EXHIBIT 99 (a)
-------------
SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement") is made by
and among MacArthur Company ("MacArthur"), Western MacArthur
Company ("Western MacArthur") and Western Asbestos Company
("Western Asbestos"), together with each of their predecessors
and successors, affiliates and subsidiaries (collectively, the
"Debtors"), United State Fidelity & Guaranty Co. ("USF&G"), The
St. ▇▇▇▇ Fire & Marine Insurance Company, The St. ▇▇▇▇ Companies,
Inc., and its affiliates and subsidiaries (collectively with
USF&G the "USF&G Parties"), and the Asbestos Plaintiffs (as
hereinafter defined). The Debtors, the USF&G Parties and the
Asbestos Plaintiffs will hereinafter be referred to individually
as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, USF&G issued various Policies (as hereinafter
defined) of insurance from 1948 through 1960 under which Western
MacArthur is alleging it is entitled to coverage, including but
not limited to those listed on Exhibit A attached hereto and made
a part hereof; and
WHEREAS, Western Asbestos was an insulation products
installer and materials supplier, which has been out of business
since 1969.
WHEREAS, in 1967, MacArthur established Western
MacArthur, which purchased certain of Western Asbestos' assets;
and
WHEREAS, various asbestos claimants have sued Western
MacArthur since the late 1970's, both in its own right, and as
successor to Western Asbestos, for asbestos-related personal
injury claims; and
WHEREAS, in 1993, an action was filed in California
state court in Western Mac ▇▇▇▇▇▇ Co. et al. v. United States
Fidelity & Guaranty Co., et al., No. 721595-7 (consolidated with
No. 828101-2) (Super. Ct. Calif. Alameda County) (the "Existing
Coverage Litigation"), which has included claims against the
USF&G Parties, and two other Western Asbestos insurers, one of
which has settled with MacArthur; and
WHEREAS, the Existing Coverage Litigation centers
around a dispute between Western MacArthur and the USF&G Parties
regarding coverage obligations of USF&G with respect to Asbestos
Related Claims brought against Western MacArthur and Western
Asbestos; and
NOW, THEREFORE, in consideration of the foregoing and
the mutual promises contained herein, the Parties agree as
follows:
1. Purpose and Scope. The purposes of this Agreement are (a)
(a) subject to implementation of the prenegotiated plan of reorganization
described below, to resolve all past, present and future coverage
disputes between the Debtors, the USF&G Parties and the Asbestos
Plaintiffs in connection with Asbestos Related Claims, (b) for
the Debtors to implement the pre-negotiated plan of
reorganization described below, (c) for the payment of funds to a
Judgment Escrow (as hereinafter defined) to be made pursuant to
the procedures specified below, (d) for all other Asbestos
Related Claims and future demands to be channeled to a trust
established pursuant to 11 U.S.C. 524(g) (the "524(g) Trust"),
and (e) for the USF&G parties to obtain 524(g) and supplemental
injunctions precluding the assertion of claims relating to or
arising from the Policies, including but not limited to claims
for "bad faith" or extra-contractual liability, and to be
released from such claims in accordance with the terms and
conditions set forth below.
2. Additional Definitions. As used in this Agreement and
for purposes of this Agreement only, the following terms shall
have the following meanings:
2.1 "Affiliates," whenever used herein in connection
with the USF&G Parties, shall mean any corporate entity that
directly or indirectly owns or controls, is owned or controlled
by, or is under common ownership or control with, another of the
USF&G Parties or their subsidiaries, provided, however, that
under no circumstances will this definition or any reference to
any "assigns" or "successors" of the USF&G Parties shall be read
to permit any of the Debtors' Other Insurers (as defined herein)
to obtain rights under this Agreement and provided further that
the terms "affiliate," "assign" and "successor" does not include
any shareholder to the extent such shareholder (including by way
of illustration, any of the Debtors' Other Insurers) may be
independently liable to any of the Asbestos Plaintiffs, the
Debtors or the Trust.
2.2 "Asbestos Plaintiffs" shall mean individuals
holding Asbestos Related Claims represented by Asbestos
Plaintiffs' Counsel who constitute at least 75% of known
creditors holding Asbestos Related Claims against any of the
Debtors.
2.3 "Asbestos Plaintiffs' Counsel" shall mean the law
firms of (1) Kazan, McClain, Edises, Abrams, Fernandez, ▇▇▇▇▇ &
Farrise, PLC; (2) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇; (3) Wartnick Law Firm.
2.4 "Asbestos Related Claims" shall mean any and all
past, present or future claims or portions of claims that may be
asserted against the Debtors, or any of them, for damages or
other monetary or other relief, under any legal theory, related
to or arising out of bodily injury, sickness, illness, ailments,
loss of consortium, mental anguish, emotional distress, disease
or death, or any claim arising from an insurance contract that
relates to such claim or claims, sustained by a Person alleged to
have been caused in whole or in part by any asbestos or
asbestos-containing product, including without limitation, the
manufacture of, mining of, use of, sale of, installation of,
removal of, destruction of, exposure to, presence of, alleged
failure to warn about asbestos, asbestos-containing products,
asbestos fibers, asbestos dust, or any operation in which such
asbestos, asbestos fibers, asbestos dust or asbestos-containing
product may have been used, and any claims for contribution,
indemnity or otherwise arising out of the foregoing, but
excluding claims for workers' compensation under any state or
federal law.
2.5 The "Bankruptcy Code" shall mean Title 11 of the
United States Code, 11 U.S.C. 101, et seq, as amended from
time to time.
