Exhibit 99
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- -----------------------------------
IN RE: )
) Chapter 11
OWENS CORNING, et al., )
) Case No. 00-03837 (JKF)
Debtors. )
) Jointly Administered
)
- -----------------------------------
DISCLOSURE STATEMENT WITH RESPECT TO FOURTH 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
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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 October 24, 2003
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TABLE OF CONTENTS
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PREFATORY SECTIONS
NOTICE WITH RESPECT TO INJUNCTIONS...........................................................i
DISCLAIMER..................................................................................ii
NOTE ON DEFINED TERMS.......................................................................iv
SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS.................................................v
I. INTRODUCTION..........................................................................1
II. PLAN VOTING INSTRUCTIONS AND PROCEDURES...............................................2
A. Definitions......................................................................2
B. Notice to Holders of Claims and Interests........................................2
C. Solicitation Package.............................................................4
D. Voting Procedures, Ballots and Voting Deadline...................................4
E. Confirmation Hearing and Deadline for Objections to Confirmation.................5
III. GENERAL INFORMATION CONCERNING THE DEBTORS............................................5
A. History and Description of Business..............................................5
B. Financial Structure of the Company at the Petition Date.........................11
IV. BACKGROUND OF ASBESTOS-RELATED LITIGATION............................................17
A. Pre-Petition Claims Against OCD.................................................17
B. Pre-Petition Claims Against Fibreboard..........................................17
C. National Settlement Program.....................................................19
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..........................................................28
C. Continuation of Business; Stay of Litigation....................................29
D. Professionals Retained in the Chapter 11 Cases..................................29
E. "First Day" and Other Orders....................................................39
F. Significant Events During the Chapter 11 Cases..................................40
G. Avoidance Actions In the Chapter 11 Cases.......................................88
VI. FUTURE BUSINESS OF THE REORGANIZED DEBTORS...........................................97
A. Structure and Business of the Reorganized Debtors...............................97
B. Board of Directors and Management of Reorganized Debtors........................97
C. Terms of Certificate of Incorporation of Reorganized OCD.......................110
D. Projected Financial Information................................................111
VII. SUMMARY OF THE PLAN OF REORGANIZATION...............................................113
A. Structure of the Plan..........................................................114
B. Substantive Consolidation under the Plan.......................................114
C. Classification and Treatment of Claims and Interests...........................117
D. Summary of Debt to be Incurred, Securities to be Issued and
Other Consideration Under the Plan; Execution of Related Documents.............140
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E. Distributions under the Plan...................................................143
F. Treatment of Executory Contracts and Unexpired Leases..........................149
G. Resolution and Treatment of Disputed, Contingent, and Unliquidated Claims......154
H. Exit Facility..................................................................155
I. Conditions Precedent to Confirmation and Effectiveness of the Plan.............156
J. Certain Releases and Injunctions Under the Plan................................164
K. Summary of Other Provisions of the Plan........................................169
L. Effects of Confirmation........................................................172
M. Retention of Jurisdiction......................................................177
N. Revesting of Assets............................................................179
O. Rights of Action...............................................................179
P. Payment of Statutory Fees......................................................180
Q. Post-Consummation Operations of the Debtors....................................180
VIII. THE ASBESTOS PERSONAL INJURY TRUST..................................................180
A. General Description of the Asbestos Personal Injury Trust......................181
B. Asbestos Personal Injury Trust Distribution Procedures.........................186
C. The Asbestos Personal Injury Permanent Channeling Injunction...................204
IX. THE FB ASBESTOS PROPERTY DAMAGE TRUST...............................................205
A. General Description of the FB Asbestos Property Damage Trust...................205
B. FB Asbestos Property Damage Claims Procedures..................................210
C. Injunction Channeling FB Asbestos Property Damage Claims.......................212
X. THE LITIGATION TRUST................................................................212
A. General Description of the Litigation Trust....................................212
B. Distributions of Litigation Trust Recoveries...................................215
XI. REGISTRATION RIGHTS/RESTRICTIONS ON TRANSFERS
OF CORPORATE SECURITIES AND CERTAIN CLAIMS..........................................215
XII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS..................................216
A. Offer and Sale of New OCD Securities Pursuant to the Plan:
Bankruptcy Code Exemption from Registration Requirements.......................217
B. Subsequent Transfers of New OCD Securities.....................................217
XIII. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN...................219
A. Federal Income Tax Consequences to the Debtors.................................220
B. Federal Income Tax Consequences to Claim Holders...............................224
C. Importance of Obtaining Professional Tax Assistance............................230
XIV. FEASIBILITY OF THE PLAN AND BEST INTERESTS OF CREDITORS.............................231
A. Feasibility of the Plan........................................................231
B. Acceptance of the Plan.........................................................232
C. Best Interests Test............................................................233
D. Liquidation Analysis...........................................................234
E. Valuation of the Reorganized Debtors...........................................235
F. Application of the "Best Interests" of Creditors Test to the
Liquidation Analysis and the Valuation.........................................242
G. Confirmation Without Acceptance of All Impaired Classes: "Cramdown"............242
XV. CERTAIN RISK FACTORS TO BE CONSIDERED...............................................243
A. Certain Factors Relating to the Chapter 11 Proceedings.........................243
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B. Certain Factors Relating to Securities to be Issued Pursuant to the Plan.......245
C. Certain Factors Relating to the Reorganized Debtors............................245
XVI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN...........................248
A. Alternative Plan(s) of Reorganization or Liquidation...........................248
B. Liquidation Under Chapter 7 or Chapter 11......................................249
XVII. THE SOLICITATION; VOTING PROCEDURE..................................................250
A. Parties in Interest Entitled to Vote...........................................250
B. Classes Impaired under the Plan................................................251
C. Waivers of Defects, Irregularities, etc........................................251
D. Withdrawal of Ballots; Revocation..............................................252
E. Further Information; Additional Copies.........................................252
XVIII. RECOMMENDATION AND CONCLUSION.......................................................253
</Table>
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NOTICE WITH RESPECT TO INJUNCTIONS
THE FOURTH AMENDED JOINT PLAN OF REORGANIZATION FOR OWENS CORNING AND ITS
AFFILIATED DEBTORS AND DEBTORS-IN-POSSESSION (THE "PLAN"), WHICH IS ATTACHED AS
APPENDIX A TO THIS DISCLOSURE STATEMENT, CONTAINS AN ASBESTOS PERSONAL INJURY
PERMANENT CHANNELING INJUNCTION UNDER 11 U.S.C. SECTION 524(g). THE PLAN ALSO
CONTAINS AN INJUNCTION UNDER 11 U.S.C. SECTION 105, WHICH CHANNELS ALL ASBESTOS
PROPERTY DAMAGE CLAIMS AGAINST FIBREBOARD CORPORATION, AN INJUNCTION UNDER 11
U.S.C. SECTION 105 WITH RESPECT TO CLAIMS AGAINST THE HARTFORD ENTITIES AND AN
INJUNCTION WITH RESPECT TO CLAIMS AGAINST RELATED PERSONS OF THE DEBTORS BY
HOLDERS OF CLAIMS WHO VOTE IN FAVOR OF THE PLAN, WHICH ARE INJUNCTIONS AGAINST
CONDUCT NOT OTHERWISE ENJOINED UNDER THE BANKRUPTCY CODE. FOR A DESCRIPTION OF
THE ACTS TO BE ENJOINED AND THE IDENTITY OF THE ENTITIES THAT WOULD BE SUBJECT
TO EACH OF THESE INJUNCTIONS, SEE THE FOLLOWING SECTIONS OF THIS DISCLOSURE
STATEMENT:
(1) THE ASBESTOS PERSONAL INJURY PERMANENT CHANNELING INJUNCTION: SECTION VIII.C
OF THIS DISCLOSURE STATEMENT ENTITLED "THE ASBESTOS PERSONAL INJURY TRUST--THE
ASBESTOS PERSONAL INJURY PERMANENT CHANNELING INJUNCTION" AND SECTION 5.14(b) OF
THE PLAN;
(2) THE INJUNCTION CHANNELING FB ASBESTOS PROPERTY DAMAGE CLAIMS: SECTION IX.C
OF THIS DISCLOSURE STATEMENT ENTITLED "THE FB ASBESTOS PROPERTY DAMAGE TRUST--
INJUNCTION CHANNELING FB ASBESTOS PROPERTY DAMAGE CLAIMS " AND SECTION 3.3(g) OF
THE PLAN;
(3) THE INJUNCTION WITH RESPECT TO CLAIMS AGAINST THE HARTFORD ENTITIES: SECTION
VII.J.6 OF THIS DISCLOSURE STATEMENT ENTITLED "INJUNCTION WITH RESPECT TO CLAIMS
AGAINST THE HARTFORD ENTITIES" AND SECTION 5.13(d) OF THE PLAN; AND
(4) THE INJUNCTION WITH RESPECT TO CLAIMS AGAINST RELATED PERSONS OF THE DEBTORS
BY HOLDERS OF CLAIMS WHO SUBMIT A BALLOT AND DO NOT ELECT TO WITHHOLD CONSENT TO
RELEASES OF THE RELEASED PARTIES BY MARKING THE APPROPRIATE BOX ON THE BALLOT:
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.
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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. Sections 101-1330 (AS AMENDED,
THE "BANKRUPTCY CODE") AND RULE 3016 OF THE FEDERAL RULES OF BANKRUPTCY
PROCEDURE (THE "BANKRUPTCY RULES") AND NOT NECESSARILY IN ACCORDANCE WITH
FEDERAL OR STATE SECURITIES LAWS OR OTHER NON-BANKRUPTCY LAWS.
EXCEPT WHERE SPECIFICALLY NOTED, THE FINANCIAL INFORMATION CONTAINED HEREIN
HAS NOT BEEN AUDITED BY A CERTIFIED PUBLIC ACCOUNTING FIRM AND HAS NOT BEEN
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
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
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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.
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NOTE ON DEFINED TERMS
For purposes of this Disclosure Statement, all capitalized terms not
otherwise defined shall have the meanings ascribed to them in Article I of the
Plan, attached to the Disclosure Statement as Appendix A, except as expressly
provided or unless the context clearly requires otherwise. A Glossary of
Additional Terms is attached to this Disclosure Statement as Appendix A-1.
Whenever the context requires, such meanings shall be equally applicable to both
the singular and plural form of such terms, and the masculine gender shall
include the feminine and the feminine gender shall include the masculine. Any
term used in initially capitalized form in this Disclosure Statement that is not
defined herein but that is used in the Bankruptcy Code shall have the meaning
ascribed to such term in the Bankruptcy Code.
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SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS
The treatment of each of the Classes is summarized as follows:
<Table>
<Caption>
ESTIMATED
ALLOWED
TREAT- CLAIMS
CLASS DESCRIPTION MENT (IN MILLIONS) ESTIMATED RECOVERY
- -----------------------------------------------------------------------------------------------------------------
Unclassified DIP Facility Claims N/A $0 100%
Claims
Unclassified Administrative Claims N/A $46 100%
Claims
Unclassified Priority Tax Claims N/A 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 $1,549 SEE ATTACHMENT TO THIS CHART
Class 5 Claims Bondholders Claims Impaired $1,389 SEE ATTACHMENT TO THIS CHART
Class 6A Claims General Unsecured Claims Impaired $109 to $475 SEE ATTACHMENT TO THIS CHART
Class 6B Claims General Unsecured/Senior Impaired $265 SEE ATTACHMENT TO THIS CHART
Indebtedness Claims
Class 7 Claims OC Asbestos Personal Injury Impaired SEE ATTACHMENT TO SEE ATTACHMENT TO THIS CHART
Claims THIS CHART
Class 8 Claims FB Asbestos Personal Injury Impaired SEE ATTACHMENT TO SEE ATTACHMENT TO THIS CHART
Claims THIS CHART
Class 9 Claims FB Asbestos Property Damage Impaired $2 to $7 100%
Claims
Class 10 Claims Intercompany Claims Impaired N/A 0%
Class 11 Claims Subordinated Claims Impaired $276 0%
Class 12 Interests OCD Interests Impaired N/A 0%
</Table>
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DISCLAIMER
ALTHOUGH EVERY REASONABLE EFFORT WAS MADE TO BE ACCURATE, THE PROJECTIONS
OF ESTIMATED RECOVERIES ARE ONLY AN ESTIMATE. ANY ESTIMATES OF CLAIMS OR
INTERESTS IN THIS DICLOSURE STATEMENT MAY VARY FROM THE FINAL AMOUNTS ALLOWED BY
THE BANKRUPTCY COURT. AS A RESULT OF THE FOREGOING AND OTHER UNCERTAINTIES WHICH
ARE INHERENT IN THE ESTIMATES, THE ESTIMATES OF RECOVERIES IN THIS DISCLOSURE
STATEMENT MAY VARY FROM THE RECOVERIES RECEIVED. IN ADDITION, THE ABILITY TO
RECEIVE DISTRIBUTIONS UNDER THE PLAN DEPENDS UPON THE ABILITY OF THE PLAN
PROPONENTS TO OBTAIN CONFIRMATION OF THE PLAN AND MEET THE CONDITIONS TO
CONFIRMATION AND EFFECTIVENESS OF THE PLAN, AS DISCUSSED IN SECTION VII.I OF
THIS DISCLOSURE STATEMENT ENTITLED "CONDITIONS PRECEDENT TO CONFIRMATION AND
EFFECTIVENESS OF THE PLAN."
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<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
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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 Initial Distribution Date,
ESTIMATED ALLOWED CLAIMS: $0 (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
ESTIMATED RECOVERY: 100% to any agreement between a Debtor and the holder of such DIP Facility Claim,
each holder of an Allowed DIP Facility Claim shall receive in full satisfaction,
settlement, release and discharge of and in exchange for such Allowed DIP
Facility Claim (a) Cash equal to the unpaid portion of such Allowed DIP Facility
Claim or (b) such other treatment as the applicable Debtor and such holder shall
have agreed in writing.
ADMINISTRATIVE CLAIMS The Plan generally provides for Administrative Claims to be paid in full. Except
as otherwise provided in the Plan and subject to the requirements of the Plan,
ESTIMATED ALLOWED CLAIMS: on, or as soon as reasonably practicable after, the latest of (i) the Initial
$46 MILLION Distribution Date, (ii) the date on which an Administrative Claim becomes an
Allowed Administrative Claim or (iii) the date on which an Administrative Claim
ESTIMATED RECOVERY: 100% 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 or has agreed in
ESTIMATED ALLOWED CLAIMS: writing to a different treatment, each holder of an Allowed Priority Tax Claim
UP TO $135 MILLION 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
ESTIMATED RECOVERY: 100% 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 DIP Facility Claims, Administrative
ESTIMATED ALLOWED CLAIMS: $0 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
</Table>
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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 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
ESTIMATED ALLOWED CLAIMS: by a valid and unavoidable Encumbrance in or on any of the Debtors' property (to
$5 MILLION 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).
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 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
ESTIMATED ALLOWED CLAIMS: any other applicable law, to the extent of the value of the Claim holder's
$6 MILLION 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
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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.
</Table>
<Table>
<Caption>
CLASS DESCRIPTION TREATMENT UNDER 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 6A or Class 6B Claim, which (i) is in an amount that is
ESTIMATED ALLOWED CLAIMS (AFTER equal to or less than $5,000 or (ii) on the Ballot has been reduced to $5,000 by
ADJUSTMENT TO ACCOUNT FOR HOLDERS 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 Initial
OPT Distribution Date, (ii) the date on which such Class 3 Claim becomes an Allowed
INTO CLASS 3): Class 3 Claim, or (iii) the date on which such Class 3 Claim becomes due and
$18 MILLION 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
ESTIMATED RECOVERY: 100% 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 6A or 6B 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.
</Table>
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<Caption>
CLASS DESCRIPTION TREATMENT UNDER PLAN
- ----------------- --------------------
CLASS 4 - BANK HOLDERS CLAIMS Class 4 consists of Claims held by the Bank Holders arising under or as a result
of the Debtors' obligations under the 1997 Credit Agreement (the "Bank Holders
ESTIMATED ALLOWED CLAIMS: Claims" or "Class 4 Claims").
$1,472 MILLION TO $1,549 MILLION
In full satisfaction, release and discharge of, and in exchange for, its Allowed
ESTIMATED RECOVERY: Class 4 Claim, each holder of an Allowed Class4 Claim shall receive the
SEE ATTACHED CHART following:
On, or 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 later 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, such holder's PRO RATA share of the portion of the Combined Supplemental
Distribution Package equal to the Class 4 Initial Supplemental 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.
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 Supplemental
Distribution Percentage of Supplemental Excess Available Cash, (ii) Excess
Senior Notes in an aggregate principal amount equal to the Class 4 Final
Supplemental Distribution Percentage of the Supplemental Excess Senior Notes
Amount, (iii) shares of New OCD Common Stock in an aggregate number equal to the
Class 4 Final Supplemental Distribution Percentage of the Supplemental Excess
New OCD Common Stock, and (iv) Cash in an amount equal to the Class 4 Final
Supplemental Distribution Percentage of the Supplemental Excess Litigation Trust
Recoveries.
CLASS 4 CLAIMS ARE IMPAIRED. TO THE EXTENT AND IN THE MANNER PROVIDED IN THE
VOTING PROCEDURES ORDER, HOLDERS OF THE CLAIMS IN CLASS 4 ARE ENTITLED TO VOTE
TO ACCEPT OR REJECT THE PLAN.
CLASS 5 - BONDHOLDERS CLAIMS Class 5 consists of Claims held by the Bondholders arising under or as a result
of the Debtors' obligations under the Pre-petition Bonds (the "Bondholders
ESTIMATED ALLOWED CLAIMS: Claims" or "Class 5 Claims").
$1,389 MILLION
In full satisfaction, release and discharge of, and in exchange for, its Allowed
ESTIMATED RECOVERY: Class 5 Claim, each holder of an Allowed Class 5 Claim shall receive the
SEE ATTACHED CHART following:
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<Table>
On, or as soon as reasonably practicable after, the later of (i) the Initial
Distribution Date, (ii) the date on which such Class 5 Claim becomes an Allowed
Class 5 Claim, or (iii) the date on which such Class 5 Claim becomes due and
payable pursuant to any agreement between a Debtor and a holder of a Class 5
Claim, each holder of an Allowed Class 5 Claim will receive in full
satisfaction, settlement, release and discharge of and in exchange for such
Allowed Class 5 Claim such holder's Pro Rata share of 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 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, such holder's PRO RATA share of the portion of the Combined Supplemental
Distribution Package equal to the Class 5 Initial Supplemental 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.
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 Supplemental
Distribution Percentage of Supplemental Excess Available Cash, (ii) Excess
Senior Notes in an aggregate principal amount equal to the Class 5 Final
Supplemental Distribution Percentage of the Supplemental Excess Senior Notes
Amount, (iii) shares of New OCD Common Stock in an aggregate number equal to the
Class 5 Final Supplemental Distribution Percentage of the Supplemental Excess
New OCD Common Stock, and (iv) Cash in an amount equal to the Class 5 Final
Supplemental Distribution Percentage of the Supplemental 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 6A - GENERAL UNSECURED CLAIMS Class 6A consists of those Claims against the Debtors that are General Unsecured
ESTIMATED ALLOWED CLAIMS: Claims, which are Claims against any of the Debtors that is not a DIP Facility
Claim, an Administrative Claim, a Priority Tax Claim, an Other Priority Claim,
$109 MILLION TO $475 MILLION 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
ESTIMATED RECOVERY: Asbestos Personal Injury Claim, an FB Asbestos Property Damage Claim, an
SEE ATTACHED CHART Intercompany Claim, a Senior Indebtedness 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
</Table>
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6A Claims").
In full satisfaction, release and discharge of, and in exchange for, its Allowed
Class 6A Claim, each holder of an Allowed Class 6A Claim shall receive the
following:
On, or as soon as reasonably practicable after, the later of (i) the Initial
Distribution Date, (ii) the date on which such Class 6A Claim becomes an Allowed
Class 6A Claim, or (iii) the date on which such Class 6A Claim becomes due and
payable pursuant to any agreement between a Debtor and a holder of a Class 6A
Claim, such holder's PRO RATA share of the portion of the Combined Distribution
Package equal to the Class 6A Initial Distribution Percentage.
In addition, on or as soon as reasonably practicable after the Final
Distribution Date, each holder of an Allowed Class 6A Claim shall receive its
PRO RATA share of the (i) Cash in an amount equal to the Class 6A Final
Distribution Percentage of Excess Available Cash, (ii) Excess Senior Notes in an
aggregate principal amount equal to the Class 6A Final Distribution Percentage
of the Excess Senior Notes Amount, (iii) shares of New OCD Common Stock in an
aggregate number equal to the Class 6A Final Distribution Percentage of the
Excess New OCD Common Stock, and (iv) Cash in an amount equal to the Class 6A
Final Distribution Percentage of the Excess Litigation Trust Recoveries.
CLASS 6A CLAIMS ARE IMPAIRED. TO THE EXTENT AND IN THE MANNER PROVIDED IN THE
VOTING PROCEDURES ORDER, HOLDERS OF THE CLAIMS IN CLASS 6A ARE ENTITLED TO VOTE
TO ACCEPT OR REJECT THE PLAN.
CLASS 6B - GENERAL UNSECURED/SENIOR Class 6B consists of all General Unsecured/Senior Indebtedness Claims, which are
INDEBTEDNESS CLAIMS those Claims against the Debtor that satisfy both of the following criteria: (a)
ESTIMATED ALLOWED CLAIMS: such Claim is a Senior Indebtedness Claim and (b) such Claim is not a DIP
Facility Claim, an Administrative Claim, a Priority Tax Claim, an Other Priority
$265 MILLION 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,
ESTIMATED RECOVERY: a FB Asbestos Personal Injury Claim, a FB Asbestos Property Damage Claim, an
SEE ATTACHED CHART Intercompany Claim, a Subordinated Claim, or an OCD Interest.
In full satisfaction, release and discharge of, and in exchange for, its
Allowed Class 6B Claim, each holder of an Allowed Class 6B Claim shall receive
the following:
On, or as soon as reasonably practicable after, the later of (i) the
Initial Distribution Date, (ii) the date on which such Class 6B Claim becomes an
Allowed Class 6B Claim, or (iii) the date on which such Class 6B Claim becomes
due and payable pursuant to any agreement between a Debtor and a holder of a
Class 6B Claim, such holder's PRO RATA share of the portion of the Combined
Distribution Package equal to the Class 6B Initial Distribution Percentage.
In addition, on or as soon as reasonably practicable after the later of (i)
the Initial Distribution Date, (ii) the date on which such Class 6B Claim
becomes an Allowed Class 6B Claim, or (iii) the date on which such Class 6B
Claim becomes due and payable pursuant to any agreement between a Debtor and a
holder of a Class 6B Claim, such holder's PRO RATA share of the portion of the
Combined Supplemental Distribution Package equal to the Class 6B Initial
Supplemental Distribution Percentage.
In addition, on or as soon as reasonably practicable after the Final
Distribution Date, each holder of an Allowed Class 6B Claim shall receive its
PRO RATA share of the (i) Cash in an amount equal to the Class 6B Final
</Table>
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Distribution Percentage of Excess Available Cash, (ii) Excess Senior Notes in an
aggregate principal amount equal to the Class 6B Final Distribution Percentage
of the Excess Senior Notes Amount, (iii) shares of New OCD Common Stock in an
aggregate number equal to the Class 6B Final Distribution Percentage of the
Excess New OCD Common Stock, and (iv) Cash in an amount equal to the Class 6B
Final Distribution Percentage of the Excess Litigation Trust Recoveries.
In addition, on or as soon as reasonably practicable after the Final
Distribution Date, each holder of an Allowed Class 6B Claim shall receive its
PRO RATA share of the (i) Cash in an amount equal to the Class 6B Final
Supplemental Distribution Percentage of Supplemental Excess Available Cash, (ii)
Excess Senior Notes in an aggregate principal amount equal to the Class 6B Final
Supplemental Distribution Percentage of the Supplemental Excess Senior Notes
Amount, (iii) shares of New OCD Common Stock in an aggregate number equal to the
Class 6B Final Supplemental Distribution Percentage of the Supplemental Excess
New OCD Common Stock, and (iv) Cash in an amount equal to the Class 6B Final
Supplemental Distribution Percentage of the Supplemental Excess Litigation Trust
Recoveries.
CLASS 6B CLAIMS ARE IMPAIRED. TO THE EXTENT AND IN THE MANNER PROVIDED IN THE
VOTING PROCEDURES ORDER, HOLDERS OF THE CLAIMS IN CLASS 6B 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
An "OC Asbestos Personal Injury Claim" means any present or future right to
ESTIMATED ALLOWED CLAIMS: payment, claim, remedy, liability or Demand against any OC Person for death,
SEE ATTACHED CHART bodily injury, or other personal damages (whether physical, emotional or
otherwise), whether or not such right, claim, remedy, liability or Demand is
ESTIMATED RECOVERY: reduced to judgment, liquidated, fixed, contingent, matured, unmatured,
SEE ATTACHED CHART 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
</Table>
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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
TO 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.
</Table>
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CLASS 8 - FB ASBESTOS Class 8 consists of FB Asbestos Personal Injury Claims ("Class 8 Claims").
PERSONAL INJURY CLAIMS
An "FB Asbestos Personal Injury Claim" means any present or future right to
ESTIMATED ALLOWED CLAIMS: payment, claim, remedy, liability or Demand against any FB Person for death,
SEE ATTACHED CHART bodily injury, or other personal damages (whether physical, emotional or
otherwise), whether or not such right, claim, remedy, liability or Demand is
ESTIMATED RECOVERY: reduced to judgment, liquidated, fixed, contingent, matured, unmatured,
SEE ATTACHED CHART 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
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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
An "FB Asbestos Property Damage Claim" means any present or future right to
ESTIMATED ALLOWED CLAIMS: payment, claim, remedy, or liability against, or debt or obligation of, any FB
$2 MILLION TO $7 MILLION 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,
ESTIMATED RECOVERY: 100% 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
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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 non-Debtor
ESTIMATED RECOVERY: 0% 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: "Subordinated Claims" consist of Claims or Interests (in the event that a Claim
$276 MILLION might be characterized as an Interest) of any Person who has entered into a
subordination or other agreement that is enforceable under applicable bankruptcy
ESTIMATED RECOVERY: 0% or 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 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 of a Subordinated Claim shall be entitled to, or
shall receive or retain any property or interest in property on account of, such
Subordinated Claim. The distributions which otherwise would have been made to
holders of Allowed Claims in Class 11 had such Claims not been subordinated in
accordance with the applicable agreements or instruments subordinating such
Claims are paid or issued to the holders of Allowed Claims in Classes 4, 5 and
6B in accordance with the subordination provisions of such agreements or
instruments. As a consequence, the amount of Allowed Claims or estimated Claims
in Class 11 shall be used for the purpose of calculating the Class ___ Initial
Distribution Percentage, the Class ___ Final Distribution Percentage, the Senior
Indebtedness Initial Distribution
</Table>
xvii
<Page>
<Table>
Percentage and the Senior Indebtedness Final Distribution Percentage.
