Attached files
file | filename |
---|---|
8-K - CONGOLEUM CORPORATION - CONGOLEUM CORP | eps3580.htm |
EX-99.1 - CONGOLEUM CORP | ex99-1.htm |
Exhibit
99.2
ANY
TERM USED IN CAPITALIZED FORM THAT IS NOT DEFINED HEREIN BUT THAT IS
DEFINED IN THE SECOND AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER
11 OF THE BANKRUPTCY CODE OF THE DEBTORS, THE OFFICIAL ASBESTOS CLAIMANTS’
COMMITTEE AND THE OFFICIAL COMMITTEE OF BONDHOLDERS FOR CONGOLEUM
CORPORATION (“CONGOLEUM”), CONGOLEUM
SALES, INC. (“CSI”) AND CONGOLEUM
FISCAL, INC. (“CFI,” AND TOGETHER WITH
CONGOLEUM AND CSI, THE “COMPANY”), DATED AS OF
OCTOBER 22, 2009 ATTACHED HERETO AS EXHIBIT A, SHALL HAVE THE MEANING
ASCRIBED TO SUCH TERM THEREIN AND SUCH DEFINITIONS ARE INCORPORATED HEREIN
BY REFERENCE.
|
PILLSBURY
WINTHROP SHAW PITTMAN LLP
1540
Broadway
New
York, NY 10033-4039
Richard
L. Epling
Robin
L. Spear
Kerry
A. Brennan
|
OKIN,
HOLLANDER & DELUCA, LLP
PARKER
PLAZA
400
Kelby Street
Fort
Lee, NJ 07024
Paul
S. Hollander
James
J. DeLuca
|
Attorneys
for the Debtors
|
|
CAPLIN
& DRYSDALE, CHTD.
One
Thomas Circle, N.W.
Washington,
D.C. 20005
Peter
Van N. Lockwood
Ronald
E. Reinsel
|
GOLDSTEIN
ISAACSON, PC
100
Morris Avenue, 3rd Floor
Springfield,
NJ 07081
Nancy
Isaacson
|
Attorneys
for the Asbestos Claimants’ Committee
|
|
AKIN
GUMP STRAUSS HAUER & FELD LLP
One
Bryant Park
New
York, NY 10036
Michael
S. Stamer
AKIN
GUMP STRAUSS HAUER & FELD LLP
1333
New Hampshire Avenue, N.W.
Washington
D.C. 20036
James
R. Savin
David
M. Dunn
Joanna
F. Newdeck
|
TEICH
GROH
691
State Highway 33
Trenton,
NJ 08619
Michael
A. Zindler
|
Attorneys
for the Official Committee of Bondholders
|
UNITED
STATES DISTRICT COURT
DISTRICT
OF NEW JERSEY
In re:
CONGOLEUM
CORPORATION, et
al.,
Debtors.
|
Case
No. 09-04371 (JAP)
Chapter
11
Case
No. 03-51524
Jointly
Administered
|
DISCLOSURE
STATEMENT WITH RESPECT TO THE SECOND AMENDED
JOINT
PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE OF THE DEBTORS,
THE OFFICIAL ASBESTOS CLAIMANTS’ COMMITTEE AND THE OFFICIAL COMMITTEE OF
BONDHOLDERS FOR CONGOLEUM CORPORATION, ET AL., DATED AS OF OCTOBER
22, 2009
THE
VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS 5:00 P.M. PREVAILING
EASTERN TIME ON _________,
2010, UNLESS OTHERWISE ORDERED BY THE DISTRICT COURT (THE “VOTING
DEADLINE”). IN ORDER TO BE COUNTED, BALLOTS MUST BE RECEIVED BY
LOGAN & COMPANY, INC. (THE “VOTING AGENT”) AT: LOGAN & COMPANY,
INC., RE: CONGOLEUM CORPORATION, 546 VALLEY ROAD, UPPER
MONTCLAIR, NEW JERSEY 07043, ON OR BEFORE THE VOTING
DEADLINE.
|
Congoleum
Corporation, Congoleum Sales, Inc. and Congoleum Fiscal, Inc. (collectively, the
“Debtors”), the Official
Asbestos Claimants’ Committee and the Official Committee of Bondholders are the
proponents of the Plan (the “Plan Proponents”) and are
providing this Disclosure Statement and the Exhibits hereto, the accompanying
ballots, and the related materials delivered herewith pursuant to section
1126(b) of the Bankruptcy Code, in connection with the Voting Procedures Order
dated ______, 2009 (“Voting
Procedures Order”) for the Second Amended Joint Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code of the Debtors, the Official Asbestos
Claimants’ Committee and the Official Committee of Bondholders for Congoleum
Corporation, et al.,
dated as of October 22, 2009 (the “Second Amended Joint Plan” or “Plan”), a copy of which is
annexed to this Disclosure Statement as Exhibit A. This Second
Amended Joint Plan amends the prior Amended Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code of the Debtors, the Official Asbestos
Claimants’ Committee and the Official Committee of Bondholders for Congoleum
Corporation, et al.,
dated as of February 5, 2008 (the “November 2008 Plan” or “Amended Joint
Plan”).
This
Disclosure Statement is to be used solely in connection with an evaluation of
the Second Amended Joint Plan; use of this Disclosure Statement for any other
purpose is not authorized. This Disclosure Statement may not be
reproduced or provided to others (other than to those advisors of any recipient
of this Disclosure Statement who may review the information contained herein to
assist such recipient in his, her or its evaluation of the Second Amended Joint
Plan) without the prior written consent of the Plan Proponents.
THE
SECOND AMENDED JOINT PLAN PROVIDES, AMONG OTHER THINGS, FOR THE ISSUANCE OF
INJUNCTIONS UNDER SECTION 524(g) OF THE BANKRUPTCY CODE THAT RESULT IN THE
CHANNELING OF ALL ASBESTOS RELATED LIABILITIES OF THE COMPANY INTO A TRUST AS
MORE FULLY DESCRIBED HEREIN. SEE SECTION 6.7(f) –
“DISCHARGE INJUNCTION” AND SECTION 6.7(g) – “ASBESTOS CHANNELING INJUNCTION” FOR
A DESCRIPTION OF SUCH INJUNCTIONS.
THE
SECOND AMENDED JOINT PLAN ALSO PROVIDES FOR THE ISSUANCE OF 50.1% OF THE SHARES
OF NEWLY CREATED CONGOLEUM COMMON STOCK TO THE TRUST, AND 49.9% OF THE SHARES OF
NEWLY CREATED CONGOLEUM COMMON STOCK TO THE HOLDERS OF ALLOWED SENIOR NOTE
CLAIMS.
Asbestos Personal Injury Claims,
Asbestos Property Damage Claims, Senior Note Claims, ABI Claims, General
Unsecured Claims and Congoleum Interests are Impaired under the Second Amended
Joint Plan; the Claims of the Company’s other creditors and Interest holders are
not Impaired under the Second Amended Joint Plan. Acceptance of the
Second Amended Joint Plan will constitute acceptance of all the provisions
thereof. Holders of Asbestos Property Damage Claims and ABI Claims
cast votes with respect to the Joint Plan of Reorganization Under Chapter 11 of
the Bankruptcy Code of the Futures Representative, the Debtors, the Official
Asbestos Claimants’ committee and the Official Committee of Bondholders for
Congoleum Corporation, et al.,
dated as of February 5, 2008 (the “February 2008 Plan” or “Joint
Plan”), and pursuant to the Voting Procedures Order, the votes of such
holders of Claims will be deemed cast with respect to the Second Amended Joint
Plan. Similarly, the holders of Asbestos Personal Injury Claims also
cast votes on the February 2008 Plan, and pursuant to the Voting Procedures
Order, only holders of Asbestos Personal Injury Claims who were classified in
the February 2008 Plan as Class 7B Settled Claimants with Litigation Rights (the
“Former Class 7B
Claimants”) will be provided with solicitation packages and cast votes
anew on the Second Amended Joint Plan, and the votes, whether acceptance or
rejection, of all other Asbestos Personal Injury Claimants cast on the February
2008 Plan will be deemed cast on the Second Amended Joint Plan. The
holders of Senior Notes Claims will be provided with Solicitation Packages and
cast votes anew on the Second Amended Joint Plan pursuant to the Voting
Procedures Order. The holders of General Unsecured Claims also will
be provided with Solicitation Packages and Allowed General Unsecured Claims will
be permitted to cast votes on the Second Amended Joint Plan pursuant to the
Voting Procedures Order. Former Class 7B Claimants, holders of Senior
Notes Claims and holders of General Unsecured Claims are urged to consider
carefully the information regarding treatment of their Claims contained in this
Disclosure Statement.
The
effectiveness of the Plan is subject to several material conditions
precedent. There can be no assurance that those conditions will be
satisfied. The Plan Proponents presently intend to seek to consummate
the Plan as promptly as practicable after the Confirmation
Date. There can be no assurance, however, as to when or whether the
Confirmation Date and the Effective Date actually will occur.
-i-
Distributions
under the Plan to creditors of the Company (other than distributions to holders
of Plan Trust Asbestos Claims) will be the responsibility of Reorganized
Congoleum. Pursuant to section 524(g) of the Bankruptcy Code,
Distributions under the Plan to holders of Plan Trust Asbestos Claims will be
the responsibility of the Plan Trust and the Reorganized Debtors will have no
liability therefor.
The
Plan Proponents strongly recommend that holders of Claims entitled to vote on
the Plan for purposes of sections 1126 and 524(g) of the Bankruptcy Code vote to
accept it.
Without
approval of the arrangements set forth in the Plan, there can be no assurance
that the Company will be able to emerge from Chapter 11 or that the Company will
not be forced into liquidation under Chapter 7 of the Bankruptcy
Code. The Plan Proponents believe that if the Company is liquidated
under Chapter 7, distributions to creditors would be delayed and would be
significantly lower than the distributions contemplated by and under the
Plan. See
Section 7.3(a)(1) – “Best Interests Test” below.
THE
PLAN PROPONENTS BELIEVE THAT THE PLAN IS IN THE BEST INTERESTS OF THE COMPANY’S
CREDITORS (INCLUDING THE HOLDERS OF ASBESTOS PERSONAL INJURY CLAIMS AND ASBESTOS
PROPERTY DAMAGE CLAIMS). ACCORDINGLY, CREDITORS ENTITLED TO VOTE IN
FAVOR OF THE PLAN FOR PURPOSES OF SECTIONS 1126 OR 524(g) OF THE BANKRUPTCY CODE
ARE URGED TO VOTE IN FAVOR OF THE PLAN. TO BE COUNTED, YOUR BALLOT
MUST BE DULY COMPLETED, EXECUTED, AND ACTUALLY RECEIVED BY THE VOTING AGENT NO
LATER THAN 5:00 P.M., PREVAILING EASTERN TIME, ON _________,2010,
UNLESS OTHERWISE ORDERED BY THE DISTRICT COURT. CREDITORS ARE
ENCOURAGED TO READ AND CONSIDER CAREFULLY THIS ENTIRE DISCLOSURE STATEMENT,
INCLUDING THE PLAN ANNEXED HERETO AS EXHIBIT A, AND THE MATTERS DESCRIBED IN
THIS DISCLOSURE STATEMENT UNDER ARTICLE 10, “RISKS OF THE PLAN” AND ARTICLE 11,
“ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN,” PRIOR TO CASTING
THEIR VOTES.
In
making a decision, creditors must rely on their own examination of the Company
and the terms of the Plan, including the merits and risks
involved. Creditors and Interest holders should not construe the
contents of this Disclosure Statement as providing any legal, business,
financial or tax advice. Each creditor or Interest holder should
consult with his, her or its own legal, business, financial and tax advisors
with respect to any such matters concerning this Disclosure Statement, the Plan,
the Voting Procedures Order and the transactions contemplated
thereby.
This
Disclosure Statement has not been filed with or reviewed by the Securities and
Exchange Commission or any securities regulatory authority of any state under
the Securities Act of 1933, as amended, or under any state securities or “blue
sky” laws. The Plan has not been approved or disapproved by the
Securities and Exchange Commission, and neither the Securities and Exchange
Commission nor any state securities commission has passed upon the accuracy or
adequacy of the information contained herein. Any representation to
the contrary is a criminal offense. This Disclosure Statement does
not constitute an offer of securities.
No
Person has been authorized by the Plan Proponents in connection with the Plan or
this Voting Procedures Order to give any information or to make any
representation other than as contained in this Disclosure Statement and the
exhibits annexed hereto or incorporated by reference or referred to herein, and,
if given or made, such information or representation may not be relied upon as
having been authorized or made by the Plan Proponents.
The
statements contained in this Disclosure Statement are made as of the date
hereof, and the delivery of this Disclosure Statement will not, under any
circumstance, create any implication that the information contained herein is
correct at any time subsequent to the date hereof. Estimates, if any,
in respect of a Claim set forth in this Disclosure Statement or any exhibit
hereto may vary from the amount ultimately Allowed in respect of such Claim by
the District Court.
-ii-
THE
SUMMARIES OF THE PLAN AND OTHER DOCUMENTS CONTAINED IN THIS DISCLOSURE STATEMENT
ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN ITSELF, THE EXHIBITS
THERETO AND ALL DOCUMENTS DESCRIBED HEREIN AND THEREIN. Copies of any
agreement described herein but not provided herewith may be obtained by
contacting the Voting Agent in writing at: Logan & Company, Inc.,
Re: Congoleum Corporation, 546 Valley Road, Upper Montclair, New
Jersey 07043.
The
information contained in this Disclosure Statement, including, but not limited
to, the information regarding the history, businesses, and operations of the
Company, the historical financial information of the Company and the liquidation
analysis relating to the Company set forth herein is included herein solely for
purposes of soliciting the acceptances required to confirm the Plan under
section 1126(c) of the Bankruptcy Code and to obtain the Injunctions set forth
in the Plan under section 524(g) of the Bankruptcy Code. As to any
contested matters that may arise, however, such information is not to be
construed as admissions or stipulations but rather as statements made in
settlement negotiations.
-iii-
TABLE
OF CONTENTS
1
|
||
1.1.
|
The
Purpose of this Disclosure Statement
|
1
|
1.2.
|
Voting
Procedures
|
1
|
1.3.
|
Voting
Deadline
|
1
|
1.4.
|
Overview
of the Reorganization
|
2
|
1.5.
|
Overview
of the Plan
|
2
|
1.6.
|
Summary
Description of Classes and Distributions
|
6
|
Article
2 GENERAL INFORMATION
|
8
|
|
2.1.
|
Business
of the Company Generally
|
8
|
2.2.
|
Factors
Leading to the Need for Bankruptcy Relief; Insurance
|
11
|
2.3.
|
Additional
Insurance Issues Relevant to the Chapter 11 Filing
|
14
|
Article
3 THE PRE-PETITION PROCESS
|
17
|
|
3.1.
|
The
Prepackaged Plan
|
17
|
3.2.
|
Selection
of the Futures Representative
|
18
|
3.3.
|
Formation
of the Pre-Petition Asbestos Claimants’ Committee
|
18
|
3.4.
|
Pre-Petition
Due Diligence Review
|
19
|
Article
4 THE COMPANY: CORPORATE STRUCTURE AND MANAGEMENT
|
19
|
|
4.1.
|
Boards
of Directors of the Company
|
19
|
4.2.
|
Management
of the Company
|
20
|
4.3.
|
Directors
and Officers of Reorganized Congoleum
|
21
|
4.4.
|
Employees
and Union Contracts
|
22
|
4.5.
|
Debt
and Equity Structure
|
22
|
4.6.
|
Other
Matters
|
25
|
4.7.
|
Debt
Financing After Giving Effect to the Plan
|
26
|
Article
5 EVENTS DURING THE REORGANIZATION CASES
|
27
|
|
5.1.
|
Commencement
of the Reorganization Cases
|
27
|
5.2.
|
Administration
of the Reorganization Cases
|
27
|
5.3.
|
Asbestos
Claimants’ Committee and Bondholders’ Committee
|
29
|
5.4.
|
Bankruptcy
Court Appointment of Futures Representative
|
29
|
5.5.
|
Retention
of Professionals
|
30
|
5.6.
|
Developments
with Regard to Certain Pre-Petition Claims
|
32
|
-i-
5.7.
|
Developments
With Regard to Certain Proofs of Claim
|
32
|
5.8.
|
Vendor
Tolling Agreements
|
33
|
5.9.
|
Asbestos
Personal Injury Claims - Related Avoidance Actions
|
34
|
5.10.
|
Settlements
with Insurers and Brokers
|
37
|
5.11.
|
Fourth
Modified Plan and Subsequent Changes
|
42
|
5.12.
|
Expiration
of Debtors’ Exclusivity to File a Plan and Solicit Acceptances Thereof and
the Filing of Competing Plans
|
42
|
5.13.
|
Mediation
and the Consensual Ninth, Tenth and Eleventh Modified
Plans
|
43
|
5.14.
|
Futures
Representative’s Plan
|
44
|
5.15.
|
The
Joint Plan (February 2008 Plan)
|
44
|
5.16.
|
The
Amended Joint Plan (November 2008 Plan)
|
45
|
5.17.
|
The
Current Second Amended Joint Plan
|
46
|
5.18.
|
Standing
of Insurers to be Heard
|
46
|
5.19.
|
Confirmation
Hearing
|
46
|
Article
6 SUMMARY OF THE PLAN
|
47
|
|
6.1.
|
General
|
47
|
6.2.
|
Classification
|
47
|
6.3.
|
Treatment
of Classified Claims and Interests
|
48
|
6.4.
|
Means
for Execution of the Plan
|
52
|
6.5.
|
Executory
Contracts and Unexpired Leases
|
56
|
6.6.
|
Insurance
Agreements.
|
57
|
6.7.
|
Compensation
and Benefits Programs
|
57
|
6.8.
|
Retiree
Benefits
|
57
|
6.9.
|
Indemnification
of Directors, Officers and Employees
|
58
|
6.10.
|
Plan
Supplement
|
58
|
6.11.
|
Injunctions,
Releases and Discharge
|
58
|
6.12.
|
Matters
Incident to Plan Confirmation
|
63
|
6.13.
|
Retention
of Jurisdiction
|
64
|
6.14.
|
Miscellaneous
Provisions
|
66
|
Article
7 CONFIRMATION OF THE PLAN
|
71
|
|
7.1.
|
Acceptance
or Rejection of the Plan
|
71
|
7.2.
|
Confirmation
Hearing
|
75
|
7.3.
|
Requirements
for Confirmation
|
75
|
-ii-
7.4.
|
Effect
of Confirmation
|
82
|
Article
8 IMPLEMENTATION OF THE PLAN
|
82
|
|
8.1.
|
Establishment
and Purpose of the Plan Trust
|
82
|
8.2.
|
Funding
and Receipt of Plan Trust Assets
|
83
|
8.3.
|
Insurance
Assignment Agreement
|
83
|
8.4.
|
Creation
of Asbestos Property Damage Claim Sub-Account
|
83
|
8.5.
|
Assumption
of Liabilities by Plan Trust
|
83
|
8.6.
|
Discharge
of Liabilities to Holders of Asbestos Claims
|
83
|
8.7.
|
TDP
|
83
|
8.8.
|
Payment
of Allowed Asbestos Property Damage Claims
|
83
|
8.9.
|
Excess
Plan Trust Assets
|
84
|
8.10.
|
Plan
Trust Expenses
|
84
|
8.11.
|
Appointment
of the Initial Plan Trustee
|
84
|
8.12.
|
The
Futures Representative
|
84
|
8.13.
|
Appointment
of Members of the Trust Advisory Committee
|
84
|
8.14.
|
Institution
and Maintenance of Legal and Other Proceedings
|
84
|
8.15.
|
Preservation
of Insurance Claims
|
85
|
8.16.
|
Indemnification
by the Plan Trust
|
85
|
8.17.
|
Establishment
of the TDP
|
85
|
8.18.
|
[reserved]
|
85
|
8.19.
|
Certain
Mergers
|
86
|
8.20.
|
The
Amended and Restated Certificate and the Amended and Restated
Bylaws.
|
86
|
8.21.
|
Directors
and Officers of Reorganized Congoleum
|
86
|
8.22.
|
Cancellation
of Existing Securities and Agreements of the Debtors/Discharge of the
Indenture Trustee.
|
86
|
8.23.
|
Exit
Facility.
|
87
|
8.24.
|
Issuance
of New Securities and Debt Instruments.
|
87
|
8.25.
|
Registration
Rights Agreement.
|
87
|
8.26.
|
Stockholders
Agreement.
|
87
|
8.27.
|
Effectuating
Documents/Further Transactions.
|
88
|
8.28.
|
Exemption
from Certain Transfer Taxes and Recording Fees.
|
88
|
8.29.
|
Section
346 Injunction.
|
88
|
-iii-
8.30.
|
Corporate
Action.
|
88
|
8.31.
|
Litigation
Settlement Agreement.
|
88
|
8.32.
|
Review
of Claimants’ Counsel Expenses
|
90
|
8.33.
|
Intercompany
Settlement.
|
90
|
8.34.
|
Deemed
Consolidation of Debtors For Plan Purposes Only.
|
91
|
Article
9 ESTIMATED CLAIMS BY CLASS
|
92
|
|
9.1.
|
Claims
other than Asbestos Claims
|
92
|
9.2.
|
Asbestos
Claims
|
93
|
Article
10 RISKS OF THE PLAN
|
93
|
|
10.1.
|
General
|
93
|
10.2.
|
Confirmation
Risks
|
93
|
10.3.
|
Insurance
Coverage for Plan Trust Asbestos Claims
|
94
|
10.4.
|
Distributions
under the TDP
|
94
|
10.5.
|
Risk
of Post-Confirmation Default
|
95
|
10.6.
|
Exit
Facility
|
95
|
10.7.
|
Litigation
Settlement Agreement
|
95
|
Article
11 ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE
PLAN
|
95
|
|
11.1.
|
Liquidation
under Chapter 7
|
95
|
11.2.
|
Alternative
Plan of Reorganization
|
96
|
11.3.
|
Dismissal
of Cases
|
96
|
Article
12 CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
|
96
|
|
12.1.
|
Tax
Consequences to Reorganized Congoleum
|
97
|
12.2.
|
Tax
Consequences to the Plan Trust
|
100
|
12.3.
|
Tax
Consequences to Certain Impaired Holders of Claims
|
100
|
Article
13 FINANCIAL INFORMATION
|
105
|
|
13.1.
|
Historical
Financial Statements
|
105
|
Article
14 SOURCES OF INFORMATION PROVIDED AND THE ACCOUNTING METHOD
USED
|
105
|
|
14.1.
|
Sources
of Information
|
105
|
14.2.
|
Accounting
Method
|
105
|
-iv-
EXHIBITS
Exhibit
A
|
Second
Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy
Code of the Debtors, the Official Asbestos Claimants' Committee and the
Official Committee of Bondholders for Congoleum Corporation, et al., dated as of
October 22, 2009
|
Exhibit
B
|
Liquidation
Analysis
|
Exhibit
C
|
Audited
Financial Statements of Congoleum Corporation for the Year Ended December
31, 2008
|
Exhibit
D
|
Unaudited
Financial Statements of Congoleum Corporation for the Quarter Ended
September 30, 2009
|
-v-
ARTICLE
1
INTRODUCTION
1.1.
|
The Purpose of this
Disclosure Statement
|
The
Plan Proponents transmit this Disclosure Statement, pursuant to section 1126(b)
of the Bankruptcy Code, for use in the solicitation of votes pursuant to the
Voting Procedures Order in connection with the Plan.
This
solicitation is being conducted in order to obtain sufficient acceptances to
enable the Plan to be confirmed by the District Court pursuant to the provisions
of the Bankruptcy Code. This Disclosure Statement is being
transmitted in order to provide adequate information to enable Former Class 7B
Claimants, holders of Senior Note Claims and holders of General Unsecured
Claims, who are Impaired under the Plan, to make an informed judgment in
exercising their right to vote to accept or reject the Plan under section 1126
of the Bankruptcy Code. In addition, because all Plan Trust Asbestos
Claims will be channeled into and addressed by the Plan Trust following the
Effective Date of the Plan, this Disclosure Statement is being transmitted in
order to provide adequate information to enable Former Class 7B Claimants to
make an informed judgment in exercising their right to vote to accept or reject
the Plan under section 524(g) of the Bankruptcy Code.
The
Plan Proponents strongly recommend the Plan as being a fair and equitable method
to address the Company’s ongoing asbestos liability issues, and as being fair
and equitable to the other creditors of the Company in light of such asbestos
liability issues, and encourages the acceptance of the Plan by creditors
entitled to vote.
1.2.
|
Voting
Procedures
|
The
Plan Proponents are soliciting acceptances of the Plan from (a) all known Former
Class 7B Claimants, (b) all known holders of Senior Note Claims and (c) all
known holders of General Unsecured Claims. In addition, the votes,
whether acceptance or rejection, of all holders of Asbestos Personal Injury
Claims (excluding Former Class 7B Claimants), Asbestos Property Damage Claims
and ABI Claims on the February 2008 Plan will be deemed cast on this Plan
pursuant to the Voting Procedures Order.
The
Voting Agent will send solicitation packages, in such format as has been
approved by the District Court, containing notice of the time for voting on the
Plan, filing objections and the hearing on confirmation, the order approving the
Disclosure Statement and Plan, appropriate ballots, and voting instructions in
accordance with the Voting Procedures Order. Holders of Senior Note
Claims, Former Class 7B Claimants and General Unsecured Claims or their counsel
should read the solicitation package materials carefully and follow the voting
instructions listed on the ballot. Such holders should only use the
appropriate ballot(s) corresponding to the class for which a vote is being
cast.
If
at least seventy-five percent (75%) of holders of Asbestos Personal Injury
Claims and Asbestos Property Damage Claims, respectively, to be channeled into
and addressed by the Plan Trust that have voted on the Plan, vote to accept the
Plan and such votes are received by the Voting Deadline (the “Requisite Acceptances”), the
Plan Proponents expect to seek confirmation of the Plan promptly.
1.3.
|
Voting
Deadline
|
IN
ORDER TO BE COUNTED FOR VOTING PURPOSES, BALLOTS MUST ACTUALLY BE RECEIVED BY
THE VOTING AGENT BY 5:00 P.M. PREVAILING EASTERN TIME ON ________, 2010 UNLESS
OTHERWISE ORDERED BY THE DISTRICT COURT, AT THE FOLLOWING ADDRESS:
Logan
& Company, Inc.
Re: Congoleum
Corporation
546
Valley Road
Upper
Montclair, New Jersey 07043
1
1.4.
|
Overview of the
Reorganization
|
|
(a)
|
Brief
Explanation of Chapter 11
|
Chapter
11 is the principal business reorganization chapter of the Bankruptcy
Code. Under Chapter 11, a debtor is authorized to reorganize its
business for the benefit of its creditors and shareholders. In
addition to permitting rehabilitation of the debtor, Chapter 11 promotes
equality of treatment of creditors and equity security holders who hold
substantially similar claims against or interests in the debtor and its
assets. In furtherance of these two goals, upon the filing of a
petition for relief under Chapter 11, section 362 of the Bankruptcy Code
provides for an automatic stay of substantially all acts and proceedings against
the debtor and its property, including all attempts to collect claims or enforce
liens that arose prior to the commencement of the Chapter 11 case.
THE
CONSUMMATION OF A PLAN OF REORGANIZATION IS THE PRINCIPAL OBJECTIVE OF A CHAPTER
11 CASE. A PLAN OF REORGANIZATION SETS FORTH THE MEANS FOR TREATING
CLAIMS AGAINST AND EQUITY INTERESTS IN A DEBTOR. CONFIRMATION OF A
PLAN OF REORGANIZATION BY THE DISTRICT COURT MAKES THE PLAN BINDING UPON THE
DEBTOR, ANY PERSON OR ENTITY ACQUIRING PROPERTY UNDER THE PLAN, AND ANY CREDITOR
OF, OR INTEREST HOLDER IN, THE DEBTOR, WHETHER OR NOT SUCH CREDITOR OR INTEREST
HOLDER (I) IS IMPAIRED UNDER OR HAS ACCEPTED THE PLAN OR (II) RECEIVES OR
RETAINS ANY PROPERTY UNDER THE PLAN. SUBJECT TO CERTAIN LIMITED
EXCEPTIONS AND OTHER THAN AS PROVIDED IN THE PLAN ITSELF OR IN THE CONFIRMATION
ORDER, THE CONFIRMATION ORDER DISCHARGES THE DEBTOR FROM ANY DEBT THAT AROSE
PRIOR TO THE DATE OF CONFIRMATION OF THE PLAN AND SUBSTITUTES THEREFOR THE
OBLIGATIONS SPECIFIED UNDER THE CONFIRMED PLAN.
1.5.
|
Overview of the
Plan
|
The following is a brief summary of
certain information contained elsewhere in this Disclosure Statement and in the
Plan. The summary is necessarily incomplete and is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Disclosure Statement, the exhibits hereto and the other Plan
Documents.
The
Plan is a product of extensive efforts by the Debtors, the Bondholders’
Committee and the Asbestos Claimants’ Committee to propose a plan of
reorganization for the Company that is fair and equitable to all parties in
interest, that provides for the issuance of an injunction under section 524(g)
of the Bankruptcy Code that results in the channeling of asbestos related
liabilities of Congoleum to the Plan Trust and that is confirmable taking into
account applicable law, including all rulings of the Bankruptcy Court and
District Court in the Reorganization Cases. This Plan is based on
earlier efforts of the Futures Representative, the Debtors, the Bondholders’
Committee and the Asbestos Claimants’ Committee with respect to the Joint Plan
and Amended Joint Plan.
The
Plan provides for, among other things, payment in full of Allowed Administrative
Claims, Allowed Priority Tax Claims, and Allowed Priority Claims, and the
establishment of the Plan Trust to satisfy Plan Trust Asbestos
Claims. Lender Secured Claims and Other Secured Claims are not
Impaired or affected by the Plan. The Plan shall be binding on all
parties holding Claims, whether asserted or not, against the
Company.
The
essential elements of the reorganization contemplated by the Plan include, among
other things:
|
(a)
|
the
creation of the Plan Trust which is intended to be a “qualified settlement
fund” within the meaning of Section 1.468B – 1(a) of the Treasury
Regulations promulgated under Section 468B of the IRC, that will assume
the liabilities of the Debtors with respect to all Plan Trust Asbestos
Claims and will use Plan Trust Assets and income to pay Plan Trust
Asbestos Claims as provided in the Plan and the Plan Trust
Documents;
|
|
(b)
|
the
funding of the Plan Trust with the Plan Trust
Assets;
|
2
|
(c)
|
the
classification of Claims and Interests and the treatment of such Claims
and Interests under the Plan;
|
|
(d)
|
the
payment of Claims in accordance with the requirements of the Bankruptcy
Code;
|
|
(e)
|
the
establishment and implementation of the TDP as provided in the Plan Trust
Agreement for the resolution of Asbestos Personal Injury
Claims;
|
|
(f)
|
the
issuance of certain injunctions, including but not limited to, the
Discharge Injunction, the Anti-Suit Injunction and the Asbestos Channeling
Injunction;
|
|
(g)
|
the
issuance by Reorganized Congoleum of the New Senior Notes and the New
Common Stock pursuant to the Plan;
|
|
(h)
|
the
procedures for addressing and resolving Disputed
Claims;
|
|
(i)
|
entry
into the Exit Facility;
|
|
(j)
|
the
merger of the Subsidiary Debtors with and into Congoleum, with Reorganized
Congoleum as the sole surviving
entity;
|
|
(k)
|
the
governance and management of Reorganized
Congoleum;
|
|
(l)
|
the
Litigation Settlement Agreement;
|
|
(m)
|
the
payment of Allowed General Unsecured Claims;
and
|
|
(n)
|
the
retention of jurisdiction by the District
Court.
|
Plan
Trust. On the Effective Date of the Plan, all Plan Trust
Asbestos Claims will be assumed by and transferred to the Plan
Trust. The Plan Trust will be funded with the Plan Trust Assets which
will include, without limitation, the following assets and any income, profits
and proceeds derived therefrom:
|
·
|
the
Plan Trust Common Stock;
|
|
·
|
the
Asbestos Insurance Rights;
|
|
·
|
the
proceeds of the Asbestos Insurance Settlement Agreements (except as
otherwise provided in the Plan);
|
|
·
|
the
proceeds of the Asbestos In-Place Insurance
Coverage;
|
|
·
|
the
proceeds of the Asbestos Insurance
Actions;
|
|
·
|
the
proceeds of the Asbestos Insurance Action
Recoveries;
|
|
·
|
the
Asbestos Property Damage Insurance Rights;
and
|
|
·
|
the
rights granted to the Plan Trust pursuant to the Insurance Assignment
Agreement.
|
Treatment of Asbestos
Personal Injury Claims: As of the Effective Date, all
liability for all Asbestos Personal Injury Claims (which includes all Former
Class 7B Claimants ) as well as liability for all future Demands shall be
assumed, automatically and without further act or deed, by the Plan Trust and
the Reorganized Debtors shall have no liability therefor. Each
Asbestos Personal Injury Claim and future Demand shall be resolved pursuant to
the Plan Trust Agreement and the TDP. The TDP shall apply to all
holders of Asbestos Personal Injury Claims and future Demands, including any
such holder who elects to resort to the legal system and obtains a judgment for
money damages.
3
As
of the Effective Date, pursuant to this Plan, all Pre-Petition Settled
Claimants, including the Litigation Settlement Claimants, will, in full
satisfaction of his, her or its Asbestos Personal Injury Claim and any and all
rights pursuant to any Pre-Petition Settlement Agreement, Claimant Agreement,
Security Agreement, Collateral Trust Agreement or any and all other agreements
and amendments thereto with respect to the pre-packaged plan of reorganization
filed by the Debtors on December 31, 2003, including with respect to any
statutes of limitation related to such Asbestos Personal Injury Claim, have been
restored to status quo ante as it existed as of the time each such Claimant
initially filed or submitted its Asbestos Claim against the Debtors that
resulted in the Claimant’s Pre-Petition Settlement Agreement or the Claimant
Agreement, respectively, and shall be treated by the Plan Trust as holding
unliquidated Asbestos Personal Injury Claims under applicable federal or state
law which shall be resolved pursuant to the Plan Trust Agreement and the TDP in
the same manner as all other Asbestos Personal Injury Claims in Class
7. Pre-Petition Settled Claimants in Class 7 shall receive pari passu
treatment under the Plan without regard to any lien, security interest or other
claim to priority treatment whatsoever (i.e. it is understood that any such
Pre-Petition Settled Claimants will need to reapply to the Plan Trust to satisfy
the TDP including medical, exposure and other requirements). The
Avoidance Actions shall be dismissed with prejudice as of the Effective
Date.
TDP: The
TDP to be adopted by the Plan Trust pursuant to the Plan Trust Agreement will
establish procedures to assign a value to all Asbestos Personal Injury Claims
and determine the timing and amount of payments to be made in respect of all
Asbestos Personal Injury Claims. It is anticipated that the TDP will
reduce expenses significantly, which expenses would otherwise reduce Plan Trust
Assets available for distribution. All holders of Plan Trust Asbestos
Claims will benefit from such cost savings by maximizing the assets which are to
be used for the payment of such Claims. The TDP filed with the Plan
is consistent with the trust distribution procedures approved in other
asbestos-related bankruptcy cases.
It
is anticipated that the Plan Trust may not be able to pay in full all Asbestos
Personal Injury Claims as they are liquidated and may not be able to pay all
Asbestos Personal Injury Claims in full over time. The mechanisms of
the Plan Trust, however, have been designed to provide reasonable assurance that
the Plan Trust will value, and will be in a financial position to pay, similar
present and future Asbestos Personal Injury Claims against the Debtors in
substantially the same manner. The Plan Trust will be administered by
the Plan Trustee pursuant to the Plan Trust Agreement and the procedures
contained therein.
Treatment of Asbestos
Property Damage Claims: Allowed Asbestos Property Damage
Claims will be paid from the Asbestos Property Damage Claim Sub-Account in
accordance with procedures established pursuant to the Plan Trust
Agreement.
Treatment of ABI
Claims. Pursuant to and in consideration of the Intercompany
Settlement and Section 5.15 of the Plan and other terms of the Plan, on the
Effective Date all Intercompany Agreements shall be rejected and all ABI Claims,
including without limitation any ABI Rejection Damages Claims (other than claims
for payment of Unpaid Intercompany Amounts that may be asserted to the extent
consistent with Section 5.15(b)(4)(B) of the Plan), shall be deemed Disallowed
and expunged.
Injunctions: The
Plan will permit the businesses of the Reorganized Debtors to operate free of
asbestos-related claims and litigation, through the operation of the following
injunctions pursuant to sections 105, 524(g) and 1141 of the Bankruptcy Code
(the “Injunctions”):
Discharge
Injunction: The Reorganized Debtors will be protected from
Claims and litigation by the Debtors’ discharge and the Discharge Injunction,
which will prohibit and enjoin the taking of any legal action against Congoleum,
Reorganized Congoleum or the Plan Trust based upon any Claim, Asbestos Claim or
Demand. For a complete description of the Discharge Injunction, see Section 11.4 of the
Plan.
Asbestos Channeling
Injunction: The Plan provides for an injunction pursuant to
section 524(g) of the Bankruptcy Code with respect to Plan Trust Asbestos Claims
against the Debtors, the Reorganized Debtors and any Protected
Party. For a complete description of the Asbestos Channeling
Injunction, see Section
11.6 of the Plan.
4
Anti-Suit
Injunction: The Plan provides for an injunction pursuant to
section 105(a) of the Bankruptcy Code to protect Settling Asbestos Insurance
Companies from non-asbestos liability released under any Asbestos Insurance
Settlement Agreement. For a complete description of the Anti-Suit
Injunction, see Section
11.11 of the Plan.
Directors and Officers of
Reorganized Congoleum: The initial board of directors of
Reorganized Congoleum shall consist of five (5) directors. One of
such directors shall be selected by the Bondholders’ Committee, three of such
directors shall be selected jointly by the Futures Representative and the
Asbestos Claimants’ Committee, and one of such directors shall be Reorganized
Congoleum’s chief executive officer. The identity of such directors
shall be disclosed by the Plan Proponents in the Plan Supplement. To
the extent any such Person is an Insider (as defined in section 101(31) of the
Bankruptcy Code), the nature of any compensation for such Person will also be
disclosed prior to the Confirmation Hearing. Each of the Persons on
the initial board of directors of Reorganized Congoleum shall serve in
accordance with the Amended and Restated Certificate and the Amended and
Restated Bylaws of Reorganized Congoleum, as the same may be amended from time
to time. Subsequently, Reorganized Congoleum’s board of directors
shall be elected in accordance with Reorganized Congoleum’s governing documents,
which governing documents shall be acceptable to the Bondholders’ Committee and
the Asbestos Claimants’ Committee.
The
initial officers of Reorganized Congoleum shall be set forth in the Plan
Supplement. To the extent any such Person is an Insider (as defined
in section 101(31) of the Bankruptcy Code), the nature of any compensation for
such Person will also be disclosed at such time. The initial officers
shall serve in accordance with the Amended and Restated Certificate and the
Amended and Restated Bylaws of Reorganized Congoleum, as the same may be amended
from time to time.
Notwithstanding
the foregoing, as part of the Intercompany Settlement described in Section 8.32
below, ABI shall make the services of Roger Marcus, Richard Marcus and Howard
Feist, III available to Reorganized Congoleum for two years after the Effective
Date in consideration of a base annual fee of $800,000 and an annual incentive
fee. Roger Marcus shall serve as Chief Executive Officer and Director
of Reorganized Congoleum. Howard Feist III shall serve as Chief Financial
Officer of Reorganized Congoleum. Substantially all of Roger Marcus's time,
approximately 25% of Richard Marcus's time, and approximately 50% of Howard
Feist III's time, in each case, during normal working hours on an annual basis
shall be made available by ABI to Reorganized Congoleum for the two years
following the Effective Date.
Further,
five percent of Reorganized Congoleum’s total authorized number of shares of
common stock shall be reserved for issuance by Reorganized Congoleum for equity
based compensation and awards to the management team of Reorganized Congoleum
with terms to be determined by the Board of Directors of Reorganized
Congoleum.
Plan
Classes: The Plan divides all Claims and Interests into 11
different Classes. Each Claim will receive the same treatment as all
other Claims in the same Class under the Plan, so that the applicable terms of
the Plan for each Claim depend upon its classification. Section 1.6
-- “Summary Description of Classes and Distributions” below, contains a summary
description of the treatment of each Class under the Plan, including whether the
Class is Impaired or Unimpaired by the Plan and whether the Claims in the Class
are channeled into and addressed by the Plan Trust. If a Class is
Impaired by the Plan, the holders of claims in that Class are entitled to vote
to accept or reject the Plan under section 1126 of the Bankruptcy Code to the
extent such holder’s claim is Allowed or temporarily allowed for voting purposes
as provided pursuant to the Voting Procedures Order. If the Claims in
a Class are channeled to, addressed, processed and paid by the Plan Trust in
accordance with the Plan Trust and the TDP, the holders of claims in that Class
are entitled to vote in favor of or against the Plan under section 524(g) of the
Bankruptcy Code as provided in the Voting Procedures
Order. Notwithstanding the foregoing, holders of Asbestos Personal
Injury Claims (other than Former Class 7B Claimants) and Asbestos Property
Damage Claims will have their votes from the February 2008 Plan, whether
acceptance or rejection, deemed cast with respect to the Second Amended Joint
Plan. Holders of Congoleum Interests in Class 10 are deemed to have
rejected the Plan in accordance with the provisions of section 1126(g) of the
Bankruptcy Code and, accordingly, their vote will not be solicited.
5
1.6.
|
Summary Description of
Classes and Distributions
|
The
Distributions to each Class are summarized in the table set forth
below. The table is qualified in its entirety by reference to the
more detailed and complete descriptions set forth in the Plan and elsewhere in
this Disclosure Statement.
|
(a)
|
Treatment
of Administrative Claims and Priority Tax
Claims
|
Description of
Claims
|
Description of
Distribution or Treatment Under the Plan
|
Administrative
Claims
|
Unless
the Debtors and the holder of an Allowed Administrative Claim agree to a
different treatment, each holder of an Allowed Administrative Claim will
receive Cash equal to the unpaid portion of such Allowed Administrative
Claim on the Distribution Date. However, Administrative Claims
incurred by the Debtors during the Reorganization Cases in the ordinary
course of business or under a loan or advance, which are not paid on or
before the Effective Date, will be paid by Reorganized Congoleum in
accordance with the terms and conditions of the particular transactions
relating to such liabilities and any agreements relating
thereto.
|
Priority
Tax Claims
|
Unless
the holder of a Priority Tax Claim agrees to a different treatment, each
holder of an Allowed Priority Tax Claim will either (a) be paid in Cash in
full on the Distribution Date or (b) at Reorganized Congoleum’s sole
discretion, receive deferred Cash payments over a period not to exceed six
years after the date of assessment of a value equal to such Allowed
Priority Tax Claim as of the Effective
Date.
|
|
(b)
|
Treatment
of Classified Claims and
Interests
|
Description of Claims
or Interests
|
Description of
Distribution or Treatment Under the Plan
|
Class
1 – Priority Claims
|
Unless
Reorganized Congoleum and the holder of an Allowed Priority Claim agree to
a different treatment, each Allowed Priority Claim will be paid in full on
the Distribution Date. Class 1 is Unimpaired.
|
Class
2 – Lender Secured Claims
|
The
Lender Secured Claim shall be paid in full indefeasibly on the Effective
Date or as soon thereafter as practicable and Wachovia shall be released
from any and all liabilities and causes of action in accordance with the
Financing Order. Class 2 is Unimpaired.
|
Class
3 – Other Secured Claims
|
Each
holder of an Allowed Other Secured Claim shall receive one of the
following three treatments at Reorganized Congoleum’s sole
option: (i) retain unaltered the legal, equitable and
contractual rights (including, but not limited to, any Liens that secure
such Claim) to which such Claim entitles such holder and such Allowed
Other Secured Claim shall be Reinstated on the Effective Date, (ii) the
Debtors shall surrender all collateral securing such Claim to the holder
thereof, in full satisfaction of such holder’s Allowed Class 3 Claim,
without representation or warranty by, or recourse against, the Debtors or
Reorganized Congoleum or (iii) such holder shall be otherwise treated in a
manner so that such Claim shall be rendered Unimpaired. Class 3
is Unimpaired.
|
6
Description of Claims
or Interests
|
Description of
Distribution or Treatment Under the
Plan
|
Class
4 – Senior Note Claims
|
Senior
Note Claims shall be Allowed in an aggregate amount equal to at least
$103,593,750.00, which shall not be subject to any avoidance, reductions,
set off, offset, recharacterization, subordination, counterclaims,
defenses, disallowance, impairment or any other challenges under
applicable law or regulation by any person or entity. On the
Effective Date, each holder of an Allowed Senior Note Claim shall receive,
in full satisfaction of its Senior Note Claim, its Pro Rata share of each
of the securities included in the Senior Note
Distribution. Class 4 is Impaired and holders of Class 4 Claims
are entitled to vote to accept or reject the Plan as set forth in the
Voting Procedures Order.
|
Class
5 – Workers’ Compensation Claims
|
Each
holder of an Allowed Workers’ Compensation Claim will be paid in the
ordinary course pursuant to such rights that exist under any state
workers’ compensation system or laws applicable to such
Claims. Class 5 is Unimpaired.
|
Class
6 – ABI Claims
|
Pursuant
to and in consideration of the Intercompany Settlement and Section 5.15 of
the Plan and other terms of the Plan, on the Effective Date all
Intercompany Agreements shall be rejected and all ABI Claims, including
without limitation any ABI Rejection Damages Claims (other than claims for
payment of Unpaid Intercompany Amounts that may be asserted to the extent
consistent with Section 5.15(b)(4)(B) of the Plan), shall be deemed
Disallowed and expunged. Class 6 is Impaired.
|
Class
7 – Asbestos Personal Injury Claims
|
As
of the Effective Date, all liability for all Asbestos Personal Injury
Claims (which includes all Claims in Class 7) as well as liability for all
future Demands shall be assumed, automatically and without further act or
deed, by the Plan Trust and the Reorganized Debtors shall have no
liability thereof. Each Asbestos Personal Injury Claim and
future Demand shall be resolved pursuant to the Plan Trust Agreement and
the TDP. The TDP shall apply to all holders of Asbestos
Personal Injury Claims and future Demands, including any such holder who
elects to resort to the legal system and obtains a judgment for money
damages.
As
of the Effective Date, pursuant to the Plan, all Pre-Petition Settled
Claimants, including Litigation Settlement Claimants, will, in full
satisfaction of his, her or its Asbestos Personal Injury Claim and any and
all rights pursuant to any Pre-Petition Settlement Agreement, Claimant
Agreement, Security Agreement, Collateral Trust Agreement or any and all
other agreements and amendments thereto with respect to the pre-packaged
plan of reorganization filed by the Debtors on December 31, 2003, be,
including with respect to any statutes of limitation related to such
Asbestos Personal Injury Claim, restored to status quo ante as it existed
as of the time each such Claimant initially filed or submitted its
Asbestos Claim against the Debtors that resulted in the Claimant’s
Pre-Petition Asbestos Settlement Agreement or the Claimant Agreement,
respectively, and shall be treated by the Plan Trust as holding
unliquidated Asbestos Personal Injury Claims under applicable federal or
state law which shall be resolved pursuant to the Plan Trust Agreement and
the TDP in the same manner as all other Asbestos Personal Injury Claims in
Class 7. Pre-Petition Settled Claimants in Class 7 shall
receive pari passu treatment under the Plan without regard to any lien,
security interest or other claim to priority treatment whatsoever (i.e. it
is understood that any such Pre-Petition Settled Claimants will
need to reapply to the Plan Trust to satisfy the TDP including medical,
exposure and other requirements). The Avoidance Actions shall
be dismissed with prejudice as of the Effective Date.
Class
7 is Impaired and holders of Former Class 7B Claims are entitled to vote
to accept or reject the Plan as set forth in the Voting Procedures
Order.
|
7
Description of Claims
or Interests
|
Description of
Distribution or Treatment Under the Plan
|
Class
8 – Asbestos Property Damage Claims
|
As
of the Effective Date, all liability for all Allowed Asbestos Property
Damage Claims will be assumed, automatically and without further act or
deed, by the Plan Trust and the Reorganized Debtors will have no liability
therefor. Each Allowed Asbestos Property Damage Claim will be
paid solely from the Asbestos Property Damage Claim Sub-Account on account
of the unpaid Allowed Amount of such Claim pursuant to the Plan Trust
Agreement. After the assets in the Asbestos Property Damage
Claim Sub-Account have been exhausted or transferred therefrom in
accordance with the Plan Trust Agreement, the Plan Trust shall have no
further liability or obligation for or in respect of any Asbestos Property
Damage Claims. All Asbestos Property Damage Claims as to which
a Proof of Claim was not filed prior to the expiration of the Asbestos
Property Damage Claim Bar Date will be deemed Disallowed. Class
8 is Impaired.
|
Class
9 – General Unsecured Claims
|
Except
to the extent that a holder of an Allowed General Unsecured Claim in Class
9 has been paid by the Debtors prior to the Effective Date or agrees to
alternate, less favorable, treatment, each holder of an Allowed Class 9
Claim shall receive, on the Distribution Date, in full and final
satisfaction of such Allowed Class 9 Claim, Cash in the amount of $.35 for
each $1.00 of such holder’s Allowed Class 9 Claim. Class 9 is
Impaired and the holders of Class 9 Claims are entitled to vote to accept
or reject the Plan. General Unsecured Claims do not include
Claims against the Debtors under the Environmental Laws as set forth in
Section 11.9 of the Plan, which Claims (other than Claims held by ABI)
survive the Reorganization Cases.
Class
9 is Impaired and holders of Class 9 Claims are entitled to vote to accept
or reject the Plan as set forth in the Voting Procedures
Order.
|
Class
10 – Congoleum Interests
|
On
the Effective Date, the Congoleum Interests will be cancelled and the
holders of the Congoleum Interests will retain and receive nothing on
account of such Congoleum Interests. Class 10 is
Impaired.
|
Class
11 – Subsidiary Interests
|
On
the Effective Date, the holders of the Subsidiary Interests will retain
such Interests. Class 11 is
Unimpaired.
|
ARTICLE
2
GENERAL
INFORMATION
2.1.
|
Business of the
Company Generally
|
|
(a)
|
Congoleum
|
Congoleum
was incorporated in Delaware in 1986, but traces its history in the flooring
business back to Nairn Linoleum Co. which began in 1886. Congoleum is
the result of a 1986 merger between Resilco, Inc., a then subsidiary of a
company previously known as Congoleum Industries, Inc., which subsidiary owned
the resilient flooring operations that were later owned by Congoleum, and
Resilient Acquisition Inc., a company formed for the purposes of merging with
Resilco, Inc. The surviving corporation to that merger changed its
name to Congoleum Corporation.
8
In
1993, the business and assets of Congoleum and those of the Amtico Tile Division
of ABI, which consisted of ABI’s then existing U.S. flooring division (the
“Tile Division”), were
combined (the “Acquisition”). The
Acquisition was effected through the organization of a new corporation,
Congoleum Holdings Incorporated (“Congoleum Holdings”), to which
Hillside Industries Incorporated (“Hillside Industries”)
contributed all of the outstanding capital stock of Resilient Holdings
Incorporated (“Resilient”), the owner of all
of the outstanding capital stock of Congoleum, and to which ABI contributed the
assets and certain liabilities of the Tile Division. Upon
consummation of the Acquisition, Congoleum Holdings owned all of the outstanding
capital stock of Resilient, which, in turn, owned all of the outstanding capital
stock of Congoleum, and Congoleum owned the Tile Division. The assets
and liabilities comprising the Tile Division which were acquired by Congoleum in
the Acquisition are held directly by Congoleum.
Pursuant
to the Acquisition, subject to certain exceptions, Congoleum is obligated to
indemnify ABI for, among other things, all liabilities relating to ABI’s former
Tile Division, including, among others, liabilities related to product liability
asbestos claims, to the extent that insurance proceeds related thereto are not
actually recovered by ABI or ABI is not reimbursed or indemnified for those
liabilities by any other source or entity (the “ABI
Indemnification”). As of December 31, 2003, pursuant to the
ABI Indemnification, Congoleum had paid ABI an aggregate amount of approximately
$2.3 million for indemnified costs, expenses and liabilities incurred by ABI for
asbestos-related claims pertaining to ABI’s former Tile Division.
In
1995, Congoleum completed a public offering (the “Offering”) of 4,650,000 shares
of its Class A common stock, par value $0.01 per share (the “Class A Common
Stock”). The Class A Common Stock is entitled to one vote per
share. Upon completion of the Offering, Congoleum implemented a Plan
of Repurchase pursuant to which its two-tiered holding company ownership
structure was eliminated through the merger of Congoleum Holdings, Resilient and
Congoleum, pursuant to which Congoleum was the surviving
corporation. Congoleum used most of the proceeds from the Offering to
repurchase most of the shares of its Class B common stock, par value $0.01 per
share (the “Class B Common
Stock”), owned by Hillside (the “Repurchase”), which was,
indirectly, the majority stockholder of Congoleum prior to the
Repurchase. Congoleum’s Class B Common Stock is generally entitled to
two votes per share. As a result of the Repurchase, ABI acquired
voting control of Congoleum.
Since
the Repurchase, ABI’s equity ownership interest in Congoleum further increased
as a result of Congoleum’s repurchases of its common stock combined with open
market purchases by ABI of Congoleum’s common stock. As of September
30, 2009, ABI’s ownership of 151,100 shares of Class A Common Stock and
4,395,605 shares of Class B common stock represented 69.4% of the voting control
of Congoleum.
Congoleum
produces both sheet and tile floor covering products with a wide variety of
product features, designs and colors. Congoleum also produces
through-chip inlaid products for both residential and commercial
markets. In addition, Congoleum purchases sundries and accessory
products for resale. Congoleum’s products serve both the residential
and commercial hard-surface flooring markets, and are used in remodeling,
manufactured housing, new construction and commercial applications.
Congoleum
owns four manufacturing facilities located in Maryland, Pennsylvania and New
Jersey and leases corporate and marketing offices in Mercerville, New Jersey,
which are described as follows:
Location
|
Owned/Leased
|
Usage
|
Square
Feet
|
Finksburg,
MD
|
Owned
|
Felt
|
107,000
|
Marcus
Hook, PA
|
Owned
|
Sheet
Flooring
|
1,000,000
|
Trenton,
NJ
|
Owned
|
Sheet
Flooring
|
1,050,000
|
Trenton,
NJ
|
Owned
|
Tile
Flooring
|
282,000
|
Mercerville,
NJ
|
Leased
|
Corporate
Offices
|
55,902
|
The
Finksburg facility consists primarily of a 16-foot wide felt production
line.
9
The
Marcus Hook facility is capable of manufacturing rotogravure printed sheet
flooring in widths of up to 16 feet. Major production lines at this
facility include a 12-foot wide oven, two 16-foot wide ovens, a 12-foot wide
printing press and a 16-foot wide printing press.
The
Trenton sheet facility is capable of manufacturing rotogravure printed and
through-chip inlaid sheet products in widths up to 6 feet. Major
production lines, all six-foot wide, include an oven, a rotary laminating line
and a press. The examination, packing and warehousing of all sheet
products (except products for the manufactured housing segment) occur at the
Trenton plant distribution center.
The
Trenton tile facility consists of three major production lines, a four-foot wide
commercial tile line, a two-foot wide residential tile line and a one-foot wide
residential tile line.
Productive
capacity and extent of utilization of Congoleum’s facilities are dependent on a
number of factors, including the size, construction, and quantity of product
being manufactured, some of which also dictate which production line(s) must be
utilized to make a given product. Congoleum’s major production lines
were operated an average of 52% of the hours available on a five-day,
three-shift basis in 2008, with the corresponding figure for individual
production lines ranging from 33% to 66%.
Although
many of Congoleum’s manufacturing facilities have been substantially
depreciated, Congoleum has generally maintained and improved the productive
capacity of these facilities over time through a program of regular capital
expenditures. Congoleum considers its manufacturing facilities to be
adequate for its present and anticipated near-term production
needs.
Congoleum
is one of many defendants in a large number of actions filed by individuals
alleging injuries resulting from exposure to asbestos and asbestos-containing
products, including resilient sheet vinyl and tile manufactured by Congoleum and
tile manufactured by the Tile Division or, in the worker’s compensation cases,
from exposure to asbestos in the course of employment with
Congoleum. Congoleum discontinued the manufacture of
asbestos-containing sheet products in 1983 and asbestos-containing tile products
in 1974.
Congoleum
purchased liability insurance policies that it believes obligates the insurers
to provide coverage for Asbestos Claims. A description of Congoleum’s
historical asbestos liabilities is set forth in Section 2.2(a) -- “Factors
Leading to the Need for Bankruptcy Relief - Asbestos Claims Against Congoleum”
below. A description of certain Congoleum insurance assets relating
to Asbestos Claims is located in Section 2.2(b) -- “Congoleum’s Insurance
Coverage for Asbestos-Related Personal Injury Claims” below. A more
detailed description of Congoleum’s business and other material assets is
located in Article 4 -- “The Company: Corporate Structure and Management”
below.
|
(b)
|
CFI
|
CFI
was incorporated on January 24, 2003 under the laws of the State of New York as
a wholly owned subsidiary of Congoleum Financial Corporation, which was a wholly
owned subsidiary of Congoleum. On January 27, 2003, Congoleum
Financial Corporation was merged with and into CFI, with CFI surviving the
merger, and the separate legal existence of Congoleum Financial Corporation
ceased. CFI is a wholly owned subsidiary of Congoleum and a limited
guarantor of Congoleum’s obligations under the Existing Credit
Agreement.
Congoleum
Financial Corporation was incorporated on November 12, 1998 under the laws
of the State of Delaware. Congoleum Financial Corporation’s business
included providing debt financing to Congoleum. As of the date of
this Disclosure Statement, Congoleum did not have any debt outstanding with
CFI.
|
(c)
|
CSI
|
CSI
was incorporated on January 24, 2003 under the laws of the State of New York as
a wholly owned subsidiary of Congoleum. CSI’s business includes
providing sales and promotion services for the purpose of promoting Congoleum’s
business. CSI is a limited guarantor of Congoleum’s obligations under
the Existing Credit Agreement.
10
2.2.
|
Factors Leading to the
Need for Bankruptcy Relief;
Insurance
|
|
(a)
|
Asbestos
Claims Against Congoleum
|
Congoleum,
along with many other manufacturers, including several of its competitor sheet
vinyl and tile manufacturers, became the subject of numerous claims by
individuals asserting bodily injury as a result of alleged exposure to
asbestos-containing products. As a result of the explosion of
asbestos claims and litigation in recent years, and the increasing costs of
settlement and defense, certain sheet vinyl and tile manufacturers and many
others in related industries, including flooring manufacturers similar to
Congoleum, have filed Chapter 11 proceedings.
As
of December 31, 2000, there were approximately 12,000 known claimants with
Asbestos Personal Injury Claims pending against Congoleum. As of
December 31, 2001, there were approximately 25,000 known claimants with Asbestos
Personal Injury Claims pending against Congoleum. As of December 31,
2002, there were approximately 56,000 known claimants with Asbestos Personal
Injury Claims pending against Congoleum. As of June 30, 2003, there
were approximately 91,000 known claimants with Asbestos Personal Injury Claims
pending against Congoleum. Thus, the number of known claimants with
Asbestos Personal Injury Claims pending against Congoleum doubled from 2001 to
2002, and nearly doubled in the first six months of 2003.
In
the spring of 2001, two damages verdicts in the amount of approximately
$18.2 million and $15.8 million, respectively, were rendered in favor
of plaintiffs in asbestos personal injury claims brought by Kenneth Cook and
Richard Arsenault in New York State Supreme Court, New York
County. Under the reverse bifurcation procedure then in effect in New
York, liability would still have to be established. The liability
trial against Congoleum was scheduled for September 2002. Congoleum
retained a leading jury consulting firm to conduct a mock trial to assess its
likelihood of prevailing at trial. The mock jury trial was conducted
in August 2002. Congoleum’s defense attorney advised Congoleum that
it was likely to lose at trial and that there was a risk for a joint and several
finding against Congoleum. During the period following August 2002,
Congoleum faced a situation in which its primary insurers claimed that their
policies were exhausted (as supported by applicable New Jersey law at the time)
while at the same time its excess carriers claimed that the primary layers were
not exhausted and that therefore excess coverage was not
available. This left Congoleum with no carriers ready and willing to
pay claims or defense costs. Thus, Congoleum was placed in an
untenable position as a result of the foregoing confluence of
events. During the fourth quarter of 2002, Congoleum continued its
efforts to attempt to secure insurance coverage from its excess insurance
carriers and also began the process of seeking a global resolution in the form
of a prepackaged bankruptcy.
During
the fourth quarter of 2002, Congoleum engaged an outside actuary to conduct an
updated analysis of Congoleum’s asbestos-related
liabilities. Developments during the latter part of 2002 included a
significant increase in claims filed against Congoleum and higher settlement
requirements, and the exhaustion of primary insurance coverage combined with a
dispute of coverage by certain of its excess insurance
carriers. These developments, together with an inability to reach
agreement with excess carriers to provide coverage for the pending asbestos
claims, led to Congoleum’s plan to file a plan of reorganization under Chapter
11 of the Bankruptcy Code.
The
study concluded that the minimum gross liability for the 56,567 known claimants
at December 31, 2002, using average settlement payments by disease for claims
settled in 2001 and 2002, was $310 million. This amount did not
include defense costs, liability for the 30,000 additional claimants purportedly
existing at December 31, 2002, for which Congoleum did not then have any record,
or for future claims, which the study concluded could not be reasonably
determined in light of the available data and uncertainty arising from an
announcement on January 13, 2003 that Congoleum had decided to pursue a possible
resolution of its asbestos crisis through a prepackaged bankruptcy
filing. Congoleum’s estimated minimum gross liability at the time was
substantially in excess of both the total assets of Congoleum (without giving
effect to rights under insurance policies) as well as Congoleum’s previous
estimates made in prior periods of the maximum liability for both known and
unasserted claims. Congoleum has stated that it believes that
(without giving effect to rights under insurance policies) it does not have the
necessary financial resources to litigate and/or fund judgments and/or
settlements of the asbestos claims in the ordinary course of
business. In addition, Congoleum has stated that it believes that its
going concern or liquidation value is substantially less than the minimum gross
liability for the known asbestos claims against it.
11
|
(b)
|
Congoleum’s
Insurance Coverage for Asbestos-Related Personal Injury
Claims
|
To
date, Congoleum has discovered excess insurance policies (in whole or in part),
or evidence of excess policies, that were issued to Congoleum beginning in
December 1953, and which Congoleum believes cover claims by third parties
injured by its activities, including but not limited to claims alleging injury
from asbestos. Such policies obligate the insurers to pay amounts
that Congoleum becomes liable to pay in connection with, among other things,
claims alleging bodily injury. Generally, such policies also obligate
the insurers to pay defense costs in connection with claims against Congoleum,
either in addition to the applicable limits of liability of the policies, as in
the case of primary and some excess policies, or subject to such limits of
liability. The discussion in this Section 2.2(b) applies only to
policy periods through 1985.
The
liability policies purchased by Congoleum generally provide two types of limits
of liability. The first type, the “per occurrence” limit, generally
limits the amount the insurer will pay in connection with a single “occurrence”
to which the limit applies, as the term “occurrence” is defined in the
policy. The second type, the “aggregate” limit, generally limits the
total amount the insurer will pay in connection with all occurrences covered by
the policy for bodily injury to which the aggregate limit applies.
In
the context of asbestos personal injury, the policies purchased by Congoleum
generally provide coverage for two fundamental types of claims. The
first type consists of claims in which the alleged exposure to asbestos is
within the “products hazard” or the “completed operation’s hazard” as those
terms are defined in the policies. Such claims, referred to herein as
“products” claims, include claims alleging exposure to asbestos-containing
products manufactured or sold by Congoleum. In many states, asbestos
claims within the “products hazard” may be considered a single occurrence
subject to annual limits in each insurance policy. In addition,
coverage for products claims may be subject to a specified annual aggregate
limit of liability under some of the policies purchased by
Congoleum.
The
second type of claim involves exposure not within the scope of the policies’
products hazard or completed operations hazard. Such claims, referred
to herein as “non-products” claims, include claims involving alleged exposure to
asbestos-containing materials, whether or not manufactured by Congoleum while
such materials were present at premises or facilities owned or operated by
Congoleum or at locations where asbestos material may have been disposed of by
Congoleum. Although non-products claims have been asserted against
Congoleum, the vast majority of asbestos-related claims that have been brought
to date are products claims.
During
the period in which Congoleum produced asbestos-containing products, Congoleum
purchased primary and excess insurance policies providing in excess of $1
billion of limits of liability for general and product liability
claims. Through August 2002, substantially all asbestos-related
claims and defense costs were paid through primary insurance
coverage. In February 2001 and then in August 2002, Congoleum
received notice from its two lead primary insurance carriers that its primary
insurance coverage was exhausted.
The
exhaustion of limits by one of the primary insurance companies was based on its
contention that limits in successive policies were not cumulative for asbestos
claims within the “products hazard” and that Congoleum was limited to only one
per occurrence limit for multiple years of coverage for such
claims. Certain excess insurance carriers claimed that the
non-cumulation provisions of the primary policies were not binding on them and
that there remained an additional $13 million in indemnity coverage plus related
defense costs before their policies were implicated. On April 10,
2003, the New Jersey Supreme Court ruled in another case involving the same
non-cumulation provisions as in the Congoleum primary policies (the “Spaulding Case”) that the
non-cumulation provisions are invalid under New Jersey law and that the primary
policies provide coverage for the full amount of their annual limits for all
successive policies. Although Congoleum was not a party to this case,
the decision in the Spaulding Case was likely binding on Congoleum and its
primary insurance company. Thus, based on the Spaulding Case
decision, the primary insurance company became obligated to provide the
additional $13 million of coverage previously disputed by the excess
carriers. After the Spaulding decision was decided, Congoleum entered
into settlement negotiations and reached a settlement with the primary insurance
company that had previously contended that limits in successive policies were
not cumulative for asbestos claims within the “products hazard.”
12
Prior
to the decision in the Spaulding Case, Congoleum had entered into settlement
agreements with asbestos claimants exceeding the $13 million amount of
previously disputed coverage. The excess carriers objected to the
reasonableness of these settlements. Congoleum believes that the
excess carriers will continue to dispute the reasonableness of the settlements,
contend that their policies still are not implicated and dispute their coverage
for that and other various reasons in ongoing coverage
litigation. The excess carriers have also raised various objections
to Congoleum’s reorganization strategy and negotiations.
In
addition, several of Congoleum’s insurers contend that multiple year policies do
not provide annual limits, but that stated limits are for the entire policy
period, ranging from two years to up to five years. Several of
Congoleum’s insurers also contend that Congoleum is unable to establish that
they issued policies to Congoleum and that policies Congoleum contends they
issued were not issued and never existed. If the insurers are correct
in their positions, which Congoleum disputes, then the amount of insurance
available to pay asbestos liabilities would be substantially less than $1
billion.
|
(c)
|
Coverage
Litigation
|
Litigation
between Congoleum and its excess insurance carriers, and the guaranty funds and
associations for the State of New Jersey was initiated on September 15, 2001, by
one of Congoleum’s excess insurers. Congoleum has reached settlements
with its insurance brokers in this litigation. Congoleum has also
reached settlements with certain of its insurance carriers, which are described
in Section 5.12 - “Settlements with Insurers and Brokers” below.
On
February 26, 2003, one of Congoleum’s excess insurers filed a motion for
preliminary and permanent injunctive relief seeking, among other things, an
order enjoining Congoleum from settling any asbestos claims against Congoleum,
individually or as part of a global resolution, without insurer consent and
compelling Congoleum to allow insurers to participate in the settlement
discussions. On March 26, 2003, the court denied, in part, the
insurers’ request for injunctive relief and granted that portion of the relief
sought requiring Congoleum to provide the insurers with certain information
fixed by the terms of the court’s order in response to the insurers’
requests.
The
parties conducted extensive discovery. Congoleum produced numerous
employees and other representatives for multiple days of depositions and
produced hundreds of thousands of pages of documents relating to the Claimant
Agreement, the prepackaged bankruptcy proceeding, and other
matters. Congoleum also served discovery requests and received
discovery responses, and conducted depositions of numerous insurance company
employees and representatives.
On
or about July 11, 2003, certain upper layer excess insurers (i.e., those in the
second excess layer and above) filed a motion for summary judgment seeking to
dismiss Congoleum’s breach of contract claims as to such upper layer excess
carriers. On August 26, 2003, the court granted the defendants’
motion. This ruling did not impact the declaratory judgment count of
the coverage litigation. The court also held that the ruling is not a
determination as to whether Congoleum had a right to enter into the Claimant
Agreement and may not be used by the insurers to determine Congoleum’s ability
to enforce insurance coverage for the Claims addressed in the Claimant
Agreement. The court also held that the question of whether there was
a sound and reasonable basis for entering into the Claimant Agreement was not
and could not be decided by this motion.
On
September 10, 2003, one of Congoleum’s excess insurers filed a motion for
summary judgment seeking a ruling that the Claimant Agreement is unreasonable
and was not entered into in good faith as a matter of law. Most of
the excess insurers joined in the application. On November 7, 2003,
the court denied the insurers’ motion for summary judgment in its
entirety.
In
December 2003, several of Congoleum’s excess insurers filed motions for summary
judgment seeking a ruling that Congoleum had violated the duty to cooperate,
consent to settle and anti-assignment provisions of their insurance policies
and, as a result, the Claimant Agreement was not enforceable against
them. Most of the excess insurers joined in the
application.
13
2.3.
|
Additional Insurance
Issues Relevant to the Chapter 11
Filing
|
|
(a)
|
Continuation
of Coverage Litigation
Post-Petition
|
On
January 6, 2004, certain of Congoleum’s insurers filed the Motion of Certain
Insurers for Declaration that Section 362(a) of the Bankruptcy Code is not
Applicable, or, in the Alternative, for Relief from the Automatic Stay (the
“Stay
Motion”). The Stay Motion sought a declaration from the
Bankruptcy Court that the Coverage Litigation between Congoleum and certain of
its insurers, described in Section 2.2(c) above, was not subject to the
automatic stay provisions of section 362 of the Bankruptcy Code or, in the
alternative, requesting that the Bankruptcy Court grant relief from the
automatic stay so that the Coverage Litigation could proceed during the pendency
of the Reorganization Cases. On March 22, 2004, the Bankruptcy Court
entered an order that permitted the claims asserted in the Coverage Litigation
(except for certain claims for rescission of insurance policies issued to
Congoleum) to proceed. The Bankruptcy Court did not make a finding as
to whether or not the automatic stay provisions of section 362 of the Bankruptcy
Code applied to the Coverage Litigation.
With
respect to the motions for summary judgment filed by insurers pre-petition and
described in Section 2.2(c) above, on April 19, 2004, the court denied the
insurers' motions for summary judgment in their entirety.
On
February 25, 2004, Congoleum filed an application for leave to file a Third
Amended Complaint against the excess insurers to allege claims for breach of the
implied covenant of good faith and fair dealing and for bad faith. On
March 5, 2004, the court granted Congoleum’s application for leave to file a
Third Amended Complaint in its entirety. On or about March 12, 2004,
Congoleum filed the Third Amended Complaint and served each excess insurer with
a copy.
On
March 22, 2004, Congoleum filed an application for a jury trial during the Phase
I trial. On April 19, 2004, the court denied Congoleum’s
application. Congoleum filed an application for leave to appeal, but
the Appellate Division refused to consider the appeal of the jury trial ruling
on an interlocutory basis.
On
August 12, 2004, the court entered a new case management order with respect to
the pending insurance coverage litigation, Case Management Order No. IV (“CMO IV”), that divides the
trial into three phases. CMO IV sets forth the deadlines for
completing fact and expert discovery. CMO IV also established
deadlines for dispositive and pre-trial motion practice. A new judge
was assigned to the case effective February 23, 2005 and the schedule was
modified as a result.
On
February 22, 2005, the court ruled on a series of summary judgment motions filed
by various insurers. The court denied a motion for summary judgment
filed by certain insurers, holding that there were disputed issues of fact
regarding the intent of the settling parties and whether the claimants had
released Congoleum from any liability for the asbestos bodily injury claims of
the claimants who signed the Claimant Agreement and the other settlement
agreements.
The
court also denied another motion for summary judgment filed by various insurers
who argued that they did not have to cover the liability arising from the
Claimant Agreement because they had not consented to it.
The
court granted summary judgment regarding Congoleum’s bad faith claims against
excess insurers (other than first-layer excess insurers), holding the refusal of
these excess insurers to cover the Claimant Agreement was at least fairly
debatable and therefore not in bad faith. Subsequently, bad faith
claims against first-layer insurers were dismissed by
stipulation. However, Congoleum contends that the court must still
determine whether the insurers fairly and honestly considered the Claimant
Agreement before refusing to consent to it.
On
March 18, 2005, the Debtors filed a motion in the Bankruptcy Court asking the
Bankruptcy Court to vacate its prior order lifting the automatic stay in
bankruptcy to permit the Coverage Litigation to proceed. The Debtors
requested that the Coverage Litigation proceedings be stayed until
the Debtors had completed their plan confirmation process in the Bankruptcy
Court. A hearing on the Debtors’ motion was held on April 12, 2005
and the motion was denied.
14
The
Phase 1 trial in the insurance coverage litigation began on August 2,
2005. The court defined the scope of the Phase 1 trial as
follows:
All
issues and claims relating to whether the insurers are obligated to provide
coverage under the policies at issue in the litigation for the global claimant’s
agreement entered into by Congoleum, including but not limited to all issues and
claims relating to both Congoleum’s decision and conduct in entering into the
Claimant Agreement and filing a pre-packaged bankruptcy and the insurance
company defendants’ decisions and conduct in opposing the Claimant Agreement and
Congoleum’s pre-packaged bankruptcy, the reasonableness and good faith of the
Claimant Agreement, whether the Claimant Agreement breached any insurance
policies and, if so, whether the insurance companies suffered any prejudice, and
whether the insurance companies’ opposition to the Claimant Agreement and
bankruptcy and various other conduct by the insurers has breached their duties
of good faith and fair dealing such that they are precluded from asserting that
Congoleum’s decision to enter into the Claimant Agreement constitutes any
breach(es) on the part of Congoleum.
