer and assign to the Asbestos
Personal Injury Trust for allocation to the FB Sub-Account the
following: (i) the FB Reversions, (ii) the Committed Claims Account, and
(iii) the FB Sub-Account Settlement Payment. The Reorganized Debtors
will, or will use all commercially reasonable efforts to, cause the
trustees of the Fibreboard Insurance Settlement Trust to irrevocably
transfer and assign (i) the Existing Fibreboard Insurance Settlement
Trust Assets, and (ii) any and all of the Fibreboard Insurance
Settlement Trust's rights in the FB Reversions, to the Asbestos Personal
Injury Trust, for allocation to the FB Sub-Account, on the Effective
Date or as soon as practicable thereafter.
The Reorganized Debtors will, or will use all commercially reasonable
efforts to, cause the trustees of the Fibreboard Insurance Settlement
Trust to irrevocably transfer and assign (i) the Existing Fibreboard
Insurance Settlement Trust Assets, and (ii) any and all of the
Fibreboard Insurance Settlement Trust's rights in the FB Reversions, to
the Asbestos Personal Injury Trust, for allocation to the FB
Sub-Account, on the Effective Date or as soon as practicable thereafter.
The Reorganized Debtors will also execute and deliver, or will use all
commercially reasonable efforts to cause the trustees of the Fibreboard
Insurance Settlement Trust to execute and deliver, to the Asbestos
Personal Injury Trust such documents as the Asbestos Personal Injury
Trustees reasonably request in connection with the transfer and
assignment of the Existing Fibreboard Insurance Settlement Trust Assets
and the FB Reversions.
Class 8 Claims are impaired. To the extent and in the manner provided in
the Voting Procedures Order, holders of the Claims in Class 8 are
entitled to vote to accept or reject the Plan. Among such conditions to
confirmation is the requirement that at least 75% of the Holders of
Class 8 Claims 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 ("Class 9 Claims").
Damage Claims
Estimated Allowed Claims: An "FB Asbestos Property Damage Claim" means any present or future
$2 million to $7 million right to payment, claim, remedy, or liability against, or debt or
obligation of, any FB Person, whether or not the facts or legal basis
Estimated Recovery: 100% for such right, claim, remedy, liability, debt or obligation are
known or unknown, under any theory of law, equity, admiralty, or
otherwise for, relating to, or arising by reason of, directly or
indirectly, damage to property, including, without limitation,
diminution in the value thereof, or environmental damage or economic
loss related thereto, caused or allegedly caused, directly or
indirectly, in whole or in part by the presence in buildings or other
systems or structures of asbestos or asbestos-containing products for
which any FB Person may be legally liable, including, without
limitation, the presence of, or exposure to, asbestos or
asbestos-containing products that were manufactured, installed,
fabricated, sold, supplied, produced, distributed, released or in any
way at any time marketed or disposed of by any FB Person prior to the
Petition Date, or for which any FB Person is liable due to the acts
or omissions of any FB Person, including, without express or implied
limitation, any right, claim, remedy, liability against, or debt or
obligation for compensatory damages (such as proximate,
consequential, general and special damages) and including punitive
damages. FB Asbestos Property Damage Claims include FB Indirect
Asbestos Property Damage Claims.
All Class 9 Claims will be channeled to the FB Asbestos Property Damage
Trust, and will be processed, liquidated and paid pursuant to the terms
and provisions of the FB Asbestos Property Damage Trust Agreement and
the FB Asbestos Property Damage Trust Distribution Procedures. The sole
recourse of the holder of an Allowed Class 9 Claim will be the FB
Asbestos Property Damage Trust, and such holder will have no right
whatsoever at any time to assert its Class 9 Claim against any FB
Person. Without limiting the foregoing, on the Effective Date, all
Persons shall be permanently and forever stayed, restrained, and
enjoined from taking any Enjoined Actions for the purpose of, directly
or indirectly, collecting, recovering, or receiving payment of, on, or
with respect to any FB Asbestos Property Damage Claims (other than
actions brought to enforce any right or obligation under the Plan, any
Exhibits to the Plan, or any other agreement or instrument between the
Debtors or Reorganized Debtors and the FB Asbestos Property Damage
Trust, which actions shall be in conformity and compliance with the
provisions of the Plan.)
The FB Asbestos Property Damage Trust will be funded as follows:
On the later of the Effective Date and the date by which the FB Asbestos
Property Damage Trustee has executed the FB Asbestos Property Damage
Trust Agreement, the Reorganized Debtors shall transfer and assign, or
cause to be transferred and assigned, to the FB Asbestos Property Damage
Trust the FB Asbestos Property Damage Insurance Assets. The FB Asbestos
Property Damage Insurance Assets means rights to coverage for FB
Asbestos Property Damage Claims under liability insurance policies
issued to Fibreboard and identified in Schedule XV 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 Administrative Claim, by a Debtor against another Debtor or a
Estimated Recovery: 0% non-Debtor Subsidiary against a Debtor, but excluding the Claims set
forth on Schedule XIII 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 XIII, to be filed or amended at
least ten (10) Business Days prior to the Objection Deadline, shall be
deemed cancelled and extinguished in accordance with Section 5.2 of the
Plan. No holder thereof shall be entitled to, or shall receive or retain
any property or interest in property on account of, such Intercompany
Claim. Schedule XIII 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 - Subordinated Claims Class 11 consists of all Subordinated Claims ("Class 11 Claims").
Estimated Allowed Claims: N/A "Subordinated Claims" consist of the Claims or Interests (in the
event that a Claim might be characterized as an Interest) of any
Estimated Recovery: 0% Person who has entered in a subordination agreement that is
enforceable under applicable non-bankruptcy law and which
subordinates such Claims or Interests to any holders of Claims who
will not be paid in full on account of such holder's Allowed Claims
under the Plan. Subordinated Claims shall include, without
limitation, the MIPS Claims and Interests.
On the Effective Date, all of the Subordinated Claims 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 Subordinated Claims.
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.
- ---------------------------------------------- -----------------------------------------------------------------------
Class 12 - OCD Interests Class 12 consists of all OCD Interests ("Class 12 Interests").
Estimated Allowed Interests: N/A "OCD Interests" consist of, (i) collectively, all Existing OCD Common
Stock, Existing OCD Preferred Stock and Existing OCD Options,
Estimated Recovery: 0% together with any options, warrants, conversion rights, rights of
first refusal or other rights, contractual, equitable or otherwise,
to acquire or receive any Existing OCD Common Stock, Existing OCD
Preferred Stock, Existing OCD Options or other capital stock in OCD,
or any contract subscription, commitment or agreement pursuant to
which any Person was or could have been entitled to receive any share
of the capital stock of OCD, or any such option, warrant, conversion
right, right of first refusal or other right (including, without
limitation, any rights of any 401(k) plan or the interest of any
participant therein), in each case issued or entered into by, or
otherwise the obligation of, OCD or another Debtor; and (ii) all
shares of Preferred Stock and Class A Common Stock of Integrex,
together with any options, warrants, conversion rights, rights of
first refusal or other rights, contractual, equitable or otherwise,
relating to such stock, held by Blue Ridge Investments, L.L.C. or its
successors and assigns.
On the Effective Date, all of the OCD Interests outstanding at the
Effective Date will be deemed cancelled and extinguished. No holder
thereof will be entitled to, or will receive or retain any property or
interest in property on account of, such OCD Interests.
Class 12 Interests are Impaired. The holders of the Interests in Class
12 are deemed to reject the Plan and, accordingly, are not entitled to
vote to accept or reject the Plan.
- ---------------------------------------------- -----------------------------------------------------------------------
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.
SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS
The calculation of estimated recoveries for Classes 4, 5, 6,
7 and 8 are 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. Classes 4, 5, 6 and 7 share in the Combined
Distribution Package, which consists of Cash, Senior Notes, and New OCD Common
Stock.
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.
- --------------------------------------------------------- ------------------------------------------------------------
ESTIMATED AGGREGATE CLAIM AMOUNT
- ------------------ -------------------------------------- ----------- ------------ ----------- ----------- -----------
CLASS DESCRIPTION A B C D E
- ------------------ -------------------------------------- ----------- ------------ ----------- ----------- -----------
Class 7 OC Asbestos Personal Injury 6,688 10,700 13,375 16,050
Claims 3,564
- ------------------ -------------------------------------- ----------- ------------ ----------- ----------- -----------
Class 8 FB Asbestos Personal Injury 2,310 3,312 5,300 6,625 7,950
Claims
- --------------------------------------------------------- ----------- ------------ ----------- ----------- -----------
TOTAL $5,874 $10,000 $16,000 $20,000 $24,000
- --------------------------------------------------------- ----------- ------------ ----------- ----------- -----------
The estimated recovery of each of the Classes for each of the various
asbestos claim assumptions, is as follows:
- -------------------------------------------------------------- -------------------------------------------------------
ESTIMATED RECOVERY
- ---------------- ------------------------------- ------------- ----------- ---------- ---------- ---------- ----------
CLASS DESCRIPTION CLAIM* A B C D E
- ---------------- ------------------------------- ------------- ----------- ---------- ---------- ---------- ----------
Class 4 Bank Holder Claims $1,472 51.0% 34.6% 24.4% 20.5% 17.6%
- ---------------- ------------------------------- ------------- ----------- ---------- ---------- ---------- ----------
Class 5 Bond Holder Claims $1,389 51.0% 34.6% 24.4% 20.5% 17.6%
- ---------------- ------------------------------- ------------- ----------- ---------- ---------- ---------- ----------
Class 6 General Unsecured Claims $323 51.0% 34.6% 24.4% 20.5% 17.6%
- ---------------- ------------------------------- ------------- ----------- ---------- ---------- ---------- ----------
Class 7 OC Asbestos Personal Injury See Above 53.3% 36.2% 25.6% 21.5% 18.5%
Claims
- ---------------- ------------------------------- ------------- ----------- ---------- ---------- ---------- ----------
Class 8 FB Asbestos Personal Injury See Above 66.6% 46.5% 29.0% 23.2% 19.4%
Claims
- ---------------- ------------------------------- ------------- ----------- ---------- ---------- ---------- ----------
Class 9 FB Asbestos Property Damage $2 100.0% 100.0% 100.0% 100.0% 100.0%
Claims
- ---------------- ------------------------------- ------------- ----------- ---------- ---------- ---------- ----------
Class 10 Intercompany Claims $0 0.0% 0.0% 0.0% 0.0% 0.0%
- ---------------- ------------------------------- ------------- ----------- ---------- ---------- ---------- ----------
Class 11 Subordinated Claims N/A 0.0% 0.0% 0.0% 0.0% 0.0%
- ---------------- ------------------------------- ------------- ----------- ---------- ---------- ---------- ----------
Class 12 OCD Interests N/A 0.0% 0.0% 0.0% 0.0% 0.0%
- ---------------- ------------------------------- ------------- ----------- ---------- ---------- ---------- ----------
* Recovery calculations based upon low-end claim estimate for Classes 4, 5, 6 and 9
I. INTRODUCTION
Owens Corning, a Delaware corporation ("OCD"), certain of its direct
and indirect Subsidiaries that are also debtors and debtors-in-possession (the
"Subsidiary Debtors" and, together with OCD, the "Debtors") in the
reorganization cases (the "Chapter 11 Cases") under Chapter 11 of the
Bankruptcy Code ("Chapter 11"), James J. McMonagle, the Legal Representative
for Future Claimants (the "Future Claimants' Representative"), and the
Official Committee of Asbestos Claimants (the "Asbestos Claimants' Committee")
(the Debtors, the Future Claimants' Representative, and the Asbestos
Claimants' Committee, collectively, the "Plan Proponents") submit this
disclosure statement (the "Disclosure Statement") pursuant to Section 1125 of
Title 11 of the United States Code (the "Bankruptcy Code") for use in the
solicitation of votes on the Amended Joint Plan of Reorganization for Owens
Corning and its Affiliated Debtors and Debtors-in-Possession, dated as of
March 28, 2003 (the "Plan"), as it may be further amended from time to time in
accordance with its terms and in accordance with Section 1127 of the
Bankruptcy Code and Federal Rule of Bankruptcy Procedure 3019, proposed by the
Plan Proponents and filed with the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). A copy of the Plan is attached
as Appendix A to this Disclosure Statement.
This Disclosure Statement sets forth certain information regarding
the Debtors' operating and financial history prior to October 5, 2000, the
Petition Date, the reasons for seeking protection and reorganization under
Chapter 11, significant events that have occurred since the Chapter 11 Cases
were commenced, and the anticipated organization, operations and financing of
the Debtors upon emergence from Chapter 11 (the "Reorganized Debtors"). This
Disclosure Statement also describes certain terms and provisions of the Plan,
including certain alternatives to the Plan, certain effects of confirmation of
the Plan, certain risk factors associated with securities to be issued under
the Plan, and the manner in which distributions will be made under the Plan.
In addition, this Disclosure Statement discusses the confirmation process and
the voting procedures that holders of Claims entitled to vote under the Plan
must follow for their votes to be counted.
Unless otherwise noted herein, all dollar amounts provided in this
Disclosure Statement and in the Plan are given in United States dollars.
FOR A DESCRIPTION OF THE PLAN AND VARIOUS RISKS AND OTHER FACTORS
PERTAINING TO THE PLAN, PLEASE SEE SECTION VII OF THIS DISCLOSURE STATEMENT,
ENTITLED "SUMMARY OF THE PLAN OF REORGANIZATION," AND SECTION XV OF THIS
DISCLOSURE STATEMENT, ENTITLED "CERTAIN RISK FACTORS TO BE CONSIDERED."
ALTHOUGH THE PLAN PROPONENTS BELIEVE THAT THE SUMMARIES OF THE PLAN
AND RELATED DOCUMENT SUMMARIES ARE FAIR AND ACCURATE, SUCH SUMMARIES ARE
QUALIFIED TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE TEXT OF SUCH
DOCUMENTS OR STATUTORY PROVISIONS. FACTUAL INFORMATION CONTAINED IN THIS
DISCLOSURE STATEMENT HAS BEEN PROVIDED BY THE DEBTORS' MANAGEMENT, EXCEPT
WHERE OTHERWISE SPECIFICALLY NOTED. THE PLAN PROPONENTS DO NOT WARRANT OR
REPRESENT THAT THE INFORMATION CONTAINED HEREIN, INCLUDING THE FINANCIAL
INFORMATION, IS WITHOUT ANY MATERIAL INACCURACY OR OMISSION.
THE PLAN PROPONENTS BELIEVE THAT THE PLAN WILL ENABLE THE DEBTORS TO
SUCCESSFULLY REORGANIZE AND ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND THAT
ACCEPTANCE OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTORS AND THE HOLDERS
OF CLAIMS AND INTERESTS. THE PLAN PROPONENTS URGE ALL HOLDERS OF CLAIMS WHOSE
VOTES ARE BEING SOLICITED TO VOTE TO ACCEPT THE PLAN.
NOTHING CONTAINED HEREIN SHALL BE DEEMED TO CONSTITUTE AN ADMISSION
OF ANY FACT OR LIABILITY BY ANY PARTY, BE ADMISSIBLE IN ANY NON-BANKRUPTCY
PROCEEDING INVOLVING THE DEBTORS OR ANY OTHER PARTY, OR BE DEEMED CONCLUSIVE
ADVICE ON THE TAX OR OTHER LEGAL EFFECTS OF THE REORGANIZATION AS TO HOLDERS
OF ALLOWED CLAIMS OR INTERESTS. YOU SHOULD CONSULT YOUR PERSONAL COUNSEL OR
TAX ADVISOR ON ANY QUESTIONS OR CONCERNS RESPECTING TAX, SECURITIES, OR OTHER
LEGAL CONSEQUENCES OF THE PLAN.
II. PLAN VOTING INSTRUCTIONS AND PROCEDURES
A. Definitions
All capitalized terms used herein and not otherwise defined herein
have the meanings given to them in the Article I of the Plan, which is
attached hereto as Appendix A, if defined in the Plan, or in the Glossary of
Additional Terms, attached hereto as Appendix A-1, except as expressly
provided or unless the context clearly requires otherwise. Whenever the
context requires, such meanings shall be equally applicable to both the
singular and plural form of such terms, and the masculine gender shall include
the feminine and the feminine gender shall include the masculine. Any term
used in initially capitalized form in this Disclosure Statement that is not
defined herein but that is used in the Bankruptcy Code shall have the meaning
ascribed to such term in the Bankruptcy Code. Additionally, the rules of
construction contained in Section 102 of the Bankruptcy Code apply to the
construction of this Disclosure Statement.
B. Notice to Holders of Claims and Interests
This Disclosure Statement is being transmitted to holders of Impaired
Claims that are entitled under the Bankruptcy Code to vote on the Plan, as
well as other parties. See Section XVII of this Disclosure Statement entitled
"The Solicitation; Voting Procedure" for a description of the Classes of
Claims that are entitled to vote on the Plan. Holders of Interests that do not
receive any distributions under the Plan on account of their Interests are
deemed to have rejected the Plan and are not entitled to vote on the Plan. The
primary purpose of this Disclosure Statement is to provide adequate
information to enable holders of Claims against the Debtors to make a
reasonably informed decision whether to vote to accept or reject the Plan.
Approval by the Bankruptcy Court of this Disclosure Statement means
the Bankruptcy Court has found that this Disclosure Statement contains
information of a kind and in sufficient and adequate detail to enable such
Claim holders to make an informed judgment whether to accept or reject the
Plan. THE BANKRUPTCY COURT'S APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT
CONSTITUTE EITHER A GUARANTEE OF THE ACCURACY OR COMPLETENESS OF THE
INFORMATION CONTAINED HEREIN OR AN ENDORSEMENT OF THE PLAN BY THE BANKRUPTCY
COURT.
IF THE PLAN IS APPROVED BY THE REQUISITE VOTE OF HOLDERS OF CLAIMS
ENTITLED TO VOTE AND IS SUBSEQUENTLY CONFIRMED BY THE BANKRUPTCY COURT, THE
PLAN WILL BIND ALL HOLDERS OF CLAIMS AGAINST, AND INTERESTS IN, THE DEBTORS,
WHETHER OR NOT THEY WERE ENTITLED TO VOTE OR DID VOTE ON THE PLAN AND WHETHER
OR NOT THEY RECEIVE OR RETAIN ANY DISTRIBUTIONS OR PROPERTY UNDER THE PLAN.
THUS ALL HOLDERS OF CLAIMS AGAINST THE DEBTORS ARE ENCOURAGED TO READ THIS
DISCLOSURE STATEMENT AND ITS APPENDICES AND SCHEDULES CAREFULLY AND IN THEIR
ENTIRETY BEFORE DECIDING TO VOTE EITHER TO ACCEPT OR REJECT THE PLAN.
THIS DISCLOSURE STATEMENT IS THE ONLY DOCUMENT AUTHORIZED BY THE
BANKRUPTCY COURT TO BE USED IN CONNECTION WITH THE SOLICITATION OF VOTES TO
ACCEPT OR REJECT THE PLAN. No solicitation of votes may be made except after
distribution of this Disclosure Statement, and no person has been authorized
to distribute any information concerning the Debtors other than the
information contained herein. No such information shall be relied upon in
making a determination to vote to accept or reject the Plan.
CERTAIN OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS
BY ITS NATURE FORWARD LOOKING AND CONTAINS ESTIMATES, ASSUMPTIONS AND
PROJECTIONS THAT MAY BE MATERIALLY DIFFERENT FROM ACTUAL FUTURE RESULTS.
Except with respect to the Pro Forma Financial Projections and Reorganization
Balance Sheet set forth in Appendix B attached hereto and except as otherwise
specifically and expressly stated herein, this Disclosure Statement does not
purport to reflect any events that may occur subsequent to the date hereof and
that may have a material impact on the information contained in this
Disclosure Statement. The Debtors do not undertake any obligation to, and do
not intend to, update the Financial Projections; thus, the Financial
Projections will not reflect the impact of any subsequent events not already
accounted for in the assumptions underlying the Financial Projections.
Further, the Debtors do not anticipate that any amendments or supplements to
this Disclosure Statement will be distributed to reflect such occurrences.
Accordingly, the delivery of this Disclosure Statement shall not under any
circumstance imply that the information herein is correct or complete as of
any time subsequent to the date hereof.
EXCEPT WHERE SPECIFICALLY NOTED, THE FINANCIAL INFORMATION CONTAINED
HEREIN HAS NOT BEEN AUDITED BY A CERTIFIED PUBLIC ACCOUNTING FIRM AND HAS NOT
BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
C. Solicitation Package
Each person entitled to vote to accept or reject this Plan is being
transmitted (1) this Disclosure Statement; (2) the Plan (attached as Appendix
A to this Disclosure Statement); (3) notification of (a) the time by which
Ballots or Master Ballots, as applicable, to accept or reject the Plan must be
submitted, (b) the date, time and place of the hearing to consider
confirmation of the Plan and related matters, and (c) the time for filing
objections to confirmation of the Plan; and (4) a Ballot or Master Ballot, as
applicable (and return envelopes), to be used in voting to accept or reject
the Plan. Any person who receives this Disclosure Statement but does not
receive a Ballot or Master Ballot and who believes that he is entitled to vote
to accept or reject the Plan should contact the Voting Agent at the address or
telephone number set forth in Section XVII of this Disclosure Statement.
D. Voting Procedures, Ballots and Voting Deadline
After carefully reviewing the Plan, this Disclosure Statement and all
related material including, without limitation, the Voting Procedures attached
hereto as Appendix H (the "Voting Procedures"), creditors should indicate
acceptance or rejection of the Plan by voting in favor of or against the Plan
on the enclosed Ballot or Master Ballot and return it in the envelope
provided. Only original Ballots and Master Ballots will be accepted.
Each Ballot and Master Ballot has been coded to reflect the Class of
Claims it represents. Accordingly, in voting to accept or reject the Plan,
only the coded Ballots or Master Ballots accompanying this Disclosure
Statement may be used.
IN ORDER FOR VOTES TO BE COUNTED, BALLOTS AND MASTER BALLOTS MUST BE
PROPERLY COMPLETED AS SET FORTH ABOVE AND IN ACCORDANCE WITH THE VOTING
PROCEDURES AND RECEIVED NO LATER THAN [DATE], AT [TIME] (-_- TIME) (THE
"VOTING DEADLINE") BY ROBERT L. BERGER & ASSOCIATES, L.L.C. (THE "VOTING
AGENT") OR BY INNISFREE M&A INCORPORATED (THE "SPECIAL VOTING AGENT"). NO
STOCK CERTIFICATES OR DEBT INSTRUMENTS OR OTHER INSTRUMENTS OR DOCUMENTS
REPRESENTING CLAIMS OR INTERESTS SHOULD BE RETURNED WITH THE BALLOT OR MASTER
BALLOT.
Questions about (1) the Voting Procedures, (2) the packet of
materials that has been transmitted, (3) the amount of a Claim or (4) requests
for an additional copy of the Plan, this Disclosure Statement or any
appendices or exhibits to such documents (for which a charge may be imposed
unless otherwise specifically provided by Federal Rule of Bankruptcy Procedure
3017(d)) should be directed to:
OWENS CORNING
c/o Robert L. Berger & Associates, L.L.C.
16501 Ventura Blvd., Suite 440
Encino, CA 91436
818-906-8300 (phone)
818-783-2737 (fax)
FOR FURTHER INFORMATION AND INSTRUCTION ON VOTING TO ACCEPT OR REJECT
THE PLAN, SEE SECTION XVII OF THIS DISCLOSURE STATEMENT ENTITLED "THE
SOLICITATION; VOTING PROCEDURE."
E. Confirmation Hearing and Deadline for Objections to Confirmation
Pursuant to Section 1128 of the Bankruptcy Code and Federal Rule of
Bankruptcy Procedure 3017(c), a hearing has been scheduled on confirmation of
the Plan (the "Confirmation Hearing") for__________ __, 2003, at ____ _.m. The
Confirmation Hearing may be adjourned from time to time without further notice
except for the announcement of the adjournment date made at the Confirmation
Hearing or at any subsequent adjourned Confirmation Hearing. Objections to
confirmation of the Plan must be made in writing and must specify in detail
the name and address of the objector, all grounds for the objection, and the
amount and class of the Claim. Any such objection must be filed with the
Bankruptcy Court on or before __________ __, 2003 at ____ _.m. Objections to
confirmation of the Plan are governed by Federal Rule of Bankruptcy Procedure
9014. Additional information regarding the filing of any objections to
confirmation of the Plan is contained in the Notice accompanying this
Disclosure Statement.
III. GENERAL INFORMATION CONCERNING THE DEBTORS
The following information is only a summary and is qualified in its
entirety by reference to OC's Annual Report on Form 10-K for the year ended
December 31, 2002, 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 17,500 employees around the world,
and manufacturing, sales and research facilities, including joint venture and
licensee relationships, in more than 30 countries. See Appendix F for a chart
depicting OC's corporate structure as of March, 2003, and Appendix G for a
description of the anticipated corporate structure of the Reorganized Debtors
after the Effective Date.
2. General Description of OC's Business
OC operates in two business segments: Building Materials
Systems and Composite Solutions. In 2002, the Building Materials Systems
segment accounted for approximately 73% of OC's total sales, while Composite
Solutions accounted for the remainder. The products and systems provided by
OC's Building Materials Systems segment are used in residential remodeling and
repair, commercial improvement, new residential and commercial construction,
and other related markets. The products and systems offered by OC's Composite
Solutions segment are used in end-use markets such as building construction,
automotive, telecommunications, marine, aerospace, energy, appliance,
packaging and electronics. Many of OC's products are marketed under registered
trademarks, including Propink(R), Advantex(R) and/or the color PINK.
Approximately 65% of OC's sales are related to home
improvement, non-residential markets, sales of composite materials and sales
outside U.S. markets. Approximately 35% of OC's 2002 sales are related to new
U.S. residential construction.
OC also has affiliate companies in a number of countries.
Generally, affiliated companies' sales, earnings and assets are not included
in either operating segment unless OC owns more than 50% of the affiliate and
the ownership is not considered temporary.
As part of OC's strategy to divest non-strategic business,
OC sold the majority of its Engineered Pipe Business during the first quarter
of 2001 and sold its 40% interest in Alcopor Owens Corning, its European
building materials joint venture, during the fourth quarter of 2001.
Revenue from external customers, income from operations and
total assets attributable to each of OC's operating segments and geographic
regions, as well as information concerning the dependence of its operating
segments on foreign operations, for each of the years 2002, 2001, and 2000,
are contained in Note 2 to OC's Consolidated Financial Statements, entitled
"Segment Data." See OC's Annual Report on Form 10-K for the year ended
December 31, 2002, 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 improvement, new residential construction,
manufactured housing and commercial construction markets.
Sales of building insulation systems, roofing
shingles and accessories, housewrap, and vinyl siding are made through home
centers, lumberyards, retailers and distributors. Other channels of
distribution for insulation systems in North America include insulation
contractors, wholesalers, specialty distributors, metal building insulation
laminators, mechanical insulation distributors and fabricators, manufactured
housing producers and appliance, office products and automotive manufacturers.
Foam insulation and related products are sold to distributors and retailers
who resell to residential builders, remodelers and do-it-yourself customers;
commercial and industrial markets through specialty distributors; and, in some
cases, large contractors, particularly in the agricultural and cold storage
markets.
Outside North America, OC has a foam technology
facility in Italy and a majority-owned joint venture foam plant in China and
has licensed others for the manufacture of foam products at locations in
Europe, the Middle East and Asia. OC sells foam products through traditional
agents and distributors.
In Latin America, OC produces and sells building
and mechanical insulation primarily through an affiliate joint venture in
Mexico, as well as exports from U.S. plants. In Asia Pacific, OC sells
primarily mechanical insulation through joint venture businesses, including
two majority owned insulation plants and an insulation fabrication center in
China, a minority owned joint venture in Saudi Arabia, and licensees.
Seasonality. Sales of the Building Materials
Systems segment tend to follow seasonal patterns in the home improvement,
remodeling and renovation, and new construction industries. Sales levels for
the segment, therefore, are typically lower in the winter months.
Major Customers. No customer of the Building
Materials Systems segment accounted for more than 6% of the segment's sales in
2002.
(b) Composite Solutions Segment
Principal Products and Methods of Distribution.
Composite Solutions operates in North America, Europe, Latin America and Asia
Pacific, with affiliates and licensees around the world.
OC is a leading producer of glass fiber materials
used in composites. Composites are made up of two or more components (e.g.,
plastic resin and a fiber, traditionally a glass fiber) used in various
applications to replace traditional materials, such as aluminum, wood and
steel. OC is increasingly providing systems that are designed for a specific
end-use application and entail a material, a proprietary process and a fully
assembled part or system. The global composites industry has thousands of
end-use applications. OC has selected strategic markets and end-users in which
OC provides integral solutions, such as the building construction,
transportation, and telecommunications/electronics markets. A large portion of
the business also serves thousands of applications within the consumer,
industrial and infrastructure markets, which include sporting goods and marine
applications. OC sells composite materials to original equipment manufacturers
and boat builders, both directly and through distributors.
Within the building construction market, glass
fiber mat is used to provide fire and mildew resistance in 95% of all asphalt
roofing shingles. OC sells glass fiber and/or mat directly to a small number
of major shingle manufacturers, including its own roofing business. Tubs,
showers and other related internal building components used for both
remodeling and new construction are also major applications of composite
materials in the construction market. These end-use products are some of the
first successful material substitution conversions normally encountered in
developing countries. Glass fiber reinforcements and composite material
solutions for these markets are sold to direct accounts, and also to
distributors around the world, who in turn service thousands of customers.
A significant portion of transportation-related
composite solutions are used in automotive applications. Non-automotive
transportation applications include heavy trucks, rail cars, shipping
containers, refrigerated containers, trailers and commercial ships. Growth
continues in automotive applications, as composite systems create new
applications or displace other materials in existing applications. There are
hundreds of composites applications, including body panels, door modules,
integrated front-end systems, instrument panels, chassis and underbody
components and systems, pick-up truck beds and heat and noise shields. These
composite parts are either produced by original equipment manufacturers or are
purchased by original equipment manufacturers from first-tier suppliers.
Within the telecommunications and electronics
markets, glass fiber composites are used to protect and reinforce fiber optic
and copper cables. OC also produces central strength members for fiber optic
cables. Other end-uses include connectors, circuit breaker boxes, computer
housings, electricians' safety ladders and hundreds of various
electro/mechanical components.
OC sells asphalt products, primarily for industrial
and specialty applications, under the Trumbull brand name. There are three
principal kinds of industrial asphalt: built-up roofing asphalt, used in
commercial flat roof systems to provide waterproofing and adhesion; saturants
or coating asphalt, used to manufacture roofing mats, felts and residential
shingles; and industrial specialty asphalt, used by manufacturers in a variety
of products such as waterproofing systems, adhesives, coatings, dyes and
product extenders, as well as in various automotive applications. There are
several channels of distribution for these products. They are used internally
in the manufacture of residential roofing products and are also sold to other
shingle manufacturers. In addition, asphalt is sold to roofing contractors and
distributors for built-up roofing asphalt systems and to manufacturers in a
variety of other industries, including automotive, chemical, rubber and
construction.
Major Customers. No customer of the Composite
Solutions segment accounted for more than 7% of the segment's sales in 2002.
(c) Business Realignment Preceding Commencement of
Chapter 11 Cases
Prior to the commencement of the Chapter 11 Cases,
OC consummated several significant acquisitions and divestitures of
non-strategic businesses and realigned existing businesses.
During the period 1994 through 1996, OC made a
number of acquisitions for its Building Materials Systems segment in the
United States and Europe. The combined purchase price for the acquisitions
totaled approximately $370 million. The largest of these acquisitions was the
$110 million acquisition in 1994 of Pilkington Insulation Limited and Kitsons
Insulation Products Limited, the United Kingdom-based insulation manufacturing
and industrial supply businesses of Pilkington PLC.
On June 27, 1997, OC acquired Fibreboard
Corporation ("Fibreboard"), a North American manufacturer of vinyl siding and
accessories, as well as manufactured stone. At the time of the acquisition,
Fibreboard was a leading producer of vinyl siding and accessories, with plants
in Georgia, Missouri and North Carolina in the United States, and British
Columbia and Ontario in Canada. Marketing products under the brand names
Norandex and Vytec, Fibreboard also operated more than 130 company-owned
distribution centers in 32 states. The purchase price of the acquisition
totaled approximately $660 million, including assumed debt of $138 million.
On July 28, 1997, OC acquired Amerimark Building
Products, Inc. ("Amerimark") (including its wholly-owned subsidiaries,
Wolverine Coil Coating, Inc. and RBP, Inc.) for a purchase price of
approximately $317 million. Amerimark was a specialty building products
company serving the exterior residential housing industry. Major product lines
included vinyl siding, vinyl windows and aluminum accessories for the exterior
of the home.
In April 1998, OC completed the sale of its 50%
interest in the Alpha/Owens Corning, L.L.C. joint venture, a manufacturer and
marketer of unsaturated polyester and vinylester resins. OC sold its interest
to the joint venture and Alpha Corporation of Tennessee. OC and Alpha
Corporation of Tennessee had created the joint venture in 1994, combining
their existing resin businesses to form the largest manufacturer of polyester
resins in North America.
In September 1998, OC completed the formation of a
joint venture with a U.S. subsidiary of Groupe Porcher Industries. The joint
venture manufactured and sold yarns and specialty materials. OC contributed
two manufacturing plants and certain proprietary technology to the joint
venture, in return for a 49% interest in the joint venture. The remaining 51%
interest in the joint venture was sold to the Groupe Porcher subsidiary for
approximately $550 million.
In late 1999, certain OC entities, including
Fibreboard, underwent an internal reorganization. On December 15, 1999, OCD
approved the transfer of the assets and liabilities of Cultured Stone
Corporation ("Cultured Stone"), a Fibreboard subsidiary, to OCD in exchange
for the transfer by OCD of stock of Amerimark to Fibreboard. Effective
December 31, 1999, Cultured Stone and Vytec Sales Corporation, also a
Fibreboard subsidiary, merged with and into Fibreboard. On that same date,
Fibreboard exchanged the Cultured Stone assets and liabilities for the
Amerimark stock. Also on the same date, Fabwel, Inc. ("Fabwel"), a Fibreboard
subsidiary, and the newly acquired Amerimark were merged with and into
Norandex, Inc. ("Norandex"), a Fibreboard subsidiary, which then changed its
name to Exterior Systems, Inc. ("Exterior Systems").
During 2000, OC implemented the first phase of a
strategic restructuring program, which continued throughout 2001. On February
2, 2000, OC completed the sale of the assets of Falcon Foam, a producer of
expanded polystyrene foam insulation in Michigan and California, to Atlas
Roofing Corp. for net proceeds of approximately $50 million. On June 5, 2000,
OC completed the sale of its European building materials business to Alcopor
Owens Corning Holding AG ("Alcopor Owens Corning"), an unconsolidated joint
venture between OC and Alcopor Holding AG, in which OC retained a 40%
interest. Proceeds from the sale, net of OC's $34 million cash infusion into
the joint venture, were $177 million.
3. Acquisitions, Divestitures and Business Realignments During
the Pendency of the Chapter 11 Cases
(a) Business Realignments
Beginning in 2000, and continuing after the filing
with the Bankruptcy Court of voluntary petitions for relief under Chapter 11
made by OCD and the Subsidiary Debtors (the "Filing"), OC reviewed its cost
structures as a response to the overall slowed economy in both the building
materials and composites industries. As a result of that review, various
restructuring programs were put into place as OC assessed cost structures of
certain businesses and facilities as well as overhead expenditures for the
entire company. One result of such assessments was the determination to exit
certain businesses and consolidate in others, leading to significant
restructuring charges as assets were written down to realizable value or other
exit costs were recognized. In addition, a strategic review of OC's businesses
resulted in additional restructuring charges in 2002.
By Order dated December 9, 2002, OC received
Bankruptcy Court approval for the restructuring of two of OC's joint ventures
in China, namely OC Shanghai and OC Guangzhou. The restructuring involved the
extension of certain debt maturities and the reduction of principal by the
China Lenders (as defined below), who were owed approximately $22 million,
which debt was originally guaranteed by OCD. The restructuring, pursuant to
the terms of the China Standstill Agreement, extended the debt maturities
through December 31, 2005, and reduced the principal. In consideration for the
proposed maturity extensions and reduction in principal, OC agreed that the
China Lenders have an Allowed unsecured guaranty Claim against the Estate in
the aggregate amount of $22 million.
(b) Acquisitions
In June 2002, OC received Bankruptcy Court approval
to consummate the restructuring of OC's Indian joint venture, Owens-Corning
(India) Limited ("OCIL"), a producer of composite material. As part of the
restructuring, OC, through its wholly-owned subsidiary, IPM Inc.("IPM"),
contributed approximately $3 million of cash into OCIL and agreed to allow a
guaranty claim in the amount of approximately $19 million in its Chapter 11
proceedings in respect of OCIL's junior debt. In addition, OCIL's senior debt
maturities were extended, and its junior debt was converted to approximately
$7 million of redeemable convertible debentures. Through these restructuring
efforts, OC's ownership interest in OCIL increased from approximately 50% to
approximately 60%. OC began consolidating OCIL on July 1, 2002, when the
restructuring was consummated by all of the parties to the restructuring and
approved by the Indian Government.
(c) Divestitures
During the first quarter of 2001, OC completed the
sale of the majority of its interest in Engineered Pipe Systems, Inc. ("EPS"),
a producer of glass-reinforced plastic pipe with operations mostly in Europe.
EPS and Saudi Arabian Amiantit Co. ("Amiantit") had entered into a Stock
Purchase Agreement, dated February 28, 2001, pursuant to which EPS sold to
Amiantit all of the capital stock of its wholly-owned subsidiaries, Flowtite
A/S and Flowtite Technology A/S. Also pursuant to the Stock Purchase
Agreement, Amiantit purchased from Norske EPS BOT A/S, its interest in
Flowtite Botswana Ltd. The purchase price was $2 million. By letter dated May
29, 2001, the Unsecured Creditors' Committee represented to the Debtors that
it had no objection to the Stock Purchase Agreement, or the implementation of
the transactions related to these agreements. Net proceeds from the sale were
$22 million.
OC completed its divestiture of the pipe business
with a sale of certain other operations to Amiantit pursuant to a Stock
Purchase Agreement, dated November 21, 2001. The purchase price for the sale
of these interests was $2.6 million. By letter dated November 29, 2001, the
Unsecured Creditors' Committee represented to the Debtors that it had no
objection to the Stock Purchase Agreement or the implementation of the
transactions provided for under the agreement.
During the fourth quarter of 2001, OC sold its
remaining 40% interest in Alcopor Owens Corning, an unconsolidated joint
venture for net proceeds of $23 million. On October 29, 2001, OC received
approval from the Bankruptcy Court to finalize the transaction, as modified.
B. Financial Structure of the Company at the Petition Date
1. Capitalization
The following table sets forth the consolidated current
liabilities and capitalization of OC as at the dates indicated. The table does
not reflect OC's pre-petition asbestos liability. This information is
qualified in its entirety by, and should be read in connection with, the
Consolidated Financial Statements of OC (including the notes thereto) that are
included in OC's Annual Report on Form 10-K for the year ended December 31,
2002, 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.
- -----------------------------------------------------------------------------------------------
(in millions of dollars)
As of
- ------------------------------------------- -------------------------- ------------------------
October 4, 2000 December 31, 2002
- ------------------------------------------- -------------------------- ------------------------
- ------------------------------------------- -------------------------- ------------------------
Current Liabilities
- ------------------------------------------- -------------------------- ------------------------
Accounts Payable and $ 281 $ 756
Accrued Liabilities
- ------------------------------------------- -------------------------- ------------------------
Short-term Debt 50 40
- ------------------------------------------- -------------------------- ------------------------
Long-term Debt - current portion 10 65
- ------------------------------------------- -------------------------- ------------------------
- ------------------------------------------- -------------------------- ------------------------
Long-term Debt 66 71
- ------------------------------------------- -------------------------- ------------------------
- ------------------------------------------- -------------------------- ------------------------
Other
- ------------------------------------------- -------------------------- ------------------------
Other employee benefits liability 322 368
- ------------------------------------------- -------------------------- ------------------------
Pension Plan liability 41 500
- ------------------------------------------- -------------------------- ------------------------
Other 133 103
- ------------------------------------------- -------------------------- ------------------------
- ------------------------------------------- -------------------------- ------------------------
Liabilities Subject to Compromise 3,503 3,362
(excluding Asbestos)
- ------------------------------------------- -------------------------- ------------------------
- ------------------------------------------- -------------------------- ------------------------
Company-obligated Securities of Entities 195 200
Holding Solely Parent Debentures-subject
to compromise
- ------------------------------------------- -------------------------- ------------------------
Minority Interest 47 49
- ------------------------------------------- -------------------------- ------------------------
- ------------------------------------------- -------------------------- ------------------------
Total Liabilities and Minority Interest $ 4,648 $ 5,514
- ------------------------------------------- -------------------------- ------------------------
- ------------------------------------------- -------------------------- ------------------------
- ------------------------------------------- -------------------------- ------------------------
Stockholders' Equity
- ------------------------------------------- -------------------------- ------------------------
Common Stock 6 6
- ------------------------------------------- -------------------------- ------------------------
Additional Paid-In Capital 694 690
- ------------------------------------------- -------------------------- ------------------------
Deficit (1,876) (4,766)
- ------------------------------------------- -------------------------- ------------------------
Accumulated other (103) (395)
comprehensive loss
- ------------------------------------------- -------------------------- ------------------------
Other (9) (3)
- ------------------------------------------- -------------------------- ------------------------
- ------------------------------------------- -------------------------- ------------------------
Total Stockholders' Equity (1,288) (4,468)
- ------------------------------------------- -------------------------- ------------------------
- ------------------------------------------- -------------------------- ------------------------
Total Liabilities and Stockholders' $ 3,360 $ 1,046
Equity (excluding Asbestos)
- ------------------------------------------- -------------------------- ------------------------
2. Pre-petition Indebtedness
As of the Petition Date, OCD, the Subsidiary Debtors and
certain Non-Debtor Subsidiaries were parties to a Credit Agreement, dated as
of June 26, 1997 (the "Credit Agreement"), with certain banks listed in Annex
A thereto and with Credit Suisse First Boston, as agent for the lenders
signatory thereto. The Credit Agreement initially provided a revolving credit
line of up to $2 billion available in the form of revolving loans. The initial
borrowers under the Credit Agreement were: OCD, European Owens-Corning
Fiberglas S.A., N.V., Owens-Corning S.A., Owens-Corning Canada Inc.,
Owens-Corning UK Holdings Ltd. and Sierra Corp. (and Fibreboard as successor
to Sierra Corp. after the merger of Sierra Corp. with Fibreboard). The Credit
Agreement was amended by Amendment No. 1, dated as of February 20, 1998
("Amendment No. 1"), pursuant to which Owens-Corning Fiberglas (U.K.) Ltd.,
Owens Corning Building Products (U.K.) Ltd., Owens Corning Polyfoam UK Ltd.
and Owens-Corning Isolation France S.A. were added as borrowers under the
credit facility. In addition, Amendment No. 1, among other things, reduced the
maximum amount of the commitment under the credit facility to $1.8 billion.
The Credit Agreement was again amended by Amendment No. 2, dated as of
November 30, 1998, pursuant to which, among other things, certain financial
covenants were modified to accommodate the NSP ("Amendment No. 2", and the
Credit Agreement as amended by Amendment No. 1 and Amendment No. 2, the "1997
Credit Agreement"). The obligations under the 1997 Credit Agreement were
guaranteed by certain Subsidiaries of OCD (collectively, the "Subsidiary
Guarantors"). OCD was a guarantor, in addition to a borrower, under the 1997
Credit Agreement.
At the Petition Date, IPM, Vytec Corporation, Owens-Corning
Fiberglas Sweden Inc., Falcon Foam Corporation, Integrex, Fibreboard, Exterior
Systems, Inc., Owens-Corning Fiberglas Technology Inc., and Soltech, Inc. were
Subsidiary Guarantors of the obligations under the 1997 Credit Agreement. As
of the Petition Date, the principal amount outstanding under the 1997 Credit
Agreement was $1,565,919,519 (including contingent liabilities for undrawn
letters of credit in the amount of $250,919.519). See Section VII.C.3.b(iii)
of this Disclosure Statement for a description of the treatment of the Bank
Holders Claims under the Plan and Section V.F.11 of this Disclosure Statement
entitled "Implementation of Process for Resolution of Inter-Creditor Issues"
and Section V.G. entitled "Avoidance Actions in the Chapter 11 Cases" of this
Disclosure Statement, for a description of certain pending litigation relating
to the Subsidiary Guarantees.
OC's other principal loan indebtedness as of the Petition
Date (excluding intercompany indebtedness) included:
---------------------------------------- ------------------------- -------------------------------
Amount Outstanding (principal
Notes Aggregate Original and accrued interest) as of
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 $250,000,000 $258,234,722
Series) 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 ($40,045,000 / $1,224,153)
due 2002
---------------------------------------- ------------------------- -------------------------------
$150 million 9.375% Debentures of the $150,000,000 $7,213,654
$300 Million High Coupon Debentures ($6,988,000 / $225,654)
due 2012
---------------------------------------- ------------------------- -------------------------------
130 Million DEM Bearer Bonds 130,000,000 DEM $62,776,357
due 2000 (7.250%) ($60,572,174 / $2,204,183)
---------------------------------------- ------------------------- -------------------------------
Industrial Revenue Bonds $9,950,000
---------------------------------------- ------------------------- -------------------------------
TOTAL $1,345,325,830
($1,317,555,174 / $27,770,656)
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 L.L.C., 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
L.L.C. then lent the proceeds from the MIPS issuance, together with the
proceeds from the issuance of common limited liability company interests, to
OCD, which loan was evidenced by the issuance by OCD to Owens-Corning Capital
L.L.C. 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 Claims and Interests" is defined
to mean all Claims asserted directly or indirectly against OCD (or Interests
to the extent any such Claims may be characterized as Interests) 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, (iii) the
Claim of The Bank of New York ("BONY"), as Special Trustee on behalf of the
holders of the MIPS, and (iv) any Interests of the foregoing to the extent any
rights of such holders may be characterized as Interests. Because the rights
against OCD under the Convertible Subordinated Debentures are contractually
subordinated to substantially all indebtedness, and since the MIPS are
themselves equity securities, the MIPS Claims and Interests are treated as
Subordinated Claims under Class 11 of the Plan. As a result, the MIPS Claims
and Interests shall be deemed extinguished. No holder thereof shall be
entitled to, or shall receive or retain any property or interest in property
on account the MIPS Claims and Interests. For a discussion of the treatment of
Subordinated Claims generally, see Section VII.C.3.b(x) of this Disclosure
Statement entitled "Class 11--Subordinated Claims."
BONY, as successor Trustee under the Indenture dated as of
May 10, 1995, for the 6.5% Convertible Subordinated Debentures due 2002 (the
"MIPS Indenture"), has alleged several defects in the Plan with respect to its
asserted claims and the rights of the holders of the MIPS. BONY has asserted:
(a) that the Plan improperly places the MIPS Claims and Interests in the same
class, because the MIPS Claims and Interests constitute both claims and
interests; (b) that, to the extent the Plan's definition of "MIPS Claims and
Interests" includes claims of BONY for fees and expenses, the Plan improperly
classifies claims that are not subordinated with subordinated claims; and (c)
that the Plan improperly discriminates between The Bank of New York's claim
for fees and expenses and the claims of Pre-petition Indenture Trustees, by
excluding the MIPS Indenture from the Plan's definition of Pre-Petition Bond
Indentures. The Debtors disagree with each of these assertions. The Debtors
believe that whether or not the parties holding or asserting rights under the
MIPS Indenture hold "claims" or "interests," such rights are subject to
contractual subordination such that they are not entitled to receive any
recovery under the Plan. The Debtors similarly believe that there are no
circumstances that would support the payment of fees and expenses to BONY.
Although the Plan gives BONY, as trustee, different treatment, regarding fees
and expenses, than it provides to Pre-petition Indenture Trustees (e.g., by
not providing for BONY to retain its liens, if any, on any payments or
distribution made to the holders of the MIPS Claims and Interests), the
Debtors believe such disparate treatment is justified. The holders of the MIPS
Claims and Interests receive no distributions under the Plan and, as a
consequence, BONY will not be disbursing any funds to such holders and there
will be no property to which its lien could attach.
In 1991, OCD formed O. C. Funding B.V. ("O.C. Funding"), a
closed company with limited liability organized under the laws of The
Netherlands, as a wholly-owned subsidiary of OCD for the purposes of obtaining
financing for OCD and its subsidiaries. O.C. Funding subsequently issued
$150,000,000 aggregate principal amount of its 10% Guaranteed Debentures due
2001 (the "O.C. Funding B.V. Debentures"), which were guaranteed as to payment
of principal and interest, on an unsubordinated basis, by OCD. The O.C.
Funding B.V. Debentures were issued pursuant to an indenture dated as of May
15, 1991, between O.C. Funding, OCD and The Bank of New York, as trustee. The
guarantee by OCD was issued pursuant to that indenture.
Substantially all of the net proceeds of the issuance of the
O.C. Funding B.V. Debentures were lent by O.C. Funding to OCD pursuant to a
loan agreement dated June 11, 1991. The intercompany loan was evidenced by a
promissory note in the principal amount of $148,000,000 (the "Debentures
Intercompany Note"). In accordance with terms required by OCD's then current
bank credit agreement, payment on the intercompany loan was subordinated in
accordance with the terms of an attached schedule.
As of the Petition Date, $42,395,000 aggregate principal
amount of the O.C. Funding B.V. Debentures remained outstanding. Wilmington
Trust Company, as successor trustee, filed a proof of claim against OCD in the
amount of $43,855,272 on account of the foregoing guaranty plus accrued
interest. This Claim is defined in the Plan as the "Wilmington Trust/O.C.
Funding B.V. Claim." See Section 1.211 of the Plan, defining the "Wilmington
Trust/O.C. Funding B.V. Claim".
KBC Bank Nederland N.V. ("KBC Bank") loaned $20 million to
O.C. Funding under a Credit Agreement dated August 10, 1999, between O.C.
Funding and KBC Bank (the "KBC Agreement"). The loan to O.C. Funding was
guaranteed on an unsubordinated basis by OCD. O.C. Funding subsequently lent
the proceeds of its borrowing under the KBC Agreement to OCD, which
intercompany borrowing was represented by a promissory note in the principal
amount of $20,000,000.
Westdeutsche Landesbank Girozentrale ("West LB") loaned $10
million to O.C. Funding under a Credit Facility dated February 24, 2000,
between O.C. Funding and West LB (the "West LB Facility"). The loan to O.C.
Funding was guaranteed on an unsubordinated basis by OCD. O.C. Funding
subsequently lent the proceeds of its borrowing under the KBC Agreement to
OCD, which intercompany borrowing was represented by a promissory note in the
principal amount of $11,800,000.
As of the Petition Date, $20,379,264 (including accrued
interest) was outstanding under the KBC Agreement, and $10,135,236 (including
accrued interest) was outstanding under the West LB Facility. KBC Bank filed a
proof of claim based on its guaranty from OCD in the amount of $20,379,264 and
West LB filed a proof of claim based on its guaranty from OCD in the amount of
$10,135,236, exclusive of postpetition interest.
In July 2003, Goldman Sachs & Co. Inc. ("Goldman Sachs")
advised OCD that it was the beneficial holder of more than 50% of the
outstanding O.C. Funding B.V. Debentures and that it was cooperating with KBC
Bank and West LB concerning the assertion of claims relating to the O.C
Funding B.V. Debentures, the KBC Agreement and the West LB Facility. Goldman
Sachs made a number of claims relating to the indebtedness under the O.C.
Funding B.V. Debentures. Among other claims, Goldman Sachs alleged that the
subordination provisions governing certain of the intercompany indebtedness
were not enforceable, and Goldman Sachs began court proceedings in The
Netherlands seeking, among other relief, to compel O.C. Funding to assert its
claim under such intercompany indebtedness on an unsubordinated basis.
Although OCD believes that it has meritorious positions with respect to the
assertions made by Goldman Sachs, OCD believed it was in the best interests of
its creditors and the maintenance of undisrupted business operations to settle
Goldman Sachs' claims by reaching an agreement as to the amount and priority
of claims that OCD would support as allowed claims in the bankruptcy
proceedings. Accordingly, OCD has reached an agreement in principle with
Goldman Sachs pursuant to which OCD would support (a) Allowed Claims in Class
5 aggregating $74,377,708 in respect of the claims of the holders of the O.C.
Funding B.V. Debentures, the KBC Agreement and the West LB Facility against
OCD arising under the direct guarantees by OCD, (ii) Allowed Claims in Class 6
aggregating $32,371,570 in respect of the claims of O.C. Funding against OCD
under the intercompany notes entered into in respect of the related
financings, (iii) an Allowed Claim in Class 6 of $15,628,430 in respect of a
negotiated portion of the claims of the holders of the O.C. Funding B.V.
Debentures against OCD under the Debentures Intercompany Note, and (iv) An
allowed Claim in Class 11 of $26,205,260 in respect of the remaining claims of
the holders of the O.C. Funding B.V. Debentures against OCD under the
Debentures Intercompany Note. The amounts of such claims specified above may
be adjusted subject to verification of the exact amounts and dates of
intercompany borrowings and other related matters.
The agreement in principle with respect to such claims has
not yet been set forth in definitive documentation, and is subject to approval
of the Bankruptcy Court, and may be challenged by other creditors. In
addition, while the agreement in principle described above has been reached
with Goldman Sachs, it has not been approved by the other holders of the O.C.
Funding B.V. Debentures, KBC Bank, West LB or Wilmington Trust Company, the
successor trustee under the O.C. Funding B.V. Debentures. If such other
parties to do not agree to the terms of this agreement in principle, or if the
agreement in principle is not set forth in definitive documentation, the
amounts of the claims asserted by the parties described above, and the
relative seniority thereof, would likely be different than as described above.
The amounts of such claims actually allowed by the Bankruptcy Court may be
more or less than the amounts indicated above.
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 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(xi) of this Disclosure Statement for a
description of the treatment of the Existing OCD Common Stock under the Plan.
IV. BACKGROUND OF ASBESTOS-RELATED LITIGATION
A. Pre-Petition Claims Against OCD
Prior to the Petition Date, numerous claims had been asserted against
OCD alleging personal injuries arising from inhalation of asbestos fibers.
Virtually all of these claims arose out of OCD's manufacture, distribution,
sale or installation of an asbestos-containing calcium silicate, high
temperature insulation product, the manufacture and distribution of which was
discontinued in 1972. OCD received approximately 18,000 asbestos personal
injury claims during 2000, approximately 32,000 such claims during 1999 and
approximately 69,000 such claims during 1998.
B. Pre-Petition Claims Against Fibreboard
Prior to 1972, Fibreboard manufactured asbestos-containing products,
including insulation products. Fibreboard has since been named as a defendant
in many thousands of personal injury claims for injuries allegedly caused by
asbestos exposure. Fibreboard received approximately 22,000 asbestos personal
injury claims during 2000.
1. The Fibreboard Insurance Settlement Trust
In an effort to deal with the financial impact of its
existing and future asbestos-related personal liability in the early 1990's,
Fibreboard entered into a settlement agreement with two of its insurers,
ultimately resulting in the creation of a trust (the "Fibreboard Insurance
Settlement Trust"). See Section IV.C.3(c) of this Disclosure Statement
entitled "Insurance Settlement" for a discussion of the Insurance Settlement
entered into by Fibreboard with respect to its asbestos-related liability.
During the fourth quarter of 1999, the Fibreboard Insurance
Settlement Trust was funded with $1.873 billion in proceeds from the
settlement referred to above. The terms of the Fibreboard Insurance Settlement
Trust provided for the funds in the trust to be applied solely to the costs of
resolving pending and future Fibreboard asbestos-related liabilities, whether
incurred as a result of a judgment in litigation or a settlement, or
otherwise.
During 2000 prior to the Petition Date, payments made out of
the Fibreboard Insurance Settlement Trust for asbestos-related claims against
Fibreboard totaled $820 million, including $45 million in defense, claims
processing and administrative expenses. As a result of the Filing, no payments
for such claims have been made from the Fibreboard Insurance Settlement Trust
since the Petition Date.
The assets of the Fibreboard Insurance Settlement Trust are
comprised of marketable securities. The Fibreboard Insurance Settlement Trust
has received a ruling from the United States Internal Revenue Service ("IRS")
that it is a "qualified settlement fund" for federal income tax purposes. At
December 31, 2002, the fair value of assets in the Fibreboard Insurance
Settlement Trust was $1.238 billion. In addition, there are $127 million in
Administrative Deposits held in settlement accounts to pay applicable
Fibreboard asbestos claim settlements. See Section IV.C.4 of this Disclosure
Statement entitled "NSP Administrative Deposits" for a discussion of these
Administrative Deposits.
2. The Committed Claims Account
Fibreboard also has an interest of approximately $30 million
in the balance of the account (the "Committed Claims Account") established by
Fibreboard and Continental Casualty Company ("Continental") pursuant to the
Agreement Between Fibreboard and Continental On Remaining Issues, dated
December 13, 1999, which was the subject of a Stipulation and Agreed Order
Between Debtors and Continental Casualty Company Regarding Status and
Disposition of Funds in Committed Claims Account and Related Matters Under
Buckets Agreement, entered by the Bankruptcy Court on June 27, 2001. Under the
Plan, the Committed Claims Account is being transferred to the FB Sub-Account
of the Asbestos Personal Injury Trust for the benefit of the holders of
Allowed Claims in Class 8, FB Asbestos Personal Injury Claims. See Section
VII.C.3.b(vii) of this Disclosure Statement entitled "Impaired Classes of
Claims--Class 8 - FB Asbestos Personal Injury Claims."
C. National Settlement Program
1. General
Beginning in late 1998, OCD implemented the National
Settlement Program ("NSP") to resolve personal injury asbestos claims through
settlement agreements with individual plaintiffs' law firms (the "NSP
Agreements").
The NSP was intended to better manage the asbestos
liabilities of OCD and to help OCD better predict the timing and amount of
indemnity payments for both pending and future asbestos claims. The number of
law firms participating in the NSP expanded from approximately 50 when the NSP
was established to approximately 120 as of the Petition Date. The NSP
Agreements extended through at least 2008 and provided for the resolution of
existing asbestos claims, including unfiled claims pending with the
participating law firm at the time it entered into an NSP Agreement ("Initial
Claims"). The NSP Agreements also established procedures and fixed payments
for resolving, without litigation, claims against either OCD or Fibreboard, or
both, arising after a participating firm entered into an NSP Agreement
("Future Claims").
Settlement amounts for both Initial Claims and Future Claims
were negotiated with each firm participating in the NSP, and each firm was to
communicate with its respective clients to obtain authority to settle
individual claims. Payments to individual claimants were to vary based on a
number of factors, including the type and severity of disease, age and
occupation. All such payments were subject to delivery of satisfactory
evidence of a qualifying medical condition and exposure to OCD's and/or
Fibreboard's products, delivery of customary releases by each claimant, and
other conditions. Certain claimants settling non-malignancy claims with OCD
and/or Fibreboard were entitled to an agreed pre-determined amount of
additional compensation if they later developed a more severe asbestos-related
medical condition.
As to Future Claims, each participating NSP firm agreed
(consistent with applicable legal requirements) to recommend to its future
clients, based on appropriately exercised professional judgment, to resolve
their asbestos personal injury claims against OCD and/or Fibreboard through an
administrative processing arrangement, rather than litigation. In the case of
Future Claims involving non-malignancy, claimants were required to present
medical evidence of functional impairment, as well as the product exposure
criteria and other requirements set forth above, to be entitled to
compensation.
2. OCD's Experience with the NSP
(a) NSP Claims Against OCD
As of the Petition Date, the NSP covered
approximately 239,000 Initial Claims against OCD, approximately 150,000 of
which had satisfied all conditions to final settlement, including receipt of
executed releases, or other resolution (the "Final NSP Settlements") at an
average cost per claim of approximately $9,300. As of the Petition Date,
approximately 89,000 of such Final NSP Settlements had been paid in full or
otherwise resolved, and approximately 61,000 were unpaid in whole or in part.
As of such date, the remaining balance payable under NSP Agreements in
connection with these unpaid Final NSP Settlements was approximately $510
million. Through the Petition Date, OCD had received approximately 6,000
Future Claims under the NSP.
(b) Non-NSP Claims Against OCD
As of the Petition Date, approximately 29,000
asbestos personal injury claims were pending against OCD outside the NSP. This
compares to approximately 25,000 such claims pending on December 31, 1999. The
information needed for a critical evaluation of pending claims, including the
nature and severity of disease and definitive identifying information
concerning claimants, typically becomes available only through the discovery
process or as a result of settlement negotiations, which often occur years
after particular claims are filed. As a result, OCD has limited information
about many of such claims.
OCD resolved (by settlement or otherwise)
approximately 10,000 asbestos personal injury claims outside the NSP during
1998, 5,000 such claims during 1999 and 3,000 such claims during 2000 prior to
the Petition Date. The average cost of resolution was approximately $35,900
per claim for claims resolved during 1998, $34,600 per claim for claims
resolved during 1999, and $44,800 per claim for claims resolved during 2000
prior to the Petition Date. Generally, these claims were settled as they were
scheduled for trial, and they typically involved more serious injuries and
diseases. Accordingly, OCD does not believe that such average costs of
resolution are representative of the value of the non-NSP claims then pending
against OCD.
(c) Asbestos-Related Payments by OCD
As a result of the Filing, OCD has not made any
asbestos-related payments since the Petition Date except for approximately $20
million paid on its behalf by third parties pursuant to appeal bonds issued
prior to the Petition Date. During 1999 and 2000 (prior to the Petition Date),
OCD made asbestos-related payments falling within four major categories: (1)
settlements in respect of verdicts incurred or claims resolved prior to the
implementation of the NSP; (2) NSP settlements; (3) non-NSP settlements
covering cases not resolved by the NSP; and (4) defense, claims processing and
administrative expenses, as follows:
- --------------------------------------------- --------------------------------- --------------------------------------
1999 2000 (through October 4)1
(In millions of dollars) (In millions of dollars)
- --------------------------------------------- --------------------------------- --------------------------------------
Pre-NSP Settlements $170 $ 51
- --------------------------------------------- --------------------------------- --------------------------------------
NSP Settlements 570 538
- --------------------------------------------- --------------------------------- --------------------------------------
Non-NSP Settlements 30 42
- --------------------------------------------- --------------------------------- --------------------------------------
Defense, Claims Processing and 90 54
Administrative Expenses
- --------------------------------------------- --------------------------------- --------------------------------------
Total2 $860 $685
- --------------------------------------------- --------------------------------- --------------------------------------
- -------------------
1 Since the Petition date, all pre-petition asbestos claims and pending
litigation against the Debtors, including, without limitation, claims
under the NSP, have been automatically stayed.
2 Amounts shown are before tax and application of insurance recoveries.
Prior to the Petition Date, OCD deposited certain
amounts in settlement accounts to facilitate claims processing under the NSP
("Administrative Deposits"). See Section IV.C.4 of this Disclosure Statement
entitled "NSP Administrative Deposits" for a further discussion of the
settlement accounts.
3. Fibreboard's Experience with the NSP
(a) NSP Claims Against Fibreboard
As described above, OCD acquired Fibreboard in
1997. Fibreboard executed the NSP Agreements and became a participant in the
NSP effective in the fourth quarter of 1999. The NSP Agreements settled
asbestos personal injury claims that had been filed against Fibreboard by
participating plaintiffs' law firms and claims that could have been filed
against Fibreboard by such firms following the lifting, in the third quarter
of 1999, of an injunction which had barred the filing of asbestos personal
injury claims against Fibreboard.
As of the Petition Date, the NSP covered
approximately 206,000 Initial Claims against Fibreboard, approximately 118,000
of which had satisfied all conditions to final settlement, including receipt
of executed releases, or other resolution as Final NSP Settlements at an
average cost per claim of approximately $7,400. As of the Petition Date,
approximately 62,000 of such Final NSP Settlements had been paid in full or
otherwise resolved, and approximately 56,000 were unpaid in whole or in part.
