Exhibit 99.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: ) Chapter 11
)
FEDERAL-MOGUL GLOBAL INC., ) Case No. 01-10578 (JKF)
T&N LIMITED, et al.,(1) ) (Jointly Administered)
)
Debtors. )
)
FINDINGS OF FACT AND CONCLUSIONS OF LAW REGARDING CONFIRMATION
OF FOURTH AMENDED JOINT PLAN OF REORGANIZATION FOR DEBTORS AND
DEBTORS-IN-POSSESSION (AS MODIFIED)
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(1) The U.S. Debtors (collectively, the "U.S. Debtors") are Carter
Automotive Company, Inc., Federal-Mogul Corporation, Federal-Mogul Dutch
Holdings Inc., Federal-Mogul FX, Inc., Federal-Mogul Global Inc., Federal-Mogul
Global Properties, Inc., Federal-Mogul Ignition Company, Federal-Mogul Machine
Tool, Inc., Federal-Mogul Mystic, Inc., Federal-Mogul Piston Rings, Inc.,
Federal-Mogul Powertrain, Inc., Federal-Mogul Products, Inc., Federal-Mogul
Puerto Rico, Inc., Federal-Mogul U.K. Holdings, Inc., Federal-Mogul Venture
Corporation, Federal-Mogul World Wide, Inc., Felt Products Manufacturing Co., FM
International LLC, Ferodo America, Inc., Gasket Holdings Inc., J.W.J. Holdings,
Inc., McCord Sealing, Inc., and T&N Industries Inc.
The U.K. Debtors to which these Findings of Fact and Conclusions of Law
apply (collectively, the "U.K. Debtors") are AE Piston Products Limited,
Aeroplane & Motor Aluminium Castings Limited, Ashburton Road Services Limited,
Brake Linings Limited, Duron Limited, Edmunds, Walker & Co. Limited,
Federal-Mogul Aftermarket UK Limited, Federal-Mogul Bradford Limited,
Federal-Mogul Bridgwater Limited, Federal-Mogul Camshaft Castings Limited,
Federal-Mogul Camshafts Limited, Federal-Mogul Engineering Limited,
Federal-Mogul Eurofriction Limited, Federal-Mogul Friction Products Limited,
Federal-Mogul Global Growth Limited, Federal-Mogul Ignition (U.K.) Limited,
Federal-Mogul Powertrain Systems International Limited, Federal-Mogul Sealing
Systems (Cardiff) Limited, Federal-Mogul Sealing Systems (Rochdale) Limited,
Federal-Mogul Sealing Systems (Slough) Limited, Federal-Mogul Sealing Systems
Limited, Federal-Mogul Shoreham Limited, Federal Mogul Sintered Products
Limited, Federal-Mogul Systems Protection Group Limited, Federal-Mogul
Technology Limited, Ferodo Caernarfon Limited, Ferodo Limited, Fleetside
Investments Limited, F-M UK Holding Limited, Friction Materials Limited, Greet
Limited, Halls Gaskets Limited, Hepworth & Grandage Limited, J.W. Roberts
Limited, Lanoth Limited, Newalls Insulation Company Limited, TAF International
Limited, T&N Holdings Limited, T&N International Limited, T&N Investments
Limited, T&N Limited, T&N Materials Research Limited, T&N Piston Products Group
Limited, T&N Properties Limited, T&N Shelf Eighteen Limited, T&N Shelf Nineteen
Limited, T&N Shelf One Limited, T&N Shelf Seven Limited, T&N Shelf Three
Limited, T&N Shelf Twenty Limited, T&N Shelf Twenty-One Limited, T&N Shelf
Twenty-Six Limited, TBA Belting Limited, TBA Industrial Products Limited,
Telford Technology Supplies Limited, The Washington Chemical Company Limited,
Turner & Newall Limited, Turner Brothers Asbestos Company Limited, and
Wellworthy Limited. Unlike all the other U.K. Debtors, T&N Investments Limited
is a Scottish rather than English company and commenced administration in
Scotland in April 2002. Certain additional U.K. affiliates of the U.S. Debtors
and U.K. Debtors have commenced chapter 11 cases but are not subjects of these
Findings of Fact and Conclusions of Law. 2007); Debtors' Notice of Filing
Deposition Counter-Designations and Deposition Transcript Excerpts, D.I. 12940
(July 6, 2007) (Beckeman, Conroy, McGovern); Pneumo Abex LLC's Counter
Designation of Deposition Transcript of Steven L. Fasman, D.I. 12941 (July 6,
2007); Plan Proponents' Counter-Designations of the Deposition Testimony of
Peter Van N. Lockwood, D.I. 12945 (July 6, 2007); Plan Proponents' Revised
Designations of the Deposition Testimony of George L. Priest, D.I. 13015 (July
17, 2007); Cooper Industries, LLC's and Pneumo Abex LLC's Designations of the
Deposition Testimony of Troy Chute, Kirk Hartley and Christian Singewald D.I.
13017 (July 17, 2007); Pneumo Abex LLC's Counter-Designation of Deposition
Transcripts of Dexter L. Kenfield, D.I. 13063 (July 24, 2007) (April 17, 2007
and June 28, 2007 Kenfield Depositions); Pneumo Abex LLC's Counter-Designation
of Deposition Transcript of Mark A. Underberg, D.I. 13064 (July 24, 2007);
Cooper Industries, LLC's Counter Designations of the Deposition Testimony of
Diane Schumacher, D.I. 13067 (July 24, 2007); Debtors' Notice of Filing
Deposition Counter-Designations and Deposition Transcript Excerpts, D.I. 13068
(July 24, 2007) (Gasparovic, Katz, Logan, Zamoyski). (5) The Plan Objectors also
submitted designations of certain deposition testimony. Certain Insurers' Notice
of Filing Deposition Designations and Deposition Transcript Excerpts, D.I. 12674
(June 13, 2007) (Gasparovic, Kenfield (April 17, 2007 Deposition), Klebe, Logan,
McGovern, Underberg, Zamoyski); PepsiAmericas' Second Notice of Filing
Deposition Designations and Deposition Transcript Excerpts, D.I. 12771 (June 19,
2007) (Gasparovic, Green, Helz, Kenfield (April 17, 2007 Deposition), Polzin);
PepsiAmericas' Notice of Filing Corrected Deposition Designations and Deposition
Transcript Excerpts, D.I. 12877 (June 29, 2007) (Fasman, Klebe, Lockwood, Logan,
Nabors, Schumaker); Certain Insurers' Notice of Filing Deposition Designations
and Deposition Transcript Excerpts, D.I. 12893 (June 29, 2007) (Beckeman,
Conroy, Fasman, Florence, Green, Helz, Henkin, Lockwood, Nabors, Polzin);
Travelers Notice of Filing Deposition Designations and Deposition Transcript
Excerpts, D.I. 13005 (July 17, 2007) (Logan, Zamoyski); Mt. McKinley Insurance
Company's Notice of Filing of Deposition Designations and Deposition Transcript
Excerpts of Witnesses Testifying at Confirmation Hearing on July 9-10, 2007,
D.I. 13006 (July 17, 2007) (Katz); PepsiAmericas, Inc.'s Notice of Filing
Deposition Designations and Deposition Transcript Excerpts from July 9 and July
10, 2007, D.I. 13013 (July 17, 2007) (Kenfield (April 17, 2007 and June 28, 2007
Depositions), Price, Schultz, Singewald); Certain Insurers' Notice of Filing
Deposition Designations
TABLE OF CONTENTS
Page
I. FINDINGS OF FACT........................................................................................10
A. BACKGROUND CONCERNING THE DEBTORS' BUSINESSES..................................................10
1. Description of the Debtors' Business Operations.......................................10
2. Commencement of the Chapter 11 Cases and Administration Proceedings
for the U.K. Debtors..................................................................11
B. HISTORY AND NUMBER OF ASBESTOS PERSONAL INJURY CLAIMS
ASSERTED AGAINST THE DEBTORS.............12
1. Background............................................................................12
2. T&N Claims............................................................................12
3. Flexitallic Claims (Claims Against Debtor Gasket Holdings Inc. ("GHI"))...............18
---
4. Ferodo Claims.........................................................................20
5. Fel-Pro Claims........................................................................21
6. Claims Against Federal-Mogul Corporation (including Vellumoid Claims).................22
7. Wagner Claims (Certain Asbestos Personal Injury Claims Asserted Against Debtor
Federal-Mogul Products, Inc.).........................................................24
8. Other Asbestos Personal Injury Claims Asserted Against the Debtors....................26
C. DEVELOPMENT AND NEGOTIATION OF THE PLAN........................................................28
D. MODIFICATIONS TO THE PLAN......................................................................33
E. COMPLIANCE WITH THE REQUIREMENTS OF SECTION 1129 OF THE BANKRUPTCY CODE........................33
1. Section 1129(a)(1) -- Compliance of the Plan with Applicable Provisions of the
Bankruptcy Code.......................................................................33
a. Sections 1122 and 1123(a)(1)-(4) -- Classification and Treatment
of Claims and Interests......................................................33
b. Section 1123(a)(5) -- Adequate Means for Implementation of the Plan..........37
i
c. Section 1123(a)(6) -- Prohibition Against
the Issuance of Nonvoting Equity Securities
and Adequate Provisions for Voting Power of
Classes of Securities........................................................38
d. Section 1123(a)(7) -- Selection of Directors and Officers in a Manner
Consistent with the Interests of Creditors and Equity Security Holders and
Public Policy................................................................39
e. Section 1123(b)(1) -- Impairment of Claims and Equity Interests..............39
f. Section 1123(b)(2) -- Assumption or Rejection of Executory Contracts and
Unexpired Leases.............................................................40
g. Section 1123(b)(3) -- Retention, Enforcement and Settlement of Claims Held by
the Debtors..................................................................40
h. Section 1123(b)(5) -- Modification of the Rights of Holders of Claims........41
i. Section 1123(b)(6) -- Other Provisions Not Inconsistent with Applicable
Provisions of the Bankruptcy Code............................................41
j. Section 1123(d) -- Cure of Defaults..........................................41
2. Section 1129(a)(2) -- Compliance with Applicable Provisions of the Bankruptcy Code....42
3. Section 1129(a)(3) -- Proposal of the Plan in Good Faith..............................43
4. Section 1129(a)(4) -- Court Approval of Certain Payments as Reasonable................44
5. Section 1129(a)(5) -- Disclosure of Identity of Proposed Management, Compensation of
Insiders and Consistency of Management Proposals with the Interests of Creditors and
Public Policy.........................................................................45
6. Section 1129(a)(6) -- Approval of Rate Changes........................................45
7. Section 1129(a)(7) -- Best Interests of Holders of Claims and Equity Interests........45
8. Section 1129(a)(8) -- Acceptance of the Plan by Each Impaired Class...................46
9. Section 1129(a)(9) -- Treatment of Claims Entitled to Priority Pursuant to Section
507(a) of the Bankruptcy Code.........................................................48
10. Section 1129(a)(10) -- Acceptance By at Least One Impaired, Non-Insider Class.........49
11. Section 1129(a)(11) -- Feasibility of the Plan........................................49
ii
12. Section 1129(a)(12) -- Payment of Bankruptcy Fees.....................................50
13. Section 1129(a)(13) -- Retiree Benefits...............................................50
14. Section 1129(d) -- Purpose of Plan....................................................50
F. THE TRUST AND THE THIRD PARTY INJUNCTION COMPLY WITH SECTION 524(g) OF THE BANKRUPTCY CODE.....51
1. The Trust Satisfies the Requirements of Section
524(g)(2)(B)(i) of the Bankruptcy Code................................................51
2. The Trust Satisfies the Requirements of Section
524(g)(2)(B)(ii) of the Bankruptcy Code...............................................52
3. The Extension of the Third Party Injunction to Third Parties Is Appropriate Pursuant
to Section 524(g)(4) of the Bankruptcy Code...........................................57
4. The Interests of Future Asbestos Claimants were Properly Represented by the Future
Claimants Representative..............................................................60
5. Entry of the Third Party Injunction Is Fair and Equitable with Respect to Future
Asbestos Claimants....................................................................60
G. THE SUPPLEMENTAL INJUNCTION IS APPROPRIATE AND NECESSARY TO SUPPLEMENT THE INJUNCTIVE EFFECT OF
THE DISCHARGE AS PROVIDED IN SECTIONS 1141 AND 524 OF THE BANKRUPTCY CODE......................61
H. THE ASBESTOS INSURANCE ENTITY INJUNCTION SATISFIES THE REQUIREMENTS OF SECTION 105(a) OF THE
BANKRUPTCY CODE................................................................................61
I. COMPREHENSIVE SETTLEMENT OF CLAIMS AND CONTROVERSIES..........................................62
J. SATISFACTION OF CONDITIONS TO CONFIRMATION.....................................................63
K. SPECIFIC FINDINGS OF FACT RELATING TO SETTLEMENT OF ASBESTOS PROPERTY DAMAGE CLAIMS FILED BY
SPEIGHTS & RUNYAN..............................................................................66
L. SPECIFIC FINDINGS OF FACT RELATING TO PLAN B SETTLEMENT........................................67
M. SPECIFIC FINDINGS OF FACT ON INSURANCE NEUTRALITY OF THE PLAN..................................69
II. CONCLUSIONS OF LAW......................................................................................70
A. JURISDICTION AND VENUE.........................................................................70
B. MODIFICATIONS TO THE PLAN......................................................................71
iii
C. EXEMPTIONS FROM TAXATION.......................................................................71
D. COMPLIANCE WITH SECTION 1129 OF THE BANKRUPTCY CODE............................................72
E. COMPLIANCE WITH SECTION 524(g) OF THE BANKRUPTCY CODE..........................................72
F. PROPRIETY OF VARIOUS AGREEMENTS AND PLAN-RELATED DOCUMENTS.....................................72
G. GOOD FAITH NEGOTIATION, IMPLEMENTATION AND CONSUMMATION........................................74
H. ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES AND THE INDEMNIFICATION OBLIGATIONS.....75
I. APPROVAL OF THE DISCHARGES, RELEASES, INJUNCTIONS, INDEMNIFICATIONS AND EXCULPATIONS PROVIDED
UNDER THE PLAN.................................................................................76
J. CONCLUSIONS OF LAW CONCERNING INSURANCE NEUTRALITY OF THE PLAN AND INSURER STANDING............77
K. TRANSFER AND ASSIGNMENT OF ASBESTOS INSURANCE ACTION RECOVERIES, ASBESTOS INSURANCE ACTIONS,
AND THE ASBESTOS IN-PLACE INSURANCE COVERAGE...................................................78
L. OBJECTIONS TO THE PLAN.........................................................................78
iv
INTRODUCTION
WHEREAS, the debtors and debtors-in-possession identified in
footnote 1 of these Findings of Fact and Conclusions of Law (collectively, the
"Debtors" and, as reorganized entities after emergence, the "Reorganized
Debtors"), together with the Official Committee of Unsecured Creditors (the
"Unsecured Creditors Committee"), the Official Committee of Asbestos Claimants
(the "Asbestos Claimants Committee"), the Legal Representative for Future
Asbestos Claimants (the "Future Claimants Representative"), the Official
Committee of Equity Security Holders (the "Equity Committee"), and JPMorgan
Chase Bank, N.A., as Administrative Agent under the Bank Credit Agreement (the
"Administrative Agent" and, collectively, with the Debtors, the Unsecured
Creditors Committee, the Asbestos Claimants Committee, the Future Claimants
Representative and the Equity Committee, the "Plan Proponents"), proposed the
Fourth Amended Joint Plan of Reorganization, dated February 7, 2007 (D.I. 11527,
11528, 11529), as modified by the Modifications, as defined below (as it may be
further modified hereafter, the "Plan");(2)
WHEREAS, on June 14, 2004, the Bankruptcy Court entered that
certain Order (I) Establishing Procedures For Solicitation and Tabulation of
Votes To Accept or Reject Amended Joint Plan of Reorganization; (II) Approving
Forms of Ballots; (III) Approving Form and Scope of Notice of the Plan &
Confirmation Hearing; (IV) Establishing a Record Date for Voting Purposes Only;
and (V) Approving Retention of Voting Agent (D.I. 5153) (the "Solicitation
Procedures Order"), by which the Bankruptcy Court, among other things,
established procedures for the solicitation and tabulation of votes to accept or
reject the Third Amended Joint Plan of Reorganization for the Debtors (the
"Third Amended Plan");
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(2) Capitalized terms and phrases used but not otherwise defined herein have the
meanings given to them in the Plan.
1
WHEREAS, on February 7, 2007, the Bankruptcy Court entered
that certain Order Approving (I) Scope of Resolicitation of Fourth Amended Joint
Plan of Reorganization; (II) Procedures and Ballot Forms for Resolicitation of
Certain Votes to Accept or Reject the Plan; (III) Procedures and Ballot Forms
for Solicitation of Votes on Plan that Implements the Plan A Settlement from
Holders of Pneumo Asbestos Claims; and (IV) Supplemental Publication Notice
(D.I. 11509) (the "Supplemental Solicitation Procedures Order"), by which the
Bankruptcy Court, among other things, established procedures for the
solicitation and tabulation of votes to accept or reject the Plan, including
providing that votes cast on the Third Amended Plan would be treated as votes on
the Plan;
WHEREAS, on June 4, 2004, the Bankruptcy Court entered that
certain Order (I) Approving Disclosure Statement, (II) Setting Date and Time of
Confirmation Hearing With Respect to the Plan of Reorganization for the Debtors,
and (III) Establishing Objection Procedures for the Plan of Reorganization for
the Debtors (D.I. 582593055) (the "Disclosure Statement Order"), by which the
Bankruptcy Court, among other things, approved the Disclosure Statement
Describing Third Amended Joint Plan of Reorganization dated as of June 4, 2004
(D.I. 5122, 5123) (the "Disclosure Statement");
WHEREAS, on February 7, 2007, the Bankruptcy Court entered
that certain Order (I) Approving Supplemental Disclosure Statement Relating to
Fourth Amended Joint Plan of Reorganization, (II) Setting Date and Time of
Confirmation Hearing with Respect to Plan of Reorganization, and (III)
Establishing Objection Procedures for Plan of Reorganization (D.I. 11510) (the
"Supplemental Disclosure Statement Order") pursuant to which the Bankruptcy
Court, among other things, approved the Supplemental Disclosure Statement
Relating to Fourth Amended Joint Plan of Reorganization (D.I. 11530) (the
"Supplemental Disclosure Statement");
2
WHEREAS, the Bankruptcy Court subsequently scheduled a hearing
to consider Confirmation of the Plan to commence on June 18, 2007 at 9:00 a.m.,
prevailing Eastern time, and which hearing continued on June 19-21, 2007, July
9-10, 2007, and October 1-2, 2007 (the "Confirmation Hearing");
WHEREAS, an affidavit of service was executed by John H.
Doherty II of R.R. Donnelley & Sons Company, as noticing agent for the Debtors,
with respect to the mailing of Solicitation Packages (as defined in the
Solicitation Procedures Order), which included, among other things, (i) the
Disclosure Statement and the exhibits thereto (including, without limitation,
the Third Amended Plan), (ii) Court-approved ballots and master ballots to be
used in voting on the Third Amended Plan, (iii) certain notices concerning the
Third Amended Plan, and (iv) certain orders of the Bankruptcy Court, which
materials were served upon holders of Claims and Equity Interests in accordance
with the Disclosure Statement Order and the Solicitation Procedures Order, which
affidavit of service was filed with the Bankruptcy Court on August 24, 2004 (D.
I. 5572) (the "August 2004 Affidavit of Service");
WHEREAS, an affidavit of service was executed by Gina M.
Ziegler of The Garden City Group, Inc. ("GCG") with respect to the mailing of
Solicitation Packages (as defined in the Supplemental Solicitation Procedures
Order), which included, among other things, (i) the Supplemental Disclosure
Statement and the exhibits thereto, (ii) the Plan (with exhibits, including,
without limitation, the Addendum), (iii) Court-approved ballots and master
ballots to be used by certain holders of Claims and Pneumo Asbestos Claims in
voting (or re-voting, as applicable) on the Plan and the Plan A Settlement, and
(iv) certain orders of the Bankruptcy Court, which materials were served upon
holders of Claims and Equity Interests in accordance with the Supplemental
Disclosure Statement Order and Supplemental Solicitation Procedures Order, which
3
affidavit of service was filed with the Bankruptcy Court on March 6, 2007 (D.I.