In
or about mid-November, 2005, and in early December 2005, certain insurers filed
motions for summary judgment on the ground, inter alia, that the decision of the
United States Court of Appeals for the Third Circuit reversing the Bankruptcy
Court’s order approving the retention of Gilbert Heintz & Randolph LLP firm
in In re Congoleum, 426
F.3d 675 (3d Cir. 2005), and/or Congoleum’s filing of avoidance actions in the
Bankruptcy Court, entitled them to judgment as a matter of law on the Phase I
issues. On March 16, 2006, the court denied the summary judgment
motions filed by insurers, ruling that the motions, which were filed and argued
before the close of plaintiff’s case, were procedurally not ripe for decision
and that there were questions of fact that prevented granting a summary judgment
motion.
Congoleum
completed the presentation of its case-in-chief on April 28,
2006. Certain insurers thereafter moved for involuntary dismissal or
judgment in their favor (the “directed verdict motions”), arguing that the
evidence in the case, even when accepted as true and even after giving Congoleum
the benefit of all legitimate inferences that may be drawn from such evidence,
as New Jersey law requires at the close of the plaintiff’s case, was not
sufficient to sustain a decision in Congoleum’s favor on Phase I. A
variety of theories were advanced by the insurers similar to those previously
made in their earlier motions for summary judgment, including but not limited to
that (a) the settlements are unreasonable and were not negotiated or made in
good faith; (b) the insurers were not in breach of their policies and,
therefore, had the right to withhold their consent to the settlements if their
objections were reasonable; (c) because the settlements were structured so as to
be paid only from insurance proceeds, not by Congoleum, the insurers may avoid
coverage entirely under the “legally obligated to pay” language of certain
policies; (d) the alleged admissions made in the pleadings filed in support of
the Avoidance Actions mandated dismissal; (e) Congoleum cannot establish
exhaustion of underlying limits of insurance; and (f) the evidence in the case
does not allow for reasonable people to disagree on these points.
Hearings
on the directed verdict motions were held on June 2 and June 7,
2006. On July 13, 2006, the court denied the motions in their
entirety as to all defendants. The court determined that, under the
applicable legal standard, which forbids the court from making credibility
determinations and requires the evidence and all inferences to be drawn from the
evidence to be construed in Congoleum’s favor at this stage of the case, there
remained fact questions that could only be resolved at the conclusion of the
trial.
In
addition to the directed verdict motions discussed above, which advanced
arguments of general applicability to Congoleum’s claims against all of the
insurers, two motions were filed by various Century entities at the close of the
plaintiff’s case and sought relief specific to these Century entities. In
the first motion, Century sought a dismissal as to Insurance Company of North
America (“INA”) Policy
XCPGO790870-2, a 1985 INA policy, on the ground that the policy contains an
asbestos exclusion set forth in an endorsement issued on May 1, 1985.
The court granted the motion on June 20, 2006, based on the asbestos exclusion,
and ordered the dismissal with prejudice and without costs of Congoleum’s claims
for coverage for all asbestos bodily injury claims with respect to that
particular INA policy, as more particularly set forth in the order. In the
second motion, ACE American Insurance Company (formerly CIGNA Insurance Company)
and ACE Property and Casualty Insurance Company (formerly CIGNA Property and
Casualty Insurance Company) (collectively, the “Former CIGNA Entities”) sought
dismissal of Congoleum’s claims against those entities for the reasons stated in
the moving parties' papers, which Congoleum contested. On June 20, 2006,
the court granted this motion, dismissing the Former CIGNA Entities, as more
particularly set forth in the order. In addition, by stipulation
dated June 19, 2006, and filed with the Court on June 20, 2006, the parties
stipulated that Century was the successor-in-interest to INA with regard to
certain INA insurance policies issued to Congoleum, as more particularly set
forth in the stipulation.
15
At
the time it denied the directed verdict motions, the court strongly encouraged
the parties to cooperate in completing the remainder of the Phase I trial to
avoid unnecessary delays.
On
May 18, 2007, the Superior Court of New Jersey issued its decision on the Phase
I trial, ruling that the Claimant Agreement is an unreasonable agreement, not
made in good faith, and therefore Congoleum's insurers have no coverage
obligations for the Claimant Agreement.
A
conference was held in the Coverage Action on February 7, 2008 to address Phase
II of the trial. At the conference, the insurer defendants sought to
expand Phase II of the Coverage Action to include claims and discovery relating
to the Joint Plan and Omnibus Claimant Settlement. The Superior Court of New
Jersey entered a case management order allowing the insurers to pursue claims
and discovery on the Joint Plan and Omnibus Claimant Settlement in addition to
the Pre-Petition Settlement Agreements. Congoleum sought to stay
Phase II of the Coverage Action trial because of the pendency of the
solicitation and balloting and scheduled confirmation hearing on the Joint Plan,
but the Bankruptcy Court denied the stay motion. On March 28, 2008, the State
Court entered Case Management Order VII setting a discovery schedule with
respect to claims relating to insurance coverage under the Omnibus Claimant
Settlement and the other pre-petition settlement agreements. Since
that time, discovery in the Coverage Action has focused on the negotiations of
pending bankruptcy plans during the course of the bankruptcy case.
At a March 11, 2009 status conference,
Judge Stroumtsos requested that both Congoleum and the insurers file
simultaneous submissions outlining the parties’ positions with respect to the
scope of Phase II. Congoleum requested that the State Court stay the
Coverage Action. Congoleum reiterated its belief that it would be premature to
litigate coverage issues with respect to claims settled under the Pre-Petition
Settlement Agreements and Claimant Agreement since the settling claimants
thereunder have agreed to relinquish their rights under the Amended Joint
Plan. In addition, Congoleum informed the State Court that the
insurers’ attempts to terminate coverage violated the automatic stay in the
bankruptcy case. After several rounds of submissions, the State Court
denied the stay motion on June 22, 2009. Congoleum moved for leave to
appeal, which application was denied on August 4, 2009.
On
June 30, 2009, the insurers proposed a new case management order for Phase
II. The State Court has not yet entered a new case management order
for Phase II but discovery is continuing. The insurers demanded in
the Coverage Action a summary judgment briefing schedule with respect to certain
affirmative claims for relief against Congoleum. On July 30, 2009,
First State filed a motion for summary judgment which motion was joined by
numerous other insurers. CNA filed a separate motion for summary
judgment. The insurers seek a declaration that they owe no coverage
for (i) asbestos claims that were settled under the Claimant Agreement or (ii)
asbestos claims that were the subject of any other agreements Congoleum entered
in the past, or may enter in the future (including those that may be resolved
pursuant any bankruptcy plan), unless Congoleum first obtains the insurers’
consent. CNA seeks a declaration that, by entering into the
pre-petition Claimant Agreement, Congoleum materially breached all of its
policies, thereby relieving CNA from coverage obligations for all of Congoleum’s
present and future asbestos claims. The summary judgment motion has
been fully briefed and was argued in September 2009. A decision is
pending.
It
is expected that the Phase II trial will commence in February 2010, although the
scope of issues has not been defined.
The
third and final phase of the trial will address bad faith punitive damages, if
appropriate.
|
(b)
|
Congoleum’s
Insurance Coverage for Asbestos Property Damage
Claims
|
The
insurance policies purchased by Congoleum also provide coverage for claims
asserting property damage. In the context of asbestos property
damage, some, but not all, of Congoleum’s primary policies provided separate
property damage limits, and some policies included property damage limits within
a combined single, overall policy aggregate or within the policy’s products
aggregate limit. Thus, Congoleum contends the property damage limits
have been exhausted for some years and not other years under Congoleum’s primary
policies. Congoleum has identified certain primary insurance
policies, set forth on Exhibit B to the Plan, that provide separate property
damage coverage limits. As a result of the Liberty Settlement,
discussed in Section 5.12 below, up to approximately $1.25 million is
earmarked for the payment of Asbestos Property Damage Claims.
16
|
(c)
|
Congoleum’s
Insolvent and Certain Run-Off
Insurers
|
The
following U.S. based insurers of Congoleum that issued policies without asbestos
exclusions are the subject of insolvency, liquidation, or rehabilitation
proceedings: Midland Insurance Co., Transit Casualty Co., Highlands
Insurance Co., Integrity Insurance Co., Mission Insurance Co., Holland-America
Insurance Co., Western Employers Insurance Co., Home Insurance Co., and
Protective National Insurance Co. of Omaha. A combined total of up to
approximately $518 million of policy limits was issued by these insurers to or
for the benefit of Congoleum; of these limits, up to approximately $272 million,
$72 million, and $68 million were issued by Midland, Transit, and Highlands,
respectively. The potentially available limits are in some cases
subject to dispute, particularly in respect of policies of other than
twelve-month policy periods.
In
March 2006, Congoleum received a Notice of Determination (“NOD”) denying its claims in
the Midland insolvency proceeding. Congoleum thereupon filed a timely
objection to the NOD. The liquidator’s adverse determination is now
subject to judicial review. Congoleum’s claims in the Transit
proceedings were denied in 2000. According to the Transit liquidator,
Congoleum did not challenge that denial, which therefore appears to have become
final in 2000.
The
liquidator of Integrity reports that Congoleum’s claims in that liquidation were
disallowed. However, the running of all appeal periods has been
tolled until the resolution of a pending appeal by Integrity’s
reinsurers. In certain insolvency proceedings, Congoleum may not have
filed a timely claim. Although inquiry is ongoing, there do not
appear to be claims pending in the liquidations of Mission, Holland-America, and
Western Employers, which estates all established bar dates falling more than a
decade prior to the Petition Date. Of the remaining insurers
mentioned above, inquiry to date shows that Congoleum filed timely claims with
the estates of Home and Protective National.
A
number of the London Market insurers of Congoleum that issued policies without
asbestos exclusions are the subject of insolvency proceedings. The
combined total of aggregate policy limits issued to or for the benefit of
Congoleum by such insolvent London Market insurers that were not the subject of
pre-petition settlements is approximately $5 million based upon information
provided by these insurers. Also, certain of the solvent London
Market insurers have proposed so-called solvent schemes of arrangement for the
purpose of paying claims under their previously issued
policies. Congoleum has received approximately $256,000 pursuant to
certain of these solvent schemes of arrangement, which funds are being held in
escrow in an account for transfer to the Plan Trust after
confirmation.
Congoleum
is continuing to attempt to pursue its claims against insurers in insolvency and
rehabilitation proceedings. However, there can be no assurance that
Congoleum’s claims will be allowed in any such proceedings or, if allowed, that
Congoleum or the Plan Trust will receive any distribution on asbestos-related or
other claims.
ARTICLE
3
THE
PRE-PETITION PROCESS
3.1.
|
The Prepackaged
Plan
|
As
both the volume of Asbestos Personal Injury Claims and the associated costs of
defense and settlements increased, and as its principal insurers refused to make
further payments or became insolvent, Congoleum became concerned about its
ability to continue in business and to pay fair compensation to claimants
allegedly injured by its historical operations. Beginning in October
2002, Congoleum consulted with its counsel regarding ways to compensate
legitimate Asbestos Claimants while preserving Congoleum’s business, including
utilization of the special provisions of the Bankruptcy Code, including section
524(g), to accomplish this purpose.
17
In
an effort to further reduce the cost and disruption of a bankruptcy filing, and
to optimize the potential for preserving value, Congoleum simultaneously
negotiated the Claimant Agreement, the Security Agreement and the Collateral
Trust Agreement. Congoleum also structured the plan of reorganization
as a prepackaged plan, in which acceptances were solicited prior to filing the
Reorganization Cases, in an effort to reduce the duration and expense of the
contemplated bankruptcy proceedings and the risk that the contemplated
bankruptcy proceedings would have a material adverse impact upon Congoleum’s
business.
Votes
were solicited for the prepackaged plan and the votes received were
overwhelmingly in favor of the prepackaged plan. While the Debtors
could have proceeded to seek confirmation of the prepackaged plan, after filing
these Chapter 11 cases, the Debtors engaged in negotiations with various
constituents in an effort to develop consensual
modifications. However, as described in Sections 5.11, 5.13, 5.14 and
5.16 below, litigation over the Pre-Petition Settlement Agreements and Claimant
Agreement that formed the basis for the prepackaged plan ultimately ensued and,
as a result of Court decisions in that litigation, the Debtors were unable to
propose a consensual plan of reorganization (either the prepackaged plan or any
plan of reorganization since then) which preserved any portion of the
Pre-Petition Settlement Agreements or Claimant Agreement that was confirmable as
a matter of law. The Litigation Settlement Agreement and treatment
provided to holders of Class 7 Claims under the Plan is intended to resolve the
issues in that litigation.
3.2.
|
Selection of the
Futures Representative
|
Congoleum
considered candidates to serve as the Futures Representative in the
Reorganization Cases to represent the interests of Asbestos Personal Injury
Claimants who are presently unknown. After reviewing the
qualifications and potential conflicts of certain candidates, and following
careful deliberation, Congoleum asked R. Scott Williams (one of the Plan
Proponents) to serve as the Futures Representative.
Mr.
Williams is a member of the Litigation Practice Group of Haskell Slaughter Young
& Rediker, L.L.C. Mr. Williams holds degrees from the University
of Illinois at Urbana-Champaign (B.A. 1985) and the University of Alabama School
of Law (J.D. 1988). Prior to joining Haskell Slaughter Young &
Rediker, L.L.C., Mr. Williams served United States Senator Howell Heflin as
counsel to the United States Senate Judiciary Committee and as judicial clerk to
the Honorable Sharon Lovelace Blackburn of the United States District Court for
the Northern District of Alabama. Mr. Williams was admitted to the
Alabama Bar in 1988 and his practice specializes in bankruptcy and commercial
litigation. Mr. Williams is a frequent lecturer and author on
bankruptcy and commercial litigation related topics and he currently serves as a
contributing editor to Collier
on Bankruptcy (15th Ed.
Revised). Mr. Williams is a past president of the Birmingham Bar
Bankruptcy and Commercial Law Section and is a former member of the Birmingham
Bar Executive Committee. In addition, Mr. Williams is an active
member of the American Bankruptcy Institute and has served in a variety of
leadership roles for that organization.
Mr.
Williams served as the futures representative in the prepackaged Chapter 11 case
of In re Shook & Fletcher
Insulation Co., U.S.B.C. N.D. Al., Case
No.: 02-02771-BGC-11. Mr. Williams has never represented a
current plaintiff, defendant, or insurer in connection with asbestos litigation
against Congoleum, and, other than being selected as the Futures Representative,
has never had a relationship with, or connection to, Congoleum or any of its
Affiliates.
Mr.
Williams’ appointment has been approved by the Bankruptcy
Court. See
Section 5.4 – “Bankruptcy Court Appointment of Futures
Representative.”
3.3.
|
Formation of the
Pre-Petition Asbestos Claimants’
Committee
|
During
the course of the negotiations of the prepackaged plan documents, various
representatives of the holders of Asbestos Personal Injury Claims engaged in
discussions with the Claimants’ Representative concerning the possible
pre-packaged bankruptcy filing by the Company. Such discussions
culminated in the formation of the Pre-Petition Asbestos Claimants’ Committee
which consisted of the following members: Perry Weitz, Esquire,
Joseph Rice, Esquire, Steve Kazan, Esquire, Russell Budd, Esquire, Bryan
Blevins, Esquire, John Cooney, Esquire and Matthew Bergmann,
Esquire. The members of the Pre-Petition Asbestos Claimants’
Committee represented a majority of the holders of Asbestos Personal Injury
Claims and a diverse mix of the types of such Asbestos Claimants.
18
3.4.
|
Pre-Petition Due
Diligence Review
|
The
Claimants’ Representative engaged L. Tersigni Consulting, P.C. (“LTC”) to conduct a due
diligence investigation of (a) the business affairs of Congoleum, (b) the equity
value of Congoleum, and (c) the feasibility of a plan of
reorganization. The Pre-Petition Asbestos Claimants’ Committee was
also apprised of the results of the due diligence investigation undertaken by
LTC and considered such results in connection with its review and approval of
the prepackaged plan of reorganization. LTC’s due diligence review
consisted of an investigation of the past and present business activities of
Congoleum and the relationship between Congoleum and its
Affiliates. Congoleum cooperated with LTC in its investigation and
produced numerous documents in response to the requests of LTC. The
Futures Representative and his professionals conducted their own due diligence
review, including consulting with advisors to the Company and the Claimants’
Representative.
ARTICLE
4
THE
COMPANY: CORPORATE STRUCTURE AND MANAGEMENT
4.1.
|
Boards of Directors of
the Company
|
|
(a)
|
Congoleum
|
The
following table sets forth the name and principal occupation of each of the
directors of Congoleum.
Name
|
Business Experience
and Other
Directorships
|
Mark
N. Kaplan
|
Of
Counsel, Skadden, Arps, Slate, Meagher & Flom LLP, attorneys, since
1999. Director of American Biltrite Inc., Volt Information
Sciences, Inc. and Autobytel Inc. Director of Congoleum since
1995.
|
Richard
G. Marcus
|
Vice
Chairman of Congoleum (since 1994) and a Director (since
1993). Director (since 1982), President (since 1983) and Chief
Operating Officer (since 1992) of American Biltrite
Inc. American Biltrite is the control shareholder of Congoleum
and owns and operates other businesses selling tape and film, flooring and
rubber products, and costume jewelry.
|
Mark
S. Newman
|
Chairman
of the Board since 1995, President and Chief Executive Officer since 1994
of DRS Technologies, Inc., a high technology defense electronics systems
company and wholly owned subsidiary of Finmeccanica
S.P.A. Director of Opticare Health Systems, Inc., SSG Precision
Optronics, Governor Aerospace Industries Association, New Jersey
Technology Council and REFAC Technology Development Corporation. Past
Chairman AEA. Director of Congoleum since
2000.
|
Roger
S. Marcus
|
Director,
President and Chief Executive Officer of Congoleum (since 1993) and
Chairman (since 1994). Mr. Marcus is also a Director (since
1981), Chairman of the Board (since 1992) and Chief Executive Officer
(since 1983) of American Biltrite Inc. From 1983 to 1992, Mr.
Marcus served as Vice Chairman of the Board of American Biltrite
Inc.
|
Jeffrey
H. Coats
|
President,
CEO and Director of Autobytel Inc., an internet automotive marketing
services company (since December 2008). Executive Chairman and
Director of Mikronite Technologies Group Inc., an industrial technology
company. Mr. Coats is also a Managing Director of Maverick
Associates LLC, a financial consulting and investment
company. Director of Congoleum since
2005.
|
19
Name
|
Business Experience
and Other
Directorships
|
Adam
H. Slutsky
|
Chief
Executive Officer of Mimeo.com, an online document production
company. Director of Congoleum since 2005.
|
William
M. Marcus
|
Director,
Executive Vice President and Treasurer of American Biltrite Inc. since
1966. Director of Congoleum since 1993.
|
C.
Barnwell Straut
|
Managing
Director of Hillside Capital Incorporated, an investment firm, since
1976. Director of Congoleum since 1986.
|
Roger
S. Marcus and Richard G. Marcus are brothers, and William M. Marcus is their
cousin. Roger S. Marcus and Richard G. Marcus were executive officers
of Congoleum on December 31, 2003, when it filed its voluntary petition for
relief under Chapter 11 of the Bankruptcy Code.
|
(b)
|
CFI
|
The
directors of CFI are Roger S. Marcus, Richard G. Marcus and
Howard N. Feist III. See Section 4.1(a) –
“Congoleum” above for information regarding Messrs. Roger and Richard Marcus and
Section 4.2(a) – “Management of the Company - Congoleum” below for
information regarding Mr. Feist.
|
(c)
|
CSI
|
The
directors of CSI are Roger S. Marcus, Richard G. Marcus and
Howard N. Feist III. See Section 4.1(a) –
“Management of the Company - Congoleum” above for information regarding
Messrs. Roger and Richard Marcus and Section 4.2(a) – “Congoleum” below for
information regarding Mr. Feist.
4.2.
|
Management of the
Company
|
|
(a)
|
Congoleum
|
The
following is a list of the executive officers of Congoleum and a brief
description of their positions and certain biographical data.
Name
|
Position with
Congoleum
|
Roger
S. Marcus
|
Chairman
of the Board, Chief Executive Officer and President
|
Richard
G. Marcus
|
Vice
Chairman
|
Howard
N. Feist III
|
Chief
Financial Officer and Secretary
|
Dennis
P. Jarosz
|
Senior
Vice President – Sales & Marketing
|
Sidharth
Nayar
|
Senior
Vice President – Finance
|
John
L. Russ III
|
Senior
Vice President – Operations
|
Thomas
A. Sciortino
|
Senior
Vice President – Administration
|
20
Roger
S. Marcus
Roger
S. Marcus has been a Director and President and Chief Executive Officer of
Congoleum since 1993, and Chairman since 1994. Mr. Marcus is also a
Director (since 1981), Chairman of the Board (since 1992) and Chief Executive
Officer (since 1983) of ABI. From 1983 to 1992, Mr. Marcus served as
Vice Chairman of ABI.
Richard
G. Marcus
Richard
G. Marcus has been Vice Chairman of Congoleum since 1994 and a Director since
1993. Mr. Marcus is also a Director (since 1982) and President (since
1983) and Chief Operating Officer (since 1992) of ABI.
Howard
N. Feist III
Howard
N. Feist III has been Chief Financial Officer and Secretary of Congoleum since
1988. Mr. Feist is also Vice President – Finance and Chief Financial
Officer of ABI (since 2000).
Dennis
P. Jarosz
Dennis
P. Jarosz has been Senior Vice President – Sales & Marketing since
2002. Previously, he was Senior Vice President – Marketing since
1995. Prior thereto, he had served as Vice President – Marketing
since 1993 and Vice President – Sales & Marketing of the Tile Division of
ABI (since 1986).
Sidharth
Nayar
Sidharth
Nayar has been Senior Vice President – Finance of Congoleum since
1999. Prior thereto, he had served as Vice President – Controller
since 1994 and prior to that he was Controller since 1990.
John
L. Russ III
John
L. Russ III has been Senior Vice President – Operations since
2002. Prior thereto, he served as Executive Vice President for Borden
Chemicals, Inc. (Forest Products Division), a supplier of resins and adhesives,
since 1997. Prior to that he was Executive Vice President of Borden
Chemicals and Plastics, a specialty resins manufacturer, since
1987.
Thomas
A. Sciortino
Thomas
A. Sciortino has been Senior Vice President – Administration of Congoleum since
1993. Prior thereto, he was Vice President – Finance of the Tile
Division of ABI (since 1982).
|
(b)
|
CFI
|
Roger
S. Marcus is the President and Howard N. Feist III is the Vice-President,
Treasurer and Secretary of CFI.
|
(c)
|
CSI
|
Roger
S. Marcus is the President and Howard N. Feist III is the Vice-President,
Treasurer and Secretary of CSI.
4.3.
|
Directors and Officers
of Reorganized Congoleum
|
On
and after the Effective Date, the business and affairs of Reorganized Congoleum
will be managed by the board of directors of Reorganized Congoleum.
21
On
the Effective Date, the term of each director of the current board of directors
for each Debtor shall expire. The initial board of directors of
Reorganized Congoleum shall consist of five (5) directors. One of
such directors shall be selected by the Bondholders’ Committee, three of such
directors shall be selected jointly by the Futures Representative and the
Asbestos Claimants’ Committee, and one of such directors shall be Reorganized
Congoleum’s chief executive officer. The identity of such directors
shall be disclosed by the Plan Proponents in the Plan Supplement. To the extent
any such Person is an Insider (as defined in section 101(31) of the Bankruptcy
Code), the nature of any compensation for such Person will also be disclosed
prior to the Confirmation Hearing.
The initial officers of Reorganized
Congoleum shall be set forth in the Plan Supplement. To the extent
any such Person is an Insider (as defined in section 101(31) of the Bankruptcy
Code), the nature of any compensation for such Person will also be disclosed at
such time.
Notwithstanding the foregoing, as part
of the Intercompany Settlement described in Section 8.32 below, ABI shall make
the services of Roger Marcus, Richard Marcus and Howard Feist, III available to
Reorganized Congoleum for two years after the Effective Date in consideration of
a base annual fee of $800,000 and an annual incentive fee. Roger
Marcus shall serve as Chief Executive Officer and Director of Reorganized
Congoleum. Howard Feist III shall serve as Chief Financial Officer of
Reorganized Congoleum. Substantially all of Roger Marcus's time, approximately
25% of Richard Marcus's time, and approximately 50% of Howard Feist III's time,
in each case, during normal working hours on an annual basis shall be made
available by ABI to Reorganized Congoleum for the two years following the
Effective Date.
Further, five percent of Reorganized
Congoleum's total authorized number of shares of common stock shall be reserved
for issuance by Reorganized Congoleum for equity based compensation and awards
to the management team of Reorganized Congoleum with terms to be determined by
the Board of Directors of Reorganized Congoleum.
4.4.
|
Employees and Union
Contracts
|
As
of December 31, 2008, Congoleum employed a total of approximately 600
personnel.
Congoleum has entered into collective bargaining agreements with hourly
employees at three of its plants and with the drivers of the trucks that provide
interplant transportation. These agreements cover approximately 400
of Congoleum’s employees. The Marcus Hook plant has a five-year
collective bargaining agreement which expires in November 2013 and a separate
five-year collective bargaining agreement which expires in January
2014. The Trenton sheet plant has a five-year collective bargaining
agreement which was renewed in February 2006 and expires in January
2011. The Trenton tile plant has a five-year collective bargaining
agreement which expires in May 2013. The Finksburg plant has a
three-year collective bargaining agreement that expires in January
2010. In the past five years, there have been no significant strikes
by employees at Congoleum and Congoleum believes that its employee relations are
satisfactory.
4.5.
|
Debt and Equity
Structure
|
|
(a)
|
Summary
of Pre-Petition Date
Indebtedness
|
|
(1)
|
The
Credit Facility
|
On
December 10, 2001, Congoleum entered into a revolving credit agreement (the
“Credit Facility”) with
Wachovia which provides for revolving loans and a letter of credit facility in
an aggregate principal amount of up to $30,000,000. Interest payable
on revolving loans is equal to .25% above a designated prime rate or 2.75% over
an adjusted Eurodollar rate, as applicable, depending on meeting the required
covenants under the Credit Facility. The Credit Facility contains
certain covenants which include a covenant requiring the maintenance of minimum
EBITDA (i.e., earnings before interest, taxes, depreciation and amortization) if
borrowing availability falls below a certain level. It also includes
restrictions on the incurrence of additional debt and limitations on capital
expenditures. The covenants and conditions under the Credit Facility
must be met in order for Congoleum to borrow under the Credit
Facility. The repayment obligations of Congoleum are secured under
the Credit Facility by a grant of a perfected security interest in certain of
Congoleum’s inventory and accounts receivable. In addition, Congoleum
Financial Corporation and Congoleum Intellectual Properties, Inc., wholly owned
subsidiaries of Congoleum as of the date of the Credit Facility, each granted a
limited guarantee in favor of Wachovia with regard to the obligations of
Congoleum under the Credit Facility.
22
Pursuant
to the terms of the Credit Facility, amounts received by Congoleum with regard
to its accounts receivable and inventory which are subject to the security
interest granted by Congoleum to Wachovia are to be deposited by Congoleum, and
Congoleum is obligated to direct its customers to remit payments, into a lockbox
or blocked account, which funds are controlled and used by Wachovia to offset
outstanding amounts borrowed by Congoleum under the Credit
Facility.
In
September 2002, Congoleum and Wachovia amended the Credit Facility to revise
certain financial and other covenants. In February 2003, Congoleum
and Wachovia further amended the Credit Facility to revise certain financial and
other covenants on terms negotiated to reflect the transactions contemplated by
Congoleum’s intended global settlement of its asbestos claims
liability. Pursuant to this amendment, CSI and CFI granted a limited
guarantee in favor of Wachovia with regard to the obligations of Congoleum under
the Credit Facility, which limited guarantee is substantially similar to the
limited guarantee that was previously granted by Congoleum Financial Corporation
and Congoleum Intellectual Properties, Inc., which entities are no longer in
existence. As of the Petition Date, the principal amount of all
pre-petition obligations owed by the Debtors to Wachovia, both absolute and
contingent, pursuant to the Credit Facility existing as of December 31, 2003
consisted of the principal amount of not less than $14,325,937, plus all
interest accrued and accruing thereon and fees, costs, expenses and other
charges accrued, accruing or chargeable with respect thereto.
Wachovia
has provided debtor-in-possession financing during the pendency of the
Reorganization Cases. See Section 5.2(b) - -
“Administration of the Reorganization Cases - DIP Financing”.
|
(2)
|
The
Senior Notes
|
On
August 3, 1998, Congoleum issued $100 million in aggregate principal amount of
8⅝% Senior Notes Due 2008 (the “Senior Notes”) priced at
99.505 to yield 8.70%. Interest is payable on the Senior Notes
semiannually on February 1 and August 1. The Senior Notes matured on August 1,
2008. The Senior Notes are redeemable at the option of Congoleum, in
whole or in part, at any time on or after August 1, 2003 at predetermined
redemption prices (ranging from 104% to 100%), plus accrued and unpaid interest
to the date of redemption. The Indenture under which the notes were
issued includes certain restrictions on additional indebtedness and uses of
cash, including dividend payments.
In
March 2003, Congoleum and the trustee under the Indenture governing the Senior
Notes (the “Indenture
Trustee”) amended the Indenture to expressly provide Congoleum, under the
terms of that Indenture, with greater flexibility to pursue possible resolutions
of its current and future asbestos claims liability, including negotiating a
global settlement with current asbestos plaintiffs and the Futures
Representative, and soliciting acceptances of and filing a prepackaged plan of
reorganization under Chapter 11 of the Bankruptcy Code. Prior to the
amendment, holders of a majority in aggregate principal amount of the Senior
Notes outstanding as of the record date for determining the holders entitled to
vote on the proposed amendment had consented to the amendment.
In
August 2003, Congoleum and the Indenture Trustee amended the Indenture to
expressly provide Congoleum, under the terms of the Indenture, with greater
flexibility to pursue approval of its pre-packaged plan of reorganization under
Chapter 11 of the Bankruptcy Code. Prior to the amendment, holders of
a majority in aggregate principal amount of the Senior Notes as of the record
date for determining the holders entitled to vote on the proposed amendment had
consented to the amendment. See Section 6.3(d) --
“Treatment of Classified Claims and Interests” for a description of the
treatment of the Senior Notes under the Plan.
|
(b)
|
Description
of Capital Stock
|
|
(1)
|
Congoleum
|
Congoleum
currently has 31,000,000 shares of capital stock authorized, of which 20,000,000
shares are designated as Class A Common Stock, 10,000,000 shares are designated
as Class B Common Stock and 1,000,000 shares are designated as preferred stock
(the “Preferred
Stock”).
23
As
of March 13, 2009, 3,663,390 shares of Class A Common Stock, 4,608,945 shares of
Class B Common Stock and no shares of Preferred Stock were issued and
outstanding. As of that date, ABI held 151,100 shares of Class A
Common Stock and 4,395,605 shares of Class B Common Stock.
Upon
the filing of amended certificates of incorporation in connection with the
Effective Date, the Class A Common Stock, the Class B Common Stock and the
Preferred Stock will be eliminated. Congoleum will have authority to
issue only common stock and the Debtors will be prohibited from issuing
non-voting capital stock in accordance with section 1123(a)(5) of the Bankruptcy
Code.
(A) Class A
Common Stock
The
Class A Common Stock is entitled to one vote per share and, generally, votes
together with the Class B Common Stock as a single class. The Class A
Common Stock and Class B Common Stock are on parity on a per share basis with
respect to dividend and liquidation rights. The Class A Common Stock
will be cancelled under the Plan.
The
Company’s Class A Stock was delisted by Amex on February 19, 2008 because it did
not meet the Amex listing standards for share value, share price, and aggregate
market capitalization. The Congoleum shares are currently traded on
the OTC Pink Sheets.
Following
the Effective Date, unless otherwise determined by the Plan Proponents in
accordance with applicable law, Congoleum’s common stock will not be publicly
traded.
(B) Class B
Common Stock
Generally,
the Class B Common Stock is entitled to two votes per share and votes together
with the Class A Common Stock as a single class. The Class B Common
Stock is only entitled to one vote per share with regard to certain
extraordinary transactions. The Class B Common Stock and Class A
Common Stock are on parity on a per share basis with respect to dividend and
liquidation rights.
A
holder of Class B Common Stock may convert any shares of such stock into an
equal number of shares of Class A Common Stock at any time at the holder’s
option. The Class B Common Stock is subject to automatic conversion
into Class A Common Stock on a one-for-one basis upon the adoption of a
resolution authorizing such conversion approved by the holders of a majority of
the outstanding shares of Class B Common Stock voting as a separate
class. In addition, any shares of Class B Common Stock sold or
otherwise transferred to a person or entity other than an affiliate of the
transferor will be automatically converted into an equal number of shares of
Class A Common Stock upon such sale or transfer. A pledge of shares
of Class B Common Stock is not considered a transfer for this purpose unless and
until the pledge is enforced. Also, with respect to shares of Class B
Common Stock held by ABI, those shares will automatically be converted into an
equal number of shares of Class A Common Stock upon the occurrence of a “change
of control” of ABI (as defined under Congoleum’s Certificate of
Incorporation).
|
(2)
|
CFI
|
CFI
has 1,000 shares of common stock, each share having a par value of $0.01,
authorized, of which 100 shares are issued and outstanding and owned by
Congoleum.
|
(3)
|
CSI
|
CSI
has 1,000 shares of common stock, each share having a par value of $0.01,
authorized, of which 100 shares are issued and outstanding and owned by
Congoleum.
24
4.6.
|
Other
Matters
|
|
(a)
|
Environmental
Proceedings
|
Congoleum
is named, together with a large number (in most cases, hundreds) of other
companies, as a potentially responsible party (“PRP”) in pending proceedings
under the federal Comprehensive Environmental Response, Compensation and
Liability Act, as amended (“CERCLA”), and similar state
laws. In addition, in four other instances, although not named as a
PRP, Congoleum has received a request for information. The pending
proceedings relate to eight disposal sites in New Jersey, Pennsylvania and
Maryland in which recovery from generators of hazardous substances is sought for
the cost of cleaning up the contaminated waste sites. Congoleum’s
ultimate liability in connection with those sites depends on many factors,
including the volume of material contributed to the site, the number of other
PRPs and their financial viability, the remediation methods and technology to be
used and the extent to which costs may be recoverable from
insurance. However, under CERCLA, and certain other laws, Congoleum,
as a PRP, can be held jointly and severally liable for all environmental costs
associated with a site.
The
most significant exposure to which Congoleum has been named a PRP relates to a
recycling facility site in Elkton, Maryland (the “Galaxy/Spectron Superfund
Site”). The PRP group at this site is made up of 81 companies,
substantially all of which are large financially solvent
entities. Two removal actions were substantially complete as of
December 31, 1998 and a groundwater treatment system was installed
thereafter. The Environmental Protection Agency (“EPA”) has selected a remedy
for the soil and shallow groundwater (“Operational Unit 1” or “OU-1”); however, the remedial
investigation/feasibility study related to the deep groundwater (“OU-2”) has not been
completed. The PRP group, of which Congoleum is a part, has entered
into a Consent Decree to perform the remedy for OU-1 and resolve natural
resource damage claims (the “Consent
Decree”). The Consent Decree also requires the PRPs to perform
the OU-2 remedy, assuming that the estimated cost of the remedy is not more than
$10 million. If the estimated cost of the OU-2 remedy is more than $10 million,
the PRPs may decline to perform it or they may elect to perform
anyway. Cost estimates for the OU-1 and OU-2 work combined (including
natural resource damages) range between $22 million and $34 million, with
Congoleum’s share ranging between approximately $1.0 million and $1.6
million. This assumes that all parties participate and that none
cash-out and pay a premium; those two factors may account for some fluctuation
in Congoleum’s share. Fifty percent (50%) of Congoleum's share of the
costs is presently being paid by one of its insurance carriers, Liberty Mutual
Insurance Company, whose remaining policy limits for this claim will cover
approximately $0.3 million in additional costs. Congoleum expects to
fund the balance to the extent further insurance coverage is not
available. The Debtors filed a motion before the Bankruptcy Court
seeking authorization and approval of the Consent Decree and related settlement
agreements for the Galaxy/Spectron Superfund Site, as well as authorization for
Liberty Mutual Insurance Company and Congoleum to make certain payments that
have been invoiced to Congoleum with respect to the Consent Decree and related
settlement agreements. The Bankruptcy Court approved the motion by Order dated
August 22, 2006.
Congoleum
also accrues remediation costs for certain of Congoleum’s owned facilities on an
undiscounted basis. Congoleum has entered into an administrative
consent order with the New Jersey Department of Environmental Protection and has
established a remediation trust fund of $100,000 as financial assurance for
certain remediation funding obligations. Estimated total cleanup
costs of $1.6 million, including capital outlays and future maintenance costs
for soil and groundwater remediation, are primarily based on engineering
studies.
Congoleum
anticipates that these matters will be resolved over a period of years and that
after application of expected insurance recoveries, funding the costs will not
have a material adverse impact on Congoleum’s liquidity or financial
position. However, unfavorable developments in these matters could
result in significant expenses or judgments that could have a material adverse
effect on the financial position of Congoleum.
|
(b)
|
Other
Matters Material to the Success of Reorganized
Congoleum
|
The
success of Reorganized Congoleum is dependent upon several
factors. One factor is the ongoing contributions of senior management
employees to be provided by ABI pursuant to the Intercompany Settlement and New
ABI Agreement, as well as certain other employees, both management and in the
field. In addition, Reorganized Congoleum’s continuing commercial
relationships with ABI under the New ABI Agreement, and with Congoleum’s
existing customer base and suppliers will be important to Reorganized
Congoleum’s success.
25
4.7.
|
Debt Financing After
Giving Effect to the Plan
|
(a) Exit
Facility. On the Effective
Date, the Existing Credit Agreement and debtor-in-possession financing with
Wachovia will be repaid and replaced by an Exit Facility, which is expected to
have an original principal amount of $30 million and to be secured by
substantially all of the assets of the Reorganized Debtors. The
performance of Reorganized Congoleum depends in part on Reorganized Congoleum’s
ability to obtain financing, including the Exit Facility, either from its
relationship with Wachovia or from alternative sources during the Reorganization
Cases and thereafter. Based on discussions with the Company
concerning its previous contacts with lenders and the collateral package the
Company is offering, the Plan Proponents would expect the Company to be able to
obtain financing for the Exit Facility on reasonable terms, which terms will be
set forth in the Exit Facility Commitment Letter or Term Sheet to be filed in
the Plan Supplement.
(b) New
Senior Notes. The New Senior Notes means the Senior Secured Notes to
be issued to holders of Allowed Senior Note Claims by Reorganized Congoleum in
the initial aggregate principal amount of $33 million on the Effective Date and
which shall be due and payable December 31, 2017. There shall be no
interest accruing or due and payable on the principal amount of the New Senior
Notes for the first six months after the Effective Date. Thereafter, interest
shall accrue on the principal amount of the New Senior Notes at the rate of 9%
per annum and be payable semi-annually in cash. At the sole option of
Reorganized Congoleum, however, beginning with the interest payment due 12
months after the Effective Date to and including the interest payment due 30
months after the Effective Date (the “PIK Period”), interest may be paid in kind
by the issuance of additional New Senior Notes in the aggregate amount of the
interest then due and payable on each such payment date within the PIK
Period. The option shall be separately exercisable with respect to
each of the four semi-annual periods within the PIK Period. If
Reorganized Congoleum elects to pay interest in kind during any semi-annual
period within the PIK Period, interest shall accrue on all the New Senior Notes
outstanding at the beginning of such semi-annual period, including any New
Senior Notes issued previously in connection with an interest payment in kind,
at the rate of 11% per annum; if the Company does not elect the PIK payment
option on any interest payment date within the PIK period, interest for such
semi-annual period shall be calculated at the rate of 9% per annum on all the
New Senior Notes outstanding at the beginning of such semi-annual period,
including any New Senior Notes issued previously in connection with an interest
payment in kind. After the expiration of the PIK Period, the option
to pay interest in kind shall expire, and be of no further force and effect, and
all interest shall accrue at 9% per annum, payable semi-annually in
cash.
The
New Indenture also shall contain a provision for the annual issuance of
additional New Senior Notes ("Additional Notes"), with the amount of Additional
Notes to be issued being determined as of the end of Reorganized Congoleum’s
fiscal year ending December 31, 2011, and on an annual basis at the end of each
of the succeeding five years (each such date, a "Determination Date"), according
to the following procedure. As soon as practicable after each
Determination Date, the average EBITDA for the two-year period ending on the
Determination Date shall be calculated. An assumed net debt capacity
("Net Debt Capacity") shall then be determined as of each such Determination
Date by multiplying this two-year average annual EBITDA by four. Additional
Notes shall be issuable to holders of New Senior Notes with respect to a
Determination Date to the extent that the Net Debt Capacity as of such
Determination Date, plus any cash amount on Congoleum's balance sheet as of such
Determination Date, exceeds the sum of (i) the amount of the balance of
Reorganized Congoleum's working capital loan (determined as the daily average of
such loan for the year ending on such Determination Date ); (ii) the $33 million
of New Senior Notes to be issued on the Effective Date; (iii) the amount of
Additional Notes issued with respect to all prior Determination Dates; and (iv)
the amount of other interest-bearing debt outstanding as of such Determination
Date. The calculation of the amount of Additional Notes to be issued
shall take place within three months after each Determination Date, and the
issuance of such Additional Notes shall be deemed to have occurred as of the
first day of the fiscal year following the Determination Date. In no
event shall the cumulative amount of Additional Notes issued under the
procedures set forth in this paragraph exceed $37 million.
The
New Senior Notes will be secured by liens or security interests in all the
assets of Reorganized Congoleum, which liens or security interests shall be
subordinate in priority only to the liens or security interests granted by
Reorganized Congoleum under the Exit Facility but shall not otherwise be
subordinated to the Exit Facility, and which New Senior Notes liens or security
interests shall be pari passu
with no other security interests or liens. The New Senior
Notes shall be in the form set forth in the New Indenture, which will be filed
as part of the Plan Supplement.
26
ARTICLE
5
EVENTS
DURING THE REORGANIZATION CASES
5.1.
|
Commencement of the
Reorganization Cases
|
On
December 31, 2003 (the “Petition Date”), Congoleum,
CSI and CFI each filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code. Each Debtor was authorized to operate its business
and manage its properties as a debtor-in-possession pursuant to sections 1107(a)
and 1108 of the Bankruptcy Code. On or about January 7, 2004,
the Bankruptcy Court entered an order providing for the joint administration of
the Reorganization Cases.
5.2.
|
Administration of the
Reorganization Cases
|
|
(a)
|
Payment
of Pre-Petition Debt Incurred in the Ordinary Course of
Business
|
On
January 7, 2004, the Bankruptcy Court entered orders that authorized the Company
to pay, in its discretion, all undisputed, unsecured pre-petition indebtedness
and obligations (other than the Asbestos Claims, Senior Note Claims and any
other indebtedness or liabilities that are impaired and to be restructured under
the Plan) which were incurred in the ordinary course of business as such
indebtedness and obligations mature in accordance with their terms, and to pay
salaries, wages, benefits and other amounts owed to employees and consultants as
such obligations become due, including obligations that were, or may have been,
incurred prior to the Petition Date.
|
(b)
|
DIP
Financing
|
In
order to fund ongoing business operations and to preserve the value of the
Debtors’ estates, the Debtors entered into a Ratification and Amendment
Agreement (the “Ratification
Agreement”) with Wachovia to ratify and amend the Credit Facility in
order to provide the Debtors with debtor-in-possession financing. The
Debtors filed a Motion for Interim and Final Orders Pursuant to Sections 363(c)
And 364(c) of the Bankruptcy Code and Bankruptcy Rule 4001 (1) Authorizing the
Use of Cash Collateral, (2) Authorizing Debtors to Obtain Interim Post-Petition
Financing, (3) Granting Senior Liens and Priority Administrative Expense Status,
(4) Modifying the Automatic Stay, (5) Authorizing Debtors to Enter into
Agreements with Congress Financial Corporation, and (6) Prescribing Form and
Manner of Notice and Time for Final Hearing under Bankruptcy Rule 4001(C) (the
“DIP
Motion”). On March 8, 2004, the Bankruptcy Court entered
a final order authorizing the Debtors to obtain debtor-in-possession financing
on a final basis, effective as of February 2, 2004 (the “DIP Order”).
In
summary, Wachovia agreed, subject to the terms of the Ratification Agreement, to
make post-petition loans to Congoleum in an aggregate principal amount not to
exceed $30 million, including a sublimit of $5 million for letters of credit,
subject to certain borrowing base and minimum excess availability
restrictions. To secure this indebtedness, Wachovia was granted
security interests in all of the collateral subject to security interests in the
Credit Facility, all present and future accounts, all present and future
acquired Inventory and all documents of title. In addition, the DIP
Order provides, inter
alia, that the obligations of the Debtors under the Ratification
Agreement will constitute, in accordance with section 364(c)(1) of the
Bankruptcy Code, allowed administrative expense claims against the Debtors in
the Reorganization Cases, with such claims having priority over all other
administrative expense claims and all unsecured claims of the Debtors then
existing or thereafter arising, of any kind or nature whatsoever including,
without limitation, all administrative expenses of the kinds specified in
sections 503(b) and 507(b) of the Bankruptcy Code. Reference should
be made to the DIP Motion (including all exhibits thereto) and the Ratification
Agreement, copies of which are on file with the Bankruptcy Court, for more
details regarding the terms of the financing.
On
November 22, 2004, with the consent of Wachovia, the Debtors filed a motion
pursuant to Section 364 of the Bankruptcy Code for an Order Approving Amendment
to Post-Petition Financing Agreement, which was granted by the Bankruptcy Court
by order dated December 14, 2004. This amendment (i) amended the
budget; (ii) extended the term of the existing Credit Facility from December 31,
2004 to June 30, 2005; (iii) placed new limitations on capital expenditures;
(iv) provided a new minimum EBITDA covenant and (v) eliminated the minimum
tangible net worth requirement. A fee of $150,000 was paid to
Wachovia upon approval of this amendment by the Bankruptcy Court.
27
Numerous
non-material amendments to the Ratification Agreement have been agreed to, and
notice of such amendments were filed with the Bankruptcy Court. Most
recently,
May
15, 2009 the Debtors filed a notice of non-material modification and amendment
to the Ratification Agreement. This amendment extended the maturity
date to the earlier of (a) December 31, 2009 and (b) the date a plan of
reorganization in the Debtors’ bankruptcy cases, as confirmed by the Bankruptcy
Court, becomes effective. In addition, the amendment modified the
minimum EBITDA covenant for periods during fiscal year 2009. The
amendment provided for payment of a $15,000 monthly fee commencing upon entry of
order until termination. This amendment did not constitute a
“material change,” as such term is defined in the DIP Order, but as a precaution
Congoleum also sought and obtained an approval order with respect to the
amendment.
|
(c)
|
Asbestos
Property Damage Claim Bar
Date
|
At
the time the Debtors commenced the Reorganization Cases, no Asbestos Property
Damage Claims were being asserted against the Debtors. In order to
bind holders of Asbestos Property Damage Claims to the Plan, the Debtors needed
to ascertain whether any such claims existed, and if so, give such claimants
notice and an opportunity to protect their interests. On January 13,
2004, the Debtors filed the Motion re: for Order (i) Establishing Asbestos
Property Damage Claim Bar Date; (ii) Approving Property Damage Proof of Claim
Form; and (iii) Approving Scope and Form of Notice (the “Asbestos Property Damage Claim Bar
Date Motion”). The Bankruptcy Court, on February 2, 2004,
entered an Order establishing May 3, 2004 as the deadline by which holders of
Asbestos Property Damage Claims were required to assert such claims against the
Debtors by the filing of an Asbestos Property Damage Proof of Claim Form or be
forever barred from asserting any such claim against the Debtors, the
Reorganized Debtors, the Plan Trust and other parties protected by the
Bankruptcy Court’s Orders or the Plan (the “Asbestos Property Damage Claim Bar
Date Order”).
Because
the Debtors were unaware of any holders of Asbestos Property Damage Claims,
notice of the Asbestos Property Damage Claim Bar Date was provided by
publication in certain national newspapers and newspaper inserts, such as The New York Times and Parade Magazine, as well as
trade publications for certain industries. In response, thirty-six
(36) Asbestos Property Damage Proofs of Claim were filed which asserted Asbestos
Property Damage Claims of approximately $900,000 in the
aggregate. After reviewing the Asbestos Property Damage Claims to
ensure that such claims were based upon the existence of Congoleum manufactured
asbestos-containing products in the buildings for which claims are asserted as
well as to ensure that such claims complied in all other respects with the
Asbestos Property Damage Claim Bar Date Order, the Debtors filed objections to
certain of the claims. By Order dated January 18, 2005, several
Asbestos Property Damage Claims were expunged. As a result, 19
Allowed Asbestos Property Damage Claims remain, which total approximately
$133,000 in the aggregate.
|
(d)
|
Bondholders’
Committee’s Motion For Bar
Date
|
On
October 12, 2007, the Bondholders’ Committee filed a motion seeking the entry of
an order establishing January 8, 2008 as the general bar date by which proofs of
claim in these Chapter 11 cases, including proofs of claim arising out of
asbestos-related claims for which the Debtors allegedly have legal liability,
must be filed against the Debtors, and approving the form and manner of notice
of the general bar date. Objections to the motion were filed by the
Futures Representative, the Asbestos Claimants’ Committee, Century Indemnity
Company, and counsel to certain asbestos claimants. The Bankruptcy
Court held a hearing on November 5, 2007. On February 4, 2008, the
Bankruptcy Court entered a Memorandum Opinion and Order denying the
motion. The Bondholders’ Committee and various insurers separately
filed appeals with respect to the Order denying the motion, which appeals were
administratively terminated by orders of the Court. Any party to the
case may reopen the case and all appellate rights are preserved.
28
5.3.
|
Asbestos Claimants’
Committee and Bondholders’
Committee
|
Section
1102 of the Bankruptcy Code authorizes the appointment of a committee of holders
of unsecured claims and such other committees as the United States Trustee or
the Bankruptcy Court may determine to appoint. On March 23, 2004, a
motion was filed requesting that the United States Trustee appoint an official
committee of unsecured asbestos-related personal injury claimants. On
April 19, 2004, the Bankruptcy Court entered an order requiring the appointment
of the Asbestos Claimants’ Committee. On April 21, 2004, the United
States Trustee appointed the Asbestos Claimants’ Committee, which currently
consists of the following members: (i) Frank Cettina, c/o Weitz &
Luxenberg, P.C.; (ii) Michael Edwards, c/o Baron & Budd, P.C.;
(iii) Gerald and Mae Ferro, c/o Kazan, McClain, Abrams, Fernandez, Lyons
& Farrise, a Professional Law Corporation; (iv) Harvey Overman, c/o
Motley Rice, LLC; and (v) Lois J. Amati, c/o Robert Taylor, II, PC &
Assocs. The Asbestos Claimants’ Committee requested and obtained
authority to employ the following professionals: (i) Caplin & Drysdale,
Chartered as counsel to the Asbestos Claimants’ Committee; (ii) Goldstein
Lem & Isaacson, P.C. as co-counsel to the Asbestos Claimants’ Committee;
(iii) LTC as financial advisors, which has now been replaced by Charter Oak
Financial Consultants, LLC; (v) Legal Analysis Systems as an asbestos-related
bodily injury consultant; and (vi) Charter Oak Financial Consultants, LLC as
financial advisors to replace LTC.
On
January 27, 2006, the United States Trustee appointed the Bondholders’
Committee consisting of Deutsche Asset Management, Wells Capital Management and
HSBC Bank USA, N.A., as Successor Indenture Trustee, to represent the interests
of the holders of Senior Note Claims. Wells Capital Management has
since resigned from the Bondholders’ Committee. As described in
Section 6.3(d), - “Treatment of Classified Claims and Interests,” the Senior
Note Claims are Impaired by the Plan. The Bondholders’ Committee
requested and obtained authority to employ the following
professionals: (i) Akin Gump Strauss Hauer & Feld as co-counsel;
(ii) Teich Groh as co-counsel; and (iii) Bates White, LLC as an asbestos-related
bodily injury consultant.
On
October 8, 2007, the United States Trustee filed a motion seeking the entry of
an order appointing an examiner to investigate the conduct of LTC and to
determine whether the Debtors or the estates have any causes of action against
LTC as a result of allegations that LTC improperly billed the estate for time
that it did not work. It is alleged that LTC improperly raised its
fees in its filed fee applications causing the estates to pay fees to LTC that
were not earned. The Debtors also filed a motion on October 8, 2007,
which sought an order requiring LTC (i) to disgorge all the fees and expenses it
received in connection with its role as financial advisor to the ACC in these
Chapter 11 cases due to LTC’s improper conduct relating to its billing
practices; (ii) prohibit and enjoin LTC from filing further fee applications for
unpaid fees and services in these Chapter 11 cases; and (iii) to reimburse the
Debtors’ estates for the fees and expenses associated with the investigation of
this matter by the Debtors and monitoring of the investigation by other estate
professionals. LTC filed for bankruptcy in the United States
Bankruptcy Court for the District of Connecticut (the “Tersigni Bankruptcy
proceeding”). The Bankruptcy Court entered an Order Directing the
Appointment of an Examiner to investigate the billing practices and related
conduct, including an investigation of any fraud, dishonesty, incompetence, or
gross mismanagement of the affairs of LTC by management. On January
14 and 16, 2008, respectively, the United States Trustee and the Debtors each
withdrew their motions pending in the Reorganization cases without
prejudice. Congoleum filed a proof of claim in the Tersigni
Bankruptcy proceeding for the amount of fees paid to LTC in the Congoleum
Chapter 11 case on or about March 10, 2008.
5.4.
|
Bankruptcy Court
Appointment of Futures
Representative
|
On
February 18, 2004, the Bankruptcy Court entered an order approving the
appointment of R. Scott Williams (also one of the Plan Proponents) as the
Futures Representative (the “Futures Representative Appointment
Order”). Mr. Williams’ qualifications to serve as Futures
Representative, and the process by which he was selected, are set forth in
Section 3.2 -- “Selection of the Futures
Representative.” Mr. Williams requested and obtained the
authority to employ the following professionals: (i) Swidler
Berlin LLP (formerly Swidler Berlin Shereff Friedman LLP) as co-counsel to Mr.
Williams; (ii) Ravin Greenberg PC as co-counsel to Mr. Williams; and
(iii) CIBC World Markets Corp. as financial advisor to
Mr. Williams. In March 2006, Swidler Berlin LLP withdrew as
co-counsel to Mr. Williams and Mr. Williams requested and obtained the authority
to retain Orrick, Herrington & Sutcliffe LLP as co-counsel to Mr.
Williams. In March 2006, CIBC World Markets Corp. also withdrew as
financial advisor to Mr. Williams and Mr. Williams requested and obtained
authority to retain Piper Jaffray & Co. as financial advisor to Mr.
Williams. On November 5, 2007, the Bankruptcy Court approved the
retention of Hamilton, Rabinovitz & Associates, Inc. to serve as an
asbestos-related bodily injury consultant to Mr. Williams.
29
On
February 27, 2004, certain insurers of the Debtors appealed the Futures
Representative Appointment Order. On August 9, 2004, the District
Court entered an order affirming the Futures Representative Appointment
Order. On September 8, 2004, the appellants appealed the District
Court’s order to the United States Court of Appeals for the Third Circuit (the
“Court of
Appeals”). By order dated February 23, 2005, with the
agreement of the parties, the Court of Appeals dismissed the
appeal.
5.5.
|
Retention of
Professionals
|
The
Debtors requested and obtained the authority to employ the following
professionals: (i) Saul Ewing LLP (“Saul Ewing”) as counsel to the
Debtors; (ii) Gilbert Heintz & Randolph LLP (“GHR”) as special insurance
counsel to the Debtors; (iii) Dughi & Hewit PC (formerly, Dughi Hewit &
Palatucci PC) as special insurance counsel to the Debtors; (iv) SSG Capital
Advisors, L.P. as financial advisors to the Debtors; (v) Ernst & Young LLP
as audit and tax advisors to the Debtors; (vi) Guiliani Capital Advisors LLC
(formerly Ernst & Young Corporate Finance LLC) as restructuring advisor to
the Debtors; (vii) Peterson Risk Consulting as insurance allocation consultant
to the Debtors; (viii) Daley-Hodkin, LLC as appraiser; (ix) Logan & Co.,
Inc. as official claims, balloting and noticing agent; (x) FTI Consulting as
trial support service provider; (xi) Ritchie & Associates as consultants;
and (xii) Gelber Organization, LLC as tax consultants.
Certain
of the Debtors’ insurers appealed the Bankruptcy Court’s Orders authorizing the
retention of Saul Ewing and GHR. On August 26, 2004 the District
Court vacated the Bankruptcy Court’s order authorizing the retention of Saul
Ewing and remanded the matter to the Bankruptcy Court for further fact
finding. A stay of this Order was subsequently entered by the
District Court pending an appeal by the Debtors. On September 24,
2004, the Debtors appealed the District Court’s order to the Court of
Appeals.
While
the Debtors and Saul Ewing denied all allegations raised by the insurers
challenging Saul Ewing’s retention, they decided that further contesting those
allegations could entail enduring a costly and potentially distracting appellate
process. Saul Ewing, in consultation with and consent of the Debtors,
concluded that it should withdraw as the Debtors’ counsel in order to avoid any
potential distraction to the Debtors’ reorganization efforts and potential
additional cost to the Debtors’ estates. On October 18, 2004, the
Bankruptcy Court approved Saul Ewing’s withdrawal as counsel to the Debtors and
established a transition period during which Saul Ewing would complete certain
work for the Debtors. The Debtors requested and obtained the
authority to employ Pillsbury Winthrop Shaw Pittman LLP (formerly Pillsbury
Winthrop LLP) and Okin, Hollander & DeLuca, LLP as substitute co-counsel to
the Debtors.
On
August 9, 2004, the District Court affirmed the Bankruptcy Court’s Order
authorizing the retention of GHR. On September 8, 2004, the
appellants appealed the District Court’s order to the Court of
Appeals.
On
October 13, 2005, the Court of Appeals determined that GHR had not obtained
effective waivers of certain conflicts of interest, issued a decision
disqualifying GHR as counsel to the Debtors (the “Disqualification Decision”)
and remanded the matter to the District Court for further proceedings consistent
with its opinion. On December 6, 2005, the Bankruptcy Court entered
an Order authorizing the retention of Covington & Burling to represent the
Debtors as co-counsel with Dughi & Hewit in the insurance coverage
litigation and with respect to insurance settlement matters previously handled
by GHR.
As
a result of the Disqualification Decision, by motion dated October 28, 2005, GHR
sought an order authorizing the withdrawal of GHR as special counsel to the
Debtors (the “Withdrawal
Motion”). In response, certain insurers filed a Cross-Motion
For Disgorgement of Fees (the “Cross-Motion”), which was
contained in the certain insurers’ objection to the Withdrawal
Motion. The Cross-Motion was joined, in whole or in part, by several
other insurers, the Bondholders’ Committee and the Office of the United States
Trustee. The Debtors sought mediation with respect to, inter alia, the
Cross-Motion.
30
The
Bankruptcy Court held a hearing on the Cross-Motion on February 6, 2006 and
issued an oral decision granting the Cross-Motion on February 7, 2006 (the
“GHR Disgorgement
Decision”). The Bankruptcy Court denied the Withdrawal Motion
as moot at a hearing held on March 6, 2006. On February 27, 2006, the
Bankruptcy Court stated that it would grant the Motion of United States Trustee
for an Order Compelling Disgorgement of Funds Received by Gilbert Heintz &
Randolph based on the identical reasoning contained in the GHR Disgorgement
Decision. Accordingly, on March 27, 2006, the Bankruptcy Court
entered an Order (the “Disgorgement Order”)
compelling GHR to disgorge all fees and expenses paid to it in connection with
GHR’s First through Sixth Fee Applications, such amounts totaling $9,662,486.71
and denying GHR’s request for $3,312,151.53 in connection with its Seventh and
Eighth Fee Applications. GHR appealed the Disgorgement Order to the
District Court. GHR’s request for a stay of the Disgorgement Order
pending appeal was denied by the Bankruptcy Court by Order, dated April 27,
2006. On April 28, 2006, GHR filed an Emergency Motion for a stay of
the Disgorgement Order pending appeal with the District Court, which was denied
by the District Court on May 15, 2006. On May 12, 2006, GHR filed an
application with the Bankruptcy Court seeking reimbursement of $1,459,150.55 in
expenses (the “GHR Expense
Application”), which would have been setoff against the $9,662,486.71
ordered to be disgorged pursuant to the Disgorgement Order. On May
26, 2006, the Debtors filed a Cross-Motion to the GHR Expense Application
seeking entry of judgment with respect to the Disgorgement Order and
authorization to register the judgment in the districts where GHR maintains its
assets. On July 27, 2006, the Debtors advised the Bankruptcy Court
that the Debtors and the Bondholders’ Committee had reached an agreement in
principle with GHR, subject to documentation, settling GHR’s liability under the
Disgorgement Order. The Debtors and GHR subsequently entered into and
agreed to the certain Stipulation and Consent Order Resolving Dispute Regarding
GHR Disgorgement Order (the “Stipulation and Consent
Order”) under which GHR was to pay Congoleum over time approximately $9.2
million plus interest. The Stipulation and Consent Order was
supported by the Bondholders’ Committee and the Futures
Representative. On October 12, 2006, the Debtors filed a motion for
an order pursuant to 11 U.S.C. § 105 and Federal Rule of Bankruptcy Procedure
9019 approving the Stipulation and Consent Order. On April 4, 2007,
the Bankruptcy Court held a hearing on the motion for approval of the
Stipulation and Consent Order, which motion was granted orally, and an order was
entered on April 5, 2007. In April 2008, GHR paid Congoleum cash in
full satisfaction of the outstanding settlement amount.
On
or about February 19, 2004, the Debtors filed an application to retain The
Kenesis Group LLC to perform post-petition services. On April 5,
2004, the Bankruptcy Court denied Kenesis’ retention application. On
December 8, 2005, certain insurers filed a Motion Seeking Disgorgement of Fees
by Kenesis and Authority to Commence an Avoidance Action against Kenesis (the
“Kenesis Disgorgement
Motion”) with the Bankruptcy Court. On February 6, 2006, the
United States Trustee filed a separate Motion For Disgorgement of Fees by
Kenesis and on February 8, 2006, the Debtors filed a Cross-Motion with respect
to the Kenesis Disgorgement Motion. The Debtors’ Cross-Motion sought
disgorgement of fees for services rendered by Kenesis after the Petition
Date.
A
hearing on the Kenesis Disgorgement Motion and the Debtors’ Cross-Motion was
held on February 14, 2006 at which the Bankruptcy Court rendered its decision
(the “Kenesis
Decision”). By the Kenesis Decision, the Bankruptcy Court
granted, in part, the Debtors’ Cross-Motion and the Kenesis Disgorgement Motion
by ordering Kenesis to disgorge all fees related to services performed after the
Petition Date. Kenesis was specifically ordered to disgorge the sum
of $181,000, and the Debtors were directed to investigate whether additional
disgorgement or fee recovery is appropriate under various legal
theories. The Bankruptcy Court denied the Kenesis Disgorgement Motion
to the extent that it sought disgorgement of fees for services rendered
pre-Petition Date and denied the certain insurers’ derivative standing to
commence an avoidance action against Kenesis. In February 2006,
Kenesis paid the Debtors $181,000 on account of the Kenesis
Decision.
On
March 9, 2006, certain insurers filed a cross-motion to appoint an independent
examiner for the GHR matters (the “Examiner
Cross-Motion”). On April 3, 2006, the Bondholders’ Committee
filed a Motion for Entry of an Order Granting Leave, Standing and Authority to
Prosecute Certain Causes of Actions on Behalf of the Estates Against Gilbert
Heintz & Randolph, LLP (the “Bondholders’ Standing
Motion”). In response to the Bondholders’ Standing Motion, by
Order, dated April 20, 2006, the Bankruptcy Court granted the Bondholders’
Committee standing on behalf of the Debtors to investigate and prosecute
malpractice claims against GHR and further granted the Bondholders’ Committee
standing on behalf of the Debtors to investigate and pursue claims against
Kenesis. Accordingly, the Debtors are no longer investigating
potential additional claims against Kenesis, but have cooperated with the
Bondholders’ Committee in its investigation and prosecution of claims on the
Debtors’ behalf. The Bankruptcy Court denied the Examiner
Cross-Motion and certain insurers have appealed the order (the “Examiner
Appeal”). On July 13, 2006, the Debtors filed a motion to
dismiss the Examiner Appeal. On July 17, 2006, the
Bondholders’ Committee filed a motion to dismiss the Examiner
Appeal. By Stipulation, dated September 27, 2006, the parties agreed
to extend the time to respond to the motion to dismiss to no later than October
30, 2006. By Order dated November 17, 2006, with the agreement of the
Debtors, certain insurers, and the Bondholders’ Committee, the District Court
administratively terminated the Examiner Appeal.
31
The
Debtors, the Bondholders’ Committee (on behalf of the estates) and Gilbert LLP
(formerly known as Gilbert Oshinsky, LLP, Gilbert Randolph LLP and Gilbert
Heintz & Randolph LLP) have entered into several tolling agreements with
respect to such malpractice claims and the present tolling agreement continues
until June 30, 2009, unless earlier terminated by act of the
parties. The Debtors and the Bondholders’ Committee filed an
adversary proceeding against Kenesis in December 2006 to which Michael Rooney
was later joined as a defendant. Subsequently, the Debtors and the
Bondholders’ Committee (on behalf of the estates) entered into a tolling
agreement with Kenesis and Rooney with respect to certain claims, and the
present tolling agreement expires on December 31, 2009, unless earlier
terminated by act of the parties. Within the next few weeks, the
Debtors and the Bondholders’ Committee expect to enter into and file a new
tolling agreement with Kenesis and Rooney extending the tolling of certain
claims until December 31, 2010.
5.6. Developments with Regard to
Certain Pre-Petition Claims
On
February 28, 2005, the Debtors filed the Objection to Asbestos Personal Injury
Claims of Certain Pre-Petition Settled Claimants (First Set) (the “Claims Objection”) seeking the
disallowance and expungement of the Asbestos Personal Injury Claims of certain
of the claimants that participated in the Claimant Agreement. The
Claims Objection asserted that certain of such claims were potentially invalid
because they may have been barred by the statutes of limitations and therefore
may not have been filed in good faith. Certain of the claims were
withdrawn, and other claimants did not respond. By the Order Concerning
Debtors’ Objection to Asbestos Personal Injury Claims of Certain Pre-Petition
Settled Claimants (First Set), dated April 5, 2005 and the Consent Order
Withdrawing Motion Without Prejudice, dated April 27, 2005, the Bankruptcy Court
disallowed approximately 580 claims totaling approximately $4.3
million.
On
September 20, 2005, the Bankruptcy Court entered a Consent Order between the
Debtors and Campbell Cherry in which Campbell Cherry agreed on behalf of certain
of its clients to withdraw certain claims that had previously been approved
under the Claimant Agreement and to forbear from exercising all rights under the
Claimant Agreement with respect to such claims. The Consent Order
related to claims with an approximate dollar value of $6.5 million.
On
May 2, 2007, the Debtors filed an objection to certain claims pursuant to
section 502 of the Bankruptcy Code seeking to disallow and expunge certain
pre-petition settlement claimants represented by Campbell Cherry, which the
Debtors assert are invalid settled claims because of a failure of one of the
conditions for an eligible, qualified claim under the Claimant
Agreement. On November 27, 2007, the Bankruptcy Court held a hearing
and denied the Debtors’ objection.
5.7.
|
Developments
With Regard to Certain Proofs of
Claim
|
|
(a)
|
Wausau
|
On
or about October 5, 2006, Employers Insurance Company of Wausau f/k/a Employers
Insurance of Wausau, a Mutual Company (“Wausau”) submitted a proof of
claim against the Debtors for an unspecified amount. In its proof of
claim, Wausau contends that it is entitled to (1) reimbursement for alleged
overpayment of indemnity limits, (2) reimbursement of defense cost overpayments
on its primary policies, (3) reimbursement for 87% of defense costs paid by
Liberty Mutual Insurance Company, and (4) reimbursement for interest
attributable to premature payments to the Debtors. On March 27, 2007,
the Debtors filed an objection to Wausau’s proof of claim. On
November 13, 2007, the Bankruptcy Court entered an Amended Joint Scheduling
Order regarding Wausau’s proof of claim, which set deadlines for completing
discovery and filing dispositive motions. Congoleum and Wausau
resolved Wausau’s proof of claim pursuant to a Stipulation Regarding Settlement
of Proof of Claim of Wausau dated as of March 19, 2008.
32
|
(b)
|
Kaplan
Storage Company
|
On
October 3, 2006, Kaplan Storage Company (“Kaplan”) filed a request for
payment of administrative expense in the Debtors’ bankruptcy case in the amount
of $107,550.62. On March 19, 2007, Kaplan filed an amended request
for payment of administrative expense in the amount of
$170,020.03. The Debtors’ contend that the amount requested in that
proof of claim was actually $202,486.61 because Kaplan improperly retained a
security deposit paid by the Debtors and deducted it from its
claim. By its proof of claim, Kaplan sought payment for certain
unbilled charged under a certain lease agreement entered into between Kaplan and
the Debtors. On June 25, 2007, the Debtors filed an objection to
Kaplan’s proof of claim. The Bankruptcy Court held a hearing on the
Debtors’ objection on November 19, 2007. On December 3, 2007, the
Bankruptcy Court entered an order providing that Kaplan (1) has an allowed
administrative claim against the Debtors’ estates in the amount of $45,860.88
which shall be paid by the Debtors within thirty days from the date of the
order, (2) has an allowed non-priority general unsecured claim against the
Debtors’ estates in the amount of $54,611.70, and (3) is permitted to apply the
security deposit held in the amount of $32,466.58 to the general unsecured claim
leaving an allowed non-priority general unsecured claim in the amount of
$22,145.12.
5.8.
|
Vendor Tolling
Agreements
|
On
August 10, 2005, the Debtors filed a motion for the entry of an order
authorizing and approving the form of tolling agreement (“Vendor Tolling Agreement”) to
be entered into between the Debtors and (i) certain individual directors and
officers of the Debtors; (ii) related companies to the Debtors; (iii)
professionals employed by the Debtors; and (iv) certain vendors, creditors and
other parties that received transfers during the ninety days preceding the
Petition Date with an aggregate value of $100,000.00 or greater, pursuant to
Bankruptcy Code sections 105(a) and 546(a). The agreements tolled the
expiration of the time established by Bankruptcy Code § 546(a) to bring causes
of action under Bankruptcy Code §§ 544, 545, 547, 548, 549 or 553 until December
31, 2006. The
Bankruptcy Court entered an order on September 8, 2005 granting the
motion.
Among
others, the Debtors obtained signed tolling agreements from Congoleum
Corporation, Congoleum Sales, Inc. and Congoleum Fiscal, Inc. in their corporate
capacities (and not as debtors-in-possession); Richard and Roger Marcus; Howard
N. Feist, III, Cyril C. Baldwin, Jr., John N. Irwin III, Mark N. Kaplan, Mark S.
Newman, and C. Barnwell Straut; American Biltrite, Inc.; Skadden, Arps, Slate,
Meagher & Flom; Gilbert, Heintz & Randolph; Dughi Hewit; and Kenesis
Group LLC.
The
Debtors did not obtain signed tolling agreements from the following
entities: Motley Rice, LLC; Weitz & Luxenberg P.C.; Ernst &
Young LLP; Liberty Mutual Insurance Group; Eastman Chemical Company; and Neville
Chemical Company. The Debtors have named Motley Rice, LLC and Weitz
& Luxenberg P.C. as defendants in the Omnibus Avoidance Action, which is
discussed, in detail, in Section 5.11 below. Ernst & Young LLP
was previously released from its avoidance action liability, and therefore, the
Debtors did not seek a tolling agreement from this entity. The
Debtors investigated their potential claims against Liberty Mutual Insurance
Group, Eastman Chemical Company, and Neville Chemical Company before the
expiration of the § 546(a) deadline and determined that the commencement of
avoidance actions against these entities was not appropriate.
On
September 19, 2006, the Debtors filed a second motion for the entry of an order
authorizing and approving a form of amended tolling agreement (the “Amended Tolling Agreement”) to
be entered into between the Debtors and those individuals, related companies,
professionals employed by the Debtors, and vendors and creditors who previously
executed Vendor Tolling Agreements. This motion was granted by the
Bankruptcy Court by order dated October 17, 2006. The Amended Tolling
Agreements further toll the expiration of the time established by Bankruptcy
Code § 546(a) to bring causes of action under Bankruptcy Code §§ 544, 545, 547,
548, 549 or 553 until December 31, 2007.
On
September 10, 2007, the Debtors filed a third motion for the entry of an order
authorizing and approving a form of amended tolling agreement (the “Second Amended Tolling
Agreement”) to be entered into between the Debtors and those individuals,
related companies, professionals employed by the Debtors, and vendors and
creditors who previously executed Vendor Tolling Agreements and Amended Tolling
Agreements. This motion was granted by the Bankruptcy Court by order
dated October 1, 2007. The Second Amended Tolling Agreements further
toll the expiration of the time established by Bankruptcy Code § 546(a) to bring
causes of action under Bankruptcy Code §§ 544, 545, 547, 548, 549 or 553 until
December 31, 2008.
33
On
September 29, 2008, the Debtors filed a third motion for the entry of an order
authorizing and approving a form of amended tolling agreement (the “Third Amended Tolling
Agreement”) to be entered into between the Debtors and those individuals,
related companies, professionals employed by the Debtors, and vendors and
creditors who previously executed Vendor Tolling Agreements and Amended Tolling
Agreements. This motion was granted by the Bankruptcy Court by order
dated October 20, 2008. The Third Amended Tolling Agreement further
tolls the expiration of the time established by Bankruptcy Code § 546(a) to
bring causes of action under Bankruptcy Code §§ 544, 545, 547, 548, 549 or 553
until December 31, 2009.