As of such date, the remaining balance payable under NSP Agreements in
connection with these unpaid Final NSP Settlements was approximately $330
million. The NSP Agreements also provided for the resolution of Future Claims
under the NSP against Fibreboard through the administrative processing
arrangement described above. Through the Petition Date, Fibreboard had
received approximately 6,000 Future Claims under the NSP.
(b) Non-NSP Claims Against Fibreboard
As of the Petition Date, approximately 9,000
asbestos personal injury claims were pending against Fibreboard outside the
NSP. This compares to approximately 1,000 such claims pending on December 31,
1999. Fibreboard resolved (by settlement or otherwise) approximately 2,000
asbestos personal injury claims outside the NSP during 2000 prior to the
Petition Date at an average cost of resolution of approximately $45,000 per
claim. Generally, these claims were settled as they were scheduled for trial,
and they typically involved more serious injuries and diseases. Accordingly,
OC does not believe that such average costs of resolution are representative
of the value of the non-NSP claims then pending against Fibreboard.
(c) Insurance Settlement
In 1993, Fibreboard entered into certain settlement
arrangements in an attempt to address the financial impact of its existing and
future asbestos-related personal injury liabilities. One such arrangement was
an insurance settlement (the "Insurance Settlement") between Fibreboard and
two of its insurers, Continental and Pacific Indemnity Company ("Pacific").
Under the terms of the Insurance Settlement, Continental and Pacific were,
among other things, to provide up to $2 billion minus interim settlements,
plus accrued interest, to resolve asbestos personal injury claims pending
against Fibreboard as of August 27, 1993 and all future asbestos personal
injury claims asserted against Fibreboard after such date, including defense
costs. These funds were to be put into the Fibreboard Insurance Settlement
Trust. See Section V.F.6 of this Disclosure Statement entitled "Insurance
Settlement" and OC's Annual Report on Form 10-K for the year ended December
31, 2002, (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:
------------------------------------------ ---------------------------------------
2000 (through October 4, 2000)3
(In millions of dollars)
------------------------------------------ ---------------------------------------
Pre-NSP Settlements $29
------------------------------------------ ---------------------------------------
NSP Settlements 705
------------------------------------------ ---------------------------------------
Non-NSP Settlements 41
------------------------------------------ ---------------------------------------
Defense, Claims Processing and 45
Administrative Expenses
------------------------------------------ ---------------------------------------
Total $820
------------------------------------------ ---------------------------------------
- -------------------
3 Only payments through October 4, 2000, are reflected. Since the
Petition date, all pre-petition asbestos claims and pending
litigation against the Debtors, including, without limitation, claims
under the NSP, have been automatically stayed.
The payments for settlements under the NSP include
certain administrative deposits during the reporting period in respect of
Fibreboard claims. Of this, approximately $127 million remains in settlement
accounts and is or will be the subject of litigation to determine if any of
these funds are recoverable by Fibreboard's estate. See Section IV.C.4 of this
Disclosure Statement entitled "NSP Administrative Deposits" for a further
discussion of the settlement accounts.
4. NSP Administrative Deposits
As referred to above, prior to the Petition Date, OCD and
Fibreboard entered into settlement agreements with four law firms including
Baron & Budd, P.C. ("B&B"), whereby OCD and Fibreboard would make certain
Administrative Deposits to facilitate claims processing under the NSP
Agreements. These Administrative Deposits were made to settlement accounts
maintained by such law firms for the benefit of their clients under the NSP
Agreements. Each of the NSP Agreements contemplated that clients of the four
firms, who received written approval from OCD and/or Fibreboard that they
qualified for settlement payments pursuant to the terms of the particular NSP
Agreement, would receive their settlement distribution from the Administrative
Deposits maintained by their law firm.
After the Petition Date, the Debtors did not authorize any
further distributions from the Administrative Deposits. Nonetheless, at least
one law firm, Waters & Kraus LLP, 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.
As OC has discussed in its public filings, any estimate for
financial reporting purposes of its liabilities for pending and expected
future asbestos claims is subject to considerable uncertainty because such
liabilities are influenced by numerous variables that are inherently difficult
to predict. As discussed further below, such uncertainties significantly
increased as a result of the Filing. Prior to the Petition Date, such
variables included, among others, the cost of resolving pending non-NSP
claims; the disease mix and severity of disease of pending NSP claims; the
number, severity of disease, and jurisdiction of claims filed in the future
(especially the number of mesothelioma claims); how many future claimants were
covered by an NSP Agreement; the extent, if any, to which individual claimants
exercised a right to opt out of an NSP Agreement and/or engage counsel not
participating in the NSP; the extent, if any, to which counsel not bound by an
NSP Agreement undertook the representation of asbestos personal injury
plaintiffs against OCD and Fibreboard; the extent, if any, to which OC
exercised its right to terminate one or more of the NSP Agreements due to
excessive opt-outs or for other reasons; and the success in controlling the
costs of resolving future non-NSP claims.
As a result of the Filing, the inherent difficulties and
uncertainties involved in estimating the number and cost of resolution of
present and future asbestos-related claims against OCD and Fibreboard have
significantly increased and will likely have the effect of increasing the
number and ultimate cost of resolution of such claims substantially. This
could result from the following factors:
o The settlement values for specified categories of disease
set forth in the NSP Agreements were established by
arms-length negotiations with the participating law firms in
circumstances very different from those prevailing in the
Chapter 11 Cases. The settlement values available to
individual claimants under the arrangements to be included
in any plan or plans of reorganization may vary
substantially from those contemplated by the NSP Agreements.
Because OC's estimate of liabilities in respect of non-NSP
claims assumed payment of settlement values similar to those
contained in the NSP Agreements, such estimate is subject to
similar uncertainty.
o OC anticipates that the number and estimated aggregate value
of allowed future claims will ultimately be determined
either as a result of negotiations involving the Future
Claimants' Representative and the other interested
constituencies or, if necessary, by the Bankruptcy Court. It
is not possible to predict the outcome of such negotiations,
or Bankruptcy Court determination, at this time.
As a result of the foregoing, the asbestos liability reserve
estimates set forth in OC's consolidated financial statements are subject to
change. In addition, for the reasons stated below, the estimation of the
asbestos liability reserve for financial statement purposes may differ from
the competing estimations of asbestos liability for Plan purposes.
2. Estimation of Asbestos Liability for Plan Purposes
Unlike the estimation of asbestos-related liability for the
purposes of establishing financial statement reserves, which are based upon a
range of probable and reasonably estimable liabilities, the estimation of
asbestos-related liability for the purposes of determining the relative
allocation of plan consideration is based upon an estimation of the number of
Allowed Claims and their value, including future claims. The proposed Plan
provides that such estimated liabilities would be determined by the District
Court or Bankruptcy Court as part of the confirmation hearing on the Plan. It
is therefore 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 or Bankruptcy Court through
litigation. It is not possible to predict the outcome of such negotiations or
litigation at this time.
In connection with establishing the number and estimated
aggregate value of Asbestos Personal Injury Claims, and as a basis for
establishing the alternative scenarios for creditor recoveries, the Debtors,
the Unsecured Creditors' Committee, the Asbestos Claimants' Committee and the
Future Claimants' Representative retained experts to assist them in estimating
the number and value of OC Asbestos Personal Injury Claims and FB Asbestos
Personal Injury Claims. Such estimates are necessary under Section 524(g) of
the Bankruptcy Code, which requires an estimate of the number of claims that
will be filed against the Debtors in the future. These estimates, particularly
in light of the extended length of the forecast period, necessarily result in
more uncertainty than generally holds for estimates of other types of
contingent liability. In addition, to make these estimates, each of the
experts must make certain assumptions, including the propensity of asbestos
claimants to file a claim against the Debtors, the timing and disease severity
of those claims, and the appropriate average settlement value of claims, all
of which add to the uncertainty and can result in significant variations in
the final estimates.
Based on facts currently known to it, including positions
that have been articulated by various interested constituencies since the
Petition Date, the Company believes that the estimates included in most or all
such analyses are likely to vary substantially from the amounts of OCD's and
Fibreboard's respective asbestos reserves in prior periods, and are likely to
also vary substantially from one another, for a number of reasons.
First, such analyses will not involve the same type of
estimation process required in connection with the preparation of financial
statements under generally accepted accounting principles. In general, such
accounting principles require accruals with respect to contingent liabilities
(including asbestos liabilities) only to the extent that such liabilities are
both probable and reasonably estimable. With respect to such liabilities that
are probable as to which a reasonable estimate can be made only in terms of a
range (with no point within the range determined to be more probable than any
other point in such range), such accounting principles require only the
accrual of the amount representing the low point in such range.
Moreover, because such analyses are prepared solely for use
in the negotiation of a plan of reorganization, they will naturally reflect
the respective interests of the different constituencies putting them forward.
Certain constituencies, for example, may have an interest in presenting an
analysis that estimates such liability at the highest level that can arguably
be justified; others may have an interest in estimating such liability at the
lowest possible level; while others may have an interest in estimating such
liability at a point between the two extremes, in an effort to achieve
consensus in the negotiation of the plan of reorganization. In addition,
interested constituencies in the Debtors' bankruptcy proceedings may also take
into account the implications of any such analyses prepared for use in the
Debtors' bankruptcy proceedings on their position in one or more of the other
asbestos-related bankruptcy cases pending in the District of Delaware or
elsewhere.
Ultimately, OCD's (and Fibreboard's) total liability for
asbestos claims will be finally determined after a lengthy period of
negotiations and, if necessary, by the Bankruptcy Court, taking into account
numerous factors not present in OCD's (and Fibreboard's) pre-petition
environment. Such factors include the claims of competing creditor groups as
to the appropriate treatment of their Allowed Claims, the size of the total
estimated asbestos liability, the total number of present Asbestos Personal
Injury Claims Allowed, the total amount of future Asbestos Personal Injury
Claims, and the impact of the procedural consolidation before Judge Wolin of
the Chapter 11 Cases of the Debtors with the cases of Armstrong World
Industries, Inc., W.R. Grace & Co., Federal-Mogul Global, Inc., and USG
Corporation on the timing, outcome or other aspects of the Chapter 11 Cases,
including estimates of the number and cost of resolution of asbestos-related
claims.
V. CHAPTER 11 CASES
A. Events Leading to the Chapter 11 Filings
Since the adoption of its NSP in the fourth quarter of 1998, OC's
strategy had been to use that program to avoid the costly and unpredictable
traditional tort system and to quantify the amount of payments to asbestos
claimants and control the timing of those payments to match the Company's
ability to make such payments. The NSP achieved these goals in many respects
and also facilitated the negotiation of the deferral of payments to NSP
participants during 2000 prior to the Filing. As discussed in more detail
below, however, OC's inability to obtain ongoing financing on acceptable
terms, the lack of support for additional payment deferrals, the higher than
anticipated number of asbestos-related claims (which adversely affected the
Company's estimated liquidity needs through 2004), and the deterioration of
OC's operations during 2000, resulted in the decision by OC to seek protection
for the Debtors under Chapter 11 of the Bankruptcy Code.
During the third quarter of 2000, OC met on a number of occasions
with CSFB, as the agent for the lenders under the 1997 Credit Agreement, to
discuss a refinancing of its $1.8 billion credit facility under the 1997
Credit Agreement, which was scheduled to expire in June 2002. OC requested
that the refinancing extend into 2005 and be increased to an amount sufficient
to meet its expected liquidity needs, including the repayment on maturity of
$300 million of debentures in 2005. Following extended negotiations, OC
concluded at the end of the third quarter of 2000 that its lenders would not
be willing to agree to a refinancing that would meet OC's needs. Moreover, OC
concluded that the lenders would require, as a part of any refinancing, that
OC pledge its assets to secure the loans and agree to limits on payments for
asbestos liabilities that would be inconsistent with its anticipated asbestos
payment obligations.
During the course of the third quarter of 2000, support for asbestos
payment deferrals was adversely impacted by several factors. First, as a
result of the downturn in the Company's operations in the third quarter of
2000 (discussed below), OC approached certain NSP firms to request additional
payment deferrals. Based on those discussions, OC determined that it would not
be feasible to obtain additional payment deferrals and that the likely terms
of the refinancing would be unacceptable to the NSP participants. Second, the
executive committee under the NSP and other participants in the NSP declined
to agree to any deferral in payments due from Fibreboard. Finally, several NSP
firms declined to grant the deferrals previously agreed upon in principle and
initiated legal proceedings to enforce the terms of their respective NSP
Agreements.
Prior to the Filing, OC noted several trends which indicated that it
would likely be required to defer asbestos-related payments in excess of
deferrals previously negotiated with law firms participating in the NSP.
First, OC began to see evidence that a higher than anticipated number of new
asbestos-related claims, particularly higher value claims, was being filed by
non-NSP firms, including new firms (where the timing of resolution is
uncertain and the amount and timing of payments may be determined by the
traditional tort system). Second, OC noted a substantial increase in the rate
of claims filed, particularly during September 2000. Approximately 7,800
asbestos-related claims were received by OC (excluding Fibreboard) during the
third quarter of 2000, compared to approximately 3,400 and 4,200 claims
received during the first and second quarters, respectively. While OC believed
that this increase in claims filings represented an acceleration of claims
from future periods as a result of the downgrading of OC's credit rating in
mid-2000, rather than an increase in the total number of asbestos-related
claims to be expected, this trend would have had the effect of accelerating
the related settlement payments and increasing liquidity needs through 2004
and/or the need to negotiate further deferrals of asbestos payments.
OC's results of operations deteriorated significantly in the third
quarter of 2000, with expectations for the quarter declining particularly
during the last half of the period. As a result of, among other factors, the
fall in demand for building materials, elevated energy and raw materials costs
and the inability of OC to fully recapture these costs in price adjustments,
OC's margins and income from operations were significantly reduced. As a
result, OC's ability to service its ongoing asbestos payments and continue to
comply with its pre-petition loan covenants was adversely affected. OC
concluded at the end of the third quarter of 2000 that, unless it used a
substantial portion of its cash to repay a portion of its debt under the 1997
Credit Agreement, OC would be in violation of the leverage ratio covenant
under that agreement. Moreover, in view of reduced expectations concerning
operating results in the fourth quarter of 2000 and beyond, OC concluded that
its long-term liquidity needs (driven in large measure by asbestos payment
obligations) could not likely be met by its cash and available credit under
the 1997 Credit Agreement (which was limited by leverage ratio and other loan
covenants).
As a result of the above factors, OC's management determined late in
the third quarter that it was unlikely that OC would be able to meet its
long-term liquidity needs, including agreed and other required asbestos
payments and repayment of debt on maturity. While OC held $378 million of Cash
and cash equivalents at the end of the third quarter of 2000, and OC's
operations (excluding the effects of asbestos) were traditionally profitable
and generated strong positive cash flow, management determined that a Chapter
11 filing in October would be in the best interest of all OC stakeholders.
B. The Chapter 11 Filings
On October 5, 2000, OCD and the Subsidiary Debtors filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code with the
Bankruptcy Court. The cases are being jointly administered as In re Owens
Corning, et al., Case No. 00-03837 (JKF) (the "Chapter 11 Cases"). The
Subsidiary Debtors that also filed for protection under Chapter 11 of the
Bankruptcy Code on the Petition Date are:
CDC Corporation Integrex Testing Systems LLC
Engineered Yarns America, Inc. HOMExperts LLC
Falcon Foam Corporation Jefferson Holdings, Inc.
Integrex Owens-Corning Fiberglas Technology Inc.
Fibreboard Corporation Owens Corning HT, Inc.
Exterior Systems, Inc. Owens-Corning Overseas Holdings, Inc.
Integrex Ventures LLC Owens Corning Remodeling Systems, LLC
Integrex Professional Services LLC Soltech, Inc.
Integrex Supply Chain Solutions LLC
The Subsidiary Debtors include only the Subsidiaries listed above and do not
include any other United States Subsidiaries of OCD or any of OCD's foreign
Subsidiaries (collectively, the "Non-Debtor Subsidiaries"). A list of the
Non-Debtor Subsidiaries may be found in Schedule II to the Plan, attached to
this Disclosure Statement as Appendix A.
C. Continuation of Business; Stay of Litigation
Since the Petition Date, the Debtors have continued to operate their
businesses as debtors-in-possession under the Bankruptcy Code. Pursuant to the
Bankruptcy Code, the Debtors are required to comply with certain statutory
reporting requirements, including the filing of monthly operating reports. As
of the date hereof, the Debtors have complied with such requirements, and
intend to continue to comply with such requirements. The Debtors are
authorized to operate their businesses in the ordinary course of business,
with transactions out of the ordinary course of business requiring Bankruptcy
Court approval. In accordance with the Bankruptcy Code, the Debtors are not
permitted to pay any claims or obligations that arose prior to the Petition
Date unless specifically authorized by the Bankruptcy Court. Similarly,
claimants may not enforce any Claims against the Debtors that arose prior to
the Petition Date unless specifically authorized by the Bankruptcy Court. As
debtors-in-possession, the Debtors have the right, under Section 365 of the
Bankruptcy Code, subject to the Bankruptcy Court's approval, to assume or
reject pre-petition executory contracts and unexpired leases in existence at
the Petition Date. Parties to contracts or leases that are rejected may assert
rejection damages claims as permitted by the Bankruptcy Code. See Section
VII.F of this Disclosure Statement entitled "Treatment of Executory Contracts
and Unexpired Leases".
As a consequence of the Filing, all pending litigation against the
Debtors was stayed automatically by Section 362 of the Bankruptcy Code and,
absent further order of the Bankruptcy Court, no party may take any action to
recover on pre-petition claims against the Debtors.
D. Professionals Retained in the Chapter 11 Cases
1. The Debtors' Professionals
The attorneys and advisors that have been retained by the
Debtors to assist them in the conduct of their Chapter 11 Cases are set forth
below:
Principal Reorganization Counsel to the Debtors:
SAUL EWING LLP
222 Delaware Avenue
Wilmington, DE 19899-1266
Special Counsel to the Debtors:
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Four Times Square
New York, NY 10036-6522
Special Reorganization Counsel to the Debtors:
ARNOLD & CARUSO, LTD.*
1822 Cherry Street
Toledo, OH 43608
* On August 26, 2002, the Bankruptcy Court entered
an order vacating the employment and retention of
Arnold & Caruso, Ltd.; however, Arnold & Caruso, Ltd.
was retained as an ordinary course professional.
Special Reorganization Counsel to the Debtors:
SHUMAKER, LOOP & KENDRICK, LLP
North Courthouse Square
1000 Jackson
Toledo, OH 43624
Special Reorganization Counsel to the Debtors:
BROBECK, PHLEGER & HARRISON, LLP*
Spear Street Tower
One Market
San Francisco, CA 94105
* Brobeck, Phleger & Harrison, LLP has ceased
performing services for the Debtors.
Special Counsel to the Debtors:
DEBEVOISE & PLIMPTON
919 Third Avenue
New York, NY 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, CT 06103
Special Insurance Counsel to the Debtors:
COVINGTON & BURLING
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2401
Special Claims Conflict Counsel for the Debtors
Adelman Lavine Gold and Levin
1100 North Market Street, 11th Floor
Wilmington, DE 19801-1292
Auditor, Tax Advisor, Accounting Advisor & Financial
Advisor to the Debtors:
ARTHUR ANDERSEN LLP*
33 West Monroe
Chicago, IL 60603
* Arthur Andersen LLP has ceased performing services
for the Debtors.
Special Financial Advisor to the Debtors:
PRICEWATERHOUSECOOPERS LLP
203 North LaSalle Street
Chicago, IL 60601
Information Technology Advisor to the Debtors:
CAP GEMINI ERNST & YOUNG US LLC
1200 Skylight Office Tower
1660 West 2nd Street
Cleveland, OH 44113
Financial and Consulting Services to the Debtors:
CRAWFORD FINANCIAL CONSULTING LLC
(d/b/a CRAWFORD & WINIARSKI)
Suite 1500
535 Griswold
Detroit, MI 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, NY 10020
Investment Banker to the Debtors:
GOLDSMITH AGIO HELMS SECURITIES, INC.
601 Second Avenue South, 46th Floor
Minneapolis, MN 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
2. The Debtors' Ordinary Course Professionals
Separately, throughout the Chapter 11 Cases, the Debtors
have employed certain other professionals to render post-petition services to
the Debtors in the ordinary course of their businesses, pursuant to an order
of the Bankruptcy Court dated November 30, 2000 (the "OCP Order"). The OCP
Order establishes certain standards, guidelines and procedures for the
Debtors' retention and payment of ordinary course professionals during the
Chapter 11 Cases. The OCP Order authorizes the Debtors to employ and
compensate ordinary course professionals without additional approval from the
Bankruptcy Court subject to certain limitations. Among other limitations, the
OCP Order requires the Debtors to obtain approval under Sections 330 and 331
of the Bankruptcy Code if payments to the ordinary course professionals exceed
an average of $35,000 per month for the professionals (with certain
exceptions), and/or if the payments to all ordinary course professionals
exceed a total of $3 million in any given month. In accordance with the terms
of the OCP Order, every two months throughout the Chapter 11 Cases, the
Debtors have submitted (and continue to submit) a statement with the
Bankruptcy Court which reports the name of the ordinary course professionals,
the amounts paid as compensation for services rendered and reimbursement of
expenses incurred by each ordinary course professional during the previous
two-month period, and a general description of the services rendered by each
ordinary course professional.
3. The Appointment of Official Committees
On October 23, 2000, the United States Trustee for the
District of Delaware appointed two creditors' committees, pursuant to Section
1102(a) of the Bankruptcy Code, one representing general unsecured creditors
(as thereafter amended or reconstituted, the "Unsecured Creditors' Committee")
and the other representing asbestos claimants (as thereafter amended or
reconstituted, the "Asbestos Claimants' Committee" and, together with the
Unsecured Creditors' Committee, the "Committees").
(a) Unsecured Creditors' Committee
The Unsecured Creditors' Committee represents
general unsecured creditors of the Debtors, including the Bank Holders, the
Bondholders, trade creditors and holders of Environmental Claims. The current
four 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
John Hancock Life Insurance Company
200 Clarendon Street
Boston, MA 02117
Jackson National Life Insurance Company
225 West Wacker
Suite 1200
Chicago, IL 60606
Counsel to the Unsecured Creditors' Committee:
DAVIS, POLK & WARDWELL
450 Lexington Avenue
New York, NY 10017
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 North Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
Financial Advisors to the Unsecured Creditors'
Committee:
HOULIHAN, LOKEY, HOWARD & ZUKIN, INC.
685 Third Avenue
15th Floor
New York, NY 10017
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
establishedtwo unofficial sub-committees (the Bank Holders' sub-committee and
the Bondholders' and trade creditors' sub-committee), each of which is
represented by separate counsel and financial advisors.
The Bank Holders' unofficial sub-committee is
represented by the following attorneys and financial advisors:
Counsel to the Bank Holders' Sub-Committee:
KRAMER LEVIN, NAFTALIS & FRANKEL LLP
919 Third Avenue
New York, NY 10022
RICHARDS LAYTON & FINGER, P.A.
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
Financial Advisors to the Bank Holders' Sub-Committee:
FTI POLICANO & MANZO
622 Third Avenue
New York, NY 10017
On July 16, 2001, the Bankruptcy Court entered an
order authorizing and approving the employment of special counsel for the
Bondholders' and trade creditors' unofficial sub-committee (also referred to
herein as the "Designated Members"). 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
MONZACK AND MONACO, P.A.
(f/k/a WALSH MONZACK AND MONACO, PA)
400 Commerce Ctr.
1201 Orange Street
P.O. Box 2031
Wilmington, DE 19899
Financial Advisors to the Bondholders' and Trade
Creditors' Unofficial Sub-Committee:
BDO SEIDMAN
330 Madison Avenue
New York, NY 10017
(b) Asbestos Claimants' Committee
The Asbestos Claimants' Committee represents
persons alleging asbestos-related personal injuries due to exposure to
products manufactured by the Debtors. The current thirteen members of, and
professionals retained by, the Asbestos Claimants' Committee are set forth
below:
Members of the Asbestos Claimants' Committee:
David Fitts
c/o Brayton & Purcell
222 Rush Landing Road
P.O. Box 2109
Novato, CA 94948
Delores Ramsey
c/o Baron & Budd
Attn: Fred Baron, Esquire
The Centrum
3102 Oak Lawn Avenue
Suite 1100
Dallas, TX 75219-4281
Charles Barrett
c/o Weitz & Luxenberg
Attn: Perry Weitz, Esquire
180 Maiden Lane
New York, NY 10038
John Edward Keane
c/o Kelley & Ferraro, LLP
1901 Bond Court Building
1300 E. 9th Street
Cleveland, OH 44114
Mary F. Stone
c/o Hartley & O'Brien
Attn: R. Dean Hartley, Esquire
827 Main Street
Wheeling, WV 26003
Glenn L. Arnott
c/o Goldberg, Perskey, Jennings & White, P.C.
Attn: Mark C. Meyer, Esquire
1030 Fifth Avenue
Pittsburgh, PA 15219
Elmer Richardson
c/o Cumbest, Cumbest, Hunter & McCormick P.A.
Attn: David O. McCormick, Esquire
729 Watts Avenue
P.O. Drawer 1176
Pascagoula, MS 39568
Barbara Casey
c/o Cooney & Conway
Attn: John D. Cooney, Esquire
701 6th Avenue
LaGrange, IL 60425
James Nelson Allen
c/o Glasser & Glasser
Attn: Richard S. Glasser, Esquire
Crown Center Building
6th Floor
580 E. Main Street
Norfolk, VA 23510
Margaret Elizabeth Fitzgerald
c/o Thorton & Naumes, LLP
Attn: Michael P. Thornton, Esquire
100 Summer Street
30th Floor
Boston, MA 02110
Yolanda England
c/o Peter G. Angelos, Esquire
5905 Harford Road
Baltimore, MD 21214
Deborah Jean Johnson
Personal Representative of the Estate of
Stephen Johnson
c/o Bergman Senn Pageler & Frockt
Attn: Matthew Bergman, Esquire
P.O. Box 2010
17530 Vashon Highway SW
Vashon, WA 98070
Joyce Salinas
Plaintiff on her own behalf and representative of
John Salinas (deceased)
c/o Kazan, McClain, Eaises, Abrams, Fernandez,
Lyons & Farrise
Attn: Steven Kazan, Esquire
171 Twelfth Street
3rd Floor
Oakland, CA 94607
Counsel for the Asbestos Claimants' Committee:
CAPLIN & DRYSDALE, CHARTERED
399 Park Avenue
New York, NY 10022-4614
CAMPBELL & LEVINE, LLC
800 King Street
Wilmington, DE 19801
Financial Advisors and Asbestos Personal Injury
Claims Valuation Consultants for the
Asbestos Claimants' Committee:
L. TERSIGNI CONSULTING, P.C.
2001 West Main Street
Suite 220
Stamford, CT 06902
Claims Expert for the Asbestos Claimants' Committee:
LEGAL ANALYSIS SYSTEMS
970 Calle Arroyo
Thousand Oaks, CA 91360
4. Future Claimants' Representative
A key element of the Plan is the Asbestos Personal Injury
Permanent Channeling Injunction, pursuant to which all current and future
personal injury asbestos-related Claims and Demands against the Debtors and
other covered Persons will be channeled to the Asbestos Personal Injury Trust
established to equitably distribute available assets to holders of all such
Allowed Claims and Demands. A channeling injunction is permitted by Section
524(g) of the Bankruptcy Code and may be issued if a number of specific
conditions are met, including the appointment of a legal representative for
the purpose of protecting the rights of persons that might subsequently assert
future Demands against the Debtors. Specifically, Congress and the courts have
recognized the need in Chapter 11 cases involving asbestos claims to protect
and represent the interests of persons who may have claims and/or Demands
against a debtor arising in the future, and have directed bankruptcy courts to
appoint a legal representative (the "Future Claimants' Representative") for
such claimants in cases where a channeling injunction is sought.
Shortly after the commencement of the Chapter 11 Cases, the
Debtors began discussions with the Unsecured Creditors' Committee and the
Asbestos Claimants' Committee, and their respective legal and financial
advisors, to consider the appointment of a Future Claimants' Representative.
Following careful consideration of the potential candidates for Future
Claimants' Representative, the Debtors determined that James J. McMonagle was
well-qualified to represent the interests of any and all persons described in
Section 524(g)(4)(B)(i) of the Bankruptcy Code who may assert Demands against
one or more of the Debtors, and therefore, should be appointed as the Future
Claimants' Representative for such persons in these cases.
On September 28, 2001, the Court appointed James J.
McMonagle, nunc pro tunc to June 12, 2001, as the Future Claimants'
Representative of any and all persons described in Section 524(g)(4)(B)(i) of
the Bankruptcy Code who may assert Demands for asbestos-related personal
injury claims against one or more of the Debtors, including without
limitation, OCD and Fibreboard. The Debtors believe the appointment of the
Future Claimants' Representative has facilitated the negotiation of the Plan
with the Asbestos Claimants' Committee and the Future Claimants'
Representative by assuring that all parties in interest, including the future
claimants, have had a fair opportunity to participate in the process.
The name and address of the Future Claimants' Representative
and the professionals retained by him are set forth below:
Future Claimants' Representative:
James J. McMonagle, Esq.
Vorys Sater Seymour & Pease LLP
2100 One Cleveland Center
1375 E. Ninth Street
Cleveland, OH 44114
Counsel to the Future Claimants' Representative:
KAYE SCHOLER LLP
425 Park Avenue
New York, NY 10022
YOUNG CONAWAY STARGATT & TAYLOR, LLP
The Brandywine Building
1000 West Street, 17th Floor
P.O. Box 391 Wilmington, DE 19899-0391
Financial Advisor to the Future Claimants' Representative:
PETER J. SOLOMON CO.
767 Fifth Avenue, 26th Floor
New York, NY 10153
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, CA 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.ss.156(c).
(b) Special Voting Agent
On March 19, 2003, the Debtors filed an application
to retain Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New
York, NY 10022, as Special Voting Agent to address notice issues related to
securities.
(c) Fee Auditor
On June 20, 2002, the Bankruptcy Court appointed
Warren H. Smith & Associates, P.C. 900 Jackson Street, 120 Founders Square,
Dallas, Texas 75202, as the Fee Auditor, to act as a special consultant to the
Bankruptcy Court for professional fee and expense review and analysis, nunc
pro tunc to April 29, 2002.
E. "First Day" and Other Orders
On or about October 6, 2000, the Debtors filed a series of motions
seeking relief by virtue of so-called "first day" orders. First day orders are
intended to facilitate the transition between a debtor's pre-petition and
post-petition business operations by approving certain regular business
practices that may not be specifically authorized under the Bankruptcy Code or
as to which the Bankruptcy Code requires prior approval by the Bankruptcy
Court. These orders were designed to allow the Debtors to continue business
operations with minimum disruptions and to ease the strain on the Debtors'
relationships with their employees and other parties. The first day orders
obtained in these cases are typical for large Chapter 11 cases. Set forth
below is a brief summary of the significant first day orders and other orders
relating to motions filed by the Debtors at or near the commencement of the
Chapter 11 Cases. The descriptions of the relief sought or obtained in the
Chapter 11 Cases set forth below and throughout this Disclosure Statement are
summaries only and reference should be made to the actual pleadings and orders
for their complete content.
The first day orders and other orders, entered at or near the
commencement of the Chapter 11 Cases, provide for, among other things:
o the payment of employees' accrued pre-petition wages,
salaries, commissions and reimbursable business expenses;
the continuation of employee benefit plans and programs
post-petition; and the direction for all banks to honor
pre-petition checks for payment of employee obligations;
o the payment of certain pre-petition import obligations
(including customs duties, freight, trucking charges and
brokerage fees), shipping charges and related possessory
liens;
o the payment of certain miscellaneous contractors in
satisfaction of perfected or potential mechanics',
materialmen's or similar liens;
o a prohibition on the Debtors' utility services providers
from discontinuing services on account of outstanding
pre-petition invoices and establishing procedures for
utility providers to seek adequate assurance of the Debtors'
future performance;
o the payment of certain pre-petition tax claims;
o the honoring of certain pre-petition obligations to
customers under various warranty and other customer
programs, and the continuation of warranty and customer
programs post-petition;
o the payment of certain critical pre-petition trade vendors'
claims;
o the joint administration of each of the Debtors' bankruptcy
cases;
o confirming administrative expense treatment for obligations
arising from post-petition delivery of goods, administrative
expense treatment for certain holders of valid reclamation
claims and a prohibition against third parties reclaiming
goods or interfering with delivery of goods to the Debtors;
and
o the extension of time for filing the Debtors' Schedules and
Statement of Financial Affairs (the "SOFAS").
F. Significant Events During the Chapter 11 Cases
In addition to the first day relief sought and received in the
Chapter 11 Cases, the Debtors have sought and received authority with respect
to various matters designed to assist in the administration of the Chapter 11
Cases, to maximize the value of the Debtors' Estates and to provide the
foundation for the Debtors' emergence from Chapter 11. Set forth below is a
brief summary of the principal motions the Debtors have filed, and to which
they have been granted relief by the Bankruptcy Court, during the pendency of
the Chapter 11 Cases.
1. Employee Related Matters
In connection with the filing of the Chapter 11 Cases, the
Debtors obtained orders of the Bankruptcy Court authorizing the Debtors to (a)
pay employees pre-petition wages, salaries and other compensation, (b)
continue certain employee benefit programs, including maintenance of
self-insured workers' compensation programs, (c) adopt a Retention Program and
a supplemental Severance Program (as defined in the Retention and Severance
Motion described below), and (d) modify certain employee retirement benefits
programs to provide limited enhancement to those programs and to bring them
into compliance with certain provisions of the Tax Reform Act of 1986.
On December 22, 2000, the Debtors filed a Motion For Order
Under 11 U.S.C. ss.ss. 105, 363 and 365 Authorizing Continuation or
Implementation of Employee Retention, Emergence, Severance, Incentive, 401(k)
Contribution and Global Awards Programs (the "Retention and Severance
Motion"), which sought approval of various new or existing programs designed
to prevent excessive turnover of key employees during the Chapter 11 Cases. On
January 17, 2001, the Bankruptcy Court entered an order approving in part the
Retention and Severance Motion. Thereafter, on February 16, 2001, the Debtors
filed a Supplement to the Retention and Severance Motion by which the Debtors
sought an order approving and authorizing the continuation, modification and
implementation of certain employee compensation programs. On March 26, 2001,
following certain modifications, the Bankruptcy Court approved the remaining
portion of the Retention and Severance Motion.
Pursuant to the January 17, 2001 and March 26, 2001 orders
approving the Retention and Severance Motion, the Debtors were authorized to
continue or to implement the following programs: (a) an employee retention
program under which the Debtors were authorized to pay retention bonuses at
specified intervals to approximately 236 key employees; (b) a supplemental
employee retention and emergence program, under which certain key employees
are entitled to receive additional bonuses in the event that the Debtors
emerge from bankruptcy by 2004; (c) continuation of the Debtors' existing
employee severance programs consisting of a "Salaried Employee Separation
Allowance Plan," which extends to all salaried employees in the United States
except senior management, as well as individually negotiated severance
agreements; (d) certain of the Debtors' existing incentive-based compensation
programs, consisting of (i) the "Corporate Incentive Plan," which provides for
discretionary performance-based incentive payments to approximately 1,250 of
the Debtors' employees, and (ii) the "Officer Stretch Incentive Plan," an
incentive program for approximately 59 of the Debtors' senior managers and key
employees; (e) certain of the Debtors' existing 401(k)-related employee
programs, consisting of (i) a 401(k) plan, a non-incentive based program
pursuant to which the Debtors make matching contributions for the benefit of a
broad cross-section of the Debtors' employees and (ii) the "Profit Sharing
Contribution Plan", an incentive-based program pursuant to which the Debtors
make additional cash contributions for the benefit of a broad cross-section of
the Debtors' employees in an amount based on objective Company performance
measures; and (f) the Debtors' "Global Awards Program," originally a
stock-based employee incentive program, which, as modified, provides for
additional cash awards to employees based on objective company performance
measures.
On March 5, 2002, the Debtors filed a Motion to Authorize
the Continuance of Employee Compensation Programs. On September 10, 2002, the
Court entered an Order Authorizing Continuation, Modification and
Implementation of Employee Compensation Programs. In addition, the Court
authorized the Debtors to continue the employee compensation programs in the
ordinary course of the Debtors' business without additional court approval,
subject to a specific procedure identified in the motion. Specifically, court
authority is unnecessary to continue the compensation programs; provided,
however, that the Debtors advise the Committees and the Future Claimants'
Representative of the Company's annual Business Plan and annual funding
criteria for the employee compensation programs, including the data necessary
to assess the reasonableness of the Debtors' business judgment as soon as
possible after January 1 in any given year, but under no circumstances later
than February 28. In the event that the Committees and/or the Future
Claimants' Representative do not consent to the Debtors' proposed employee
compensation programs, they are required, within 30 days after receipt of the
annual program review, to provide written notice to the Debtors' counsel of
their specific objections to the proposed employee compensation programs. If
the parties are unable to resolve the objections, the Debtors are required to
file the appropriate pleading with the Bankruptcy Court.
On April 28, 2003, the Court approved a Stipulation and
Order Regarding Employee Compensation Programs, by and between the Debtors,
Committees, and Future Claimants' Representative, which authorized the
continuation of the Employee Compensation Programs (as defined in the
Stipulation), eliminated the Corporate Stretch Incentive Plan, and approved
the implementation of the Long Term Incentive Plan by the Debtors. The Court's
approval of the Stipulation was intended to constitute "shareholder approval"
for the purposes of all applicable law, including, without limitation, section
162(m) of the Internal Revenue Code.
2. Vendor and Customer Issues
Immediately following the commencement of the Chapter 11
Cases, the Debtors received numerous inquiries from their vendors, customers,
and other parties providing services to the Debtors concerning the Debtors'
ability to satisfy debts incurred prior to the Petition Date and their
continuing commitments. The Debtors believe that the maintenance of
relationships with their vendors, customers and other business partners has
been, and will continue to be, a critical factor in the continued viability of
the Debtors' ongoing business operations and the ultimate success of their
rehabilitation effort.
(a) Relief at Commencement of Chapter 11 Cases
In order to enable the Debtors to minimize the
adverse effects of the Chapter 11 Cases, and in their efforts to maintain
relationships and goodwill with certain of their vendors and customers, the
Debtors obtained orders from the Bankruptcy Court that authorized them to:
(i) honor certain pre-petition obligations to
customers under the Debtors' warranty and other customer programs (including
product warranties, cash discounts, rebates, category management, preferred
contractor incentive programs, and customer dispute resolution), and to
continue and maintain such programs on a post-petition basis;
(ii) pay pre-petition claims of contractors
(including mechanics, tradespersons and other contractors) in satisfaction of
perfected or potential mechanics', materialmen's or similar liens or
interests;
(iii) grant administrative expense status to
vendors and suppliers for undisputed obligations arising from pre-petition
purchase orders outstanding as of the Petition Date for products and goods
received by the Debtors on or subsequent to the Petition Date;
(iv) pay vendors and suppliers for post-petition
delivery of goods in the ordinary course of business;
(v) pay critical pre-petition trade claims
(discussed below); and
(vi) grant administrative expense treatment for
certain holders of valid reclamation claims; and prohibit third parties from
reclaiming goods or interfering with the delivery of goods to the Debtors
(discussed below).
(b) Critical Trade Vendors
Recognizing the importance of certain vendors to
the Debtors' businesses, the Debtors included among their "first day" motions
several motions for authorization to pay critical pre-petition trade vendors,
which were granted by orders of the Bankruptcy Court dated October 6, 2000
(the "Critical Vendor Orders"). The Critical Vendor Orders 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 Orders, the Debtors were authorized to pay critical vendors up to an
aggregate amount of approximately $123 million. Such amount was comprised of
certain elements: (a) $3.0 million for critical trade payments on account of
customs duties, ocean freight, air freight and the like; (b) $25 million on
account of amounts owed to commercial common carriers; (c) $48 million on
account of amounts owed to critical materials vendors; (d) $19 million, on
account of amounts owed to critical project vendors; (e) $23 million, on
account of amounts owed to critical affiliated vendors; and (f) $5.0 million,
on account of amounts owed to mechanics lien creditors. 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 one of the Critical Vendor Orders 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 860 of its
vendors and suppliers as "critical" vendors, many of which were freight
carriers. The Debtors reached settlements with the critical vendors whereby,
in general, the Debtors paid the vendors less than the total pre-petition
amounts owed in satisfaction of claims those vendors may have held against the
Debtors for pre-petition goods or services, and those vendors agreed to
maintain or return to normal credit terms.
(c) Reclamation Claims
At the commencement of the Chapter 11 Cases, the
Debtors anticipated that many of their vendors and suppliers would attempt to
assert their right to reclaim goods delivered to the Debtors shortly before or
soon after the Petition Date pursuant to Section 546(c) of the Bankruptcy Code
and Section 2-702 of the Uniform Commercial Code. As part of their "first day"
motions, the Debtors sought certain initial relief in connection with the
treatment of reclamation claims, which relief was granted by order dated
October 6, 2000 (the "Initial Reclamation Procedures Order"). The Initial
Reclamation Procedures Order established preliminary reclamation procedures in
order to facilitate the continued operation of the Debtors' businesses, to
prevent distraction of the Debtors' management and professionals and to allow
the Debtors the opportunity to conduct a thorough review and evaluation of the
reclamation claims. Among other things, the Initial Reclamation Procedures
Order provided that vendors would be entitled to administrative expense claims
if and to the extent that the vendor made a valid, written reclamation demand
for the goods at issue, and to the extent that such vendor proved the validity
of its demand. The Initial Reclamation Procedures Order also prohibited
vendors and other third parties from reclaiming or interfering with the
post-petition delivery of goods to the Debtors.
As anticipated, the Debtors received a large number
of reclamation claims - approximately 220 claims, with an aggregate
approximate amount of $34 million, exclusive of claims which did not specify
an amount. The Debtors devoted substantial time and effort in reviewing and
analyzing the claims, in order to determine which claims were valid
reclamation claims.
Between February and September, 2002, the Debtors
filed five separate motions (each of which addressed certain of the 220
reclamation claims), requesting orders approving their proposed allowance
and/or disallowance of the reclamation claims, and approving their proposed
treatment of the allowed reclamation claims (together, the "Reclamation
Motions"). More specifically, in the Reclamation Motions, the Debtors
requested orders (i) granting administrative expense priority status for
reclamation claims to the extent, and in the amounts, the Debtors determined
such claims to be allowable pursuant to the applicable provisions of the
Bankruptcy Code; (ii) denying administrative expense priority status for all
other reclamation claims; and (iii) authorizing the Debtors to pay the Allowed
amount of each valid reclamation claim. The Bankruptcy Court granted the
Reclamation Motions and, upon Court approval of the Debtors' proposed
treatment of the individual reclamation claims, the Debtors were authorized to
pay the Allowed claims.
Approximately sixteen reclamation claimants filed
objections and/or responses to the Reclamation Motions, and many other
reclamation claimants contacted the Debtors concerning the Debtors' proposed
treatment of their claims as described in the Reclamation Motions. Through
discussions, negotiations and/or the exchange of documents and information
between parties, the Debtors reached a consensual resolution with the majority
of these claimants, either by entering a settlement stipulation or by the
Bankruptcy Court's entry of a modified order.
As of the date of this Disclosure Statement, the
vast majority of reclamation claims have been resolved. The Debtors continue
to negotiate with the specific claimants in their efforts to resolve the few
outstanding claims.
(d) Setoffs
Section 553 of the Bankruptcy Code recognizes the
right of setoff of mutual, pre-petition obligations if certain criteria are
met. However, Section 362(a)(7) of the Bankruptcy Code operates as a stay of
the setoff of any debt owing to the debtor that arose pre-petition against any
pre-petition claim against the debtor. Rule 4001 of the Bankruptcy Rules
allows for parties to consensually modify the automatic stay provisions to
allow for setoff in appropriate circumstances.
Throughout the Chapter 11 Cases, the Debtors have
entered a number of stipulations (the "Setoff Stipulations") with various
vendors and suppliers authorizing a modification of the automatic stay to
effectuate the setoff of pre-petition mutual debts. The Debtors determined
that entering the Setoff Stipulations would be in the best interest of the
Debtors' estates and their creditors because, in general, among other reasons,
the setoffs allowed the Debtors to reconcile their books and records without
further dispute, maintain amicable relationships with their customers and
vendors, and continue the free flow of goods and services from their customers
and vendors.
3. Debtor-in-Possession Financing and the DIP Facility
In connection with the Filing, and in order to fund its
on-going business operations during the pendency of the Chapter 11 Cases, the
Debtors, excluding Jefferson Holdings, Inc., obtained a debtor-in-possession
credit facility (the "DIP Facility") from a group of lenders (the "DIP
Lenders") led by Bank of America, N.A., as administrative agent (the "DIP
Agent"). On November 17, 2000, the Bankruptcy Court approved the Final Order
Authorizing Post-Petition Financing on a Superpriority Administrative Claim
Basis Pursuant to 11 U.S.C. ss. 364(c)(1) and Granting Relief from the
Automatic Stay Pursuant to 11 U.S.C. ss. 362 (the "DIP Order"). The DIP Order
authorized, among other things, (a) the Debtors to borrow from the DIP
Lenders, on specified terms and conditions, post-petition financing of up to
$500 million, including revolving loans and letters of credit, pursuant to an
agreement among the Debtors and Lenders; (b) the execution by the Debtors of
notes and other documents requested by the DIP Lenders evidencing the
post-petition financing; and (c) the granting of certain protections to the
DIP Agent and the DIP Lenders including without limitation a superpriority
administrative claim over any and all administrative expenses of the kinds
specified in Sections 503(b), 105, 326, 328, 330, 331, 506(c), 507(a), 546(c),
726 or 1112 of the Bankruptcy Code.
The DIP Facility also provided for unsecured post-petition
financing from the DIP Lenders for general working capital and other general
corporate purposes in an aggregate principal amount not to exceed $500
million. The amount available under the DIP Facility depends on a borrowing
base of qualifying receivables and inventory of the Debtors. Borrowings under
the DIP Facility bear interest at a floating rate equal to LIBOR plus a margin
varying from 0.75% to 2.00%, based upon the average daily outstanding balance.
In addition, a commitment fee is payable on unused portions of the aggregate
commitment amount under the DIP Facility of 0.375% per annum and a letter of
credit fee is payable based on the average daily maximum aggregate amount
available to be drawn under all outstanding letters of credit and certain
other expenses incurred by the DIP Lenders issuing the letters of credit. The
DIP Facility contains covenants, representations and warranties, events of
default, and other terms and conditions typical of credit facilities of a
similar nature.
The DIP Facility was to expire on November 15, 2002 in
accordance with its terms. On October 28, 2002, the DIP Lenders and the
Debtors entered into an amendment to the DIP Facility, approved by the
Bankruptcy Court, pursuant to which, among other things, the maximum available
credit amount under the DIP Facility was reduced at the Debtors' request to
$250 million and its term was extended through November 15, 2004.
The Debtors have never utilized the facility except for
standby letters of credit and similar uses. As of December 31, 2002,
approximately $62 million of availability under this facility was utilized for
standby letters of credit and similar uses. As of the Effective Date, the
Debtors expect to have no outstanding borrowings, but approximately $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 Section 13.06 of the 1997 Credit Agreement against money in bank
accounts of the Debtors and Non-Debtor Subsidiaries held by the Bank Holders;
(ii) declaring any Non-Debtor Subsidiaries in default under any separate
banking agreements as a result of the Filings; (iii) accelerating the payments
under any separate banking agreements as a result of the Filings; (iv)
freezing, impairing or otherwise moving against the funds of Non-Debtor
Subsidiaries that are held by the Bank Holders as a result of the Filings; and
(v) declaring the rights and obligations of the parties under Section 13.06 of
the 1997 Credit Agreement.
Concurrent with the filing of the Complaint, the
Debtors filed a Motion for Temporary Restraining Order and Preliminary
Injunction under Sections 105(a) and 362(a) of the Bankruptcy Code (the "TRO
Motion"). By the TRO Motion, the Debtors requested an order that enjoined (i)
the Bank Holders from calling, canceling, or revoking credit facilities of the
Non-Debtor Subsidiaries solely as a result of the Debtors' seeking relief
under Chapter 11 of the Bankruptcy Code; and (ii) the Bank Holders and their
affiliates from setting off against funds deposited by the Non-Debtor
Subsidiaries in bank accounts at the Bank Holders or their affiliates.
The purpose of the Standstill Adversary Proceeding
and the TRO Motion was to protect the assets of the Non-Debtor Subsidiaries by
preventing their assets from being used to satisfy all or a portion of the
obligations under the 1997 Credit Agreement that had been guaranteed by
certain Non-Debtor Subsidiaries.
On October 10, 2000, with the consent of the Bank
Holders, the Court entered a temporary restraining order ("TRO") enjoining and
restraining the Bank Holders from exercising any enforcement right or remedy
under the 1997 Credit Agreement against any Non-Debtor Subsidiaries, including
any setoff rights, under any other agreement, or under applicable law.
Notwithstanding the injunction, the TRO permitted the Bank Holders to impose
an administrative freeze on any funds in accounts of the designated Non-Debtor
Subsidiaries as of the Petition Date and to refuse to make additional loans or
advances to the Non-Debtor Subsidiaries.
Following negotiations between counsel for the
Debtors and the Bank Holders (except for the China Lenders as discussed
below), and in order to preserve the status quo for the benefit of the
Debtors' bankruptcy estates and their creditors, the Debtors and the Bank
Holders entered into various modifications and extensions of the TRO, which
were approved by the Court.
The Debtors and the Bank Holders continued to
engage in discussions for the purpose of entering into an agreement pursuant
to which the Bank Holders would stand still from exercising certain
enforcement rights and remedies against the Non-Debtor Subsidiaries, waive
certain rights and remedies under the 1997 Credit Agreement and certain credit
facilities with the Non-Debtor Subsidiaries (the "Bilateral Facilities"),
amend the 1997 Credit Agreement to release, discharge and waive all claims
against certain Non-Debtor Subsidiaries, and resolve disputes regarding setoff
rights. On May 30, 2001, after successful negotiations between the Debtors and
the Bank Holders, the Debtors filed the Motion for Order Under 11 U.S.C.
ss.ss. 105(a), 362(a), and Fed. R. Bankr. P. 6004, 7065 and 9019 (I)
Authorizing the Debtors to Enter Into, and to Take All Necessary or
Appropriate Action to Effectuate the Terms of, a Standstill and Waiver
Agreement with Certain Defendants, (II) Terminating the Temporary Restraining
Order Entered with Respect to Certain Defendants, (III) Dismissing this
Adversary Proceeding with Respect to Certain Defendants, (IV) Authorizing the
Debtors to Compromise and Settle Setoff Rights Asserted by the Defendants and
Terminating the Stay of 11 U.S.C. ss. 362(a) with Respect to Certain Setoff
Rights, and (V) Releasing, Discharging, and Waiving Certain Claims of
Defendants (the "Standstill Motion").
The Standstill Motion was approved by Court Order
dated June 19, 2001 (the "Standstill Order"). The Standstill Order, among
other things, authorized the Debtors to enter into the Standstill and Waiver
Agreement among the Debtors, certain Non-Debtor Subsidiaries and the Bank
Holders (the "Standstill Agreement"), authorized the Debtors to settle the
setoff rights asserted by the Bank Holders, released, discharged and waived
certain claims of the Defendants, and dismissed, without prejudice, the
Standstill Adversary Proceeding and terminated the TRO with respect to all the
Defendants except the China Lenders, as defined below.
Pursuant to the terms of the Standstill Agreement,
the Bank Holders agreed not to exercise certain remedies against the
Non-Debtor Subsidiaries during the Specified Period (the "Standstill Period")
in consideration of certain undertakings of the Debtors and Non-Debtor
Subsidiaries, including subjecting certain Non-Debtor Subsidiaries to
affirmative and negative covenants. The Standstill Period would expire on the
earliest to occur of (i) the date of filing of a plan or plans of
reorganization, (ii) a termination due to an event of default under the
Standstill Agreement, or (iii) a date no earlier than October 31, 2002 which
is 45 days after written notice to the Debtors and their counsel by the
Pre-petition Agent that the requisite number of Bank Holders (as determined in
the 1997 Credit Agreement) elected to terminate the Standstill Period.
More specifically, the Standstill Agreement
provides that, during the Standstill Period the Bank Holders are not to
exercise any right or remedy for the enforcement, collection or recovery of
any of the guaranteed obligations under the 1997 Credit Agreement from any of
the Non-Debtor Subsidiaries other than with respect to valid setoff rights in
existence on the Petition Date. In addition, the Standstill Agreement
precludes those Bank Holders that are parties to the Bilateral Facilities from
exercising, as a result of any default under such facilities arising solely
from the commencement of the Chapter 11 Cases (which default is waived during
the Standstill Period), enforcement rights or remedies against such Non-Debtor
Subsidiaries other than with respect to valid setoff rights existing as of the
Petition Date. However, the Bank Holders are not required to make additional
loans or advances under a Bilateral Facility nor are they prevented from
exercising any other rights or remedies available to them under a Bilateral
Facility.
The Standstill Agreement also provided that the
Debtors, the Non-Debtor Subsidiaries and the Bank Holders would provide
information to determine the validity of setoff rights and seek in good faith
to resolve all disputes regarding setoff rights. Pending resolution of the
setoff rights, the TRO remained in effect and all parties' rights with respect
to the setoff issue were preserved.
Pursuant to the Standstill Agreement, OCD made a
payment of $3 million to the Pre-petition Agent for and on behalf of the Bank
Holders executing the Standstill Agreement (the "Participating Lenders") with
each Participating Lender receiving a pro rata share of such fee based on such
Participating Lender's outstanding commitment under the 1997 Credit Agreement.
OCD also paid a fee of $200,000 to each of the Pre-petition Agent and Chase
Manhattan Bank, in their respective capacities as co-chairs of the Bank
Holders' steering committee. OCD was also responsible for payment of certain
fees and expenses of the Bank Holders, subject to certain monetary limits.
On November 25, 2002, the parties to the Standstill
Agreement executed a Stipulation and Order to Amend the Standstill and Waiver
Agreement (the "Standstill Amendment") to, among other things, extend the
Standstill Period, which was approved by the Court on November 25, 2002. The
Standstill Amendment provides, in part, that the extended Standstill Period
will end on the earliest to occur of (i) a termination due to an event of
default specified in the Standstill Amendment, or (ii) the date which is 45
days after written notice of intention to terminate the Standstill Agreement
has been given to OCD or the Pre-petition Agent as provided in the Standstill
Amendment. The Standstill Amendment also provides that the Pre-petition Agent
approved of the first amendment to the DIP Facility and that the fraudulent
conveyance actions filed on or about October 4, 2002 by the Debtors, as
described in more detail below, or the appointment of a limited purpose
trustee or examiner would not constitute an event of default under the
Standstill Agreement.
(b) The China Standstill Agreement
Since the Petition Date, the Debtors also have been
engaged in ongoing negotiations with Standard Chartered Bank ("SCB"), as agent
and co-ordinating arranger for the Loan Facility Agreement, dated March 12,
1998 (the "Revolving Loan Facility") among SCB, Societe Generale ("Soc Gen")
and KBC Bank, N.V. ("KBC" and, together with SCB and Soc Gen, the "China
Lenders"), Owens Corning (China) Investment Company, Ltd. ("OCI"),
Owens-Corning (Guangzhou) Fiberglas Co., Ltd. ("OC Guangzhou"), Owens-Corning
(Shanghai) Fiberglas Co., Ltd. ("OC Shanghai"), as borrowers, and OCD as
guarantor, to effectuate the continued servicing of the Revolving Loan
Facility and to settle certain setoff rights asserted by SCB in the
approximate amount of $7.8 million. Resolution of the issues surrounding the
Revolving Loan Facility was necessary to settle the setoff rights asserted by
SCB and would permit OC to realize future value and profits from OC Guangzhou
and OC Shanghai, which provide valuable production support to OC's global
insulation business and are strategically important to OC's long term business
strategy in China.
Following negotiations, OCD, OC Guangzhou, OC
Shanghai and the China Lenders reached agreement on the key terms of a
Standstill and Amendment Agreement (the "China Standstill Agreement"). On
October 16, 2002, the Debtors filed a motion for an order under 11
U.S.C.ss.ss.363 and 105, and Fed. R. Bankr. P. 6004 and 9019 authorizing and
approving (i) execution of the China Standstill Agreement by and among OCD, OC
Guangzhou, OC Shanghai, and the China Lenders; (ii) consummation of the
transactions contemplated in the China Standstill Agreement; and (iii)
granting the China Lenders an Allowed, General Unsecured Claim against OCD in
the amount of $22 million conditioned upon the closing of the China Standstill
Agreement (the "China Standstill Motion"). The Court approved the China
Standstill Motion on December 9, 2002.
The China Standstill Agreement became effective and
on January 27, 2003, the Bankruptcy Court entered a Stipulation and Order
terminating the TRO and dismissing the Standstill Adversary Proceeding as
related to the China Lenders.
A portion of the $7.8 million setoff has been
released, a portion has been used to cover outstanding obligations in
connection with letters of credit, and the remaining portion will be released
by SCB upon full payment of the outstanding letter of credit obligations,
which is scheduled to occur approximately June 30, 2003.
(c) Setoff of Bank Accounts
In connection with the consummation of the
Standstill Agreement, the Debtors and the Bank Holders agreed to conduct
discussions in an attempt to reach a consensual resolution with respect to the
Bank Holders' setoff rights against both the Debtors and the Non-Debtor
Subsidiaries. The dispute concerning the Bank Holders' potential setoff rights
centered around the accounts upon which the Bank Holders had placed an
administrative freeze after the commencement of the Chapter 11 Cases (as
described above). In their efforts to reach a resolution, the parties to the
Standstill Agreement exchanged information and documents which enabled them to
stipulate to material facts regarding most of the frozen accounts. These facts
were set forth in a Stipulation Concerning Debtors' Frozen Bank Accounts,
which was filed in the Bankruptcy Court on February 15, 2002.
Contemporaneous with the filing of the factual
stipulation, the Bank Holders filed a motion in the Bankruptcy Court, entitled
Motion of Credit Suisse First Boston, as Agent, for an Order Modifying the
Automatic Stay to Permit Setoff of Frozen Funds (the "Setoff Motion"). By the
Setoff Motion, the Bank Holders requested relief from the automatic stay to
exercise setoff rights against 22 frozen bank accounts of certain Debtors
Non-Debtor Subsidiaries, totaling approximately $35 million. The Debtors, as
well as certain other creditor groups, objected to the Setoff Motion. In their
objection, the Debtors disputed the amount of the Bank Holders' setoff rights
and asserted, among other things, that the Bank Holders were wrongfully
withholding the entire balance of many of the frozen accounts, and that the
Bank Holders did not have valid setoff rights with respect to a substantial
number of the frozen accounts.
After extensive settlement negotiations, the
Debtors and the Bank Holders agreed to settle the Setoff Motion and the
parties' competing claims to the bank accounts at issue, together with certain
other bank accounts not covered by the Setoff Motion, which accounts totaled
$36,779,719.99, plus interest earned after the Petition Date. The parties
executed an agreement for the settlement of the Setoff Motion, the terms of
which authorized the release of specified funds totaling $18,953,325.31 plus
51.532% of the interest accrued on the frozen funds to the Debtors and
permitted the Bank Holders to exercise their setoff rights with respect to the
balance of the frozen funds, $17,826,394.68 plus 48.468% of the accrued
interest. The settlement agreement was approved by order of the Bankruptcy
Court, dated June 20, 2002.
(d) Cash Management System
On October 6, 2000, the Debtors filed a motion for
interim and final orders (i) authorizing (a) the maintenance of certain
existing bank accounts, (b) the continued use of existing business forms, (c)
the use of a modified cash management system and (d) the transfer of funds to
Non-Debtor Subsidiaries and (ii) waiving certain investment and deposit
requirements of Section 345(b) of the Bankruptcy Code (the "Cash Management
Motion"). The Court granted the relief requested in the Cash Management
Motion, as modified by an "Exhibit D-1" (which was introduced into evidence at
the hearing on the Cash Management Motion), by "so ordering" the record, to be
followed by the submission of an agreed-upon form of written order.
On June 19, 2001, the Court approved the
Agreed-Upon Interim Order Under 11 U.S.C. ss.ss. 105, 345(b) and 363 (I)
Authorizing (A) Maintenance of Certain Existing Bank Accounts, (B) Continued
Use of Existing Business Forms, (C) Use of Modified Cash Management System,
and (D) Transfer of Funds to Non-Debtor Subsidiaries; and (II) Waiving, on an
Interim Basis, Investment and Deposit Requirements of 11 U.S.C. ss. 345(b)
(the "Interim CMO").
The Interim CMO originally had an expiration date
of December 18, 2001. On December 17, 2001, the Court entered a Stipulation
and Order which extended the expiration date of the Interim CMO until February
26, 2002. The Debtors and Creditors submitted and the Court approved the final
cash management order (the "Final CMO"), which became effective on February
25, 2002 and is to continue in effect until confirmation of the Plan.
Pursuant to the Final CMO, in accordance with
Sections 105 and 363 of the Bankruptcy Code, the Debtors may (i) designate,
maintain and continue to use all of their respective collection, collateral,
operating, depository, payroll and other accounts existing at the Petition
Date in accordance with existing account agreements, (ii) close any such
accounts, and (iii) treat such accounts as accounts of the Debtors in their
capacity as debtors-in-possession. The Final CMO provides that the Debtors and
Non-Debtor Subsidiaries are permitted to utilize their cash management system
existing prior to the Petition Date.
With certain allowed exceptions, the Final CMO
prohibits the Debtors and Non-Debtor Subsidiaries from transferring funds to
pay pre-petition intercompany indebtedness. However, the Final CMO permits
transfers of funds among Debtors and Non-Debtor Subsidiaries in payment for
goods and services provided to the payor after the Petition Date. The Final
CMO also permits transfers of funds among Debtors and Non-Debtor Subsidiaries
for capital expenditures, working capital and short term liquidity as long as
the transfers are evidenced as loans, within the appropriate monetary limits
and properly recorded on applicable accounts, with additional limits on
transfers of funds to negative net worth Debtors and Non-Debtor Subsidiaries.
The Final CMO permits the Debtors and Non-Debtor Subsidiaries to invest and
deposit funds in accordance with their established deposit and investment
practices as of the Petition Date. The Final CMO also approved eight specific
transactions as exceptions to the limitations set forth in the Final CMO.
5. Unexpired Leases and Executory Contracts
As of the Petition Date, the Debtors were party to thousands
of unexpired leases and executory contracts, including, among others, real
property leases, information technology agreements, equipment leases,
plant-related service agreements, and supply agreements. During the pendency
of the Chapter 11 Cases, the Debtors have evaluated the costs and potential
benefits of these agreements, including the availability of alternate services
and more profitable end-users for its products, all without disrupting core
business operations.
Section 365 of the Bankruptcy Code authorizes a debtor,
subject to approval of the Bankruptcy Court, to assume or reject unexpired
leases and executory contracts. Under the Bankruptcy Code, a debtor has until
confirmation of a plan of reorganization to assume or reject executory
contracts and unexpired leases of residential real property or of personal
property of the debtor. A debtor in a Chapter 11 case ordinarily must assume
or reject unexpired leases of nonresidential real property within sixty (60)
days after commencement of the case. If a debtor fails to assume this type of
lease within the applicable time period, the lease is deemed rejected. The
bankruptcy court may extend the relevant time periods for cause.
(a) Real Property Leases
The Debtors are lessees under approximately 200
unexpired nonresidential real property leases. Most of the unexpired leases
are for space used by the Debtors for conducting the production, warehousing,
distribution, sales, sourcing, accounting and general administrative functions
that comprise the Debtors' businesses. Given the size and complexity of the
Chapter 11 Cases, the Debtors determined that they would be unable to complete
their analysis of all nonresidential real property leases during the time
limitation prescribed in Section 365(d)(4) of the Bankruptcy Code.
Accordingly, the Debtors sought, and the Bankruptcy Court approved, six (6)
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 May 21, 2003, and expires on the earlier of
(i) December 4, 2003, or (ii) the effective date of any confirmed plan in the
Chapter 11 Cases.