11692) (the "March 2007 Affidavit of Service");
WHEREAS, the Affidavit of Wayne L. Pines on Completion of
Notification Programs Relating to Debtors' Reorganization Proceedings (the
"Publication Affidavit") was filed with the Bankruptcy Court on November 23,
2004 (D.I. 6440) regarding, inter alia, the publication of the notices approved
by the Bankruptcy Court in certain magazines and newspapers in the United
States, the United Kingdom, and more than 120 other countries, as set forth in
the Solicitation Procedures Order;
WHEREAS, certain Affidavits of Publication of the Notice of
the Rescheduled Confirmation Hearing in The Wall Street Journal, The New York
Times, USA Today, and The Detroit Free Press were filed with the Bankruptcy
Court on April 26, 2007 (D.I. 12186, 12187, 12188, 12189) regarding, inter alia,
the publication of the notices approved by the Bankruptcy Court as set forth in
the Supplemental Solicitation Procedures Order (the "Supplemental Publication
Affidavits");
WHEREAS, GCG, as the Court-appointed solicitation and
tabulation agent in respect of the Plan, filed the Declaration of Jeffrey S.
Stein of The Garden City Group, Inc. Certifying the Methodology for the
Tabulation of Votes and Results of Voting with Respect to the Fourth Amended
Joint Plan of Reorganization on May 1, 2007 (D.I. 12241), which was subsequently
amended on May 3, 2007 (D.I. 12267) and June 15, 2007 (D.I. 12755) (as so
amended, the "Ballot Certification");
WHEREAS, objections to Confirmation of the Plan (or joinders
to such objections to Confirmation of the Plan) (collectively, the "Objections")
were filed by: (i) the Office of the United States Trustee (D.I. 11956, 12579),
4
(ii) General Motors Corporation (D.I. 11966), (iii) the United States (D.I.
12001), (iv) Oracle USA, Inc. (D.I. 11998), (v) Owens-Illinois, Inc. (D.I.
11983, 12131, 12580), (vi) Doris Everitt, et al., (D.I. 11969, 12574), (vii) the
Estate of Thurston Little and the Estate of Billy R. Scruggs (D.I. 11967,
12575), (viii) DaimlerChrysler Corporation and Volkswagen of America, Inc. (D.I.
12115, 12573), (ix) Ford Motor Company (D.I. 12116, 12572), (x) Globe Indemnity
Company and Royal Indemnity Company (D.I. 12117, 12660), (xi) Certain AIG Member
Companies (D.I. 12126, 12694), (xii) the ACE Insurers (D.I. 12127, 12587),
(xiii) TIG Insurance Company (D.I. 12129, 582593469), (xiv) Travelers (D.I.
12133, 12584), (xv) Mt. McKinley Insurance Company (D.I. 12134), (xvi) Columbia
Casualty Company, Continental Casualty Company, and Continental Insurance
Company (D.I. 12135, 12598), (xvii) OneBeacon America Insurance Company, Seaton
Insurance Company, and Stonewall Insurance Company (D.I. 12137, 12585,
582593413), (xviii) Fireman's Fund Insurance Company and National Surety Company
(D.I. 12139, 12646), (xix) Certain Underwriters at Lloyd's, London and Certain
London Market Companies (D.I. 12140, 12576), (xx) PepsiAmericas, Inc. (D.I.
12141, 12600), (xxi) Federal Insurance Company (D.I. 12142, 12588), (xxii)
Employers Insurance Company of Wausau (D.I. 12143, 12601), (xxiii) Joseph Mallia
(D.I. 12146), (xxiv) Hartford Accident & Indemnity Company, First State
Insurance Company, and New England Insurance Company (D.I. 12147, 12611), (xxv)
Robert Cleghorn (D.I. 12019), (xxvi) Rothschild, Inc. (D.I. 12269), (xxvii)
MagneTek, Inc. (D.I. 12499), (xxviii) International Union, United Auto Workers
(D.I. 11979), (xxix) Allianz Global Corporate & Specialty AG, Allianz Global
Risks U.S. Insurance Company, and Allianz Underwriters Insurance Company (D.I.
12645), and (xxx) Liberty Mutual Insurance Company (D.I. 13381);
5
WHEREAS, on May 4, June 4, June 11, June 14, July 31, and
August 31, 2007 the Plan Proponents, Cooper and Pneumo Abex filed certain
memoranda of law in support of Confirmation of the Plan and in response to
certain of the Objections (D.I. 12281, 12282, 12602, 12605, 12609, 582593482,
582593483, 12697, 582593565, 582593566) (the "Confirmation Briefs");
WHEREAS, on various dates, the parties submitting the
Objections filed briefs in support of the Objections (the "Objector Briefs");
WHEREAS, the declarations of Robert L. Katz (D.I. 13053),
Michael Henkin (Docket No. 13053), Jayne Conroy (D.I. 13053), Kurt Beckeman
(D.I. 13053), Charles H. Polzin (D.I. 12615), Eric D. Green (D.I. 12923 (the
"Green Decl."), 12924 (the "Green Rev. Plan A Decl.")), B. Thomas Florence,
Ph.D. (D.I. 12589, 12590 (the "Florence Fel-Pro Decl."), 12591 (the "Florence
Vel. Decl.")), Francis McGovern (D.I. 13053), Peter Van N. Lockwood (D.I.
13053), Clinton B. Fisher (D.I. 12675), Olin Lee Harn III (D.I. 12568), Diane K.
Schumacher (D.I. 12936), Steven L. Fasman (D.I. 12931), Terry Helz (D.I. 12937),
and Linda Nabors (D.I. 12607) (3) together with various exhibits and attachments
thereto, were submitted in support of confirmation of the Plan (collectively,
the "Plan Supporter Declarations");(4)
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(3) Certain of the Plan Supporter Declarations were filed collectively under one
docket number (D.I. 13053) following modifications made to such declarations as
a result of consensual resolutions to objections thereto raised by the Plan
Objectors and/or evidentiary rulings of the Bankruptcy Court.
(4) The Plan Supporters also submitted designations of certain deposition
testimony. Future Claimants' Representative's Counter-Designation of Deposition
Transcript of Eric D. Green re: PepsiAmerica's Deposition Designation, D.I.
12925 (July 6, 2007); Future Claimants' Representative's Counter-Designation of
Deposition Transcript of Eric D. Green re: Certain Insurers' Deposition
Designation, D.I. 12926 (July 6, 2007); Future Claimants' Representative's
Motion to Strike Certain Insurers' Deposition Designations and Submission of
Deposition Counter-Designation Excerpts re: B. Thomas Florence, Ph.D., D.I.
12935 (July 6, 2007); Cooper Industries LLC's Counter Designations of the
Deposition Testimony of Terrance Helz and Linda Nabors, D.I. 12938 (July 6,
6
WHEREAS, the declarations of Randall Lambert (D.I. 12570),
Tapan K. Nayak (D.I. 12571), Professor George L. Priest (D.I. 582593515), Mark
A. Behrens (D.I. 582593509), Joseph J. Renn, M.D. (D.I. 582593507), David
Steuber (D.I. 13082), Kirk Hartley (D.I. 13033), Troy Chute (D.I. 13072), Dr.
Francine F. Rabinovitz (D.I. 12784), Somers S. Price (D.I. 582593511), and
Robert H. Schultz (D.I. 12922) (together with various exhibits and attachments
thereto, were submitted in opposition to confirmation of the Plan (collectively,
the "Plan Objector Declarations");(5)
7
WHEREAS, the Plan Proponents filed a modified version of the
Plan on June 4, 2007 (D.I. 12620, 12621, 12622) and additionally filed certain
modifications to the Plan and other Plan Documents on July 31, 2007 (D.I.
582593567), September 26, 2007 (D.I. 13374), September 27, 2007 (D.I. 13391),
October 30, 2007 (D.I. 13614) and November 5, 2007 (D.I. 13649) (collectively,
the "Modifications");
WHEREAS, the Bankruptcy Court has reviewed the Plan
(including, for the avoidance of doubt, the Modifications), the Disclosure
Statement, the Supplemental Disclosure Statement, the Disclosure Statement
Order, the Supplemental Disclosure Statement Order, the Solicitation Procedures
Order, the Supplemental Solicitation Procedures Order, the August 2004 Affidavit
of Service, the March 2007 Affidavit of Service, the Publication Affidavit, the
Supplemental Publication Affidavits, the Ballot Certification, the Objections,
the Confirmation Briefs, the Objector Briefs, the Plan Supporter Declarations,
the Plan Objector Declarations, and the other papers and materials before the
Bankruptcy Court in connection with Confirmation of the Plan;
WHEREAS, the Bankruptcy Court (1) heard the statements of
counsel in support of Confirmation, (2) heard the statements of counsel in
opposition to Confirmation, and (3) considered the Plan Supporter Declarations
and Plan Objector Declarations submitted into evidence, all as reflected in the
record made at the Confirmation Hearing;
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and Deposition Transcript Excerpts, D.I. 13014 (July 17, 2007) (Katz,
Schumaker); Mt. McKinley Insurance Company's Notice of Filing of "Corrected"
Deposition Designations and Deposition Transcript Excerpts of Diane Schumacher,
D.I. 13024 (July 18, 2007); PepsiAmericas, Inc.'s Notice of Filing
Counter-Deposition Designations and Deposition Transcript Excerpts from July 9
and July 10, 2007 Regarding Troy L. Chute, D.I. 13065 (July 24, 2007);
PepsiAmericas, Inc.'s Notice of Filing Counter-Deposition Designations and
Deposition Transcript Excerpts from July 9 and July 10, 2007 Regarding Kirk T.
Hartley, D.I. 13066 (July 24, 2007).
8
WHEREAS, the Bankruptcy Court has considered all evidence
submitted at the Confirmation Hearing;
WHEREAS, the Bankruptcy Court has taken judicial notice of the
papers and pleadings on file and prior Court hearings in these Reorganization
Cases;
WHEREAS, the Bankruptcy Court has separately entered
concurrently herewith that certain Order Confirming Fourth Amended Joint Plan of
Reorganization for Debtors and Debtors-in-Possession (As Modified);
WHEREAS, the Bankruptcy Court has separately entered or may
enter (i) that certain Order Approving Addendum of Additional Provisions
Incorporated Into Joint Plan of Reorganization (Pneumo Abex "Plan A"
Settlement), and (ii) those certain Findings of Fact and Conclusions of Law
Regarding Addendum of Additional Provisions Incorporated Into Joint Plan of
Reorganization (Pneumo Abex "Plan A" Settlement) (the "Plan A Settlement
Findings and Conclusions"), which Plan A Settlement Findings and Conclusions
relate exclusively to the Plan A Settlement and the Addendum;
WHEREAS, the findings of fact and conclusions of law set out
below (the "Findings of Fact and Conclusions of Law") are in addition to, and
are separate from, the Plan A Settlement Findings and Conclusions, and relate to
the Confirmation of the Plan and the authorization and approval of the various
transactions, settlements and agreements contemplated thereby or to be
implemented in connection therewith, including, without limitation, the approval
of the Plan B Settlement Agreement (but excluding the Addendum and the
Definitive Documents (as such term is defined in the Addendum), which are the
subject of the Plan A Approval Order and the Plan A Settlement Findings and
Conclusions);
9
NOW, THEREFORE, the Bankruptcy Court hereby enters the
following Findings of Fact and Conclusions of Law with respect to Confirmation
of the Plan.(6)
I FINDINGS OF FACT.
A. BACKGROUND CONCERNING THE DEBTORS' BUSINESSES
1. Description of the Debtors' Business Operations
a. The Debtors, together with their non-Debtor Affiliates
(collectively, the "Federal-Mogul Group"), are collectively a leading global
supplier of vehicular parts, components, modules and systems to customers in the
automotive, small engine, heavy-duty, marine, railroad, aerospace and industrial
markets. (See Form 10-K for Federal-Mogul Corporation for the year ending
December 31, 2006 (Ex. PS-173) at 4.) The Federal-Mogul Group has business
operations in 34 countries. (Id.) The Federal-Mogul Group collectively employed
approximately 43,100 people on a full-time basis as of December 31, 2006. (Id.
at 17.) Also as of December 31, 2006, the Federal-Mogul Group had approximately
$7.2 billion in assets. (Id. at 13.) During the fiscal year ending December 31,
2006, the Federal-Mogul Group had approximately $6.3 billion in sales. (Id.)
b. Federal-Mogul Corporation ("Federal-Mogul") is a
corporation organized and existing under the laws of the State of Michigan. (Id.
at cover page.) Federal-Mogul is the ultimate corporate parent of each of the
Debtors other than itself and their non-Debtor Affiliates. (Id. at 4.) Each of
the U.S. Debtors is a corporate entity organized under the laws of one of the
states of the United States and is a direct or indirect subsidiary of
- ------------------
(6) These Findings of Fact and Conclusions of Law constitute the Bankruptcy
Court's findings of fact and conclusions of law under Fed. R. Civ. P. 52, as
made applicable herein by Bankruptcy Rules 7052 and 9014. Any finding of fact
shall constitute a finding of fact even if it is referred to as a conclusion of
law, and any conclusion of law shall constitute a conclusion of law even if it
is referred to as a finding of fact. Citations to the Bankruptcy Code and
Bankruptcy Rules are to the sections and rules as applicable to the Debtors'
Reorganization Cases.
10
Federal-Mogul. (Id.) Each of the U.K. Debtors is a corporate entity organized
under the laws of England and Wales (or in the case of T&N Investments Limited,
organized under the laws of Scotland) and is a direct or indirect subsidiary of
Federal-Mogul. (See Plan Ex. 1.1.173 (Explanatory Statement for Principal CVAs)
ss. 4.4.)
2. Commencement of the Chapter 11 Cases and Administration
Proceedings for the U.K. Debtors
a. There are 157 entities within the Federal-Mogul Group
that have commenced Reorganization Cases before this Court. (See Order Directing
Joint Administration of Chapter 11 Cases, D.I. 56 (entered Oct. 5, 2001).) Of
those entities, 82 have proposed plans of reorganization that are collectively
embodied in the Plan. (Plan at 1 n.1.) In addition to the Reorganization Cases,
133 of the entities within the Federal-Mogul Group that commenced Reorganization
Cases before this Court - each of which is incorporated under the laws of
England and Wales - commenced administration proceedings before the High Court
of Justice in London, England on October 1, 2001. (See Plan Ex. 1.1.173
(Explanatory Statement for Principal CVAs) ss. 4.4.) One additional Debtor (T&N
Investments Limited) is incorporated under the laws of Scotland and commenced
administration proceedings before the Court of Session in Edinburgh, Scotland in
April 2002. (Id.)
b. In connection with the commencement of the
administration proceedings, the relevant courts in the United Kingdom appointed
individuals to act as Administrators of the companies that had commenced the
administration proceedings (the "Administrators") (Id.) Under U.K. law, the
Administrators had broad powers to oversee the businesses of the U.K. entities
that had commenced administration proceedings. However, in the Reorganization
Cases, the Administrators assigned much of their authority to oversee the U.K.
entities' businesses to the Debtors' management pursuant to a Cross-Border
11
Insolvency Protocol entered into by the Debtors' management and the
Administrators and approved by both the Bankruptcy Court and the relevant courts
in the United Kingdom. (See Final Order Approving Cross-Border Insolvency
Protocol, D.I. 1241 (entered Feb. 13, 2002).)
B. HISTORY AND NUMBER OF ASBESTOS PERSONAL INJURY CLAIMS ASSERTED
AGAINST THE DEBTORS.
1. Background
a. As of the Petition Date, there were collectively more
than 500,000 asbestos personal injury claims pending against various defendant
Debtors relating to one of seven (7) "streams" of asbestos liabilities. (Conroy
Decl. P. P. 5-28; Polzin Decl. P. P. 4-15.) These claims arose from
asbestos-containing products manufactured by those Debtors or their
predecessors-in-interest. (Id.) Many of those various corporate acquisitions
were made from the 1960s through the 1990s. The seven "streams" of asbestos
liabilities are (i) T&N Claims (asserted against Debtor T&N Limited and certain
of its United Kingdom subsidiaries), (ii) Flexitallic Claims (asserted against a
Debtor known as Gasket Holdings Inc.), (iii) Ferodo Claims (asserted against
Debtor Ferodo America, Inc.), (iv) Fel-Pro Claims (asserted against Debtor Felt
Products Manufacturing Co.), (v) Vellumoid Claims (asserted against Debtor
Federal-Mogul Corporation), (vi) Wagner Claims (asserted against Debtor
Federal-Mogul Products, Inc.), and (vii) Pneumo Asbestos Claims (also asserted
against Debtor Federal-Mogul Products, Inc.). (Id.) Certain additional
asbestos-related claims have been asserted against others of the Debtors as
well, as discussed in Section I.B.8, infra. Each of these "streams" or types of
asbestos liabilities is described in detail below.
2. T&N Claims
a. Background Concerning T&N's Historical Businesses
12
i. Debtor T&N Limited ("T&N") is a wholly-owned indirect
subsidiary of Federal-Mogul that was acquired in March 1998 when Federal-Mogul
Global Growth Limited (a wholly-owned U.K. subsidiary of Federal-Mogul)
purchased 100% of its stock. T&N was incorporated in England in February 1920 as
Turner & Newall, Ltd. At the date of its incorporation, T&N was a holding
company that constituted an amalgamation of four (4) pre-existing U.K. companies
involved in the manufacture of asbestos-containing materials that were earlier
separately owned by the Turner and Newall families, who were prominent
industrialists in northwestern England. (Conroy Decl. P. 6.)
ii. The four original companies from which T&N was
formed - Turner Brothers Asbestos Company Limited, The Washington Chemical
Company Limited, J.W. Roberts Limited, and Newalls Insulation Company Limited
("Newalls") - manufactured asbestos-containing textiles, thermal insulation,
industrial insulating mattresses or, in the case of Newalls, installed
manufactured insulation materials. Asbestos was used in these applications
because of its unique fire and heat-resistant properties and its light weight.
(Conroy Decl. P. 7.) From the 1920s to the 1980s, the T&N group of companies
expanded into the manufacture, distribution, sale and installation of virtually
every type of asbestos-containing product in numerous countries throughout the
world, including sprayed-on and pre-formed asbestos-containing insulation,
asbestos cement pipe, asbestos-containing building materials, and numerous other
products. The T&N group of companies also eventually owned or controlled
asbestos mines in Canada and southern Africa. (Id.)
iii. Throughout its history, T&N conducted its various
businesses through a number of wholly-owned U.K. "agency" companies. These
companies conducted business as undisclosed agents for T&N, as principal. As a
13
result of this undisclosed agency relationship, T&N has historically accepted
responsibility in the U.S. asbestos-related litigation for the products and
actions of its various U.K. agency companies. (Conroy Decl. P. 8; see also In re
Federal-Mogul Global Inc., 330 B.R. 133, 138 (D. Del. 2005).) In both the United
States and the United Kingdom, holders of asbestos-related claims have asserted
such claims against either or both of T&N and its agency companies, although, as
noted above, T&N has historically accepted responsibility for and defended such
claims. (Conroy Decl. P. 8.)
iv. According to the Debtors' books and records, and
including information developed during the U.K. Debtors' administration
proceedings, 38 direct and indirect subsidiaries of T&N have had
asbestos-related claims asserted against them as a historical matter and/or have
asbestos-related claims pending against them. (Conroy Decl. P. 9.) These claims
have been asserted in the United States and the United Kingdom on a variety of
theories. (Id.) In addition, claims have been asserted against Federal-Mogul and
Federal-Mogul Global Growth Limited ("FMGGL") as alleged successors in interest
to T&N. (Id.)
b. Background Concerning Asbestos-Containing Products
Manufactured, Produced, Distributed or Sold by T&N and
Its Affiliates
i. Asbestos Personal Injury Claims Asserted Against T&N
and its Affiliates in the United States. T&N was named in its first asbestos
personal injury case in the United States in August 1977. See Federal-Mogul, 330
B.R. at 137. By the Petition Date, approximately 114,000 such lawsuits were
pending in the United States, based on the actions either of T&N itself or on
the actions of one or more of its agency companies. (Id.) Prior to the Petition
Date, T&N resolved approximately 245,000 asbestos personal injury claims
asserted against it and its United Kingdom affiliates, and paid out nearly $835
million (in 2005 dollars, as determined at the Estimation Hearing) to resolve
those claims. (Id. at 136.) T&N's liability for asbestos-related claims
primarily arose out of four (4) areas of its historical businesses:
14
o T&N's manufacture of Sprayed Limpet Asbestos
("Limpet"), which was a spray-on application that was
used for fireproofing, insulation, condensation
control, and decorative finishes. Limpet was made of
pure asbestos, either amosite or crocidolite, and had
the greatest asbestos content of any product in the
United States. (Id. at 137.) Limpet was not widely
marketed or used in the United States due to its
significant expense, its relatively slow spraying
process, and its U.S. licensees' lack of success in
promoting the product. (Id.)
o T&N's ownership from 1934 to 1962 of Keasbey & Mattison
Co. ("Keasbey"), which manufactured and sold various
asbestos-containing products, including Limpet,
textiles, insulation, and building materials. (Id.) T&N
was sometimes sued prior to the Petition Date based on
its alleged supply of raw asbestos fiber to Keasbey.