On
October 2, 2009, the Debtors filed a fourth motion for the entry of an order
authorizing and approving a form of amended tolling agreement (the “Fourth Amended Tolling
Agreement”) to be entered into between the Debtors and those individuals,
related companies, professionals employed by the Debtors, and vendors and
creditors who previously executed Vendor Tolling Agreements and Amended Tolling
Agreements. No party has objected to this motion and the Debtors
expect that it will be granted by the District Court on November 2,
2009. The Fourth Amended Tolling Agreement will further toll the
expiration of the time established by Bankruptcy Code § 546(a) to bring causes
of action under Bankruptcy Code §§ 544, 545, 547, 548, 549 or 553 until December
31, 2010.
5.9.
|
Asbestos Personal
Injury Claims - Related Avoidance
Actions
|
|
(a)
|
Congoleum
Corporation v. Arthur J. Pergament, et
al.,
Adv. Proc. No. 05-06245
(KCF)
|
On
December 3, 2005, the Debtors commenced the Omnibus Avoidance Action by filing
in the Bankruptcy Court a Complaint to Avoid Pre-Petition Liens, to Avoid and
Recover Preferential Transfers of Property and Fraudulent Transfers of Property
Pursuant to 11 U.S.C. §§ 544, 547, 548, 549 and 550, and to Disallow Claims
Pursuant to 11 U.S.C. § 502(d) against (a) Arthur J. Pergament, in his capacity
as Collateral Trustee; (b) Joseph F. Rice and the law firm of Motley Rice LLC;
(c) Perry Weitz and the law firm of Weitz & Luxenberg, P.C.; and (d) those
holders of Secured Asbestos Claims that did not voluntarily execute an Asbestos
Personal Injury Claim Tolling Agreement.
The
Debtors commenced the Omnibus Avoidance Action for the purpose of (i) avoiding
and recovering certain preferential transfers of property made to the Asbestos
Claimants named as defendants; (ii) avoiding and recovering certain fraudulent
transfers of property made to the Asbestos Claimants named as defendants; (iii)
avoiding and/or determining the validity, priority, or extent of certain
pre-petition liens granted to secure the claims of the Asbestos Claimants named
as defendants; and (iv) preserving, for the benefit of the Debtors’ estates and
the Plan Trustee, the claims alleged therein. The Omnibus Avoidance
Action also seeks to avoid and recover certain preferential and/or fraudulent
transfers of property made to Joseph Rice and/or Motley Rice, and to avoid and
recover certain preferential and/or fraudulent transfers of property made to
Perry Weitz and/or Weitz & Luxenberg.
An
amended complaint was filed on December 30, 2005, providing additional factual
background, clarifying certain language, and including an additional prayer for
relief relating to payments made to Asbestos Claimants named as defendants
pursuant to Pre-Petition Settlement Agreements. The amended
complaint also corrects an error listing certain Asbestos Claimants named
therein under multiple law firms, and removes as defendants certain Asbestos
Claimants that executed tolling agreements after the filing of the original
complaint.
On
December 8, 2005, the Debtors filed a Notice of Plaintiff Congoleum
Corporation’s Motion Establishing Case Management Procedures and Establishing
Briefing and Discovery Schedules, seeking an order with respect to organizing
the phases of the action. At a hearing on December 28, 2005, the
Bankruptcy Court approved, over certain objections, a case management order for
the Omnibus Avoidance Action agreed upon by the Debtors and counsel for certain
of the defendants. Pursuant to the case management order, the Omnibus
Avoidance Action is divided into three stages. The first stage of the
Omnibus Avoidance Action focused on the avoidance of certain of the rights under
the Claimant Agreement and other pre-petition settlements as preferential
pre-petition and/or unauthorized post-petition transfers of the Debtors in
property pursuant to Bankruptcy Code §§ 547 and 549. The second stage of the
Omnibus Avoidance Action
34
focused
on (i) the avoidance and recovery of certain fraudulent transfers of property
made to the Asbestos Claimants named as defendants pursuant to Bankruptcy Code §
548 and applicable state law, and (ii) avoiding and/or determining the validity,
priority, or extent of the rights under the Claimant Agreement and other
pre-petition settlements granted to secure the claims of all of the Asbestos
Claimants named as defendants under Bankruptcy Code § 544. The third
stage of the Omnibus Avoidance Action was to focus on the avoidance and
recovery of certain preferential and fraudulent transfers of property made to
Joseph Rice and/or Motley Rice and Perry Weitz and/or Weitz & Luxenberg
pursuant to Bankruptcy Code §§ 547, 548, and 550 and applicable state law, and
any additional claims that the Debtors may assert.
On
March 16, 2006, the Debtors filed a motion for summary judgment with respect to
the issues in Counts I and II of the amended complaint. The motion
for summary judgment sought the avoidance of liens and security interests
granted to the Asbestos Claimants named as defendants and the allowance of
liquidated settlement amounts with respect to these claims during the ninety
days before the Petition Date as voidable preferential transfers. The
motion also sought the avoidance of liens and security interests granted to the
Asbestos Claimants named as defendants and the allowance of liquidated
settlement amounts with respect to these claims after the Petition Date, as
voidable post-petition transfers.
On
March 29, 2006, the Bondholders’ Committee filed a motion to intervene in the
Omnibus Avoidance Action, which the Bankruptcy Court granted pursuant to an
order entered on April 25, 2006. On April 13, 2006, the Futures
Representative filed a motion to intervene in the Omnibus Avoidance Action,
which the Bankruptcy Court granted pursuant to an order entered on May 9,
2006.
On
May 8, 2006, the Bankruptcy Court held a hearing and heard argument from the
Debtors, the defendants, the Bondholders’ Committee, and the Futures
Representative on the defendants’ motion for more definite statement and the
Debtors’ motion for summary judgment. On June 19, 2006, the
Bankruptcy Court issued an opinion denying the Debtors’ summary judgment motion,
and granting summary judgment on Counts I and II in favor of all of the
defendants in the Omnibus Adversary Proceeding. The Bankruptcy Court
held that the Security Agreement granted a security interest to the Collateral
Trustee, not to the individual claimants, but that nothing in the Security
Agreement made the grant of the security interest contingent on compliance with
the terms of the Claimant Agreement. The Bankruptcy Court further
found that the claimants gave value to support the Collateral Trustee’s security
interest at the time the Claimant Agreement was signed on April 10, 2003, by
agreeing to submit their claims for settlement and to enter into a 150-day
litigation moratorium. As a result, the Bankruptcy Court held that
for the purposes of Bankruptcy Code §§ 547 and 549, the date of the transfer to
the Collateral Trustee was June 11, 2003, when the parties signed the Security
Agreement, which was before the commencement of the Preference Period and before
the Petition Date. The Bankruptcy Court further held that when the
claimants’ documentation was approved, they did not receive a transfer of a
security interest from the Debtors, but rather became beneficiaries of the
security interest granted to the Collateral Trustee. An order denying
the Debtors’ summary judgment motion and granting summary judgment in favor of
the defendants on Counts I and II of the amended complaint was entered by the
Bankruptcy Court on July 31, 2006.
On
April 16, 2007, the Debtors filed a second Motion for Summary Judgment on the
Omnibus Avoidance Action seeking to void the security interests and liens
securing pre-petition settlements with certain Asbestos Claimants (the “Summary
Judgment Motion”).
On
June 7, 2007, the Debtors also filed their Omnibus Objection to Settled Asbestos
Personal Injury Claims of all Qualified Pre-Petition Settlement Claimants (Class
2 Claimants) and all Qualified Participating Claimants (Class 3 Claimants) (ECF
Doc. #5563) (the “Omnibus Claims Objection”), requesting (i) that the Claims
settled under the Claimant Agreement or other pre-petition settlement agreements
be disallowed and expunged, or (ii) in the alternative, rescinding the
Pre-Petition Settlement Agreements, Claimant Agreement, Security Agreement and
Collateral Trust Agreement, disallowing and expunging the claims without
prejudice and restoring the parties thereto to status quo ante.
35
On
July 27, 2007, the Bankruptcy Court issued two decisions regarding the legal
status of the settled Claims: the first with respect to the Omnibus
Claims Objection (the “Omnibus Claims Objection Opinion”) and the second with
respect to the Summary Judgment Motion (the “Summary Judgment
Opinion”). Regarding the Omnibus Claims Objection, the Bankruptcy
Court held that the relief requested in the Omnibus Claims Objection should be
heard in the context of an adversary proceeding in order to ensure that the
Bankruptcy Court has jurisdiction over all the affected Claimants and that their
due process rights are otherwise protected. The Bankruptcy Court also
reiterated and expanded on its view that all the Asbestos Personal Injury
Claims, unless they had obtained a final judgment as to liability and damages,
are similarly situated and must receive similar treatment in any section 524(g)
reorganization plan. On August 14, 2007, the Debtors filed a motion
to amend the existing Omnibus Adversary Proceeding along with a proposed amended
complaint to assert as causes of action the objections contained in the Omnibus
Claims Objection consistent with the Bankruptcy Court's July 27, 2007 Omnibus
Claims Objection Opinion.
In
its July 27, 2007 Summary Judgment Opinion, the Bankruptcy Court ruled that the
security interests in insurance that were granted to the settled Claimants
pre-bankruptcy were ineffective and unenforceable against Congoleum's insurance
policies or the proceeds of those policies because the attempts to create a
security interest were outside the scope of Article 9 of the Uniform Commercial
Code; nor could such security interests be considered to be a common law
pledge. The Bankruptcy Court therefore granted summary judgment in
Congoleum's favor on Counts V and VI of the Omnibus Avoidance Action, which
counts sought to void the security interests and liens securing the pre-petition
settlements of Asbestos Claims.
On
August 14, 2007, the Debtors filed a motion seeking leave to amend the Omnibus
Avoidance Action to include additional counts reflective of the relief sought in
the Omnibus Claims Objection (the “Third Amended
Complaint”). On September 4, 2007, the Bankruptcy Court held a
hearing on the motion, which was granted. Certain defendants filed
answers and counterclaims to the Third Amended Complaint.
On
September 17, 2007, First State Insurance Company and Twin City Fire Insurance
Company filed a motion to intervene with respect to counts 17, 18, 19 and 20 of
the Third Amended Complaint. On October 2, 2007, the Debtors and
certain defendants each filed oppositions to the motion to
intervene. On October 9, 2007, the Bankruptcy Court held a hearing on
the motion, which was denied and an order was entered on October 10,
2007.
On
October 9, 2007, the Debtors and Bondholders’ Committee filed an application for
entries of default judgment against certain defendants for their failure to
plead or otherwise defend with respect to the Third Amended
Complaint. On October 17, 2007, the Bankruptcy Court entered a
default judgment against certain defendants. On November 1, 2007,
certain defendants filed motions to vacate the default judgments entered against
them because they alleged that such default judgments were entered in
error. The motions to vacate the default judgments were granted by
the Bankruptcy Court on November 27, 2007. On November 16, 2007,
certain other defendants filed a motion to vacate the default judgments entered
against them alleging that they are not proper parties to the Omnibus Avoidance
Action in the first instance because they did not participate in the Claimant
Agreement or the Pre-Petition Settlement Agreements. On December 11,
2007, the court entered a stipulation and order vacating default and default
judgment with respect to those certain other defendants.
On
November 1, 2007, the Asbestos Claimants’ Committee filed a motion to intervene
in the Omnibus Avoidance Action. On December 11, 2007, the Bankruptcy
Court entered an order approving a stipulation and agreement between the Debtors
and the Asbestos Claimants’ Committee, which provides, among other things, that
the Asbestos Claimants’ Committee agrees to withdraw its motion to intervene
without prejudice and that it will have the right to appear and be heard in the
Omnibus Avoidance Action regarding any issue that it deems relevant to the
rights of its general unsecured asbestos claimant constituency.
On
October 12, 2007, the Debtors filed a third motion for summary judgment on the
Omnibus Avoidance Action seeking to disallow and expunge with prejudice all
claims settled under the Pre-Petition Settlement Agreements and the Claimant
Agreement, or alternatively to disallow the asbestos claims settled pursuant to
those agreements under the doctrines of legal frustration or equitable
disallowance. Objections to the third motion for summary judgment
were filed by certain defendants. The Bankruptcy Court held a hearing
on the third motion for summary judgment on November 5, 2007 and reserved
decision. On December 28, 2007, the Bankruptcy Court denied the third
motion for summary judgment and entered an order denying the motion on January
24, 2008. On February 1 and 4, 2008, the Bondholders’ Committee and
the Debtors, respectively, each filed a notice of appeal to the District Court
from the Bankruptcy Court’s January 24, 2008 order denying the third motion for
summary judgment.
36
Pursuant
to the Omnibus Claimant Settlement and as incorporated in the February 2008
Plan, with respect to any appeal by the Debtors, Bondholders’ Committee and/or
Futures Representative of the Bankruptcy Court’s summary judgment order dated
January 24, 2008 (concerning Counts XVII, XVIII, XIX, and XX in the Omnibus
Avoidance Action), the asbestos defendants therein consent to a stay of such
appeal until sixty (60) days after the Effective Date, but otherwise do not
waive any rights with regard thereto, and such appeal shall be terminated within
sixty (60) days following the Effective Date. In this
regard, if the Debtors, Bondholders’ Committee and/or Futures Representative
appeal such order, then the defendants in the Omnibus Avoidance Action have
stated their intent to cross-appeal the Bankruptcy Court’s order
dated August 27, 2007 (concerning Counts V and VI of the Omnibus Avoidance
Action).
Most of the defendants in the Omnibus
Avoidance Action and Sealed Avoidance Action have agreed to a Litigation
Settlement Agreement with Congoleum compromising and settling those avoidance
actions. The Litigation Settlement Agreement is more fully described
in Section 5.16 hereof.
|
(b)
|
Congoleum
Corporation v. Arthur J. Pergament, et
al.,
Adv. Proc. No. 05-06461
(KCF)
|
On
December 30, 2005, the Debtors commenced the Sealed Avoidance Action by filing
under seal a Complaint to Avoid and Recover Fraudulent Transfers of Property
Pursuant to 11 U.S.C. §§ 544, 548, 550, the Uniform Fraudulent Transfer Act and
Applicable State Law against (a) Arthur J. Pergament, in his capacity as
Collateral Trustee; and (b) all holders of Secured Asbestos Claims, including
those who voluntarily executed an Asbestos Personal Injury Claim Tolling
Agreement. The Sealed Avoidance Action has been assigned Adversary
Proceeding No. 05-06461 (KCF).
The
Debtors commenced the Sealed Avoidance Action for the purpose of (i) avoiding
and recovering pursuant to Bankruptcy Code §§ 548(a)(i)(A) and 550(a) transfers
of property made to the Asbestos Claimants and (ii) avoiding and recovering
pursuant to Bankruptcy Code §§ 544(b) and 550(a), the Uniform Fraudulent
Transfer Act, and applicable state law transfers of property made to the
Asbestos Claimants. The Sealed Avoidance Action was also commenced
for the purpose of preserving, for the benefit of the Debtors’ estates and the
Plan Trustee, the claims alleged therein.
The
Sealed Avoidance Action was also commenced as a separate adversary proceeding in
order to resolve a motion to intervene filed by Continental Casualty Company and
Continental Insurance Company (and joined by Century Indemnity Company, ACE
American Insurance, ACE Property and Casualty Insurance Company) in the Omnibus
Avoidance Action. As set forth in the Bankruptcy Court’s Stipulation
and Order Relating to Preservation of Certain Claims of the Debtor-in-Possession
and CNA’s Motion to Intervene and Century’s Joinder to Such Motion (entered in
the Omnibus Avoidance Action on December 28, 2005), the Debtors have not sought
issuance of any summonses in the Sealed Avoidance Action and the Bankruptcy
Court will not require issuance of a summons in the Sealed Avoidance Action
until further order of the Bankruptcy Court. The Sealed Avoidance
Action also has been stayed and all deadlines tolled until further
order.
On
April 13, 2006, Continental Casualty Company and Continental Insurance Company
filed a motion to unseal the Sealed Avoidance Action, to which the Debtors filed
an objection on May 1, 2006. The Debtors resolved the motion with
Continental Casualty Company and Continental Insurance Company without holding a
hearing, and the motion was withdrawn on May 18, 2006.
On
July 21, 2006, the Bondholders’ Committee filed a Motion to Intervene pursuant
to 11 U.S.C. § 1109(b) and Bankruptcy Rule 7024(a) in the Sealed Avoidance
Action (the “Bondholders’
Intervention Motion”). On August 14, 2006, the Bankruptcy
Court granted the Bondholders’ Intervention Motion.
5.10.
|
Settlements with
Insurers and Brokers
|
|
(a)
|
Liberty
Mutual Settlement Agreement
|
On
June 24, 2004, the Debtors filed a motion for approval of a settlement agreement
with Liberty Mutual Insurance Company (“Liberty”), which provided
primary liability insurance coverage to Congoleum including coverage for
asbestos-related claims (the “Liberty
Settlement”). On July 29, 2004, the Bankruptcy Court entered
an order approving the Liberty Settlement. Pursuant to the Liberty Settlement,
Liberty paid $14,450,000 (“Liberty Proceeds”) to the
Debtors’ Estates. Upon the confirmation order becoming a Final Order,
Liberty agreed to contribute an additional $950,000 for the benefit of the Plan
Trust. In exchange, the Debtors agreed, among other things, to
designate Liberty as a Settling Asbestos Insurance Company, thereby entitling
Liberty to the benefit of certain injunctions under their Plan pursuant to
sections 105(a) and 524(g) of the Bankruptcy Code. Reference should
be made to the Liberty Settlement, which is attached as an exhibit to the motion
seeking approval of the Liberty Settlement and which is on file with the
Bankruptcy Court for more details regarding the terms of the Liberty
Settlement.
37
Pursuant
to an order dated July 18, 2005, the Bankruptcy Court ordered the release of
$6,091,247.31 from the Liberty Proceeds to the Debtors consistent with the
Liberty Settlement, the Security Agreement and the Fifth Modified
Plan. In accordance with an order dated September 28, 2006, the
Bankruptcy Court ordered the release of $3,683,782.00 from the Liberty Proceeds
to the Debtors consistent with the Liberty Settlement and the Security
Agreement.
|
(b)
|
Marsh
and Aon Settlements
|
On
September 28, 2004, the Debtors filed motions for the approval of settlement
agreements with Marsh USA, Inc. et al. (“Marsh”) and Aon Corporation
et al. (“Aon”), both of which provided
insurance brokerage services to Congoleum with respect to certain of the
policies issued to Congoleum that provide coverage for Asbestos Personal Injury
Claims (respectively, the “Marsh Settlement” and the
“Aon
Settlement”). On October 18, 2004, the Bankruptcy Court
approved the Marsh and Aon Settlements. In summary, the Marsh and Aon
Settlements provides that Marsh and Aon will contribute $40,000 and $75,000,
respectively, for the benefit of the Debtors’ Estates. Reference
should be made to the Marsh Settlement and the Aon Settlement, which are
attached as exhibits to the motions seeking approval of the Marsh and Aon
Settlements and which are on file with the Bankruptcy Court for more details
regarding the terms of those settlements.
|
(c)
|
AIG
Settlement
|
On
May 13, 2005, the Debtors filed a Motion Pursuant to Bankruptcy Rule 9019 and
Bankruptcy Code Section 363 Approving Insurance Settlement Agreement with
Certain AIG Companies (“AIG”) (the “AIG
Settlement”). On June 28, 2005, the Bankruptcy Court approved
the AIG Settlement. AIG provided excess liability insurance coverage
to Congoleum for asbestos-related claims. Under the terms of the
settlement, AIG will pay $103 million over ten years to the Plan
Trust. In exchange, the Debtors agreed, among other things, to
designate AIG as a Settling Asbestos Insurance Company, thereby entitling AIG to
the benefit of certain injunctions under their Plan pursuant to sections 105(a)
and 524(g) of the Bankruptcy Code. The settlement resolves coverage
obligations of policies with a total of $114 million in liability limits for
asbestos bodily injury claims, and is subject to final approval and
effectiveness of a plan that contains a Bankruptcy Code § 524(g)
injunction. Reference should be made to the AIG Settlement, which is
attached as an exhibit to the motion seeking approval of the AIG Settlement and
which is on file with the Bankruptcy Court for more details regarding the terms
of the AIG Settlement. An insurer appealed the approval order granted
by the Bankruptcy Court to the District Court. The District Court,
however, entered an Order on September 8, 2006 that administratively terminated
the appeal. AIG has recently reserved the right to argue that a plan,
if confirmed, could lead to the possibility that the AIG Settlement may be
declared void; for its part, Congoleum has reserved its rights to oppose any
such argument. The AIG Settlement further provides that any party may
declare that the agreement is null and void if the Confirmation Order fails to
become a Final Order by May 10, 2007. The Debtors and AIG have
engaged in further discussions about the AIG Settlement.
|
(d)
|
Lloyd’s
and Equitas Settlement
|
On
June 27, 2005, the Debtors filed a Motion Pursuant to Bankruptcy Rule 9019 and
Bankruptcy Code Section 363 Approving Insurance Settlement Agreement with
Certain Underwriters at Lloyd’s, London (“Lloyd’s Underwriters”) (the
“Lloyd’s
Settlement”). On August 11, 2005, the Bankruptcy Court
approved the Lloyd’s Settlement. Lloyd’s Underwriters severally
subscribed to certain policies of insurance under which Congoleum is an insured
(the “London
Policies”). Under the terms of the settlement, Lloyd’s
Underwriters paid into escrow a total of $19.950 million. Lloyd’s
Underwriters and Equitas Limited, Equitas Reinsurance Limited, Equitas Holdings
Limited, Equitas Management Services Limited, and Equitas Policyholders Trust
Limited (collectively, “Equitas”), solely in their
capacity as Lloyd’s Underwriters’ reinsurer and run-off agent, will be
designated as Settling Asbestos Insurance Companies, thereby entitling Lloyd’s
Underwriters and Equitas to certain injunctions under the Debtors' plan pursuant
to sections 105(a) and 524(g) of the Bankruptcy Code. The settlement
is subject to the effectiveness of a plan that contains the Section 524(g)
injunction specified in the Lloyd’s Settlement. On November 12, 2007,
the Debtors filed a motion seeking Bankruptcy Court approval of an amendment to
the Lloyd’s Settlement, which, among other things, removes the temporal
condition to termination of the agreement by any party in exchange for revised
terms relating to disposition of interest and earnings that have accrued and
will continue to accrue on the $19.950 million settlement amount being held in
an escrow account. On December 3, 2007, the Bankruptcy Court entered
an order approving the amendment.
38
|
(e)
|
Federal
Settlement Agreement
|
On
August 4, 2005, the Debtors filed a Motion for Order Pursuant to Bankruptcy Rule
9019 Approving Insurance Settlement Agreement with Federal Insurance Company
(“Federal”) (the “Federal
Settlement”). On October 11, 2005, the Bankruptcy Court
approved the Federal Settlement. Federal provided certain liability
insurance coverage to Congoleum for asbestos-related claims. Under
the terms of the Federal Settlement, Federal will pay $4 million to the Plan
Trust once a plan of reorganization with the Section 524(g) protection specified
in the Federal Settlement agreement goes effective. In exchange, the Debtors
agreed, among other things, to designate Federal as a Settling Asbestos
Insurance Company, thereby entitling Federal to the benefit of certain
injunctions under their plan pursuant to sections 105(a) and 524(g) of the
Bankruptcy Code. The Federal Settlement contains a downward
adjustment mechanism which will permit Federal to pay a settlement amount less
than $4 million if certain market conditions occur. The purpose of
the downward adjustment mechanism is to equalize the settlement percentage of
Federal’s settlement amount to the settlement percentages of other high level
excess insurers that are similarly situated to Federal in these bankruptcy
cases.
The
Futures Representative appealed the approval order granted by the Bankruptcy
Court to the District Court. The Debtors, Federal and the Futures
Representative entered into negotiations in an effort to resolve the Futures
Representative’s objection to the Federal Settlement. The parties
were successful in that effort and on February 14, 2007, the Debtors filed a
Motion for Order Pursuant to Bankruptcy Rule 9019 Approving the Amendment to the
Settlement Agreement and Release By, Between and Among Congoleum Corporation,
the Plan Trust, and Federal Insurance Company. On March 12, 2007, the
Bankruptcy Court approved the amendment to the Federal Settlement (the “Amended Federal
Settlement”). The Amended Federal Settlement does not include
the downward adjustment mechanism, and the original settlement amount of $4
million was adjusted such that Federal will pay $2.1 million to the Plan
Trust. Such payment will be made within thirty days of the order
approving the Amended Federal Settlement becoming a final order, the occurrence
of the effective date of the Debtors’ plan, the confirmation order becoming a
final order and Federal being designated as a Settling Asbestos Insurance
Company.
|
(f)
|
The
Mt. McKinley and Everest
Settlement
|
On
October 6, 2005, the Debtors filed a Motion for Order Pursuant to Bankruptcy
Rule 9019 Authorizing and Approving Insurance Settlement Agreement Among
Debtors, Plan Trust, Mt. McKinley Insurance Company (“Mt. McKinley”)and Everest
Reinsurance Company (“Everest”) (the “Mt. McKinley and Everest
Settlement”). Under the terms of the Mt. McKinley and Everest
Settlement, Mt. McKinley and Everest paid $21.5 million into an escrow
account. In exchange, the Debtors agreed, among other things, to
designate Mt. McKinley and Everest as Settling Asbestos Insurance Companies,
thereby entitling Mt. McKinley and Everest to the benefit of certain injunctions
under their plan pursuant to sections 105(a) and 524(g) of the Bankruptcy
Code. The Bankruptcy Court approved the Mt. McKinley and Everest
Settlement on November 18, 2005. The Mt. McKinley and Everest
Settlement is subject to the effectiveness of a plan of reorganization that
contains a Bankruptcy Code § 524(g) injunction. The Futures
Representative appealed the approval order granted by the Bankruptcy Court to
the District Court. On June 15, 2007, the District Court entered a
Stipulated Order withdrawing the appeal of the Futures Representative with
respect to approval of the Mt. McKinley and Everest Settlement.
39
On January 18, 2008, the Debtors and
Mt. McKinley and Everest, with the consent of the Asbestos Claimants’ Committee
and the Futures Representative, entered in to an Amended and Restated Settlement
Agreement and Release (the "Amended Mt. McKinley and Everest
Settlement"), which amends, among other things, the Mt. McKinley and
Everest Settlement by (i) eliminating the sunset provision pursuant to which the
Debtors and Mt. McKinley and Everest, in certain circumstances, may terminate
the Mt. McKinley and Everest Settlement, (ii) causing the Escrow Agent (as
defined in the Amended Mt. McKinley and Everest Settlement) to pay Mt. McKinley
and Everest all interest and other income earned in the Escrow Agreement (as
defined in the Amended Mt. McKinley and Everest Settlement), net of all
applicable fees, taxes and expenses; (iii) restructuring the Mt. McKinley and
Everest Settlement as a sale and buyback of the Subject Policies (as defined in
the Amended Mt. McKinley and Everest Settlement) pursuant to section 363(f) of
the Bankruptcy Code, supplemented by a section 105 injunction; (iv) eliminating
the condition precedent of the Confirmation Order (as defined in the Mt.
McKinley and Everest Settlement); and (v) modifying the terms of the Mt.
McKinley and Everest Settlement as further set forth in the Amended Mt. McKinley
and Everest Settlement. The Amended Mt. McKinley and Everest
Settlement is not dependent on a section 524 plan of
reorganization. On January 28, 2008, the Debtors filed a motion in
the Bankruptcy Court seeking entry of an order approving the Amended Mt.
McKinley and Everest Settlement. The Bankruptcy Court approved the
Amended Mt. McKinley and Everest Settlement in February 2008.
|
(g)
|
The
Harper Settlement
|
On
March 8, 2005, the Debtors filed a Motion for Order Pursuant to Bankruptcy Rule
9019 Authorizing and Approving Insurance Settlement Agreement With Harper
Insurance Limited, Formerly Known as Turegum Insurance Company (the “Harper
Settlement”). On April 4, 2006, the Bankruptcy Court approved
the Harper Settlement. Under the terms of the Harper Settlement,
Harper Insurance Limited (“Harper”) has agreed to pay the
total amount of $1,375,000 to the Plan Trust within three business days of the
Debtors notifying Harper of the order approving the Harper settlement becoming a
final order, the confirmation order becoming a final order and a plan containing
a Bankruptcy Code § 524(g) injunction having become effective. In
exchange, the Debtors agreed, among other things, to obtain, for the benefit of
Harper, an injunction pursuant to section 524(g) of the Bankruptcy
Code. Reference should be made to the Harper Settlement, which is
attached as an exhibit to the motion seeking approval of the Harper Settlement
and which is on file with the Bankruptcy Court for more details regarding the
terms of the Harper Settlement.
|
(h)
|
The
St. Paul Travelers Settlement and Buyback
Agreement
|
On
May 3, 2006, the Debtors filed a Motion For Order Authorizing and Approving the
Settlement and Policy Buyback Agreement and Release Among the Congoleum
Entities, the Plan Trust, the ABI Entities and the St. Paul Travelers Entities
and Sale of Subject Policies Pursuant to Sections 105, 363, 1107 and 1108 of the
Bankruptcy Code and Rules 2002, 6004, 9014 and 9019 of the Federal Rules of
Bankruptcy Procedure (the “St.
Paul Travelers Settlement and Buyback Agreement”). The St.
Paul Travelers Entities allegedly issued certain policies of insurance under
which Congoleum is an insured (the “Subject Policies”). Under the
terms of the settlement, a total of $25 million will be paid in two installments
to the Plan Trust, or as otherwise ordered by the Bankruptcy Court, within 13
months of the occurrence of certain events, including confirmation of a plan of
reorganization for the Debtors containing a section 524(g) plan trust and
channeling injunction for Asbestos Claims. In exchange, the Debtors
agreed, among other things, to designate the St. Paul Travelers Entities as
Settling Asbestos Insurance Companies, thereby entitling the St. Paul Travelers
Entities to the benefit of certain injunctions under their plan pursuant to
sections 105(a) and 524(g) of the Bankruptcy Code. The St. Paul
Travelers Settlement and Buyback Agreement resolves coverage obligations under
the Subject Policies with respect to both asbestos and non-asbestos
claims. The St. Paul Travelers Settlement and Buyback Agreement is
subject to final Bankruptcy Court approval and effectiveness of a plan that
contains a Bankruptcy Code § 524(g) injunction. Reference should be
made to the terms of the St. Paul Travelers Settlement and Buyback Agreement,
which is attached as an exhibit to the motion seeking approval of the St. Paul
Travelers Settlement and Buyback Agreement and which is on file with the
Bankruptcy Court for more details regarding the terms of the St. Paul Travelers
Settlement and Buyback Agreement.
The
Futures Representative filed an objection to the settlement, and a hearing to
consider approval of the settlement was held on April 12, 2007. On
May 11, 2007, the Bankruptcy Court denied the Debtors’ motion to approve the St.
Paul Travelers Settlement and Buyback Agreement. The Debtors and the
St. Paul Travelers Entities appealed the Bankruptcy Court’s decision to the
District Court. On March 25, 2008, the District Court issued a
decision remanding the matter to the Bankruptcy Court for further consideration
of the settlement.
40
|
(i)
|
The
Fireman’s Fund Settlement
|
On
May 8, 2006, the Debtors filed their Motion for Order pursuant to Bankruptcy
Rule 9019 and 11 U.S.C. § 363(f) Authorizing and Approving Settlement Agreement
between Congoleum Corporation and Fireman’s Fund Insurance Company (the “Fireman’s Fund
Settlement”). On September 25, 2006, the Bankruptcy Court
approved the Fireman’s Fund Settlement. Fireman’s Fund Insurance
Company (“Fireman’s
Fund”) issued an insurance policy (the “Subject Policy”) under which
Congoleum is an insured. Under the terms of the settlement, Fireman’s
Fund will pay to Congoleum, or as otherwise directed by the Plan or the
Confirmation Order, a total of $1 million within three (3) business days
following the date that the Confirmation Order becomes a Final
Order. In exchange, the Debtors will designate Fireman’s Fund as
Settling Asbestos Insurance Company thereby entitling Fireman’s Fund to the
benefit of certain injunctions under their plan pursuant to sections 105(a) and
524(g) of the Bankruptcy Code. The settlement resolves coverage
obligations under the Subject Policy of all asbestos-related
claims. The Fireman’s Fund Settlement is subject to final approval
and effectiveness of a plan that contains a Bankruptcy Code § 524(g)
injunction. Reference should be made to the Fireman’s Fund
Settlement, which is attached as an exhibit to the motion seeking approval of
the Fireman’s Fund Settlement and which is on file with the Bankruptcy Court for
more details regarding the terms of the Fireman’s Fund Settlement.
|
(j)
|
The
Century Settlement
|
Over
an objection by Munich Reinsurance America, Inc., f/k/a American Re-Insurance
Company, and Mutual Marine Office, Inc., as managing general agent and
attorney-in-fact for Employers Mutual Casualty Company (collectively, the “Objecting Insurers”), on
September 20, 2006, the Bankruptcy Court entered an Order granting the
Debtors’ Motion for Order Pursuant to Sections 105, 363, 1107 and 1108 of the
Bankruptcy Code and Rules 2002, 6004, 9014 and 9019 of the Federal Rules of
Bankruptcy Procedure (i) Authorizing Debtor to Enter into a Settlement and
Compromise of Certain Claims, (ii) Approving Sale of Certain Insurance Policies
Free and Clear of Liens, Claims, Interests and Other Encumbrances, and (iii)
Approving the Settlement and Buyback Agreement and Releases by and between the
"Congoleum Entities" and the Century Entities (defined below) (the “Century Settlement and Buyback
Agreement”) following a hearing on September 11, 2006. Under
the terms of the settlement, certain alleged claims against the Debtors
(including any claim for substantial contribution) will be released by Century
and a total of $16.95 million will be paid to the Plan Trust, or as otherwise
ordered, within three years of the occurrence of certain events, including
confirmation of a plan of reorganization for the Debtors containing a section
524(g) plan trust and channeling injunction for asbestos claims. In
exchange, the Debtors agreed, among other things, to designate Century Indemnity
Company, individually and as successor to CCI Insurance Company, as successor to
Insurance Company of North America and various affiliated described companies as
more fully described in the Century Settlement and Buyback Agreement (the “Century Entities”) as Settling
Asbestos Insurance Companies, thereby entitling the Century Entities to the
benefit of certain injunctions under their plan pursuant to sections 105(a) and
524(g) of the Bankruptcy Code. The Debtors also agreed that the
Reorganized Debtors will not in any way voluntarily assist any person or entity
in the establishment of any right, action, cause of action or claim against the
Century Entities in any way relating to any asbestos claim or other claim
released under the Century Settlement and Buyback Agreement.
The
Century Settlement and Buyback Agreement resolves coverage obligations under
certain policies of insurance under which Congoleum is an insured with respect
to both asbestos and non-asbestos claims. The Century Settlement and
Buyback Agreement is subject to, among other conditions, final approval and the
effectiveness of a plan that contains a Bankruptcy Code § 524(g)
injunction. Reference should be made to the terms of the Century
Settlement and Buyback Agreement, which is attached as an exhibit to the motion
seeking approval of the Century Settlement and Buyback Agreement and which is on
file with the Bankruptcy Court for more details on the Century Settlement and
Buyback Agreement.
The
Objecting Insurers appealed the Bankruptcy Court’s order approving the Century
Settlement and Buyback Agreement. On December 6, 2006, the District
Court entered a stipulation and settlement among the Objecting Insurers, the
Debtors, and Century, which resolved the appeal.
41
|
(k)
|
The
Protective Settlement
|
In
February 2008, Congoleum entered into a settlement agreement with Protective
National Insurance, which insurer is presently in liquidation. Under
the terms of this settlement, Congoleum will receive an allowed claim in the
amount of $3 million to be paid over time at the payment percentage in such
liquidation proceedings. The settlement was approved by the
Bankruptcy Court.
5.11.
|
Fourth
Modified Plan and Subsequent
Changes
|
On
November 12, 2004, the Debtors filed the Fourth Modified Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code of Congoleum
Corporation, et al. (the “Fourth Modified
Plan”). The Futures Representative supported confirmation of
the Fourth Modified Plan.
In
January 2005, the Debtors commenced a solicitation with respect to the Fourth
Modified Plan. Votes were solicited from holders of impaired Claims
and Interests. Based on the votes received for the solicitation, the
Fourth Modified Plan was overwhelmingly supported by a majority of the Debtors’
creditors, including the holders of Asbestos Personal Injury
Claims.
In
April 2005, while the parties were preparing for a contested confirmation
hearing on the Fourth Modified Plan, the Debtors met with the Asbestos
Claimants’ Committee, the Futures Representative and the Claimants’
Representative to discuss further modifications to the Fourth Modified Plan to
eliminate or minimize certain objections to the Plan. These
discussions led to an agreement in principle that holders of Secured Asbestos
Claims would permanently forbear from enforcing their lien and/or security
interest claims in and to the Plan Trust Assets and such creditors would share
pro rata with holders
of Unsecured Asbestos Personal Injury Claims and Demands from a single, common
fund to be held in the Plan Trust.
In
July 2005, Congoleum filed an amended plan of reorganization (the “Sixth Modified Plan”) and
related documents with the Bankruptcy Court which reflected the result of these
negotiations, as well as other technical modifications. The Futures
Representative supported confirmation of the Sixth Modified Plan. The
Bankruptcy Court approved the disclosure statement and voting procedures and
Congoleum commenced solicitation of acceptances of the Sixth Modified Plan in
August 2005. In September 2005, the Debtors learned that certain
Claimants holding Asbestos Secured Claims represented by the Weitz &
Luxenburg firm no longer supported the Sixth Modified Plan. The
Debtors’ attempts to negotiate a consensual resolution of the Weitz Claimants’
objections proved to be unsuccessful, and on December 13, 2005, the Debtors
withdrew the Sixth Modified Plan. Thereafter, the Debtors continued
to have contacts and discussions with representatives of the Asbestos Claimants’
Committee, the Futures Representative, certain of the insurers, and
representatives of the new Bondholders’ Committee concerning the elements of a
Seventh and Eighth Modified Plan.
On
February 3, 2006, the Debtors filed the Seventh Modified Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code of Congoleum Corporation,
et al. (the “Seventh Modified
Plan”). The Futures Representative did not support approval of
the Seventh Modified Plan. As a result of subsequent negotiations
with the Asbestos Claimants’ Committee and the Bondholders’ Committee, on March
17, 2006, the Debtors filed the Eighth Modified Plan. The Futures
Representative did not support approval of the Eighth Modified
Plan.
5.12.
|
Expiration of Debtors’
Exclusivity to File a Plan and Solicit Acceptances Thereof and the Filing
of Competing Plans
|
The
Bankruptcy Court had approved several extensions of exclusivity for the Debtors
to file a plan and solicit acceptances thereof. On November 9, 2005,
the Bankruptcy Court denied the Debtors’ motion to extend the periods during
which the Debtors had the exclusive right to file a plan and solicit acceptances
thereof under section 1121(d) of the Bankruptcy Code (the “Exclusive Periods”), thus
terminating the Debtors’ exclusive right to file a plan of
reorganization. As a result of this ruling, on December 2, 2005,
Continental Casualty Company and Continental Insurance Company (“CNA”) filed a Joint Plan of
Reorganization under Chapter 11 of the Bankruptcy Code for Congoleum
Corporation, Congoleum Sales, Inc. and Congoleum Fiscal, Inc.
42
On
February 3, 2006, the Bondholders’ Committee filed a Joint Plan of
Reorganization under Chapter 11 of the Bankruptcy Code for Congoleum
Corporation, Congoleum Sales, Inc. and Congoleum Fiscal, Inc. (the “Bondholders’
Plan”). The Bondholders’ Committee subsequently withdrew the
Bondholders’ Plan.
On
August 18, 2006, CNA and the Bondholders’ Committee jointly filed a Joint Plan
of Reorganization under Chapter 11 of the Bankruptcy Code for Congoleum
Corporation, Congoleum Sales, Inc. and Congoleum Fiscal, Inc. (the “CNA/Bondholder Plan”), which
was subsequently withdrawn when the Bondholders’ Committee reached agreement
with the Debtors.
5.13.
|
Mediation and the
Consensual Ninth, Tenth and Eleventh Modified
Plans
|
By
the Bankruptcy Court’s Order for Mediation, dated May 30, 2006, and with the
agreement of the parties with an interest in the resolution of the Debtors’
bankruptcy cases and/or the Coverage Litigation, including the non-settling
insurance companies, the Asbestos Claimants’ Committee, the Futures
Representative, the Bondholders’ Committee, the Claimants’ Representative, ABI
and the Debtors, the Bankruptcy Court ordered the mediation (the “Mediation”) of all issues in
the Debtors’ bankruptcy cases before the honorable Mark B. Epstein and the
honorable Judith H. Wizmur, Chief Judge of the United States Bankruptcy Court
for the District of New Jersey. The Mediation, which commenced on
June 8, 2006, has continued, both formally and informally, since that
time.
On September 11, 2006, the Bankruptcy
Court entered an Amended Pre-Trial Order, pursuant to which the Debtors filed
the Tenth Modified Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code of Congoleum Corporation, et al., and The Asbestos
Claimants’ Committee, Dated As Of September 15, 2006 (the “Tenth Modified Plan”) and a
related disclosure statement (the “Tenth Disclosure Statement”)
on September 15, 2006. The Tenth Modified Plan was supported by the
Bondholders’ Committee. Pursuant to the same order,
CNA filed its Second Modified Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code for Congoleum Corporation, Congoleum Sales,
Inc. and Congoleum Fiscal, Inc. (the “Second CNA
Plan”). The Amended Pre-Trial Order also established a
briefing schedule for the filing and consideration of motions for summary
judgment as to whether any of the pending plans were confirmable as a matter of
law and objections to disclosure statements.
On October 10, 2006, the Debtors and
the Asbestos Claimants’ Committee filed a joint summary judgment motion,
including a supporting statement of material facts, regarding the confirmability
of the Second CNA Plan. In addition to addressing the terms of the
Second CNA Plan, the Debtors’ and Asbestos Claimants’ Committee requested the
reinstatement of the Debtors’ exclusive rights to file and solicit a plan of
reorganization. On October 10, 2006, each of (i) CNA and (ii) First
State Insurance Company and Twin City Fire Insurance Company (collectively,
“First State”) filed
motions for summary judgment requesting the denial of confirmation of the Tenth
Modified Plan.
On October 23, 2006, the Debtor filed
the Eleventh Modified Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code of Congoleum Corporation, et al., and The Asbestos
Claimants' Committee, Dated As Of October 23, 2006 (the "Eleventh Modified
Plan").
On October 26, 2006, the Bankruptcy
Court held a hearing on the summary judgment motions and the adequacy of the
disclosure statements filed with respect to the Tenth Modified Plan and the
Second CNA Plan. The Bankruptcy Court provisionally approved the
disclosure statements filed with respect to the Tenth Modified Plan and the
Second CNA Plan pending its decision on the summary judgment
motions.
On February 1, 2007, the Bankruptcy
Court granted summary judgment in part and denied it in part with respect to
First State’s motion regarding the Tenth Modified Plan, ruling that the Tenth
Modified Plan was not confirmable as a matter of law. The Bankruptcy
Court denied summary judgment on the issue of the feasibility of the Second CNA
Plan and declined to reinstate the Debtors’ exclusivity period.
On February 9, 2007, the Debtors,
joined by the Asbestos Claimants’ Committee, filed a notice of appeal and a
motion for leave to appeal from the Bankruptcy Court’s summary judgment decision
granting in part and denying in part First State’s motion regarding the Tenth
Modified Plan. In October 2007, the Debtors advised the Asbestos
Claimants’ Committee that they were no longer pursuing the appeal. On
November 8, 2007, the District Court entered an order administratively
terminating the appeal.
43
5.14.
|
Futures
Representative’s Plan
|
On
July 3, 2007, the Futures Representative filed a plan and supplemental
disclosure statement with the Bankruptcy Court. Certain objections
were filed in response thereto on behalf of the Debtors, the Bondholders’
Committee, the Asbestos Claimants’ Committee and ABI. In addition, in response
to the Futures Representative’s July 3, 2007 filing, certain insurers filed
reservations of rights to object to confirmation of the Plan.
On
August 30, 2007, the Bankruptcy Court held a hearing on the supplemental
disclosure statement and all objections thereto. The Bankruptcy Court
ordered the Futures Representative to file an amended disclosure statement by
October 25, 2007. Objections to the amended disclosure statement were
filed on November 1, 2007 on behalf of the Debtors, the Bondholders’ Committee,
and the Asbestos Claimants’ Committee. The Bankruptcy Court held a
hearing on the amended disclosure statement and all objections thereto on
November 8, 2007. At that hearing, the Bankruptcy Court ordered the
Futures Representative to address certain issues relating to the plan and
amended disclosure statement and to file such changes on December 3,
2007.
5.15.
|
The Joint Plan
(February 2008 Plan)
|
Following the Bankruptcy Court's
rulings on the Tenth Modified Plan, the Debtors engaged in extensive mediation
sessions with the Futures Representative, the Asbestos Claimants’ Committee and
the Bondholders’ Committee. The product of that mediation was the
February 2008 Plan. The February 2008 Plan proposed to implement a
compromise and settlement with respect to each person whose asbestos personal
injury claim was settled in a Pre-Petition Settlement Agreement or the Claimant
Agreement (the “Omnibus
Claimant Settlement”). Pursuant to the Omnibus Claimant
Settlement, all of the approximately 79,000 claimants who settled their claims
under the Claimant Agreement agreed to relinquish all of their rights, claims
and interests in such agreement. Such claimants were classified in
the Joint Plan in Class 7A and were to be treated by the Plan Trust as holding
unliquidated Asbestos Personal Injury Claims which Claims would be liquidated
pursuant to the compensable disease matrix in the Joint Plan’s
TDP. Additionally, the Settled Claimants in Class 7A agreed to
resubmit their Asbestos Personal Injury Claims to the Plan Trust for processing
and payment under the TDP, without regard to any lien, security interest or
other claim to priority treatment whatsoever. Thus, the over 79,000
settled claimants in Class 7A agreed voluntarily to be treated in the same
manner as the other current and future Asbestos Personal Injury Claimants and
their Claims would be fixed using the same standards and criteria.
As part of the Omnibus Claimant
Settlement, each settled claimant who was a party to a Pre-Petition Settlement
Agreement was given the option to elect to be treated as (i) a Settled Claimant
in Class 7A, or (ii) a Settled Claimant with Litigation Rights in Class
7B. The Settled Claimants with Litigation Rights could elect to seek
declaratory judgment in a continued adversary proceeding that the liquidated
amounts under their Pre-Petition settlement Agreements may be recognized and
treated in a plan of reorganization that is compliant with §
524(g). Regardless of the outcome of the continued adversary
proceeding, the Settled Claimants with Litigation Rights in Class 7B would be
subject to the same Payment Percentage as all other Asbestos Personal Injury
Claimants as set forth in the TDP. The Settled Claimants with
Litigation Rights are referred to herein as Former Class 7B
Claimants.
The Bankruptcy Court approved the
disclosure statement and voting procedures for the Joint Plan in February 2008
and solicitation commenced shortly thereafter. The Joint Plan
received the overwhelming support of all voting creditors, including
approximately 95% of all voting asbestos claimants.
The Plan Proponents and the parties who
opposed confirmation filed summary judgment motions with respect to certain
issues that the parties believed could be decided as a matter of law (the “Joint Plan Summary Judgment
Motions”). On June 6, 2008, the Bankruptcy Court issued its
Joint Plan Opinion with respect to the Joint Plan Summary Judgment
Motions. The Bankruptcy Court held, among other things, that the
classification and litigation rights afforded to the former Settled Claimants
with Litigation Rights, referred to herein as Former Class 7B Claimants,
relating to their Pre-Petition Settlement Agreements did not comply with §
524(g) of the Bankruptcy Code. A corresponding order was entered on
June 13, 2008 (the “Joint Plan
Order”). The Debtors filed a notice of appeal of the Joint
Plan Order on June 20, 2008.
44
In
conjunction with the Joint Plan Opinion, the Bankruptcy Court entered its sua sponte Order to Show
Cause for Dismissal or Conversion in a Chapter 11 Case which proposed to dismiss
the Debtors’ Chapter 11 cases or to covert them to liquidation proceedings under
Chapter 7. Upon opposition from Congoleum and from every creditor and
claimant constituency in these bankruptcy cases, the Bankruptcy Court issued an
opinion that vacated the Order to Show Cause and instructed the parties to
propose a confirmable plan by the end of calendar year 2008.
On
September 3, 2008, the Bankruptcy Court issued a supplemental opinion with
respect to the Joint Plan (the “Supplemental Joint Plan
Opinion”). The Bankruptcy Court determined that, on the issue
of assignability of Congoleum’s rights under its insurance policies, such rights
may assigned to a plan trust despite the existence of various anti-assignment
provisions in the insurance policies. The Bankruptcy Court further
ruled on issues relating to whether the Joint Plan impermissibly altered the
non-settling insurers’ rights under their insurance policies. The
Bankruptcy Court concluded that the Joint Plan did not impair the insurers’
contractual rights to cooperation from the Debtors and that the Joint Plan did
not impair the right of non-settling insurers to obtain contribution from
settling insurers. As to whether the Joint Plan eliminates the
insurers’ right to object to claims, the Bankruptcy Court denied summary
judgment because a determination could not be made in advance as to the
underlying nature of all claim objections. Various insurers have
filed notices of appeal of the Supplemental Joint Plan Opinion, which appeals
were consolidated with the Debtors’ appeal of the Joint Plan
Order. Pursuant to a stipulation and order dated December 15, 2008,
the Debtors and the insurers agreed to administratively terminate the
appeal. Either party may reopen the appeal upon written request and
all appellate rights are preserved.
5.16.
|
The Amended Joint Plan
(November 2008 Plan)
|
After the Bankruptcy Court’s
instruction to file a confirmable plan by year-end 2008, the Debtors and certain
of their creditor constituencies engaged in further extensive mediation and
settlement discussions. As a result, on August 4, 2008, Congoleum,
along with the Bondholders’ Committee, Asbestos Claimants’ Committee and the
Futures Representative reached an agreement in principle on certain material
terms of a plan of reorganization and a settlement of Congoleum’s claims in the
Avoidance Actions. The material terms of the settlement in principle
were set forth in a term sheet publicly filed with the Bankruptcy Court on
August 14, 2008.
Subsequently, the parties negotiated a
litigation settlement agreement resolving the Avoidance Actions against asbestos
claimants who were parties to certain individual pre-petition asbestos
settlements or the Claimant Agreement, collectively the Pre-Petition Settled
Claimants, as well as resolving claims with Claimants’ Counsel, Joseph Rice and
Perry Weitz (the “Litigation
Settlement Agreement”). The Voting Agent distributed the
Litigation Settlement Agreement for execution by claimant law
firms. As of October 18, 2008, 79 claimant law firms, representing
87% of the Pre-Petition Settled Claimants had executed the Litigation Settlement
Agreement. Congoleum and the Bondholders’ Committee filed a joint
motion before the Bankruptcy Court seeking approval of the Litigation Settlement
Agreement. Certain defendant insurers filed objections to the
Litigation Settlement Agreement. Following a hearing on October 18,
2008 at which the motion and all objections were heard, the Bankruptcy Court
approved the Litigation Settlement Agreement, but the court reserved until a
later date a determination of whether the settlement met the standards required
for confirmation of a plan of reorganization. Subsequently, on
October 31, 2008, the Bankruptcy Court issued its order approving the Litigation
Settlement Agreement.
Thereafter,
on November 14, 2008, the Amended Joint Plan, which incorporated the Litigation
Settlement Agreement, was filed. In January 2009, certain insurers
filed a motion for summary judgment seeking denial of confirmation of the
Amended Joint Plan contending that (i) the Amended Joint Plan did not satisfy
the equality of distribution principles under the Bankruptcy Code and (ii) the
Amended Joint Plan was defective because it lacked an express clause providing
for court review of certain payments made to Claimants’ Counsel under Code §
1129(a)(4).
45
On
February 26, 2009, the Bankruptcy Court rendered an opinion granting the
insurers’ motion for summary judgment and denied confirmation of the Amended
Joint Plan (the “Amended Joint
Plan Summary Judgment Order”). In connection with the Amended
Joint Plan Summary Judgment Order, the Bankruptcy Court, over objection of all
parties-in-interest, entered an Order of Dismissal dismissing Congoleum’s
bankruptcy case (the “Dismissal
Order”). On March 3, 2009, the Bankruptcy Court entered an
order granting a stay of the Dismissal Order pending entry of a final
non-appealable decision affirming the Dismissal Order.
On
February 27, 2009, Congoleum and the Bondholders’ Committee filed an appeal of
the Dismissal Order and the Amended Joint Plan Summary Judgment Order to the
District Court. On August 17, 2009, the District Court entered an
order and opinion affirming, in part, and reversing, in part, the Bankruptcy
Court’s Amended Joint Plan Summary Judgment Order (the “August 17
Order”). The District Court affirmed the grant of summary
judgment to the insurers regarding the payments made to Claimants’ Counsel and
ruled that such payments would be reviewed for reasonableness pursuant to §
1129(a)(4) of the Bankruptcy Code. The District Court reversed the
Amended Joint Plan Summary Judgment Order with respect to the equality of
distribution issue, finding that the aspect of the Litigation
Settlement Agreement relating to the estates’ compromise of the Comstock, Cook
and Arsenault claims was not an impediment to confirmation. The
District Court also reversed the Dismissal Order, finding that the Bankruptcy
Court abused its discretion in dismissing the case. Finally, the
District Court withdrew the reference of the case from the Bankruptcy Court
pursuant to 28 U.S.C. § 157(d) and assumed authority over all further
proceedings. The District Court then directed the Plan Proponents to
file a new plan of reorganization that would provide for court review of the
payments made to Claimants’ Counsel and requested briefing on additional
confirmation issues.
On
August 27, 2009, the insurers moved the District Court to amend its August 17
Order by certifying it for potential interlocutory appeal under 28 U.S.C. §
1292(b). On October 2, 2009, the District Court entered an order
refusing to certify the August 17 Order for interlocutory appeal.
The
insurers also took the position that the August 17 Order was a final,
immediately appealable order. On September 14, 2009 and September 24,
2009, the insurers filed notices of appeal of the August 17 Order to the Third
Circuit Court of Appeals. On October 9, the Plan Proponents filed a
motion to dismiss the appeal for lack of jurisdiction, which is currently
pending before the Third Circuit.
5.17.
|
The Current Second
Amended Joint Plan
|
As
instructed by the District Court in its August 17 Order, the Plan Proponents
have filed this Second Amended Joint Plan. The Debtors, the
Bondholders’ Committee and the Asbestos Claimants’ Committee are the Plan
Proponents of this Second Amended Joint Plan.
5.18.
|
Standing of Insurers
to be Heard
|
The
Debtors have filed motions challenging the standing of certain of Congoleum’s
insurers to raise objections and be heard in the Reorganization
Cases. While the Bankruptcy Court previously determined that the
insurers do not have standing to raise objections and be heard with respect to
past disclosure statements, the Bankruptcy Court and the District Court have
ruled that the insurers have standing to raise objections and be heard with
respect to plans of reorganization. The Plan Proponents expect that
such insurers and perhaps others will file objections in connection with
Confirmation of the Plan, and the Plan Proponents may assert that such insurers
lack standing to do so.
5.19.
|
Confirmation
Hearing
|
The
District Court has scheduled the Confirmation Hearing to commence on March 29,
2009, and additional dates will be set as necessary by the
Court. Notice of the Confirmation Hearing will be published in one
newspaper of general circulation and counsel for known holders of Claims who are
entitled to vote on the Plan also will be sent copies of the Voting Procedures
Order, at least 25 days before the date of the Confirmation Hearing, unless the
District Court specifies otherwise. See Section 7.2. –
"Confirmation Hearing" below.
46
ARTICLE
6
SUMMARY
OF THE PLAN
6.1.
|
General
|
The
following is a summary intended as a brief overview of certain provisions of the
Plan and is qualified in its entirety by reference to the full text of the Plan,
a copy of which is annexed hereto as Exhibit A. Other provisions of
the Plan not summarized in this Article 6 may be summarized elsewhere in this
Disclosure Statement, including in Article 8. Holders of Claims and
Interests are respectfully referred to the relevant provisions of the Bankruptcy
Code and are encouraged to review the Plan and this Disclosure Statement with
their counsel, or other advisors.
6.2.
|
Classification
|
|
(a)
|
Generally
|
Article II of the Plan sets forth an
explanation of Claims that are not classified under the Plan and a designation
of Classes of Claims and Interests. Subject to the occurrence of the
Effective Date, the Debtors shall be deemed consolidated under the Plan for Plan
purposes only. Each and every Claim filed or to be filed against any
of the Debtors shall be deemed filed against the deemed consolidated Debtors and
shall be deemed one Claim against and obligation of the deemed consolidated
Debtors. Notwithstanding anything contained in the Plan to the contrary, the
deemed consolidation of the Debtors shall not have any effect on any of the
Claims being reinstated and left unimpaired under the Plan, and the legal,
equitable, and contractual rights to which the holders of any such Claims are
entitled shall be left unaltered by the Plan.
|
(b)
|
Unclassified
Claims
|
In
accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims
and Priority Tax Claims are not classified and are excluded from the Classes
established in Article II of the Plan. The treatment accorded
Administrative Claims and Priority Tax Claims is set forth in Article III of the
Plan.
|
(c)
|
Classes
|
For
purposes of the Plan, the Claims against and Interests in the Debtors are
grouped in the following Classes in accordance with section 1122(a) of the
Bankruptcy Code:
Class
1 – Priority Claims
Class
2 – Lender Secured Claims
Class
3 – Other Secured Claims
Class
4 – Senior Note Claims
Class
5 – Workers’ Compensation Claims
Class
6 – ABI Claims
Class
7 – Asbestos Personal Injury Claims
Class
8 – Asbestos Property Damage Claims
Class
9 – General Unsecured Claims
Class
10 – Congoleum Interests
Class
11 – Subsidiary Interests
47
|
(d)
|
Administrative
Claims
|
On
the Distribution Date, each holder of an Allowed Administrative Claim, except as
otherwise provided in the Plan and subject to the requirements of Section 13.14
of the Plan, will receive, in full satisfaction, settlement, release,
extinguishment, and discharge of such Allowed Administrative Claim, (a) Cash
equal to the unpaid portion of such Allowed Administrative Claim, or (b) such
different treatment as to which the applicable Debtor and such holder shall have
agreed upon in writing; provided, however, that
Allowed Administrative Claims representing (i) post-petition liabilities
incurred in the ordinary course of business by the Debtors and (ii)
post-petition contractual liabilities arising under loans or advances to the
Debtors (whether or not incurred in the ordinary course of business), will be
paid by Reorganized Congoleum in accordance with the terms and conditions of the
particular transactions relating to such liabilities and any agreements relating
thereto.
|
(e)
|
Priority
Tax Claims
|
On
the Distribution Date, each holder of an Allowed Priority Tax Claim will
receive, in full satisfaction, settlement, release, and discharge of and in
exchange for such Allowed Priority Tax Claim, (i) Cash equal to the unpaid
portion of such Allowed Priority Tax Claim, (ii) such different treatment as to
which the applicable Debtor and such holder shall have agreed upon in writing,
or (iii) at Reorganized Congoleum’s sole discretion, deferred Cash payments
having a value, as of the Effective Date, equal to such Allowed Priority Tax
Claim, over a period not exceeding six (6) years after the date of assessment of
such Allowed Priority Tax Claim.
|
(f)
|
Substantial
Contribution Claims
|
Any
Entity who requests compensation or expense reimbursement for making a
substantial contribution in the Reorganization Cases pursuant to sections
503(b)(3), (4) and (5) of the Bankruptcy Code (“Substantial Contribution
Claim”) must file an application with the clerk of the District Court on
or before a date that is sixty (60) days subsequent to the Effective Date and
serve such application on counsel for the Debtors, counsel for the Futures
Representative, counsel for the Asbestos Claimants’ Committee, counsel for the
Bondholders’ Committee and on all other parties as otherwise required by the
Bankruptcy Court and the Bankruptcy Code, or be forever barred from seeking such
compensation or expense reimbursement. All Allowed Substantial
Contribution Claims shall be paid by Reorganized Congoleum within sixty (60)
days of allowance by the District Court.
6.3.
|
Treatment of
Classified Claims and
Interests
|
Allowed
Claims and Allowed Interests, as classified in Article II of the Plan, will be
treated in the manner set forth in Article IV of the Plan. The
following constitutes a summary of such treatment:
|
(a)
|
Class
1 - Priority Claims
|
|
(1)
|
Impairment
and Voting
|
Class
1 is Unimpaired by the Plan. Each holder of an Allowed Priority Claim
in Class 1 is conclusively presumed to have accepted the Plan and is not
entitled to vote to accept or reject the Plan under section 1126 of the
Bankruptcy Code.
|
(2)
|
Treatment
|
On
the Distribution Date, each holder of an Allowed Priority Claim will receive
either (i) the Allowed Amount of its Priority Claim in Cash, or (ii) such
different treatment as may be agreed to by such holder and Reorganized
Congoleum. Reorganized Congoleum will be responsible for payment of
Allowed Priority Claims.
48
|
(b)
|
Class
2 – Lender Secured Claims
|
|
(1)
|
Impairment
and Voting
|
Class
2 is Unimpaired by the Plan. Lender Secured Claims constitute any
Claim arising under or relating to the Existing Credit Agreement, Existing
Subsidiary Guaranty or any related documents. Each holder of a Lender
Secured Claim in Class 2 is conclusively presumed to have accepted the Plan and
is not entitled to vote to accept or reject the Plan under section 1126 of the
Bankruptcy Code.
|
(2)
|
Treatment
|
The
Lender Secured Claim will be paid in full indefeasibly on the Effective Date or
as soon thereafter as practicable and Wachovia will be released from any and all
liabilities and causes of action in accordance with the Financing
Order.
|
(c)
|
Class
3 – Other Secured Claims
|
|
(1)
|
Impairment
and Voting
|
Class
3 is Unimpaired by the Plan. Each sub-Class of Class 3 Other Secured
Claims contains a single Other Secured Claim and is a separate Class for all
purposes under the Bankruptcy Code and the Plan. Other Secured Claims
include any pre-petition Secured Claim asserted against the Debtors, other than
Lender Secured Claims. Each holder of an Other Secured Claim in Class
3 is conclusively presumed to have accepted the Plan and is not entitled to vote
to accept or reject the Plan under section 1126 of the Bankruptcy
Code.
|
(2)
|
Treatment
|
Each
holder of an Allowed Other Secured Claim shall receive one of the following
three treatments at Reorganized Congoleum’s sole option: (i) retain
unaltered the legal, equitable and contractual rights (including, but not
limited to, any Liens that secure such Claim) to which such Claim entitles such
holder and such Allowed Other Secured Claim shall be Reinstated on the Effective
Date, (ii) the Debtors shall surrender all collateral securing such Claim to the
holder thereof, in full satisfaction of such holder’s Allowed Class 3 Claim,
without representation or warranty by, or recourse against, the Debtors or
Reorganized Congoleum or (iii) such holder shall be otherwise treated in a
manner so that such Claim shall be rendered Unimpaired.
|
(d)
|
Class
4 – Senior Note Claims
|
|
(1)
|
Impairment
and Voting
|
Class
4 is Impaired by the Plan. Each holder of an Allowed Senior Note
Claim is entitled to vote to accept or reject the Plan under section 1126 of the
Bankruptcy Code pursuant to the Voting Procedures Order.
|
(2)
|
Treatment
|
Senior Note Claims shall be Allowed in
an aggregate amount equal to at least $103,593,750.00, which shall not be
subject to any avoidance, reductions, set off, offset, recharacterization,
subordination, counterclaims, defenses, disallowance, impairment or any other
challenges under applicable law or regulation by any person or
entity. On the Distribution Date, each holder of an Allowed Senior
Note Claim shall receive, in full satisfaction of its Senior Note Claim, its Pro
Rata share of each of the securities included in the Senior Note
Distribution.
49
|
(e)
|
Class
5 – Workers’ Compensation
Claims
|
|
(1)
|
Impairment
and Voting
|
Class
5 is Unimpaired by the Plan. Each holder of an Allowed Workers’
Compensation Claim is conclusively presumed to have accepted the Plan and is not
entitled to vote to accept or reject the Plan under section 1126 of the
Bankruptcy Code.
|
(2)
|
Treatment
|
The
holders of Allowed Workers’ Compensation Claims will be paid in the ordinary
course pursuant to such rights that exist under any state workers’ compensation
system or laws that apply to such Claims.
|
(f)
|
Class
6 - ABI Claims
|
|
(1)
|
Impairment
and Voting
|
Class
6 is Impaired by the Plan. The holder of the Allowed ABI Claims is
entitled to vote to accept or reject the Plan under section 1126 of the
Bankruptcy Code pursuant to the Voting Procedures Order.
|
(2)
|
Treatment
|
Pursuant
to and in consideration of the Intercompany Settlement and Section 5.15 of the
Plan and other terms of the Plan, on the Effective Date all Intercompany
Agreements shall be rejected and all ABI Claims, including without limitation
any ABI Rejection Damages Claims (other than claims for payment of Unpaid
Intercompany Amounts that may be asserted to the extent consistent with Section
5.15(b)(4)(B) of the Plan), shall be deemed Disallowed and
expunged.
|
(g)
|
Class
7 – Asbestos Personal Injury
Claims
|
|
(1)
|
Impairment
and Voting
|
Class
7 (including each of its subclasses) is Impaired by the Plan. Class 7
consists of all Asbestos Personal Injury Claims. Holders of Asbestos
Personal Injury Claim are entitled to vote to accept or reject the Plan under
section 1126 of the Bankruptcy Code pursuant to the Voting Procedures
Order.
|
(2)
|
Treatment
|
As
of the Effective Date, all liability for all Asbestos Personal Injury Claims
(including all Pre-Petition Settled Claimants) as well as liability for all
future Demands shall be assumed, automatically and without further act or deed,
by the Plan Trust and the Reorganized Debtors shall have no liability
therefor. Each Asbestos Personal Injury Claim and future Demand shall
be resolved pursuant to the Plan Trust Agreement and the TDP. The TDP
shall apply to all holders of Asbestos Personal Injury Claims and future
Demands, including any such holder who elects to resort to the legal system and
obtains a judgment for money damages.
As
of the Effective Date, pursuant to the Plan, all Pre-Petition Settled Claimants,
including Litigation Settlement Claimants, will, in full satisfaction of his,
her or its Asbestos Personal Injury Claim and any and all rights pursuant to any
Pre-Petition Settlement Agreement, Claimant Agreement, Security Agreement,
Collateral Trust Agreement or any and all other agreements and amendments
thereto with respect to the pre-packaged plan of reorganization filed by the
Debtors on December 31, 2003, be, including with respect to any statutes of
limitation related to such Asbestos Personal Injury Claim, restored to status
quo ante as it existed as of the time each such Claimant initially filed or
submitted its Asbestos Claim against the Debtors that resulted in the Claimant’s
Pre-Petition Asbestos Settlement Agreement or the Claimant Agreement,
respectively, and shall be treated by the Plan Trust as holding an unliquidated
Asbestos Personal Injury Claim under applicable federal or state law which shall
be resolved pursuant to the Plan Trust Agreement and the TDP in the same manner
as all other Asbestos Personal Injury Claims in Class 7. The
Pre-Petition Settled Claimants shall receive pari passu treatment under the Plan
without regard to any lien, security interest or other claim to priority
treatment whatsoever (i.e. it is understood that any such claimants will need to
reapply to the Plan Trust to satisfy the TDP including medical, exposure and
other requirements). The Avoidance Actions shall be dismissed with
prejudice as of the Effective Date.
50
|
(h)
|
Class
8 - Asbestos Property Damage
Claims
|
|
(1)
|
Impairment
and Voting
|
Class
8 is Impaired by the Plan. Asbestos Property Damage Claims constitute
all Asbestos Property Damage Claims for which Proofs of Claim have been filed
prior to the Asbestos Property Damage Claim Bar Date. The holders of Allowed
Asbestos Property Damage Claims are entitled to vote to accept or reject the
Plan under section 1126 of the Bankruptcy Code.
|
(2)
|
Treatment
|
As
of the Effective Date, all liability for all Allowed Asbestos Property Damage
Claims will be assumed, automatically and without further act or deed, by the
Plan Trust and the Reorganized Debtors will have no liability
therefor. Each Allowed Asbestos Property Damage Claim will be paid
solely from the Asbestos Property Damage Claim Sub-Account on account of the
unpaid Allowed Amount of such Claim pursuant to the Plan Trust
Agreement. After the assets in the Asbestos Property Damage Claim
Sub-Account have been exhausted, the Plan Trust shall have no further liability
or obligation for or in respect of any Asbestos Property Damage
Claims. All Asbestos Property Damage Claims as to which a Proof of
Claim was not filed prior to the expiration of the Asbestos Property Damage
Claim Bar Date will be deemed Disallowed.
|
(i)
|
Class
9 – General Unsecured Claims
|
|
(1)
|
Impairment
and Voting
|
Class
9 is Impaired by the Plan. The holders of Allowed General Unsecured
Claims are entitled to vote to accept or reject the Plan under section 1126 of
the Bankruptcy Code pursuant to the Voting Procedures Order.
|
(2)
|
Treatment
|
Except
to the extent that a holder of an Allowed General Unsecured Claim in Class 9 has
been paid by the Debtors prior to the Effective Date or agrees to alternate,
less favorable, treatment, each holder of an Allowed Class 9 Claim shall
receive, in full and final satisfaction of such Allowed Class 9 Claim, Cash in
the amount of $.35 for each $1.00 of such holder’s Allowed Class 9
Claim. Class 9 is Impaired and the holders of Class 9 Claims are
entitled to vote to accept or reject the Plan. General Unsecured
Claims do not include Claims against the Debtors under the Environmental Laws as
set forth in Section 11.9 of the Plan, which Claims (other than Claims held by
ABI) survive the Reorganization Cases.
|
(j)
|
Class
10 – Congoleum Interests
|
|
(1)
|
Impairment
and Voting
|
Class
10 is Impaired by the Plan. The holders of the Congoleum Interests
are deemed to have rejected the Plan in accordance with section 1126(g) of the
Bankruptcy Code and, accordingly, their separate vote will not be
solicited.
|
(2)
|
Treatment
|
On
the Effective Date, the Congoleum Interests will be cancelled and the holders of
the Congoleum Interests will retain and receive nothing on account of such
Congoleum Interests.
51
|
(k)
|
Class
11 – Subsidiary Interests
|
|
(1)
|
Impairment
and Voting
|
Class
11 is Unimpaired by the Plan. Each holder of a Subsidiary Interest is
conclusively presumed to have accepted the Plan and is not entitled to vote to
accept or reject the Plan under section 1126 of the Bankruptcy
Code.
|
(2)
|
Treatment
|
On
the Effective Date, the holders of the Subsidiary Interests will retain such
Subsidiary Interests.
6.4.
|
Means for Execution of
the Plan
|
|
(a)
|
Establishment
of the Plan Trust
|
The
Plan Trust will be established in accordance with the Plan Documents on or prior
to the Effective Date. See Article 8 -- “Plan Trust
and Asbestos Claims Resolution Matters” for a description of the Plan
Trust. In addition, on the Effective Date, the Plan Trust established
pursuant to the Plan Trust Agreement will become solely responsible for the
payment of all Plan Trust Asbestos Claims. See Section 5.1 of the Plan
for a further description of the Plan Trust.
|
(b)
|
Plan
Trust Funding
|
|
(1)
|
The
New Common Stock
|
On
the Effective Date, Congoleum will issue shares of its newly created common
stock to the Plan Trust in an amount equal to 50.1% of the Congoleum common
stock to be issued on the Effective Date. Such newly created common
stock shall have the rights set forth in the Amended and Restated Certificate
substantially in the form attached to the Plan as Exhibit K.
|
(2)
|
Proceeds
of Insurance Settlements
|
Assuming the following settlements
remain in place if the Plan becomes effective, the Plan Trust shall receive the
following:
(A) The Liberty
Payment
Upon the confirmation order becoming a
final order, Liberty will contribute $950,000 to the Plan Trust and the Debtors
will turn over the balance of the Liberty Proceeds to the Plan Trust, less the
reimbursement of defense and indemnity costs for Asbestos Claims incurred by
Congoleum prior to the Effective Date pursuant to Section 5.1(q) of the
Plan.
(B) The Lloyd’s Underwriters
Payment
Conditioned
upon the occurrence of the effective date of a section 524(g) plan of
reorganization of the Debtors’ estates, the Confirmation Order of such a plan
becoming a Final Order and Lloyd’s Underwriters and Equitas having been
designated as Settling Asbestos Insurance Companies, Lloyd’s Underwriters will
contribute $19.950 million to the Plan Trust. The Lloyd’s Settlement
provides that any party to the settlement may declare the settlement null and
void under certain circumstances. In order to avoid either a
termination of the Lloyd’s Settlement or the cost and distraction of a dispute
over termination rights under the agreement, the Debtors and Lloyd’s
Underwriters, along with the Futures Representative and the Asbestos Claimants’
Committee, participated in discussions to negotiate an appropriate amendment to
the Lloyd’s Settlement to address the parties’ concerns and
views. After such negotiations, the parties entered into an
amendment, which, among other things, removes the temporal condition to
termination of the Lloyd’s Settlement by any party in exchange for revised terms
relating to disposition of interest and earnings that have accrued and will
continue to accrue on the $19.950 million settlement amount being held in an
escrow account. On November 12, 2007, the Debtors filed a motion
seeking Bankruptcy Court approval of the amendment. On December 3,
2007, the Bankruptcy Court entered an order granting the motion.
52
(C) The Federal
Payment
Conditioned
upon the occurrence of the effective date of a section 524(g) plan of
reorganization of the Debtors’ estates, the confirmation order becoming a final
order and Federal being designated as a Settling Asbestos Insurance Company,
Federal will contribute $2.1 million to the Plan Trust. The Amended
Federal Settlement provides that any party to the settlement may declare the
settlement null and void under certain circumstances. There can be no
assurances that a party to the Amended Federal Settlement will not exercise its
right to declare the settlement null and void.