Throughout the Chapter 11 Cases, the Debtors were
actively engaged in an ongoing review of the unexpired nonresidential real
property leases to determine whether the rejection or assumption and
assignment of the leases was in the best interest of their respective estates.
Through the end of 2002, the Debtors had rejected approximately seventy (70)
nonresidential real property leases; assumed six (6) nonresidential real
property leases; and assumed and assigned three (3) nonresidential real
property leases. The Debtors continue their review and analysis of their
unexpired nonresidential real property leases.
Generally, all unexpired nonresidential real
property leases that have not previously been assumed or rejected by the
Debtors will be assumed under the Plan, except for those leases specified on
Schedule IV of the Plan, which must be filed at least five (5) days prior to
the Objection Deadline. See Section VII.F of this Disclosure Statement
entitled "Treatment of Executory Contracts and Leases."
(b) Executory Contracts and Unexpired Leases
Since the Petition Date, the Debtors have
instituted an internal process to review all executory contracts and unexpired
leases to evaluate the economic costs and benefits to each of them. Throughout
the Chapter 11 Cases, the Debtors have successfully renegotiated or rejected
numerous leases and executory contracts, resulting in a reduction in fixed
costs. The Debtors also have assumed, assumed as modified, or assumed and
assigned a number of executory contracts and unexpired personal property
leases since the Petition Date. By their review process, the Debtors have
realized significant savings without business interruption.
Generally, all unexpired nonresidential real
property leases that have not previously been assumed or rejected by the
Debtors will be assumed under the Plan, except for those leases specified on
Schedule IV of the Plan, which must be filed at least five (5) days prior to
the Objection Deadline. See Section VII.F of this Disclosure Statement
entitled "Treatment of Executory Contracts and Leases."
The following is a description of the disposition
of certain of the Debtors' executory contracts and unexpired leases throughout
the Chapter 11 Cases:
(i) Enron. In January 2001, the Debtors, with
Bankruptcy Court authority, assumed their various executory contracts with
Enron Energy Services, Inc. and other Enron-related entities. Among other
things, these contracts required Enron to provide to the Debtors certain
commodities and commodity-related services, as well as certain energy, energy
efficiency and consultation services. Among the services provided by Enron
were billing consolidation services, by which Enron would assemble and
consolidate third-party energy bills for presentation to OCD. OCD would make
payment on such bills to Enron, which was contractually obligated to convey
the appropriate portion of such payments to the underlying third party
providers. In connection with the assumption of these contracts, the Debtors
made a cure payment of approximately $20 million to Enron, on account of funds
owed to Enron and/or to third party energy providers. By order dated August
28, 2001, the Debtors obtained Bankruptcy Court approval to amend the
previously-assumed Enron agreements so as to, among other things, expand the
services provided thereunder to additional facilities of the Debtors. On
December 2, 2001, Enron Corp. and certain of its affiliates filed Chapter 11
bankruptcy petitions in the United States Bankruptcy Court for the Southern
District of New York. Prior to Enron Corp.'s bankruptcy filing, the Debtors
sent one or more notices to Enron by which the Debtors terminated their
various contractual agreements with Enron. Enron has asserted significant
post-petition claims against OCD as a result of the foregoing contract
terminations. By motion filed on May 9, 2003, OCD sought Court approval of a
settlement with Enron Corp. and certain of its affiliates that would resolve
all disputes among the parties. Among other things, such settlement resolved
the following issues: (i) the amount, if any, owed by OCD to Enron on account
of OCD's purchase of commodities from Enron subsequent to the Petition Date;
(ii) the amount, if any, owed by OCD in connection with certain projects under
construction for OC by Enron or parties controlled by Enron, including
incomplete projects; (iii) the amount, if any, owed by OCD on account of OCD's
alleged cost savings from such projects; and (iii) invoices allegedly issued
by Enron or affiliated parties in connection with uncompleted projects under
construction for OCD; (iv) the appropriate disposition of Owens Corning Energy
LLC, a limited liability company owned by OCD and an Enron affiliate; (v)
whether OCD or any of its affiliates were entitled to an allowed claim against
any of the Enron bankruptcy cases; (vi) whether any of the Enron debtors were
entitled to an allowed administrative or other claim against OCD or any of the
Debtors; (vii) the status and disposition of certain of the property leased to
OCD pursuant to certain lease agreement among the parties; and (viii) which of
the parties was entitled to certain natural gas stored at OCD's natural gas
storage facilities.
Under the terms of such settlement, which was
approved by Court Order dated June 13, 2003: (a) certain agreements among the
parties are deemed to have been terminated as of December 1, 2001; (b) the
master leases among the parties will be terminated and the property leased to
OCD thereunder was transferred to OCD "as is, where is and with all faults"
with no representations or warranties and free and clear of the liens or
encumbrances, other than certain excluded liens; (c) OCD will pay to Enron
Energy Services Operations, Enron Energy Services International Leasing, Inc.
and Owens Corning Energy LLC $43.0 million in cash as follows: $13,805,312 to
Owens Corning Energy LLC, $427,505 to Enron Energy Services International
Leasing, Inc. and the remainder to Enron Energy Services Operations; (d)
releases are to be exchanged among the parties; (e) certain other assets are
to be transferred to OCD free and clear of all liens, claims and encumbrances,
other than specified excluded liens; (f) OCD is to withdraw with prejudice any
claims filed by it or any controlled affiliate in the Enron bankruptcy cases
arising out of certain specified agreements and the transactions contemplated
thereby; (g) Enron and certain affiliates are to withdraw with prejudice any
proof of claim filed by them or any controlled affiliate against any of the
Debtors arising out of specified agreements and the transactions contemplated
thereby; (h) OCD is to assign its interests in Owens Corning Energy LLC to
Enron Energy Services Organization; and (i) Enron and specified affiliates are
to transfer to OCD any natural gas currently stored at OCD's natural gas
storage facilities.
(ii) Xerox Corp. OCD and Xerox Corp. were parties
to a pre-petition services agreement pursuant to which Xerox Corp. was
obligated to operate OCD's global documents management systems, the term of
which expired on December 31, 2001. Prior to the expiration of the agreement,
and after extensive negotiations, OCD and Xerox Corp. entered into a
post-petition document services agreement, which was approved by order of the
Bankruptcy Court dated July 16, 2001. OCD's execution of the post-petition
document services agreement, which replaced the original agreement as of May
21, 2001, was necessary to the Debtors' ongoing business operations. In
accordance with the entry of the post-petition agreement, Xerox Corp. became
entitled to an Allowed General Unsecured Claim against OCD in the approximate
amount of $3 million, and became entitled to assert an additional General
Unsecured Claim against OCD in the approximate amount of $892,000.
(iii) SAP America, Inc. With Bankruptcy Court
approval in June 2001, OCD assumed, with certain modifications, its software
license agreement with SAP America, Inc. Under the agreement, SAP America,
Inc. licenses certain software to OCD, which software is absolutely
fundamental to the Debtors' business operations. Upon the assumption of the
agreement, OCD and SAP America, Inc. agreed to make modifications to the
agreement in order to provide the Debtors with greater operational flexibility
and to facilitate the Debtors' potential divestiture of certain assets and/or
business units. In connection with the assumption of the agreement, OCD made a
cure payment to SAP America, Inc. in the approximate amount of $6.3 million.
In addition, SAP America, Inc. became entitled to an Allowed General Unsecured
Claim against OCD in the approximate amount of $287,000.
(iv) Owens-Corning (India) Limited. In connection
with the restructuring of OCD's Indian joint venture, Owens-Corning (India)
Limited ("OCIL") (discussed in Section III.A.3.b of this Disclosure
Statement), OCD assumed, as amended and restated, several executory contracts
between OCD and OCIL pursuant to which OCD provides OCIL with certain services
and OCIL provides certain products to OCD. Assumption of the agreements, as
modified (which included technology license agreements, a trademark and trade
name license agreement, an alloy services agreement, an offtake contract, a
shareholder agreement and an investment agreement), was part of the overall
restructuring of OCIL, which provided significant benefit to OCD's estate. No
cure payments were owed with respect to the assumption of the agreements. The
Bankruptcy Court authorized OCD's assumption of the agreements by order dated
June 18, 2002.
(v) Miscellaneous executory contracts and unexpired
leases. Since the Petition Date and through the end of January 2003, the
Debtors have filed twelve (12) motions rejecting miscellaneous contracts and
unexpired leases that no longer were required for the Debtors' business
operations, and have filed numerous additional motions to reject specific
contracts and leases, which have resulted in the rejection of such contracts
and unexpired leases.
6. Insurance
(a) General
During the 20-year period prior to the initiation
of the Chapter 11 Cases, billions of dollars of insurance proceeds were paid
out by various insurers to directly fund or reimburse OCD for funding the
settlement and defense of asbestos claims. During the pendency of the Chapter
11 Cases, the Debtors have been involved in litigation, arbitration and
negotiation in which the Debtors have sought to establish asbestos-related
coverage rights under policies that were not previously released in full with
respect to asbestos claims. In the second quarter of 2001, OCD entered into a
settlement agreement with a group of its excess level insurance carriers,
resolving a dispute concerning coverage from such insurers for non-products
asbestos-related personal injury claims. As a result, during the third quarter
of 2001, those carriers funded $55 million into an escrow account to be
released upon the substantial consummation of a plan of reorganization
confirmed by the entry of a final order of the Bankruptcy Court in the Chapter
11 Cases. During the third and fourth quarters of 2001 and the second quarter
of 2002, OCD also received payments of approximately, $5 million, $2 million
and $5 million, respectively, in respect of previously allowed claims from
liquidators of insolvent insurers, and expect to receive significant
additional amount over the next several years in respect of distribution on
asbestos claims previously allowed.
OCD also has other unconfirmed potential coverage
rights for asbestos-related bodily injury claims against solvent excess level
carriers and liquidators and others who now bear responsibility for insolvent
carriers. OCD is actively pursuing insurance recoveries under these remaining
excess policies in litigation, arbitration and otherwise. In October 2001, OCD
filed a lawsuit in Lucas County, Ohio, against ten excess level insurance
carriers for declaratory relief and damages for failure to make payments for
asbestos non-products claims; that lawsuit is in the discovery stages. Under
the ADR procedures of the Wellington Agreement, OCD is seeking recovery for
asbestos non-products claims against one excess carrier and expects to
initiate ADRs against the remaining Wellington insurers with which it has not
previously settled all asbestos products and non-products issues. OCD is also
pursuing litigation against a state guaranty association on account of its
responsibility for asbestos claims that would otherwise have been paid by a
now-insolvent excess insurer. Finally, OCD is continuing to pursue
asbestos-related coverage rights against liquidators of certain of its excess
insurers and recently entered into an agreement 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.
(b) Insurance Coverage Issues
OCD has 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.
(i) Litigation Against Non-Wellington Carriers.
On October 26, 2001, OCD filed a lawsuit in Lucas
County, Ohio, styled Owens Corning v. Birmingham Fire Insurance Co. et al. No.
CI0200104929, against the following ten excess level insurance carriers for
declaratory relief and damages for failure to make payments for asbestos
non-products claims under excess policies issued in the period between June
18, 1974 and September 1, 1984: Birmingham Fire Insurance Company of
Pennsylvania, Granite State Insurance Company, Landmark Insurance Company,
Lexington Insurance Company, National Union Fire Insurance Company of
Pittsburgh, Pa., Mt. McKinley Insurance Company, Allianz Insurance Company,
Allianz Underwriters Insurance Company, Affiliated FM Insurance Company, and
Royale Belge, S.A. That lawsuit is in the discovery stages; the trial date in
the Case Management Order is April 6, 2004. The insurer defendants each have
raised numerous defenses and dispute OCD's right to any coverage for
non-products claims. On June 6, 2003, the defendants filed a partial summary
judgment motion with respect to policies issued after September 1, 1980,
contending that there is no coverage available under those policies because
all of the claims fall under the completed operations hazard. OCD strongly
disputes the defendants' position. The motion is pending.
(ii) Wellington ADR Proceedings.
Under the ADR procedures of the Wellington
Agreement, OCD is seeking recovery for asbestos non-products claims under
policies issued by Insurance Company of North America. In addition to its
claims against corporate affiliates of ACE USA, Owens Corning is pursuing
coverage for asbestos non-products claims from the following insurer groups
that are signatories to the Wellington Agreement: Royal, Continental, and
Zurich. Those companies have reserved their rights with respect to coverage.
These claims are not yet in an ADR proceeding.
(iii) Proceedings Involving Policies Issued By
Insolvent Carriers.
OCD is 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. Also, OCD is
continuing to pursue asbestos-related coverage rights against liquidators of
certain of its excess insurers. OCD recently entered into an agreement with
Midland's liquidator that is now before the court on an approval motion. OCD
is involved in another proceeding in which it seeks coverage for asbestos and
other claims from an insolvent carrier estate.
7. Baron & Budd Administrative Deposits
Prior to the Petition Date, B&B was the law firm of record
for various plaintiffs in a number of asbestos-related personal injury
lawsuits against OCD and Fibreboard who were participants in the NSP. Under a
settlement agreement between OCD, Fibreboard and B&B, OCD and Fibreboard were
required to pay Administrative Deposits into settlement accounts to be
maintained by B&B for the benefit of its clients. The settlement agreement
provided for payments to be made in each of 2000, 2001, and 2002. OCD made its
first required payment of approximately $66 million on March 13, 2000 and
Fibreboard made its first required payment of approximately $44 million on
April 6, 2000. Prior to the Petition Date, and after receiving written
approval from OCD and/or Fibreboard, B&B distributed approximately $23 million
from the settlement accounts to its clients pursuant to the terms of the
settlement agreement. Because of the Chapter 11 filings, the Debtors did not
make the 2001 or 2002 payments to B&B and B&B did not make the 2001 or 2002
distributions to plaintiffs.
Under the settlement agreement, B&B was required to invest
the funds held for the plaintiffs and maintain the funds in settlement
accounts. Any income from the funds was designated as Investment Proceeds
under the agreement ("Investment Proceeds") and declared to be the property of
either OC or Fibreboard (the entity that deposited the funds).
After the Petition Date, B&B proposed to distribute the
funds remaining in the settlement accounts 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.
The Future Claimants' Representative and the Unsecured
Creditors' Committee disputed the existence of a trust or an escrow
arrangement and asserted that the entire balance in each of the settlement
accounts was property of OCD's and Fibreboard's respective estates.
After numerous hearings on the pleadings during 2001 and
2002, on June 20, 2002, the Bankruptcy Court issued an order granting B&B's
amended motion in part and denying it in part. The Bankruptcy Court ordered,
among other things, that: (a) the Investment Proceeds (approximately $8
million) were property of OCD and Fibreboard's respective estates and must be
returned to OCD and Fibreboard; (b) as to those plaintiffs who received
written notice of approval for payment pursuant to the agreement from OCD or
Fibreboard, and who had received payment of the first installment of their
settlement prior to the Petition Date (the "Qualifying OC and Fibreboard
Plaintiffs"), B&B, OCD and Fibreboard had met the standards under Texas law to
establish that the requirements of an escrow were fulfilled pre-petition as to
the principal balance; (c) to the extent that the principal balance in the B&B
settlement accounts of the settlement payments by OCD and Fibreboard
represented amounts due under the settlement agreement to the Qualifying OC
and Fibreboard Plaintiffs, then such balance (the "Qualifying OC and
Fibreboard Balance," approximately $70 million) was not property of the
Debtors' estates; (d) the Qualifying OC and Fibreboard Plaintiffs were
entitled to receive the second and third installments of their settlement out
of the Qualifying OC and Fibreboard Balance; and (e) the principal balance
remaining in the B&B settlement account, after deducting the Qualifying OC and
Fibreboard Balance (the "OC and Fibreboard Residual Balance", approximately $6
million) was property of the Debtors' estates and must be returned to OCD
(amounts due under settlement agreements to Qualifying Fibreboard Plaintiffs
would exhaust the remaining principal balance in the Fibreboard settlement
account).
On June 27, 2002, B&B filed a motion to amend the judgment,
requesting that the Bankruptcy Court amend its June 20, 2002 order to clarify
the method of calculating the Investment Proceeds and the OC and Fibreboard
Residual Balance, or, in the alternative, for a new trial. In the motion, B&B
asserted that the Qualifying OC and Fibreboard Plaintiffs were entitled to the
payment of interest from the dates they were to have received their second and
third installments. The Debtors, the Unsecured Creditors' Committee, the
Future Claimants' Representative and Plant each filed objections to B&B's
motion to amend the judgment.
On September 20, 2002, the Bankruptcy Court amended its
order of June 20, 2002 and ordered that the Investment Proceeds earned
subsequent to June 20, 2002 and all interest and other earnings on the
post-June 20, 2002 Investment Proceeds, should be allocated as follows: (i)
the Investment Proceeds on the Qualifying OC and Fibreboard Balance should be
allocated respectively to the Qualifying OC and Fibreboard Plaintiffs; and
(ii) the Investment Proceeds on the OC and Fibreboard Residual Balance should
be payable respectively to OCD and Fibreboard. The Bankruptcy Court further
ordered that the Investment Proceeds, interest and other earnings on the
Qualifying OC and Fibreboard Balance and the OC and Fibreboard Residual
Balance earned prior to June 20, 2002, should be payable respectively to OCD
and Fibreboard.
On October 2, 2002, B&B filed a notice of appeal of the
Bankruptcy Court's September 20, 2002 order. The Future Claimants'
Representative and the Unsecured Creditors' Committee also filed notices of
appeal from the June 20 and September 20, 2002 orders. The appeals have been
consolidated and the parties proceeded under a briefing schedule established
by the District Court, by order dated December 23, 2002. The briefing of the
issues is complete and the appeal is pending before Judge Wolin. The Plan
Proponents express no opinion as to the outcome of the appeal.
8. Coordination Between the Debtors, the Committees and the
Future Claimants' Representative
Since their formation, the Committees and the Future
Claimants' Representative have consulted with the Debtors concerning the
administration of the Chapter 11 Cases. The Debtors have kept the Committees
and the Future Claimants' Representative informed concerning their operations
and have sought the concurrence of the Committees and the Future Claimants'
Representative for actions outside the ordinary course of business. The
Asbestos Claimants' Committees and the Future Claimants' Representative
participated actively, together with the Debtors' management and advisors, in
the negotiation and formulation of the Plan.
9. Implementation of Process for Resolution of Inter-Creditor
Issues
Shortly after the Petition Date, the Debtors' counsel began
an extensive review of the facts and circumstances relating to certain
potential inter-creditor issues (the "Inter-Creditor Issues"), including
issues relating to the Guarantees (the "Subsidiary Guarantees") entered into
by the Subsidiary Guarantors under the 1997 Credit Agreement, which include a
number of the Debtors and certain Non-Debtor Subsidiaries. (See Section
V.G.3.c of this Disclosure Statement entitled "Guarantee/Bank Holders Action"
for further discussion of the adversary proceedings filed in the Chapter 11
Cases to avoid and set aside or equitably subordinate the Claims of the Bank
Holders under the Subsidiary Guarantees as fraudulent conveyances.) The
Inter-Creditor Issues include any and all claims, objections, motions,
contested matters, adversary proceedings or any other proceedings involving,
related to or affecting issues of the amount, validity, enforceability or
priority of Claims by the Bank Holders against any of the Debtors or any
Non-Debtor Subsidiary (to the extent the Bankruptcy Court has jurisdiction to
affect the Claims against Non-Debtor Subsidiaries) which is a Subsidiary
Guarantor of the Debtors' obligations to the Bank Holders, including without
limitation: (a) any claims relating to substantive consolidation of the
Debtors; (b) any claims relating to the validity, enforcement or priority of
the Pre-petition Bonds; (c) any claims relating to the validity or
enforceability of a License Agreement, dated as of October 1, 1991, by and
between OCD and OCFT (as amended) and a License Agreement, dated as of April
27, 1999, by and between OCFT and Amerimark; (d) any claims regarding the
amount, validity, enforceability or priority of the Subsidiary Guarantees; (e)
any claims against any direct or indirect Subsidiary of OCD in respect of
OCD's asbestos liability; and (f) any claims as to the amount, validity,
enforceability, priority or avoidability of any intercompany transfers.
The Debtors' counsel advised the various creditor
constituencies that the manner of resolution of Inter-Creditor Issues could
materially impact their respective recoveries. To assist the various creditor
constituencies in their analysis of the Inter-Creditor Issues, the Debtors
proposed a process by which the corporate and financial interrelationships
between the Subsidiary Debtors and the Non-Debtor Subsidiaries could
efficiently be reviewed. The Debtors' goal was to inform the creditor
constituencies about these issues in order to initiate negotiations and thus
avoid a litigated resolution of the complex legal and factual issues, or in
the event that a consensual resolution could not be reached, to provide an
efficient manner for conducting factual discovery.
To facilitate a consensual resolution of the Chapter 11
Cases, in the spring of 2001, the Debtors voluntarily agreed to produce a
documentary record that would aid in this review. During the period between
July 2001 and October 2001, the Debtors produced a large volume of documents
designed to be a compilation of relevant documents that would be useful in
reviewing and investigating each Debtor or Subsidiary Guarantor's corporate
history, major creditor relationships, and significant cash and value
transfers (the "Inter-Creditor Project").
The Debtors established an information and document
depository (the "Information Depository") at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP in New York City. To date, over four hundred-fifty
thousand pages of information and materials have been deposited in the
Information Depository, available to be reviewed by those who entered into a
confidentiality agreement with the Company (the "Participating Parties"),
which confidentiality agreements were necessary to assure the protection of
privileged and confidential material included in the production of documents
to the Information Depository.
In addition to the Information Depository, the Debtors also
created a secure, web-enabled database by which the Participating Parties were
able to access the same documents and materials located in the Information
Depository.
After the initial production of the Debtors' documents and
materials described above, the parties formalized the Inter-Creditor Project.
On September 24, 2001, the Debtors proposed an "Inter-Creditor Stipulation and
Order" which the Bankruptcy Court adopted on such date after hearing from the
various creditor constituencies. The Inter-Creditor Stipulation and Order
delineated a schedule for additional discovery regarding the investigation of
the Inter-Creditor Issues. The Inter-Creditor Stipulation and Order also
directed the Debtors to provide a report to the Court at each omnibus hearing
regarding the status of compliance with the Inter-Creditor Stipulation and
Order.
Pursuant to the Inter-Creditor Stipulation and Order, on
October 20, 2001, the Debtors and the Participating Parties exchanged written
discovery requests. The Debtors searched for documents potentially relevant to
such requests at the Company's headquarters, at its off-site storage facility
in Toledo, Ohio, at its off-site storage facility in Granville, Ohio, and at
the offices of certain of the Debtors' outside professionals. Debtors' counsel
responded to the request for documents.
In addition to the Debtors' production, in December, 2001,
and January, 2002, the Participating Parties commenced document production in
response to the requests received from the other Participating Parties.
In January and February, 2002, the Debtors and the
Participating Parties met to discuss the results of their review and to share
their views regarding the issues. The Debtors and other Participating Parties
identified certain issues and entities for further investigation and
resolution.
On February 19, 2002, the Pre-petition Agent under the 1997
Credit Agreement filed a statement (the "Statement") regarding the resolution
of Inter-Creditor Issues. The Statement requested the implementation of a
process designed to result in the efficient resolution of questions relating
to the value of the Subsidiary Guarantors.
On February 22, 2002, the Debtors filed a Status Report
recommending that the Inter-Creditor Project proceed. More specifically, the
Debtors proposed that they develop proposed factual stipulations and proffer
them to the other Participating Parties pursuant to a specific schedule.
Further, the Debtors urged the continuance of the monthly meetings with the
Participating Parties and the presentation of status reports to the Court.
By order dated March 18, 2002 (the "Inter-Creditor Issues
Order"), the Bankruptcy Court established a schedule for addressing the
resolution of Inter-Creditor Issues. The schedule established the dates on
which the Debtors were to submit to the Participating Parties certain proposed
factual stipulations, generally concerning corporate history and governance,
management and business operations, the financial condition of the entities,
and relationships with Affiliates, the dates on which the Participating
Parties were to provide the Debtors with responses and comments to the
proposed factual stipulations, and the dates of the circulation by the Debtors
of a revised version of the proposed factual stipulations. At a hearing on
June 20, 2002, the Bankruptcy Court authorized the filing of the stipulations
under seal if the parties so desired.
In June 2002, Blue Ridge Investments LLC ("Blue Ridge")
moved, in part, to compel the Debtors to comply with the Inter-Creditor
Stipulation and Order and the Inter-Creditor Issues Order and sought to be
deemed a Participating Party. Following a hearing on Blue Ridge's motion, the
Debtors and Blue Ridge agreed to a consensual resolution of the motion, which
was approved by the Court on August 26, 2002, whereby upon executing a
confidentiality agreement, Blue Ridge was granted full access to the
Information Depository and was also entitled to receive and comment on the
proposed Stipulations of Fact concerning Integrex. Blue Ridge was also
entitled to receipt of the final stipulations of fact concerning OCFT, OCD,
IPM and Fibreboard.
In response to the Inter-Creditor Issues Order, the Debtors
submitted their proposed factual stipulations with respect to OCFT, IPM, OCD,
Integrex, Fibreboard to the Participating Parties; the Participating Parties
responded and commented on the proposed factual stipulations and the Debtors
circulated revised versions of each of the proposed factual stipulations.
Pursuant to the Inter-Creditor Issues Order, with certain
modified deadlines, the Debtors filed, under seal, the following Final
Stipulations:
(1) On November 21, 2002, the Debtors filed, under seal,
Stipulations and Objections to Proposed Stipulations of Fact
Concerning OC, and Document Summaries.
(2) On November 21, 2002, the Debtors filed, under seal,
Stipulations and Objections to Proposed Stipulations of Fact
Concerning Integrex, and Document Summaries.
(3) On December 18, 2002, the Debtors filed, under seal,
Stipulations and Objections to Proposed Stipulations of Fact
Concerning IPM, Inc., and Document Summaries.
(4) On January 7, 2003, the Debtors filed, under seal,
Stipulations and Objections to Proposed Stipulations of Fact
Concerning Fibreboard Corporation.
(5) On January 16, 2003, the Debtors filed, under seal,
Stipulations and Objections to Proposed Stipulations of Fact
Concerning OCFT, and Document Summaries.
At the omnibus hearing on January 27, 2003, the Debtors'
counsel advised the Court that, as a result of the Inter-Creditor Project,
approximately 4,500 proposed stipulations had been filed with the Court.
10. 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. Under the Case Management Order, the Honorable Judith K.
Fitzgerald was appointed settlement judge for the two matters for which the
reference was withdrawn. Professor Francis McGovern was appointed mediator for
those same matters and the parties were directed to appear for mediation. In
addition, the Court appointed William A. Drier, Esquire, as Special Master for
limited purposes related to discovery.
The Court 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. 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. It is anticipated that Judge Wolin will issue final
findings of fact and conclusions of law with respect to the Substantive
Consolidation Motion in conjunction with any Order confirming the Plan in
these Cases.
A hearing on the Bank Holders Action was scheduled
to commence April 2003, but was subsequently postponed. The Bank Holders
Action was to include the taking of evidence regarding the positions of the
parties on the validity, extent and value of the Subsidiary Guarantees for the
purpose of determining any benefits and harms resulting from the substantive
consolidation provisions of the Plan.
(c) The Appointment of Consultants
By order dated December 28, 2001 (the "Consultants
Order"), the District Court ordered that William A. Drier, Esq., David R.
Gross, Esq., C. Judson Hamlin, Esq., John E. Keefe, Esq., and Professor
Francis E. McGovern be designated as court appointed consultants (the "Court
Appointed Consultants") to advise the District Court and to undertake, in
connection with the Chapter 11 Cases of the Debtors and the cases of Armstrong
World Industries, Inc., W.R. Grace & Co., Federal-Mogul Global, Inc., and USG
Corporation, such responsibilities, including by way of example and not
limitation, mediation of disputes, holding case management conferences, and
consultation with counsel, as the District Court may delegate to them
individually. The Consultants Order also provided that the District Court
could, without further notice, appoint any of the Court-Appointed Consultants
to act as a special master ("Special Master") to hear any disputed matter and
to make a report and recommendation to the District Court on the disposition
of such matter. By the same order, the District Court ordered that the fees of
the Court Appointed Consultants and Special Masters are to be borne by the
debtors in such manner and apportionment as the District Court or the
bankruptcy court of each respective case may direct.
(d) The Appointment of a Mediator
Consistent with the terms and purpose of the
Consultants Order, on June 17, 2002, the Debtors filed a motion seeking an
order appointing Professor Francis E. McGovern as mediator ("Mediator") nunc
pro tunc to May 1, 2002, and directing the Mediator to report periodically to
the District Court and Bankruptcy Court during the pendency of the Chapter 11
Cases on the status of the mediation process between the Committees. The
Bankruptcy Court appointed Francis E. McGovern as Mediator, effective May 1,
2002, and ordered that the Mediator report periodically to the District Court
and/or the Bankruptcy Court (as may be determined by the circumstances or by
future orders of either court) on the status of the negotiations between the
parties. The Bankruptcy Court further ordered that the Mediator not serve as
Special Master to hear disputed matters and report to the Bankruptcy Court or
the District Court on any matters on which he previously served as mediator,
or on any matter materially related thereto, and not serve as Mediator on any
disputed matter on which he previously heard and reported to the Bankruptcy
Court or the District Court as a Special Master, or on any matter materially
related thereto.
Pursuant to Judge Wolin's December 23, 2002 order
directing mediation, the Debtors, the Bank Holders, the Designated Members,
the Committees and the Future Claimants' Representative reported for
mediation.
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.
By Order dated November 25, 2002, the Bankruptcy Court
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. By Order dated May 12, 2003,
the Court extended the Solicitation Period to November 30, 2003. On March 13,
2002, the Debtors filed a motion seeking an extension from March 14, 2003,
until March 31, 2003, to file their proposed Disclosure Statement. By Order
dated April 22, 2003, the Court further extended until March 31, 2003 the
Debtors time to file their Disclosure Statement. The proposed Disclosure
Statement was filed on March 28, 2003.
12. Extension of Time to Remove Actions
The Debtors are parties to numerous judicial and
administrative proceedings currently pending in multiple forums throughout the
country (collectively, the "Actions"). The Actions involve a wide variety of
claims. Pursuant to 28 U.S.C. ss. 1452 and Bankruptcy Rule 9027(a)(2), the
Bankruptcy Court has entered orders extending the time period within which the
Debtors may review Actions and determine whether to remove them to the
District Court or the Bankruptcy Court. The date by which the Debtors must
file notices of removal under Bankruptcy Rule 9027(a)(2)(A) has been extended
through and including the later of (a) thirty (30) days after confirmation of
a plan of reorganization, or (b) thirty (30) days after the entry of an order
terminating the automatic stay with respect to the particular action sought to
be removed.
13. Summary of Claims Process and Bar Dates
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.
General Claims Bar Date and Proofs of Claim
In connection with the Chapter 11 Cases, the Bankruptcy
Court set April 15, 2002 as the last date by which holders of certain
pre-petition Claims against the Debtors were required to file Proofs of Claim
(the "General Bar Date"). The General Bar Date did not apply to certain
claims, including Asbestos Personal Injury Claims other than OC Indirect
Asbestos PI Trust Claims and FB Indirect Asbestos PI Trust Claims. Pursuant to
order of the Bankruptcy Court dated November 27, 2001, any holder of a Claim
that was required to but failed to file a Claim on or before the General Bar
Date was barred from asserting such Claim against any of the Debtors and will
not participate in any distribution in the Chapter 11 Cases on account of such
Claim.
Pursuant to notice procedures approved by the Bankruptcy
Court, the Debtors sent out approximately 204,000 Proofs of Claim forms and
notices of the General Bar Date to known claimants and their attorneys, and
published notice of the General Bar Date twice in the national and (if
applicable) international editions of The New York Times, The Wall Street
Journal and USA Today; once in approximately 250 regional or local newspapers
in the areas in which the Debtors had significant business operations at the
time of publication; and once in approximately 35 trade publications in the
primary lines of business in which the Debtors operate or formerly operated.
In response to the General Bar Date, approximately 24,000
Proof of Claims, including late-filed claims, were filed with the Claims Agent
and/or Bankruptcy Court, asserting approximately $16.1 billion of aggregate
liabilities. The Debtors are investigating these claims to determine their
validity.
The Debtors have identified approximately 15,000 claims,
asserting approximately $8.4 billion of aggregate liabilities, which they
believe should be disallowed by the Bankruptcy Court, primarily because such
claims appear to be duplicate or amended claims or claims that are not related
to any of the Debtors' cases (the "Currently Disputed Claims"). It is the
intention of the Debtors to file objections to these Currently Disputed
Claims. While the Bankruptcy Court will ultimately determine liability
amounts, if any, that will be allowed as part of the Chapter 11 Cases, the
Debtors believe that all or substantially all of these claims will be
disallowed.
As of the date of the filing of this Disclosure Statement,
the Debtors have filed 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.
- 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:
o Class 1: The Debtors believe that no unpaid liabilities
exist for this class.
o Class 2A: $4.4 million to $5 million
o Class 2B: $6 million
o Class 3: $18.0 million to $18.5 million
o Class 4 : $1,472 million to $1,577 million
o Class 5: $1,389 million
o Class 6: $323 million to $687 million
o Class 7: See Sections IV.D.2 and VII.C.3.b(vi) of this
Disclosure Statement
o Class 8: See Sections IV.D.2 and VII.C.3.b(vii) of this
Disclosure Statement
o 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.
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.
The Unsecured Creditors' Committee asserts that a bar date
should be established for Asbestos Personal Injury Claims. The Unsecured
Creditors' Committee also maintains that the Debtors should currently
implement procedures requiring holders of Asbestos Personal Injury Claims to
provide evidence with respect to the claims in the manner in which holders of
OC Asbestos Property Damage Claims are required to file claims and provide
evidence. The Plan Proponents assert that there are valid reasons for the
different approaches to these claims. OC Asbestos Property Damage Claims will
not be channeled to a trust and will receive distributions as Class 6 Claims.
In order to resolve these claims and reduce reserves needed to be maintained
for Disputed Claims, the Debtors have commenced the process of analyzing these
OC Asbestos Property Damage Claims as part of the claims review and objection
process. Because the determination of Asbestos Personal Injury Claims will be
governed by the Asbestos Personal Injury Trust Distribution Procedures after
confirmation, as required by Section 524(g), the Debtors contend that there is
no valid reason for the Debtors to supplant the function of the Asbestos
Personal Injury Trust Distribution Procedures. By Order dated April 25, 2003,
Judge Wolin withdrew the reference with regard to the motion of the Official
Committee of Unsecured Creditors for an order establishing a bar date for
filing proofs of claim for personal injury and wrongful death claims against
the Debtors. The proceedings with regard to the Motion are stayed pending
further order of the District Court.
14. Plant Insulation Company Motion to Appoint Examiner
On September 28, 2001, Plant filed a motion (the "Plant
Motion") under Section 1104(c)(2) of the Bankruptcy Code for an order
appointing a disinterested examiner to conduct an examination of Fibreboard,
including an investigation as to whether Fibreboard assets were diverted to
pay OCD debts. Plant alleged that funds which were purportedly set aside for
payment of Fibreboard's asbestos liability had been diverted to pay for
certain liability of OCD, or, that when OCD and Fibreboard entered into
various joint settlements for liability, disproportionate liability was
assessed to Fibreboard. Plant argued that the appointment of an examiner was
mandatory pursuant to the provisions of Section 1104(c)(2) of the Bankruptcy
Code, which provides, in part, that "on request of a party in interest...the
court shall order the appointment of an examiner to conduct...an investigation
of the debtor as is appropriate...if...the debtor's fixed, liquidated,
unsecured debts, other than debts for goods, services, or taxes, or owing to
an insider, exceed $5,000,000." Plant argued that an examiner should be
appointed because Fibreboard's fixed, liquidated, unsecured asbestos debts
exceeded $5 million and because there was allegedly reason to believe that
assets of the Fibreboard Insurance Settlement Trust had been diverted to help
pay OCD's asbestos debts.
The Plant Motion was opposed by the Debtors, the Future
Claimants' Representative, the Unsecured Creditors' Committee and the Asbestos
Claimants' Committee, all of which filed an objection and/or response to the
Plant Motion. A fundamental dispute between Plant and the responding parties
was whether Section 1104(c)(2) of the Bankruptcy Code is a mandatory provision
which allegedly requires the Bankruptcy Court to appoint an examiner if the $5
million debt threshold is satisfied, or whether the Court retains discretion
to deny a request for the appointment of an examiner under these
circumstances. The United States Trustee also filed a response to the Plant
Motion, stating its position that if the $5 million debt threshold of Section
1104(c)(2) of the Bankruptcy Code is satisfied, the appointment of an examiner
is mandatory.
Following a hearing, the Bankruptcy Court denied Plant's
motion for the appointment of an examiner without prejudice, by order entered
March 22, 2002.
On March 27, 2002, Plant filed a notice of appeal of the
Bankruptcy Court's order. By order dated December 4, 2002, Judge Wolin granted
Plant's appeal and further ordered that "the Order of the Bankruptcy Court
denying Plant's application for the appointment of an examiner on the ground
that no motion for a trustee had been denied by the Bankruptcy Court is hereby
vacated solely on the ground upon which it was based....." The District Court
remanded the matter to the Bankruptcy Court for further proceedings on Plant's
motion for the appointment of an examiner.
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, an individual asbestos claimant, 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 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 and the EPA signed a proposed
agreement 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 proposed
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 proposed 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 proposed Environmental Settlement Agreement also contains work
plans for limited removal actions by the Debtors at two Rhode Island sites.
The United States has lodged the proposed Environmental Settlement Agreement
with the Court and published a notice of the lodging in the Federal Register
on June 5, 2003. On June 17, 2003, the Debtors filed a Motion for Approval of
Settlement of Environmental Claims of the United States (the "EPA Settlement
Motion"). On July 17, 2003, the United States filed a joinder in support of
the EPA Settlement Motion. The Court approved the EPA Settlement Motion on
July 23, 2003.
(ii) State Claims
The Debtors have negotiated an
Environmental Settlement Agreement similar to the Environmental Settlement
Agreement with the EPA, discussed above, with the State of New York, where the
Debtors conducted operations, which agreement covers only that State's costs
at sites that are presently unknown. The Debtors also negotiated settlement
agreements with the Texas Commission on Environmental Quality and the City of
Tacoma.
(iii) Private Party Claims
The Debtors have settled various Claims
covering various formerly owned properties (Ashton, Rhode Island, Snyder
Lumber Sites and Gardena, California) or prior waste disposal sites (GBF
Site).
(iv) Enforcement Action Claims
The Debtors have resolved most prepetition
environmental actions, including an Ohio air settlement ($201,633), a Colorado
air settlement ($9,000) and a federal Clean Water settlement ($40,000).
(b) Claims Arising Under Environmental Laws Involving
Formerly owned Properties Resolved as
Administrative Claims
The Debtors resolved the following claims: Oregon
Department of Environmental Quality for the former St. Helens Plant ($900,000)
and Industry factory rental for the former Ashton Plant ($75,000).
(c) Unresolved Claims Arising Under Environmental Laws
State Claims
The Debtors have been engaged in extensive
negotiations with the Rhode Island Department of Environmental Management
("RIDEM") regarding its Proof of Claim in the amount of $80 million with
respect to five sites in Rhode Island where alleged releases of hazardous
substances by the Debtors may have contributed to contamination. In an effort
to focus settlement negotiations, the Debtors have recently completed a
limited investigation of environmental conditions at the Dupraw and Mackland
Farms sites and an investigation to identify other parties that used that site
for waste disposal. Discussions with Rhode Island regarding its Proof of Claim
are ongoing.
The Debtors have also been engaged in
extensive negotiations with the New Jersey Department of Environmental
Protection ("NJDEP") regarding its Proof of Claim in the amount of
approximately $74 million, concerning the BEMS landfill in Burlington, a
multi-party waste disposal site used by the Debtors. Ongoing litigation may
continue beyond the Debtors' emergence from bankruptcy.
The Kansas Department of Health and
Environment ("KDHE") has filed a Proof of Claim in the amount of approximately
$1.9 million with respect to remedial costs at a landfill previously operated
by the City of Kansas City and used for disposal by the Debtors and a number
of other parties. The Debtors have been engaged in discussions with KDHE
regarding this Claim and at this point, the Debtors expect that this Claim,
and a related Claim by the Kansas National Guard, may require an estimation
proceeding.
The State of California has filed a Proof
of Claim in the amount of $40 million with respect to costs at two disposal
sites: Operating Industries, Inc. and the GBF landfill. The Debtors believe
that the State's claim is without merit because, in each case, the Debtors
have resolved their liability for cleanup costs through settlements with the
EPA or private parties.
Liabilities arising from environmental
conditions at properties currently owned and operated by the Debtors are not
generally subject to discharge and may need to be satisfied as Administrative
Claims or by the Debtors after emergence from bankruptcy. On that basis, the
Oklahoma Department of Environmental Quality has withdrawn a protective Proof
of Claim regarding site conditions at the Debtors' facility in Oklahoma City,
which the Debtors expect to resolve.
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
The Company's federal income tax returns typically are
audited by the IRS in multi-year audit cycles. The audit for the years
1992-1995 was completed in late 2000. Due to the Filing, the IRS also
accelerated and completed the audit for the years ended 1996-1999 by March of
2001. As the result of these audits and unresolved issues from prior audit
cycles, the IRS is asserting claims for approximately $390 million in income
taxes plus interest of approximately $175 million.
Pending audit of the Company's federal income tax return for
the year 2000, the IRS has also filed a protective claim in the amount of
approximately $50 million, covering a tax refund received by the Company for
such year, plus interest.
The United States Department of Treasury has filed Proofs of
Claim, totaling approximately $530 million, in connection with these tax
claims.
In accordance with generally accepted accounting principles,
the Company maintains tax reserves to cover audit issues. While the Company
believes that the existing reserves are appropriate in light of the audit
issues involved, its defenses, its prior experience in resolving audit issues,
and its ability to realize the benefit of certain challenged deductions in
subsequent tax returns if the IRS is successful, there can be no assurance
that such reserves will be sufficient. The Company will continue to review its
tax reserves on a periodic basis and to make such adjustments as may be
appropriate. Any such revision could be material to the Company's consolidated
financial position and results of operations in any given period.
In this regard, the Company is in the process of attempting
to negotiate a settlement of the United States federal income tax audits of
the Company's taxable years 1984 - 1999 at the Appeals level of the IRS. The
Company believes that it has reached a preliminary oral agreement to settle
with the IRS pursuant to which, if finalized, the Company would owe the IRS up
to $135 million in taxes and interest.
The Company's preliminary oral settlement with the IRS is
non-binding and subject to further negotiation and change. Even if agreed to
by the Company, moreover, the settlement would have to be approved by the
Joint Committee on Taxation, signed thereafter by the IRS, and approved by the
Bankruptcy Court. There can be no assurance that this will occur and
accordingly, there can be no assurance that the IRS will not continue to
assert that the Company owes $530 million to the IRS.
17. Asset Dispositions
Section 363(f) of the Bankruptcy Code authorizes a debtor,
under certain circumstances and subject to approval of the Bankruptcy Court,
to sell property of the estate free and clear of liens, claims and
encumbrances, with such liens, claims and encumbrances to attach to the
proceeds of sale. Since the Petition Date, the Debtors have, pursuant to
section 363(f) of the Bankruptcy Code, sold certain property, including, but
not limited to, the following assets.
(a) Sale of Bradenton, Florida Plant Assets
Exterior Systems, Inc. designed and manufactured
aluminum windows and patio doors products at a plant located at 4504 30th
Street, W., Bradenton, Florida. Unfortunately, due to a number of factors,
including the older technology employed at the plant, Exterior Systems, Inc.
was unable to operate the plant profitably. As a result, the Debtors
contemplated selling the plant assets or, if a sale could not be consummated,
closing the plant to limit their losses.
Throughout the year 2002, the Debtors contacted and
solicited levels of interest for the purchase of the plant from potential
purchasers that would have an interest in such assets. Simonton Building
Products, Inc. was determined to be the only viable purchaser, and the parties
entered into an Asset Sale and Purchase Agreement, dated December 17, 2002,
with a sale price of $4,351,500, subject to certain adjustments and other
calculations. The parties also agreed to enter into a lease agreement pursuant
to which the plant will be leased to the buyer and to enter into a supply
agreement.
On December 19, 2002, the Debtors filed a motion
seeking authorization to sell the assets to Simonton Building Products, Inc.
The motion was granted and the sale was approved by order of the Bankruptcy
Court, dated January 27, 2003.
(b) Sale of Real Property in South Gate, California
Owens Corning owned an approximately 6.9 acre
parcel of real property located at 4452 Ardine Street in South Gate,
California, on which there was situated an outdated manufacturing facility.
The Debtors' only use of the property was the storage of product manufactured
at a nearby plant, for which they were in the process of securing other
storage facilities. Accordingly, Owens Corning engaged a broker and ultimately
entered into Purchase and Sale Agreement, dated December 10, 2002, with Cha
Haw Trading Corporation, as buyer, for a sale price of $4,250,000.
On December 19, 2002, the Debtors filed a motion
seeking authorization to sell the property to Cha Haw Trading Corporation. The
motion was granted and the sale was approved by order of the Bankruptcy Court,
dated January 27, 2003.
(c) Sale of Atlanta, Georgia Plant Assets
Exterior Systems, Inc. designed and manufactured
vinyl siding and related products at leased facilities located at 5625, 5655
and 5675 Fulton Industrial Boulevard in Atlanta, Georgia. As part of an
ongoing review of its business operations, Exterior Systems, Inc. decided to
reduce the excess capacity in its vinyl siding operations and to reduce the
number of competing brands offered. To that end, the Debtors made a formal
announcement in the fall of 2002 to discontinue the manufacture and sale of
the Owens Corning brand of vinyl siding products, which were manufactured only
at the Atlanta plant. Several potential purchasers in the vinyl siding
manufacturing business expressed an interest in acquiring the assets of the
plant. Alcoa Home Exteriors, Inc. was the only party that submitted an offer
to acquire the ongoing operations of the plant, including hiring essentially
all of the plant's employees. The proposal also contemplated an assignment of
the real estate leases of the subject premises. The parties ultimately entered
into an Asset Purchase Agreement, dated January 15, 2003, for a sale price of
$5.5 million.
On January 15, 2003, the Debtors filed a motion
seeking authorization to sell the assets to Alcoa Home Exteriors, Inc. The
motion was granted and the sale was approved by order of the Bankruptcy Court,
dated February 27, 2003.
(d) Sale of Real Property in Nappannee, Indiana
Exterior Systems, Inc. owned real property located
at 851 Tomahawk Drive, Nappannee, Indiana, at which the Debtors had ceased
their equipment reconditioning activity. Before a brokerage firm could be
engaged, an adjoining property owner expressed an interest in purchasing the
property. Based on the opportunity for an immediate sale without the
associated cost of a broker's commission and marketing time, Exterior Systems,
Inc. negotiated and entered into a Purchase and Sale Agreement, dated March
17, 2003, with Dutch Real Estate Corp., as buyer, for a sale price of
$476,000.
On March 19, 2003, the Debtors filed a motion
seeking authorization to sell the property to Dutch Real Estate Corp. The
Debtors also sought in the motion authorization to pay from the sale proceeds
certain real estate taxes totaling approximately $14,196.73 in principal. The
motion was granted and the sale was approved by order of the Bankruptcy Court,
dated April 24, 2003.
(e) Sale of Phenix City, Alabama Plant Assets
Owens Corning HT, Inc. ("OCHT") owned a plant
located at 908 Owens Corning Drive, Phenix City, Alabama, at which it
manufactured rock wool pipe, board and batts for use in insulation
applications. As part of the Debtors' ongoing review of its business
operations, the Debtors determined that the business at the facility was
non-strategic and non-core. The business consistently under-performed
financially and lost money at the gross margin level for the year 2002.
Consequently, the Debtors decided to sell the assets of the Phenix City plant.
The Debtors undertook marketing efforts targeted to
sell the assets of the Phenix City plant to commercial and industrial
insulation competitors, as well as to manufacturers of other insulation
materials. After negotiating with the two interested parties who had made
acceptable preliminary offers, OCHT and Owens Corning entered into an
Agreement of Sale, dated March 18, 2003, with IIG Minwool, LLC ("IIG"). IIG
agreed to purchase certain assets of the Phenix City plant for a purchase
price of $6.7 million, $3.7 million of which was due at closing by wire
transfer and $3 million of which was payable pursuant to a promissory note
attached to the Agreement of Sale, which obligation was to be secured by
security interests in all of the assets being acquired under the Agreement of
Sale.
On March 19, 2003, the Debtors filed a motion
seeking authorization to sell the Phenix City plant assets. The Debtors also
sought authorization to pay from the sale proceeds certain personal property
taxes totaling approximately $121,069.18.
Subsequent to the filing of the motion, the other
interested party, Fibrex Insulation, LLC ("Fibrex"), contacted the Debtors to
propose a counteroffer to the offer by IIG as set forth in the Agreement of
Sale. The Debtors conducted an auction on April 28, 2003. After spirited
bidding by IIG and Fibrex, IIG emerged as the highest bidder with its final
bid of $8 million in cash.
A hearing was held before the Bankruptcy Court on
April 28, 2003. The sale to IIG was approved, subject to the submission of a
revised proposed sale order. On May 12, 2003, the Bankruptcy Court entered an
order approving the sale to IIG, nunc pro tunc to April 28, 2003.
(f) Sale of Owens Corning Metal Systems Assets
Owens Corning Metal Systems ("OCMS"), a division of
Exterior Systems, Inc., was in the aluminum building products industry. As
part of the Debtors' ongoing review of its business operations, the Debtors
determined that the business of OCMS was non-strategic and non-core.
Consequently, the Debtors decided to sell the assets utilized in the business
of OCMS at auction.
The Debtors, through their investment banker,
Goldsmith Agio Helms Securities, Inc., undertook solicitation and marketing
efforts directed at potential strategic buyers and financial sponsors. After
consideration of the proposals submitted by interested bidders in January 2003
and following on-going discussions with those interested bidders who had made
acceptable proposals, the Debtors determined that the offer proposed by ALSCO
Acquisition Corp., now known as ALSCO Metals Corporation ("ALSCO") was the
highest and best offer. Accordingly, Exterior Systems, Inc., Owens-Corning
Fiberglas Technology, Inc. and, for limited purposes, Owens Corning, entered
into an Asset Purchase Agreement, dated March 19, 2003, with ALSCO for the
sale of certain assets, the assumption by ALSCO of certain liabilities, the
execution and entry of a supply agreement and a transition services agreement
and the Debtors' assumption and assignment to ALSCO of certain executory
contracts and unexpired leases. The purchase price set forth in the Asset
Purchase Agreement was $50 million in cash plus certain assumed liabilities.
The Asset Purchase Agreement was subject to higher and better offers.
On March 19, 2003, the Debtors filed a motion to
approve sale procedures and bidding protections. This Motion was granted by
order of the Bankruptcy Court, dated April 22, 2003. On March 19, 2003, the
Debtors also filed a motion seeking authorization to sell the assets to ALSCO
or to the successful bidder.
The Debtors conducted an auction on May 16, 2003.
After spirited bidding by ALSCO and another bidder, MIC Acquisition Corp.,
ALSCO emerged as the highest bidder with its final bid of $53 million in cash
and a $3 million note. A hearing was held before the Bankruptcy Court on May
19, 2003. The sale to ALSCO was approved by order by the Bankruptcy Court,
dated May 19, 2003.
(g) Sale of Real Property in Hebron, Ohio
Owens Corning owned property located at 341 O'Neill
Drive in Hebron, Ohio. Owens Corning had ceased all activity at the property,
and the property was no longer needed for the Debtors' operations.
Accordingly, Owens Corning decided to sell the property and entered into
Purchase and Sale Agreement, dated June 18, 2003, with Golden Property
Management LLC, as buyer, for a sale price of $1,015,000.
On June 18, 2003, the Debtors filed a motion
seeking authorization to sell the property to Golden Property Management LLC.
The Debtors also sought it the motion authorization to pay from the sale
proceeds certain real estate taxes totaling approximately $16,900 in principal
and any other delinquent taxes affecting the property. The motion was granted
and the sale was approved by order of the Bankruptcy Court, dated July 23,
2003.
18. 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.
19. Certain Proposed Asbestos Legislation
On May 22, 2003, Senate Judiciary Chairman Orrin Hatch
introduced the Fairness in Asbestos Resolution Act of 2003, Bill S. 1125,
which proposes to establish an asbestos administrative claims resolution
structure through which all asbestos claims would be channeled and reviewed.
It is impossible to predict whether any such legislation will become law.
20. 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.
The pension plans are managed by an investment review
committee which meets periodically to provide oversight, review long term
investment strategies, assess plan and individual manager investment
performance and evaluate the funding status of the plans. Over the last
several years, various factors, such as the decline in asset value due to
market conditions, the decrease in the discount rate, as well as the review of
assumptions related to the valuation of pension plan liabilities have impacted
OC's long-term pension plan liability and funding.
Certain of the Company's pension plans have an accumulated
benefit obligation in excess of the fair value of plan assets. The accumulated
benefit obligation and fair value of plan assets for such plans are $1,115
million and $624 million, respectively, at October 31, 2002. Certain of the
Company's pension plans are not funded. The portion of the total projected
benefit obligation attributable to unfunded plans is approximately $7 million
at October 31, 2002.
The Company also sponsors defined contribution plans
available to substantially all United States employees. Company contributions
reflect a matching of a percentage of employee savings up to a maximum savings
level and certain profit sharing awards. The Company recognized expense of $34
million in 2002.
The Pension Benefit Guaranty Corporation ("PBGC"), an agency
of the United States, filed a Claim on the General Bar Date in the amount of
approximately $458 million, in connection with statutory liability for
unfunded benefit liabilities of the Owens Corning Merged Retirement Plan (the
"Merged Plan"). The Claim states that it is contingent upon termination of the
Merged Plan. The Merged Plan is a tax-qualified defined benefit pension plan
covered by and subject to Title IV of the Employee Retirement Income Security
Act of 1974, as amended, 29 U.S.C. ss.ss. 1301-1462 ("ERISA"). Pursuant to
Title IV, each of the Debtors is a contributing sponsor of the Merged Plan or
a member of a contributing sponsor's controlled group. 29 U.S.C. ss.
1301(a)(13)(14). The Plan specifically provides that OCD and any other of the
Reorganized Debtors whose employees are covered by the Merged Plan shall
assume and continue the Merged Plan, satisfy the minimum funding standards
pursuant to 26 U.S.C. Section 412 and 29 U.S.C. Section 1082, and administer
the Merged Plan in accordance with its terms and the provisions of ERISA.
Further, nothing in the Plan of Reorganization shall be construed in any way
as discharging, releasing or relieving the Debtors or the Debtors' successors,
including the Reorganized Debtors, or any party, in any capacity, from
liability imposed under any law or regulatory provision with respect to the
Merged Plan or PBGC.
OCD is required to comply with ERISA's minimum funding
requirements. Funding is generally in cash but may also be in stock or debt
(in general, not exceeding 10% of the plan's assets). OC has estimated that it
will make cash payments to fund the Merged Plan in the range of $300 million
to $400 million over 2003 and 2004 relating to post-petition service periods.
It is assumed that the 2004 pension payments will be made from cash on hand
and operating cash flow. As 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.
21. Summary of Certain Litigation
(a) John Hancock Litigation
Certain of OCD's current and former directors and
officers, as well as certain underwriters, are named defendants in a class
action lawsuit captioned John Hancock Life Insurance Company, et al. v.
Goldman, Sachs & Co., et al., CA No. 01-10729-RWZ, pending in the United
States District Court for the District of Massachusetts (the "Hancock
Litigation"). The suit, commenced on or about April 30, 2001, is a
securities-related class action on behalf of purchasers of securities pursuant
to, or traceable to, two public offerings by OCD on or about April 30, 1998
and July 22, 1998. None of the Debtors is a defendant in the lawsuit.
On or about April 27, 2001, a complaint was filed
on behalf of purchasers of the $300 million aggregate principal amount of $550
Million Term Notes (First Series) issued by OCD due May 1, 2005 (consisting of
7.5% Term Notes) and the $250 million aggregate principal amount of $550
Million Term Notes (Second Series) issued by OCD due May 1, 2008 (consisting
of 7.7% Term Notes) in offerings occurring on or about April 30, 1998. On or
about July 5, 2001, an amended complaint was filed which added reference to
the $400 million aggregate principal amount of $400 Million Debentures issued
by OCD due August 1, 2018 (consisting of 7.5% Debentures), in an offering
occurring on or about July 23, 1998.
By the amended complaint, the plaintiffs allege,
among other things, that the defendants violated the Securities Act of 1933 in
that the SEC Form S-3 registration statements, including the prospectus and
prospectus supplements, pursuant to which the debt offerings were made
contained untrue and misleading statements of material fact and omitted to
state certain required material facts. In particular, the amended complaint
alleges that the registration statements for the debt securities contained the
following untrue and misleading statements of fact and omissions of material
facts: (a) the representation that the debt securities would "rank equally
with all other unsecured and unsubordinated indebtedness of the Company," (b)
misleading representations concerning OCD's other unsecured indebtedness, (c)
the failure to disclose that certain of OCD's other unsecured and
unsubordinated indebtedness was guaranteed by one or more of OCD's
Subsidiaries, (d) the failure to disclose that OCD had a substantial debt to
one of its Subsidiaries, (e) the failure to disclose the existence of and the
terms of certain promissory notes issued by OCD to one of its Subsidiaries,
and (f) the failure to disclose the existence of and terms of an intellectual
property licensing arrangement between OCD and one of its Subsidiaries. The
amended complaint sought, among other things, an unspecified amount of damages
or, where appropriate, rescission of the plaintiffs' purchases of the
securities.
On November 14, 2001, and November 20, 2001,
respectively, the underwriter defendants and the individual defendants filed
motions to dismiss the amended complaint for failure to state a claim upon
which relief can be granted. The individual defendants argued that the
plaintiffs' action should be dismissed because the information which
plaintiffs claim was omitted either was disclosed in OCD's filings with the
SEC and incorporated by reference into the registration statements, or was not
required to be disclosed under applicable SEC regulations. The individual
defendants further argued that the plaintiffs' action was barred by the
applicable statute of limitations because it was brought more than one year
after the allegedly concealed facts were disclosed in public filings.
On January 28, 2002, the plaintiffs filed a
combined opposition to the underwriter and individual defendants' motions to
dismiss. On March 29, 2002, both the individual defendants and the underwriter
defendants filed reply memorandums in further support of their respective
motions. A hearing was held on the motions to dismiss on April 11, 2002.
On August 26, 2002, the United States District
Court for the District of Massachusetts issued a memorandum of decision,
wherein it determined that dismissal of the amended complaint is inappropriate
because "several questions of fact remain," including: (i) "whether
defendants' statement that the securities would 'rank equally with other
unsecured and unsubordinated obligations of the Company,' was false or
misleading when read in context with the rest of the information provided in
the registration statement;" (ii) "whether the defendants' disclosures about
intercompany licensing agreements and guarantees on other debt by OCD's
subsidiaries were false or misleading with respect to the subordination rights
of securities purchasers;" and (iii) "whether the registration statements
provided plaintiffs with sufficient information to fully understand their
rights relevant to other unsecured creditors." The court further concluded
that, contrary to the defendants' argument, the plaintiffs' claims were not
time-barred. The court, therefore, denied the defendants' motions to dismiss
the amended complaint. The parties are currently involved in discovery
proceedings with respect to this litigation. The named defendants in this
proceeding have each filed contingent indemnification claims with respect to
this litigation against OC pursuant to the General Bar Date process.
Executive Risk Indemnity Inc. ("Executive Risk")
issued to OCD Directors and Officers Liability Insurance Policy No. 8165-4021
for the policy period March 29, 2001 to March 29, 2002 (the "Policy").
Executive Risk received notice under the Policy relating to the Hancock
Litigation and has indicated a willingness to pay on a current basis certain
defense expenses, as that term is used in the Policy, incurred on or after
March 29, 2002 under the Policy, subject to mutual reservations of rights, in
connection with the Hancock Litigation to or on behalf of the insureds. A
proposed Stipulation and Order Among Debtors, Executive Risk Indemnity Inc.,
Norman P. Blake, Jr., Gaston Caperton, Domenico Cecere, Leonard S. Coleman,
Jr., William W. Colville, John H. Dasburg, Landon Hilliard, Glen H. Hiner, Sir
Trevor Holdsworth, Jon M. Huntsman, Jr., Ann Iverson, W. Walker Lewis, Michael
I. Miller, Furman C. Moseley, Jr., W. Ann Reynolds, and Steven J. Strobel was
filed with the Court providing inter alia that, notwithstanding the automatic
stay of 11 U.S.C.ss.362, Executive Risk shall be and hereby is authorized to
make payments under the Policy to or for the benefit of the Insureds for
Defense Expenses incurred in connection with the Hancock Litigation.
(b) Deloitte Litigation
On August 10, 2001, Deloitte Consulting, L.P.
("Deloitte") filed an Administrative Claim (the "Deloitte Administrative
Claim") in the Chapter 11 Cases seeking not less than $2 million, on the
theory that after the Petition Date, the Debtors had converted Deloitte's
contributions to Debtors' HOMExperts home repair and inspection business. On
February 5, 2002, Deloitte filed its adversary complaint against the Debtors,
asserting copyright infringement, conversion, and post-petition use and
benefit, seeking not less than $2 million in damages and/or administrative
expenses (the "Deloitte Adversary Action"). The Debtors vigorously contested
the Deloitte Administrative Claim and the Deloitte Adversary Action and moved
to dismiss the Deloitte Administrative Claim.
The Debtors and Deloitte exchanged discovery
requests, documents and written responses, and commenced depositions. After
considerable negotiations, the Debtors and Deloitte reached a settlement
resolving, without further litigation, all of Deloitte's claims related to
HOMExperts, the Deloitte Administrative Claim, and the Deloitte Adversary
Action. Pursuant to the terms of the settlement, Deloitte was allowed an
administrative expense claim of $350,000 to be paid within 30 days after entry
of the order approving the settlement; Deloitte was allowed an unsecured
pre-petition claim against OCD in the net amount of $400,000 by reason of the
matters asserted in the Deloitte Administrative Claim and the Deloitte
Adversary Action against OCD, Integrex and HOMExperts LLC, which shall be
treated in the Chapter 11 Cases and pursuant to applicable provisions of the
Bankruptcy Code as an Allowed General Unsecured Claim; the Deloitte Adversary
Action was automatically dismissed upon entry of the order approving the
settlement; and Deloitte released the Debtors for all claims resolved under
the settlement.
(c) Tobacco Litigation
OC has spent significant monies to resolve claims
of asbestos claimants whose injuries were caused or exacerbated by cigarette
smoking. OCD and Fibreboard are pursuing litigation against tobacco companies
(discussed below) for restitution/unjust enrichment, fraud, and violations of
state antitrust law to obtain payment of monetary damages (including punitive
damages) for payments made by OCD and Fibreboard to asbestos claimants who
developed smoking-related diseases. There can be no assurance that any such
litigation will go to trial or be successful.
In October 1998, the Circuit Court for Jefferson
County, Mississippi granted leave to file an amended complaint in an existing
action to add claims by OCD against seven tobacco companies and several other
tobacco industry defendants. The action brought by OCD in the Circuit Court of
Jefferson County, Mississippi is styled Ezell Thomas, et al. v. R.J. Reynolds
Tobacco Company, et al. and Owens Corning v. RJ Reynolds Tobacco Company ,
Docket No. 96-0065. On June 17, 2001, the Jefferson County court entered an
order dismissing OCD's case in response to the defendants' motion for summary
judgment on the basis that OCD's injuries were indirect and thus too remote
under Mississippi law to allow recovery. OCD has appealed such dismissal to
the Supreme Court of Mississippi.
In addition to the Mississippi lawsuit, in December
1997, OCD and Fibreboard brought a lawsuit in the Superior Court of
California, County of Alameda, against the same tobacco companies. That
lawsuit, which is currently pending, is styled Fibreboard Corp., et al. v.