(Id.)
o T&N's brokerage of raw asbestos fiber. T&N owned or
controlled asbestos mines and mining interests in
southern Africa and Canada, sold small quantities of
raw asbestos fiber to asbestos companies in the United
States, and used its mined fiber to manufacture its own
products. (Id. at 138.) T&N was sued in the United
States by plaintiffs alleging personal injury from
asbestos exposure in the manufacturing or
transportation process, and was also sued by end-users
of asbestos-containing products on a supplier theory.
(Id.)
o T&N's manufacture of asbestos-containing products in
the United Kingdom and distribution of those products
in the United States. Certain United Kingdom
subsidiaries of T&N manufactured various finished
products containing asbestos and marketed and
distributed those products in the United States. (Id.)
In addition to the foregoing theories, T&N was also sued from time to time on
conspiracy or related theories based on its long-time involvement with asbestos
and asbestos-containing products. (Conroy Decl. P. 11.)
ii. Asbestos Personal Injury Claims Asserted Against T&N
and Its Affiliates in the United Kingdom. T&N also had approximately 950
Asbestos Personal Injury Claims pending against it in the United Kingdom as of
the Petition Date. (Conroy Decl. P. 12.) Due to the significant legal
differences implicated in litigating products liability lawsuits in the U.S. and
U.K. courts, T&N has historically been named in far fewer cases in the United
Kingdom (including cases originally commenced in South Africa that plaintiffs
sought to litigate in the United Kingdom), and has historically spent far less
15
in judgments, settlements and defense costs in such cases. (Id.) As part of the
administration proceedings in the United Kingdom of T&N and its subsidiaries,
the Administrators identified 2,037 asbestos personal injury claims pending
against T&N as of early 2006. (See Plan Ex. 1.1.173 (Explanatory Statement for
Principal CVAs) ss. 8.2.)
c. District Court Estimation of Asbestos Personal Injury
Claims Against T&N and Its United Kingdom Affiliates. In June 2005, the District
Court conducted a five (5) day trial to estimate the aggregate present value of
present and future Asbestos Personal Injury Claims against T&N and its United
Kingdom subsidiaries (the "Estimation Hearing"). Federal-Mogul, 330 B.R. at 135.
On September 13, 2005, the District Court entered an opinion and order
estimating the aggregate present value of present and future Asbestos Personal
Injury Claims against T&N and its United Kingdom subsidiaries at $9 billion for
claims in the United States and (pound)229 million for claims in the United
Kingdom. Id. at 164. That decision was appealed by the Asbestos Property Damage
Committee on September 15, 2005. See Official Committee of Asbestos Claimants
and Eric D. Green, as Legal Representative for Future Asbestos Claimants v.
Official Committee of Asbestos Property Damage Claimants, Case No. 05-59 (D.
Del.), D.I. 77.(7)
d. Asbestos Property Damage Claims Against T&N and Certain
of Its United Kingdom Affiliates.
i. Prior to the Petition Date, T&N and two of its United
Kingdom subsidiaries that are also Debtors, J.W. Roberts Limited and TAF
International Limited, were named as defendants in certain asbestos property
damage actions. (Conroy Decl. P. 30.) In those actions, owners or operators of
- ------------------
(7) As a result of the resolution of all outstanding Asbestos Property Damage
Claims against the Debtors, including through the Settlement Agreement with the
holders of the Speights & Runyan Claims attached to the Plan as Exhibit 8.26 and
approved as part of Confirmation of the Plan, the parties to this appeal intend
to dismiss the appeal. (See Supp. Disclosure Statement at V.D.)
16
non-residential buildings (including commercial office buildings, government
buildings, colleges and universities, hospitals, churches, and schools) sought
to recover the costs associated with detecting, analyzing, repairing, and
removing asbestos-containing products in their buildings. (Id.)
ii. T&N was served with its first asbestos property
damage case in October 1982, and a total of 146 such cases were brought against
it in the United States. Of these cases, 106 were dismissed without payment, 36
were settled - some as consolidations or joint settlements, two (2) were won at
trial by T&N, and two (2) were pending as of the Petition Date (one of which was
filed in August 2001, shortly before the Petition Date). (Conroy Decl. P. 31.)
T&N had also been named in eight (8) property damage cases in British Columbia,
Canada; all of those cases were filed between March 1990 and November 1991 and
all were settled in 1995. (Id.)
iii. By order entered on June 13, 2002, the Bankruptcy
Court established a bar date for the filing of asbestos property damage claims
against the Debtors of March 3, 2003 (the "Asbestos PD Bar Date"). (See Order
(A) Establishing Bar Date For Filing Proofs of Claim on Account Asbestos-Related
Damage to Property Located in the United States and Canada; (B) Approving
Proposed Proof of Claim Form For Such Asbestos-Related Property Damage Claims;
and (C) Approving Scope and Manner of Notice of Bar Date for Asbestos-Related
Property Damage Claims, D.I. 1867 (dated June 4, 2002).) As a result of the
establishment of the Asbestos PD Bar Date and the ensuring Court-approved notice
program, approximately 3,700 Asbestos Property Damage Claims relating to
approximately 1,300 building sites in the United States and Canada were
asserted. These claims were asserted principally against four (4) of the
Debtors: Federal-Mogul, T&N, J.W. Roberts Limited and TAF International Limited.
(Conroy Decl. P. 32.)
17
iv. Through both the withdrawal of many Asbestos
Property Damage Claims and the sustaining of a number of omnibus objections by
the Debtors to such claims, the number of Asbestos Property Damage Claims
outstanding against the Debtors was reduced from the approximately 3,700 filed
claims to under 1,000. The remaining Asbestos Property Damage Claims have been
the subject of settlements approved by the Bankruptcy Court or, with respect
solely to two (2) Asbestos Property Damage Claims, are Asbestos Property Damage
Claims that the Debtors have asserted should be Allowed in their filed amount.
(Conroy Decl. P. 33.)
3. Flexitallic Claims (Claims Against Debtor Gasket Holdings
Inc. ("GHI"))
a. Background Concerning GHI's Historical Business
i. GHI (f/k/a Flexitallic, Inc.) was formerly a
wholly-owned indirect subsidiary of T&N and, as a result of Federal-Mogul's
purchase of T&N, is now a wholly-owned indirect subsidiary of Federal-Mogul. By
number of asbestos personal injury claims, GHI represented the largest portion
of Debtors' collective asbestos-related liabilities due to the frequent
identification of its products. (Conroy Decl. P. 13.)
ii. GHI began business in Camden, New Jersey in 1912.
The company was reincorporated in Connecticut as Flexitallic Gasket Co., Inc. in
1963, and the prior owners sold 100% of GHI's stock to T&N in June 1970. T&N
re-incorporated GHI in Delaware as Flexitallic, Inc. in 1986. In April, 1997,
T&N sold certain assets, including GHI's assets (collectively, the "T&N
Assets"), to Dan=Loc Corporation and certain of its subsidiaries (n/k/a The
Flexitallic Group, Inc.) (referred to herein as "Dan=Loc"). Dan=Loc continued to
use the T&N Assets, including the Flexitallic trade name, trademarks and trade
dress after the transaction.
18
iii. At the time of the April 1997 asset sale, GHI, as
well as its former parent, T&N and other T&N subsidiaries and affiliates, agreed
to indemnify Dan=Loc for, among other things, asbestos-related claims arising
from products they had sold before the April 1997 sale date, which
indemnification obligations were honored by Federal-Mogul and GHI after
Federal-Mogul's January 1998 acquisition of T&N. (Conroy Decl. P. 14; Harn Decl.
P. P. 2, 3, 4, 5, 6 and 7.)
b. Background Concerning GHI's Liability for Asbestos
Personal Injury Claims
i. The asbestos personal injury claims against GHI
primarily concern a single product, the spiral wound industrial gasket, which
was invented by GHI's founder in 1912. The gasket, which was manufactured
exclusively by GHI until the 1940s, was used in the effective sealing of joints,
and was made by spirally winding alternating strips of metal and asbestos paper
tape to create an inner ring, which was placed inside an outer metal ring.
Asbestos was used as the filler material because it has excellent resistance to
alkaline solutions and gases and a very high melting point. (Conroy Decl. P.
15.) GHI never used raw asbestos fiber in the manufacture of its gaskets, and
discontinued the use of asbestos in gaskets manufactured in the United States
for U.S. sale and distribution in April 1992. (Id.) Dan=Loc has never
manufactured, sold, distributed or utilized asbestos-containing products in the
United States, and therefore, any asbestos-related claims asserted against
Dan=Loc relating to the T&N Assets arose prior to Dan=Loc's acquisition of the
T&N Assets, and Dan=Loc cannot have any direct independent liability for such
claims. (Harn Decl. P. P. 8 and 11.)
ii. The first asbestos personal injury lawsuit against
GHI was filed in January 1976. As of the Petition Date, approximately 158,000
such lawsuits were pending in the U.S. (Conroy Decl. P. 16.)
19
4. Ferodo Claims
a. Background Concerning Ferodo's Business
i. Ferodo was a wholly-owned indirect subsidiary of T&N
and is thus now a wholly-owned indirect subsidiary of Federal-Mogul. Ferodo was
established by T&N as Nuturn Corp., a Delaware corporation, in June 1977 (T&N
owned 80% of Nuturn's stock until 1982, when it acquired the remaining 20%.) In
January 1991, Nuturn changed its name to Ferodo America, Inc. Prior to its
acquisition by Federal-Mogul, Ferodo was headquartered in Smithville, Tennessee.
(Conroy Decl. P. 17.)
b. Background Concerning Ferodo's Liability for Asbestos
Personal Injury Claims
i. The asbestos personal injury claims against Ferodo
stemmed from asbestos-containing disc pads, clutch facings, heavy-duty brake
linings, and drum brake linings. Ferodo's products were distributed by various
third parties under the Ferodo trade names "Grizzly," "Worldbestos" and
"Leland." Ferodo used chrysotile asbestos in the manufacture of disc pads,
clutch facings, heavy-duty brake linings, and drum brake linings. Ferodo removed
asbestos as a component of some of these product lines by the mid-1980s and of
others by the late 1990s. Ferodo never purchased amosite or crocidolite
asbestos. (Conroy Decl. P. 18.)
ii. Pursuant to the agreements by which Ferodo acquired
assets from certain other entities (Maremont Corporation and Lear Siegler,
Inc.), both of those companies agreed to indemnify Ferodo for, among other
things, asbestos personal injury claims relating to products manufactured before
the dates of the respective purchase agreements. Accordingly, Ferodo has not
historically paid claims associated with any asbestos-containing friction
products manufactured before June 1977 and for Worldbestos products manufactured
before 1979 (Conroy Decl. P. 19.)
20
iii. The first asbestos personal injury lawsuit against
Ferodo was filed in November 1979. As of the Petition Date, approximately 41,000
such lawsuits were pending in the United States. (Conroy Decl. P. 20.) Almost
every Ferodo case with demonstrated product identification involved former brake
mechanics who claimed to have contracted asbestos-related diseases from exposure
to Ferodo products during the installation and replacement of
asbestos-containing brake systems. (Id.)
5 Fel-Pro Claims
a. Background Concerning Fel-Pro's Business
i. Fel-Pro is a wholly-owned, indirect subsidiary of
Federal-Mogul which was originally incorporated in Illinois in 1923 as Felt
Products Manufacturing Company and which maintained its headquarters in Skokie,
Illinois. In February 1998, Federal-Mogul acquired 100% of Fel-Pro's stock. At
the time of its acquisition, Fel-Pro's primary product lines consisted of
gaskets and diesel engine components. (Conroy Decl. P. 21.)
b. Background Concerning Fel-Pro Asbestos Claims
i. Fel-Pro manufactured and sold a full line of gaskets
and gasket materials for use in conjunction with internal combustion engines
(principally in automobiles, but also on ships) for 75 years. From the 1930s
until the early 1990s, some, but not all, of these engine gaskets contained
encapsulated asbestos, and were sold for distribution or re-distribution by
other companies under their names. In general, the asbestos portion of these
gaskets consisted of chrysotile asbestos bound together in a paper or sheet
material and further encapsulated by Teflon, an epoxy-phenolic coating, rubber,
metal, and/or some other material. (Conroy Decl. P. 22.)
ii. The first asbestos personal injury claim against
Fel-Pro was filed in 1980. As of the Petition Date, less than 2,000 such
lawsuits were pending in the United States. In addition, approximately 32,000
21
other such lawsuits, all concerning maritime exposures and all filed by a single
plaintiffs' firm, had been asserted against Fel-Pro but had been dismissed
without prejudice. In those cases, plaintiffs generally alleged that they were
exposed to asbestos when removing gaskets from engines for engine repairs.
(Conroy Decl. P. 23.)
iii. Fel-Pro also manufactured or distributed packing
materials that were primarily used as sealants in hostile industrial
environments (such as petrochemical refineries and steel mills) for pumps,
valves, expansion joints, or process equipment handling steam, hot gases, acids,
or other strong corrosives. The company manufactured and distributed very
limited quantities of these products from approximately the 1930s or 1940s to
approximately 1971. Some of the packing materials that Fel-Pro manufactured or
distributed contained chrysotile or crocidolite asbestos, which was encapsulated
by metal or other materials. Fel-Pro has historically been named in very few
cases alleging exposure to asbestos-containing packing materials. (Conroy Decl.
P. 24.)
6. Claims Against Federal-Mogul Corporation (including
Vellumoid Claims)
a. Background Information Concerning the Vellumoid Claims
i. Federal-Mogul has had certain asbestos personal
injury claims asserted against it based upon the products of a former division
of Federal-Mogul known as the Vellumoid Division. (Conroy Decl. P. 25.) The
Vellumoid business began as the Vellumoid Paper Co. in Worcester, Massachusetts
in 1900, and originally involved the manufacture and sale of Vellumoid, a cured
parchment material that was impregnated with a solution of animal glue and
formaldehyde, which was marketed as a wrapping for food and then as a shoe cover
and sock lining. In time, the company began making gaskets and gasket materials
from Vellumoid, particularly for use in automobile and aircraft engines. (Id.)
22
ii. Vellumoid was privately owned until December 1959,
when it was purchased by Dewey & Almy Chemical Co., a subsidiary of W.R. Grace &
Co. ("Grace"). Federal-Mogul bought the Vellumoid assets and business from Grace
in September 1965 and operated the business as its Vellumoid Division. Pursuant
to the asset purchase agreement, Federal-Mogul was to be liable for Vellumoid
products manufactured after the transaction date, and Grace was to be liable for
all products manufactured before that date. Federal-Mogul sold the Vellumoid
assets and business to a group of private investors (who organized a new North
Carolina corporation, Vellumoid, Inc.) in February 1981. (Conroy Decl. P. 26.)
b. Background Concerning Vellumoid Claims and other
Asbestos Personal Injury Claims Asserted Against
Federal-Mogul
i. From the 1920s or 1930s until 1988, Vellumoid
manufactured a single asbestos-containing product, a pre-cut automotive gasket
that was sold under the name "Velbestos." Velbestos gaskets were used to seal
metal joints in automobiles to prevent leakage of oil, water, gasoline, and
other fluids. The gaskets were cut from a rubber-encapsulated
asbestos-containing sheet material consisting of approximately 60% to 80%
chrysotile asbestos, 20% to 40% rubber and a small percentage of other filler
materials. Until approximately 1972, Vellumoid also occasionally re-sold
compressed asbestos sheet material that it purchased from its own suppliers to
other gasket fabricators, including Fel-Pro. (Conroy Decl. P. 27.)
ii. The first record of an asbestos personal injury
claim involving the Velbestos product was in 1985. As of the Petition Date,
approximately 61,500 asbestos personal injury claims were pending against
Federal-Mogul in the United States (the "FMC/Vellumoid Claims"), although many
of these claims appear to have been claims against Federal-Mogul based on
various theories that Federal-Mogul was liable for the products of one or more
of its subsidiaries (either as a successor or otherwise) and do not appear to
have been based expressly on any Vellumoid product. In cases where a Vellumoid
23
product has been identified, plaintiffs have generally alleged that they were
exposed to asbestos when removing gaskets from engines for engine repairs.
(Conroy Decl. P. 28.).
7. Wagner Claims (Certain Asbestos Personal Injury Claims
Asserted Against Debtor Federal-Mogul Products, Inc.)
a. Background Concerning Wagner Business
i. Wagner Electric Corporation ("Wagner") was originally
incorporated in Delaware in 1922, and manufactured, distributed and sold a broad
range of electrical and automotive products, including certain
asbestos-containing automotive and industrial brake products. (Polzin Decl. P.
4.)
ii. Wagner went through several changes of corporate
ownership prior to the acquisition of the Wagner business by the Federal-Mogul
Group. In particular, in 1967 all of the stock of Wagner was purchased by
Studebaker Corporation, which was in turn a wholly-owned subsidiary of
Studebaker-Worthington, Inc. ("Studebaker-Worthington"). (Polzin Decl. P. 5.) On
October 23, 1979, the common stock of Studebaker-Worthington was purchased by
Edison International, Inc. ("Edison"), which was a wholly-owned subsidiary of
McGraw-Edison Company ("McGraw-Edison"). On January 2, 1981,
Studebaker-Worthington merged into Edison, resulting in Wagner becoming a
subsidiary of Edison, which, in turn, was a direct subsidiary of McGraw-Edison.
(Id.)
iii. In 1985, Cooper Industries, Inc. purchased all of
the stock of McGraw-Edison. As a result of this transaction, Wagner became an
indirect wholly-owned subsidiary of Cooper Industries, Inc. (Polzin Decl. P. 6.)
On January 1, 1997, Wagner was merged into another wholly-owned subsidiary of
Cooper Industries, Inc., Moog Automotive, Inc. ("Moog"). The combined
Wagner/Moog entity retained the Moog name. (Id.)
24
iv. In 1998, certain entities within the Federal-Mogul
Group acquired the common stock of certain businesses owned by Cooper
Industries, Inc., including Moog. Subsequent to that acquisition, Moog was
renamed Federal-Mogul Products, Inc. ("FMP"). (Polzin Decl. P. 7.)
b. Background Concerning Wagner Asbestos Claims
i. Wagner asbestos personal injury claims concern
various asbestos-containing friction products. Almost all of these claims,
however, concerned Wagner's role in the assembly (rather than the manufacture)
of asbestos-containing brake products. Specifically, Wagner sold brake
assemblies (including backing plates and other connected apparatus) to over 75
original equipment manufacturers until 1982, including Volvo, NAPCO, Mack Truck,
International Harvester, General Motors, Ford, Dodge, Clark Equipment, Chrysler
Canada, American Motors Corporation, and Disneyland. Wagner friction products
were distributed and sold nationwide under the brand names Comax, Wagner Comax,
Wagner Lockheed, Wagner Lockheed Comax, Wagner, and Chatham. In addition, Wagner
also sold brake block lining from approximately 1940 to 1968. Wagner also sold
various aftermarket brake assemblies. (Polzin Decl. P. 8.)
ii. Wagner purchased friction material containing, among
other components, chrysotile asbestos modified by a bonding agent, coating or
binder or other materials and assembled this material with other,
non-asbestos-containing components into brake shoes, disc pad assemblies and
clutch facings. It always obtained its friction materials from other
manufacturers, which manufactured the materials according to performance
standards specified by Wagner. (Polzin Decl. P. 9.)