(D) The Mt. McKinley and Everest
Payment
Conditioned
upon a confirmation order for a plan of reorganization becoming a final order,
the Debtors will turn over the proceeds of the Amended Mt. McKinley and Everest
Settlement to the Plan Trust.
(E) The Harper
Payment
Conditioned
upon the occurrence of the effective date of a section 524(g) plan of
reorganization of the Debtors’ estates, the confirmation order of such a plan
becoming a final order and Harper having obtained the benefit of an injunction
pursuant to section 524(g) of the Bankruptcy Code, Harper will contribute
$1,375,000 to the Plan Trust.
(F) The Fireman’s Fund
Payment
Conditioned
upon a section 524(g) plan of reorganization of the Debtors’ estates, the
occurrence of the effective date of the Debtors’ plan, the confirmation order
becoming a final order and Fireman’s Fund having obtained the benefit of an
injunction pursuant to section 524(g) of the Bankruptcy Code, Fireman’s Fund
will contribute $1,000,000 to the Plan Trust.
(G) The Century
Payment
Conditioned
upon the occurrence of the effective date of a section 524(g) plan of
reorganization of the Debtors’ estates, and the confirmation order becoming a
final order, the Century Entities will contribute $16.9 million to the Plan
Trust.
(H) Protective National Insurance
Payment
Conditioned
upon the occurrence of the effective date of a plan reorganization after the
confirmation order becoming a Final Order, the Debtors shall turn over to the
Plan Trust any and all proceeds of its settlement with Protective National
Insurance. Pursuant to the settlement, Congoleum received an allowed
claim in the amount of $3 million in the liquidation proceedings of Protective
National insurance.
(I) Marsh and AON
Payment
Conditioned
upon the occurrence of the effective date of a plan of reorganization, the
Debtors shall turn over the proceeds of the Marsh and AON settlement to the Plan
Trust.
(J) Solvent Scheme
Payment
Conditioned
upon the occurrence of the effective date of a plan of reorganization, the
Debtors shall turn over the proceeds of any payments received from certain
solvent schemes of arrangement.
53
|
(c)
|
Plan
Distributions
|
The
Disbursing Agent shall make all distributions required under the Plan (other
than distributions to holders of Plan Trust Asbestos Claims and Senior Note
Claims). Distributions shall be made on the Distribution Date (unless
otherwise provided by the Plan or ordered) with respect to all Claims except for
Plan Trust Asbestos Claims. Distributions to be made on the
Distribution Date will be deemed actually made on the Distribution Date if made
either (a) on the Distribution Date or (b) as soon as practicable
thereafter. With respect to Plan Trust Asbestos Claims, distributions
to holders of Plan Trust Asbestos Claims will be made in accordance with the
Plan Trust Agreement and/or the TDP, as applicable. With respect to
Senior Note Claims, Distributions will be made by the Indenture Trustee, whose
reasonable fees and expenses in connection with such Distributions shall be paid
by Reorganized Congoleum.
|
(d)
|
Distributions
of Cash
|
Any
Distribution of Cash made by Reorganized Congoleum pursuant to the Plan shall,
at Reorganized Congoleum’s option, be made by check drawn on a domestic bank or
by wire transfer from a domestic bank.
|
(e)
|
No
Interest on Claims
|
Unless
otherwise specifically provided for in the Plan, the Confirmation Order, or a
post-petition agreement in writing between the Debtors and a holder,
Post-Petition Interest shall not accrue or be paid on Claims, and no holder
shall be entitled to Interest accruing on or after the Petition
Date. Additionally, and without limiting the foregoing, interest
shall not accrue or be paid on any Disputed Claim in respect of the period from
the Effective Date to the date a Final Distribution is made when and if such
Disputed Claim becomes an Allowed Claim. Notwithstanding the
foregoing, this provision shall not apply to Plan Trust Asbestos Claims which
shall be governed in all cases by the Plan Trust Agreement and the
TDP.
|
(f)
|
Delivery
of Distributions
|
Distributions
to holders of Allowed Claims other than Asbestos Claims shall be made by the
Disbursing Agent or the Indenture Trustee, as applicable, (a) at the holder’s
last known address, or (b) at the address in any written notice of address
change delivered to the Disbursing Agent or the Indenture Trustee, as
applicable. If any holder’s distribution made by the Disbursing Agent
is returned as undeliverable, no further distributions to such holder shall be
made, unless and until the Disbursing Agent is notified of such holder’s then
current address, at which time all missed distributions shall be made to such
holder without interest. Amounts in respect of undeliverable
distributions made through the Disbursing Agent shall be returned to Reorganized
Congoleum until such distributions are claimed or become unclaimed property
pursuant to Section 6.8 of the Plan. With respect to Plan Trust Asbestos Claims,
distributions to the holders of Plan Trust Asbestos Claims shall be made in
accordance with the Plan Trust Agreement and/or the TDP, as
applicable. With respect to Senior Note Claims, distributions to
holders of Senior Note Claims shall be made in accordance with the
Indenture.
|
(g)
|
Distributions
to Holders as of the Record
Date
|
All
Distributions on Allowed Claims shall be made to the Record Holders of such
Claims. As of the close of business on the Record Date, the Claims
register maintained by the Voting Agent shall be closed, and there shall be no
further changes in the Record Holder of any Claim. Reorganized
Congoleum shall have no obligation to recognize any transfer of any Claim
occurring after the Record Date. Reorganized Congoleum shall instead
be entitled to recognize and deal for all purposes under the Plan with the
Record Holders as of the Record Date.
|
(h)
|
Fractional
Securities; Fractional
Dollars
|
Distributions
of fractions of shares of New Common Stock will not be made and shall be rounded
(up or down) to the nearest whole number, with half shares or less being rounded
down. Reorganized Congoleum shall not be required to make
Distributions or payments of fractions of dollars. Whenever any
payment of a fraction of a dollar under the Plan would otherwise be called for,
the actual payment shall reflect a rounding of such fraction to the nearest
whole dollar (up or down), with half dollars or less being rounded
down.
54
|
(i)
|
Withholding
of Taxes
|
The
Disbursing Agent shall withhold from any assets or property distributed under
the Plan any assets or property that must be withheld pursuant to applicable
law.
|
(j)
|
Unclaimed
Property
|
Any
Cash, assets and other property to be distributed on account of any Claim (other
than a Plan Trust Asbestos Claim) under the Plan that remain unclaimed
(including by an Entity’s failure to negotiate a check issued to such Entity) or
otherwise not deliverable to the Entity entitled thereto before the later of
(a) one year after the date of distribution or (b) 120 calendar days after
an order allowing such Entity’s Claim becomes a Final Order, shall become vested
in, and shall be transferred and delivered to, Reorganized
Congoleum. In such event, such Entity’s Claim shall no longer be
deemed to be Allowed and such Entity shall be deemed to have waived its rights
to such payments or distributions under the Plan pursuant to section 1143 of the
Bankruptcy Code and shall have no further Claim in respect of such distribution
and shall not participate in any further distributions under the Plan with
respect to such Claim.
|
(k)
|
Procedures
for the Treatment of Disputed
Claims
|
|
(1)
|
Disallowance
of Improperly Filed Claims
|
Subject
to section 502(j) of the Bankruptcy Code and Bankruptcy Rules 3008 and 9006, any
Administrative Claim, Asbestos Property Damage Claim or Claim (other than
Asbestos Personal Injury Claims) for which the filing of a Proof of Claim,
application or motion with the District Court is required under the terms of the
Bankruptcy Code, the Bankruptcy Rules, any order of the Bankruptcy Court or
District Court (including one providing a Bar Date) or the Plan will be
disallowed if and to the extent that such Proof of Claim (or other filing) is
not timely and properly made.
|
(2)
|
Prosecution
of Objections to Claims
|
Unless
otherwise ordered by the District Court after notice and a hearing, after the
Effective Date, Reorganized Congoleum, the Bondholders’ Committee and the
Asbestos Claimants’ Committee each shall have the right to make and file
objections to Proofs of Claims, other than Proofs of Claims in respect of
Asbestos Personal Injury Claims and Professional Fee Claims, at any time on or
before ninety (90) days after the later of (i) the Effective Date or (ii) the
date on which such Claim was filed with the District Court unless no Proof of
Claim is required to be filed pursuant to Bankruptcy Rule 3002, the Plan or any
order of the District Court; provided, however, that (x)
this deadline may be extended by the District Court on motion by the Debtors,
Reorganized Congoleum, the Bondholders’ Committee or the Asbestos Claimants’
Committee, as applicable, and (y) neither the Debtors, Reorganized Congoleum,
the Futures Representative, the Bondholders’ Committee, the Asbestos Claimants’
Committee, nor any other Person may file an objection to any (1) Claim that was
Allowed by a Final Order entered during the Reorganization Cases, or (2) Claim
Allowed by the Plan. In addition, unless otherwise ordered by the
District Court after notice and a hearing, after the Effective Date Reorganized
Congoleum, the Bondholders’ Committee and the Asbestos Claimants’ Committee,
subject to Sections 13.8 and 13.14 of the Plan, each shall have the exclusive
right to make and file objections to Administrative Claims and to amend the
Schedules or to object to any Claim specified on the Schedules, at any time on
or before sixty (60) days after the later of (i) the Effective Date or (ii) the
date on which such Claim was filed with the District Court unless no Proof of
Claim is required to be filed pursuant to Bankruptcy Rule 3002, the Plan or any
order of the District Court; provided, however, that (x)
this deadline may be extended by the District Court on motion by the Debtors,
Reorganized Congoleum, the Bondholders’ Committee, or the Asbestos Claimants’
Committee, as applicable, (y) neither the Debtors, Reorganized Congoleum, the
Futures Representative, the Bondholders’ Committee, the Asbestos Claimants’
Committee nor any other Person may file an objection to any (1) Claim that was
Allowed by a Final Order entered during the Reorganization Cases, or (2) Claim
Allowed by the Plan, and (z) with respect to any Administrative Claim referred
to in sub-clause (a)(4) of the definition of Administrative Expense, no
objection may be filed with respect to any such Administrative Expense other
than with respect to the reasonableness of such Administrative Expense or
whether such Administrative Expense was incurred in accordance with Section 6.6
of the Indenture. Without prejudice to the right of any Asbestos
Insurance Company to assert any Asbestos Insurer Coverage Defenses, after the
Effective Date, only the Plan Trustee shall have the authority to contest
Asbestos Personal Injury Claims and Asbestos Property Damage Claims and litigate
to judgment, settle or withdraw such objections and each Asbestos Personal
Injury Claim and Asbestos Property Damage Claim, whether or not a Proof of Claim
was filed with the Bankruptcy Court or District Court, shall be satisfied
exclusively in accordance with the Plan Trust Documents.
55
|
(3)
|
No
Distributions Pending
Allowance
|
Notwithstanding
any other provision hereof, if a Claim or any portion of a Claim (other than an
Asbestos Personal Injury Claim) is a Disputed Claim, no payment or distribution
shall be made on account of the Disputed Claim, unless and until such Disputed
Claim becomes an Allowed Claim.
|
(4)
|
Distributions
After Allowance
|
Payments
and distributions to each holder of a Claim that is Disputed, or that is not
Allowed, to the extent that such Claim ultimately becomes Allowed, shall be made
in accordance with the provisions hereof governing the Class of Claims in which
such Claim is classified. As soon as practicable after the date that
the order or judgment of the Bankruptcy Court allowing any Disputed Claim (other
than a disputed Asbestos Claim) becomes a Final Order, Reorganized Congoleum
shall distribute to the holder of such Claim any payment or property that would
have been distributed to such holder if the Claim had been Allowed as of the
Effective Date (or such other date on which such distribution would have been
made).
6.5.
|
Executory Contracts
and Unexpired Leases
|
|
(a)
|
Assumption
or Rejection of Executory Contracts and Unexpired
Leases
|
(i) Assumption. Except
for any unexpired lease or executory contract that the Plan Proponents reject or
designate as being subject to rejection on or before the Effective Date, as of
the Effective Date, all executory contracts and unexpired leases not previously
assumed or rejected by the Debtors pursuant to section 365 of the Bankruptcy
Code shall be deemed to have been assumed by the Debtors, and the Plan shall
constitute a motion to assume such executory contracts and unexpired
leases. Subject to the occurrence of the Effective Date, entry of the
Confirmation Order by the District Court shall constitute approval of such
assumptions pursuant to section 365(a) of the Bankruptcy Code and a finding by
the District Court that each such assumption is in the best interests of the
Debtors, the Estates and all parties in interest in the Reorganization Cases.
With respect to each such executory contract or unexpired lease assumed by the
Debtors, unless otherwise determined by the District Court pursuant to a Final
Order or agreed to by the parties thereto on or before the Effective Date, any
defaults of the Debtors with respect to such assumed executory contracts or
leases existing as of the Effective Date shall be cured in the ordinary course
of the Reorganized Debtors’ business promptly after any such default becomes
known to the Debtors and, if disputed, established pursuant to applicable law by
the District Court, and the assumed executory contracts or leases shall be
binding upon and enforceable upon the parties thereto, subject to any rights and
defenses existing thereunder. Subject to the occurrence of the
Effective Date, upon payment of such cure amounts, all defaults of the Debtors
existing as of the Confirmation Date with respect to such executory contract or
unexpired lease shall be deemed cured.
(ii) Rejection. Notwithstanding
subpart (a) of this Section 6.5, the Plan Proponents may reject those executory
contracts and unexpired leases listed on an exhibit to be filed with the
District Court as part of the Plan Supplement (as such list may be amended or
supplemented up to and including the Confirmation Date).
(iii) ABI Canada License
Agreement; Intercompany Agreements. Pursuant to and in
consideration of the New ABI Agreement and the Intercompany Settlement set forth
in Section 5.16 of the Plan and other terms of the Plan, on the Effective Date
(A) the ABI Canada License Agreement shall be amended as provided in the
Intercompany Settlement and deemed to have been assumed by Congoleum and become
a contractual obligation of Reorganized Congoleum, and the Plan shall constitute
a motion to assume such license agreement and (B) all Intercompany Agreements
shall be rejected and all ABI Claims, including without limitation any ABI
Rejection Damages Claims (other than claims for payment of Unpaid Intercompany
Amounts that may be asserted to the extent consistent with Section 5.16(b)(4)(B)
of the Plan), shall be deemed Disallowed and expunged.
56
|
(b)
|
Damages
Upon Rejection
|
Except
to the extent arising out of or based on the rejection of any executory contract
related to or involving asbestos which shall be dealt with under the TDP, the District Court will
determine the dollar amount, if any, of the Claim of any Entity seeking damages
by reason of the rejection of any executory contract or unexpired lease; provided, however, that such
Entity must file a Proof of Claim with the District Court on or before thirty
(30) calendar days following the later of the Confirmation Date or the date of
rejection of the executory contract or unexpired lease. To the extent
that any such Claim is Allowed by the District Court by Final Order, such Claim
shall become, and shall be treated for all purposes under the Plan as, a Class 9
General Unsecured Claim, and the holder thereof shall receive distributions as a
holder of an Allowed Claim in such Class pursuant to the Plan unless such Claim
is held by ABI, in which case such Claim shall be Disallowed and
expunged.
6.6.
|
Insurance
Agreements.
|
Except
to the extent expressly set forth in any Asbestos Insurance Settlement
Agreement, nothing contained in the Plan or any negotiations leading up to the
Plan, including this Section 6.6, shall constitute a waiver
of: (i) any claim, right, or cause of action that any of
the Debtors or the Plan Trust, as applicable, may have against any insurer,
including under any insurance agreement; or (ii) any Asbestos Insurer Coverage
Defenses that any Asbestos Insurance Company may have against the Debtors or the
Plan Trust. The discharge and release provisions contained in the
Plan shall neither diminish nor impair the duties or obligations of any Debtor
or any other Entity under any Asbestos Insurance Policy or agreement relating
thereto (including any Asbestos Insurance Settlement Agreement), nor shall the
discharge and release provisions contained in the Plan diminish nor impair the
duties, obligations or the Asbestos Insurer Coverage Defenses of any Asbestos
Insurance Company under any Asbestos Insurance Policy or agreement relating
thereto. The Reorganized Debtors shall not voluntarily assist any
Person in the establishment of any rights, action, cause of action or claim
against the Century Entities in anyway relating to any Asbestos Claim or other
claim released under the Settlement and Buyback Agreement.
6.7.
|
Compensation and
Benefits Programs
|
Except
for the Congoleum Interests which are treated elsewhere in the Plan, unless
otherwise agreed to by the affected parties or modified by order of the District
Court, all of the Debtors’ obligations under employment and severance policies,
and all compensation and benefit plans, policies, and programs shall be treated
as though they are executory contracts that are deemed assumed under the
Plan.
As
of the Effective Date, the Pension Plans as well as the collective bargaining
agreement by and between the Debtors and Teamsters Local 312, will be deemed to
have been assumed by Reorganized Congoleum. Reorganized Congoleum
will continue the Pension Plans, satisfy the minimum funding standards pursuant
to 26 U.S.C. § 412 and 29 U.S.C. § 1082, and administer the Pension Plans in
accordance with their terms and the provisions of ERISA. Furthermore,
nothing in the Plan will be construed as discharging, releasing or relieving the
Debtors or Reorganized Congoleum, or any party, in any capacity, from any
liability imposed under any law or regulatory provision with respect to the
Pension Plans, the Pension Benefit Guaranty Corporation (“PBGC”) or the Teamsters
Pension Trust Fund of Philadelphia Vicinity (the “Teamsters Pension
Fund”). The PBGC, the Pension Plans and the Teamsters Pension Fund
will not be enjoined or precluded from enforcing such liability as a result of
any provision of the Plan or the Confirmation Order. Notwithstanding
anything in this Section 6.7, the Plan Trust shall not assume any of the
liabilities, obligations, or responsibilities of the Debtors or Reorganized
Congoleum with respect to the Pension Plans, the PBGC or the Teamsters Pension
Fund.
6.8.
|
Retiree
Benefits
|
Notwithstanding
any other provisions of the Plan (other than the last sentence of this Section
6.8), any payments that are due to any individual for the purpose of providing
or reimbursing payments for retired employees and their spouses and dependents
for medical, surgical, or hospital care benefits, or benefits in the event of
sickness, accident, disability, or death under any plan, fund, or program
(through the purchase of insurance or otherwise) maintained or established in
whole or in part by the Debtors prior to the Petition Date shall be continued
for the duration of the period, if any, that the Debtors have obligated
themselves to provide such benefits. Notwithstanding the foregoing,
no employee or retired employee (nor their spouses or dependents and
beneficiaries) of the Debtors or the Reorganized Debtors shall be entitled to
assert any Asbestos Claim against the Debtors or the Reorganized
Debtors.
57
6.9.
|
Indemnification of
Directors, Officers and
Employees
|
The
obligations of the Debtors to indemnify their current and former directors,
officers or employees to the extent provided in the Debtors’ constituent
documents or required pursuant to applicable general corporation law shall be
deemed and treated as obligations that are assumed by Reorganized Congoleum
pursuant to the Plan as of the Effective Date, provided, however, that (i)
with respect to acts or omissions occurring prior to, on or after the Petition
Date, the indemnification obligation of Reorganized Congoleum is limited
exclusively to the extent of proceeds available under any applicable directors
and officers insurance policy for the act(s) and/or omission(s) at issue, and
(ii) no current or former director, officer or employee shall be indemnified
with respect to the gross negligence, fraud or willful misconduct of such
party.
6.10.
|
Plan
Supplement
|
The
Plan Supplement will contain, among other things, without limitation,
substantially final forms of a schedule identifying rejected contracts, the Exit
Facility Commitment Letter or Term Sheet, the Registration Rights Agreement, the
New ABI Agreement, the New Indenture, the Stockholders Agreement, the Amended
and Restated Bylaws, the Amended and Restated Certificate and schedules
identifying the initial officers and the initial board of directors of
Reorganized Congoleum, and shall be filed with the District Court no later than
ten (10) Business Days prior to the last date for filing objections to
Confirmation of the Plan. Notwithstanding the foregoing, the Plan
Proponents may amend the Plan Supplement and any attachments thereto, through
and including the Confirmation Date.
6.11.
|
Injunctions, Releases
and Discharge
|
|
(a)
|
Term
of Certain Injunctions and Automatic
Stay
|
(A) All
of the injunctions and/or automatic stays provided for in or in connection with
the Reorganization Cases, whether pursuant to section 105, section 362, section
524(g), or any other provision of the Bankruptcy Code or other applicable law,
in existence immediately prior to Confirmation will remain in full force and
effect until the Injunctions become effective, and thereafter if so provided by
the Plan, the Confirmation Order, or by their own terms. In addition,
on and after Confirmation, the Plan Proponents may seek such further orders as
they may deem necessary to preserve the status quo during the time between
Confirmation and the Effective Date.
(B) Each
of the Injunctions will become effective on the Effective Date and will continue
in effect at all times thereafter. Notwithstanding anything to the
contrary contained in the Plan, all actions in the nature of those to be
enjoined by the Injunctions will be enjoined during the period between the
Confirmation Date and the Effective Date.
|
(b)
|
Discharge
|
(i) Except
as specifically provided in the Plan, the Plan Documents or in the Confirmation
Order, as of the Effective Date, Confirmation will discharge the Debtors and the
Reorganized Debtors pursuant to section 1141(d)(1)(A) of the Bankruptcy Code
from any and all Claims of any nature whatsoever and Demands including, without
limitation, any Claims, demands and liabilities that arose before Confirmation,
and all debts of the kind specified in section 502(g), 502(h) or 502(i) of the
Bankruptcy Code, whether or not (i) a Proof of Claim based on such Claim was
filed or deemed filed under section 501 of the Bankruptcy Code, or such Claim
was listed on the Schedules of the Debtors, (ii) such Claim is or was Allowed
under section 502 of the Bankruptcy Code, or (iii) the holder of such Claim has
voted on or accepted the Plan. Except as specifically provided in the
Plan or Plan Documents, the rights that are provided in the Plan as of the
Effective Date will be in exchange for and in complete satisfaction, settlement
and discharge of all Claims (including without limitation Asbestos Claims) or
Demands against, Liens on, and interests in the Debtors or the Reorganized
Debtors or any of their assets or properties. Notwithstanding
anything herein to the contrary, nothing in Section 11.1 of the Plan will affect
the right of any Asbestos Insurance Company to assert any Asbestos Insurer
Coverage Defenses.
58
(ii) Notwithstanding
any other provision of the Plan to the contrary, Confirmation will not discharge
any pre-Petition Date or post-Petition Date, pre-Confirmation Date liability
that may be due from any of the Debtors to the Internal Revenue Service as
currently set forth in certain Proofs of Claim and Administrative Expense Claim,
as amended, filed by the Internal Revenue Service. Should any
pre-Petition Date or post-Petition Date, pre-Confirmation Date tax liabilities
be determined by the Internal Revenue Service to be due from any of the Debtors
for any of the tax periods reflected by such Proofs of Claim or Administrative
Expense Claim, such liabilities will be determined administratively or in a
judicial forum in the manner in which such liabilities would have been resolved
had the Reorganization Cases not been commenced. Any resulting
liabilities determined pursuant to a Final Order or other final determination
will be paid as if the Reorganization Cases had not been commenced.
|
(c)
|
Exculpation
|
As
of the Effective Date, (i) the Debtors, the Futures Representative, the Asbestos
Claimants’ Committee, the Bondholders’ Committee, and each of their respective
Representatives shall not have or incur any liability to any Entity for any act
or omission taken on or after the Petition Date in connection with or arising
out of the negotiation of the Plan, any Plan Document or any prior plan of
reorganization relating to the Debtors or other related documents, the pursuit
of Confirmation of the Plan or any prior plan of reorganization relating to the
Debtors, the consummation of the Plan, or the administration of the Plan or the
property to be distributed under the Plan; and (ii) in all respects the Debtors,
the Futures Representative, the Asbestos Claimants’ Committee and the
Bondholders’ Committee shall be entitled to rely upon the advice of counsel with
respect to their duties and responsibilities under the Plan and the other Plan
Documents. For the avoidance of doubt, in no event shall any such
party be exculpated from liability under Section 11.2 of the Plan in the case of
the gross negligence, fraud or willful misconduct of such party. None
of the foregoing parties shall be exculpated under this provision with respect
to any acts occurring prior to the Petition Date. With respect to
officers and directors of the Debtors, this section shall apply only to such
officers and directors who were serving in such capacity on and after the
Petition Date.
|
(d)
|
Releases
by Holders of Claims
|
Pursuant
to Section 11.3 of the Plan and the Confirmation Order, which may include
release(s) for the benefit of any Settling Asbestos Insurance Company consistent
with the terms of such Section 11.3 and the terms of the relevant Asbestos
Insurance Settlement Agreement, any holder of a Plan Trust Asbestos Claim that
receives a payment from the Plan Trust shall be deemed to have unconditionally
released the Plan Trust and each Settling Asbestos Insurance Company from any
and all Claims, obligations, rights, suits, damages, causes of action, remedies,
and liabilities whatsoever, whether known or unknown, foreseen or unforeseen,
existing or hereafter arising, in law, equity, or otherwise, arising from,
relating to, or involving the manufacture, sale, distribution, installation,
formulation, marketing, transport, handling or any other activity involving any
asbestos containing products of Congoleum and any of Congoleum entities
identified in the Confirmation Order, which may incorporate the terms of one or
more Asbestos Insurance Settlement Agreement, or their premises to the extent
such Claim arises from, relates to or involves exposure to asbestos, including
without limitation, any operation claims, contribution claims, direct action
claims, and insurance coverage claims. For the avoidance of doubt, in
no event shall any such party be released in the case of the gross negligence,
fraud or willful misconduct of such party.
|
(e)
|
Discharge
Injunction
|
Except
as specifically provided in the Plan Documents to the contrary, the
satisfaction, release, and discharge set forth in Section 11.1 of the Plan will
also operate as an injunction, pursuant to sections 105, 524(g) and 1141 of the
Bankruptcy Code, prohibiting and enjoining the commencement or continuation of
any action, the employment of process or any act to collect, recover from, or
offset (i) any Claim or Demand against or Interest in the Debtors, the
Reorganized Debtors, or the Plan Trust by any Entity and (ii) any cause of
action, whether known or unknown, against the Debtors and the Reorganized
Debtors based on such Claim or Interest described in subpart (i) of this clause
(e).
59
|
(f)
|
Third
Party Releases
|
Notwithstanding
anything set forth in the Plan, no third party releases are being granted
pursuant to the Plan nor are the Plan Proponents seeking approval of any such
third party releases.
|
(g)
|
Asbestos
Channeling Injunction
|
THE
SOLE RECOURSE OF THE HOLDER OF A PLAN TRUST ASBESTOS CLAIM OR DEMAND ON ACCOUNT
OF SUCH CLAIM OR DEMAND OR OF A PERSON THAT HAD OR COULD HAVE ASSERTED AN
ASBESTOS CLAIM OR DEMAND WILL BE TO THE PLAN TRUST PURSUANT TO THE PROVISIONS OF
THE ASBESTOS CHANNELING INJUNCTION, THE PLAN, THE PLAN TRUST AGREEMENT AND THE
TDP, AND SUCH HOLDER WILL HAVE NO RIGHT WHATSOEVER AT ANY TIME TO ASSERT ITS
PLAN TRUST ASBESTOS CLAIM OR DEMAND AGAINST THE DEBTORS, THE REORGANIZED
DEBTORS, ANY OTHER PROTECTED PARTY, OR ANY PROPERTY OR INTEREST IN PROPERTY OF
THE DEBTORS, THE REORGANIZED DEBTORS, OR ANY OTHER PROTECTED
PARTY. WITHOUT LIMITING THE FOREGOING, FROM AND AFTER THE EFFECTIVE
DATE, THE ASBESTOS CHANNELING INJUNCTION WILL APPLY TO ALL PRESENT AND FUTURE
HOLDERS OF PLAN TRUST ASBESTOS CLAIMS AND DEMANDS, AND ALL SUCH HOLDERS WILL BE
PERMANENTLY AND FOREVER STAYED, RESTRAINED, AND ENJOINED FROM TAKING ANY OF THE
FOLLOWING ACTIONS FOR THE PURPOSE OF, DIRECTLY OR INDIRECTLY, COLLECTING,
RECOVERING, OR RECEIVING PAYMENT OF, ON, OR WITH RESPECT TO ANY PLAN TRUST
ASBESTOS CLAIMS AND DEMANDS, OTHER THAN FROM THE PLAN TRUST IN ACCORDANCE WITH
THE ASBESTOS CHANNELING INJUNCTION AND PURSUANT TO THE PLAN, THE PLAN TRUST
AGREEMENT AND THE TDP:
(I) COMMENCING, CONDUCTING, OR CONTINUING
IN ANY MANNER, DIRECTLY OR INDIRECTLY, ANY SUIT, ACTION, OR OTHER PROCEEDING
(INCLUDING A JUDICIAL, ARBITRATION, ADMINISTRATIVE, OR OTHER PROCEEDING) IN ANY
FORUM AGAINST OR AFFECTING ANY PROTECTED PARTY OR ANY PROPERTY OR INTERESTS IN
PROPERTY OF ANY PROTECTED PARTY;
(II) ENFORCING, LEVYING, ATTACHING
(INCLUDING ANY PREJUDGMENT ATTACHMENT), COLLECTING, OR OTHERWISE RECOVERING BY
ANY MEANS OR IN ANY MANNER, WHETHER DIRECTLY OR INDIRECTLY, ANY JUDGMENT, AWARD,
DECREE, OR OTHER ORDER AGAINST ANY PROTECTED PARTY OR ANY PROPERTY OR INTERESTS
IN PROPERTY OF ANY PROTECTED PARTY;
(III) CREATING, PERFECTING, OR OTHERWISE
ENFORCING IN ANY MANNER, DIRECTLY OR INDIRECTLY, ANY ENCUMBRANCE AGAINST ANY
PROTECTED PARTY, OR ANY PROPERTY OR INTERESTS IN PROPERTY OF ANY PROTECTED
PARTY;
(IV) SETTING OFF, SEEKING REIMBURSEMENT
OF, CONTRIBUTION FROM, OR SUBROGATION AGAINST, OR OTHERWISE RECOUPING IN ANY
MANNER, DIRECTLY OR INDIRECTLY, ANY AMOUNT AGAINST ANY LIABILITY OWED TO ANY
PROTECTED PARTY OR ANY PROPERTY OR INTERESTS IN PROPERTY OF ANY PROTECTED PARTY;
AND
(V) PROCEEDING IN ANY MANNER IN ANY PLACE
WITH REGARD TO ANY MATTER THAT IS SUBJECT TO RESOLUTION PURSUANT TO THE PLAN
TRUST, EXCEPT IN CONFORMITY AND COMPLIANCE WITH THE PLAN, THE PLAN TRUST
AGREEMENT AND THE TDP.
60
ANY
RIGHT, CLAIM OR CAUSE OF ACTION THAT AN ASBESTOS INSURANCE COMPANY MAY HAVE BEEN
ENTITLED TO ASSERT AGAINST A SETTLING ASBESTOS INSURANCE COMPANY BASED ON OR
RELATING TO ASBESTOS CLAIMS WILL BE CHANNELED TO AND BECOME A RIGHT, CLAIM OR
CAUSE OF ACTION AS AN OFFSET CLAIM AGAINST THE PLAN TRUST AND NOT AGAINST THE
SETTLING ASBESTOS INSURANCE COMPANY IN QUESTION AND ALL PERSONS, INCLUDING ANY
ASBESTOS INSURANCE COMPANY, WILL BE ENJOINED FROM ASSERTING ANY SUCH RIGHT,
CLAIM OR CAUSE OF ACTION AGAINST A SETTLING ASBESTOS INSURANCE
COMPANY.
EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN THE PLAN, NOTHING CONTAINED IN THE PLAN WILL
CONSTITUTE OR BE DEEMED A WAIVER OF ANY CLAIM, RIGHT OR CAUSE OF ACTION THAT THE
DEBTORS, THE REORGANIZED DEBTORS, OR THE PLAN TRUST MAY HAVE AGAINST ANY ENTITY
IN CONNECTION WITH OR ARISING OUT OF OR RELATED TO AN ASBESTOS
CLAIM. NOTWITHSTANDING ANY OTHER PROVISION IN THE PLAN TO THE
CONTRARY, NOTHING IN THE PLAN WILL BE UNDERSTOOD TO CHANNEL, PREVENT, IMPAIR OR
LIMIT IN ANY WAY ENFORCEMENT AGAINST THE DEBTORS, REORGANIZED CONGOLEUM, OR ANY
OTHER PROTECTED PARTY OF ANY RIGHTS PROVIDED IN CONNECTION WITH ANY WORKERS’
COMPENSATION CLAIM.
|
(h)
|
Reservation
of Rights
|
Notwithstanding
any other provision of the Plan to the contrary, the satisfaction, release and
discharge, and the Injunctions set forth in Article XI of the Plan, will not
serve to satisfy, discharge, release, or enjoin (a) claims by any Entity (other
than the Reorganized Debtors and their Affiliates) against the Plan Trust for
payment of Plan Trust Asbestos Claims in accordance with the Plan, the Plan
Trust Agreement and the TDP, as applicable, (b) claims by any Entity against the
Plan Trust for the payment of Plan Trust Expenses, (c) claims by the Reorganized
Debtors, the Plan Trust, or any other Entity to enforce the provisions of any
Asbestos Insurance Settlement Agreement or any provision of the Plan or another
Plan Document, or (d) the rights of any Asbestos Insurance Company to assert any
claim, debt, obligation, cause of action or liability for payment against any
other Asbestos Insurance Company that is not a Settling Asbestos Insurance
Company.
|
(i)
|
Rights
Against Non-Debtors under Securities
Laws
|
Notwithstanding
any language to the contrary contained in this Disclosure Statement, the Plan,
and/or the Confirmation Order, no provision will release any non-Debtor,
including any current and/or former officer and/or director of the Debtors from
liability to the United States Securities and Exchange Commission, in connection
with any legal action or claim brought by such governmental unit against such
Person(s).
|
(j)
|
Rights
Against Debtors under Environmental
Laws
|
Environmental
rights and Claims of Governmental Units and rights of contribution,
reimbursement and indemnity by other Entities (other than ABI) under applicable
Environmental Laws will survive the Reorganization Cases, will not be
discharged, impaired or adversely affected by the Plan and the Reorganization
Cases and will be determined in the manner and by the administrative or judicial
tribunals in which such rights or Claims would have been resolved or adjudicated
if the Reorganization Cases had not been commenced. Governmental
Units and other Entities, other than ABI whose claims, if any, shall be
discharged, need not file any Proofs of Claim under Environmental Laws in the
Reorganization Cases in order to preserve Claims under Environmental
Laws. Nothing in the Confirmation Order or Plan will be construed as
releasing or relieving any Entity of any liability under any Environmental
Law.
|
(k)
|
Disallowed
Claims and Disallowed
Interests
|
On
and after the Effective Date, the Debtors will be fully and finally discharged
from any liability or obligation on a Disallowed Claim or a Disallowed Interest,
and any order creating a Disallowed Claim or a Disallowed Interest that is not a
Final Order as of the Effective Date solely because of an Entity’s right to move
for reconsideration of such order pursuant to section 502 of the Bankruptcy Code
or Bankruptcy Rule 3008 will nevertheless become and be deemed to be a Final
Order on the Effective Date. The Confirmation Order, except as
otherwise provided in the Plan or ordered by the District Court, will constitute
an order: (i) disallowing all Claims (other than Plan Trust Asbestos
Claims that have not been previously expunged by Final Order of the Bankruptcy
Court, District Court or withdrawn) and Interests to the extent such Claims and
Interests are not allowable under any provision of section 502 of the Bankruptcy
Code, including, but not limited to, time-barred Claims, and Claims for
unmatured interest, and (ii) disallowing or subordinating, as the case may be,
any Claims, or portions of Claims, for penalties or Non-Compensatory
Damages.
61
|
(l)
|
Anti-Suit
Injunction
|
With
respect to any Settling Asbestos Insurance Company, Section 11.11 of the Plan
will operate as an injunction, pursuant to section 105(a) of the Bankruptcy
Code, permanently and forever prohibiting and enjoining the commencement,
conduct or continuation of any action or cause of action, whether known or
unknown, the employment of process or any act to collect, recover from or offset
any non-asbestos claim, Claim or demand against any Settling Asbestos Insurance
Company arising out of, relating to, or in connection with an Asbestos Insurance
Policy or any other insurance policy or rights under such other insurance policy
issued to or insuring the relationship of the relevant Settling Asbestos
Insurance Companies with, the relevant Congoleum entities that are insureds
under such policies, but such injunction pursuant to section 105(a) of the
Bankruptcy Code will not affect or modify the rights of Persons insured under
policies of insurance except to the extent released in an Asbestos Insurance
Settlement Agreement.
|
(m)
|
Insurance
Neutrality
|
Section 11.12(a) of the Plan provides
that except as otherwise provided in Section 11.12(b) of the Plan:
(i) Nothing
in the Plan, the Plan Documents or the Confirmation Order shall preclude any
Entity from asserting in any proceeding any and all claims, defenses, rights or
causes of action that it has or may have under or in connection with any
Asbestos Insurance Policy or any Asbestos Insurance Settlement Agreement with
respect thereto;
(ii) Nothing
in the Plan, the Plan Documents or the Confirmation Order shall be deemed to
waive any claims, defenses, rights or causes of action that any Entity has or
may have under the provisions, terms, conditions, defenses and/or exclusions
contained in any Asbestos Insurance Policy or any Asbestos Insurance Settlement
Agreement with respect thereto, including but not limited to any and all such
claims, defenses, rights or causes of action based upon or arising out of
Asbestos Personal Injury Claims that are liquidated, resolved, discharged,
channeled, or paid in connection with the Plan; and
(iii) Notwithstanding
anything to the contrary in the Confirmation Order, the Plan, or any of the Plan
Documents, nothing in the Confirmation Order, the Plan, or any of the Plan
Documents (including any other provision that purports to be preemptory or
supervening other than Section 11.12(b)), shall in any way operate to impair, or
have the effect of impairing, the insurers’ legal, equitable, or contractual
rights, if any, in any respect; nor shall the Plan, any of the Plan Documents,
the Confirmation Order, or the estimation, liquidation, or payment of any Claim
for purposes of distribution by the Trust in accordance with the Plan and the
Plan Documents have any binding effect on any Asbestos Insurance Company or have
any res judicata effect
or collateral estoppel effect upon any Asbestos Insurance Company for any other
purpose, including without limitation with respect to the amount or the
reasonableness of any such claim, or constitute a binding determination on any
issue or creation of any liquidated claim with respect to any Asbestos Insurance
Company. The rights of insurers shall be determined under the
applicable Asbestos Insurance Policy or any Asbestos Insurance Settlement
Agreement with respect thereto.
Notwithstanding the foregoing, Section
11.12(b) of the Plan states that Asbestos Insurance Companies shall be bound by
the District Court’s findings and conclusions with respect to
whether, under the Bankruptcy Code, the assignment or transfer of rights
under the Asbestos Insurance Assignment is valid and enforceable against each
Asbestos Insurance Company notwithstanding any anti-assignment provision in or
incorporated into any Asbestos Insurance Policy and applicable state
law, and therefore Asbestos Insurance Companies shall be entitled to
litigate that issue in connection with Confirmation, and shall retain all
rights of appeal with respect thereto. Further, to the extent any
Asbestos Insurance Company chooses, notwithstanding the protections provided by
Section 11.12(a), to litigate any other issues in connection with Confirmation,
and the District Court gives such Asbestos Insurance Company standing to
litigate those issues and rules on the merits of those issues, then such
Asbestos Insurance Company shall be bound by the District Court’s findings and
conclusions thereon, subject to any rights of appeal.
62
|
(n)
|
No
Liability for Solicitation or
Participation
|
Pursuant
to section 1125(e) of the Bankruptcy Code, the Confirmation Order will provide
that all of the Persons who have solicited acceptances or rejections of the Plan
(including the Plan Proponents, and each of their respective members and
Representatives, as applicable, and the Voting Agent) have acted in good faith
and in compliance with the applicable provisions of the Bankruptcy Code, and are
not liable on account of such solicitation or participation, for violation of
any applicable law, rule, or regulation governing the solicitation of
acceptances or rejections of the Plan or the offer, issuance, sale or purchase
of securities.
6.12.
|
Matters Incident to
Plan Confirmation
|
|
(a)
|
No
Successor Liability
|
Except
as otherwise expressly provided in the Plan, the Debtors, the Reorganized
Debtors, their Affiliates, the Asbestos Claimants’ Committee, the Bondholders’
Committee, and the Futures Representative do not, pursuant to the Plan or
otherwise, assume, agree to perform, pay, or indemnify creditors or otherwise
have any responsibilities for any liabilities or obligations of the Debtors
relating to or arising out of the operations of or assets of the Debtors,
whether arising prior to, on, or after the Confirmation Date. Neither
the Debtors, the Reorganized Debtors, their Affiliates, nor the Plan Trust is,
or will be, a successor to the Debtors by reason of any theory of law or equity,
and none will have any successor or transferee liability of any kind or
character, except that the Reorganized Debtors and the Plan Trust will assume
the obligations specified in the Plan and the Confirmation Order.
|
(b)
|
Revesting
of Assets
|
Except
as otherwise expressly provided in the Plan, on the Effective Date, Reorganized
Congoleum will be vested with all of the assets and property of the Estates,
free and clear of all Claims, Liens, charges and other interests of holders of
Claims or Interests, and may operate its business free of any restrictions
imposed by the Bankruptcy Code or by the District Court.
|
(c)
|
Vesting
and Enforcement of Causes of
Action
|
Pursuant
to section 1123(b)(3)(B) of the Bankruptcy Code, except as otherwise provided in
the Plan, Reorganized Congoleum will be vested with and have the right to
enforce against any Entity any and all of the Debtors’ Causes of Action other
than Causes of Action related to Plan Trust Asbestos Claims and Plan Trust
Assets (including the right to pursue such claims, if any, in the name of any
Debtor if necessary), with the proceeds of the recovery of any such actions to
be property of Reorganized Congoleum; provided, however, that
nothing herein will alter, amend, or modify the injunctions (including the
Injunctions), releases, or discharges provided in the Plan. Pursuant
to section 1123(b)(3)(B) of the Bankruptcy Code, except as otherwise provided in
the Plan, the Plan Trust shall be vested with and have the right to enforce
against any Entity any and all of the Debtors’ Causes of Action relating to any
Plan Trust Asbestos Claims or any Plan Trust Assets, including the right to
pursue such claims, if any, in the name of any Debtor, if necessary; and for
this purpose the Plan Trust will be designated as a representative of the
Estates, with the proceeds of the recovery of any such actions to be property of
the Plan Trust; provided
further, that nothing herein will alter, amend, or modify the injunctions
(including the Injunctions), releases, or discharges provided in the
Plan.
After
the Effective Date, Reorganized Congoleum, in its sole and absolute discretion,
shall have the right to bring, settle, release, compromise, or enforce such
Causes of Action (or decline to do any of the foregoing), without further
approval of the District Court. Reorganized Congoleum, or any successors, in the
exercise of its sole discretion, may pursue such Causes of Action so long as it
is in the best interests of Reorganized Congoleum or any successors holding such
rights of action. The failure of the Plan Proponents to specifically
list any claim, right of action, suit, proceeding or other Causes of Action in
the Plan or the Plan Supplement does not, and will not be deemed to, constitute
a waiver or release by the Debtors or Reorganized Congoleum of such claim, right
of action, suit, proceeding or other Causes of Action, and Reorganized Congoleum
will retain the right to pursue such claims, rights of action, suits,
proceedings and other Causes of Action in its sole discretion and, therefore, no
preclusion doctrine, collateral estoppel, issue preclusion, claim preclusion,
estoppel (judicial, equitable or otherwise) or laches will apply to such claim,
right of action, suit, proceeding or other Causes of Action upon or after the
confirmation or consummation of the Plan.
63
|
(d)
|
GHR/Kenesis
Actions
|
On
the Effective Date, the GHR/Kenesis Actions shall be preserved for enforcement
solely by, and for the sole benefit of, Reorganized Congoleum.
6.13.
|
Retention of
Jurisdiction
|
|
(a)
|
Jurisdiction
|
Until
the Reorganization Cases are closed, the District Court will retain the fullest
and most extensive jurisdiction permissible, including that necessary to ensure
that the purposes and intent of the Plan are carried out. Except as
otherwise provided in the Plan, the District Court will retain jurisdiction to
hear and determine all Claims against and Interests in the Debtors, and to
adjudicate and enforce all other causes of action which may exist on behalf of
the Debtors. Nothing contained in the Plan will prevent the Debtors,
Reorganized Congoleum, or the Plan Trust from taking such action as may be
necessary in the enforcement of any cause of action which any Debtor has or may
have and which may not have been enforced or prosecuted by such Debtor, which
cause of action will survive Confirmation of the Plan and will not be affected
thereby except as specifically provided in the Plan. Nothing
contained in the Plan concerning the retention of jurisdiction by the District
Court will be deemed to be a retention of exclusive jurisdiction with respect to
any Asbestos Insurance Action; rather any court other than the District Court
which has jurisdiction over an Asbestos Insurance Action will have the
continuing right to exercise such jurisdiction.
|
(b)
|
General
Retention
|
Following
the Confirmation of the Plan, the administration of the Reorganization Cases
will continue at least until the completion of the transfers contemplated to be
accomplished on the Effective Date. Moreover, the Plan Trust will be
subject to the continuing jurisdiction of the District Court in accordance with
the requirements of section 468B of the IRC and the regulations issued pursuant
thereto. The District Court will also retain jurisdiction for the
purpose of classification of any Claim and the re-examination of Claims that
have been Allowed for purposes of voting, and the determination of such
objections as may be filed with the District Court with respect to any
Claim. The failure by the Debtors to object to, or examine, any Claim
for the purposes of voting, will not be deemed a waiver of the right of the
Debtors, Reorganized Congoleum, or the Plan Trust, as the case may be, to object
to or re-examine such Claim in whole or in part.
|
(c)
|
Specific
Purposes
|
In
addition to the foregoing, the District Court will retain jurisdiction for the
following specific purposes after the Confirmation Date:
|
·
|
to
modify the Plan after Confirmation, pursuant to the provisions of the
Bankruptcy Code and the Bankruptcy
Rules;
|
|
·
|
to
correct any defect, cure any omission, reconcile any inconsistency, or
make any other necessary changes or modifications in or to the Plan, the
Plan Documents or the Confirmation Order as may be necessary to carry out
the purposes and intent of the Plan, including the adjustment of the
date(s) of performance under the Plan Documents in the event that the
Effective Date does not occur as provided in the Plan so that the intended
effect of the Plan may be substantially realized
thereby;
|
64
|
·
|
to
assure the performance by the Disbursing Agent and the Plan Trustee of
their respective obligations to make distributions under the
Plan;
|
|
·
|
to
enforce and interpret the terms and conditions of the Plan
Documents;
|
|
·
|
to
enter such orders or judgments, including, but not limited to,
injunctions (i) as are necessary to enforce the title, rights,
and powers of the Debtors, the Reorganized Debtors, the Plan Trust, the
Futures Representative and the Trust Advisory Committee, or (ii) as are
necessary to enable holders of Claims to pursue their rights against any
Entity that may be liable therefor pursuant to applicable law or
otherwise, including, but not limited to, Bankruptcy Court or District
Court orders;
|
|
·
|
to
hear and determine any motions or contested matters involving taxes, tax
refunds, tax attributes, tax benefits, tax proceedings and similar or
related matters with respect to the Debtors, the Reorganized Debtors, or
the Plan Trust relating to tax periods or portions thereof ending on or
before the Effective Date, arising on account of transactions contemplated
by the Plan Documents, or relating to the period of administration of the
Reorganization Cases;
|
|
·
|
to
hear and determine all applications for compensation of professionals and
reimbursement of expenses under sections 330, 331, or 503(b) of the
Bankruptcy Code;
|
|
·
|
to
hear and determine any causes of action arising during the period from the
Petition Date through the Effective
Date;
|
|
·
|
to
hear and determine any claim, causes of action, dispute or other matter in
any way related to the Plan Documents or the transactions contemplated
thereby against the Debtors, the Reorganized Debtors, the Bondholders’
Committee, the Asbestos Claimants’ Committee, the Trust Advisory
Committee, the Plan Trust, the Plan Trustee, or the Futures Representative
and each of their respective
Representatives;
|
|
·
|
to
hear and determine any and all motions pending as of Confirmation for the
rejection, assumption, or assignment of executory contracts or unexpired
leases and the allowance of any Claim resulting
therefrom;
|
|
·
|
to
determine the allowance and/or disallowance of any Claims against the
Debtors or their Estates, including, without limitation, any objections to
any such Claims and the compromise and settlement of any Claim against the
Debtors or their Estates;
|
|
·
|
to
hear and determine such other matters and for such other purposes as may
be provided in the Confirmation
Order;
|
|
·
|
to
consider and act on the compromise and settlement of any Claim against or
Interest in the Debtors or their
Estates;
|
|
·
|
to
hear and determine all questions and disputes regarding title to the
assets of the Debtors, their Estates, Reorganized Congoleum or the Plan
Trust;
|
|
·
|
to
hear and determine any other matters related to the Plan, including the
implementation and enforcement of all orders entered by the Bankruptcy
Court and District Court in the Reorganization
Cases;
|
|
·
|
to
retain continuing jurisdiction with regard to the Plan Trust sufficient to
satisfy the requirements of the Treasury Regulations promulgated under
section 468B of the IRC (including Treas. Reg. Section
1.468B-1(c)(1));
|
65
|
·
|
to
hear and determine any and all applications brought by the Plan Trustee to
amend, modify, alter, waive, or repeal any provision of the Plan Trust
Agreement or the TDP;
|
|
·
|
to
enter such orders as are necessary to implement and enforce the
Injunctions and the other injunctions described in the Plan, including,
without limitation, orders extending the protections afforded by section
524(g)(4) of the Bankruptcy Code to the Protected Parties, including
without limitation, the Settling Asbestos Insurance Companies;
and
|
|
·
|
to
hear and determine any motions or contested matters involving or related
to any GHR/Kenesis Actions.
|
6.14.
|
Miscellaneous
Provisions
|
|
(a)
|
Payment
of Statutory Fees
|
All
fees payable pursuant to section 1930 of title 28 of the United States Code, as
determined by the District Court at the Confirmation Hearing, shall be paid by
the Debtors on or before the Effective Date and thereafter by Reorganized
Congoleum as due until the Reorganization Cases are closed, converted or
dismissed. The Reorganized Debtors shall pay any quarterly fees
payable pursuant to 28 U.S.C. § 1930(a)(6) to the United States Trustee after
the Effective Date until such time as the case is converted, dismissed or closed
pursuant to a final decree. The Reorganized Debtor shall file
post-Effective Date reports, the form of which will be supplied by the United
States Trustee. Nothing contained in the Plan shall relieve the
Debtors or Reorganized Debtors from making payments to the United States Trustee
when due as required by 28 U.S.C. § 1930(a)(6).
|
(b)
|
Securities
Law Matters
|
It
is an integral and essential element of the Plan that the issuance of the New
Common Stock pursuant to the Plan shall be exempt from registration under the
Securities Act, pursuant to Section 1145 of the Bankruptcy Code and from
registration under state securities laws. Nothing in the Plan is
intended to preclude the Securities and Exchange Commission from exercising its
police and regulatory powers relating to the Debtors or any other
entity.
|
(c)
|
Allocation
of Plan Distributions Between Principal and
Interest
|
To
the extent that any Allowed Claim entitled to a Distribution under the Plan is
composed of indebtedness and accrued but unpaid interest thereon, such
Distribution shall, to the extent permitted by applicable law, be allocated for
United States federal income tax purposes to the principal amount of the Claim
first and then, to the extent the consideration exceeds the principal amount of
the Claim, to the portion of the Claim representing accrued but unpaid
interest. Notwithstanding the foregoing, no Distribution shall be
made on account of Post-Petition Interest.
|
(d)
|
The
Asbestos Claimants’ Committee, the Futures Representative and the
Bondholders’ Committee
|
As
of the Effective Date, the Futures Representative shall (a) continue in
existence and the rights, duties and responsibilities of the Futures
Representative appointed by the Bankruptcy Court to serve after the Effective
Date shall be as set forth in the Plan Trust Documents and (b) continue in
existence for purposes of the Reorganization Cases with respect to any appeal or
request for reconsideration or stay pending appeal of the Confirmation Order and
have the right to prosecute and/or object to applications for Professional Fee
Claims. The Representatives retained by the Futures Representative
during the Reorganization Cases shall, be released and discharged of and from
all further authority, duties, responsibilities and obligations related to, or
arising from, the Reorganization Cases on the same date as the Futures
Representative ceases existence for purposes of the Reorganization
Cases. On the Effective Date, the Asbestos Claimants’ Committee and
the Bondholders’ Committee shall be dissolved except for the purposes of: (i)
any appeal or request for reconsideration or stay pending appeal of the
Confirmation Order; (ii) pending adversary proceedings; and (iii) prosecuting
and/or objecting to Professional Fee Claims. Representatives of the
Asbestos Claimants’ Committee and the Bondholders’ Committee shall be released
and discharged of and from all further authority, duties, responsibilities, and
obligations related to, or arising from, the Reorganization Cases on the same
date the Asbestos Claimants’ Committee or the Bondholders’ Committee, as
applicable, cease to exist for purposes of the Reorganization
Cases. Until the Effective Date, the Debtors shall pay the reasonable
fees and expenses of the Asbestos Claimants’ Committee, the Bondholders’
Committee and Futures Representative in accordance with any applicable fee order
in the Reorganization Cases. On the Effective Date,
the Trust Advisory Committee will assume those powers, duties, and
responsibilities as provided in the Plan Trust Agreement.
66
|
(e)
|
Modification
of the Plan
|
The
Plan Proponents may propose amendments to or modifications of any of the Plan
Documents under § 1127 of the Bankruptcy Code and as herein provided, to the
extent applicable law permits. Subject to the limitations contained
herein, the Plan Proponents may modify the Plan in accordance with this
paragraph, before or after confirmation, without notice or hearing, or after
such notice and hearing as the District Court deems appropriate, if the District
Court finds that the modification does not materially and adversely affect the
rights of any parties in interest which have not had notice and an opportunity
to be heard with regard thereto. After Confirmation, the Plan
Proponents may remedy any defects or omissions or reconcile any inconsistencies
in the Plan or the Confirmation Order or any other order entered for the purpose
of implementing the Plan in such manner as may be necessary to carry out the
purposes and intent of the Plan, provided, however, that
none of the Debtors, ABI, Reorganized Congoleum, the Futures
Representative, the Plan Trustee, the Asbestos Claimants’ Committee, and the
Bondholders’ Committee shall seek to terminate, reduce or limit the scope of the
Asbestos Channeling Injunction or any other injunction contained in the Plan
that inures to the benefit of any Settling Asbestos Insurance
Company. Anything in the Plan or in any Plan Document to the contrary
notwithstanding, following Confirmation but prior to the Effective Date, the
Plan Documents shall not be modified, supplemented, changed or amended in any
material respect except with the written consent of the Plan
Proponents. In the event of any modification on or before
Confirmation, any votes to accept or reject the Plan shall be deemed to be votes
to accept or reject the Plan as modified, unless the District Court finds that
the modification materially and adversely affects the rights of parties in
interest which have cast said votes. The Plan Proponents reserve the
right in accordance with section 1127 of the Bankruptcy Code to modify the Plan
at any time before the Confirmation Date. Subject to § 1127 of the
Bankruptcy Code, if the District Court determines at or in connection with the
Confirmation Hearing that any provision of the Plan is invalid or unenforceable,
such provision, to the extent the Plan Proponents agree, shall be severable from
the Plan and null and void, and, in such event, such determination shall in no
way limit or affect the enforceability or operative effect of any or all other
provisions of the Plan.
|
(f)
|
Revocation
of the Plan
|
The
Plan Proponents reserve the right to revoke and withdraw the Plan before the
entry of the Confirmation Order. If the Plan Proponents revoke or
withdraw the Plan, or if Confirmation or the Effective Date does not occur,
then, with respect to all parties in interest, the Plan will be deemed null and
void and nothing contained therein will be deemed to constitute a waiver or
release of any Claims by or against the Debtors or any other Entity or to
prejudice in any manner the rights of the Debtors or such Entity in any further
proceedings involving the Debtors.
|
(g)
|
Modification
of Payment Terms
|
Reorganized
Congoleum shall have the right to modify the treatment of any Allowed Claim
(other than a Plan Trust Asbestos Claim), as provided in section 1123(a)(4) of
the Bankruptcy Code, at any time after the Effective Date with the consent of
the holder of such Allowed Claim.
|
(h)
|
Entire
Agreement
|
The
Plan Documents and the Plan Trust Documents set forth the entire agreement and
undertakings relating to the subject matter thereof and supersede all prior
discussions and documents. No Entity shall be bound by any terms,
conditions, definitions, warranties, understandings, or representations with
respect to the subject matter hereof, other than as expressly provided for
herein or as may hereafter be agreed to by the parties in writing.
67
|
(i)
|
Headings
|
Headings
are utilized in the Disclosure Statement are for convenience and reference only
and shall not constitute a part of the Disclosure Statement for any other
purpose.
|
(j)
|
Professional
Fee Claims
|
All
final requests for payment of Professional Fee Claims must be filed and served
on Reorganized Congoleum and their counsel no later than 60 days after the
Effective Date, unless otherwise ordered by the District
Court. Objections to any application of such Bankruptcy Professionals
or other Entities for compensation or reimbursement of expenses must be filed
and served on the respective applicant and its counsel no later than the first
Business Day following 30 days (or such other period as may be allowed by order
of the District Court) after the date on which the applicable application for
compensation or reimbursement was received. Reorganized Congoleum may
pay the reasonable charges that they incur on and after the Effective Date for
Bankruptcy Professionals’ fees, disbursements, expenses or related support
services without application to the District Court. Reorganized
Congoleum shall pay the reasonable fees and expenses of the Bondholders’
Committee, Asbestos Claimants’ Committee and Futures Representative after the
Effective Date in connection with the purposes set forth in Section 13.8 of the
Plan, without application to the District Court.
|
(k)
|
Recordable
Order
|
Upon
Confirmation of the Plan, the Confirmation Order shall be deemed to be in
recordable form, and shall be accepted by any recording officer for filing and
recording purposes without further or additional orders, certifications, or
other supporting documents.
|
(l)
|
Preparation
of Estates’ Returns and Resolution of Tax
Claims.
|
The
Debtors or Reorganized Congoleum shall file all tax returns and other filings
with governmental authorities and may file determination requests under section
505(b) of the Bankruptcy Code to resolve any Disputed Claim relating to taxes
with a governmental authority.
|
(m)
|
No
Admission
|
Nothing
contained in the Plan or in the Disclosure Statement shall be deemed as an
admission by the Plan Proponents with respect to any matter set forth herein or
therein, including, without limitation, liability on any Claim or the propriety
of any Claims classification.
|
(n)
|
Consent
to Jurisdiction
|
Upon
default under the Plan or any Plan Documents, the Debtors, Reorganized
Congoleum, the Affiliates, the Plan Trust, the Trust Advisory Committee, the
Futures Representative, ABI and the Plan Trustee consent to the jurisdiction of
the District Court, or any successor thereto, and agree that it shall be the
preferred forum for all proceedings relating to such default.
|
(o)
|
Setoffs
|
Subject
to the limitations provided in section 553 of the Bankruptcy Code, the Debtors
or the Plan Trust, as applicable, may, but will not be required to, setoff
against any Claim and the payments or other distributions to be made pursuant to
the Plan in respect of such Claim, claims of any nature whatsoever the Debtors
may have against the holder of such Claim, but neither the failure to do so nor
the allowance of any Claim under the Plan will constitute a waiver or release by
the Debtors of any such claim that the Debtors may have against such holder;
provided that
Reorganized Congoleum may not offset any obligations under the Plan Trust Common
Stock against any claim that Reorganized Congoleum may have against the Plan
Trust.
68
|
(p)
|
Successors
and Assigns
|
The
rights, duties, and obligations of any Entity named or referred to in the Plan
shall be binding upon, and shall inure to the benefit of, the successors and
assigns of such Entity.
|
(q)
|
Non-Debtor
Waiver of Rights
|
Non-Debtor
parties shall have the right to voluntarily waive any rights, benefits or
protections that are afforded to them under the provisions of the Plan or any
order issued in furtherance of the Plan, and such waiver shall supersede such
rights, benefits or protections. Any such waiver shall only be
effective if, and then only to the extent that, such party expressly and
specifically waives in writing one or more of such rights, benefits or
protections.
|
(r)
|
Further
Authorizations
|
The
Debtors, Reorganized Congoleum, the Bondholders’ Committee, and the Plan Trust,
if and to the extent necessary, may seek with notice to the others such orders,
judgments, injunctions, and rulings that any of them deem necessary to further
carry out the intentions and purposes of, and give full effect to the provisions
of, the Plan.
|
(s)
|
No
Bar to Suits
|
Except
as otherwise provided in Article XI of the Plan, neither the Plan nor
Confirmation hereof shall operate to bar or estop the Debtors or Reorganized
Congoleum from commencing any Cause of Action, or any other legal action against
any holder of a Claim or any individual, corporation, partnership, trust,
venture, governmental unit, or any other form of legal entity, whether such
Cause of Action, or any other legal action arose prior to or after the
Confirmation Date and whether or not the existence of such Cause of Action, or
any other legal action was disclosed in any disclosure statement filed by the
Debtors in connection with the Plan or whether or not any payment was made or is
made on account of any Claim.
|
(t)
|
Conflicts
|
Unless
otherwise provided in the Confirmation Order, in the event of a conflict between
the terms or provisions of the Plan and any other Plan Document, the terms of
the other Plan Document will control.
|
(u)
|
Notices
|
All
notices, requests, elections, or demands in connection with the Plan shall be in
writing and shall be mailed by registered or certified mail, return receipt
requested, to:
If
to the Debtors:
Congoleum
Corporation
3500
Quakerbridge Road
Hamilton,
NJ 08619
Attn: Howard
N. Feist
CFO
and
Pillsbury
Winthrop Shaw Pittman LLP
1540
Broadway
New
York, NY 10033-4039
Attn: Richard
L. Epling
Robin L. Spear
Kerry A. Brennan
69
If
to the Futures Representative:
R.
Scott Williams, Esquire
Haskell
Slaughter Young & Rediker, L.L.C.
2001
Park Place North, Suite 1400
Birmingham,
AL 35203
and
Orrick,
Herrington & Sutcliffe LLP
1152
15th Street, N.W.
Washington,
D.C. 20005
Attn: Roger
Frankel
Richard Wyron
Jonathan Guy
If
to the Asbestos Claimants’ Committee:
Caplin
& Drysdale, Chartered
One
Thomas Circle, N.W.
Washington,
D.C. 20005
Attn: Peter
Van N. Lockwood
Ronald Reinsel
If
to the Bondholders’ Committee:
Akin
Gump Strauss Hauer & Feld LLP
One
Bryant Park
New
York, NY 10036
Attn: Michael
S. Stamer
Akin
Gump Strauss Hauer & Feld LLP
1333
New Hampshire Avenue, N.W.
Washington,
D.C. 20036
Attn: James
R. Savin
David M. Dunn
Joanna F. Newdeck
|
(v)
|
Duty
to Cooperate
|
Notwithstanding
anything therein to the contrary, nothing in the Plan, the Plan Documents or the
Confirmation Order shall relieve (by way of injunction or otherwise) any of the
Debtors or Reorganized Congoleum or any other Entity which is or claims to be an
insured or entitled to indemnity under an Asbestos Insurance Policy from any
duty to cooperate that may be required by any such insurance policy under
applicable law with respect to the defense and/or settlement of any Claim for
which coverage is sought under such Asbestos Insurance Policy. To the
extent that any entity incurs costs in satisfying such duty to cooperate with
respect to Asbestos Personal Injury Claims after the Effective Date, the Plan
Trust shall reimburse such entity for all such reasonable out-of-pocket
expenses.
|
(w)
|
Governing
Law
|
Except
to the extent that federal law (including, but not limited to, the Bankruptcy
Code and the Bankruptcy Rules) is applicable or where the Plan provides
otherwise, the rights and obligations arising under the Plan shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Delaware, without giving effect to the principles of conflicts of law thereof
that would require application of any other law.
70
ARTICLE
7
CONFIRMATION
OF THE PLAN
7.1.
|
Acceptance or
Rejection of the Plan
|
|
(a)
|
Persons
Entitled to Vote on the Plan
|
Pursuant
to section 1126 of the Bankruptcy Code, only Classes of Claims and Interests
that are impaired under the terms and provisions of the Plan are entitled to
vote to accept or reject the Plan. Generally speaking, under section
1124 of the Bankruptcy Code, a class of claims or interests is “impaired” under
a plan of reorganization unless, with respect to each claim or interest in such
class, the plan in question (1) leaves unaltered the legal, equitable and
contractual rights to which such claim or interest entitles the holder of such
claim or interest; or (2) notwithstanding any contractual provision or
applicable law that entitles the holder of such claim or interest to demand or
receive accelerated payment of such claim or interest after the occurrence of a
default (A) cures any such default that occurred before or after the
commencement of the case under the Bankruptcy Code, other than a default of the
kind specified in section 365(b)(2) thereof; (B) reinstates the maturity of such
claim or interest as such maturity existed before such default; (C) compensates
the holder of such claim or interest for any damages incurred as a result of any
reasonable reliance by such holder on such contractual provision or such
applicable law; and (D) does not otherwise alter the legal, equitable, or
contractual rights to which such claim or interest entitles the holder of such
claim or interest. Only those claimants whose claims are Allowed or
have been temporarily allowed for voting purposes will be entitled to vote on
the Plan.
Under
the Plan, Classes 1, 2, 3, 5, and 11 are Unimpaired; therefore, the holders of
Claims and Interests in such Classes are conclusively presumed to have accepted
the Plan pursuant to section 1126(f) of the Bankruptcy Code. The Plan
Proponents will not solicit acceptances of the Plan from holders of Claims and
Interests in these Classes.
Classes
4, 6, 7, 8, 9 and 10 are Impaired; therefore, the holders of Claims and
Interests in Classes 4, 6, 7, 8, 9 and 10 are entitled to vote to accept or
reject the Plan pursuant to the Voting Procedures Order; provided however, holders of
Asbestos Property Damage Claims in Class 8 and ABI Claims in Class 6 cast votes
on the February 2008 Plan, and pursuant to the Voting Procedures Order, the
votes of such holders of Claims will be deemed cast on the
Plan. Similarly, the holders of Asbestos Personal Injury Claims in
Class 7 also cast votes on the February 2008 Plan, and pursuant to the Voting
Procedures Order, only Former Class 7B Claimants will be provided with
solicitation packages and cast votes anew on the Plan, and the votes, whether
acceptance or rejection, of all other Asbestos Personal Injury Claimants cast on
the February 2008 Plan will be deemed cast on the Plan. The holders
of Senior Notes Claims in Class 4 will be provided with Solicitation Packages
and cast votes anew on the Plan pursuant to the Voting Procedure
Order. The holders of General Unsecured Claims in Class 9 will be
provided with Solicitation Packages and Allowed General Unsecured Claims will be
permitted to cast votes on the Plan pursuant to the Voting Procedures
Order. Former Class 7B Claimants, holders of Senior Notes Claims and
holders of General Unsecured Claims are urged to consider carefully the
information regarding treatment of their Claims contained in this Disclosure
Statement; provided further
that the holders of Congoleum Interests in Class 10 are deemed to have
rejected the Plan in accordance with the provisions of section 1126(g) of the
Bankruptcy Code and accordingly their votes are not being
solicited. Section 524(g) of the Bankruptcy Code permits
supplementary injunctions to be issued which channel all asbestos claims to a
trust if, among other things, 75% of those claimants voting in the Class or
Classes of claimants whose Claims are to be addressed by the trust vote for the
plan. Because the Claims in Classes 7 and 8 are to be channeled into
the Plan Trust, the Plan Proponents are soliciting acceptances of the Plan for
purposes of section 524(g) from these Classes.
The
Plan Proponents believe that the Plan provides the best available alternative
for maximizing the distributions that holders of Asbestos Claims and other
unsecured claims will receive from the Estates.
|
(b)
|
Voting
Instructions
|
The
voting procedures summarized in this Article 7 are based on the Voting
Procedures Order of the District Court and the voting procedures which are
included with the solicitation package accompanying this Disclosure
Statement. You should carefully read the Voting Procedures
Order. It establishes, among other things: (1) the deadlines,
procedures and instructions for voting to accept or reject the Plan,
(2) the applicable standards for tabulating ballots, (3) the deadline
for filing objections to confirmation of the Plan, and (4) the date and
time of the Confirmation Hearing.
71
The
Voting Procedures Order should be referred to if you have any questions
concerning the procedures described herein. If there are any
inconsistencies or ambiguities between this Disclosure Statement and the Voting
Procedures Order, the Voting Procedures Order will control.
Please
note that, in soliciting votes on the Plan, the Plan Proponents have relied on
databases created by or on behalf of the Debtors in connection with
solicitations of the Debtors’ prior plans of reorganization.
|
(1)
|
Completion
and Return of Ballots:
|
PLEASE
USE THE BALLOT SENT TO YOU WITH THIS DISCLOSURE STATEMENT IN VOTING FOR OR
AGAINST THE PLAN. YOU SHOULD COMPLETE AND SIGN THE BALLOT AND RETURN
IT TO THE VOTING AGENT, AT THE APPROPRIATE ADDRESS SET FORTH BELOW AND IN THE
VOTING INSTRUCTIONS WHICH ACCOMPANY THE ENCLOSED BALLOT, ON OR BEFORE
5:00 P.M., PREVAILING EASTERN TIME, ON _________, 2010, UNLESS OTHERWISE
EXTENDED BY THE DISTRICT COURT. ALL BALLOTS WILL BE TABULATED BY THE
VOTING AGENT.
IN ORDER TO BE
COUNTED, BALLOTS MUST BE ACTUALLY RECEIVED BY THE VOTING AGENT ON OR BEFORE
5:00 P.M., PREVAILING EASTERN TIME, ON ___________ 2010, UNLESS OTHERWISE
ORDERED BY THE DISTRICT COURT, AT THE APPROPRIATE ADDRESS SET FORTH BELOW AND IN
THE VOTING INSTRUCTIONS WHICH ACCOMPANY THE ENCLOSED BALLOT.
|
(2)
|
Place
to Send Completed Ballots:
|
All ballots should be returned by mail,
hand-delivery or overnight courier to:
Logan
& Company, Inc.
Re:
Congoleum Corporation – Plan Ballots
546
Valley Road
Upper
Montclair, NJ 07043
|
(3)
|
Deadline
for Receiving Completed
Ballots:
|
ALL
BALLOTS MUST BE ACTUALLY RECEIVED BY THE VOTING AGENT BY THE VOTING DEADLINE.
THE VOTING AGENT WILL NOT ACCEPT BALLOTS SUBMITTED BY FACSIMILE OR ELECTRONIC
TRANSMISSION.
|
(4)
|
The
Voting Agent will date and time-stamp all ballots received before and
after the Voting Deadline.
|
|
(5)
|
Ballots
will be made available for inspection and copying at the inspecting
party’s cost at the offices of the Voting Agent beginning on a date
specified by the Voting Agent.
|
|
(6)
|
Claimant’s
Allowance Motions
|
Only
claimants whose Claims (i) are treated as Impaired under the Plan, (ii) are not
in a Class that is deemed to have accepted and/or rejected the Plan, (iii) are
known to the Plan Proponents as of the Record Date, and (iv) are not the subject
of an objection that is pending as of the Record Date may vote on the
Plan.
72
Any
claimant who is not entitled to vote because such claimant’s claim is the
subject of an objection pending before the District Court, or otherwise, or who
seeks a determination from the District Court, for purposes of voting only, the
amount to be used to tabulate acceptance or rejection of the Plan, may file an
allowance motion (a “Claimant’s
Allowance Motion”). A Claimant’s Allowance Motion must be
filed by the dated specified in the Voting Procedures Order, an objection to
such motion must be filed by the dated specified in the Voting Procedures Order,
and a hearing to address unresolved objections will be held on the dated
specified in the Voting Procedures Order. As to any claimant filing
such a motion, such claimant’s ballot will not be counted unless temporarily
allowed by the District Court for voting purposes, after notice and a
hearing.
|
(7)
|
Tabulation
of Votes -- Ballots
Excluded:
|
Any
ballot pertaining to a Claim will not be counted if any of the following,
without limitation, applies to such ballot:
(i) The
ballot attempts to vote a Claim that is not entitled to vote pursuant to
theVoting
Procedures.
(ii) The
ballot is not actually
received by the Voting Agent by the Voting Deadline.
(iii) The
ballot is returned to the Voting Agent indicating acceptance or rejection
ofthe Plan but is
unsigned.
(iv) The
ballot is received after the Voting Deadline, regardless of when it ispostmarked.
(v) The
ballot is illegible or contains insufficient information (such asincomplete or missing social security numbers
for holders of Asbestos PersonalInjury Claims) to permit the identification of
the claimant.
(vi) The
ballot is transmitted to the Voting Agent by facsimile or otherelectronic means.
(vii) A
vote is submitted on a ballot other than provided with the solicitationpackage.
(viii) A
ballot that is incomplete, including, without limitation, because of the
failureto make the required
certifications.
(ix) A
ballot to the extent that it purports to vote on the behalf of a holder of
aPreviously Expunged or Withdrawn
Claim.
|
(8)
|
Tabulation
of Votes – General Voting Procedures and Standard
Assumptions:
|
In
addition to the foregoing, the following voting procedures and standard
assumptions will be used in tabulating ballots:
(i) The
holder of a Claim may not split a vote. Accordingly, (a) each Claim
holderwill have a single vote
within a particular Class, (b) the full claim amount of theClaim holder within a particular Class will be
deemed to have been voted eitherto accept or reject a Plan, and (c) any ballot
that partially rejects and partially accepts the Plan will not be
counted.
73
(ii) The
Voting Agent, in its discretion, may contact voters or their counsel to
cureany defects in a client list
or ballot.