R.J. Reynolds Tobacco Company, et al., Case No. 791919-8. In August 2001, the
defendants filed motions to dismiss OCD's and Fibreboard's claims on the basis
of the decision in the Mississippi lawsuit as well as California law. After a
hearing on these motions on November 20, 2001, the California court denied the
motion to dismiss Fibreboard's claims on the basis of the decision in the
Mississippi lawsuit and otherwise stayed the proceeding pending the outcome of
the Mississippi suit. If OCD and Fibreboard prevail, OCD's and Fibreboard's
recoveries from such lawsuits against the tobacco companies will be
transferred to the Litigation Trust.
(d) Greenburg Class Action Securities Litigation
On or about January 27, 2003, a class action
lawsuit was filed in the United States District Court for the Northern
District of Ohio, Western Division on behalf of certain purchasers of common
stock and preferred stock of OCD during the period from September 20, 1999
through October 5, 2000. The complaint, entitled Robert Greenburg v. Hiner, et
al., No. 03 Civ. 7036 (N.D. Ohio), names five of OCD's current and former
directors and officers as defendants in the suit. None of the Debtors are
named as defendants.
The complaint asserts claims for violation of
Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934. In the
complaint, the plaintiffs allege that the violations stem from the
dissemination of materially false and misleading information by the defendants
during the relevant time period that materially misrepresented OCD's financial
health and performance, thereby causing OCD's stock to trade at
artificially-inflated prices. Among other things, the action seeks to recover
an unspecified amount of damages and/or rescission of the plaintiffs'
purchases of the stock. No answer has yet been filed to the Complaint. Defense
costs with respect to this litigation are covered by OCD's directors' and
officers' insurance policy.
Three substantially similar class actions were
subsequently filed in the United States District Court for the Northern
District of Ohio: an action entitled Nicholas Radosevich v. Hiner, et al.,
Case No. 3-03-07069 (N.D. Ohio) was filed on February 14, 2003; an action
entitled entitled Howard E. Leppla v. Hiner, et al., No. 3-03-07088 (N. D.
Ohio) was filed on March 3, 2003; and an action entitled William Benanchietti
v. Hiner, et al., Case No. 3-03-07116 (N.D. Ohio), filed on March 12, 2003.
(e) New York Packaging Corp.'s Administrative Claim
New York Packaging Corporation ("NYPC"), a supplier
of plastic sheets to certain of the Debtors' manufacturing facilities, filed a
motion for allowance of administrative expense on January 22, 2002. NYPC
claimed that the Debtors owed it approximately $1.4 million in connection with
an unpaid invoice for the purchase order of plastic sheets placed by the
Debtors in or around April 2001. The Debtors filed an objection to the motion
on March 25, 2002, wherein they contended that the invoice was incorrect and
that the Debtors owe NYPC only $7,154 on account of the order. The parties
engaged in discovery and a trial was held before the Bankruptcy Court on
January 21, 2003. As of the filing of this Disclosure Statement, the matter is
pending in the Bankruptcy Court and the outcome is uncertain. The primary
issues before the Court were (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.
On April 9, 2003, the Court issued a Memorandum
Opinion finding that the purchase order contained an error in the price based
upon a mistake of material fact. The Court reformed the contract and modified
the price to avoid an unconscionable result. Having found that the Debtors
previously paid the sum due, the Court determined that nothing further was
owed to NYPC.
(f) Foreland Refining Corporation
Foreland Refining Corporation ("Foreland") is the
owner of an asphalt manufacturing facility located in Salt Lake City, Utah
which produces, manufactures, packages and sells in packages or in bulk
certain oxidized asphalt products (the "Asphalt Product"). Prior to the
Petition Date, the Debtors and Foreland entered into a Joint Asphalt
Production and Marketing Agreement (the "Asphalt Agreement"), the initial term
for which was five years, with automatic one year renewal terms unless
terminated by either party. Pursuant to the Asphalt Agreement, Foreland agreed
to sell and the Debtor agreed to buy Asphalt Product. Also pursuant to the
Agreement, the Debtor was obligated to purchase a minimum of 40,000 tons of
Asphalt Product per year. Pursuant to Exhibit E to the Agreement, Foreland was
granted the exclusive right to market and sell Asphalt Product in Utah, Idaho,
Montana, Wyoming, Nevada, Arizona, Washington, New Mexico and Northern
California. On or about July 18, 2001, Debtors and Foreland entered into a
Stipulation and Consent Order pursuant to which the Asphalt Agreement was
rejected.
After the Asphalt Agreement was rejected, Foreland
continued to sell Asphalt product to Debtors. On or about March 6, 2002,
Foreland filed an amended application alleging an administrative expense claim
for the post-petition delivery of Asphalt Product to $104,853.93. The Debtors
objected to the application. Thereafter, the Debtors and Foreland resolved the
dispute and entered into a stipulation whereby Foreland withdrew its
applications with prejudice subject to the Debtors payment of $75,000 in full
and complete satisfaction of any and all claims asserted by Foreland in the
Application or the Amended Application. In addition, the Stipulation provided
for certain releases and waivers of claims, except, both Debtors and Foreland
reserved and retained their respective rights, claims and defenses as to all
other matters, including without limitation, their respective rights with
respect to the Disputed Asphalt and to issues raised by Foreland in its Proof
of Claim.
Foreland alleges it holds that the exclusive
marketing provisions are enforceable claim notwithstanding the rejection and
give rise to an administrative claim in excess of $11 million. The Debtors
maintain that pursuant to Sections 101(5) and 365(g) of the Bankruptcy Code,
the rejection rendered all damages for breach of the Asphalt Agreement as
General Unsecured Claims. The Debtors also dispute the amount of the Claim
asserted by Foreland. The amount and priority of the Foreland claim will be
determined by the Bankruptcy Court.
G. Avoidance Actions In the Chapter 11 Cases
1. General Background
The Bankruptcy Code creates certain "avoidance actions"
which a debtor-in-possession or a trustee may pursue on behalf of the
bankruptcy estate to recover funds transferred prior to and, in certain
circumstances, after the filing of a debtor's bankruptcy petition. Included
among such avoidance actions are "preferences" and "fraudulent conveyances."
Preferences. Pursuant to the Bankruptcy Code, a debtor may
recover (or "avoid") as "preferential" payments of funds and other transfers
of property that were (a) made to or for the benefit of a creditor, (b) made
while the debtor was insolvent, (c) made on account of pre-existing debts and
(d) made during the ninety (90) days immediately prior to the debtor's
bankruptcy filing, but only to the extent such payment or transfer permitted
the recipient to receive more than it would have received if (i) the transfer
had not been made, (ii) the debtor had been liquidated under Chapter 7 of the
Bankruptcy Code and (iii) the transferee was paid in accordance with
applicable bankruptcy law. The ninety (90) day recovery period is extended to
one year if the recipient of the preferential transfer is an "insider" of the
debtor.
There are various defenses to preference actions. For
example, transfers made in the ordinary course of the debtor's and the
transferee's businesses, and made in accordance with ordinary business terms,
may not be avoidable. Similarly, a transferee that extended credit subsequent
to its receipt of an otherwise preferential transfer (and prior to the
commencement of the debtor's bankruptcy case) for which the transferee was not
repaid, is entitled to an offset/credit against an otherwise avoidable
preference for the amount of such new value provided.
Fraudulent Conveyances. Under Sections 548 and 544 of the
Bankruptcy Code and under various state laws, a debtor may recover, on a
"fraudulent conveyance" theory, transfers of property made while the debtor
was insolvent or which rendered the debtor insolvent if and to the extent the
debtor received less than reasonably equivalent value for such transfer. A
debtor also may be able to recover, as a fraudulent conveyance, transfers made
with the actual intent to hinder, delay or defraud creditors.
2. Description of Avoidance Actions During Chapter 11 Cases
In accordance with their duties as debtors-in-possession,
the Debtors undertook a review to determine the extent to which avoidance
actions existed on behalf of their estates. The Debtors shared the results of
their review with the Committees and the Future Claimants' Representative and
discussed with them what avoidance actions should be commenced. The Debtors,
the Committees and the Future Claimants' Representative generally agreed that
the Debtors would (a) pursue actions against non-key vendors that received
potential preferential transfers in the aggregate amount of $200,000 or more,
to the extent tolling agreements could not be obtained, (b) obtain tolling
agreements with each of their outside professionals that received potentially
preferential payments exceeding $200,000, and (c) obtain tolling agreements
from each of their present and former officers who received more than $200,000
of so-called "CIP" and/or "OSIP" incentive payments in September 2000. With
the exception of three non-key vendors, the Debtors obtained each of the
referenced tolling agreements. The Debtors commenced preference actions
against the three vendors that did not execute tolling agreements, as
described below.
An intercompany tolling agreement was also executed between
and among each of the Debtors and their Non-Debtor Subsidiaries. Such tolling
agreement expires on December 31, 2003.
Because not all parties agreed as to which actions should be
brought or which party should bring certain avoidance actions, the Unsecured
Creditors' Committee, the Future Claimants' Representative and the 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.
The Asbestos Claimants Committee' Committee joined in the Future Claimants'
Motion.
(b) The Unsecured Creditors' Committee Motion
On September 10, 2002, the Unsecured Creditors'
Committee filed a motion (the "Unsecured Committee Motion") for an order
authorizing it to commence the following avoidance actions on behalf of the
Debtors' Estates:
(i) an action under Sections 547 and 550 of the
Bankruptcy Code seeking the return of approximately $115 million in
preferential transfers made to NSP claimants and their law firms during the 90
days prior to the Petition Date;
(ii) an action under Sections 547 and 550 of the
Bankruptcy Code seeking the return of approximately $290 million in
preferential transfers made to NSP executive committee members and the NSP
claimants represented by those members between approximately March 2000 and
the Petition Date;
(iii) an action under Sections 547 and 550 of the
Bankruptcy Code seeking the return of payments made to the Debtors' officers
and directors within one year prior to the Petition Date (which included
mid-year bonuses based on performance during the first six months of 2000);
(iv) an action under Sections 548, 544 and 550 of
the Bankruptcy Code seeking the return of approximately $700 million in cash
transferred by OCD and/or Fibreboard into the accounts of certain law firms
participating in the NSP; and
(v) an action under Sections 548, 544 and 550 of
the Bankruptcy Code seeking to avoid obligations incurred, and the return of
funds transferred, by OCD pursuant to some or all NSP Agreements which OCD
entered into after January 1, 2000 and agreements entered into earlier but
allegedly converted or accelerated as a result of OCD's financial
difficulties.
On September 17, 2002, the Unsecured Creditors'
Committee filed a joinder and response to the Future Claimants' Motion,
seeking authority to prosecute the claims identified in the Future Claimants'
Motion, either with the Future Claimants' Representative, or independently, if
the Future Claimants' Representative did not prosecute the claims.
The Debtors filed a response to the Unsecured
Committee Motion, in which the Debtors asked the Bankruptcy Court to deny the
motion on several grounds. Among other things, the Debtors stated that they
were actively pursuing tolling agreements with the NSP firms specified in the
Unsecured Committee Motion and, if the Debtors were able to obtain tolling
agreements, the Unsecured Committee Motion would be largely mooted. Further,
the Debtors requested that the Unsecured Committee Motion be denied on
substantive grounds because the Unsecured Creditors' Committee had not met its
burden of establishing that the claims it sought to assert were colorable.
Waters & Kraus LLP ("W&K") also filed a response in
opposition to the Unsecured Committee Motion.
W & K has contested the claims on the grounds that
the administrative deposit held by W & K came exclusively from the Fibreboard
Insurance Settlement Trust under the NSP and that the Fibreboard Insurance
Settlement Trust is an independent legal entity, separate from the Debtors.
Therefore, W & K asserts that the property of the Fibreboard Insurance
Settlement Trust was not property of Fibreboard on the Petition Date.
Accordingly, W & K believes that the Debtors lack standing to pursue recovery
of the administrative deposit held by W & K. W & K executed a tolling
agreement and no action has been filed against W & K as of the date of this
Disclosure Statement.
(c) The Designated Members' Motion
On September 11, 2002, the Designated Members filed
a motion for an order authorizing them to commence the following avoidance
actions on behalf of the Debtors' Estates in addition to the actions sought to
be asserted by the Unsecured Committee's Motion:
(i) a fraudulent conveyance action pursuant to
Section 544 of the Bankruptcy Code to avoid and set aside OCD's acquisition of
Fibreboard's capital stock and related transactions. The Designated Members
sought recovery of the property transferred or the value of such property for
the benefit of the Debtors' estates and for creditors, as well as other
relief, including realignment of the allocation of the purported asbestos
liabilities of the Debtors as between Fibreboard and its pre-acquisition
affiliates, on the one hand, and the rest of the Debtors, on the other;
(ii) a fraudulent conveyance action pursuant to
Section 544 of the Bankruptcy Code to avoid and set aside the claims of the
Bank Holders against the Debtors and their Non-Debtor Subsidiaries under
Subsidiary Guarantees supporting the Pre-petition loans made by the Bank
Holders to certain of the Debtors or, alternatively, to equitably subordinate
such claims; and
(iii) a fraudulent conveyance action pursuant to
Sections 544 and 548 of the Bankruptcy Code to avoid dividends paid to the
Debtors' shareholders between 1996 and 2000, and to recover such dividends for
the Debtors' Estates.
(d) Subsequent Developments Relating to Motions
Concerning Avoidance Actions
On September 20, 2002, several days before the
hearing on the above-described motions and the expiration of the statute of
limitations, the United States Court of Appeals for the Third Circuit (in
Official Comm. v. Chinery (In re Cybergenics Corp.), 304 F.3d 316 (3d Cir.
2002) reh'g en banc granted, op. vacated, 310 F.3d 785 (3d Cir. 2002), rev'd
en banc, 330 F.3d 548 (3d Cir. 2003) 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").
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.
On November 18, 2002, the Third Circuit vacated the
September 20, 2002 opinion and judgment in Cybergenics and granted rehearing
en banc. On May 29, 2003, the Third Circuit, en banc, held that "bankruptcy
courts can authorize creditors' committees to sue derivatively to avoid
fraudulent transfers for the benefit of the estate."
3. Commencement of Avoidance Actions
(a) Dividend Action
On October 2, 2002, OC filed a class action
complaint with the Bankruptcy Court pursuant to Sections 105, 544, 548 and 550
of the Bankruptcy Code, Sections 2201(a) and 2202 of Title 28 of the United
States Code and Bankruptcy Rules 7001 and 7023, against certain shareholders
of OCD common stock who each had received at least $100,000 in total dividends
from June 1996 through the Petition Date, seeking the return of up to
approximately $62 million. OC's complaint sought (i) a determination that the
dividend payments constituted fraudulent transfers pursuant to bankruptcy and
state law and were therefore voidable and (ii) the recovery of such transfers,
or the value thereof, together with interest.
(b) Bank of America Action
On October 2, 2002, the Debtors filed a complaint
against Bank of America Corp. with the Bankruptcy Court pursuant to Sections
105, 544 and 550 of the Bankruptcy Code, Sections 2201(a) and 2202 of Title 28
of the United States Code and Federal Rule of Bankruptcy Procedure 7001
seeking (i) a determination that the repayment of approximately $133 million
to Bank of America Corp. relating to the acquisition of Fibreboard was a
fraudulent transfer and was therefore voidable and (ii) recovery of such
transfer or the value thereof, with interest.
(c) Guarantee/Bank Holders Action
On October 3, 2002, the Debtors and certain
Non-Debtors filed a complaint against the Bank Holders with the Bankruptcy
Court entitled Owens Corning, et al. v. Credit Suisse First Boston, et al.,
A-02-5829, (i) to avoid the fraudulent incurrence of the obligations under the
Subsidiary Guarantees; (ii) in the alternative, for declaratory relief to
limit and determine respective amounts of such obligations; (iii) to avoid and
recover preferential transfers; and (iv) to determine the allowed amount of
claims of the Pre-petition Agent and certain lenders party to the 1997 Credit
Agreement. The plaintiffs argued that, given the opinion in Official Committee
of Asbestos Personal Injury Claimants v. Sealed Air Corporation (In re: W.R.
Grace & Co.), 281 B.R. 852 (D. Del. 2002), and the latency periods inherent in
the continuing development of asbestos-related personal injuries, the entities
subject to such asbestos-related claims may have been insolvent far earlier
than previously understood and earlier than the entities themselves reasonably
believed. The plaintiffs accordingly asserted, among other things, that (i)
the Subsidiary Guarantors were insolvent or became insolvent and/or had
unreasonably small capital in relation to their business or the transaction at
the time or as a result of the guaranteed obligations incurred within a year
of the Petition Date; (ii) within a year before the Petition Date, each
Subsidiary Guarantor incurred guaranteed obligations for which they received
less than reasonably equivalent value; and (iii) the obligations at issue
could be avoided under applicable state law, including the Uniform Fraudulent
Conveyance Act and the Uniform Fraudulent Transfer Act. In addition, the
Debtors sought avoidance and recovery of transfers of certain payments made by
OC during the 90-day period prior to the Petition Date to the Pre-petition
Agent as "preferences" under Sections 547 and 550 of the Bankruptcy Code.
(d) Fibreboard Shareholders Action
On October 3, 2002, OCD and Fibreboard filed a
class action complaint with the Bankruptcy Court seeking a determination that
the tender offer and payment by OCD of up to approximately $515 million to
Fibreboard's shareholders, through its wholly-owned subsidiary Sierra
Corporation, for the acquisition of Fibreboard were fraudulent transfers
pursuant to Section 544 of the Bankruptcy Code and applicable state law and
seeking recovery of payments to those shareholders who received $198,000 or
more. OCD and Fibreboard sought to recover these transfers or their value
pursuant to Section 550 of the Bankruptcy Code. In applying the rationale set
out in the Grace decision discussed above, OCD and Fibreboard asserted that
OCD and Sierra Corporation were insolvent at the time of, or were rendered
insolvent by, and/or had unreasonably small assets or capital in relation to
their business or the transaction at the time or as a result of the tender
offer or payment for the acquisition of Fibreboard, and Fibreboard was also
insolvent at that time. OCD and Fibreboard accordingly asserted that the
tender offer and payments at issue were voidable as fraudulent transfers by
OCD and should be avoided pursuant to Section 544 of the Bankruptcy Code and
applicable law, including the Uniform Fraudulent Conveyance Act and the
Uniform Fraudulent Transfer Act.
(e) NSP Actions and Tolling Agreements
The Debtors executed tolling agreements with
approximately 104 of the approximately 115 law firms that entered into NSP or
non-NSP Agreements with the Debtors on behalf of claimants asserting
asbestos-related personal injury or wrongful death claims.
With respect to those law firms that did not sign
tolling agreements, on October 4, 2002, OCD, Fibreboard and Integrex filed 11
complaints with the Bankruptcy Court, pursuant to Sections 544, 548 and 550 of
the Bankruptcy Code, Sections 2201(a) and 2202 of Title 28 of the United
States Code and Federal Rule of Bankruptcy Procedure 7001. These complaints
sought declaratory relief determining, among other things, whether (i) the NSP
Agreement with each respective defendant was a valid agreement enforceable in
accordance with its terms, subject to applicable bankruptcy law; and (ii) the
NSP payments made to each respective defendant were avoidable or recoverable
as fraudulent transfers under applicable state and federal fraudulent
conveyance law.
These complaints were filed as declaratory judgment actions
in order to preserve certain allegations asserted by the Unsecured Creditors'
Committee, which do not reflect the views of the Debtors. In light of the
Cybergenics Decision, the Unsecured Creditors' Committee was named as a
defendant in each of these actions in order to make it a party to permit it to
present its own position on the allegations. In the event that the Bankruptcy
Court determines that the NSP payments made to each respective defendant are
avoidable or recoverable as fraudulent transfers under applicable state and
federal fraudulent conveyance law, one or more claims will exist against each
defendant to avoid and recover some or all of the NSP-related payments at
issue.
Recoveries, if any, of funds held by attorneys
under the NSP paid from the Fibreboard Insurance Settlement Trust are included
in the definition of FB Reversions under Section 1.104 of the Plan as
"recoveries, including any recoveries on account of Avoidance Actions, which
recover funds paid from the Fibreboard Insurance Settlement Trust." As such,
any such recoveries would be transferred to the FB Sub-Account of the Asbestos
Personal Injury Trust under Section 10.3(b) of the Plan.
(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 further orders of the Bankruptcy Court the stay was
further extended. Currently, the Avoidance Actions are stayed until February
2, 2004 (with the exception of service of process) and 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 March 4, 2004. Despite the orders of the Bankruptcy
Court staying the Avoidance Actions, certain defendants have answered or
otherwise responded to particular Avoidance Actions. In addition, Lewis &
Lewis, one of the defendants, has orally requested termination of the stay. If
the adversary action is not resolved, the Court will entertain Lewis & Lewis'
oral motion to lift the stay will be heard at the August 25, 2003 hearing.
(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.
Although a hearing was scheduled to commence April
2003, it was subsequently postponed.
(b) The Unsecured Creditors' Committee Motion to
Intervene
On August 5, 2003, the Unsecured Creditors
Committee filed a motion to intervene as of right as a party plaintiff and to
file complaints in the Avoidance Actions involving payments to law firms under
NSP Agreeemnts. This Motion also seeks to lift the stay applicable to those
actions, and for an order authorizing the Committee to commence actions
against all of the law firms with which the Debtors have entered into tolling
agreements. The Unsecured Creditors Committee also filed a motion to schedule
the motion to intervene on shortened notice so that the motion is heard on
August 25, 2003 and objections are filed August 18, 2003. Both motions are
currently pending before the Court and no responses/objections have been filed
to either motion.
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. For a more detailed
description of the Restructuring Transactions, see Appendix G of this
Disclosure Statement entitled "Proposed Corporate Structure of the Reorganized
Debtors." A detailed description of the actions and steps required to
implement the Restructuring Transactions will be filed al least ten (10)
Business Days prior to the Objection Deadline. On or prior to, or as soon as
practicable after, the Effective Date, the Reorganized Debtors may take such
steps as may be necessary or appropriate to effectuate Restructuring
Transactions that satisfy the requirements set forth Section 5.6 of the Plan.
B. Board of Directors and Management of Reorganized Debtors
As of June 30, 2003, OCD's Board of Directors was composed of eleven
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.
1. Composition of the Board of Directors as of Date of
Disclosure Statement
The following is a list, as of August __, 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].
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
Norman P. Blake, Jr. has been a Director since 1992. He is
former Chairman, President and Chief Executive Officer of Comdisco, Inc.,
global technology services, Rosemont, IL. A graduate of Purdue University, Mr.
Blake previously has served as Chief Executive Officer of the United States
Olympic Committee; Chairman, Chief Executive Officer and President of Promus
Hotel Corporation; Chairman, Chief Executive Officer and President of USF&G
Corporation; and Chairman and Chief Executive Officer of Heller International
Corporation of Chicago. Mr. Blake is a member of the Purdue Research
Foundation and Purdue University's President's Council and Dean's Advisory
Council, Krannert Graduate School of Management. He is the recipient of the
degree of Doctor of Economics honoris causa from Purdue University, granted
jointly by the Krannert Graduate School of Management and School of Liberal
Arts. He has also been awarded The Ellis Island Medal of Honor.
David T. Brown has been a Director since January, 2002, and,
since April 18, 2002, has been President and Chief Executive Officer of OCD. A
graduate of Purdue University, Mr. Brown became Executive Vice President and
Chief Operating Officer in January 2001. Previously, he held numerous
leadership positions in sales and marketing at OC, including serving as
President of the Insulating Systems Business beginning in 1998, President of
Building Materials Sales and Distribution beginning in 1996, and President of
the Roofing and Asphalt Business beginning in 1994. Mr. Brown joined OC in
1978 after working for Procter & Gamble, Shearson Hammill and Eli Lilly. Mr.
Brown is a past board member of Asphalt Roofing Manufacturers Association
Executive Committee, National Roofing Contractors Association Advisory Board,
Thermal Insulation Manufacturers Association and Executive Committee of the
North American Insulation Manufacturers Association.
Gaston Caperton has been a Director since 1997. He is
President and Chief Executive Officer of The College Board, a not-for-profit
educational association, New York, NY, Chairman of The Caperton Group, a
business investment and development company, Shepherdstown, WV and former
Governor of the State of West Virginia. A graduate of the University of North
Carolina, Mr. Caperton began his career in a small insurance agency, became
its principal owner and chief operating officer, and led the firm to become
the tenth largest privately-owned insurance brokerage firm in the U.S. He also
has owned a bank and mortgage banking company. Mr. Caperton was elected
Governor of West Virginia in 1988 and 1992. In 1997, Mr. Caperton taught at
Harvard University as a fellow at the John F. Kennedy Institute of Politics.
Prior to beginning his current position in mid-1999, Mr. Caperton also taught
at Columbia University, where he served as Director of the Institute on
Education and Government at Teachers College. Mr. Caperton is a director of
United Bankshares, Inc., Energy Corporation of America, West Virginia Media
Holdings, and Benedum Foundation. He was the 1996 Chair of the Democratic
Governors' Association, and served on the National Governors' Association
executive committee and as a member of the Intergovernmental Policy Advisory
Committee on U.S. Trade. He also was Chairman of the Appalachian Regional
Commission, Southern Regional Education Board, and the Southern Growth Policy
Board.
Leonard S. Coleman, Jr. has been a Director since 1996. He
is Senior Advisor to Major League Baseball, professional sports, New York, NY.
A graduate of Princeton and Harvard Universities, Mr. Coleman became President
of The National League of Professional Baseball Clubs in 1994 after serving as
Executive Director, Market Development of Major League Baseball. He assumed
his current position with Major League Baseball in 1999. Mr. Coleman is a
director of H. J. Heinz Company, the Omnicom Group, New Jersey Resources,
Cendant Corporation, Electronic Arts Inc., Aramark Corporation, and Churchill
Downs Incorporated. He also serves as a director of The Metropolitan Opera,
The Schumann Fund, The Jackie Robinson Foundation and The Children's Defense
Fund.
William W. Colville has been a Director since 1995. He is
now retired and was a former Senior Vice President, General Counsel and
Secretary. A graduate of Yale University and the Columbia University Law
School, Mr. Colville began his career at OC in 1984 as Senior Vice President
and General Counsel. Prior to joining OC, he was President of the Sohio
Processed Minerals Group from 1982 to 1984, and General Counsel of Kennecott
Corporation from 1980 to 1982. Mr. Colville is a director of Nordson
Corporation.
Landon Hilliard has been a Director since 1989. He is a
partner with Brown Brothers Harriman & Co., private bankers, New York, NY. A
graduate of the University of Virginia, Mr. Hilliard began his career at
Morgan Guaranty Trust Company of New York. He joined Brown Brothers Harriman
in 1974 and became a partner in 1979. Mr. Hilliard is a director of Norfolk
Southern Corporation and Western World Insurance Company. He is also Chairman
of the Board of Trustees of the Provident Loan Society of New York and
Secretary of The Economic Club of New York.
Ann Iverson has been a Director since 1996. She is Chairman
of Brooks Sports, Inc., athletic footwear and apparel, Bothell, WA and
President and Chief Executive Officer of International Link, an international
consulting firm, Scottsdale, AZ. Ms. Iverson began her career in retailing and
held various buying and executive positions at retail stores in the U.S.
through 1989, including Bloomingdales, Dayton Hudson, and US Shoe. She then
joined British Home Stores as Director of Merchandising and Operations in
1990; Mothercare as Chief Executive Officer in 1992; Kay-Bee Toy Stores as
President and Chief Executive Officer in 1994; and Laura Ashley Holdings plc.
as Group Chief Executive in 1995. In 1998, she founded and became President
and Chief Executive Officer of International Link. Ms. Iverson is a director
of Candie's, Inc., as well as several privately-held companies. She is also a
member of the Board of Trustees of the 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 August __, 2003, of the names
of the executive officers of OC and the positions held by each such executive
officer at OC [the date, list and biographies contained in this section will
be revised up to five (5) Business Days prior to the Disclosure Statement
Hearing and thereafter, with the permission of the Bankruptcy Court].
----------------------------------------- ---------------------------------------------------------
Name Title
----------------------------------------- ---------------------------------------------------------
Sheree L. Bargabos Vice President and President, Exterior Systems Business
----------------------------------------- ---------------------------------------------------------
David T. Brown President and Chief Executive Officer
----------------------------------------- ---------------------------------------------------------
Charles E. Dana Vice President, Corporate Controller and Global Sourcing
----------------------------------------- ---------------------------------------------------------
Daniel J. Dietzel Vice President and President, Siding Solutions Business
----------------------------------------- ---------------------------------------------------------
David L. Johns Senior Vice President and Chief Supply Chain and
Information Technology Officer
----------------------------------------- ---------------------------------------------------------
George E. Kiemle Vice President and President, Insulating Systems
Business
----------------------------------------- ---------------------------------------------------------
Stephen K. Krull Senior Vice President, General Counsel and Secretary
----------------------------------------- ---------------------------------------------------------
Richard D. Lantz Vice President and President, Composite Solutions
Business
----------------------------------------- ---------------------------------------------------------
Edward Mirra, Jr. Senior Vice President, Human Resources
----------------------------------------- ---------------------------------------------------------
Michael H. Thaman Chief Financial Officer
----------------------------------------- ---------------------------------------------------------
Sheree L. Bargabos has been Vice President and President of
Exterior Systems since August 2002. She was formerly Vice President of
Training and Development, Vice President of the Insulating Systems Business,
Vice President and General Manager of the Foam Business, General Manager of
the Foam Business and Sales Leader of the Building Materials Sales and
Distribution, Canada.
David T. Brown has been President and Chief Executive
Officer of OCD since April 2002. He was formerly Executive Vice President and
Chief Operating Officer and has also formerly served as Vice President and
President of the Insulating Systems Business, President of Building Materials
Sales and Distribution. He has also been a Director since January 2002.
Charles E. Dana has been Vice President of Corporate
Controller and Global Sourcing since January 2002. He was formerly Vice
President of the Global Sourcing and eBusiness, Vice President of Owens
Corning Supply Chain Solutions, Vice President of Global Sourcing Management
and Vice President of Planning and Analysis - Composite Systems.
Daniel J. Dietzel has been Vice President and President of
the Siding Solutions Business since July 2002. He was formerly Vice President
of the Distribution-Exterior Systems Business and President of Norandex
Distribution.
David L. Johns has been Senior Vice President and Chief
Supply Chain and Information Technology Officer since April 2001. He was
formerly Senior Vice President, Chief Technology Officer and Chief Information
Officer.
George E. Kiemle has been Vice President and President of
the Insulating Systems Business since February 2001. He was formerly Vice
President of the Manufacturing, Insulating Systems Business.
Stephen K. Krull became Senior Vice President, General
Counsel and Secretary of OCD on February 6, 2003. He was formerly Vice
President of Corporate Communications, Vice President and General Counsel of
Operations, Director, Law, and Senior Counsel, Law.
Richard D. Lantz has been Vice President and President of
the Composite Solutions Business since November 2001. He was formerly Vice
President and President of the Roofing Solutions Business, Vice President and
President of the Systems Thinking Sales and Distribution Business, Vice
President-Marketing of the Insulation Business.
Edward Mirra, Jr. has been Senior Vice President of Human
Resources since July 2000. He was formerly Vice President of Roofing
Operations and Vice President of Trumbull Asphalt.
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
jointly designate seven (7) directors, and the existing Board of Directors
will appoint the remaining initial directors, one of which shall be the
Company's Chief Executive Officer, provided that OCD's designees shall be
reasonably acceptable to the Asbestos Claimants' Committee and the Future
Claimants Representative. All of such initial directors shall be identified
reasonably in advance of the confirmation hearing on the Plan. In addition, as
long as the Asbestos Personal Injury Trust owns a specified percentage of the
equity securities issued to it under the Plan, the Asbestos Claimants'
Committee and the Future Claimants Representative shall each be entitled to
designate a non-voting board observer, which board observer will be entitled
to participate in all of OCD's Board of Directors meetings. The board
observers shall receive (i) notice of each meeting of the Board of Directors
at the same time that notice is provided to members of the Board of Directors,
and (ii) copies of all materials distributed to members of the Board of
Directors prior to any such meeting. 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"). One of
the directors shall also qualify as an "audit committee financial expert"
within the meaning of the SEC Regulation S-K Item 401(h). The initial term of
the initial directors shall be until the first annual shareholders meeting
following the second anniversary date of the Effective Date (the "Initial
Term").
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
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").
Long Term Compensation
Annual Compensation Payouts
Awards
- ------------------------------------------------------------------------ ----------------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Award(s) Options/ Payouts Compensation
Principal Position4 Year ($) ($) ($)5 ($)6 SARs(#)7 ($) ($) 8
- ------------------- ---- ------ ----- ------------ ---------- ---------- ------- ------------
David T. Brown 2002 647,916 1,713,199 15,300
President and Chief 2001 400,000 1,200,000 483,550
Executive Officer 2000 343,750 425,000 245,275
Michael H. Thaman 2002 584,375 1,380,000 15,300
Chairman of the Board 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 2000 220,000 140,000 113,400
Systems Business
Glen H. Hiner 2002 303,030 909,090 165,413 81,831
Former Chief Executive 2001 1,000,000 3,000,000 267,036 1,361,976
Officer 2000 1,000,000 2,035,600 207,341 697,451
- -------------------
4 Prior to April 2002, Mr. Brown served as Executive Vice President and
Chief Operating Officer; prior to January 2001, he served as Vice
President and President, Insulating Systems Business. Prior to April
2002, Mr. Thaman served as Senior Vice President and Chief Financial
Officer; prior to April 2000, he served as Vice President and
President, Exterior Systems Business. Prior to February 2003, Ms.
Smith also served as Chief Restructuring Officer, General Counsel and
Secretary; she assumed the duties of Chief Restructuring Officer in
November 2000. Prior to April 2001, Mr. Johns served as Senior Vice
President and Chief Technology Officer. Prior to February 2001, Mr.
Kiemle served as Vice President Manufacturing, Insulating Systems
Business. Mr. Hiner retired as Chairman of the Board and Chief
Executive Officer in April 2002.
5 "Other Annual Compensation" includes perquisites and personal
benefits, where such perquisites and personal benefits exceed the
lesser of $50,000 or 10% of the Names 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 Names Executive
Officers received perquisites and/or personal benefits in excess of
the applicable threshold.
6 There were no restructed stock awards to any of the Names 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 shards of restricted stock, valued at $5,698; Mr. Johns
held a total of 4,200 shares of restricted stock, valued at $1,764;
Mr. Kiemel held a total of 5,075 shares of restricted stock, valued
at $2,132; and Mr. Hiner held no shares of restricted stock. The
value of these aggregate restricted stock holdings was calculated by
multiplying the number of shares held by the closing price of OCD
common stock on December 31, 2002 (as reported on the Over The
Counter Bulletin Board). Dividends are paid by OC on restricted stock
held by the Names Executive Officers if paid on stock generally.
7 No stock options or stock appreciation rights (SARs) were awarded to
any of the Names 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 Names 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:
---------------------------------- ----------------------------------
Date of Emergence Percentage of Emergence Amount
---------------------------------- ----------------------------------
December 31, 2001 125%
---------------------------------- ----------------------------------
June 30, 2002 100%
---------------------------------- ----------------------------------
December 31, 2002 90%
---------------------------------- ----------------------------------
June 30, 2003 80%
---------------------------------- ----------------------------------
December 31, 2003 70%
---------------------------------- ----------------------------------
June 30, 2004 60%
---------------------------------- ----------------------------------
December 31, 2004 50%
---------------------------------- ----------------------------------
Thereafter 0%
---------------------------------- ----------------------------------
Under the Senior Leader Emergence Incentive Plan,
no payment will be made to any participant if the Debtors do not emerge from
Chapter 11 by December 31, 2004. The Senior Leader Emergence Incentive Plan
also provides for a pro rata payment upon a termination of a Named Officer's
employment with OC after January 1, 2002 and before the Effective Date if the
employment is terminated: (i) by OC other than for "cause," (ii) by reason of
death or disability, or (iii) by reason of retirement at OC's request or with
the consent of the chief executive officer of OC (or, in the case of the chief
executive officer, with the consent of the Compensation Committee).
(b) Retirement Benefits
OC maintains a tax-qualified Cash Balance Plan
covering certain of its salaried and hourly employees in the United States,
including each of the Named Officers, in lieu of the qualified Salaried
Employees' Retirement Plan maintained prior to 1996 ("Prior Plan"), which
provided retirement benefits primarily on the basis of age at retirement,
years of service and average earnings from the highest three consecutive years
of service. In addition, OC has a non-qualified Executive Supplemental Benefit
Plan ("ESBP") to pay eligible employees leaving OC the difference between the
benefits payable under OC's tax-qualified retirement plan and those benefits
which would have been payable except for limitations imposed by the Internal
Revenue Code. Named Officers are eligible to participate in both the Cash
Balance Plan and the ESBP.
Cash Balance Plan - Under the Cash Balance Plan,
each covered employee's earned retirement benefit under the Prior Plan
(including the ESBP) was converted to an opening cash balance. Each year,
eligible employees earn a benefit based on a percentage of such employee's
covered pay. During 2002, the percentage was 2% for covered pay up to 50% of
the Social Security Taxable Wage Base and 4% for covered pay in excess of such
wage base; subject to, and effective upon, Internal Revenue Service approval,
the percentage will be 4% for all subsequent covered pay. For this purpose,
covered pay includes base pay, overtime pay, other wage premium pay and annual
incentive bonuses payable during the year. Accrued benefits earn monthly
interest based on the average interest rate for five-year U.S. treasury
securities. Employees may receive benefit under the Cash Balance Plan as a
lump sum or as a monthly payment when they leave OC.
For employees who were at least age 40 with 10
years of service as of December 31, 1995 ("Grandfathered Employees"),
including Messrs. Brown and Kiemle, the credit percentages applied to covered
pay are increased pursuant to a formula based on age and years of service on
such date. In addition, Grandfathered Employees are entitled to receive the
greater of their benefit under the Prior Plan frozen as of December 31, 2000,
or under the Cash Balance Plan (in each case including the ESBP).
Supplemental Executive Retirement Plan - OC
maintains a Supplemental Executive Retirement Plan ("SERP") covering certain
employees. The SERP provides for a lump sum payment following termination of
employment equal to a multiple of the covered employee's Cash Balance Plan
balance minus an offset equal to the present value of retirement benefits
attributable to prior employment. The applicable multiplier for each covered
employee ranges from 0 to 4 (determined by the covered employee's age when
first employed by OC).
In 1992, OC established a Pension Preservation
Trust for amounts payable under the ESBP as well as under the individual
pension arrangements described above. Each year, the Compensation Committee
determines the participants in and any amounts to be paid with respect to the
Pension Preservation Trust, which may include a portion of benefits earned
under the ESBP and the pension agreements described above. Amounts paid into
the Trust and income from the Trust reduce the pension otherwise payable at
retirement. During 2002, no payments were made to the Trust.
The Debtors have analyzed the Pension Preservation
Trust and provided the Unsecured Creditors' Committee the documents relating
to the Pension Preservation Trust and the SERP. According to the Debtors'
analysis, the Pension Preservation Trust is a true or "secular" trust, which
is not property of the estate.
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
On January 18, 2001, the Bankruptcy Court approved the Order
Under 11 U.S.C. ss.ss. 105, 363 and 365 Authorizing Continuation or
Implementation of Employee, Emergence and Severance Programs. The Bankruptcy
Court found that the reaffirmation of the Debtors' existing Employee Severance
Program as defined in the Motion was necessary to the Debtors reorganization
efforts and specifically authorized the Debtors to provide severance benefits
to their employees in accordance with the Employee Severance Program and in
accordance with certain employment contracts identified in Exhibit D thereto.
The Court also authorized the filing of the exhibits to the Motion under seal.
OC has entered into a Key Management Severance Agreement
with each of the Named Officers (the "Severance Agreement"). Under the terms
of the Severance Agreement, if the Named Officer's employment is terminated
without "cause" or if the Named Officer terminates his or her employment due
to "Constructive Termination" (which among other things, following the
occurrence of a "change of control", includes a reduction in base pay or
incentive opportunity) the Named Officer is entitled to a payment in an amount
equal to two times the sum of base salary and annual incentive compensation,
plus continuation of insurance benefits for a period of up to two years and,
in the case of Messrs. Brown and Thaman, a payment equal to the additional
lump sum pension benefit that would have accrued had such individuals been
three years older, with three additional years of service, at the time of
employment termination. Under the terms of the Severance Agreement, the
consummation of the Plan on the Effective Date will constitute a "change of
control" for purposes of the Severance Agreement.
8. Directors' Compensation
Retainer and Meeting Fees - In 2002, OC paid each director
who was not an OC employee an annual retainer of $35,000. Non-employee
Committee Chairmen receive an additional retainer of $4,000 each year. In
addition, OC paid non-employee directors a fee of $1,200 for (a) attendance at
one or more meetings of the Board of Directors on the same day, (b) attendance
at one or more meetings of each Committee of the Board of Directors on the
same day, and (c) for each day's attendance at other functions in which
directors were requested to participate.
Prior to December 2000, a director could elect to defer all
or a portion of his or her annual retainer and meeting fees under the
Directors' Deferred Compensation Plan, in which case his or her account was
credited with the number of shares of common stock that such deferred
compensation could have purchased on the date of payment. The account was also
credited with the number of shares that dividends on previously credited
shares could have purchased on dividend payment dates. Account balances are
payable in cash based on the value of the account, which is determined by the
then fair market value of OC common stock, at the time the participant ceases
to be a director.
Stock Plan for Directors - OC maintains a stockholder
approved Stock Plan for Directors, applicable to each director who is not an
OC employee. The plan provides for two types of grants to each eligible
director: (1) a one-time non-recurring grant of options to each new outside
director to acquire 10,000 shares of common stock at a per share exercise
price of 100 percent of the value of a share of common stock on the date of
grant, and (2) an annual grant of 500 shares of common stock on the fourth
Friday in April.
Initial option grants become exercisable in equal
installments over five years from date of grant, subject to acceleration in
certain events, and generally expire ten years from date of grant. No grant
may be made under the plan after August 20, 2007, and a director may not
receive an annual grant of common stock in the same calendar year he or she
receives an initial option grant. A director entitled to receive an annual
grant may elect to defer receipt of the common stock until he or she leaves
the Board of Directors.
No initial option grants or annual grants were made under
the Plan during 2002. Pursuant to action of the Board of Directors, additional
option grants and annual grants under the Plan were suspended effective April
1, 2002, pending further action by the Board.
C. Terms of Certificate of Incorporation of Reorganized OCD
The Amended and Restated Certificate of Incorporation and the Amended
and Restated Bylaws of Reorganized OCD shall be acceptable to Reorganized OCD,
the Asbestos Claimants' Committee and the Future Claimants' Representative. To
date, OCD and the Asbestos Claimants' Committee and the Future Claimants'
Representative have agreed in principle on most of the key terms to be
included in the Amended and Restated Certificate of Incorporation and the
Amended and Restated Bylaws, but there remain certain issues that have not yet
been agreed, principally relating to matters of corporate governance.
The Amended and Restated Certificate of Incorporation will also
include a provision that as long as the Asbestos Personal Injury Trust owns
35% of the equity securities issued to it under the Plan, Reorganized OCD will
not authorize any action, without the approval of the Asbestos Personal Injury
Trust, that would: (i) amend the Amended and Restated Certificate of
Incorporation or the Amended and Restated Bylaws in a manner that would reduce
or eliminate rights or claims the Asbestos Personal Injury Trust has or
elevate a class or series of capital stock to have rights equal or senior to
the rights of the Asbestos Personal Injury Trust; (ii) authorize, create,
designate any new class or series of capital stock or any security convertible
into or exchangeable for capital stock of Reorganized OCD, or issue any shares
of common stock or securities convertible into or exchangeable for common
stock; (iii) authorize or alter the size of the Board of Directors; (iv)
subject to specified exceptions to be agreed upon by the parties, authorize or
enter into a transaction or a series of transactions involving Reorganized OCD
or any Material Subsidiary involving a merger of all or substantially all of
Reorganized OCD or a Material Subsidiary's assets, transaction(s) involving
the liquidation, dissolution, sale or winding up of Reorganized OCD or any of
its Material Subsidiaries or transaction(s) involving the disposition of more
that 10% of the voting power or capital stock of Reorganized OCD or any of its
Material Subsidiaries; (v) subject to specified exceptions, allow a Material
Subsidiary to issue any capital stock, other equity securities or securities
convertible into or exchangeable for capital stock or other equity interests;
(vi) authorize, declare or pay dividends or distributions other than with
respect to regular quarterly dividends or distributions of any kind on any
equity securities of Reorganized OCD; or (vii) subject to specified
exceptions, authorize or effect the purchase, repurchase, redemption,
retirement or other acquisition of any securities of Reorganized OCD other
than in accordance with the terms of such security. In addition, pursuant to
the Amended and Restated Certificate of Incorporation, Reorganized OCD will
opt out of the application of Section 203 of the Delaware Corporation law.
D. Projected Financial Information
1. Responsibility For and Purpose of the Financial Projections
Appendix B to this Disclosure Statement sets forth certain
financial information with respect to the projected future operations of OC
("Financial Projections"). As a condition to confirmation of a plan, the
Bankruptcy Code requires, among other things, that the bankruptcy court
determine that the plan is "feasible" (i.e., that confirmation is not likely
to be followed by a liquidation or the need for further financial
reorganization of the debtor) as set forth in Section 1129(a)(11) of the
Bankruptcy Code. In connection with the development of the Plan, and for
purposes of determining whether the Plan satisfies feasibility standards, OC's
management has, through the development of financial projections, analyzed the
ability of OC to meet its obligations under the Plan to maintain sufficient
liquidity and capital resources to conduct its business. The Financial
Projections were also prepared to assist each holder of a claim entitled to
vote under the Plan in determining whether to accept or reject the Plan.
The Financial Projections indicate that the Reorganized
Debtors should have sufficient cash flow to (a) make the payments required
under the Plan, (b) repay and service debt obligations, and (c) maintain
operations on a going-forward basis. Accordingly, the Debtors believe that the
Plan complies with Section 1129(a)(11) of the Bankruptcy Code. The Financial
Projections should be read in conjunction with the assumptions, qualifications
and footnotes to tables containing the projections set forth herein, the
historical consolidated financial information (including the notes and
schedules thereto) and the other information set forth in OC's Annual Report
on Form 10-K for the year ended December 31, 2002, 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 June,
2003.
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
(i) 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, which along
with the Financial Projections are set forth in Appendix B.
DISCLAIMER
THE FINANCIAL PROJECTIONS PROVIDED IN THIS DISCLOSURE STATEMENT HAVE
BEEN PREPARED EXCLUSIVELY BY THE DEBTORS' MANAGEMENT. THESE FINANCIAL
PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED
ON A VARIETY OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE
BY MANAGEMENT, MAY NOT BE REALIZED, AND ARE INHERENTLY SUBJECT TO SIGNIFICANT
BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF
WHICH ARE BEYOND THE DEBTORS' CONTROL. NO REPRESENTATIONS CAN BE MADE AS TO
THE ACCURACY OF THESE FINANCIAL PROJECTIONS OR TO OC'S ABILITY TO ACHIEVE THE
PROJECTED RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE. FURTHER,
EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THESE
FINANCIAL PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED OR,
ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE
EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIAL AND POSSIBLY ADVERSE MANNER.
THE FINANCIAL PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTEE OR
OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR. THESE FINANCIAL
PROJECTIONS SHOULD BE CONSIDERED IN CONJUNCTION WITH THE RISK FACTORS SET
FORTH IN SECTION XV OF THIS DISCLOSURE STATEMENT ENTITLED "CERTAIN RISK
FACTORS TO BE CONSIDERED."
VII. SUMMARY OF THE PLAN OF REORGANIZATION
THIS SECTION PROVIDES A SUMMARY OF THE STRUCTURE AND MEANS FOR
IMPLEMENTATION OF THE PLAN, AND OF THE CLASSIFICATION AND TREATMENT OF CLAIMS
AND INTERESTS UNDER THE PLAN, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE PLAN (AS WELL AS THE EXHIBITS THERETO AND DEFINITIONS THEREIN), WHICH IS
ATTACHED TO THIS DISCLOSURE STATEMENT AS APPENDIX A. SEE ALSO, THE GLOSSARY OF
ADDITIONAL TERMS SET FORTH IN APPENDIX A-1 OF THIS DISCLOSURE STATEMENT.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT INCLUDE
SUMMARIES OF THE PROVISIONS CONTAINED IN THE PLAN AND IN DOCUMENTS REFERRED TO
THEREIN. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT DO NOT PURPORT
TO BE PRECISE OR COMPLETE STATEMENTS OF ALL THE TERMS AND PROVISIONS OF THE
PLAN OR DOCUMENTS REFERRED TO THEREIN, AND REFERENCE IS MADE TO THE PLAN AND
TO SUCH DOCUMENTS FOR THE FULL AND COMPLETE STATEMENTS OF SUCH TERMS AND
PROVISIONS.
THE PLAN ITSELF AND THE DOCUMENTS REFERRED TO THEREIN WILL CONTROL
THE ACTUAL TREATMENT OF CLAIMS AGAINST, AND INTERESTS IN, THE DEBTORS UNDER
THE PLAN AND WILL, UPON THE EFFECTIVE DATE, BE BINDING UPON HOLDERS OF CLAIMS
AGAINST, OR INTERESTS IN, THE DEBTORS, THE REORGANIZED DEBTORS AND OTHER
PARTIES IN INTEREST. IN THE EVENT OF ANY CONFLICT BETWEEN THIS DISCLOSURE
STATEMENT AND THE PLAN OR ANY OTHER OPERATIVE DOCUMENT, THE TERMS OF THE PLAN
AND/OR SUCH OTHER OPERATIVE DOCUMENT WILL CONTROL.
A. Structure of the Plan
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under Chapter 11, a debtor is authorized to reorganize its
business for the benefit of its creditors and shareholders. Upon the filing of
a petition for relief under Chapter 11, Section 362 of the Bankruptcy Code
provides for an automatic stay of substantially all acts and proceedings
against the debtor and its property, including all attempts to collect claims
or enforce liens that arose prior to the commencement of the Chapter 11 case.
The consummation of a plan of reorganization is the principal
objective of a Chapter 11 case. A plan of reorganization sets forth the means
for satisfying claims against and interests in a debtor. Confirmation of a
plan of reorganization by the Bankruptcy Court makes the plan binding upon the
debtor, any issuer of securities under the plan, any person or entity
acquiring property under the plan, and any creditor of or equity security
holder in the debtor, whether or not such creditor or equity security holder
(1) is impaired under or has accepted the plan or (2) receives or retains any
property under the plan. Subject to certain limited exceptions and other than
as provided in the plan itself or in the confirmation order, the confirmation
order discharges the debtor from any debt that arose prior to the date of
confirmation of the plan and substitutes therefor the obligations specified
under the confirmed plan, and terminates all rights and interests of equity
security holders.
The terms of the Plan are based upon, among other things, the
Debtors' assessment of their ability to achieve the goals of their Business
Plan, make the distributions contemplated under the Plan and pay certain of
their continuing obligations in the ordinary course of the Reorganized
Debtors' businesses as approved by the Bankruptcy Court. Under the Plan,
Claims against, and Interests in, the Debtors are divided into Classes
according to their relative seniority and other criteria.
If the Plan is confirmed by the Bankruptcy Court and consummated, (1)
the Claims in certain Classes will be reinstated or modified and receive
distributions equal to the full amount of such Claims, (2) the Claims in other
Classes will be modified and receive distributions constituting a partial
recovery on such Claims and (3) the Claims and Interests in other Classes will
receive no recovery on such Claims or Interests. On the Effective Date and at
certain times thereafter, the Reorganized Debtors will distribute cash,
securities, notes or other property in respect of certain Classes of Claims as
provided in the Plan. The Classes of Claims against the Debtors created under
the Plan, the treatment of those Classes under the Plan and the securities and
other property to be distributed under the Plan are described below.
B. Substantive Consolidation under the Plan
Generally, substantive consolidation of the estates of multiple
debtors in a bankruptcy case effectively combines the assets and liabilities
of the multiple debtors for certain purposes under a plan. The effect of
consolidation is the pooling of the assets of and claims against the
consolidated debtors; satisfying liabilities from a common fund; and combining
the creditors of the debtors for purposes of voting on reorganization plans.
The authority of a bankruptcy court to order substantive consolidation is
derived from its general equitable powers under Section 105(a) of the
Bankruptcy Code, which provides that the court may issue orders necessary to
implement the provisions of the Bankruptcy Code, including Section 1123 of the
Bankruptcy Code. As there are no statutorily prescribed standards for
substantive consolidation, judicially developed standards control whether
substantive consolidation should be granted in any given case.
Under the Plan, the Debtors (but not the Fibreboard Insurance
Settlement Trust) will be substantively consolidated for the purposes of
voting, determining which Claims and Interests will be entitled to vote to
accept or reject the Plan, confirming the Plan, the resultant discharge of
Claims and cancellation of Interests and the distribution of consideration to
holders of Allowed Claims. Subject to Section 5.6 of the Plan (concerning
Restructuring Transactions), substantive consolidation under the Plan will not
result in the merger of or the transfer or commingling of any assets of any of
the Debtors or Non-Debtor Subsidiaries. Subject to Section 5.6 of the Plan,
all assets (whether tangible or intangible) will continue to be owned by the
respective Debtors or Non-Debtor Subsidiaries, as the case may be. In that
regard, OC intends to implement a restructuring plan which would reorganize
OCD and its Subsidiaries along OC's major business lines. The planning for
this restructuring is in a preliminary stage. It is anticipated that the
restructuring plan which is adopted will be announced 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. See Section VII C.3.b.(iii) of this Disclosure Statement entitled
"Class 4: Bank Holders Claims").
The holders of Allowed Claims in Class 8 (the FB Asbestos Personal
Injury Claims) will be the only claimants entitled to recover against the
assets of the Fibreboard Insurance Settlement Trust, the FB Reversions, the
Committed Claims Account and the FB Sub-Account Settlement Payment, which will
be transferred to the FB Sub-Account of the Asbestos Personal Injury Trust (as
discussed below). The holders of Allowed Claims in Class 9 (FB Asbestos
Property Damage Claims) will be the only claimants to recover against the FB
Asbestos Property Damage Insurance Assets transferred to the FB Asbestos
Property Damage Trust. At the same time, holders of Allowed Claims in Classes
8 and 9 do not share on a Pro Rata basis with Classes 4, 5, 6 and 7 in the
Combined Distribution Package. 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 reasonable 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 commenced April 8, 2003 and ended on May 2, 2003. The
hearing scheduled on the Substantive Consolidation Motion is part of the
confirmation proceedings and 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.
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. Because the Debtor has been unable to reach an agreement 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. The timing of any such filing would be
determined at a later date, but any such filing would be made to permit the
inclusion of such entities as part of the Plan. In the event of such filings,
the Debtors would file first day motions seeking authority to pay all trade
creditors as critical venndors in order to avoid any potential disruption of
OC's foreign operations. In the event that an agreement is reached for a
consensual plan of reorganization, the Debtors reserve the right not to cause
these entities to file for bankruptcy protection.
Since the Combined Distribution Package already includes 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 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); Class 11
(Subordinated Claims) and Class 12 (OCD Interests). Classes 10, 11 and 12 are
deemed to have rejected the Plan and are not entitled to vote to accept or
reject the Plan.
The Debtors believe that separate classification and
treatment of various types of unsecured non-priority claims (the Convenience
Claims, the Bank Holders Claims, the Bondholders Claims, the General Unsecured
Claims, the OC Asbestos Personal Injury Claims, the FB Asbestos Personal
Injury Claims, the FB Asbestos Property Damage Claims and the Intercompany
Claims) is appropriate, fair, and reasonable given the underlying facts and
circumstances. Factors considered by the Debtors with respect to these issues
include: (a) providing separate classification to the Bank Holders and
Bondholders to give separate representation to their divergent interests and
to provide a vehicle for resolving the separate dispute with the Bank Holders
concerning substantive consolidation; (b) a recognition of the special
historic circumstances requiring the different treatment to the OC Asbestos
Personal Injury Claims and the FB Asbestos Personal Injury Claims, including
the limitation of certain assets, such as the Fibreboard Insurance Settlement
Trust, to the satisfaction of claims to which the assets are dedicated; (c)
avoiding the severe impact on all other creditors if the FB Asbestos Personal
Injury Claims are permitted to "spill over" as claims against the consolidated
estate; (d) the need to obtain separate approval of holders of Asbestos
Personal Injury Claims in order to qualify under Section 524(g) of the
Bankruptcy Code to receive the benefits of the Asbestos Personal Injury
Permanent Channeling Injunction; (e) the existence of insurance to pay FB
Asbestos Property Damage Claims; and (f) the desire not to disenfranchise
holders of the certain unsecured claims (such as trade creditors and creditors
with smaller claims) by including such claims in a class with larger unsecured
claims of different types (such as the Bondholders Claims).
The Debtors believe that the Plan has classified all Claims
and Interests in compliance with the provisions of Section 1122 of the
Bankruptcy Code and applicable case law, but it is possible that a holder of a
Claim or Interest may challenge the Debtors' classification of Claims and
Interests or that the Bankruptcy Court may find that a different
classification is required for the Plan to be confirmed. In that event, the
Plan Proponents intend, to the extent permitted by the Bankruptcy Code, the
Plan and the Bankruptcy Court, to consider reasonable modifications of the
classifications under the Plan to permit confirmation and to use the Plan
acceptances received in this solicitation for purposes of obtaining the
approval of the reconstituted Class or Classes of which each accepting holder
ultimately is deemed to be a member. Any such reclassification could adversely
affect the Class in which such holder initially was a member, or any other
Class under the Plan, by changing the composition of such Class and the vote
required of that Class for approval of the Plan.
The amount of any Impaired Claim that ultimately is Allowed
by the Bankruptcy Court may vary from any estimated Allowed amount of such
Claim and, accordingly, the total Claims ultimately Allowed by the Bankruptcy
Court with respect to each Impaired Class of Claims may also vary from any
estimates contained herein with respect to the aggregate Claims in any
Impaired Class. Thus, the value of the property that ultimately will be
received by a particular holder of an Allowed Claim under the Plan may be
affected by the aggregate amount of Claims ultimately Allowed in the
applicable Class.
The classification of Claims and Interests and the nature of
distributions to members of each Class are summarized below. The Debtors
believe that the consideration, if any, provided under the Plan to holders of
Claims and Interests reflects an appropriate resolution of their Claims and
Interests, taking into account the differing nature and priority of such
Claims and Interests and the fair value of the Debtors' assets. In view of the
deemed rejection by Classes 11 and 12, however, as set forth below, the
Debtors will seek confirmation of the Plan pursuant to the "cramdown"
provisions of the Bankruptcy Code. Specifically, Section 1129(b) of the
Bankruptcy Code permits confirmation of a Chapter 11 plan in certain
circumstances even if the plan has not been accepted by all impaired classes
of claims and interests. See Section XIV.G of this Disclosure Statement
entitled "Confirmation Without Acceptance of All Impaired Classes:
`Cramdown'."
Although the Debtors believe that the Plan can be confirmed
under Section 1129(b), there can be no assurance that the Bankruptcy Court or
District Court will find that the requirements have been satisfied.
2. Treatment of Unclassified Claims Under the Plan
(a) DIP Facility Claims
The Plan provides for DIP Facility Claims to be
paid in full. On, or as soon as reasonably practicable after, the latest of
(i) the Initial Distribution Date, (ii) the date on which a DIP Facility Claim
becomes an Allowed DIP Facility Claim or (iii) the date on which a DIP
Facility Claim becomes payable pursuant to any agreement between a Debtor and
the holder of such DIP Facility Claim, each holder of an Allowed DIP Facility
Claim shall receive in full satisfaction, settlement, release and discharge of
and in exchange for such Allowed DIP Facility Claim (x) Cash equal to the
unpaid portion of such Allowed DIP Facility Claim or (y) such other treatment
as the applicable Debtor and such holder shall have agreed in writing.
The Debtors estimate that there will be no
aggregate Allowed DIP Facility Claims that have not previously been paid
pursuant to an order of the Bankruptcy Court as of the Effective Date. See
Section III.B.2 of this Disclosure Statement entitled "Pre-petition
Indebtedness."
(b) Administrative Claims
The Plan generally provides for Administrative
Claims to be paid in full. Except as otherwise provided in and subject to the
requirements of the Plan, on, or as soon as reasonably practicable after, the
latest of (i) the Initial Distribution Date, (ii) the date on which an
Administrative Claim becomes an Allowed Administrative Claim or (iii) the date
on which an Administrative Claim becomes payable pursuant to any agreement
between a Debtor and the holder of such Administrative Claim, each holder of
an Allowed Administrative Claim shall receive in full satisfaction,
settlement, release and discharge of and in exchange for such Allowed
Administrative Claim (a) Cash equal to the unpaid portion of such Allowed
Administrative Claim or (b) such other treatment as the applicable Debtor and
such holder shall have agreed in writing; provided, however, that Allowed
Administrative Claims with respect to liabilities incurred by a Debtor in the
ordinary course of business during the Chapter 11 Cases shall be paid in the
ordinary course of business in accordance with the terms and conditions of any
agreements relating thereto. All payments to professionals in connection with
the Chapter 11 Cases for compensation and reimbursement of expenses and all
payments to reimburse expenses of members of the Unsecured Creditors'
Committee and the Asbestos Claimants' Committee will be made in accordance
with the procedures established by the Bankruptcy Code and the Bankruptcy
Rules and will be subject to approval of the Bankruptcy Court as being
reasonable.
The Debtors estimate that the aggregate Allowed
Administrative Claims that have not previously been paid pursuant to an order
of the Bankruptcy Court (which will be primarily comprised of professional
fees 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 up to $135 million. See Section V.F.16 of this
Disclosure Statement, entitled "IRS Claims."
3. Treatment of Classified Claims and Interests Under the Plan
(a) Unimpaired Classes of Claims
(i) Class 1: Other Priority Claims
Class 1 consists of all Allowed Claims
entitled to priority pursuant to Section 507(a) of the Bankruptcy Code other
than DIP Facility Claims, Administrative Claims or Priority Tax Claims. The
allowed priority claims are generally required to be paid in full on the
Effective Date, subject to certain exceptions set forth in Sections
1129(a)(9)(A) and (B). Under the Plan, on, or as soon as reasonably
practicable after, the latest of (i) the Initial Distribution Date, (ii) the
date on which such Class 1 Claim becomes an Allowed Class 1 Claim, or (iii)
the date on which such Class 1 Claim becomes due and payable pursuant to any
agreement between a Debtor and a holder of a Class 1 Claim, each holder of an
Allowed Class 1 Claim shall receive in full satisfaction, settlement, release
and discharge of and in exchange for such Allowed Class 1 Claim (a) Cash equal
to the unpaid portion of such Allowed Class 1 Claim or (b) such other
treatment as the applicable Debtor and such holder shall have agreed in
writing. All Allowed Class 1 Claims which are not by their terms due and
payable on or before the Effective Date will be paid in the ordinary course of
business in accordance with the terms thereof.
Because the Debtors received orders from
the Bankruptcy Court which allowed them to satisfy their pre-petition wage
claims and employee benefit obligations during the Chapter 11 Cases, the
Debtors believe there will be no Allowed Other Priority Claims. Class 1 Claims
are Unimpaired and holders of the Claims in Class 1 are therefore deemed to
have accepted the Plan and are not entitled to vote to accept or reject the
Plan.