25
iii. The first asbestos personal injury lawsuit against
Wagner was filed in 1979. (Polzin Decl. P. 10.) Between October 1, 1998 and the
Petition Date, over 51,000 asbestos-related personal injury and wrongful death
claims were filed against Wagner (or Moog or FMP as successors to Wagner). As of
the Petition Date, there were approximately 33,000 pending asbestos personal
injury claims that named Wagner as a defendant and/or Moog or FMP as
successor-in-interest to Wagner. (Id.)
8. Other Asbestos Personal Injury Claims Asserted Against the
Debtors
a. Abex Claims
i. In addition to the "streams" of liability for
Asbestos Personal Injury Claims described above, certain of the Debtors have
also been responsible for the processing, defense, and payment of Asbestos
Personal Injury Claims relating to land vehicle friction products manufactured
by Abex Corporation. As described in Section I.B.7 above, in 1998 certain
entities within the Federal-Mogul Group acquired the stock of a number of
companies from Cooper Industries, Inc., including the stock of Moog Automotive,
Inc. (successor to Wagner Electric Corporation), which was renamed Federal-Mogul
Products, Inc. (Polzin Decl. P. P. 7, 11.)
ii. In 1994, Wagner Electric Corporation had acquired
the Abex land vehicle friction products business from Pneumo Abex Corporation,
the successor to Abex Corporation. In connection with that transaction, Wagner
Electric Corporation agreed to become liable for and to indemnify Pneumo Abex
Corporation from, on an after-insurance basis, certain asbestos-related claims
against Pneumo Abex relating to the business Wagner purchased from Abex, which
obligations became liabilities of Federal-Mogul Products, Inc. (as the successor
to Moog Automotive, Inc.) when Moog Automotive, Inc. and various other companies
were acquired by the Federal-Mogul Group from Cooper Industries, Inc. in 1998.
(Polzin Decl. P. 12.)
26
iii. During the period between the acquisition of Moog
Automotive, Inc. in 1998 and the Petition Date, F-M Products defended Pneumo
Abex Corporation against asbestos-related personal injury claims related to the
Abex land vehicle friction products business. As of the Petition Date, there
were approximately 66,000 asbestos personal injury claims pending against Pneumo
Abex that were related to the Abex land vehicle friction products business.
Following the Petition Date, Federal-Mogul Products, Inc. stopped performing its
indemnity of Pneumo Abex. (Polzin Decl. P. 13.)
iv. Asbestos personal injury claims relating to land
vehicle friction products manufactured by Abex Corporation have been asserted by
certain plaintiffs against both Federal-Mogul Products, Inc. and Federal-Mogul
Corporation, purportedly as successors-in-interest to Abex Corporation and/or
Pneumo Abex Corporation. (Polzin Decl. P. 14.)
v. During the period for which Federal-Mogul Products,
Inc. was responsible for the handling and defense of asbestos claims relating to
the Abex land vehicle friction products businesses (i.e., from the acquisition
of Moog Automotive, Inc. in 1998 through the Petition Date), Federal-Mogul
Products, Inc. incurred approximately $22.3 million in defense costs and made
approximately $12.4 million in indemnity payments relating to such claims.
(Polzin Decl. P. 15.)
b. Asbestos Personal Injury Claims Against Federal-Mogul
Global Growth Ltd. FMGGL is a U.K. Debtor and the immediate parent company of
T&N. Prior to the Petition Date, FMGGL had been named in a number of asbestos
personal injury and wrongful death lawsuits alleging that FMGGL was the
successor-in-interest to T&N. (Conroy Decl. P. 9.)
c. Asbestos Personal Injury Claims Against Federal-Mogul
Ignition (U.K.) Limited. Federal-Mogul Ignition (U.K.) Limited ("F-M Ignition
27
UK") is a U.K. Debtor that has historically operated out of a facility in Upton,
England. It is neither a subsidiary of T&N nor a historical affiliate of T&N.
F-M Ignition UK is one of the companies that was acquired by various entities
within the Federal-Mogul Group from Cooper Industries, Inc. in 1998 in the same
transaction in which the stock of Moog Automotive, Inc. (now Federal-Mogul
Products, Inc.) was acquired. (See Section II.B.7, supra.) Prior to the Petition
Date, F-M Ignition UK was named as a defendant with respect to two asbestos
personal injury claims in the United Kingdom. (Conroy Decl. P. 29.).
C. DEVELOPMENT AND NEGOTIATION OF THE PLAN.
1. The Plan is based upon several commercial settlements
that collectively involve all of the Debtors' major constituencies of creditors
and holders of Equity Interests, as well as a number of additional parties.
Those various settlements have been negotiated among the parties during the
Reorganization Cases. (Katz Decl. P. 7.)
2. The Central Deal. The first version of the plan of
reorganization for the Debtors was filed with the Bankruptcy Court on March 6,
2003. (D.I. 582592994.) That version of the plan of reorganization embodied a
settlement that, as stated by the Plan Proponents, was reached primarily between
the Unsecured Creditors Committee and the Asbestos Claimants Committee, with the
support of the Future Claimants Representative. (See Disclosure Statement ss.
II.A.) That settlement provided that the holders of Federal-Mogul's prepetition
note debt, on the one hand, and the holders of current and future Asbestos
Personal Injury Claims, on the other hand, would receive 100% of the common
stock of Reorganized Federal-Mogul. (Id.) Specifically, 50.1% of that common
stock and rights to the proceeds of insurance for Asbestos Personal Injury
Claims would be distributed to a trust to be established by the plan of
reorganization pursuant to section 524(g) of the Bankruptcy Code for payment of
Asbestos Personal Injury Claims, while the remaining 49.9% of the common stock
28
of Reorganized Federal-Mogul would be paid pro rata to the holders of
Federal-Mogul's prepetition note debt. (Green Decl. P. 19.) This compromise has
been referred to as the "Central Deal" and is the foundation for the Plan.
(Id.)
3. Additional Settlements. Subsequent versions of the plan of
reorganization were filed in early 2004. (See Amended Joint Plan of
Reorganization, D.I. 4539 (dated Mar. 4, 2004); Second Amended Joint Plan of
Reorganization, D.I. 4875 (dated Apr. 22, 2004); Second Amended Joint Plan of
Reorganization (as Modified), D.I. 4979 (dated May 10, 2004).) Those versions of
the plan of reorganization reflected settlements with additional major
constituencies in the Reorganization Cases. Specifically, those versions of the
Plan reflected a settlement with the Equity Committee under which the holders of
existing preferred and common stock would receive warrants pursuant to the plan
of reorganization to purchase common stock in Reorganized Federal-Mogul. (Id.)
Those versions of the Plan also reflected a settlement that had been reached
with the Administrative Agent, pursuant to which claims arising under or related
to the Bank Credit Agreement will be allowed under the Plan and satisfied with
new obligations under the Reorganized Federal-Mogul Secured Term Loan Agreement
and the Reorganized Federal-Mogul Junior Secured PIK Notes. (Id.) The Debtors
and several others of the Plan Proponents also reached a settlement with the
Sureties, pursuant to which the Sureties are to receive under the Debtors' plan
of reorganization a total of $28 million, apportioned among new obligations
under the Reorganized Federal-Mogul Secured Term Loan Agreement and the
Reorganized Federal-Mogul Junior Secured PIK Notes. That settlement was approved
by the Bankruptcy Court in March 2005. (See Order Pursuant to 11 U.S.C. ss. 363
and Fed. R. Bankr. P. 9019 Approving Compromise and Settlement of Surety Claims,
29
For Treatment Thereof Under Third Amended Joint Plan of Reorganization and
Related Matters, D.I. 7131 (dated Mar. 17, 2005).)
4. Approval of the Disclosure Statement and Solicitation
of the Third Amended Plan. Following the embodiment of the various settlements
into a draft Plan and accompanying Disclosure Statement,(8) the Bankruptcy Court
(Lyons, J.) set a hearing to consider approval of the Disclosure Statement for
May 11, 2004, at which the Disclosure Statement was approved and a confirmation
hearing scheduled for late 2004. (See Disclosure Statement Order.) The
Disclosure Statement and related solicitation materials, including the Third
Amended Plan, were subsequently served upon creditors, holders of Equity
Interests, and other parties in the Reorganization Cases as specified in the
Solicitation Procedures Order and as reflected in the August 2004 Affidavit of
Service. In addition, between June 2004 and November 2004 the Debtors
implemented the program of publication notice set forth in the Solicitation
Procedures Order, as reflected by the Publication Affidavit. As a result of this
process, votes on the Plan were received in approximately 200 individual Classes
of Claims and Equity Interests. (See Declaration of Jeffrey S. Stein of The
Garden City Group, Inc. Certifying the Methodology for the Tabulation of Votes
and Results of Voting With Respect to the Third Amended Joint Plan of
Reorganization, D.I. 6522 (dated Dec. 3, 2004).) All of such Classes, except the
Classes of Unsecured Claims against six (6) of the Debtors, voted to accept the
Third Amended Plan. (Id.)
5. The confirmation hearing on the Third Amended Plan was
ultimately postponed due to disputes with the Administrators concerning, among
other things, the valuation of the asbestos liabilities of T&N and its
subsidiaries. (See Supp. Disclosure Statement ss. II.A.) While the outcome of
the Estimation Hearing was pending, the Plan Proponents engaged in negotiations
- ------------------
(8) The settlement with the Sureties was reached after the Disclosure Statement
was approved by the Bankruptcy Court.
30
with the Administrators and the trustees of the T&N Pension Plan, two U.K.-based
parties that did not accept the proposed valuation of T&N's asbestos liabilities
under the Third Amended Plan and did not participate in the Estimation Hearing.
(Id.)
6. Those negotiations culminated in the U.K. Global
Settlement Agreement, which was approved by the Bankruptcy Court by a Final
Order entered on November 15, 2005. (See Order Granting in Part and Denying in
Part Joint Motion of Debtors-in-Possession and U.K. Administrators for an Order
Pursuant to the Doctrine of Comity, Granting the Relief Required by Clause 3(i)
of the U.K. Global Settlement Agreement, D.I. 8620 (dated Nov. 15, 2005).)
Pursuant to the U.K. Global Settlement Agreement, among other things, the
Debtors agreed to fund company voluntary arrangements (the "CVAs") for certain
of the U.K. Debtors to be proposed by the Administrators of the U.K. Debtors.
The CVAs, which are attached to the Plan collectively as Exhibits 1.1.14 and
1.1.173, are detailed documents that provide, among other things, for the
treatment of (i) all claims against the Debtors arising under or relating to the
T&N Pension Plan, (ii) U.K. and certain non-U.S. asbestos personal injury claims
against the U.K. Debtors, and (iii) trade and other unsecured claims against the
U.K. Debtors. (Plan Exs. 1.1.14, 1.1.173.) The CVAs were circulated to creditors
and shareholders of the U.K. Debtors for consideration in July 2006 and were
approved by the statutory majorities under English law at meetings of creditors
and shareholders in September 2006. (See Supp. Disclosure Statement ss. II.C.)
Following the expiration of a statutorily-required period for legal challenges
under English law, during which no such challenges to the CVAs were brought, the
CVAs became effective in accordance with their terms on October 11, 2006. (Id.)
The Plan recognizes and incorporates the treatment afforded to claims under the
CVAs. (Plan Art. III, ss. 8.1.1.)
31
7. As negotiations concerning the CVAs were ongoing, the
Debtors and certain of the Plan Proponents were also involved at times in
negotiations with Cooper and Pneumo Abex aimed at resolving various issues
respecting the Plan that had been asserted by those parties. (7/10/07 Hr'g Tr.
52-53:25-16 (Gasparovic); McGovern Decl. P. P. 8-12; Schumacher Decl. P. P. 24,
33.) Those negotiations culminated in the creation of the Addendum (which
relates to the Plan A Settlement) and the Plan B Settlement Agreement, which
collectively embody alternative resolutions of Cooper's and Pneumo Abex's issues
concerning the Debtors. (Plan Exs. 1.1.4 (Addendum), 8.22 (Plan B Settlement
Agreement).) Additional details regarding the Plan A Settlement are set forth in
(i) the Plan A Approval Order and (ii) the Plan A Settlement Findings and
Conclusions that have been entered or may be entered by this Court.
8. The Debtors and certain of the Plan Proponents reached
additional settlements that have resolved a number of parties' actual or
potential objections to the Plan. Specifically, following several years of
negotiations, the Debtors and certain of the Plan Proponents reached a
settlement with the holders of Asbestos Property Damage Claims represented by
the Speights & Runyan law firm, which constituted the only outstanding,
unresolved Asbestos Property Damage Claims against any of the Debtors. (Fisher
Decl. P. 3.)
9. The Debtors, the Unsecured Creditors Committee, and others
of the Plan Proponents also arrived at a settlement of potential objections to
the Plan asserted by the Ad Hoc Committee of Certain Unsecured
Creditors (the "Ad Hoc Committee"). Pursuant to that settlement, the holders of
Unsecured Claims against the U.S. Debtors were offered the option to elect to
receive their distributions under the Plan in Reorganized Federal-Mogul Class A
Common Stock rather than Cash. (Plan ss. 8.15.2.)
32
10. Following the documentation of all of the foregoing
settlements and a hearing on February 2, 2007, the Bankruptcy Court approved the
Supplemental Disclosure Statement on February 7, 2007, and subsequently set the
Confirmation Hearing to commence on June 18, 2007. (See Supplemental Disclosure
Statement Order; Modified Order (I) Setting Objection and Briefing Deadlines and
(II) Governing Discovery with Respect to Confirmation Hearing on Fourth Amended
Joint Plan of Reorganization, D.I. 582593384 (dated Apr. 3, 2007).)
D. MODIFICATIONS TO THE PLAN
The Plan Proponents filed the Modifications on June 4, 2007,
July 31, 2007, September 26, 2007, September 27, 2007 and October 30, 2007. The
Modifications do not materially and adversely affect or change the treatment of
any Claim against or Equity Interest in any Debtor.
E. COMPLIANCE WITH THE REQUIREMENTS OF SECTION 1129 OF THE
BANKRUPTCY CODE
1. Section 1129(a)(1) -- Compliance of the Plan with
Applicable Provisions of the Bankruptcy Code
The Plan complies with all applicable provisions of the
Bankruptcy Code, as required by section 1129(a)(1) of the Bankruptcy Code,
including sections 1122 and 1123 of the Bankruptcy Code, as set forth below.
a. Sections 1122 and 1123(a)(1)-(4) -- Classification and
Treatment of Claims and Interests
i. The Plan constitutes a separate plan of
reorganization for each of the Debtors. (Plan ss. 6.7.1.)
ii. In accordance with section 1122(a) of the Bankruptcy
Code, Article III of the Plan classifies each Claim against and Equity Interest
in each of the Debtors into a Class containing only substantially similar Claims
33
or Equity Interests. (Plan Art. III.) Specifically, Article III of the Plan
designates 18 classes of Claims and Equity Interests, which have been assigned
letters from A through Q. (Id.)
iii. In accordance with section 1123(a)(1) of the
Bankruptcy Code, Article III of the Plan properly classifies all Claims and
Equity Interests that require classification. (Plan Art. III.) In particular,
Article III of the Plan segregates into separate classes with respect to each
applicable Debtor:
- ----------------------------------------------- --------------------------------
Priority Claims Classes 1A through 86A
- ----------------------------------------------- --------------------------------
Bank Claims Classes 1B through 5B, Classes
Classes 23B through 33B
20B through 21B, and
- ----------------------------------------------- --------------------------------
Surety Claims Classes 1C through 6C, Classes
20C through 33C
- ----------------------------------------------- --------------------------------
Noteholder Claims Classes 1D through 5D, Classes
20D through 21D, Classes 23D
through 33D
- ----------------------------------------------- --------------------------------
Other Secured Claims Classes 1E through 6E, Classes
23E through 32E
- ----------------------------------------------- --------------------------------
Convertible Subordinated Debenture Claims Class 1F
- ----------------------------------------------- --------------------------------
On-Site Environmental Claims Classes 1G through 5G, Classes
11G through 12G, Class 17G,
Class 30G, Class 32G
- ----------------------------------------------- --------------------------------
Unsecured Claims Classes 1H through 86H
- ----------------------------------------------- --------------------------------
Asbestos Property Damage Claims Classes 6H.PD, 69H.PD,
and 80H.PD
- ----------------------------------------------- --------------------------------
Non-Priority Employee Benefit Claims Classes 1I through 19I, Classes
40I through 42I, Class 59I,
Class 64I, Class 78I, Class 81I
- ----------------------------------------------- --------------------------------
Asbestos Personal Injury Claims Class 1J, Classes 5J through 7J,
Classes 11J through 15J, Class
17J, Classes 19J through 22J,
Class 41J, Classes 57J through
86J
- ----------------------------------------------- --------------------------------
Bonded Claims Classes 1K through 5K
- ----------------------------------------------- --------------------------------
Affiliate Claims Classes 1L through 86L
- ----------------------------------------------- --------------------------------
Federal-Mogul Corporation Preferred Stock Class 1M
Interests
- ----------------------------------------------- --------------------------------
Subordinated Securities Claims Class 1N
- ----------------------------------------------- --------------------------------
Federal-Mogul Common Stock Interests Class 1O
- ----------------------------------------------- --------------------------------
34
- ----------------------------------------------- --------------------------------
Equity Interests Classes 2P through 86P
- ----------------------------------------------- --------------------------------
Pneumo Parties Claims Classes 1Q, 5Q, 33Q, 37Q, 62Q
- ----------------------------------------------- --------------------------------
The number of Classes reflects the diverse characteristics of those Claims
against and Equity Interests in the various Debtors, and the legal rights under
the Bankruptcy Code of each of the holders of Claims or Equity Interests within
a particular Class are substantially similar to other holders of Claims or
Equity Interests within that Class.
iv. In accordance with section 1123(a)(2) of the
Bankruptcy Code, Article III of the Plan identifies and describes each Class of
Claims or Equity Interests that is not impaired under the Plan. Specifically,
Article III of the Plan states that Claims and Equity Interests in the following
Classes are not impaired under the Plan:
- ----------------------------------------------- --------------------------------
Class A Priority Claims Classes 6A through 19A, Class
33A, Classes 39A through 86A
- ----------------------------------------------- --------------------------------
Class E Other Secured Claims Classes 1E through 6E, Classes
23E through 32E
- ----------------------------------------------- --------------------------------
Class G On-Site Environmental Claims Classes 1G through 5G, Classes
11G through 12G, Class 17G,
Class 30G, Class 32G
- ----------------------------------------------- --------------------------------
Class I Non-Priority Employee Benefit Claims Classes 1I through 5I
- ----------------------------------------------- --------------------------------
Class K Bonded Claims Classes 1K through 5K
- ----------------------------------------------- --------------------------------
Class L Affiliate Claims Classes 6L through 19L, Classes
23L through 86L
- ----------------------------------------------- --------------------------------
Class P Equity Interests Classes 2P through 86P
- ----------------------------------------------- --------------------------------
v. In accordance with section 1123(a)(3) of the
Bankruptcy Code, Article III of the Plan identifies and describes any Class of
Claims or Interests that is impaired under the Plan. Specifically, Article III
of the Plan states that Claims and Equity Interests in the following Classes are
impaired and describes the treatment of each such Class:
35
- ----------------------------------------------- --------------------------------
Class A Priority Claims Classes 1A through 5A, Classes
20A through 32A, Classes 34A
through 38A
- ----------------------------------------------- --------------------------------
Class B Bank Claims Classes 1B through 5B, Classes
20B through 21B, Classes 23B
through 33B
- ----------------------------------------------- --------------------------------
Class C Surety Claims Classes 1C through 6C, Classes
20C through 33C
- ----------------------------------------------- --------------------------------
Class D Noteholder Claims Classes 1D through 5D, Classes
20D through 21D, Classes 23D
through 33D
- ----------------------------------------------- --------------------------------
Class F Convertible Subordinated Debenture Class 1F
Claims
- ----------------------------------------------- --------------------------------
Class H Unsecured Claims Classes 1H through 86H
- ----------------------------------------------- --------------------------------
Class H.PD Asbestos Property Damage Claims Class 6H.PD, Class 69H.PD, Class
80H.PD
- ----------------------------------------------- --------------------------------
Class I Non-Priority Employee Benefit Claims Classes 6I through 19I, 40I
through 42I, 59I, 64I, 78I and
81I
- ----------------------------------------------- --------------------------------
Class J Asbestos Personal Injury Claims Class 1J, Classes 5J through 7J,
Classes 11J through 15J, Class
17J, Classes 19J through 22J,
Class 41J, Classes 57J through
86J
- ----------------------------------------------- --------------------------------
Class L Affiliate Claims Classes 1L through 5L, Classes
20L through 22L
- ----------------------------------------------- --------------------------------
Class M Federal-Mogul Preferred Stock Interests Class 1M
- ----------------------------------------------- --------------------------------
Class N Subordinated Securities Claims Class 1N
- ----------------------------------------------- --------------------------------
Class O Federal-Mogul Common Stock Interests Class 1O
- ----------------------------------------------- --------------------------------
Class Q Pneumo Parties Claims Class 1Q, Class 5Q, Class 33Q,
Class 37Q, Class 62Q
- ----------------------------------------------- --------------------------------
vi. In accordance with section 1123(a)(4) of the
Bankruptcy Code, the treatment of each Claim or Equity Interest within a Class
is the same as the treatment of each other Claim or Equity Interest in such
Class unless the holder of a Claim or Equity Interest has agreed or subsequently
36
agrees to less favorable treatment on account of its Claim or Equity Interest.