CLASS 11 CLAIMS ARE IMPAIRED. THE HOLDERS OF THE CLAIMS IN CLASS 11 ARE DEEMED
TO HAVE REJECTED 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, together with any
ESTIMATED RECOVERY: 0% 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 HAVE REJECTED THE PLAN AND, ACCORDINGLY, ARE NOT ENTITLED TO VOTE TO
ACCEPT OR REJECT THE PLAN.
</Table>
THE PLAN PROPONENTS BELIEVE THAT THE PLAN PROVIDES THE BEST RECOVERIES
POSSIBLE FOR HOLDERS OF CLAIMS AGAINST THE DEBTORS AND THUS STRONGLY RECOMMEND
THAT YOU VOTE TO ACCEPT THE PLAN.
xviii
<Page>
SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS
The calculation of estimated recoveries for Classes 4, 5, 6A, 6B, 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, 6A, 6B, and 7 share in the Combined Distribution
Package, which consists of Cash, Senior Notes, and New OCD Common Stock. Holders
of Allowed Claims in Classes 4, 5 and 6B benefit from the distributions that
would otherwise be paid or issued to holders of Allowed Claims in Class 11.
The following chart details five scenarios assuming varying asbestos
claim amounts, ranging from the Company's current asbestos reserve of $5.8
billion to $24 billion.
<Table>
<Caption>
ESTIMATED AGGREGATE CLAIM AMOUNT
- ------------------------------------------------------------------------------------------------------------
CLASS DESCRIPTION A B C D E
- ------------------------------------------------------------------------------------------------------------
Class 7 OC Asbestos Personal Injury 3,564 6,688 10,700 13,375 16,050
Claims
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
- ------------------------------------------------------------------------------------------------------------
</Table>
The estimated recovery of each of the Classes for each of the various
asbestos claim assumptions, is as follows:
<Table>
<Caption>
ESTIMATED RECOVERY
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS DESCRIPTION CLAIM* A B C D E
- ---------------------------------------------------------------------------------------------------------------------------------
Class 4 Bank Holder Claims $ 1,472 52.8% 36.4% 26.0% 21.8% 18.8%
Class 5 Bond Holder Claims $ 1,389 52.8% 36.4% 26.0% 21.8% 18.8%
Class 6A General Unsecured Claims $ 109 48.5% 33.4% 23.9% 20.1% 17.3%
Class 6B General Unsecured/Senior $ 265 52.8% 36.4% 26.0% 21.8% 18.8%
Indebtedness Claims
Class 7 OC Asbestos Personal Injury Claims See Above 51.0% 35.1% 25.1% 21.1% 18.2%
Class 8 FB Asbestos Personal Injury Claims See Above 66.6% 46.5% 29.0% 23.2% 19.4%
Class 9 FB Asbestos Property Damage Claims $ 2 100.0% 100.0% 100.0% 100.0% 100.0%
Class 10 Intercompany Claims $ 0 0.0% 0.0% 0.0% 0.0% 0.0%
Class 11 Subordinated Claims $ 276 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%
</Table>
* RECOVERY CALCULATIONS BASED UPON LOW-END CLAIM ESTIMATE FOR CLASSES 4, 5, 6A,
6B AND 9
xix
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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
<Page>
REPRESENT THAT THE INFORMATION CONTAINED HEREIN, INCLUDING THE FINANCIAL
INFORMATION, IS WITHOUT ANY MATERIAL INACCURACY OR OMISSION.
THE PLAN PROPONENTS BELIEVE THAT THE PLAN WILL ENABLE THE DEBTORS TO
SUCCESSFULLY REORGANIZE AND ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND THAT
ACCEPTANCE OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTORS AND THE HOLDERS
OF CLAIMS AND INTERESTS. THE PLAN PROPONENTS URGE ALL HOLDERS OF CLAIMS WHOSE
VOTES ARE BEING SOLICITED TO VOTE TO ACCEPT THE PLAN.
NOTHING CONTAINED HEREIN SHALL BE DEEMED TO CONSTITUTE AN ADMISSION OF ANY
FACT OR LIABILITY BY ANY PARTY, BE ADMISSIBLE IN ANY NON-BANKRUPTCY PROCEEDING
INVOLVING THE DEBTORS OR ANY OTHER PARTY, OR BE DEEMED CONCLUSIVE ADVICE ON THE
TAX OR OTHER LEGAL EFFECTS OF THE REORGANIZATION AS TO HOLDERS OF ALLOWED CLAIMS
OR INTERESTS. YOU SHOULD CONSULT YOUR PERSONAL COUNSEL OR TAX ADVISOR ON ANY
QUESTIONS OR CONCERNS RESPECTING TAX, SECURITIES, OR OTHER LEGAL CONSEQUENCES OF
THE PLAN.
II. PLAN VOTING INSTRUCTIONS AND PROCEDURES
A. DEFINITIONS
All capitalized terms used herein and not otherwise defined herein have the
meanings given to them in the Article I of the Plan, which is attached hereto as
APPENDIX A, if defined in the Plan, or in the Glossary of Additional Terms,
attached hereto as APPENDIX A-1, except as expressly provided or unless the
context clearly requires otherwise. Whenever the context requires, such meanings
shall be equally applicable to both the singular and plural form of such terms,
and the masculine gender shall include the feminine and the feminine gender
shall include the masculine. Any term used in initially capitalized form in this
Disclosure Statement that is not defined herein but that is used in the
Bankruptcy Code shall have the meaning ascribed to such term in the Bankruptcy
Code. Additionally, the rules of construction contained in Section 102 of the
Bankruptcy Code apply to the construction of this Disclosure Statement.
B. NOTICE TO HOLDERS OF CLAIMS AND INTERESTS
This Disclosure Statement is being transmitted to holders of Impaired
Claims that are entitled under the Bankruptcy Code to vote on the Plan, as well
as other parties. SEE Section XVII of this Disclosure Statement entitled "The
Solicitation; Voting Procedure" for a description of the Classes of Claims that
are entitled to vote on the Plan. Holders of Interests that do not receive any
distributions under the Plan on account of their Interests are deemed to have
rejected the Plan and are not entitled to vote on the Plan. The primary purpose
of this Disclosure Statement is to provide adequate information to enable
holders of Claims against the Debtors to make a reasonably informed decision
whether to vote to accept or reject the Plan.
2
<Page>
Approval by the Bankruptcy Court of this Disclosure Statement means the
Bankruptcy Court has found that this Disclosure Statement contains information
of a kind and in sufficient and adequate detail to enable such Claim holders to
make an informed judgment whether to accept or reject the Plan. THE BANKRUPTCY
COURT'S APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE EITHER A
GUARANTEE OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN OR
AN ENDORSEMENT OF THE PLAN BY THE BANKRUPTCY COURT.
IF THE PLAN IS APPROVED BY THE REQUISITE VOTE OF HOLDERS OF CLAIMS ENTITLED
TO VOTE AND IS SUBSEQUENTLY CONFIRMED BY THE BANKRUPTCY COURT, THE PLAN WILL
BIND ALL HOLDERS OF CLAIMS AGAINST, AND INTERESTS IN, THE DEBTORS, WHETHER OR
NOT THEY WERE ENTITLED TO VOTE OR DID VOTE ON THE PLAN AND WHETHER OR NOT THEY
RECEIVE OR RETAIN ANY DISTRIBUTIONS OR PROPERTY UNDER THE PLAN. THUS ALL HOLDERS
OF CLAIMS AGAINST THE DEBTORS ARE ENCOURAGED TO READ THIS DISCLOSURE STATEMENT
AND ITS APPENDICES AND SCHEDULES CAREFULLY AND IN THEIR ENTIRETY BEFORE DECIDING
TO VOTE EITHER TO ACCEPT OR REJECT THE PLAN.
THIS DISCLOSURE STATEMENT IS THE ONLY DOCUMENT AUTHORIZED BY THE BANKRUPTCY
COURT TO BE USED IN CONNECTION WITH THE SOLICITATION OF VOTES TO ACCEPT OR
REJECT THE PLAN. No solicitation of votes may be made except after distribution
of this Disclosure Statement, and no person has been authorized to distribute
any information concerning the Debtors other than the information contained
herein. No such information shall be relied upon in making a determination to
vote to accept or reject the Plan.
CERTAIN OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS BY ITS
NATURE FORWARD LOOKING AND CONTAINS ESTIMATES, ASSUMPTIONS AND PROJECTIONS THAT
MAY BE MATERIALLY DIFFERENT FROM ACTUAL FUTURE RESULTS. Except with respect to
the Pro Forma Financial Projections and Reorganization Balance Sheet set forth
in APPENDIX B attached hereto and except as otherwise specifically and expressly
stated herein, this Disclosure Statement does not purport to reflect any events
that may occur subsequent to the date hereof and that may have a material impact
on the information contained in this Disclosure Statement. The Debtors do not
undertake any obligation to, and do not intend to, update the Financial
Projections; thus, the Financial Projections will not reflect the impact of any
subsequent events not already accounted for in the assumptions underlying the
Financial Projections. Further, the Debtors do not anticipate that any
amendments or supplements to this Disclosure Statement will be distributed to
reflect such occurrences. Accordingly, the delivery of this Disclosure Statement
shall not under any circumstance imply that the information herein is correct or
complete as of any time subsequent to the date hereof.
EXCEPT WHERE SPECIFICALLY NOTED, THE FINANCIAL INFORMATION CONTAINED HEREIN
HAS NOT BEEN AUDITED BY A CERTIFIED PUBLIC ACCOUNTING FIRM AND HAS NOT BEEN
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
3
<Page>
C. SOLICITATION PACKAGE
Each person entitled to vote to accept or reject this Plan is being
transmitted (1) this Disclosure Statement; (2) the Plan (attached as APPENDIX A
to this Disclosure Statement); (3) notification of (a) the time by which Ballots
or Master Ballots, as applicable, to accept or reject the Plan must be
submitted, (b) the date, time and place of the hearing to consider confirmation
of the Plan and related matters, and (c) the time for filing objections to
confirmation of the Plan; and (4) a Ballot or Master Ballot, as applicable (and
return envelopes), to be used in voting to accept or reject the Plan. Any person
who receives this Disclosure Statement but does not receive a Ballot or Master
Ballot and who believes that he is entitled to vote to accept or reject the Plan
should contact the Voting Agent at the address or telephone number set forth in
Section XVII of this Disclosure Statement.
D. VOTING PROCEDURES, BALLOTS AND VOTING DEADLINE
After carefully reviewing the Plan, this Disclosure Statement and all
related material including, without limitation, the Voting Procedures attached
hereto as APPENDIX H (the "VOTING PROCEDURES"), creditors should indicate
acceptance or rejection of the Plan by voting in favor of or against the Plan on
the enclosed Ballot or Master Ballot and return it in the envelope provided.
Only original Ballots and Master Ballots will be accepted.
Each Ballot and Master Ballot has been coded to reflect the Class of Claims
it represents. Accordingly, in voting to accept or reject the Plan, only the
coded Ballots or Master Ballots accompanying this Disclosure Statement may be
used.
IN ORDER FOR VOTES TO BE COUNTED, BALLOTS AND MASTER BALLOTS MUST BE
PROPERLY COMPLETED AS SET FORTH ABOVE AND IN ACCORDANCE WITH THE VOTING
PROCEDURES AND RECEIVED NO LATER THAN [DATE], AT [TIME] (-_- TIME) (THE "VOTING
DEADLINE") BY ROBERT L. BERGER & ASSOCIATES, L.L.C. (THE "VOTING AGENT") OR BY
INNISFREE M&A INCORPORATED (THE "SPECIAL VOTING AGENT"). NO STOCK CERTIFICATES
OR DEBT INSTRUMENTS OR OTHER INSTRUMENTS OR DOCUMENTS REPRESENTING CLAIMS OR
INTERESTS SHOULD BE RETURNED WITH THE BALLOT OR MASTER BALLOT.
Questions about (1) the Voting Procedures, (2) the packet of materials that
has been transmitted, (3) the amount of a Claim or (4) requests for an
additional copy of the Plan, this Disclosure Statement or any appendices or
exhibits to such documents (for which a charge may be imposed unless otherwise
specifically provided by Federal Rule of Bankruptcy Procedure 3017(d)) should be
directed to:
OWENS CORNING
c/o Robert L. Berger & Associates, L.L.C.
16501 Ventura Blvd., Suite 440
Encino, CA 91436
818-906-8300 (phone)
818-783-2737 (fax)
4
<Page>
FOR FURTHER INFORMATION AND INSTRUCTION ON VOTING TO ACCEPT OR REJECT THE
PLAN, SEE SECTION XVII OF THIS DISCLOSURE STATEMENT ENTITLED "THE SOLICITATION;
VOTING PROCEDURE."
E. CONFIRMATION HEARING AND DEADLINE FOR OBJECTIONS TO CONFIRMATION
Pursuant to Section 1128 of the Bankruptcy Code and Federal Rule of
Bankruptcy Procedure 3017(c), a hearing has been scheduled on confirmation of
the Plan (the "CONFIRMATION HEARING") for__________ __, 2003, at ____ _.m. The
Confirmation Hearing may be adjourned from time to time without further notice
except for the announcement of the adjournment date made at the Confirmation
Hearing or at any subsequent adjourned Confirmation Hearing. Objections to
confirmation of the Plan must be made in writing and must specify in detail the
name and address of the objector, all grounds for the objection, and the amount
and class of the Claim. Any such objection must be filed with the Bankruptcy
Court on or before __________ __, 2003 at ____ _.m. Objections to confirmation
of the Plan are governed by Federal Rule of Bankruptcy Procedure 9014.
Additional information regarding the filing of any objections to confirmation of
the Plan is contained in the Notice accompanying this Disclosure Statement.
III. GENERAL INFORMATION CONCERNING THE DEBTORS
THE FOLLOWING INFORMATION IS ONLY A SUMMARY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO OC'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2002, OC'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 2003, OC'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2001, AND OC'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000,
COPIES OF WHICH MAY BE OBTAINED, FREE OF CHARGE, THROUGH OC'S WEBSITE AT
www.owenscorning.com. READERS OF THIS DISCLOSURE STATEMENT ARE DIRECTED TO THE
FULL TEXT OF THOSE REPORTS FOR ADDITIONAL INFORMATION CONCERNING THE HISTORICAL
BUSINESS AND OPERATIONS OF OC. OC'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 2002, MAY ALSO BE OBTAINED BY SENDING A WRITTEN REQUEST. SEE
DIRECTIONS FOR OBTAINING THIS DOCUMENT IN APPENDIX D.
A. HISTORY AND DESCRIPTION OF BUSINESS
1. INTRODUCTION
OCD began as a glass fiber joint venture in the 1930's between
Owens-Illinois and Corning Glass. At the end of 1938, the year in which it was
incorporated, OCD reported sales of $2,555,000 and had 632 employees. Today,
OCD, along with its approximately 85 direct and indirect subsidiaries in the
United States and throughout the world (collectively, OCD and its subsidiaries
are referred to as "OC" or the "COMPANY") is a global leading producer of glass
fiber materials used in composites and a leading home building products company.
For the year ended December 31, 2002, OC had over $4.8 billion in sales,
approximately 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.
5
<Page>
2. GENERAL DESCRIPTION OF OC'S BUSINESS
OC operates in two business segments: Building Materials Systems and
Composite Solutions. In 2002, the Building Materials Systems segment accounted
for approximately 73% of OC's total sales, while Composite Solutions accounted
for the remainder. The products and systems provided by OC's Building Materials
Systems segment are used in residential remodeling and repair, commercial
improvement, new residential and commercial construction, and other related
markets. The products and systems offered by OC's Composite Solutions segment
are used in end-use markets such as building construction, automotive,
telecommunications, marine, aerospace, energy, appliance, packaging and
electronics. Many of OC's products are marketed under registered trademarks,
including Propink(R), Advantex(R) and/or the color PINK.
Approximately 65% of OC's sales are related to home improvement,
non-residential markets, sales of composite materials and sales outside U.S.
markets. Approximately 35% of OC's 2002 sales are related to new U.S.
residential construction.
OC also has affiliate companies in a number of countries. Generally,
affiliated companies' sales, earnings and assets are not included in either
operating segment unless OC owns more than 50% of the affiliate and the
ownership is not considered temporary.
As part of OC's strategy to divest non-strategic business, OC sold the
majority of its Engineered Pipe Business during the first quarter of 2001 and
sold its 40% interest in Alcopor Owens Corning, its European building materials
joint venture, during the fourth quarter of 2001.
Revenue from external customers, income from operations and total
assets attributable to each of OC's operating segments and geographic regions,
as well as information concerning the dependence of its operating segments on
foreign operations, for each of the years 2002, 2001, and 2000, are contained in
Note 2 to OC's Consolidated Financial Statements, entitled "Segment Data." SEE
OC's Annual Report on Form 10-K for the year ended December 31, 2002, OC's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, OC's Annual
Report on Form 10-K for the year ended December 31, 2001, and OC's Annual Report
on Form 10-K for the year ended December 31, 2000, copies of which may be
obtained, free of charge, through OC's website at www.owenscorning.com. OC's
Annual Report on Form 10-K for the year ended December 31, 2002, may also be
obtained by sending a written request. SEE directions for obtaining this
document in Appendix D.
(a) BUILDING MATERIALS SYSTEMS
PRINCIPAL PRODUCTS AND METHODS OF DISTRIBUTION. Building
Materials Systems operates primarily in North America. It also has a presence in
Latin America and Asia Pacific. Building Materials Systems sells a variety of
products and systems in two major categories: (i) insulating systems, including
thermal and acoustical insulation and air ducts formed from glass wool fibers
and foam insulation, and (ii) exterior systems for the home, including roofing
shingles, vinyl and metal siding and accessories, windows and doors, cast stone
building products and branded housewrap. These products are used primarily in
the home improvement, new residential construction, manufactured housing and
commercial construction markets.
6
<Page>
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.
7
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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.
8
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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").
9
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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.
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(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)
<Table>
<Caption>
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
</Table>
11
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<Table>
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' Equity $ 3,360 $ 1,046
(excluding Asbestos)
--------------------------------------------------------------------------------
</Table>
2. PRE-PETITION INDEBTEDNESS
As of the Petition Date, OCD, the Subsidiary Debtors and certain
Non-Debtor Subsidiaries were parties to a Credit Agreement, dated as of June 26,
1997 (the "CREDIT AGREEMENT"), with certain banks listed in Annex A thereto and
with Credit Suisse First Boston, as agent for the lenders signatory thereto. The
Credit Agreement initially provided a revolving credit line of up to $2 billion
available in the form of revolving loans. The initial borrowers under the Credit
Agreement were: OCD, European Owens-Corning Fiberglas S.A., N.V., Owens-Corning
S.A., Owens-Corning Canada Inc., Owens-Corning UK Holdings Ltd. and Sierra Corp.
(and Fibreboard as successor to Sierra Corp. after the merger of Sierra Corp.
with 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.
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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(iv) of this
Disclosure Statement for a description of the treatment of the Bank Holders
Claims under the Plan and Section V.F.9 of this Disclosure Statement entitled
"Implementation of Process for Resolution of Inter-Creditor Issues" and Section
V.G. entitled "Avoidance Actions in the Chapter 11 Cases" of this Disclosure
Statement, for a description of certain pending litigation relating to the
Subsidiary Guarantees.
OC's other principal loan indebtedness as of the Petition Date
(excluding intercompany indebtedness) included:
<Table>
<Caption>
AMOUNT OUTSTANDING
NOTES AGGREGATE ORIGINAL (PRINCIPAL AND ACCRUED
PRINCIPAL AMOUNT INTEREST) AS OF
OCTOBER 1, 2000
--------------------------------------------------------------------------------------------
$400 Million Debentures due 2018 $ 400,000,000 $405,333,333
(7.5%) ($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)
--------------------------------------------------------------------------------------------
</Table>
Collectively, the debt securities listed above are referred to as the
"PRE-PETITION BONDS". SEE Section VII.C.3.b(v) 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
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<Page>
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. The distributions, which would otherwise be made to
holders of the MIPS Claims and Interests had the MIPS Claims and Interests not
been subordinated, are paid or issued to the holders of Allowed Claims in
Classes 4, 5 and 6B in accordance with the subordination provisions of the
agreements or instruments providing for the subordination. This is the same
treatment provided for all Subordinated Claims under Class 11. For a discussion
of the treatment of Subordinated Claims generally, see Section VII.C.3.b(xii) 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"), and certain holders of MIPS Claims and Interests have alleged
several defects in the Plan with respect to its asserted claims and the rights
of the holders of the MIPS. BONY and such holders have 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; (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; (d) the Plan fails to
limit the recovery of the holders of Senior Indebtedness from the distributions
to the Subordinated Claims to 100% of the claim of any holder of Senior
Indebtedness; and (e) purports to cancel interests in an entity that is not a
Debtor. 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
14
<Page>
disbursing any funds to such holders and there will be no property to which its
lien could attach. Finally, the Plan cancels and extinguishes only OCD
Interests.
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"). Payment on the intercompany loan was made subject to the
terms of an attached schedule containing certain subordination provisions.
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 1.225 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, certain holders of the outstanding O.C. Funding B.V.
Debentures advised OCD that they were cooperating with the holders of the
outstanding debt under the KBC
15
<Page>
Agreement and West LB Facility concerning the assertion of claims relating to
the O.C. Funding B.V. Debentures, the KBC Agreement and the West LB Facility
(collectively, the "O.C. FUNDING CREDITORS"). The O.C. Funding Creditors made a
number of claims relating to the indebtedness under the O.C. Funding B.V.
Debentures, including that the subordination provisions governing certain of the
intercompany indebtedness were not enforceable. A holder of the O.C. Funding
B.V. Debentures, in its capacity as a creditor of O.C. Funding, 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 the O.C. Funding Creditors, OCD believed
it was in the best interests of its creditors and the maintenance of undisrupted
business operations to settle the O.C. Funding Creditors 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 the O.C. Funding Creditors pursuant to which OCD
would support (a) Allowed Claims in Class 5 aggregating $43,855,272 in respect
of the claims of the holders of the O.C. Funding B.V. Debentures, Allowed Claims
in Class 6B aggregating $20,387,333 under the KBC Agreement and Allowed Claims
in Class 6B aggregating $10,135,236 under the West LB Facility arising under the
direct guarantees by OCD of each such obligation, (ii) Allowed Claims in Class
6A aggregating $50,858,291 in respect of a negotiated portion of the claims of
O.C. Funding against OCD under the intercompany notes entered into for
financings relating to the loan of proceeds from the O.C. Funding B.V.
Debentures, the KBC Agreement and the West LB Facility, and (iii) an Allowed
Claim in Class 11 of $23,336,305 in respect of the remaining claims of O.C.
Funding against OCD under the intercompany notes entered into for financings
relating to the loan of proceeds from the O.C. Funding B.V. Debentures, the KBC
Agreement and the West LB Facility. 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 the O.C.
Funding Creditors, it has not been approved by the other holders of 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, 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
16
<Page>
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 Section 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(xiii) 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.
17
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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(ix) of this
Disclosure Statement entitled "Impaired Classes of Claims--Class 8: FB Asbestos
Personal Injury Claims."
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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
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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:
<Table>
<Caption>
1999 2000 (THROUGH OCTOBER 4)(1)
(IN MILLIONS OF DOLLARS) (IN MILLIONS OF DOLLARS)
- -------------------------------------------------------------------------------------------
Pre-NSP Settlements $ 170 $ 51
NSP Settlements 570 538
Non-NSP Settlements 30 42
Defense, Claims Processing and
Administrative Expenses 90 54
- -------------------------------------------------------------------------------------------
Total(2) $ 860 $ 685
- -------------------------------------------------------------------------------------------
</Table>
- ----------
(1) Since the Petition date, all pre-petition asbestos claims and pending
litigation against the Debtors, including, without limitation, claims under
the NSP, have been automatically stayed.
(2) Amounts shown are before tax and application of insurance recoveries.
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Prior to the Petition Date, OCD deposited certain amounts in
settlement accounts to facilitate claims processing under the NSP
("ADMINISTRATIVE DEPOSITS"). SEE Section IV.C.4 of this Disclosure Statement
entitled "NSP Administrative Deposits" for a further discussion of the
settlement accounts.
3. FIBREBOARD'S EXPERIENCE WITH THE NSP
(a) NSP CLAIMS AGAINST FIBREBOARD
As described above, OCD acquired Fibreboard in 1997. Fibreboard
executed the NSP Agreements and became a participant in the NSP effective in the
fourth quarter of 1999. The NSP Agreements settled asbestos personal injury
claims that had been filed against Fibreboard by participating plaintiffs' law
firms and claims that could have been filed against Fibreboard by such firms
following the lifting, in the third quarter of 1999, of an injunction which had
barred the filing of asbestos personal injury claims against Fibreboard.
As of the Petition Date, the NSP covered approximately 206,000
Initial Claims against Fibreboard, approximately 118,000 of which had satisfied
all conditions to final settlement, including receipt of executed releases, or
other resolution as Final NSP Settlements at an average cost per claim of
approximately $7,400. As of the Petition Date, approximately 62,000 of such
Final NSP Settlements had been paid in full or otherwise resolved, and
approximately 56,000 were unpaid in whole or in part. As of such date, the
remaining balance payable under NSP Agreements in connection with these unpaid
Final NSP Settlements was approximately $330 million. The NSP Agreements also
provided for the resolution of Future Claims under the NSP against Fibreboard
through the administrative processing arrangement described above. Through the
Petition Date, Fibreboard had received approximately 6,000 Future Claims under
the NSP.
(b) NON-NSP CLAIMS AGAINST FIBREBOARD
As of the Petition Date, approximately 9,000 asbestos personal
injury claims were pending against Fibreboard outside the NSP. This compares to
approximately 1,000 such claims pending on December 31, 1999. Fibreboard
resolved (by settlement or otherwise) approximately 2,000 asbestos personal
injury claims outside the NSP during 2000 prior to the Petition Date at an
average cost of resolution of approximately $45,000 per claim. Generally, these
claims were settled as they were scheduled for trial, and they typically
involved more serious injuries and diseases. Accordingly, OC does not believe
that such average costs of resolution are representative of the value of the
non-NSP claims then pending against Fibreboard.