(ii) Class 2A: Other Secured Tax Claims
Class 2A consists of all Claims which
otherwise would be tax claims entitled to priority under Section 507(a)(8) of
the Bankruptcy Code, but which are secured by a valid and unavoidable
Encumbrance in or on any of the Debtors' property (to the extent of the value
of the Claim holder's interest in the Debtors' property, as determined
pursuant to Section 506 of the Bankruptcy Code). Except to the extent that a
holder of an Allowed Other Secured Tax Claim has been paid by the Debtors
prior to the Initial Distribution Date or has agreed in writing to a different
treatment, each holder of an Allowed Other Secured Tax Claim shall receive in
full satisfaction, settlement, release and discharge of and in exchange for
such Allowed Other Secured Tax Claim, at the sole discretion of the Debtors,
(i) Cash equal to the amount of such Allowed Other Secured Tax Claim on the
later of the Initial Distribution Date and the date such Other Secured Tax
Claim becomes an Allowed Claim, or as soon thereafter as is practicable, (ii)
deferred Cash payments, having a value as of the Effective Date equal to such
Allowed Other Secured Tax Claim, over a period not exceeding six (6) years
after the assessment of the tax on which such Claim is based as the applicable
Debtor and such holder shall have agreed in writing, or (iii) such other
treatment as the applicable Debtor and such holder shall have agreed in
writing. Each holder of an Allowed Class 2A Claim shall retain the
Encumbrances (or replacement Encumbrances as may be contemplated under
nonbankruptcy law) securing its Allowed Class 2A Claim as of the Effective
Date until full and final payment of such Allowed Class 2A Claim is made as
provided in the Plan and, upon such full and final payment, such Encumbrances
shall be deemed null and void and shall be unenforceable for all purposes.
Although for Unsecured Claims, a Claim becomes Allowed unless objected to by
the Claims Objection Deadline, the Debtors' failure to object to any Class 2A
Claim in the Chapter 11 Cases will be without prejudice to the rights of the
Debtors or the Reorganized Debtors to contest or otherwise defend against such
Claim in the appropriate forum when and if such Claim is sought to be enforced
by the holder of such Claim. Furthermore, nothing in the Plan or elsewhere
will preclude the Debtors or Reorganized Debtors from challenging the validity
of any alleged Encumbrance on any asset of a Debtor or the value of any
collateral notwithstanding a failure to file an objection by the Claims
Objection Deadline.
The Debtors estimate that aggregate
Allowed Other Secured Tax Claims that have not previously been paid pursuant
to an order of the Bankruptcy Court will be 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 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.
The Plan Proponents previously attempted
to resolve the dispute over substantive consolidation with the Bank Holders by
providing the holders of Class 4 Claims with an "off the top" 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. Despite extensive negotiations among the Debtors,
Bank Holders, Bondholders, Asbestos Claimants' Claimants Committee and the
Future Claimants' Representative, no agreement was reached to resolve this
dispute on a consensual basis. Thus the Plan provides for substantive
consolidation as described herein. 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. Class 4 is expected to object
to the confirmation of the Plan and the substantive consolidation provided for
in the Plan. Under this Plan, Classes 4, 5, 6 and 7 would share in the
Combined Distribution Package (as defined below).
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) 80 million shares of New OCD Common
Stock, with an estimated value of $2,000 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 (c) ___ million shares
of New OCD Common Stock to be held for employee incentive programs, 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 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 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 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 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 $1,472 million to $1,577
million. 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 reasonable 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 the portion of the Combined Distribution Package equal to the
Class 5 Initial Distribution Percentage.
In addition, on or as soon as reasonably
practicable after the Final Distribution Date, each holder of an Allowed Class
5 Claim shall receive its Pro Rata share of the (i) Cash in an amount equal to
the Class 5 Final Distribution Percentage of Excess Available Cash, (ii)
Excess Senior Notes in an aggregate principal amount equal to the Class 5
Final Distribution Percentage of the Excess Senior Notes Amount, (iii) shares
of New OCD Common Stock in an aggregate number equal to the Class 5 Final
Distribution Percentage of the Excess New OCD Common Stock, and (iv) Cash in
an amount equal to the Class 5 Final Distribution Percentage of the Excess
Litigation Trust Recoveries.
Holders of Class 5 Bond Holder Claims may
have their distributions under the Plan reduced to the extent Pre-petition
Indenture Trustees exercise any applicable rights under the Pre-petition Bond
Indentures to recover their costs and/or expenses from the distributions to be
paid to Holders of Class 5 Bond Holder Claims under the Plan. Any payment of
such costs or expenses will commensurately reduce the recovery realized under
the Plan by holders of Class 5 Bond Holder Claims.
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 $1,389 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, a
Subordinated 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 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 $323 million and $687
million.
OC Asbestos Property Damage Claims are
Class 6 Claims. Holders of OC Asbestos Property Damage Claims were required to
file Proofs of Claim by the April 15, 2002 General Bar Date. OCD received over
300 property damage Proofs of Claim. Of these, approximately 65 claims
asserted aggregate damages of approximately $730 million, including the Claim
of the State of Louisiana in the amount of $582 million. The remaining claims
did not provide a claimed amount and provided almost no documentation to
support their claim or to allow the Debtors to estimate the value of their
claim. 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 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) the portion of the Combined Distribution
Package equal to the Class 7 Initial Distribution Percentage, (ii) the OC
Asbestos Personal Injury Liability Insurance Assets and (iii) the OCD
Insurance Escrow.
On or as soon as reasonably practicable
after the Final Distribution Date, the Reorganized Debtors shall irrevocably
transfer and assign to the Asbestos Personal Injury Trust for allocation to
the OC Sub-Account the following: (i) Cash in an amount equal to the Class 7
Final Distribution Percentage of Excess Available Cash, (ii) Excess Senior
Notes in an aggregate principal amount equal to the Class 7 Final Distribution
Percentage of the Excess Senior Notes Amount, (iii) shares of New OCD Common
Stock in an aggregate number equal to the Class 7 Final Distribution
Percentage of the Excess New OCD Common Stock, and (iv) Cash in an amount
equal to the Class 7 Final Distribution Percentage of the Excess Litigation
Trust Recoveries.
The Reorganized Debtors will also execute
and deliver to the Asbestos Personal Injury Trust such documents as the
Asbestos Personal Injury Trustees reasonably request to issue the
Distributable Shares to be distributed to the Asbestos Personal Injury Trust
in the name of the Asbestos Personal Injury Trust or a nominee and transfer
and assign to the Asbestos Personal Injury Trust all other assets which
constitute the assets of the Asbestos Personal Injury Trust.
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.
Class 7 Claims are Impaired and, to the
extent and in the manner provided in the Voting Procedures Order, holders of
the Claims in Class 7 are entitled to vote to accept or reject the Plan. Among
such conditions to confirmation is the requirement that at least 75% of the
holders of Class 7 that vote on the Plan vote in favor of the Plan.
(vii) Class 8: FB Asbestos Personal Injury Claims
Class 8 consists of FB Asbestos Personal
Injury Claims ("Class 8 Claims"). An "FB Asbestos Personal Injury Claim" means
any present or future right to payment, claim, remedy, liability or Demand
against any FB Person for death, bodily injury, or other personal damages
(whether physical, emotional or otherwise), whether or not such right, claim,
remedy, liability or Demand is reduced to judgment, liquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured, whether or not the facts of or legal basis for such
right, claim, remedy, liability or Demand are known or unknown, under any
theory of law, equity, admiralty, or otherwise, to the extent caused or
allegedly caused, directly or indirectly, by the presence of, or exposure to
asbestos or asbestos-containing products that for which any FB Person may be
legally liable, including, without limitation, the presence of, or exposure
to, asbestos or asbestos-containing products that were manufactured,
installed, fabricated, sold, supplied, produced, distributed, released, or in
any way at any time marketed or disposed of by any FB Person, including,
without express or implied limitation, any right, claim, remedy, liability or
Demand for compensatory damages (such as loss of consortium, wrongful death,
survivorship, proximate, consequential, general and special damages) and
including punitive damages. FB Asbestos Personal Injury Claims (i) include FB
Indirect Asbestos PI Trust Claims and Unpaid FB Resolved Asbestos Personal
Injury Claims, but (ii) exclude FB Resolved Asbestos Personal Injury Claims,
FB Asbestos Property Damage Claims, FB Indirect Asbestos Property Damage
Claims, workers' compensation claims, OC Asbestos Personal Injury Claims, OC
Indirect Asbestos PI Trust Claims, OC Asbestos Property Damage Claims, and OC
Indirect Asbestos Property Damage Claims.
ALL CLASS 8 CLAIMS SHALL BE CHANNELED TO
THE ASBESTOS PERSONAL INJURY TRUST, AND SHALL BE PROCESSED, LIQUIDATED AND
PAID PURSUANT TO THE TERMS AND PROVISIONS OF THE ASBESTOS PERSONAL INJURY
TRUST DISTRIBUTION PROCEDURES AND THE ASBESTOS PERSONAL INJURY TRUST
AGREEMENT. SEE SECTION VIII.C. OF THIS DISCLOSURE STATEMENT ENTITLED "THE
ASBESTOS PERSONAL INJURY PERMANENT CHANNELING INJUNCTION." THE SOLE RECOURSE
OF THE HOLDER OF A CLASS 8 CLAIM SHALL BE THE ASBESTOS PERSONAL INJURY TRUST,
AND SUCH HOLDER SHALL HAVE NO RIGHT WHATSOEVER AT ANY TIME TO ASSERT ITS CLAIM
OR DEMAND AGAINST ANY PROTECTED PARTY. WITHOUT LIMITING THE FOREGOING, ON THE
EFFECTIVE DATE, ALL PERSONS SHALL BE PERMANENTLY AND FOREVER STAYED,
RESTRAINED, AND ENJOINED FROM TAKING ANY ENJOINED ACTIONS FOR THE PURPOSE OF,
DIRECTLY OR INDIRECTLY, COLLECTING, RECOVERING, OR RECEIVING PAYMENT OF, ON,
OR WITH RESPECT TO ANY CLASS 8 CLAIM (OTHER THAN ACTIONS BROUGHT TO ENFORCE
ANY RIGHT OR OBLIGATION UNDER THE PLAN, ANY EXHIBITS TO THE PLAN, OR ANY OTHER
AGREEMENT OR INSTRUMENT BETWEEN THE DEBTORS OR REORGANIZED DEBTORS AND THE
ASBESTOS PERSONAL INJURY TRUST, WHICH ACTIONS SHALL BE IN CONFORMITY AND
COMPLIANCE WITH THE PROVISIONS OF THE PLAN).
On the Effective Date, or as soon as
practicable thereafter, the Reorganized Debtors shall irrevocably transfer and
assign to the Asbestos Personal Injury Trust for allocation to the FB
Sub-Account the following: (i) the FB Reversions, (ii) the Committed Claims
Account, and (iii) the FB Sub-Account Settlement Payment. The Reorganized
Debtors will, or will use all commercially reasonable efforts to, cause the
trustee 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
trustee 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 trustee 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 trustee of the Fibreboard Insurance Settlement Trust to execute
and deliver, to the Asbestos Personal Injury Trust such documents as the
Asbestos Personal Injury Trustees reasonably request in connection with the
transfer and assignment of the Existing Fibreboard Insurance Settlement Trust
Assets and the FB Reversions. For a discussion of the Fibreboard Insurance
Settlement Trust, see Section IV.B.1 of this Disclosure Statement entitled
"The Fibreboard Insurance Settlement Trust."
The FB Sub-Account Settlement Payment is
$140 million. It consists of the following: (a) $7 million in Cash, (b) Senior
Notes in the aggregate principal amount of $63 million; and (c) 2.8 million
shares of New OCD Common Stock, with an estimated value of $70 million.
The FB Sub-Account Settlement Payment is a
payment for the benefit of the holders of FB Asbestos Personal Injury Claims
in resolution of a number of issues and after consideration of several
factors. Although the Plan Proponents believe that substantive consolidation
is justified by the facts of this case and applicable law, the strict
application of principles of substantive consolidation would enable the
holders of FB Asbestos Personal Injury Claims to receive distributions against
the assets of the consolidated OCD estate. These distributions from OCD, when
combined with the specific assets dedicated for payment of FB Asbestos
Personal Injury Claims, would provide these claimants with 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.
In determining the amount of the FB
Sub-Account Settlement Payment, the Debtors, the Asbestos Claimants' Committee
and the Future Claimants' Representative reviewed various information
including (1) the hypothetical enterprise value of Fibreboard and its
operating subsidiaries, (2) the restructuring of Fibreboard and its
subsidiaries and the asset swaps between Fibreboard and OCD subsequent to the
acquisition by OCD (in particular the swap of the Cultured Stone business in
1999 for certain OCD assets), (3) the estimated claims against Fibreboard and
its operating subsidiaries, both external claims and intercompany claims, and
(4) administrative expenses and other obligations borne by the OCD estate on
behalf of the Fibreboard estate. Accordingly, the parties analyzed the values
that might have been available to holders of FB Asbestos Personal Injury
Claims (in addition to the Fibreboard Insurance Settlement Trust) had
Fibreboard not been absorbed into the OC consolidated operation and guaranteed
the obligations to the Bank Holders. The Plan Proponents view these factors as
an appropriate basis for a payment to compensate the holders of FB Asbestos
Personal Injury Claims to give up the so-called "spillover claim", which claim
would arguably provide a windfall to the holders of these claims.
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.
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.
Class 8 Claims are Impaired and, to the
extent and in the manner provided in the Voting Procedures Order, holders of
the Claims in Class 8 are entitled to vote to accept or reject the Plan. Among
such conditions to confirmation is the requirement that at least 75% of the
holders of Class 8 that vote on the Plan vote in favor of the Plan.
(viii) Class 9: FB Asbestos Property Damage Claims
Class 9 consists of FB Asbestos Property
Damage Claims ("Class 9 Claims"). An "FB Asbestos Property Damage Claim" means
any present or future right to payment, claim, remedy, or liability against,
or debt or obligation of, any FB Person, whether or not the facts or legal
basis for such right, claim, remedy, liability, debt or obligation are known
or unknown, under any theory of law, equity, admiralty, or otherwise for,
relating to, or arising by reason of, directly or indirectly, damage to
property, including, without limitation, diminution in the value thereof, or
environmental damage or economic loss related thereto, caused or allegedly
caused, directly or indirectly, in whole or in part by the presence in
buildings or other systems or structures of asbestos or asbestos-containing
products for which any FB Person may be legally liable, including, without
limitation, the presence of, or exposure to, asbestos or asbestos-containing
products that were manufactured, installed, fabricated, sold, supplied,
produced, distributed, released or in any way at any time marketed or disposed
of by any FB Person prior to the Petition Date, or for which any FB Person is
liable due to the acts or omissions of any FB Person, including, without
express or implied limitation, any right, claim, remedy, liability against, or
debt or obligation for compensatory damages (such as proximate, consequential,
general and special damages) and including punitive damages. FB Asbestos
Property Damage Claims include FB Indirect Asbestos Property Damage Claims.
ALL CLASS 9 CLAIMS SHALL BE CHANNELED TO
THE FB ASBESTOS PROPERTY DAMAGE TRUST, AND SHALL BE PROCESSED, LIQUIDATED AND
PAID PURSUANT TO THE TERMS AND PROVISIONS OF THE FB ASBESTOS PROPERTY DAMAGE
TRUST AGREEMENT AND THE FB ASBESTOS PROPERTY DAMAGE TRUST DISTRIBUTION
PROCEDURES. THE FB ASBESTOS PROPERTY DAMAGE TRUST WILL BE FUNDED IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 11.3 OF THE PLAN. THE SOLE RECOURSE OF THE
HOLDER OF AN ALLOWED CLASS 9 CLAIM SHALL BE THE FB ASBESTOS PROPERTY DAMAGE
TRUST, AND SUCH HOLDER SHALL HAVE NO RIGHT WHATSOEVER AT ANY TIME TO ASSERT
ITS CLASS 9 CLAIM AGAINST ANY FB PERSON. WITHOUT LIMITING THE FOREGOING, ON
THE EFFECTIVE DATE, ALL PERSONS SHALL BE PERMANENTLY AND FOREVER STAYED,
RESTRAINED, AND ENJOINED FROM TAKING ANY ENJOINED ACTIONS FOR THE PURPOSE OF,
DIRECTLY OR INDIRECTLY, COLLECTING, RECOVERING, OR RECEIVING PAYMENT OF, ON,
OR WITH RESPECT TO ANY FB ASBESTOS PROPERTY DAMAGE CLAIMS (OTHER THAN ACTIONS
BROUGHT TO ENFORCE ANY RIGHT OR OBLIGATION UNDER THE PLAN, ANY EXHIBITS TO THE
PLAN, OR ANY OTHER AGREEMENT OR INSTRUMENT BETWEEN THE DEBTORS OR REORGANIZED
DEBTORS AND THE FB ASBESTOS PROPERTY DAMAGE TRUST, WHICH ACTIONS SHALL BE IN
CONFORMITY AND COMPLIANCE WITH THE PROVISIONS HEREOF).
On the later of the Effective Date and the
date by which the FB Asbestos Property Damage Trustee has executed the FB
Asbestos Property Damage Trust Agreement, the Reorganized Debtors shall
transfer and assign, or cause to be transferred and assigned, the FB Asbestos
Property Damage Insurance Assets to the FB Asbestos Property Damage Trust. 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 XV 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.
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 XIII 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 XIII, to be filed or amended at least ten (10) Business Days prior to
the Objection Deadline, shall be deemed cancelled and extinguished in
accordance with Section 5.2 of the Plan. Except as specified on Schedule XIII,
no holder on an Intercompany Claim shall be entitled to, or shall receive or
retain any property or interest in property on account of, such Intercompany
Claim. Schedule XIII shall indicate the classification and/or treatment of the
Claims set forth therein. 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: Subordinated Claims
Class 11 consists of all Subordinated
Claims ("Class 11 Claims"). "Subordinated Claims" consist of Claims or
Interests (in the event that a Claim might be characterized as an Interest) of
any Person who has entered in a subordination agreement that is enforceable
under applicable non-bankruptcy law and which subordinates such Claims or
Interests to any holders of Claims who will not be paid in full on account of
such holders Allowed Claims under the Plan. Subordinated Claims include,
without limitation, the MIPS Claims and Interests.
On the Effective Date, all of the
Subordinated Claims 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 Subordinated Claims.
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.
(xi) Class 12: OCD Interests
Class 12 consists of all OCD Interests
("Class 12 Interests"). "OCD Interests" consist of (i) collectively, all
Existing OCD Common Stock, Existing OCD Preferred Stock and Existing OCD
Options, together with any options, warrants, conversion rights, rights of
first refusal or other rights, contractual, equitable or otherwise, to acquire
or receive any Existing OCD Common Stock, Existing OCD Preferred Stock,
Existing OCD Options or other capital stock in OCD, or any contract
subscription, commitment or agreement pursuant to which any Person was or
could have been entitled to receive any share of the capital stock of OCD, or
any such option, warrant, conversion right, right of first refusal or other
right (including, without limitation, any rights of any 401(k) plan or the
interest of any participant therein), in each case issued or entered into by,
or otherwise the obligation of, OCD or another Debtor; and (ii) all shares of
Preferred Stock and Class A Common Stock of Integrex, together with any
options, warrants, conversion rights, rights of first refusal or other rights,
contractual, equitable or otherwise, relating to such stock, held by Blue
Ridge Investments, L.L.C. or its successors and assigns.
On the Effective Date, all of the OCD
Interests outstanding at the Effective Date shall be deemed cancelled and
extinguished. No holder thereof shall be entitled to, or shall receive or
retain any property or interest in property on account of, such OCD Interests.
Class 12 Interests are Impaired. The
holders of the Interests in Class 12 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."
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 as determined by the Bankruptcy Court 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 assumes cash of $792 million as of the Effective Date and
excludes (i) a reserve of $380 million for working capital and pension
contribution purposes, (ii) $40 million for Exit Facility fees and employee
retention payments, (retention program previously approved by the Bankruptcy
Court and due upon emergence from bankruptcy), and (iii) $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, expected 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, 80 million shares of New OCD Common Stock will be issued and
outstanding.
All shares of New OCD Common Stock will be identical and
will entitle the holders thereof to the same rights and privileges and, except
as otherwise required by law, on all matters submitted for a vote of OCD's
stockholders, the holders of New OCD Common Stock will be entitled to one
vote, in person or by proxy, for each share of New OCD Common Stock owned. The
New OCD Common Stock will be subject to dilution as a result of future
issuances, including shares that are or may be issued under any stock-based
management incentive plans. Holders of New OCD Common Stock will be entitled
to receive such dividends, if any, as may be declared from time to time by the
Board of Directors of Reorganized OCD in its discretion from funds legally
available therefore. When and as dividends or other distributions are paid,
whether payable in Cash, in property or in securities of Reorganized OCD, the
holders of New OCD Common Stock will be entitled to share equally, share for
share, in such dividends or other distributions. In the event of any
liquidation, dissolution or winding up of the affairs of Reorganized OCD,
whether voluntary or involuntary or otherwise, the holders of New OCD Common
Stock will be entitled to share, Pro Rata, in any property available for
distribution after satisfaction of all other claims.
Holders of the shares of New OCD Common Stock will have no
preemptive or other subscription rights and there will be no conversion rights
or redemption or sinking fund provisions with respect to such shares. All of
the shares of New OCD Common Stock that will be issued as of the Effective
Date will be fully paid and nonassessable.
OC will determine the equity value of the New OCD Common
Stock as of the Effective Date, based upon the residual value of the equity of
Reorganized OCD, with the assistance of its financial advisors and the
financial advisors for the other Plan Proponents. See Section XIV of the
Disclosure Statement entitled "Feasibility of the Plan and Best Interests of
Creditors."
4. Litigation Trust Recoveries
As part of the distributions to be made under the Plan, the
holders of Allowed Claims in Classes 4, 5, and 6 and the OC Sub-Account of the
Asbestos Personal Injury Trust 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 or surety or other
security for the performance of its duties unless otherwise ordered by the
Bankruptcy Court.
2. Distributions for Claims Allowed as of the Initial
Distribution Date
Except as otherwise provided in the Plan or as ordered by
the Bankruptcy Court, distributions to be made on account of Claims that are
Allowed Claims as of the Initial Distribution Date shall be made on, or as
soon as practicable after, the Initial Distribution Date, which means with
respect to holders of Allowed Class 1, 2A, 2B, 3, 4, 5, and 6 Claims, a date
that is not later than thirty (30) days after the Effective Date.
Distributions on account of (a) Class 7 and 8 Claims shall be made in
accordance with the terms or conditions of the Asbestos Personal Injury Trust
Agreement and the Asbestos Personal Injury Trust Distribution Procedures (see
Section VIII of this Disclosure Statement entitled "The Asbestos Personal
Injury Trust"), and (b) Class 9 Claims shall be made in accordance with the
terms or conditions of the FB Asbestos Property Damage Trust Agreement and the
FB Asbestos Property Damage Trust Distribution Procedures (see Section IX of
this Disclosure Statement entitled "The FB Asbestos Property Damage Trust").
Distributions on account of Claims that first become Allowed Claims after the
Initial Distribution Date shall be made pursuant to Section 9.4 of the Plan,
as described in Section VII. G.3 of this Disclosure Statement entitled
"Distributions on Account of Disputed Claims Once They are Allowed".
Notwithstanding the date on which any distribution of New OCD Securities is
actually made to a holder of a Claim that is an Allowed Claim on the Initial
Distribution Date, as of the date of the distribution such holder shall be
deemed to have the rights of a holder of such securities distributed as of the
Initial Distribution Date.
"Allowed" means:
(a) with respect to any Claim, other than an Administrative
Claim, an Asbestos Personal Injury Claim or an FB Asbestos Property Damage
Claim, proof of which was filed within the applicable period of limitation
fixed in accordance with Federal Rule of Bankruptcy Procedure 3003(c)(3) by
the Bankruptcy Court, (i) as to which no objection to the allowance thereof
has been interposed on or before the Initial Distribution Date and as to which
the Debtors have not sent a notice to the holder of such Claim by the Initial
Distribution Date that the Claim in under review for possible objection, or
(ii) as to which no objection is filed within the applicable period of
limitation fixed by the Plan, the Bankruptcy Code, the Federal Rules of
Bankruptcy Procedure or a Final Order of the Bankruptcy Court, to the extent
asserted in the proof of such Claim or (iii) as to which an objection has been
interposed, to the extent that such Claim has been allowed in whole or in part
by a Final Order of the Bankruptcy Court;
(b) with respect to any Claim, other than an Administrative
Claim, an Asbestos Personal Injury Claim or an FB Asbestos Property Damage
Claim, as to which no Proof of Claim was filed within the applicable period of
limitation fixed by the Plan, the Bankruptcy Code, the Federal Rules of
Bankruptcy Procedure or a Final Order of the Bankruptcy Court, to the extent
that such Claim has been listed by one of the Debtors in its SOFAS as
liquidated in amount and not disputed or contingent and (i) as to which no
objection to the allowance thereof has been interposed on or before the
Initial Distribution Date and as to which the Debtors have not sent a notice
to the holder of such Claim by the Initial Distribution Date that the Claim in
under review for possible objection, or (ii) as to which no objection to the
allowance thereof has been interposed within the applicable period of
limitation fixed by the Plan, the Bankruptcy Code, the Federal Rules of
Bankruptcy Procedure or a Final Order of the Bankruptcy Court or (iii) as to
which an objection has been interposed, to the extent that such Claim has been
allowed in whole or in part by a Final Order of the Bankruptcy Court;
(c) with respect to any other Claim that is asserted to
constitute an Administrative Claim, other than a Claim of a professional
person employed under Section 327 or 1103 of the Bankruptcy Code that is
required to apply to the Bankruptcy Court for the allowance of compensation
and reimbursement of expenses pursuant to Section 330 of the Bankruptcy Code,
(a) that represents an actual or necessary expense of preserving the Estate or
operating the business of the Debtors, to the extent that such Claim is
reflected as a postpetition liability of any of the Debtors on the Debtors'
books and records as of the Effective Date, or (b) that the Debtors dispute,
to the extent that such Claim is allowed in whole or in part by a Final Order
of the Bankruptcy Court and only to the extent that such allowed portion is
deemed, pursuant to a Final Order of the Bankruptcy Court, to constitute a
cost or expense of administration under Sections 503(b) and 507(a)(1) of the
Bankruptcy Code;
(d) with respect to any other Claim that is asserted to
constitute an Administrative Claim that represents a Claim of a professional
person employed under Section 327 or 1103 of the Bankruptcy Code that is
required to apply to the Bankruptcy Court for the allowance of compensation
and reimbursement of expenses pursuant to Section 330 of the Bankruptcy Code,
to the extent that such Claim is allowed by a Final Order of the Bankruptcy
Court under Section 330 of the Bankruptcy Code;
(e) with respect to any Asbestos Personal Injury Claim, such
Claim to the extent that it is Allowed in accordance with the procedures
established pursuant to the Asbestos Personal Injury Trust Agreement and the
Asbestos Personal Injury Trust Distribution Procedures; or
(f) with respect to any FB Asbestos Property Damage Claim,
proof of which was filed within the applicable period of limitation fixed in
accordance with Bankruptcy Rule 3003(c)(3) by the Bankruptcy Court, such Claim
to the extent that it is Allowed in accordance with the procedures established
pursuant to the FB Asbestos Property Damage Trust Agreement and the FB
Asbestos Property Damage Trust Distribution Procedures.
3. Interest on Claims
Unless otherwise specifically provided for in the Plan, the
Confirmation Order, or the Asbestos Personal Injury Trust Distribution
Procedures, or required by applicable bankruptcy law, post-petition interest
shall not accrue or be paid on Claims, and no holder of a Claim shall be
entitled to interest accruing on or after the Petition Date on any Claim.
Interest shall not accrue or be paid upon any Disputed Claim in respect of the
period from the Petition Date to the date a final distribution is made thereon
if and after such Disputed Claim becomes an Allowed Claim.
4. Record Date for Distributions to Holders of Bank Holders
Claims and Bondholders Claims
At the close of business on the Distribution Record Date,
the transfer records for the Bank Holders Claims and Bondholders Claims will
be closed, and there shall be no further changes in the record holders of Bank
Holders Claims or Bondholders Claims. None of the Reorganized Debtors, the
Disbursing Agent, if any, CSFB, as agent for the Bank Holders nor the
applicable Pre-petition Indenture Trustee under the Pre-petition Bond
Indenture for the Bondholders will have any obligation to recognize any
transfer of Allowed Bank Holders Claims or Allowed Bondholders Claims, as
applicable, occurring after the Distribution Record Date, and they will be
entitled instead to recognize and deal for all purposes hereunder with only
those record holders as of the close of business on the Distribution Record
Date.
Distributions to holders of Bondholder Claims administered
by the Pre-petition Indenture Trustees will be made by means of book-entry
exchange through the facilities of the Despository Trust Corporation ("DTC")
in accordance with the customary practices of the DTC, as and to the extent
practicable. In connection with such book-entry exchange, each Pre-petition
Indenture Trustee will deliver instructions to the DTC directing the DTC to
effect distributions on a pro rata basis as provided under the Plan with
respect to the Bondholder Claims upon which such Indenture Trustee acts as
trustee.
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. 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 after the first (1st) anniversary of the Effective Date.
Cash payments made pursuant to the Plan will be in
United States funds by means agreed to by the payor and the payee, including
by check or wire transfer, or, in the absence of an agreement, such
commercially reasonable manner as the payor shall determine in its sole
discretion.
(b) Fractional New OCD Common Stock; Other
Distributions
(i) No fractional shares of New OCD Common Stock
will be issued or distributed under the Plan. If any distribution pursuant to
the Plan would otherwise result in the issuance of New OCD Common Stock that
is not a whole number, the actual distribution of shares of such stock shall
be rounded to the next higher or lower whole number as follows: (a) fractions
of greater than one-half (1/2) shall be rounded to the next higher whole
number, and (b) fractions of one-half (1/2) or less shall be rounded to the
next lower whole number. The total number of shares of New OCD Common Stock
and the Senior Notes to be distributed pursuant to the Plan shall be adjusted
as necessary to account for the rounding provided for herein.
(ii) No consideration shall be provided in lieu of
fractional shares that are rounded down. The Senior Notes will only be issued
with a principal amount in multiples of $1,000 or integral multiples thereof.
The principal amount of the Senior Notes that would have been distributed in
amounts of other than $1,000 shall be rounded as follows: (a) amounts equal to
or less than $500 shall be reduced to $0.00 and (b) amounts greater than $500
shall be increased to $1,000.
(iii) The payment of fractions of dollars shall not
be made. Whenever any payment of a fraction of a dollar under the Plan would
otherwise be called for, the actual payment made shall reflect a rounding of
the fraction to the nearest whole dollar (up and down), with half dollars
rounded down.
(iv) The Disbursing Agent, or any agent or
servicer, as the case may be, shall not make any payment of less than thirty
dollars ($30.00) with respect to any Claim.
(c) Surrender of Pre-petition Bonds
(i) Manner of Surrender of the Pre-petition
Bonds
Except as provided in connection with
lost, stolen, mutilated or destroyed Pre-petition Bonds, each holder of an
Allowed Claim evidenced by a Pre-petition Bond shall tender such Pre-petition
Bond to the respective Pre-petition Indenture Trustee in accordance with
written instructions to be provided in a letter of transmittal to such holders
by the Pre-petition Indenture Trustee as promptly as practicable following the
Effective Date. Such letter of transmittal shall specify that delivery of such
Pre-petition Bonds will be effected, and risk of loss and title thereto will
pass, only upon the proper delivery of such Pre-petition Bonds with the letter
of transmittal in accordance with such instructions. Such letter of
transmittal shall also include, among other provisions, customary provisions
with respect to the authority of the holder of the applicable note or
Pre-petition Bonds to act and the authenticity of any signatures required on
the letter of transmittal. All surrendered Pre-petition Bonds shall be marked
as cancelled and delivered by the respective Pre-petition Indenture Trustee to
the Reorganized Debtors.
(ii) Lost, Mutilated or Destroyed Pre-petition
Bonds
In addition to any requirements under the
applicable certificate or articles of incorporation or bylaws of the
applicable Debtor, any holder of indebtedness or obligation of a Debtor
evidenced by a Pre-petition Bond that has been lost, stolen, mutilated or
destroyed shall, in lieu of surrendering the Pre-petition Bond, deliver to the
Pre-petition Indenture Trustee (a) evidence satisfactory to the Pre-petition
Indenture Trustee of the loss, theft, mutilation or destruction; and (b) such
indemnity as may be required by the Pre-petition Indenture Trustee to hold the
Pre-petition Indenture Trustee harmless from any damages, liabilities or costs
incurred in treating such individual as a holder of a Pre-petition Bond.
(iii) Failure to Surrender Cancelled Pre-petition
Bonds
Any holder of a Pre-petition Bond that
fails to surrender or be deemed to have surrendered such Pre-petition Bond
before the first (1st) anniversary of the Effective Date shall have its Claim
for a distribution on account of such Pre-petition Bond discharged and shall
be forever barred from asserting any such Claim against any Reorganized Debtor
or their respective property.
(iv) Distributions upon Receipt of Pre-petition
Bonds
No distribution of property under the Plan
shall be made to or on behalf of any such holders unless and until such
Pre-petition Bond is received by the appropriate Pre-petition Indenture
Trustee, or the unavailability of such Pre-petition Bond is established to the
reasonable satisfaction of the appropriate Pre-petition Indenture Trustee or
such requirement is waived by the Reorganized Debtors.
(d) Withholding and Reporting Requirements
For distributions under the Plan, the Disbursing
Agent shall, to the extent applicable, comply with all tax withholding and
backup withholding and reporting requirements imposed by any federal, state,
provincial, local or foreign taxing authority, and all distributions
thereunder shall be subject to any such withholding and reporting
requirements. The Disbursing Agent shall be authorized to take any and all
actions that may be necessary or appropriate to comply with such withholding
and reporting requirements.
(e) Setoffs
The Reorganized Debtors may, but shall not be
required to, set off against any Claim and the payments or other distributions
to be made pursuant to the Plan in respect of such Claim, claims of any nature
whatsoever that the Debtors or Reorganized Debtors may have against the holder
of such Claim; provided, however, that neither the failure to do so nor the
allowance of any Claim hereunder shall constitute a waiver or release by the
Reorganized Debtors of any such claim that the Debtors or Reorganized Debtors
may have against such holder.
F. Treatment of Executory Contracts and Unexpired Leases
1. Assumption and Rejection of Executory Contracts and
Unexpired Leases
Under Section 365 of the Bankruptcy Code, the Debtors have
the right, subject to Bankruptcy Court approval, to assume or reject any
executory contracts or unexpired leases. If the Debtors reject an executory
contract or unexpired lease that was entered into before the Petition Date,
the contract or lease will be treated as if it had been breached on the date
immediately preceding the Petition Date, and the other party to the agreement
will have a Class 6 Claim for damages incurred as a result of the rejection.
In the case of rejection of employment severance agreements and real property
leases, damages are subject to certain limitations imposed by Sections 365 and
502 of the Bankruptcy Code.
(a) Assumed Contracts and Leases
Except as otherwise provided in the Plan, or in any
contract, instrument, release, indenture or other agreement or document
entered into in connection with the Plan, as of the Effective Date, each
Debtor shall be deemed to have assumed each executory contract and unexpired
lease to which it is a party, unless such contract or lease (i) was previously
assumed or rejected by such Debtor, (ii) previously expired or terminated
pursuant to its own terms, (iii) is the subject of a motion pending before the
Bankruptcy Court as of the Confirmation Date to assume or reject such contract
or lease or (iv) is listed on Schedule IV, to be filed at least 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 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.
(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
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 notice that the executory contract or unexpired lease has been
rejected.
(e) Insurance Policies and Agreements
The Plan contains separate provisions with respect
to insurance policies and agreements. The Debtors do not believe that the
insurance policies issued to, or insurance agreements entered into by, the
Debtors prior to the Petition Date constitute executory contracts. To the
extent that such insurance policies or agreements are considered to be
executory contracts, then the Plan shall constitute a motion to assume such
insurance policies and agreements, and, subject to the occurrence of the
Effective Date, the entry of the Confirmation Order shall constitute approval
of such assumption pursuant to Section 365(a) of the Bankruptcy Code and a
finding by the Bankruptcy Court that each such assumption is in the best
interest of each Debtor, its Estate, and all parties in interest in the
Chapter 11 Cases. Unless otherwise determined by the Bankruptcy Court pursuant
to a Final Order or agreed to by the parties thereto prior to the Effective
Date, no payments are required to cure any defaults of the Debtors existing as
of the Confirmation Date with respect to each such insurance policy or
agreement. To the extent that the Bankruptcy Court determines otherwise as to
any such insurance policy or agreement, the Debtors reserve the right to seek
rejection of such insurance policy or agreement or other available relief.
Nonetheless, the Debtors may elect to reject
certain insurance policies and agreements to the extent they are determined to
be executory contracts. To the extent that any or all of the insurance
policies and agreements set forth on Schedule XI to the Plan, to be filed no
later than 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, 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) Professional Fee Claims, (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). Nothing herein shall be
construed as limiting the right of the United States Trustee to be heard under
Sections 307 or 502(a) of the Bankruptcy Code with regard to any Professional
Fee Claims or other similar claims or requests for payment of administrative
expenses. 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. If an
objection has not been filed to a Proof of Claim or a scheduled Claim, other
than Asbestos Personal Injury Claims and FB Asbestos Property Damage Claims,
by the Claims Objection Deadline, the Claim to which the Proof of Claim or
scheduled Claim relates will be treated as an Allowed Claim if such Claim has
not been Allowed earlier.
Notwithstanding any other provision in this Plan, no payments or
distributions shall be made with respect to all or any portion of a Disputed
Claim unless and until all objections to such Disputed Claim have been settled
or withdrawn or have been determined by Final Order, and the Disputed Claim,
or some portion thereof, has become an Allowed Claim.
2. Disputed Distribution Reserve
The Disbursing Agent shall establish appropriate reserves
for Disputed Claims by withholding the lesser of (i) 100% of distributions to
which holders of Disputed Claims would be entitled under the Plan if such
Disputed Claims were Allowed Claims, or (ii) such other amount as may be
approved by the Bankruptcy Court. On, or as soon as practicable after, the
Initial Distribution Date, the Reorganized Debtors shall transmit to the
Disbursing Agent, and the Disbursing Agent shall reserve for the account of
each holder of a Disputed Claim, (a) Cash, Senior Notes, New OCD Common Stock,
or such other property which would otherwise be distributable to such holder
on such date in accordance with the Plan were such Disputed Claim an Allowed
Claim on such date, in the Face Amount thereof, or (b) Cash, Senior Notes, New
OCD Common Stock, or such other property of a lesser value as such holder and
the Reorganized Debtors may agree. Cash, Senior Notes, New OCD Common Stock,
or such other property reserved under the Plan shall be set aside and
segregated by Class of Claims and, in the case of Cash, Cash dividends or Cash
payments in respect thereof, to the extent practicable, held by the Disbursing
Agent in an interest bearing escrow fund (which may be a single account for
each Class, provided that separate book entries for each Claim are maintained
by the Disbursing Agent) to be established and maintained by the Disbursing
Agent pending resolution of such Disputed Claims.
3. Distributions on Account of Disputed Claims Once They are
Allowed
On each Quarterly Distribution Date (the calendar quarters
ending in March, June, September and December), the Disbursing Agent shall
make payments and distributions from the reserve established for Disputed
Claims to each holder of a Disputed Claim that has become an Allowed Claim
during the preceding calendar quarter. After the date that the order or
judgment of the Bankruptcy Court allowing such Claim becomes a Final Order,
the Reorganized Debtors shall distribute to the holder of such Claim any
property in the reserve established for Disputed Claims that would have been
distributed to the holder of such claim had such Claim been an Allowed Claim,
pursuant to the provisions of Article III governing the applicable Class.
Holders of such Claims that are ultimately Allowed will also be entitled to
receive, on the basis of the amount ultimately Allowed, the amount of any
dividends or other distributions received on account of the property in
reserve between the Effective Date and the date such distribution is made to
such holder of a Claim.
H. Exit Facility
The Debtors anticipate that they will obtain new bank financing on
the Effective Date (the "Exit Facility") for general working capital and
corporate purposes, in such amounts and on such terms as are satisfactory to
the Debtors and the Plan Proponents. The Debtors have not yet ascertained the
amount or the terms of the Exit Facility.
I. Conditions Precedent to Confirmation and Effectiveness of
the Plan
1. Conditions to Confirmation Relating to the Asbestos
Permanent Channeling Injunction
The Plan will not be confirmed, and the Confirmation Order
will not be entered, until and unless the Confirmation Conditions set forth
below have been satisfied or waived by the Plan Proponents. These Confirmation
Conditions are designed to, inter alia, ensure that the Asbestos Personal
Injury Permanent Channeling Injunction will be effective, binding and
enforceable and will be based on the following general findings of the
Bankruptcy Court, each of which will be contained in the Confirmation Order in
form and substance acceptable to the Plan Proponents. The following are
conditions to the Plan which relate to Asbestos Personal Injury Claims and the
Asbestos Personal Injury Permanent Channeling Injunction, although such
conditions may be relevant to the FB Asbestos Property Damage Claims and the
FB Asbestos Property Damage Trust.
(a) The Asbestos Personal Injury Permanent Channeling
Injunction is to be implemented in connection with the Asbestos Personal
Injury Trust and the Plan.
(b) At the time of the order for relief with respect to OC
and Fibreboard, OC and Fibreboard had been named as defendants in personal
injury, wrongful death or property damage actions seeking recovery for damages
allegedly caused by the presence of, or exposure to, asbestos or
asbestos-containing products.
(c) The Asbestos Personal Injury Trust, as of the Effective
Date, will assume the liabilities of all of the OC Persons with respect to OC
Asbestos Personal Injury Claims and, upon such assumption, the Reorganized
Debtors and the OC Persons shall have no liability for any OC Asbestos
Personal Injury Claims.
(d) The Asbestos Personal Injury Trust, as of the Effective
Date, will assume the liabilities of all of the FB Persons with respect to FB
Asbestos Personal Injury Claims and, upon such assumption, the Reorganized
Debtors and the FB Persons shall have no liability for any FB Asbestos
Personal Injury Claims.
(e) The OC Sub-Account of the Asbestos Personal Injury Trust
is to be funded in whole or in part with Cash, Senior Notes, New OCD Common
Stock, the OCD Insurance Escrow, the OC Asbestos Personal Injury Liability
Insurance Assets, distributable proceeds of the Litigation Trust Assets, and
by the obligation of Reorganized OCD to make future payments, including
dividends.
(f) The FB Sub-Account of the Asbestos Personal Injury Trust
is to be funded in whole or in part with the Existing Fibreboard Insurance
Settlement Trust Assets, the FB Reversions, the Committed Claims Account, and
the FB Sub-Account Settlement Payment.
(g) The Asbestos Personal Injury Trust is to own, upon the
Initial Distribution Date, a majority of the voting shares of Reorganized OCD.
(h) In light of the benefits provided, or to be provided, to
the Asbestos Personal Injury Trust on behalf of each Protected Party, the
Asbestos Personal Injury Permanent Channeling Injunction is fair and equitable
with respect to the persons that might subsequently assert Asbestos Personal
Injury Claims against any Protected Party.
(i) Reorganized OCD and Reorganized Fibreboard are likely to
be subject to substantial Demands for payment arising out of the same or
similar conduct or events that gave rise to (a) OC Asbestos Personal Injury
Claims and (b) FB Asbestos Personal Injury Claims, respectively, that are
addressed by the Asbestos Personal Injury Permanent Channeling Injunction.
(j) The actual amounts, numbers, and timing of such Demands
cannot be determined.
(k) Pursuit of such Demands outside the procedures
prescribed by the Plan is likely to threaten the Plan's purpose to deal
equitably with Claims and Demands.
(l) The terms of the Asbestos Personal Injury Permanent
Channeling Injunction, including any provisions barring actions against the
Protected Parties pursuant to Section 524(g)(4)(A) of the Bankruptcy Code, are
set forth in the Plan and in any disclosure statement supporting the Plan.
(m) The Plan establishes, in Classes 7 and 8, separate
Classes of claimants whose Claims are to be addressed by the Asbestos Personal
Injury Trust.
(n) Class 7 and Class 8 claimants have each voted, by at
least 75 percent (75%) of those voting, in favor of the Plan.
(o) Pursuant to court orders or otherwise, the Asbestos
Personal Injury Trust will operate through mechanisms such as structured,
periodic or supplemental payments, pro rata distributions, matrices or
periodic review of estimates of the numbers and values of present Claims and
Demands, or other comparable mechanisms, that provide reasonable assurance
that the Asbestos Personal Injury Trust will value, and be in a financial
position to pay, present Claims and Demands that involve similar Claims in
substantially the same manner.
(p) The Future Claimants' Representative was appointed as
part of the proceedings leading to the issuance of the Asbestos Personal
Injury Permanent Channeling Injunction for the purpose of protecting the
rights of persons that might subsequently assert Demands of the kind that are
addressed in the Asbestos Personal Injury Permanent Channeling Injunction and
channeled to and assumed by the Asbestos Personal Injury Trust. The Future
Claimants' Representative has in all respects fulfilled his duties,
responsibilities, and obligations as the future representative in accordance
with Section 524(g) of the Bankruptcy Code.
(q) Identifying or describing each Protected Party in the
Asbestos Personal Injury Permanent Channeling Injunction is fair and equitable
with respect to persons that might subsequently assert Demands against each
such Protected Party, in light of the benefits provided, or to be provided, to
the Asbestos Personal Injury Trust by or on behalf of any such Protected
Party.
(r) The Plan complies in all respects with Section 524(g) of
the Bankruptcy Code.
(s) The Asbestos Personal Injury Trust is to use its assets
and income to pay Asbestos Personal Injury Claims.
(t) The Plan and its Exhibits constitute a fair, equitable,
and reasonable resolution of the liabilities of the Debtors for Asbestos
Personal Injury Claims.
(u) The confirmation and consummation of the Plan, including
the discharge of the Debtors pursuant to the Plan and the issuance of Asbestos
Personal Injury Permanent Channeling Injunction, shall not provide the
insurers a defense to liability for insurance coverage based upon the alleged
elimination of the liability of the insured(s).
(v) The duties and obligations of the insurers that issued
policies and their successors and assigns, or, with respect to any insolvent
insurers, their liquidators and/or the state insurance guaranty funds that
bear responsibility with respect to such rights under such policies which
constitute the OC Asbestos Personal Injury Liability Insurance Assets are not
eliminated or diminished by (i) the discharge, release and extinguishment of
all the liabilities of the Debtors or Reorganized Debtors pursuant to the Plan
in respect to the OC Asbestos Personal Injury Claims; (ii) the assumption of
liability for the OC Asbestos Personal Injury Claims by the Asbestos Personal
Injury Trust; or (iii) the transfer pursuant to the Plan of the Debtors'
rights to the OC Asbestos Personal Injury Liability Insurance Assets to the
extent determined and permitted under applicable bankruptcy law.
(w) 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.
(x) 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.
(y) 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.
Certain insurers who have contested their obligations to OC
with respect to coverage for Asbestos Personal Injury Claims have objected to
various aspects of the Plan as violative of their rights under policies of
insurance and otherwise, including rights they claim to be subject to
resolution outside the bankruptcy proceedings. In particular, the insurers
criticize aspects of the Plan that: (i) assign OC Asbestos Personal Injury
Liability Insurance Assets to the Asbestos Personal Injury Trust, (ii) provide
for estimation, resolution, and payment of Asbestos Personal Injury Claims,
(iii) allegedly eliminate their ability to pursue counterclaims or set-off
defenses in coverage actions initiated by OC, and (d) condition confirmation
on the Bankruptcy Court or District Court making certain findings contained in
Section 12.1 of the Plan that may relate to insurance. These insurers assert
that the Plan must be made so-called insurance neutral.
The Plan Proponents believe that many of the insurers'
criticisms -- while ostensibly advanced in support of insurance neutrality --
seek to alter provisions that are already insurance neutral in purpose or
effect and thereby to place insurance rights at jeopardy rather than to assure
true neutrality. The Plan Proponents do not believe that provisions should be
eliminated that are either usual and customary in bankruptcy plans or are
insurance neutral in the sense that they are designed neither to enhance nor
to diminish access to coverage for the payment of Asbestos Personal Injury
Claims. To the extent that the Plan Proponents and insurers do not resolve
their disputes, such issues may be resolved by the Bankruptcy Court or
District Court as part of confirmation and/or in separate proceedings or in
various arbitral or judicial proceedings in which coverage issues may be
adjudicated.
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 or
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.
(c) The Debtors do not need the consent of their insurers to
transfer the FB Asbestos Property Damage Insurance Assets to the FB Asbestos
Property Damage Trust. Alternatively, the Debtors' insurers have an obligation
not to withhold consent to such transfer unreasonably, and the refusal to
consent to the transfer under the circumstances would be unreasonable.
3. General Conditions to Confirmation.
In addition to the foregoing conditions expressly stated in
the Plan, including those which are also included in Section 524(g) of the
Bankruptcy Code as conditions to the issuance of a channeling injunction, in
order to confirm the Plan, the Bankruptcy Court or the District Court must
determine at the Confirmation Hearing whether the requirements for
confirmation set forth in Section 1129 of the Bankruptcy Code have been
satisfied. Such requirements include determinations with respect to the
following:
(a) The Plan complies with the applicable provisions of the
Bankruptcy Code.
(b) The Debtors have complied with the applicable provisions
of the Bankruptcy Code.
(c) The Plan has been proposed in good faith and not by any
means forbidden by law.
(d) Any payment made or promised by the Debtors or by a
person issuing securities or acquiring property under the Plan for services or
for costs and expenses in, or in connection with, the Chapter 11 Cases, or in
connection with the Plan and incident to the Chapter 11 Cases, has been
disclosed to the Bankruptcy Court, and any such payment made before
confirmation of the Plan is reasonable or, if such payment is to be fixed
after confirmation of the Plan, such payment is subject to the approval of the
Bankruptcy Court as reasonable.
(e) The Debtors have disclosed (i) the identity and
affiliations of (x) any individual proposed to serve, after confirmation of
the Plan, as a director, officer or voting trustee of the Reorganized Debtors,
(y) any Affiliate of the Debtors participating in a joint plan with the
Debtors, or (z) any successor to the Debtors under the Plan (and the
appointment to, or continuance in, such office of such individual(s) is
consistent with the interests of Claims and Interest holders and with public
policy), and (ii) the identity of any insider that will be employed or
retained by the Reorganized Debtors and the nature of any compensation for
such insider.
(f) With respect to each Class of Claims or Interests, each
holder of an Impaired Claim or Impaired Interest either has accepted the Plan
or will receive or retain under the Plan on account of the Claims or Interests
held by such entity, property of a value, as of the Effective Date, that is
not less than the amount that such entity would receive or retain if the
Debtors were liquidated on such date under Chapter 7 of the Bankruptcy Code.
See Section XIV of this Disclosure Statement entitled "Best Interests Test."
(g) The Plan provides that Administrative Claims and DIP
Facility Claims will be paid in full on the Effective Date and that Priority
Tax Claims will receive on account of such Claims the treatment required by
1129(a)(9)(C) of the Bankruptcy Code. (See Section VII.C.2.c of this
Disclosure Statement entitled "Treatment of Unclassified Claims Under the Plan
- -Priority Tax Claims."
(h) If a Class of Claims is Impaired under the Plan, at
least one Class of Impaired Claims has accepted the Plan, determined without
including any acceptance of the Plan by insiders holding Claims in such Class.
(i) Confirmation of the Plan is not likely to be followed by
the liquidation, or the need for further financial reorganization, of the
Debtors or any successor to the Debtors under the Plan, unless such
liquidation or reorganization is proposed in the Plan. See Section XIV.A of
this Disclosure Statement entitled "Feasibility of the Plan."
(j) All fees payable under Section 1930 of Title 28 have
been paid or the Plan provides for the payment of all such fees on the
Effective Date.
(k) The Plan provides for the continuation after the
Effective Date of all retiree benefits, if any, at the level established
pursuant to Sections 1114(e)(1)(B) or 1114(g) of the Bankruptcy Code at any
time prior to the Confirmation Date, for the duration of the period the
Debtors have obligated themselves to provide such benefits.
The Debtors believe that, upon receipt of the votes required
to confirm the Plan, the Plan will satisfy all the statutory requirements of
Chapter 11 of the Bankruptcy Code, that the Debtors have complied or will have
complied with all of the requirements of Chapter 11, and that the Plan has
been proposed and submitted to the Bankruptcy Court in good faith.
4. Conditions to the Effective Date
The following are conditions precedent to the occurrence of
the Effective Date, each of which may be satisfied or waived in accordance
with Section 12.3 of the Plan:
(a) The Confirmation Order shall have been entered, shall
have become a Final Order, and shall be in form and substance reasonably
satisfactory to the Plan Proponents.
(b) The Asbestos Personal Injury Permanent Channeling
Injunction shall be in full force and effect.
(c) All agreements or other instruments which are exhibits
to the Plan shall be in form and substance reasonably acceptable to the Plan
Proponents and shall have been executed and delivered.
(d) All actions, documents and agreements necessary to
implement the Plan shall have been effected or executed.
(e) The Asbestos Personal Injury Trustees shall have
accepted their appointment as Asbestos Personal Injury Trustees and shall have
executed the Asbestos Personal Injury Trust Agreement.
(f) The individuals designated to serve as members of the
TAC shall have accepted their appointment as TAC members.
(g) The Future Claimants' Representative shall have agreed
to continue to serve in such capacity following the Confirmation Date.
(h) The Private Letter Ruling ("PLR") with respect to the
qualification of the trust formed pursuant to Section 524(g) of the Bankruptcy
Code described therein as a "qualified settlement fund" within the meaning of
Treasury Regulations Section 1.468B-1, et seq., promulgated under Section 468B
of the Internal Revenue Code of 1986, as amended ("IRC"), shall not have been
cancelled, withdrawn or revoked and shall remain in full force and effect.
Alternatively, the Reorganized Debtors shall have received an opinion of
counsel with respect to the tax status of the Asbestos Personal Injury Trust
as a "qualified settlement fund" reasonably satisfactory to the Plan
Proponents, and, (i) if Class 4 accepts the Plan, the Bank Holders, and/or
(ii) if Class 6 accepts the Plan, the Unsecured Creditors' Committee.
(i) The FB Asbestos Property Damage Trustee shall have
accepted his or her appointment as FB Asbestos Property Damage Trustee and
shall have executed the FB Asbestos Property Damage Trust Agreement.
(j) The Reorganized Debtors shall have entered into and
shall have credit availability under the Exit Facility in an amount sufficient
to meet the needs of Reorganized Debtors, as determined by the Plan
Proponents.
(k) Each of the Exhibits shall be in form and substance
acceptable to the Plan Proponents.
(l) The Existing Fibreboard Insurance Settlement Trust
Assets will be irrevocably assigned and transferred on the Effective Date to
the Asbestos Personal Injury Trust, for allocation to the FB Sub-Account, or
the Existing Fibreboard Insurance Settlement Trust Assets will be treated in
accordance with Section 10.5 of the Plan.
5. Waiver of Conditions to the Effective Date
Under the Plan, the Plan Proponents reserve, in their sole
discretion, the right, with the written consent of (a) if Class 4 accepts the
Plan, the Bank Holders, and/or (b) if Classes 4, 5 and 6 all accept the Plan,
the Unsecured Creditors' Committee, to waive the occurrence of any of the
foregoing conditions precedent to the Effective Date or to modify any of such
conditions precedent. Any such written waiver of a condition precedent set
forth in this section may be effected at any time, without notice, without
leave or order of the Bankruptcy Court, and without any formal action other
than proceeding to consummate the Plan. Any actions required to be taken on
the Effective Date shall take place and shall be deemed to have occurred
simultaneously, and no such action shall be deemed to have occurred prior to
the taking of any other such action. If the Plan Proponents decide that one of
the foregoing conditions cannot be satisfied, and the occurrence of such
condition is not waived in the manner set forth above, then the Plan
Proponents shall file a notice of the failure of the Effective Date with the
Bankruptcy Court, at which time the Plan and the Confirmation Order shall be
deemed null and void.
J. Certain Releases and Injunctions Under the Plan
This section of the Disclosure Statement contains a discussion of
certain releases and injunctions under the Plan. The following releases and
injunctions are described in this Disclosure Statement: (1) an injunction of
Enjoined Actions against the Debtors (See Section VII.J.2 of this Disclosure
Statement entitled "Releases by Holders of Claims and Interests"); (2) the
Debtors' discharge and the discharge injunction (See Section VII.L.2 of this
Disclosure Statement entitled "Discharge of the Debtors"); (3) the Asbestos
Personal Injury Permanent Channeling Injunction (See Section VII.L.4 of this
Disclosure Statement entitled "The Asbestos Personal Injury Permanent
Channeling Injunction"); (4) the injunction related to FB Asbestos Property
Damage Claims (See Section IX.C of this Disclosure Statement entitled
"Injunction Channeling FB Asbestos Property Damage Claims"); and (5) an
injunction with respect to claims against the Hartford Entities (See Section
VII.J.6 of this Disclosure Statement entitled "Injunction with Respect to
Claims Against the Hartford Entities").
1. Debtors' Releases of Claims
Effective as of the Confirmation Date, but subject to the
occurrence of the Effective Date, for good and valuable consideration, to the
fullest extent permissible under applicable law, each of the Debtors and
Reorganized Debtors and their respective Estates and each of their respective
Related Persons will be deemed to completely and forever release, waive, void,
extinguish and discharge all Released Actions (other than the rights to
enforce the Plan and any right or obligation under the Plan, and the
securities, contracts, instruments, releases, indentures and other agreements
or documents delivered thereunder or contemplated thereby) that may be
asserted by or on behalf of the Debtors or Reorganized Debtors or their
respective Estates or each of their respective Related Persons against (a) the
Released Parties, (b) the Pre-petition Indenture Trustees, (c) the DIP Agent
and the holders of DIP Facility Claims and (d) the Persons who are Related
Persons of Persons listed in clauses (b) - (c) above.
Unless listed on Schedule XIV of the Plan, the Plan would
release certain actions against insiders of the Debtor. The proposed releases
to insiders by the Debtor would release the certain claims which are currently
subject to tolling agreements. These claims have been identified by the
Debtors using the thresholds (minimums) agreed to with Unsecured Creditors'
Committee and consist of the following: (1) alleged causes of action against
twelve former and present officers and directors to recover approximately
$6,750,000 in payments under the Officer Stretch Incentive Plan and Corporate
Incentive Plan in September, 2000 (from individuals who received in excess of
$200,000 from such payments; (2) an alleged cause of action against William
Coleville, a director, to recover $ 164,327 for a consulting fee paid just
before the bankruptcy filing; (3) an alleged cause of action against Glenn
Hiner to recover $103,131.07 in dividends. If these payments were 100%
recoverable without any cost to the estate, such recoveries are estimated to
result in an additional payment to creditors of approximately .05% of their
claims. Thus a creditor with a $1000 claim would receive an additional
50(cent).
The "Related Persons" means, with respect to any Person,
such Person's predecessors, successors and assigns (whether by operation of
law or otherwise) and their respective present and former Affiliates and each
of their respective present and former members, partners, equity-holders,
officers, directors, employees, representatives, advisors, attorneys, agents
and professionals, acting in such capacity, and any Person claiming by or
through any of them.
"Released Actions" means all Claims, obligations, suits,
judgments, damages, debts, rights, causes of action and liabilities, and all
Interests and rights of an equity security holder, whatsoever, whether
liquidated or unliquidated, fixed or contingent, matured or unmatured, known
or unknown, foreseen or unforeseen, then existing or thereafter arising, in
law, equity or otherwise that are based in whole or part on any act, omission,
transaction, event or other circumstance taking place or existing on or prior
to the Effective Date in connection with or related to the Debtors and
Reorganized Debtors and their respective Estates, the Chapter 11 Cases or the
Plan, except for the (a) Tobacco Causes of Action, (b) the Avoidance Actions
listed on Schedule XIV 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 XIV 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 respective Related Persons will be deemed to completely and
forever release, waive, void, extinguish and discharge all Released Actions
(other than the rights to enforce the Debtors' or the Reorganized Debtors'
obligations under the Plan, and any right or obligation of such holder under
the Plan, and the securities, contracts, instruments, releases, indentures and
other agreements or documents delivered thereunder or contemplated thereby)
that otherwise may be asserted against the Claimant Released Parties.
"Claimant Released Parties" means (a) the Debtors, the
Reorganized Debtors and their respective predecessors, successors and assigns
(whether by operation of law or otherwise) and their respective present and
former Affiliates as of the Petition Date or thereafter, and additionally (b)
if the Person granting the release votes in favor of the Plan, the Released
Parties. The terms "Released Parties" and "Related Persons" are defined in the
previous section of this Disclosure Statement.
UNDER THE ABOVE-DESCRIBED PROVISIONS OF THE PLAN, PARTIES
WHO VOTE IN FAVOR OF THE PLAN AGREE AND ARE DEEMED TO RELEASE CERTAIN CLAIMS
AGAINST PARTIES WHO ARE NOT DEBTORS IN THESE CHAPTER 11 CASES, INCLUDING
AFFILIATED OFFICERS AND DIRECTORS BASED IN WHOLE OR IN PART ON ANY ACT,
OMISSION, TRANSACTION, EVENT OR OTHER CIRCUMSTANCE TAKING PLACE OR EXISTING ON
OR PRIOR TO THE EFFECTIVE DATE IN CONNECTION WITH OR RELATED TO THE DEBTORS
AND REORGANIZED DEBTORS AND THEIR RESPECTIVE ESTATES, THE CHAPTER 11 CASES OR
THE PLAN. PARTIES WHO RELEASE SUCH CLAIMS PURSUANT TO THE PLAN ARE SUBJECT TO
AN INJUNCTION AGAINST ASSERTING SUCH CLAIMS, AS DESCRIBED BELOW.
3. Injunctions Related to Releases
EXCEPT AS OTHERWISE PROVIDED HEREIN OR IN THE CONFIRMATION
ORDER, AS OF THE CONFIRMATION DATE, BUT SUBJECT TO THE OCCURRENCE OF THE
EFFECTIVE DATE, EACH PERSON THAT HAS HELD, CURRENTLY HOLDS OR MAY HOLD A CLAIM
THAT IS RELEASED PURSUANT TO THIS SECTION 5.13 OF THE PLAN (DESCRIBED IN THE
PREVIOUS SECTION) OR OTHER OBLIGATION, SUIT, JUDGMENT, DAMAGES, DEBT, RIGHT,
CAUSE OF ACTION, LIABILITY, INTEREST OR OTHER RIGHT OF AN EQUITY SECURITY
HOLDER RELEASED PURSUANT TO SECTION 5.13 OF THE PLAN, AND EACH OTHER PARTY IN
INTEREST AND EACH OF THEIR RESPECTIVE RELATED PERSONS ARE PERMANENTLY, FOREVER
AND COMPLETELY STAYED, RESTRAINED, PROHIBITED AND ENJOINED FROM TAKING ANY OF
THE FOLLOWING ACTIONS, WHETHER DIRECTLY OR INDIRECTLY, DERIVATIVELY OR
OTHERWISE ON ACCOUNT OF OR BASED ON THE SUBJECT MATTER OF ANY SUCH RELEASED
CLAIMS OR OTHER RELEASED OBLIGATIONS, SUITS, JUDGMENTS, DAMAGES, DEBTS,
RIGHTS, CAUSES OF ACTION OR LIABILITIES OR INTERESTS OR OTHER RIGHTS OF AN
EQUITY SECURITY HOLDER: (I) COMMENCING, CONDUCTING OR CONTINUING IN ANY
MANNER, DIRECTLY OR INDIRECTLY, ANY SUIT, ACTION OR OTHER PROCEEDING
(INCLUDING, WITHOUT LIMITATION, TO ANY JUDICIAL, ARBITRAL, ADMINISTRATIVE OR
OTHER PROCEEDING) IN ANY FORUM; (II) ENFORCING, ATTACHING (INCLUDING, WITHOUT
LIMITATION, ANY PREJUDGMENT ATTACHMENT), COLLECTING, OR IN ANY WAY SEEKING TO
RECOVER ANY JUDGMENT, AWARD, DECREE, OR OTHER ORDER; (III) CREATING,
PERFECTING OR IN ANY WAY ENFORCING IN ANY MANNER, DIRECTLY OR INDIRECTLY, ANY
ENCUMBRANCE; (IV) SETTING OFF, SEEKING REIMBURSEMENT OR CONTRIBUTIONS FROM, OR
SUBROGATION AGAINST, OR OTHERWISE RECOUPING IN ANY MANNER, DIRECTLY OR
INDIRECTLY, ANY AMOUNT AGAINST ANY LIABILITY OR OBLIGATION OWED TO ANY PERSON
RELEASED UNDER SECTION 5.13(A) OR SECTION 5.13(B), AS APPLICABLE; AND (V)
COMMENCING OR CONTINUING IN ANY MANNER, IN ANY PLACE OF ANY ACTION, WHICH IN
ANY SUCH CASE DOES NOT COMPLY WITH OR IS INCONSISTENT WITH THE PROVISIONS OF
THE PLAN.