(Plan Art. III.)
b. Section 1123(a)(5) -- Adequate Means for Implementation
of the Plan
In accordance with section 1123(a)(5) of the Bankruptcy
Code, the Plan, including Article VIII of the Plan, provides adequate means for
its implementation, including, among other things: (i) recognition and
incorporation of the treatment provided for certain claims against the U.K.
Debtors under the CVAs for those U.K. Debtors, which CVAs are attached to the
Plan as Exhibits 1.1.14 and 1.1.173 respectively (Plan ss. 8.1.1); (ii) the
continued corporate existence of the Debtors under Section 8.2 of the Plan and
the vesting of the Debtors' assets in the Reorganized Debtors under Section 8.7
of the Plan; (iii) the cancellation of the existing Notes, Other Debt
Securities, Indentures, and Federal-Mogul Corporation common stock and the
surrender of existing securities and instruments (Plan ss.ss. 8.3.1 - 8.3.3,
8.3.9); (iv) the issuance of the Reorganized Federal-Mogul Common Stock,
Warrants, and the Reorganized Federal-Mogul Junior Secured PIK Notes for
distribution in accordance with the terms of the Plan (Plan ss.ss. 8.3.4, 8.3.7,
8.11); (v) the entry by Reorganized Federal-Mogul, the other Reorganized U.S.
Debtors and Reorganized Federal-Mogul UK Holding Limited into the Reorganized
Federal-Mogul Secured Term Loan Agreement (Plan ss. 8.10); (vi) the call option
in favor of Thornwood Associates Limited Partnership over certain of the
Reorganized Federal-Mogul Class B Common Stock (Plan ss. 8.3.6); (vii) the
adoption of the various corporate documents that will govern the Reorganized
Debtors (Plan ss. 8.3.12); (viii) the identification of the initial boards of
directors of the Reorganized Debtors as provided in Sections 8.3.13 and 8.4 of
the Plan, respectively; (ix) the retention of certain rights of action by the
Reorganized Debtors pursuant to Section 8.8 of the Plan; (x) Reorganized
Federal-Mogul's entry into the Exit Facilities (Plan ss. 8.12); (xi) detailed
37
provisions for the making of distributions under the Plan (Plan ss.ss. 8.14,
8.15); (xii) implementation of various settlements under the Plan (although, in
accordance with Sections 8.22 and 8.23 of the Plan and the documents referenced
therein, the Plan A Settlement and the Plan B Settlement embody alternative
settlements) (Plan ss.ss. 8.20 - 8.28); (xiii) the various discharges, releases,
injunctions, indemnifications and exculpations provided under the Plan,
including those set forth in Sections 5.6, 9.1, 9.2, 9.3, and 9.6 of the Plan;
(xiv) the assumption or rejection of executory contracts and unexpired leases to
which any Debtor is a party, as stated in Article V of the Plan; and (xv) the
creation of the Trust pursuant to Section 4.1 of the Plan, the transfer of the
Trust Assets pursuant to Section 4.3 of the Plan (including, without limitation,
the transfer of Asbestos Insurance Actions, Asbestos In-Place Insurance
Coverage, and Asbestos Insurance Action Recoveries), and, subject to and except
as provided in Article IV of the Plan, the assumption of all Asbestos Personal
Injury Claims by the Trust and the discharge of the Debtors' obligations and
liabilities on account of Asbestos Personal Injury Claims, as detailed in
Article IV of the Plan.
c. Section 1123(a)(6) -- Prohibition Against the Issuance
of Nonvoting Equity Securities and Adequate Provisions
for Voting Power of Classes of Securities
i. In accordance with section 1123(a)(6) of the
Bankruptcy Code, the Reorganized Debtors' charters, bylaws or similar
constituent documents (including those set forth in Exhibits A and B to the
Plan) contain (or shall be deemed to contain) provisions prohibiting the
issuance of nonvoting equity securities and provide for the appropriate
distribution of voting power among all classes of equity securities authorized
for issuance. In particular, Section 8.3.12.1 of the Plan provides that the
Certificates of Incorporation for Reorganized Federal-Mogul will, among other
things, prohibit the issuance of nonvoting equity securities. (Plan ss.
8.3.12.1.) This prohibition is stated in the form of Amended and Restated
38
Certificate of Incorporation of Reorganized Federal-Mogul filed as Exhibit
8.3.12(1) to the Plan. (Plan Ex. 8.3.12(1).)
ii. The Amended and Restated Certificate of
Incorporation of Reorganized Federal-Mogul also provides for the allocation of
voting power among the Reorganized Federal-Mogul Class A Common Stock and the
Reorganized Federal-Mogul Class B Common Stock, which are the only classes of
equity securities to be issued in Reorganized Federal-Mogul as of the Effective
Date. (Plan ss. 8.3.12; Plan Ex. 8.3.12(1).)
d. Section 1123(a)(7) -- Selection of Directors and
Officers in a Manner Consistent with the Interests of
Creditors and Equity Security Holders and Public Policy
In accordance with section 1123(a)(7) of the Bankruptcy
Code, the provisions of the Plan and the Reorganized Debtors' charters, bylaws
and similar constituent documents regarding the manner of selection of officers
and directors of the Reorganized Debtors are consistent with the interests of
creditors and equity security holders and with public policy. Section 8.3.12.2
of the Plan provides that, subject to the Certificate of Incorporation of
Reorganized Federal-Mogul, the initial board of directors for Reorganized
Federal-Mogul shall consist of nine (9) members (as determined in accordance
with the amended Certificate of Incorporation), and that the holders of
Reorganized Federal-Mogul Class A Common Stock shall initially be entitled to
nominate six (6) directors and the holders of Reorganized Federal-Mogul Class B
Common Stock shall initially be entitled to nominate three (3) directors. (Plan
ss. 8.3.12.2.) Of the six (6) directors that the holders of the Reorganized
Federal-Mogul Class A Common Stock shall initially be entitled to nominate, one
of such directors shall be the Chief Executive Officer of Reorganized
Federal-Mogul, and one other of such directors shall be Neil Subin, presently
chairman of the Unsecured Creditors Committee. (Plan ss. 8.3.12.2.)
e. Section 1123(b)(1) -- Impairment of Claims and Equity
Interests
39
As permitted by section 1123(b)(1) of the Bankruptcy
Code, Article III of the Plan provides for the impairment of certain Classes of
Claims and Equity Interests, while leaving other Classes unimpaired. (Plan Art.
III.) Those Classes of Claims and Equity Interests that are impaired are set
forth in Section II.E.1.a.v, supra. Those Classes of Claims and Equity Interests
that are not impaired are set forth in Section II.E.1.a.iv, supra.
f. Section 1123(b)(2) -- Assumption or Rejection of
Executory Contracts and Unexpired Leases
In accordance with section 1123(b)(2) of the Bankruptcy
Code, Article V and other provisions of the Plan and the Confirmation Order
provide for the assumption or rejection of the executory contracts and unexpired
leases of the Debtors that have not been previously assumed, assumed and
assigned or rejected pursuant to section 365 of the Bankruptcy Code and
appropriate authorizing orders of the Bankruptcy Court. (Plan Art. V.)
g. Section 1123(b)(3) -- Retention, Enforcement and
Settlement of Claims Held by the Debtors
In accordance with section 1123(b)(3) of the Bankruptcy
Code, Section 8.8 of the Plan provides that, except (i) for the Trust Causes of
Action and (ii) as provided in Section 11.5 of the Plan or as otherwise provided
in the Plan or the Confirmation Order, the Reorganized Debtors shall retain and
have the exclusive right, in their sole discretion, to enforce, sue on, settle,
or compromise (or decline to do any of the foregoing) all claims, rights, causes
of action, suits and proceedings, including rights and causes of action arising
under the Bankruptcy Code which are commenced prior to the closing of the
Reorganization Cases, that the Debtors or their Estates may hold against any
Entity; provided, however, that without limiting the foregoing, the Reorganized
Debtors, with the consent of the Trustees, may retain, prosecute and enforce any
Asbestos Insurance Action in their own name, for the benefit of the Trust and
the holders of Asbestos Personal Injury Claims, provided that any costs and
40
expenses to be incurred by the Reorganized Debtors in any such Asbestos
Insurance Action shall be reimbursed to the Reorganized Debtors by the Trust as
Trust Expenses as soon as practically possible. (Plan ss. 8.8.)
h. Section 1123(b)(5) -- Modification of the Rights of
Holders of Claims
Article III of the Plan, together with other provisions of
the Plan that may be referred to in Article III of the Plan, modifies or leaves
unaffected, as the case may be, the rights of holders of each class of Claims
and Equity Interests. (Plan Art. III.)
i. Section 1123(b)(6) -- Other Provisions Not Inconsistent
with Applicable Provisions of the Bankruptcy Code
In accordance with section 1123(b)(6) of the Bankruptcy
Code, the Plan includes additional appropriate provisions that are not
inconsistent with the applicable provisions of the Bankruptcy Code, including,
without limitation: (i) the provisions of Article III of the Plan governing
treatment on account of Allowed Claims and Equity Interests; (ii) the provisions
of Article IV of the Plan governing the Trust and the treatment of Asbestos
Personal Injury Claims; (iii) the provisions of Article V of the Plan governing
executory contracts and unexpired leases; (iv) the provisions of Article VIII of
the Plan governing implementation of the Plan; and (v) the provisions of Article
IX of the Plan concerning the injunctions, releases and discharge to be effected
by the Plan. (Plan Art. III, IV, V, VIII, IX.)
j. Section 1123(d) -- Cure of Defaults
In accordance with section 1123(d) of the Bankruptcy
Code, Section 5.1.1 of the Plan and the Confirmation Order provide for the
satisfaction of cure amounts associated with each executory contract and
unexpired lease to be assumed pursuant to the Plan in accordance with section
365(b)(1) of the Bankruptcy Code. All cure amounts are as set forth in the Cure
Exhibit filed with the Bankruptcy Court on or about September 10, 2004 (D.I.
41
5675), as such exhibit may have been modified from time to time prior to the
date of entry of the Confirmation Order.
2. Section 1129(a)(2) -- Compliance with Applicable
Provisions of the Bankruptcy Code
The Plan Proponents have complied with all applicable
provisions of the Bankruptcy Code, as required by section 1129(a)(2) of the
Bankruptcy Code, including section 1125 of the Bankruptcy Code and Bankruptcy
Rules 3017 and 3018. The Disclosure Statement, the Supplemental Disclosure
Statement and the procedures by which the Ballots for acceptance or rejection of
the Plan were solicited and tabulated were fair, properly conducted and in
accordance with sections 1125 and 1126 of the Bankruptcy Code, Bankruptcy Rules
3017 and 3018, the Solicitation Procedures Order, the Supplemental Solicitation
Procedures Order, the Disclosure Statement Order and the Supplemental Disclosure
Statement Order, as evidenced by the Ballot Certification, the August 2004
Affidavit of Service, the March 2007 Affidavit of Service, the Publication
Affidavit, and the Supplemental Publication Affidavits. Votes with respect to
the Plan were solicited in good faith and in a manner consistent with the
Bankruptcy Code, the Bankruptcy Rules, the Solicitation Procedures Order, the
Supplemental Solicitation Procedures Order, the Disclosure Statement Order, and
the Supplemental Disclosure Statement Order, as evidenced by the Ballot
Certification, the August 2004 Affidavit of Service, the March 2007 Affidavit of
Service, the Publication Affidavit, and the Supplemental Publication Affidavits.
In light of the foregoing, the solicitation and notice described in this Section
I.E.2 and in the recitals of these Findings of Fact and Conclusions of Law are
adequate and sufficient under the circumstances. Without limiting the foregoing,
the Bankruptcy Court hereby determines that no further solicitation or notice is
required in connection with the Plan (as modified by the Modifications) or in
connection with the subject matter of the Preemption Order (as defined in
42
Section II.K below). Each of the Plan Proponents, together with (where
applicable) their respective members and each of their respective directors,
officers, employees, agents, members and professionals, acting in such capacity,
have acted in "good faith," within the meaning of section 1125(e) of the
Bankruptcy Code.
3. Section 1129(a)(3) -- Proposal of the Plan in Good Faith
i.The Plan Proponents proposed the Plan in good faith
and not by any means forbidden by law. In determining that the Plan has been
proposed in good faith, the Bankruptcy Court has examined the terms of the Plan.
The Bankruptcy Court has examined the Ballot Certification, which demonstrates
that all Classes of creditors and holders of Equity Interests voted to accept
the Plan. (Ballot Certification Ex. C-1.) Based on the evidence presented at the
Confirmation Hearing, the Bankruptcy Court finds and concludes that the Plan has
been proposed with the legitimate purpose of reorganizing the affairs of each of
the Debtors and maximizing the returns available to creditors and holders of
Equity Interests. (Katz Decl. P. 13.) Consistent with the objectives and
purposes of the Bankruptcy Code, the Plan is designed to allow each of the
Debtors to reorganize by resolving certain pending disputes and proceedings and
providing the Reorganized Debtors with a capital structure that will allow them
to satisfy their obligations with sufficient liquidity and capital resources and
to fund necessary capital expenditures and otherwise conduct their businesses.
(See Katz Decl. P. 13; Henkin Decl. P. 13; Beckeman Decl. P. 10.) In particular,
and without limitation, the Plan achieves a global resolution of Asbestos
Personal Injury Claims through the assumption of such Claims (including Demands)
by the Trust, subject to the terms of the Plan. (Plan ss. 4.2.)
ii. The Plan and the Plan Documents and the arms' length
negotiations among the Debtors and the other Plan Proponents, as well as
(without limitation), Cooper, Pneumo Abex, the Administrators, the Sureties, the
43
parties to the Environmental Settlement Agreements, Owens-Illinois, the parties
covered by the Sherrill Claim, the holders of Asbestos Property Damage Claims
represented by Speights & Runyan, and the MagneTek Parties, taken together with
the acceptance of the Plan by all impaired Classes of Claims and Equity
Interests in which any Claims or Equity Interests were voted, provide
independent evidence of the Debtors' and the other Plan Proponents' good faith
in proposing the Plan. (Katz Decl. P. 13; Green Decl. P. 18; Ballot
Certification Ex. C-1.)
iii. For the avoidance of doubt, the findings of fact
and/or conclusions of law set forth in this Section I.E.3, and any other
findings of fact and/or conclusions of law set forth in these Findings of Fact
and Conclusions of Law with respect to good faith, relate solely to the Plan and
the other Plan Documents (other than the Addendum and the Definitive Documents
(as such term is defined in the Addendum)); the findings of fact and conclusions
of law concerning the proposal of the Plan A Settlement in good faith are set
forth exclusively in the Plan A Settlement Findings and Conclusions.
4 Section 1129(a)(4) -- Court Approval of Certain Payments
as Reasonable
a. In accordance with section 1129(a)(4) of the
Bankruptcy Code, no payment for services or costs and expenses of professionals
in or in connection with the Reorganization Cases, or in connection with the
Plan and incidental to the Reorganization Cases, has been or will be made by a
Debtor other than payments that have been authorized by order of the Bankruptcy
Court.
b. The Plan provides for the payment for services or
costs and expenses of professionals subject to review by the Bankruptcy
Court-appointed fee auditor and the Bankruptcy Court. (Plan ss. 2.5.) In
addition, the Plan provides for the payment of various Administrative Claims,
including those which are subject to Bankruptcy Court approval and the standards
44
of the Bankruptcy Code. (Plan ss. 2.1.) The Plan also provides, at Section
8.14.6, that the Indenture Trustees shall receive reasonable compensation and
reimbursement of actual and necessary expenses pursuant to the Indentures and
the procedures set forth in the Plan, which include, inter alia, resolution of
any dispute concerning such compensation and expenses by the Bankruptcy Court in
accordance with Section 8.14.6(b) of the Plan. (Plan ss. 8.14.6.)
c. In connection with the foregoing, Section 11.3.6 of the
Plan provides that the Bankruptcy Court shall retain jurisdiction after the
Effective Date to hear and determine all applications for allowance of
compensation of professionals or reimbursement of expenses thereof under
sections 330, 331, or 503(b) of the Bankruptcy Code. (Plan ss. 11.3.6.)
5. Section 1129(a)(5) -- Disclosure of Identity of Proposed
Management, Compensation of Insiders and Consistency of
Management Proposals with the Interests of Creditors and
Public Policy
On Exhibits 8.3.13 and 8.4 to the Plan (as such exhibits were
modified or supplemented at or prior to the Confirmation Hearing), the Debtors
have disclosed all necessary information regarding the Reorganized Debtors'
directors and officers and, for the directors and officers of Reorganized
Federal-Mogul who may constitute insiders, the nature of the compensation for
such insiders. (Plan Exs. 8.3.13, 8.4; Katz Decl. P. 15.) The appointment or
continuance of the proposed directors is consistent with the interests of the
holders of Claims and Equity Interests and with public policy.
6. Section 1129(a)(6) -- Approval of Rate Changes
The Debtors' current businesses do not involve the establishment of rates over
which any regulatory commission has or will have jurisdiction after
Confirmation. (Katz Decl. P. 16.)
7. Section 1129(a)(7) -- Best Interests of Holders of Claims
and Equity Interests
45
Each holder of an impaired Claim or Equity Interest that has
not accepted the Plan will on account of such Claim or Equity Interest (as
applicable), as demonstrated by the liquidation analyses included as Exhibit B
to the Supplemental Disclosure Statement, receive or retain property under the
Plan having a value, as of the Effective Date, that is not less than the amount
that such holder would so receive or retain if the Debtors were liquidated under
chapter 7 of the Bankruptcy Code on the Effective Date. (Beckeman Decl. P. P.
5-8; Notice of Filing Updated Liquidation Analysis, D.I. 11854 (dated Mar. 26,
2007).)