(c) INSURANCE SETTLEMENT
In 1993, Fibreboard entered into certain settlement arrangements
in an attempt to address the financial impact of its existing and future
asbestos-related personal injury liabilities. One such arrangement was an
insurance settlement (the "INSURANCE SETTLEMENT") between Fibreboard and two of
its insurers, Continental and Pacific Indemnity Company ("PACIFIC"). Under the
terms of the Insurance Settlement, Continental and Pacific were, among other
things, to provide up to $2 billion minus interim settlements, plus accrued
interest, to
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resolve asbestos personal injury claims pending against Fibreboard as of August
27, 1993 and all future asbestos personal injury claims asserted against
Fibreboard after such date, including defense costs. These funds were to be put
into the Fibreboard Insurance Settlement Trust. SEE Section V.F.6 of this
Disclosure Statement entitled "Insurance" and OC's Annual Report on Form 10-K
for the year ended December 31, 2002, (which is available free of charge from
OC's website, www.owenscorning.com), for a further description of the Insurance
Settlement. OC's Annual Report on Form 10-K for the year ended December 31,
2002, may also be obtained by sending a written request. SEE directions for
obtaining this document in Appendix D.
The Insurance Settlement became effective in 1999 and, during the
fourth quarter of 1999, Continental and Pacific funded the Fibreboard Insurance
Settlement Trust with $1.873 billion.
(d) ASBESTOS-RELATED PAYMENTS BY FIBREBOARD
As a result of the Filing, Fibreboard has not made any
asbestos-related payments since the Petition Date. During 2000 (prior to the
Petition Date), gross payments for asbestos-related claims against Fibreboard,
all of which were paid/reimbursed by the Fibreboard Insurance Settlement Trust,
fell within four major categories, as follows:
<Table>
<Caption>
2000 (through October 4, 2000)(3)
(In millions of dollars)
----------------------------------------------------------------------
Pre-NSP Settlements $ 29
NSP Settlements 705
Non-NSP Settlements 41
Defense, Claims Processing and
Administrative Expenses 45
----------------------------------------------------------------------
Total $ 820
----------------------------------------------------------------------
</Table>
The payments for settlements under the NSP include certain
administrative deposits during the reporting period in respect of Fibreboard
claims. Of this, approximately $127 million remains in settlement accounts and
is or will be the subject of litigation to determine if any of these funds are
recoverable by Fibreboard's estate. SEE Section IV.C.4 of this Disclosure
Statement entitled "NSP Administrative Deposits" for a further discussion of the
settlement accounts.
4. NSP ADMINISTRATIVE DEPOSITS
As referred to above, prior to the Petition Date, OCD and Fibreboard
entered into settlement agreements with four law firms including Baron & Budd,
P.C. ("B&B"), whereby OCD and Fibreboard would make certain Administrative
Deposits to facilitate claims processing under the NSP Agreements. These
Administrative Deposits were made to settlement accounts 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
- ----------
(3) Only payments through October 4, 2000, are reflected. Since the Petition
date, all pre-petition asbestos claims and pending litigation against the
Debtors, including, without limitation, claims under the NSP, have been
automatically stayed.
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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. B&B
asserts that under some circumstances its clients may be entitled to receive
their settlement distribution from the Administrative Deposits even without
receipt of written approval from OCD and/or Fibreboard, while the Debtors
contend that the written approval of OCD/Fibreboard was a requirement for
disbursement under the NSP Agreements. B&B asserts that approval pursuant to the
terms of the NSP Agreement with B&B would be deemed to have occurred after the
passing of certain time-period without approval or disapproval and that the
Debtors waived the right to approve payments by their inaction.
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. Certain of the issues have been
determined, but those matters are on appeal. 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
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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:
- The settlement values for specified categories of disease set forth in
the NSP Agreements were established by arms-length negotiations with
the participating law firms in circumstances very different from those
prevailing in the Chapter 11 Cases. The settlement values available to
individual claimants under the arrangements to be included in any plan
or plans of reorganization may vary substantially from those
contemplated by the NSP Agreements. Because OC's estimate of
liabilities in respect of non-NSP claims assumed payment of settlement
values similar to those contained in the NSP Agreements, such estimate
is subject to similar uncertainty.
- OC anticipates that the number and estimated aggregate value of
allowed future claims will ultimately be determined either as a result
of negotiations involving the Future Claimants' Representative and the
other interested constituencies or, if necessary, by the Bankruptcy
Court. It is not possible to predict the outcome of such negotiations,
or Bankruptcy Court determination, at this time.
As a result of the foregoing, the asbestos liability reserve estimates
set forth in OC's consolidated financial statements are subject to change. In
addition, for the reasons stated below, the estimation of the asbestos liability
reserve for financial statement purposes may differ from the competing
estimations of asbestos liability for Plan purposes.
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<Page>
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
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<Page>
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.
The Asbestos Claimants' Committee and the Future Claimants'
Representative believe, based on their experts' valuations, that $16 billion is
the minimum acceptable valuation for Asbestos Personal Injury Claims. The
Asbestos Claimants' Committee and the Future Claimants' Representative believe
that the valuations of their experts take into account historical values for
such claims. The Unsecured Creditors' Committee reserves the right to contest
that position and to also assert that punitive damages should be excluded from
any analysis of the valuation of Asbestos Personal Injury Claims.
The Unsecured Creditors' Committee contends that holders of Asbestos
Personal Injury Claims that entered into any settlement of their claims have
been misclassified under the Plan and should be included in Class 6A (General
Unsecured Claims). The Plan proponents believe that such Claims have been
properly classified.
Certain insurers contend that any estimation(s) of asbestos liability
for plan purposes has/have no effect on the respective rights or obligations of
either of the Debtors or any other party to any contract, including contracts of
insurance. The Plan Proponents disagree with this contention.
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
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<Page>
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.
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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
Engineered Yarns America, Inc.
Falcon Foam Corporation
Integrex
Fibreboard Corporation
Exterior Systems, Inc.
Integrex Ventures LLC
Integrex Professional Services LLC
Integrex Supply Chain Solutions LLC
Integrex Testing Systems LLC
HOMExperts LLC
Jefferson Holdings, Inc.
Owens-Corning Fiberglas Technology Inc.
Owens Corning HT, Inc.
Owens-Corning Overseas Holdings, Inc.
Owens Corning Remodeling Systems, LLC
Soltech, Inc.
The Subsidiary Debtors include only the Subsidiaries listed above and do not
include any other United States Subsidiaries of OCD or any of OCD's foreign
Subsidiaries (collectively, the "NON-DEBTOR SUBSIDIARIES"). A list of the
Non-Debtor Subsidiaries may be found in Schedule II to the Plan, attached to
this Disclosure Statement as APPENDIX A.
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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
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* 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
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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
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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:
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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 established two unofficial
sub-committees (the Bank Holders' sub-committee and the Bondholders' and trade
creditors' sub-committee), each of which is represented by separate counsel and
financial advisors.
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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
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(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
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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
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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
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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
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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. Section
156(c).
(b) SPECIAL VOTING AGENT
On March 19, 2003, the Debtors filed an application to retain
Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York, NY 10022,
as Special Voting Agent to address notice issues related to securities.
(c) FEE AUDITOR
On June 20, 2002, the Bankruptcy Court appointed Warren H. Smith
& Associates, P.C. 900 Jackson Street, 120 Founders Square, Dallas, Texas 75202,
as the Fee Auditor, to act as a special consultant to the Bankruptcy Court for
professional fee and expense review and analysis, nunc pro tunc to April 29,
2002.
E. "FIRST DAY" AND OTHER ORDERS
On or about October 6, 2000, the Debtors filed a series of motions seeking
relief by virtue of so-called "first day" orders. First day orders are intended
to facilitate the transition between a debtor's pre-petition and post-petition
business operations by approving certain regular business practices that may not
be specifically authorized under the Bankruptcy Code or as to which the
Bankruptcy Code requires prior approval by the Bankruptcy Court. These orders
were designed to allow the Debtors to continue business operations with minimum
disruptions and to ease the strain on the Debtors' relationships with their
employees and other parties. The first day orders obtained in these cases are
typical for large Chapter 11 cases. Set forth below is a brief summary of the
significant first day orders and other orders relating to motions filed by the
Debtors at or near the commencement of the Chapter 11 Cases. THE DESCRIPTIONS OF
THE RELIEF SOUGHT OR OBTAINED IN THE CHAPTER 11 CASES SET FORTH BELOW AND
THROUGHOUT THIS DISCLOSURE STATEMENT ARE SUMMARIES ONLY AND REFERENCE SHOULD BE
MADE TO THE ACTUAL PLEADINGS AND ORDERS FOR THEIR COMPLETE CONTENT.
The first day orders and other orders, entered at or near the commencement
of the Chapter 11 Cases, provide for, among other things:
- the payment of employees' accrued pre-petition wages, salaries,
commissions and reimbursable business expenses; the continuation of
employee benefit plans and programs post-petition; and the direction
for all banks to honor pre-petition checks for payment of employee
obligations;
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- the payment of certain pre-petition import obligations (including
customs duties, freight, trucking charges and brokerage fees),
shipping charges and related possessory liens;
- the payment of certain miscellaneous contractors in satisfaction of
perfected or potential mechanics', materialmen's or similar liens;
- a prohibition on the Debtors' utility services providers from
discontinuing services on account of outstanding pre-petition invoices
and establishing procedures for utility providers to seek adequate
assurance of the Debtors' future performance;
- the payment of certain pre-petition tax claims;
- the honoring of certain pre-petition obligations to customers under
various warranty and other customer programs, and the continuation of
warranty and customer programs post-petition;
- the payment of certain critical pre-petition trade vendors' claims;
- the joint administration of each of the Debtors' bankruptcy cases;
- confirming administrative expense treatment for obligations arising
from post-petition delivery of goods, administrative expense treatment
for certain holders of valid reclamation claims and a prohibition
against third parties reclaiming goods or interfering with delivery of
goods to the Debtors; and
- the extension of time for filing the Debtors' Schedules and Statement
of Financial Affairs (the "SOFAS").
F. SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASES
In addition to the first day relief sought and received in the Chapter 11
Cases, the Debtors have sought and received authority with respect to various
matters designed to assist in the administration of the Chapter 11 Cases, to
maximize the value of the Debtors' Estates and to provide the foundation for the
Debtors' emergence from Chapter 11. Set forth below is a brief summary of the
principal motions the Debtors have filed, and to which they have been granted
relief by the Bankruptcy Court, during the pendency of the Chapter 11 Cases.
1. EMPLOYEE RELATED MATTERS
In connection with the filing of the Chapter 11 Cases, the Debtors
obtained orders of the Bankruptcy Court authorizing the Debtors to (a) pay
employees pre-petition wages, salaries and other compensation, (b) continue
certain employee benefit programs, including maintenance of self-insured
workers' compensation programs, (c) adopt a Retention Program and a supplemental
Severance Program (as defined in the Retention and Severance Motion described
below), and (d) modify certain employee retirement benefits programs to provide
limited
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enhancement to those programs and to bring them into compliance with certain
provisions of the Tax Reform Act of 1986.
On December 22, 2000, the Debtors filed a Motion For Order Under 11
U.S.C. Sections 105, 363 and 365 Authorizing Continuation or Implementation of
Employee Retention, Emergence, Severance, Incentive, 401(k) Contribution and
Global Awards Programs (the "RETENTION AND SEVERANCE MOTION"), which sought
approval of various new or existing programs designed to prevent excessive
turnover of key employees during the Chapter 11 Cases. On January 17, 2001, the
Bankruptcy Court entered an order approving in part the Retention and Severance
Motion. Thereafter, on February 16, 2001, the Debtors filed a Supplement to the
Retention and Severance Motion by which the Debtors sought an order approving
and authorizing the continuation, modification and implementation of certain
employee compensation programs. On March 26, 2001, following certain
modifications, the Bankruptcy Court approved the remaining portion of the
Retention and Severance Motion.
Pursuant to the January 17, 2001 and March 26, 2001 orders approving
the Retention and Severance Motion, the Debtors were authorized to continue or
to implement the following programs: (a) an employee retention program under
which the Debtors were authorized to pay retention bonuses at specified
intervals to approximately 236 key employees; (b) a supplemental employee
retention and emergence program, under which certain key employees are entitled
to receive additional bonuses in the event that the Debtors emerge from
bankruptcy by 2004; (c) continuation of the Debtors' existing employee severance
programs 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
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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;
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(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
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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
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allows for parties to consensually modify the automatic stay provisions to allow
for setoff in appropriate circumstances.
Throughout the Chapter 11 Cases, the Debtors have entered a
number of stipulations (the "SETOFF STIPULATIONS") with various vendors and
suppliers authorizing a modification of the automatic stay to effectuate the
setoff of pre-petition mutual debts. The Debtors determined that entering the
Setoff Stipulations would be in the best interest of the Debtors' estates and
their creditors because, in general, among other reasons, the setoffs allowed
the Debtors to reconcile their books and records without further dispute,
maintain amicable relationships with their customers and vendors, and continue
the free flow of goods and services from their customers and vendors.
3. DEBTOR-IN-POSSESSION FINANCING AND THE DIP FACILITY
In connection with the Filing, and in order to fund its on-going
business operations during the pendency of the Chapter 11 Cases, the Debtors,
excluding Jefferson Holdings, Inc., obtained a debtor-in-possession credit
facility (the "DIP FACILITY") from a group of lenders (the "DIP LENDERS") led by
Bank of America, N.A., as administrative agent (the "DIP AGENT"). On November
17, 2000, the Bankruptcy Court approved the Final Order Authorizing
Post-Petition Financing on a Superpriority Administrative Claim Basis Pursuant
to 11 U.S.C. Section 364(c)(1) and Granting Relief from the Automatic Stay
Pursuant to 11 U.S.C. Section 362 (the "DIP ORDER"). The DIP Order authorized,
among other things, (a) the Debtors to borrow from the DIP Lenders, on specified
terms and conditions, post-petition financing of up to $500 million, including
revolving loans and letters of credit, pursuant to an agreement among the
Debtors and Lenders; (b) the execution by the Debtors of notes and other
documents requested by the DIP Lenders evidencing the post-petition financing;
and (c) the granting of certain protections to the DIP Agent and the DIP Lenders
including without limitation a superpriority administrative claim over any and
all administrative expenses of the kinds specified in Sections 503(b), 105, 326,
328, 330, 331, 506(c), 507(a), 546(c), 726 or 1112 of the Bankruptcy Code.
The DIP Facility also provided for unsecured post-petition financing
from the DIP Lenders for general working capital and other general corporate
purposes in an aggregate principal amount not to exceed $500 million. The amount
available under the DIP Facility depends on a borrowing base of qualifying
receivables and inventory of the Debtors. 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
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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
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Bankruptcy Code; and (ii) the Bank Holders and their affiliates from setting off
against funds deposited by the Non-Debtor Subsidiaries in bank accounts at the
Bank Holders or their affiliates.
The purpose of the Standstill Adversary Proceeding and the TRO
Motion was to protect the assets of the Non-Debtor Subsidiaries by preventing
their assets from being used to satisfy all or a portion of the obligations
under the 1997 Credit Agreement that had been guaranteed by certain Non-Debtor
Subsidiaries.
On October 10, 2000, with the consent of the Bank Holders, the
Court entered a temporary restraining order ("TRO") enjoining and restraining
the Bank Holders from exercising any enforcement right or remedy under the 1997
Credit Agreement against any Non-Debtor Subsidiaries, including any setoff
rights, under any other agreement, or under applicable law. Notwithstanding the
injunction, the TRO permitted the Bank Holders to impose an administrative
freeze on any funds in accounts of the designated Non-Debtor Subsidiaries as of
the Petition Date and to refuse to make additional loans or advances to the
Non-Debtor Subsidiaries.
Following negotiations between counsel for the Debtors and the
Bank Holders (except for the China Lenders as discussed below), and in order to
preserve the status quo for the benefit of the Debtors' bankruptcy estates and
their creditors, the Debtors and the Bank Holders entered into various
modifications and extensions of the TRO, which were approved by the Court.
The Debtors and the Bank Holders continued to engage in
discussions for the purpose of entering into an agreement pursuant to which the
Bank Holders would stand still from exercising certain enforcement rights and
remedies against the Non-Debtor Subsidiaries, waive certain rights and remedies
under the 1997 Credit Agreement and certain credit facilities with the
Non-Debtor Subsidiaries (the "BILATERAL FACILITIES"), amend the 1997 Credit
Agreement to release, discharge and waive all claims against certain Non-Debtor
Subsidiaries, and resolve disputes regarding setoff rights. On May 30, 2001,
after successful negotiations between the Debtors and the Bank Holders, the
Debtors filed the Motion for Order Under 11 U.S.C. Sections 105(a), 362(a), and
Fed. R. Bankr. P. 6004, 7065 and 9019 (I) Authorizing the Debtors to Enter Into,
and to Take All Necessary or Appropriate Action to Effectuate the Terms of, a
Standstill and Waiver Agreement with Certain Defendants, (II) Terminating the
Temporary Restraining Order Entered with Respect to Certain Defendants, (III)
Dismissing this Adversary Proceeding with Respect to Certain Defendants, (IV)
Authorizing the Debtors to Compromise and Settle Setoff Rights Asserted by the
Defendants and Terminating the Stay of 11 U.S.C. Section 362(a) with Respect to
Certain Setoff Rights, and (V) Releasing, Discharging, and Waiving Certain
Claims of Defendants (the "STANDSTILL MOTION").
The Standstill Motion was approved by Court Order dated June 19,
2001 (the "STANDSTILL ORDER"). The Standstill Order, among other things,
authorized the Debtors to enter into the Standstill and Waiver Agreement among
the Debtors, certain Non-Debtor Subsidiaries and the Bank Holders (the
"STANDSTILL AGREEMENT"), authorized the Debtors to settle the setoff rights
asserted by the Bank Holders, released, discharged and waived certain claims of
the Defendants, and dismissed, without prejudice, the Standstill Adversary
Proceeding and
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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
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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-coordinating arranger for the Loan Facility Agreement, dated March 12, 1998
(the "REVOLVING LOAN FACILITY") among SCB, Societe Generale ("SOC GEN") and KBC
Bank, N.V. ("KBC" and, together with SCB and Soc Gen, the "CHINA LENDERS"),
Owens Corning (China) Investment Company, Ltd. ("OCI"), Owens-Corning
(Guangzhou) Fiberglas Co., Ltd. ("OC GUANGZHOU"), Owens-Corning (Shanghai)
Fiberglas Co., Ltd. ("OC SHANGHAI"), as borrowers, and OCD as guarantor, to
effectuate the continued servicing of the Revolving Loan Facility and to settle
certain setoff rights asserted by SCB in the approximate amount of $7.8 million.
Resolution of the issues surrounding the Revolving Loan Facility was necessary
to settle the setoff rights asserted by SCB and would permit OC to realize
future value and profits from OC Guangzhou and OC Shanghai, which provide
valuable production support to OC's global insulation business and are
strategically important to OC's long term business strategy in China.
Following negotiations, OCD, OC Guangzhou, OC Shanghai and the
China Lenders reached agreement on the key terms of a Standstill and Amendment
Agreement (the "CHINA STANDSTILL AGREEMENT"). On October 16, 2002, the Debtors
filed a motion for an order under 11 U.S.C. Sections 363 and 105, and Fed. R.
Bankr. P. 6004 and 9019 authorizing and approving (i) execution of the China
Standstill Agreement by and among OCD, OC Guangzhou, OC Shanghai, and the China
Lenders; (ii) consummation of the transactions contemplated in the China
Standstill Agreement; and (iii) granting the China Lenders an Allowed, general
unsecured claim against OCD in the amount of $22 million conditioned upon the
closing of the 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
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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. Sections 105, 345(b) and 363 (I) Authorizing (A)
Maintenance of Certain Existing Bank Accounts, (B) Continued Use of Existing
Business Forms, (C) Use of Modified Cash Management System, and (D) Transfer of
Funds to Non-Debtor Subsidiaries; and (II) Waiving,
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on an Interim Basis, Investment and Deposit Requirements of 11 U.S.C. Section
345(b) (the "INTERIM CMO").
The Interim CMO originally had an expiration date of December 18,
2001. On December 17, 2001, the Court entered a Stipulation and Order which
extended the expiration date of the Interim CMO until February 26, 2002. The
Debtors and Creditors submitted and the Court approved the final cash management
order (the "FINAL CMO"), which became effective on February 25, 2002 and is to
continue in effect until confirmation of the Plan.
Pursuant to the Final CMO, in accordance with Sections 105 and
363 of the Bankruptcy Code, the Debtors may (i) designate, maintain and continue
to use all of their respective collection, collateral, operating, depository,
payroll and other accounts existing at the Petition Date in accordance with
existing account agreements, (ii) close any such accounts, and (iii) treat such
accounts as accounts of the Debtors in their capacity as debtors-in-possession.
The Final CMO provides that the Debtors and Non-Debtor Subsidiaries are
permitted to utilize their cash management system existing prior to the Petition
Date.
With certain allowed exceptions, the Final CMO prohibits the
Debtors and Non-Debtor Subsidiaries from transferring funds to pay pre-petition
intercompany indebtedness. However, the Final CMO permits transfers of funds
among Debtors and Non-Debtor Subsidiaries in payment for goods and services
provided to the payor after the Petition Date. The Final CMO also permits
transfers of funds among Debtors and Non-Debtor Subsidiaries for capital
expenditures, working capital and short term liquidity as long as the transfers
are evidenced as loans, within the appropriate monetary limits and properly
recorded on applicable accounts, with additional limits on transfers of funds to
negative net worth Debtors and Non-Debtor Subsidiaries. The Final CMO permits
the Debtors and Non-Debtor Subsidiaries to invest and deposit funds in
accordance with their established deposit and investment practices as of the
Petition Date. The Final CMO also approved eight specific transactions as
exceptions to the limitations set forth in the Final CMO.
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.
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(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 Unexpired 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 Unexpired Leases."
The following is a description of the disposition of certain of
the Debtors' executory contracts and unexpired leases throughout the Chapter 11
Cases:
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(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
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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) OWENS CORNING WORLD HEADQUARTERS RESTRUCTURING. The
Debtors maintain their World Headquarters in a 400,000 square foot facility
located on a 42 acre tract of land in Toledo, Ohio. Approximately 1,100 of the
Debtors' employees are located in the World Headquarters, including key
management, business unit employees, customer service, sales support and
business process personnel. As of the Petition Date, Owens Corning leased the
World Headquarters facility from the Toledo Lucas County Port Authority (the
"Port Authority")
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pursuant to two leases. The payments due under the first lease primarily were
used to pay principal, interest and other amounts owing under the Port
Authority's $85.4 million Taxable World Headquarters Revenue Bonds, Series 1995
(the "Revenue Bonds"), as well as amounts due under the Port Authority's $10
million Taxable State Loan Revenue Note, payable to the State of Ohio. The Port
Authority leases the ground underlying the World Headquarters facility pursuant
to third party ground leases which were scheduled to expire on May 31, 2030.
After negotiations with the necessary parties, the Debtors
reached a comprehensive agreement to restructure the leases on the World
Headquarters and resolve the underlying bond debt. By Order dated May 19, 2003,
the Court approved this proposed restructuring. The principal terms of the
agreement consisted of the following: (a) Owens Corning's purchase of the
Revenue Bonds for $691.961 per $1,000 of the outstanding principal of such bonds
(for a total purchase price of $32 million); (b) the allowance of general
unsecured (non-priority) claims to the holders of the Revenue Bonds in the
amount of $399.039 per $1,000 of outstanding principal amount of such bonds (for
total allowed general unsecured claims of approximately $21.4 million); (c) the
modification of Owens Corning's second lease for the World Headquarters, to
provide for (x) extensions through 2075, at Owens Corning's option, and (y) a
more favorable purchase option; and (d) modifications of the underlying ground
leases with respect to the World Headquarters, through 2075, at Owens Corning's
option.
(vi) 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.
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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.
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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.
The Wellington Agreement is an agreement that was entered
into in 1985 between certain asbestos producers (as defined therein), including
OCD, and certain insurers, including Cigna Property and Casualty Insurance
Company and Royal Indemnity Company, that (1) resolved certain insurance
coverage disputes; and (2) established certain alternative dispute resolution
("ADR") procedures. The OC Asbestos Personal Injury Liability Insurance Assets
include rights to coverage under certain insurance policies issued by insurers
that are signatories to the Wellington Agreement. The Reorganized Debtors intend
to transfer the OC Asbestos Personal Injury Liability Insurance Assets to the
Asbestos Personal Injury Trust. Certain insurer signatories to the Wellington
Agreement assert that issues concerning the transfer of the OC Asbestos Personal
Injury Insurance Assets to the Asbestos Personal Injury Trust cannot be resolved
by the Bankruptcy Court (or the District Court); the Plan Proponents disagree
with this assertion. 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
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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. The first required Fibreboard
payment of approximately $44 million was made on April 6, 2000 from funds
obtained from the Fibreboard Insurance Settlement Trust. 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"). It is the Debtors' position that all such Investment
Proceeds are the property of either OCD or Fibreboard. B&B contends that at
least a portion of the Investment Proceeds is properly considered property of
the plaintiffs for whose benefit the funds were deposited with B&B.
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). The parties currently dispute whether B&B
changed its position that the settlement agreement created an express trust in
the amended motion. B&B asserted if the funds were held in an escrow account,
the Debtors were still not entitled to the funds under Texas escrow law. B&B
asserted that whether the agreement created an express trust or an escrow
account, the automatic stay did 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.
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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.
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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.
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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.
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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.
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(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
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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
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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.
(e) MOTION TO RECUSE JUDGE WOLIN
On October 15, 2003, Kensington International Limited
("Kensington") and Springfield Associates, LLC ("Springfield"), two of the Bank
Holders, filed a motion to recuse Judge Wolin from further participation in the
Debtors' cases. Kensington and Springfield allege, among other things, that two
of the Court Appointed Consultants, David R. Gross, Esq. and C. Judson Hamlin,
Esq., are not neutral advisors of the District Court, but are partisan advocates
who have a material interest in the outcome of the Debtors cases. Kensington and
Springfield claim that because Messrs. Hamlin and Gross advise the District
Court on issues that directly affect their constituents' right in the Chapter 11
case of G-I Holdings Inc., f/k/a GAF Corporation ("G-I"), the District Court's
appearance of neutrality and impartiality is questioned.
Kensington and Springfield state that on October 10, 2001, Mr.
Hamlin was appointed to serve as the Legal Representative of Present and Future
Holders of Asbestos-Related Demands (the "G-I Future Representative") in the G-I
case. Kensington and Springfield also note that the G-I Future Representative
promptly hired the firm with which Mr. Gross was then a partner to act as
counsel to the G-I Future Representative. Kensington and Springfield allege that
Messrs. Hamlin and Gross take advantage of the overlapping asbestos-related
factual and legal issues in the Debtors' cases and the G-I case by advocating
positions in G-I based upon the District Court's decisions in the Debtors'
cases, decisions that are issued while Messrs. Hamlin and Gross are advising the
District Court. Kensington and Springfield contend that Messrs. Hamlin and Gross
have actively and materially participated in the Debtors' cases for the past
twenty-two months and that the District Court cannot return to an appearance of
neutrality and impartiality.