4. Deemed Consent
BY VOTING TO ACCEPT THE PLAN, EACH HOLDER OF A CLAIM WILL BE
DEEMED, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, TO HAVE
SPECIFICALLY CONSENTED TO THE RELEASES AND INJUNCTIONS AS DESCRIBED ABOVE.
5. No Waiver
The releases described above shall not, however, limit,
abridge or otherwise affect the rights of the Reorganized Debtors to enforce,
sue on, settle or compromise the rights, claims and other matters retained by
the Reorganized Debtors pursuant to the Plan.
6. Injunction With Respect to Claims Against the Hartford
Entities
OCD has entered into a Settlement Agreement between it and
the Hartford Financial Services Group, Inc., dated June 18, 2001, and approved
by the Bankruptcy Court by Order dated July 16, 2001. Pursuant to the
Settlement Agreement, the Debtors propose the following injunction under the
Plan:
EXCEPT AS TO ANY RIGHTS WITH RESPECT TO WHICH THE DEBTORS
EXPLICITLY DECLINED TO GIVE A RELEASE TO THE HARTFORD ENTITIES PURSUANT TO
SECTION VI OF THE HARTFORD SETTLEMENT AGREEMENT, EFFECTIVE AS OF THE
CONFIRMATION DATE, BUT SUBJECT TO THE OCCURRENCE OF THE EFFECTIVE DATE, FOR
GOOD AND VALUABLE CONSIDERATION, PURSUANT TO SECTION 105(A) OF THE BANKRUPTCY
CODE, TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, EACH PERSON THAT
HAS HELD, CURRENTLY HOLDS OR MAY HOLD A CLAIM SHALL BE PERMANENTLY ENJOINED
PURSUANT TO 11 U.S.C. ss.105(A) FROM TAKING ANY ACTION OR SEEKING ANY RECOVERY
AGAINST OR FROM ANY OF THE HARTFORD ENTITIES THAT SEEKS TO ENFORCE ANY RIGHTS
UNDER, THROUGH OR RELATED TO THE HARTFORD POLICIES.
"Hartford Entities" means (a) the Hartford Financial
Services Group, Inc., Excess Insurance Company, Ltd., Fencourt Reinsurance
Company, Ltd., First State Insurance Company, Hartford Accident and Indemnity
Company, Hartford Casualty Insurance Company, Hartford Fire Insurance Company,
Hartford Insurance Company of Canada, Hartford Insurance Company of Illinois,
Hartford Insurance Company of the Midwest, Hartford Insurance Company of the
Southeast, Hartford Insurance, Ltd. (Bermuda), Hartford Lloyds Insurance
Company, Hartford Underwriters Insurance Company (formerly New York
Underwriters Insurance Company), New England Insurance Company, New England
Reinsurance Corporation, Nutmeg Insurance Company, Pacific Insurance Company,
Ltd., Property and Casualty Insurance Company of Hartford, Sentinel Insurance
Company, Ltd., Trumbull Insurance Company, and Twin City Fire Insurance
Company; as well as (b) all of their respective predecessors, successors,
assigns, subsidiaries, affiliates, holding companies (if any), parent
companies (if any), merged companies and acquired companies, exclusive of any
former asset, affiliate, or member company of Reliance Group Holdings, Inc.;
and (c) all of the respective employees, officials, agents, attorneys,
representatives, officers, and directors, in their capacity as such, of the
entities encompassed by clauses (a) and (b).
"Hartford Policies" means the following policies issued to OCD:
-------------------------------- ------------------------------- ------------------------------
Issuer Policy Period Policy Number
-------------------------------- ------------------------------- ------------------------------
First State 06/18/74 to 10/22/74 921434
-------------------------------- ------------------------------- ------------------------------
10/22/74 to 10/22/75 921434
-------------------------------- ------------------------------- ------------------------------
10/22/75 to 10/22/76 921434
-------------------------------- ------------------------------- ------------------------------
10/22/76 to 10/22/77 923542
-------------------------------- ------------------------------- ------------------------------
10/22/77 to 9/01/78 925625
-------------------------------- ------------------------------- ------------------------------
09/01/78 to 09/01/79 926735
-------------------------------- ------------------------------- ------------------------------
03/08/79 to 09/01/79 927953
-------------------------------- ------------------------------- ------------------------------
09/01/82 to 09/01/83 934962
-------------------------------- ------------------------------- ------------------------------
Twin City 09/01/82 to 09/01/83 TXX111365
-------------------------------- ------------------------------- ------------------------------
Excess 09/01/79 to 09/01/80 EL 10300 (EL 10-87)
-------------------------------- ------------------------------- ------------------------------
First State 09/01/82 to 09/01/83 933186
-------------------------------- ------------------------------- ------------------------------
09/01/83 to 09/01/84 EU 935321
-------------------------------- ------------------------------- ------------------------------
09/01/83 to 09/01/84 EU 935324
-------------------------------- ------------------------------- ------------------------------
10/31/79 to 11/29/82 GC802752
-------------------------------- ------------------------------- ------------------------------
04/01/81 to 04/01/84 GC802770
-------------------------------- ------------------------------- ------------------------------
05/01/88 to 05/01/89 GC009556
-------------------------------- ------------------------------- ------------------------------
05/01/89 to 05/01/90 GC010810
-------------------------------- ------------------------------- ------------------------------
Hartford 12/01/74 to 12/01/75 57 IC 620122
-------------------------------- ------------------------------- ------------------------------
Pacific 05/01/93 to 05/01/94 ZG 0001003
-------------------------------- ------------------------------- ------------------------------
04/01/94 to 04/01/95 ZG 0002864
-------------------------------- ------------------------------- ------------------------------
05/01/95 to 05/01/96 ZG 0004839
-------------------------------- ------------------------------- ------------------------------
05/01/96 to 05/01/97 ZG 0006912
-------------------------------- ------------------------------- ------------------------------
05/01/97 to 05/01/98 ZG 0008946
-------------------------------- ------------------------------- ------------------------------
Twin City 09/01/83 to 09/01/84 TXX 102719
-------------------------------- ------------------------------- ------------------------------
The term "Hartford Policies" also includes all insurance
policies other than the above-listed policies ("Unknown Policies"), that were
issued prior to January 1, 2001, by and in the name of one of the specifically
named Hartford Entities, either to OCD or that insure OCD, including all known
and unknown primary, umbrella, excess, or other insurance policies, contracts,
and/or agreements of any nature, type, or kind (including but not limited to:
all comprehensive general liability policies; general liability policies;
casualty policies; environmental liability policies; environmental impairment
policies; difference in conditions policies; directors' and officers'
liability policies; errors and omissions liability policies; contractual
liability policies; automobile liability policies; products liability
policies; and workers' compensation policies). Notwithstanding any of the
foregoing and for the avoidance of any doubt, Unknown Policies shall not
include: (a) policies issued by one of the specifically named Hartford
Entities to Persons other than OCD or the Debtors (except to the extent of the
interest of OCD in such policies); (b) policies issued to Persons that become
Affiliates of OCD or Reorganized OCD after June 18, 2001; (c) policies issued
or subscribed by Excess Insurance Company Ltd. that are subject to a May 15,
1999 settlement agreement between OCD and London Market Insurers; (d) First
State policy number EU 935321 to the extent that it provides coverage for
products/completed operations claims other than asbestos claims; and (e)
policies issued to or insuring Fibreboard.
K. Summary of Other Provisions of the Plan
1. Dissolution of the Creditors' Committees and Termination of
Futures Claimants' Representative
(a) Creditors' Committees
Under the Plan, on the Effective Date, each of the
Unsecured Creditors' Committee and the Asbestos Claimants' Committee will
dissolve and their respective members will be released and discharged from all
duties and obligations arising from or related to the Chapter 11 Cases, except
for the purpose of completing any matters, including, without limitation,
litigation or negotiations, pending as of the Effective Date. The
professionals retained by each of the Unsecured Creditors' Committee and the
Asbestos Claimants' Committee and the respective members thereof will not be
entitled to compensation or reimbursement of expenses for any services
rendered after the Effective Date, except (i) as authorized in the preceding
sentence or (ii) to the extent such services are rendered in connection with
the hearing on final allowances of compensation pursuant to Section 330 of the
Bankruptcy Code.
(b) Futures Claimants' Representative
On the Effective Date, the existence of the Future
Claimants' Representative and his rights to ongoing reimbursement of expenses
and the rights of his professionals to ongoing compensation and reimbursement
of expenses shall continue after the Effective Date only for (i) the purposes
set forth in the Asbestos Personal Injury Trust Agreement and the annexes
thereto and (ii) the purposes of completing any matters, including, without
limitation, litigation or negotiations, pending as of the Effective Date, and
shall otherwise terminate on the Effective Date.
2. Cancellation of Debt and Debt Agreements
On the Effective Date, (a) the Debt shall be cancelled and
extinguished and (b) the obligations of the Debtors, CFSB as agent for the
Bank Holders and the Pre-petition Indenture Trustees under the Debt Agreements
shall be discharged. Notwithstanding the foregoing, each of the Pre-petition
Bond Indentures shall continue in effect solely for the purposes of (x)
allowing the Pre-petition Indenture Trustee to make distributions to holders
of Allowed Class 5 Claims pursuant to the Plan and (y) permitting the
Pre-petition Indenture Trustee to maintain any rights or liens it may have for
fees, costs, expenses and indemnification under its indenture or other
agreement or applicable law, but the foregoing shall not result in any expense
or liability to any Reorganized Debtor other than as expressly provided for in
the Plan.
No Reorganized Debtor shall have any obligations to any
Pre-petition Indenture Trustee, agent or service (or to any disbursing agent
replacing a Pre-petition Indenture Trustee, agent or service) for any fees,
costs or expenses, except as expressly provided in the Plan. Except as
provided in any contract, instrument or other agreement or document entered
into or delivered in connection with the Plan, on the Effective Date and
immediately following the completion of distributions to holders of Claims in
Class 5, the Pre-petition Indenture Trustees shall be released from all
duties, without any further action on the part of the Debtors or Reorganized
Debtors.
3. Cancellation of OCD Interests
As of the Effective Date, by virtue of the Plan, and without
any action necessary on the part of the holders thereof or any corporate
action, except as specified in the Plan, all of the OCD Interests outstanding
at the Effective Date shall be cancelled, extinguished and retired, and no
consideration will be paid or delivered with respect thereto. Holders of OCD
Interests shall not be required to surrender their certificates or other
instruments evidencing ownership of such OCD Interests.
4. Certificates of Incorporation and Bylaws
The certificate or articles of incorporation and bylaws of
each Debtor will be amended as necessary to satisfy the provisions of the Plan
and the Bankruptcy Code and will include, among other things, pursuant to
Section 1123(a)(6) of the Bankruptcy Code, a provision prohibiting the
issuance of non-voting equity securities, but only to the extent required by
Section 1123(a)(6) of the Bankruptcy Code. The Amended and Restated
Certificate of Incorporation of Reorganized OCD and the Amended and Restated
Bylaws of Reorganized OCD will also include provisions (a) creating the New
OCD Common Stock, and (b) 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
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 twenty (20) days after the date on which the applicable application for
compensation or reimbursement was served. Nothing herein shall be construed as
limiting the right of the United States Trustee to be heard under Section 307
or 502(a) of the Bankruptcy Code with regard to any Professional Fee Claims or
other similar claims or requests for payment of administrative expenses.
7. Continuation of Certain Orders
Notwithstanding anything in the Plan to the contrary, the
Debtors will continue to pay any Claims authorized to be paid by an order of
the Bankruptcy Court during the Chapter 11 Cases, pursuant to the terms and
conditions of any such order.
L. Effects of Confirmation
1. Binding Effect
The Plan will be binding upon and inure to the benefit of
each of the Debtors and Reorganized Debtors and their respective Estates and
each of their respective Related Persons and any Person claiming by or through
them, and any Person that has held, currently holds or may hold a Claim or
other obligation, suit, judgment, damages, Demand, debt, right, cause of
action or liability or Interest or any right of an equity security holder,
against or in the Debtors whether or not such Person will receive or retain
any property or interest in property under the Plan and each of their
respective successors and assigns; in each case, including, without
limitation, all parties-in-interest in the Chapter 11 Cases.
2. Discharge of the Debtors
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.
Pursuant to 11 U.S.C. ss. 1141(d)(1), the Debtors and the
Internal Revenue Service agree that the confirmation of the Plan does not
discharge any liabilities to the Internal Revenue Service that may be due from
the any of Debtors after the Petition Date and prior to the Confirmation Date.
Should any such tax liabilities be determined by the Internal Revenue Service
to be due from any of the Debtors, such liabilities shall be determined
administratively or in a judicial forum in the manner in which such
liabilities would have been resolved had the Chapter 11 Cases not been
commenced. Any resulting liabilities shall be paid as if the Chapter 11 Cases
had not been commenced.
As of the Confirmation Date, except as otherwise provided
herein or in the Confirmation Order, all Persons shall be precluded from
asserting against the Debtors or the Reorganized Debtors or their respective
Related Persons any other or further Claims or other obligations, suits,
judgments, damages, debts, rights, causes of action or liabilities or
Interests or other rights of an equity security holder relating to the Debtors
or the Reorganized Debtors or their respective Estates based upon any act,
omission, transaction or other activity of any nature that occurred prior to
the Confirmation Date. In accordance with the foregoing, except as otherwise
provided herein or in the Confirmation Order, the Confirmation Order shall be
a judicial determination of discharge of all such Claims or other obligations,
suits, judgments, damages, debts, rights, causes of action or liabilities or
Interests or other rights of an equity security holder against the Debtors or
the Reorganized Debtors or their respective Estates and termination of all OCD
Interests, pursuant to Sections 524 and 1141 of the Bankruptcy Code, and such
discharge shall void any judgment obtained against the Debtors or the
Reorganized Debtors or their respective Estates at any time, to the extent
that such judgment relates to a discharged Claim or terminated OCD Interest.
3. Permanent Injunctions Related to the Discharge
Except as provided in the Plan or the Confirmation Order, as
of the Confirmation Date, but subject to the occurrence of the Effective Date,
all Persons and any Person claiming by or through them, that have held,
currently hold or may hold a Claim or other obligation, suit, judgment,
damages, debt, right, cause of action or liability (other than a Demand) that
is discharged or an Interest or other right of an equity security holder that
is terminated pursuant to the terms of the Plan will be permanently, forever
and completely stayed, restrained, prohibited and enjoined from taking any
Enjoined Action against any of the Released Parties or Claimant Released
Parties whether directly or indirectly, derivatively or otherwise for the
purpose of, directly or indirectly, collecting, recovering or receiving
payment of, on or with respect to any such discharged Claim or other
obligation, suit, judgment, damages, debt, right, cause of action or
liability, or terminated Interest or right of an equity security holder on
account of, or based on the subject matter of, any such discharged Claims,
obligations, suits, judgments, damages, debts, rights, causes of action or
liabilities or terminated Interests or rights of an equity security holder.
4. Asbestos Personal Injury Permanent Channeling Injunction
The Confirmation Order will establish, among other things,
the Asbestos Personal Injury Permanent Channeling Injunction. Pursuant to
Section 524(g) of the Bankruptcy Code and pursuant to and in conjunction with
the Confirmation Order, all Persons will be permanently, forever and
completely stayed, restrained, prohibited and enjoined from taking any
Enjoined Action, or proceeding in any manner in any place with regard to any
matter that is subject to resolution pursuant to the Asbestos Personal Injury
Trust Agreement, including, without limitation, with respect to any Resolved
Asbestos Personal Injury Claim, except in conformity and compliance therewith,
against any Protected Party or property or interests in property of any
Protected Party, whether directly or indirectly, derivatively or otherwise,
for the purpose of, directly or indirectly, collecting, recovering or
receiving payment of, on or with respect to any Asbestos Personal Injury
Claims (other than pursuant to the provisions of the Asbestos Personal Injury
Trust Agreement or to enforce the provisions of the Plan).
"Protected Party" means any of the following: (a) any Debtor
and its Related Persons, but solely to the extent set forth on Schedule X to
the Plan, as it may be amended up to 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
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
PERSONS SHALL BE PERMANENTLY AND FOREVER STAYED, RESTRAINED, AND ENJOINED FROM
TAKING ANY ENJOINED ACTIONS FOR THE PURPOSE OF, DIRECTLY OR INDIRECTLY,
COLLECTING, RECOVERING, OR RECEIVING PAYMENT OF, ON, OR WITH RESPECT TO ANY
CLASS 7 CLAIM (OTHER THAN ACTIONS BROUGHT TO ENFORCE ANY RIGHT OR OBLIGATION
UNDER THE PLAN, ANY EXHIBITS TO THE PLAN, OR ANY OTHER AGREEMENT OR INSTRUMENT
BETWEEN THE DEBTORS OR REORGANIZED DEBTORS AND THE ASBESTOS PERSONAL INJURY
TRUST, WHICH ACTIONS SHALL BE IN CONFORMITY AND COMPLIANCE WITH THE PROVISIONS
THEREOF).
ALL CLASS 8 CLAIMS SHALL BE CHANNELED TO THE ASBESTOS
PERSONAL INJURY TRUST, AND SHALL BE PROCESSED, LIQUIDATED AND PAID PURSUANT TO
THE TERMS AND PROVISIONS OF THE ASBESTOS PERSONAL INJURY TRUST DISTRIBUTION
PROCEDURES AND THE ASBESTOS PERSONAL INJURY TRUST AGREEMENT. THE ASBESTOS
PERSONAL INJURY TRUST WILL BE FUNDED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 10.3 OF THE PLAN. THE SOLE RECOURSE OF THE HOLDER OF A CLASS 8 CLAIM
SHALL BE THE ASBESTOS PERSONAL INJURY TRUST, AND SUCH HOLDER SHALL HAVE NO
RIGHT WHATSOEVER AT ANY TIME TO ASSERT ITS CLAIM OR DEMAND AGAINST ANY
PROTECTED PARTY. WITHOUT LIMITING THE FOREGOING, ON THE EFFECTIVE DATE, ALL
PERSONS SHALL BE PERMANENTLY AND FOREVER STAYED, RESTRAINED, AND ENJOINED FROM
TAKING ANY ENJOINED ACTIONS FOR THE PURPOSE OF, DIRECTLY OR INDIRECTLY,
COLLECTING, RECOVERING, OR RECEIVING PAYMENT OF, ON, OR WITH RESPECT TO ANY
CLASS 8 CLAIM (OTHER THAN ACTIONS BROUGHT TO ENFORCE ANY RIGHT OR OBLIGATION
UNDER THE PLAN, ANY EXHIBITS TO THE PLAN, OR ANY OTHER AGREEMENT OR INSTRUMENT
BETWEEN THE DEBTORS OR REORGANIZED DEBTORS AND THE ASBESTOS PERSONAL INJURY
TRUST, WHICH ACTIONS SHALL BE IN CONFORMITY AND COMPLIANCE WITH THE PROVISIONS
THEREOF).
Nothing contained in the Asbestos Personal Injury Permanent
Channeling Injunction shall be deemed a waiver of any claim, right or cause of
action that the Debtors, the Reorganized Debtors or the Asbestos Personal
Injury Trust may have against any Person in connection with or arising out of
an Asbestos Personal Injury Claim, and the injunction shall not apply to the
assertion of any such claim, right, or cause of action by the Debtors, the
Reorganized Debtors, the Asbestos Personal Injury Trust, or the Litigation
Trust.
For a description of the Asbestos Personal Injury Trust, the
Asbestos Personal Injury Trust Agreement, and the Asbestos Personal Injury
Trust Distribution Procedures, see Section VII of this Disclosure Statement.
5. Exculpation and Limitation of Liability; Indemnity
No Claimant Released Party shall have or incur any liability
to any Person that has held, currently holds or may hold a Claim or other
obligation, suit, judgment, damages, Demand, debt, right, cause of action or
liability or Interest or other right of an equity security holder, or any
other party in interest, or any Person claiming by or through them, or any of
their respective Related Persons, for any act or omission in connection with,
relating to, or arising out of, the Chapter 11 Cases, formulating, negotiating
or implementing the Plan, the solicitation of acceptances of the Plan, the
pursuit of confirmation of the Plan, the confirmation of the Plan, the
consummation of the Plan or the administration of the Plan or the property to
be distributed under the Plan, except for willful misconduct or gross
negligence, and, in all respects shall be entitled to reasonably rely upon the
advice of counsel with respect to their duties and responsibilities under the
Plan.
Notwithstanding any other provision herein, no Person that
has held, currently holds or may hold a Claim or other obligation, suit,
judgment, damages, Demand, debt, right, cause of action or liability or
Interest or other right of an equity security holder, no person claiming by or
through them, nor any of their respective Related Persons, shall have any
right of action against any Claimant Released Party for any act or omission in
connection with, relating to, or arising out of, the Chapter 11 Cases,
formulating, negotiating or implementing the Plan, solicitation of acceptances
of the Plan, the pursuit of confirmation of the Plan, the consummation of the
Plan, the confirmation of the Plan or the administration of the Plan or the
property to be distributed under the Plan, except for willful misconduct or
gross negligence.
The foregoing exculpation and limitation on liability shall
not, however, limit, abridge or otherwise affect the rights of the Reorganized
Debtors to enforce, sue on, settle or compromise the rights, claims and other
matters retained by the Reorganized Debtors pursuant to Section 5.10 of the
Plan.
M. Retention of Jurisdiction
Pursuant to Sections 105(a) and 1142 of the Bankruptcy Code, and
notwithstanding entry of the Confirmation Order and occurrence of the
Effective Date, the District Court, together with the Bankruptcy Court to the
extent of any reference made to it by the District Court and the Reference
Order, will retain exclusive jurisdiction over all matters arising out of, and
related to, the Chapter 11 Cases and the Plan, including, among other things,
jurisdiction to:
(a) interpret, enforce, and administer the terms of the Asbestos
Personal Injury Trust Agreement (including all annexes and exhibits thereto);
(b) allow, disallow, determine, liquidate, classify, estimate or
establish the priority or secured or unsecured status of any Claim (other than
an Asbestos Personal Injury Claim and an FB Asbestos Property Damage Claim) or
Interest not otherwise Allowed under the Plan, including the resolution of any
request for payment of any Administrative Claim and the resolution of any
objections to the allowance or priority of Claims or Interests;
(c) hear and determine all applications for compensation and
reimbursement of expenses of professionals under the Plan or under Sections
330, 331, 503(b), 1103 and 1129(a)(4) of the Bankruptcy Code; provided,
however, that from and after the Effective Date, the payment of the fees and
expenses of the retained professionals of the Reorganized Debtors shall be
made in the ordinary course of business and shall not be subject to the
approval of the Bankruptcy Court;
(d) hear and determine all matters with respect to the assumption or
rejection of any executory contract or unexpired lease to which a Debtor is a
party or with respect to which a Debtor may be liable, including, if
necessary, the nature or amount of any required Cure or the liquidation or
allowance of any Claims arising therefrom;
(e) effectuate performance of and payments under the provisions
herein;
(f) hear and determine any and all adversary proceedings, motions,
applications, and contested or litigated matters arising out of, under, or
related to, the Chapter 11 Cases;
(g) enter such orders as may be necessary or appropriate to execute,
implement, or consummate the provisions herein and all contracts, instruments,
releases, and other agreements or documents created in connection with the
Plan, the Disclosure Statement or the Confirmation Order;
(h) hear and determine disputes arising in connection with the
interpretation, implementation, consummation, or enforcement of the Plan,
including disputes arising under agreements, documents or instruments executed
in connection with the Plan;
(i) consider any modifications of the Plan, cure any defect or
omission, or reconcile any inconsistency in any order of the Bankruptcy Court,
including, without limitation, the Confirmation Order;
(j) issue injunctions, enter and implement other orders, or take such
other actions as may be necessary or appropriate to restrain interference by
any entity with implementation, consummation, or enforcement of the Plan or
the Confirmation Order;
(k) enter and implement such orders as may be necessary or
appropriate if the Confirmation Order is for any reason reversed, stayed,
revoked, modified or vacated;
(l) hear and determine any matters arising in connection with or
relating to the Plan, the Disclosure Statement, the Confirmation Order or any
contract, instrument, release or other agreement or document created in
connection with the Plan, the Disclosure Statement or the Confirmation Order;
(m) enforce all orders, judgments, injunctions, releases,
exculpations, indemnifications and rulings entered in connection with the
Chapter 11 Cases;
(n) except as otherwise limited herein, recover all assets of the
Debtors and property of the Debtors' Estates, wherever located;
(o) hear and determine matters concerning state, local and federal
taxes in accordance with Sections 346, 505 and 1146 of the Bankruptcy Code;
(p) hear and determine all disputes involving the existence, nature
or scope of the Debtors' discharge;
(q) hear and determine such other matters as may be provided in or
that may arise in connection with the Plan, the Confirmation Order, the Claims
Trading Injunction, the Asbestos Personal Injury Permanent Channeling
Injunction, or as may be authorized under, or not inconsistent with,
provisions of the Bankruptcy Code;
(r) enter a final decree closing the Chapter 11 Cases; and
(s) to hear and determine all objections to the termination of the
Asbestos Personal Injury Trust and/or the FB Asbestos Property Damage Trust.
Notwithstanding entry of the Confirmation Order and/or the occurrence
of the Effective Date, the reference to the Bankruptcy Court pursuant to the
Reference Order shall continue, but subject to any modifications or
withdrawals of the reference specified in the Confirmation Order, Reference
Order, Case Management Order or other Order of the District Court; provided,
however, that nothing in the Plan, the Reference Order or other Order shall
affect the procedures established pursuant to the Asbestos Personal Injury
Trust Agreement, the Asbestos Personal Injury Trust Distribution Procedures,
the FB Asbestos Property Damage Trust Agreement and the FB Asbestos Property
Damage Trust Distribution Procedures.
N. Revesting of Assets
Pursuant to Section 1141(b) of the Bankruptcy Code, all property of
the respective Estate of each Debtor, together with any property of each
Debtor that is not property of its Estate and that is not specifically
disposed of pursuant to the Plan, shall revest in the applicable Reorganized
Debtor on the Effective Date. Thereafter, the Reorganized Debtors may operate
their businesses and may use, acquire and dispose of property free of any
restrictions of the Bankruptcy Code, the Bankruptcy Rules and the Bankruptcy
Court. As of the Effective Date, all property of each Reorganized Debtor shall
be free and clear of all Encumbrances, Claims and Interests, except as
specifically provided in the Plan or the Confirmation Order. Without limiting
the generality of the foregoing, each Reorganized Debtor may, without
application to or approval by the Bankruptcy Court, pay fees that it incurs
after the Effective Date for professional services and expenses.
O. Rights of Action
Except as otherwise provided in the Plan or the Confirmation Order,
or in any contract, instrument, release, indenture or other agreement entered
into in connection with the Plan, in accordance with Section 1123(b) of the
Bankruptcy Code, the Reorganized Debtors shall retain and may enforce, sue on,
settle or compromise (or decline to do any of the foregoing) all rights,
claims, causes of action, suits or proceedings accruing to the Debtors or the
Estates pursuant to the Bankruptcy Code or pursuant to any statute or legal
theory, including, without limitation, any avoidance or recovery actions under
Sections 544, 545, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code and
any suits or proceedings for recovery under any policies of insurance issued
to or on behalf of the Debtors. Except to the extent such rights, title and
interest in the Litigation Trust Assets are transferred and assigned to the
Litigation Trust, the Reorganized Debtors shall be deemed the appointed
representative to, and may pursue, litigate, compromise and settle any such
rights, claims, causes of action, suits or proceedings as appropriate, in
accordance with the best interests of the Reorganized Debtors or their
respective successors who hold such rights. The Reorganized Debtors will
transfer and assign, or cause to be transferred and assigned, all their right,
title and interest in and to the Litigation Trust Assets to the Litigation
Trust in accordance with Section 5.8 of the Plan, or, if deemed necessary, any
right, title and interest in and to Litigation Trust Assets shall be pursued
in the name of the Debtors or the Reorganized Debtors for the benefit of the
Litigation Trust. Notwithstanding anything in the Plan to the contrary, the
Debtors, upon such transfer and assignment, shall forgo any interest they may
have in the Litigation Trust Assets, except with respect to the Litigation
Trust Reimbursement Obligation.
P. Payment of Statutory Fees
Under the Plan, all fees payable pursuant to Section 1930 of Title 28
of the United States Code, as determined by the Bankruptcy Court at the
Confirmation Hearing, will be paid on or before the Effective Date. After the
Effective Date, the Reorganized Debtors shall pay all required fees pursuant
to Section 1930 of Title 28 of the United States Code or any other statutory
requirement and comply with all statutory reporting requirements.
Q. Post-Consummation Operations of the Debtors
1. Continued Corporate Existence and Restructuring Transactions
Following confirmation and consummation of the Plan, but
subject to the right of the Debtors or Reorganized Debtors to effect the
Restructuring Transactions as provided in Section 5.6 of the Plan, the
Reorganized Debtors will be authorized to continue to exist as separate
corporate entities in accordance with the laws of their respective states of
incorporation and pursuant to their respective certificates or articles of
incorporation and bylaws in effect at the Effective Date. In that regard, OC
intends to implement a restructuring plan which would reorganize OCD and its
Subsidiaries along OC's major business lines. The planning for this
restructuring is in a preliminary stage. It is anticipated that the
restructuring plan which is adopted will be announced 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.
[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. 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 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.
On the Effective Date, or as soon thereafter as is
practicable, at the sole cost and expense of the Asbestos Personal Injury
Trust and in accordance with written instructions provided to the Reorganized
Debtors by the Asbestos Personal Injury Trust, the Reorganized Debtors will
transfer and assign, and will use all commercially reasonable efforts to cause
the trustee of the Fibreboard Insurance Settlement Trust to transfer and
assign, to the Asbestos Personal Injury Trust all books and records of the
Debtors and the Fibreboard Insurance Settlement Trust that pertain directly to
Asbestos Personal Injury Claims that have been asserted against the Debtors
and/or the Fibreboard Insurance Settlement Trust. The Debtors will request
that the Bankruptcy Court, in the Confirmation Order, rule that such transfers
shall not result in the invalidation or waiver of any applicable privileges
pertaining to such books and records.
The Reorganized Debtors shall cooperate with the Asbestos
Personal Injury 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 OC Asbestos
Personal Injury Liability Insurance Assets to the Asbestos Personal Injury
Trust for allocation to the OC Sub-Account. By way of enumeration and not of
limitation, the Reorganized Debtors shall be obligated (i) to provide the
Asbestos Personal Injury Trust with copies of insurance policies and
settlement agreements included within or relating to the OC Asbestos Personal
Injury Liability Insurance Assets; (ii) to provide the Asbestos Personal
Injury Trust with information necessary or helpful to the Asbestos Personal
Injury Trust in connection with its efforts to obtain insurance coverage for
Asbestos Personal Injury Claims; (iii) to execute further assignments or allow
the Asbestos Personal Injury Trust to pursue claims relating to the OC
Asbestos Personal Injury Liability Insurance Assets in its name (subject to
appropriate disclosure of the fact that the Asbestos Personal Injury Trust is
doing so and the reasons why it is doing so), including by means of
arbitration, alternative dispute resolution proceedings or litigation, to the
extent necessary or helpful to the efforts of the Asbestos Personal Injury
Trust to obtain insurance coverage under the OC Asbestos Personal Injury
Liability Insurance Assets for Asbestos Personal Injury Claims; and (iv) to
pursue and recover insurance coverage in its own name or right to the extent
that the transfer and assignment of the OC Asbestos Personal Injury Liability
Insurance Assets to the Asbestos Personal Injury Trust is not able to be fully
effectuated. The Asbestos Personal Injury Trust shall be obligated to
compensate the Reorganized OCD for costs reasonably incurred in connection
with providing assistance to the Asbestos Personal Injury Trust pursuant to
this Section 10.6, including, without limitation, out-of-pocket costs and
expenses, consultant fees, and attorneys' fees.
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:
o 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
o 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
o 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.
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 within the meaning of Treasury Regulations
Section 1.468B-1, et seq., promulgated under Section 468B of the Internal
Revenue Code.
B. Asbestos Personal Injury Trust 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 the Asbestos Personal Injury Trust Distribution
Procedures, 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.
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.
Disease Level Scheduled Value Medical/Exposure Criteria
Mesothelioma (Level VIII) OC: $215,000 (1) Diagnosis of mesothelioma; and (2)
credible evidence of OC or FB Exposure.10
FB: $135,000
Lung Cancer 1 (Level (VII) OC: $40,000 (1) Diagnosis of a primary lung cancer plus
evidence of an underlying Bilateral
FB: $27,000 Asbestos-Related Nonmalignant Disease,11
(2) six months OC or FB Exposure prior to
December 31, 1982, (3) Significant
Occupational Exposure12 to asbestos, and
(4) supporting medical documentation
establishing asbestos exposure as a
contributing factor in causing the lung
cancer in question.
Lung Cancer 2 (Level VI) None (1) Diagnosis of a primary lung cancer; (2)
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
$20,000 for OCD and $12,000 for Fibreboard,
with such awards capped at $50,000 for OCD
and $30,000 for Fibreboard, 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. In any event,
no presumption of validity will be available
for any claims in this category.
- -------------------
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, III, V, and
VII is described in the Asbestos Personal Injury Trust Distribution Procedures.
12 As defined in the Asbestos Personal Injury Trust Distribution Procedures.
Other Cancer (Level V) OC: $22,000 (1) Diagnosis of a primary colo-rectal,
laryngeal, esophageal, pharyngeal, or
FB: $12,000 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) OC: $42,000 (1) Diagnosis of asbestosis with ILO of 2/1
or greater, or asbestosis determined by
FB: $29,000 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 OC: $19,000 Diagnosis of Bilateral Asbestos-Related
(Level III) Nonmalignant Disease, plus (a) TLC less than
FB: $11,500 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 OC: $8,000 (1) Diagnosis of a Bilateral
(Level II) Asbestos-Related Nonmalignant Disease, and
FB: $4,500 (2) six months OC or FB Exposure prior to
December 31, 1982, and (3) five years
cumulative occupational exposure to asbestos.
Other Asbestos Disease (Level I - Cash OC: $400 (1) Diagnosis of a Bilateral Asbestos-
Discount Payment) Related Nonmalignant Disease or an
FB: $240 asbestos-related malignancy other than
mesothelioma, and (2) OC or FB Exposure prior
to December 31, 1982.
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.
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.
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 sixty percent (60%)
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 forty percent
(40%) 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, sixty percent (60%) of that
amount will be available to pay Category A claims and forty percent (40%) will
be available to pay Category B claims.
The 60%/40% 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, subject to certain conditions and procedures germane
to claims for indemnity and contribution.
Plant asserted that various such special provisions of the
Asbestos Personal Injury Trust Distribution Procedures were improper.
Specifically, Plant alleged that two of the preconditions for processing and
payment of OC Indirect Asbestos PI Trust Claims and FB Indirect Asbestos PI
Trust Claims cannot be met in a substantial percentage of its cases, thus
barring the payment of valid claims. Plant alleged that the requirement that
the claimant establish that it has paid in full the liability and obligations
of the Asbestos Personal Injury Trust to the individual claimant will be
impossible to fulfill in a substantial number of cases involving Plant,
because Plant's liability to the holder of the direct claim is allegedly less
than Fibreboard's liability in many such cases. Plant also asserted that the
requirement that holders of the OC Indirect Asbestos PI Trust Claims and FB
Indirect Asbestos PI Trust Claims prove that the individual claimant has fully
released the Asbestos Personal Injury Trust from all liability cannot be met
in many cases due to the death of the claimant. Plant alleged that the
Asbestos Personal Injury Trust Distribution Procedures should contain
procedures for the processing of OC Indirect Asbestos PI Trust Claims and FB
Indirect Asbestos PI Trust Claims and should not leave the Asbestos Personal
Injury Trust with the discretion to formulate procedures, including forms for
proofs of claim in addition to those they filed by the Bar Date of April 15,
2002. Plant objected to the Asbestos Personal Injury Trust Distribution
Procedures based on other alleged ambiguities in the Asbestos Personal Injury
Trust Distribution Procedures language that bars holders of OC Indirect
Asbestos PI Trust Claims and FB Indirect Asbestos PI Trust Claims from having
rights superior to the holders of the direct claims.
The Plan Proponents made several changes to the Asbestos
Personal Injury Trust Distribution Procedures to address the Plant objections.
The Asbestos Personal Injury Trust Distribution Procedures now provide for
individual consideration and evaluation of any OC Indirect Asbestos PI Trust
Claim and FB Indirect Asbestos PI Trust Claim that fails to meet the
requirements for presumptive validity, including those requirements objected
to by Plant. The review shall determine whether the indirect claimant can
establish under applicable state law that it has satisfied a liability or
obligation that the Asbestos Personal Injury Trust would otherwise have to the
direct claimant. Any unresolved disputes are subject to non-binding
arbitration procedures set forth in the Asbestos Personal Injury Trust
Distribution Procedures and, if not resolved by arbitration, resolution
through litigation in the tort system. See Section VIII.B.26 of this
Disclosure Statement entitled "Suits in the Tort System."
The Plan Proponents contend that the conditions and other
limitations in the Asbestos Personal Injury Trust Distribution Procedures
concerning payment of OC Indirect Asbestos PI Trust Claims and FB Indirect
Asbestos PI Trust Claims are consistent with both state law and bankruptcy
law, including Sections 502(e) and 509(c) of the Bankruptcy Code. Plant's
objections to the Asbestos Personal Injury Trust Distribution Procedures will
be resolved, if necessary, by the Bankruptcy Court or District Court as part
of the Confirmation Hearing.
Plant and the Debtors have had a longstanding dispute with
respect to the alleged claims of Plant. The Debtors have consistently
maintained that Plant's claims are not valid and the Debtors may file
objections to the majority of Plant's claims under both applicable state law
and the Bankruptcy Code. The Debtors assert that is well established under
California law that Plant does not have a right to contractual indemnity
against Fibreboard. See Borromeo v. Raybestos Manhattan, Inc., Action No.
8201115 (San Francisco Super. Ct. June 2, 1989) (holding that Plant has no
right to implied contractual indemnity against Fibreboard), discussed in Plant
Insulation Co. v. Fibreboard Corp., No. A06116 (Cal. App. July 1, 1994); Plant
Insulation Co. v. Fibreboard Corp., 224 Cal. App. 3d 781, 791 (1990) (holding
that Plant has no right to express indemnity under its 1948 agreement with
Fibreboard); Plant Insulation Co. v. Fibreboard Corp., No. A06116 (Cal. App.
July 1, 1994) (affirming trial court's finding that Plant has no right to
"implied-in-fact" express indemnity from Fibreboard). Moreover, a "good faith"
settlement determination bars all claims for equitable or implied contractual
indemnity. See Bay Development, Ltd. v. Superior Court of San Diego County,
791 P.2d 290 (Cal. 1990); Far West Financial Corp. v. D&S Co., Inc., 760 P.2d
399 (Cal. 1988). The Debtors will therefore argue that almost three quarters
of Plant's proofs of claim (1,613 out of 2,213) should be disallowed on the
grounds that they relate to claims previously settled by Fibreboard in good
faith. Plant maintains it has a right to indemnification and that some of
Fibreboard's settlements were not in good faith. Plant's claims for
indemnification against Fibreboard may also be barred by Sections 502(e) and
509(c) of the Bankruptcy Code.
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 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 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.
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 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.
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 all of 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.
17. Scheduled, Average and Maximum Values
The Scheduled, Average and Maximum Values for claims
involving Disease Levels I - VIII are the following:
- ----------------------------------------------------------------------------------------------------------------------
OC SUB-ACCOUNT
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Scheduled Disease Scheduled Value Average Value Maximum Value
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Mesothelioma (Level VIII) $215,000 $270,000 $650,000
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Lung Cancer (Level VII) $ 40,000 $ 50,000 $150,000
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Lung Cancer (Level VI) None $ 20,000 $ 50,000
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Other Cancer (Level V) $ 22,000 $ 25,000 $ 60,000
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Severe Asbestosis (Level IV) $ 42,000 $ 50,000 $150,000
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Asbestos/Pleural Disease $ 19,000 $ 20,000 $ 35,000
(Level III)
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Asbestos/Pleural Disease $ 8,000 $ 9,000 $ 20,000
(Level II)
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Other Asbestos Disease (Cash $ 400 None None
Discount Payment) (Level I)
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------------------------------------------------------------------------------------------
FB SUB-ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Scheduled Disease Scheduled Value Average Value Maximum Value
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Mesothelioma (Level VIII) $135,000 $180,000 $450,000
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Lung Cancer (Level VII) $ 27,000 $ 35,000 $ 90,000
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Lung Cancer (Level VI) None $ 12,000 $ 30,000
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Other Cancer (Level V) $ 12,000 $ 15,000 $ 36,000
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Severe Asbestosis (Level IV) $ 29,000 $ 30,000 $ 90,000
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Asbestos/Pleural Disease $ 11,500 $ 12,000 $ 21,000
(Level III)
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Asbestos/Pleural Disease $ 4,500 $ 5,400 $ 12,000
(Level II)
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
Other Asbestos Disease (Cash $ 240 None None
Discount Payment) (Level I)
- ----------------------------------- ------------------------ ---------------------------- ----------------------------
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 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
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, or an
asbestos-related disease otherwise compensable under the Asbestos Personal
Injury Trust Distribution Procedures, 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, 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) for Disease Levels I - III, evidence of
Bilateral Asbestos-Related Nonmalignant Disease (as defined in Footnote 3 of
the Asbestos Personal Injury Trust Distribution Procedures), and for Disease
Level IV, either an ILO reading of 2/1 or greater or pathological evidence of
asbestosis, 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) for Disease
Levels I - III, evidence of Bilateral Asbestos-Related Nonmalignant Disease
(as defined in Footnote 3 of the Asbestos Personal Injury Trust Distribution
Procedures), and for Disease Level IV, either an ILO reading of 2/1 or greater
or pathological evidence of asbestosis.
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
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 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 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.
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 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.
27. Objections concerning the Asbestos Personal Injury Trust
Distribution Procedures
Some parties have indicated potential objections to the
provisions of the Asbestos Personal Injury Trust Distribution Procedures,
which set forth the Disease Levels, value of the Asbestos Personal Injury
Claims ascribed to the Disease Level and the evidence to be required to
support Asbestos Personal Injury Claims, as described above. For example, the
Unsecured Creditors' Committee asserts that the values do not appropriately
differentiate between those who have serious, life-altering injuries and those
who have no daily life impairment. The Plan Proponents believe that the
provisions of the Asbestos Personal Injury Trust Distribution Procedures are
fair, equitable and provide appropriate procedures for the allowance of
Asbestos Personal Injury Claims, including Disease Levels and values that are
fair, equitable and appropriate. Any objections to the provisions of the
Asbestos Personal Injury Trust Distribution Procedures shall be resolved by
the Bankruptcy Court or District Court at the confirmation hearing.
C. The Asbestos Personal Injury Permanent Channeling Injunction
In 1994, the Bankruptcy Code was amended to add subsections (g) and
(h) to Section 524. These subsections confirm the validity of existing
injunctions (such as those used in the Chapter 11 cases of Johns-Manville
Corporation and UNR Corporation) similar to the Asbestos Personal Injury
Permanent Channeling Injunction and codify a court's authority to issue a
permanent injunction in asbestos-related reorganizations under Chapter 11 to
supplement the injunctive relief afforded by Section 524. Section 524(g)
provides that, if certain specified conditions are satisfied, a court may
issue a supplemental permanent injunction, such as the Asbestos Personal
Injury Permanent Channeling Injunction, barring claims and demands against the
reorganized company and certain identified protected parties and channeling
those claims and demands to an independent trust.
Pursuant to the Asbestos Personal Injury Permanent Channeling
Injunction and the Plan, the 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.
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 insurers who are parties to these agreements reserve
all rights to object to confirmation of the Plan, including to the extent any
aspect of the Plan or its confirmation purports to alter their obligations or
decide any matter adversely to them. Fibreboard also has unconfirmed coverage
under policies issued by other carriers as set forth on Schedule XV. Lloyd's
of London objects to the inclusion on Schedule XV of policy nos. 564/155055,
564/477688, 53/8540D, 54/83850, 55/7871D.
On the Effective Date, or as soon thereafter as is
practicable, at the sole cost and expense of the FB Asbestos Property Damage
Trust and in accordance with written instructions provided to the Reorganized
Debtors by the FB Asbestos Property Damage Trust, the Reorganized Debtors will
transfer and assign to the FB Asbestos Property Damage Trust copies of all
books and records of the Debtors that pertain directly to FB Asbestos Property
Damage Claims that have been asserted against the Debtors and/or the
Fibreboard Insurance Settlement Trust. The Debtors will request that the
Bankruptcy Court, in the Confirmation Order, rule that such transfers shall
not result in the invalidation or waiver of any applicable privileges
pertaining to such books and records.
In consideration for the property transferred to the FB
Asbestos Property Damage Trust, and in furtherance of the purposes of the FB
Asbestos Property Damage Trust and the Plan, the FB Asbestos Property Damage
Trust shall assume all liability and responsibility for all FB Asbestos
Property Damage Claims, and the Reorganized Debtors shall have no further
financial or other responsibility or liability therefor. The FB Asbestos
Property Damage Trust shall also assume all liability for premiums,
deductibles, retrospective premium adjustments, security or collateral
arrangements, or any other charges, costs, fees, or expenses (if any) that
become due to any insurer in connection with the FB Asbestos Property Damage
Insurance Assets as a result of FB Asbestos Property Damage Claims,
asbestos-related property damage claims against Persons insured under policies
included in the FB Asbestos Property Damage Insurance Assets by reason of
vendors' endorsements, or under the indemnity provisions of settlement
agreements that the Debtors made with any insurers prior to the Confirmation
Date to the extent that those indemnity provisions relate to FB Asbestos
Property Damage Claims, and the Reorganized Debtors shall have no further
financial or other responsibility or liability for any of the foregoing;
provided, however, that such liability of the FB Asbestos Property Damage
Trust shall be limited to the extent of the benefits of such Trust, as
reasonably determined by the Trustee of such Trust, so that the FB Asbestos
Property Damage Trust may elect to terminate such liability in the event that
the Trustee determines the benefits of maintaining the insurance policies are
no longer worth the costs.
The Reorganized Debtors shall cooperate with the FB Asbestos
Property Damage Trust and use commercially reasonable efforts to take or cause
to be taken all appropriate actions and to do or cause to be done all things
necessary or appropriate to effectuate the transfer of the FB Asbestos
Property Damage Insurance Assets to the FB Asbestos Property Damage Trust. By
way of enumeration and not of limitation, the Reorganized Debtors shall be
obligated (a) to provide the FB Asbestos Property Damage Trust with copies of
insurance policies and settlement agreements included within or relating to
the FB Asbestos Property Damage Insurance Assets; (b) to provide the FB
Asbestos Property Damage Trust with information necessary or helpful to the FB
Asbestos Property Damage Trust in connection with its efforts to obtain
insurance coverage for FB Asbestos Property Damage Claims; (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; and (d) to pursue and recover insurance coverage in its own name or
right to the extent that the transfer and assignment of the FB Asbestos
Property Damage Insurance Assets to the FB Asbestos Property Damage Trust is
not able to be fully effectuated. The FB Asbestos Property Damage Trust shall
be obligated to compensate the Reorganized Debtors for costs reasonably
incurred in connection with providing assistance to the FB Asbestos Property
Damage Trust, including without limitation, out-of-pocket costs and expenses,
consultant fees, and attorneys' fees.
On the Confirmation Date, the Debtors will be empowered and
authorized to take or cause to be taken, prior to the Effective Date, all
actions necessary to enable them to implement effectively the provisions of
the Plan and the FB Asbestos Property Damage Trust Agreement.
3. The FB Asbestos Property Damage Trustee
(a) Appointment of the FB Asbestos Property Damage
Trustee
On the Confirmation Date, effective as of the
Effective Date, the Bankruptcy Court shall confirm the appointment of the
individual selected by the Debtors to serve as the FB Asbestos Property Damage
Trustee of the FB Asbestos Property Damage Trust.
(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. 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 annual compensation plus a per diem allowance for meetings
attended in amounts to be determined, disclosed and filed with the Bankruptcy
Court at least ten(10) Business Days prior to the Objection Deadline. The FB
Asbestos Property Damage Trustee will also be entitled to be reimbursed for
out-of-pocket costs and expenses. The FB Asbestos Property Damage Trustee's
per annum compensation may only be increased annually at the rate of the
Consumer Price Index - All Cities. Any increase in excess of such an
adjustment based on the Consumer Price Index may be made only with the
Bankruptcy Court's approval.
4. FB Asbestos Property Damage Trust Termination Provisions
The FB Asbestos Property Damage Trust is irrevocable, but
will terminate ninety (90) days after the first day any of the following
events occurs:
(i) the FB Asbestos Property Damage Trustee , in
his or her sole discretion, decides to terminate the FB Asbestos Property
Damage Trust because (a) all duly filed FB Asbestos Property Damage Claims
have been liquidated and satisfied and two years have elapsed since the
Effective Date, (b) the FB Asbestos Property Damage Trustee determines that it
is unlikely that any new claims will be filed against the FB Asbestos Property
Damage Trust;
(ii) a final order of the Bankruptcy Court is
obtained approving the FB Asbestos Property Damage Trustee's procurement of
irrevocable insurance policies and establishment of claims handling agreements
with suitable third parties adequate to discharge all expected remaining FB
Asbestos Property Damage Trust obligations and expenses of the FB Asbestos
Property Damage Trust in a manner consistent with the FB Asbestos Property
Damage Trust Agreement and the FB Asbestos Property Damage Trust Distribution
Procedures;
(iii) in the judgment of the FB Asbestos Property
Damage Trustee , with the consent of the Property Damage Advisory Committee
("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 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.
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 XV 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.
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 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 $1 million, or such other amount
upon which the Plan Proponents may agree no later than ten (10) Business Days
prior to the Objection Deadline (the "Litigation Trust Initial Deposit"), to
the Litigation Trustee on the Effective Date. The Litigation Trustee will use
the Litigation Trust Initial Deposit consistent with the purpose of the
Litigation Trust and subject to the terms and conditions of the Plan and the
Litigation Trust Agreement.
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 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.
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. REGISTRATION RIGHTS/RESTRICTIONS ON TRANSFERS OF CORPORATE
SECURITIES AND CERTAIN CLAIMS
Reorganized OCD will enter into registration rights agreements with
the Asbestos Personal Injury Trust with respect to the Senior Notes (the
"Senior Notes Registration Rights Agreement") and the shares of New OCD Common
Stock (the "Equity Registration Rights Agreement") issued to the Asbestos
Personal Injury Trust. To date, OCD and the Asbestos Claimants' Committee and
the Future Claimants' Representative have agreed in principle on most of the
key terms to be included in the registration rights agreements but there
remain certain items relating to timing and procedures relating to
registration of securities still to be agreed upon.
Under the terms of the Senior Notes Registration Rights Agreement,
Reorganized OCD will, as determined by Reorganized OCD and the Asbestos
Personal Injury Trust, file with the SEC and cause to be effective
registration statement(s) designed to afford the Asbestos Personal Injury
Trust with liquidity for the Senior Notes issued to it and will be subject to
such terms relating to timing of filing and effectiveness, underwriting and
other matters as shall be agreed upon by Reorganized OCD and the Asbestos
Personal Injury Trust. Within 90 days of the Effective Date, Reorganized OCD
will file a registration statement, using such form or forms for which
Reorganized OCD is eligible, and which is appropriate for the type of offering
contemplated and shall use commercially reasonable efforts to cause such
registration statement to become effective no later than 180 days after the
Effective Date. If Reorganized OCD is not S-3 eligible within some period of
time to be agreed upon by the parties, the parties will agree upon another
registration arrangement. After such time as Reorganized OCD is eligible to
use Form S-3, Reorganized OCD will file a shelf registration statement to
permit sales from time to time by the Asbestos Personal Injury Trust and shall
keep the shelf registration statement continuously effective for a period of
three years from its initial effectiveness, or such shorter period ending when
all Senior Notes have been sold or all Senior Notes can be sold pursuant to
Rule 144 of the Act without restrictions as to volume limitation, subject to
any extensions for any delay periods imposed. The Senior Notes Registration
Rights Agreement will also contain provisions related to suspension periods
and transferability of rights and customary provisions regarding registration
rights relating to debt securities of a similar rating, including, but not
limited to, payment of certain registration expenses by Reorganized OCD, cross
indemnification, holdback agreements, withdrawal rights and underwriting
arrangements, provided that in the event that the registration is for an
underwritten offering, the underwriter(s) shall be selected by the Asbestos
Personal Injury Trust and be reasonably acceptable to Reorganized OCD.
The Equity Registration Rights Agreement will contain certain shelf,
demand and piggyback registration rights for the benefit of the Asbestos
Personal Injury Trust. Prior to nine months after the Effective Date, the
Asbestos Personal Injury Trust will not have any "demand" registration rights
relating to New OCD Common Stock. If, at the date that is 270 days after the
Effective Date, it appears reasonably likely that Reorganized OCD will not be
S-3 eligible by the date that is 450 days after the Effective Date, or if
Reorganized OCD is not S-3 eligible 450 days after the Effective Date, then
Reorganized OCD, if requested, will file one registration statement to
register an agreed upon minimum amount of New OCD Common Stock. After
Reorganized OCD becomes S-3 eligible, subject to the terms and conditions of
the Equity Registration Rights Agreement, the Asbestos Personal Injury Trust
shall have the following registration rights: (i) two "demand" rights each
year until the fifth anniversary of the Effective Date, and one demand
registration right each year thereafter until all shares of New OCD Common
Stock can be sold without regard to the volume and manner of sale limitations
imposed under Rule 144; provided, however, that Reorganized OCD shall not be
required to effect a registration pursuant to a demand registration more than
once in any six month period unless common stock having a value of at least
$100 million or such lesser amount that the Asbestos Personal Injury Trust
then holds is proposed to be sold; and (ii) piggyback registration rights
subject to certain limitations if the piggyback registration is with respect
to an offering of securities by Reorganized OCD for its own account. In any
"demand" registration, the underwriter(s) shall be selected by the Asbestos
Personal Injury Trust and be reasonably acceptable to Reorganized OCD. The
Asbestos Personal Injury Trust may only transfer its registration rights to a
transferee of a minimum specified amount of New OCD Common Stock issued to the
Asbestos Personal Injury Trust under the Plan provided that such transferee
agrees to be bound to the terms of the Equity Registration Rights Agreement.
Registration rights will not be transferable to any purchaser under a
registration statement or to any purchaser in sales made pursuant to Rule 144.
The Equity Registration Rights Agreement shall also contain customary
provisions regarding registration rights relating to equity securities,
including, but not limited to, registration expenses, cross indemnification,
holdback agreements, withdrawal rights, participation rights in other
offerings, underwriting arrangements and the period of time in which any
registration statement shall be kept effective (which period, subject to
specified exceptions, shall be 180 days or such shorter period during which
the distribution described in the registration statement shall have been
completed).
XII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS
It is not currently expected that any registration statement will be
filed under the Securities Act or any state securities laws with respect to
the issuance or distribution of the New OCD Securities under the Plan or their
subsequent transfer or resale. The Debtors believe that, subject to certain
exceptions described below, various provisions of the Securities Act, the
Bankruptcy Code and state securities laws exempt from federal and state
securities registration requirements (a) the offer and the sale of such
securities pursuant to the Plan and (b) subsequent transfers of such
securities.
A. Offer and Sale of New OCD Securities Pursuant to the Plan:
Bankruptcy Code Exemption from Registration Requirements
Holders of Allowed Claims in Classes 4, 5 and 6 and the Asbestos
Personal Injury Trust will receive New OCD Securities pursuant to the Plan.
Section 1145(a)(1) of the Bankruptcy Code provides that the registration
requirements of federal and state securities laws do not apply to the offer or
sale of securities under a plan of reorganization if three principal
requirements are satisfied: (1) the securities must be issued "under a plan"
of reorganization by the debtor or its successor under a plan or by an
affiliate participating in a joint plan of reorganization with the debtor; (2)
the recipients of the securities must hold a pre-petition or administrative
expense claim against the debtor or an interest in the debtor; and (3) the
securities must be issued entirely in exchange for the recipient's claim
against or interest in the debtor, or "principally" in such exchange and
"partly" for cash or property. In reliance upon this exemption, the Debtors
believe that the offer and sale of the New OCD Securities under the Plan will
be exempt from registration under the Securities Act and state securities
laws. In addition, the Debtors will seek to obtain, as part of the
Confirmation Order, a provision confirming such exemption. Accordingly, such
securities may be resold without registration under the Securities Act or
other federal securities laws pursuant to an exemption provided by Section
4(1) of the Securities Act, unless the holder is an "underwriter" (see
discussion below) with respect to such securities, as that term is defined
under the Bankruptcy Code. However, recipients of securities issued under the
Plan are advised to consult with their own legal advisors as to the
availability of any such exemption from registration under state law in any
given instance and as to any applicable requirements or conditions to such
availability.
B. Subsequent Transfers of New OCD Securities
Section 1145(b) of the Bankruptcy Code defines the term "underwriter"
for purposes of the Securities Act as one who, except with respect to
"ordinary trading transactions" of an entity that is not an "issuer," (1)
purchases a claim against, interest in, or claim for an administrative expense
in the case concerning, the debtor, if such purchase is with a view to
distributing any security received in exchange for such a claim or interest;
(2) offers to sell securities offered or sold under a plan for the holders of
such securities; (3) offers to buy securities offered or sold under the plan
from the holders of such securities, if the offer to buy is: (a) with a view
to distribution of such securities; and (b) under an agreement made in
connection with the plan, with the consummation of the plan, or with the offer
or sale of securities under the plan; or (4) is an "issuer" with respect to
the securities, as the term "issuer" is defined in Section 2(11) of the
Securities Act.
The term "issuer" is defined in Section 2(4) of the Securities Act;
however, the reference contained in Section 1145(b)(1)(D) of the Bankruptcy
Code to Section 2(11) of the Securities Act purports to include as statutory
underwriters all persons who, directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with,
an issuer of securities. "Control" (as such term is defined in Rule 405 of
Regulation C under the Securities Act) means the possession, direct or
indirect, of the power to direct or cause the direction of the policies of a
person, whether through the ownership of voting securities, by contract, or
otherwise. Accordingly, an officer or director of a reorganized debtor (or its
successor) under a plan of reorganization may be deemed to be a "control
person," particularly if such management position is coupled with the
ownership of a significant percentage of the debtor's (or successor's) voting
securities. Moreover, the legislative history of Section 1145 of the
Bankruptcy Code suggests that a creditor who owns at least 10% of the
securities of a reorganized debtor may be presumed to be a "control person."
To the extent that persons deemed to be "underwriters" receive New
OCD Securities pursuant to the Plan, resales by such persons would not be
exempted by Section 1145 of the Bankruptcy Code from registration under the
Securities Act or other applicable law. Such persons would not be permitted to
resell such New OCD Securities unless such securities were registered under
the Securities Act or an exemption from such registration requirements were
available. Entities deemed to be statutory underwriters for purposes of
Section 1145 of the Bankruptcy Code may, however, be able, at a future time
and under certain conditions described below, to sell securities without
registration pursuant to the resale provisions of Rule 144 and Rule 144A under
the Securities Act.
Rule 144A provides a non-exclusive safe harbor exemption from the
registration requirements of the Securities Act for resales to certain
"qualified institutional buyers" of securities that are "restricted securities
"within the meaning of the Securities Act, irrespective of whether the seller
of such securities purchased his, her or its securities under the provisions
of Rule 144A. Under Rule 144A, a "qualified institutional buyer" is defined to
include, among other persons (e.g., "dealers" registered as such pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and "banks" as defined in Section 3(a)(2) of the Securities Act), any
entity that purchases securities for its own account or for the account of
another qualified institutional buyer and that (in the aggregate) owns and
invests on a discretionary basis at least $100 million in the securities of
unaffiliated issuers. Subject to certain qualifications, Rule 144A does not
exempt the offer or sale of securities that, at the time of their issuance,
were securities of the same class of securities then listed on a national
securities exchange (registered under Section 6 of the Exchange Act) or quoted
in a U.S. automated interdealer quotation system (e.g., NASDAQ). For so long
as none of the New OCD Securities to be issued under the Plan are not also
listed or quoted as described above, holders of New OCD Securities who are
deemed to be "underwriters" within the meaning of Section 1145(b)(1) of the
Bankruptcy Code or who may be otherwise deemed to be "affiliates" or "control
persons" of Reorganized OCD within the meaning of Rule 405 of Regulation C
under the Securities Act, and holders of securities whose securities will be
"restricted securities" within the meaning of the Securities Act should,
assuming that all other conditions of Rule 144A are met, be entitled to avail
themselves of the safe harbor resale provisions thereof.
To the extent that Rule 144A is unavailable, such holders may be
entitled to resell their securities pursuant to the limited safe harbor resale
provisions of Rule 144. Generally, Rule 144 provides that, if certain
conditions are met (e.g., the availability of current public information with
respect to the issuer, volume of sale limitations, and notice and manner of
sale requirements), specified persons who resell "restricted securities" or
who resell securities that are not restricted but such persons are
"affiliates" of the issuer, will not be deemed to be "underwriters" as defined
in Section 2(11) of the Securities Act.
Pursuant to the Plan, certificates evidencing New OCD Securities
received by a holder of 10% or more of the outstanding New OCD Common Stock
(which will include the Asbestos Personal Injury Trust) will bear a legend
substantially in the form below:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR
SALE, OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH
REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
Whether or not any particular person would be deemed to be an
"underwriter" of New OCD Securities to be issued pursuant to the Plan, or an
"affiliate" of Reorganized OCD, would depend upon various facts and
circumstances applicable to that person. Accordingly, OCD expresses no view as
to whether any such person would be such an "underwriter" or "affiliate."
THE FOREGOING SUMMARY DISCUSSION IS GENERAL IN NATURE AND HAS BEEN
INCLUDED IN THIS DISCLOSURE STATEMENT SOLELY FOR INFORMATIONAL PURPOSES. THE
DEBTORS MAKE NO REPRESENTATIONS CONCERNING, AND DO NOT HEREBY PROVIDE ANY
OPINION OR ADVICE WITH RESPECT TO, THE SECURITIES LAW AND BANKRUPTCY LAW
MATTERS DESCRIBED ABOVE. IN LIGHT OF THE COMPLEX AND SUBJECTIVE INTERPRETIVE
NATURE OF WHETHER A PARTICULAR RECIPIENT OF NEW DEBT SECURITIES OR NEW OCD
COMMON STOCK MAY BE DEEMED TO BE AN "UNDERWRITER" WITHIN THE MEANING OF
SECTION 1145(B)(1) OF THE BANKRUPTCY CODE AND/OR AN "AFFILIATE" OR "CONTROL
PERSON" UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND, CONSEQUENTLY,
THE UNCERTAINTY CONCERNING THE AVAILABILITY OF EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND EQUIVALENT STATE
SECURITIES AND "BLUE SKY" LAWS, OCD ENCOURAGES EACH CLAIMANT TO CONSIDER
CAREFULLY AND CONSULT WITH HIS, HER, OR ITS OWN LEGAL ADVISORS WITH RESPECT TO
SUCH (AND ANY RELATED) MATTERS.
XIII. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion is a summary of certain United States
federal income tax aspects of the Plan, for general information purposes only,
and should not be relied upon for purposes of determining the specific tax
consequences of the Plan with respect to a particular holder of a Claim. This
discussion does not purport to be a complete analysis or listing of all
potential tax considerations.
This discussion is based on existing provisions of the IRC, existing
and proposed Treasury Regulations promulgated thereunder, and current
administrative rulings and court decisions. Legislative, judicial, or
administrative changes or interpretations enacted or promulgated after the
date hereof could alter or modify the analyses set forth below with respect to
the United States federal income tax consequences of the Plan. Any such
changes or interpretations may be retroactive and could significantly affect
the United States federal income tax consequences of the Plan.