8. Section 1129(a)(8) -- Acceptance of the Plan by Each
Impaired Class
a. Pursuant to section 1129(a)(8) of the Bankruptcy Code,
all Classes of Claims and Equity Interests in which there were Claims or Equity
Interests that voted on the Plan have either accepted the Plan or are
unimpaired. Specifically, the following Classes of Claims and Equity Interests
voted to accept the Plan by at least two-thirds in amount and more than one-half
in number of Claims (in accordance with section 1126(c) of the Bankruptcy Code),
or, in the case of Classes of Equity Interests, by at least two-thirds in amount
(in accordance with section 1126(d) of the Bankruptcy Code):
- ----------------------------------------------- --------------------------------
Category of Claims or Equity Interests Classes Voting to Accept
- -------------------------------------- ------------------------
the Plan
--------
- ----------------------------------------------- --------------------------------
Priority Claims (Class A) Classes 1A, 28A
- ----------------------------------------------- --------------------------------
Bank Claims (Class B) Classes 1B - 5B, 20B - 21B,
23B-33B
- ----------------------------------------------- --------------------------------
Surety Claims (Class C) Classes 1C - 6C, 20C - 33C
- ----------------------------------------------- --------------------------------
Noteholder Claims (Class D) Classes 1D - 5D, 20D - 21D,
23D - 33D
- ----------------------------------------------- --------------------------------
Convertible Subordinated Debenture Class 1F
Claims (Class F)
- ----------------------------------------------- --------------------------------
Unsecured Claims (Class H) Classes 1H - 43H, 47H-54H,
56H-58H, 61H-64H, 66H, 68H-69H,
71H-74H, 76H-82H, 84H, 86H
- ----------------------------------------------- --------------------------------
46
- ----------------------------------------------- --------------------------------
Asbestos Property Damage Claims (Class H.PD) Classes 6H.PD, 69H.PD, 80H.PD
- ----------------------------------------------- --------------------------------
Non-Priority Employee Benefit Claims (Class I) Classes 6I - 7I
- ----------------------------------------------- --------------------------------
Asbestos Personal Injury Claims (Class J) Classes 1J, 5J, 20J - 22J, 41J,
57J - 86J
- ----------------------------------------------- --------------------------------
Affiliate Claims (Class L) Classes 1L - 5L
- ----------------------------------------------- --------------------------------
Federal-Mogul Corporation Preferred Stock Class 1M
Interests (Class M)
- ----------------------------------------------- --------------------------------
Subordinated Securities Claims (Class N) Class 1N
- ----------------------------------------------- --------------------------------
Federal-Mogul Corporation Common Stock Class 1O
Interests (Class O)
- ----------------------------------------------- --------------------------------
Pneumo Parties Claims (Class Q) Classes 1Q, 5Q, 33Q, 37Q, 62Q
- ----------------------------------------------- --------------------------------
Accordingly, section 1129(a)(8) of the Bankruptcy Code has been satisfied with
respect to all such Classes of Claims and Equity Interests.
b. In addition to the foregoing, the following Classes of
Claims and Equity Interests are unimpaired under the Plan and, therefore, are
deemed to have accepted the Plan:
- ----------------------------------------------- --------------------------------
Class A Priority Claims Classes 6A through 19A, Class
33A, Classes 39A through 86A
- ----------------------------------------------- --------------------------------
Class E Other Secured Claims Classes 1E through 6E, Classes
23E through 32E
- ----------------------------------------------- --------------------------------
Class G On-Site Environmental Claims Classes 1G through 5G, Classes 11G
through 12G, Class 17G, Class
30G, Class 32G
- ----------------------------------------------- --------------------------------
Class I Non-Priority Employee Benefit Claims Classes 1I through 5I
- ----------------------------------------------- --------------------------------
Class K Bonded Claims Classes 1K through 5K
- ----------------------------------------------- --------------------------------
47
- ----------------------------------------------- --------------------------------
Class L Affiliate Claims Classes 6L through 19L, Classes
23L through 86L
- ----------------------------------------------- --------------------------------
Class P Equity Interests Classes 2P through 86P
- ----------------------------------------------- --------------------------------
(Plan Art. III.)
9. Section 1129(a)(9) -- Treatment of Claims Entitled to Priority
Pursuant to Section 507(a) of the Bankruptcy Code
a. The Plan also meets the requirements regarding the
payment of Administrative Claims and Priority Claims, as set forth in section
1129(a)(9) of the Bankruptcy Code. Specifically, Section 2.1 of the Plan
provides that, subject to the terms of that section, each holder of an Allowed
Administrative Claim against any of the Debtors shall receive Cash equal to the
Allowed Amount of its Administrative Claim on or as soon as practicable after
the Effective Date, except to the extent that any holder agrees to different
treatment. (Plan ss. 2.1.) In addition, Article III of the Plan provides that
holders of Allowed Priority Claims against each of the Debtors shall receive, on
or as soon as practicable after the Effective Date, either (i) Cash equal to the
Allowed Amount of such Priority Claim or (ii) such other treatment as may be
agreed between such holder and the relevant Debtor. (See, e.g., Plan ss.ss.
3.1.1, 3.2.1, 3.3.1.)
b. With respect to claims of a kind specified in section
507(a)(8) of the Bankruptcy Code ("Priority Tax Claims"), the Plan provides
that, except to the extent that any holder agrees to different treatment, each
holder of an Allowed Priority Tax Claim shall receive on account of such Claim
deferred cash payments, over a period not exceeding six (6) years after the date
of assessment of each such Claim, of a value, as of the Effective Date of the
Plan, equal to the Allowed Amount of such Priority Tax Claim. (Plan ss. 2.4.)
48
10. Section 1129(a)(10) -- Acceptance By at Least One Impaired,
Non-Insider Class
As indicated in the Ballot Certification and as reflected in
the record of the Confirmation Hearing, at least one Class of Claims or Equity
Interests that is impaired under the Plan has voted to accept the Plan,
determined without including the acceptance by any insider, with respect to all
Debtors under the Plan. (See Ballot Certification Ex. C-1.)
11. Section 1129(a)(11) -- Feasibility of the Plan
a. As demonstrated by the Debtors' financial projections
contained in Exhibit B to the Supplemental Disclosure Statement, the
Declarations, and the other evidence in the record, Confirmation of the Plan is
not likely to be followed by the liquidation, or the need for further financial
reorganization, of the Debtors, the Reorganized Debtors or any successor to the
Reorganized Debtors under the Plan. (Beckeman Decl. P. 10.) The Debtors'
management has asserted that the cash and liquidity available to them from their
business operations and the Exit Facilities will be sufficient to, among other
things, (i) refinance the DIP Facility as part of the Exit Facilities and (ii)
provide adequate working capital for the Debtors' businesses. (Katz Decl. P.
17.) Based upon all of the evidence in the record, including the Katz
Declaration, upon the Effective Date, the Reorganized Debtors will have
sufficient operating cash and liquidity to meet their financial obligations
under the Plan and to fund ongoing business operations. (Id.; Beckeman Decl. P.
P. 10-11; Henkin Decl. P. P. 13-14.)
b. The Plan additionally provides for a comprehensive
resolution of the Debtors' liability for Asbestos Personal Injury Claims through
the discharge of all such liability on the part of the Debtors and the
assumption of liability for all Asbestos Personal Injury Claims against the
Debtors by the Trust, subject in all cases to the provisions of Article IV of
the Plan. (Plan ss.ss. 4.2, 4.4, 4.5.) The assumption of liability for Asbestos
Personal Injury Claims by the Trust and the discharge of the Debtors from such
liability on the terms set forth in the Plan are essential to ensuring that
Confirmation of the Plan is not likely to be followed by the liquidation, or the
need for further financial reorganization, of the Debtors.
49
12. Section 1129(a)(12) -- Payment of Bankruptcy Fees
Section 7.2.4 of the Plan provides that 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, shall be paid on or before the
Effective Date. (Plan ss. 7.2.4.) After the Effective Date, the Plan provides
for the payment of all required fees pursuant to section 1930 of title 28 of the
United States Code or any other statutory requirement and compliance with all
statutory reporting requirements. (Plan ss. 8.14.13.)
13. Section 1129(a)(13) -- Retiree Benefits
The Plan provides that absent the termination of any
retiree benefit plans to which section 1114 of the Bankruptcy Code is applicable
in accordance with section 1114 of the Bankruptcy Code, and subject to the
provisions of Section 5.4.2 of the Plan (concerning the U.K. Debtors' pension
plans and Excluded Non-Qualified Pension Claims), payment of all retiree
benefits under retiree benefit plans to which section 1114 of the Bankruptcy
Code is applicable shall be continued after the Effective Date. (Plan ss. 5.4.)
Accordingly, the Plan complies with the provisions of section 1129(a)(13) of the
Bankruptcy Code.
14. Section 1129(d) -- Purpose of Plan
The principal purpose of the Plan is not avoidance of taxes or
avoidance of the requirements of section 5 of the Securities Act of 1933, and
there has been no filing by any governmental unit asserting such avoidance.
Accordingly, the Plan complies with the provisions of section 1129(d) of the
Bankruptcy Code. (See Katz Decl. P. 7 (stating that the principal purpose of the
Reorganization Cases has been to resolve the Debtors' asbestos liabilities while
de-leveraging the Debtors' balance sheet).)
50
F. THE TRUST AND THE THIRD PARTY INJUNCTION COMPLY WITH SECTION 524(g) OF
THE BANKRUPTCY CODE
The Plan comports with the Bankruptcy Code's requirements for
issuance of an injunction to enjoin entities from taking legal action to
recover, directly or indirectly, payment in respect of Asbestos Personal Injury
Claims against the Reorganized Debtors or their property.
1. The Trust Satisfies the Requirements of Section 524(g)(2)(B)(i)
of the Bankruptcy Code
a. The Third Party Injunction is to be implemented in
connection with the Trust, which is created pursuant to the Plan. (Plan ss.ss.
4.1, 9.3.2.)
b. Subject to the provisions of Article IV of the Plan,
the Trust is to assume the liabilities of each and all of the Debtors that has a
Class of Asbestos Personal Injury Claims ascribed to it under the Plan (the
"Asbestos Debtors"). (Green Decl. P. 26.) Each of the Asbestos Debtors has been
named as a defendant 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. (Conroy Decl. P. P. 5-33;
Polzin Decl. P. P. 5-15; see also ss. I.B, supra.) Accordingly, the Plan
satisfies section 524(g)(2)(B)(i)(I) of the Bankruptcy Code.
c. The Trust is to be funded by the Trust Assets, which
include, inter alia (and subject to the provisions of the Plan): (i) the
Reorganized Federal-Mogul Class B Common Stock, which constitutes securities of
one of the Debtors involved in the Plan; (ii) the Asbestos Insurance Actions,
the Asbestos Insurance Action Recoveries attributable to any Asbestos Personal
Injury Claims, and the proceeds of any Asbestos In-Place Insurance Coverage;
(iii) the Asbestos Insurance Settlement Agreements attributable to any Asbestos
51
Personal Injury Claims, other than such agreements attributable to the Hercules
Policy, (iv) the Trust Causes of Action; and (v) any and all other funds,
proceeds, or other consideration otherwise contributed to the Trust pursuant to
the Plan and/or the Confirmation Order. (Plan ss.ss. 1.1.218 (definition of
Trust Assets), 4.3; Green Decl. P. P. 19, 30.) Under the Certificate of
Incorporation for Reorganized Federal-Mogul, the holders of the Reorganized
Federal-Mogul Class B Common Stock have the right to receive a proportionate
share of the distributions made to holders of common stock in Reorganized
Federal-Mogul. (Plan Art. VIII & Ex. 8.3.12(1) (certificate of incorporation for
Reorganized Federal-Mogul).) Accordingly, the Plan satisfies section
524(g)(2)(B)(i)(II) of the Bankruptcy Code.
d. The Reorganized Federal-Mogul Class B Common Stock to
be distributed to the Trust pursuant to the Plan comprises a majority (i.e.,
50.1%) of the voting shares of Reorganized Federal-Mogul. (Plan ss. 8.3.4.)
Reorganized Federal-Mogul is the parent corporation of all of the other Debtors.
(See Form 10-K for Federal-Mogul Corporation for the year ending December 31,
2006 (PS-173) at 4.) Accordingly, the Trust is to receive a majority of the
voting shares of either "each such Debtor" (in the case of Reorganized
Federal-Mogul) or "the parent corporation of each such Debtor" (in the case of
all other Debtors), as provided in clauses (aa) and (bb) of section
524(g)(2)(B)(i)(III) of the Bankruptcy Code, and the requirements of that
section are therefore satisfied.
e. The Trust is to use the Trust Assets and the income
therefrom to pay the expenses of the Trust and Asbestos Personal Injury Claims
(including Demands) (Plan ss.ss. 1.1.218 (definition of Trust Assets), 4.2.1;
Green Decl. P. 26.) Accordingly, the Plan satisfies section 524(g)(2)(B)(i)(IV)
of the Bankruptcy Code.
2. The Trust Satisfies the Requirements of Section 524(g)(2)(B)(ii)
of the Bankruptcy Code
52
a. The Findings of Fact set forth in Section I.B hereof
are incorporated herein by reference.
b. Satisfaction of Section 524(g)(2)(B)(ii)(I)
Requirements. Based on the long latency period of asbestos-related diseases and
the substantial number of asbestos personal injury claims that had been asserted
against the Asbestos Debtors prior to the Petition Date and the substantial
number of such claims that remained unresolved on the Petition Date, the
Debtors, either directly or indirectly, likely would be subject to substantial
future Demands for payment arising out of the same or similar conduct or events
that gave rise to the asbestos personal injury claims that were pending against
the Asbestos Debtors on the Petition Date and that are addressed by the Third
Party Injunction. (Conroy Decl. P. P. 5-29; Polzin Decl. P. P. 5-15.) In the
case of the Fel-Pro Claims and the FMC/Vellumoid Claims, the only streams of the
Debtors' asbestos liabilities as to which any of the Plan Objectors have
challenged whether the requirements of section 524(g)(2)(B)(ii)(I) are
satisfied, this finding is reinforced by the projections of B. Thomas Florence,
Ph.D., who projected that approximately 2,634 to 8,065 Fel-Pro Claims were
likely to be asserted over the next 42 years, and who further projected that
approximately 200,000 to 500,000 FMC/Vellumoid Claims were likely to be asserted
over the next 40 years. (Florence Fel-Pro Decl. P. 20, Ex. A at Table 3;
Florence Vel. Decl. P. 21 & Table 1.)
c. Satisfaction of Section 524(g)(2)(B)(ii)(II)
Requirements. In light of (i) the long latency period of asbestos-related
diseases, (ii) the inherent uncertainties regarding asbestos-related claims and
demands, and (iii) the substantial number and amounts of asbestos-related
personal injury and wrongful death claims asserted against the Debtors prior to
53
the Petition Date, the actual number and amounts of such future Demands to which
the Debtors would be subject, and the timing of assertion of such Demands,
cannot be determined.
d. Satisfaction of Section 524(g)(2)(B)(ii)(III)
Requirements. The pursuit of Demands against the Debtors outside the procedures
prescribed by the Plan (specifically, the assumption by the Trust of all of the
Debtors' liabilities for Asbestos Personal Injury Claims and Demands (subject to
Article IV of the Plan) and the processing and payment of Asbestos Personal
Injury Claims and Demands as provided in Article IV of the Plan and the Asbestos
Personal Injury Trust Distribution Procedures), would be likely to threaten the
Plan's purpose to deal equitably with Asbestos Personal Injury Claims and
Demands. (Katz Decl. P. 18.) Specifically, the pursuit of Demands outside the
procedures prescribed by the Plan would present an ongoing threat to the
successful reorganization of the Debtors, which could result in reduced
recoveries to holders of Asbestos Personal Injury Claims and Demands as a result
of additional future restructuring proceedings. (Id.)
In addition, the pursuit of Demands outside of the
procedures prescribed by the Plan would likely threaten the equitable treatment
of Asbestos Personal Injury Claims (including Demands) by resulting in the
consumption of the Debtors' assets by those claimants who first file suit,
potentially leaving nothing for future Demand holders. (Green Decl. P. P. 43,
46.) Given that the Debtors have been subject to substantial past liabilities
for Asbestos Personal Injury Claims (Conroy Decl. P. P. 5-29; Polzin Decl. P. P.
5-15), and because it is impossible to predict with reliability the outcome of
future litigation relating to Asbestos Personal Injury Claims and Demands, there
is a significant risk that, absent implementation of the procedures described in
the Plan to address Asbestos Personal Injury Claims and Demands, the Debtors
would be rendered unable to satisfy Demands.
54
Furthermore, the District Court has determined in the
case of Asbestos Personal Injury Claims and Demands against T&N and its United
Kingdom subsidiaries that the majority of those Debtors' liabilities for
Asbestos Personal Injury Claims and Demands relates to Demands. See
Federal-Mogul, 330 B.R. at 158-59. In the case of Fel-Pro Claims and
FMC/Vellumoid Claims, the Plan Proponents have demonstrated that the number of
Fel-Pro Claims and FMC/Vellumoid Claims likely to be asserted in the future
exceeds the number of those pending against Fel-Pro and Federal-Mogul,
respectively, as of the Petition Date, with between 2,634 to 8,065 future
Fel-Pro Claims likely to be asserted and 200,000 and 500,000 future
FMC/Vellumoid Claims likely to be asserted. (Florence Fel-Pro Decl. P. 20, Ex. A
at Table 3; Florence Vel. Decl. P. 21 and Table 1.)
Also with respect to the Fel-Pro Claims and the
FMC/Vellumoid Claims, the Plan Proponents have demonstrated that the
post-Effective Date business of the Reorganized Debtors would be harmed, in the
form of potentially higher borrowing costs, more restrictive terms from vendors,
and similar costs, if the Fel-Pro Claims and the FMC/Vellumoid Claims were not
addressed by the procedures prescribed by the Plan. (7/10/07 Hr'g Tr. 105:7-21;
143:20 - 146:7 (Katz).) The Plan Proponents further demonstrated that the
financial projections prepared for the Debtors in connection with the Plan
assumed that all Asbestos Personal Injury Claims against the Debtors would be
treated as provided in the Plan (i.e., assumed by the Trust in accordance with
the provisions of the Plan). (6/18/07 Hr'g Tr. 190:13-16 (Henkin).) Pursuit of
the Fel-Pro Claims and FMC/Vellumoid Claims outside of the Plan's procedures
thus threatens the financial health of the Reorganized Debtors and,
consequently, the purposes of the Plan.
e. Satisfaction of Section 524(g)(2)(B)(ii)(IV)
Requirements. The terms of the Third Party Injunction, including any provisions
barring actions against third parties (i.e., the Protected Parties) pursuant to
55
section 524(g)(4)(A) of the Bankruptcy Code, are set out in conspicuous language
in the Plan and the Disclosure Statement. (Plan ss.ss. 9.3.2; Disclosure
Statement ss. VI.F.)
The Debtors designated, in Class J against each of the
Asbestos Debtors (Class 1J, Classes 5J through 7J, Classes 11J through 15J,
Class 17J, Classes 19J through 22J, Class 41J, and Classes 57J through 86J)
separate Classes of Asbestos Personal Injury Claims, which Claims are to be
addressed by the Trust. For each such Class of Asbestos Personal Injury Claims,
over 75 percent of the holders of Asbestos Personal Injury Claims voted in favor
of the Plan. (Ballot Certification Ex. C-1.)
f. Satisfaction of Section 524(g)(2)(B)(ii)(V)
Requirements. As set forth in Article IV of the Plan and Exhibit 1.1.217 to the
Plan (comprising the Trust Agreement and the Asbestos Personal Injury Trust
Distribution Procedures), all Asbestos Personal Injury Claims shall be
determined and paid pursuant to the terms of the Plan, the Trust Agreement and
the Asbestos Personal Injury Trust Distribution Procedures. (Green Decl. P. P.
26-27.) The Trust Agreement and the Asbestos Personal Injury Trust Distribution
Procedures provide that the Trust shall be administered by the Trustees (subject
to the overall supervision of the TAC and the Future Claimants Representative),
and shall 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 Asbestos Personal Injury Claims
and Demands, or other comparable mechanisms, that provide reasonable assurance
that the Trust will value, and be in a financial position to pay, present
Asbestos Personal Injury Claims and Demands that involve similar claims in
substantially the same manner. (Green Decl. P. P. 38-42; Plan Art. IV; Plan Ex.