(iii) There
shall be a rebuttable presumption that any claimant who submits aproperly completed superseding ballot on or
before the Voting Deadline hassufficient cause, within the meaning of
Bankruptcy Rule 3018(a), to change orwithdraw such claimant’sprevious acceptance or rejection of the
Plan.
(iv) A
ballot that is completed, but on which the claimant did not note whether toaccept or reject the Plan, shall not be
counted as a vote to accept or reject thePlan.
(v) A
ballot that is complete, but on which the claimant noted both an acceptanceand rejection of the Plan, shall not be
counted.
(vi) If
multiple ballots are received from a holder of a Claim and someonepurporting to be such holder’s attorney or
agent, the ballot received from theholder of the Claim will be the ballot that is
counted, and the vote of thepurported attorney or agent will not be
counted.
(vii) If
a holder of a Claim casts more than one ballot voting the same Claim beforethe Voting Deadline, the last-dated
ballot received before the Voting Deadlinewill be deemed to reflect the voter’s intent
and thus will supersede any priorballots.
|
(9)
|
The
Solicitation Period
|
The
solicitation period for ballots with respect to the Plan will expire at 5:00
p.m., Prevailing Eastern Time, on ________, 2010 unless otherwise ordered by the
District Court. Except to the extent allowed by the District Court,
ballots that are received after the Voting Deadline may not be accepted or used
by the Plan Proponents in connection with its request for Confirmation of the
Plan or any modification thereof.
|
(10)
|
Ballot
Retention
|
The
original ballots will be maintained by the Voting Agent for a period of two (2)
years following the Effective Date, unless otherwise instructed by the Plan
Proponents, in writing, or otherwise ordered by the District Court.
|
(c)
|
Class
Acceptance Requirement
|
Chapter
11 of the Bankruptcy Code does not require that each holder of a Claim vote in
favor of the Plan for it to be confirmed by the District
Court. Instead, the Bankruptcy Code defines acceptance of the Plan by
a Class of Claims as acceptance by holders of at least two-thirds in dollar
amount and more than one-half in number of the claims of that Class that have
voted on the Plan, excluding any holders of Claims designated pursuant to
section 1126(e) of the Bankruptcy Code. Acceptance by a Class of
Interests is defined as acceptance by holders of at least two-thirds in amount
of the Allowed Interests of that Class held by holders of such Interests that
have voted on the Plan, excluding any holders of Interests designated pursuant
to section 1126(e) of the Bankruptcy Code. Section 1126(e) provides
that a vote may be disregarded if the District Court determines, after notice
and a hearing, that an Entity’s acceptance or rejection of the Plan was not in
good faith, or was not solicited or procured in good faith, or in accordance
with the provisions of the Bankruptcy Code.
|
(d)
|
Acceptance
Pursuant to Section 524(g) of the Bankruptcy
Code
|
In
accordance with section 524(g)(2)(B)(ii)(IV)(bb) of the Bankruptcy Code, a
supplementary injunction may be issued if, among other things, 75% of those
voting in the Class or Classes of claimants addressed by the Plan Trust vote in
favor of the Plan.
74
7.2.
|
Confirmation
Hearing
|
Section
1128(a) of the Bankruptcy Code requires the court, after notice, to hold a
hearing on confirmation of a plan. Notice of the Confirmation Hearing
will be provided to all creditors and equity holders or their representatives.
The Confirmation Hearing may be adjourned from time to time by the District
Court without further notice except for an announcement of the adjourned date
made at the Confirmation Hearing or any subsequent adjourned Confirmation
Hearing.
Section
1128(b) of the Bankruptcy Code provides that any party in interest may object to
confirmation of a plan. Any objection to confirmation of the Plan must be in
writing, must conform to the Bankruptcy Rules, must set forth the name of the
objecting party, the nature and amount of Claims or Interests held or asserted
by the objectant against the Debtor or property, the basis for the objection and
the specific grounds therefor, and must be filed with the District Court by the
date and time set forth in the notice of the Confirmation Hearing, and served
upon the parties and their counsel, so as to be received no later than the date
and time for service of the objections, all as designated in the notice of the
Confirmation Hearing.
7.3.
|
Requirements for
Confirmation
|
|
(a)
|
Confirmation
Under Section 1129(a) of the Bankruptcy
Code
|
At
the Confirmation Hearing, the District Court will determine whether the
requirements of section 1129(a) of the Bankruptcy Code have been satisfied, in
which event the District Court will enter the Confirmation
Order. Such requirements include, among others:
(i) That
the Plan complies with applicable provisions of the Bankruptcy
Code.
(ii) That
the Plan Proponents have complied with the applicable provisions of the
Bankruptcy Code.
(iii) That
the Plan has been proposed in good faith and not by any means forbidden by
law.
(iv) That
any payment made by the Debtors or promised under the Plan to any Entity for
services, costs or expenses in or in connection with the Reorganization Cases or
the Plan has been approved by or is subject to approval by the District Court as
reasonable.
(v) That
the Plan Proponents have disclosed the identity and affiliations of any
individual proposed to serve as a director or an officer of the Reorganized
Debtors after confirmation of the Plan and that the appointment to, or
continuance in, such office by such individual is consistent with the interests
of holders of Claims and Interests and with public policy.
(vi) That
the Plan is in the best interests of the holders of Claims and Interests; that
is, each holder of an Allowed Claim or Allowed Interest either has accepted the
Plan or will receive or retain on account of its Claim or Equity Interest
property with a value, as of the Effective Date, that is not less than the
amount that the holder would receive or retain if the Debtors were liquidated
under Chapter 7 of the Bankruptcy Code on the Effective Date.
(vii) Each
Class of Claims or Interests has either accepted the Plan or is not impaired
under the Plan; provided,
however, that if such requirement is not met, the Plan may be confirmed
pursuant to section 1129(b) of the Bankruptcy Code.
(viii) The
Plan does not discriminate unfairly, and is fair and equitable, with respect to
each Class, if any, of Claims and Interests that is impaired under and has not
accepted the Plan.
(ix) Except
to the extent that the holder of a particular Claim has agreed to a different
treatment of such Claim, the Plan provides that Allowed Administrative Expense
Claims and Allowed Priority Claims will be paid in full on the Effective Date
and that Allowed Priority Tax Claims will be either paid in full on the
Effective Date or will receive on account of such Claims deferred cash payments,
over a period not exceeding six years after the date of assessment of such
Claims, of a value, as of the Effective Date, equal to the Allowed Amount of
such Claims.
75
(x) At
least one Impaired Class of Claims has accepted the Plan, without regard to the
votes of any insiders.
(xi) That
the Plan is feasible; that is, confirmation is not likely to be followed by the
need for liquidation or further reorganization of the Reorganized
Debtors.
(xii) All
fees comparable to the fees payable under section 1930 of title 28 of the U.S.
Code, if and to the extent due, have been paid on or prior to the Effective
Date.
(xiii) The
Plan provides for the continuation after the Effective Date of payment of all
retiree benefits, as that term is defined in section 1114 of the Bankruptcy
Code, without modification by the Plan, thereby complying with section 1114 of
the Bankruptcy Code.
The
Plan Proponents believe that the Plan satisfies all applicable requirements of
section 1129(a) of the Bankruptcy Code. A discussion of the reasons
the Plan Proponents believe the Plan satisfies certain of such requirements is
set forth below:
|
(1)
|
Best
Interests Test
|
Under
the best interests test, the Plan may be confirmed if, with respect to each
Impaired Class of Claims or Interests, each holder of an Allowed Claim or
Allowed Interest in such Class either (A) has accepted the Plan or (B) will
receive or retain under the Plan, on account of its Claim or Interest, property
of a value, as of the Effective Date, that is not less than the amount such
holder would receive or retain if the Company were to be liquidated under
Chapter 7 of the Bankruptcy Code.
To determine what the holders in each
Class of Claims or Interests would receive if the Company were to be liquidated,
the District Court must estimate the dollar amount that would be generated from
the liquidation of the Company’s assets and properties in the context of a
Chapter 7 liquidation case. The cash amount that would be available for
satisfaction of the Allowed Claims and Allowed Interests of the Company would
consist of the proceeds resulting from the disposition of the assets of the
Company, augmented by the cash held by the Company at the time of the
commencement of a Chapter 7 case. Such cash amount would be reduced
by the costs and expenses of the liquidation and by any additional
Administrative Claims and Priority Claims that would result from the termination
of the Company’s business and the use of a Chapter 7 proceeding for the purposes
of liquidation. See Exhibit B (Liquidation
Analysis). The Liquidation Analysis was prepared using the Debtors’
valuation of its assets in a liquidation and is based on the estimated values of
such assets as of August 31, 2007; such values have not been subject
to any review, compilation or audit by any independent accounting
firm.
The
timing of distributions under a Chapter 7 case would be delayed and the amount
of distributions that would be made in a Chapter 7 case would be materially less
than the distributions contemplated by the Plan. In addition, the
ability of the trustee in a Chapter 7 case to negotiate settlements with
insurance companies without the benefit of the section 524(g) injunctions is
likely to be impaired, with the result that fewer settlements are likely to be
achieved, and the terms of any such settlements are likely to be less favorable
to Asbestos Claimants than settlements achievable in the Reorganization
Cases. Furthermore, unlike the Plan Trust in the Reorganization
Cases, a Chapter 7 trustee would not receive the benefits of the Plan Trust
Common Stock.
The
Plan Proponents believe that the members of each Class of Impaired Claims will
receive more under the Plan than they would receive if the Company was
liquidated under Chapter 7 and that the holders of Congoleum Interests would not
recover anything if the Company was liquidated under Chapter 7. The
Plan Proponents therefore believe that the Plan is in the best interests of all
holders of Claims and Interests.
76
|
(2)
|
Feasibility
of the Plan
|
In
order for the Plan to be confirmed, the District Court also must determine that
the Plan is feasible -- that is, that the need for further reorganization or a
subsequent liquidation of the Company is not likely to result following
confirmation of the Plan. In determining whether a plan of reorganization is
feasible, a court will consider (A) the adequacy of the proposed capital
structure of the reorganized entity, (B) its earning power, (C) the overall
economic conditions in which it will operate, (D) the capability of its
management, (E) the continuity of its management and (F) any other factors the
court deems relevant to the successful operation of the reorganized entity to
perform the provisions of the plan of reorganization.
The
Reorganized Debtors will be discharged from Asbestos Claims and otherwise in
general will be free of pre-petition and other debt, other than indebtedness in
respect of or under (1) the Exit Facility effected to refinance the Lender
Secured Claim, (2) Other Secured Claims and (3) the New Senior Notes, as well as
ongoing business expenses and reorganization costs. The Plan
Proponents believe that the cash flow generated by Reorganized Congoleum’s
business and assets will be sufficient to pay their ongoing obligations under
their long-term debt and business expenses.
The
Plan Proponents, therefore, believe that the Plan is feasible.
|
(3)
|
Acceptance
by an Impaired Class
|
Because
the Plan impairs several Classes of Claims (Classes 4, 6, 7, 8, 9 and 10),
section 1129(a)(10) of the Bankruptcy Code requires that for the Plan to be
confirmed, at least one Impaired Class of Claims must accept the Plan by the
requisite vote. As more fully described in Section 7.1(c) –
“Acceptance or Rejection of the Plan -- Class Acceptance Requirement,” an
Impaired Class of Claims will have accepted the Plan if and only if at least
two-thirds in dollar amount and more than one-half in number of the Allowed
Claims in such Class that vote have voted to accept the Plan. Holders
of Congoleum Interests are deemed to have rejected the Plan in accordance with
the provisions of section 1126(g) of the Bankruptcy Code and their votes are not
being solicited. Accordingly, if at least one voting Class accepts
the Plan, the Plan Proponents will seek to confirm the Plan under the “cram
down” provision of section 1129(b) with respect to Congoleum Interests and with
respect to any other non-accepting Class, to the extent that section is
applicable.
|
(4)
|
Unfair
Discrimination and Fair and Equitable
Tests
|
To
obtain confirmation of the Plan, it must be demonstrated that the Plan “does not
discriminate unfairly” and is “fair and equitable” with respect to each
impaired, non-accepting Class. The Bankruptcy Code provides the
following non-exclusive definition of the phrase “fair and equitable,” as it
applies to unsecured creditors and equity holders:
(i) Unsecured
Creditors
With
respect to any class of unsecured claims that rejects a plan, the Bankruptcy
Code requires that either (i) each impaired unsecured creditor receives or
retains under the plan property of a value equal to the amount of its allowed
claim, or (ii) the holders of claims and interests that are junior to the claims
of the rejecting class of unsecured creditors will not receive or retain any
property under the plan. This test will be applicable if any of Class
4 (Senior Note Claims), Class 6 (ABI Claims), Class 7 (Asbestos Personal Injury
Claims), Class 8 (Asbestos Property Damage Claims), or Class 9 (General
Unsecured Claims) rejects the Plan.
(ii) Equity Holders
With
respect to any class of equity interests that rejects a plan, the Bankruptcy
Code requires that either (i) each holder of an equity interest will receive or
retain under the plan property of a value equal to the greatest of the fixed
liquidation preference to which such holder is entitled, the fixed redemption
price to which such holder is entitled, or the value of the interest, or (ii)
the holder of an interest that is junior to the non-accepting class will not
receive or retain any property under the plan. Holders of Congoleum
Interests are deemed to have rejected the Plan. Nevertheless, the
Plan Proponents believe that the Plan satisfies clause (ii) of the foregoing
test because there is no junior class to the Congoleum Interests. It
follows that no interest junior to Congoleum Interests will receive any property
under the Plan.
77
|
(b)
|
Conditions
to Confirmation
|
Confirmation
of the Plan will not occur unless each of the following conditions has been
satisfied or waived in accordance with Section 10.3 the Plan. These
conditions to Confirmation, which are designed, among other things, to ensure
that the Injunctions, releases, and discharges set forth in Article XI of
the Plan will be effective, binding and enforceable, are as
follows:
(i) The
District Court will have made specific findings and determinations, among
others, in substantially the following form:
(A) The
Discharge Injunction and the Asbestos Channeling Injunction are to be
implemented in connection with the Plan and the Plan Trust;
(B) As
of the Petition Date, Congoleum 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;
(C) The
Plan Trust, upon the Effective Date, will assume the liabilities of the Debtors
with respect to Plan Trust Asbestos Claims and Demands;
(D) The
Plan Trust is to be funded in part by securities of Reorganized Congoleum in the
form of the Plan Trust Common Stock, which constitute an obligation of
Reorganized Congoleum to make future payments to the Plan Trust;
(E) On
the Effective Date, the Plan Trust will own a majority of the voting shares of
Reorganized Congoleum;
(F) The
Plan Trust is to use its assets and income to pay Plan Trust Asbestos Claims and
Plan Trust Expenses;
(G) Congoleum
is 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 Plan Trust Asbestos
Claims, which are addressed by the Asbestos Channeling Injunction;
(H) The
actual amounts, numbers and timing of future Demands cannot be
determined;
(I) Pursuit
of Demands outside the procedures prescribed by the Plan and the TDP is likely
to threaten the Plan’s purpose to deal equitably with Plan Trust Asbestos Claims
and future Demands;
(J) The
Plan establishes a separate Class 7 for Asbestos Personal Injury Claims that are
to be addressed by the Plan Trust and at least seventy-five percent (75%) of the
Asbestos Claimants voting in each of Class 7A and Class 7B have accepted the
Plan;
(K) The
Plan establishes a separate class of Asbestos Property Damage Claims that are to
be addressed by the Plan Trust and at least seventy-five percent (75%) of the
claimants voting in such class have accepted the Plan;
(L) Pursuant
to court orders or otherwise, the Plan Trust will operate through mechanisms
such as structured, periodic or supplemental payments, pro rata
distributions, matrices or periodic review of estimates of the numbers and
values of Asbestos Personal Injury Claims or other comparable mechanisms, that
provide reasonable assurance that the Plan Trust will value, and be in a
financial position to pay, Asbestos Personal Injury Claims and Demands therefor
in substantially the same manner;
78
(M) The
Futures Representative was appointed by the Bankruptcy Court as part of the
proceedings leading to the issuance of the Discharge Injunction and the Asbestos
Channeling 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 Discharge Injunction and the Asbestos Channeling Injunction and
transferred to the Plan Trust;
(N) In
light of the benefits provided, or to be provided, to the Plan Trust on behalf
of each Protected Party, the Asbestos Channeling Injunction is fair and
equitable with respect to the persons that might subsequently assert Demands
against any Protected Party;
(O) The
Plan otherwise complies with section 524(g) of the Bankruptcy Code;
(P) Congoleum’s
contribution to the Plan Trust provided for in the Plan, including the Asbestos
Insurance Assignment and the Plan Trust Common Stock, constitute substantial
assets of the Plan Trust and the reorganization;
(Q) The
duties and obligations of the insurers that issued policies and their successors
and assigns, or, with respect to any insolvent insurers, their liquidators
and/or the state insurance guaranty funds that bear responsibility with respect
to such rights under such policies which constitute the Asbestos Insurance
Rights and Asbestos Property Damage Insurance Rights are not eliminated or
diminished by the transfer pursuant to the Plan of the Debtors’ rights in the
Asbestos Insurance Rights and Asbestos Property Damage Insurance Rights pursuant
to the Insurance Assignment Agreement;
(R) The
Settling Asbestos Insurance Companies are entitled to the benefits of the
Asbestos Channeling Injunction with respect to Plan Trust Asbestos
Claims;
(S) After
Confirmation, each Asbestos Insurance Settlement Agreement of a Settling
Asbestos Insurance Company and each Final Order of the Bankruptcy Court or the
District Court approving such Settlement Agreements will be binding upon and
inure to the benefit of the Plan Trust and the Plan Trustee, and the Plan Trust
will become fully bound by, and entitled to all of the rights afforded to the
Plan Trust and/or the Debtors under, all of the terms and conditions of each
such Asbestos Insurance Settlement Agreement without need for further act or
documentation of any kind;
(T) After
Confirmation, none of the Debtors, Reorganized Congoleum, the Futures
Representative, the Plan Trustee, and the Asbestos Claimants’ Committee, will
seek to terminate, reduce or limit the scope of the Asbestos Channeling
Injunction or any other injunction contained in the Plan that inures to the
benefit of any Settling Asbestos Insurance Company;
(U) As
of the Effective Date, the Insurance Assignment Agreement shall be a valid and
binding obligation of each of the parties thereto, shall be in full force and
effect and shall be enforceable in accordance with its terms, in each case
notwithstanding any anti-assignment provision in or incorporated into any
Asbestos Insurance Policy and applicable state law; and
(V) The
Plan Trust is a "qualified settlement fund" pursuant to Section 468(B) of the
IRC and the regulations issued pursuant thereto.
(ii) The
District Court will have made such findings and determinations regarding the
Plan as will enable the entry of the Confirmation Order and any other order
entered in conjunction therewith, each of which will be in form and substance
acceptable to Plan Proponents, and, insofar as such findings and determinations
affect the Financing Order or the rights of Wachovia thereunder,
Wachovia.
|
(c)
|
Conditions
for Effective Date
|
Notwithstanding
any other provision of the Plan or the Confirmation Order, the Effective Date of
the Plan will not occur unless and until each of the following conditions has
been satisfied or, if applicable, waived in accordance with Section 10.3 of the
Plan:
79
|
(1)
|
Confirmation
Order
|
The
Confirmation Order will have been entered by the District Court, and the
Confirmation Order and any order of the District Court will be in form and
substance acceptable to the Plan Proponents, and the Confirmation Order will
have become a Final Order; provided, however, that the
Effective Date may occur at a point in time when the Confirmation Order is not a
Final Order at the option of the Plan Proponents unless the effectiveness of the
Confirmation Order has been stayed, reversed or vacated. The
Effective Date may occur, again at the option of the Plan Proponents, on the
first Business Day immediately following the expiration or other termination of
any stay of effectiveness of the Confirmation Order.
|
(2)
|
Injunctions
|
The
Discharge Injunction, the Asbestos Channeling Injunction and the Anti-Suit
Injunction will be in full force and effect.
|
(3)
|
Exit
Facility
|
The
Exit Facility to be entered into by Reorganized Congoleum, and all
documents to be executed in connection with the Exit Facility, shall be in form
and substance reasonably satisfactory to the Plan Proponents and shall have been
executed and delivered and all conditions precedent to effectiveness thereof
shall have been satisfied or waived by the parties thereto.
|
(4)
|
New
Senior Notes and New
Indenture
|
The
New Indenture shall have been executed and authorized and the New Senior Notes
shall have been delivered in accordance with the New Indenture and shall
constitute valid senior secured indebtedness of Reorganized
Congoleum.
|
(5)
|
New
Common Stock
|
The
New Common Stock shall have been issued in accordance with the
Plan.
|
(6)
|
Plan
Documents
|
The
Plan Documents necessary or appropriate to implement the Plan (which shall
include without limitation, the Plan, the Plan Trust Agreement, the TDP, the
Exit Facility, the New Senior Notes, the New Indenture, the Registration Rights
Agreement, the Amended and Restated Certificate, the Amended and Restated
Bylaws, the New ABI Agreement, the Stockholders Agreement, and the Insurance
Assignment Agreement) shall have been executed, delivered and, where applicable,
filed with the appropriate governmental authorities; all conditions precedent to
the effectiveness of each of such Plan Documents shall have been satisfied or
waived by the respective parties thereto; and the Plan Documents shall be in
full force and effect. The Plan Documents shall be acceptable to the
Plan Proponents.
|
(7)
|
Other
Assurances
|
The
Plan Proponents will have obtained either (i) a private letter ruling from the
Internal Revenue Service establishing that the Plan Trust is a “qualified
settlement fund” pursuant to Section 468(B) of the IRC and the regulations
issued pursuant thereto, or (ii) other decisions, opinions or assurances
regarding certain tax consequences of the Plan, satisfactory to the Debtors and
the Asbestos Claimants’ Committee.
(8) Merger
The
District Court will have made a specific finding and determined that the merger
of the Subsidiary Debtors with and into Congoleum, with Reorganized Congoleum as
the sole surviving corporation, is authorized.
80
(9) Judicial
Fees
All
fees payable pursuant to 28 U.S.C. § 1930 if and to the extent assessed against
the Bankruptcy Estates of the Debtors will have been paid in full.
(10)
Other
Approvals, Documents and Actions
All
authorizations, consents and regulatory approvals required, if any, in
connection with the consummation of the Plan will have been obtained, and all
actions, documents, and agreements necessary to implement the Plan will have
been effected or executed.
|
(d)
|
Waiver
of Conditions
|
Each
of the conditions set forth in Sections 10.1 and 10.2 of the Plan may be waived
in whole or in part by the Plan Proponents without any notice to other parties
in interest or the District Court and without a hearing. The failure
of the Plan Proponents to exercise any of the foregoing rights shall not be
deemed a waiver of any other rights, and each such right shall be deemed an
ongoing right that may be asserted at any time.
|
(e)
|
Nonconsensual
Confirmation Under Section 1129(b) of the Bankruptcy
Code
|
Although
section 1129(a)(8) of the Bankruptcy Code requires that a plan be accepted by
each class that is impaired by such plan, section 1129(b) of the Bankruptcy Code
provides that the Plan may be confirmed if all requirements of section 1129(a)
other than section 1129(a)(8) are met and if, with respect to each Class of
Claims or Interests that is impaired under the Plan and has not voted to accept
the Plan, the Plan “does not discriminate unfairly” and is “fair and
equitable.” A plan confirmed on the basis of this provision is
commonly referred to as a “cramdown” plan. A cramdown plan is only
available pursuant to section 1129(a)(10) of the Bankruptcy Code if at least one
impaired class of claims accepts the plan. In the event there is no
Impaired accepting Class, the Plan Proponents could not seek cramdown
confirmation of the Plan because the Plan would not comply with the requirements
of section 1129(a)(10) of the Bankruptcy Code. For a more detailed
description of Bankruptcy Code Section 1129(b)’s “unfair discrimination” and
“fair and equitable” tests, see Section 7.3
- “Requirements for Confirmation” above.
|
(f)
|
Injunction
Under Section 524(g) of the Bankruptcy
Code
|
Section
524(g) of the Bankruptcy Code authorizes a Bankruptcy Court or District Court to
enjoin Entities from taking action to collect, recover or receive payment or
recovery with respect to any Claim or Demand that is to be paid in whole or in
part by a trust created by a plan of reorganization that satisfies the
requirements of the Bankruptcy Code. The injunction may also bar any action
based on such Claims or Demands against Congoleum that are directed at third
parties.
To
obtain the injunction, a trust must be established that (1) assumes Congoleum’s
Plan Trust Asbestos Claims; (2) is funded in whole or in part by securities of
Congoleum and with an obligation by Congoleum to make future payments; (3) owns
or is entitled to own if specified contingencies occur, a majority of the voting
shares of Congoleum; and (4) uses its assets or income to satisfy claims and
demands.
As
a requirement before issuing an injunction under section 524(g) of the
Bankruptcy Code, the Bankruptcy Court or District Court must determine that (1)
Congoleum is likely to be subject to substantial Demands for payment arising out
of the same or similar conduct or events that give rise to the Claims that are
addressed by the injunction; (2) the actual amounts, numbers and timing of such
Demands cannot be determined; (3) pursuit of such Demands outside the procedures
prescribed by the Plan is likely to threaten the Plan’s purpose to deal
equitably with Claims and Demands; and (4) the Plan Trust will operate through
mechanisms such as structured, periodic, or supplemental payments, pro rata
distributions, matrices, or periodic review of estimates of the numbers and
values of Claims and Demands, or other comparable mechanisms that provide
reasonable assurance that the Plan Trust will value, and be in a financial
position to pay, Claims and Demands that involve similar Claims in substantially
the same manner.
81
The
Bankruptcy Court or District Court must also ensure that the terms of any
proposed section 524(g) injunction are set forth in the plan and disclosure
statement and that a separate Class or Classes of claimants whose Claims are to
be addressed by the trust be established and vote, by at least seventy-five
percent (75%) of those voting in such Class or Classes, in favor of the
Plan. Moreover, the injunction will be valid and enforceable as to
future claimants only if a legal representative is appointed to protect their
rights in the proceedings and if the court determines that applying the
injunction to future claimants in favor of the beneficiaries of the injunction
is fair and equitable with respect to the Persons that might subsequently assert
such Demands, in light of the benefits provided, or to be provided, to the Plan
Trust on behalf of Congoleum or a beneficiary of the third party
injunction.
The
order confirming the Plan must be issued or affirmed by the District Court that
has jurisdiction over the Reorganization Cases.
The
Plan Proponents believe that they will be able to satisfy the requirements of
section 524(g) of the Bankruptcy Code if the requisite number of claimants in
Class 7 and Class 8 vote in favor of the Plan.
Under
the jurisdictional scheme applicable to bankruptcy courts, jurisdiction over
bankruptcy cases and proceedings arising under the Bankruptcy Code or arising in
or related to bankruptcy cases is vested in the district courts. However, the
district courts may refer them to the bankruptcy judges of the district. In most
districts, the district court has entered a standing order referring all such
matters to the bankruptcy judges.
The
Company filed the Reorganization Cases with the Bankruptcy Court of the District
of New Jersey. However, the District Court withdrew the reference
from the Bankruptcy Court pursuant to 28 U.S.C. § 157(d) as of August 17, 2009
and assumed authority over the Reorganization Cases. Accordingly, the
District Court will conduct the Confirmation Hearing and enter the Confirmation
Order. In this case, the section 524(g) injunctions will be
enforceable upon the District Court’s issuance of the Confirmation
Order.
7.4.
|
Effect of
Confirmation
|
Upon
the District Court’s entry of the Confirmation Order, and subject to the
occurrence of the Effective Date, the Plan will be binding upon the Company, all
holders of Claims and Interests and all other parties in interest, regardless of
whether they have accepted the Plan.
ARTICLE
8
IMPLEMENTATION
OF THE PLAN
THE
FOLLOWING INCLUDES A SUMMARY OF CERTAIN SIGNIFICANT FEATURES OF THE PLAN TRUST
AND OTHER PROVISIONS MATERIAL TO IMPLEMENTATION OF THE PLAN. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TEXT OF THE
PLAN TRUST DOCUMENTS AND THE PLAN.
8.1.
|
Establishment and
Purpose of the Plan Trust
|
On
or prior to the Effective Date, the Plan Trust shall be established in
accordance with the Plan Trust Agreement. The Plan Trust is intended
to be a “qualified settlement fund” within the meaning of section 468B of the
IRC and the Treasury Regulations promulgated thereunder. The purpose
of the Plan Trust shall be to, among other things: (i) pay all Plan Trust
Asbestos Claims in accordance with the Plan, the Plan Trust Agreement, the TDP
and the Confirmation Order; (ii) preserve, hold, manage, and maximize the Plan
Trust Assets for use in paying and satisfying Plan Trust Asbestos Claims in
accordance with the Plan Trust Agreement and the TDP; (iii) prosecute, settle
and manage the disposition of the Asbestos In-Place Insurance Coverage; and (iv)
prosecute, settle, and manage Asbestos Insurance Actions and Direct
Actions.
All
Plan Trust Asbestos Claims, including the future Asbestos Claims and Demands of
Plan Trust Asbestos Claimants that are presently unknown, will be resolved
pursuant to the Plan, the Plan Trust Agreement and the TDP.
82
8.2.
|
Funding and Receipt of
Plan Trust Assets
|
On
the Effective Date, Reorganized Congoleum shall issue the Plan Trust Common
Stock to the Plan Trust in accordance with the Plan and all Plan Trust Assets
shall be transferred to, vested in, and assumed by, the Plan Trust free and
clear of all Claims, Liens and encumbrances; provided, however, that to
the extent that certain Plan Trust Assets, because of their nature or because
they will accrue subsequent to the Effective Date, cannot be transferred to,
vested in, and assumed by the Plan Trust on the Effective Date, such Plan Trust
Assets shall be transferred to, vested in, and assumed by the Plan Trust free
and clear of Claims, Liens and encumbrances, as soon as practicable after the
Effective Date.
8.3.
|
Insurance Assignment
Agreement
|
On
the Effective Date, the Debtors shall deliver the Insurance Assignment Agreement
attached to the Plan as Exhibit B. Such agreement shall be valid,
binding and enforceable. The Insurance Assignment Agreement shall
transfer claims and rights set forth therein as Debtors may have, subject to any
and all Asbestos Insurer Coverage Defenses.
8.4.
|
Creation of Asbestos
Property Damage Claim
Sub-Account
|
On
the Effective Date, the Plan Trust shall cause the Asbestos Property Damage
Insurance Rights and any proceeds thereof, including $1.2 million from the
proceeds of that certain settlement agreement between the Debtors and Liberty
Mutual Insurance Company approved by the Bankruptcy Court by order dated July
30, 2004, to be held in the Asbestos Property Damage Claim
Sub-Account. In accordance with the terms of the Plan Trust
Agreement, the Plan Trustee shall be permitted to transfer monies from the
Asbestos Property Damage Claim Sub-Account to the Asbestos Personal Injury Claim
Sub-Account, from time to time, to the extent that the funds in the Asbestos
Property Damage Claim Sub-Account exceed the aggregate amount of all unpaid
Asbestos Property Damage Claims that have been filed prior to the Asbestos
Property Damage Claim Bar Date, and a reasonable reserve for Plan Trust Expenses
and indemnification costs or expenses, in either case, related to Asbestos
Property Damage Claims.
8.5.
|
Assumption of
Liabilities by Plan Trust
|
On
the Effective Date, all liabilities, obligations and responsibilities relating
to all Plan Trust Asbestos Claims shall be transferred to the Plan Trust as set
forth herein and the Plan Trustee, on behalf of the Plan Trust, shall expressly
assume all liability for all Plan Trust Asbestos Claims and Demands as set forth
herein, subject to the provisions of the Plan Trust Agreement. With
the exception of the liabilities identified in the preceding sentence, the Plan
Trust shall not assume any of the liabilities, obligations or responsibilities
of the Debtors or Reorganized Congoleum.
8.6.
|
Discharge of
Liabilities to Holders of Asbestos
Claims
|
Except
as provided in the Plan and the Confirmation Order, the transfer to, vesting in,
and assumption by the Plan Trust of the Plan Trust Assets as contemplated by the
Plan shall, among other things, discharge the Debtors and the Reorganized
Debtors from and in respect of all Plan Trust Asbestos Claims.
8.7.
|
TDP
|
From
and after the Effective Date, the Plan Trust shall pay the Plan Trust Asbestos
Claims in accordance with the Plan Trust Agreement and the TDP. The
Plan Trustee shall have the power to administer, amend, supplement or modify the
TDP in accordance with the terms thereof.
8.8.
|
Payment of Allowed
Asbestos Property Damage
Claims
|
From
and after the Effective Date, the Plan Trust shall cause the payment of Allowed
Asbestos Property Damage Claims from the Asbestos Property Damage Claim
Sub-Account in accordance with the Plan Trust Agreement, provided, however that once
the assets in the Asbestos Property Damage Claim Sub-Account have been
exhausted, the Plan Trust shall have no further liability or obligation for or
in respect of any Asbestos Property Damage Claims.
83
8.9.
|
Excess Plan Trust
Assets
|
To
the extent there are any Plan Trust Assets remaining after the payment in full
of all Plan Trust Asbestos Claims and all Plan Trust Expenses (or provision has
been made therefor) in accordance with the Plan Trust Agreement and the TDP,
such excess Plan Trust Assets will be transferred to a tax-exempt organization
qualified under section 501(c)(3) of the IRC, which is to be determined by the
Plan Trustee; provided,
however, that the purpose thereof, if practicable, will be related to the
treatment of or research regarding asbestos-related disorders.
8.10.
|
Plan Trust
Expenses
|
The
Plan Trust shall pay all Plan Trust Expenses from the Plan Trust Assets in
accordance with the Plan Trust Agreement. Neither the Debtors, the
Reorganized Debtors, nor their Affiliates shall have any obligation to pay any
Plan Trust Expenses. The Plan Trustee, each member of the TAC, the
Futures Representative and the Representatives of each of the foregoing will
have a lien upon the Plan Trust Assets which will be prior to any lien thereon,
and the Plan Trust will grant a security interest in the Plan Trust Assets, all
proceeds thereof and all accounts into which such proceeds or the Plan Trust
Assets are deposited or maintained to secure payment of amounts payable to them
as compensation or indemnification.
8.11.
|
Appointment of the
Initial Plan Trustee
|
Effective
as of the Effective Date, the District Court shall appoint the initial Plan
Trustee to serve as Plan Trustee in accordance with the Plan Trust
Agreement. The Plan Trustee shall be designated no later than thirty
(30) days prior to the Confirmation Hearing and shall be mutually acceptable to
the Asbestos Claimants’ Committee and the Futures Representative. For
purposes of performing his or her duties and fulfilling his or her obligations
under the Plan Trust Agreement, the TDP and the Plan, the Plan Trustee shall be
deemed to be a party in interest within the meaning of section 1109(b) of the
Bankruptcy Code. The Plan Trustee shall be the “administrator” of the
Plan Trust as that term is used in Treas. Reg.
Section 1.468B-2(k)(3).
8.12.
|
The Futures
Representative
|
Effective
as of the Effective Date, the District Court shall appoint a Person to serve as
the Futures Representative from and after the Effective Date pursuant to the
terms of the Plan Trust Agreement and who shall have the functions and rights
provided in the Plan Trust Documents.
8.13.
|
Appointment of Members
of the Trust Advisory
Committee
|
Effective
as of the Effective Date, the District Court shall appoint five initial members
of the TAC (and thereupon the TAC shall be formed) to serve as members of the
TAC in accordance with the Plan Trust Agreement.
8.14.
|
Institution and
Maintenance of Legal and Other
Proceedings
|
As
of the Effective Date, the Plan Trust shall be empowered to initiate, prosecute,
defend, and resolve all legal actions and other proceedings related to any
asset, liability, or responsibility of the Plan Trust, including, without
limitation, the Coverage Action, in each case to the extent not adjudicated,
compromised or settled prior to the Effective Date. The Plan Trust
shall be empowered to initiate, prosecute, defend, and resolve all such actions
in the name of the Debtors and/or Reorganized Congoleum if deemed necessary or
appropriate by the Plan Trustee. Except as otherwise provided by law
or agreement, the Plan Trust shall be responsible for the payment of all
damages, awards, judgments, settlements, expenses, costs, fees, and other
charges incurred subsequent to the Effective Date arising from or associated
with any legal action or other proceeding brought pursuant to this Section 8.14
and shall pay or reimburse all deductibles, retrospective premium adjustments,
or other charges which may arise from the receipt of insurance proceeds by the
Plan Trust. Without in any way limiting the foregoing and subject to
any Asbestos Insurer Coverage Defenses, the Plan Trust shall be empowered to
elect to (or not to), initiate, prosecute, defend, settle, and resolve all
Asbestos Insurance Actions and Direct Actions, and to maintain, administer,
preserve, or pursue the Asbestos-In-Place Insurance Coverage, the Asbestos
Insurance Action Recoveries, Asbestos Insurance Rights, the Asbestos Insurance
Policies and rights under the Asbestos Insurance Settlement
Agreements. All Causes of Action other than Asbestos Insurance
Actions and Direct Actions shall remain the property of the Reorganized
Debtors.
84
8.15.
|
Preservation of
Insurance Claims
|
The
discharge and releases provided herein, and the injunctive protection provided
to the Debtors, the Reorganized Debtors and any Protected Party with respect to
Demands as provided in the Plan, shall neither diminish nor impair the
enforceability of any of the Asbestos Insurance Policies by any Entity except
(i) to the extent that any such Asbestos Insurance Company is also a Settling
Asbestos Insurance Company or (ii) that all Asbestos Insurer Coverage Defenses
are preserved.
8.16.
|
Indemnification by the
Plan Trust
|
Pursuant
to sections 1.4 and 4.6 of the Plan Trust Agreement, the Plan Trust shall
indemnify and defend the Plan Trustee, the members of the TAC and the Futures
Representative in the performance of their duties under the Plan Trust Agreement
to the fullest extent that a statutory trust or corporation organized under the
laws of the state of Delaware is from time to time entitled to indemnify and
defend such persons against any and all liabilities, expenses, claims, damages
or losses incurred by them in the performance of their duties under the Plan
Trust Agreement or in connection with activities undertaken by them prior to the
Effective Date in connection with the formation, establishment, or funding of
the Plan Trust. The Plan Trust shall indemnify any of the Additional
Indemnitees (as defined in the Plan Trust Agreement) in the performance of their
duties under the Plan Trust Agreement to the fullest extent that a statutory
trust or corporation organized under the laws of the Plan Trust’s jurisdiction
of organization is from time to time entitled to indemnify and defend such
persons against any and all liabilities, expenses, claims, damages or losses
incurred by them in the performance of their duties under the Plan Trust
Agreement or in connection with activities undertaken by them prior to the
Effective Date in connection with the formation, establishment or funding of the
Plan Trust. Notwithstanding the foregoing, the Plan Trustee and the
Additional Indemnitees shall not be indemnified or defended in any way for any
liability, expense, claim, damage, or loss for which he, she or it is ultimately
liable under Section 4.4 of the Plan Trust Agreement.
Pursuant to section 1.4(d) of the Plan
Trust Agreement, the Plan Trust shall also indemnify, defend and hold harmless
each of the Debtors, the Reorganized Debtors and their past, present and future
Representatives for any expenses, costs and fees (including reasonable
attorneys’ fees and costs, but excluding any such expenses, costs and fees
incurred prior to the Effective Date), judgments, settlements or other
liabilities arising from or incurred in connection with, any Plan Trust Asbestos
Claim, including but not limited to indemnification or contribution for Plan
Trust Asbestos Claims prosecuted against the Reorganized Debtors after the
Effective Date but excluding (i) any amounts paid prior to or on the Effective
Date by the Debtors or their past or present Representatives and (ii) any
amounts paid or incurred by any Reorganized Debtor or its Representatives,
whether before or after the Effective Date, in connection with defending,
objecting to, or otherwise related to any proceedings to determine whether an
Asbestos Property Damage Claim is or should be Allowed.
8.17.
|
Establishment of the
TDP
|
Following
the Effective Date, the Plan Trustee will promptly implement the
TDP. The TDP sets forth the procedures for resolving Plan Trust PI
Asbestos Claims. The TDP also provides mechanisms such as structured,
periodic or supplemental payments, pro rata distributions, or periodic review of
estimates of the numbers and values of present Unsecured Asbestos Personal
Injury Claims and future Demands, or other comparable mechanisms, that provide
reasonable assurance that the Plan Trust will value and be in a financial
position to pay similar Asbestos Personal Injury Claims in substantially the
same manner. The TDP may be modified prior to the Effective Date and
after the Effective Date from time to time in accordance with the terms of the
TDP and the Trust Agreement.
8.18.
|
[reserved]
|
85
8.19.
|
Certain
Mergers
|
On
the Effective Date, the Subsidiary Debtors shall merge with and into Congoleum, with Reorganized Congoleum as the sole surviving corporation.
8.20.
|
The Amended and
Restated Certificate and the Amended and Restated
Bylaws.
|
The
Amended and Restated Certificate and the Amended and Restated Bylaws of
Reorganized Congoleum shall be in form and substance acceptable to the Plan
Proponents and shall be consistent with the provisions of the Plan and the
Bankruptcy Code. The Amended and Restated Certificate shall, among
other things (a) authorize the issuance of New Common Stock pursuant to Section
5.7 of the Plan, and (b) provide, pursuant to section 1123(a)(6) of the
Bankruptcy Code, for a provision prohibiting the issuance of non-voting common
equity securities. The Amended and Restated Bylaws and the Amended
and Restated Certificate of Reorganized Congoleum shall be substantially in the
form attached to the Plan as Exhibits J and K and will be filed as part of the
Plan Supplement.
8.21.
|
Directors and Officers
of Reorganized Congoleum
|
The
initial board of directors of Reorganized Congoleum shall consist of five (5)
directors. One of such directors shall be selected by the
Bondholders’ Committee, three of such directors shall be selected jointly
by the Futures Representative and the Asbestos Claimants’ Committee,
and one of such directors shall be Reorganized Congoleum’s chief executive
officer. The identity of such directors shall be disclosed by the
Plan Proponents in the Plan Supplement. To the extent any such Person
is an Insider (as defined in section 101(31) of the Bankruptcy Code), the nature
of any compensation for such Person will also be disclosed prior to the
Confirmation Hearing. Each of the Persons on the initial board of
directors of Reorganized Congoleum shall serve in accordance with the Amended
and Restated Certificate and the Amended and Restated Bylaws of Reorganized
Congoleum, as the same may be amended from time to
time. Subsequently, Reorganized Congoleum’s board of directors shall
be elected in accordance with Reorganized Congoleum’s governing documents, which
governing documents shall be acceptable to the Bondholders’ Committee and the
Asbestos Claimants’ Committee.
The
initial officers of Reorganized Congoleum shall be set forth in the Plan
Supplement. To the extent any such Person is an Insider (as defined
in section 101(31) of the Bankruptcy Code), the nature of any compensation for
such Person will also be disclosed at such time. The initial officers
shall serve in accordance with the Amended and Restated Certificate and the
Amended and Restated Bylaws of Reorganized Congoleum, as the same may be amended
from time to time.
Notwithstanding the foregoing, as part
of the Intercompany Settlement described in Section 8.32 below, ABI shall make
the services of Roger Marcus, Richard Marcus and Howard Feist, III available to
Reorganized Congoleum for two years after the Effective Date in consideration of
a base annual fee of $800,000 and an annual incentive fee. Roger
Marcus shall serve as Chief Executive Officer and Director of Reorganized
Congoleum. Howard Feist III shall serve as Chief Financial Officer of
Reorganized Congoleum. Substantially all of Roger Marcus's time, approximately
25% of Richard Marcus's time, and approximately 50% of Howard Feist III's time,
in each case, during normal working hours on an annual basis shall be made
available by ABI to Reorganized Congoleum for the two years following the
Effective Date.
Further, five percent of Reorganized
Congoleum's total authorized number of shares of common stock shall be reserved
for issuance by Reorganized Congoleum for equity based compensation and awards
to the management team of Reorganized Congoleum with terms to be determined by
the Board of Directors of Reorganized Congoleum.
8.22.
|
Cancellation of
Existing Securities and Agreements of the Debtors/Discharge of the
Indenture Trustee.
|
Except
as set forth in the Plan, upon the Effective Date, the Existing Securities shall
be cancelled and the holders thereof shall have no further rights or
entitlements in respect thereof against the Debtors except the right to receive
any Distributions to be made to such holders under the Plan. To the
extent possible, Distributions to
86
be
made under the Plan to the beneficial owners of the Senior Notes shall be made
through the Depository Trust Company and its participants. The
Confirmation Order shall authorize and direct the Indenture Trustee to take
whatever action may be necessary or appropriate, in its reasonable discretion,
to deliver the Distributions, including, without limitation, obtaining an order
of the District Court. On the Effective Date, the Indenture Trustee
and its agents shall be discharged of all their obligations associated with (i)
the Senior Notes, (ii) the Indenture, and (iii) any related documents, and
released from all Claims arising in the Reorganization Cases. As of
the Effective Date, the Indenture shall be deemed fully satisfied and cancelled;
provided, however, that
the Indenture shall continue in effect solely for the purposes of: (1) allowing
holders of the Senior Note Claims to receive distributions under the Plan, (2)
allowing and preserving the rights of the Indenture Trustee to (a) make
distributions in satisfaction of Allowed Senior Note Claims, (b) exercise its
charging liens against any such distributions, and (c) seek compensation and
reimbursement for any fees and expenses incurred in making such
distributions. Upon completion of all such distributions, the Senior
Notes and the Indenture shall terminate completely. From and after
the Effective Date, the Indenture Trustee shall have no duties or obligations
under the Indenture other than to make distributions pursuant to the
Plan.
8.23.
|
Exit
Facility.
|
On
the Effective Date, Reorganized Congoleum shall obtain exit financing consistent
with the terms and conditions set forth in the Exit Facility Commitment Letter
or Term Sheet, which shall be filed as part of the Plan Supplement, from the
Exit Facility Lenders.
8.24.
|
Issuance of New
Securities and Debt
Instruments.
|
(a) New Common
Stock
On
the Effective Date, Reorganized Congoleum shall issue the New Common Stock
pursuant to the Plan. The Amended and Restated Certificate, a
substantially similar form of which is attached to the Plan as Exhibit K, sets
forth the rights and preferences of the New Common Stock. The New
Common Stock shall be issued subject to the Stockholders Agreement described
below.
(b) New Senior
Notes
On
the Effective Date, Reorganized Congoleum shall issue $33 million in initial
principal amount of 9% New Senior Notes, which shall mature on December 31,
2017. The New Senior Notes shall be governed by the terms and
conditions set forth in the New Indenture.
8.25.
|
Registration Rights
Agreement.
|
In
the event the board of directors of Reorganized Congoleum determines in its
discretion to register any of the New Common Stock with the Securities and
Exchange Commission, or if Reorganized Congoleum is required under the
Stockholders Agreement or applicable securities laws to register any of the New
Common Stock with the Securities and Exchange Commission, any Person receiving
Distributions of the New Common Stock issued on the Effective Date that is not
entitled to an exemption from registration under applicable securities laws
pursuant to section 1145(a) of the Bankruptcy Code, or whose resale of the New
Common Stock is otherwise restricted under the securities laws, shall be
entitled to become a party to the Registration Rights Agreement. The
Registration Rights Agreement shall be satisfactory in form and substance to the
Plan Proponents, a substantially similar form of which will be filed in the Plan
Supplement.
8.26.
|
Stockholders
Agreement.
|
On
the Effective Date, the Stockholders Agreement will be adopted by Reorganized
Congoleum and be binding upon all holders of New Common Stock. All
Holders of New Common Stock will be subject to the Stockholders Agreement which
will, among other things, govern the access each holder of New Common Stock
shall have to information with respect to Reorganized Congoleum and the ability
to transfer such holder’s New Common Stock. Each certificate
representing share(s) of New Common Stock shall bear a legend indicating that
the New Common Stock is subject to the Stockholders Agreement. The
Stockholders Agreement will be effective as of the Effective
Date. The Stockholders Agreement contains customary terms and
conditions, including minority stockholder protections, and includes the
minority stockholders having both a right of first refusal and right of first
offer on the Plan Trust Common Stock. The Stockholders Agreement
shall be satisfactory in form and substance to the Bondholders’ Committee, and
the Asbestos Claimants’ Committee, a substantially similar form of which is
attached to the Plan as Exhibit “L,” which will be filed as part of the Plan
Supplement.
87
8.27.
|
Effectuating
Documents/Further
Transactions.
|
Each
of the Debtors (subject to the consent of the Bondholders’ Committee and the
Asbestos Claimants’ Committee) and Reorganized Congoleum, and their respective
officers and designees, is authorized and directed to execute, deliver, file, or
record such contracts, instruments, releases, indentures, and other agreements
or documents, and take such actions as may be requested by the Plan Proponents,
or as may be necessary or appropriate, to effectuate and further evidence the
terms and conditions of the Plan, the Exit Facility, or any other Plan Document,
or to otherwise comply with applicable law.
8.28.
|
Exemption from Certain
Transfer Taxes and Recording
Fees.
|
Pursuant
to section 1146(c) of the Bankruptcy Code, any transfers from a Debtor to
Reorganized Congoleum or to any other Person or entity pursuant to the Plan, or
any agreement regarding the transfer of title to or ownership of any of the
Debtors’ real or personal property will not be subject to any document recording
tax, stamp tax, conveyance fee, sales tax, intangibles or similar tax, mortgage
tax, stamp act, real estate transfer tax, mortgage recording tax, Uniform
Commercial Code filing or recording fee, or other similar tax or governmental
assessment, and the Confirmation Order will direct the appropriate state or
local governmental officials or agents 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 such tax or
governmental assessment.
8.29.
|
Section 346
Injunction.
|
In
accordance with section 346 of the Bankruptcy Code for the purposes of any state
or local law imposing a tax, income will not be realized by the Estates, the
Debtors or the Reorganized Debtors by reason of the forgiveness or discharge of
indebtedness resulting from the consummation of the Plan. As a
result, each state or local taxing authority is permanently enjoined and
restrained, after the Confirmation Date, from commencing, continuing or taking
any act to impose, collect or recover in any manner any tax against the Debtors
or the Reorganized Debtors arising by reason of the forgiveness or discharge of
indebtedness under the Plan.
8.30.
|
Corporate
Action.
|
All
matters provided for under the Plan involving the corporate structure of the
Debtors or Reorganized Congoleum, or any corporate action to be taken by, or
required of the Debtors or Reorganized Congoleum shall be deemed to have
occurred and be effective as provided herein, and shall be authorized and
approved in all respects without any requirement for further action by the
stockholders or directors of any of such entities.
a)
|
Litigation Settlement
Agreement.
|
(a) The
Plan implements a compromise and settlement with respect to each such Litigation
Settlement Claimant whose Asbestos Personal Injury Claim was liquidated pursuant
to the Claimant Agreement or a Pre-Petition Settlement Agreement, as the case
may be, and the Litigation Settlement Agreement, which was approved by the Court
by an order signed on October 31, 2008, shall be binding on the parties
thereto.
(b) As
of the Effective Date of the Plan,
(i) The
Litigation Settlement Claimants shall waive any and all rights with respect to
any pre-petition settlement of their Asbestos Personal Injury Claims against the
Debtors, whether pursuant to any Pre-Petition Settlement Agreement or the
Claimant Agreement, including the liquidated amounts thereof; provided, however,
that:
88
|
●
|
any
Asbestos Personal Injury Claim against the Debtors held by any such
Litigation Settlement Claimant, including with respect to any statutes of
limitation related thereto, shall be restored to the status quo ante as it
existed as of the time the Litigation Settlement Claimant initially filed
or submitted its Asbestos Personal Injury Claim against the Debtors that
resulted in the Claimant’s Pre-Petition Settlement Agreement or the
Claimant Agreement (the “Submission
Date”);
|
|
●
|
any
statute of limitation with respect to such Asbestos Personal Injury Claim
shall be tolled until the later of ninety (90) days after the expiration
of any stay imposed due to the filing of the Debtors’ chapter 11 cases of
such additional time as may be provided pursuant to the TDP incorporated
in the Plan (the “Asbestos Tolling
Period”);
|
|
●
|
neither
the Asbestos Tolling Period nor any other term or provision of the
Litigation Settlement Agreement shall revive any statute of limitations
that expired as of the Submission Date;
and
|
|
●
|
all
parties retain the right to assert any statute of limitations defense or
other defenses that they could have asserted as of the Submission
Date.
|
(ii) With
respect to the Litigation Settlement Claimants, the Debtors shall be released
from any and all obligations and duties imposed pursuant to any Pre-Petition
Settlement Agreement, Claimant Agreement, the Collateral Trust Agreement,
Security Agreement and any and all other agreements and amendments thereto with
respect to the pre-packaged plan of reorganization filed by the Debtors on
December 31, 2003.
(iii) The
Debtors shall be deemed to have forever withdrawn, released, discharged, waived
and forgiven the Litigation Settlement Claimants and Claimants’ Counsel, and
each of their respective assigns, administrators and successors in interest, for
and from any and all claims, actions, causes of action, counterclaims, proofs of
claim, and any other obligation of any kind or nature arising from or related to
the Bankruptcy Code, the Avoidance Actions, and any and all claims related to
any Pre-Petition Settlement Agreement, Claimant Agreement, the Collateral Trust
Agreement, Security Agreement, pre-petition payments to Claimants Counsel, and
any and all other agreements and amendments thereto with respect to the
pre-packaged plan of reorganization filed by the Debtors on December 31,
2003, including all pending and potential causes of action, whether accrued or
to accrue, whether asserted by way of claim, counterclaim, cross-claim,
third-party action, action for indemnity or contribution or otherwise; provided,
however, that the
foregoing shall not constitute a release of any rights to enforce the terms of
the Litigation Settlement Agreement or any defenses to Asbestos Personal Injury
Claims that may be asserted by the Debtors as contemplated in the Litigation
Settlement Agreement.
(iv) Except
as otherwise provided for in the Litigation Settlement Agreement, all Litigation
Settlement Claimants and Claimants’ Counsel shall be deemed to have forever
withdrawn, released, discharged, waived and forgiven the Debtors and their
respective assigns, administrators and successors in interest, for and from any
and all claims, actions, causes of action, counterclaims, proofs of claim, and
any other obligation of any kind or nature arising from or related to the
Bankruptcy Code, the Avoidance Actions, and any and all claims related to any
Pre-Petition Settlement Agreement, Claimant Agreement, the Collateral Trust
Agreement, Security Agreement and any and all other agreements and amendments
thereto with respect to the pre-packaged plan of reorganization filed by the
Debtors on December 31, 2003, including all pending and potential causes of
action, whether accrued or to accrue, whether asserted by way of a claim,
counterclaim, cross-claim, third-party action, action for indemnity or
contribution or otherwise; provided, however, that the foregoing shall not
constitute a release of any rights to enforce the terms of the Litigation
Settlement Agreement and shall not constitute a release by Litigation Settlement
Claimants of their Asbestos Personal Injury Claims against the Debtors, the Plan
Trust, or any other party or entity.
89
(c) Pursuant
to the Litigation Settlement Agreement and contingent upon confirmation of the
Plan, the estates of Comstock, Cook and Arsenault have elected to forgo any
further distribution from the Debtors and/or Plan Trust.
(d) Within
30 days after the Effective Date of the Plan, the Bankruptcy Court shall enter
an order of dismissal of all claims and counterclaims in the Avoidance Actions,
with prejudice, and with all parties to bear their own costs and attorneys
fees.
(e) Subject
to the terms of this Plan, the mutual releases set forth in the Litigation
Settlement Agreement shall not abridge the right of Litigation Settlement
Claimants to submit and recover upon their Asbestos Personal Injury Claims
against the Debtors including as against the Plan Trust.
(g) Any
claim by Claimants’ Counsel for the payment of additional fees and expenses
shall be subject to application to, and approval by, the District
Court.
(h) Each
Litigation Settlement Claimant shall be entitled to submit its Asbestos Personal
Injury Claim to the Debtors’ bankruptcy estates, including the Plan Trust, as an
unliquidated claim for resolution and treatment pursuant to TDP, provided that,
any Litigation Settlement Claimant who received a partial payment from the
Debtors with respect thereto prior to the Petition Date, including specifically
claimants Cook, Arsenault, and Comstock, in addition to the other provisions
hereof, hereby agrees to either: (a) not seek any further recovery with respect
thereto against the Debtors, including from any Plan Trust, or (b) return and
relinquish any such pre-petition partial payment for the benefit of the Plan
Trust as a condition precedent to asserting any such further Asbestos Personal
Injury Claim against the Debtors or the Plan Trust.
(i) Pursuant
to the Plan, any Pre-Petition Settled Claimant that is not a Litigation
Settlement Claimant shall nevertheless receive the same treatment as the
Litigation Settlement Claimants.
8.32.
|
Review of Claimants’
Counsel Expenses
|
The
expenses paid pre-petition by the Debtors to the Claimants’ Counsel pursuant to
the Claimant Agreement shall be subject to approval by the District Court under
§ 1129(a)(4) of the Bankruptcy Code. The result of the District
Court’s review may impact Litigation Settlement Agreement.
8.33.
|
Intercompany
Settlement.
|
(a) The
Plan implements a compromise and settlement with respect to ABI, the ABI Claims
and the Intercompany Agreements (as set forth in Section 5.16 of the Plan, the
“Intercompany
Settlement”). Pursuant to Bankruptcy Rule 9019 and section
1123(b)(3) of the Bankruptcy Code and consistent with section 1129 of the
Bankruptcy Code, the Plan shall constitute a motion for approval of, and the
Confirmation Order shall authorize and constitute District Court approval of,
the Intercompany Settlement.
(b) On
the Effective Date, pursuant to Bankruptcy Rule 9019 and section 1123(b)(3) of
the Bankruptcy Code, in full and final satisfaction of the ABI Claims, and for
good and valuable consideration including ABI's agreement to the treatment
specified in the Plan for the ABI Claims and the Claims and Interests asserted
by other parties in interest, the ABI Settlement shall be effectuated in
accordance with the following terms:
1. All
ABI Claims, including without limitation ABI Rejection Damages Claims (other
than claims for payment of Unpaid Intercompany Amounts that may be asserted to
the extent consistent with Section 5.16(b)(4)(B) of the Plan), shall be deemed
Disallowed and expunged.
2. All
Intercompany Agreements shall be deemed rejected, and any and all ABI Rejection
Damages Claims (other than claims for payment of Unpaid Intercompany Amounts
that may be asserted to the extent consistent with Section 5.16(b)(4)(B) of the
Plan) arising therefrom shall be deemed Disallowed and expunged.
90
3. ABI
and Reorganized Congoleum shall enter into and effectuate the New ABI Agreement,
and which shall govern the relationship between ABI and Reorganized Congoleum
upon the Effective Date.
4. The
ABI Parties and ABI and their respective Representatives (in their capacities as
such) shall be deemed to have received and exchanged mutual general releases
with and from the Debtors, their Estates and Reorganized Congoleum, such
that:
A. As of the Effective Date, the
Debtors, their Estates and Reorganized Congoleum shall be deemed to forever
release, waive and discharge all claims, obligations, suits, judgments, demands,
debts, rights, causes of action and liabilities (other than their rights to
enforce the terms of the Intercompany Settlement, the New ABI Agreement and the
ABI Canada License Agreement, as amended by Section 5.16(b)(5) of the Plan, and
their rights to payment of not more than $2 million on account of net Unpaid
Intercompany Amounts remaining after intercompany offsets of Unpaid Intercompany
Amounts), whether liquidated or unliquidated, fixed or contingent, matured or
unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter
arising, in law, equity or otherwise, that are based in whole or in part on any
act, omission, transaction, event or other occurrence taking place on or prior
to the Effective Date in any way relating to the Debtors, Reorganized Congoleum,
the Reorganization Cases, the Plan or the Disclosure Statement, and that could
have been asserted by or on behalf of the Debtors, their Estates or Reorganized
Congoleum, as of the Petition Date or thereafter, against the ABI Parties, ABI
and/or their respective Representatives (in their capacities as such);
and
B. As of the Effective Date, the ABI
Parties, ABI and their respective Representatives (in their capacities as such)
shall be deemed to forever release, waive and discharge all claims, obligations,
suits, judgments, demands, debts, rights, causes of action and liabilities
(other than their rights to enforce the terms of the Intercompany Settlement,
the New ABI Agreement and the ABI Canada License Agreement, as amended by
Section 5.16(b)(5) of the Plan, and their rights to payment of not more than $2
million on account of net Unpaid Intercompany Amounts remaining after
intercompany offsets of Unpaid Intercompany Amounts), whether liquidated or
unliquidated, fixed or contingent, matured or unmatured, known or unknown,
foreseen or unforeseen, then existing or thereafter arising, in law, equity or
otherwise, that are based in whole or in part on any act, omission, transaction,
event or other occurrence taking place on or prior to the Effective Date in any
way relating to the Debtors, Reorganized Congoleum, the Reorganization Cases,
the Plan or the Disclosure Statement, and that could have been asserted by or on
behalf of the ABI Parties, ABI and their respective Representatives (in their
capacities as such), as of the Petition Date or thereafter, against the Debtors,
their Estates or Reorganized Congoleum.
5. The
ABI Parties Canada License Agreement shall be deemed to have been assumed by
Congoleum and become an obligation of Reorganized Congoleum, provided, however, that
Article 7.02 of the ABI Canada License Agreement shall be modified so that the
“Term” thereof shall expire two years from the Effective Date and the ABI Canada
License Agreement shall be deemed amended accordingly as of the Effective Date
without any further action of any Person or Entity.
8.34.
|
Deemed Consolidation
of Debtors For Plan Purposes
Only.
|
Subject
to the occurrence of the Effective Date, the Debtors shall be deemed
consolidated under the Plan for Plan purposes only. Each and every
Claim filed or to be filed against any of the Debtors shall be deemed filed
against the deemed consolidated Debtors and shall be deemed one Claim against
and obligation of the deemed consolidated Debtors. Such deemed
consolidation, however, shall not (other than for purposes related to funding
distributions under the Plan and as set forth above in this Section 8.33)
affect: (i) the legal and organizational structure of the Debtors; or (ii) any
Liens that are required to be maintained under the Plan (A) in connection with
executory contracts or unexpired leases that were entered into during the
Reorganization Cases or that have been or will be assumed, (B) pursuant to the
Plan, or (C) in connection with any Exit Facility. Notwithstanding
anything contained in the Plan to the contrary, the deemed consolidation of the
Debtors shall not have any effect on any of the Claims being reinstated and left
unimpaired under the Plan, and the legal, equitable, and contractual rights to
which the holders of any such Claims are entitled shall be left unaltered by the
Plan.
91
ARTICLE
9
ESTIMATED
CLAIMS BY CLASS
The
Company and its professionals have attempted to determine the number and amount
of Asbestos Claims likely to be asserted in the case. There are such
inherent difficulties in doing so that no representation can be made as to the
precise accuracy of such information. Nonetheless, the Company
provided estimates of Claims against the Company in the Tenth Disclosure
Statement which the Plan Proponents have incorporated below into the relevant
classes under the Plan.
9.1.
|
Claims other than
Asbestos Claims
|
|
(a)
|
Administrative
Expense Claims
|
The
post-petition costs and expenses of the Reorganization Cases to date
(including the post-petition costs and expenses of the Coverage Action) is
approximately $103 million, including the costs of professionals retained during
the Reorganization Cases.
|
(b)
|
Priority
Tax Claims
|
The
Company has stated it is likely that there will be few, if any, Priority Tax
Claims.
|
(c)
|
Priority
Claims (Class 1)
|
The
Company obtained approval of the Bankruptcy Court to pay Priority Claims in the
ordinary course of business, including wages due to employees and contributions
on its employees’ behalf to employee benefit plans. The Company has
stated that there will be few, if any, Priority Claims remaining unpaid at the
Effective Date.
|
(d)
|
Lender
Secured Claims (Class 2)
|
The
Company has estimated that the Lender Secured Claims (Class 2) total
approximately $11.8 million.
|
(e)
|
Senior
Note Claims (Class 4)
|
The
Company noted that it expects that the Senior Note Claims total approximately
$100 million, plus accrued pre-petition interest.
|
(f)
|
Workers’
Compensation Claims (Class
5)
|
According
to the Company, as of the Petition Date, the current incurred liability was
estimated to be approximately $3.2 million.
|
(g)
|
ABI
Claims (Class 6)
|
The
Company has estimated such Claims total approximately $1.8 million.
(h) General
Unsecured Claims (Class 9)
As described in Section 5.8 above, the
Plan Proponents understand that there are several General Unsecured Claims
relating to pre-petition periods that remain unpaid.
The Company obtained authority from the
Bankruptcy Court at the beginning of the Reorganization Cases to pay operating
expenses and trade claims in the ordinary course of business, when such claims
become due. In addition, all executory contracts (other than contracts with ABI
which are treated in the Class of ABI Claims) will be assumed.
92
The Company has estimated that the
General Unsecured Claims asserted against it total approximately $3
million.
9.2.
|
Asbestos
Claims
|
|
(a)
|
Asbestos
Property Damage Claims (Class
8)
|
According
to the Company, the aggregate amount of Allowed Asbestos Property Damage Claims
is approximately $133,000 and does not exceed the amount of proceeds from
insurance coverage available for such Claims.
|
(b)
|
Asbestos
Personal Injury Claims (Class
7)
|
Consistent
with the disclosure statements previously filed by the Debtors and other Plan
Proponents and approved by the Bankruptcy Court, the Plan Proponents have not
provided an estimate of Asbestos Personal Injury Claims due to the uncertainties
and difficulties inherent in determining the number and amount of Asbestos
Personal Injury Claims. However, the Debtors have asserted that as of
the Petition Date there were approximately 22,000 pending lawsuits (including
workers’ compensation cases) involving approximately 106,000 individuals
alleging personal injury or death from exposure to asbestos or
asbestos-containing products. Moreover, under the terms of the
Claimant Agreement, 79,630 claims meeting the requirements of the Claimant
Agreement with a settlement value in excess of $466 million were
processed. In addition, other Pre-Petition Settlement Agreements
total approximately $25 million. Pursuant to this Plan, these
claimants will receive the treatment provided for Asbestos Personal Injury
Claims in Class 7. As a result of tabulating ballots on its Fourth
Modified Plan in the first quarter of 2005, the Company became aware of
additional claims by claimants whose claims were not determined under the
Claimant Agreement or Pre-Petition Settlement Agreements and such claimants have
submitted ballots asserting claims with a value of approximately $512
million. Additional new claimants submitted ballots asserting new
claims in connection with the February 2008 Plan. The Plan Proponents
believe that the classification and treatment provided by the Plan complies with
applicable law and is fair and equitable.
ARTICLE
10
RISKS
OF THE PLAN
10.1.
|
General
|
The
following is intended as a summary of certain risks associated with the Plan,
but is not exhaustive and must be supplemented by the analysis and evaluation of
the Plan and this Disclosure Statement as a whole by each holder of a Claim with
such holder’s own counsel and other advisors.
10.2.
|
Confirmation
Risks
|
For
the Plan to be confirmed, each Impaired Class of Claims is given the opportunity
to vote to accept or reject the Plan or will have its prior votes from the
February 2008 Plan deemed cast on this Plan pursuant to the Voting Procedures
Order. With regard to the Impaired Classes which vote on the Plan,
the Plan will be deemed accepted by a Class of Impaired Claims if the Plan is
accepted by holders of Claims of such Class who hold at least two-thirds in
dollar amount and more than one-half in number of the total Allowed Claims of
such Class actually voting on the Plan. Only those members of a Class who vote
to accept or reject the Plan will be counted for voting purposes. The
Plan must also comply with the requirements of section 524(g) of the Bankruptcy
Code. Thus, if votes of holders of Claims in Classes 4, 6, 7, 8 and 9
are received in number and amount sufficient to enable the District Court to
confirm the Plan and issue a supplemental injunction under section 524(g) of the
Bankruptcy Code, the Plan Proponents intend to seek, as promptly as practicable,
confirmation of the Plan.
Any
objection to the Plan by a party in interest could either prevent, or delay for
a significant period of time, Confirmation of the Plan.
Moreover,
although the Plan Proponents believe that the Plan will satisfy all requirements
necessary for confirmation by the District Court (including the cramdown
requirements specified in Section 7.3(a)(4)(ii) above with respect to Congoleum
Interests which have been deemed to reject the Plan), there can be no assurance
that the District Court will reach the same conclusion.
93
10.3.
|
Insurance Coverage for
Plan Trust Asbestos Claims
|
Congoleum’s
insurers have asserted that Congoleum does not have the right to negotiate or
agree to claims resolution criteria and bankruptcy trust distribution procedures
as part of its plan of reorganization over their objections and/or without their
consent and/or without their participation and that Congoleum has breached and
continues to breach the terms of its insurance policies when it negotiates
claims resolution criteria as part of its plan of reorganization and bankruptcy
trust distribution procedures without their participation or
consent. According to Congoleum’s insurers, Congoleum has violated
numerous provisions in its insurance policies by negotiating claims resolution
criteria as part of its plan of reorganization and bankruptcy trust distribution
procedures without insurers’ participation or consent, including
consent-to-settlement clauses, cooperation clauses, consent-to-assignment
clauses, and other clauses. In addition, the insurers have asserted
that the claims resolution criteria in the plan of reorganization and bankruptcy
trust distribution procedures are unfair and unreasonable and were not and are
not being negotiated in good faith and are the result of improper “collusion”
among counsel representing Asbestos Claimants and Congoleum and that, for these
reasons as well as others, the insurers do not and will not owe coverage for any
claims resolved and/or paid under the bankruptcy trust distribution
procedures. Various insurers have written letters objecting to
Congoleum’s plan and trust distribution procedures and stating various reasons
for contending that Congoleum was and is in breach of insurance policies and
various reasons for contending that the insurers will not owe coverage for
claims resolved or paid under terms of Congoleum's plan.
Because
of the risks involved with respect to the effects of various potential rulings
by the District Court or an appeal thereof, as well as the uncertainty in the
resolution of any present or future Asbestos Insurance Action, including the
Coverage Litigation, the ultimate value of the insurance proceeds that will be
available to the Plan Trust is uncertain. The Plan Proponents have
addressed the potential impact of this uncertainty on the Plan Trust by
authorizing the Plan Trustee, with the consent of the TAC and the Futures
Representative, to amend the TDP and/or the Plan Trust Agreement under certain
circumstances. Moreover, the possibility that one or more of the
insurance companies may become insolvent in the future may impact the value of
Congoleum’s insurance coverage, and thus the value of the Plan Trust
Assets.
As
noted in Section 2.3(a) above, on May 18, 2007, the Superior Court of New Jersey
issued its decision on the Phase I trial, ruling that the Claimant Agreement is
an unreasonable agreement, not made in good faith, and therefore Congoleum's
insurers have no coverage obligations for the Claimant Agreement. The
Confirmation condition and risk discussed in Section 10.6 below should eliminate
coverage issues with respect to the Claimant Agreement. However,
while the Plan Proponents have attempted to address insurer objections in the
TDP associated with the Plan, there can be no assurance that insurer objections
similar to those noted above with respect to plans proposed by Congoleum will
not be made with respect to such TDP. Counsel for First State
Insurance Company and Twin City Fire Insurance Company, Wausau, Continental
Casualty Company and Continental Insurance Company, and Certain London Market
Insurance Companies have each sent letters to the Plan Proponents identifying
some of their objections and concerns with, among other things, the TDP filed
with prior plans.
10.4.
|
Distributions under
the TDP
|
Payments
that will be made on Plan Trust Asbestos Claims will be determined under the
TDP, the Plan and the Plan Trust Agreement and will be based on one hand, upon
estimates of the number, types and amount of present and expected future Plan
Trust Asbestos Claims and, on the other hand, on the value of the Plan Trust
Assets, the liquidity of the Plan Trust Assets, the Plan Trust’s expected future
expenses and income, as well as other material matters that are reasonable and
likely to affect the sufficiency of funds to pay all holders of Plan Trust
Asbestos Claims. There can be no certainty as to the precise amounts
that will be distributed by the Plan Trust in any particular time period or when
Plan Trust Asbestos Claims will be paid by the Plan Trust.
94
10.5.
|
Risk of
Post-Confirmation Default
|
Although
no guarantees can be given, the Plan Proponents believe that the cash flow
generated by the Reorganized Debtors' business and assets will be sufficient to
pay their ongoing obligations under their long-term debt and business
expenses. At the Confirmation Hearing, the District Court will be
required to make a judicial determination that the Plan is feasible in order to
confirm the Plan.
Congoleum
is subject to the effects of general economic conditions. A sustained
general economic slowdown could have serious negative consequences for
Congoleum’s business, results of operations and financial
condition. Moreover, Congoleum’s business is cyclical and is affected
by the economic factors that affect the remodeling and housing industries in
general and the manufactured housing industry specifically, including the
availability of credit, consumer confidence, changes in interest rates, market
demand and general economic conditions. Congoleum has experienced a
significant decline in sales as a result of weakness in the housing market and
general economy. Congoleum may experience further sales declines
resulting from continued deterioration in the housing market.
10.6.
|
Exit
Facility
|
There
can be no assurance that the Company will be able to reach terms with lenders to
provide the Exit Facility needed for the Company to emerge from
bankruptcy. Confirmation of any plan of reorganization will depend on
Congoleum obtaining exit financing to provide it with sufficient liquidity to
fund obligations upon the plan becoming effective. If Congoleum’s
cash flow from operations is materially less than anticipated and/or if the
costs of seeking confirmation of this Plan or any plan of reorganization or in
connection with the Coverage Litigation are materially more than anticipated,
Congoleum may be unable to obtain exit financing which, when combined with net
cash provided from operating activities, would provide it with sufficient
funds.
10.7.
|
Litigation
Settlement
Agreement
|
The
Litigation Settlement Agreement is an integral part of the
Plan. Although the Bankruptcy Court approved the Litigation
Settlement Agreement pursuant to Bankruptcy Rule 9019, there can be no assurance
that the District Court will determine that any of the components of the
Litigation Settlement Agreement as incorporated into the Plan will satisfy the
requirements for confirmation, as put forth in the Bankruptcy Code.