Except as discussed in Sections A.1, A.2 and B.2 below, no ruling has
been requested or obtained from the IRS with respect to any tax aspects of the
Plan and no opinion of counsel has been sought or obtained with respect
thereto. No representations or assurances are being made to the holders of
Claims with respect to the United States federal income tax consequences
described herein.
Each holder of a Claim affected by the Plan is strongly urged to
consult its tax advisor regarding the specific tax consequences of the
transactions described herein and in the Plan.
A. Federal Income Tax Consequences to the Debtors
1. Cancellation of Indebtedness Income
Under the IRC, a taxpayer generally must recognize income
from the cancellation of debt ("COD income") to the extent that its
indebtedness is discharged during the taxable year. Section 108(a)(1)(A) of
the IRC provides an exception to this rule where a taxpayer is in bankruptcy
and where the discharge is granted, or is effected pursuant to a plan
approved, by the bankruptcy court. This exception is subject to the conditions
imposed by Section 108(b) of the IRC, which requires that the COD income be
applied to reduce certain tax attributes of the taxpayer, in the following
order: NOLs, general business and minimum tax credit carryforwards, capital
loss carryforwards, the basis of the taxpayer's assets, and finally, foreign
tax credit tax carryforwards (collectively, "Tax Attributes"). Section
108(b)(5) of the IRC permits a taxpayer to elect to first apply the reduction
to the basis of the taxpayer's depreciable assets, with any remaining balance
applied to the taxpayer's other Tax Attributes in the order stated above.
Section 108(e)(2) of the IRC provides a further exception to the realization
of COD income to the extent that the taxpayer's satisfaction of the debt would
have given rise to a deduction for federal income tax purposes. The effect of
Section 108(e)(2) of the IRC, where applicable, is to allow a taxpayer to
discharge indebtedness without recognizing income and to avoid any reduction
of its Tax Attributes.
As a result of the application of Section 108(a)(1)(A) of
the IRC, the Debtors generally will not recognize COD income from the
discharge of indebtedness pursuant to the Plan; however, certain Tax
Attributes of the Debtors may be reduced or eliminated. The Debtors have not
yet determined whether they will make the election under Section 108(b)(5) of
the IRC to apply any required attribute reduction first to the basis of the
Debtors' depreciable property, with any excess next applied to reduce their
NOLs, and then to reduce the Debtors' other Tax Attributes. To the extent that
the discharge meets the criteria of Section 108(e)(2) of the IRC, no COD
income will be recognized and no reduction of Tax Attributes will occur. The
Debtors received a private letter ruling from the IRS on July 23, 2002 (the
"PLR") that, among other rulings, confirms that the discharge of indebtedness
arising from settlement of OC Asbestos Personal Injury Claims, other than OC
Indirect Asbestos PI Trust Claims, will satisfy the requirements of Section
108(e)(2) of the IRC and, therefore, will not result in any reduction of the
Debtors' Tax Attributes. It is also expected that the settlement of certain
claims in Class 6 (on account of OC Asbestos Property Damage Claims) and
claims in Class 7 (on account of OC Indirect Asbestos PI Trust Claims), Class
8 (FB Asbestos Personal Injury Claims) and Class 9 (FB Asbestos Property
Damage Claims), all of which should give rise to deductions for federal income
tax purposes, should satisfy the requirements of Section 108(e)(2) of the IRC.
Although not free from doubt, based on existing authorities,
the Debtors believe that any reduction in Tax Attributes other than NOLs
generally will occur on a separate company basis even though the Debtors file
a consolidated federal income tax return. The IRS has recently taken the
position, however, that with respect to NOLs, a consolidated filing group's
consolidated NOLs must be reduced, irrespective of the source of those losses.
The current IRS position as to how the attribute reduction rules should
operate in the case of other Tax Attributes of consolidated group members is
unclear. Any required attribute reduction will take place after the Debtors
have determined their taxable income, and any federal income tax liability,
for the taxable year in which the Effective Date occurs.
2. Net Operating Losses and Other Attributes
Following the Effective Date, the Debtors may have NOLs. The
Debtors currently have approximately $630 million of NOLs as of January 1,
2003, and the Debtors will generate NOLs on the Effective Date to the extent
that the Debtors have generated deductions for federal income tax purposes
that are not offset by income and/or gain and are not eliminated by the
attribute reduction rules of Section 108(b) of the IRC discussed above. In
this regard, the IRS has confirmed in the PLR that, provided certain
conditions are satisfied (which conditions the Debtors expect to satisfy),
including the obtaining of a "Qualified Appraisal" as defined in Treasury
Regulation ss.1.468B-3(b)(3), the Debtors will be entitled to a current
deduction for all transfers of Cash, property other than indebtedness of the
Debtors, and New OCD Common Stock to the OC Sub-Account of the Asbestos
Personal Injury Trust for OC Asbestos Personal Injury Claims other than OC
Indirect Asbestos PI Trust Claims. It is also expected that the Debtors will
be entitled to a current deduction for transfers of Cash, property other than
indebtedness of the Debtors, and New OCD Common Stock to the OC Sub-Account of
the Asbestos Personal Injury Trust in respect of OC Indirect Asbestos PI Trust
Claims and the FB Sub-Account of the Asbestos Personal Injury Trust for Class
7 Claims (on account of OC Indirect Asbestos PI Trust Claims) and Class 8
Claims (FB Asbestos Personal Injury Claims). The amount of the aggregate
deduction to which the Debtors will be entitled will equal the sum of the Cash
and the fair market value of the other property (excluding any indebtedness of
the Debtors) and New OCD Common Stock transferred to the Asbestos Personal
Injury Trust to satisfy such OC Asbestos Personal Injury Claims and FB
Asbestos Personal Injury Claims. It should be noted, however, that no
deduction for transfers to the Asbestos Personal Injury Trust will be allowed
to the extent that the transferred amounts represent amounts received from the
settlement of insurance claims, which amounts were not included in the
Debtors' gross income. Accordingly, the Debtors will not be entitled to a
deduction for transfers to the Asbestos Personal Injury Trust to satisfy
claims in Class 8 (FB Asbestos Personal Injury Claims) to the extent such
transfers are of insurance proceeds, including any transfer of Existing
Fibreboard Insurance Settlement Trust Assets. After applying the foregoing
deduction against the income and gain of the Debtors recognized during the
taxable year in which the Effective Date occurs, the Debtors anticipate that
their NOLs will increase. As explained above, however, the Debtors' NOLs and
other Tax Attributes may be reduced or eliminated as of the beginning of the
taxable year following the year in which the Effective Date occurs as a result
of the COD income expected to be realized on implementation of the Plan.
Accordingly, there can be no assurance that Reorganized OCD will have NOLs
following the year in which the Plan is implemented.
As a general rule, an NOL incurred by a taxpayer during a
taxable year can be carried back and deducted from its taxable income
generated within the two preceding taxable years and the remainder carried
forward and deducted from the taxable income of the 20 succeeding taxable
years. NOLs attributable to certain tort liability losses, however, may be
carried back for ten years. Pursuant to the PLR, the transfer of Cash and
other property (excluding any indebtedness of the Debtors) and the issuance of
New OCD Common Stock to the OC Sub-Account of the Asbestos Personal Injury
Trust with respect to OC Asbestos Personal Injury Claim will generate
deductions that relate to a qualifying tort liability and, therefore, any
resulting NOLs will be eligible to be carried back for ten years. In addition,
any deductions generated from the transfer of Cash and other property
(excluding any indebtedness of the Debtors) and the issuance of New OCD Common
Stock to the FB Sub-Account of the Asbestos Personal Injury Trust for claims
in Class 8 (FB Asbestos Personal Injury Claims) should also relate to a
qualifying tort liability, and, therefore, any resulting NOLs should be
eligible to be carried back for ten years. However, the Debtors have not
realized significant amounts of taxable income during the previous ten year
period, and, accordingly, there can be no certainty that Reorganized OCD would
be entitled to material amounts of tax refunds in respect of that period.
With respect to any NOLs of the Debtors remaining after
confirmation of the Plan and any required attribute reduction, Section 382 of
the IRC contains certain rules limiting the ability of corporate taxpayers to
utilize NOLs when there has been an "ownership change" (the "Annual Section
382 Limitation"). An "ownership change" generally is defined as a more than 50
percentage point change in ownership of the value of the stock of a "loss
corporation" (a corporation with NOLs) that takes place during the three year
period ending on the date on which such change in ownership is tested. The
Debtors will undergo an ownership change on the Effective Date.
As a general rule, the Annual Section 382 Limitation equals
the product of the value of the stock of the loss corporation (with certain
adjustments) immediately before the ownership change and the applicable
"long-term tax-exempt rate," a rate published monthly by the Treasury
Department (4.35% for ownership changes that occur during August 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 in a new business for two years after the ownership
change, the Annual Section 382 Limitation is zero.
Section 382(l)(5) of the IRC provides an exception to the
application of the Annual Section 382 Limitation when a corporation is under
the jurisdiction of a court in a Title 11 case (the "Bankruptcy Exception").
The Bankruptcy Exception provides that where an ownership change occurs
pursuant to a bankruptcy reorganization or similar proceeding, the Annual
Section 382 Limitation will not apply if the pre-change shareholders and/or
"qualified creditors" (as defined by applicable Treasury Regulations) own at
least 50 percent of the stock of the reorganized corporation immediately after
the ownership change. However, under the Bankruptcy Exception, a corporation's
pre-change losses and excess credits that may be carried over to a post-change
year must be reduced to the extent attributable to any interest paid or
accrued on certain debt converted to stock in the reorganization. In addition,
if the Bankruptcy Exception applies, a second ownership change of the
corporation within a two-year period will cause the corporation to forfeit all
of its unused NOLs that were incurred prior to the date of the second
ownership change. If a corporation qualifies for the Bankruptcy Exception, the
use of its NOLs will be governed by that exception unless the corporation
affirmatively elects out.
If a corporation that is eligible for the Bankruptcy
Exception elects out of that provision, a special rule under Section 382 will
apply in calculating the Annual Section 382 Limitation. Under this special
rule, the limitation will be calculated by reference to the lesser of the
value of the corporation's stock (with certain adjustments) immediately after
the ownership change (as opposed to immediately before the ownership change,
as discussed above) or the value of the Debtor's assets (determined without
regard to liabilities) immediately before the ownership change.
The PLR generally holds that Reorganized OCD's ability to
use its NOLs following confirmation of the Plan will be governed by the
Bankruptcy Exception. As noted above, if the Debtors 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. Although the Debtors currently intend to rely
upon the Bankruptcy Exception, they do not intend to implement restrictions on
the transfer of securities or claims. Accordingly, there can be no assurance
that Reorganized OCD will not undergo a second ownership change within two
years of the Effective Date, which would cause Reorganized OCD to forfeit any
NOLs incurred prior to such second ownership change. If the Debtors choose to
elect out of the Bankruptcy Exception, Reorganized OCD's use of its NOLs will
be subject to the Annual Section 382 Limitation following confirmation of the
Plan, calculated under the special bankruptcy rule described above.
3. Accrued Interest
To the extent that the consideration issued to holders of
Claims pursuant to the Plan is attributable to accrued but unpaid interest,
the Debtors should be entitled to interest deductions in the amount of such
accrued interest, but only to the extent the Debtors have not already deducted
such amount. The Debtors should not have COD income from the discharge of any
accrued but unpaid interest pursuant to the Plan to the extent that the
payment of such interest would have given rise to a deduction pursuant to
Section 108(e)(2) of the IRC discussed above.
4. Federal Alternative Minimum Tax
A corporation may incur alternative minimum tax liability
even where NOL carryovers and other tax attributes are sufficient to eliminate
its taxable income as computed under the regular corporate income tax. It is
possible that Reorganized OCD will be liable for the alternative minimum tax.
B. Federal Income Tax Consequences to Claim Holders
The United States federal income tax consequences to a Claim holder
of the transactions contemplated by the Plan will depend upon a number of
factors. For purposes of the following discussion, a "United States Person" is
any person or entity (1) who is a citizen or resident of the United States,
(2) that is a corporation or partnership created or organized in or under the
laws of the United States or any state thereof, (3) that is an estate, the
income of which is subject to United States federal income taxation regardless
of its source or (4) that is a trust (a) the administration over which a
United States person can exercise primary supervision and all of the
substantial decisions of which one or more United States persons have the
authority to control; or (b) that has elected to be treated as a United States
Person for United States federal income tax purposes. In the case of a
partnership, the tax treatment of its partners will depend on the status of
the partner and the activities of the partnership. United States persons who
are partners in a partnership should consult their tax advisors. A "Non-United
States Person" is any person or entity that is not a United States Person. The
general United States federal income tax consequences to Claim holders that
are Non-United States Persons are discussed below under Section XIII.B.1(g) 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 `Security'",
below. Certain holders of Claims (such as foreign persons, S corporations,
regulated investment companies, insurance companies, financial institutions,
small business investment companies, broker-dealers and tax-exempt
organizations) may be subject to special rules not addressed in this summary
of United States federal income tax consequences. There also may be state,
local, and/or foreign income or other tax considerations or United States
federal estate and gift tax considerations applicable to holders of Claims,
which are not addressed herein. Each holder of a Claim should consult its tax
advisor for information that may be relevant to its particular situation and
circumstances and for advice concerning the particular tax consequences to it
of the transactions contemplated by the Plan.
1. United States Federal Income Tax Consequences
(a) General
A holder of a Claim who receives Cash or other
consideration in satisfaction of its claims may recognize ordinary income or
loss to the extent that any portion of such consideration is characterized as
accrued interest. A holder of a Claim who did not previously include in income
accrued but unpaid interest attributable to its Claim, and who surrenders its
Claim pursuant to the Plan, will be treated as having received interest income
to the extent that any consideration received is characterized for United
States federal income tax purposes as interest, regardless of whether the
holder of the Claim realizes an overall gain or loss as a result of
surrendering its Claim. A holder of a Claim who previously included in its
income accrued but unpaid interest attributable to its Claim should recognize
an ordinary loss to the extent that such accrued but unpaid interest is not
satisfied, regardless of whether the holder of the Claim realizes an overall
gain or loss as a result of surrendering its Claim. Although the manner in
which consideration is to be allocated between accrued interest and principal
for these purposes is unclear under present law, the Debtors intend,
consistent with the Plan, to allocate the consideration paid pursuant to the
Plan with respect to a Claim, first to the principal amount of such Claim as
determined for United States federal income tax purposes and then to accrued
interest, if any, with respect to such Claim. Accordingly, in cases where a
holder of a Claim receives less than the principal amount of its Claim, the
Debtors intend to allocate the full amount of consideration transferred to
such holder to the principal amount of such obligation and to take the
position that no amount of the consideration to be received by such holder is
attributable to accrued interest. There is no assurance that such allocation
will be respected by the IRS for federal income tax purposes.
A holder of a Claim that receives Senior Notes will
generally be required to include interest on the Senior Notes in income in
accordance with such holder's regular method of tax accounting. If, however,
the Senior Notes are treated as issued with original issue discount for United
States federal income tax purposes, a holder of Senior Notes will be required
to include in income the amount of such original issue discount over the term
of the Senior Notes based on the constant yield method. In such case, a holder
will be required to include amounts in income before they are received. A
holder's tax basis in a Senior Note will be increased by the amount of
original issue discount included in income and reduced by the amount of cash
(other than payments of stated interest) received with respect to the Senior
Note.
If not otherwise so required, a holder of a Claim
that receives New OCD Common Stock in exchange for his Claim will be required
to treat gain recognized on a subsequent sale or other taxable disposition of
the New OCD Common Stock as ordinary income to the extent of (i) any bad debt
deductions taken with respect to the Claim and any ordinary loss deductions
incurred upon satisfaction of the Claim, less any income (other than interest
income) recognized by the holder upon satisfaction of its Claim, and (ii) any
amounts which would have been included in a holder's gross income if the
holder's Claim had been satisfied in full, but which was not included in
income because of the application of the cash method of accounting.
(b) Holders of Class 4, Class 5 and Class 6 Claims
(Bank Holders, Bondholders and General Unsecured
Claims)
The holders of the Class 4, Class 5 and Class 6
Claims will realize gain or loss for United States federal income tax purposes
as a result of the consummation of the Plan equal to the difference between
their adjusted tax bases in their Claims immediately prior to the Effective
Date and the sum of (i) the amount of Cash, (ii) the "issue price" of the
Senior Notes and (iii) the fair market value of the New OCD Common Stock they
received.
The "issue price" of the Senior Notes is generally
expected to equal the principal amount thereof if they are not "publicly
traded" or their fair market value on the Effective Date if they are "publicly
traded." For these purposes, a debt instrument generally is treated as
"publicly traded" if, at any time during the 60 day period ending 30 days
after the issue date, (i) the debt is listed on a national securities exchange
or quoted on an interdealer quotation system sponsored by a national
securities association, (ii) it appears on a system of general circulation
(including a computer listing disseminated to subscribing brokers, dealers or
traders) that provides a reasonable basis to determine fair market value by
disseminating either recent price quotations (including rates, yields or other
pricing information) of one or more identified brokers, dealers or traders or
actual prices (including rates, yields or other pricing information) of recent
sales transactions or (iii) if, in certain circumstances, price quotations are
readily available from dealers, brokers or traders.
If the Class 4, Class 5 and/or Class 6 Claims do
not constitute "securities" for United States federal income tax purposes,
then the exchange of Class 4, Class 5 or Class 6 Claims, as the case may be,
will be a taxable transaction, and holders of such Claims will be required to
recognize the full amount of their gain or loss realized on the exchange. The
initial tax basis of the holders of Class 4, Class 5 or Class 6 Claims in the
property that they received in exchange for their Class 4, Class 5 or Class 6
Claims, respectively, should equal the fair market value of such property.
Such tax basis would be allocated among the items of property received based
on the relative fair market values of such items of property on the Effective
Date. The holder's holding period in property received in the exchange would
commence on the day after the Effective Date.
If the Class 4, Class 5 and/or Class 6 Claims
constitute "securities" for United States federal income tax purposes, then
the exchange of Class 4, Class 5 or Class 6 Claims, respectively, will be
treated as a "recapitalization" for United States federal income tax purposes.
In such case, holders of Class 4, Class 5 or Class 6 Claims who realize a loss
on the transaction will not be permitted to recognize such loss.
If the exchange of Class 4, Class 5 and Class 6
Claims, respectively, is a recapitalization and the Senior Notes constitute
"securities" for United States federal income tax purposes, Holders who
realize gain on the exchange will be required to recognize the lesser of (i)
the amount of gain realized, which will likely be determined by substituting
the principal amount of the Senior Notes for their issue price, and (ii) the
amount of Cash received. The initial tax basis of the holders of Class 4,
Class 5 and Class 6 Claims in the property received by them in the exchange
should equal the sum of (i) their adjusted tax bases in the Class 4, Class 5
and Class 6 Claims, respectively, and (ii) the amount of gain recognized by
them on the exchange, reduced by the amount of Cash received by them in the
exchange. Such basis will be allocated between the Senior Notes and the New
OCD Common Stock received based on their relative fair market values. A
holder's holding period in the New OCD Common Stock and Senior Notes will
include the holding period in the Class 4, Class 5 or Class 6 Claim
surrendered.
If the exchange of Class 4, Class 5 and Class 6
Claims, respectively, is a recapitalization and the Senior Notes do not
constitute "securities" for United States federal income tax purposes, Holders
who realize gain on the exchange will be required to recognize the lesser of
(i) the amount of gain realized and (ii) the sum of the fair market value of
the Senior Notes and the amount of Cash received. The initial tax basis of the
holders of Class 4, Class 5 and Class 6 Claims in the property received by
them in the exchange should equal the sum of (i) their adjusted tax bases in
the Class 4, Class 5 and Class 6 Claims, respectively, and (ii) the amount of
gain recognized by them on the exchange, reduced by the amount of Cash
received by them in the exchange. Such basis will be allocated first, to the
Senior Notes, to the extent of their fair market value, and, thereafter, to
the New OCD Common Stock. A holder's holding period in the New OCD Common
Stock received will include the holding period in the Class 4, Class 5 or
Class 6 Claim surrendered. A holder's holding period in the Senior Notes will
commence on the day after the Effective Date.
There is no authority that directly addresses the
treatment of the receipt of the right to receive a portion of the Excess
Available Cash, Excess Senior Notes Amount, Excess New OCD Common Stock and
Excess Litigation Trust Recoveries (the "Excess Recoveries"). Holders of Class
4, Class 5 and Class 6 Claims that receive such rights may be permitted to
claim that the fair market value of those rights is speculative as of the
Effective Date and that the receipt of such rights should be subject to "open
transaction" treatment and taken into account only when such amounts are
actually determined. In such case, however, a holder of a Class 4, Class 5 or
Class 6 Claim that realizes a loss may not be permitted to recognize such loss
until the amount of the Excess Recoveries to be distributed to such holder is
finally determined.
For a discussion of the consequences of the receipt
of an interest in the Litigation Trust, see Section B.3, below.
The Debtors intend to treat the Disputed
Distribution Reserve as a grantor trust for United States federal income tax
purposes. Accordingly, it is intended that each holder of a Disputed Claim
will be treated as if such holder had received a distribution of Cash and
property in exchange for its Claim and then contributed such cash and property
to the Disputed Distribution Reserve. If such treatment is respected, a holder
of a Disputed Claim will be subject to United States federal income tax on its
proportionate share of any income earned with regard to the assets in the
Disputed Distribution Reserve. There can, however, be no assurance that the
IRS will agree with such treatment.
(c) Holders of Class 7 and Class 8 Claims (OC Asbestos
Personal Injury and FB Asbestos Personal Injury
Claims)
To the extent that payments from the Asbestos
Personal Injury Trust to holders of OC Asbestos Personal Injury Claims and FB
Asbestos Personal Injury Claims represent damages on account of personal
physical injuries of such holders, such holders should not recognize gross
income under Section 104 of the IRC, except to the extent that such payments
are attributable to medical expense deductions allowed under Section 213 of
the IRC for a prior taxable year.
(d) Holders of Class 9 Claims (FB Asbestos Property
Damage Claims)
The fair market value of any payments from the FB
Asbestos Property Damage Trust to holders of FB Asbestos Property Damage
Claims will be taxable to such holders to the extent of the excess of such
fair market value over the amount, if any, of losses with regard to FB
Asbestos Property Damage Claims not previously deducted for United States
federal income tax purposes by the holder. Holders of FB Asbestos Property
Damage Claims that have not previously deducted losses with regard to such
Claims for United States federal income tax purposes will recognize losses
equal to the difference between the amount of loss not previously deducted and
the fair market value of any payments received.
(e) Market Discount
The market discount provisions of the IRC may apply
to holders of certain Claims. In general, a debt obligation that is acquired
by a holder in the secondary market is a "market discount bond" as to that
holder if its stated redemption price at maturity (or, in the case of a debt
obligation having original issue discount, its adjusted issue price) exceeds,
by more than a statutory de minimis amount, the tax basis of the debt
obligation in the holder's hands immediately after its acquisition. If a
holder of a Claim has accrued market discount with respect to such Claims and
such holder realizes gain upon the exchange of its Claims for property
pursuant to the Plan, such holder may be required to include as ordinary
income the amount of such holder's accrued market discount to the extent of
such realized gain. A holder of a Claim who realizes loss on such exchange
generally will not be required to include the amount of any such market
discount in income. A holder of a Claim who receives Senior Notes in an
exchange pursuant to the Plan that constitutes a "recapitalization" for United
States federal income tax purposes may not be required immediately to include
in income the accrued market discount to the extent such accrued market
discount is allocable to the Senior Notes. In this event, such portion of the
accrued market discount should carry over to the Senior Notes. Holders of
Claims who have accrued market discount with respect to their claims should
consult their tax advisors as to the application of the market discount rules
to them in view of their particular circumstances.
(f) Definition of "Security"
Whether an instrument constitutes a "security" for
United States federal income tax purposes is determined based on all of the
facts and circumstances. Certain authorities have held that one factor to be
considered is the length of the initial term of the debt instrument. These
authorities have indicated that an initial term of less than five years is
evidence that the instrument is not a security, whereas an initial term of ten
years or more is evidence that it is a security. There are numerous other
factors that could be taken into account in determining whether a debt
instrument is a security, including, but not limited to, whether repayment is
secured, the level of creditworthiness of the obligor, whether or not the
instrument is subordinated, whether the holders have the right to vote or
otherwise participate in the management of the obligor, whether the instrument
is convertible into an equity interest, whether payments of interest are
fixed, variable or contingent and whether such payments are made on a current
basis or are accrued.
(g) Non-United States Persons
A holder of a Claim against a Debtor that is a
Non-United States Person generally will not be subject to United States
federal income tax with respect to property (including money) received in
exchange for such Claim pursuant to the Plan, unless (i) such Claim holder is
engaged in a trade or business in the United States to which income, gain or
loss from the exchange is "effectively connected" for United States federal
income tax purposes, or (ii) if such Claim holder is an individual, such Claim
holder is present in the United States for 183 days or more during the taxable
year of the exchange and certain other requirements are met.
(h) Information Reporting and Backup Withholding
Certain payments, including the payments with
respect to Claims pursuant to the Plan, may be subject to information
reporting by the payor (the relevant Debtor) to the IRS. Moreover, such
reportable payments may be subject to backup withholding (currently at a rate
of 28%) 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 Treasury Regulations Section 1.468B-1, et seq.,
promulgated under Section 468B of the IRC. The receipt of property, including
Cash, Senior Notes and New OCD Common Stock by the OC Sub-Account or the FB
Sub-Account of the Asbestos Personal Injury Trust from the Debtors will not
constitute taxable income to the Asbestos Personal Injury Trust, the adjusted
tax basis of the assets transferred by the Debtors to the Asbestos Personal
Injury Trust will be the fair market value of those assets at the time of
receipt, and the Asbestos Personal Injury Trust will be taxed on modified
gross income as defined within the Treasury regulations (generally at the
highest rate applicable to estates and trusts). The transfer of Existing
Fibreboard Insurance Settlement Trust Assets to the FB Sub-Account of the
Asbestos Personal Injury Trust should not result in net taxable income to the
Debtors or the Asbestos Personal Injury Trust.
3. The Litigation Trust
For federal income tax purposes, it is intended that the
Litigation Trust be classified as a liquidating trust under Section 301.7701-4
of the Treasury Regulations and that such trust be treated as owned by its
beneficiaries. Accordingly, for federal income tax purposes, it is intended
that the beneficiaries be treated as if they had received a taxable
distribution of an undivided interest in the Litigation Trust Assets,
including Cash, and then contributed such interests to the Litigation Trust.
There can be no assurance that the IRS will respect the foregoing treatment.
For example, the IRS may characterize the Litigation Trust as a grantor trust
for the benefit of the Debtors or otherwise as owned by and taxable to the
Debtors. Alternatively, the IRS could characterize the Litigation Trust as a
so-called "complex trust" subject to a separate entity level tax on its
earnings, except to the extent that such earnings are distributed during the
taxable year. Moreover, because of the possibility that the amounts of
consideration received by a holder of a Class 4, Class 5 or Class 6 Claim may
increase or decrease, depending on whether the Litigation Trust is treated as
a grantor trust, the holder could be prevented from recognizing a loss until
the time at which all of the Litigation Trust Assets have been distributed.
Beneficiaries of the Litigation Trust are urged to consult
their tax advisors regarding the potential United States federal income tax
treatment of the Litigation Trust and the consequences to them of such
treatment (including the effect on the computation of a holder's gain or loss
in respect of its Claim, the subsequent taxation of any distribution from the
Litigation Trust, and the possibility of taxable income without a
corresponding receipt of Cash or property with which to satisfy the tax
liability).
C. Importance of Obtaining Professional Tax Assistance
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN
INCOME TAX CONSEQUENCES OF THE PLAN AND IS NOT A SUBSTITUTE FOR CAREFUL TAX
PLANNING WITH A TAX PROFESSIONAL. THE ABOVE DISCUSSION IS FOR INFORMATIONAL
PURPOSES ONLY AND IS NOT TAX ADVICE. THE TAX CONSEQUENCES ARE IN MANY CASES
UNCERTAIN AND MAY VARY DEPENDING ON A CLAIM HOLDER'S PARTICULAR CIRCUMSTANCES.
ACCORDINGLY, CLAIM HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE
UNITED STATES FEDERAL, STATE AND LOCAL, AND APPLICABLE FOREIGN INCOME AND
OTHER TAX CONSEQUENCES OF THE PLAN.
XIV. FEASIBILITY OF THE PLAN AND BEST INTERESTS OF CREDITORS
A. Feasibility of the Plan
In connection with confirmation of the Plan, the Bankruptcy Court
will have to determine that the Plan is feasible pursuant to Section
1129(a)(11) of the Bankruptcy Code, which means that the confirmation of the
Plan is not likely to be followed by the liquidation or the need for further
financial reorganization of the Debtors.
To support their belief in the feasibility of the Plan, the Debtors
have relied, among other things, upon the Financial Projections, which are
annexed to this Disclosure Statement as Appendix B.
The Financial Projections indicate that the Reorganized Debtors
should have sufficient cash flow to pay and service their debt obligations,
including the Exit Facility, and to fund their operations as contemplated by
the Business Plan. Accordingly, the Debtors believe that the Plan complies
with the financial feasibility standard of Section 1129(a)(11) of the
Bankruptcy Code.
The Financial Projections were not prepared with a view toward
compliance with the published guidelines of the American Institute of
Certified Public Accountants or any other regulatory or professional agency or
body or generally accepted accounting principles. Furthermore, the Debtors'
independent certified public accountants have not compiled or examined the
Financial Projections and accordingly do not express any opinion or any other
form of assurance with respect thereto and assume no responsibility for the
Financial Projections.
The Financial Projections assume that (1) the Plan will be confirmed
and consummated in accordance with its terms, (2) there will be no material
change in legislation or regulations, or the administration thereof, including
environmental legislation or regulations, that will have an unexpected effect
on the operations of the Reorganized Debtors, (3) there will be no change in
United States generally accepted accounting principles that will have a
material effect on the reported financial results of the Reorganized Debtors,
and (4) there will be no material contingent or unliquidated litigation or
indemnity claims applicable to the Reorganized Debtors. To the extent that the
assumptions inherent in the Financial Projections are based upon future
business decisions and objectives, they are subject to change. In addition,
although they are presented with numerical specificity and are considered
reasonable by the Debtors when taken as a whole, the assumptions and estimates
underlying the Financial Projections are subject to significant business,
economic and competitive uncertainties and contingencies, many of which will
be beyond the control of the Reorganized Debtors. Accordingly, the Financial
Projections are speculative in nature. It should be expected that some or all
of the assumptions in the Financial Projections will not be realized and that
actual results will vary from the Financial Projections, which variations may
be material and may increase over time. The Financial Projections should
therefore not be regarded as a representation by the Debtors or any other
person that the results set forth in the Financial Projections will be
achieved. In light of the foregoing, readers are cautioned not to place undue
reliance on the Financial Projections. The Financial Projections should be
read together with the information in Section 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
limited to, further adverse developments with respect to the liquidity
position of OC or operations of the various businesses of OC, adverse
developments in the bank financing or public or private markets for debt or
equity securities of OCD, adverse developments in the timing or results of the
implementation of the Business Plan (including the time line to emerge from
Chapter 11), the difficulty in controlling industry costs and integrating new
operations, the ability of the OC to realize the anticipated general and
administrative expense savings and overhead reductions contemplated in the
Financial Projections, the ability of OC to maintain profitability of their
operations, the level and nature of any restructuring and other one-time
charges, the difficulty in estimating costs relating to exiting certain
markets and consolidating and closing certain operations, and the possible
negative effects of a change in applicable legislation.
B. Acceptance of the Plan
As a condition to confirmation, the Bankruptcy Code requires that
each Class of Impaired Claims vote to accept the Plan, except under certain
circumstances.
Section 1126(c) of the Bankruptcy Code defines acceptance of a plan
by a class of impaired claims as acceptance by holders of at least two thirds
(2/3) in dollar amount and more than one half (50%) in number of claims in
that class, but for that purpose counts only those who actually vote to accept
or to reject the plan. Thus, each of Classes 3, 4, 5, 6, 7, 8 and 9 will have
voted to accept the Plan only if two-thirds (2/3) in dollar amount and a
majority in number actually voting in each Class cast their Ballots in favor
of acceptance. Holders of Claims who fail to vote are not counted as either
accepting or rejecting the Plan.
In order to satisfy the requirements of Section
524(g)(2)(B)(II)(IV)(bb) of the Bankruptcy Code, seventy-five (75%) percent of
each of Classes 7 and 8, covering the respective holders of the OC Asbestos
Personal Injury Claims and FB Asbestos Personal Injury Claims actually voting
must vote in favor of the Plan in order for the Reorganized Debtors to obtain
the benefits of Section 524(g) of the Bankruptcy Code.
The Voting Procedures provide certain special rules concerning the
calculation of the amount of Claims voting in a Class of Claims (for further
information regarding voting procedures see Section XVII of this Disclosure
Statement entitled "The Solicitation; Voting Procedure.") The following
special rules concerning calculation of the amount of Claims are for
illustrative purposes.
A Ballot will not be counted if a Claim has been disallowed or an
objection is pending to the Claim as of the _____________, and the claimant
has not obtained, on or before the Voting Deadline, a Bankruptcy Court order
allowing such Claim, either in whole or in part, for all purposes or for
voting purposes only.
IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY
COMPLETED AS SET FORTH ABOVE AND IN ACCORDANCE WITH THE VOTING PROCEDURES ON
THE BALLOT AND RECEIVED NO LATER THAN THE VOTING DEADLINE BY THE VOTING AGENT.
DO NOT RETURN ANY STOCK CERTIFICATES OR DEBT INSTRUMENTS WITH YOUR BALLOT. In
addition, a vote may be disregarded if the Bankruptcy Court determines, after
notice and a hearing, that such acceptance or rejection was not solicited or
procured in good faith or in accordance with the provisions of the Bankruptcy
Code.
C. Best Interests Test
As noted above, even if a plan is accepted by the holders of each
class of claims and interests, the Bankruptcy Code requires a bankruptcy court
to determine that the plan is in the best interests of all holders of claims
or interests that are impaired by the plan and that have not accepted the
plan. The "best interests" test, as set forth in Section 1129(a)(7) of the
Bankruptcy Code, requires a bankruptcy court to find either that all members
of an impaired class of claims or interests have accepted the plan or that the
plan will provide a member who has not accepted the plan with a recovery of
property of a value, as of the effective date of the plan, that is not less
than the amount that such holder would recover if the debtor were liquidated
under Chapter 7 of the Bankruptcy Code.
To calculate the probable distribution to holders of each impaired
class of claims and interests if the Debtors were liquidated under Chapter 7,
a bankruptcy court must first determine the aggregate dollar amount that would
be generated from a debtor's assets if its Chapter 11 cases were converted to
Chapter 7 cases under the Bankruptcy Code. This "liquidation value" would
consist primarily of the proceeds from a forced sale of the debtor's assets by
a Chapter 7 trustee.
The amount of liquidation value available to unsecured creditors
would be reduced by, first, the claims of secured creditors to the extent of
the value of their collateral, and, second, by the costs and expenses of
liquidation, as well as by other administrative expenses and costs of both the
Chapter 7 cases and the Chapter 11 cases. Costs of liquidation under Chapter 7
of the Bankruptcy Code would include the compensation of a trustee, as well as
of counsel and other professionals retained by the trustee, asset disposition
expenses, all unpaid expenses incurred by the debtor in its Chapter 11 cases
(such as compensation of attorneys, financial advisors and accountants) that
are allowed in the Chapter 7 cases, litigation costs, and claims arising from
the operations of the debtor during the pendency of the Chapter 11 cases. The
liquidation itself would trigger certain priority payments that otherwise
would be due in the ordinary course of business. Those priority claims would
be paid in full from the liquidation proceeds before the balance would be made
available to pay general claims or to make any distribution in respect of
equity interests. The liquidation would also prompt the rejection of a large
number of executory contracts and unexpired leases and thereby significantly
enlarge the total pool of unsecured claims by reason of resulting rejection
claims.
Once the court ascertains the recoveries in liquidation of secured
creditors and priority claimants, it must determine the probable distribution
to general unsecured creditors and equity security holders from the remaining
available proceeds in liquidation. If such probable distribution has a value
greater than the distributions to be received by such creditors and equity
security holders under the plan, then the plan is not in the best interests of
creditors and equity security holders.
D. Liquidation Analysis
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.
Because the Unsecured Creditors' Committee contends that the
liquidation analysis is not permitted to assume any payment to future asbestos
claimants in a Chapter 7 liquidation, and based on certain other assumptions,
the Unsecured Creditors' Committee contends that creditors would receive more
in a Chapter 7 liquidation than under the Plan. Therefore, the Unsecured
Creditors' Committee contends that the Plan fails to satisfy the "best
interests test" of Section 1129(a)(7).The Plan Proponents and Lazard disagree
with this analysis. For a more detailed discussion of this dispute, see
Appendix C to this Disclosure Statement. The Bankruptcy Court or the District
Court will determine, in conjunction with confirmation, whether the Plan
satisfies the "best interests test" of Section 1129(a)(7).
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 $3.3 billion to $3.7 billion (with a mid-point estimate of $3.5
billion) as of an assumed Effective Date of December 31, 2003. This estimated
reorganization value includes $100 million associated with the utilization of
tax net operating loss carryforwards created as part of the Plan. Lazard's
estimate of reorganization value does not constitute an opinion as to fairness
from a financial point of view of the consideration to be received under the
Plan or of the terms and provisions of the Plan.
THE ASSUMED RANGE OF THE REORGANIZATION VALUE, AS OF AN
ASSUMED EFFECTIVE DATE OF DECEMBER 31, 2003, REFLECTS WORK PERFORMED BY LAZARD
ON THE BASIS OF INFORMATION IN RESPECT OF THE BUSINESS AND ASSETS OF THE
DEBTORS AVAILABLE TO LAZARD AS OF JUNE 26, 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 $3.3 billion and $3.7 billion, an assumed
total debt of $1.5 billion (including approximately $100 million of existing
debt, $1.4 billion of Senior Notes less the aggregate principal amount of the
debt issued to the IRS for their Allowed Priority Tax Claim, Lazard imputed an
estimated range of equity values for the Reorganized Debtors of between $1.8
billion and $2.2 billion, with a point estimate of $2.0 billion. Assuming a
distribution of 80.0 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 $22.50 and $27.50 per share (with a mid-point estimate of $25.00
per share). Pursuant to the Plan, it is contemplated that approximately 2.8
million shares will be set aside as restricted stock for issuance to employees
as part of the employee incentive programs. The remaining 77.2 million shares
will be distributed to creditors pursuant to the Plan.
With respect to the Financial Projections prepared by the
management of the Debtors and included as Appendix B to this Disclosure
Statement, Lazard assumed that such Financial Projections have been reasonably
prepared in good faith and on a basis reflecting the best currently available
estimates and judgments of the Debtors as to the future operating and
financial performance of the Reorganized Debtors. Lazard's estimate of a range
of reorganization values assumes that operating results projected by the
Debtors will be achieved by the Reorganized Debtors in all material respects,
including revenue growth and improvements in operating margins, earnings and
cash flow. Certain of the results forecast by the management of the Debtors
are better than the recent historical results of operations of the Debtors. As
a result, to the extent that the estimate of enterprise values is dependent
upon the Reorganized Debtors performing at the levels set forth in the
Financial Projections, such analysis must be considered speculative. If the
business performs at levels below those set forth in the Financial
Projections, such performance may have a material impact on the estimated
range of values.
In estimating the range of the reorganization value and
equity value of the Reorganized Debtors, Lazard (a) reviewed certain
historical financial information of OC for recent years and interim periods;
(b) reviewed certain internal financial and operating data of OC, including
the Financial Projections as described in Section VI.C.2 of this Disclosure
Statement, which data was prepared and provided to Lazard by the management of
OC and which relate to OC's business and its prospects; (c) met with certain
members of senior management of OC to discuss OC's operations and future
prospects; (d) reviewed publicly available financial data and considered the
market value of public companies that Lazard deemed generally comparable to
the operating business of OC; (e) considered relevant precedent transactions
in the building products industry; (f) considered certain economic and
industry information relevant to the operating business; and (g) conducted
such other studies, analysis, inquiries, and investigations as it deemed
appropriate. Although Lazard conducted a review and analysis of OC's business,
operating assets and liabilities and the Reorganized Debtors' business plan,
it assumed and relied on the accuracy and completeness of all financial and
other information furnished to it by OC, as well as publicly available
information.
In addition, Lazard did not independently verify
management's projections in connection with such estimates of the
reorganization value and equity value, and no independent valuations or
appraisals of OC were sought or obtained in connection herewith. In the case
of the Reorganized Debtors, the estimates of the reorganization value prepared
by Lazard represent the hypothetical reorganization value of the Reorganized
Debtors. Such estimates were developed solely for purposes of the formulation
and negotiation of the Plan and the analysis of implied relative recoveries to
creditors thereunder. Such estimates reflect computations of the range of the
estimated reorganization value of the Reorganized Debtors through the
application of various valuation techniques and do not purport to reflect or
constitute appraisals, liquidation values or estimates of the actual market
value that may be realized through the sale of any securities to be issued
pursuant to the Plan, which may be significantly different than the amounts
set forth herein.
The value of an operating business is subject to numerous
uncertainties and contingencies which are difficult to predict and will
fluctuate with changes in factors affecting the financial condition and
prospects of such a business. As a result, the estimate of the range of the
reorganization enterprise value of the Reorganized Debtors set forth herein is
not necessarily indicative of actual outcomes, which may be significantly more
or less favorable than those set forth herein. Because such estimates are
inherently subject to uncertainties, neither OC, Lazard, nor any other person
assumes responsibility for their accuracy. In addition, the valuation of newly
issued securities is subject to additional uncertainties and contingencies,
all of which are difficult to predict. Actual market prices of such securities
at issuance will depend upon, among other things, prevailing interest rates,
conditions in the financial markets, the anticipated initial securities
holdings of pre-petition creditors, some of whom may prefer to liquidate their
investment rather than hold it on a long-term basis, and other factors which
generally influence the prices of securities.
2. Additional Assumptions Regarding the Reorganized Debtors
With respect to the valuation of the Reorganized Debtors, in
addition to the foregoing, Lazard has relied upon the following assumptions:
o the Reorganized Debtors' enterprise valuation consists
of the aggregate enterprise value of Reorganized OCD and
its direct and indirect Subsidiaries, including the
Non-Debtor Subsidiaries.
o The reorganization value range indicated represents the
"enterprise value" of the Reorganized Debtors, and
assumes the pro forma debt levels (as set forth in the
Financial Projections) adjusted for ownership
percentages in order to calculate a range of equity
value.
o The Debtors will emerge from Chapter 11 on or about
December 31, 2003.
o The projections for the Reorganized Debtors are
predicated upon the assumption that OC will be able to
obtain all necessary financing, as described herein, and
that no asset sales other than those contemplated to be
consummated by the Company prior to the Effective Date,
or assumed in the Financial Projections, will be
required to meet the Reorganized Debtors' ongoing
financial requirements. Lazard makes no representations
as to whether the Company will obtain financing or
consummate such asset sales or as to the terms upon
which such financing may be obtained or such asset sales
may be consummated.
o The present senior management of OC will continue
following consummation of the Plan, and general
financial and market conditions as of the assumed
Effective Date of the Plan will not differ materially
from those conditions prevailing as of the date of this
Disclosure Statement.
Lazard's valuation represents a hypothetical value that
reflects the estimated intrinsic value of the Company derived through the
application of various valuation techniques. Such analysis does not purport to
represent valuation levels which would be achieved in, or assigned by, the
public markets for debt and equity securities or private markets for
corporations. Estimates of enterprise value do not purport to be appraisals or
necessarily reflect the values which may be realized if assets are sold as a
going concern, in liquidation, or otherwise.
3. Valuation Methodology
The following is a brief summary of certain financial
analyses performed by Lazard to arrive at its estimation of the reorganization
value of the Reorganized Debtors. Lazard performed certain procedures,
including each of the financial analyses described below, and reviewed the
assumptions with the management of OC on which such analyses were based and
other factors, including the projected financial results of the Reorganized
Debtors. Lazard's estimate of reorganization value must be considered as a
whole and selecting just one methodology or portions of the analysis, without
considering the analysis as a whole, could create a misleading or incomplete
conclusion as to enterprise value.
(a) Discounted Cash Flow Analysis
The discounted cash flow ("DCF") valuation
methodology relates the value of an asset or business to the present value of
expected future cash flows to be generated by that asset or business. The DCF
methodology is a "forward looking" approach that discounts the expected future
cash flows by a theoretical or observed discount rate determined by
calculating the average cost of debt and equity for publicly traded companies
that are similar to the Debtors. This approach has two components: the present
value of the projected un-levered after-tax free cash flows for a determined
period and the present value of the terminal value of cash flows (representing
firm value beyond the time horizon of the projections).
As the estimated cash flows, estimated discount
rate and expected capital structure of the Reorganized Debtors are used to
derive a potential value, an analysis of the results of such an estimate is
not purely mathematical, but instead involves complex considerations and
judgments concerning potential variances in the projected financial and
operating characteristics of the Reorganized Debtors, as well as other factors
that could affect the future prospects and cost of capital considerations for
the Reorganized Debtors.
The DCF calculation was performed based on
un-levered after-tax free cash flows for the projection period 2004 to 2012,
discounted to the Effective Date of December 31, 2003. Lazard utilized
management's detailed financial projections for the period 2004 and 2005 as
the primary input. Management assisted Lazard with the development of
projections for the extended period of 2006 to 2012. Beginning with earnings
before interest and taxes ("EBIT"), the analysis taxes this figure at an
assumed rate of 40% to calculate an un-levered net income figure. The analysis
then adds back the non-cash operating expense of depreciation and
amortization. In addition, other factors affecting free cash flow are taken
into account, such as the change in working capital and capital expenditures,
all of which do not affect the income statement and therefore require separate
adjustments in the calculation.
In performing the calculation, Lazard made
assumptions for the weighted average cost of capital (the "Discount Rate"),
which is used to value future cash flows based on the riskiness of the
projections, and the EBITDA exit multiple, which is used to determine the
future value of the enterprise after the end of the projected period. In
determining the Discount Rate, Lazard estimated the cost of equity and the
after-tax cost debt for the Debtors, and applied a weighting of 45% debt and
55% equity. The weighting was determined based upon target leverage ratios
which Lazard believes would correlate to an investment grade credit rating of
"BBB/Baa" by the independent rating agencies.
Lazard estimated the cost of equity based on the
Capital Asset Pricing 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 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 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.
Unlike the comparable public company analysis, the
valuation in this methodology includes a "control" premium, representing the
purchase of a majority or controlling position in a company's assets. Thus,
this methodology generally produces higher valuations than the comparable
public company analysis. Other aspects of value that manifest itself in a
precedent transaction analysis include the following:
(i) Circumstances surrounding a merger transaction
may introduce "noise" into the analysis (e.g., an additional premium may be
extracted from a buyer in the case of a competitive bidding contest);
(ii) The market environment is not identical for
transactions occurring at different periods of time;
(iii) Circumstances pertaining to the financial
position of a company may have an impact on the resulting purchase price
(e.g., a company in financial distress may receive a lower price due to
perceived weakness in its bargaining leverage).
As with the comparable company analysis, because no
acquisition used in any analysis is identical to a target transaction,
valuation conclusions cannot be based solely on quantitative results. The
reasons for and circumstances surrounding each acquisition transaction are
specific to such transaction, and there are inherent differences between the
businesses, operations and prospects of each. Therefore, qualitative judgments
must be made concerning the differences between the characteristics of these
transactions and other factors and issues that could affect the price an
acquirer is willing to pay in an acquisition. The number of completed
transactions over the prior two years for which public data is available also
limits this analysis. Because the precedent transaction analysis explains
other aspects of value besides the inherent value of a company, there are
limitations as to its use in the Reorganized Debtors' valuation.
The summary set forth above does not purport to be
a complete description of the analyses performed by Lazard. The preparation of
an estimate involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods in
the particular circumstances and, therefore, such an estimate is not readily
susceptible to summary description. In performing their analyses, Lazard and
the Debtors made numerous assumptions with respect to industry performance,
business and economic conditions and other matters. The analyses performed by
Lazard are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses.
F. Application of the "Best Interests" of Creditors Test to the
Liquidation Analysis and the Valuation
It is impossible to determine with any specificity the value each
creditor will receive as a percentage of its Allowed Claim. This difficulty in
estimating the value of recoveries is due to, among other things, the lack of
any public market for the New OCD Common Stock.
Notwithstanding the difficulty in quantifying recoveries to holders
of Allowed Claims with precision, the Debtors believe that the financial
disclosures and projections contained herein imply a greater or equal recovery
to holders of Claims in Impaired Classes than the recovery available in a
Chapter 7 liquidation. As set forth below, the Debtors have set forth an
estimate of the comparative distributions between a Chapter 7 liquidation and
the Plan.
Accordingly, the Debtors believe that the "best interests" test of
Section 1129 of the Bankruptcy Code is satisfied.
Because the Unsecured Creditors' Committee contends that the
liquidation analysis is not permitted to assume any payment to future asbestos
claimants in a Chapter 7 liquidation, and based on certain other assumptions,
the Unsecured Creditors' Committee contends that creditors would receive more
in a Chapter 7 liquidation than under the Plan. Therefore, the Unsecured
Creditors' Committee contends that the Plan fails to satisfy the "best
interests test" of Section 1129(a)(7).The Plan Proponents and Lazard disagree
with this analysis. For a more detailed discussion of this dispute, see
Appendix C to this Disclosure Statement. The Bankruptcy Court or the District
Court will determine, in conjunction with confirmation, whether the Plan
satisfies the "best interests test" of Section 1129(a)(7).
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 11 and Class 12 (which are deemed to
have rejected the Plan) in view of the treatment proposed for such Classes.
The Debtors would seek confirmation of the Plan pursuant to the
above-described "cramdown" provisions over the dissent of any Class other than
Classes 7 and 8. In addition, the Debtors do not believe that the Plan
unfairly discriminates against any Class who may vote to reject the Plan.
XV. CERTAIN RISK FACTORS TO BE CONSIDERED
A. Certain Factors Relating to the Chapter 11 Proceedings
1. There can be no assurance that the Plan will be consummated
as proposed.
The Plan sets forth a method, determined by negotiation
between OC and certain of its creditor constituencies, for resolving Claims
and reorganizing the Debtors. However, the Plan has not been approved by all
of the Debtors' creditor constituencies and, as a result, there remains
significant uncertainty as to whether the proposed resolution of Claims as
described herein (including the amount and form of recoveries) will be
effected. Although it is possible under applicable bankruptcy law to approve
and confirm a plan of reorganization over the objection of various creditor
groups, no assurance can be given that such a resolution will be achievable in
this instance. Claimants who object to the terms of the Plan may be expected
to challenge it in court proceedings and there can be no assurance that any
such proceedings will be resolved favorably to the Debtors or that such
proceedings, or further negotiations, will not result in significant changes
to the terms of the Plan, including the amount and form of recoveries.
The proposed relative amounts of recovery by holders of
Claims and Interests is the result of negotiation among various of the
constituencies of claimants with the Company, as well as the application of
legal principles regarding ranking of Claims and Interests, and other matters.
While the Company believes that the overall treatment of Claims and Interests
under the Plan is fair and reasonable, not all Claims and Interests are
treated equally, and certain Claims and Interests receive no distributions
pursuant to the Plan.
The ultimate recoveries under the Plan to holders of Claims
(other than holders whose entire Distribution is paid in Cash under the Plan)
depend upon the realizable value of the Senior Notes and the New OCD Common
Stock, which are subject to a number of material risks, including, but not
limited to, those specified below under the caption "Certain Factors Relating
to Securities to be issued under the Plan." In addition, changes to the terms
of the Plan, including to the form and amount of recoveries, may significantly
affect the nature of recoveries, or may make further distinctions between the
recoveries applicable to different classes of creditors.
2. Even if holders of Claims vote to approve the Plan, there
can be no assurance that the Plan will be confirmed by the
Bankruptcy Court and consummated.
Even if all Impaired Classes entitled to vote in fact vote
in favor of the Plan and, with respect to any Impaired Class deemed to have
rejected the Plan, the requirements for "cramdown" are met, the Bankruptcy
Court, which as a court of equity may exercise substantial discretion, may
choose not to confirm the Plan. Section 1129 of the Bankruptcy Code requires,
among other things, a showing that confirmation of the Plan will not be
followed by liquidation or the need for further financial reorganization of
the Debtors (see Section XII.A of this Disclosure Statement), and that the
value of distributions to dissenting holders of Claims and Interests may not
be less than the value such holders would receive if the Debtors were
liquidated under Chapter 7 of the Bankruptcy Code. See Section XII.C of this
Disclosure Statement. Although the Debtors believe that the Plan will meet
such tests, there can be no assurance that the Bankruptcy Court will reach the
same conclusion. See Appendix C annexed hereto for a liquidation analysis of
the Debtors. Because the Unsecured Creditors' Committee contends that the
liquidation analysis is not permitted to assume any payment to future asbestos
claimants in a Chapter 7 liquidation, and based on certain other assumptions,
the Unsecured Creditors' Committee contends that creditors would receive more
in a Chapter 7 liquidation than under the Plan. Therefore, the Unsecured
Creditors' Committee contends that the Plan fails to satisfy the "best
interests test" of Section 1129(a)(7).The Plan Proponents and Lazard disagree
with this analysis. For a more detailed discussion of this dispute, see
Appendix C to this Disclosure Statement. The Bankruptcy Court or the District
Court will determine, in conjunction with confirmation, whether the Plan
satisfies the "best interests test" of Section 1129(a)(7).
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
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.
C. Certain Factors Relating to the Reorganized Debtors
1. The Asbestos Personal Injury Trust will own a majority of
the outstanding shares of New OCD Common Stock and will
thereby be able to control Reorganized OCD.
The Asbestos Personal Injury Trust will beneficially own
more than 50% of the issued and outstanding shares of New OCD Common Stock.
Accordingly, the Asbestos Personal Injury Trust will have significant control
over Reorganized OCD and have the power to elect the majority of the
Reorganized OCD directors, and, by virtue of its ability to elect a majority
of directors, to appoint new management and approve any action requiring the
approval of the holders of New OCD Common Stock, including adopting amendments
to the Amended and Restated Certificate of Incorporation and approving mergers
or sales of all or substantially all of Reorganized OCD's assets. This
concentration of ownership could also facilitate or hinder a negotiated change
of control of Reorganized OCD, and, consequently, could have an impact upon
the value of the New OCD Common Stock. There can be no assurance that the
interests of the Asbestos Personal Injury Trust will not conflict with the
interests of Reorganized OCD's other stakeholders.
2. The financial projections are inherently uncertain.
The Financial Projections set forth in Appendix B hereto
cover the Debtors' projected future operations through fiscal 2008. The
Financial Projections contain statements which constitute "forward-looking
statements" within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. "Forward-looking statements" in the Financial
Projections include the intent, belief or current expectations of OC and
members of its management team with respect to the timing and completion of
the implementation of the Plan, the feasibility of the Business Plan, the
availability of bank and other financing, the conditions of the debt and
equity markets, the state of general business and economic conditions, and
OC's future liquidity, as well as the assumptions upon which such statements
are based. While OC believes that these expectations are based on reasonable
assumptions within the bounds of its knowledge of its business and operations,
parties in interest are cautioned that any such forward-looking statements are
not guaranties of future performance, and involve risks and uncertainties, and
that actual results are likely to differ materially from those contemplated by
such forward-looking statements.
Important factors currently known to OC's management that
could cause actual results to differ materially from those contemplated by the
forward-looking statements in the Financial Projections include, but are not
limited to, adverse developments with respect to the liquidity position of OC
or operations of the various businesses of OC, adverse developments in the
bank financing or public or private markets for debt or equity securities of
OCD, adverse developments in the timing or results of the implementation of
the Business Plan (including the time to emerge from Chapter 11), the
difficulty in controlling industry costs and integrating new operations, the
ability of the OC to realize the anticipated general and administrative
expense savings and overhead reductions contemplated in the Financial
Projections, the ability of OC to maintain profitability of their operations,
the level and nature of any restructuring and other one-time charges, the
difficulty in estimating costs relating to exiting certain markets and
consolidating and closing certain operations, and the possible negative
effects of a change in applicable legislation. See Section V.3 of this
Disclosure Statement.
3. There can be no assurance that the Reorganized Debtors will
be able to refinance certain indebtedness.
Following the Effective Date of the Plan, the Debtors'
working capital needs and letter of credit requirements are anticipated to be
funded under the new Exit Facility. See Section VII.H of this Disclosure
Statement. Obtaining the Exit Facility is a condition precedent to the
Effective Date. There can be no assurance, however, that the Reorganized
Debtors will be able to obtain replacement financing for such facility to fund
future working capital needs and letters of credit, or that replacement
financing, if obtained, would be on terms equally as favorable to the
Reorganized Debtors. Furthermore, there can be no assurance that the
Reorganized Debtors will be able to refinance the Senior Notes upon their
maturity, should such a need arise.
4. Retention of key management and technical personnel may be
important to the future performance of the Reorganized
Debtors.
Many aspects of the business of the Debtors require
personnel with significant experience or technical expertise. In addition, the
past business performance of the Debtors has been achieved, in part, by the
skills of key management personnel who possess very particular knowledge and
expertise relating to the Debtors' business. There can be no assurance that
such personnel can be retained or, that if any such personnel do not continue
in the employ of the Reorganized Debtors, that the Reorganized Debtors will be
able to replace such key personnel.
5. There can be no assurance that Reorganized OCD will pay
dividends.
The Debtors cannot anticipate whether Reorganized OCD will
pay any dividends on the New OCD Common Stock in the foreseeable future. In
addition, restrictive covenants in certain debt instruments to which
Reorganized OCD will be a party, including the Exit Facility, may limit the
ability of Reorganized OCD to pay dividends.
6. The Reorganized Debtors are subject to environmental
regulation and failure to comply with environmental
regulation could harm its business.
The Reorganized Debtors will remain subject to a variety of
environmental laws and regulations governing, among other things, discharges
to air and water, the handling, storage, and disposal of hazardous or solid
waste materials, and may also be required to undertake the remediation of
contamination associated with releases of hazardous substances. Such laws and
regulations and the risk of attendant litigation can cause significant delays
and add significantly to the cost of operations. Violations of these
environmental laws and regulations could subject the Reorganized Debtors and
their management to civil and criminal penalties and other liabilities based
on their post-petition conduct. There can be no assurance that such laws and
regulations will not become more stringent, or more stringently implemented,
in the future.
Various federal, state and local environmental laws and
regulations, as well as common law, may impose liability for property damage
and costs of investigation and cleanup of hazardous or toxic substances on
property currently or previously owned by the Debtors or arising out of the
Debtors' waste management activities. Such laws may impose responsibility and
liability without regard to knowledge of or causation of the presence of the
contaminants, and the liability under such laws is joint and several. The
Debtors have potential liabilities associated with their past waste disposal
activities and with their current and prior ownership of certain property. In
general, the Debtors believe that the likely amount of such liabilities will
not be material, because the Debtors may have a valid defense to liability
with respect to a given site or the Debtors should only be responsible for a
small percentage of the total cleanup costs with respect to a given site.
However, because liability under such laws is joint and several, no assurances
can be given that the Reorganized Debtors will not eventually be responsible
for all or a substantial portion of the liabilities associated with one or
more of these sites, which liabilities could be material either individually
or in the aggregate.
7. The IRS may challenge OC, OC's tax reserves may be
insufficient and any revision to these reserves may
adversely affect OC's financial position.
In accordance with generally accepted accounting principles,
OC maintains tax reserves to cover audit issues. While OC believes that the
existing reserves are appropriate in light of the audit issues involved, its
defenses, its prior experience in resolving audit issues, and its ability to
realize certain challenged deductions in subsequent tax returns if the IRS
were successful, there can be no assurance that such reserves will be
sufficient. OC will continue to review its tax reserves on a periodic basis
and make such adjustments as may be appropriate. Any such revision could be
material to OC's consolidated financial position and results of operations in
any given period.
8. The performance of OC's business reflects the impact of
business cycles.
Sales of OC's products are correlated to business activity
in the new construction and remodeling markets, which are highly sensitive to
national and regional economic conditions. From time to time, the construction
industry has been adversely affected in various parts of the country by
unfavorable economic conditions, low use of manufacturing capacity, high
vacancy rates, changes in tax laws affecting the real estate industry, high
interest rates and the unavailability of financing. In addition, sales of OC's
products may be adversely affected by weakness in demand within particular
customer groups or a recession in the general construction industry or in
particular geographic regions. OC cannot predict the timing or severity of
future economic or industry downturns. Any economic downturn, particularly in
states where many of OC's sales are made, could have a material adverse effect
on its results of operations and financial condition.
9. Particular risks involving international operations may
affect the performance of the Reorganized Debtors.
OC pursues project opportunities throughout the world
through foreign and domestic subsidiaries as well as agreements with foreign
joint-venture partners. These foreign operations are subject to special risks,
including: uncertain political and economic environments, potential
incompatibility with foreign joint-venture partners, foreign currency controls
and fluctuations, war and military operations, civil disturbances and labor
strikes.
XVI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN
The Debtors believe that the Plan affords holders of Claims the
potential for the greatest realization on the Debtors' assets and, therefore,
is in the best interests of such holders.
If, however, the requisite acceptances are not received, or the Plan
is not subsequently confirmed and consummated, the theoretical alternatives
include: (a) formulation of an alternative plan or plans of reorganization, or
(b) liquidation of the Debtors under Chapter 7 or 11 of the Bankruptcy Code.
A. Alternative Plan(s) of Reorganization or Liquidation
If the requisite acceptances are not received by the Voting Deadline
or if the Plan is not confirmed, the Debtors (or, if the Debtors' exclusive
periods in which to file and solicit acceptances of a plan of reorganization
have expired, any other party-in-interest) could attempt to formulate and
propose a different plan or plans of reorganization. Such a plan or plan(s)
might involve either a reorganization and continuation of the Debtors'
businesses or an orderly liquidation of the Debtors' assets.
With respect to an alternative plan, the Debtors have explored
various alternatives in connection with the formulation and development of the
Plan. The Debtors believe that the Plan enables the holders of Claims against
the Debtors to realize the greatest possible value under the circumstances,
and that, as compared to any alternative plan of reorganization, the Plan has
the greatest chance to be confirmed and consummated.
B. Liquidation Under Chapter 7 or Chapter 11
If no plan is confirmed, the Chapter 11 Cases may be converted to
cases under Chapter 7 of the Bankruptcy Code, pursuant to which a trustee
would be elected or appointed to liquidate the Debtors' assets for
distribution to claimants in accordance with the priorities established by the
Bankruptcy Code. It is impossible to predict precisely how the proceeds of the
liquidation would be distributed to the respective holders of Claims against
or Interests in the Debtors.
The Debtors believe that in a liquidation under Chapter 7, before
claimants receive any distribution, additional administrative expenses arising
from the appointment of a trustee or trustees and attorneys, accountants and
other professionals to assist such trustees would cause a substantial
diminution in the value of the Debtors' Estates. The assets available for
distribution to claimants would be reduced by such additional expenses and by
Claims, some of which would be entitled to priority, arising by reason of the
liquidation and from the rejection of leases and other executory contracts in
connection with the cessation of operations and the failure to realize the
greater going concern value of the Debtors' Estates.
The Debtors could also be liquidated pursuant to the provisions of a
Chapter 11 plan of reorganization. In a liquidation under Chapter 11, the
Debtors' assets could be sold in an orderly fashion over a more extended
period of time than in a liquidation under Chapter 7. Thus, a Chapter 11
liquidation might result in larger recoveries than in a Chapter 7 liquidation,
but the delay in distributions could result in lower present values received
and higher administrative costs. Because a trustee is not required in a
Chapter 11 case, expenses for professional fees could be lower than in a
Chapter 7 case, in which a trustee must be appointed. Any distribution to the
holders of Claims under a Chapter 11 liquidation plan probably would be
delayed substantially. Moreover, without the support of the holders of
Asbestos Personal Injury Claims, the purchaser or purchasers of assets from
the Debtors would not be assured the protection from liability for
asbestos-related claims available under Section 524(g) of the Bankruptcy Code,
thus potentially diminishing the value of such assets in a sale under Chapter
11.