1.1.217 (Asbestos Personal Injury Trust Distribution Procedures).)
56
In the case of the Fel-Pro Claims and the FMC/Vellumoid
Claims, the Plan and the Asbestos Personal Injury Trust Distribution Procedures
provide for the Trust to assume liability for such claims and then for the Trust
to tender such claims to the insurer or insurers who have provided coverage for
claims arising out of such exposure in accordance with the terms of the Plan,
the Trust Agreement, and the Asbestos Personal Injury Trust Distribution
Procedures. (Plan ss. 4.2, Plan Ex. 1.1.217 (Asbestos Personal Injury Trust
Distribution Procedures) ss. 5.11(b); Green Decl. P. 34.) The Plan Proponents
projected that the insurance assets available for the payment of Fel-Pro Claims
at 72% to 82% of historical liquidated values and FMC/Vellumoid Claims at their
full liquidated values thereby affording substantially similar treatment to
Fel-Pro Claims and FMC/Vellumoid Claims, respectively. (Florence Fel-Pro Decl.
P. 20, Florence Vel. Decl. P. 22; Green Decl. P. P. 34-36.) The Trust Agreement
and Asbestos Personal Injury Trust Distribution Procedures expressly provide for
the possible future implementation of additional mechanisms, such as structured,
periodic or supplemental payments, pro rata distributions, matrices or periodic
review of estimates of the numbers and values of Fel-Pro Claims and/or
FMC/Vellumoid Claims, to ensure that the Trust is able to continue to address
present Claims and future Demands in a similar manner over its anticipated
decades-long lifespan. (Plan Ex. 1.1.217; Green Decl. P. 42.) Accordingly, the
Plan satisfies section 524(g)(2)(B)(ii)(V) of the Bankruptcy Code.
3. The Extension of the Third Party Injunction to Third Parties Is
Appropriate Pursuant to Section 524(g)(4) of the Bankruptcy Code
a. Sections 1.1.178 and 9.3.2 of the Plan contemplate
that, in addition to protecting the Debtors, the Reorganized Debtors, their
non-Debtor Affiliates, the Affiliated Subsidiaries, and all of their respective
past and present officers, directors and employees, the Third Party Injunction
57
will be extended to protect the following non-debtor-related parties and third
parties pursuant to sections 524(g)(3) and 524(g)(4)(A)(ii) of the Bankruptcy
Code:
i. the Noteholders, the holders of Bank Claims, and the
Sureties, together with their respective successors, past and present officers,
directors, and employees, in each case limited to such party's capacity as such,
in accordance with section 524(g)(4)(A)(ii)(IV) of the Bankruptcy Code;
ii. any Entity which, pursuant to the Plan or after the
Effective Date, becomes a direct or indirect transferee of, or successor to, any
assets of the Debtors, Reorganized Federal-Mogul or the Trust, but only to the
extent that a claim or liability is asserted against such Entity on account of
its status as such transferee or successor, in accordance with section
524(g)(3)(A)(ii) of the Bankruptcy Code;
iii. any Entity that, pursuant to the Plan or after the
Effective Date, makes a loan to the Debtors, Reorganized Federal-Mogul, or the
Trust, but only to the extent that liability is asserted to exist by reason of
such lending relationship or to the extent any Lien created in connection with
such a loan is sought to be challenged or impaired, in accordance with section
524(g)(3)(a)(iii) of the Bankruptcy Code;
iv. each Settling Asbestos Insurance Company identified
on Exhibit 1.1.198 to the Plan; provided, however, that in the event a Settling
Asbestos Insurance Company enters into any Asbestos Insurance Settlement
Agreement(s) that cover less than all Asbestos Insurance Policies applicable to
such Settling Asbestos Insurance Company, such Settling Asbestos Insurance
Company shall be a Protected Party only with respect to those Asbestos Insurance
Policies as to which it has entered into an Asbestos Insurance Settlement
Agreement or Agreements, in accordance with section 524(g)(4)(A)(ii)(III) of the
Bankruptcy Code; and
58
v. Dan=Loc, in accordance with section 524(g)(4)(A)(ii)(I)
and (IV) of the Bankruptcy Code.
b. Each Protected Party is identifiable from the terms
of the Third Party Injunction by name or as part of an identifiable group. (Plan
ss. 9.3.2.)
c. Identifying or describing each Protected Party in the
Third Party Injunction is fair and equitable with respect to persons that might
subsequently assert Demands against each such Protected Party, in light of the
benefits provided, or to be provided, to the Trust by or on behalf of any such
Protected Party. (Green Decl. P. 44.) The Plan Proponents demonstrated that
holders of Bank Claims, the Sureties, and the holders of Noteholder Claims have
made substantial contributions to the Debtors' reorganization and to the Trust
through accepting significant discounts on their claims as a result of accepting
the treatment afforded by the Plan. (Beckeman Decl. P. P. 17-22.) The Settling
Asbestos Insurance Companies either have made or will make substantial
contributions to the Trust in the form of payments of insurance proceeds under
the settlement agreements that must be entered into in order to become a
Settling Asbestos Insurance Company (Plan ss. 1.1.198 (definition of Settling
Asbestos Insurance Company).) The Plan Proponents have also demonstrated that
Dan=Loc has agreed to provide significant benefits to the Debtors and the Trust
in order to be named in the Third Party Injunction, which no Plan Objector has
contested. (Harn Decl. P. 12.) Specifically, Dan=Loc has agreed to release all
claims (other than certain Asbestos Property Damage Claims) against the Debtors,
their non-Debtor Affiliates, and the Released Parties, both in the form of a
$3.6 million liquidated claim and future claims under indemnity agreements that
are asserted to run through 2024. (Id.) These released claims include, among
59
other things, any Indirect Asbestos Personal Injury Claims Dan=Loc might
otherwise have asserted against the Trust. (Id.) Accordingly, the extension of
the Third Party Injunction to third parties is consistent with section
524(g)(4)(A)(ii) of the Bankruptcy Code.
4. The Interests of Future Asbestos Claimants were
Properly Represented by the Future Claimants Representative
In accordance with section 524(g)(4)(B)(i) of the
Bankruptcy Code, the Future Claimants Representative was appointed as part of
the proceedings leading to the issuance of the Third Party Injunction for the
purpose of protecting the rights of persons that might subsequently assert
Demands of the kind that are addressed by the Third Party Injunction and
channeled to and assumed by the Trust. (See Order Appointing Legal
Representative for Future Claimants, D.I. 1222 (dated Feb. 11, 2002); Green
Decl. P. 13.) The Future Claimants Representative has in all respects fulfilled
his duties, responsibilities, and obligations as the futures representative in
accordance with section 524(g) of the Bankruptcy Code.
5. Entry of the Third Party Injunction Is Fair and
Equitable with Respect to Future Asbestos Claimants
The Trust is to use its assets and income to pay
Asbestos Personal Injury Claims. (Plan ss. 4.2.1.) Each of the Protected Parties
has made substantial contributions to the consideration to be distributed to the
Trust, either directly or through the consensual resolution of claims against
the Debtors that have made the Plan (including the creation of the Trust)
feasible and have increased the value of the Reorganized Federal-Mogul Common
Stock to be contributed to the Trust. (See ss. I.F.3.c, supra; Beckeman Decl. P.
P. 17-22; Harn Decl. P. 12.) In light of the substantial contributions to be
made to the Trust by or on behalf of the Protected Parties, entry of the Third
Party Injunction, and the naming of the Protected Parties therein, respectively,
is fair and equitable with respect to persons that might subsequently assert
future asbestos-related Demands. (Green Decl. P. 44.) Accordingly, the Plan
satisfies section 524(g)(4)(B)(ii) of the Bankruptcy Code.
60
G. THE SUPPLEMENTAL INJUNCTION IS APPROPRIATE AND NECESSARY TO SUPPLEMENT
THE INJUNCTIVE EFFECT OF THE DISCHARGE AS PROVIDED IN SECTIONS 1141
AND 524 OF THE BANKRUPTCY CODE
In order to preserve and promote the settlements contemplated
by and provided for in the Plan, and to supplement, where necessary, the
injunctive effect of the discharge provided in sections 1141 and 524 of the
Bankruptcy Code and as described in Article IX of the Plan, Section 9.3.1 of the
Plan provides for the Supplemental Injunction. As described in more detail in
Section 9.3.1 of the Plan, the Supplemental Injunction enjoins all Entities that
hold or assert claims, demands or causes of action against any of the Released
Parties relating in any way to any Claim against or Equity Interest in any of
the Debtors. The issuance of the Supplemental Injunction is necessary to
preserve and promote the settlements contemplated by and provided for in the
Plan, and to supplement, where necessary, the injunctive effect of the discharge
provided in sections 1141 and 524 of the Bankruptcy Code, and hence issuance of
the Supplemental Injunction is appropriate.
H. THE ASBESTOS INSURANCE ENTITY INJUNCTION SATISFIES THE REQUIREMENTS OF
SECTION 105(a) OF THE BANKRUPTCY CODE
Pursuant to section 105(a) of the Bankruptcy Code, in order to
protect the Trust and preserve the Trust Assets, Section 9.3.3 of the Plan
provides for the Asbestos Insurance Entity Injunction with respect to certain
actions against Asbestos Insurance Companies. As described in more detail in
Section 9.3.3 of the Plan, the Asbestos Insurance Entity Injunction enjoins all
Entities (except the Trust and/or the Reorganized Debtors) that hold or assert
61
claims, demands, or causes of action related in any way to any Asbestos Personal
Injury Claims or Demands from taking any actions to recover on such claims,
demands, or causes of action from any Asbestos Insurance Company. The issuance
of the Asbestos Insurance Entity Injunction is necessary to facilitate the
Plan's provisions for the treatment of Asbestos Personal Injury Claims and
demands and, accordingly, the Asbestos Insurance Entity Injunction is
appropriate under section 105(a) of the Bankruptcy Code. (Green Decl. P.
45.)
I. COMPREHENSIVE SETTLEMENT OF CLAIMS AND CONTROVERSIES
1. Based upon the terms of the Plan and Plan Documents,
as well as the representations and arguments of counsel for the Plan Proponents,
the Declarations and all other testimony either actually given or proffered at
the Confirmation Hearing or prior hearings and the full record of these
Reorganization Cases, the findings and conclusions of which are hereby
incorporated by reference as if fully set forth herein, the Bankruptcy Court
finds that, pursuant to section 1123(b) of the Bankruptcy Code and Bankruptcy
Rule 9019 and in consideration of the distributions and other benefits provided
under the Plan, the provisions of the Plan, including, without limitation, the
injunctions, releases, exculpations, indemnifications and discharges set forth
in Sections 5.6, 9.1, 9.2, 9.3, and 9.6 of the Plan, constitute a good faith
compromise and settlement of all claims or controversies relating to the rights
that a holder of a Claim or Equity Interest may have with respect to any Claim,
Asbestos Personal Injury Claim or Equity Interest or any distribution to be made
pursuant to the Plan on account of any Allowed Claim, Asbestos Personal Injury
Claim or Equity Interest. (Katz Decl. P. P. 13, 18, 20, 21, 24.)
2. Moreover, based upon the Plan Supporter Declarations
and the representations and arguments of counsel for the Plan Proponents and all
62
other testimony either actually given or proffered at the Confirmation Hearing
or prior hearings relating to the negotiations leading to, among other things,
the Surety Claims Settlement Agreement, the U.K. Global Settlement Agreement,
the Plan B Settlement Agreement, and ultimately the Plan, the Plan constitutes a
fair and reasonable, good faith settlement and compromise of all claims or
controversies relating to the rights of holders of Claims against and Equity
Interests in the Debtors. (Katz Decl. P. 10, 13, 21.)
3. Finally, each of the injunctions, releases,
exculpations, indemnifications and discharges set forth in Sections 5.6, 9.1,
9.2, 9.3, and 9.6 of the Plan is implemented in accordance with applicable law,
is consensual, and/or is supported by substantial consideration. (Beckeman Decl.
P. P. 17-22; Katz Decl. P. 24; Green Decl. P. P. 44-45.)
J. SATISFACTION OF CONDITIONS TO CONFIRMATION
1. Section 7.1 of the Plan contains conditions precedent
to Confirmation that must be satisfied or duly waived by the Plan Proponents.
Pursuant to these Findings of Fact and Conclusions of Law and the Confirmation
Order, each of the conditions precedent set forth in Section 7.1.1 through and
including Section 7.1.3 of the Plan has been satisfied or duly waived, subject
to the affirmance of the Confirmation Order by the District Court. In addition,
by virtue of the Bankruptcy Court's approval of the Plan B Settlement, the
condition precedent set forth in Section 7.1.4 of the Plan has been satisfied or
duly waived, subject to the affirmance of the Confirmation Order by the District
Court with respect to the Plan B Settlement solely in the event that the
District Court rules on the Plan B Settlement.
2. Concerning the establishment of the Trust and the
issuance of the Supplemental Injunction, the Third Party Injunction, and the
Asbestos Insurance Entity Injunction, among other things, the Bankruptcy Court
specifically finds:
63
a. The Supplemental Injunction, the Third Party
Injunction, and the Asbestos Insurance Entity Injunction are to be implemented
in connection with the Trust. (Plan ss.ss. 4.1, 9.3.2.)
b. As of the Petition Date, each of the Debtors that has
a Class J - Asbestos Personal Injury Claims Class under the Plan had been named
as a defendant 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. (Conroy Decl. P. P. 5-29; Polzin
Decl. P. P. 5-15; see also ss.ss. I.B, I.F.1.b, supra.)
c. Subject to Article IV of the Plan, upon Confirmation,
the Trust shall assume the liabilities of the Debtors with respect to Asbestos
Personal Injury Claims. (Green Decl. P. 26.)
d. The Trust will be funded in part by the Reorganized
Federal-Mogul Class B Common Stock, and all rights to receive dividends or other
distributions on account of such stock. (Plan ss.ss. 1.1.218 (definition of
Trust Assets), 4.3, Ex. 8.3.12(1) (Certificate of Incorporation for Reorganized
Federal-Mogul); Green Decl. P. P. 19, 30.)
e. On the Effective Date, the Trust will own a majority
of the voting shares of Reorganized Federal-Mogul; specifically, the Reorganized
Federal-Mogul Class B Common Stock, which constitutes 50.1% of the common stock
of Reorganized Federal-Mogul. (Plan ss. 4.3.)
f. The Trust will use its assets or income to pay
Asbestos Personal Injury Claims and Demands. (Plan ss. 4.2.)
64
g. The Debtors are likely to be subject to substantial
future Demands for payment arising out of the same or similar conduct or events
that gave rise to the Asbestos Personal Injury Claims that are addressed by the
Supplemental Injunction, the Third Party Injunction, and the Asbestos Insurance
Entity Injunction. (See ss. I.F.2.b, supra.)
h. The actual amounts, numbers and timing of future
Demands cannot be determined. (See ss. I.F.2.c, supra.)
i. Pursuit of Asbestos Personal Injury Claims, including
Demands, outside the procedures prescribed by the Plan is likely to threaten the
Plan's purpose to deal equitably with Asbestos Personal Injury Claims and
Demands. (See ss. I.F.2.d, supra.)
j. The terms of the Supplemental Injunction, the Third
Party Injunction, and the Asbestos Insurance Entity Injunction, including any
provisions barring actions against third parties, are set forth in conspicuous
language in the Plan and in the Disclosure Statement previously approved by this
Court. (Plan ss.ss. 9.3.1, 9.3.2, 9.3.3; Disclosure Statement ss. VI.F.3.)
k. Pursuant to court orders or otherwise, the Trust
shall operate through mechanisms, such as structured, periodic or supplemental
payments, pro rata distributions, matrices or periodic review of estimates of
the numbers and value of Asbestos Personal Injury Claims or other
comparable mechanisms, that provide reasonable assurance that the Trust will
value, and be in a financial position to pay, present Asbestos Personal Injury
Claims and future Asbestos Personal Injury Claims and Demands that involve
similar Claims in substantially the same manner. (Plan Ex. 1.1.217 (Asbestos
Personal Injury Trust Distribution Procedures); Green Decl. P. P. 38-42; Plan
Art. IV.)
65
l. The Future Claimants Representative was appointed as
part of the proceedings leading to the issuance of the Supplemental Injunction,
the Third Party Injunction, and the Asbestos Insurance Entity Injunction for the
purpose of, among other things, protecting the rights of persons that might
subsequently assert Demands of the kind that are addressed in the Supplemental
Injunction, the Third Party Injunction, and the Asbestos Insurance Entity
Injunction and transferred to and assumed by the Trust. (See Order Appointing
Legal Representative for Future Claimants, D.I. 1222 (dated Feb. 11, 2002);
Green Decl. P. 13.)
m. The inclusion of each Debtor or beneficiary within
the protection afforded by the Supplemental Injunction, the Third Party
Injunction, and the Asbestos Insurance Entity Injunction, as applicable, is fair
and equitable with respect to the persons that might subsequently assert Demands
against each such Debtor or beneficiary in light of the benefits provided, or to
be provided, to the Trust on behalf of such Debtor or such beneficiary. (See
ss.ss. I.F.5, I.G, I.H supra.)
n. The Plan complies in all respects with section 524(g)
of the Bankruptcy Code. (See ss. I.F, supra.)
o. The Supplemental Injunction, the Third Party
Injunction, and the Asbestos Insurance Entity Injunction are essential to the
Plan and the Debtors' reorganization efforts. (Katz Decl. P. P. 18, 24.)
K. SPECIFIC FINDINGS OF FACT RELATING TO SETTLEMENT OF ASBESTOS PROPERTY
DAMAGE CLAIMS FILED BY SPEIGHTS & RUNYAN
The Plan Proponents seek to implement through the Plan a
settlement with the holders of Asbestos Property Damage Claims filed by the law
firm of Speights & Runyan (the "Speights & Runyan Settlement"). The Speights &
66
Runyan Settlement provides in summary that $36.2 million will be allocated under
the Plan and under the Settlement Agreement attached to the Plan as Exhibit 8.26
to satisfy approximately 886 claims. (Plan Ex. 8.26.) Speights & Runyan has
asserted that the total damages relating to such sites is over $1 billion.
(Fisher Decl. P. 3.) The Debtors analyzed the Speights & Runyan claims for
settlement purposes and concluded that, while there may have been meritorious
defenses to many, if not all of the claims, an appropriate valuation for the
claims for settlement purposes was $27 million to $54 million. (Fisher Decl. P.
13.) The Debtors additionally assessed their likely costs in litigating the
Speights & Runyan Asbestos Property Damage Claims, and concluded that litigation
costs of $5 million to $10 million could be incurred. (Fisher Decl. P. 14.) The
Debtors concluded based on such considerations that the proposed $36.2 million
Speights & Runyan Settlement was fair, reasonable and appropriate, both with
respect to the resolution of such claims and the valuation of such claims as
compared to those held by other claimants. (Fisher Decl. P. 15.)
L. SPECIFIC FINDINGS OF FACT RELATING TO PLAN B SETTLEMENT
The Plan B Settlement is one of two alternative
settlements (together with the Plan A Settlement) proposed by the Plan
Proponents for the resolution of the bulk of the claims of Cooper, Pneumo Abex,
and their affiliates.(9) (Supp. Disclosure Statement ss. III.D.3 (describing
Plan B Settlement); Green Decl. P. 24.) Reduced to summary form, the Plan B
Settlement provides that, if implemented, the Pneumo Parties will receive $140
million ($138 million to be paid to Cooper and $2 million to be paid to Pneumo
Abex) from funds that would otherwise go to the Trust, in full and complete
satisfaction of the claims held by the Pneumo Parties in respect of Pneumo
Asbestos Claims. (Plan Ex. 8.22 (Plan B Settlement Agreement); Green Decl. P.
24.) The claims of Cooper alone to be satisfied by the Plan B Settlement have
been asserted in aggregate amount (covering both present and future claims) in
excess of $480 million. (Schumacher Decl. P. 40.)