The Plan Proponents believe that the motion to recuse is without
merit.
On October 15, 2003, Judge Wolin entered an order withdrawing the
reference from the Bankruptcy Court regarding the motion to recuse and
adjourning all briefing and hearings on the motion until further order from the
District Court. On October 23, 2003, Judge Wolin issued a letter opinion and
order staying all proceedings related to the motion until further order of the
District Court.
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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, 2003, 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.
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12. EXTENSION OF TIME TO REMOVE ACTIONS
The Debtors are parties to numerous judicial and administrative
proceedings currently pending in multiple forums throughout the country
(collectively, the "ACTIONS"). The Actions involve a wide variety of claims.
Pursuant to 28 U.S.C. Section 1452 and Bankruptcy Rule 9027(a)(2), the
Bankruptcy Court has entered orders extending the time period within which the
Debtors may review Actions and determine whether to remove them to the District
Court or the Bankruptcy Court. The date by which the Debtors must file notices
of removal under Bankruptcy Rule 9027(a)(2)(A) has been extended through and
including the later of (a) thirty (30) days after confirmation of a plan of
reorganization, or (b) thirty (30) days after the entry of an order terminating
the automatic stay with respect to the particular action sought to be removed.
13. SUMMARY OF CLAIMS PROCESS AND BAR DATES
(a) SCHEDULES AND STATEMENTS OF FINANCIAL AFFAIRS
As part of their "first day" motions, the Debtors filed a motion
requesting additional time to file their SOFAS. Such motion was granted by order
of the Bankruptcy Court dated October 6, 2000, and the Debtors were granted an
extension until December 19, 2000. On November 22, 2000, the Debtors filed
separate SOFAS for OCD and each of the 17 Subsidiary Debtors. Among other
things, the SOFAS set forth the Claims of known creditors against each of the
Debtors as of the Petition Date, based upon the Debtors' books and records.
On November 20, 2001, the Debtors filed Amended and Restated Schedules
of Assets and Liabilities (the "AMENDED SCHEDULES") for OCD and each of the 17
Subsidiary Debtors. The Amended Schedules amended and wholly superseded the
Schedules filed by the Debtors in November 2000. Revisions to the Amended
Schedules were filed on January 30, 2002 for certain of the Debtors.
Exclusive of asbestos-related personal injury and wrongful death
claims, the total amount of liabilities listed in the Debtors' Amended Schedules
was approximately $8,470 million, consisting of $1,460 million of pre-petition
bank debt; $1,338 million of pre-petition bond debt; $190 million of
pre-petition trade debt; $10 million of pre-petition tax debt; and $5,270
million in pre-petition intercompany debt and $212 million in other pre-petition
debt.
(b) GENERAL CLAIMS BAR DATE AND PROOFS OF CLAIM
In connection with the Chapter 11 Cases, the Bankruptcy Court set
April 15, 2002 as the last date by which holders of certain pre-petition Claims
against the Debtors were required to file Proofs of Claim (the "GENERAL BAR
DATE"). The General Bar Date did not apply to certain claims, including Asbestos
Personal Injury Claims other than OC Indirect Asbestos PI Trust Claims and FB
Indirect Asbestos PI Trust Claims. Pursuant to order of the Bankruptcy Court
dated November 27, 2001, any holder of a Claim that was required to but failed
to file a Claim on or before the General Bar Date was barred from asserting such
Claim against any of the Debtors and will not participate in any distribution in
the Chapter 11 Cases on account of such Claim.
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Pursuant to notice procedures approved by the Bankruptcy Court, the
Debtors sent out approximately 204,000 Proofs of Claim forms and notices of the
General Bar Date to known claimants and their attorneys, and published notice of
the General Bar Date twice in the national and (if applicable) international
editions of THE NEW YORK TIMES, THE WALL STREET JOURNAL and USA TODAY; once in
approximately 250 regional or local newspapers in the areas in which the Debtors
had significant business operations at the time of publication; and once in
approximately 35 trade publications in the primary lines of business in which
the Debtors operate or formerly operated.
In response to the General Bar Date, approximately 24,000 Proof of
Claims, including late-filed claims, were filed with the Claims Agent and/or
Bankruptcy Court, asserting approximately $16.1 billion of aggregate
liabilities. The Debtors are investigating these claims to determine their
validity.
The Debtors have identified approximately 15,000 claims, asserting
approximately $8.4 billion of aggregate liabilities, which they believe should
be disallowed by the Bankruptcy Court, primarily because such claims appear to
be duplicate or amended claims or claims that are not related to any of the
Debtors' cases (the "CURRENTLY DISPUTED CLAIMS"). It is the intention of the
Debtors to file objections to these Currently Disputed Claims. While the
Bankruptcy Court will ultimately determine liability amounts, if any, that will
be allowed as part of the Chapter 11 Cases, the Debtors believe that all or
substantially all of these claims will be disallowed.
As of the date of the filing of this Disclosure Statement, the Debtors
have filed eleven omnibus objections to claims, which have objected to
approximately 1200 Claims, and which seek to disallow or expunge approximately
$1.3 billion of asserted claims. Currently Disputed Claims contained therein
have been expunged pursuant to an order of the Bankruptcy Court or are pending
before the Bankruptcy Court.
In addition to the Currently Disputed Claims described above, the
remaining Proof of Claims include approximately 9,000 claims, totaling
approximately $7.7 billion, as follows:
- Approximately 2,900 OC Indirect Asbestos PI Trust Claims and FB
Indirect Asbestos PI Trust Claims, totaling approximately $1.4 billion
of asserted liabilities.
- Approximately 600 OC Asbestos Property Damage Claims, OC Indirect
Asbestos Property Damage Claims, FB Asbestos Property Damage Claims
and FB Indirect Asbestos Property Damage Claims, totaling
approximately $0.7 billion of asserted liabilities. The Debtors
believe that most of these claims were submitted with insufficient
documentation. The Debtors expect to vigorously contest any asserted
asbestos-related property damage claims in the Bankruptcy Court. Based
upon their historic experience in respect of asbestos-related property
damage claims, the Debtors do not anticipate significant liability
from such claims.
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- Approximately 5,500 claims, totaling approximately $5.6 billion,
alleging rights to payment for financial, environmental, trade and
other matters (the "GENERAL CLAIMS"). The Company has previously
recorded approximately $3.7 billion in liabilities for these claims.
The General Claims with the largest variance from the recorded amounts
are: claims by the United States Department of Treasury, totaling
approximately $530 million, in connection with taxes; a contingent
claim for approximately $458 million by the Pension Benefit Guaranty
Corporation; claims for contract rejections, totaling approximately
$310 million, of which approximately $250 million are protective
claims covering contracts which have not yet been rejected by the
Debtors; a $275 million class action claim involving alleged problems
with a specialty roofing product, which claim the Debtors do not
believe is meritorious based upon their historic experience with
servicing their warranty program for such product; and environmental
claims, totaling approximately $244 million.
The Debtors have recorded liability amounts for those claims that can
be reasonably estimated and which they believe are probable of being allowed by
the Bankruptcy Court. At this time, it is impossible to reasonably estimate the
value of all the claims that will ultimately be allowed by the Bankruptcy Court,
due to the uncertainties of the Chapter 11 process, the in-progress state of the
Debtors' investigation of submitted claims, and the lack of documentation
submitted in support of many claims. The Debtors continue to evaluate claims
filed in the Chapter 11 Cases and will make such adjustments as may be
appropriate. Although the Debtors' review of all Claims filed is anticipated to
be completed after the Confirmation Date, the Debtors estimate, based on their
analysis of the Claims thus far, that the Claims that are likely to become
Allowed Claims are as follows, on a class-by-class basis:
- Class 1: The Debtors believe that no unpaid liabilities exist
for this class.
- Class 2A: $4.4 million to $5 million
- Class 2B: $6 million
- Class 3: $18.0 million to $18.5 million
- Class 4: $1,472 million to $1,549 million
- Class 5: $1,389 million
- Class 6A: $109 million to $475 million
- Class 6B: $265 million
- Class 7: See Sections IV.D.2 and VII.C.3.b(viii) of this
Disclosure Statement
- Class 8: See Sections IV.D.2 and VII.C.3.b(ix) of this
Disclosure Statement
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- Class 9 $2 million to $7 million
- Class 11 $276 million
NOTWITHSTANDING THE DEBTORS' BEST ESTIMATES, THE ACTUAL AMOUNT OF
CLAIMS AGAINST THE DEBTORS THAT ULTIMATELY BECOME ALLOWED CLAIMS COULD
MATERIALLY EXCEED THESE AMOUNTS, AND IN SUCH EVENT, THE ESTIMATED PERCENTAGE
RECOVERIES FOR HOLDERS OF CLAIMS COULD BE MATERIALLY LESS THAN AS ESTIMATED IN
THIS DISCLOSURE STATEMENT.
(c) ASBESTOS CLAIMS BAR DATE AND PROOFS OF CLAIM
As indicated above, the General Bar Date did not apply to
asbestos-related personal injury and asbestos-related wrongful death claims,
although it did apply to asbestos property damage claims, OC Indirect Asbestos
PI Trust Claims and FB Indirect Asbestos PI Trust Claims. A bar date for filing
Proofs of Claim against the Debtors with respect to these types of Claims has
not been set. Despite this, approximately 2,900 Proofs of Claim, totaling
approximately $2.2 billion, were filed in response to the General Bar Date on
account of asserted asbestos-related personal injury and asbestos-related
wrongful death claims.
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 6A 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
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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.
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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.
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(a) RESOLVED AS ALLOWED CLASS 6A 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 6A 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 6A 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).
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(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.
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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
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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.
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(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
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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
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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
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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,
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29 U.S.C. Sections 1301-1462 ("ERISA"). Pursuant to Title IV, each of the
Debtors is a contributing sponsor of the Merged Plan or a member of a
contributing sponsor's controlled group. 29 U.S.C. Section 1301(a)(13)(14). The
Plan specifically provides that OCD and any other of the Reorganized Debtors
whose employees are covered by the Merged Plan shall assume and continue the
Merged Plan, satisfy the minimum funding standards pursuant to 26 U.S.C. Section
412 and 29 U.S.C. Section 1082, and administer the Merged Plan in accordance
with its terms and the provisions of ERISA. Further, nothing in the Plan of
Reorganization shall be construed in any way as discharging, releasing or
relieving the Debtors or the Debtors' successors, including the Reorganized
Debtors, or any party, in any capacity, from liability imposed under any law or
regulatory provision with respect to the Merged Plan or PBGC.
OCD is required to comply with ERISA's minimum funding requirements.
Funding is generally in cash but may also be in stock or debt (in general, not
exceeding 10% of the plan's assets). OC has estimated that it will make cash
payments to fund the Merged Plan in the range of $300 million to $400 million
over 2003 and 2004 relating to post-petition service periods. It is assumed that
the 2004 pension payments will be made from cash on hand and operating cash
flow. As a consequence, for purposes of this Disclosure Statement it is assumed
for purposes of projections of future performance and projected distributions
under the Plan that (1) the Merged Plan will not be terminated, (2) OCD will
make all minimum funding payments and (3) the Pension Plan will be less than
100% funded at December 31, 2003, and (4) OCD will not be required to reserve
assets in the Plan to adequately fund the Pension Plan, but will be required to
demonstrate its ability to fully fund the Merged Plan in future periods.
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
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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,
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2001 to March 29, 2002 (the "POLICY"). Executive Risk received notice under the
Policy relating to the Hancock Litigation and has indicated a willingness to pay
on a current basis certain defense expenses, as that term is used in the Policy,
incurred on or after March 29, 2002 under the Policy, subject to mutual
reservations of rights, in connection with the Hancock Litigation to or on
behalf of the insureds. A proposed Stipulation and Order Among Debtors,
Executive Risk Indemnity Inc., Norman P. Blake, Jr., Gaston Caperton, Domenico
Cecere, Leonard S. Coleman, Jr., William W. Colville, John H. Dasburg, Landon
Hilliard, Glen H. Hiner, Sir Trevor Holdsworth, Jon M. Huntsman, Jr., Ann
Iverson, W. Walker Lewis, Michael I. Miller, Furman C. Moseley, Jr., W. Ann
Reynolds, and Steven J. Strobel was filed with the Court providing inter alia
that, notwithstanding the automatic stay of 11 U.S.C. Section 362, Executive
Risk shall be and hereby is authorized to make payments under the Policy to or
for the benefit of the Insureds for Defense Expenses incurred in connection with
the Hancock Litigation.
(b) DELOITTE LITIGATION
On August 10, 2001, Deloitte Consulting, L.P. ("DELOITTE") filed
an Administrative Claim (the "DELOITTE ADMINISTRATIVE CLAIM") in the Chapter 11
Cases seeking not less than $2 million, on the theory that after the Petition
Date, the Debtors had converted Deloitte's contributions to Debtors' HOMExperts
home repair and inspection business. On February 5, 2002, Deloitte filed its
adversary complaint against the Debtors, asserting copyright infringement,
conversion, and post-petition use and benefit, seeking not less than $2 million
in damages and/or administrative expenses (the "DELOITTE ADVERSARY ACTION"). The
Debtors vigorously contested the Deloitte Administrative Claim and the Deloitte
Adversary Action and moved to dismiss the Deloitte Administrative Claim.
The Debtors and Deloitte exchanged discovery requests, documents
and written responses, and commenced depositions. After considerable
negotiations, the Debtors and Deloitte reached a settlement resolving, without
further litigation, all of Deloitte's claims related to HOMExperts, the Deloitte
Administrative Claim, and the Deloitte Adversary Action. Pursuant to the terms
of the settlement, Deloitte was allowed an administrative expense claim of
$350,000 to be paid within 30 days after entry of the order approving the
settlement; Deloitte 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
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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. Oral argument on this appeal was held on October
1, 2003.
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
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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
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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) THE SERVICELANE LITIGATION
Owens Corning owns 54% of the stock in SL.com, the parent company
of ServiceLane.com, Inc. ("ServiceLane"), an internet-based home repair and
remodeling business. ServiceLane has commenced a chapter 7 bankruptcy case in
the United States Bankruptcy Court for the Northern District of Texas, Dallas
Division, Case No. 01-36044-HCA-7 (Abrahamson, B.J.). Two former employees of
ServiceLane, Michael Burchfield ("Burchfield") and R.Q. Whitmire ("Whitmire")
have filed proofs of claim (Claims No. 8651 and 8622) in the Owens Corning
bankruptcy alleging fraud and misrepresentation. Additionally, on July 24, 2003,
Burchfield and Whitmire, along with ServiceLane's chapter 7 trustee, brought
suit against Michael H. Thaman and Charles W. Stein, Owens Corning officers who
also were directors of ServiceLane, in the United States District Court for the
Northern District of Ohio, Western Division. In the complaint, entitled
ServiceLane.com, INC., ET AL. V. STEIN, ET AL., Case No. 3:03CV7448 (Carr, J.),
ServiceLane alleges a breach of fiduciary duty against both Mr. Thaman and Mr.
Stein and Burchfield and Whitmire allege fraud solely against Mr. Stein. Mr.
Thaman and Mr. Stein are represented by their own counsel in this action.
On September 10, 2003, Owens Corning filed the Debtors'
Fourteenth Omnibus (Substantive) Objection to Proofs of Claim filed by Michael
Burchfield and R.Q. Whitmire and Counterclaim, containing objections to the
Burchfield and Whitmire proofs of claim, along with a counterclaim seeking
declaratory relief in the form of a declaration that neither Owens Corning nor
Mr. Thaman and Mr. Stein harmed Burchfield and Whitmire. On October 10, 2003,
Burchfield and Whitmire moved to dismiss Owens Corning's counterclaim, and the
Company filed an opposition to that motion. On October 1, 2003, Mr. Thaman and
Mr. Stein filed a similar adversary proceeding in the Bankruptcy Court, and it
is anticipated that the parties will seek to consolidate the lawsuits in the
near future. A motion to dismiss the Ohio lawsuit is anticipated to be filed on
behalf of Mr. Thaman and Mr. Stein by their counsel in the near future.
Owens Corning believes that neither the claims of Burchfield and
Whitmire nor the claims of the chapter 7 trustee of ServiceLane have merit.
Owens Corning intends to vigorously defend against these claims.
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(h) "THE NEW YORK COMPLAINT FILED BY CERTAIN BANK HOLDERS"
On or about September 2, 2003, certain of the Company's current
and former directors and officers were named as defendants in a lawsuit
captioned KENSINGTON INTERNATIONAL LIMITED, ET AL. V. GLEN HINER, ET AL., filed
in the Supreme Court of the State of New York, County of New York. Owens Corning
is not named in the lawsuit. The suit, which was brought by two assignees of
lenders under the Pre-Petition Credit Facility, Kensington and Springfield ( who
are "Bank Holders" as such definition is used in this Disclosure Statement),
alleges causes of action (1) against all defendants for breach of fiduciary
duty, and (2) against certain defendants for fraud in connection with certain
loans made under the Pre-Petition Credit Facility. The complaint seeks an
unspecified amount of damages. Owens Corning believes that the claims made in
the complaint are without merit. The named defendants in this proceeding have
each filed contingent indemnification claims with respect to such litigation
against Owens Corning. SEE Section VII.F.1(f) of this Disclosure Statement
entitled "Indemnification Obligations and Agreements Concerning Obligations to
Indemnify."
On October 6, 2003, the Debtors filed a Verified Complaint for
Temporary Restraining Order, Preliminary Injunction, and Enforcement of the
Automatic Stay, along with a Motion to Enforce Automatic Stay Pursuant To 11
U.S.C. Section 362(a), or, in the Alternative, for Injunctive Relief Pursuant to
11 U.S.C. Section 105(a) in the Bankruptcy Court. In this case, entitled OWENS
CORNING, ET AL. V. KENSINGTON INTERNATIONAL LTD, ET AL., Adversary No.
A-03-56359, the Debtors seek an injunction requiring Kensington and Springfield
to dismiss the New York Complaint or, in the alternative, an order enjoining
Kensington and Springfield from pursuing the New York Complaint until after
confirmation. Kensington and Springfield and the New York Defendants have
jointly entered into a stipulation staying proceedings in that case until after
the hearing on the preliminary injunction is held before Judge Fitzgerald. That
hearing will take place on November 5, 2003.
(i) THE CSFB CONSTRUCTIVE TRUST COMPLAINT
On October 15, 2003, OCD and twenty unnamed law firms who are
alleged to have received payments under the NSP were named as defendants in a
case captioned CREDIT SUISSE FIRST BOSTON V. OWENS CORNING, ET AL.., Adversary
No. 03-56919-JKF (the "CSFB Complaint"). The CSFB Complaint seeks (1) to impose
a constructive trust on funds held by Owens Corning drawn under the 1997 Credit
Agreement between March 1, 2000 and October 5, 2000; and (2) to impose a
constructive trust against the unnamed law firms. In both counts, CSFB
essentially claims that the NSP resulted in financial difficulties for Owens
Corning, which allegedly culminated in loan covenant breaches under the 1997
Credit Agreement that were not disclosed to CSFB, in turn causing the loan of
monies under the 1997 Credit Agreement that the lenders would not have been
required to lend.
The Plan Proponents assert that the CSFB Complaint is without
merit and they intend to vigorously oppose the CSFB Complaint in appropriate
proceedings.
(j) UNSECURED CREDITORS' COMMITTEE MOTION TO APPOINT TRUSTEE
On October 17, 2003, the Unsecured Creditors' Committee filed a
Motion for Appointment of Chapter 11 Trustee, by which the Unsecured Creditors'
Committee sought
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the appointment of a chapter 11 trustee for the Debtors' estates. In such
motion, the Unsecured Creditors' Committee asserts that a chapter 11 trustee
should be appointed because the Debtors allegedly have breached their fiduciary
duties by, among other things: aligning themselves too closely with the
interests of their asbestos creditors; including in the Plan a condition to
confirmation that the Class 7 Aggregate Amount and the Class 8 Aggregate Amount
be determined to be not less than $16 billion prior to certain deductions; not
seeking a bar date for the filing of asbestos personal injury claims; allegedly
not pursuing certain alleged avoidance actions against law firms that received
settlement funds from the Debtors prior to the Petition Date; including the FB
Sub-Account Settlement Payment in the Plan; and providing New OCD Common Stock
under the Plan for the management and employees of the Reorganized Debtors as
part of the Management Arrangements.
In the event the Unsecured Creditors' Committee's motion were to
be granted and a trustee were to be appointed for the Debtors' chapter 11 cases
prior to the Confirmation Date, such trustee's rights with respect to the Plan,
including without limitation such trustee's rights under section 14.13 of the
Plan, would be determined by the Court.
The Debtors do not believe the Unsecured Creditors' Committee's
motion has any merit, and will vigorously oppose the motion. As of the date of
this Disclosure Statement, there has been no ruling on this motion.
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.
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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.
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(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.
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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
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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
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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
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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 1.108 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
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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.
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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 Agreements. This
Motion also sought to lift the stay applicable to those actions, as well as 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 requested a hearing on its motion on shortened notice.
The Debtors objected to the Unsecured Creditors' Committee's motion to shorten
notice on August 18, 2003 and responded to the Unsecured Creditors' Committee's
motion to intervene on September 9, 2003.
On August 19, 2003, the Bankruptcy Court entered an Order denying
the Unsecured Creditors' Committee's motion to shorten notice. A hearing was
held on the motion to intervene on September 22, 2003, and on September 24,
2003, the Bankruptcy Court entered two orders addressing the motion. The first
Order directed all law firms that had entered into NSP Agreements or non-NSP
agreements with the Debtors, and their professionals, to preserve all records
related to such NSP Agreements or non-NSP agreements. The second Order
authorized the Unsecured Creditors' Committee, upon filing appropriate motions
in the Avoidance Actions involving payments to law firms under NSP Agreements,
to intervene in such actions. However, the Order did not authorize the Unsecured
Creditors' Committee to file amended or other complaints in such actions and did
not modify the stay in effect with respect to such actions. The second Order
also directed the Debtors, on or before September 29, 2003, to either (a) obtain
and file new tolling agreements, to the extent necessary, from the appropriate
law firms, or (b) commence suits against such law firms. To the extent the
Debtors did not obtain tolling agreements or file suits, the Unsecured
Creditors' Committee was authorized by such Order to commence suits against such
firms.
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By September 29, 2003, the Debtors entered into approximately 79
new tolling agreements. With respect to those law firms that did not sign new
tolling agreements, OCD, Fibreboard and Integrex filed five complaints with the
Bankruptcy Court in substantially the same form as the complaints filed on
October 4, 2002. SEE Section V.G.3.e of this Disclosure Statement entitled "NSP
Actions and Tolling Agreements."
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 in 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 October 24, 2003, of the names of each
of the Directors of OCD:
<Table>
<Caption>
Name Title
---- -----
Norman P. Blake, Jr. Director
David T. Brown Director, President and Chief Executive Officer
Gaston Caperton Director
Leonard S. Coleman, Jr. Director
William W. Colville Director
Landon Hilliard Director
Ann Iverson Director
W. Walker Lewis Director
Furman C. Moseley, Jr. Director
W. Ann Reynolds Director
Michael H. Thaman Director, Chairman of the Board and Chief Financial Officer
</Table>
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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
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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
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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 October 24, 2003, of the names of the
executive officers of OC and the positions held by each such executive officer
at OC:
<Table>
<Caption>
NAME TITLE
---- -----
Sheree L. Bargabos Vice President and President, Exterior Systems Business
David T. Brown President and Chief Executive Officer
Charles E. Dana Vice President, Corporate Controller and Global Sourcing
Daniel J. Dietzel Vice President and President, Siding Solutions Business
David L. Johns Senior Vice President and Chief Supply Chain and
Information Technology Officer
George E. Kiemle Vice President and President, Insulating Systems Business
Stephen K. Krull Senior Vice President, General Counsel and Secretary
Richard D. Lantz Vice President and President, Composite Solutions Business
Michael H. Thaman Chief Financial Officer
</Table>
Sheree L. Bargabos has been Vice President and President of Exterior
Systems since August 2002. She was formerly Vice President of Training and
Development, Vice President of the Insulating Systems Business, Vice President
and General Manager of the Foam Business, General Manager of the Foam Business
and Sales Leader of the Building Materials Sales and Distribution, Canada.
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<Page>
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.
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, and Lantz 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
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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
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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").
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<Page>
<Table>
<Caption>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
- ----------------------------------------------------------------------------- -----------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION(4) YEAR ($) ($) ($)(5) ($)(6) SARS(#)(7) ($) ($)(8)
--------------------- ---- ------ ----- ------------ ---------- ---------- ------- ------------
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
</Table>
- ----------
(4) Prior to April 2002, Mr. Brown served as Executive Vice President and Chief
Operating Officer; prior to January 2001, he served as Vice President and
President, Insulating Systems Business. Prior to April 2002, Mr. Thaman
served as Senior Vice President and Chief Financial Officer; prior to April
2000, he served as Vice President and President, Exterior Systems Business.
Prior to February 2003, Ms. Smith also served as Chief Restructuring
Officer, General Counsel and Secretary; she assumed the duties of Chief
Restructuring Officer in November 2000. Prior to April 2001, Mr. Johns
served as Senior Vice President and Chief Technology Officer. Prior to
February 2001, Mr. Kiemle served as Vice President Manufacturing,
Insulating Systems Business. Mr. Hiner retired as Chairman of the Board and
Chief Executive Officer in April 2002.
(5) "Other Annual Compensation" includes perquisites and personal benefits,
where such perquisites and personal benefits exceed the lesser of $50,000
or 10% of the Named Executive Officer's annual salary and bonus for the
year, as well as certain other items of compensation. For the years shown,
none of the Named Executive Officers received perquisites and/or personal
benefits in excess of the applicable threshold.
(6) There were no restricted stock awards to any of the Named Executive
Officers in 2000, 2001, or 2002.
At the end of 2002, Mr. Brown held a total of 11,350 shares of restricted
stock, valued at $4,767; Mr. Thaman held a total of 10,800 shares of
restricted stock, valued at $4,536; Ms. Smith held a total of 13,566 shares
of restricted stock, valued at $5,698; Mr. Johns held a total of 4,200
shares of restricted stock, valued at $1,764; Mr. Kiemle held a total of
5,075 shares of restricted stock, valued at $2,132; and Mr. Hiner held no
shares of restricted stock. The value of these aggregate restricted stock
holdings was calculated by multiplying the number of shares held by the
closing price of OCD common stock on December 31, 2002 (as reported on the
Over The Counter Bulletin Board). Dividends are paid by OC on restricted
stock held by the Named Executive Officers if paid on stock generally.
(7) No stock options or stock appreciation rights (SARs) were awarded to any of
the Named Executive Officers in 2000, 2001, or 2002.