ARTICLE
11
ALTERNATIVES
TO CONFIRMATION AND CONSUMMATION OF THE PLAN
If
the Plan is not confirmed and consummated, the alternatives to the Plan include
(a) liquidation of the Company under Chapter 7 of the Bankruptcy Code; (b) an
alternative plan of reorganization, including a plan of reorganization proposed
by the CNA or other parties in interest, and (c) dismissal of the Reorganization
Cases.
11.1.
|
Liquidation under
Chapter 7
|
If
no plan can be confirmed, the Reorganization Cases may be converted to cases
under Chapter 7 of the Bankruptcy Code, pursuant to which a trustee would be
appointed to liquidate the assets of the Debtors for distribution in accordance
with the priorities established by the Bankruptcy Code. A discussion
of the effects that a Chapter 7 liquidation would have on the recovery of
holders of Claims and Equity Interests and a Liquidation Analysis with respect
to the Debtors are set forth above in Section 7.3(a)(1) – "Best Interests
Test." The Plan Proponents agree that the timing of the distributions
under a Chapter 7 case would be delayed and the amount of distributions that
would be made in a Chapter 7 case would be materially less than the
distributions contemplated by the Plan, because, among other things, (a) a
Chapter 7 trustee would not receive the benefits of the enterprise value
represented by the shares of the New Senior Notes and the New Common Stock to be
issued by Reorganized Congoleum to the Plan Trust, and (b) the ability of the
trustee in a Chapter 7 case to negotiate settlements with Asbestos Insurance
Companies is likely to be impaired.
95
Attached
hereto as Exhibit B is a Liquidation Analysis, which was prepared based on asset
valuations provided by the Debtors, which assumes that a bankruptcy case under
Chapter 7 is commenced immediately and that the Debtors' assets are liquidated
by a Chapter 7 trustee in an orderly liquidation. The Liquidation
Analysis is based upon a number of estimates and assumptions which, are
inherently beyond the control of the Plan Proponents or any Chapter 7
trustee. Accordingly, there can be no assurances that the values
reflected in the Liquidation Analysis would be realized if the Debtors were to
undergo such a Chapter 7 liquidation; actual results could vary materially from
those shown in Exhibit B. In addition, any liquidation would
necessarily take place in the future under circumstances which presently cannot
be predicted. Accordingly, if the Estates were liquidated, the actual
liquidation proceeds could be materially lower or higher than the amounts set
forth in Exhibit B, and no representation or warranty can be made with respect
to the actual proceeds that could be received in a Chapter 7
liquidation.
11.2.
|
Alternative Plan of
Reorganization
|
The
Plan Proponents believe that the Plan provides a greater recovery to the holders
of valid Claims than any plan filed or proposed to date and is otherwise in the
best interests of the Debtors' Estates, but holders of Claims must rely on their
own examination of the terms of any plan of reorganization that is filed and has
not been ruled to be unconfirmable as a matter of law.
11.3.
|
Dismissal of
Cases
|
Under
Section 1112(b) of the Bankruptcy Code, the District Court can dismiss the
Reorganization Cases if it finds that dismissal is in the best interests of
creditors and the Estates. After dismissal, Claims against the
Debtors would be resolved in accordance with applicable nonbankruptcy
law. The Plan Proponents believe that the Debtors lack sufficient
assets to pay all Asbestos Personal Injury Claims and other Claims.
THE
PLAN PROPONENTS BELIEVE THAT THE CONFIRMATION AND IMPLEMENTATION OF THE PLAN IS
PREFERABLE TO ANY OF THE ALTERNATIVES BECAUSE IT SHOULD PROVIDE GREATER
RECOVERIES THAN THOSE AVAILABLE IN LIQUIDATION OR UNDER ANY ALTERNATIVE
PLAN.
ARTICLE
12
CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
TO
ENSURE COMPLIANCE WITH U.S. TREASURY DEPARTMENT CIRCULAR 230, HOLDERS OF CLAIMS
ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF UNITED STATES FEDERAL TAX ISSUES
IN THIS DISCLOSURE STATEMENT IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND
CANNOT BE RELIED UPON, BY HOLDERS OF CLAIMS FOR THE PURPOSE OF AVOIDING
PENALTIES THAT MAY BE IMPOSED ON HOLDERS OF CLAIMS UNDER THE IRC; (B) SUCH
DISCUSSION IS INCLUDED HEREIN IN CONNECTION WITH THE PROMOTION OR MARKETING
(WITHIN THE MEANING OF U.S. TREASURY DEPARTMENT CIRCULAR 230) OF THE
TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) HOLDERS OF CLAIMS SHOULD SEEK
ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX
ADVISER. HOLDERS OF CONGOLEUM INTERESTS ARE NOT BEING SOLICITED
PURSUANT TO THIS DISCLOSURE STATEMENT AND THEREFORE THE CONSEQUENCES OF THE
CANCELLATION OF CONGOLEUM INTERESTS TO THE HOLDERS THEREOF IS NOT ADDRESSED
HEREIN.
A
summary description of certain United States federal income tax consequences of
the Plan is provided below. This summary is for informational
purposes only and should not be relied upon for purposes of determining the
specific tax consequences of the Plan to a particular holder of a
Claim. Only the principal United States federal income tax
consequences of the Plan to Reorganized Congoleum, the Plan Trust and certain
impaired holders of Claims are described below. No opinion of counsel
has been sought or obtained with respect to any tax consequences of the
Plan. No rulings or determinations of the Internal Revenue Service or
any other taxing authority have been sought or obtained with respect to any tax
consequences of the Plan, and the discussion below is not binding upon the
Internal Revenue Service or any other taxing authority. No assurance
can be given that the Internal Revenue Service or any other taxing authority
would not assert, or that a court would not sustain, a different position from
any discussed herein.
96
This
summary is based upon existing United States federal income tax law, which is
subject to change, possibly with retroactive effect. This summary
does not address all aspects of United States federal income taxation that may
be important to a particular holder of a Claim in light of such holder’s
individual investment circumstances or to certain types of holders of Claims
subject to special tax rules (e.g., financial
institutions, insurance companies, broker-dealers, tax-exempt organizations, and
foreign persons), all of whom may be subject to tax rules that differ
significantly from those summarized below. This summary does not
discuss any foreign, state, or local tax considerations. In addition,
this summary does not address the possible application of IRC provisions and
United States Treasury regulations concerning reportable transactions, which
include transactions with respect to which, under certain circumstances,
taxpayers claim losses.
This
summary is not intended to constitute a complete analysis of all tax
considerations relevant to a particular holder of a Claim. Each
holder of a Claim should seek advice from its own independent tax advisors
concerning the United States federal, state, local, foreign income and other tax
consequences of the Plan to them in light of their particular
circumstances.
12.1.
|
Tax Consequences to
Reorganized Congoleum
|
|
(a)
|
Discharge
of Indebtedness; New Senior
Notes
|
In
general, a taxpayer must include in gross income the amount of any indebtedness
that is cancelled (“COD
Income”) during the taxable year. However, Section
108(a)(1)(A) of the IRC provides an exception to this rule where a taxpayer is
subject to the jurisdiction of a court overseeing a bankruptcy case and the
cancellation of indebtedness is granted by, or effected pursuant to, a plan
approved by such court, as would be the case upon the confirmation of the
Plan. In this event, rather than being included in gross income, the
COD Income is applied to reduce the following tax attributes of the taxpayer in
the following order: net operating losses, business and minimum tax credit carry
forwards, capital loss carry forwards, the basis of the taxpayer’s assets, and
foreign tax credit carry forwards (collectively, the “Tax
Attributes”). Under Section 108(b)(5) of the IRC, a taxpayer
may elect to first apply the reduction to the basis of the taxpayer’s
depreciable assets, with any remaining balance applied to the other Tax
Attributes in the order stated above. Additionally, Section 108(e)(2)
of the IRC provides that no COD Income is realized to the extent that the
taxpayer’s satisfaction of the cancelled debt would have given rise to a tax
deduction for United States federal income tax purposes. The effect
of Section 108(e)(2) of the IRC, where applicable, is to allow the taxpayer’s
debt to be cancelled without the recognition of income by the taxpayer and
without reduction of its Tax Attributes. Furthermore, under Section
108(e)(8) of the IRC, a corporation that acquires its debt in exchange for stock
is deemed to have satisfied the indebtedness with an amount of money equal to
the fair market value of the stock. The effect of Section 108(e)(8)
will also be to reduce the level of the recognition of income by the taxpayer
and the reduction of Tax Attributes.
Pursuant
to the Plan, although an amount of Asbestos Claims will be paid, holders of
Asbestos Claims may receive less than 100% of the face value of their Claims and
thus an amount of Asbestos Claims also may be cancelled. However,
such cancellation of Asbestos Claims generally will not result in COD Income to
Reorganized Congoleum because payment of the Asbestos Claims would have given
rise to tax deductions for Reorganized Congoleum.
Any
forgiveness of accrued and unpaid interest on the Senior Notes will likely
result in COD Income to Reorganized Congoleum to the extent that such accrued
and unpaid interest has been previously deducted by Congoleum for United States
federal income tax purposes. The Plan provides that a Distribution on
an Allowed Claim, including a Senior Note Claim, will, to the extent permitted
by applicable law, be allocated for United States federal income tax purposes
first to the principal amount of the Allowed Claim and then to accrued and
unpaid interest thereon. There can be no assurance that the Internal
Revenue Service will not successfully challenge that
position. Further, exchange of Senior Notes for New Senior Notes and
New Common Stock pursuant to the Plan will result in COD Income to
the extent that, among other things, the sum of the aggregate “issue price” of
the New Senior Notes and the aggregate fair market value of the New Common Stock
allocated to the principal amount of the Senior Notes is less than the aggregate
principal amount of the Senior Notes. The issue price of the New
Senior Notes will be their fair market value at the time of the exchange if a
substantial amount of Senior Notes or New Senior Notes are “traded on an
established market” within the meaning of applicable Treasury
regulations. If neither are so traded, because the New Senior Notes
will be treated as “contingent payment debt instruments,” as discussed
97
below,
the issue price of the New Senior Notes will be the lesser of the instrument's
noncontingent principal payments and the sum of the present values of the
noncontingent payments (as calculated pursuant to the applicable Treasury
regulations). Further, increases in the principal amount of the New
Senior Notes (by the issuance of additional New Senior Notes based on EBITDA of
the Reorganized Congoleum) may result is a loss or other deduction to offset COD
Income. The Plan Proponents anticipate that the sum of the aggregate
issue price of the New Senior Notes (including additional New Senior Notes based
on EBITDA of the Reorganized Congoleum) and the aggregate fair market value of
the New Common Stock allocated to the principal amount of the Senior Notes will
be less than the aggregate principal amount of the Senior Notes and, therefore,
Reorganized Congoleum will recognize COD Income from the exchange.
Because
the New Senior Notes will be treated as “contingent payment debt instruments,”
the New Senior Notes will be issued with “original issue discount”
(“OID”) for federal income tax purposes. In general, Reorganized
Congoleum will be entitled to deduct OID under complex contingent payment debt
instrument rules. However, under the “applicable high
yield debt obligation” rules, Reorganized Congoleum may be required to defer, or
may be denied, deductions for OID in whole or in part, as discussed
below.
Although
the terms of the Exit Facility have not yet been determined, the Plan Proponents
believe it unlikely that replacement of the Existing Credit Agreement with the
Exit Facility will result in COD Income to Reorganized Congoleum.
Notwithstanding
the foregoing, in the event that the discharge of indebtedness pursuant to the
Plan were to cause Reorganized Congoleum to recognize COD Income, the
Plan Proponents have not determined whether Reorganized Congoleum would make the
election under Section 108(b)(5) of the IRC to apply any required Tax Attribute
reduction first to depreciable property, with any excess next applied to reduce
other Tax Attributes. In this regard, as of December 31, 2008,
Congoleum reported that it had net operating losses (“NOLs”) of approximately $21.4
million.
|
(b)
|
Net
Operating Losses
|
Congoleum
has indicated that it is uncertain as to whether Reorganized Congoleum will have
an NOL after emerging from bankruptcy, taking into account any COD
Income. The following discussion would apply should Reorganized
Congoleum have an NOL after emergence.
The
extent to which Reorganized Congoleum will be able to utilize its NOLs after
emerging from bankruptcy will depend on Section 382 of the IRC, which generally
imposes an annual limitation (the “Section 382 Limitation”) on a
corporation’s use of its NOLs (and may limit a corporation’s use of certain
built-in losses recognized within a five-year period following an ownership
change) if a corporation undergoes an ownership change. The annual
Section 382 Limitation on the use of pre-change losses (the NOLs and built-in
losses recognized within the five year post-ownership change period) in any
“post-change year” is generally equal to the product of the fair market value of
the loss corporation’s outstanding stock immediately before the ownership change
multiplied by the long-term tax-exempt rate in effect for the month in which the
ownership change occurs. The long-term tax-exempt rate is published
monthly by the Internal Revenue Service and is intended to reflect current
interest rates on long-term tax-exempt debt obligations. For November
2009, the rate is 4.33%. Section 383 of the IRC
applies a similar limitation to capital loss carryforwards and tax
credits. As discussed below, however, a special exception from these
rules may apply in the case of a corporation that experiences an ownership
change as the result of a bankruptcy proceeding.
In
general, an ownership change occurs when the percentage of the corporation’s
stock owned by certain “5 percent shareholders” increases by more than 50
percentage points in the aggregate over the lowest percentage owned by them at
any time during the applicable “testing period” (generally, the shorter of (a)
the 36-month period preceding the testing date or (b) the period of time since
the most recent ownership change of the corporation). Reorganized
Congoleum will experience an ownership change under Section 382 of
the IRC as a result of the consummation of the Plan.
98
Even
though such an ownership change occurs, it may not give rise to any limitation
on Reorganized Congoleum’s ability to use its NOLs after emergence from
bankruptcy. Section 382(1)(5) of the IRC provides a special rule
applicable in the case of a bankruptcy reorganization (the “Section 382(1)(5)
Exception”). If a corporation qualifies for the Section
382(1)(5) Exception, the annual Section 382 Limitation will not apply to the
corporation’s NOLs. The Section 382(1)(5) Exception does, however,
require that the corporation’s NOL carryovers be computed without taking into
account the aggregate amount of all interest deductions in respect of debt
exchanged for the corporation’s stock during the three prior taxable years and
the portion of the current taxable year ending on the date of the ownership
change. Further, Section 382(1)(5) of the IRC provides that if a
company that utilizes the Section 382(1)(5) Exception undergoes another
ownership change within two years, that company’s NOL is reduced to
zero.
A
corporation that is reorganized in bankruptcy will qualify for the Section
382(1)(5) Exception if the corporation’s pre-bankruptcy shareholders and holders
of certain debt (“Qualifying
Debt”) own at least 50% of the stock of the corporation after the
reorganization, and the corporation does not “elect out” of the Section
382(1)(5) Exception. Qualifying Debt is a claim which (i) was held by
the same creditor for at least 18 months prior to the bankruptcy filing or (ii)
arose in the ordinary course of a corporation’s trade or business and has been
owned, at all times, by the same creditor. Indebtedness will be
treated as arising in the ordinary course of a corporation’s trade or business
if such indebtedness is incurred by the corporation in connection with the
normal, usual or customary conduct of the corporation’s business. It
is not clear whether the Reorganized Congoleum would be eligible for
the Section 382(1)(5) Exception, and the Plan Proponents have not
determined whether Reorganized Congoleum would avail itself of the Section
382(1)(5) Exception, should it be available.
|
(c)
|
Transfers
to the Plan Trust
|
The
Treasury regulations promulgated under Section 468B of the IRC provide that a
fund, account, or trust will constitute a qualified settlement fund (“QSF”) if it satisfies three
conditions. First, the fund, account, or trust must be
established pursuant to an order of or be approved by a government
authority, including a court, and must be subject to the continuing jurisdiction
of that government authority. Second, the fund, account, or trust
must be established to resolve or satisfy one or more contested or uncontested
claims that have resulted or may result from an event or related series of
events that has occurred and that has given rise to at least one claim asserting
liability arising from, among other things, a tort. Third, the fund,
account, or trust must be a trust under applicable state law or have its assets
physically segregated from the other assets of the transferor and persons
related to the transferor.
A
payment to a QSF generally is deductible when made, assuming that such payment
otherwise constitutes an ordinary and necessary business expense. A
transferor is generally entitled to a deduction in an amount equal to the fair
market value of its equity transferred to a QSF. The issuance of a
transferor’s equity to the QSF generally does not result in gain or loss to the
transferor. Additionally, no deduction is allowed with respect to the
transfer of insurance proceeds to a QSF to the extent the transferred amounts
are excludable from gross income of the transferor. If the settlement
of an insurance claim occurs after the transfer of such claim to the QSF and a
deduction has been taken with respect to such transfer, then the transferor must
include in income the amounts received from the settlement of the insurance
claim to the extent of the deduction.
Assuming
confirmation of the Plan, the Plan Trust will be established to satisfy Plan
Trust Asbestos Claims alleged to arise out of a tort or torts, will be a trust
under state law, and will be approved by the District Court and subject to its
continuing jurisdiction. Accordingly, based on those assumptions and
on the completion of certain filings, the Plan Trust should constitute a QSF
after confirmation of the Plan. Certain insurance proceeds and
certain rights under insurance coverage will be transferred to the Plan Trust,
and Reorganized Congoleum also will transfer the Plan Trust Common Stock to the
Plan Trust. Although amounts transferred to a QSF generally are
deductible, no deduction will be allowed to Reorganized Congoleum with respect
to the transfer of insurance proceeds to the extent the transferred amounts are
excludable from gross income of Reorganized Congoleum. Further, if
the settlement of an insurance claim occurs after the transfer of such claim to
the QSF and Reorganized Congoleum has taken a deduction with respect to such
transfer, then Reorganized Congoleum will be required to include in income the
amounts received from the settlement of the insurance claim to the extent of the
deduction.
99
|
(d)
|
Alternative
Minimum Tax
|
In
general, an alternative minimum tax (“AMT”) is imposed on a corporation’s
alternative minimum taxable income at a 20% rate to the extent such tax exceeds
the corporation’s regular federal income tax. For purposes of
computing taxable income for AMT purposes, certain tax deductions and other
beneficial allowances are modified or eliminated. In particular, even
though a corporation otherwise might able to offset all of its taxable income
for regular tax purposes by available NOL carryforwards, only 90% of a
corporation’s taxable income from AMT purposes may be offset by available NOL
carryforwards (as computed for AMT purposes).
In
addition, if a corporation undergoes an ownership change, within the meaning of
Section 382 of the IRC and is in a net unrealized built-in loss position (as
determined for AMT purposes) on the date of the ownership change, the
corporation’s aggregate tax basis in its assets would be adjusted for certain
AMT purposes to reflect the fair market value of such assets as of the change
date.
12.2.
|
Tax Consequences to
the Plan Trust
|
Assuming
that, as expected, the Plan Trust qualifies as a QSF, the Plan Trust will be
required to pay federal income tax on its modified gross income, as defined in
the Treasury regulations promulgated under Section 468B of the IRC, at the
highest rate applicable to estates and trusts. The Plan Trust
generally will not be required to include in income amounts transferred to it
pursuant to the Plan. Any sale, exchange or distribution of Plan
Trust property generally will result in gain or loss equal to the difference
between the consideration received (or the fair market value of the property) on
the date of such sale, exchange or distribution and the adjusted tax basis of
such property. For this purpose, the tax basis of property received
by the Plan Trust will be its fair market value at the time of
receipt. The Plan Trust will not be entitled to deduct amounts that
it pays with respect to Plan Trust Asbestos Claims, but will be entitled to
deduct amounts paid for administrative costs and other incidental costs of the
Plan Trust. Dividends on the Plan Trust Common Stock will be
includible in gross income by the Plan Trust.
12.3.
|
Tax Consequences to
Certain Impaired Holders of
Claims
|
The
United States federal income tax consequences to a holder of a Claim that is
impaired and the character and amount of income, gain or loss recognized as a
consequence of the Plan and the distributions provided for thereby will be
determined by reference to the Claim in respect of which the distribution is
made and as if the distribution were made directly by Reorganized Congoleum and
accordingly will depend upon, among other things: (1) the nature of the Claim,
(2) the manner in which a holder acquired the Claim, (3) the length of time the
Claim has been held, (4) whether the Claim was acquired at a discount, (5)
whether the holder has taken a bad debt deduction with respect to the Claim (or
any portion thereof) in the current or prior years, (6) whether the holder has
previously included in income accrued but unpaid interest with respect to the
Claim, (7) the method of tax accounting of the holder, and (8) whether the Claim
constitutes a security for United States federal income tax
purposes. Accordingly, each holder of a Claim is urged to consult its
tax advisor regarding the tax consequences of the Plan to it.
|
(a)
|
Holders
of Asbestos Claims
|
Under
Section 104 of the IRC, to the extent that a payment from the Plan Trust to a
holder of an Asbestos Personal Injury Claim constitutes damages on account of
personal physical injuries or physical sickness of such holder, such payment
will not constitute gross income to such holder, except to the extent that the
payment is attributable to medical expense deductions taken under Section 213 of
the IRC for a prior taxable year. A payment from the Plan Trust to a
holder of an Asbestos Personal Injury Claim other than on account of personal
physical injuries or physical sickness generally will be includible in gross
income of such holder.
A
payment to a holder of an Allowed Asbestos Property Damage Claim generally will
result in a non-taxable return of capital, and a corresponding decrease in the
holder’s tax basis in the damaged property, and will generate income or gain, if
any, to the holder in an amount equal to the excess of the payment received over
such holder’s tax basis in the damaged property.
100
|
(b)
|
Holders
of Senior Note Claims
|
The
Plan provides for an exchange for United States federal income tax purposes of
Senior Notes held by holders of Senior Note Claims for New Senior Notes and New
Common Stock. The discussion below may differ to the extent that a
holder of Senior Notes has claimed a bad debt or worthless security deduction in
respect of the Senior Notes. Such holders should consult their own
tax advisors regarding the consequences of the exchange of Senior Note Claims
for New Senior Notes and New Common Stock in light of their particular
circumstances.
The
New Senior Notes provide for the issuance of additional New Senior Notes based
on EBITDA of the Reorganized Congoleum. Applicable Treasury
regulations (the “Contingent Debt Regulations”) provide that a debt instrument
that provides for one or more contingent payments is, subject to certain
exceptions, treated as a “contingent payment debt instrument” or
“CPDI.” Accordingly, Reorganized Congoleum will treat the New Senior
Notes as CPDIs for U.S. federal income tax purposes. However, the
application of the Contingent Debt Regulations to instruments such as the New
Senior Notes is uncertain in several respects, and no rulings have been sought
from the IRS or a court with respect to any of the tax consequences discussed
below. Accordingly, no assurance can be given that the IRS or a court
will agree with the treatment described herein. Any differing
treatment could affect the amount, timing and character of income, gain or loss
in respect of the New Senior Notes and in respect of the exchange of New Senior
Notes for Senior Note Claims. In particular, a holder might be
required to accrue OID at a different rate and might recognize capital gain or
loss upon a taxable disposition of its New Senior Notes. Holders
should consult their own tax advisors concerning the tax treatment of the
acquisition, ownership and disposition of New Senior Notes and the consequences
of the exchange of New Senior Notes for Senior Note Claims.
|
Exchange of Senior
Notes for New Senior Notes
|
The
United States federal income tax consequences of the exchange of Senior Notes
for New Senior Notes and New Common Stock pursuant to the Plan will depend on
whether or not the Senior Notes and the New Senior Notes are treated as
“securities” for United States federal income tax purposes. The term
“security” is not defined in the IRC or applicable Treasury regulations and has
not been clearly defined in court decisions. Although several factors
are relevant in determining whether a debt instrument is a security, one
important factor is the debt instrument’s original term to
maturity. As a general rule, a debt instrument with an original term
to maturity of ten years or more is likely to be considered a security, while a
debt instrument with an original term to maturity of five years or less may not
be considered a security (although a recent Internal Revenue Service ruling
suggests that, in certain circumstances, a debt instrument with a term of five
years or less may be considered a security). Reorganized Congoleum
intends to take the position, and the following summary assumes, that the Senior
Notes are securities for United States federal income tax purposes, but there
can be no assurance that the Internal Revenue Service will not successfully
challenge that position. The New Senior Notes mature on March 31,
2017. Holders of Senior Notes should consult their own tax advisors
regarding whether or not the Senior Notes and the New Senior Notes will be
treated as securities for United States federal income tax
purposes.
If
the New Senior Notes are treated as securities, a holder of a Senior Note Claim
should not recognize gain or loss upon the exchange to the extent that New
Senior Notes and New Common Stock are allocated to the principal amount of the
Senior Notes (assuming that the principal amount of New Senior Notes so
allocated does not exceed the principal amount of Senior Notes so
exchanged). Holders should consult their own tax advisors concerning
“principal amount” of the New Senior Notes because they will be treated as
CPDIs. The holder will have an aggregate initial tax basis in the New
Senior Notes and New Common Stock so allocated equal to the holder’s aggregate
adjusted tax basis in the Senior Notes immediately before the exchange, and the
holder’s holding period for the New Senior Notes and New Common Stock so
allocated will include the holder’s holding period for the Senior
Notes.
If
the New Senior Notes are not treated as securities, a holder of a Senior Note
Claim will recognize gain, but not loss, upon the exchange in an amount equal to
the lesser of (i) the difference between the amount realized on the exchange and
the holder’s adjusted tax basis in the Senior Notes and (ii) the value of the
New Senior Notes allocated to the principal amount of the Senior
Notes. For this purpose, it is unclear whether the “value” of the New
Senior Notes will be the fair market value or the issue price of the New Senior
Notes. In addition, there will be other considerations arising from
the treatment of the New Senior Notes as CPDIs (and depending upon whether the,
at the time of the exchange, a substantial amount of Senior Notes or New Senior
Notes are “traded on an established market” within the
101
meaning
of applicable Treasury regulations) and if the installment method were to apply
to the New Senior Notes. Except to the extent of any accrued market
discount not previously included in income, as described below, such gain or
loss will be long-term capital gain or loss if the Senior Notes have been held
as capital assets for more than one year. Net long-term capital gains
of individuals are eligible for preferential rates of United States federal
income taxation. The deductibility of capital losses is subject to
limitations. The holder will have an initial tax basis in New Common
Stock so allocated equal to the holder’s adjusted tax basis in the Senior Notes
immediately before the exchange (increased by the amount of gain, if any,
recognized and decreased by the value (determined as described above) of the New
Senior Notes so allocated) and the holding period for such New Common Stock will
include the holder’s holding period for the Senior Notes. The holder
should have an initial tax basis in the portion of New Senior Notes so allocated
equal to the value (as determined above) of such New Senior Notes, and the
holder’s holding period for such New Senior Notes should not include the
holder’s holding period for the Senior Notes. In addition, there will
be other considerations arising from the treatment of the New Senior Notes as
CPDIs (and depending upon whether the, at the time of the exchange, a
substantial amount of Senior Notes or New Senior Notes are “traded on an
established market” within the meaning of applicable Treasury
regulations). Holders of New Senior Notes should consult their own
tax advisers regarding the treatment of the exchange of the Senior Notes for the
New Senior Notes.
The
applicable Treasury regulations governing CPDIs determine the income tax
consequences to a holder of New Senior Note depending upon whether the, at the
time of the exchange, a substantial amount of Senior Notes or New Senior Notes
are “traded on an established market” within the meaning of applicable Treasury
regulations. At this time, the Debtors do not believe as substantial
amount of the Senior Notes are “traded on an established market.”
If
a substantial amount of Senior Notes or New Senior Notes are not so traded,
Reorganized Congoleum would be required to calculate income and OID includible
by a holder based on the method of Treasury regulation section
1.1275-4(c). These methods are very complex and holders of Senior
Note Claims should consult their tax advisors regarding application of these
rules, including the interaction of these rules and exchange of the Senior Notes
for New Senior Note Claims and the treatment of sale, exchange or retirement of
New Senior Notes. A brief summary of this method
follows.
Under
this Treasury regulation, when debt instruments are issued in exchange for
property that is not publicly traded, the contingent and noncontingent payments
are treated as separate instruments, and OID is computed separately for these
two instruments. The noncontingent payments on the New Senior Notes
issued on the Effective Date are treated as a separate, noncontingent debt
instrument. The initial issue price of a New Senior Note would be
equal to the lesser of (1) its noncontingent principal payments or (2) the sum
of the present values of the noncontingent payments determined by discounting at
a test rate under a method specified in the Treasury regulations, provided that it is
not treated as issued in a potentially abusive situation. The
difference between the amount of the payment and its present value is treated as
interest (here, the stated interest), which is includable in the holder’s gross income and deductible,
subject to the AHYDO rules described below, by Reorganized Congoleum in their
respective taxable years in which the amount of the payment becomes fixed.
When
an additional New Senior Note is issued due to satisfying the EBITDA tests, such
contingent payment is treated as a payment of principal and some interest on the
underlying New Senior Note. If the New Senior Notes issued for
reaching the EBITDA targets have a maturity in excess of six months, they would
be treated as if Reorganized Congoleum issued a separate debt instrument for
property with an issue price equal to the present value of the payments under
the additional New Senior Notes, determined by discounting at the test rate
described above. The amount of the issue price would then be
discounted back to the issue date of the underlying New Senior Notes
at an appropriate test rate, with a portion treated as interest at the time, and
the balance allocated to principal and treated as a principal payment on the
underlying New Senior Notes as of the date the contingent payment New Senior
Note became fixed.
If
a holder’s basis in a New Senior Note is different from its adjusted issue price
(and the holder is not reporting the income from the exchange on the installment
method), including as a result of a tax-free exchange described above, the
holder must allocate its basis in the New Senior Note first to the noncontingent
component and to any related separate debt instruments described above for
additional New Senior Notes whose maturity is in excess of 6 months up to their adjusted issue prices. The difference, if any, between the allocated basis and adjusted
issue price of the New Senior Notes is taken into account under the normal rules
for market discount, premium, and acquisition premium that apply to
noncontingent debt instruments.
102
Any
basis that is not allocated to the noncontingent component above is then
allocated to the right to contingent payments. When a
contingent payment is subsequently made, the holder’s basis in the contingent
component is reduced by the portion the payment treated as
principal. If the holder’s basis is reduced to zero, any additional
principal payments on the contingent component that is issued constitute gain
from the sale or exchange of the debt instrument. Any basis remaining
on the contingent component when the final contingent payment is made increases
the holder’s adjusted basis in the noncontingent component (or, if there are no
remaining noncontingent payments, is treated as loss from the sale or exchange
of the debt instrument).
If
a substantial amount of Senior Notes or New Senior Notes are “traded on an
established market,” Reorganized Congoleum would be required to calculate income
and OID includible by a holder pursuant to the “noncontingent bond method” of
Treasury regulation section 1.1275-4(b). Under the “noncontingent
bond method,” interest is generally treated as paid or received according to a
projected payment schedule established when the debt instrument is issued.
Actual deviations from the schedule are taken into account by means of separate
adjustments that do not change the schedule. Additionally, under the
noncontingent bond method, interest on a debt instrument must be taken into
account whether or not the amount of any payment is fixed or determinable in the
tax year. The amount of interest that is taken into account for each accrual
period is determined by constructing a projected payment schedule for the debt
instrument and applying rules similar to those for accruing OID on a
noncontingent debt instrument. If the actual amount of a contingent
payment is not equal to the projected amount, appropriate adjustments are made
to reflect the difference.
|
Sale, exchange or
retirement of New Senior
Notes.
|
Assuming,
as we have above, that a substantial amount of Senior Notes or New Senior Notes
are not treated as “traded on an established market, then upon the sale,
exchange, retirement, or other taxable disposition of a New Senior Note, a
holder will generally recognize gain or loss equal to the difference between the
amount realized upon the sale, exchange, retirement, or other taxable
disposition and the adjusted tax basis of the New Senior Note, subject to the
market discount rules described below. The holder must allocate the
amount received from a sale, exchange, retirement, or other taxable disposition
of a debt instrument that is not “traded on an established market” first to the
noncontingent component and to any separate debt instruments in an amount up to
the total of the adjusted issue price of the noncontingent component and the
adjusted issue prices of the separate debt instruments. This amount
is treated as an amount realized from the sale, exchange, retirement, or other
taxable disposition of the noncontingent component or separate debt
instrument. The balance is allocated to the contingent component and
is treated as a contingent payment made on the date of the sale, exchange,
retirement, or other taxable disposition and is characterized as interest and
principal.
In
the event that a substantial amount of Senior Notes or New Senior Notes are
treated as “traded on an established market,” upon the sale, exchange,
retirement, or other taxable disposition of a New Senior Note (or of any PIK
Note), a Holder generally will recognize gain or loss equal to the difference
between the amount realized upon the sale, exchange, retirement, or other
taxable disposition and the adjusted tax basis of the New Senior Note (or the
PIK Note). Any gain recognized on the sale, exchange, retirement or other
taxable disposition of a New Senior Note generally will be treated as ordinary
income. Loss from the disposition of a New Senior Note will be treated as
ordinary loss to the extent of a Holder’s prior net OID inclusions with respect
to the New Senior Note. Any loss in excess of that amount will be treated as
capital loss. The deductibility of capital losses by individuals and
corporations is subject to limitations. Special rules apply in determining the
adjusted tax basis of a New Senior Note.
|
Accrued but Unpaid
Interest
|
To
the extent that any portion of New Senior Notes and New Common Stock received by
a holder of a Senior Note Claim under the Plan is allocable to accrued interest
that was not previously included in the holder’s gross income, such amount
should be taxable to the holder as interest income. Conversely, a
holder of a Senior Note Claim may be able to recognize a deductible loss (or
possibly a write-off against a reserve for worthless debts) to the extent that
any accrued interest on the Senior Notes was previously included in the holder’s
gross income but was not paid in full under the Plan. The Plan
provides that a Distribution on Allowed Claims, including a Senior
Note Claim, will to the extent permitted by applicable law, be allocated for
United States federal income tax purposes first to the principal amount of the
Allowed Claim and then to accrued and unpaid interest thereon. There can be no
assurance that the Internal Revenue Service will not successfully challenge that
position. The holder should consult his or her tax advisor regarding
the initial tax basis in the portion of New Senior Notes and New Common Stock,
if any, allocable to accrued and untaxed interest on the Senior
Notes and the holder’s holding period for that portion of New Senior
Notes and New Common Stock should not include the holder’s holding period for
the Senior Notes.
103
|
Market
Discount
|
Notwithstanding
the foregoing, if a holder purchased a Senior Note at a price less than its
principal amount, the difference generally would constitute “market discount”
for United States federal income tax purposes. If a holder holds a
Senior Note with market discount, any gain recognized on the exchange of the
Senior Note for New Senior Notes and New Common Stock pursuant to the Plan will
be treated as ordinary income to the extent of any accrued market discount not
previously included in income. In addition, if New Senior Notes are
treated as securities for United States federal income tax purposes and a Senior
Note has unrecognized market discount in the hands of a holder, New Senior Notes
and/or New Common Stock received in exchange for the Senior Note may be treated
as having market discount (which may result in the recognition of ordinary
income upon a disposition of the New Senior Note and/or New Common
Stock). The market discount rules are complex. Holders of
Senior Notes with market discount should consult their own tax advisors
regarding the application of the market discount rules to them in light of their
particular circumstances.
|
Applicable High Yield
Interest Obligations
|
Any
interest or OID on the New Senior Notes generally would be deductible by
Reorganized Congoleum under the Contingent Debt Regulations, unless the New
Senior Notes are treated as applicable high yield discount obligations
(“AHYDOs”) within the meaning of Section 163(e)(5) of the Tax Code. If the AHYDO
rules apply, Reorganized Congoleum may claim an interest deduction only up to
the amount of OID that is paid. To the extent that Reorganized
Congoleum is denied a deduction for a portion of the interest or OID, that
portion may be treated as a dividend to corporate holders of such notes, which
may be entitled to a dividends-received deduction for such amount. In
general, an AHYDO is any debt instrument with “significant original issue
discount,” a maturity date that is more than five years from the issue date and
a yield to maturity that is at least five percentage points higher than the
applicable federal rate on the issue date. For this purpose, OID is
significant if, immediately before the close of any accrual period ending more
than five years after issue, “the aggregate amount” that has been included “in
gross income with respect to such instrument” will exceed the sum of (1) all
interest paid on the instrument and (2) the product of the instrument's issue
price and yield to maturity. For purposes of the latter test, it is
assumed that each interest payment will be made on the last day permitted under
the instrument. A payment in the form of stock or another obligation of the
issuer or a related person is treated as made only when the stock or other
obligation is required to be redeemed for cash or property other than stock and
debt.
In
addition, if notes are treated as AHYDOs, then the issuer may permanently be
denied a deduction for a portion of the original issue discount on such notes
and may claim an interest deduction as to the remainder of the original issue
discount only when such portion is paid. To the extent that the issuer is denied
a deduction for a portion of the original issue discount, that portion may be
treated as a dividend to corporate holders of such notes, which may be entitled
to a dividends-received deduction for such amount.
The
determination of whether the AHYDO rules will apply is complex. It is
not yet possible to determine whether the AHYDO rules will apply to the New
Senior Notes. Moreover, since the applicable federal rate to likely
to be different if and when additional New Senior Notes might be issued, it is
impossible to determine how the AHYDO rules will apply to each such note, when
issued. An exception to the AHYDO rules was provided in the American
Recovery and Reinvestment Act of 2009, but Debtors do not expect the New Senior
Notes to qualify as the exception does not apply to any obligation the interest
of which is interest from contingent debt instruments as described in IRC
section 871(h)(4). As the New Senior Notes will be treated as
contingent payment debt instruments under the CPDI Regulations, it is also
anticipated that the New Notes would be treated as a contingent debt instruments
as described in IRC section 871(h)(4).
104
|
(c)
|
Information
Reporting and Backup
Withholding
|
Payments
of Allowed Claims under the Plan (including payments and distributions to the
Plan Trust) may be subject to applicable information reporting and backup
withholding (at the applicable rate). Backup withholding is not an
additional tax. Amounts withheld under the backup withholding rules may be
credited against a holder’s United States federal income tax liability, and a
holder may obtain a refund of any excess amounts withheld under the backup
withholding rules by filing an appropriate claim for refund with the Internal
Revenue Service (generally, a United States federal income tax
return).
ARTICLE
13
FINANCIAL
INFORMATION
13.1.
|
Historical Financial
Statements
|
An
analysis of the Company’s financial condition appears in the financial
statements prepared by the Company for the year ended December 31, 2008
(attached hereto as Exhibit C) and for the quarter ended September 30, 2009
(attached hereto as Exhibit D). These financial statements were
obtained from the Company’s filings with the Securities and Exchange Commission
(the “SEC”).
The
Company is required to file monthly operating reports in the Reorganization
Cases and such information is publicly available. In addition,
Congoleum continues to make filings required by the Securities Exchange Act of
1934, as amended.
ARTICLE
14
SOURCES
OF INFORMATION PROVIDED AND
THE
ACCOUNTING METHOD USED
14.1.
|
Sources of
Information
|
The
information set forth in this Disclosure Statement was provided by and/or
prepared in consultation with the Company and/or is based on publicly available
information.
14.2.
|
Accounting
Method
|
The
Company maintains its books and records on an accrual basis, in accordance with
generally accepted accounting principles. The financial statements of the
Company have been audited by the accounting firm of Ernst & Young LLP
through December 31, 2008.
RECOMMENDATION
AND CONCLUSION
The
Plan Proponents recommend that all holders of Claims in Classes 4, 6, 7, 8 and 9
vote to accept the Plan, and urges each of them to evidence such acceptance and
approval, by instructing the holder of any proxy for them to vote to accept the
Plan on their behalf, or by returning their ballots so that they will be
received on or before the Voting Deadline.
In
the view of the Plan Proponents, the Plan provides the best available
alternative for maximizing the distributions that holders of Asbestos Claims and
other unsecured claims will receive from the Estates.
The
undersigned has executed this Disclosure Statement as of the 22nd day of
October, 2009.
105
Respectfully submitted, | |||
CONGOLEUM
CORPORATION
|
|||
By:
|
_______________________________ | ||
Name: Howard
N. Feist III
|
|||
Title: Chief
Financial Officer and Secretary
|
|||
CONGOLEUM
SALES, INC.
|
|||
By:
|
_______________________________ | ||
Name: Howard
N. Feist III
|
|||
Title: Vice
President, Treasurer and Secretary
|
|||
CONGOLEUM
FISCAL, INC.
|
|||
:
|
By
|
_______________________________ | |
Name: Howard
N. Feist III
|
|||
Title: Vice
President, Treasurer and Secretary
|
PILLSBURY
WINTHROP SHAW PITTMAN LLP
1540
Broadway
New
York, NY 10033-4039
Richard
L. Epling
Robin
L. Spear
Kerry
A. Brennan
|
OKIN,
HOLLANDER & DELUCA, LLP
Parker
Plaza
400
Kelby Street
Fort
Lee, NJ 07024
Paul
S. Hollander
James
J. DeLuca
|
Attorneys
for the Debtors
|
ASBESTOS
CLAIMANTS’ COMMITTEE
|
||
By:
|
_______________________________ | |
Name: Ronald E.
Reinsel
|
||
Title: Counsel for
the Asbestos Claimants’ Committee
|
CAPLIN
& DRYSDALE, CHTD.
One
Thomas Circle, N.W.
Washington,
D.C. 20005
Peter
Van N. Lockwood
Ronald
Reinsel
|
GOLDSTEIN
ISAACSON, PC
100
Morris Avenue, 3rd Floor
Springfield,
NJ 07081
Nancy
Isaacson
|
Attorneys
for the Asbestos Claimants’
Committee
|
BONDHOLDERS’
COMMITTEE
|
|||
By:
|
_______________________________ | ||
Name: Paul
Kunz
|
|||
Title: Authorized
representative of Deutsche
Asset Management, not in its
individual or
principal capacity, but solely in
its capacity
as Chair of the Official
Committee of
Bondholders
|
106
AKIN
GUMP STRAUSS HAUER & FELD LLP
One
Bryant Park
New
York, NY 10036
Michael
S. Stamer
AKIN
GUMP STRAUSS HAUER & FELD LLP
1333
New Hampshire Avenue, N.W.
Washington
D.C. 20036
James
R. Savin
David
M. Dunn
Joanna
F. Newdeck
|
TEICH
GROH
691
State Highway 33
Trenton,
NJ 08619
Michael
A. Zindler
|
Attorneys
for the Official Committee of Bondholders
|
107
Exhibit A to the
Plan
Asbestos
Property Damage Insurance Policies
Exhibit B to the
Plan
Insurance
Assignment Agreement
EXHIBIT
B TO THE PLAN
INSURANCE ASSIGNMENT
AGREEMENT
This INSURANCE ASSIGNMENT AGREEMENT
(this "Agreement") is
made as of
[ ]
by and among Congoleum Corporation, Congoleum Sales, Inc. and Congoleum Fiscal,
Inc. (collectively, the "Insurance Contributors") and
the Plan Trust. Capitalized terms used herein without definition shall have the
meanings given to such terms in the Second Amended Joint Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code of the Debtors, the Official Asbestos
Claimants’ Committee and the Official Committee of Bondholders for Congoleum
Corporation, et al.
dated as of October 22, 2009 (as amended, modified or supplemented from time to
time in accordance with the terms thereof, the "Plan").
WHEREAS, to protect themselves from
certain risks resulting from their businesses, the Insurance Contributors
purchased liability insurance policies;
WHEREAS, numerous individuals, business
organizations, and other persons have asserted asbestos-related claims against
Congoleum and certain affiliated entities;
WHEREAS, on December 31, 2003,
Congoleum and certain affiliated entities filed voluntary petitions for relief
under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy
Court for the District of New Jersey, and as of August 17, 2009, the United
States District Court for the District of New Jersey withdrew the reference from
the Bankruptcy Court pursuant to 28 U.S.C. § 157(d) and assumed authority over
the reorganization cases;
WHEREAS, the Plan was confirmed on
[ ],
and has become effective;
WHEREAS, the Plan provides that the
Insurance Contributors will assign the Asbestos Insurance Rights to the Plan
Trust;
WHEREAS, the Insurance Contributors
wish to implement the terms of the Plan; and
WHEREAS, the Insurance Contributors are
receiving good and valuable consideration in exchange for the transfers, grants,
assignments, and promises made in this Agreement, the receipt and sufficiency of
which is acknowledged and agreed;
NOW, THEREFORE, subject to and on the
terms and conditions herein set forth, the Insurance Contributors and the Plan
Trust hereby agree as follows:
1
EXHIBIT
B TO THE PLAN
I. ASSIGNMENT
TO THE PLAN TRUST
A. Effective
upon the Effective Date, the Insurance Contributors hereby irrevocably transfer
and assign to the Plan Trust any and all of their Asbestos Insurance Rights and
all rights and claims asserted in the pending Coverage Litigation (including
without limitation, except as otherwise expressly provided in the Plan, cash and
other proceeds of all such rights and claims received by any Insurance
Contributor and/or any Debtor during the pendency of the Reorganization Cases),
free and clear of all Claims, Liens and encumbrances, provided, however, that such
transfer and assignment of the Asbestos Insurance Rights shall be subject to the
terms of the Plan and the Plan Trust Agreement.
B. The
Plan Trust and the Insurance Contributors intend that the assignments made
pursuant to this Agreement be made to the maximum extent permitted under
applicable law.
C. The
assignments made pursuant to this Agreement are not assignments of any insurance
policy.
D. Upon
request by the Plan Trust and at the cost of the Plan Trust (as provided in
Section II herein), an Insurance Contributor or Reorganized Debtor, as
applicable, shall (i) provided that the Plan Trust provides reasonable evidence
of its ability to promptly pay all costs incurred in such effort, use its best
efforts to pursue any of the Asbestos Insurance Rights for the benefit of and to
the fullest extent required by the Plan Trust, and (ii) except as otherwise
expressly provided in the Plan, immediately transfer any amounts recovered under
or on account of any of the Asbestos Insurance Rights to the Plan Trust; provided, however, that while
any such amounts are held by or under the control of an Insurance Contributor or
Reorganized Debtor, such amounts (and any interest earned thereon) shall be
segregated and held in trust for the benefit of the Plan Trust.
II. COOPERATION
A. To
the fullest extent permitted by applicable law, the Insurance Contributors
and/or Reorganized Debtors, as the case may be, shall provide the Plan Trust
with such cooperation as the Plan Trust may reasonably request in connection
with the pursuit by the Plan Trust of the Asbestos Insurance
Rights. Such cooperation shall include, but not be limited to, making
their books, records, employees, agents and professionals available to the Plan
Trust. The Plan Trust shall reimburse the Insurance Contributors
and/or Reorganized Debtors, as the case may be, for their reasonable
out-of-pocket costs and expenses (including reasonable attorneys' and
consultants' fees) incurred (i) in connection with providing the cooperation
described in the preceding sentences, and (ii) in connection with the pursuit of
Asbestos Insurance Rights as provided in Section I.D.(i) above. Such
reimbursement shall be paid promptly following request for reimbursement
accompanied by appropriate documentation.
2
EXHIBIT
B TO THE PLAN
B. Notwithstanding
anything in the Plan Documents to the contrary, the Insurance Contributors
and/or Reorganized Debtors, as the case may be, as part of every settlement with
any one or more London Market Insurer(s) (including Equitas), hereby agree that
the Plan Trust, in its sole discretion, may effectuate a complete policy
buy-back of any policies subscribed by any one or more London Market insurer(s)
(following which the Insurance Contributors and/or Reorganized Debtors shall
retain no coverage with respect to such insurer(s)). The Insurance
Contributors and/or Reorganized Debtors, as the case may be, hereby waive their
rights to any proceeds of all such settlements, and all proceeds of each such
settlement shall be held for the benefit of Asbestos Claimants in accordance
with the Plan Documents.
C. The
Insurance Contributors and/or Reorganized Debtors, as the case may be, upon
request of the Plan Trustee, shall evaluate additional requests for complete
policy commutations. To the extent that additional complete policy
commutations do not materially impair the Insurance Contributors' and/or
Reorganized Debtors', as the case may be, ongoing need for insurance coverage
for potential non-asbestos liabilities and such additional releases are
reasonably necessary to permit the realization of asbestos-related insurance
settlements, the Insurance Contributors and/or Reorganized Debtors, as the case
may be, will cooperate with the Plan Trustee to provide additional policy
commutations. Such additional policy commutations may be conditioned
upon a reasonable allocation of policy proceeds or other provisions to protect
Congoleum from potential non-asbestos liabilities as may be agreed between the
Insurance Contributors and/or Reorganized Debtors, as the case may be, and the
Plan Trustee.
D. The
Insurance Contributors and/or Reorganized Debtors, as the case may be, agree
that their collection or use, if any, of proceeds of any Asbestos Insurance
Policy, to the extent permitted under the Plan Documents, (i) will not reduce
any aggregate, per occurrence or other policy limit of any Asbestos Insurance
Policy that is or could potentially be applicable to Asbestos Claims, and (ii)
will not in any way interfere with the Plan Trust's exercise of any Asbestos
Insurance Rights.
III. MISCELLANEOUS
A. Binding
Effect, Assignment, Third Party Beneficiaries. This Agreement
shall be binding on each of the parties hereto and their respective successors
and assigns. This Agreement is not intended, and shall not be
construed, deemed or interpreted, to confer on any person or entity not a party
hereto any rights or remedies hereunder.
B. Entire
Agreement; Amendment; Waivers. This Agreement, the Plan and the other
Plan Documents shall constitute the entire agreement and understanding among the
parties to this Agreement with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, among the
parties hereto relating to the subject matter of this Agreement. This
Agreement may not be amended or modified, and no provision hereof may be waived,
except by agreement in writing signed by the party against whom enforcement of
any such amendment, modification or waiver is sought.
3
EXHIBIT
B TO THE PLAN
C. Governing
Law. This Agreement and the rights and obligations of the parties
hereto under this Agreement shall be governed by and construed and enforced in
accordance with the substantive laws of the State of Delaware, without regard to
any conflicts of law provisions thereof that would result in the application of
the laws of any other jurisdiction.
D. Counterparts. This
Agreement may be executed in multiple counterparts, each of which will be an
original, but all of which together will constitute one and the same
agreement.
IN
WITNESS WHEREOF, the parties hereto have caused this Insurance Assignment
Agreement to be duly executed by their respective duly authorized
representatives of the date first above written.
CONGOLEUM
CORPORATION
By:
______________________________
Its:
______________________________
CONGOLEUM
SALES, INC.
By:
______________________________
Its:
______________________________
CONGOLEUM
FISCAL, INC.
By:
______________________________
Its:
______________________________
CONGOLEUM
PLAN TRUST
By: _____________________________
Trustee:_____________________________
4
Exhibit C to the
Plan
(Reserved)
Exhibit D to the
Plan
Indenture
(To
be filed as part of the Plan Supplement)
Exhibit E to the
Plan
Plan
Trust Agreement
TABLE
OF CONTENTS
|
||
Page
|
||
SECTION
I
|
AGREEMENT
OF TRUST
|
2
|
1.1
|
Creation
and Name.
|
2
|
1.2
|
Purpose
|
2
|
1.3
|
Transfer
of Assets.
|
2
|
1.4
|
Acceptance
of Assets and Assumption of Liabilities.
|
2
|
SECTION
II
|
POWERS
AND TRUST ADMINISTRATION
|
3
|
2.1
|
Powers
|
3
|
2.2
|
General
Administration
|
6
|
2.3
|
Claims
Administration
|
9
|
SECTION
III
|
ACCOUNTS,
INVESTMENTS AND PAYMENTS
|
9
|
3.1
|
Accounts.
|
9
|
3.2
|
Investments.
|
10
|
3.3
|
Source
of Payments
|
12
|
3.4
|
Payments
of Allowed Asbestos Property Damage Claims
|
12
|
3.5
|
Payment
of Plan Trust Expenses
|
13
|
3.6
|
Indemnification
Payments.
|
13
|
SECTION
IV
|
PLAN
TRUSTEE AND DELAWARE TRUSTEE
|
14
|
4.1
|
Number.
|
14
|
4.2
|
Term
of Service
|
14
|
4.3
|
Appointment
of Successor Plan Trustee
|
14
|
4.4
|
Liability
of Plan Trustee, Delaware Trustee, Officers and Employees.
|
15
|
4.5
|
Compensation
and Expenses of Plan Trustee.
|
15
|
4.6
|
Indemnification
of Plan Trustee and Additional Indemnitees.
|
15
|
4.7
|
Lien.
|
17
|
4.8
|
Plan
Trustee's Employment of Experts; Delaware Trustee's Employment of
Counsel.
|
17
|
4.9
|
Plan
Trustee’s Independence.
|
18
|
4.10
|
Bond
|
18
|
4.11
|
Delaware
Trustee.
|
18
|
-i-
TABLE
OF CONTENTS
|
||
(continued)
|
||
Page
|
||
SECTION
V
|
PLAN
TRUST ADVISORY COMMITTEE
|
19
|
5.1
|
Members.
|
19
|
5.2
|
Duties.
|
19
|
5.3
|
Consent
of TAC With Respect to Certain Actions.
|
19
|
5.4
|
Term
of Office.
|
19
|
5.5
|
Appointment
of Successor.
|
20
|
5.6
|
TAC’s
Employment of Professionals.
|
20
|
5.7
|
Compensation
and Expenses of the TAC.
|
21
|
5.8
|
Procedures
for Consultation With and Obtaining the Consent of the TAC
|
21
|
(a)
Consultation Process
|
21
|
|
(b)
Consent Process.
|
21
|
|
5.9
|
Copies
to the TAC.
|
22
|
SECTION
VI
|
THE
FUTURES REPRESENTATIVE
|
22
|
6.1
|
Duties.
|
22
|
6.2
|
Term
of Office.
|
22
|
6.3
|
Appointment
of Successor.
|
23
|
6.4
|
Futures
Representative’s Employment of Professionals
|
23
|
6.5
|
Compensation
and Expenses of the Futures Representative
|
24
|
6.6
|
Procedures
for Consultation with and Obtaining the Consent of the Futures Representative
|
24
|
(a)
Consultation Process
|
24
|
|
(b)
Consent Process.
|
24
|
|
6.7
|
Copies
to Futures Representative
|
25
|
SECTION
VII
|
GENERAL
PROVISIONS
|
25
|
7.1
|
Irrevocability.
The Plan Trust is irrevocable.
|
25
|
7.2
|
Dissolution.
|
25
|
7.3
|
Amendments.
|
26
|
7.4
|
Meetings
|
27
|
7.5
|
Severability.
|
27
|
7.6
|
Notices.
|
27
|
-ii-
TABLE
OF CONTENTS
|
||
(continued)
|
||
Page
|
||
7.7
|
Successors
and Assigns
|
28
|
7.8
|
Limitation
on Claim Interests for Securities Laws Purposes
|
28
|
7.9
|
Entire
Agreement; No Waiver.
|
29
|
7.10
|
Headings.
|
29
|
7.11
|
Governing
Law.
|
29
|
7.12
|
Settlor
Representative and Cooperation
|
29
|
7.13
|
Dispute
Resolution
|
29
|
7.14
|
Enforcement
and Administration
|
29
|
7.15
|
Effectiveness
|
30
|
7.16
|
Counterpart
Signatures
|
30
|
-iii-
EXHIBIT
E TO PLAN
CONGOLEUM PLAN TRUST
AGREEMENT
This
Congoleum Plan Trust Agreement (this “Plan Trust Agreement”), dated
the date set forth on the signature page hereof and effective as of
[ ], is entered into by
Congoleum Corporation, Congoleum Sales, Inc., and Congoleum Fiscal, Inc.
(collectively referred to as the “Debtors,” “Congoleum,” or the “Settlors”), the debtors and
debtors-in-possession, the Futures Representative, the Asbestos Claimants
Committee (“ACC”), the
Plan Trustee, the Delaware Trustee and the members of the Trust Advisory
Committee (“TAC”)
identified on the signature page hereof and appointed at Confirmation pursuant
to the confirmed Second Amended Joint Plan of Reorganization Under Chapter 11 of
the Bankruptcy Code of the Debtors, the Official Asbestos Claimants’ Committee
and the Official Committee of Bondholders for Congoleum Corporation, et al.
dated October 22, 2009 (the “Plan”), as such Plan may be
amended, modified or supplemented from time to time. All capitalized
terms not otherwise defined herein shall have their respective meanings as set
forth in the Plan, and such definitions are incorporated herein by
reference. All capitalized terms not defined herein or defined in the
Plan, but defined in the Bankruptcy Code or Bankruptcy Rules, shall have the
meanings ascribed to them by the Bankruptcy Code and Bankruptcy Rules, and such
definitions are incorporated herein by reference.
WHEREAS,
at the time of the entry of the order for relief in the Chapter 11 case,
Congoleum was named as a defendant in actions seeking recovery for damages
allegedly caused by the presence of or exposure to asbestos or
asbestos-containing products for which Congoleum, its predecessors, successors
and assigns have legal liability (that is, “Plan Trust Asbestos Claims” as
defined in the Plan); and
WHEREAS,
on December 31, 2003, Congoleum and certain affiliated entities filed voluntary
petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United
States Bankruptcy Court for the District of New Jersey, and as of August 17,
2009, the United States District Court for the District of New Jersey withdrew
the reference from the Bankruptcy Court pursuant to 28 U.S.C. § 157(d) and
assumed authority over the reorganization cases; and
WHEREAS,
the Plan has been confirmed by the District Court; and
WHEREAS,
the Plan provides, inter
alia, for the creation of the Plan Trust; and
WHEREAS,
pursuant to the Plan, the Plan Trust is to use its assets and income to satisfy
all Plan Trust Asbestos Claims; and
WHEREAS,
it is the intent of Congoleum, the Plan Trustee, the ACC, the TAC, and the
Futures Representative that the Plan Trust be administered, maintained, and
operated at all times through mechanisms that provide reasonable assurance that
the Plan Trust will satisfy all Plan Trust Asbestos Claims pursuant to this Plan
Trust Agreement and, to the extent provided therein, the TDP that is attached
hereto as Exhibit A in substantially the same manner, and in strict compliance
with the terms of this Plan Trust Agreement; and
WHEREAS,
pursuant to the Plan, the Plan Trust is intended to qualify as a
“qualified
EXHIBIT
E TO PLAN
settlement
fund” within the meaning of section 1.468B-1 et seq. of the Treasury
Regulations promulgated under section 468B of the Internal Revenue Code (“IRC”); and
WHEREAS,
the District Court has determined that the Plan Trust and the Plan satisfy all
the prerequisites for an injunction pursuant to section 524(g) of the Bankruptcy
Code, and such injunction has been entered in connection with the Confirmation
Order;
NOW,
THEREFORE, it is hereby agreed as follows:
SECTION
I
AGREEMENT
OF TRUST
1.1 Creation and Name.
The Debtors as Settlors hereby create a trust known as the “Congoleum Plan Trust,” which
is the Plan Trust provided for and referred to in the Plan. The Plan
Trustee may transact the business and affairs of the Plan Trust in the name of
the Plan Trust. It is the intention of the parties hereto that the
trust created hereby constitutes a statutory trust under Chapter 38 of title 12
of the Delaware Code, 12 Del. C. § 3801 et seq. (the “Act”) and that this document,
together with the by-laws described herein, constitute the governing instruments
of the Plan Trust. The Plan Trustee and the Delaware Trustee are
hereby authorized and directed to execute and file a Certificate of Trust with
the Delaware Secretary of State in the form attached hereto as Exhibit
B.
1.2 Purpose. The purpose
of the Plan Trust is to assume the liabilities of Congoleum, its predecessors
and successors in interest, for all Plan Trust Asbestos Claims, and to use the
Plan Trust’s assets and income to pay the holders of all Plan Trust Asbestos
Claims in accordance with this Plan Trust Agreement and, other than with respect
to Asbestos Property Damage Claims, the TDP in such a way that such holders of
Plan Trust Asbestos Claims are treated fairly, equitably and reasonably in light
of the limited assets available to satisfy such claims, and to otherwise comply
in all respects with the requirements of a trust set forth in section
524(g)(2)(B) of the Bankruptcy Code. All Plan Trust Asbestos Claims
(other than the Asbestos Property Damage Claims) shall be determined,
liquidated, and paid pursuant to this Plan Trust Agreement and the
TDP. Asbestos Property Damage Claims shall be determined pursuant to
the Plan and paid, if Allowed, pursuant to this Plan Trust
Agreement. In addition, the Plan Trust shall prosecute, settle and
manage the disposition of the Asbestos In-Place Insurance Coverage and
prosecute, settle and manage Asbestos Insurance Actions and Direct
Actions.
1.3 Transfer of Assets.
Pursuant to the Plan, the Plan Trust Assets have been transferred and assigned
to the Plan Trust to settle and discharge all Plan Trust Asbestos
Claims. Pursuant to the Plan, Reorganized Congoleum and others may
also transfer and assign additional assets to the Plan Trust from time to
time. In all events, such assets will be transferred to the Plan
Trust free and clear of any liens or other claims by Congoleum, the Reorganized
Debtors, any creditor, or other entity. Congoleum, the Reorganized Debtors, and
any other transferors shall also execute and deliver such documents to the Plan
Trust as the Plan Trustee reasonably requests to transfer and assign the Plan
Trust Assets to the Plan Trust.
1.4 Acceptance of Assets and
Assumption of Liabilities.
2
EXHIBIT
E TO PLAN
(a) In
furtherance of the purposes of the Plan Trust, the Plan Trustee, on behalf of
the Plan Trust, hereby expressly accepts the transfer and assignment to the Plan
Trust of the Plan Trust Assets in the time and manner as contemplated in the
Plan Documents.
(b) In
furtherance of the purposes of the Plan Trust, the Plan Trustee, on behalf of
the Plan Trust, expressly assumes all liabilities, obligations and
responsibilities relating to all Plan Trust Asbestos Claims. Except
as otherwise provided in this Plan Trust Agreement and the TDP, the Plan Trust
shall have all defenses, cross-claims, offsets, and recoupments, as well as
rights of indemnification, contribution, subrogation, and similar rights,
regarding such Plan Trust Asbestos Claims that Congoleum or the Reorganized
Debtors has or would have had under applicable law. Regardless of the foregoing,
however, a claimant must meet otherwise applicable federal, state and foreign
statutes of limitations and repose, except that a claimant may establish that
such statutes were tolled by operation of law or as provided in the
TDP.
(c) No
provision herein or in the TDP shall be construed to mandate distributions on
any claims or other actions that would contravene the Plan Trust’s compliance
with the requirements of a qualified settlement fund within the meaning of
section 1.468B-1 et seq. of the Treasury Regulations promulgated under section
468B of the IRC.
(d) The
Plan Trust shall indemnify, defend and hold harmless each of the Debtors, the
Reorganized Debtors and their past, present and future Representatives for any
expenses, costs and fees (including reasonable attorneys’ fees and costs, but
excluding any such expenses, costs and fees incurred prior to the Effective
Date), judgments, settlements or other liabilities arising from or incurred in
connection with, any Plan Trust Asbestos Claim, including but not limited to
indemnification or contribution for Plan Trust Asbestos Claims prosecuted
against the Reorganized Debtors after the Effective Date but excluding (i) any
amounts paid prior to or on the Effective Date by the Debtors or their past or
present Representatives and (ii) any amounts paid or incurred by any Reorganized
Debtor or its Representatives, whether before or after the Effective Date, in
connection with defending, objecting to, or otherwise related to any proceedings
to determine whether an Asbestos Property Damage Claim is or should be
Allowed.
(e) Nothing
in this Plan Trust Agreement shall be construed in any way to limit the scope,
enforceability, or effectiveness of the Injunctions issued in connection with
the Plan or the Plan Trust’s assumption of all liability for Plan Trust Asbestos
Claims, subject to the provisions of Section 1.4(b) above.
SECTION
II
POWERS
AND TRUST ADMINISTRATION
2.1 Powers.
(a) The
Plan Trustee is and shall act as a fiduciary to the Plan Trust in accordance
with the provisions of this Plan Trust Agreement and the Plan. The
Plan Trustee shall, at all times, administer the Plan Trust and the Plan Trust
Assets in accordance with the purposes set forth in Section 1.2 above. Subject
to the limitations set forth in this Plan Trust Agreement, the Plan Trustee
shall have the power to take any and all actions that, in the
3
EXHIBIT
E TO PLAN
judgment
of the Plan Trustee, are necessary or proper to fulfill the purposes of the Plan
Trust, including, without limitation, each power expressly granted in this
Section 2.1, any power reasonably incidental thereto, and any trust power now or
hereafter permitted under the laws of the State of New Jersey.
(b) Except
as required by applicable law or otherwise specified herein, the Plan Trustee
need not obtain the order or approval of any court in the exercise of any power
or discretion conferred hereunder.
(c) Without
limiting the generality of Section 2.1(a) above, and except as limited below,
the Plan Trustee shall have the power to:
(i) receive
and hold the Plan Trust Assets, vote the Plan Trust Common Stock, and exercise
all rights with respect to, and sell, any securities issued by any of the
Reorganized Debtors that are included in the Plan Trust Assets;
(ii) invest
the monies held from time to time by the Plan Trust;
(iii) sell,
transfer, or exchange any or all of the Plan Trust Assets at such prices and
upon such terms as the Plan Trustee may consider proper, consistent with the
other terms of this Plan Trust Agreement;
(iv) enter
into leasing and financing agreements with third parties to the extent such
agreements are reasonably necessary to permit the Plan Trust to
operate;
(v) pay
liabilities and expenses of the Plan Trust, including, but not limited to, Plan
Trust Expenses;
(vi) establish
such funds, reserves and accounts within the Plan Trust estate, as deemed by the
Plan Trustee to be useful in carrying out the purposes of the Plan
Trust;
(vii) sue
and be sued and participate, as a party or otherwise, in any judicial,
administrative, arbitrative, or other proceeding;
(viii) establish,
supervise and administer the Plan Trust in accordance with the TDP and the terms
thereof;
(ix) appoint
such officers and hire such employees and engage such legal, financial,
accounting, investment, auditing and forecasting, and other consultants and
agents as the business of the Plan Trust requires, and delegate to such persons
such powers and authorities as the fiduciary duties of the Plan Trustee permit
and as the Plan Trustee, in his or her discretion, deems advisable or necessary
in order to carry out the terms of the Plan Trust;
4
EXHIBIT
E TO PLAN
(x) pay
employees, legal, financial, accounting, investment, auditing, and forecasting,
and other consultants, advisors, and agents, including those engaged by the Plan
Trust in connection with its alternative dispute resolution activities,
reasonable compensation;
(xi) compensate
the Plan Trustee, the TAC members, the Delaware Trustee and the Futures
Representative as provided below, and their employees, legal, financial,
accounting, investment and other advisors, consultants, independent contractors,
and agents, and reimburse the Plan Trustee, the TAC members, the Delaware
Trustee and the Futures Representative all reasonable out-of-pocket costs and
expenses incurred by such persons in connection with the performance of their
duties hereunder;
(xii) execute
and deliver such instruments as the Plan Trustee considers proper in
administering the Plan Trust;
(xiii) enter
into such other arrangements with third parties as are deemed by the Plan
Trustee to be useful in carrying out the purposes of the Plan Trust, provided
such arrangements do not conflict with any other provision of this Plan Trust
Agreement;
(xiv) in
accordance with Section 4.6 below, defend, indemnify and hold harmless (and
purchase insurance indemnifying) (A) the Plan Trustee and (B) the TAC, the
Futures Representative, the officers and employees of the Plan Trust, and any
agents, advisors and consultants of the Plan Trust, the TAC, or the Futures
Representative (the “Additional
Indemnitees”), to the fullest extent that a corporation or statutory
trust organized under the law of the Plan Trust’s situs is from time to time
entitled to indemnify and/or insure its directors, trustees, officers,
employees, agents, and representatives;
(xv) indemnify
the Entities to be indemnified in accordance with Section 1.4 and Section 4.6
and purchase insurance or make other such arrangements for the Plan Trust and
those Entities for whom the Plan Trust has an indemnification obligation
hereunder;
(xvi) delegate
any or all of the authority herein conferred with respect to the investment of
all or any portion of the Plan Trust Assets to any one or more reputable
individuals or recognized institutional investment advisors or investment
managers without liability for any action taken or omission made because of any
such delegation, except as provided in Section 4.4 below;
(xvii) consult
with the Reorganized Debtors, the TAC and the Futures Representative at such
times and with respect to such issues relating to the conduct of the Plan Trust
as the Plan Trustee may consider necessary, appropriate or
desirable;
(xviii) make,
pursue (by litigation or otherwise), collect, compromise or settle, in the name
of the Plan Trust or the name of any of the Reorganized
5
EXHIBIT
E TO PLAN
Debtors,
any claim, right, action, or cause of action included in the Plan Trust Assets
related to Plan Trust Asbestos Claims and Plan Trust Assets to the extent not
compromised or settled under the Plan; and insurance recoveries, before any
court of competent jurisdiction; provided that settlement of
actions before the District Court require the approval of the District Court as
applicable after notice to Reorganized Congoleum; and
(xix) to
pay any agreed fees and costs incurred by a claims-handling entity (“Claims
Handling Fee”) in connection with processing and qualifying claims for inclusion
into the Claimant Agreement to the extent that such Claims Handling Fee has not
been reimbursed or paid to the Debtors or Reorganized Debtors, as applicable,
prior to the Effective Date.
|
(d)
|
The
Plan Trustee shall not have the power to guarantee any debt of other
persons.
|
|
(e)
|
The
Plan Trustee shall give the TAC, the Futures Representative and
Reorganized Congoleum prompt notice of any act performed or taken pursuant
to Sections 2.1(c)(i), (iii), (vii), or (xv) above, and any act proposed
to be performed or taken pursuant to Section 2.2(f)
below.
|
2.2 General
Administration.
(a) The
Plan Trustee shall adopt, with the consent of the TAC and the Futures
Representative, and act in accordance with the Plan Trust Bylaws. To
the extent not inconsistent with the terms of this Plan Trust Agreement, the
Plan Trust Bylaws shall govern the affairs of the Plan Trust. In the event of an
inconsistency between the Plan Trust Bylaws and this Plan Trust Agreement, this
Plan Trust Agreement shall govern.
(b) The
Plan Trustee shall (i) timely file such income tax and other returns and
statements and shall timely pay all taxes required to be paid, (ii) comply with
all withholding obligations, as required under the applicable provisions of the
IRC and of any state law and the regulations promulgated thereunder, (iii) meet
without limitation all requirements necessary to qualify and maintain
qualification of the Plan Trust as a qualified settlement fund within the
meaning of section 1.468B-1 et
seq. of the Treasury Regulations promulgated under section 468B of the
IRC, and (iv) take no action that could cause the Plan Trust to fail to qualify
as a qualified settlement fund within the meaning of section 1.468B-1 et seq. of the Treasury
Regulations promulgated under section 468B of the IRC.
(c) The
Plan Trustee shall timely account to the District Court, regardless of whether
the Reorganization Cases are closed, as follows:
(i) The
Plan Trustee shall cause to be prepared and filed with the District Court Court,
as soon as available, and in any event within one hundred and twenty (120) days
following the end of each fiscal year, an annual report containing financial
statements of the Plan Trust (including, without limitation, a balance sheet of
the Plan Trust as of the end of such fiscal year and a statement of operations
for such fiscal year) audited by a firm of independent certified
public
6
EXHIBIT
E TO PLAN
accountants
selected by the Plan Trustee and accompanied by an opinion of such firm as to
the fairness of the financial statements’ presentation of the cash and
investments available for the payment of claims and as to the conformity of the
financial statements with generally accepted accounting principles. The Plan
Trustee shall provide a copy of such report to the TAC, the Futures
Representative, and Reorganized Congoleum when such report is so filed with the
District Court.
(ii) Simultaneously
with delivery of each set of financial statements referred to in Section
2.2(c)(i) above, the Plan Trustee shall cause to be prepared and filed with the
District Court a report containing a summary regarding the number and type of
Plan Trust Asbestos Claims disposed of, and the amount paid in respect of such
Plan Trust Asbestos Claims, during the period covered by the financial
statements. The Plan Trustee shall provide a copy of such report to
the TAC, the Futures Representative and Reorganized Congoleum when such report
is filed.
(iii) All
materials required to be filed with the District Court by this Section 2.2(c)
shall be available for inspection by the public in accordance with procedures
established by the Bankruptcy Court and shall be filed with the Office of the
United States Trustee for the District of New Jersey.
(d) The
Plan Trustee shall cause to be prepared as soon as practicable prior to the
commencement of each fiscal year a budget and cash flow projections covering
such fiscal year and the succeeding four fiscal years. The budget and
cash flow projections shall include a determination of the Maximum Annual
Payment pursuant to Section 2.5 of the TDP and the Claims Payment Ratio pursuant
to Section 2.6 of the TDP. The Plan Trustee shall provide a copy of the budget
and cash flow projections to the TAC and the Futures
Representative.
(e) The
Plan Trustee shall consult with the TAC and the Futures
Representative
(i) on the general implementation and administration of the Plan Trust; (ii) on
the general implementation and administration of the TDP; and (iii) on such
other matters as may be required under this Plan Trust Agreement and the
TDP.