The Debtors believe that any alternative liquidation under Chapter
11, if feasible at all, is a much less attractive alternative to creditors
than the Plan. THE COMPANY BELIEVES THAT THE PLAN AFFORDS SUBSTANTIALLY
GREATER BENEFITS TO CREDITORS THAN WOULD A LIQUIDATION UNDER CHAPTER 7 OR
CHAPTER 11 OF THE BANKRUPTCY CODE.
The Liquidation Analysis, prepared by the Debtors with the assistance
of Lazard, is premised upon a liquidation in a Chapter 7 case. In the
analysis, the Debtors have taken into account the nature, status, and
underlying value of their assets, the ultimate realizable value of such
assets, and the extent to which the assets are subject to liens and security
interests.
The likely form of any liquidation would be the sale of individual
assets. Based on this analysis, it is likely that a liquidation of the
Debtors' assets would produce less value for distribution to creditors than
that recoverable in each instance under the Plan. In the Debtors' opinion, the
recoveries projected to be available in liquidation are not likely to afford
holders of Claims as great a realization potential as does the Plan.
Because the Unsecured Creditors' Committee contends that the
liquidation analysis is not permitted to assume any payment to future asbestos
claimants in a Chapter 7 liquidation, and based on certain other assumptions,
the Unsecured Creditors' Committee contends that creditors would receive more
in a Chapter 7 liquidation than under the Plan. Therefore, the Unsecured
Creditors' Committee contends that the Plan fails to satisfy the "best
interests test" of Section 1129(a)(7).The Plan Proponents and Lazard disagree
with this analysis. For a more detailed discussion of this dispute, see
Appendix C to this Disclosure Statement. The Bankruptcy Court or the District
Court will determine, in conjunction with confirmation, whether the Plan
satisfies the "best interests test" of Section 1129(a)(7).
XVII. THE SOLICITATION; VOTING PROCEDURE
The Bankruptcy Court may confirm the Plan only if it determines that
the Plan complies with the technical requirements of Chapter 11 of the
Bankruptcy Code and that the disclosures by the Debtors concerning the Plan
have been adequate and have included information concerning all payments made
or to be made in connection with the Plan and the Chapter 11 Cases. In
addition, the Bankruptcy Court must determine that the Plan has been proposed
in good faith and not by any means forbidden by law and, under Rule 3020(b)(2)
of the Bankruptcy Rules, it may do so without receiving evidence if no
objection is timely filed.
In particular, the Bankruptcy Code requires the Bankruptcy Court to
find, among other things, that (a) the Plan has been accepted by the requisite
votes of the Classes of Impaired Claims unless approval will be sought under
Section 1129(b) of the Bankruptcy Code despite the dissent of one or more such
classes, which will be the case under the Plan, (b) the Plan is "feasible,"
which means that there is a reasonable probability that confirmation of the
Plan will not be followed by liquidation or the need for further financial
reorganization, and (c) the Plan is in the "best interests" of all holders of
Claims and Interests, which means that such holders will receive at least as
much under the Plan as they would receive in a liquidation under Chapter 7 of
the Bankruptcy Code. The Bankruptcy Court must find that all conditions
mentioned above are met before it can confirm the Plan. Thus, even if all
Classes of Impaired Claims and Interests accept the Plan by the requisite
votes, the Bankruptcy Court must make an independent finding that the Plan
conforms to the requirements of the Bankruptcy Code, that the Plan is
feasible, and that the Plan is in the best interests of the holders of Claims
against, and Interests in, the Debtors. These statutory conditions to
confirmation are discussed above.
By Order dated __________ (the "Voting Procedures Order") , the Court
has approved certain Voting Procedures which govern, among other things, the
manner in which votes on the Plan will be solicited and Ballots and Master
Ballots on the Plan tabulated. A copy of the Voting Procedures is attached
hereto as Appendix H. For further information regarding Voting Procedures and
rules concerning the calculation of the amount of Claims voting in a Class of
Claims, see Section XIV.B of this Disclosure Statement entitled "Feasibility
of the Plan and Best Interests of Creditors-Acceptance of the Plan."
A. Parties in Interest Entitled to Vote
Under Section 1124 of the Bankruptcy Code, a class of claims or
interests is deemed to be impaired under a Plan unless (1) the Plan leaves
unaltered the legal, equitable, and contractual rights to which such claim or
interest entitles the holder thereof or (2) notwithstanding any legal right to
an accelerated payment of such claim or interest, the plan cures all existing
defaults (other than defaults resulting from the occurrence of events of
bankruptcy) and reinstates the maturity of such claim or interest as it
existed before the default.
In general, a holder of a claim or interest may vote to accept or to
reject a plan if (1) the claim or interest is allowed, which means generally
that no party in interest has objected to such claim or interest, and (2) the
claim or interest is impaired by the plan. If the holder of an impaired claim
or interest will not receive or retain any distribution under the plan in
respect of such claim or interest, the Bankruptcy Code deems such holder to
have rejected the plan. If the claim or interest is not impaired, the
Bankruptcy Code deems that the holder of such claim or interest has accepted
the plan and the plan proponent need not solicit such holder's vote.
The holder of a Claim against a Debtor that is Impaired under the
Plan is entitled to vote to accept or reject the Plan if (i) the Plan provides
a distribution in respect to such Claim and (ii) (a) the Claim has been
Scheduled by the Debtors (and such claim is not Scheduled at zero or as
disputed, contingent, or unliquidated) or (b) it has filed a Proof of Claim on
or before the bar date applicable to such holder, pursuant to Sections 502(a)
and 1126(a) of the Bankruptcy Code and Bankruptcy Rules 3003 and 3018. Any
Claim as to which an objection has been timely filed and has not been
withdrawn or dismissed or denied by Final Order is not entitled to vote unless
the Bankruptcy Court, pursuant to Federal Rule of Bankruptcy Procedure
3018(a), upon application of the holder of the Claim with respect to which
there has been objection, temporarily allows the Claim in an amount that the
Bankruptcy Court deems proper for the purpose of accepting or rejecting the
Plan.
A vote may be disregarded if the Bankruptcy Court determines,
pursuant to Section 1126(e) of the Bankruptcy Code, that it was not solicited
or procured in good faith or in accordance with the provisions of the
Bankruptcy Code. The Voting Procedures Order also sets forth assumptions and
procedures for tabulating Ballots that are not completed fully or correctly.
B. Classes Impaired under the Plan
Classes 3, 4, 5, 6, 7, 8, and 9 are entitled to vote to accept or
reject the Plan. By operation of law, each Unimpaired Class of Claims is
deemed to have accepted the Plan and, therefore, is not entitled to vote to
accept or reject the Plan. The Plan provides that the holders of Intercompany
Claims in Class 10, Subordinated Claims in Class 11, and OCD Interests in
Class 12 will not receive any distributions of property or retain any interest
in the Debtors. By operation of law, Classes 10, 11 and 12, therefore, are
deemed to have rejected the Plan and therefore are not entitled to vote to
accept or reject the Plan.
C. Waivers of Defects, Irregularities, etc.
Unless otherwise directed by the Bankruptcy Court, all questions as
to the validity, form, eligibility (including time of receipt), acceptance,
and revocation or withdrawal of Ballots or Master Ballots will be determined
by the Voting Agent or the Special Voting Agent, as applicable, and the
Debtors in accordance with the Voting Procedures in their sole discretion,
which determination will be final and binding. The Debtors also reserve the
right to reject any and all Ballots and Master Ballots not in proper form, the
acceptance of which would, in the opinion of the Debtors or their counsel, be
unlawful. The Debtors further reserve the right to waive any defects or
irregularities or conditions of delivery as to any particular Ballot or Master
Ballot.
D. Withdrawal of Ballots; Revocation
Any party who has delivered a valid Ballot or Master Ballot for the
acceptance or rejection of the Plan may withdraw such acceptance or rejection
by delivering a written notice of withdrawal to the Voting Agent or Special
Voting Agent, as applicable, at any time prior to the Voting Deadline in
accordance with the Voting Procedures. The Debtors intend to consult with the
Voting Agent or Special Voting Agent to determine whether any withdrawals of
Ballots or Master Ballots were received and whether the requisite acceptances
of the Plan have been received. As stated above, the Debtors expressly reserve
the absolute right to contest the validity of any such withdrawals of Ballots
and Master Ballots.
E. Further Information; Additional Copies
If you have any questions about (1) the Voting Procedures for voting
your Claim or Interest or with respect to the packet of materials that you
have received or (2) the amount of your Claim, or if you wish to obtain, at
your own expense, unless otherwise specifically required by Federal Rule of
Bankruptcy Procedure 3017(d), an additional copy of the Plan, this Disclosure
Statement or any appendices or Exhibits to such documents, please contact:
OWENS CORNING
c/o Robert L. Berger & Associates, L.L.C.
16501 Ventura Blvd., Suite 440
Encino, CA 91436
818-906-8300 (phone)
818-783-2737 (fax)
XVIII. RECOMMENDATION AND CONCLUSION
For all of the reasons set forth in this Disclosure Statement, the
Plan Proponents believe that confirmation and consummation of the Plan is
preferable to all other alternatives. Consequently, the Plan Proponents urge
all holders of Classes 3, 4, 5, 6, 7, 8, and 9 Allowed Claims to vote to
ACCEPT the Plan, and to complete and return their Ballots or Master Ballots so
that they will be actually 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: August 8, 2003
OWENS CORNING, et al.
(for itself and on behalf of the
Subsidiary Debtors)
By: /s/ Stephen Krull
_______________________________
Name: Stephen Krull
Title: Senior Vice President
and General Counsel
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
Jay A. Shulman and Debtors-in-Possession
Edith K. Altice
100 South Charles Street
Baltimore, MD 21201-2773
(410) 332-8600
Adam H. Isenberg COVINGTON & BURLING
MaryJo Bellew 1201 Pennsylvania Avenue, N.W.
Centre Square West Mitchell F. Dolin
1500 Market Street, 38th Floor Anna P. Engh
Philadelphia, PA 19102-2186 Washington, D.C. 20004-2401
(215) 972-7777 (202) 662-6000
Attorneys for the Debtors and Special Insurance Counsel to Debtors
Debtors-in-Possession and Debtors-in-Possession
KAYE SCHOLER LLP CAPLIN & DRYSDALE, CHARTERED
Michael J. Crames Elihu Inselbuch
Jane W. Parver 399 Park Avenue
Andrew A. Kress New York, NY 10022
Edmund M. Emrich (212) 319-7125
425 Park Avenue
New York, NY 10022 Peter Van N. Lockwood
(212) 836-8000 Julie W. Davis
One Thomas Circle, N.W.
YOUNG, CONAWAY, Washington, D.C. 20005
STARGATT & TAYLOR LLP (202) 862-5000
James L. Patton, Jr. (I.D. # 2202)
Edwin J. Harron (I.D. # 3396) CAMPBELL & LEVINE, LLC
The Brandywine Building Marla Eskin (I.D. # 2989)
1000 West Street, 17th Floor Mark T. Hurford (I.D. # 3299)
Wilmington, DE 19899-0391 800 King Street
(302) 571-6600 Wilmington, DE 19801
(302) 426-1900
Attorneys for James J. McMonagle, Attorneys for the Official
Legal Representative for Future Claimants Committee of Asbestos Claimants
TABLE OF APPENDICES
APPENDIX NAME
Appendix A Third Amended Joint Plan of Reorganization of
Owens Corning and its Affiliated Debtors and
Debtors-in-Possession, dated as of August 8, 2003
Appendix A-1 Glossary of Additional Terms
Appendix B Pro Forma Financial Projections and Reorganization
Balance Sheet
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
Appendix H Voting Procedures [THIS DOCUMENT WILL BE INSERTED
UPON APPROVAL OF VOTING PROCEDURES]
APPENDIX A
THIRD AMENDED JOINT PLAN OF
REORGANIZATION OF OWENS CORNING AND
ITS AFFILIATED DEBTORS AND
DEBTORS-IN-POSSESSION, DATED AS OF
AUGUST 8, 2003
(See Exhibit 2 to the Current Report on Form 8-K,
filed by Owens Corning on August 8, 2003.)
APPENDIX A-1
GLOSSARY OF ADDITIONAL TERMS
GLOSSARY OF ADDITIONAL TERMS
"ADDITIONAL SITES" means, in connection with the draft Environmental Settlement
Agreement between the Debtors and the EPA, those waste disposal sites used by
the Debtors before the Petition Date that are not discovered until after
confirmation of the Plan or where the Debtors' use of the site has been
confirmed but an allocable share of liability cannot yet be determined.
"ADMINISTRATIVE DEPOSITS" means those amounts deposited by OCD and Fibreboard
prior to the Petition date in settlement accounts to facilitate claims
processing under the NSP.
"ANNUAL SECTION 382 LIMITATION" means certain rules under Section 382 of the
IRC limiting the ability of corporate taxpayers to utilize NOLs when there has
been an "ownership change."
"ARMSTRONG" means Armstrong World Industries, Inc.
"B&B" means Baron & Budd, P.C., a law firm which was a participant in the NSP.
"BANKRUPTCY EXCEPTION" means the exception to the application of the Annual
Section 382 Limitation provided for in Section 382(l)(5) of the IRC when a
corporation is under the jurisdiction of a court in a Title 11 case.
"CASH MANAGEMENT MOTION" means the motion filed by the Debtors on October 6,
2000 for interim and final orders (1) authorizing (a) the maintenance of
certain existing bank accounts, (b) the continued use of existing business
forms, (c) the use of a modified cash management system and (d) the transfer of
funds to Non-Debtor Subsidiaries and (2) waiving certain investment and deposit
requirements of Section 345(b) of the Bankruptcy Code.
"CASE MANAGEMENT ORDER" means the order of the Honorable Alfred M. Wolin of the
United States District Court for the District of New Jersey (sitting by
designation), dated December 23, 2002, which, among other things, withdrew the
reference with respect to the Bank Holders Action and the Substantive
Consolidation Motion.
"CHINA LENDERS" means KBC Bank, N.V., Standard Chartered Bank and Societe
Generale.
"CHINA STANDSTILL AGREEMENT" means the Standstill and Amendment Agreement
entered into between OCD, Owens-Corning (Guangzhou) Fiberglas Co., Ltd.,
Owens-Corning (Shanghai) Fiberglas Co., Ltd. and the China Lenders, of which
the Bankruptcy Court authorized execution on December 9, 2002.
"CLAIMS AGENT" means Robert L. Berger & Associates, L.L.C., appointed by the
Bankruptcy Court pursuant to 28 U.S.C. ss. 156(c).
"CLEAN WATER ACT" means The Federal Water Pollution Control Act, 33 U.S.C.S.
ss.ss. 1251 et seq.
"COMPANY" means OCD and its Subsidiaries.
"CONSULTANTS ORDER" means the order of the District Court, dated December 28,
2001, appointing the Court Appointed Consultants.
"CONTINENTAL" means Continental Casualty Company.
"COURT APPOINTED CONSULTANTS" means William A. Drier, Esq., David R. Gross,
Esq., C. Judson Hamlin, Esq., John E. Keefe, Esq., and Professor Francis E.
McGovern, being the consultants appointed by the District Court to advise the
District Court and to undertake certain duties in connection with the Chapter
11 cases of the Debtors and the cases of Armstrong World Industries, Inc., W.R.
Grace & Co., Federal-Mogul Global, Inc. and USG Corporation.
"CRITICAL VENDOR ORDER" means the order of the Bankruptcy Court, dated October
6, 2000, which authorized, but did not require, the Debtors to pay the
pre-petition claims of certain critical suppliers of raw and processed
materials, goods and services with whom the Debtors continued to do business
and whose material, goods and services were essential to the Debtors' business
operations.
"CURRENTLY DISPUTED CLAIMS" means those Proofs of Claim that the Debtors have
identified which they believe should be disallowed by the Bankruptcy Court,
primarily because such claims appear to be duplicate or amended claims or
claims that are not related to any of the Debtors' cases.
"DESIGNATED MEMBERS" means the Bondholders and trade creditor members of the
Unsecured Creditors' Committee.
"DIP ORDER" means the Final Order Authorizing Post-Petition Financing on a
Superpriority Administrative Claim Basis Pursuant to 11 U.S.C. ss. 364(c)(1)
and Granting Relief from the Automatic Stay Pursuant to 11 U.S.C. ss. 362,
approved by the Bankruptcy Court on November 17, 2000, which, among other
things, authorized the Debtors to obtain the DIP Facility from the DIP Lenders.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
29 U.S.C. ss.ss. 1301-1462.
"EXCESS RECOVERIES" means Excess Available Cash, Excess Senior Notes Amount,
Excess New OCD Common Stock and Excess Litigation Trust Recoveries.
"EXCLUSIVE PERIOD" means the period during which the Debtors have the exclusive
right to file a plan of reorganization under Section 1121(b) of the Bankruptcy
Code.
"FEE AUDITOR" means Warren H. Smith & Associates, P.C., appointed by the
Bankruptcy Court to act as a special consultant to the Court for professional
fee and expense review and analysis.
"FINAL CMO" means the final cash management order approved by the Bankruptcy
Court, which became effective on February 25, 2002 and is to continue in effect
until confirmation of the Plan.
"FINAL NSP SETTLEMENTS" means the approximately 150,000 Initial Claims which,
as of the Petition Date, had satisfied all conditions to final settlement,
including receipt of executed releases, or other resolution.
"FINANCIAL PROJECTIONS" means certain financial information with respect to the
projected future operations of OC, attached as Appendix B to the Disclosure
Statement.
"FUTURE CLAIMANTS' MOTION" means the motion filed by the Future Claimants'
Representative on September 6, 2002, for an order authorizing the Future
Claimants' Representative (either alone or in combination with other creditor
constituencies) to commence certain avoidance actions on behalf of the Debtors'
Estates under Sections 544, 545, 547, 548 and/or 553 of the Bankruptcy Code.
"GENERAL BAR DATE" means April 15, 2002, as the date set by the Bankruptcy
Court as the last date by which holders of certain pre-petition Claims against
the Debtors were required to file Proofs of Claim.
"GENERAL CLAIMS" means the approximately 5,500 claims, totaling approximately
$5.6 billion, alleging rights to payment for financial, environmental, trade
and other matters.
"HANCOCK LITIGATION" means the securities-related class action lawsuit pending
in the United States District Court for the District of Massachusetts,
commenced on or about April 30, 2001, on behalf of purchasers of certain
securities against certain of OCD's current and former directors and officers,
as well as certain underwriters, and captioned John Hancock Life Insurance
Company, et al. v. Goldman, Sachs & Co., et al., CA No. 01-10729-RWZ.
"INITIAL CLAIMS" means those claims relating to existing asbestos claims,
including unfiled claims pending with the law firm participating in the NSP at
the time it entered into an NSP Agreement, which claims were resolved pursuant
to the NSP Agreement.
"INFORMATION DEPOSITORY" means the information and document depository
established by the Debtors at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP in New York City in connection with the Inter-creditor Project.
"INSURANCE SETTLEMENT" means the insurance settlement entered into in 1993 by
Fibreboard, Continental Casualty Company and Pacific Indemnity Company, which
became effective in 1999.
"INTEGREX" means Integrex, a Delaware corporation, which is a Debtor and a
Subsidiary Guarantor.
"INTER-CREDITOR ISSUES" means potential inter-creditor issues, including any
and all claims, objections, motions, contested matters, adversary proceedings
or any other proceedings involving, related to or affecting issues of the
amount, validity, enforceability or priority of Claims by the Bank Holders
against any of the Debtors or any Non-Debtor Subsidiary (to the extent the
Bankruptcy Court has jurisdiction to affect the Claims against Non-Debtor
Subsidiaries) which is a Subsidiary Guarantor of the Debtors' obligations to
the Bank Holders, including without limitation: (1) any claims relating to
substantive consolidation of the Debtors; (2) any claims relating to the
validity, enforcement or priority of the Pre-petition Bonds; (3) any claims
relating to the validity or enforceability of a License Agreement, dated as
October 1, 1991, by and between OCD and OCFT (as amended) and a License
Agreement, dated as of April 27, 1999, by and between OCFT and Amerimark
Building Products, Inc.; (4) any claims regarding the amount, validity,
enforceability or priority of the Subsidiary Guarantees; (5) any claims against
any direct or indirect Subsidiary of OCD in respect of OCD's asbestos
liability; and (6) any claims as to the amount, validity, enforceability,
priority or avoidability of any intercompany transfers.
"INTER-CREDITOR ISSUES ORDER" means the order of the Bankruptcy Court, dated
March 18, 2002, which established a schedule for addressing the resolution of
Inter-Creditor Issues.
"INTER-CREDITOR PROJECT" means the Debtors' voluntary production of a
documentary record designed to be a compilation of relevant documents that
would be useful in reviewing and investigating each Debtor or Subsidiary
Guarantor's corporate history, major creditor relationships, and significant
cash and value transfers in connection with the analysis of the Inter-Creditor
Issues.
"INVESTMENT PROCEEDS" means any investment income from the funds in settlement
accounts maintained by B&B pursuant to a certain settlement agreement between
OCD, Fibreboard and B&B which required OCD and Fibreboard to pay Administrative
Deposits into such settlement accounts.
"LAZARD" means Lazard Freres & Co. LLC, the investment banker and financial
advisor to the Debtors.
"LIQUIDATED SITES" means the existing known sites at which waste materials of
the Debtors were disposed before the Petition Date, for which the draft
Environmental Settlement Agreement between the Debtors and the EPA quantifies
liability as Pre-petition Claims, with respect to some of which the EPA would
have an Allowed Class 6 Claim.
"LIQUIDATION ANALYSIS" means the analysis prepared by Lazard and attached to
the Disclosure Statement as Appendix C, subject in all respects to the
assumptions set forth in Appendix D attached to the Disclosure Statement,
describing the value that would be received by holders of Allowed Claims in
Classes 3, 4, 5, 6, 7, 8 and 9 if the Debtors were liquidated under Chapter 7
of the Bankruptcy Code as of the Effective Date.
"MEDIATOR" means Professor Francis E. McGovern, appointed as mediator for
certain purposes by the Bankruptcy Court, effective May 1, 2002, and appointed
as mediator pursuant to the Case Management Order for the Bank Holders Action
and Substantive Consolidation Motion.
"MERGED PLAN" means the Owens Corning Merged Retirement Plan.
"NOLS" means net operating losses.
"NON-NSP AGREEMENT" means an agreement, other than an NSP Agreement, between
one or more of the Debtors and one or more holders or representatives of
Asbestos Personal Injury Claims.
"NON-UNITED STATES PERSON" is any person or entity that is not a United States
Person.
"OC AND FIBREBOARD RESIDUAL BALANCE" means the principal balance remaining in
the B&B settlement account, after deducting the Qualifying OC and Fibreboard
Balance.
"OCFT" means Owens-Corning Fiberglas Technology Inc.
"OCIL" means Owens-Corning (India) Limited.
"PACIFIC" means Pacific Indemnity Company.
"PARTICIPATING LENDERS" means those Bank Holders that executed the Standstill
Agreement.
"PARTICIPATING PARTIES" means those parties who, having entered into a
confidentiality agreement with the Company to assure the protection of
privileged and confidential material included in the production of documents to
the Information Depository, were provided access to the materials in the
Information Depository.
"PBGC" means the Pension Benefit Guaranty Corporation, an agency of the United
States.
"PLANT" means Plant Insulation Company.
"PLANT MOTION" means the motion, filed by Plant on September 28, 2001, for an
order appointing a disinterested examiner to conduct an examination of
Fibreboard, including an investigation as to whether Fibreboard assets were
diverted to pay OCD debts.
"PRE-PETITION AGENT" means Credit Suisse First Boston, the agent for the Bank
Holders under the 1997 Credit Agreement.
"PROFESSIONAL FEE CLAIMS" means those final requests for compensation or
reimbursement of the fees of any professional employed in the Chapter 11 Cases
pursuant to Sections 327 or 1103 of the Bankruptcy Code or otherwise, as
described in Section VII.K.5 of the Disclosure Statement and Section 14.1 of
the Plan.
"PRP" means a Potentially Responsible Party, as such term is defined in the
Superfund.
"QUALIFYING OC AND FIBREBOARD BALANCE" means the principal balance of the
settlement payments made by OCD and Fibreboard to B&B, representing amounts due
to the Qualifying OC and Fibreboard Plaintiffs under a certain settlement
agreement between OCD, Fibreboard and B&B.
"QUALIFYING OC AND FIBREBOARD PLAINTIFFS" means those plaintiffs under the NSP
who received written notice of approval for payment from OCD or Fibreboard
prior to the Petition Date pursuant to a certain settlement agreement between
OCD, Fibreboard and B&B, and who received payment of the first installment of
their settlement prior to the Petition Date.
"REVOLVING LOAN FACILITY" means the Loan Facility Agreement, dated March 12,
1998, among the China Lenders, Owens Corning (China) Investment Company, Ltd.,
Owens-Corning (Guangzhou) Fiberglas Co., Ltd., Owens-Corning (Shanghai)
Fiberglas Co., Ltd., as borrowers, and OCD as guarantor.
"SCB" means Standard Chartered Bank, the agent and coordinating arranger for
the Revolving Loan Facility.
"SEC" means the United States Securities and Exchange Commission.
"SETOFF MOTION" means the motion filed in the Bankruptcy Court by the Bank
Holders on February 15, 2002, entitled Motion of Credit Suisse First Boston, as
Agent, for an Order Modifying the Automatic Stay to Permit Setoff of Frozen
Funds, whereby the Bank Holders requested relief from the automatic stay to
exercise setoff rights against 22 frozen bank accounts of certain Debtors and
Non-Debtor Subsidiaries, totaling approximately $35 million.
"SITE PARTICIPATION AGREEMENT" means the pre-petition agreement pursuant to
which the Debtors were obligated for a percentage of the environmental clean-up
costs incurred by the Holliday Remediation Task Force at the Doepke-Holliday
disposal site in Johnson County, Kansas.
"SOLICITATION PERIOD" means the period during which the Debtors have the
exclusive right to solicit and obtain acceptances of a plan of reorganization
filed by the Debtors during the Exclusive Period under Section 1121(c) of the
Bankruptcy Code.
"SPECIAL VOTING AGENT" means Innisfree M&A Incorporated, whom the Debtors have
sought to retain to address notice issues related to securities.
"STANDSTILL ADVERSARY PROCEEDING" means the adversary proceeding commenced by
the Debtors on the Petition Date in the Bankruptcy Court against the Bank
Holders (entitled Owens Corning, et al. v. Credit Suisse First Boston, et al.,
Adv. Proc. No. A-00-1575) to enjoin the Bank Holders from, among other things,
exercising certain rights and remedies under the 1997 Credit Agreement.
"STANDSTILL AGREEMENT" means that certain Standstill and Waiver Agreement
entered into among the Debtors, certain Non-Debtor Subsidiaries and the Bank
Holders party to the 1997 Credit Agreement.
"STANDSTILL AMENDMENT" means the Stipulation and Order to Amend the Standstill
and Waiver Agreement, approved by the Bankruptcy Court on November 25, 2002,
which amended the Standstill Agreement.
"STANDSTILL ORDER" means the order of the Bankruptcy Court, dated June 19,
2001, which, among other things, authorized the Debtors to enter into the
Standstill Agreement and dismissed, without prejudice, the Standstill Adversary
Proceeding.
"SUBSIDIARY GUARANTEES" means the obligations that were incurred by the
Subsidiary Guarantors under the 1997 Credit Agreement.
"SUBSIDIARY GUARANTORS" means the Subsidiaries of OCD that guaranteed the
obligations under the 1997 Credit Agreement.
"SUBSTANTIVE CONSOLIDATION MOTION" means the Debtors' Motion for Approval of
Substantive Consolidation as Part of Proposed Chapter 11 Plan of
Reorganization, which was filed on January 17, 2003.
"SUPERFUND" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, commonly referred to as the Superfund Act,
42 U.S.C. ss. 9601 et seq.
"TAX ATTRIBUTES" means, collectively, NOLs, general business and minimum tax
credit carryforwards, capital loss carryforwards, the basis of the taxpayer's
assets and foreign tax credit tax carryforwards.
"TREASURY REGULATIONS" means those certain proposed, temporary and final
regulations promulgated by the U.S. Treasury Department under the IRC.
"UNSECURED COMMITTEE MOTION" means the motion filed by the Unsecured Creditors'
Committee on September 10, 2002, for an order authorizing it to commence
certain avoidance actions on behalf of the Debtors' Estates.
"UNITED STATES PERSON" means, for purposes of federal income tax consequences
to Claim holders, any person or entity (1) who is a citizen or resident of the
United States, (2) that is a corporation or partnership created or organized in
or under the laws of the United States or any state thereof, (3) that is an
estate, the income of which is subject to United States federal income taxation
regardless of its source or (4) that is a trust (a) the administration over
which a United States person can exercise primary supervision and all of the
substantial decisions of which one or more United States persons have the
authority to control; or (b) that has elected to be treated as a United States
Person for United States federal income tax purposes.
"VOTING AGENT" means Robert L. Berger & Associates, L.L.C., appointed by the
Bankruptcy Court pursuant to 28 U.S.C. ss. 156(c).
"W&K" means Waters & Kraus, LLP, a law firm participating in the NSP, which
filed a response in opposition to the Unsecured Committee Motion.
APPENDIX B
PRO FORMA FINANCIAL PROJECTIONS AND REORGANIZATION BALANCE SHEET
APPENDIX B
PROJECTED FINANCIAL INFORMATION(1)
OWENS CORNING, ET. AL.
The Debtors believe that the Plan meets the Bankruptcy Code's
feasibility requirement that Plan confirmation is not likely to be followed by
liquidation, or the need for further financial reorganization of the Debtors or
any successor under the Plan. In connection with the development of the Plan,
and for the purposes of determining whether the Plan satisfies this feasibility
standard, the Debtors analyzed their ability to satisfy their financial
obligations while maintaining sufficient liquidity and capital resources.
Management, with Lazard's assistance, developed and refined a business plan and
prepared financial projections (the "Projections") for the calendar years
ending December 31, 2003 through 2005 (the "Projection Period").
The Debtors do not, as a matter of course, publish their business
plans and strategies or projections, anticipated financial position or results
of operations. Accordingly, the Debtors do not anticipate that they will, and
disclaim any obligation to, furnish updated business plans or projections to
holders of Claims or Interests after the Confirmation Date, or to include such
information in documents required to be filed with the SEC or otherwise make
such information public.
In connection with the planning and development of the Plan, the
Projections were prepared by the Debtors, with Lazard's assistance, to present
the anticipated impact of the Plan. The Projections assume that the Plan will
be implemented in accordance with its stated terms. The Projections are based
on forecasts of key economic variables and may be significantly affected by
changes in the competitive environment, the Company's ability to create the
efficiency gains it is forecasting, and a variety of other factors.
Accordingly, the estimates and assumptions underlying the Projections are
inherently uncertain and are subject to significant business, economic and
competitive uncertainties. Therefore, such Projections, estimates and
assumptions are not necessarily indicative of current values or future
performance, which may be significantly less favorable or more favorable than
as set forth. The Projections included herein were prepared in June 2003.
The projections should be read in conjunction with the significant
assumptions, qualifications and notes set forth below and with the audited
consolidated financial statements for the fiscal year ended December 31, 2002,
contained in the 2002 Form 10-K, and with Owens Corning's first quarter 2003
Form 10-Q. The Forms 10-K and 10-Q are available free of charge from Owens
Corning's website, www.owenscorning.com.
ALTHOUGH EVERY REASONABLE EFFORT WAS MADE TO BE ACCURATE, THE
PROJECTIONS ARE ONLY AN ESTIMATE, AND ACTUAL RESULTS MAY VARY CONSIDERABLY FROM
THE PROJECTIONS. IN ADDITION, THE UNCERTAINTIES WHICH ARE INHERENT IN THE
PROJECTIONS INCREASE FOR LATER YEARS IN THE PROJECTION PERIOD, DUE TO INCREASED
DIFFICULTY ASSOCIATED WITH FORECASTING LEVELS OF ECONOMIC ACTIVITY AND
PERFORMANCE AT MORE DISTANT POINTS IN THE FUTURE. CONSEQUENTLY, THE PROJECTED
INFORMATION INCLUDED HEREIN SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE
DEBTORS, THE DEBTORS' ADVISORS, OR ANY OTHER PERSON THAT THE DEBTORS WILL
ACHIEVE THE PROJECTED RESULTS. ALTHOUGH EVERY EFFORT WAS MADE TO PREPARE THE
PROJECTIONS IN COMPLIANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, THE
PROJECTIONS HAVE NOT BEEN AUDITED OR REVIEWED BY THE DEBTORS' INDEPENDENT
CERTIFIED ACCOUNTANTS. CREDITORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
THE FOLLOWING PROJECTIONS IN DETERMINING WHETHER TO VOTE TO ACCEPT OR REJECT
THE PLAN.
- -----------------
1 Any capitalized term used but not defined in this Exhibit "B" will
have the meaning ascribed to such term in the Plan.
1. Pro Forma Projected Balance Sheet (Unaudited) (a)
(As of December 31, 2003)
OWENS CORNING AND SUBSIDIARIES REORGANIZATION ADJUSTMENTS
------------------------------
($ in millions) ESTIMATED PRO FORMA
PRE-REORG "FRESH REORGANIZED
BALANCE REORG START" BALANCE
SHEET ADJ. ADJ. SHEET
--------------- -------------- -------------- ---------------
ASSETS:
Cash and equivalents.............................. $ 792 $ (412) (b) - $ 380
Accounts receivable, net.......................... 487 - - 487
Inventories....................................... 358 - 150 (l) 508
Other current assets.............................. 23 - - 23
--------------- -------------- -------------- ---------------
TOTAL CURRENT ASSETS 1,660 (412) 150 1,398
Property, plant and equipment, net................ 1,986 - 250 (m) 2,236
Goodwill.......................................... 133 - (133) (n) -
Intangible assets................................. 16 - - (n) 16
Excess reorganization value....................... - - 914 (n) 914
Debt issuance costs............................... 1 5 (c) - 6
Fibreboard trust and restricted cash.............. 1,399 (1,399) (d) - -
OC restricted cash and insurance escrow........... 170 (170) (e) - -
Deferred tax assets............................... 1,291 - (984) (o) 307
Other non-current assets.......................... 266 - (28) (p) 238
--------------- -------------- -------------- ---------------
TOTAL ASSETS $ 6,922 $ (1,976) $ 170 $ 5,116
=============== ============== ============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable.................................. $ 294 - - $ 294
Accrued liabilities............................... 352 - - 352
New debt - current portion........................ - 23 (f) - 23
Existing debt - short term and current portion.... 95 (74) (g) - 21
Chapter 11 liabilities............................ 63 (63) (h) - -
--------------- -------------- -------------- ---------------
TOTAL CURRENT LIABILITIES 804 (114) - 690
New debt.......................................... - 1,374 (f) - 1,374
Existing debt..................................... 82 - (g) - 82
Liabilities subject to compromise................. 9,272 (9,272) (i) - -
--------------- -------------- -------------- ---------------
TOTAL LONG TERM DEBT 9,354 (7,898) - 1,456
Pension plan liabilities.......................... 306 - - 306
Post-retirement benefit liabilities............... 398 - 135 (q) 533
Other non-current liabilities..................... 131 - - 131
--------------- -------------- -------------- ---------------
TOTAL LIABILITIES 10,993 (8,013) 135 3,116
Monthly income preferred securities (MIPS)........ 200 (200) (j) - -
Shareholders' equity.............................. (4,271) 6,236 (k) 35 (k) 2,000
--------------- -------------- -------------- ---------------
TOTAL LIAB. AND SHAREHOLDERS' EQUITY $ 6,922 $ (1,976) $ 170 $ 5,116
=============== ============== ============== ===============
NOTES TO PRO FORMA PROJECTED BALANCE SHEET
a. The pro forma balance sheet adjustments contained herein account for
(i) the reorganization and related transactions pursuant to the Plan
of Reorganization, and (ii) the implementation of "fresh start"
accounting pursuant to Statement of Position 90-7 ("SOP 90-7") as
issued by the American Institute of Certified Public Accountants (the
"AICPA"). The fresh start adjustments are based on an estimated
Reorganized Owens Corning equity value of $2.0 billion as more fully
described in the Disclosure Statement (see Section XIV.E - Valuation
of the Reorganized Debtors). Under SOP 90-7, reorganization value is
generally allocated first to tangible assets, then to identifiable
intangible assets, and lastly to excess reorganization value. Please
note that although management has followed the principles of fresh
start accounting, the actual adjustments will be determined at a later
date and may be materially different from those presented herein upon
completion of the required asset appraisals.
b. The Company's cash and cash equivalents reflects the use of $412
million to implement the Plan of Reorganization. This amount includes
(i) $372 million to be distributed pursuant to the Plan, (ii) an
estimated $5 million for the Exit Facility fees, and (iii) $35 million
for employee retention and emergence payments previously approved by
the Court. The balance of $380 million at the Effective Date will be
used to fund working capital requirements (estimated to be up to $200
million during the first and second quarters, consistent with
historical requirements) and to fund an anticipated $177 million
pension plan payment in September 2004.
c. The Company is projected to incur estimated debt issuance costs of $5
million related to the Exit Facility which will replace the existing
debtor-in-possession financing.
d. The Fibreboard Insurance Settlement Trust and Fibreboard Restricted
Cash will be transferred to the Asbestos Personal Injury Trust or
otherwise distributed pursuant to the Plan.
e. The OCD Restricted Cash and the OCD Insurance Escrow will be
transferred to the Asbestos Personal Injury Trust or otherwise
distributed pursuant to the Plan.
f. Approximately $1.4 billion of new debt will be issued pursuant to the
Plan. It is anticipated that new debt will include Senior Notes (in
one or more series - to be determined) less the aggregate principal
amount of the debt issued to the IRS for their Allowed Priority Tax
Claim. In addition, it is anticipated that the Debtors will obtain an
Exit Facility as of the Effective Date (no amounts are projected to be
outstanding at emergence or at year-end during the projection period
other than letters of credit).
g. Existing debt includes debt owed primarily by Non-Debtor Foreign
Subsidiaries including consolidated joint ventures. A portion of the
existing debt will be discharged pursuant to the Plan.
h. This adjustment reflects payment of Chapter 11 related accrued
expenses pursuant to the Plan, including professional fees ($28
million) and employee retention and emergence bonuses ($35 million)
previously approved by the Court.
i. The Debtors liabilities subject to compromise, including the asbestos
related liabilities, will be eliminated at emergence pursuant to the
Plan's discharge, channeling injunction, and other injunction
provisions. For purposes of these projections, the liabilities subject
to compromise related to asbestos liabilities reflects the Debtors
current reserve amount of $5.874 billion (for both Owens Corning and
Fibreboard). It is currently anticipated that the asbestos liability
will be determined as a result of negotiations involving the various
asbestos and creditor constituencies or, if necessary, the Bankruptcy
Court or District Court. At this time, it is not possible to predict
the outcome of these negotiations. Given the nature of the Chapter 11
proceedings, the asbestos liability ultimately established in the
Chapter 11 proceedings may be higher or lower than the Company's
reserve (see Section IV.D.1 and 2 for additional information on the
asbestos liability and related reserve).
j. The Debtors' Monthly Income Preferred Securities (MIPS) will be
discharged at emergence pursuant to the Plan.
k. The increase in shareholders' equity reflects the gain from the
cancellation of indebtedness pursuant to the Plan. New Common Stock of
Reorganized Owens Corning will be issued with an estimated value of
$2.0 billion, prior to dilution for any options issued to management.
The existing Owens Corning Common Stock will be cancelled pursuant to
the Plan.
l. In adjusting the balance sheet accounts to fair market value in
accordance with SOP 90-7, the Company's preliminary estimate indicates
that Inventories should be increased by $150 million to approximate
fair market value.
m. In adjusting the balance sheet accounts to fair market value in
accordance with SOP 90-7, the Company's preliminary estimate indicates
that PP&E should be increased by $250 million to approximate fair
market value. The Company estimates that this adjustment will result
in a $20 million annual increase in depreciation expense. The actual
fresh start adjustment to PP&E will be determined at a later date
following the completion of asset appraisals.
n. In accordance with SOP 90-7, existing goodwill is eliminated and
excess reorganization value is recorded for amounts in excess of value
allocable to identifiable assets. It is likely that a portion of
excess reorganization value will be allocated to intangible assets
following an appraisal of the Company's intangible assets.
o. As described more fully in Section XIII entitled "CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN," it is expected
that Reorganized OC will receive tax deductions for cash and the value
of stock distributed to the Asbestos Personal Injury Trust upon such
distribution. With respect to debt securities distributed to the
Asbestos Personal Injury Trust, tax deductions are taken as the debt
securities are repaid. These tax deductions may result in tax net
operating loss carryovers ("NOLs"). The NOL carryovers may be reduced
by the amount of debt cancellation (excluding asbestos liabilities)
including certain other pre-petition liabilities cancelled in the
reorganization. Based upon numerous assumptions, the Debtors estimate
that Reorganized OC will have deferred tax assets of approximately
$307 million at emergence.
p. Based on a fiscal year-end 2002 actuarial valuation, a $135 million
adjustment is required to record post-retirement benefits liability at
fair value, in accordance with SOP 90-7.
2. Projected Statements of Operations (Unaudited)
OWENS CORNING AND SUBSIDIARIES PROJECTED
FISCAL YEAR ENDED DECEMBER 31,
--------------------------------------------------
($ in millions)
2003 2004 2005
------------- -------------- ---------------
Net sales................................................... $ 5,051 $ 5,123 $ 5,461
Cost of sales............................................... 4,139 4,159 4,384
Other cost of sales......................................... 27 44 -
------------- -------------- ---------------
GROSS PROFIT 885 920 1,077
Marketing and administrative expenses....................... 473 461 492
Science and technology expenses............................. 44 43 44
Chapter 11 reorganization items............................. 103 15 -
Restructuring costs ........................................ 2 - -
Provision for asbestos claims............................... - - -
Other expenses.............................................. 5 10 10
------------- -------------- ---------------
INCOME FROM OPERATIONS 258 391 530
Cost of borrowed funds, net................................. 17 90 85
------------- -------------- ---------------
INCOME BEFORE TAXES 241 301 445
Income tax expense ......................................... 103 121 178
------------- -------------- ---------------
INCOME AFTER TAXES 138 180 267
Minority interest .......................................... (6) (3) (3)
Equity in net income (loss) of affiliates................... (2) (2) (2)
------------- -------------- ---------------
NET INCOME (A) $ 130 $ 176 $ 263
------------- -------------- ---------------
MEMO:
INCOME FROM OPERATIONS 258 391 530
Plus: Other cost of sales................................... 27 44 -
Plus: Chapter 11 reorganization items....................... 103 15 -
Plus: Restructuring costs................................... 2 - -
------------- -------------- ---------------
ADJUSTED INCOME FROM OPERATIONS (b) 390 450 530
Plus: Depreciation and amortization......................... 209 241 249
------------- -------------- ---------------
ADJUSTED EBITDA (c) $ 599 $ 691 $ 779
------------- -------------- ---------------
(a) Net income for 2003 before gain on debt discharge
(b) Adjusted to exclude non-recurring items (see attached assumptions)
(c) Earnings before interest, taxes, depreciation and amortization
3. Projected Balance Sheets (Unaudited)
OWENS CORNING AND SUBSIDIARIES PROJECTED
FISCAL YEAR ENDED DECEMBER 31
----------------------------------------------------
($ in millions) 2003* 2004 2005
ASSETS:
Cash and equivalents.............................. $ 380 $ 470 $ 704
Accounts receivable, net.......................... 487 478 509
Inventories....................................... 508 489 521
Other current assets.............................. 23 23 23
---------------- --------------- ----------------
TOTAL CURRENT ASSETS 1,398 1,461 1,757
Property, plant and equipment, net................ 2,236 2,218 2,198
Intangible assets................................. 16 16 16
Excess reorganization value....................... 914 914 914
Debt issuance costs............................... 6 5 3
Deferred tax assets............................... 307 306 295
Other non-current assets.......................... 238 241 257
---------------- --------------- ----------------
TOTAL ASSETS $ 5,116 $ 5,161 $ 5,441
================ =============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable.................................. $ 294 $ 292 $ 310
Accrued liabilities............................... 352 344 336
New debt - current portion........................ 23 23 23
Existing debt - current portion................... 21 33 16
---------------- --------------- ----------------
TOTAL CURRENT LIABILITIES 690 692 685
New debt.......................................... 1,374 1,351 1,328
Existing debt..................................... 82 56 55
---------------- --------------- ----------------
TOTAL DEBT 1,456 1,407 1,383
Pension plan liabilities.......................... 306 189 198
Post-retirement benefit liabilities............... 533 565 597
Other non-current liabilities..................... 131 133 141
---------------- --------------- ----------------
TOTAL LIABILITIES 3,116 2,985 3,003
Shareholders' equity.............................. 2,000 2,176 2,438
---------------- --------------- ----------------
TOTAL LIAB. AND SHAREHOLDERS' EQUITY $ 5,116 $ 5,161 $ 5,441
================ =============== ================
* Estimated post-reorganization balance sheet
4. Projected Statements of Cash Flow (Unaudited)
OWENS CORNING AND SUBSIDIARIES PROJECTED
FISCAL YEAR ENDED DECEMBER 31,
($ in millions) 2004 2005
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................ $ 176 $ 263
Depreciation and amortization ........................ 241 249
Deferred income taxes ................................ 1 11
(Increase) decrease in receivables.................... 9 (31)
(Increase) decrease in inventories.................... 19 (31)
Increase (decrease) in accounts payable............... (2) 18
Increase (decrease) in accrued liabilities............ (8) (8)
(Increase) decrease in other non-current assets....... (3) (16)
Increase (decrease) in other non-current liabilities.. 2 9
Pension fund contribution............................. (177) (51)
Increase in pension plan liabilities.................. 60 60
Increase (decrease) in post-retirement benefit liabilities 32 32
Other................................................. 1 1
--------------- ----------------
NET CASH FLOW PROVIDED (USED BY) OPERATING ACTIVITIES 350 505
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures.................................. (222) (230)
--------------- ----------------
NET CASH FLOW PROVIDED (USED BY) INVESTING ACTIVITIES (222) (230)
CASH FLOWS FROM FINANCING ACTIVITIES
New debt.............................................. (23) (23)
Existing debt......................................... (14) (18)
--------------- ----------------
NET CASH FLOW PROVIDED (USED BY) FINANCING ACTIVITIES (37) (41)
BEGINNING CASH AND CASH EQUIVALENTS BALANCE 380 470
Net increase in cash.................................. 90 234
--------------- ----------------
ENDING CASH AND EQUIVALENTS BALANCE $ 470 $ 704
--------------- ----------------
ASSUMPTIONS TO FINANCIAL PROJECTIONS
PROJECTIONS
The Debtors, with Lazard's assistance, prepared the attached projected
consolidated financial results (the "Projections") for the three years ending
December 31, 2003, December 31, 2004 and December 31, 2005. The Projections are
based on a number of assumptions made by management with respect to the future
performance of the Company's various lines of business. The Projections should
be reviewed in conjunction with a review of these assumptions, including the
qualifications and footnotes, set forth herein. While management has prepared
the Projections in good faith and believes the assumptions to be reasonable, it
is important to note that the Debtors can provide no assurance that such
assumptions will be realized. As outlined in Section XV, a variety of risk
factors could affect the Company's financial results and must be considered.
The following summarizes the underlying assumptions behind the
Projections.
KEY ASSUMPTIONS
A. GENERAL
1. Methodology. The Projections were prepared using a "bottoms-up"
methodology. Management prepared operating forecasts for each of 23
distinct operating segments, which were then combined into four
primary business lines (Insulating Systems, Composite Solutions,
Exterior Systems, and Siding Solutions).
2. Plan Consummation. The operating assumptions assume the Plan will be
confirmed and consummated by the end of 2003. The "fresh start"
accounting adjustments are more specifically based on an emergence as
of December 31, 2003.
3. Macroeconomic and Industry Environment. The Projections reflect a
cyclical improvement in the overall economic environment over the
projected period on a basis consistent with historical ranges in the
building products and composites business cycles.
B. PROJECTED STATEMENTS OF OPERATIONS
1. Revenues. Consolidated revenues are projected to increase by 1.4% to
$5.123 billion in 2004, and increase by 6.6% to $5.461 billion in
2005. The solid revenue growth in 2005 reflects improvement in
business conditions for both building products and composites.
o Composite Solutions revenues are forecasted to increase by 0.4% in
2004 and increase by 6.9% in 2005.
o Exterior Systems revenues are projected to decrease by 1.9% in 2004
and increase by 7.1% in 2005
o Insulating Systems revenues are projected to increase by 0.6% in 2004
and increase by 5.0% in 2005.
o Siding Solutions revenues are projected to increase by 13.7% in 2004
and 4.8% in 2005.
2. Other Cost of Sales. During 2003, the Company recorded a $27 million
charge to cost of sales related to the write-down of two groups of
assets in the Building Materials segment to net realizable value. As
part of the fresh start adjustments, manufacturing profit in finished
goods inventory will be adjusted to fair value. During fiscal 2004,
disposal of this inventory is projected to increase cost of sales by
approximately $44 million. For purposes of these financial
projections, these expenses have been described as other cost of sales
to highlight the one-time nature of the expense
3. Gross Margin. Gross margin is projected to improve from 17.5% in 2003,
to 18.0% in 2004 and to 19.7% in 2005. Excluding the non-recurring
items in "Other Cost of Sales", gross margin would be projected to
improve from 18.1% in 2003, to 18.8% in 2004 and to 19.7% in 2005.
Gross margin improvement is driven by efficiency improvements
throughout the Company, particularly in the Composite Solutions
business. Technology transfers among Company plants and the shifting
of production to low cost locations are the primary drivers of this
projected improvement in efficiency.
4. Depreciation. Depreciation is projected based on estimates of useful
life of the Company's PP&E. In adjusting the balance sheet accounts to
fair market value in accordance with SOP 90-7, the Company's
preliminary analysis indicates that PP&E should be increased by $250
million. The Company estimates that this adjustment will result in a
$20 million annual increase in depreciation expense which is included
in the 2004 and 2005 depreciation expense.
5. Marketing and Administrative Expenses. Marketing and administration
expenses are projected to decline from 9.4% of revenues in 2003 to
9.0% in 2004 and 2005. This improvement reflects continued
cost-cutting initiatives and efficiency improvements.
6. Chapter 11 Reorganization Items. Restructuring costs of $103 million
in 2003 consist primarily of costs relating to professional fees and
employee retention programs. An estimated $15 million of restructuring
costs are forecast during 2004.
7. Provision for Asbestos Claims. For purposes of these projections, the
liabilities subject to compromise related to asbestos liabilities
reflects the Debtors current reserve amount of $5.874 billion (for
both Owens Corning and Fibreboard). It is currently anticipated that
the asbestos liability will be determined as a result of negotiations
involving the various asbestos and creditor constituencies or, if
necessary, the Bankruptcy Court. At this time, it is not possible to
predict the outcome of these negotiations. Given the nature of the
Chapter 11 proceedings, the asbestos liability ultimately established
in the Chapter 11 proceedings may be higher or lower than the
Company's reserve. In the event that the asbestos liability were to be
determined to be larger than the reserve amount, the Debtors would be
required to record a charge in the amount by which the asbestos
liability exceeds the reserve (see Section IV.D.1 and 2 for additional
information on the asbestos liability and related reserve).
8. Cost of Borrowed Funds, Net. Reflects interest expense on (i) the
Company's New Senior Notes assuming a blended rate of 6.5% per annum,
and (ii) on the existing indebtedness of non-debtor subsidiaries and
joint ventures at a blended rate of 7.5% per annum. Cost of borrowed
funds is shown net of interest income assuming a rate of 1.5% per
annum.
9. Income Tax Expense. Income tax expense assumes a 40% effective rate
and includes a statutory federal income tax rate of 35% and an
additional 5% due primarily to foreign and state income taxes.
C. PROJECTED BALANCE SHEETS
1. Cash. For purposes of these projections, increases in cash are not
used to prepay Reorganized Owens Corning's indebtedness.
2. Property, Plant and Equipment. Capital expenditures during 2003
included approximately $84 million related to the restructuring of the
Company's leases with respect to its corporate headquarters. Capital
expenditures are projected to remain relatively constant at $222
million in 2004 and $230 million in 2005.
3. Deferred Tax Assets. As described more fully in Section XIII of the
Disclosure Statement, entitled "CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES OF THE PLAN," it is expected that Reorganized OC will
receive tax deductions for cash and the value of stock distributed to
the Asbestos Personal Injury Trust upon such distribution. With
respect to debt securities distributed to the Asbestos Personal Injury
Trust, tax deductions are taken as the debt securities are repaid.
These tax deductions may result in tax net operating loss carryovers
("NOLs"). The NOL carryovers may be reduced by the amount of debt
cancellation (excluding asbestos liabilities) including certain other
pre-petition liabilities cancelled in the reorganization. Based upon
numerous assumptions (including the ultimate asbestos related claims,
the ultimate recovery of unsecured creditors, the form of
consideration received by the Asbestos Personal Injury Trust, etc.),
the Debtors estimate that Reorganized OC will have NOL carryovers
between $200 million and $500 million available following the year
after emergence (after reduction for cancellation of indebtedness).
For purposes of these financial projections, the Debtors have assumed
that Reorganized OC's NOLs will be subject to the limitations imposed
by Section 382 of the Internal Revenue Code (see Section XIII).
Accordingly, the Debtors have assumed that $87 million of NOLs are
available annually through expiration to reduce taxable income. Based
upon a 40% income tax rate, the usage of NOLs result in a decrease in
deferred tax assets of approximately $35 million in 2004 and 2005.
4. New Debt. Approximately $1.4 billion of new debt will be issued
pursuant to the Plan. It is anticipated that new debt will include
Senior Notes (in one or more series - to be determined) less the
aggregate principal amount of the debt issued to the IRS for their
Allowed Priority Tax Claim. The Tax Notes will be repaid in annual
installments over a six-year period.
5. Pension Plan Liabilities. Pension plan liabilities are projected to
decrease from $500 million in 2002 to $306 million in 2003, to $189
million in 2004, and to increase to $198 million in 2005. The decrease
in pension plan liability is related to the Company's expected pension
plan contributions of $250 million in 2003, $177 million in 2004 and
$51 million in 2005. Offsetting these contributions are projected
annual pension expenses of $56 million in 2003, $60 million in 2004
and $60 million in 2005.
6. Post-Retirement Benefit Liabilities. Post-retirement liabilities are
projected to increase by approximately $32 million annually from 2003
through 2005.
APPENDIX C
LIQUIDATION ANALYSIS
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 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 included 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 reflect amounts to satisfy
secured, 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 WOULD BE LIKELY TO 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.
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.
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, a Section 524(g) channeling injunction is only available in
chapter 11 cases and there is no certainty that the purchaser(s) could be
insulated from future claims. 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. As a result, many likely
purchasers would either avoid bidding or do so at a reduced level.
Consequently, it is unclear whether a chapter 7 trustee could successfully
accomplish sales in the manner assumed in this liquidation analysis, which is
premised on proceeds being set aside for pro rata participation to both present
and future asbestos claims and an attempt by the Bankruptcy Court to impose a
commensurate restriction on the right of any such claimants to pursue the
purchaser(s).
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.
OWENS CORNING
HYPOTHETICAL LIQUIDATION PROCEEDS
LIQUIDATION ________VALUE________
($ IN MILLIONS)
ASSETS Low High Note
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 2,412
Plus: Unrestricted Cash 742 742 C
Less: Debt Obligations at Non-Debtor Subsidiaries (100) (100) D
Liquidation Value of Assets 2,786 3,054
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 135 135 H
Secured Claims 11 11 I
-------- ------
Total Claims and Expenses 315 320
-------- ------
Proceeds Available to Unsecured Creditors $ 2,471 $ 2,734
============== ============
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 14% 15%
EQUITY INTERESTS
Proceeds Available to Equity Interests $ 0 $ 0 P
%Recovery to Equity Interests 0% 0%
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 entitled
"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 (excluding value attributable to NOLs which would have no value in
a liquidation). 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:
o 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.
o 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.
o 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.
o 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, a Section 524(g) channeling injunction is only available
in chapter 11 cases and there is no certainty that the purchaser(s)
could be insulated from future claims, 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. For purposes of this
analysis, Lazard assumed that the asset sale(s) would provide for proceeds to
be paid to both present and future asbestos claimants and that the Bankruptcy
Court would, as a result, attempt to to impose a commensurate restriction on
the right of any such claimants to pursue the purchaser(s). 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%.
In Lazard's judgment, any liquidation which neither provided for
payments to future claimants nor attempted to restrict future claimant's right
to sue the purchaser for successor liability would render such sale(s)
extremely more difficult and result in a much larger discount than 33%. In
fact, such sale asset sale(s) would not likely generate proceeds in sufficient
amount to provide a recovery for unsecured creditors approaching the recovery
projected under this liquidation analysis or the Plan.
C. Unrestricted Cash
Unrestricted cash is assumed to total $742 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.
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 $135 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
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.
Position of the Unsecured Creditors' Committee and Plan Proponents' Response
The Unsecured Creditors' Committee contends that the liquidation
analysis is not permitted to assume any payment to future asbestos claimants in
a chapter 7 liquidation. According to the Unsecured Creditors' Committee,
future asbestos claims are not claims under the Bankruptcy Code according to
its interpretation of In re Frenville, 744 F.2d 332 (3d Cir. 1984). Under the
Unsecured Creditors' Committee view, a chapter 11 trustee can only distribute
to holders of "claims" and a proper liquidation analysis for purposes of
Section 1129(a)(7) of the Bankruptcy Code must proceed on the assumption that
future asbestos claimants would receive no distribution or proceeds from the
Debtors' liquidation. The Unsecured Creditors' Committee makes certain
assumptions as to what percent of the Debtors' asbestos liabilities constitute
future claims and asserts that if such claims are excluded, the recoveries to
all unsecured creditors, using Lazard's assumed 33% discount upon liquidation,
would exceed the payments under the Plan. Thus, the Committee asserts, the Plan
fails to satisfy the "best interests test" of Section 1129(a)(7).
The Plan Proponents and Lazard disagree with this analysis. The
Frenville decision itself acknowledged that its analysis, which has been
criticized outside the Third Circuit, might require an exception for mass tort
cases. These issues are unsettled. Additionally, the Plan Proponents and Lazard
do not understand the Unsecured Creditors' Committee's methodology for
computing present and future asbestos claims. Most importantly, the Plan
Proponents and Lazard do not believe that such asset sale(s) would likely
generate proceeds equal to 67% of reorganization value if no provision was made
to pay future claimants and restrict the right of future claimants to sue any
purchaser for successor liability. In fact, the Plan Proponents and Lazard
believe such asset sale(s) would not likely generate proceeds in sufficient
amount to provide a recovery for unsecured creditors approaching the recovery
projected under the liquidation analysis prepared by Lazard or the Plan. Under
the Plan, providing there are sufficient acceptances by asbestos claimants, all
present and future asbestos claims will be subject to Asbestos Personal Injury
Permanent Channeling Injunction, thus preserving the enterprise value of the
Debtors for the creditors.
The Court will determine, in conjunction with confirmation, whether
the Plan satisfies the "best interests test" of Section 1129(a)(7).
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.
APPENDIX E
PRINCIPAL TERMS AND CONDITIONS OF SENIOR NOTES
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 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; REPRESENTATIONS: The Senior Notes will contain customary
covenants in accordance with market
convention for similarly rated securities.
CLOSING DATE: The Effective Date of the Plan.
APPENDIX F
CURRENT CORPORATE STRUCTURE OF COMPANY
APPENDIX G
PROPOSED CORPORATE STRUCTURE OF THE REORGANIZED DEBTORS
APPENDIX G
PROPOSED RESTRUCTURING TRANSACTIONS
OVERVIEW
OC has determined to effect an internal restructuring in
order to adopt a holding company structure. The restructuring will be
implemented at the Effective Date and so will become effective only upon OC's
emergence from bankruptcy. The internal restructuring is designed to implement
a corporate legal structure that is expected to facilitate improved management
reporting and information systems as well as budgeting and operating plan
processes that will enhance OC's ability to develop and implement its business
plans for its various businesses.
As a result of the internal restructuring, OCD will become a
holding company which will own, directly or indirectly, subsidiaries
representing OC's different businesses. OCD will also own substantially all the
intellectual property rights used by OCD's businesses, including the
intellectual property rights which have historically been held by OCFT.
IMPLEMENTATION OF THE RESTRUCTURING
In order to implement the restructuring, OCD will transfer to
existing or newly organized subsidiaries the stock or assets and liabilities
relating to different businesses. Certain assets, such as intellectual
property, that are used in more than one business, will be shared. At present,
substantially all of the United States domestic intellectual property owned by
OCD is held by its wholly-owned subsidiary, Owens-Corning Fiberglas Technology,
Inc. ("OCFT"), which in turn grants licenses to OCD for use of such
intellectual property by OCD and other members of the OC group. In the
restructuring, OCFT will be merged into (or its assets and liabilities
transferred to) OCD and intellectual property assets of other subsidiaries will
be transferred to OCD with the result that most of the intellectual property
will be held by the parent company. Appropriate arrangements will then be made
to permit the use of such intellectual property by the various business units
that use it. Central ownership by the parent company is expected to permit more
flexibility in structuring future licensing rights or dispositions, and may
permit OCD to take advantage of international treaties designed to minimize
administrative and filing fees.
The internal restructuring will also affect the structure of
OCD's foreign operations. Substantially all of OCD's non-U.S. subsidiaries and
affiliates are presently consolidated under IPM, Inc. ("IPM"), which is
responsible for the maintenance and administration of such foreign entities.
The foreign operations presently owned by IPM will be transferred in the
restructuring to holding companies for the applicable business lines in which
those foreign entities operate.
Section 1123 of the Bankruptcy Code provides that a plan must
contain adequate means for its implementation and include appropriate
provisions that are not inconsistent with the Bankruptcy Code. The Debtors may
transfer any or all of the property of their estates to one or more entities,
whether organized before or after confirmation, merge or consolidate the
Debtors with one or more Persons and effect the amendment and modifications of
the Debtors' charters. With respect to the actions of the Debtors necessary to
effectuate Restructuring Transactions, including transactions necessary to
effect the internal restructuring. Section 5.6 of the Plan expressly authorizes
the Debtors to enter into Restructuring Transactions and to take such actions
as may be necessary or appropriate to effect such Restructuring Transactions.
Pursuant to this provision, the Debtors will file a summary of the corporate
actions necessary to accomplish the Restructuring Transactions at least ten
(10) Business Days prior to the Objection Deadline. The Confirmation Order will
constitute authorization of the Bankruptcy Court or District Court for the
Debtors to execute any necessary corporate documents and implement the
Restructuring Transactions. To the extent that Non-Debtor Subsidiaries must
similarly take steps to effectuate the Restructuring Transactions, such actions
will be implemented in accordance with the procedures of applicable
non-bankruptcy law.
To the extent that it involves transactions affecting the
Debtors, the internal restructuring will be part of the Plan and, thus, subject
to review by holders of Claims entitled to vote on the Plan. In this regard,
OCD does not expect the internal restructuring to have a significant financial
impact upon the respective rights of the holders of Claims in any Class to
recoveries in accordance with the Plan. In addition, OCD does not expect that
there will be any material U.S. federal income tax costs in connection with
implementation of the internal restructuring, and OCD does not currently
anticipate that there will be any material ongoing tax costs associated with
the internal restructuring relative to the structure that is currently in
place.
The internal restructuring described above is expected to be refined further as
steps are taken to implement it. Subject to Bankruptcy Court approval and
confirmation of the Plan, OCD does not believe that the internal restructuring
will require a shareholder vote.
APPENDIX H
VOTING PROCEDURES
[THIS DOCUMENT WILL BE INSERTED WHEN THE VOTING PROCEDURES
ARE APPROVED BY THE COURT]