(8) Of Mr. Hiner's number for 2002, $63,333 represents amounts payable during
2002 pursuant to a post-retirement Release and Non-Competition Agreement
and $3,198 was the present value (based upon the Applicable Federal Rate
from date of payment to earliest date of repayment to OC) of split-dollar
life insurance premiums paid by OC which were invested on his behalf in
2002. Upon Mr. Hiner's termination of employment, OC was reimbursed for all
such insurance premiums previously invested on his behalf.
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6. COMPENSATION/RETIREMENT PLANS
(a) SENIOR LEADER EMERGENCE INCENTIVE PLAN
The Named Officers participate in the Senior Leader Emergence
Incentive Plan. The Senior Leader Emergence Incentive Plan provides to each
participant who remains employed by OC through the Effective Date a cash payment
equal to the "Emergence Amount" as established by the Compensation Committee.
The Emergence Amount for each Named Officer will be based on the Effective Date
and shall be paid as follows:
<Table>
<Caption>
PERCENTAGE OF EMERGENCE
DATE OF EMERGENCE AMOUNT
------------------------------------------------
December 31, 2001 125%
June 30, 2002 100%
December 31, 2002 90%
June 30, 2003 80%
December 31, 2003 70%
June 30, 2004 60%
December 31, 2004 50%
Thereafter 0%
</Table>
Under the Senior Leader Emergence Incentive Plan, no payment will
be made to any participant if the Debtors do not emerge from Chapter 11 by
December 31, 2004. The Senior Leader Emergence Incentive Plan also provides for
a pro rata payment upon a termination of a Named Officer's employment with OC
after January 1, 2002 and before the Effective Date if the employment is
terminated: (i) by OC other than for "cause," (ii) by reason of death or
disability, or (iii) by reason of retirement at OC's request or with the consent
of the chief executive officer of OC (or, in the case of the chief executive
officer, with the consent of the Compensation Committee).
(b) RETIREMENT BENEFITS
OC maintains a tax-qualified Cash Balance Plan covering certain
of its salaried and hourly employees in the United States, including each of the
Named Officers, in lieu of the qualified Salaried Employees' Retirement Plan
maintained prior to 1996 ("PRIOR PLAN"), which provided retirement benefits
primarily on the basis of age at retirement, years of service and average
earnings from the highest three consecutive years of service. In addition, OC
has a non-qualified Executive Supplemental Benefit Plan ("ESBP") to pay eligible
employees leaving
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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
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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. Sections 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
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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.
9. INCENTIVE PLANS TO BE IMPLEMENTED IN CONNECTION WITH EMERGENCE FROM
CHAPTER 11 REORGANIZATION
The Plan Proponents have negotiated the principal terms and conditions
of certain incentive plans to be made available to employees generally and to
certain management employees in connection with the emergence of the Reorganized
Debtors from reorganization under Chapter 11. These plans include a broad-based
Employee Stock Incentive Program and a Management Incentive Program. A summary
of the terms of these programs is set forth below. The summaries set forth below
are qualified in their entirety by reference to the terms of the plan documents,
which will be filed up to ten (10) Business Days prior to the Objection
Deadline, and to the terms of any individual agreements that may be entered into
pursuant to those plan documents.
EMPLOYEE STOCK OWNERSHIP PROGRAM. All full-time employees and regular
part-time employees of OCD as of the Emergence Date will be eligible to receive
a grant of 100 restricted shares of New OCD Common Stock (the "Shares") pursuant
to OCD's Employee Stock Ownership Program (the "ESOP"), except that no employee
who participates in the Management Plan (as defined and discussed below) on the
Emergence Date shall be eligible to participate in the ESOP. OCD has reserved
1,750,000 shares of New OCD Common Stock for issuance under the ESOP (assuming
17,500 eligible employees worldwide). Each award of 100 shares of New OCD Common
Stock under the ESOP will vest in its entirety on the third anniversary of the
Effective Date, subject to accelerated vesting for OCD-approved retirements or
in the event that OCD terminates the employee's employment without cause. The
1,750,000 shares of New OCD Common Stock to be issued under the ESOP represent
2.19% of the primary number of shares of New OCD Common Stock to be outstanding
immediately after the Effective Date (assuming issuance of 80,000,000 shares on
the Effective Date).
MANAGEMENT INCENTIVE PROGRAM. Certain executive officers and members
of management (i.e., employees in Band 1-4) will be eligible to receive awards
under OCD's Management Incentive Program (the "Management Plan"). Awards granted
under the Management Plan (each, an "Award") will consist of restricted shares
of New OCD Common Stock (the "Restricted Shares") and options to purchase shares
of New OCD Common Stock (the
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"Options") and will be allocated such that 25% of each Award will be in the form
of Restricted Shares and 75% of each Award will be in the form of Options.
Although the Management Plan will become effective on the Effective Date without
any further action by the board of directors of Reorganized OCD or the
stockholders of Reorganized OCD, a majority of the stockholders of Reorganized
OCD must approve the Management Plan in order for the Management Plan to qualify
under section 162(m) of the Internal Revenue Code. Accordingly, OCD intends to
request that the Asbestos Personal Injury Trust, as the majority stockholder of
Reorganized OCD, approve the Management Plan on or immediately after the
Effective Date.
TOTAL SHARES RESERVED FOR ISSUANCE OF AWARDS UNDER THE MANAGEMENT
PLAN. Approximately 1,038,961 shares of Restricted Shares and 3,116,883 Options
of New OCD will be reserved for awards to employees of OCD. The Restricted
Shares to be awarded represent 1.30% of the primary number of shares of New OCD
Common Stock to be outstanding immediately after the Effective Date (assuming
issuance of 80,000,000 shares on the Effective Date), and 1.25% of the fully
diluted number of shares of OCD Common Stock, assuming exercise of the Options.
The Options to be awarded represent 3.75% of the fully diluted number of shares
of New OCD Common Stock (assuming 83,116,883 shares on a fully diluted basis).
INITIAL AWARDS. It is expected that approximately 654,000 Restricted
Shares and 1,962,000 Options will be awarded to eligible employees on the
Effective Date. Of the 654,000 Restricted Shares reserved for initial awards, an
aggregate of 206,000 Restricted Shares will be awarded to Messrs. Brown, Thaman,
Johns and Kiemle, an aggregate of 388,000 Restricted Shares will be awarded to
44 senior officers and an aggregate of 60,000 Restricted Shares will be awarded
to up to 120 key leaders. Of the 1,962,000 Shares of Options reserved for
initial awards, an aggregate of 618,000 Options will be awarded to Messrs.
Brown, Thaman, Johns and Kiemle, an aggregate of 1,164,000 Options will be
awarded to 44 senior officers and an aggregate of 180,000 Options will be
awarded to up to 120 key leaders. If OCD continues its current compensation
programs and practices (including maintaining the Long-Term Incentive Plan and
the Corporate Incentive Plan) with respect to senior management, the senior
management has agreed not to request any additional equity awards with respect
to fiscal years 2004, 2005 and 2006.
The following table sets forth for the persons indicated the numbers
of Restricted Shares and Options that will be awarded on the Effective Date:
<Table>
<Caption>
RESTRICTED SHARES
NAME POSITION AWARDED OPTIONS AWARDED
---- -------- ----------------- ---------------
David T. Brown President and Chief Executive Officer 70,000 210,000
Michael H. Thaman Chief Financial Officer 70,000 210,000
David L. Johns Sr VP and Chief Supply Chain and 33,000 99,000
Information Technology Officer
George E. Kiemle VP and President, Insulating Systems 33,000 99,000
Business
</Table>
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<Table>
44 Senior Officers 388,000 1,164,000
Up to 120 Key Leaders 60,000 180,000
</Table>
RESTRICTED SHARES. Each Award of Restricted Shares will vest in its
entirety on the third anniversary of the date of grant, with certain exceptions
for retiring employees and OCD-initiated terminations, other than for "cause"
(as defined in an applicable individual restricted stock agreement or, if there
is none applicable, the Management Plan). Restricted Shares will be held by
Reorganized OCD and will be released and delivered to the employee upon vesting.
However, all Restricted Shares, whether or not vested, will be entitled to
receive dividends if declared and paid, and, if declared and paid, dividends on
the Restricted Shares will be paid to the employee at the same time as dividends
are paid to other stockholders of Reorganized OCD.
STOCK OPTIONS. Each Award of an Option will vest in its entirety on
the third anniversary of the date of grant, with certain exceptions for retiring
employees and terminations initiated by OCD, other than terminations for "cause"
(as defined in an applicable individual option agreement or, if there is none
applicable, the Management Plan). Each Option will have a term of ten years and
will be granted with an exercise price equal to $25 per share with respect to
Options granted on the Effective Date or the fair market value per share of New
OCD Common Stock on the date of grant with respect to Options granted
thereafter. All shares of New OCD Common Stock underlying Options will be
entitled to dividend equivalents regardless of whether such Option is vested.
Dividend equivalents on shares of New OCD Common Stock underlying unvested
Options will be held in trust on behalf of the grantee until the time of
vesting, but any dividend equivalents on shares underlying vested Options will
be payable to the grantee at the same time as dividend equivalents are paid to
other stockholders of Reorganized OCD.
SHARES RESERVED FOR FUTURE ISSUANCE. In addition to the shares of New
OCD Common Stock that will be issued or reserved under the Management Plan in
respect of grants made as of the Effective Date, 384,961 shares of New OCD
Common Stock will be reserved for future issuance of Restricted Shares and
1,154,883 Shares will be reserved for future issuance of Options. The issuance
of such additional Restricted Shares or Options, however, will be at the sole
discretion of the Board of Directors of Reorganized OCD and the Compensation
Committee of the Board of Directors, provided that management will have the
right to award up to 75,000 shares of New OCD restricted Common Stock and
225,000 stock options to key employees who did not receive an "initial" award
under the Management Incentive Program.
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.
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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. If Section 203 were to be
applicable, Reorganized OCD might be precluded from entering into a merger or
other business combination transaction in which the majority vote in favor
thereof was provided by the Asbestos Personal Injury Trust. Since the Asbestos
Personal Injury Trust is interested in liquidity in order to pay Asbestos
Personal Injury Claims, such a restriction would be undesirable from the point
of view of the Asbestos Personal Injury Trust. The Debtors determined that the
potential for liquidity for all shareholders, and the possibility that a
potential suitor for the Company as a whole would be deterred if the provision
were applicable, made it appropriate, in their reasonable business judgment, to
elect for Section 203 not to apply.
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
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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 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. 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, in the view of the
Debtors' management, was prepared on a reasonable basis, reflects the best
available estimates and judgments at the time made, and presents, to the best of
management's knowledge and belief, the expected course of action and the
respective expected future financial performance of OC. However, this
information is not fact and should not be relied upon as being necessarily
indicative of future results, and readers of this Disclosure Statement are
cautioned not to place undue reliance on the Financial Projections. Accordingly,
the Debtors do not intend, and disclaim any obligation, to (a) furnish updated
projections to holders of Claims or Interests prior to the Effective Date or to
any party after the Effective Date, (b) include such updated information in any
documents that may be required to be filed with the SEC, or (c) otherwise make
such updated information publicly available. See the Disclaimer set forth below.
2. SUMMARY OF SIGNIFICANT ASSUMPTIONS
The Debtors' management has developed the Financial Projections to
assist holders of Claims and Interests in their evaluation of the Plan and to
analyze its feasibility. The Financial Projections are based upon a number of
significant assumptions, which along with the Financial Projections are set
forth in Appendix B.
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DISCLAIMER
THE FINANCIAL PROJECTIONS PROVIDED IN THIS DISCLOSURE STATEMENT HAVE BEEN
PREPARED EXCLUSIVELY BY THE DEBTORS' MANAGEMENT. THESE FINANCIAL PROJECTIONS,
WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY
OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY MANAGEMENT,
MAY NOT BE REALIZED, AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS,
ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE
BEYOND THE DEBTORS' CONTROL. NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY
OF THESE FINANCIAL PROJECTIONS OR TO OC'S ABILITY TO ACHIEVE THE PROJECTED
RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE. FURTHER, EVENTS AND
CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THESE FINANCIAL
PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED OR, ALTERNATIVELY,
MAY HAVE BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE EVENTS MAY AFFECT
FINANCIAL RESULTS IN A MATERIAL AND POSSIBLY ADVERSE MANNER. THE FINANCIAL
PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTEE OR OTHER ASSURANCE
OF THE ACTUAL RESULTS THAT WILL OCCUR. THESE FINANCIAL PROJECTIONS SHOULD BE
CONSIDERED IN CONJUNCTION WITH THE RISK FACTORS SET FORTH IN SECTION XV OF THIS
DISCLOSURE STATEMENT ENTITLED "CERTAIN RISK FACTORS TO BE CONSIDERED."
VII. SUMMARY OF THE PLAN OF REORGANIZATION
THIS SECTION PROVIDES A SUMMARY OF THE STRUCTURE AND MEANS FOR
IMPLEMENTATION OF THE PLAN, AND OF THE CLASSIFICATION AND TREATMENT OF CLAIMS
AND INTERESTS UNDER THE PLAN, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE PLAN (AS WELL AS THE EXHIBITS THERETO AND DEFINITIONS THEREIN), WHICH IS
ATTACHED TO THIS DISCLOSURE STATEMENT AS APPENDIX A. SEE ALSO, THE GLOSSARY OF
ADDITIONAL TERMS SET FORTH IN APPENDIX A-1 OF THIS DISCLOSURE STATEMENT.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT INCLUDE SUMMARIES OF
THE PROVISIONS CONTAINED IN THE PLAN AND IN DOCUMENTS REFERRED TO THEREIN. THE
STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT DO NOT PURPORT TO BE PRECISE
OR COMPLETE STATEMENTS OF ALL THE TERMS AND PROVISIONS OF THE PLAN OR DOCUMENTS
REFERRED TO THEREIN, AND REFERENCE IS MADE TO THE PLAN AND TO SUCH DOCUMENTS FOR
THE FULL AND COMPLETE STATEMENTS OF SUCH TERMS AND PROVISIONS.
THE PLAN ITSELF AND THE DOCUMENTS REFERRED TO THEREIN WILL CONTROL THE
ACTUAL TREATMENT OF CLAIMS AGAINST, AND INTERESTS IN, THE DEBTORS UNDER THE PLAN
AND WILL, UPON THE EFFECTIVE DATE, BE
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BINDING UPON HOLDERS OF CLAIMS AGAINST, OR INTERESTS IN, THE DEBTORS, THE
REORGANIZED DEBTORS AND OTHER PARTIES IN INTEREST. IN THE EVENT OF ANY CONFLICT
BETWEEN THIS DISCLOSURE STATEMENT AND THE PLAN OR ANY OTHER OPERATIVE DOCUMENT,
THE TERMS OF THE PLAN AND/OR SUCH OTHER OPERATIVE DOCUMENT WILL CONTROL.
A. STRUCTURE OF THE PLAN
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under Chapter 11, a debtor is authorized to reorganize its
business for the benefit of its creditors and shareholders. Upon the filing of a
petition for relief under Chapter 11, Section 362 of the Bankruptcy Code
provides for an automatic stay of substantially all acts and proceedings against
the debtor and its property, including all attempts to collect claims or enforce
liens that arose prior to the commencement of the Chapter 11 case.
The consummation of a plan of reorganization is the principal objective of
a Chapter 11 case. A plan of reorganization sets forth the means for satisfying
claims against and interests in a debtor. Confirmation of a plan of
reorganization by the Bankruptcy Court makes the plan binding upon the debtor,
any issuer of securities under the plan, any person or entity acquiring property
under the plan, and any creditor of or equity security holder in the debtor,
whether or not such creditor or equity security holder (1) is impaired under or
has accepted the plan or (2) receives or retains any property under the plan.
Subject to certain limited exceptions and other than as provided in the plan
itself or in the confirmation order, the confirmation order discharges the
debtor from any debt that arose prior to the date of confirmation of the plan
and substitutes therefor the obligations specified under the confirmed plan, and
terminates all rights and interests of equity security holders.
The terms of the Plan are based upon, among other things, the Debtors'
assessment of their ability to achieve the goals of their Business Plan, make
the distributions contemplated under the Plan and pay certain of their
continuing obligations in the ordinary course of the Reorganized Debtors'
businesses as approved by the Bankruptcy Court. Under the Plan, Claims against,
and Interests in, the Debtors are divided into Classes according to their
relative seniority and other criteria.
If the Plan is confirmed by the Bankruptcy Court and consummated, (1) the
Claims in certain Classes will be reinstated or modified and receive
distributions equal to the full amount of such Claims, (2) the Claims in other
Classes will be modified and receive distributions constituting a partial
recovery on such Claims and (3) the Claims and Interests in other Classes will
receive no recovery on such Claims or Interests. On the Effective Date and at
certain times thereafter, the Reorganized Debtors will distribute cash,
securities, notes or other property in respect of certain Classes of Claims as
provided in the Plan. The Classes of Claims against the Debtors created under
the Plan, the treatment of those Classes under the Plan and the securities and
other property to be distributed under the Plan are described below.
B. SUBSTANTIVE CONSOLIDATION UNDER THE PLAN
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
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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. The Restructuring Transactions are summarized in Appendix G
to this Disclosure Statement and may be amended up to ten (10) Business Days
prior to the Objection Deadline. 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.
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.(iv) 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
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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.(ix) of this Disclosure Statement entitled "Class 8: FB Asbestos Personal
Injury Claims" and Section VII C.3.b.(x) 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 the Reference."
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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 vendors 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
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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 6A (General Unsecured Claims); Class 6B (General Unsecured/Senior
Indebtedness 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
General Unsecured/Senior Indebtedness Claims, the OC Asbestos Personal Injury
Claims, the FB Asbestos Personal Injury Claims, the FB Asbestos Property Damage
Claims, the Intercompany Claims, and the Subordinated 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
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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."
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(b) ADMINISTRATIVE CLAIMS
The Plan generally provides for Administrative Claims to be paid
in full. Except as otherwise provided in and subject to the requirements of the
Plan, on, or as soon as reasonably practicable after, the latest of (i) the
Initial Distribution Date, (ii) the date on which an Administrative Claim
becomes an Allowed Administrative Claim or (iii) the date on which an
Administrative Claim becomes payable pursuant to any agreement between a Debtor
and the holder of such Administrative Claim, each holder of an Allowed
Administrative Claim shall receive in full satisfaction, settlement, release and
discharge of and in exchange for such Allowed Administrative Claim (a) Cash
equal to the unpaid portion of such Allowed Administrative Claim or (b) such
other treatment as the applicable Debtor and such holder shall have agreed in
writing; provided, however, that Allowed Administrative Claims with respect to
liabilities incurred by a Debtor in the ordinary course of business during the
Chapter 11 Cases shall be paid in the ordinary course of business in accordance
with the terms and conditions of any agreements relating thereto. All payments
to professionals in connection with the Chapter 11 Cases for compensation and
reimbursement of expenses and all payments to reimburse expenses of members of
the Unsecured Creditors' Committee and the Asbestos Claimants' Committee will be
made in accordance with the procedures established by the Bankruptcy Code and
the Bankruptcy Rules and will be subject to approval of the Bankruptcy Court as
being reasonable.
The Debtors estimate that the aggregate Allowed Administrative
Claims that have not previously been paid pursuant to an order of the Bankruptcy
Court (which will be primarily comprised of professional fees and Cure amounts)
will be approximately $46 million as of the Effective Date, of which $25 million
is estimated to be professional fees, $20 million is estimated to be Cure
amounts, and $1 million miscellaneous other Claims.
(c) PRIORITY TAX CLAIMS
Priority Tax Claims are required under the Bankruptcy Code to be
paid in full within the time period specified by Section 1129(a)(9)(C), unless
the taxing authority has agreed to a different treatment. Under the Plan, except
to the extent that a holder of an Allowed Priority Tax Claim has been paid by
the Debtors prior to the Initial Distribution Date or has agreed in writing to a
different treatment, each holder of an Allowed Priority Tax Claim shall receive
in full satisfaction, settlement, release and discharge of and in exchange for
such Allowed Priority Tax Claim, at the sole discretion of the Debtors, (i) Cash
equal to the amount of such Allowed Priority Tax Claim on the later of the
Initial Distribution Date and the date such Priority Tax Claim becomes an
Allowed Claim, or as soon thereafter as is practicable, (ii) deferred Cash
payments, having a value as of the Effective Date equal to such Allowed Priority
Tax Claim, over a period not exceeding six (6) years after the assessment of the
tax on which such Claim is based as the applicable Debtor and such holder shall
have agreed in writing, or (iii) such other treatment as the applicable Debtor
and such holder shall have agreed in writing.
The Debtors estimate that aggregate Allowed Priority Tax Claims
that have not previously been paid pursuant to an order of the Bankruptcy Court
will be up to $135 million. SEE Section V.F.16 of this Disclosure Statement,
entitled "IRS Claims."
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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
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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.
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(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 6A or 6B 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 6A or 6B 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, 6A, 6B, and 7
The primary source of distributions under the Plan to
Classes 4, 5, 6A and 6B 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, 6A and 6B 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
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the Plan and the substantive consolidation provided for in the Plan. Under this
Plan, Classes 4, 5, 6A, 6B 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 2.8 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(ix) 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, 6A, 6B 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, 6A and 6B. 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, 6A and 6B 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, 6A, 6B 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.
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(iii) Description of Certain Terms of the Plan Applicable to
the Treatment of Classes 4, 5, and 6B on Account of Subordinated Claims
Pursuant to agreements or instruments subordinating the
Subordinated Claims to Senior Indebtedness, Classes 4, 5 and 6B will receive
supplemental distributions which otherwise would have been made to holders of
Allowed Claims in Class 11 had such Claims not been subordinated in accordance
with the applicable agreements or instruments subordinating such Claims. Claims
in Classes 4, 5 and 6B constitute Senior Indebtedness Claims in accordance with
the agreements or instruments subordinating the Subordinated Claims. "SENIOR
INDEBTEDNESS CLAIMS" consist of any Claim that: (1) arises for borrowed money,
securities sold, funds provided, assets or services purchased or any other
transaction whether or not in the ordinary course of business and which is
evidenced by a promissory note, bond, debenture, writing or other instrument of
indebtedness or reflected on the accounting records of the Debtors as a payable
(but expressly excluding (A) amounts owed for compensation to employees, (B)
obligations owing under judgments arising out of obligations that are not
indebtedness for borrowed money (other than any such obligations arising from
obligations which are otherwise Senior Indebtedness), (C) any indebtedness which
by the terms of the instrument creating or evidencing the same is not superior
in right of payment to or is junior in right of payment to the MIPS Claims and
Interests, (D) any liability for federal, state, local or other taxes owed or
owing by the Company, (E) any liability in respect of any employee benefit plan
(including, without limitation, any liability to the Pension Benefit Guaranty
Corporation or any successor thereto) and (F) indebtedness or obligations to a
Subsidiary of the Debtors); (2) is owed with respect to any lease, conditional
sale or installment sale agreement or other financing instrument or agreement
which in accordance with generally accepted accounting principles is, at the
time the lease, conditional sale or installment sale agreement or other
financing instrument or agreement is entered into, assumed or guaranteed,
directly or indirectly, by one or more of the Debtors, required to be reflected
as a liability on the face of the balance sheet of the Debtors; (3) is for
principal of and interest on any loan and other extension of credit under any
lines of credit, revolving credit agreements or promissory notes from a bank or
other financial institution (including ,without limitation, any letters of
credit, bankers' acceptances, performance bonds and other credit facilities
under such borrowing arrangements) and all fees, expenses, reimbursements,
indemnities, premiums and other amounts payable under such borrowing
arrangements; (4) is for any amounts payable in respect of any interest rate
exchange agreement, ceiling rate agreement, currency exchange agreement or
similar agreement; and (5) is a renewal, deferral, amendment, modification,
supplement, extension, or refunding of any of the indebtedness described in
clauses (1) through (5), inclusive, or evidences of indebtedness issued in
exchange for such Senior Indebtedness. Without limitation, Senior Indebtedness
shall not include any: (a) Environmental Claim; (b) OC Asbestos Property Damage
Claim; (c) FB Asbestos Property Damage Claim; (d) OC Asbestos Personal Injury
Claim; (e) FB Asbestos Personal Injury Claim; (f) non-asbestos tort Claim; (g)
Claim of any present or former employee of the Debtors for compensation; (h)
Claim for on account of any tax; and (i) Claim with respect to any employee
benefit plan, including without limitation any Claim of the Pension Benefit
Guaranty Corporation.
Under the Plan, these supplemental distributions are
calculated by calculating what distributions would have been made from the
Combined Distribution Package to the holders of Allowed Claims in Class11 were
those Claims not subordinated to Senior
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Indebtedness Claims and instead treated pari passu with the Classes receiving
PRO RATA distributions from the Combined Distribution Package. The agreements
and instruments containing the subordination provisions of the Subordinated
Claims provide that the Subordinated Claims may not receive any payment in a
bankruptcy case until Senior Indebtedness Claims have been paid in full and that
any payments to which holders of Subordinated Claims would be entitled may be
paid directly to holders of Senior Indebtedness Claims until such Claims are
paid in full. These supplemental distributions to Classes 4, 5, and 6B will
occur in two phases just like the regular distributions made to Classes 4, 5,
6A, 6B and 7, 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. 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 have been Allowed or
Disallowed and the amounts of Allowed Claims in all applicable Classes are
determined, the reserves on account of the Disallowed Claims will be distributed
to the holders of Allowed Claims in Classes 4, 5, and 6B on the Final
Distribution Date as an additional supplemental distribution.
(iv) 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").
In full satisfaction, release and discharge of, and in
exchange for, its Allowed Class 4 Claim, each holder of an Allowed Class 4 Claim
shall receive the following:
On, or 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 later 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, such holder's PRO RATA share of the
portion of the Combined Supplemental Distribution Package equal to the Class 4
Initial Supplemental 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
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New OCD Common Stock, and (iv) Cash in an amount equal to the Class 4 Final
Distribution Percentage of the Excess Litigation Trust Recoveries.
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 Supplemental Distribution Percentage of Supplemental Excess Available
Cash, (ii) Excess Senior Notes in an aggregate principal amount equal to the
Class 4 Final Supplemental Distribution Percentage of the Supplemental Excess
Senior Notes Amount, (iii) shares of New OCD Common Stock in an aggregate number
equal to the Class 4 Final Supplemental Distribution Percentage of the
Supplemental Excess New OCD Common Stock, and (iv) Cash in an amount equal to
the Class 4 Final Supplemental Distribution Percentage of the Supplemental
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 $1,549 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.
(v) 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").
In full satisfaction, release and discharge of, and in
exchange for, its Allowed Class 5 Claim, each holder of an Allowed Class 5 Claim
shall receive the following:
On, or as soon as reasonably practicable after, the later
of (i) the Initial Distribution Date, (ii) the date on which such Class 5 Claim
becomes an Allowed Class 5 Claim, or (iii) the date on which such Class 5 Claim
becomes due and payable pursuant to any agreement between a Debtor and a holder
of a Class 5 Claim, each holder of an Allowed Class 5 Claim will receive in full
satisfaction, settlement, release and discharge of and in exchange for such
Allowed Class 5 Claim such holder's Pro Rata share of 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 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, such holder's PRO RATA share of the
portion of the Combined Supplemental Distribution Package equal to the Class 5
Initial Supplemental Distribution Percentage.