(f) The
Plan Trustee shall be required to obtain the consent of the TAC and the Futures
Representative pursuant to the Consent Process set forth in Section 5.8(b) and
6.6(b) below, in addition to any other instances elsewhere enumerated, in
order:
(i) to
determine and thereafter redetermine the Payment Percentage (defined in Section
5.1 of the TDP)
described in Section 2.4 of the TDP as provided in Section 4.2 of the
TDP;
(ii) to
change the Claims Payment Ratio (as defined in Section 2.6 of the TDP) pursuant
to Section 2.6 of the TDP;
(iii) to
change the Disease Levels, Scheduled Values and/or Medical/Exposure Criteria set
forth in Section 6.2(a)(3) of the TDP, and/or the
7
EXHIBIT
E TO PLAN
Average
Values and/or Maximum Values set forth in Section 6.2(b)(3) of the
TDP;
(iv) to
establish and/or to change the Claims Materials to be provided holders of Plan
Trust Asbestos Claims under Section 7.1 of the TDP;
(v) to
require that claimants provide additional kinds of medical and/or exposure
evidence pursuant to Sections 6.6(b) and 8.1 of the TDP;
(vi) to
adopt or thereafter change the form of release to be provided pursuant to
Section 8.8 of the TDP;
(vii) amend
any provision of the TDP in accordance with the terms thereof;
(viii) to
adopt the Plan Trust Bylaws in accordance with Section 2.2, above, or thereafter
to amend the Plan Trust Bylaws in accordance with the terms
thereof;
(ix) to
terminate the Plan Trust pursuant to Section 7.2 below;
(x) to
settle the liability of any insurer under any insurance policy or legal action
related thereto;
(xi) to
change the compensation and/or per diem of the members of the TAC, the Futures
Representative or the Plan Trustee, other than to reflect cost-of-living
increases or changes approved by the District Court as otherwise provided
herein;
(xii) to
take structural or other actions to minimize any tax on the Plan Trust
Assets;
(xiii) to
vote the stock of any Reorganized Debtor for purposes of appointing members of
the Board of Directors of such Reorganized Debtor;
(xiv) to
acquire an interest in or to merge any asbestos claims resolution organization
formed by the Plan Trust with another asbestos claims resolution organization
that is not specifically created by this Plan Trust Agreement or the TDP, or to
contract with another asbestos claims resolution organization or other entity
that is not specifically created by this Plan Trust Agreement or the TDP, or
permit any other party to join in any asbestos claims resolution organization
that is formed by the Plan Trust pursuant to this Plan Trust Agreement or the
TDP; provided that such
merger, acquisition, contract or joinder shall not (a) subject any Reorganized
Debtors, or any successors in interest thereto, to any risk of having any Plan
Trust Asbestos Claim asserted against it or them, or (b) otherwise jeopardize
the validity or enforceability of the section 524(g) injunction; and provided further that the
terms of such merger will require the surviving organization to make decisions
about the allowability and value of
8
EXHIBIT
E TO PLAN
claims
in accordance with Section 2.1 of the TDP which requires that such decisions be
based on the provisions of the TDP;
(xv) to
sell, pledge, transfer or otherwise dispose of any securities issued by any
Reorganized Debtor subject to any restrictions imposed by the Plan;
or
(g) The
Plan Trustee shall meet with the TAC and the Futures Representative no less
often than quarterly during the first two years following the Effective Date and
thereafter at least two times per year. The Plan Trustee shall meet
in the interim with the TAC and the Futures Representative when so requested by
either at mutually convenient times and locations.
(h) The
Plan Trustee, upon notice from the Futures Representative or the TAC requesting
consideration of one or more issues, shall at the Plan Trust’s next regular
meeting, if practicable in view of pending business, or, if appropriate, at a
specially called meeting, place such issue(s) on the agenda and consider such
issues.
(i) Periodically,
but not less often than once a year, the Plan Trustee shall make available to
the Futures Representative, the TAC and any holder (or the personal
representative or attorney of such holder) of a Plan Trust Asbestos Claim (other
than any Asbestos Property Damage Claim) on file with the Plan Trust that has
not been paid in accordance with, or finally rejected pursuant to, the TDP the
number of claims by disease levels that have been resolved both by individual
review and by arbitration, as well as by trial, indicating the amounts of the
awards and the averages of the awards by jurisdiction pursuant to Section 8.10
of the TDP.
2.3 Claims
Administration. The Plan Trustee shall promptly proceed to
implement the TDP.
SECTION
III
ACCOUNTS,
INVESTMENTS AND PAYMENTS
3.1 Accounts.
(a) The
Plan Trustee may, from time to time, create such accounts and reserves within
the Plan Trust estate as it may deem necessary, prudent, or useful in order to
provide for the payment of Plan Trust Expenses and payment of Plan Trust
Asbestos Claims subject to the TDP and may, with respect to any such account or
reserve, restrict the use of monies therein. In addition, the Plan Trustee shall
establish, as soon as practicable after the Effective Date, two separate and
distinct accounts (maintained in separate banking and/or other accounts
including accounts established by book entry) to be designated the “Asbestos Personal Injury Claim
Sub-Account” and the “Asbestos Property Damage Claim
Sub-Account,” and none of the assets held in the Asbestos Personal Injury
Claim Sub-Account or Asbestos Property Damage Claim Sub-Account shall be
commingled with assets held by the Plan Trust in any other account. In addition,
separate books and records shall be kept with respect to each of the Asbestos
Personal Injury Claim Sub-Account and Asbestos Property Damage Claim
Sub-Account.
9
EXHIBIT
E TO PLAN
(b) All
Plan Trust Assets and other property held by or received by the Plan Trust
(other than the Asbestos Property Damage Insurance Rights and all proceeds
thereof and earnings thereon, shall be held solely in the Asbestos Personal
Injury Claim Sub-Account and shall be used to pay Plan Trust Asbestos Claims
that are Asbestos Personal Injury Claims (“Plan Trust PI Asbestos
Claims”), as well as Plan Trust Expenses and indemnification costs or
expenses, in either case related to Plan Trust PI Asbestos Claims.
(c) All
amounts received by the Plan Trust in respect of the Asbestos Property Damage
Insurance Rights, and all proceeds thereof and earnings thereon, shall be held
solely in the Asbestos Property Damage Claim Sub-Account and shall be used to
pay Allowed Asbestos Property Damage Claims, as well as Plan Trust Expenses and
indemnification costs or expenses, in either case related to Asbestos Property
Damage Claims. Notwithstanding the foregoing, the Plan Trustee may transfer
monies from the Asbestos Property Damage Claim Sub-Account to the Asbestos
Personal Injury Claim Sub-Account, from time to time, to the extent that the
funds in the Asbestos Property Damage Claim Sub-Account exceed the aggregate
face amount of all unpaid Asbestos Property Damage Claims filed prior to the
Asbestos Property Damage Claim Bar Date and a reasonable reserve for Plan Trust
Expenses and indemnification costs or expenses, in either case related to
Asbestos Property Damage Claims.
3.2 Investments.
Investment of monies held in the Plan Trust shall be administered in the manner
in which individuals of ordinary prudence, discretion, and judgment would act in
the management of their own affairs, subject to the following limitations and
provisions:
(a) The
Plan Trust shall not acquire, directly or indirectly, equity in any entity
(other than the Reorganized Debtors or any successor to a Reorganized Debtor) or
business enterprise if, immediately following such acquisition, the Plan Trust
would hold more than 5% of the equity in such entity or business
enterprise. The Plan Trust shall not hold, directly or indirectly,
more than 10% of the equity in any entity (other than the Reorganized Debtors or
any successor to a Reorganized Debtor) or business enterprise.
(b) Excluding
any securities issued by the Debtors or the Reorganized Debtors or any successor
to a Reorganized Debtor, the Plan Trust shall not acquire or hold any long-term
debt securities unless (i) such securities are Plan Trust Assets under the Plan,
(ii) such securities are rated “Baa” or higher by Moody’s, “BBB” or higher by
Standard & Poor’s (“S&P’s”), or have been
given an equivalent investment grade rating by another nationally recognized
statistical rating agency, or (iii) have been issued or fully guaranteed as to
principal and interest by the United States of America or any agency or
instrumentality thereof.
(c) The
Plan Trust shall not acquire or hold for longer than ninety (90) days any
commercial paper unless such commercial paper is rated “Prime 1” or higher by
Moody’s or “A 1” or higher by S&P’s, or has been given an equivalent rating
by another nationally recognized statistical rating agency.
(d) Excluding
any securities issued by the Debtors or the Reorganized Debtors or any successor
to a Reorganized Debtor, or transferred to the Plan Trust in accordance with the
provisions of the Plan, the Plan Trust shall not acquire or hold any common or
preferred stock or convertible securities unless such stock or securities are
rated “A” or higher by Moody’s or “A”
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or
higher by S&P’s, or have been given an equivalent investment grade rating by
another nationally recognized statistical rating agency.
(e) The
Plan Trust shall not acquire any debt securities or other instruments issued by
any entity (other than debt securities or other instruments issued or fully
guaranteed as to principal and interest by the United States of America or any
agency or instrumentality thereof and other than debt securities or other
instruments of the Reorganized Debtors or any successor to a Reorganized Debtor)
if, following such acquisition, the aggregate market value of all debt
securities and instruments issued by such entity held by the Plan Trust would
exceed 2% of the aggregate value of the Plan Trust’s assets. The Plan
Trust shall not hold any debt securities or other instruments issued by any
entity (other than debt securities or other instruments issued or fully
guaranteed as to principal and interest by the United States of America or any
agency or instrumentality thereof and other than debt securities or other
instruments of the Reorganized Debtors or any successor to a Reorganized Debtor)
to the extent that the aggregate market value of all securities and instruments
issued by such entity held by the Plan Trust would exceed 5% of the aggregate
value of the Plan Trust’s assets.
(f) The
Plan Trust shall not acquire or hold any certificates of deposit unless all
publicly held, long-term debt securities, if any, of the financial institution
issuing the certificate of deposit and the holding company, if any, of which
such financial institution is a subsidiary, meet the standards set forth in
Section 3.2(b) above.
(g) The
Plan Trust may acquire and hold any securities or instruments issued by the
Reorganized Debtors or any successor to a Reorganized Debtor, or obtained as
proceeds of litigation or otherwise to resolve disputes, without regard to the
limitations set forth in Section 3.2(a)-(f) above.
(h) The
Plan Trust shall not acquire or hold any repurchase obligations unless, in the
opinion of the Plan Trustee, they are adequately collateralized.
(i) The
Plan Trust shall not acquire or hold any options.
3.3 Source of Payments.
All Plan Trust expenses and payments and all liabilities with respect to claims
shall be payable solely by the Plan Trustee out of the Plan Trust
Assets. Neither Congoleum, the Reorganized Debtors, their
subsidiaries, any successor in interest, the present or former directors,
officers, employees or agents of Congoleum, the Reorganized Debtors, nor the
Plan Trustee, the TAC or Futures Representative, or any of their officers,
agents, advisors, or employees shall be liable for the payment of any Plan Trust
Asbestos Claim, Plan Trust Expense or any other liability of the Plan
Trust.
3.4 Payments of Allowed Asbestos
Property Damage Claims.
(a) All
Asbestos Property Damage Claims filed before the Asbestos Property Damage Claim
Bar Date shall be Allowed or Disallowed by a Final Order (whether such Final
Order resolves a contested matter or adversary proceeding, approves a compromise
or settlement or otherwise). The Plan Trust shall only be obligated to pay
Asbestos Property Damage Claims that (i) were filed prior to the Asbestos
Property Damage Claim Bar Date and (ii) have been Allowed (and the Plan Trust
shall only be obligated to pay such Asbestos Property Damage
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Claims
to the extent so Allowed) by a Final Order. The Plan Trust shall not make any
distributions with respect to Allowed Asbestos Property Damage Claims until all
Asbestos Property Damage Claims have been Allowed or Disallowed by Final
Order. Any Asbestos Property Damage Claims filed after the Asbestos
Property Damage Claim Bar Date shall, pursuant to the terms of the Plan, be
automatically Disallowed, with no further action of any Entity.
(b) Payments
to holders of Allowed Asbestos Property Damage Claims shall be made solely from
the Asbestos Property Damage Claim Sub-Account.
(c) Subject
to the terms and conditions of Section 3.4(d), with respect to any distribution
in respect of Allowed Asbestos Property Damage Claims, each holder of an Allowed
Asbestos Property Damage Claim shall be paid a pro rata portion of such holder’s
Allowed Asbestos Property Damage Claim determined by multiplying the aggregate
amount of the distribution to be made by a fraction, the numerator of which is
the amount of such holder’s Allowed Asbestos Property Damage Claim and the
denominator of which is the total of all Allowed Asbestos Property Damage Claims
until the assets in the Asbestos Property Damage Claim Sub-Account are
exhausted; provided
that the aggregate of all distributions made hereunder to a holder of an Allowed
Asbestos Property Damage Claim shall not exceed the Allowed Amount of such
holder’s Allowed Asbestos Property Damage Claim; and provided further that once all of the
assets in the Asbestos Property Damage Claim Sub-Account have been exhausted,
the Plan Trust shall have no further obligation or liability in respect of
Allowed Asbestos Property Damage Claims.
(d) The
Plan Trustee shall determine the timing and the appropriate method for making
payments in respect of Allowed Asbestos Property Damage Claims, subject to the
requirements and general principles of this Plan Trust Agreement and the
Plan. Methods for making payments in respect of Allowed Asbestos
Personal Damage Claims may include payment on an installment
basis. In the event that the Plan Trust faces periods of limited
liquidity in the Asbestos Property Damage Claim Sub-Account, the Plan Trustee
may defer, delay, limit, or suspend altogether, payments or a portion thereof in
respect of Allowed Asbestos Property Damage Claims.
3.5 Payment of Plan Trust
Expenses
(a) Except
as otherwise provided in Section 3.1(d), all Plan Trust Expenses and all
liabilities of the Plan Trust with respect to all Asbestos Personal Injury
Claims and Plan Trust Assets and proceeds thereof and earnings thereon (other
than that the Asbestos Property Damage Insurance Rights and proceeds thereof and
earnings thereon), shall be payable by the Plan Trust solely out of the Asbestos
Personal Injury Claim Sub-Account. All Plan Trust Expenses and all liabilities
with respect to Asbestos Property Damage Claims (and the Asbestos Property
Damage Insurance Rights and proceeds thereof and earnings thereon) shall be
payable by the Plan Trust solely out of the Asbestos Property Damage Claim
Sub-Account. If Plan Trust Expenses and liabilities relate to more
than one of the categories described in the preceding sentences, such Plan Trust
Expenses and liabilities shall be satisfied from one or more of the accounts as
determined by the Plan Trustee in his or her sole discretion. Notwithstanding
any other provision of this Plan Trust Agreement or the Plan, the Plan Trust
shall have no further
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liability
or obligation for or in respect of Plan Trust Expenses or other liabilities
relating to Asbestos Property Damage Claims once all of the assets in the
Asbestos Property Damage Claim Sub-Account have been exhausted.
(b) Notwithstanding
anything in this Plan Trust Agreement or the TDP to the contrary, the Plan
Trustee shall deduct from the Plan Trust’s assets and shall pay such amounts as
are required to pay the Plan Trust Expenses after receipt by the Plan Trustee of
evidence satisfactory to them of the applicable Plan Trust Expense and provided that the Plan
Trustee does not contest the amount of such Plan Trust Expense.
3.6
Indemnification Payments. Any claim for indemnification from the Plan Trust and
all costs and expenses associated therewith shall be satisfied as
follows:
(a) If
an indemnification claim relates solely to or arises solely in connection with
an Asbestos Personal Injury Claim, such claim shall be satisfied solely from
assets held in the Asbestos Personal Injury Claim Sub-Account;
(b) If
an indemnification claim relates solely to or arises solely in connection with
an Asbestos Property Damage Claim, such claim shall be satisfied solely from
assets held in the Asbestos Property Damage Claim Sub-Account;
(c) If
an indemnification claim relates to or arises in connection with both Asbestos
Personal Injury Claims and Asbestos Property Damage Claims, or if such
indemnification claim does not clearly relate to or arise in connection with
Asbestos Personal Injury Claims or Asbestos Property Damage Claims, such claim
shall be satisfied from assets held in the Asbestos Personal Injury Claim
Sub-Account and the Asbestos Property Damage Claim Sub-Account in such relative
proportion as the Plan Trustee determines in his or her sole
discretion.
Notwithstanding
any other provision of this Plan Trust Agreement or the Plan, the Plan Trust
shall have no further liability or obligation for or in respect of
indemnification relating to or arising from Asbestos Property Damage Claims and
all costs and expenses associated therewith once all of the assets in the
Asbestos Property Damage Claim Sub-Account have been exhausted.
SECTION
IV
PLAN
TRUSTEE AND DELAWARE TRUSTEE
4.1 Number. In addition
to the Delaware Trustee appointed pursuant to Section 4.11 hereof, there shall
be one (1) Plan Trustee who shall be initially that person appointed by the
District Court pursuant to the Plan and who is named on the signature page
hereof, namely ______________________.
4.2 Term of
Service.
(a) The
initial Plan Trustee shall serve from the Effective Date until the earlier of
(i) his or her death, (ii) his or her resignation pursuant to Section 4.2(b)
below, (iii) his or her removal pursuant to Section 4.2(c) below, or (iv) the
termination of the Plan Trust pursuant to Section 7.2 below.
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(b) The
Plan Trustee may resign at any time by written notice to the TAC and the Futures
Representative. Such notice shall specify a date when such resignation shall
take place, which shall not be less than ninety (90) days after the date such
notice is given, where practicable.
(c) The
Plan Trustee may be removed by unanimous vote of the TAC and the Futures
Representative in the event that he or she becomes unable to discharge his or
her duties hereunder due to accident or physical or mental deterioration, or for
other good cause. Good cause shall be deemed to include, without
limitation, any substantial failure to comply with the general administration
provisions of Section 2.2 above, a consistent pattern of neglect and failure to
perform or participate in performing the duties of the Plan Trustee hereunder,
or repeated nonattendance at scheduled meetings. Such removal shall
require the approval of the District Court and shall take effect at such time as
the District Court shall determine.
4.3 Appointment of Successor
Plan Trustee.
(a) In
the event of a vacancy in the position of the Plan Trustee, whether by
resignation or removal, the TAC and the Futures Representative shall consult
concerning appointment of a successor Plan Trustee. The vacancy shall
be filled by the unanimous vote of the TAC and the Futures
Representative. In the event that the TAC or the Futures
Representative cannot agree on a successor Plan Trustee, the District Court
shall make the appointment.
(b) Immediately
upon the appointment of any successor Plan Trustee, all rights, titles, duties,
powers and authority of the predecessor Plan Trustee hereunder shall be vested
in, and undertaken by, the successor Plan Trustee without any further
act. No successor Plan Trustee shall be liable personally for any act
or omission of his or her predecessor Plan Trustee.
(c) Each
successor Plan Trustee shall serve until the earlier of (i) his or her death,
(ii) his or her resignation pursuant to Section 4.2(b) above, (iii) his or her
removal pursuant to Section 4.2(c) above, or (iv) the termination of the Plan
Trust pursuant to Section 7.2 below.
4.4 Liability of Plan Trustee,
Delaware Trustee, Officers and Employees. The Plan Trustee, the Delaware
Trustee, and the individuals identified as Additional Indemnitees in Section
2.1(c)(xiv) above shall not be liable to the Plan Trust, to any individual
holding a Plan Trust Asbestos Claim, or to any other person, except for such
individual’s own breach of trust committed in bad faith or willful
misappropriation. In addition, the Plan Trustee, the Delaware Trustee
and the Additional Indemnitees shall not be liable for any act or omission of
any other Plan Trustee, the Delaware Trustee or Additional Indemnitee unless
such person acted with bad faith in the selection or retention of such other
Plan Trustee, the Delaware Trustee or Additional Indemnitee.
4.5 Compensation and Expenses of
Plan Trustee.
(a) The
Plan Trustee shall receive compensation in accordance with Section 3.6 above,
from the Plan Trust for his or her services as Plan Trustee in the amount
of
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$60,000.00
per annum, plus a per diem allowance for meetings or other Plan Trust business
performed in the amount of $1,500.00. For purposes of Section 7.4
below, the Plan Trustee shall determine the scope and duration of activities
that constitute a meeting and, if the Plan Trustee elects to provide for payment
for activities of less than a full day’s duration, may provide for partial
payment of per diem amounts on a proportional basis for activities of less than
a full day’s duration. The per annum and per diem compensation
payable to the Plan Trustee hereunder shall be reviewed every three (3) years
and appropriately adjusted for changes in the cost of living with the consent of
the TAC and the Futures Representative. Any other changes in compensation of the
Plan Trustee shall be made subject to the approval of the District
Court. The Delaware Trustee shall be paid such compensation as is
agreed pursuant to a separate fee agreement.
(b) The
Plan Trust will promptly reimburse the Plan Trustee in accordance with Section
3.6 above, for all reasonable out-of-pocket costs and expenses incurred by the
Plan Trustee in connection with the performance of his or her duties hereunder
following submission of appropriate documentation evidencing payment of such
costs or expenses.
(c) The
Plan Trust shall include a description of the amounts paid under this Section
4.5 in the accounts to be filed with the District Court and provided to the TAC,
the Futures Representative, and Reorganized Congoleum pursuant to Section
2.2(c)(i).
4.6 Indemnification of Plan
Trustee and Additional Indemnitees.
(a) The
Plan Trust shall indemnify and defend the Plan Trustee, the members of the TAC
and the Futures Representative in the performance of their duties hereunder to
the fullest extent that a statutory trust or corporation organized under the
laws of the state of Delaware is from time to time entitled to indemnify and
defend such persons against any and all liabilities, expenses, claims, damages
or losses incurred by them in the performance of their duties hereunder or in
connection with activities undertaken by them prior to the Effective Date in
connection with the formation, establishment, or funding of the Plan
Trust. The Plan Trust shall indemnify any of the Additional
Indemnitees in the performance of their duties hereunder to the fullest extent
that a statutory trust or corporation organized under the laws of the Plan
Trust’s jurisdiction of organization is from time to time entitled to indemnify
and defend such persons against any and all liabilities, expenses, claims,
damages or losses incurred by them in the performance of their duties hereunder
or in connection with activities undertaken by them prior to the Effective Date
in connection with the formation, establishment or funding of the Plan
Trust. Notwithstanding the foregoing, the Plan Trustee and the
Additional Indemnitees shall not be indemnified or defended in any way for any
liability, expense, claim, damage, or loss for which he, she or it is ultimately
liable under Section 4.4 above.
(b) Reasonable
expenses, costs and fees (including attorneys’ fees and costs) incurred by or on
behalf of the Plan Trustee or an Additional Indemnitee in connection with any
action, suit, or proceeding, whether civil, administrative or arbitrative, from
which they are indemnified by the Plan Trust pursuant to Section 4.6(a) above,
shall be paid by the Plan Trust in advance of the final disposition thereof upon
receipt of an undertaking, by or on behalf of the Plan Trustee or Additional
Indemnitee, to repay such amount in the event that it shall be determined
ultimately by final order that such Plan Trustee or Additional Indemnitee is not
entitled to be indemnified by the Plan Trust.
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(c) The
Plan Trustee may purchase and maintain reasonable amounts and types of insurance
on behalf of an individual who is or was a Plan Trustee or Additional
Indemnitee, including against liability asserted against or incurred by such
individual in that capacity or arising from his or her status as a Plan Trustee,
TAC member, Futures Representative, officer, employee, agent or other
representative.
4.7 Lien. The Plan
Trustee and the Additional Indemnitees shall have a first priority lien upon the
Plan Trust Assets to secure the payment of any amounts payable to them pursuant
to Section 4.6.
4.8 Plan Trustee's Employment of
Experts; Delaware Trustee's Employment of Counsel.
(a) The
Plan Trustee may, but shall not be required to, retain and/or consult with
counsel, accountants, appraisers, auditors and forecasters, and other
parties
(“Professionals”) deemed by the
Plan Trustee to be qualified as experts on the matters submitted to them, and,
in the absence of gross negligence, the written opinion of or information
provided by any such party deemed by the Plan Trustee to be an expert on the
particular matter on any matters submitted to such party by the Plan Trustee
shall be full and complete authorization and protection in respect of any action
taken or not taken by the Plan Trustee hereunder in good faith and in accordance
with the written opinion of or information provided by any such
party.
(b) The
Delaware Trustee shall be permitted to retain counsel only in such circumstances
as required in the exercise of its obligations hereunder and compliance with the
advice of such counsel shall be full and complete authorization and protection
for actions taken or not taken by the Delaware Trustee in good faith in
compliance with such advice.
4.9 Plan Trustee’s
Independence. The Plan Trustee shall not, during the term of his or her
service, hold a financial interest in, act as attorney or agent for, or serve as
any other professional for the Reorganized Debtors. Notwithstanding
the foregoing, the Plan Trustee may serve, without any additional compensation
other than the per diem compensation to be paid by the Plan Trust pursuant to
Section 4.5(a) above, as a director of any Reorganized Debtor. No Plan Trustee
shall act as an attorney for any person who holds an asbestos
claim.
4.10 Bond. The Plan
Trustee and the Delaware Trustee shall not be required to post any bond or other
form of surety or security unless otherwise ordered by the District
Court.
4.11 Delaware
Trustee.
(a) There
shall at all times be a Delaware Trustee. The Delaware Trustee shall
either be (i) a natural person who is at least 21 years of age and a resident of
the State of Delaware or (ii) a legal entity that has its principal place of
business in the State of Delaware, otherwise meets the requirements of
applicable Delaware law and shall act through one or more persons authorized to
bind such entity. If at any time the Delaware Trustee shall cease to be eligible
in accordance with the provisions of this Section 4.11, it shall resign
immediately in the manner and with the effect hereinafter specified in Section
4.11(c) below. For the avoidance of
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doubt,
the Delaware Trustee will only have such rights and obligations as expressly
provided by reference to the Delaware Trustee hereunder.
(b) The
Delaware Trustee shall not be entitled to exercise any powers, nor shall the
Delaware Trustee have any of the duties and responsibilities, of the Plan
Trustee set forth herein. The Delaware Trustee shall be one of the trustees of
the Plan Trust for the sole and limited purpose of fulfilling the requirements
of Section 3807 of the Act and for taking such actions as are required to be
taken by a Delaware Trustee under the Act. The duties (including fiduciary
duties), liabilities and obligations of the Delaware Trustee shall be limited to
(i) accepting legal process served on the Plan Trust in the State of Delaware
and (ii) the execution of any certificates required to be filed with the
Secretary of State of the State of Delaware that the Delaware Trustee is
required to execute under Section 3811 of the Act and there shall be no other
duties (including fiduciary duties) or obligations, express or implied, at law
or in equity, of the Delaware Trustee.
(c) The
Delaware Trustee shall serve until such time as the Plan Trustee removes the
Delaware Trustee or the Delaware Trustee resigns and a successor Delaware
Trustee is appointed by the Plan Trustee in accordance with the terms of Section
4.11(d) below. The Delaware Trustee may resign at any time upon the giving of at
least 60 days’ advance written notice to the Plan Trustee; provided, that such
resignation shall not become effective unless and until a successor Delaware
Trustee shall have been appointed by the Plan Trustee in accordance with Section
4.11(d) below. If the Plan Trustee does not act within such 60-day period, the
Delaware Trustee may apply to the Court of Chancery of the State of Delaware for
the appointment of a successor Delaware Trustee.
(d) Upon
the resignation or removal of the Delaware Trustee, the Plan Trustee shall
appoint a successor Delaware Trustee by delivering a written instrument to the
outgoing Delaware Trustee. Any successor Delaware Trustee must satisfy the
requirements of Section 3807 of the Act. Any resignation or removal of the
Delaware Trustee and appointment of a successor Delaware Trustee shall not
become effective until a written acceptance of appointment is delivered by the
successor Delaware Trustee to the outgoing Delaware Trustee and the Plan Trustee
and any fees and expenses due to the outgoing Delaware Trustee are
paid. Following compliance with the preceding sentence, the successor
Delaware Trustee shall become fully vested with all of the rights, powers,
duties and obligations of the outgoing Delaware Trustee under this Agreement,
with like effect as if originally named as Delaware Trustee, and the outgoing
Delaware Trustee shall be discharged of its duties and obligations under this
Agreement.
SECTION
V
PLAN
TRUST ADVISORY COMMITTEE
5.1 Members. The TAC
shall consist of five (5) members, who shall initially be the persons appointed
by the District Court pursuant to the Plan and who are named on the signature
page hereof, namely ____________________________________________.
5.2 Duties. The members
of the TAC shall serve in a fiduciary capacity representing all holders of
present Plan Trust Asbestos Claims. Subject to Section 5.3 below, the
Plan Trustee
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must
consult with the TAC on matters identified in Section 2.2(e) above and in other
provisions herein, and must obtain the consent of the TAC on matters identified
in Section 2.2(f) above. Where provided in the TDP, certain other actions by the
Plan Trustee are also subject to the consent of the TAC.
5.3 Term of
Office.
(a) The
initial members of the TAC appointed in accordance with Section 5.1 above shall
serve staggered terms of three-, four-, or five-year terms as indicated on the
signature page hereof. Thereafter, each term of service shall be five (5)
years. A member of the TAC shall serve until the earlier of (i) his
or her death, (ii) his or her resignation pursuant to Section 5.4(b) below,
(iii) his or her removal pursuant to Section 5.4(c) below, (iv) the end of his
or her term as provided above, or (v) the termination of the Plan Trust pursuant
to Section 7.2 below.
(b) A
member of the TAC may resign at any time by written notice to the other members
of the TAC, the Plan Trustee and the Futures Representative. Such
notice shall specify a date when such resignation shall take effect, which shall
not be less than ninety (90) days after the date such notice is given, where
practicable.
(c) A
member of the TAC may be removed in the event that he or she becomes unable to
discharge his or her duties hereunder due to accident, physical deterioration,
mental incompetence, or a consistent pattern of neglect and failure to perform
or to participate in performing the duties of such member hereunder, such as
repeated non-attendance at scheduled meetings, or for other good
cause. Such removal shall be made at the recommendation of the
remaining members of the TAC with the approval of the District
Court.
5.4 Appointment of
Successor.
(a) In
the event of a vacancy caused by the resignation, expiration of the
term, or death of a TAC member, his or her successor shall be
pre-selected by the TAC member who has resigned, is deceased or whose term has
expired, or by his or her law firm in the event that such member has not
pre-selected a successor. Nothing shall prevent a TAC member or his
or her law firm from pre-selecting that TAC member to succeed himself or herself
at the expiration of his or her term, and there shall be no limit on the number
of terms that a TAC member may serve. If neither the member nor the law firm
exercises the right to make such a selection, the successor shall be chosen by a
majority vote of the remaining TAC members. If a majority of the
remaining members cannot agree, the District Court shall appoint the
successor. In the event of a vacancy caused by the removal of a TAC
member, the remaining members of the TAC by majority vote shall name the
successor. If the majority of the remaining members of the TAC cannot
reach agreement, the District Court shall appoint the successor.
(b) Each
successor TAC member shall serve until the earlier of (i) his or her death, (ii)
his or her resignation pursuant to Section 5.4(b) above, (iii) his or her
removal pursuant to Section 5.4(c) above, (iv) the expiration of his or her term
pursuant to Section 5.4(a) above, or (v) the termination of the Plan Trust
pursuant to Section 7.2 below.
5.5 TAC’s Employment of
Professionals.
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(a) The
TAC may, but is not required to, retain and/or consult Professionals deemed by
the TAC to be qualified as experts on matters submitted to the
TAC. The TAC and its Professionals shall at all times have complete
access to the Plan Trust’s officers, employees and agents, as well as to the
Professionals retained by the Plan Trust, and shall also have complete access to
all information generated by them or otherwise available to the Plan Trust or
the Plan Trustee. In the absence of gross negligence, the written opinion of or
information provided by any Professional deemed by the TAC to be qualified as an
expert on the particular matter submitted to the TAC shall be full and complete
authorization and protection in support of any action taken or not taken by the
TAC in good faith and in accordance with the written opinion of or information
provided by the Professional.
(b) The
Plan Trust shall promptly reimburse, or pay directly if so instructed, the TAC
for all reasonable fees and costs associated with the TAC’s employment of legal
counsel pursuant to this provision in connection with the TAC’s performance of
its duties hereunder. The Plan Trust shall also promptly reimburse,
or pay directly if so instructed, the TAC for all reasonable fees and costs
associated with the TAC’s employment of any other Professional pursuant to this
provision in connection with the TAC’s performance of its duties hereunder;
provided, however, that
(i) the TAC has first submitted to the Plan Trust a written request for such
reimbursement setting forth the reasons (A) why the TAC desires to employ such
Professional, and (B) why the TAC cannot rely on Professionals retained by the
Plan Trust to meet the needs of the TAC for such expertise or advice, and (ii)
the Plan Trust has approved the TAC’s request for reimbursement in
writing. If the Plan Trust agrees to pay for the TAC Professional,
such reimbursement shall be treated as a Plan Trust Expense. If the
Plan Trust declines to pay for the TAC Professional, it must set forth its
reasons in writing. If the TAC still desires to employ such
Professional at Plan Trust expense, the TAC and/or the Plan Trustee shall
resolve their dispute pursuant to Section 7.13 below.
5.6 Compensation and Expenses of
the TAC. The members of the TAC shall receive compensation from the Plan
Trust for their services as TAC members in the form of a reasonable hourly rate
set by the Plan Trustee for attendance at meetings or other conduct of Plan
Trust business. The members of the TAC shall also be reimbursed promptly for all
reasonable out-of-pocket costs and expenses incurred in connection with the
performance of their duties hereunder. Such reimbursement or direct
payment shall be deemed a Plan Trust Expense. The Plan Trust shall
include a description of the amounts paid under this Section 5.7 in the accounts
to be filed with the District Court and provided to the Plan Trustee, the
Futures Representative, and Reorganized Congoleum pursuant to Section
2.2(c)(i).
5.7 Procedures for Consultation
With and Obtaining the Consent of the TAC.
(a) Consultation
Process.
(i) In
the event the Plan Trustee is required to consult with the TAC pursuant to
Section 2.2(e) above or on other matters as provided herein, the Plan Trustee
shall provide the TAC with written advance notice of the matter under
consideration, and with all relevant information concerning the matter as is
reasonably practicable under the circumstances. The Plan Trustee
shall also provide the TAC with such reasonable access to the Professionals and
other
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experts
retained by the Plan Trust and its staff (if any) as the TAC may reasonably
request during the time that the Plan Trustee is considering such matter, and
shall also provide the TAC the opportunity, at reasonable times and for
reasonable periods of time, to discuss and comment on such matter with the Plan
Trustee.
(ii) The
Plan Trustee shall take into consideration the time required for the TAC, if its
members so wish, to engage and consult with its own independent financial or
investment advisors as to such matter.
(b) Consent
Process.
(i) In
the event the Plan Trustee is required to obtain the consent of the TAC pursuant
to Section 2.2(f) above, the Plan Trustee shall provide the TAC with a written
notice stating that their consent is being sought pursuant to that provision,
describing in detail the nature and scope of the action the Plan Trustee
proposes to take, and explaining in detail the reasons why the Plan Trustee
desires to take such action. The Plan Trustee shall provide the TAC
as much relevant additional information concerning the proposed action as is
reasonably practicable under the circumstances. The Plan Trustee
shall also provide the TAC with such reasonable access to the Professionals and
other experts retained by the Plan Trust and its staff (if any) as the TAC may
reasonably request during the time that the Plan Trustee is considering such
action, and shall also provide the TAC the opportunity, at reasonable times and
for reasonable periods of time, to discuss and comment on such action with the
Plan Trustee.
(ii) The
TAC must consider in good faith and in a timely fashion any request for its
consent by the Plan Trustee, and must in any event advise the Plan Trustee in
writing of its consent or its objection to the proposed action within 30 days of
receiving the original request for consent from the Plan Trustee. The
TAC may not withhold its consent unreasonably. If the TAC decides to withhold
its consent, it must explain in detail its objections to the proposed action. If
the TAC does not advise the Plan Trustee in writing of its consent or its
objections to the action within thirty (30) days of receiving notice regarding
such request, the TAC’s consent to the proposed actions shall be deemed to have
been affirmatively granted.
(iii) If,
after following the procedures specified in this Section 5.8(b), the TAC
continues to object to the proposed action and to withhold its consent to the
proposed action, the Plan Trustee and/or the TAC shall resolve their dispute
pursuant to Section 7.13. However, the burden of proof with respect to the
validity of the TAC’s objection and withholding of its consent shall be on the
TAC.
5.8 Copies to the TAC.
The Plan Trustee shall provide the TAC with copies of all notices and other
written information provided to the Futures Representative pursuant to this Plan
Trust Agreement.
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SECTION
VI
THE
FUTURES REPRESENTATIVE
6.1 Duties. The initial
Futures Representative shall be the individual appointed by the District Court
pursuant to the Plan to serve in such capacity. He shall serve in a fiduciary
capacity, representing the interests of the holders of future Plan Trust
Asbestos Claims for the purpose of protecting the rights of such persons. The
Plan Trustee must consult with the Futures Representative on matters identified
in Section 2.2(e) above and on certain other matters provided herein, and must
obtain the consent of the Futures Representative on matters identified in
Section 2.2(f) above. Where provided in the TDP, certain other
actions by the Plan Trust or Plan Trustee are also subject to the consent of the
Futures Representative.
6.2 Term of
Office.
(a) The
Futures Representative shall serve until the earlier of (i) his or her death,
(ii) his or her resignation pursuant to Section 6.2(b) below, (iii) his or her
removal pursuant to Section 6.2(c) below, or (iv) the termination of the Plan
Trust pursuant to Section 7.2 below.
(b) The
Futures Representative may resign at any time by written notice to the Plan
Trustee. Such notice shall specify a date when such resignation shall take
effect, which shall not be less than ninety (90) days after the date such notice
is given, where practicable.
(c) The
Futures Representative may be removed by the District Court in the event he or
she becomes unable to discharge his or her duties hereunder due to accident,
physical deterioration, mental incompetence, or a consistent pattern of neglect
and failure to perform or to participate in performing the duties hereunder,
such as repeated non-attendance at scheduled meetings, or for other good
cause.
6.3 Appointment of
Successor. A vacancy caused by death or resignation shall be
filled with an individual nominated prior to the effective date of the
resignation or the death by the resigning or deceased Futures Representative,
and a vacancy caused by removal of the Futures Representative shall be filled
with an individual nominated by the Plan Trustee in consultation with the TAC,
subject to the approval of the District Court. In the event a nominee
has not been pre-selected and the Plan Trustee fails to nominate a successor,
the successor shall be chosen by the District Court.
6.4 Futures Representative’s
Employment of Professionals.
(a) The
Futures Representative may, but is not required to, retain and/or consult
Professionals deemed by the Futures Representative to be qualified as experts on
matters submitted to the Futures Representative. The Futures
Representative and his or her Professionals shall at all times have complete
access to the Plan Trust’s officers, employees and agents, as well as to the
Professionals retained by the Plan Trust, and shall also have complete access to
all information generated by them or otherwise available to the Plan Trust or
the Plan Trustee. In the absence of gross negligence, the written
opinion of or information provided by any Professional deemed by the Futures
Representative to be qualified as an expert on the particular matter submitted
to the Futures Representative shall be full and complete authorization
and
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EXHIBIT
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protection
in support of any action taken, or not taken, by the Futures Representative in
good faith and in accordance with the written opinion of or information provided
by the Professional.
(b) The
Plan Trust shall promptly reimburse, or pay directly if so instructed, the
Futures Representative for all reasonable fees and costs associated with the
Futures Representative’s employment of legal counsel pursuant to this provision
in connection with the Futures Representative’s performance of his or her duties
hereunder. The Plan Trust shall also promptly reimburse, or pay
directly if so instructed, the Futures Representative for all reasonable fees
and costs associated with the Futures Representative’s employment of any other
Professionals pursuant to this provision in connection with the Futures
Representative’s performance of his or her duties hereunder; provided, however, that (i)
the Futures Representative has first submitted to the Plan Trust a written
request for such reimbursement setting forth the reasons (A) why the Futures
Representative desires to employ the Professional, and (B) why the Futures
Representative cannot rely on Professionals retained by the Plan Trust to meet
the needs of the Futures Representative for such expertise or advice, and (ii)
the Plan Trust has approved the Futures Representative’s request for
reimbursement in writing. If the Plan Trust agrees to pay for the
Futures Representative’s Professional, such reimbursement shall be treated as a
Plan Trust Expense. If the Plan Trust declines to pay for the Futures
Representative’s Professional, it must set forth its reasons in
writing. If the Futures Representative still desires to employ the
Professional at Plan Trust expense, the Futures Representative and/or the Plan
Trustee shall resolve their dispute pursuant to Section 7.13 below.
6.5 Compensation and Expenses of
the Futures Representative. The Futures Representative shall receive
compensation from the Plan Trust in the form of payment at the Futures
Representative’s normal hourly rate for services performed. The Plan
Trust will promptly reimburse the Futures Representative for all reasonable
out-of-pocket costs and expenses incurred by the Futures Representative in
connection with the performance of his or her duties hereunder. Such
reimbursement or direct payment shall be deemed a Plan Trust
Expense. The Plan Trust shall include a description of the amounts
paid under this Section 6.5 in the accounts to be filed with the District Court
and provided to the Plan Trustee, the Futures Representative, and Reorganized
Congoleum pursuant to Section 2.2(c)(i).
6.6 Procedures for Consultation
with and Obtaining the Consent of the Futures
Representative.
(a) Consultation
Process.
(i) In
the event the Plan Trustee is required to consult with the Futures
Representative pursuant to Section 2.2(e) above or on any other matters
specified herein, the Plan Trustee shall provide the Futures Representative with
written advance notice of the matter under consideration, and with all relevant
information concerning the matter as is reasonably practicable under the
circumstances. The Plan Trustee shall also provide the Futures
Representative with such reasonable access to Professionals and other experts
retained by the
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Plan
Trust and its staff (if any) as the Futures Representative may reasonably
request during the time that the Plan Trustee is considering such matter, and
shall also provide the Futures Representative the opportunity, at reasonable
times and for reasonable periods of time, to discuss and comment on such matter
with the Plan Trustee.
(ii) The
Plan Trustee shall take into consideration the time required for the Futures
Representative, if he or she so wishes, to engage and consult with his or her
own independent financial, actuarial or investment advisors as to such
matter.
(b) Consent
Process.
(i) In
the event the Plan Trustee is required to obtain the consent of the Futures
Representative pursuant to Section 2.2(f) above, the Plan Trustee shall provide
the Futures Representative with a written notice stating that his or her consent
is being sought pursuant to that provision, describing in detail the nature and
scope of the action the Plan Trustee proposes to take, and explaining in detail
the reasons why the Plan Trustee desires to take such action. The
Plan Trustee shall provide the Futures Representative as much relevant
additional information concerning the proposed action as is reasonably
practicable under the circumstances. The Plan Trustee shall also
provide the Futures Representative with such reasonable access to the
Professionals and other experts retained by the Plan Trust and its staff (if
any) as the Futures Representative may reasonably request during the time that
the Plan Trustee is considering such action, and shall also provide the Futures
Representative the opportunity, at reasonable times and for reasonable periods
of time, to discuss and comment on such action with the Plan
Trustee.
(ii) The
Futures Representative must consider in good faith and in a timely fashion any
request for his or her consent by the Plan Trustee, and must in any event advise
the Plan Trustee in writing of his or her consent or objection to the proposed
action within thirty (30) days of receiving the original request for consent
from the Plan Trustee. The Futures Representative may not withhold his or her
consent unreasonably. If the Futures Representative decides to
withhold consent, he or she must explain in detail his or her objections to the
proposed action. If the Futures Representative does not advise the
Plan Trustee in writing of his or her consent or objections to the proposed
action within thirty (30) days of receiving the notice from the Plan Trustee
regarding such consent, the Futures Representative’s consent shall be deemed to
have been affirmatively granted.
(iii) If,
after following the procedures specified in this Section 6.6(b), the Futures
Representative continues to object to the proposed action and to withhold its
consent to the proposed action, the Plan Trustee and/or the Futures
Representative shall resolve their dispute pursuant to Section 7.13. However,
the
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burden
of proof with respect to the validity of the Futures Representative’s objection
and withholding of his or her consent shall be on the Futures
Representative.
6.7 Copies to Futures
Representative. The Plan Trustee shall provide the Futures Representative
with copies of all notices and other written information provided to the TAC
pursuant to this Plan Trust Agreement.
SECTION
VII
GENERAL
PROVISIONS
7.1 Irrevocability. The
Plan Trust is irrevocable.
7.2 Dissolution.
(a) The
term for which the Plan Trust is to exist shall commence on the date of the
filing of the Certificate of Trust and shall terminate pursuant to the
provisions of this Section 7.2.
(b) The
Plan Trust shall automatically dissolve on the date ninety (90) days after the
first to occur of the following events (the “Dissolution
Date”):
(i) the
Plan Trustee decides to dissolve the Plan Trust because (A) he or she deems it
unlikely that new asbestos claims will be filed against the Plan Trust, (B) all
Plan Trust Asbestos Claims duly filed with the Plan Trust have been liquidated
and paid to the extent provided in this Plan Trust Agreement and the TDP or have
been disallowed by a final, non-appealable order, to the extent possible based
upon the funds available through the Plan, and (C) twelve (12) consecutive
months have elapsed during which no new asbestos claim has been filed with the
Plan Trust; or
(ii) if
the Plan Trustee has procured and has in place irrevocable insurance policies
and has established claims handling agreements and other necessary arrangements
with suitable third parties adequate to discharge all expected remaining
obligations and expenses of the Plan Trust in a manner consistent with this Plan
Trust Agreement and the TDP, the date on which the District Court enters an
order approving such insurance and other arrangements and such order becomes a
final order; or
(iii) to
the extent that any rule against perpetuities shall be deemed applicable to the
Plan Trust, twenty-one (21) years less ninety-one (91) days pass after the death
of the last survivor of all of the descendants of the late Joseph P. Kennedy,
Sr., father of the late President John F. Kennedy, living on the date
hereof.
(c) On
the Dissolution Date or as soon as reasonably practicable after the wind-up of
the Plan Trust’s affairs by the Plan Trustee and payment of all the Plan
Trust’s
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liabilities
has been provided for (including, without limitation, Plan Trust Expenses) as
required by applicable law including Section 3808 of the Act, all assets
remaining in the Plan Trust estate shall be given to such organization(s) exempt
from federal income tax under section 501(c)(3) of the Internal Revenue Code,
which tax-exempt organization(s) shall be selected by the Plan Trustee using his
or her reasonable discretion; provided, however, that (i)
if practicable, the activities of the selected tax-exempt organization(s) shall
be related to the treatment of, research on, or the relief of suffering of
individuals suffering from asbestos related lung disorders, and (ii) the
tax-exempt organization(s) shall not bear any relationship to Reorganized
Congoleum within the meaning of section 468B(d)(3) of the Internal Revenue
Code. Notwithstanding any contrary provision of the Plan and related
documents, this Section 7.2(c) cannot be modified or amended.
(d) Following
the dissolution and distribution of the assets of the Plan Trust, the Plan Trust
shall terminate and the Plan Trustee shall execute and cause a Certificate of
Cancellation of the Certificate of Trust of the Plan Trust to be filed in
accordance with the Act. Notwithstanding anything to the contrary contained in
this Agreement, the existence of the Plan Trust as a separate legal entity shall
continue until the filing of such Certificate of Cancellation.
7.3 Amendments. Except as
otherwise provided herein, the Plan Trustee, after consultation with the TAC and
the Futures Representative, and subject to the unanimous consent of the TAC and
the Futures Representative, may modify or amend this Plan Trust Agreement and
the Plan Trust Bylaws. The Plan Trustee, after consultation with the
TAC and the Futures Representative, and subject to the consent of the TAC and
the Futures Representative, may modify or amend the TDP; provided, however, that no
amendment to the TDP shall be inconsistent with the provisions limiting
amendments to that document provided therein, and in particular the provisions
limiting amendment of the Claims Payment Ratio set forth in Section 2.6 of the
TDP and of the Payment Percentage set forth in Section 5.2 of the
TDP. Any modification or amendment made pursuant to this Section must
be done in writing. Notwithstanding anything contained in this Plan
Trust Agreement to the contrary, neither this Plan Trust Agreement, the Plan
Trust Bylaws, the TDP, nor any document annexed to the foregoing shall be
modified or amended in any way that could jeopardize, impair, or modify the
applicability of section 524(g) of the Bankruptcy Code, the efficacy or
enforceability of the injunction entered thereunder, or the Plan Trust’s
qualified settlement fund status under section 468B of the Internal Revenue
Code.
7.4 Meetings. The Plan
Trustee, the TAC, and the Futures Representative shall be deemed to have
attended a meeting in the event such person participates in a substantial
portion of such meeting by conferring, in person or by telephone conference
call, on Plan Trust matters with the TAC, the Futures Representative, or Plan
Trustee, as applicable. The Plan Trustee, the TAC and the Futures
Representative shall have complete discretion to determine whether a meeting, as
described herein, occurred for purposes of Sections 4.5, 5.7, and 6.5
above.
7.5 Severability. Should
any provision in this Plan Trust Agreement be determined to be unenforceable,
such determination shall in no way limit or affect the enforceability and
operative effect of any and all other provisions of this Plan Trust
Agreement.
7.6 Notices.
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(a) Notices
to persons asserting claims shall be given by first class mail, postage prepaid,
at the address of such person, or, where applicable, such person’s legal
representative, in each case as provided on such person’s claim form submitted
to the Plan Trust with respect to his or her Plan Trust Asbestos
Claim.
(b) (i) Any
notices or other communications required or permitted hereunder to the following
parties shall be in writing and delivered at the addresses designated below, or
sent by electronic mail (email) or facsimile pursuant to the instructions listed
below, or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows, or to such other address or addresses as
may hereafter be furnished in writing to each of the other parties listed below
in compliance with the terms hereof.
To
the Plan Trust through the Plan Trustee:
To
the TAC:
To
the Futures Representative:
To
Debtors, Settlors, or Reorganized Debtors:
Congoleum
Corporation
3500
Quakerbridge Road
P.O.
Box 3127 Mercerville, NJ 08619-0127
Attention:
President
Fax:
609-584-3685
Congoleum
Sales, Inc.
c/o
Congoleum Corporation
3500
Quakerbridge Road
P.O.
Box 3127
Mercerville,
NJ 08619-0127
Attention:
President
Fax:
609-584-3685
Congoleum
Fiscal, Inc.
c/o
Congoleum Corporation
3500
Quakerbridge Road
P.O.
Box 3127
Mercerville,
NJ 08619-0127
Attention:
President
Fax:
609-584-3685
With
a copy to (which copy shall not constitute notice):
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(ii) All
such notices and communications if mailed shall be effective when physically
delivered at the designated addresses or, if electronically transmitted, when
the communication is received at the designated addresses and confirmed by the
recipient by return transmission.
7.7 Successors and
Assigns. The provisions of this Plan Trust Agreement shall be binding
upon and inure to the benefit of Congoleum, the Plan Trust, the Plan Trustee and
the Reorganized Debtors, and their respective successors and assigns, except
that neither Congoleum, the Plan Trust, the Plan nor any Reorganized Debtor may
assign or otherwise transfer any of its, or their, rights or obligations under
this Plan Trust Agreement except, in the case of the Plan Trust and the Plan
Trustee, as contemplated by Section 2.1 above.
7.8 Limitation on Claim
Interests for Securities Laws Purposes. Plan Trust Asbestos Claims, and
any interests therein (a) shall not be assigned, conveyed, hypothecated, pledged
or otherwise transferred, voluntarily or involuntarily, directly or indirectly,
except by will or under the laws of descent and distribution; (b) shall not be
evidenced by a certificate or other instrument; (c) shall not possess any voting
rights; and (d) shall not be entitled to receive any dividends or interest;
provided, however, that
clause (a) of this Section 7.8 shall not apply to the holder of a claim that is
subrogated to a Plan Trust Asbestos Claim as a result of its satisfaction of
such Plan Trust Asbestos Claim.
7.9 Entire Agreement; No
Waiver. The entire agreement of the parties relating to the subject
matter of this Plan Trust Agreement is contained herein and in the documents
referred to herein, and this Plan Trust Agreement and such documents supersede
any prior oral or written agreements concerning the subject matter
hereof. No failure to exercise or delay in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any further exercise thereof or of any other right, power or
privilege. The rights and remedies herein provided are cumulative and
are not exclusive of rights under law or in equity.
7.10 Headings. The
headings used in this Plan Trust Agreement are inserted for convenience only and
do not constitute a portion of this Plan Trust Agreement, nor in any manner
affect the construction of the provisions of this Plan Trust
Agreement.
7.11 Governing Law. This
Plan Trust Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware without regard to Delaware conflict of law
principles.
7.12 Settlor Representative and
Cooperation. Congoleum is hereby irrevocably designated as the Settlors,
and it is hereby authorized to take any action required of the Settlors in
connection with the Plan Trust Agreement. Congoleum agrees to
cooperate in implementing the goals and objectives of this Plan
Trust.
7.13 Dispute
Resolution. Any disputes that arise under this Plan Trust
Agreement or under the TDP between or among any party to this Plan Trust
Agreement shall be resolved by
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submission
of the matter to an alternative dispute resolution (“ADR”) process mutually
agreeable to the parties involved. Should any party to the ADR
process be dissatisfied with the decision of the arbitrator(s), that party may
apply to the District Court for a judicial determination of the matter. In
either case, if the dispute arose pursuant to the consent provision set forth in
Section 5.8(b) (in the case of the TAC) or Section 6.6(b) (in the case of the
Futures Representative), the burden of proof shall be on the party or parties
who withheld consent to show that the objection was valid. Should the dispute
not be resolved by ADR process within thirty (30) days after submission, the
parties are relieved of the requirement to pursue ADR prior to application to
the District Court. Notwithstanding anything else herein contained,
to the extent any provision of this Plan Trust Agreement is inconsistent with
any provision of the Plan or the TDP, the Plan or the TDP shall
control.
7.14 Enforcement and
Administration. The provisions of this Plan Trust Agreement and the TDP
attached hereto shall be enforced by the District Court pursuant to the
Plan. The parties hereby further acknowledge and agree that the
District Court shall have exclusive jurisdiction over the settlement of the
accounts of the Plan Trustee and over any disputes hereunder not resolved by
alternative dispute resolution in accordance with Section 7.13
above.
7.15 Effectiveness. This
Plan Trust Agreement shall not become effective until it has been executed and
delivered by all the parties hereto.
7.16 Counterpart
Signatures. This Plan Trust Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but such counterparts
shall together constitute but one and the same instrument.
IN
WITNESS WHEREOF, the parties have executed this Plan Trust Agreement this _____
day of ________________________, _______.
CONGOLEUM CORPORATION,
SETTLOR, by
Name:
___________________________________
Title:
___________________________________
CONGOLEUM SALES, INC.,
SETTLOR, by
Name:
___________________________________
Title:
___________________________________
CONGOLEUM FISCAL, INC., SETTLOR,
by
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Name:
___________________________________
Title:
___________________________________
PLAN
TRUSTEE
_________________________________________
Name:
ASBESTOS
CLAIMANTS' COMMITTEE
_________________________________________
TRUST
ADVISORY COMMITTEE
_________________________________________
Name
Expiration
Date of Initial Term: Third Anniversary
Of the Date of this
Agreement
_________________________________________
Name
Expiration
Date of Initial Term: Third Anniversary
Of the Date of this
Agreement
_________________________________________
Name
Expiration
Date of Initial Term: Third Anniversary
Of the Date of this
Agreement
_________________________________________
Name
Expiration
Date of Initial Term: Fourth Anniversary
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EXHIBIT
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Of the Date of this
Agreement
_________________________________________
Name
Expiration
Date of Initial Term: Fourth Anniversary
Of the Date of this
Agreement
_________________________________________
Name
Expiration
Date of Initial Term: Fifth Anniversary
Of the Date of this
Agreement
FUTURES
REPRESENTATIVE
__________________________________________
30
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EXHIBIT
B
CERTIFICATE
OF TRUST
[TO
COME]
31
Exhibit F to the
Plan
Distributor
Protected Parties
(To
be filed as part of the Plan Supplement)
Exhibit G to the
Plan
Trust
Distribution Procedures (TDP)
EXHIBIT
G TO THE PLAN
CONGOLEUM
PLAN
TRUST
DISTRIBUTION PROCEDURES
Table
of Contents
Page
|
||
SECTION
I
|
Introduction
|
1
|
1.1
|
Purpose
|
1
|
SECTION
II
|
Overview
|
1
|
2.1
|
Plan
Trust Goals
|
1
|
2.2
|
Claims
Liquidation Procedures
|
2
|
2.3
|
Pre-Petition
Settled Claims
|
3
|
2.4
|
Application
of the Payment Percentage
|
3
|
2.5
|
Plan
Trust’s Determination of the Maximum Annual Payment and
|
|
Maximum
Available Payment
|
4
|
|
2.6
|
Claims
Payment Ratio
|
4
|
2.7
|
Indirect
Plan Trust Asbestos Claims
|
6
|
SECTION
III
|
Claims
Handling Fee, Plan Trust Expenses and Coverage Costs
|
6
|
SECTION
IV
|
TDP
Administration
|
6
|
4.1
|
Trust
Advisory Committee and Futures Representative
|
6
|
4.2
|
Consent
and Consultation Procedures
|
6
|
SECTION
V
|
Payment
Percentage; Periodic Estimates
|
7
|
5.1
|
Uncertainty
of Congoleum’s Personal Injury Asbestos Liabilities
|
7
|
5.2
|
Computation
of Payment Percentage
|
7
|
5.3
|
Applicability
of the Payment Percentage
|
8
|
SECTION
VI
|
Resolution
of Plan Trust PI Asbestos Claims
|
9
|
6.1
|
Ordering,
Processing and Payment of Claims
|
9
|
6.2
|
Resolution
of Plan Trust PI Asbestos Claims
|
11
|
6.3
|
Categorizing
Claims as Extraordinary and/or Exigent Hardship
|
19
|
6.4
|
Secondary
Exposure Claims
|
20
|
6.5
|
Indirect
Plan Trust Asbestos Claims
|
20
|
6.6
|
Evidentiary
Requirements
|
22
|
6.7
|
Claims
Audit Program
|
25
|
6.8
|
Second
Disease (Malignancy) Claims
|
25
|
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EXHIBIT
G TO THE PLAN
6.9
|
Arbitration
|
25
|
6.10
|
Litigation
|
26
|
SECTION
VII
|
Claims
Materials
|
26
|
7.1
|
Claims
Materials
|
26
|
7.2
|
Content
of Claims Materials
|
27
|
7.3
|
Withdrawal
or Deferral of Claims
|
27
|
7.4
|
Filing
Requirements and Fees
|
27
|
7.5
|
Confidentiality
of Claimants’ Submissions
|
27
|
SECTION
VIII
|
General
Guidelines for Liquidating and Paying Claims
|
28
|
8.1
|
Showing
Required
|
28
|
8.2
|
Costs
Considered
|
28
|
8.3
|
Discretion
to Vary the Order and Amounts of Payments in Event of Limited
Liquidity
|
28
|
8.4
|
Punitive
Damages
|
29
|
8.5
|
Sequencing
Adjustment
|
29
|
8.6
|
Suits
in the Tort System
|
30
|
8.7
|
Payment
of Judgments for Money Damages
|
30
|
8.8
|
Releases
|
31
|
8.9
|
Third-Party
Services
|
31
|
8.10
|
Plan
Trust Disclosure of Information
|
31
|
SECTION
IX
|
Miscellaneous
|
31
|
9.1
|
Amendments
|
31
|
9.2
|
Severability
|
32
|
9.3
|
Governing
Law
|
32
|
-ii-
EXHIBIT
G TO THE PLAN
The
Congoleum Plan Trust Distribution Procedures (this “TDP”) contained
herein provide for resolving all asbestos-related personal injury and death
claims caused by exposure to products for which, Congoleum Corporation,
Congoleum Sales, Inc., and Congoleum Fiscal, Inc., (collectively referred to as
the “Debtors”
or “Congoleum”), and
their predecessors, successors, and assigns, have legal responsibility as the
result of the manufacture, distribution, installation or use of Congoleum
products containing asbestos or exposure to asbestos or asbestos-containing
products in a Congoleum facility, which consist of Asbestos Personal Injury
Claims and Unknown Asbestos Claims, as provided in and required by the confirmed
Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy
Code of the Debtors, the Official Asbestos Claimants’ Committee and the Official
Committee of Bondholders for Congoleum Corporation, et al., (the “Plan”) and the
Congoleum Plan Trust Agreement (the “Plan Trust
Agreement”). The Plan and Plan Trust Agreement establish the Congoleum
Plan Trust (“Plan
Trust”). The Plan Trustee shall implement and administer this TDP in
accordance with the Plan Trust Agreement. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to them in the Plan and, if
not defined in the Plan, in the Plan Trust Agreement.
SECTION
I
Introduction
1.1 Purpose. This TDP has
been adopted pursuant to the Plan Trust Agreement. It is designed to (a) provide
fair, equitable and substantially similar treatment for all Asbestos Personal
Injury Claims and Unknown Asbestos Claims that may presently exist or may arise
in the future and (b) otherwise give effect to the treatment provisions
applicable to Asbestos Personal Injury Claims set forth in Section 4.1(g) of the
Plan.
1.2 Interpretation.
Except as may otherwise be provided below, nothing in this TDP shall be deemed
to create a substantive right for any claimant.
SECTION
II
Overview
2.1 Plan Trust Goals. The
goal of the Plan Trust is to treat all claimants equitably and in accordance
with their legal rights. This TDP furthers that goal by setting forth procedures
for processing and paying Congoleum’s share of the unpaid portion of the
liquidated value of Asbestos Personal Injury Claims, including the claims of
Pre-Petition Settled Claimants, which are addressed in Sections 2.3 and
6.1(a)(1) below and Unknown Asbestos Claims (hereinafter for all purposes of
this TDP defined as “Plan Trust PI Asbestos
Claims”) generally on an impartial, first-in first-out (“FIFO”) basis, with
the intention of paying all claimants over time as equivalent a share as
possible of the value of their claims based on historical values for
substantially similar
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claims
in the tort system.1 To
this end, this TDP establishes a schedule of eight asbestos-related diseases
(“Disease
Levels”), seven of which have presumptive medical and exposure
requirements (“Medical/Exposure
Criteria”) and specific liquidated values (“Scheduled Values”),
and seven of which have both anticipated average values (“Average Values”) and
caps on their liquidated values (“Maximum Values”). The
Disease Levels, Medical/Exposure Criteria, Scheduled Values, Average Values and
Maximum Values, which are set forth in Section 6.2 below, have all been selected
and derived with the intention of achieving a fair allocation of the Plan Trust
funds as among claimants suffering from different disease processes in light of
the best available information considering the settlement history of Congoleum
and the rights claimants would have in the tort system absent the
bankruptcy.
2.2 Claims Liquidation
Procedures. Plan Trust PI Asbestos Claims shall be processed based on
their place in the FIFO Processing Queue to be established pursuant to Section
6.1(a)(2) below. The Plan Trust shall take all reasonable steps to resolve Plan
Trust PI Asbestos Claims as efficiently and expeditiously as possible at each
stage of claims processing and arbitration, which steps may include, in the Plan
Trust’s sole discretion, conducting settlement discussions with claimants’
representatives with respect to more than one claim at a time, provided that the
claimants’ respective positions in the FIFO Processing Queue are maintained; and
each claim is individually evaluated pursuant to the valuation factors set forth
in Section 6.2(b)(2) below. The Plan Trust shall also make every effort to
resolve each year at least that number of Plan Trust PI Asbestos Claims required
to exhaust the Maximum Annual Payment and the Maximum Available Payment for
Category A claims and Category B claims, as those terms are defined
below.
The
Plan Trust shall liquidate all Plan Trust PI Asbestos Claims except Foreign
Claims (as defined below) that meet the presumptive Medical/Exposure Criteria of
Disease Levels I – V, VII and VIII under the Expedited Review Process described
in Section 6.2(a) below. Claims involving Disease Levels I – V, VII and VIII
that do not meet the presumptive Medical/Exposure Criteria for the relevant
Disease Level may undergo the Plan Trust’s Individual Review Process described
in Section 6.2(b) below. In such a case, notwithstanding that the claim does not
meet the presumptive Medical/Exposure Criteria for the relevant Disease Level,
the Plan Trust can offer the claimant an amount up to the Scheduled Value of
that Disease Level if the Plan Trust is satisfied that the claimant has
presented a claim that would be cognizable and valid in the tort
system.
Claimants
holding claims for Disease Levels II-V and VII-VIII may alternatively seek to
establish a liquidated value for the claim that is greater than its Scheduled
Value by electing the Plan Trust’s Individual Review Process. However, the
liquidated value of a claim that undergoes the Individual Review Process for
valuation purposes may be determined to be less than its Scheduled Value, and in
any event shall not exceed the Maximum Value for the relevant Disease Level set
forth in Section 6.2(b)(3) below, unless the claim qualifies as an Extraordinary
Claim as defined in Section 6.3(a) below, in which case its liquidated value
cannot exceed the
______________
|
1
|
As
used in this TDP, the phrase “in the tort system” shall not include claims
asserted against a trust established for the benefit of asbestos personal
injury claimants pursuant to section 524(g) and/or section 105 of the
Bankruptcy Code or any other applicable law (an “Asbestos Claim
Trust”).
|
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maximum
extraordinary value specified in that provision for such claims. Level VI (Lung
Cancer 2) claims and all Foreign Claims may be liquidated only pursuant to the
Plan Trust’s Individual Review Process.
Based
upon Congoleum’s claims settlement history in light of applicable tort law, and
current projections of present and future unliquidated claims, the Scheduled
Values and Maximum Values set forth in Section 6.2(b)(3) have been established
for Disease Levels that are eligible for Individual Review of their liquidated
values, with the expectation that the settlements in Level VI (Lung Cancer 2)
resulting from the Individual Review Process should result in Average Values
also set forth in that provision.
All
unresolved disputes over a claimant’s medical condition, exposure history and/or
the liquidated value of the claim shall be subject to binding or non-binding
arbitration as set forth in Section 6.9 below, at the election of the claimant,
under the ADR Procedures that are provided in Attachment A hereto. Plan Trust PI
Asbestos Claims that are the subject of a dispute with the Plan Trust that
cannot be resolved by non-binding arbitration may enter the tort system as
provided in Sections 6.10 and 8.6 below. However, if and when a claimant obtains
a judgment in the tort system, the judgment shall be payable (subject to the
Payment Percentage, Maximum Available Payment, and Claims Payment Ratio
provisions set forth below) as provided in Section 8.7 below.
2.3 Pre-Petition Settled
Claimants. As set forth in the Plan, each Pre-Petition Settled Claimant
shall be restored to status
quo ante at the time that the claimant originally filed or submitted the
Asbestos Personal Injury Claim that resulted in such claimant’s Pre-Petition
Settlement Agreement or the Claimant Agreement, respectively, and each
Pre-Petition Settled Claimant will be treated in all respects for purposes of
this TDP as the holder of a Plan Trust PI Asbestos Claim.
2.4 Application of the Payment
Percentage. After the liquidated value of a Plan Trust PI Asbestos Claim
other than a claim involving Other Asbestos Disease (Disease Level I – Cash
Discount Payment), as defined in Section 6.2(a)(3) below, is determined pursuant
to the procedures set forth herein for Expedited Review, Individual Review,
arbitration, or litigation in the tort system, the claimant shall ultimately
receive a pro-rata share of that value based on a Payment Percentage described
in Section 5.2 below. The Payment Percentage shall also apply to all sequencing
adjustments paid pursuant to Section 8.5 below.
After
the Plan Trust is established, an initial Payment Percentage shall be set
pursuant to Section 5.2, below, by the Plan Trustee, the TAC and the Futures
Representative (who are described in Section 4.1, below). The initial Payment
Percentage shall be calculated on the assumption that the Average Values set
forth in Section 6.2(b)(3), below, shall be achieved with respect to existing
present claims and projected future claims involving Disease Levels II –
VIII.
The
Payment Percentage may thereafter be adjusted upwards or downwards from time to
time by the Plan Trustee with the consent of the TAC and the Futures
Representative to reflect then-current estimates of the Plan Trust’s assets and
its liabilities, as well as then-estimated value of then-pending and future
claims. Any adjustment to the initial Payment Percentage shall
be
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made
only pursuant to Section 5.2 below. If the Payment Percentage is increased over
time, claimants whose claims were liquidated and paid in prior periods under the
TDP shall receive additional payments only as provided in Section 5.2 below.
Because there is uncertainty in the prediction of both the number and severity
of future Plan Trust PI Asbestos Claims, and the amount of the Plan Trust’
assets, no guarantee can be made of any Payment Percentage of a Plan Trust PI
Asbestos Claim’s liquidated value.
2.5 Plan Trust’s Determination
of the Maximum Annual Payment and Maximum Available Payment. The Plan
Trust shall estimate or model the amount of cash flow anticipated to be
necessary over its entire life to ensure that funds shall be available to treat
all present and future Congoleum claimants as similarly as possible. In each
year, the Plan Trust shall be empowered to pay out all of the income earned
during the year (net of taxes payable with respect thereto), together with a
portion of its principal, calculated so that the application of Plan Trust funds
over its life, after payment of and reasonable reserves for Plan Trust Expenses,
shall correspond with the needs created by the anticipated flow of claims (the
“Maximum Annual
Payment”), taking into account the Payment Percentage provisions set
forth in Sections 2.4 above and 5.2 below. The Plan Trust’s distributions to all
claimants for that year shall not exceed the Maximum Annual Payment determined
for that year. In distributing the Maximum Annual Payment, the Plan Trust shall,
after reimbursing the Reorganized Debtors for the Claims Handling Fee (as
defined in the Plan Trust Agreement), allocate and use the remaining portion of
the Maximum Annual Payment (the “Maximum Available
Payment”) to satisfy all liquidated Plan Trust PI Asbestos Claims,
subject to the Claims Payment Ratio set forth in Section 2.6 below.
2.6 Claims Payment Ratio.
Based upon Congoleum’s claims settlement history and analysis of present and
future claims, a “Claims Payment Ratio”
has been determined which, as of the Effective Date, has been set at 75% for
Category A claims, which consist of Plan Trust PI Asbestos Claims involving
severe asbestosis and malignancies (Disease Levels IV – VIII) that were
unliquidated as of the Petition Date, and at 25% for Category B claims, which
are Plan Trust PI Asbestos Claims involving Other Asbestos Disease (Disease
Level I – Cash Discount Payment), non-malignant Asbestosis (Disease Level II) or
Pleural Disease (Disease Level III) that were similarly unliquidated as of the
Petition Date.
In
each year, after the determination of the Maximum Available Payment described in
Section 2.5 above, 75% of that amount shall be available to pay Category A
claims and 25% shall be available to pay Category B claims that have been
liquidated since the Petition Date. In the event there are insufficient funds in
any year to pay the liquidated claims within either or both of the Categories,
the available funds allocated to the particular Category shall be paid to the
maximum extent to claimants in that Category based on their place in the FIFO
Payment Queue described in Section 6.1(c) below, which shall be based upon the
date of claim liquidation. Claims for which there are insufficient funds
allocated to the relevant Category shall be carried over to the next year where
they shall be placed at the head of the FIFO Payment Queue. If there are excess
funds in either or both Categories, because there is an insufficient amount of
liquidated claims to exhaust the respective Maximum Available Payment amount for
that Category, then the excess funds for either or both Categories shall be
rolled over and remain dedicated to the respective Category to which they were
originally allocated.
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The
75%/25% Claims Payment Ratio and its rollover provision shall apply to all Plan
Trust Voting Claims The term “Plan Trust Voting
Claims” includes (i) claims filed against Congoleum in the tort system
prior to the Petition Date of December 31, 2003, including claims that were
subject to the Claimant Agreement and any other Pre-Petition Settlement
Agreements; and all claims filed against another defendant in the tort system
prior to the Petition Date; provided, however, that (1) either (a) the holder of
a claim described in subsection (i) above, or his or her authorized agent,
actually voted to accept or reject the Plan pursuant to the voting procedures
established by the Bankruptcy Court or District Court, unless such holder
certifies to the satisfaction of the Plan Trustee that he or she was prevented
from voting in this proceeding as a result of circumstances resulting in a state
of emergency affecting, as the case may be, the holder’s residence, principal
place of business or legal representative’s place of business at which the
holder or his or her legal representative receives notice and/or maintains
material records relating to his or her Plan Trust Voting Claim or (b) the
holder of such a claim is deemed, pursuant to the Plan, to be bound by the
treatment provisions in Section 4.1(g)(ii) of the Plan, as applicable; and
provided further that (2) the claim was subsequently filed with the Plan Trust
pursuant to Section 6.1 below by the Initial Claims Filing Date defined in
Section 6.1(a)(2) below. Thereafter, both the Claims Payment Ratio and its
rollover provision shall be continued absent circumstances, such as a
significant change in law or medicine, necessitating amendment to avoid a
manifest injustice. However, the accumulation, rollover and subsequent delay of
claims resulting from the application of the Claims Payment Ratio shall not, in
and of itself, constitute such circumstances. In addition, an increase in the
numbers of Category B claims beyond those predicted or expected shall not be
considered as a factor in deciding whether to reduce the percentage allocated to
Category A claims.
In
considering whether to make any amendments to the Claims Payment Ratio and/or
its rollover provisions, the Plan Trustee shall consider the reasons for which
the Claims Payment Ratio and its rollover provisions were adopted, the
settlement history that gave rise to its calculation, and the foreseeability or
lack of foreseeability of the reasons why there would be any need to make an
amendment. In that regard, the Plan Trustee should keep in mind the interplay
between the Payment Percentage and the Claims Payment Ratio as it affects the
net cash actually paid to claimants.
In
any event, no amendment to the Claims Payment Ratio to reduce the percentage
allocation to Category A claims may be made without the unanimous consent of the
TAC and the Futures Representative. The percentage allocated to Category A
claims shall be reviewed as soon as practicable after the first anniversary of
the date the Plan Trust first accepts for processing proof of claims forms and
the other materials required to file a claim with the Plan Trust, and may be
increased at any time thereafter, with the consent of the TAC and the Futures
Representative. In case of any amendments to the Claims Payment Ratio, consents
shall be governed by the consent process set forth in Sections 5.8(b) and 6.6(b)
of the Plan Trust Agreement, however, failure to obtain consent shall not be
subject to the dispute resolution provisions of Section 7.13 thereof. The Plan
Trustee, with the consent of the TAC and the Futures Representative, may offer
the option of a reduced Payment Percentage to holders of claims in either
Category A or Category B in return for prompter payment (the “Reduced Payment
Option”).
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2.7 Indirect Plan Trust Asbestos
Claims. As set forth in Section 6.5 below, “Indirect Asbestos Claims” (as
defined below), if any, shall be subject to the same categorization, evaluation,
and payment provisions of this TDP as all other Plan Trust PI Asbestos
Claims.
SECTION
III
Claims Handling Fee, Plan
Trust Expenses and Coverage Costs
Notwithstanding
any other provision contained in this TDP, (i) the holder of the Claim for the
Claims Handling Fee shall be paid as provided in the Plan Trust Agreement; and
(ii) distributions to Plan Trust PI Asbestos Claims shall not be prior to the
payment of or reserve for Plan Trust Expenses nor prior to payment of or
reimbursement for Coverage Costs in accordance with Section 5.1(q) of the
Plan.