(9) At the request of the Court, the Plan Proponents, Cooper and Pneumo Abex
have submitted separate findings of fact and conclusions of law respecting the
Plan A Settlement. (See Plan A Settlement Findings and Conclusions).
67
The Plan B Settlement is proposed in good faith. The
Plan, including the Plan B Settlement, was approved by overwhelming majorities
of the holders of Asbestos Personal Injury Claims. (Ballot Certification Ex. C-1
(showing greater than 90% acceptance of the Plan among all Classes of Asbestos
Personal Injury Claims at all Debtors); Lockwood Decl. P. 4.) In addition, the
Debtors, through their financial advisors, AlixPartners, analyzed the assets of
both the Debtors and certain non-Debtor Affiliates that could be available to
satisfy any claims asserted by Cooper, and concluded that even if the number of
entities Cooper could proceed against was limited, the assets available to
satisfy Cooper's claims were likely to be in excess of the $140 million
settlement amount payable under the Plan B Settlement. (Beckeman Decl. P. P.
11-16.) The Plan B Settlement was the product of protracted, detailed and
extensive arms-length negotiations under the auspices of the Court-appointed
mediator, Professor Francis E. McGovern (McGovern Decl. P. 10.) Based on these
facts, Professor McGovern, as well as the Debtors, the Asbestos Claimants
Committee, and the Future Claimants Representative, concluded that the Plan B
Settlement is a fair and reasonable resolution of the Pneumo Parties Claims
against the Debtors, and further concluded that the Plan B Settlement should be
approved. (McGovern Decl. P. 14; Lockwood Decl. P. 5; Green Decl. P. 25; Katz
Decl. P. 10.)
As a result of the foregoing, the Plan B Settlement is
fair, reasonable and adequate within the standards set forth in Protective Comm.
for Indep. Stockholders of TMT Ferry, Inc. v. Anderson, 390 U.S. 414, 424
(1968); Myers v. Martin (In re Martin), 91 F.3d 389, 393 (3d Cir. 1996).
68
For the avoidance of doubt, the findings of fact and/or
conclusions of law set forth in this Section I.L relate solely to the Plan B
Settlement; the findings of fact and/or conclusions of law concerning the
proposal of the Plan A Settlement in good faith are set forth exclusively in the
Plan A Settlement Findings and Conclusions.
M. SPECIFIC FINDINGS OF FACT ON INSURANCE NEUTRALITY OF THE PLAN
The Plan contains various detailed provisions that are
intended to render the Plan "insurance neutral." (See, e.g., Plan ss. 10.4.)
Specifically, Section 10.4.1 of the Plan, as well as numerous accompanying
provisions, apply to all Asbestos Insurance Companies other than Certain
Underwriters at Lloyd's, London and Certain London Market Companies ("London
Market Insurers"). Those provisions were negotiated by and among the Debtors,
the Asbestos Claimants Committee, the Future Claimants Representative, and the
representatives of a number of the Asbestos Insurance Companies, more than
thirty (30) of which ultimately signed a stipulation agreeing to limit their
objections to Confirmation of the Plan and their attendant discovery concerning
Confirmation as a result of the Plan's inclusion of such language (the
"Insurance Neutrality Stipulation"). (Order (I) Approving Stipulation Regarding
Plan Modifications and Potential Confirmation Objections and Plan-Related
Discovery by Certain Insurance Companies, (II) Staying Discovery Requests by
Certain Insurance Companies, and (III) Granting Related Relief, D.I. 10606
(Sept. 19, 2006).)(10) The provisions of Section 10.4 and its accompanying
provisions, which were appended to the Insurance Neutrality Stipulation (in
forms that have been slightly modified in the Plan) are modeled upon the
insurance neutrality provisions contained in the Plan confirmed by this Court in
- ------------------------
(10) Certain others of the Asbestos Insurance Companies did not sign the
Insurance Neutrality Stipulation, and objected to Confirmation of the Plan on
numerous grounds including, inter alia, that the Plan was not, in their view,
insurance neutral.
69
In re Kaiser Aluminum Corp., 02-10429 (JKF) (Bankr. D. Del. Feb. 6, 2005).
Section 10.4.2 of the Plan, which applies only to London
Market Insurers, is modeled upon the insurance neutrality provisions contained
in the plan of reorganization approved by the Third Circuit as "insurance
neutral" in In re Combustion Engineering, Inc., 391 F.3d 190 (3d. Cir. 2004).
The Plan Proponents and London Market Insurers agreed that as a result of the
inclusion of the provisions of Section 10.4.2 in the Plan, London Market
Insurers would limit its objections to confirmation of the Plan solely to the
issue of whether, under the Bankruptcy Code as a matter of law, the assignment
of any Asbestos Insurance Policies or other rights and obligations with respect
to, arising under, or related to Asbestos Insurance Policies subscribed by
London Market Insurers is valid and enforceable against London Market Insurers
notwithstanding (i) anti-assignment provisions in or incorporated in the
Asbestos Insurance Policies subscribed by London Market Insurers and (ii)
applicable state law. (Certification of Counsel with Respect to Stipulation by
and Between (I) Plan Proponents and (II) Certain Underwriters at Lloyd's, London
and Certain London Market Companies, D.I. 13062, Ex. 1 (July 24, 2007).)
II. CONCLUSIONS OF LAW
A. JURISDICTION AND VENUE
The Bankruptcy Court and the District Court have
jurisdiction over this matter pursuant to 28 U.S.C. ss.ss. 157 and 1334.
Confirmation of the Plan is a core proceeding pursuant to 28 U.S.C. ss.
157(b)(2). Each of the Debtors was and is qualified to be a debtor under section
109 of the Bankruptcy Code. Venue of the Chapter 11 Cases in the United States
Court for the District of Delaware was proper as of the Petition Date, pursuant
to 28 U.S.C. ss. 1408, and continues to be proper. The Bankruptcy Court has
70
jurisdiction to enter a final order with respect thereto, except to the extent
of the requirements of section 524(g) of the Bankruptcy Code for issuance or
affirmance of the Confirmation Order by the District Court.
B. MODIFICATIONS TO THE PLAN
The Modifications do not materially and adversely affect
or change the treatment of any Claim against or Equity Interest in any Debtor.
Pursuant to section 1127(b) of the Bankruptcy Code and Bankruptcy Rule 3019, the
Modifications do not require additional disclosure under section 1125 of the
Bankruptcy Code or the resolicitation of acceptances or rejections of the Plan
under section 1126 of the Bankruptcy Code, nor do they require that holders of
Claims against or Equity Interests in the Debtors be afforded an opportunity to
change previously cast acceptances or rejections of the Plan as filed with the
Bankruptcy Court. Disclosure of the Modifications constitutes due and sufficient
notice thereof under the circumstances of the Reorganization Cases. Accordingly,
the Plan (as modified) is properly before the Bankruptcy Court and all votes
cast with respect to the Plan prior to the Modifications shall be binding and
shall be deemed to be cast with respect to the Plan as modified.
C. EXEMPTIONS FROM TAXATION
Pursuant to section 1146(c) of the Bankruptcy Code, (i)
any transfers in the United States from a Debtor to a Reorganized Debtor or any
other Entity pursuant to the Plan shall not be subject to any document recording
tax, stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, stamp
act, real estate transfer tax, mortgage recording tax, franchise tax, or other
similar tax or governmental assessment, and (ii) the appropriate state or local
governmental officials or agents are hereby directed to forego the collection of
any such tax or governmental assessment and to accept for filing and recordation
any of the foregoing instruments or other documents without the payment of any
71
such tax or governmental assessment. In addition, pursuant to section 1146(c) of
the Bankruptcy Code, the issuance, transfer or exchange of any security
contemplated by the Plan (including, without limitation, the Reorganized
Federal-Mogul Junior Secured PIK Notes, the Warrants, and the Reorganized
Federal-Mogul Common Stock) or the making or delivery of any instrument of
transfer under the Plan, may not be taxed under any law imposing a stamp tax or
similar tax.
D. COMPLIANCE WITH SECTION 1129 OF THE BANKRUPTCY CODE
As set forth in Section I.E above, the Plan complies in
all respects with the applicable requirements of section 1129 of the Bankruptcy
Code.
E. COMPLIANCE WITH SECTION 524(g) OF THE BANKRUPTCY CODE
As set forth in Section I.F above, the Plan complies in
all respects with the applicable requirements of section 524(g) of the
Bankruptcy Code.
F. PROPRIETY OF VARIOUS AGREEMENTS AND PLAN-RELATED DOCUMENTS
1. In light of the extensive litigation in the
Reorganization Cases and based on the evidentiary record presented at the
Confirmation Hearing, including the Declarations, and in light of all of the
circumstances and the record in these Reorganization Cases, the terms of the
various settlements incorporated in the Plan are fair, reasonable and adequate,
in accordance with applicable case law; provided, however, that the Plan A
Settlement is subject to the Plan A Approval Order. See Protective Comm. for
Indep. Stockholders of TMT Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968);
Myers v. Martin (In re Martin), 91 F.3d 389, 393 (3d Cir. 1996).
72
2. In light of all of the circumstances and the record
in the Reorganization Cases, each of the transactions contemplated by or
referenced in the Plan Documents and the creation of the Trust is integral to
the terms, conditions and settlements contained in the Plan and is critical to
the effectuation of the purposes of the Plan, subject to the terms and
conditions of the Plan and the Plan Documents. (Katz Decl. P. P. 18-24.) All
contracts, instruments, releases, agreements and documents related to, or
necessary to implement, effectuate and consummate, the Plan, including, without
limitation, (a) each of the Amended and Restated Certificate of Incorporation of
Reorganized Federal-Mogul and the Amended and Restated Bylaws of Reorganized
Federal-Mogul; (b) the Warrants; (c) the Plan Support Agreement; (d) all
agreements and documents to be executed and delivered in connection with the
Call Option; (e) all agreements and documents to be executed and delivered in
connection with the Trust; (f) the Reorganized Federal-Mogul Secured Term Loan
Agreement and the Reorganized Federal-Mogul Junior Secured PIK Notes; (g) the
Plan B Settlement Agreement; and (h) that certain Credit Agreement to be entered
into among Reorganized Federal-Mogul, Citicorp USA, Inc., as Administrative
Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, and the Lenders from
time to time party thereto (the "Exit Facility Credit Agreement"), together with
all other contracts, instruments, agreements and documents to be executed and
delivered by any Debtor or Reorganized Debtor in connection with the Exit
Facility Credit Agreement, are valid, proper and reasonable under the
circumstances and due and sufficient notice thereof has been provided in
connection with, among other things, approval of (i) the Disclosure Statement
and the Supplemental Disclosure Statement, (ii) entry of the Solicitation
Procedures Order and the Supplemental Solicitation Procedures Order, and (iii)
Confirmation of the Plan. (Katz Decl. P. 21.)
73
3. Without limiting the approvals set forth above with
respect to the settlements embodied in the Plan, the entry into the Plan B
Settlement by the Debtors, the Asbestos Claimants Committee, and the Future
Claimants Representative is a reasonable exercise of the business judgment of
those parties in accordance with the standards set forth in TMT Ferry, 390 U.S.
at 424 and Martin, 91 F.3d at 393, and is therefore approved.
4. Without limiting the approvals set forth above with
respect to the settlements embodied in the Plan, the entry into the Speights &
Runyan Settlement by the Debtors and the implementation of such settlement
through the Plan is a reasonable exercise of the business judgment of those
parties in accordance with the standards set forth in TMT Ferry, 390 U.S. at 424
and Martin, 91 F.3d at 393, and is therefore approved.
G. GOOD FAITH NEGOTIATION, IMPLEMENTATION AND CONSUMMATION
The Debtors, the Official Committees, the Future
Claimants Representative, the Administrative Agent, Thornwood, Cooper, Pneumo
Abex, the agents to the lenders under the Exit Facilities, and all other parties
entering into settlements embodied in the Plan, as applicable, participated in
good faith in negotiating, at arm's length, the Plan, the Plan Documents, and
all other contracts, instruments, releases, agreements and documents related to
or necessary to implement, effectuate and consummate the Plan, including,
without limitation, (a) the new or amended certificates of incorporation and
bylaws or comparable constituent documents of the Reorganized Debtors; (b) the
Warrants; (c) the Plan Support Agreement; (d) the documents relating to the Call
Option; (e) all agreements and documents to be executed and delivered in
connection with the Trust; (f) the Exit Facilities and all other contracts,
instruments, agreements and documents to be executed and delivered by any Debtor
or Reorganized Debtors in connection therewith; (g) the Reorganized
Federal-Mogul Secured Term Loan Agreement and the Reorganized Federal-Mogul
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Junior Secured PIK Notes; and (h) the Plan B Settlement Agreement. Each of the
Debtors, the Official Committees, the Future Claimants Representative, the
Administrative Agent, Thornwood, Cooper, Pneumo Abex, the agents to the lenders
under the Exit Facilities, and all other parties entering into settlements
embodied in the Plan, as applicable, also participated in good faith in each of
the actions taken to bring about, and in satisfying each of the conditions
precedent to, confirmation and consummation. (Katz Decl. P. 21.) In so
determining, the Court has examined, among other things, the totality of the
circumstances surrounding the filing of the Reorganization Cases, the record of
these proceedings and the Plan, the Plan Documents and all related pleadings,
exhibits, statements and comments regarding Confirmation of the Plan. For the
avoidance of doubt, the findings of fact and/or conclusions of law set forth in
this Section II.G relate solely to the Plan, the Plan Documents, and all other
contracts, instruments, releases, agreements and documents related to or
necessary to implement, effectuate and consummate the Plan; the findings of fact
and/or conclusions of law concerning the proposal of the Plan A Settlement in
good faith are set forth exclusively in the Plan A Settlement Findings and
Conclusions.
H. ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES AND THE
INDEMNIFICATION OBLIGATIONS
The assumption by the Debtors of all existing executory
contracts and unexpired leases, with the exception of any contracts or leases
listed on Exhibit 5.1.2 to the Plan or identified in Section 5.2 of the Plan, is
both beneficial and necessary to the Debtors' and Reorganized Debtors' business
operations upon and subsequent to emergence from chapter 11. (Katz Decl. P. 22.)
The assumption of such executory contracts and unexpired leases pursuant to the
Plan is a sound exercise of the Debtors' business judgment and is in the best
interest of the Debtors, their estates, and their creditors. (Katz Decl. P. 23.)
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Based upon, among other things, the Reorganized Debtors' anticipated financial
wherewithal after the Effective Date, including, without limitation, the
operating cash and liquidity available to the Reorganized Debtors under the Exit
Facilities to fund their post-emergence business operations, each Reorganized
Debtor that is assuming a contract or lease pursuant to the Plan has
demonstrated that it will be fully capable of performing under the terms and
conditions of the respective contract or lease to be assumed or assumed and
assigned on a going forward basis. (Id.)
I. APPROVAL OF THE DISCHARGES, RELEASES, INJUNCTIONS, INDEMNIFICATIONS
AND EXCULPATIONS PROVIDED UNDER THE PLAN
Each of the discharges, releases, injunctions,
indemnifications and exculpations provided under the Plan, including those set
forth in Sections 5.6, 9.1, 9.2, 9.3 and 9.6 of the Plan, is (1) integral to the
terms, conditions and settlements contained in the Plan, (2) appropriate in
connection with the reorganization of the Debtors and (3) supported by
reasonable consideration. (Katz Decl. P. 24; Beckeman Decl. P. P. 17-22; Green
Decl. P. P. 44-45.) In light of all of the circumstances and the record in the
Reorganization Cases, each of the discharges, releases, injunctions,
indemnifications and exculpations provided under the Plan is fair and reasonable
to all parties in interest. Each of the discharge, release, injunctive,
indemnification and exculpation provisions set forth in the Plan and the
Confirmation Order is: (i) within the jurisdiction of the Bankruptcy Court under
28 U.S.C. ss.ss. 1334(a), 1334(b) and 1334(d); (ii) an essential means of
implementing the Plan pursuant to section 1123(a)(6) of the Bankruptcy Code;
(iii) an integral element of the transactions incorporated into the Plan; (iv)
beneficial to, and in the best interests of, the Debtors, their estates and
their creditors; (v) critical to the overall objectives of the Plan to finally
resolve all Claims among or against the parties in interest in the
Reorganization Cases with respect to each of the Debtors; and (vi) consistent
with sections 105, 1123, 1129 and other applicable provisions of the Bankruptcy
Code.
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J. CONCLUSIONS OF LAW CONCERNING INSURANCE NEUTRALITY OF THE PLAN AND
INSURER STANDING
As stated in Section 10.4 of the Plan, and accompanying
additional provisions of the Plan, the rights of issuers of Asbestos Insurance
Policies, including all Asbestos Insurer Coverage Defenses, are preserved save
for defenses concerning the assignment of Asbestos Insurance Action Recoveries,
Asbestos Insurance Actions and Asbestos In-Place Insurance Coverage discussed in
Section II.K, infra. As a result, the Plan "broadly preserves [the Asbestos
Insurance Companies'] pre-petition rights under the subject insurance policies
and settlements," and permits the Asbestos Insurance Companies to "dispute
coverage under specific policies, and . . . raise any of the same challenges or
defenses to the payment of claims available pre-petition." In re Combustion
Engineering, Inc., 391 F.3d 190, 217 (3d Cir. 2004). Moreover, based on the
presence of the insurance neutrality provisions in the Plan, the Plan does not
diminish the rights of the Asbestos Insurance Companies or increase their
burdens under the subject insurance policies and settlements. (Id.) Accordingly,
the Plan is "insurance neutral" as a matter of law, following the decision in
Combustion Engineering, 391 F.3d at 217.
As in Combustion Engineering, because the Plan has been
rendered "insurance neutral" and broadly preserves the Asbestos Insurance
Companies' rights and defenses to coverage, the Plan does not affect the direct
interests of the Asbestos Insurance Companies (with the exception of the
assignment issue discussed in Section II.K, infra), and hence the Asbestos
Insurance Companies lack standing to contest Confirmation of the Plan. See In re
Orlando Investors, L.P., 103 B.R. 593, 596 (Bankr. E.D. Pa. 1989).
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K. TRANSFER AND ASSIGNMENT OF ASBESTOS INSURANCE ACTION RECOVERIES,
ASBESTOS INSURANCE ACTIONS, AND THE ASBESTOS IN-PLACE INSURANCE
COVERAGE
The transfer and assignment of the Asbestos Insurance
Action Recoveries, Asbestos Insurance Actions, and the Asbestos In-Place
Insurance Coverage by the Debtors to the Trust pursuant to Section 4.3 of the
Plan, the preemption of any anti-assignment provisions of the Asbestos Insurance
Policies pursuant to sections 524(g), 541(c)(1), 1123(a)(5)(B) and 1129(a)(1) of
the Bankruptcy Code, and the adjudication of the objections of certain Asbestos
Insurance Companies to such assignment and preemption are and shall be
exclusively the subject of the Order Granting Joint Motion Seeking Determination
of Asbestos Insurance Assignment and Preemption Issues Pursuant to Plan (the
"Preemption Order") which has been entered by this Court, or may be entered
hereafter. These Findings of Fact and Conclusions of Law are separate and
independent from, and are mutually independent of, the terms and conditions of
the Preemption Order.
L. OBJECTIONS TO THE PLAN
Based upon the record of these Reorganization Cases, the
Bankruptcy Court hereby determines that all of the objections to Confirmation,
whether informal or filed (including, without limitation, the Objections), to
the extent not satisfied by the Modifications or by separate agreement, have
been consensually resolved or otherwise voluntarily withdrawn, provided,
however, that as set forth in Section II.K hereof, the objections of certain
Asbestos Insurance Companies with respect to the transfer of the Asbestos
Insurance Action Recoveries, Asbestos Insurance Actions, and the Asbestos
In-Place Insurance Coverage to the Trust pursuant to the Plan and the preemption
of any anti-assignment provisions of the Asbestos Insurance Policies and any
other applicable non-bankruptcy law pursuant to the Bankruptcy Code are and
shall be exclusively the subject of the separate and independent Preemption
Order.
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Dated: November 8, 2007
/s/ Judith K. Fitzgerald
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. The Honorable Judith K. Fitzgerald
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