In addition, on or as soon as reasonably practicable
after the Final Distribution Date, each holder of an Allowed Class 5 Claim shall
receive its Pro Rata share of the (i) Cash in an amount equal to the Class 5
Final Distribution Percentage of Excess Available Cash, (ii) Excess Senior Notes
in an aggregate principal amount equal to the Class 5 Final Distribution
Percentage of the Excess Senior Notes Amount, (iii) shares of New OCD Common
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Stock in an aggregate number equal to the Class 5 Final Distribution Percentage
of the Excess New OCD Common Stock, and (iv) Cash in an amount equal to the
Class 5 Final Distribution Percentage of the Excess Litigation Trust Recoveries.
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 Supplemental Distribution Percentage of Supplemental Excess Available
Cash, (ii) Excess Senior Notes in an aggregate principal amount equal to the
Class 5 Final Supplemental Distribution Percentage of the Supplemental Excess
Senior Notes Amount, (iii) shares of New OCD Common Stock in an aggregate number
equal to the Class 5 Final Supplemental Distribution Percentage of the
Supplemental Excess New OCD Common Stock, and (iv) Cash in an amount equal to
the Class 5 Final Supplemental Distribution Percentage of the Supplemental
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, including the right to
assert a Charging Lien against such distributions. 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.
(vi) Class 6A: General Unsecured Claims
Class 6A 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 Senior Indebtedness
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 6A CLAIMS").
On, or as soon as reasonably practicable after, the later
of (i) the Initial Distribution Date, (ii) the date on which such Class 6A Claim
becomes an Allowed Class 6A Claim, or (iii) the date on which such Class 6A
Claim becomes due and payable pursuant to any agreement between a Debtor and a
holder of a Class 6A Claim, each holder of an Allowed Class 6A Claim will
receive in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Class 6A Claim such holder's PRO RATA share of the
portion of the Combined Distribution Package equal to the Class 6A Initial
Distribution Percentage.
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In addition, on or as soon as reasonably practicable
after the Final Distribution Date, each holder of an Allowed Class 6A Claim
shall receive its PRO RATA share of the (i) Cash in an amount equal to the Class
6A Final Distribution Percentage of Excess Available Cash, (ii) Excess Senior
Notes in an aggregate principal amount to the Class 6A Final Distribution
Percentage of the Excess Senior Notes Amount, (iii) shares of New OCD Common
Stock in an aggregate number equal to the Class 6A Final Distribution Percentage
of the Excess New OCD Common Stock, and (iv) Cash in an amount equal to the
Class 6A Final Distribution Percentage of the Excess Litigation Trust
Recoveries.
The Debtors estimate that aggregate Allowed Class 6A
Claims that have not previously been paid pursuant to an order of the Bankruptcy
Court will be between approximately $109 million and $475 million.
OC Asbestos Property Damage Claims are Class 6A 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.
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Class 6A Claims are Impaired and, to the extent and in
the manner provided in the Voting Procedures Order, holders of the Claims in
Class 6A shall be entitled to vote to accept or reject the Plan.
(vii) Class 6B: General Unsecured/Senior Indebtedness Claims
Class 6B consists of all General Unsecured/Senior
Indebtedness Claims, which are those Claims against the Debtor that satisfy both
of the following criteria : (a) such Claim is a Senior Indebtedness Claim and
(b) such Claim is 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, a FB Asbestos Personal Injury Claim, a FB
Asbestos Property Damage Claim, an Intercompany Claim, a Subordinated Claim, or
an OCD Interest.
In full satisfaction, release and discharge of, and in exchange for, its
Allowed Class 6B Claim, each holder of an Allowed Class 6B Claim shall receive
the following:
On, or as soon as reasonably practicable after, the later of (i) the
Initial Distribution Date, (ii) the date on which such Class 6B Claim becomes an
Allowed Class 6B Claim, or (iii) the date on which such Class 6B Claim becomes
due and payable pursuant to any agreement between a Debtor and a holder of a
Class 6B Claim, such holder's PRO RATA share of the portion of the Combined
Distribution Package equal to the Class 6B Initial Distribution Percentage.
In addition, on or as soon as reasonably practicable after the later of (i)
the Initial Distribution Date, (ii) the date on which such Class 6B Claim
becomes an Allowed Class 6B Claim, or (iii) the date on which such Class 6B
Claim becomes due and payable pursuant to any agreement between a Debtor and a
holder of a Class 6B Claim, such holder's PRO RATA share of the portion of the
Combined Supplemental Distribution Package equal to the Class 6B Initial
Supplemental Distribution Percentage.
In addition, on or as soon as reasonably practicable after the Final
Distribution Date, each holder of an Allowed Class 6B Claim shall receive its
PRO RATA share of the (i) Cash in an amount equal to the Class 6B Final
Distribution Percentage of Excess Available Cash, (ii) Excess Senior Notes in an
aggregate principal amount equal to the Class 6B Final Distribution Percentage
of the Excess Senior Notes Amount, (iii) shares of New OCD Common Stock in an
aggregate number equal to the Class 6B Final Distribution Percentage of the
Excess New OCD Common Stock, and (iv) Cash in an amount equal to the Class 6B
Final Distribution Percentage of the Excess Litigation Trust Recoveries.
In addition, on or as soon as reasonably practicable after the Final
Distribution Date, each holder of an Allowed Class 6B Claim shall receive its
PRO RATA share of the (i) Cash in an amount equal to the Class 6B Final
Supplemental Distribution Percentage of Supplemental Excess Available Cash, (ii)
Excess Senior Notes in an aggregate principal amount equal to the Class 6B Final
Supplemental Distribution Percentage of the Supplemental Excess Senior Notes
Amount, (iii) shares of New OCD Common Stock in an aggregate number equal to the
Class 6B Final Supplemental Distribution Percentage of the Supplemental Excess
New OCD Common
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Stock, and (iv) Cash in an amount equal to the Class 6B Final Supplemental
Distribution Percentage of the Supplemental Excess Litigation Trust Recoveries.
The Debtors estimate that aggregate Allowed Class 6B Claims that have not
previously been paid pursuant to an order of the Bankruptcy Court will be
approximately $265 million. Class 6B Claims are Impaired. To the extent and in
the manner provided in the Voting Procedures Order, holders of the Claims in
Class 6B are entitled to vote to accept or reject the Plan.
(viii) 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. The Unsecured Creditors' Committee has
asserted that the holders of OC Asbestos Personal Injury Claims are improperly
classified as a single Class and the Plan Proponents dispute this assertion.
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,
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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, 6A, 6B 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.
(ix) 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
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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
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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."
Under the Fibreboard Insurance Settlement Trust, transfer
of the trust assets is subject to the conditions that (i) the transfer be
approved by the order of the supervising court, (ii) the receiving trust
constitute a "designated settlement fund" or a "qualified settlement fund" under
Section 468B of the Internal Revenue Code or the related Treasury Regulations,
and (iii) that the receiving trust contain indemnity and other provisions not
less favorable to the insurers than set forth in the Fibreboard Insurance
Settlement Trust. The Plan Proponents believe that the nature of the Asbestos
Personal Injury Trust and the related Channeling Injunction should be sufficient
to meet the substantive requirements of the existing Fiberboard Insurance
Settlement Trust and accordingly expect that the trustee of the Fiberboard
Insurance Settlement Trust and the Bankruptcy Court or District Court will make
the requisite findings. Based on informal discussions with the trustee of the
Fibreboard Insurance Settlement Trust, the Plan Proponents do believe that the
trustee of the Fibreboard Insurance Settlement Trust will consent to the
transfer.
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
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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.
Thus, the establishment of the FB Sub-Account Settlement Payment is
the product of negotiation and compromise concerning matters involving several
factors which are difficult to quantify or value. 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. The Unsecured Creditors' Committee contends that
the FB Sub-Account Settlement Payment is excessive and unjustified.
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
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Plan Applicable to the Treatment of Classes 4, 5, 6A, 6B 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.
(x) 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,
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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
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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.
(xi) 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 of 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 have rejected the Plan and, accordingly, are not
entitled to vote to accept or reject the Plan.
(xii) 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 into 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.
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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.
The distributions which otherwise would have been made to
holders of Allowed Claims in Class 11 had such Claims not been subordinated in
accordance with the applicable agreements or instruments subordinating such
Claims are paid or issued to the holders of Allowed Claims in Classes 4, 5 and
6B in accordance with the subordination provisions of such agreements or
instruments. As a consequence, the amount of Allowed Claims or estimated Claims
in Class 11 shall be used for the purpose of calculating the Class ___ Initial
Distribution Percentage, the Class ___ Final Distribution Percentage, the Senior
Indebtedness Initial Distribution Percentage and the Senior Indebtedness Final
Distribution Percentage.
The Debtors estimate that aggregate Allowed Class 11
Claims will be approximately $276 million. Class 11 Claims are Impaired. The
holders of the Claims in Class 11 are deemed to have rejected the Plan and,
accordingly, are not entitled to vote to accept or reject the Plan.
(xiii) 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 have rejected the Plan and, accordingly, are
not entitled to vote to accept or reject the Plan.
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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, 6A,
6B, 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 V.F.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." B&B asserts that Administrative Deposits may be held to be wholly
or partially outside the property of the estate, and therefore not available for
any purpose other than satisfying the claims in respect of which the funds were
deposited with the law firms.
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
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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
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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 expected to result in the securities trading at or near par upon
initial issuance 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.
The specifics of the Senior Notes, including the indenture, will be finalized
and filed at least ten (10) Business Days prior to the Objection Deadline.
The interest rate will be fixed on the 3rd day prior to the Issuance
Date (or if such date is not a Business Day, the next Business Day). The details
of the method by which the interest rate will be determined are set forth in
APPENDIX E to this Disclosure Statement. In general, the interest rate will
equal the sum of (x) the Treasury Rate for the U.S. Treasury security having a
term and maturity closest to the term and maturity of the Senior Notes and (y)
the spread to worst for the Goldman Sachs Index that most closely correlates to
the credit rating received by Reorganized OCD from Standard & Poor's Rating
Services and Moody's Investors Service with respect to the Senior Notes prior to
the Issuance Date. In the event of a split rating by the rating agencies, a
spread based on the average of the credit ratings shall apply.
The Unsecured Creditors' Committee contends that the Plan does not
adequately assure creditors that the value of the Senior Notes will equal their
face value on the Effective Date and reserves the right to object to
confirmation of the Plan on this basis. The Unsecured Creditors' Committee also
contends that to the extent the Senior Notes trade for less than par, the
projected distributions contained in this Disclosure Statement would be
overstated. The Plan Proponents disagree with this position. The proposed Terms
of the Senior Notes contained in Appendix E to this Disclosure Statement state
that the interest rate and material financial terms be set so that the Senior
Notes would trade at par, that is, their face value, as of the Effective Date.
Although there is no formula that can eliminate all risk that the Senior Notes
may trade slightly below or slightly above par, the mechanism described in the
APPENDIX E creates no more risk that the Senior Notes will trade under par than
they will trade over par. The Unsecured Creditors' Committee fails to
acknowledge that an equal number of outcomes might result in a trading price
slightly above par. The Bankruptcy Court or the District Court will determine,
in conjunction with confirmation, whether the terms of the Senior Notes comply
with the provisions of Section 1129 of the Bankruptcy Code.
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
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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, 6A and 6B 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, 6A and 6B (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)-(viii) 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
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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, 6A and 6B 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
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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
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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, 6A and 6B 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
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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
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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.
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(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 6A 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
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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.
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(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 (including the Wellington Agreement) 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
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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 (including
the Wellington Agreement) 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 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 and
enforceable under applicable state law 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
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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 seeking indemnification under the charter or
by-laws of the Debtor against whom indemnification is sought, or any
assumed contract or any statute for (i) funds recovered or to be
recovered from such party pursuant to an Avoidance Action, (ii) except
to the extent necessary to retain the benefit of coverage under
insurance policies covering directors' or officers' conduct, 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, or (iii) except to the extent necessary to retain the
benefit of coverage under insurance policies covering directors' or
officers' conduct , claims alleging prepetition conduct in violation
of federal or state securities laws brought in shareholder litigation.
The assumption of the Indemnification Obligations under the Plan
results in the treatment of certain obligations to indemnify for prepetition
conduct as Administrative Claims or postpetition obligations, which are paid in
full, which is more favorable treatment than if such obligations were breached
and treated as prepetition General Unsecured Claims. With the exclusions
contained in the definition of Indemnification Obligations for the Hancock
Litigation and the claims alleging prepetition conduct in violation of federal
or state securities laws brought in shareholder litigation, but excepting the
New York Complaint filed by Kensington and Springfield against the New York
Defendants, the Debtors have protected the creditors from the effects of
granting priority for indemnification of those known claims, which, if the
plaintiffs were successful and the claims were not covered by insurance policies
covering directors' or officers' conduct, might have a material impact on the
value of distributions to creditors under the Plan. The Debtors believe in the
exercise of their business judgment that assumption of the Indemnification
Obligations is necessary to retain experienced and quality directors, officers
and employees and attract directors, officers and employees of such caliber in
the future. The Debtors believe that the New York Complaint is without merit.
Nonetheless, to the extent the Debtors or Reorganized Debtors are required to
pay such Indemnification Obligations as Administrative Claims or postpetition
obligations, such payment might have a material impact on the value of
distributions to creditors under the Plan.
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The Unsecured Creditors' Committee contends that treatment of
Indemnification Obligations as proposed under the Plan is improper, because,
among other reasons, it is a partial affirmance of executory contracts. The Plan
Proponents disagree that bankruptcy law would prohibit the proposed treatment of
the Indemnification Obligations. Objections to the validity of the treatment of
the Indemnification Obligations will be resolved by the Bankruptcy Court or
District Court as part of the proceedings on confirmation of the Plan.
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 of 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, Class 6A, Class 6B or Class 11 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
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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. The Exit Facility is anticipated to be in an
immaterial amount and is not anticipated to impose any obstacles to effectuation
of the Plan. The Financial Projections assume no amounts will be borrowed under
the Exit Facility on the Effective Date.
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I. CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVENESS OF THE PLAN
1. CONDITIONS TO CONFIRMATION RELATING TO THE ASBESTOS PERMANENT
CHANNELING INJUNCTION
The Plan will not be confirmed, and the Confirmation Order will not be
entered, until and unless the Confirmation Conditions set forth below have been
satisfied or waived by the Plan Proponents, except that only the waiver of the
Asbestos Claimants' Committee and the Future Claimants' Representative is
required to waive the condition set forth in SECTION 12.1(aa), set forth in
subparagraph (x) below, concerning the minimum threshold for valuation of
Asbestos Personal Injury Claims. 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.
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(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
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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 6A and Class 6B 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
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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. Certain insurers assert that the issues of (i)
whether or not insurance policies or settlement agreements relating to insurance
policies are executory contracts, (ii) the assignment pursuant to the Plan of
rights under insurance policies, and (iii) the reasonableness of the Asbestos
Personal Injury Trust Distribution Procedures as to the insurers are coverage
questions that must be decided in a separate coverage action in a court of
competent jurisdiction or a Wellington ADR proceeding, and cannot be resolved by
the Bankruptcy Court (or the District Court) because they do not constitute core
proceedings. The insurers further contend that nothing in the Plan, including,
without limitation, exhibits, schedules and documents created pursuant to the
Plan (including any other provision that purports to be preemptory or
supervening), shall in any way operate to, or have the effect of, impairing in
any respect the legal, equitable, or contractual rights of the insurers, whose
coverage (pursuant to the their policies and the Wellington Agreement) is
intended by Debtors to be included in the OC Asbestos Personal Injury Liability
Assets. The Plan Proponents disagree with the assertions of the insurers.
These insurers assert that the Plan must be made so-called insurance
neutral. Certain insurers also assert that there will be complete defenses to
coverage and that there will be no additional OC Asbestos Personal Injury
Insurance Liability Assets available to the Asbestos Personal Injury Trust. The
insurers further assert that the OCD insurance policies that the Debtors will
attempt to assign to the Asbestos Personal Injury Trust have been exhausted
and/or there is no coverage available under the policies for various current or
future Asbestos Personal Injury Claims. While the Debtors strongly dispute these
assertions and intend to vigorously pursue their rights to such assets, the
availability, the feasibility of the Plan does not depend of the availability of
OC Asbestos Personal Injury Insurance Liability Assets and the projections of
potential recoveries under the Plan do not assume any value for the OC Asbestos
Personal Injury Insurance Liability Assets. Nonetheless, if the position of the
Debtors is sustained, the availability of the OC Asbestos Personal Injury
Insurance Liability Assets to the Asbestos Personal Injury Trust might
significantly enhance the distributions to holders of OC Asbestos Personal
Injury Claims.
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.
Affiliated FM Insurance Company, Allianz Insurance Company, Allianz
Underwriters Insurance Company, Axa-Belgium Insurance Company, Mt. McKinley
Insurance
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Company, Birmingham Fire Insurance Company of Pennsylvania, Granite State
Insurance Company, Landmark Insurance Company, Lexington Insurance Company,
National Union Fire Insurance Company of Pittsburgh, PA, Royal Indemnity
Company, Century Indemnity Company, as successor-in-interest to CCI Insurance
Company, as successor-in-interest to Insurance Company of North America, Central
National Insurance Company, and Pacific Employers Insurance Company: (i) reserve
all of their rights and defenses under their respective liability insurance
policies and related agreements which the Debtors may allege provide coverage
for any Claim; and (ii) reserve all of their rights to object to confirmation of
the Plan and to all agreements, schedules, and documents relating to the Plan,
including any aspect of the foregoing that purports to alter Certain Insurers'
obligations or rights or to decide any matter adversely to them.
The Unsecured Creditors' Committee contends that the (i) condition that the
sum of the Class 7 Aggregate Amount and the Class 8 Aggregate Amount be
determined by the Bankruptcy Court and the District Court shall be an amount not
less than $16 billion prior to certain deductions, (ii) condition that the Class
6A and Class 6B 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, and (iii) various conditions
regarding the insurance issues render the Plan unconfirmable. The Unsecured
Creditors' Committee asserts that the condition described in (i) concerning
valuation of Asbestos Personal Injury Claims would impermissibly permit the
Asbestos Claimants' Committee and the Future Claimants' Representative to
nullify a judicial determination of the valuation of Asbestos Personal Injury
Claims and contends that such valuation should be less than $16 billion. The
Unsecured Creditors' Committee asserts that the condition described in (ii)
concerning the maximum amount of Class 6A and Class 6B Claims gives improper
discretion to the Plan Proponents. The Plan Proponents do not agree that any of
these conditions render the Plan unconfirmable. The Asbestos Claimants'
Committee and the Future Claimants' Representative believe, based on their
experts' valuations, that $16 billion is the minimum acceptable valuation for
Asbestos Personal Injury Claims. The Asbestos Claimants' Committee and the
Future Claimants' Representative believe that the valuations of their experts
take into account historical values for such claims. Under the Plan, the sole
right to waive this condition is held jointly by the Asbestos Claimants'
Committee and the Future Claimants' Representative. Although the Debtors have
never asserted that the Asbestos Personal Injury Claims total is at least $16
billion, the Debtors understand that valuation to be a key element of the
willingness of the Asbestos Claimants' Committee and the Future Claimants'
Representative to be Plan Proponents of a Plan which creates a Section 524(g)
trust. Accordingly, the Debtors were willing to condition the approval of the
Plan on valuation of Asbestos Personal Injury Claims in an amount acceptable to
the Asbestos Claimants' Committee and the Future Claimants' Representative.
The Unsecured Creditors' Committee reserves the right to contest these
positions. The Unsecured Creditors' Committee also reserves the right to assert
that punitive damages were a component of settlements entered into prior to the
Petition Date which should be excluded from any analysis of the valuation of
Asbestos Personal Injury Claims.
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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) The Plan and its Exhibits constitute a fair, equitable, and
reasonable resolution of the liabilities of the Debtors for FB Asbestos Property
Damage Claims.
(b) The confirmation and consummation of the Plan, including the
discharge of the Debtors pursuant to the Plan and the issuance of the injunction
channeling all FB Asbestos Property Damage Claims to the FB Asbestos Property
Damage Trust pursuant to Section 3.3(h) of the Plan, shall not provide the
insurers a defense to liability for insurance coverage based upon the alleged
elimination of the liability of the insured(s).
(c) 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 FB Asbestos Property Damage 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 FB Asbestos Property Damage Claims; (ii) the assumption of
liability for the FB Asbestos Property Damage Claims by the FB Asbestos Property
Damage Trust; or (iii) the transfer pursuant to the Plan of the Debtors' rights
to the FB Asbestos Property Damage Insurance Assets to the extent determined and
permitted under applicable bankruptcy law.
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
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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.C 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.
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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.
(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.
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(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,
to waive in writing 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 "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.
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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 50CENTS.
"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,
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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 additionally (b) if the Person submits a
Ballot and does not elect to withhold consent to releases of the Released
Parties by marking the appropriate box on the Ballot, 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 SUBMIT A
BALLOT AND DO NOT ELECT TO WITHHOLD CONSENT TO RELEASES OF THE RELEASED PARTIES
BY MARKING THE APPROPRIATE BOX ON THE BALLOT 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,
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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 SUBMITTING A BALLOT AND NOT ELECTING TO WITHHOLD CONSENT TO
RELEASES OF RELEASED PARTIES BY MARKING THE APPROPRIATE BOX ON THE BALLOT, EACH
HOLDER OF A CLAIM WILL BE DEEMED, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, TO HAVE SPECIFICALLY CONSENTED TO THE RELEASES AND INJUNCTION 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.
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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.
SECTION105(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:
<Table>
<Caption>
ISSUER POLICY PERIOD POLICY NUMBER
------ ------------- -------------
First State 06/18/74 to 10/22/74 921434
10/22/74 to 10/22/75 921434
10/22/75 to 10/22/76 921434
10/22/76 to 10/22/77 923542
10/22/77 to 9/01/78 925625
09/01/78 to 09/01/79 926735
03/08/79 to 09/01/79 927953
</Table>
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<Table>
09/01/82 to 09/01/83 934962
Twin City 09/01/82 to 09/01/83 TXX111365
Excess 09/01/79 to 09/01/80 EL 10300 (EL 10-87)
First State 09/01/82 to 09/01/83 933186
09/01/83 to 09/01/84 EU 935321
09/01/83 to 09/01/84 EU 935324
10/31/79 to 11/29/82 GC802752
04/01/81 to 04/01/84 GC802770
05/01/88 to 05/01/89 GC009556
05/01/89 to 05/01/90 GC010810
Hartford 12/01/74 to 12/01/75 57 IC 620122
Pacific 05/01/93 to 05/01/94 ZG 0001003
04/01/94 to 04/01/95 ZG 0002864
05/01/95 to 05/01/96 ZG 0004839
05/01/96 to 05/01/97 ZG 0006912
05/01/97 to 05/01/98 ZG 0008946
Twin City 09/01/83 to 09/01/84 TXX 102719
</Table>
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
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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. The
Charging Liens of the Pre-petition Indenture Trustees will be discharged solely
upon payment in full of the Indenture Trustee Fees, and nothing herein shall be
deemed to impair, waive or discharge any Charging Lien for any fees and expenses
not paid by the Reorganized Debtors.
The Securities and Exchange Commission (the "Commission")has asserted
that fees and expenses of the Pre-petition Indenture Trustees should be subject
to the review of the Bankruptcy Court for reasonableness even if paid from
distributions to holders of Allowed Class 5 Claims and not paid by the
Reorganized Debtors. The Commission reserves the right to object to the Plan to
the extent the Plan does not provide for such review.
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
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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.
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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
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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. Section 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 any of the
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.
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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
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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).
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ALL CLASS 8 CLAIMS SHALL BE CHANNELED TO THE ASBESTOS PERSONAL INJURY
TRUST, AND SHALL BE PROCESSED, LIQUIDATED AND PAID PURSUANT TO THE TERMS AND
PROVISIONS OF THE ASBESTOS PERSONAL INJURY TRUST DISTRIBUTION PROCEDURES AND THE
ASBESTOS PERSONAL INJURY TRUST AGREEMENT. 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 VIII 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.
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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;
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(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.
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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.
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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, subject to the
Restructuring Transactions, the Reorganized Debtors will 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 prior to the Effective Date,
except to the extent such certificates or articles of incorporation and bylaws
are amended pursuant to the Plan. 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. The Restructuring
Transactions are summarized in Appendix G to this Disclosure Statement and may
be amended up to ten (10) Business Days prior to the Objection Deadline. 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.
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.]
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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 Trust Advisory Committee or the Future Claimants' Representative
vetoes the appointment. In that event, the Bankruptcy Court will make the
appointment.
The Trustees shall receive compensation from the PI Trust for their
services as Trustees in the amount of $60,000.00 per annum, except that the
Managing Trustee shall receive $75,000.00 per annum for his or her service. All
Trustees shall also receive a per diem allowance for meetings or other PI Trust
business performed in the amount of $1,500.00 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
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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 ("TAC"). The initial members of the
TAC will be identified, and a complete biography for each such initial member
will be provided, to the Bankruptcy Court prior to the Confirmation Hearing. 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 or death of a TAC
member, his or her successor shall be pre-selected by the resigning or deceased
TAC member, or by his or her law firm in the event that such member has not
pre-selected a successor. If neither the member nor the law firm exercises the
right to make such a selection, the successor shall be chosen by a majority vote
of the remaining TAC members. If a majority of the remaining members cannot
agree, the Bankruptcy Court shall appoint the successor. In the event of a
vacancy caused by the removal of a TAC member, the remaining members of the TAC
by majority vote shall name the successor. If the majority of the remaining
members of the TAC cannot reach agreement, the Bankruptcy Court shall 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
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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 caused by death or resignation shall be filled with an
individual nominated prior to the death or the effective date of the resignation
by the deceased or resigning Future Claimants' Representative, and a vacancy
caused by removal of the Future Claimants' Representative shall be filled with
an individual nominated by the Trustees in consultation with the TAC, subject to
the approval of the Bankruptcy Court. In the event a majority of the Trustees
cannot agree, or a nominee has not been pre-selected, the successor shall be
chosen by 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
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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.