SECTION
IV
TDP
Administration
4.1 Trust Advisory Committee and
Futures Representative. Pursuant to the Plan and the Plan Trust
Agreement, the Plan Trust and this TDP shall be administered by the Plan Trustee
in consultation with the TAC, which represents the interests of holders of
present Plan Trust PI Asbestos Claims, and the Futures Representative, who
represents the interests of holders of Plan Trust PI Asbestos Claims that shall
be asserted in the future. The Plan Trustee shall obtain the consent of the TAC
and the Futures Representative on any amendments to this TDP pursuant to Section
9.1 below, and on such other matters as are otherwise required below and in
Section 2.2(f) of the Plan Trust Agreement. The Plan Trustee shall also consult
with the TAC and the Futures Representative on such matters as are provided
below and in Section 2.2(e) of the Plan Trust Agreement. The initial Plan
Trustee, the initial members of the TAC and the initial Futures Representative
are identified in the Plan Trust Agreement.
4.2 Consent and Consultation
Procedures. In those circumstances in which consultation or consent is
required, the Plan Trustee shall provide written notice to the TAC and the
Futures Representative of the specific amendment or other action that is
proposed. The Plan Trustee shall not implement such amendment nor take such
action unless and until the parties have engaged in the Consultation Process
described in Sections 5.8(a) and 6.6(a), or the Consent Process described in
Sections 5.8(b) and 6.6(b), of the Plan Trust Agreement,
respectively.
SECTION
V
Payment Percentage; Periodic
Estimates
5.1 Uncertainty of Congoleum’s
Personal Injury Asbestos Liabilities. As discussed above, there is
inherent uncertainty regarding Congoleum’s total asbestos-related tort
liabilities, as well as the total value of the assets available to the Plan
Trust to pay Plan Trust PI Asbestos Claims. Consequently, there is inherent
uncertainty regarding the amounts that holders of Plan
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Trust
PI Asbestos Claims shall receive. To seek to ensure substantially equivalent
treatment of all present and future Plan Trust PI Asbestos Claims, the Plan
Trustee must determine from time to time the percentage of full liquidated value
that holders of present and future Plan Trust PI Asbestos Claims shall be likely
to receive, i.e., the “Payment Percentage”
described in Section 2.4 above and Section 5.2 below.
5.2 Computation of Payment
Percentage. As provided in Section 2.4 above, an initial Payment
Percentage shall be set by the Plan Trustee with the consent of the TAC and the
Futures Representative after the Plan Trust is established and sufficient
information is available concerning the expected assets and liabilities of the
Plan Trust over its lifetime.
The
Payment Percentage shall thereafter be subject to change pursuant to the terms
of this TDP and the Plan Trust Agreement if the Plan Trustee determines that an
adjustment is required. No less frequently than once every three years,
commencing with the first day of January occurring after the Plan is
consummated, the Plan Trustee shall reconsider the then applicable Payment
Percentage to assure that it is based on accurate, current information and may,
after such reconsideration, change the Payment Percentage if necessary with the
consent of the TAC and the Futures Representative. The Plan Trustee shall also
reconsider the then applicable Payment Percentage at shorter intervals if they
deem such reconsideration to be appropriate or if requested to do so by the TAC
or the Futures Representative.
The
Plan Trustee must base its determination of the Payment Percentage on current
estimates of the number, types, and values of present and future Plan Trust PI
Asbestos Claims, the value of the assets then available to the Plan Trust for
their payment, all anticipated administrative and legal expenses, and any other
material matters that are reasonably likely to affect the sufficiency of funds
to pay a comparable percentage of full value to all holders of Plan Trust PI
Asbestos Claims. When making these determinations, the Plan Trustee shall
exercise common sense and flexibly evaluate all relevant factors. The Payment
Percentage applicable to Category A or Category B claims may not be reduced to
alleviate delays in payments of claims in the other Category; both Categories of
claims shall receive the same Payment Percentage, but the payment may be
deferred as needed, and a Reduced Payment Option may be instituted as described
in Section 2.6 above.
The
uncertainty surrounding the amount of the Plan Trust’s future assets is due in
significant part to the fact that the estimates of those assets do not take into
account the possibility that the Plan Trust may receive substantial additional
funds from successful recoveries of insurance proceeds that have been assigned
to the Plan Trust with respect to which the coverage is presently in dispute or
the solvency of the carrier is in doubt. There is also uncertainty surrounding
the totality of the Plan Trust PI Asbestos Claims to be paid over time as well
as the extent to which changes in existing federal and/or state law could affect
the Plan Trust’s liabilities under this TDP. If the Plan Trust successfully
resolves an insurance coverage dispute or otherwise receives a substantial
recovery of insurance proceeds, the Plan Trust shall use those proceeds and/or
claims savings, as the case may be, first to maintain the Payment Percentage
then in effect.
If
the Plan Trustee, with the consent of the TAC and the Futures Representative,
determines to increase the Payment Percentage, including the initial Payment
Percentage
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applicable
to Plan Trust Voting Claims, due to a material change in the estimates of the
Plan Trust’s future assets and/or liabilities, the Plan Trustee shall also make
supplemental payments to all claimants who previously liquidated their claims
against the Plan Trust and received payments based on a lower Payment
Percentage. The amount of any such supplemental payment shall be the liquidated
value of the claim in question times the newly adjusted Payment Percentage, less
all amounts previously paid to the claimant with respect to the claim, not
including the portion, if any, of such previously paid amounts that was
attributable to any sequencing adjustment.
The
Plan Trustee’s obligation to make a supplemental payment to a claimant shall be
suspended in the event the payment in question would be less than $100.00, and
the amount of the suspended payment shall be added to the amount of any prior
supplemental payment/payments that was/were also suspended because it/they would
have been less than $100.00. However, the Plan Trustee shall pay any such
aggregate supplemental payments due the claimant at such time that the total
exceeds $100.00.
5.3 Applicability of the Payment
Percentage. Except as set forth in Section 5.2 above with respect to
supplemental payments, no holder of a Plan Trust Voting Claim, other than a
holder of a claim for Other Asbestos Disease (Disease Level I – Cash Discount
Payment) as defined in Section 6.2(a)(3) below shall receive a payment that
exceeds the initial Payment Percentage times the liquidated value of the claim.
Except as otherwise provided in Section 6.1(c) below for Plan Trust PI Asbestos
Claims involving deceased or incompetent claimants for which approval of the
Plan Trust’s offer by a court or through a probate process is required, no
holder of any other Plan Trust Asbestos Claim, other than a Plan Trust Asbestos
Claim for Other Asbestos Disease (Disease Level I - Cash Discount Payment) shall
receive a payment that exceeds the liquidated value of the claim times the
Payment Percentage in effect at the time of payment. Plan Trust PI Asbestos
Claims involving Other Asbestos Disease (Disease Level I - Cash Discount
Payment) shall not be subject to the Payment Percentage, but shall instead be
paid the full amount of their Scheduled Value as set forth in Section 6.2(a)(3)
below.
If
a redetermination of the Payment Percentage has been proposed in writing by the
Plan Trustee to the TAC and the Futures Representative but has not yet been
adopted, the claimant shall receive the lower of the current Payment Percentage
or the proposed Payment Percentage. However, if the proposed Payment Percentage
was the lower amount but was not subsequently adopted, the claimant shall
thereafter receive the difference between the lower proposed amount and the
higher current amount. Conversely, if the proposed Payment Percentage was the
higher amount and was subsequently adopted, the claimant shall thereafter
receive the difference between the lower current amount and the higher adopted
amount.
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SECTION
VI
Resolution of Plan Trust PI
Asbestos Claims
6.1 Ordering, Processing and
Payment of Claims.
(a) Ordering of
Claims.
(1) Pre-Petition Settled
Claimants.
a. The
claims of each Pre-Petition Settled Claimant shall be restored to status quo ante at the time
that the claimant originally filed or submitted the Asbestos Personal Injury
Claim that resulted in the claimant’s Pre-Petition Settlement Agreement or the
Claimant Agreement, respectively, and each such Pre-Petition Settled Claimant
will be required to satisfy the TDP procedures, including medical, exposure and
other requirements in the TDP.
(2) Establishment of the FIFO
Processing Queue.
The
Plan Trust shall order Plan Trust PI Asbestos Claims that are sufficiently
complete to be reviewed for processing purposes on a FIFO basis except as
otherwise provided herein (the “FIFO Processing
Queue”). For all claims filed on or before the date six months after the
date that the Plan Trust first makes available the proof of claim forms and
other claims materials required to file a claim with the Plan Trust (the “Initial Claims Filing
Date”), a claimant’s position in the FIFO Processing Queue shall be
determined as of the earlier of (i) the date prior to December 31, 2003 (the
“Petition
Date”) that the specific claim was either filed against Congoleum in the
tort system or was actually submitted to Congoleum pursuant to an administrative
settlement agreement; (ii) the date before the Petition Date that a claim was
filed against another defendant in the tort system if at the time the claim was
subject to a tolling agreement with Congoleum; (iii) the date after the Petition
Date but before the Initial Claims Filing Date that the claim was filed against
another defendant in the tort system; (iv) the date after the Petition Date but
before the Effective Date that a proof of claim was filed against Congoleum in
this Chapter 11 proceeding; or (v) the date a ballot was submitted on behalf of
the claimant for purposes of voting to accept or reject the Plan pursuant to the
voting procedures approved by the Bankruptcy Court or District
Court.
Following
the Initial Claims Filing Date, the claimant’s position in the FIFO Processing
Queue shall be determined by the date the claim is filed with the Plan Trust. If
any claims are filed on the same date, the claimant’s position in the FIFO
Processing Queue shall be determined by the date of the diagnosis of the
asbestos-related disease. If any claims are filed and diagnosed on the same
date, the claimant’s position in the FIFO Processing Queue shall be determined
by the claimant’s date of birth, with older claimants given priority over
younger claimants. Pre-Petition Settled Claimants shall be deemed to have been
filed with the Plan Trust on the Effective Date for purposes of the FIFO
Processing Queue even if filed at anytime thereafter.
(3) Effect of Statutes of
Limitation and Repose.
The
claimant's diagnosis date must be recent enough so that the assertion of a claim
against the Plan Trust, or against Congoleum if a claim was asserted prior to
the Petition Date,
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was
within the applicable federal, state or foreign statute of limitations and
repose that was in effect at the time of the assertion of the claim. For the
purposes of calculating such period of limitations, the running of the
limitations period shall be deemed tolled as of the earliest of (A) the actual
filing of the claim against Congoleum prior to the Petition Date, (B) the
tolling of the claim against Congoleum prior to the Petition Date by an
agreement or otherwise, provided such tolling is still in effect on the Petition
Date, or (C) the Petition Date. If a Plan Trust PI Asbestos Claim meets any of
the tolling provisions set forth in the preceding sentence and the claim was not
barred by the applicable federal, state or foreign statute of limitations and
repose at the time of the tolling event, it shall be treated as timely filed if
it is actually filed with the Plan Trust within three (3) years after the
Initial Claims Filing Date. In addition, for an asbestos-related disease that
was first diagnosed after the Petition Date, irrespective of the application of
any relevant federal, state or foreign statute of limitation or repose, any
claims may be filed with the Plan Trust within three (3) years after the date of
diagnosis or within three (3) years after the Initial Claims Filing Date,
whichever occurs later. The statute of limitations with respect to claims by
Pre-Petition Settled Claimants shall be deemed tolled from the date that the
Pre-Petition Settled Claimant initially filed or submitted its claim against
Congoleum that resulted in the Pre-Petition Settlement Agreement (the
“Submission Date”), and any statute of limitations with respect to such claim
shall be tolled until three (3) years after the Initial Claims Filing Date.
However, the processing of any Plan Trust PI Asbestos Claim by the Plan Trust
may be deferred at the election of the claimant pursuant to Section 7.3
below.
(b) Processing of Claims.
As a general practice, the Plan Trust shall review its claims files on a regular
basis and notify all claimants whose claims are likely to come up in the FIFO
Processing Queue in the near future.
(c) Payment of Claims.
Plan Trust PI Asbestos Claims that have been liquidated by the Expedited Review
Process as provided in Section 6.2(a) below, by the Individual Review Process as
provided in Section 6.2(b) below, by arbitration as provided in Section 6.9
below, or by litigation in the tort system provided in Section 6.10 below, shall
be paid in FIFO order based on the date their liquidation became final (the
“FIFO Payment
Queue”), all such payments being subject to the applicable Payment
Percentage, the Maximum Available Payment, and the Claims Payment Ratio, and the
sequencing adjustment provided for in Section 8.5 below, except as otherwise
provided herein.
Where
the claimant is deceased or incompetent, and the settlement and payment of his
or her claim must be approved by a court of competent jurisdiction or through a
probate process prior to acceptance of the claim by the claimant’s
representative, an offer made by the Plan Trust on the claim shall remain open
so long as proceedings before that court or in that probate process remain
pending, provided that the Plan Trust has been furnished with evidence that the
settlement offer has been submitted to such court or in the probate process for
approval. If the offer is ultimately approved by the court or through the
probate process and accepted by the claimant’s representative, the Plan Trust
shall pay the claim in the amount so offered, multiplied by the Payment
Percentage in effect at the time the offer was first made.
If
any claims are liquidated on the same date, the claimant’s position in the FIFO
Payment Queue shall be determined by the date of the diagnosis of the claimant’s
asbestos-related disease. If any claims are liquidated on the same date and the
respective holders’
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asbestos-related
diseases were diagnosed on the same date, the position of those claims in the
FIFO Payment Queue shall be determined by the Plan Trust based on the dates of
the claimants’ birth, with older claimants given priority over younger
claimants.
6.2 Resolution of Plan Trust PI
Asbestos Claims
Within
six months after the establishment of the Plan Trust, the Plan Trustee, with the
consent of the TAC and the Futures Representative, shall adopt procedures for
reviewing and liquidating all Plan Trust PI Asbestos Claims, which shall include
deadlines for processing such claims. Such procedures shall also require that
claimants seeking resolution of Plan Trust PI Asbestos Claims must first file a
proof of claim form, together with the required supporting documentation, in
accordance with the provisions of Sections 7.1 and 7.2 below. It is anticipated
that the Plan Trust shall provide an initial response to the claimant within six
months of receiving the proof of claim form.
The
proof of claim form shall require the claimant to assert his or her claim for
the highest Disease Level for which the claim qualifies at the time of filing.
Irrespective of the Disease Level alleged on the proof of claim form, all claims
shall be deemed to be a claim for the highest Disease Level for which the claim
qualifies at the time of filing, and all lower Disease Levels for which the
claim may also qualify at the time of filing or in the future shall be treated
as subsumed into the higher Disease Level for both processing and payment
purposes.
Upon
filing of a valid proof of claim form with the required supporting
documentation, the claimant shall be placed in the FIFO Processing Queue in
accordance with the ordering criteria described in Section 6.1(a)(2) above. The
Plan Trust shall provide the claimant with six-months notice of the date by
which it expects to reach the claim in the FIFO Processing Queue, following
which the claimant shall promptly (i) advise the Plan Trust whether the claim
should be liquidated under the Plan Trust’s Expedited Review Process described
in Section 6.2(a) below or, in certain circumstances, under the Plan Trust’s
Individual Review Process described in Section 6.2(b) below; (ii) provide the
Plan Trust with any additional medical and/or exposure evidence that was not
provided with the original claim submission; and (iii) advise the Plan Trust of
any change in the claimant’s Disease Level. If a claimant fails to respond to
the Plan Trust’s notice prior to the reaching of the claim in the FIFO
Processing Queue, the Plan Trust shall process and liquidate the claim under the
Expedited Review Process based upon the medical/exposure evidence previously
submitted by the claimant, although the claimant shall retain the right to
request Individual Review as described in Section 6.2(b) below.
(a) Expedited Review
Process.
(1) In General. The Plan
Trust’s Expedited Review Process is designed primarily to provide an
expeditious, efficient and consistent method for liquidating all Plan Trust PI
Asbestos Claims (except those involving Lung Cancer 2 – Disease Level VI and all
Foreign Claims (as defined below), which shall only be liquidated pursuant to
the Plan Trust’s Individual Review Process), where the claim can easily be
verified by the Plan Trust as meeting the presumptive Medical/Exposure Criteria
for the relevant Disease Level.
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Thus,
claims that undergo Expedited Review and meet the presumptive Medical/Exposure
Criteria for the relevant Disease Level shall be paid the Scheduled Value for
such Disease Level set forth in Section 6.2(a)(3) below. However, except for
claims involving Other Asbestos Disease (Disease Level I), all claims liquidated
by Expedited Review shall be subject to the applicable Payment Percentage, the
Maximum Available Payment, and the Claims Payment Ratio limitations set forth
above. Claimants holding claims that cannot be liquidated by Expedited Review
because they do not meet the presumptive Medical/Exposure Criteria for the
relevant Disease Level may elect the Plan Trust’s Individual Review Process set
forth in Section 6.2(b) below.
Further,
the claimant’s eligibility to receive the Scheduled Value for his or her Plan
Trust Asbestos Claim pursuant to the Expedited Review Process shall be
determined solely by reference to the Medical/Exposure Criteria set forth below
for each of the Disease Levels eligible for Expedited Review.
(2) Claims Processing Under
Expedited Review. All claimants seeking liquidation of their
claims pursuant to Expedited Review shall file the Plan Trust’s proof of claim
form. As a proof of claim form is reached in the FIFO Processing Queue, the Plan
Trust shall determine whether the claim described therein meets the
Medical/Exposure Criteria for one of the seven Disease Levels eligible for
Expedited Review, and shall advise the claimant of its determination. If a
Disease Level is determined, the Plan Trust shall tender to the claimant an
offer of payment of the Scheduled Value for the relevant Disease Level
multiplied by the applicable Payment Percentage, together with a form of release
approved by the Plan Trust. If the claimant accepts the Scheduled Value and
returns the release properly executed, the claim shall be placed in the FIFO
Payment Queue, following which the Plan Trust shall disburse payment subject to
the limitations of the Maximum Available Payment and Claims Payment Ratio, if
any.
(3) Disease Levels, Scheduled
Values and Medical/Exposure Criteria. The eight Disease Levels covered by
this TDP, together with the Medical/Exposure Criteria for each and the Scheduled
Values for the seven Disease Levels eligible for Expedited Review, are set forth
below. These Disease Levels, Scheduled Values, and Medical/Exposure Criteria
shall apply to all Plan Trust Voting Claims filed with the Plan Trust on or
before the Initial Claims Filing Date provided in Section 6.1(a)(2) above for
which the claimant elects the Expedited Review Process. Thereafter, for purposes
of administering the Expedited Review Process and with the consent of the TAC
and the Futures Representative, the Plan Trustee may add to, change, or
eliminate Disease Levels, Scheduled Values, or Medical/Exposure Criteria;
develop subcategories of Disease Levels, Scheduled Values or Medical/Exposure
Criteria; or determine that a novel or exceptional asbestos personal injury
claim is compensable even though it does not meet the Medical/Exposure Criteria
for any of the then current Disease Levels.
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Disease
Level
|
Scheduled
Value
|
Medical/Exposure
Criteria
|
Mesothelioma
(Level VIII)
|
$120,000
|
Diagnosis2
of mesothelioma; and (2) Congoleum Exposure prior to December 31, 1982, as
defined in Section 6.6(b)(3).
|
Lung
Cancer 1 (Level VII)
|
$40,000
|
(1)
Diagnosis of a primary lung cancer plus evidence of an underlying
Bilateral Asbestos-Related Nonmalignant Disease,3
(2) six months Congoleum Exposure prior to December 31, 1982, (3)
Significant Occupational Exposure4
to asbestos, and (4) supporting medical documentation establishing
asbestos exposure as a contributing factor in causing the lung cancer in
question.
|
Lung
Cancer 2 (Level VI)
|
Individual
Evaluation
|
(1)
Diagnosis of a primary lung cancer; (2) Congoleum Exposure prior to
December 31, 1982, and (3) supporting medical documentation establishing
asbestos exposure as a contributing factor in causing the lung cancer in
question.
|
______________
2
|
The
requirements for a diagnosis of an asbestos-related disease that may be
compensated under the provisions of this TDP are set forth in Section 6.6
below.
|
3
|
Evidence
of “Bilateral Asbestos-Related Nonmalignant Disease,” for purposes of
meeting the criteria for establishing Disease Levels I, II, III, V and
VII, means either (i) a chest X-ray read by a qualified B reader of 1/0 or
higher on the ILO scale or (ii)(x) a chest X-ray read by a qualified B
reader or other Qualified Physician, (y) a CT scan read by a Qualified
Physician, or (z) pathology, in each case showing either bilateral
interstitial fibrosis, bilateral pleural plaques, bilateral pleural
thickening, or bilateral pleural calcification. Evidence submitted to
demonstrate (i) or (ii) above must be in the form of a written report
stating the results (e.g., an ILO report,
written radiology report or pathology report). Solely for asbestos claims
filed against Congoleum or another defendant in the tort system prior to
the Petition Date, if an ILO reading is not available, either (i) a chest
X-ray or a CT scan read by a Qualified Physician, or (ii) pathology, in
each case showing bilateral interstitial fibrosis, bilateral pleural
plaques, bilateral pleural thickening, or bilateral pleural calcification
consistent with or compatible with a diagnosis of asbestos-related
disease, shall be evidence of a Bilateral Asbestos-Related Nonmalignant
Disease for purposes of meeting the presumptive medical requirements of
Disease Levels I, II, III, V and VII. Pathological proof of asbestosis may
be based on the pathological grading system for asbestosis described in
the Special Issue of the Archives of Pathology and Laboratory Medicine,
“Asbestos-associated Diseases,” Vol. 106, No. 11, App. 3 (October 8,
1982). For all purposes of this TDP, a “Qualified Physician” is a
physician whose is board-certified (or in the case of Canadian claims or
Foreign Claims, a physician who is certified or qualified under comparable
medical standards or criteria of the jurisdiction in question) in one or
more relevant specialized fields of medicine such as pulmonology,
radiology, internal medicine or occupational medicine; provided, however,
subject to the provisions of Section 6.7, that the requirement for board
certification in this provision shall not apply to otherwise qualified
physicians whose X-ray and/or CT scan readings are submitted for deceased
holders of Plan Trust PI Asbestos
Claims.
|
4
|
The
term “Significant Occupational Exposure” is defined in Section 6.6(b)(2)
below.
|
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Disease
Level
|
Scheduled
Value
|
Medical/Exposure
Criteria
|
Lung
Cancer 2 (Level VI) claims are claims that do not meet the more stringent
medical and/or exposure requirements of Lung Cancer 1 (Level VII) claims.
All claims in this Disease Level shall be individually evaluated. The
estimated likely average of the individual evaluation awards for this
category is $15,000, with such awards capped at $24,000 unless the claim
qualifies for Extraordinary Claim treatment.
Level
VI claims that show no evidence of either an underlying Bilateral
Asbestos-Related Non-malignant Disease or Significant Occupational
Exposure may be individually evaluated, although it is not expected that
such claims shall be treated as having any significant value, especially
if the claimant is also a smoker.5
In any event, no presumption of validity shall be available for any claims
in this category.
|
||
Other
Cancer (Level V)
|
$12,000
|
(1)
Diagnosis of a primary colo-rectal, laryngeal, esophageal, pharyngeal, or
stomach cancer, plus evidence of an underlying Bilateral Asbestos-Related
Nonmalignant Disease, (2) six months Congoleum Exposure prior to December
31, 1982, (3) Significant Occupational Exposure to asbestos, and (4)
supporting medical documentation establishing asbestos exposure as a contributing
factor in causing the other cancer in question.
|
______________
|
5
|
There
is no distinction between Non-Smokers (defined below) and smokers for
either Lung Cancer 1 (Level VII) or Lung Cancer 2 (Level VI), although a
claimant who meets the more stringent requirements of Lung Cancer 1 (Level
VII) (evidence of an underlying Bilateral Asbestos-Related Nonmalignant
Disease plus Significant Occupational Exposure), and who is also a
Non-Smoker, may wish to have his or her claim individually evaluated by
the Plan Trust. In such a case, absent circumstances that would otherwise
reduce the value of the claim, it is anticipated that the liquidated value
of the claim might well exceed the $40,000 Scheduled Value for Lung Cancer
1 (Level VII) shown above. “Non-Smoker” means a claimant who either (a)
never smoked or (b) has not smoked during any portion of the twelve (12)
years immediately prior to the diagnosis of the lung
cancer.
|
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Disease
Level
|
Scheduled
Value
|
Medical/Exposure
Criteria
|
Severe
Asbestosis (Level IV)
|
$30,000
|
(1)
Diagnosis of asbestosis with ILO of 2/1 or greater, or asbestosis
determined by pathological evidence of asbestos, plus (a) TLC less than
65%, or (b) FVC less than 65% and FEV1/FVC ratio greater than 65%, (2) six
months Congoleum Exposure prior to December 31, 1982, (3) Significant
Occupational Exposure to asbestos, and (4) supporting medical
documentation establishing asbestos exposure as a contributing factor in
causing the pulmonary disease in question.
|
Asbestosis/Pleural
Disease (Level III)
|
$3,600
|
(1)
Diagnosis of Bilateral Asbestos- Related Nonmalignant Disease, plus (a)
TLC less than 80%, or (b) FVC less than 80% and FEV1/FVC ratio greater
than or equal to 65%, and (2) six months Congoleum Exposure prior to
December 31, 1982, (3) Significant Occupational Exposure to asbestos, and
(4) supporting medical documentation establishing asbestos exposure as a
contributing factor in causing the pulmonary disease in
question.
|
Asbestosis/Pleural
Disease (Level II)
|
$1,200
|
(1)
Diagnosis of a Bilateral Asbestos- Related Nonmalignant Disease, and (2)
six months Congoleum Exposure prior to December 31, 1982, and (3) five
years cumulative occupational exposure to asbestos.
|
Other
Asbestos Disease (Level I – Cash Discount Payment)
|
$250
|
(1)
Diagnosis of a Bilateral Asbestos- Related Nonmalignant Disease or an
asbestos-related malignancy other than mesothelioma, and (2) Congoleum
Exposure prior to December 31, 1982.
|
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(b) Individual Review
Process.
(1) In General. Subject
to the provisions set forth below, a Congoleum claimant may elect to have his or
her Plan Trust PI Asbestos Claim reviewed for purposes of determining whether
the claim would be compensable in the tort system even though it does not meet
the presumptive Medical/Exposure Criteria for any of the Disease Levels set
forth in Section 6.2(a)(3). In addition or alternatively, a Congoleum claimant
may elect to have a claim undergo the Individual Review Process for purposes of
determining whether the liquidated value of a claim involving Disease Levels II,
III, IV, V, VII or VIII exceeds the Scheduled Value for the relevant Disease
Level also set forth in said provision. However, until such time as the Plan
Trust has made an offer on a claim pursuant to Individual Review, the claimant
may change his or her Individual Review election and have the claim liquidated
pursuant to the Plan Trust’s Expedited Review Process. In the event of such a
change in the processing election, the claimant shall nevertheless retain his or
her place in the FIFO Processing Queue.
The
liquidated value of all Foreign Claims payable under this TDP shall be
established only under the Plan Trust’s Individual Review Process. Because Plan
Trust PI Asbestos Claims of individuals exposed in Canada who were resident in
Canada when such claims were filed were routinely litigated and resolved in the
courts of the United States, and because the resolution history of these claims
has been included in developing the Expedited Review Process, such claims shall
not be considered Foreign Claims hereunder and shall be eligible for liquidation
under the Expedited Review Process. Accordingly, a “Foreign Claim” is a
Plan Trust PI Asbestos Claim with respect to which the claimant’s exposure to an
asbestos-containing product occurred outside of the United States and its
Territories and Possessions, and outside of the Provinces and Territories of
Canada.
In
reviewing such Foreign Claims, the Plan Trust shall take into account all
relevant procedural and substantive legal rules to which the claims would be
subject in the Claimant’s Jurisdiction as defined in Section 6.2(b)(2) below.
The Plan Trust shall determine the liquidated value of Foreign Claims based on
historical settlements and verdicts in the Claimant’s Jurisdiction as well as
the other valuation factors set forth in Section 6.2(b)(2) below.
For
purposes of the Individual Review Process for Foreign Claims, the Plan Trustee,
with the consent of the TAC and the Futures Representative, may develop separate
Medical/Exposure Criteria and standards, as well as separate requirements for
physician and other professional qualifications, which shall be applicable to
all Foreign Claims channeled to the Plan Trust; provided however, that such
criteria, standards or requirements shall not effectuate substantive changes to
the claims eligibility requirements under this TDP, but rather shall be made
only for the purpose of adapting those requirements to the particular licensing
provisions and/or medical customs or practices of the foreign country in
question.
At
such time as the Plan Trust has sufficient historical settlement, verdict and
other valuation data for claims from a particular foreign jurisdiction, the Plan
Trustee, with the consent of the TAC and the Futures Representative, may also
establish a separate valuation matrix for any such Foreign Claims based on that
data.
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(A) Review of Medical/Exposure
Criteria. The Plan Trust’s Individual Review Process provides a claimant
with an opportunity for individual consideration and evaluation of a Plan Trust
PI Asbestos Claim that fails to meet the presumptive Medical/Exposure Criteria
for Disease Levels I – V, VII or VIII. In such a case, the Plan Trust shall
either deny the claim or, if the Plan Trust is satisfied that the claimant has
presented a claim that would be cognizable and valid in the tort system, the
Plan Trust can offer the claimant a liquidated value amount up to the Scheduled
Value for that Disease Level.
(B) Review of Liquidated
Value. Claimants holding claims in Disease Levels II – VIII shall also be
eligible to seek Individual Review of the liquidated value of their claims, as
well as of their medical and exposure evidence. The Individual Review Process is
intended to result in payments equal to the full liquidated value for each claim
multiplied by the Payment Percentage; however, the liquidated value of any Plan
Trust PI Asbestos Claim that undergoes Individual Review may be determined to be
less than the Scheduled Value the claimant would have received under Expedited
Review. Moreover, the liquidated value for a claim involving Disease Levels II
–VIII shall not exceed the Maximum Value for the relevant Disease Level set
forth in Section 6.2(b)(3) below, unless the claim meets the requirements of an
Extraordinary Claim described in Section 6.3(a) below, in which case its
liquidated value cannot exceed the Maximum Value set forth in that provision for
such claims. Because the detailed examination and valuation process pursuant to
Individual Review requires substantial time and effort, claimants electing to
undergo the Individual Review Process may be paid the liquidated value of their
Plan Trust PI Asbestos Claims later than would have been the case had the
claimant elected the Expedited Review Process. Subject to the provisions of
Section 6.7, the Plan Trust shall devote reasonable resources to the review of
all claims to ensure that there is a reasonable balance maintained in reviewing
all classes of claims.
(2) Valuation Factors to Be
Considered in Individual Review. The Plan Trust shall liquidate the value
of each Plan Trust PI Asbestos Claim that undergoes Individual Review based on
the historic liquidated values of other similarly situated claims in the tort
system for the same Disease Level. The Plan Trust shall thus take into
consideration all of the factors that affect the severity of damages and values
within the tort system including, but not limited to, (i) the degree to which
the characteristics of a claim differ from the presumptive Medical/Exposure
Criteria for the Disease Level in question; (ii) factors such as the claimant’s
age, disability, employment status, disruption of household, family or
recreational activities, dependencies, special damages, and pain and suffering;
(iii) evidence that the claimant’s damages were (or were not) caused by asbestos
exposure, including exposure to an asbestos-containing product manufactured,
produced or distributed by Congoleum prior to December 31, 1982 (for example,
alternative causes, and the strength of documentation of injuries); (iv) the
industry of exposure; (v) settlements and verdict histories and other law firms’
experience in the Claimant’s Jurisdiction for similarly situated claims; and
(vi) settlements and verdict histories for the claimant’s law firm for similarly
situated claims.
For
these purposes, the “Claimant’s
Jurisdiction” is the jurisdiction in which the claim was filed (if at
all) against Congoleum in the tort system prior to the Petition Date. If the
claim
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was
not filed against Congoleum in the tort system prior to the Petition Date, the
claimant may elect as the Claimant’s Jurisdiction either (i) the jurisdiction in
which the claimant resides at the time of diagnosis or when the claim is filed
with the Plan Trust; or (ii) a jurisdiction in which the claimant experienced
exposure to an asbestos-containing product manufactured, produced or distributed
by Congoleum or to asbestos or asbestos-containing products in a Congoleum
facility.
With
respect to the “Claimant’s Jurisdiction” in the event a personal representative
or authorized agent makes a claim under this TDP for wrongful death with respect
to which the governing law of the Claimant’s Jurisdiction could only be the
Alabama Wrongful Death Statute, the Claimant’s Jurisdiction for such claim shall
be the Commonwealth of Pennsylvania, and such claimant’s damages shall be
determined pursuant to the statutory and common laws of the Commonwealth of
Pennsylvania without regard to its choice of law principles. The choice of law
provision in Section 8.4 below applicable to any claim with respect to which,
but for this choice of law provision, the applicable law of the Claimant’s
Jurisdiction pursuant to this Section 6.2(b)(2) is determined to be the Alabama
Wrongful Death Statute, shall only govern the rights between the Plan Trust and
the claimant, and, to the extent the Plan Trust seeks recovery from any entity
that provided insurance coverage to Congoleum, the Alabama Wrongful Death
Statute shall govern.
(3) Scheduled, Average and
Maximum Values. The Scheduled, Average and Maximum Values for
claims involving Disease Levels I – VIII are the following:
Scheduled
Disease
|
Scheduled Value
|
Average Value
|
Maximum Value
|
Mesothelioma
(Level VIII)
|
$120,000
|
$150,000
|
$720,000
|
Lung
Cancer 1 (Level VII)
|
$40,000
|
$48,000
|
$240,000
|
Lung
Cancer 2 (Level VI)
|
None
|
$12,000
|
$24,000
|
Other
Cancer (Level V)
|
$12,000
|
$14,000
|
$40,000
|
Severe
Asbestosis (Level IV)
|
$30,000
|
$35,000
|
$60,000
|
Asbestosis/Pleural
Disease (Level III)
|
$3,600
|
$3,600
|
$3,600
|
Asbestosis/Pleural
Disease (Level II)
|
$1,200
|
$1,200
|
$1,200
|
Other
Asbestos Disease—Cash Discount Payment (Level I)
|
$250
|
N/A
|
$250
|
These
Scheduled Values, Average Values and Maximum Values shall apply to all Plan
Trust Voting Claims filed with the Plan Trust on or before the Initial Claims
Filing Date as
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provided
in Section 6.1(a)(2) above. Thereafter, the Plan Trustee, with the consent of
the TAC and the Futures Representative pursuant to Sections 5.8(b) and 6.6(b) of
the Plan Trust Agreement, may change these valuation amounts for good cause and
consistent with other restrictions on the amendment power.
6.3 Categorizing Claims as
Extraordinary and/or Exigent Hardship.
(a) Extraordinary Claims
“Extraordinary
Claim” means a Plan Trust PI Asbestos Claim that otherwise satisfies the
Medical Criteria for Disease Levels II-VIII, and that is held by a claimant
whose exposure to asbestos (i) occurred primarily as a result of working in a
manufacturing facility of Congoleum during a period in which Congoleum was
manufacturing asbestos-containing products at that facility, or (ii) was at
least 75% the result of exposure to an asbestos-containing product manufactured,
produced or distributed by Congoleum, and in either case there is little
likelihood of a substantial recovery elsewhere. All such Extraordinary Claims
shall be presented for Individual Review and, if valid, shall be entitled to an
award of up to a value of five (5) times the Scheduled Value set forth in
Section 6.2(b)(3) for claims qualifying for Disease Levels II –V, VII and VIII,
and six (6) times the Average Value for claims in Disease Level VI, multiplied
by the applicable Payment Percentage.
Any
dispute as to Extraordinary Claim status shall be submitted to a special
Extraordinary
Claims Panel established by the Plan Trust with the consent of the TAC and the
Futures Representative. All decisions of the Extraordinary Claims Panel shall be
final and not subject to any further administrative or judicial review. An
Extraordinary Claim, following its liquidation, shall be placed in the FIFO
Payment Queue ahead of all other Plan Trust PI Asbestos Claims except Disease
Level I Claims and Exigent Hardship Claims, which shall be paid first in that
order in said Queue, based on its date of liquidation, subject to the Maximum
Available Payment and Claims Payment Ratio described above.
(b) Exigent Hardship
Claims. At any time the Plan Trust may liquidate and pay Plan Trust PI
Asbestos Claims that qualify as Exigent Hardship Claims as defined below. Such
claims may be considered separately no matter what the order of processing
otherwise would have been under this TDP. An Exigent Hardship Claim, following
its liquidation, shall be placed first in the FIFO Payment Queue ahead of all
other liquidated Plan Trust PI Asbestos Claims except Disease Level I Claims,
subject to the Maximum Available Payment and Claims Payment Ratio described
above. A Plan Trust Asbestos Claim qualifies for payment as an Exigent Hardship
Claim if the claim meets the Medical/Exposure Criteria for Severe Asbestosis
(Disease Level IV) or an asbestos-related malignancy (Disease Levels V-VIII),
and the Plan Trust, in its sole discretion, determines (i) that the claimant
needs financial assistance on an immediate basis based on the claimant’s
expenses and all sources of available income, and (ii) that there is a causal
connection between the claimant’s dire financial condition and the claimant’s
asbestos-related disease.
6.4 Secondary Exposure
Claims. If a claimant alleges an asbestos-related disease resulting
solely from exposure to an occupationally exposed person, such as a family
member, the claimant must seek Individual Review of his or her claim pursuant to
Section 6.2(b) above. In such a case, the claimant must establish that the
occupationally exposed person would have met the requirements of Congoleum
Exposure under this TDP that would have been applicable
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had
that person filed a direct claim against the Plan Trust. In addition, the
claimant with secondary exposure must establish that he or she is suffering from
one of the eight Disease Levels described in Section 6.2(a)(3) above or an
asbestos-related disease otherwise compensable under this TDP, that his or her
own exposure to the occupationally exposed person occurred within the same time
frame as the occupationally exposed person was exposed to an asbestos-containing
product manufactured, produced or distributed by Congoleum, or to asbestos or an
asbestos-containing products in a Congoleum facility, and that such secondary
exposure was a cause of the claimed disease. All other liquidation and payment
rights and limitations under this TDP shall be applicable to such
claims.
6.5 Indirect Plan Trust Asbestos
Claims. Indirect asbestos claims asserted against the Plan Trust based
upon theories of contribution or indemnification under applicable law (“Indirect
Asbestos Claims”) shall be treated as presumptively valid and paid by the Plan
Trust subject to the applicable Payment Percentage if (a) such claim satisfied
the requirements of the bar date for such claims established by the District
Court, if applicable, and is not otherwise disallowed by Section 502(e) of the
Bankruptcy Code or subordinated under Section 509(c) of the Bankruptcy Code, and
(b) the holder of such claim (the “Indirect Claimant”)
establishes to the satisfaction of the Plan Trustee that (i) the Indirect
Claimant has paid in full the liability and obligation of the Plan Trust to the
individual claimant to whom the Plan Trust would otherwise have had a liability
or obligation under this TDP (the “Direct Claimant”),
(ii) the Direct Claimant and the Indirect Claimant have forever and fully
released the Plan Trust from all liability to the Direct Claimant, and (iii) the
claim is not otherwise barred by a statute of limitation or repose or by other
applicable law. In no event shall any Indirect Claimant have any rights against
the Plan Trust superior to the rights of the related Direct Claimant against the
Plan Trust, including any rights with respect to the timing, amount or manner of
payment. In addition, no Indirect Claim may be liquidated and paid in an amount
that exceeds what the Indirect Claimant has actually paid the related Direct
Claimant.
To
establish a presumptively valid Indirect Asbestos Claim, the Indirect Claimant’s
aggregate liability for the Direct Claimant’s claim must also have been fixed,
liquidated and paid fully by the Indirect Claimant by settlement (with an
appropriate full release in favor of the Plan Trust) or a Final Order (as
defined in the Plan) provided that such claim is valid under the applicable
state law. In any case where the Indirect Claimant has satisfied the claim of a
Direct Claimant against the Plan Trust under applicable law by way of a
settlement, the Indirect Claimant shall obtain for the benefit of the Plan Trust
a release in form and substance satisfactory to the Plan Trustee.
If
an Indirect Claimant cannot meet the presumptive requirements set forth above,
including the requirement that the Indirect Claimant provide the Plan Trust with
a full release of the Direct Claimant’s claim, the Indirect Claimant may request
that the Plan Trust review the Indirect Plan Trust Asbestos Claim individually
to determine whether the Indirect Claimant can establish under applicable state
law that the Indirect Claimant has paid all or a portion of a liability or
obligation that the Plan Trust had to the Direct Claimant as of the effective
date of this TDP. If the Indirect Claimant can show that it has paid all or a
portion of such a liability or obligation, the Plan Trust shall reimburse the
Indirect Claimant the amount of the liability or obligation so paid, times the
then applicable Payment Percentage. However, in no event shall such
reimbursement to the Indirect Claimant be greater than the amount to which the
Direct
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Claimant
would have otherwise been entitled. Further, the liquidated value of any
Indirect Asbestos Claim paid by the Plan Trust to an Indirect Claimant shall be
treated as an offset to or reduction of the full liquidated value of any Plan
Trust PI Asbestos Claim that might be subsequently asserted by the Direct
Claimant against the Plan Trust.
Any
dispute between the Plan Trust and an Indirect Claimant over whether the
Indirect Claimant has a right to reimbursement for any amount paid to a Direct
Claimant shall be subject to the ADR procedures provided in Section 6.9 below
and set forth in Attachment A hereto. If such dispute is not resolved by said
ADR procedures, the Indirect Claimant may litigate the dispute in the tort
system pursuant to Sections 6.10 and 8.6 below.
The
Plan Trustee may develop and approve a separate proof of claim form for Indirect
Asbestos Claims. Indirect Asbestos Claims that have not been disallowed,
discharged, or otherwise resolved by prior order of the Bankruptcy Court or
District Court shall be processed in accordance with procedures to be developed
and implemented by the Plan Trustee consistent with the provisions of this
Section 6.5, which procedures (a) shall determine the validity, allowability and
enforceability of such claims; and (b) shall otherwise provide the same
liquidation and payment procedures and rights to the holders of such claims as
the Plan Trust would have afforded the holders of the underlying valid Plan
Trust PI Asbestos Claims. Nothing in this TDP is intended to preclude a trust to
which asbestos-related liabilities are channeled from asserting an Indirect
Asbestos Claim against the Plan Trust subject to the requirements set forth
herein.
6.6 Evidentiary
Requirements.
(a) Medical
Evidence.
(1) In General. All
diagnoses of a Disease Level shall be accompanied by either (i) a statement by
the physician providing the diagnosis that at least 10 years have elapsed
between the date of first exposure to asbestos or asbestos-containing products
and the diagnosis, or (ii) a history of the claimant’s exposure sufficient to
establish a 10-year latency period. A finding by a physician after the Effective
Date that a claimant’s disease is “consistent with” or “compatible with”
asbestosis alone shall not be treated by the Plan Trust as a
diagnosis.
(A) Disease Levels I –
IV. Except for claims filed against Congoleum or any other asbestos
defendant in the tort system prior to the Petition Date, all diagnoses of a
non-malignant asbestos-related disease (Disease Levels I-IV) shall be based in
the case of a claimant who was living at the time the claim was filed, upon a
physical examination of the claimant by the physician providing the diagnosis of
the asbestos-related disease. All living claimants must also provide (i) for
Disease Levels I-III, evidence of Bilateral Asbestos-Related Nonmalignant
Disease (as defined in Footnote 3 above); (ii) for Disease Level IV,6 an
ILO reading of 2/1 or greater or pathological
______________
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6
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All
diagnoses of Asbestosis/Pleural Disease (Disease Levels II and III) not
based on pathology shall be presumed to be based on findings of bilateral
asbestosis or pleural disease, and all diagnoses of Mesothelioma (Disease
Level VIII) shall be presumed to be based on findings that the disease
involves a malignancy. However, the Plan Trust may rebut such
presumptions.
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evidence
of asbestosis, and (iii) for Disease Levels III and IV, pulmonary function
testing.7
In
the case of a claimant who was deceased at the time the claim was filed, all
diagnoses of a non-malignant asbestos-related disease (Disease Levels I-IV)
shall be based upon either (i) a physical examination of the claimant by the
physician providing the diagnosis of the asbestos-related disease; or (ii)
pathological evidence of the non-malignant asbestos-related disease; or (iii) in
the case of Disease Levels I-III, evidence of Bilateral Asbestos-Related
Nonmalignant Disease (as defined in Footnote 3 above), and for Disease Level IV,
either an ILO reading of 2/1 or greater or pathological evidence of asbestosis;
and (iv) for either Disease Level III or IV, pulmonary function
testing.
(B) Disease Levels V –
VIII. All diagnoses of an asbestos-related malignancy (Disease Levels V –
VIII) shall be based upon either (i) a physical examination of the claimant by
the physician providing the diagnosis of the asbestos-related disease, or (ii) a
diagnosis of such a malignant Disease Level by a board-certified pathologist or
by a pathology report prepared at or on behalf of a hospital accredited by the
Joint Commission on Accreditation of Healthcare Organizations
(“JCAHO”).
(C) Exception to the Exception
for Certain Pre-Petition Claims. If the holder of a Plan Trust Asbestos
Claim that was filed against Congoleum or any other defendant in the tort system
prior to the Petition Date has available a report of a diagnosing physician
engaged by the holder or his or her law firm who conducted a physical
examination of the holder as described in Section 6.6(a)(1)(A), or if the holder
has filed such medical evidence with another asbestos-related personal injury
settlement trust that requires such evidence without regard to whether the
claimant or the law firm engaged the diagnosing physician, the holder shall
provide such medical evidence to the Plan Trust notwithstanding the exception in
Section 6.6(a)(1)(A).
(2) Credibility of Medical
Evidence. Before making any payment to a claimant, the Plan Trust must
have reasonable confidence that the medical evidence provided in support of the
claim is credible and consistent with recognized medical standards. The Plan
Trust may require the submission of X-rays, CT scans, detailed results of
pulmonary function tests, laboratory tests, tissue samples, results of medical
examination or reviews of other medical evidence, and may require that any
medical evidence submitted comply with recognized medical
______________
7
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“Pulmonary Function
Testing” or “PFT” shall mean testing that is in material compliance
with the quality criteria established by the American Thoracic Society
(“ATS”) and is performed on equipment which is in material compliance with
ATS standards for technical quality and calibration. PFT performed in a
hospital accredited by the JCAHO, or performed, reviewed or supervised by
a board certified pulmonologist or other Qualified Physician shall be
presumed to comply with ATS standards, and the claimant may submit a
summary report of the testing. If the PFT was not performed in an
JCAHO-accredited hospital, or performed, reviewed or supervised by a board
certified pulmonologist or other Qualified Physician, the claimant must
submit the full report of the testing (as opposed to a summary report);
provided however that if the PFT was conducted prior to the Effective Date
of the Plan, and the full PFT report is not available, the claimant must
submit a signed declaration in the form provided by the Plan Trust
certifying that the PFT was conducted in material compliance with ATS
standards.
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standards
regarding equipment, testing methods and procedures to assure that such evidence
is reliable.8
Medical
evidence (i) that is of a kind shown to have been received in evidence by a
state or federal judge at trial, or (ii) that is a diagnosis by a physician
shown to have previously qualified as a medical expert with respect to the
asbestos-related disease in question before a state or federal judge, is
presumptively reliable, although the Plan Trust may seek to rebut the
presumption. In addition, claimants who otherwise meet the requirements of this
TDP for payment of a Plan Trust PI Asbestos Claim shall be paid irrespective of
the results in any litigation at any time between the claimant and any other
defendant in the tort system. However, any relevant evidence submitted in a
proceeding in the tort system, other than any findings of fact, a verdict, or a
judgment, involving another defendant may be introduced by either the claimant
or the Plan Trust in any Individual Review proceeding conducted pursuant to
Section 6.2(b) or any Extraordinary Claim proceeding conducted pursuant to
Section 6.3(a).
(b) Exposure
Evidence.
(1) In General. As set
forth above in Section 6.2(a)(3), to qualify for any Disease Level, the claimant
must demonstrate a minimum exposure to an asbestos-containing product
manufactured, produced or distributed by Congoleum, or to asbestos or
asbestos-containing products in a Congoleum facility. Claims based on conspiracy
theories that involve no such Congoleum exposure are not compensable under this
TDP. To meet the presumptive exposure requirements of Expedited Review set forth
in Section 6.2(a)(3) above, the claimant must show (i) for all Disease Levels,
Congoleum Exposure as defined in Section 6.6(b)(3) below prior to December 31,
1982; (ii) for Asbestosis/Pleural Disease (Disease Level II), six months
Congoleum Exposure prior to December 31, 1982, plus five years cumulative
occupational exposure to asbestos; and (iii) for Asbestosis/Pleural Disease
(Disease Level III), Severe Asbestosis (Disease Level IV), Other Cancer (Disease
Level V) or Lung Cancer 1 (Disease Level VII), the claimant must show six months
Congoleum Exposure prior to December 31, 1982, plus Significant Occupational
Exposure to asbestos. If the claimant cannot meet the relevant presumptive
exposure requirements for a Disease Level eligible for Expedited Review, the
claimant may seek Individual Review pursuant to Section 6.2(b) of his or her
claim based on exposure to an asbestos-containing product manufactured, produced
or distributed by Congoleum or to asbestos or asbestos-containing products in a
Congoleum facility.
(2) Significant Occupational
Exposure. “Significant Occupational
Exposure” means employment for a cumulative period of at least five years
with a minimum of two years prior to December 31, 1982, in an industry and an
occupation in which the claimant (a) handled asbestos fibers on a regular basis;
(b) fabricated asbestos-containing products so that the claimant in the
fabrication process was exposed on a regular basis to asbestos fibers; (c)
altered, repaired or otherwise worked with an asbestos-containing product such
that the claimant was exposed on a regular basis to asbestos fibers; or (d) was
employed in an industry and occupation such that the claimant worked on a
regular basis in close proximity to the activities described in (a), (b) and/or
(c).
______________
8
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Provided,
however, the provisions of footnote 7, supra, regarding PFT,
are applicable.
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(3) Congoleum Exposure.
The claimant must demonstrate “Congoleum Exposure,” which is defined as
meaningful and credible exposure, which occurred prior to December 31, 1982, to
asbestos or asbestos-containing products in a Congoleum facility, or to asbestos
or asbestos-containing products supplied, specified, manufactured,, produced,
distributed, installed, maintained, or repaired by Congoleum and/or any entity,
including a Congoleum contracting unit, for which Congoleum has legal
responsibility (a “Congoleum Product”). That meaningful and credible exposure
evidence may be established by an affidavit or sworn statement of the claimant,
an affidavit or sworn statement of a co-worker, or the affidavit or sworn
statement of a family member in the case of a deceased claimant (providing the
Plan Trust finds such evidence reasonably reliable), invoices, employment,
construction or similar records, or other credible evidence. The Plan Trust can
also require submission of other or additional evidence of exposure when it
deems such to be necessary. The Plan Trust shall require other or additional
evidence to demonstrate the nexus between the exposure to a Congoleum Product
and the causation of the claimant’s asbestos-related disease. The specific
exposure information required by the Plan Trust to process a claim under either
Expedited or Individual Review shall be set forth on the proof of claim form to
be used by the Plan Trust.
Evidence
submitted to establish proof of Congoleum Exposure is for the sole benefit of
the Plan Trust, not third parties or defendants in the tort system. The Plan
Trust has no need for, and therefore claimants are not required to furnish the
Plan Trust with evidence of, exposure to specific asbestos products other than
those for which Congoleum has legal responsibility, except to the extent such
evidence is required elsewhere in this TDP. Similarly, failure to identify
Congoleum Products in the claimant’s underlying tort action, or to other
bankruptcy trusts, does not preclude the claimant from recovering from the Plan
Trust, provided the claimant otherwise satisfies the medical and exposure
requirements of this TDP.
6.7 Claims Audit Program.
The Plan Trustee, with the consent of the TAC and the Futures Representative,
may develop methods for auditing the reliability of medical evidence, including
additional reading of X-rays, CT scans and verification of pulmonary function
tests, as well as the reliability of evidence of exposure to asbestos, including
exposure to asbestos-containing products manufactured, produced or distributed
by Congoleum prior to December 31, 1982. In the event that the Plan Trust
reasonably determines that any individual or entity has engaged in a pattern or
practice of providing unreliable medical evidence to the Plan Trust, to any
other Asbestos Claims Trust, or in connection with any court proceeding, it may
decline to accept evidence from such provider.
Further,
in the event that an audit reveals that fraudulent information has been provided
to the Plan Trust, the Plan Trust may penalize any claimant or claimant’s
attorney by disallowing the Plan Trust PI Asbestos Claim or by other means
including, but not limited to, requiring the source of the fraudulent
information to pay the costs associated with the audit and any future audit or
audits, reordering the priority of payment of all affected claimants’ Plan Trust
Asbestos Claims, raising the level of scrutiny of additional information
submitted from the same source or sources, refusing to accept additional
evidence from the same source or sources, seeking the prosecution of the
claimant or claimant’s attorney for presenting a fraudulent claim in violation
of 18 U.S.C. §152, and seeking sanctions from the District
Court.
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6.8 Second Disease (Malignancy)
Claims. The holder of a Plan Trust PI Asbestos Claim involving a
non-malignant asbestos-related disease (Disease Levels I through IV) may assert
a new Plan Trust PI Asbestos Claim against the Plan Trust for a malignant
disease (Disease Levels V – VIII) that is subsequently diagnosed. Any additional
payments to which such claimant may be entitled with respect to such malignant
asbestos-related disease shall not be reduced by the amount paid for the
non-malignant asbestos-related disease, provided that the malignant disease had
not been diagnosed by the time the claimant was paid with respect to the
original claim involving the non-malignant disease.
6.9 Arbitration.
(a) Establishment of ADR
Procedures. The Plan Trustee, with the consent of the TAC and the Futures
Representative, shall institute binding and non-binding arbitration procedures
in accordance with the Alternative Dispute Resolution (“ADR”) Procedures
included in Attachment A hereto for resolving disputes concerning whether the
Plan Trust’s outright rejection or denial of a claim was proper, or whether the
claimant’s medical condition or exposure history meets the requirements of this
TDP for purposes of categorizing a claim involving Disease Levels I – VIII.
Binding and non-binding arbitration shall also be available for resolving
disputes over the liquidated value of a claim involving Disease Levels II –
VIII, as well as disputes over the validity of an Indirect Asbestos
Claim.
In
all arbitrations, the arbitrator shall consider the same medical and exposure
evidentiary requirements that are set forth in Section 6.6 above. In the case of
an arbitration involving the liquidated value of a claim involving Disease
Levels II – VIII, the arbitrator shall consider the same valuation factors that
are set forth in Section 6.2(b)(2) above. With respect to all claims eligible
for arbitration, the claimant, but not the Plan Trust, may elect either
non-binding or binding arbitration. The ADR Procedures set forth in Attachment A
hereto may be modified by the Plan Trustee with the consent of the TAC and the
Futures Representative.
(b) Claims Eligible for
Arbitration. In order to be eligible for arbitration, the claimant must
first complete the Individual Review Process with respect to the disputed issue
as well as either the Pro Bono Evaluation or the Mediation processes set forth
in the ADR Procedures. Individual Review shall be treated as completed for these
purposes when the claim has been individually reviewed by the Plan Trust, the
Plan Trust has made an offer on the claim, the claimant has rejected the
liquidated value resulting from the Individual Review, and the claimant has
notified the Plan Trust of the rejection in writing. Individual Review shall
also be treated as completed if the Plan Trust has rejected the
claim.
(c) Limitations on and Payment
of Arbitration Awards. In the case of a non-Extraordinary Claim involving
Disease Level I, the arbitrator shall not return an award in excess of the
Scheduled Value for such claim. In the case of a non-Extraordinary Claim
involving Disease Levels II – VIII, the arbitrator shall not return an award in
excess of the Maximum Value for the appropriate Disease Level as set forth in
Section 6.2(b)(3) above, and for an Extraordinary Claim involving one of those
Disease Levels, the arbitrator shall not return an award greater than the
maximum extraordinary value for such a claim as set forth in Section 6.3 above.
A claimant who submits to arbitration and who accepts the arbitral award shall
receive payments in the same manner as one who accepts the Plan Trust's original
valuation of the claim.
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6.10 Litigation. Claimants
who elect non-binding arbitration and then reject their arbitral awards retain
the right to institute a lawsuit in the tort system against the Plan Trust
pursuant to Section 8.6 below. However, a claimant shall be eligible for payment
of a judgment for monetary damages obtained in the tort system from the Plan
Trust’s available cash only as provided in Section 8.7 below.
SECTION
VII
Claims
Materials
7.1 Claims Materials. The
Plan Trust shall prepare suitable and efficient claims materials (“Claims
Materials”) for all Plan Trust PI Asbestos Claims, and shall provide such Claims
Materials upon a written request for such materials to the Plan Trust. In
addition, a separate claim form for Plan Trust PI Asbestos Claims that
constitute Indirect Asbestos Claims may be developed. The proof of claim form to
be submitted to the Plan Trust shall require the claimant to assert the highest
Disease Level for which the claim qualifies at the time of filing. The proof of
claim form shall also include a certification by the claimant or his or her
attorney sufficient to meet the requirements of Rule 11(b) of the Federal Rules
of Civil Procedure. In developing its claim filing procedures, the Plan Trust
shall make every effort to provide claimants with the opportunity to utilize
currently available technology at their discretion, including filing claims and
supporting documentation over the internet and electronically by disk or CD-rom.
The initial proof of claim form(s) (and subsequent changes thereto) shall be
adopted by the Plan Trustee, with the consent of the TAC and the Futures
Representative.
7.2 Content of Claims
Materials. The Claims Materials shall include a copy of this TDP, such
instructions as the Plan Trustee shall approve, and a detailed proof of claim
form. If feasible, the forms used by the Plan Trust to obtain claims information
shall be the same or substantially similar to those used by other asbestos
claims resolution organizations. If requested by the claimant, the Plan Trust
shall accept information provided electronically. The claimant may, but shall
not be required to, provide the Plan Trust with evidence of recovery from other
asbestos defendants and claims resolution organizations.
7.3 Withdrawal or Deferral of
Claims. A claimant can withdraw a Plan Trust PI Asbestos Claim at any
time upon written notice to the Plan Trust and file another claim subsequently
without affecting the status of the claim for statute of limitations purposes,
but any such claim filed after withdrawal shall be given a place in the FIFO
Processing Queue based on the date of such subsequent filing. A claimant can
also request that the processing of his or her Plan Trust PI Asbestos Claim by
the Plan Trust be deferred for a period not to exceed three (3) years without
affecting the status of the claim for statute of limitation purposes, in which
case the claimant shall also retain his or her original place in the FIFO
Processing Queue. During the period of such deferral, a sequencing adjustment on
such claimant’s Plan Trust PI Asbestos Claim as provided in Section 8.5
hereunder shall not accrue and payment thereof shall be deemed waived by the
claimant. Except for Plan Trust PI Asbestos Claims held by representatives of
deceased or incompetent claimants for which court or probate approval of the
Plan Trust’s offer is required, or a Plan Trust PI Asbestos Claim for which
deferral status has been granted, a claim shall be deemed to have been withdrawn
if the claimant neither accepts,
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rejects,
nor initiates arbitration within six months of the Plan Trust’s offer of payment
or rejection of the claim. Upon written request and good cause, the Plan Trust
may extend the withdrawal or deferral period for an additional six
months.
7.4 Filing Requirements and
Fees. The Plan Trustee shall have the discretion to determine, with the
consent of the TAC and the Futures Representative, (a) whether a claimant must
have previously filed an asbestos-related personal injury claim in the tort
system to be eligible to file the claim with the Plan Trust and (b) whether a
filing fee should be required for any Plan Trust PI Asbestos
Claims.
7.5 Confidentiality of
Claimants’ Submissions. All submissions to the Plan Trust by a holder of
a Plan Trust PI Asbestos Claim of a proof of claim form and materials related
thereto shall be treated as made in the course of settlement discussions between
the holder and the Plan Trust, and intended by the parties to be confidential
and to be protected by all applicable state and federal privileges, including
but not limited to those directly applicable to settlement discussions. The Plan
Trust will preserve the confidentiality of such claimant submissions, and shall
disclose the contents thereof only, with the permission of the holder, to
another trust established for the benefit of asbestos personal injury claimants
pursuant to section 524(g) and/or section 105 of the Bankruptcy Code or other
applicable law, to such other persons as authorized by the holder, or in
response to a valid subpoena of such materials issued by the District Court, a
Delaware State Court, or the United Statues District Court for the District of
Delaware. Furthermore, the Plan Trust shall provide counsel for the
holder a copy of any such subpoena immediately upon being served. The Plan Trust
shall on its own initiative or upon request of the claimant in question take all
necessary and appropriate steps to preserve said privileges before the District
Court, a Delaware State Court or the United States District Court for the
District of Delaware and before those courts having appellate jurisdiction
related thereto. Notwithstanding anything in the foregoing to the contrary, with
the consent of the TAC and the Futures Representative, the Plan Trust may, in
specific limited instances, disclose information, documents or other materials
reasonably necessary in the Plan Trust’s judgment to preserve, litigate,
resolve, or settle coverage, or to comply with an applicable obligations under
an Asbestos Insurance Policy or Asbestos Insurance Settlement Agreement;
provided, however, that the Plan Trust shall take any and all steps reasonably
feasible in its judgment to preserve the further confidentiality of such
information , documents and materials, and prior to the disclosure of such
information, documents or materials to a third party, the Plan Trust shall
receive from such third party a written agreement of confidentiality that (a)
ensures that the information, documents and materials provided by the Plan Trust
shall be used solely by the receiving party for the purpose stated in the
agreement and (b) prohibits any other use or further dissemination of the
information, documents and materials by the third party.
SECTION
VIII
General Guidelines for
Liquidating and Paying Claims
8.1 Showing Required. To
establish a valid Plan Trust PI Asbestos Claim, a claimant must meet the
requirements set forth in this TDP. The Plan Trust may require the submission of
X-rays, CT scans, laboratory tests, medical examinations or reviews, other
medical evidence, or
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any
other evidence to support or verify the claim, and may further require that
medical evidence submitted comply with recognized medical standards regarding
equipment, testing methods, and procedures to assure that such evidence is
reliable.
8.2 Costs Considered.
Notwithstanding any provisions of this TDP to the contrary, the Plan Trustee
shall always give appropriate consideration to the cost of investigating and
uncovering invalid Plan Trust PI Asbestos Claims so that the payment of valid
Plan Trust PI Asbestos Claims is not further impaired by such processes with
respect to issues related to the validity of the medical evidence supporting a
Plan Trust PI Asbestos Claim. The Plan Trustee shall also have the latitude to
make judgments regarding the amount of transaction costs to be expended by the
Plan Trust so that valid Plan Trust PI Asbestos Claims are not unduly further
impaired by the costs of additional investigation. Nothing herein shall prevent
the Plan Trustee, in appropriate circumstances, from contesting the validity of
any claim against the Plan Trust whatever the costs, or to decline to accept
medical evidence from sources that the Plan Trustee has determined to be
unreliable pursuant to the Claims Audit Program described in Section 6.7
above.
8.3 Discretion to Vary the Order
and Amounts of Payments in Event of Limited
Liquidity. Consistent with the provisions hereof and subject
to the FIFO Processing and Payment Queues, the Maximum Annual Payment, the
Maximum Available Payment and the Claims Payment Ratio requirements set forth
above, the Plan Trustee shall proceed as quickly as possible to liquidate valid
Plan Trust PI Asbestos Claims, and shall make payments to holders of such claims
in accordance with this TDP promptly as funds become available and as claims are
liquidated, while maintaining sufficient resources to pay future valid claims in
substantially the same manner.
Because
the Plan Trust’s income over time remains uncertain, and decisions about
payments must be based on estimates that cannot be done precisely, they may have
to be revised in light of experiences over time, and there can be no guarantee
of any specific level of payment to claimants. However, the Plan Trustee shall
use its best efforts to treat similar claims in substantially the same manner,
consistent with its duties as Plan Trustee, the purposes of the Plan Trust, the
established allocation of funds to claims in Categories A and B, and the
practical limitations imposed by the inability to predict the future with
precision.
In
the event that the Plan Trust faces temporary periods of limited liquidity, the
Plan Trustee may, with the consent of the TAC and the Futures Representative,
suspend the normal order of payment and may temporarily limit or suspend
payments altogether, and may offer a Reduced Payment Option as described in
Section 2.6 above.
8.4 Punitive Damages.
Except as provided below for claims asserted under the Alabama Wrongful Death
Statute, in determining the value of any liquidated or
unliquidated Plan Trust PI Asbestos Claim, punitive or exemplary
damages, i.e., damages other than compensatory damages, shall not be considered
or allowed, notwithstanding their availability in the tort system.
Similarly,
no punitive or exemplary damages shall be payable with respect to any claim
litigated against the Plan Trust in the tort system pursuant to Sections 6.10
above and 8.6 below.
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The
only damages that may be awarded pursuant to this TDP to Alabama Claimants who
are deceased and whose personal representatives pursue their claims only under
the Alabama Wrongful Death Statute shall be compensatory damages determined
pursuant to the statutory and common law of the Commonwealth of Pennsylvania,
without regard to its choice of law principles. The choice of law provision in
this Section 8.4 applicable to any claim with respect to which, but for this
choice of law provision, the applicable law of the Claimant’s Jurisdiction
pursuant to Section 6.3(b)(2) is determined to be the Alabama Wrongful Death
Statute, shall only govern the rights between the Plan Trust and the claimant
including, but not limited to, suits in the tort system pursuant to Section 8.6,
and to the extent the Plan Trust seeks recovery from any entity that provided
insurance to Congoleum, the Alabama Wrongful Death Statute shall
govern.
8.5 Sequencing
Adjustment.
(a) In General. Except
for any Plan Trust PI Asbestos Claim involving Other Asbestos Disease (Disease
Level I – Cash Discount Payment) and subject to the limitations set forth below,
a sequencing adjustment shall be paid on all Plan Trust PI Asbestos Claims with
respect to which the claimant has had to wait a year or more for payment,
provided, however, that no claimant shall receive a sequencing adjustment for a
period in excess of seven (7) years. The initial sequencing adjustment factor
shall be decided by the Plan Trust, with the approval of the TAC and the Futures
Representative, and shall be effective for the first five (5) years after the
Effective Date; thereafter, the Plan Trust shall have the discretion to change
the annual sequencing adjustment factor with the consent of the TAC and the
Futures Representative.
(b) Plan Trust PI Asbestos
Claims. A sequencing adjustment shall be payable on the Scheduled Value
of any Plan Trust PI Asbestos Claim that meets the requirements of Disease
Levels II – V, VII and VIII, whether the claim is liquidated under Expedited
Review, Individual Review, or by arbitration. No sequencing adjustment shall be
paid on any claim involving Disease Level I or on any claim liquidated in the
tort system pursuant to Section 6.10 above and Section 8.6 below. The sequencing
adjustment on an unliquidated Plan Trust PI Asbestos Claim that meets the
requirements of Disease Level VI shall be based on the Average Value of such a
claim. Sequencing adjustments on all such unliquidated claims shall be measured
from the date of payment back to the earliest of the date that is one year after
the date on which (a) the claim was filed against Congoleum prior to the
Petition Date; (b) the claim was filed against another defendant in the tort
system on or after the Petition Date but before the Effective Date; (c) the
claim was filed with the Bankruptcy Court or District Court during the pendency
of the Chapter 11 proceeding; or (d) the claim was filed with the Plan Trust
after the Effective Date
8.6 Suits in the Tort
System. If the holder of a disputed claim disagrees with the Plan Trust’s
determination regarding the Disease Level of the claim, the claimant’s exposure
history or the liquidated value of the claim, and if the holder has first
submitted the claim to non-binding arbitration as provided in Section 6.9 above,
the holder may file a lawsuit in the Claimant’s Jurisdiction as defined in
Section 6.2(b)(2) above. Any such lawsuit must be filed by the claimant in his
or her own right and name and not as a member or representative of a class, and
no such lawsuit may be consolidated with any other lawsuit. All defenses
(including, with respect to the Plan Trust, all defenses which could have been
asserted by Congoleum) shall be available to both sides at trial; however, the
Plan Trust may waive any defense and/or concede any issue of fact or law. If the
claimant was alive at the time the initial pre-petition
complaint
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was
filed or on the date the proof of claim form was filed with the Plan Trust, the
case shall be treated as a personal injury case with all personal injury damages
to be considered even if the claimant has died during the pendency of the
claim.
8.7 Payment of Judgments for
Money Damages. If and when a claimant obtains a judgment in the tort
system, the claim shall be placed in the FIFO Payment Queue based on the date on
which the judgment became final. Thereafter, the claimant shall receive from the
Plan Trust an initial payment (subject to the applicable Payment Percentage, the
Maximum Available Payment, the Claims Payment Ratio and the sequencing
adjustment provisions set forth above) of an amount equal to the greater of (i)
the Plan Trust’s last offer to the claimant or (ii) the award that the claimant
declined in non-binding arbitration. The claimant shall receive the balance of
the judgment, if any, in five equal installments in years six (6) through ten
(10) following the year of the initial payment (also subject to the applicable
Payment Percentage, the Maximum Available Payment, the Claims Payment Ratio, and
the sequencing adjustment provisions above).
In
the case of a claim involving Disease Level I, the total amounts paid with
respect to such claim shall not exceed the Scheduled Value for such Disease
Level. In the case of non-Extraordinary claims involving Disease Levels II-VIII,
the total amounts paid with respect to such claims shall not exceed the Maximum
Values for such Disease Levels set forth in Section 6.2(b)(3). In the case of
Extraordinary Claims, the total amounts paid with respect to such claims shall
not exceed the maximum extraordinary value for such claims set forth in Section
6.2(b)(3) above. Under no circumstances shall either a sequencing adjustment be
paid pursuant to Section 8.5 or interest be paid under any statute on any
judgments obtained in the tort system.
8.8 Releases. The Plan
Trustee shall have the discretion to determine the form and substance of the
releases to be provided to the Plan Trust in order to maximize recovery for
claimants against other tortfeasors without increasing the risk or amount of
claims for indemnification or contribution from the Plan Trust. As a condition
to making any payment to a claimant, the Plan Trust shall obtain a general,
partial, or limited release as appropriate in accordance with the applicable
state or other law. If allowed by state law, the endorsing of a check or draft
for payment by or on behalf of a claimant shall constitute such a
release.
8.9 Third-Party Services.
Nothing in this TDP shall preclude the Plan Trust from contracting with another
asbestos claims resolution organization to provide services to the Plan Trust so
long as decisions about the categorization and liquidated value of Plan Trust PI
Asbestos Claims are based on the relevant provisions of this TDP, including the
Disease Levels, Scheduled Values, Average Values, Maximum Values, and
Medical/Exposure Criteria set forth above.
8.10 Plan Trust Disclosure of
Information. Periodically, but not less often than once a year, the Plan
Trust shall make available to claimants and other interested parties, including
insurers funding the Plan Trust, the number of claims by Disease Levels that
have been resolved both by the Individual Review Process and by arbitration as
well as by litigation in the tort system indicating the amounts of the awards
and the averages of the awards by jurisdiction.
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SECTION
IX
Miscellaneous
9.1 Amendments. Except as
otherwise provided herein, the Plan Trustee may amend, modify, delete, or add to
any provisions of this TDP (including, without limitation, amendments to conform
this TDP to advances in scientific or medical knowledge or other changes in
circumstances), provided that the proposed
amendment is consistent with the purpose and goals of this TDP as stated in
Sections 1.1 and 2.1 and they first obtain the consent of the TAC and the
Futures Representative pursuant to the Consent Process set forth in Sections
5.8(b) and 6.6(b) of the Plan Trust Agreement, except that the right to amend
the Claims Payment Ratio is governed by the restrictions in Section 2.6 above,
and the right to adjust the Payment Percentage is governed by Section 5.2
above. Nothing herein is intended to preclude the TAC or the Futures
Representative from proposing to the Plan Trustee, in writing, amendments to the
TDP. Any amendment proposed by the TAC or the Futures Representative shall
remain subject to Section 7.3 of the Plan Trust Agreement. Notwithstanding
anything herein to the contrary, no amendment may weaken the medical or product
exposure requirements of this TDP.
9.2 Severability. Should
any provision contained in this TDP be determined to be unenforceable, such
determination shall in no way limit or affect the enforceability and operative
effect of any and all other provisions of this TDP. Should any provision
contained in this TDP be determined to be inconsistent with or contrary to
Congoleum’s obligations to any insurance company providing insurance coverage to
Congoleum in respect of claims for personal injury based on exposure to an
asbestos-containing product manufactured, produced or distributed by Congoleum,
or to asbestos or asbestos-containing products in a Congoleum facility, the Plan
Trustee with the consent of the TAC and the Futures Representative may amend
this TDP and/or the Plan Trust Agreement to make the provisions of either or
both documents consistent with the duties and obligations of Congoleum to said
insurance company.
9.3 Governing Law. Except
for purposes of determining the liquidated value of any Plan Trust PI Asbestos
Claim, administration of this TDP shall be governed by, and construed in
accordance with, the laws of the State of New Jersey. The law governing the
liquidation of Plan Trust PI Asbestos Claims in the case of Individual Review,
arbitration or litigation in the tort system shall be the law of the Claimant’s
Jurisdiction as described in Section 6.2(b)(2) above.
31
Exhibit H to the
Plan
Schedule
of Settling Asbestos Insurance Companies
(To
be provided)
Exhibit I to the
Plan
New
ABI Agreement
(To
be filed as part of the Plan Supplement)
Exhibit J to the
Plan
Amended
and Restated Bylaws
(To
be filed as part of the Plan Supplement)
Exhibit K to the
Plan
Amended
and Restated Certificate of Incorporation
(To
be filed as part of the Plan Supplement)
Exhibit L to the
Plan
Stockholders’
Agreement
(To
be filed as part of the Plan Supplement)