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7. ASBESTOS PERSONAL INJURY TRUST TERMINATION PROVISIONS
The Asbestos Personal Injury Trust is irrevocable, but will terminate
ninety (90) days after the first to occur of any of the following events:
- the Trustees decide to terminate the Asbestos Personal Injury Trust
because (a) they deem it unlikely that new asbestos claims will be
filed against the Asbestos Personal Injury Trust, (b) all OC and
Fibreboard Asbestos Personal Injury Claims duly filed with the
Asbestos Personal Injury Trust have been liquidated and paid to the
extent provided in the Asbestos Personal Injury Trust Agreement and
the Asbestos Personal Injury Trust Distribution Procedures or
disallowed by a final, non-appealable order, to the extent possible
based upon the funds available through the Plan, and (c) twelve
(12) consecutive months have elapsed during which no new asbestos
claim has been filed with the Asbestos Personal Injury Trust; or
- if the Trustees have procured and have in place irrevocable
insurance policies and have established claims handling agreements
and other necessary arrangements with suitable third parties
adequate to discharge all expected remaining obligations and
expenses of the Asbestos Personal Injury Trust in a manner
consistent with this Asbestos Personal Injury Trust Agreement and
the Asbestos Personal Injury Trust Distribution Procedures, the
date on which the Bankruptcy Court enters an order approving such
insurance and other arrangements and such order becomes a final
order; or
- to the extent that any rule against perpetuities will be deemed
applicable to the Asbestos Personal Injury Trust, twenty-one (21)
years less ninety-one (91) days pass after the death of the last
survivor of all of the descendents of the late Joseph P. Kennedy,
Sr., father of the late President John F. Kennedy, living on the
date hereof.
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
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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)
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.
- ----------
(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.
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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.
The Asbestos Personal Injury Trust Distribution Procedures provide
that the Trustees, with the consent of the Future Claimants Representative and
the TAC, may adjust the Initial Payment Percentage upward or downward depending
on a multitude of factors. Therefore, no assurance can be given that some
holders of Asbestos Personal Injury Claims may not be subject to a payment
percentage that is higher or lower than the Initial Payment Percentage.
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.
<Table>
<Caption>
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
Asbestos-Related
</Table>
- ----------------
(10) As defined in the Asbestos Personal Injury Trust Distribution Procedures.
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<Table>
<Caption>
DISEASE LEVEL SCHEDULED VALUE MEDICAL/EXPOSURE CRITERIA
- ------------- --------------- -------------------------
FB: $27,000 Nonmalignant Disease,(11) (2) six months OC or FB Exposure prior to
December 31, 1982, (3) Significant Occupational Exposure(12) to asbestos, and
(4) supporting medical documentation establishing asbestos exposure as a
contributing factor in causing the lung cancer in question.
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.
</Table>
- ----------
(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.
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<Table>
Other Cancer (Level V) OC: $22,000 (1) Diagnosis of a primary colo-rectal, laryngeal, esophageal, pharyngeal, or
stomach cancer, plus evidence of an underlying Bilateral Asbestos-Related
FB: $12,000 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 pathological evidence of asbestos, plus (a) TLC less than 65%, or (b) FVC
FB: $29,000 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 Nonmalignant Disease, plus (a) TLC less
(Level III) than 80%, or (b) FVC less than 80% and FEV1/FVC ratio greater than or equal to
FB: $11,500 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 Asbestos-Related Nonmalignant Disease, and (2) six
(Level II) months OC or FB Exposure prior to December 31, 1982, and (3) five years
FB: $4,500 cumulative occupational exposure to asbestos.
Other Asbestos Disease OC: $400 (1) Diagnosis of a Bilateral Asbestos-Related Nonmalignant Disease or an
(Level I - Cash Discount asbestos-related malignancy other than mesothelioma, and (2) OC or FB Exposure
Payment) FB: $240 prior to December 31, 1982.
</Table>
Certain parties have indicated they may challenge the Scheduled Values
as an objection to confirmation of the Plan. 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.
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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").
With respect to OC Asbestos Personal Injury Trust Voting Claims, the
initial Payment Percentage has been set at 21.4 % (the "OC INITIAL PAYMENT
PERCENTAGE"), and will apply to all OC Asbestos Personal Injury Trust Voting
Claims accepted as valid by the Asbestos
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Personal Injury Trust, unless adjusted by the Asbestos Personal Injury Trust
with the consent of the TAC and the Future Claimants' Representative. With
respect to Fibreboard Asbestos Personal Injury Trust Voting Claims, the initial
Payment Percentage has been set at 23.5 % (the "FIBREBOARD INITIAL PAYMENT
PERCENTAGE", and together with the OC Initial Payment Percentage, the "INITIAL
PAYMENT PERCENTAGE") and will apply to all 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 on or
before the date six months after the Effective Date (the "INITIAL CLAIMS FILING
DATE"). The Initial Payment Percentage has been calculated, inter alia, 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
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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
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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 the Plan Proponents
believe assures that holders of OC Indirect Asbestos PI Trust Claims and FB
Indirect Asbestos PI Trust Claims are not granted 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 paid 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." Plant continues to assert, despite these modifications to the Asbestos
Personal Injury Trust Distribution Procedures, that the Asbestos Personal Injury
Trust Distribution Procedures are ambiguous as to whether holders of indemnity
claims are precluded from the recovering on account of claims for attorneys'
fees and interest, allegedly recoverable under certain conditions pursuant to
the laws of most states, including California.
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. Plant asserts that is
entitled to indemnification from Fibreboard under California law.
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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
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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
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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
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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.
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17. SCHEDULED, AVERAGE AND MAXIMUM VALUES
The Scheduled, Average and Maximum Values for claims involving Disease
Levels I - VIII are the following:
OC SUB-ACCOUNT
<Table>
<Caption>
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
(Level III) $ 19,000 $ 20,000 $ 35,000
Asbestos/Pleural Disease $ 8,000 $ 9,000 $ 20,000
(Level II)
Other Asbestos Disease (Cash $ 400 None None
Discount Payment) (Level I)
</Table>
FB SUB-ACCOUNT
<Table>
<Caption>
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)
</Table>
These Scheduled Values, Average Values and Maximum Values will apply
to all OC and Fibreboard Asbestos
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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
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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; and (iv) for either Disease
Level III or IV, pulmonary function testing.
All 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
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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
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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.
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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
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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 in Section VIII.B.2 entitled "Disease Levels,
Scheduled Values and Medical/Exposure Criteria Set Forth in the Asbestos
Personal Injury Trust Distribution Procedures" and Section VIII.B.20 entitled
"Evidentiary Requirements" and the Asbestos Personal Injury Trust Distribution
Procedures, which is Exhibit D-1 to the Plan. 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. Certain insurers assert that the Bankruptcy Court cannot
make a finding that the Asbestos Personal Injury Trust Distribution Procedures
are fair and equitable as to them, and that any payments made thereunder are not
binding on any Insurer(s) absent an adjudication of coverage issues as respects
any relevant asbestos claims in proceedings in a separate and appropriate forum.
The Insurers assert that the foregoing procedures, as presently disclosed, do
not properly protect their contractual rights regarding the defense or
settlement of any Asbestos Personal Injury Claims for which coverage is sought
and that the result may be that any otherwise available coverage is voided as to
such claims. The Debtors disagree with this assertion; the outcome of this
dispute cannot be regarded as certain. 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 ruled upon 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, VII, 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.
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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 Trust Agreement ("FB ASBESTOS PROPERTY DAMAGE
TRUST
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AGREEMENT"), a copy of which will be attached to the Plan as EXHIBIT E. In
accordance with SECTION 1.100 of the Plan and EXHIBIT E to the Plan, the FB
Asbestos Property Damage Trust Agreement may be amended up to 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. Fibreboard
also has unconfirmed coverage under policies issued by other carriers as set
forth on Schedule XV. The London Market Insurers object to the inclusion on
Schedule XV of policy nos. 564/155055, 564/477688, 53/8540D, 54/83850, 55/7871D.
Century Indemnity Company (as successor to Insurance Company of North
America and CIGNA Specialty Insurance Company, formerly known as California
Union Insurance Company), Central National Insurance Company of Omaha (through
its managing general agent Cravens Dargan & Co., Pacific Coast), and ACE
Property and Casualty Insurance Company (formerly CIGNA Property and Casualty
Insurance Company) (collectively, the "ACE Entities"); American Home Assurance
Company, Granite State Insurance Company, Insurance Company of the State of
Pennsylvania, and New Hampshire Insurance Company (collectively, the "AIG Member
Companies"); Hartford Accident and Indemnity Company, Hartford Fire Insurance
Company, Twin City Fire Insurance Company, First State Insurance Company, New
England Insurance Company, and all other entities identified as "Hartford
Entities" in section VII.J.6 ("Injunction With Respect to Claims Against the
Hartford Entities") of this Disclosure Statement (collectively, the "Hartford
Entities"); and certain Underwriters at Lloyd's London and certain British
insurance companies who have subscribed to the Fiberboard policies,
(collectively, the "London Market Insurers," and collectively with the ACE
Entities, the AIG Member Companies, and the Hartford Entities, "Certain
Insurers") (i) reserve all of their rights and defenses under their respective
liability insurance policies and related agreements which the Debtors may allege
provide coverage for any Claim; and (ii) reserve all of their rights to object
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to confirmation of the Plan and to all agreements, schedules, and documents
relating to the Plan, including any aspect of the foregoing that purports to
alter Certain Insurers' obligations or rights or to decide any matter adversely
to them.
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
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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.
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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.
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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 as "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
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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
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by the Debtors to exceed all Allowed FB Asbestos Property Damage Claims, the
Debtors believe that recoveries will be 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
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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 shall be designated by
the Plan Proponents and approved by the Bankruptcy Court. On or prior to ten
(10) Business Days prior to the Objection Deadline, the Plan Proponents shall
file with the Bankruptcy Court a notice designating the Person they have
selected as Litigation Trustee and seeking approval of such designation at the
Confirmation Hearing. Once approved by the Bankruptcy Court, the Litigation
Trustee shall have and perform all of 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, 6A and 6B 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. The Unsecured Creditors' Committee and certain insurance companies
believe that a Litigation Trust Initial Deposit in the amount of $1 million
would be inadequate.
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, 6A and 6B 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,
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(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.
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B. DISTRIBUTIONS OF LITIGATION TRUST RECOVERIES
The Litigation Trustee shall apply Litigation Trust Recoveries as follows:
(a) first, to pay Litigation Trust Expenses; (b) second, to pay the Litigation
Trust Reimbursement Obligation until the Litigation Trust Reimbursement
Obligation is paid in full; (c) third, to the Disbursing Agent for any further
remaining disbursement amounts (i) to holders of Allowed Claims in each of
Classes 4, 5, 6A and 6B in accordance with Sections 3.3(b), 3.3(c), 3.3(d),and
3.3(e), respectively of the Plan; and (ii) to the Asbestos Personal Injury Trust
for distribution in accordance with Section 3.3(f) 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. The advisors to the Debtors, the Asbestos Claimants'
Committee and the Future Claimants' Representative agree that the shares of New
OCD Common Stock to be distributed to the Asbestos Personal Injury Trust will be
deemed to be restricted securities, because they will be held by an "affiliate."
The Asbestos Personal Injury Trust would be unable to sell shares unless they
were registered or another exemption were available. Because the Asbestos
Personal Injury Trust will need liquidity to pay Allowed Claims in Class 7 and
Class 8, the the Debtors agreed to grant, in the exercise of their reasonable
business judgment, registration rights to permit the registered resale of
securities. The Debtors believe that no other shareholder or group of affiliated
shareholders will receive enough stock to be considered an "affiliate" subject
to the sale restrictions.
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
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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
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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, 6A and 6B 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.
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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.
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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
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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, however, where a taxpayer is in bankruptcy and where the
discharge is granted, or is effected pursuant to a plan approved, by the
bankruptcy court. In this case, instead of recognizing income, the taxpayer is
required, under Section 108(b) of the IRC, to reduce certain of its tax
attributes by the amount of COD Income. The attributes of the taxpayer are to be
reduced 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. In addition to the foregoing, Section 108(e)(2) of the IRC
provides a further exception to the realization of COD upon the discharge of
debt, providing that a taxpayer will not recognize 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 having their debt reduced in connection with their
bankruptcy, the Debtors generally will not recognize COD income from the
discharge of indebtedness pursuant to the Plan; however, certain Tax Attributes
of the Debtors will be reduced or eliminated. The
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Debtors have not yet determined whether they will make the election under 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 is of amounts that the Debtors would have been entitled to deduct if
the Debtors had paid such amounts, 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.
To the extent that the Debtors are required to reduce their Tax
Attributes, such attribute reduction will be governed by recently issued
temporary Treasury Regulations which contain rules that govern the mechanics of
attribute reduction where the debtor corporation is a member of a group filing a
consolidated return. The temporary regulations generally provide that the first
Tax Attributes subject to reduction are those attributable to the debtor
corporation. For this purpose, Tax Attributes attributable to the debtor member
include consolidated Tax Attributes (such as consolidated NOLs, consolidated tax
credits, and consolidated capital losses) that are attributable to the debtor
member pursuant to the consolidated return regulations and also include the
basis of property of the debtor, all of which are reduced in the order
prescribed above. To the extent that the excluded COD Income exceeds the Tax
Attributes attributable to the debtor member, the temporary regulations require
the reduction of consolidated Tax Attributes attributable to other members. In
addition, to the extent that the debtor corporation is required to reduce its
basis in the stock of another group member, the lower-tier member also must
reduce its Tax Attributes, including the consolidated Tax Attributes
attributable to that lower-tier member. 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 Section1.468B-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
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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
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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
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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;
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(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
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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, CLASS 6A AND CLASS 6B CLAIMS (BANK
HOLDERS, BONDHOLDERS, GENERAL UNSECURED CLAIMS AND GENERAL
UNSECURED/SENIOR INDEBTEDNESS CLAIMS)
The holders of the Class 4, Class 5, Class 6A and Class 6B 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, Class 6A and/or Class 6B Claims do not
constitute "securities" for United States federal income tax purposes, then the
exchange of Class 4, Class 5, Class 6A and/or Class 6B 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, Class 6A or Class 6B
Claims in the property that they received in exchange for their Class 4, Class
5, Class 6A or Class 6B 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
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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, Class 6A and/or Class 6B Claims
constitute "securities" for United States federal income tax purposes, then the
exchange of Class 4, Class 5, Class 6A or Class 6B Claims, respectively, will be
treated as a "recapitalization" for United States federal income tax purposes.
In such case, holders of Class 4, Class 5, Class 6A or Class 6B Claims who
realize a loss on the transaction will not be permitted to recognize such loss.
If the exchange of Class 4, Class 5, Class 6A and Class 6B
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, Class 6A and
Class 6B 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, Class 6A and
Class 6B 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, Class 6A or Class 6B Claim surrendered.
If the exchange of Class 4, Class 5, Class 6A and Class 6B
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, Class 6A and Class 6B 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, Class 6A and Class 6B 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, Class 6A or Class 6B 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, Class
6A and Class 6B 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, Class 6A or Class 6B
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.
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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
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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
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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, Class 6A or Class 6B 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,
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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
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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.
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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, 6A, 6B, 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
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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, 6A, 6B, 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
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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 this and certain other assumptions,
including an assumption that it would be possible to sell the Company as a going
concern in a Chapter 7 case, the Unsecured Creditors' Committee contends that
creditors would receive more in a Chapter 7 liquidation than under the Plan. The
Unsecured Creditors' Committee asserts its position is supported by certain
decisions of the Third Circuit, including IN RE M. FRENVILLE, 744 F.2d 332 (3d
Cir. 1984) and IN RE TRANS WORLD AIRLINES, INC., 322 F.3d 283 (3d Cir. 2003).
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 the
following reasons. No case in the Supreme Court, the Third Circuit or any
federal circuit has addressed whether future tort claimants may be excluded from
distributions in a Chapter 7 liquidation or whether a bankruptcy court would be
permitted to insulate a purchaser of assets from a bankruptcy estate against
claims of successor liability from such future claimants. The position of the
Unsecured Creditors' Committee incorrectly focuses on its legal arguments when
the proper focus would be on the perspective of those who would purchase the
assets. No purchaser would be willing to assume the risk of billions of dollars
in potential tort liability based on mere legal arguments or even court
decisions on such issues, especially when the purchaser could not predict in
which jurisdiction successor liability claims would be brought. The Plan
Proponents and Lazard have therefore assumed that a Chapter 7 trustee would be
forced to sell assets in a traditional "bricks and mortar" liquidation with the
loss of most if not all "going-concern" value attributable to the Debtors
assets. For purposes of this analysis, the Plan Proponents and Lazard have also
assumed that future asbestos claimants would participate in distributions in a
Chapter 7 liquidation, rather than make a speculative assumption to the
contrary, including speculation as to the priority of asbestos claims which
accrue under state law during the bankruptcy case (after the Petition Date or
conversion date and before the case were closed). As a result of the foregoing,
the Plan Proponents and Lazard assert that holders of Allowed Claims in Classes
3, 4, 5, 6A, 6B, 7, 8 and 9 would receive less in a Chapter 7 liquidation than
under the Plan.
For a more detailed discussion of this liquidation analysis and the dispute
with the Unsecured Creditors' Committee, 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
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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.
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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.D 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:
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- the Reorganized Debtors' enterprise valuation consists of the
aggregate enterprise value of Reorganized OCD and its direct and
indirect Subsidiaries, including the Non-Debtor Subsidiaries.
- The reorganization value range indicated represents the "enterprise
value" of the Reorganized Debtors, and assumes the pro forma debt
levels (as set forth in the Financial Projections) adjusted for
ownership percentages in order to calculate a range of equity
value.
- The Debtors will emerge from Chapter 11 on or about December 31,
2003.
- The projections for the Reorganized Debtors are predicated upon the
assumption that OC will be able to obtain all necessary financing,
as described herein, and that no asset sales other than those
contemplated to be consummated by the Company prior to the
Effective Date, or assumed in the Financial Projections, will be
required to meet the Reorganized Debtors' ongoing financial
requirements. Lazard makes no representations as to whether the
Company will obtain financing or consummate such asset sales or as
to the terms upon which such financing may be obtained or such
asset sales may be consummated.
- The present senior management of OC will continue following
consummation of the Plan, and general financial and market
conditions as of the assumed Effective Date of the Plan will not
differ materially from those conditions prevailing as of the date
of this Disclosure Statement.
Lazard's valuation represents a hypothetical value that reflects the
estimated intrinsic value of the Company derived through the application of
various valuation techniques. Such analysis does not purport to represent
valuation levels which would be achieved in, or assigned by, the public markets
for debt and equity securities or private markets for corporations. Estimates of
enterprise value do not purport to be appraisals or necessarily reflect the
values which may be realized if assets are sold as a going concern, in
liquidation, or otherwise.
3. VALUATION METHODOLOGY
The following is a brief summary of certain financial analyses
performed by Lazard to arrive at its estimation of the reorganization value of
the Reorganized Debtors. Lazard performed certain procedures, including each of
the financial analyses described below, and reviewed the assumptions with the
management of OC on which such analyses were based and other factors, including
the projected financial results of the Reorganized Debtors. Lazard's estimate of
reorganization value must be considered as a whole and selecting just one
methodology or portions of the analysis, without considering the analysis as a
whole, could create a misleading or incomplete conclusion as to enterprise
value.
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(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
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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
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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
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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 Section XIV.D of this Disclosure
Statement entitled "Liquidation Analysis" and the Liquidation Analysis contained
in APPENDIX C. 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.
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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.
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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 XIV.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.
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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
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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 VI.D 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.
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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.
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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.
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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.
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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
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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, 6A, 6B, 7, 8, and 9 are entitled to vote to accept or
reject the Plan. In Classes 7 and 8, only holders of present Asbestos Personal
Injury Claims will vote on 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
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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)
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XVIII. RECOMMENDATION AND CONCLUSION
For all of the reasons set forth in this Disclosure Statement, the Plan
Proponents believe that confirmation and consummation of the Plan is preferable
to all other alternatives. Consequently, the Plan Proponents urge all holders of
Classes 3, 4, 5, 6A, 6B, 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: October 24, 2003
OWENS CORNING, et al.
(for itself and on behalf of the Subsidiary
Debtors)
By: /s/ STEPHEN K. KRULL
----------------
Name: Stephen K. Krull
Title: Sr. Vice President, General Counsel
and Secretary
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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
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TABLE OF APPENDICES
-------------------
Appendix Name
- -------- ----
Appendix A Fourth Amended Joint Plan of Reorganization of
Owens Corning and its Affiliated Debtors and
Debtors-in-Possession, dated as of October 24,
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 (updated as of
March, 2003)
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
Fourth Amended Joint Plan of Reorganization of Owens Corning
and its Affiliated Debtors and Debtors-in-Possession,
dated as of October 24, 2003
[See Exhibit 2 to Owens Corning's Current Report on Form 8-K,
filed with the SEC on October 27, 2003.]
APPENDIX A-1
GLOSSARY OF ADDITIONAL TERMS
----------------------------
"Additional Sites" means, in connection with the proposed 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.
"Asbestos Personal Injury Trust Voting Claims" means certain claims which
includes: (1) Unpaid OC and FB Resolved Asbestos Personal Injury Claims; (2)
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 (3) all claims filed against another defendant in
the tort system prior to the date the Plan was filed with the Bankruptcy
Court; provided, however, that the claim described in (1), (2) or (3) 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 Asbestos Personal Injury Claims Filing Date.
"Asbestos-Related Property Damage Case Management Order" means the Order
Establishing Case Management Procedures for Asbestos-Related Property Damage
Claims, entered by the Bankruptcy Court on March 31, 2003, 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.
"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.
"BONY" means The Bank of New York.
"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).
"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 Orders" means the orders 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
unofficial sub-committee 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
-2-
17, 2000, which, among other things, authorized the Debtors to obtain the DIP
Facility from the DIP Lenders.
"DTC" means Depository Trust Corporation.
"Equity Registration Rights Agreement" means the registration rights agreement
Reorganized OCD will enter into with the Asbestos Personal Injury Trust with
respect to the shares of New OCD Common Stock issued to the Asbestos Personal
Injury Trust.
"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.
-3-
"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.
"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.
"Initial Claims Filing Date" means the date six months after the Effective
Date.
"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.
"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
-4-
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 proposed
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 C 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.
"MIPS" means the 6.5% Convertible Monthly Income Preferred Securities issued
and sold by Owens Corning Capital L.L.C.
"MIPS Indenture" means the indenture dated as of May 10, 1995, for the 6.5%
Convertible Subordinated Debentures due 2002.
"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.
-5-
"O.C. Funding" means O.C. Funding B.V., 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 B.V. Debentures" means the $150,000,000 aggregate principal
amount of O.C. Funding's 10% Guaranteed Debentures due 2001, which O.C.
Funding issued and which were guaranteed as to principal and interest, on an
unsubordinated basis, by OCD.
"OCHT" means Owens Corning HT, Inc.
"OCIL" means Owens-Corning (India) Limited.
"OCMS" means Owens Corning Metal Systems, a division of Exterior Systems, Inc.
"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.
"PD Advisory Committee" means the Property Damage Advisory Committee.
"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.6 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
-6-
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.
"Senior Notes Registration Rights Agreement" means the registration rights
agreement Reorganized OCD will enter into with the Asbestos Personal Injury
Trust with respect to the Senior Notes issued to the Asbestos Personal Injury
Trust.
"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.
"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
retained 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.
-7-
"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.
-8-
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
_________________
(1) Any capitalized term used but not defined in this Exhibit "B" will have the
meaning ascribed to such term in the Plan.
B-1
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.
B-2
1. Pro Forma Projected Balance Sheet (Unaudited) (a)
(As of December 31, 2003)
Owens Corning and Subsidiaries Reorganization Adjustments
------------------------------
Estimated Pro Forma
Pre-Reorg "Fresh Reorganized
Balance Reorg Start" Balance
($ in millions) 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....................... - - 844 (n) 844
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) 238
--------------- -------------- -------------- ---------------
Total assets $ 6,922 $ (1,976) $ 99 $ 5,046
=============== ============== ============== ===============
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 (p) 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) (36) (k) 1,930
--------------- -------------- -------------- ---------------
Total liab. and shareholders' equity $ 6,922 $ (1,976) $ 99 $ 5,046
=============== ============== ============== ===============
B-3
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
B-4
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 reduction for restricted shares issued to management
and employees with a value of approximately $70 million. A Deferred Stock
Compensation contra-account will reduce Shareholders' Equity to $1.930
billion. 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 $135 million
adjustment is required to record post-retirement benefits liability at
fair value, in accordance with SOP 90-7.
B-5
2. Projected Statements of Operations (Unaudited)
Owens Corning and Subsidiaries Projected
Fiscal Year Ended December 31,
--------------------------------------------------
($ 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 33 33
------------- -------------- ---------------
Income from operations 258 368 508
Cost of borrowed funds, net................................. 17 90 85
------------- -------------- ---------------
Income before taxes 241 278 422
Income tax expense ......................................... 103 111 169
------------- -------------- ---------------
Income after taxes 138 167 253
Minority interest .......................................... (6) (3) (3)
Equity in net income (loss) of affiliates................... (2) (2) (2)
------------- -------------- ---------------
Net income (a) $ 130 $ 162 $ 249
------------- -------------- ---------------
Memo:
Income from operations 258 368 508
Plus: Other cost of sales................................... 27 44 -
Plus: Chapter 11 reorganization items....................... 103 15 -
Plus: Restructuring costs................................... 2 - -
Plus: Other expense (non-cash deferred compensation expense) - 23 23
------------- -------------- ---------------
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) and
deferred compensation expense related to restricted stock issued to management
and employees at emergence
(c) Earnings before interest, taxes, depreciation and amortization
B-6
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....................... 844 844 844
Debt issuance costs............................... 6 5 3
Deferred tax assets............................... 307 315 314
Other non-current assets.......................... 238 241 257
---------------- --------------- ----------------
Total assets $ 5,046 $ 5,100 $ 5,390
================ =============== ================
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..................... 131 133 142
---------------- --------------- ----------------
Total liabilities 3,116 2,985 3,003
Shareholders' equity.............................. 1,930 2,115 2,387
---------------- --------------- ----------------
Total liab. and shareholders' equity $ 5,046 $ 5,100 $ 5,390
================ =============== ================
* Estimated post-reorganization balance sheet
B-7
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............................................ $ 162 $ 249
Depreciation and amortization ........................ 241 250
Deferred income taxes ................................ (8) 2
(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 327 482
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)
Deferred stock compensation........................... 23 23
--------------- ----------------
Net cash flow provided (used by) financing activities (14) (18)
Beginning cash and cash equivalents balance 380 470
Net increase in cash.................................. 90 234
--------------- ----------------
Ending cash and equivalents balance $ 470 $ 704
--------------- ----------------
B-8
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.
B-9
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. Other Expenses. Includes $23 million non-cash expense in 2004 and
2005 related to Deferred Stock Compensation expense that results
from the issuance at emergence of restricted stock to employees and
management. Annual expense based upon three-year vesting period.
9. 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
B-10
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.
10. 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.
B-11
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 equity
Interest must either (a) accept the Plan or (b) receive or retain under the
Plan property of a value, as of the Plan's Effective Date, that is not less
than the value such non-accepting holder would receive or retain if the
Debtors were to be liquidated under Chapter 7 of the Bankruptcy Code on the
Effective Date. In determining whether the Best Interests Test has been met,
the first step is to determine the dollar amount that would be generated from
a hypothetical liquidation of the Debtors' assets in Chapter 7. The gross
amount of cash available would be the sum of the proceeds from the disposition
of the Debtors' assets and the cash held by the Debtors at the commencement of
their Chapter 7 cases. Such amount then would be reduced by the costs and
expenses of the liquidation. Prior to determining whether the Best Interests
Test has been met, further reductions would be required to eliminate cash and
asset liquidation proceeds that would be applied to secured claims and amounts
necessary to satisfy Administrative, Tax, and Priority Claims that are senior
to General Unsecured Claims, including any incremental Administrative Claims
that may result from the termination of the Debtors' business and the
liquidation of their assets. Any remaining cash would be available for
distribution to general unsecured creditors and shareholders in accordance
with the distribution hierarchy established by section 726 of the Bankruptcy
Code.
The Liquidation Analysis below reflects the estimated cash proceeds,
net of liquidation-related costs that would be available to the Debtors'
creditors if they were to be liquidated in Chapter 7 cases. Underlying the
Liquidation Analysis are a number of estimates and assumptions regarding
liquidation proceeds that, although developed and considered reasonable by
management and Lazard, are inherently subject to significant business,
economic and competitive uncertainties and contingencies beyond the control of
the Company and its management. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT
THE VALUES REFLECTED IN THE LIQUIDATION ANALYSIS WOULD BE REALIZED IF THE
DEBTORS (TOGETHER WITH THE NON-DEBTOR SUBSIDIARIES) WERE, IN FACT, TO UNDERGO
SUCH A LIQUIDATION, AND ACTUAL RESULTS COULD VARY MATERIALLY FROM THOSE SHOWN
HERE.
The 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. In addition, the Liquidation Analysis has been prepared assuming that
certain 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 also converted to Chapter 7. The Liquidation Analysis includes
these entities as Debtors.
The assets and liabilities of each of these Debtors (but not the Fibreboard
Insurance Settlement Trust) are treated for this analysis as if they were
merged.
2. Liquidation of the Debtors. 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 analysis assumes that the Debtors would begin to wind-down daily
operations immediately and that all manufacturing operations would be closed
and secured within sixty days. During this period, the Debtors would notify
employees of their pending termination under the WARN Act. During the sixty
day period, all employees would be expected to assist with the wind-down and
securing of the facilities. All hourly employees would be terminated after the
sixty day period. Approximately 85% of corporate employees would be terminated
after the sixty day period and the remaining employees would assist with the
wind-down of the operations including the collection of receivables and the
sale of inventory. Approximately 15% of the corporate employees would remain
until the end of the fourth month, and 5% of the employees would remain until
the end of the twelve months.
The Liquidation Analysis 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 Debtors have assumed that the collection of
receivables, sale of assets, and wind-down of operations would be
substantially concluded within a twelve month period. The Debtors have also
assumed that the Chapter 7 trustee would need an additional twelve months to
complete the liquidation process, resolve litigation and determine a mechanism
for distributing liquidation proceeds to thousands of asbestos plaintiffs and
other creditors. There can be no assurances that all assets would be
completely liquidated during this time period.
The liquidation analysis was prepared based upon a review of the
Debtors' assets and estimates of hypothetical liquidation values were
determined primarily by assessing classes of assets. For the preparation of
this analysis, the Debtors did not retain third party experts to value
individual assets. The Liquidation Analysis assumes that there are no proceeds
from the recoveries of any potential preferences, fraudulent conveyances, or
other causes of action.
3. Treatment of the Non-Debtor Subsidiaries. The Liquidation Analysis
assumes that the conversion to Chapter 7 by the Debtors would result in the
insolvency of the Non-Debtor Subsidiaries and a cessation of operations.
Accordingly, the Liquidation Analysis assumes the orderly liquidation of the
Non-Debtor Subsidiaries. This assumption is premised on several factors
including the following:
o Owens Corning's operations are organized based on a centralized
management structure. As a result, the Non-Debtor Subsidiaries
have minimal management structure and rely upon Owens Corning's
corporate staff to perform much of their administrative and
accounting functions.
-2-
o Production is optimized based upon a global sourcing matrix. As
a result, each of the Non-Debtor Subsidiaries, both individually
and collectively, represent only a portion of the global
portfolio of products sold by Owens Corning.
o Generally, customer relationships are handled on a global basis
by the Debtors' employees from its Toledo headquarters and not
by the Non-Debtor Subsidiaries. The liquidation of the Debtors
would likely result in a significant erosion in the level of
orders placed by customers on a global basis, thereby
significantly eroding the financial performance of the
Non-Debtor Subsidiaries.
o The withdrawal of financial and managerial support provided by
the Debtors would likely lead to an unwillingness by local
vendors to extend payment terms to the Non-Debtor Subsidiaries,
thereby leading to liquidity issues.
o The Directors of many of the individual Non-Debtor Subsidiaries
would be required to place their legal entities into
administrative proceedings unless alternative local financing
sources were procured. It is likely that the cash management
program currently in place among the Non-Debtor Subsidiaries
would be discontinued in the event of the liquidation of the
Debtors.
Management believes that the Non-Debtor Subsidiaries do not maintain
the necessary management, administrative services, client relationships and
product portfolio to operate as a going concern in the event of a cessation of
operations at the Debtors.
The estimated recovery to the Debtors from the orderly liquidation of
the Non-Debtor Subsidiaries, assuming the Debtors' inter-company claims are
subordinated to those of third party creditors of the Non-Debtor Subsidiaries,
would be approximately $124 million. If the Debtors' inter-company claims were
deemed to be pari passu with those of third party creditors, the estimated
recovery to the Debtors would be approximately $319 million. For purposes of
this analysis, the inter-company claims were assumed to be subordinated to
those of third party claims.
4. Execution risk of a liquidation. A liquidation of Owens Corning
would be unprecedented in scale and scope. The assets of the Debtors and
Non-Debtor Subsidiaries include billions of dollars worth of manufacturing
assets which utilize proprietary technology and are strategically placed
worldwide to create an integrated product sourcing matrix. The assets are
located throughout the world, cross many national borders, and would be
subject to the laws of numerous states within the United States and numerous
foreign jurisdictions. Given the complexity of such an undertaking, the
Debtors believe significant execution risk exists if a liquidation were
actually pursued. The Debtors are not aware of any successful liquidation of
similar magnitude or complexity.
-3-
APPENDIX C
OWENS CORNING
Hypothetical Liquidation Analysis
STATEMENT OF ASSETS
Book Value
as of Hypothetical Estimated
($ in millions) June 30, 2003 Percentage Liquidation
(Note A) Recovery Value
Note (Unaudited) (Unaudited)
---- ----------- ----------- ----------
[1] [2] [1]*[2]=[3]
Debtor Entities
---------------
Cash and Cash Equivalents B 564 100% 564
Trade Accounts/Notes Receivable C 431 72% 310
Non-Trade Receivables 34 5% 2
Inventory D 466 42% 195
Other Current Assets E 34 52% 18
Property, Plant and Equipment, Net F 1,406 35% 498
Deferred Taxes 1,244 0% 0
Deferred Charges 39 0% 0
Fibreboard Trust and Restricted Cash G 1,555 0% 0
Goodwill and Other Intangibles H 54 184% 100
Other Non-Current Assets I 33 32% 11
----------- ------------
Total Assets $5,861 $1,696
Net Orderly Liquidation Value of
Non-Debtor Entities J 124
------------
Gross Estimated Liquidation Proceeds
Available for Distribution $1,821
------------
Costs Associated with Liquidation: K
Payroll and Overhead Related to
Wind-down Costs (165)
Chapter 7 Trustee Fees (34)
Chapter 7 Professional Fees (15)
------------
Costs Associated with Liquidation ($214)
------------
Net Estimated Liquidation Proceeds Available for Distribution $1,607
------------
The accompanying notes are an integral pan of the Liquidation Analysis
-4-
DISTRIBUTION ANALYSIS SUMMARY
($ in millions)
Estimated Estimated
Allowable Liquidation
Note Claims Value
---- ------ -----
Net Estimated Liquidation Proceeds Available for Distribution $1,607
Less Secured Creditor Claims: L
Other Secured Claims 11
Secured Creditor Claims $11
Net Estimated Liquidation Proceeds Available After Secured Claims $1,596
Less Chapter 11 Administrative and Priority Claims: M
Post-Petition Letters-of-Credit Drawn under DIP 85
Post-Petition Accounts Payable 246
Post-Petition Accrued Expenses 166
Administrative Expense Claims 25
Priority Tax Claims 135 ----------
Total Administrative and Priority Claims $657
Proceeds Available to Unsecured Claims $939
Less Unsecured Claims: N
Bank Claims 1,566
Bond Claims 1,389
General Unsecured Claims 412
Pension Benefit Guarantee Corp. Claim 275
Contract Rejection Claims 300
Asbestos Personal Injury Claims 10,530
FB Asbestos Personal Injury Claims 3,901 ----------
Total Unsecured Claims $18,373
Net Estimated Deficiency to Unsecured Claims ($17,434)
----------
Hypothetical Recovery (%) 5.1%
----------
The accompanying notes are an integral part of the Liquidation Analysis
-5-
STATEMENT OF ASSETS
Book Value
($ in millions) as of Hypothetical Estimated
June 30, 2003 Percentage Liquidation
(Note A) Recovery Value
Note (Unaudited) (Unaudited)
---- ----------- ----------- ----------
[1] [2] [1]*[2]=[3]
Non Debtor Entities J
Cash and Cash Equivalents 242 100% 242
Trade Accounts/Notes Receivable, Gross 103 71% 73
Inventory 115 43% 50
Other Current Assets 3 30% 1
Property, Plant and Equipment, Net 522 20% 106
Deferred Taxes 115 0% 0
Deferred Charges 19 0% 0
Goodwill and Other Intangibles 80 0% 0
Other Non-Current Assets 89 19% 17
----------- ----------
Total Assets $1,289 $490
----------
Assets Available for Distribution $490
----------
Costs Associated with Liquidation:
Payroll and Overhead Related to Wind-down Costs (54)
Administrator Fees (7)
Professional Fees (5)
Employee Severance (4,000 employees at $1,500) (6)
----------
Costs Associated with Liquidation ($72)
Net Estimated Liquidation Proceeds Available for Distribution $418
Claim Recovery
-------- --------
Less Liabilities:
Accounts Payable 70 70
Accrued Expenses (excludes reserves, etc.) 74 74
Pension Liability (UK and Canada) 60 60
Notes Payable (excludes OC Funding BV Debt) 89 89
Other 0 0
-------- --------
Total Third Party Liabilities 293 293
Hypothetical Recovery (%) - Third Party Creditor 100.0%
Net Estimated Liquidation Proceeds Available to The Debtors $124
--------
Inter-company Liabilities owed to The Debtors 960 124
Hypothetical Recovery (%) - The Debtors 13.0%
The accompanying notes are an integral pan of the Liquidation Analysis
-6-
Notes to Liquidation Analysis
A summary of the assumptions used by Lazard and Debtors' management
in preparing the liquidation analysis is set forth below.
Note A - Book Values as of June 30, 2003
Unless stated otherwise, the book values used in this Liquidation
Analysis reflect the unaudited book values as of June 30, 2003 and are assumed
to be representative of the Debtors' assets and liabilities as of December 31,
2003. The balances exclude investments in affiliates, investments in
subsidiaries, and amounts due from subsidiary companies. The liquidation value
of the Non-Debtor Subsidiaries and the related recovery to the Debtors has
been calculated separately and is discussed in Note J below.
Note B - Cash and Cash Equivalents
It is assumed that cash and cash equivalents of approximately $564
million held in Debtor accounts would be 100% collectible. Cash located at
Non-Debtor Subsidiaries is estimated at $242 million, and has been included in
the orderly liquidation value of the Non-Debtor Subsidiaries. The Liquidation
Analysis assumes that approximately $175 million of cash is generated during
the second half of fiscal 2003 and that this cash is utilized to make an
approximately $175 million contribution to the Debtors' pension plans (this
contribution was made on or about September 15, 2003). Accordingly, the
estimated chapter 7 unsecured claim by the Pension Benefit Guaranty
Corporation is assumed to be reduced by $175 million.
Note C - Accounts Receivable
Proceeds from the collection of accounts receivable were estimated
based upon an analysis of the Debtors' accounts receivable including a review
of the Debtors' receivables aging schedule. The following collection rates
were assumed as part of the analysis: 0-30 days (75%), 31-60 days (50%), 61-90
days (20%), and over 91 days (10%). The weighted average recovery rate based
on this methodology was approximately 72%. In addition, the Debtors reviewed
the borrowing base calculations as determined in accordance with the Debtors'
DIP Facility. Based upon the June 30, 2003 borrowing base, assuming an 85%
recovery rate (equal to the advance rate) on "eligible" receivables and a 25%
recovery rate on "ineligible" receivables would result in an equivalent 72%
average recovery rate.
Note D - Inventory
Inventories are comprised of raw materials, work-in-process, and
finished goods. Proceeds from the sale of inventories were estimated based
upon a review of the Debtors' inventories and the likely discount required to
induce third parties to purchase and distribute these inventories. A
significant portion of the Debtors' inventories include "high weight / low
value" and "high volume / low value" products (for example, an entire
truck-load of insulation has a retail value of approximately $9,500). These
characteristics increase the costs to an intermediary who is required to
pick-up, ship and store the Debtors' inventories prior to resale.
-7-
In addition, it is unlikely that the Debtors' competitors would be interested
in purchasing the Debtors' branded inventories for resale to their own
customers (for example, "pink" insulation).
Raw materials inventory and work-in-process were assumed to be
recoverable at 20% of book value. Finished goods inventory was assumed to be
recoverable at 50% of book value. This methodology resulted in an overall
inventory recovery of 42% of book value (excluding the LIFO Reserve).
Note E - Other Current Assets
Other current assets include prepaid insurance, prepaid taxes and
other miscellaneous current assets. Prepaid insurance represents approximately
two-thirds of Other Current Assets and is assumed to have a 75% recovery rate.
The liquidation value of prepaid taxes and other miscellaneous assets are
assumed to have between 0% and 10% recovery rate.
Note F - Property, Plant & Equipment, Net
Property, Plant & Equipment includes land, buildings, machinery and
equipment, alloy metals, and construction-in-progress. The orderly liquidation
value for land and buildings was assumed to be 40% of net book value and was
based upon a review by management of the Debtors' facilities. Machinery and
equipment was assumed to have an orderly liquidation value of 10% of net book
value. Construction-in-progress was assumed to have an orderly liquidation
value of 10% of net book value. The recovery rate on alloy metals was
calculated based upon an analysis of the quantity of the alloy's bases metals,
platinum and rhodium. The liquidation value of the alloy was determined based
upon current market prices for platinum ($699.50 per troy ounce) and rhodium
($460.00 per troy ounce), less a discount for collection and processing costs
to separate the alloy into the base metals (approximately 10% for platinum and
15% for rhodium).
Note G - Fibreboard Trust and Restricted Cash
The Fibreboard Insurance Settlement Trust with funds totaling $1.258
billion is not assumed to be an asset of the Debtors' estates for the purposes
of this analysis and is therefore used to reduce Fibreboard Asbestos Personal
Injury Claims. Restricted cash of $106 million held by law firms on behalf of
Owens Corning asbestos plaintiffs is not assumed to be recoverable by the
Chapter 7 trustee and is used to reduce Owens Corning Asbestos Personal Injury
Claims. Restricted cash of $127 million held by law firms on behalf of
Fibreboard asbestos plaintiffs is not assumed to be recoverable by the Chapter
7 trustee and is used to reduce Fibreboard Asbestos Personal Injury Claims. An
Owens Corning Insurance Escrow in the amount of $60 million is not assumed to
be recoverable by the Chapter 7 trustee and is used to reduce Owens Corning
Asbestos Personal Injury Claims.
Note H - Goodwill and Intangibles
Goodwill was assumed to have no recovery value. Intangibles include,
inter alia, the Owens Corning brand name and various related trade marks such
as the color pink (with respect
-8-
to insulation products). Based upon a review of royalty rates for commercial
and industrial trade-names, the liquidation value of the Owens Corning brand
name and related trade marks is estimated to be approximately $75 million.
Although this amount is included in the calculation of liquidation value,
there is no precedent for determination of the ability to sell the brand name
of an enterprise with substantial asbestos liabilities, as the prospective
purchaser might anticipate being subjected to litigation. In addition, the
Debtors have assumed that the patents and proprietary technology would have a
value of approximately $25 million. The Debtors' proprietary technology
consists primarily of manufacturing processes and "know-how" which will be
significantly diminished with the liquidation of the equipment and termination
of the employee base. Other intangible assets are assumed to have de minimis
liquidation value.
Note I - Other Non-Current Assets
Other non-current assets include equity in net assets of affiliates,
deferred taxes, long-term prepaid expenses and advances, and other long-term
notes and investments. On an aggregate basis, other non current assets were
deemed to have a liquidation value of approximately 32% of book value.
Note J - Orderly Liquidation Value of Non-Debtor Subsidiaries
As discussed above, the conversion of the Debtors to Chapter 7 is
assumed to result in the insolvency of the Non-Debtor Subsidiaries.
Accordingly, Lazard and management have prepared an analysis of the orderly
liquidation value of the Non-Debtor Subsidiaries. The recovery assumptions by
asset category are generally consistent with those assumed for the Debtors
with two exceptions. The overall recovery rate on property, plant and
equipment is lower due to the fact that the proportion of owned alloy is
significantly lower at the Non-Debtor Subsidiaries. The recovery value of
goodwill owned by the Non-Debtor Subsidiaries was assumed to be de minimis.
For purposes of the Liquidation Analysis, it was assumed that
approximately $960 million of inter-company liabilities owed by the Non-Debtor
Subsidiaries to the Debtors would be treated by European and Asian
Administrators as subordinate to third party liabilities. Management estimates
that the recovery to the Debtors from the orderly liquidation of the
Non-Debtor Subsidiaries, assuming the Debtors' inter-company claims are
subordinated to those of third party creditors of the Non-Debtor Subsidiaries,
would be approximately $124 million. If the Debtors' inter-company claims were
deemed to be pari passu with those of third party creditors, management
estimates that the recovery to the Debtors would be approximately $319
million.
Note K - Costs Associated with Liquidation
The Liquidation Analysis assumes that all employees are given
immediate notice of their pending termination pursuant to the WARN Act.
Employees at the facilities are utilized during the sixty day period to assist
with the wind-down and securing of the facilities. Corporate employees are
utilized during the sixty day period to assist with the collection of
receivables and the sale of inventory. Total payroll for the Debtors is
estimated to total approximately $150
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million during the sixty day period. Following the sixty day period, it is
estimated that 15% of the corporate employees would remain until the end of
the fourth month, and 5% would remain until the end of the twelve months.
Corporate payroll and overhead costs associated with the liquidation after the
sixty day period were calculated based on a $22 million monthly run-rate which
reflects the actual costs for June 2003.
Chapter 7 Trustee Fees include those fees associated with the
appointment of a Chapter 7 trustee in accordance with Section 326 of the
Bankruptcy Code. Trustee fees are estimated based on historical experience in
other similar cases and are calculated at 3% of the total cash generated from
non-cash assets during the liquidation.
Chapter 7 Professional Fees include legal and accounting fees
incurred during the twenty-four month liquidation period. Monthly professional
fees are assumed to be $1.0 million per month for six months and $0.5 million
per month for eighteen months.
The costs of administering a Chapter 7 liquidation are estimated as
follows:
Corporate payroll & Overhead Costs $165 million
Trustee Fees $34 million
Professional Fees $15 million
Total $214 million
Note L - Secured Creditor Claims
Secured claims are assumed to be $11 million, equal to the amount in
the plan, and includes certain industrial revenue bonds and mechanics liens.
Note M - Administrative and Priority Claims
Administrative and priority claims totaling $657 million are assumed to
include the following:
i. Post-petition letters of credit under the DIP Facility
totaling $85 million which are assumed to be drawn as a
result of the conversion to Chapter 7;
ii. Post-petition accounts payable of $246 million;
iii. Post-petition accrued expenses of $166 million, which has
been adjusted to exclude reserves and other expenses
unlikely to become claims;
iv. Administrative expenses consisting primarily of professional
fees of $25 million; and
v. Priority tax claims of $135 million
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Note N - Pre-petition Unsecured Claims
Pre-petition Unsecured Claims include commercial creditor and
asbestos related claims. For purposes of this analysis, the Liquidation
Analysis assumes a combined asbestos claim of $16.0 billion as detailed below
(the actual allowed claim amount will be determined by the Court).
Pre-petition Unsecured Claims totaling $18.373 billion are assumed to
include the following:
i. Bank claims of $1.566 billion, which assumes that all
letters of credit issued prior to the Chapter 11 filing are
drawn by the holders;
ii. Bond claims of $1.389 billion;
iii. General unsecured claims of $412 million, which includes
$374 million of claims as included in the Plan, $18 million
of claims classified as convenience claims in the Plan, and
$20 million of claims classified as cure costs under the
Plan;
iv. An additional claim from the PBGC estimated at $275 million
(similar to the $450 million proof of claim filed in these
cases assuming a termination of the Debtors' pension plans
less the $175 million pension contribution made on or about
September 15, 2003);
v. An additional claim estimated at $300 million related to the
rejection of executory contracts and operating leases,
including contracts and leases that were previously assumed
during the pendancy of these cases;
vi. For the purposes of this analysis, the OC Asbestos Personal
Injury Claims (both current and future claims) are assumed
to total $10.530 billion. This amount assumes a gross claim
of $10.700 billion less Restricted Cash of $106 million and
less OC Asbestos Personal Injury Liability Insurance Assets
of $64 million (estimated amounts as of December 31, 2003).
vii. For the purposes of this analysis, the FB Asbestos Personal
Injury Claims (both current and future claims) are assumed
to total $3.901 million. This amount assumes a gross claim
of $5.300 billion less Restricted Cash of $130 million and
less the Fibreboard Insurance Settlement Trust of $1.269
billion (estimated amounts as of December 31, 2003).
-11-
Position of the Unsecured Creditors' Committee
and the 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. Based on this and certain other assumptions,
including an assumption that it would be possible to sell the Company as a
going concern in a Chapter 7 case, the Unsecured Creditors' Committee contends
that creditors would receive more in a Chapter 7 liquidation than under the
Plan. The Unsecured Creditors' Committee asserts its position is supported by
certain decisions of the Third Circuit, including In re M. Frenville, 744 F.2d
332 (3d Cir. 1984) and In re Trans World Airlines, Inc., 322 F.3d 283 (3d Cir.
2003). 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 the
following reasons. No case in the Supreme Court, the Third Circuit or any
federal circuit has addressed whether future tort claimants may be excluded
from distributions in a Chapter 7 liquidation or whether a bankruptcy court
would be permitted to insulate a purchaser of assets from a bankruptcy estate
against claims of successor liability from such future claimants. The position
of the Unsecured Creditors' Committee incorrectly focuses on its legal
arguments when the proper focus would be on the perspective of those who would
purchase the assets. No purchaser would be willing to assume the risk of
billions of dollars in potential tort liability based on mere legal arguments
or even court decisions on such issues, especially when the purchaser could
not predict in which jurisdiction successor liability claims would be brought.
The Plan Proponents and Lazard have therefore assumed that a Chapter 7 trustee
would be forced to sell assets in a traditional "bricks and mortar"
liquidation with the loss of most if not all "going-concern" value
attributable to the Debtors assets. For purposes of this analysis, the Plan
Proponents and Lazard have also assumed that future asbestos claimants would
participate in distributions in a Chapter 7 liquidation, rather than make a
speculative assumption to the contrary, including speculation as to the
priority of asbestos claims which accrue under state law during the bankruptcy
case (after the Petition Date or conversion date and before the case were
closed). As a result of the foregoing, the Plan Proponents and Lazard assert
that holders of Allowed Claims in Classes 3, 4, 5, 6A, 6B, 7, 8 and 9 would
receive less in a Chapter 7 liquidation than under the Plan.
The Court will determine, in conjunction with confirmation, whether
the Plan satisfies the "best interests test" of Section 1129(a)(7).
-12-
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 OCD. 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 aggregate principal amount, subject to
adjustment in accordance with the Plan.
Securities: Senior unsecured notes of Reorganized OCD, issued in
up to three (3) series, with maturities to be
determined by OCD prior to the Effective Date.
OCD 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 OCD.
Interest Rate: Interest rates will be set by OCD, together with
Lazard Freres & Co. LLC, OCD's financial advisor,
prior to the Effective Date according to a
procedure, described below, intended to assign to
the Senior Notes interest rates expected to result
in the securities trading at or near par upon
initial issuance. Interest will be payable in cash
semi-annually in arrears on the basis of a 360 day
year.
The interest rate will be fixed on the 3rd day prior
to the Issuance Date (or if such date is not a
Business Day, the next Business Day) and shall equal
the sum (expressed as a percentage rounded to the
nearest one one-thousandth (.001) of 1.000%) of (x)
the Treasury Rate for the U.S. Treasury security
having a term and maturity closest to the term and
maturity of the Senior Notes and (y) the spread to
worst for the Goldman Sachs Index that most closely
correlates to the credit rating received by
Reorganized OCD with respect to the Senior Notes
prior to the Issuance Date. If Reorganized OCD
receives a credit rating of "BB+", "BB" or "BB-"
rating from Standard & Poor's Rating Services
("S&P") or "Ba1", Ba2", or "Ba3" from Moody's
Investors Service ("Moody's"), then the spread shall
be the spread to worst for the Goldman Sachs High
Yield Index as set forth on the Bloomberg
Professional(R) financial information service
("Bloomberg") (under the key "Corp" followed by keys
"WCIX" followed by key stroke "4" and with the
spread being the number under the column marked
"Spread" for the BB rating category. If
-E-1-
Reorganized OCD receives a credit rating of "BBB+",
"BBB" or "BBB-" from S&P or "Baa1", Baa2", or "Baa3"
from Moody's, then the spread shall be the spread to
worst for the Goldman Sachs Investment Grade Index as
set forth on Bloomberg (under the key "Corp" followed
by keys "WCIX" followed by key stroke "5" and with
the spread being the number under the column marked
"Spread" for the BBB rating category. In the event of
a split rating by the rating agencies, a spread based
on the average of the credit ratings shall apply.
Security/Priority: The Senior Notes will be unsecured senior
obligations of Reorganized OCD. 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 OCD 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
OCD 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 OCD
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: The Senior Notes will contain customary covenants in
accordance with market convention for similarly
rated securities.
Issuance Date: The Effective Date of the Plan.
-E-2-
APPENDIX F
Current Corporate Structure of Company
(updated as of March, 2003)
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]