2.6 The "Chapter 11 Cases" shall mean the voluntary
petitions under Chapter 11 of the Bankruptcy Code that Western
Asbestos, Western MacArthur and MacArthur shall file in the
United States Bankruptcy Court or the United States District
Court for a District in California to implement the pre-
negotiated plan of reorganization, the terms of which shall
conform to this Agreement.
2.7 The "Court" shall mean the United States
Bankruptcy Court or the United States District Court in one of
the Districts of California.
2.8 The "Effective Date" shall mean the date upon
which the Debtor, the USF&G Parties and the Asbestos Plaintiffs
shall have executed this Agreement and the conditions precedent
set forth in Section 8.1 shall have been satisfied.
2.9 "524(g) Trust" shall mean a trust established
pursuant to 11 U.S.C. 524(g) and in accordance with the terms
of the Plan consistent with the terms of this Agreement.
2.10 "Future Representative" shall mean the
representative of the interests of future holders of Asbestos
Related Claims against the Debtors, who will be appointed in
connection with the Chapter 11 Cases and shall be approved by the
Court as contemplated by Section 524(g)(4)(B)(i) of the
Bankruptcy Code.
2.11 "Other Insurers" shall mean General Accident
Insurance Company of America, The Hartford Accident and Indemnity
Company and their related entities, The Home Insurance Company,
individually and as successor in interest to The Home Indemnity
Company, Argonaut Insurance Company, Continental Casualty Company
and CNA Casualty Company and related entities among others.
2.12 "Person" shall mean an individual, a corporation,
a partnership, an association, a trust, a class or group of
individuals, any "Insured", "Named Insured", "Persons Insured",
additional insured or additional named insured, or equivalent
term contained in the Policies as those terms are used in the
Policies, or any other entity or organization, including without
limitation any federal, state or local governmental or
quasi-governmental body or political subdivision, department,
agency or instrumentality thereof.
2.13 "Debtors' Counsel" shall mean the law firms of
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP; ▇▇▇▇▇▇ & ▇▇▇▇, ▇.▇.; and
▇▇▇▇▇▇, ▇▇▇▇▇ & Regalia.
2.14 "Plan" shall mean the pre-negotiated plan of
reorganization for the Debtors contemplated by this Settlement
Agreement, which shall include a settlement among the Debtors,
the Asbestos Plaintiffs and the USF&G Parties, the principal
terms and conditions of which are set forth herein.
2.15 "Plan Approval" shall mean the date upon which the
Plan is "substantially consummated" (as defined in Section
1101(2) of the Bankruptcy Code).
2.16 "Plan Disapproval" shall mean the date upon which
there is a final Court order denying confirmation of the Plan
that is not subject to stay or appeal.
2.17 "Policies" shall mean any and all policies of
insurance, whether primary, umbrella, excess or otherwise, and
whether liability, first party or otherwise, and whether known or
unknown, issued or alleged to have been issued by any of the
USF&G Parties to any of the Debtors prior to the Effective Date
or under which any of the Debtors claim to be entitled to
insurance coverage as a matter of law or as a named insured,
insured, additional named insured, additional insured, person
insured, or equivalent term contained in the policies, including
but not limited to those policies listed in Exhibit A. The term
"Policies" includes the foregoing policies whether the Debtors
assert a right to coverage as a named insured, insured,
additional named insured, additional insured, person insured, or
equivalent term contained in the policies, or by way of
assignment from another insured or Person claiming an interest in
or derived from such policies. The term "Policies" shall not
include any insurance policy issued by an insurance company other
than any of the USF&G Parties.
2.18 "Trustee" shall mean the trustee of the 524(g)
Trust.
Each defined term stated in a singular form shall
include the plural form, and each defined term stated in a plural
form shall include the singular form.
3. Financial Terms of Settlement.
3.1 Subject to all of the terms and conditions set
forth herein and to be included in the definitive Plan
documentation, the USF&G Parties will pay a total of $975
million, plus interest at the 30-day T ▇▇▇▇ rate as it exists
from time to time from the Effective Date until paid (with
accrued interest) into escrow or into the 524(g) Trust. Subject
to Plan Approval, USF&G's total obligation to Debtors and/or to
Asbestos Plaintiffs under this Agreement arising from or related
to the Policies shall not exceed $975 million with the exception
of (i) interest as provided under this Agreement, and (ii) the
reimbursable fees and costs set forth in Section 3.2(a) below in
addition to 3.2(a)(iv), and nothing in this Agreement shall be
construed to impose upon the USF&G Parties any additional
obligation. This amount shall be paid as follows:
(a) Judgment Escrow. No later than ten (10) days
after the Effective Date, the USF&G Parties shall pay $160
million into an escrow account (the "Judgment Escrow") for
payment to individuals holding Asbestos Related Claims who hold
judgments against any or all of the Debtors entered on or
before the Effective Date ("Judgment Creditors"), in partial
settlement of all potential claims that Judgment Creditors may
have directly against any of the USF&G Parties, with any
remaining settlement amounts to be paid from the 524(g) Trust.
The USF&G Parties shall be provided with documentation from the
Judgment Creditors or their counsel evidencing the payments to
each Judgment Creditor from the Judgment Escrow, such
documentation to include the date of payment and amount of
payment as to each Judgment Creditor. The $160 million paid
into the Judgment Escrow shall be paid as follows:
(i) $110 million, with accrued interest, shall be
disbursed at any time or from time to time, pursuant to joint
instructions of counsel for the Judgment Creditors whose
judgments amount to at least 80% of the value of all of the
judgments held by all of the Judgment Creditors, or pursuant to
an award of an arbitrator or arbitrators, or order of a court.
In the event of Plan Disapproval, none of these funds paid to
or remaining in the Judgment Escrow shall be returned to the
USF&G Parties; and
(ii) $50 million, with accrued interest, shall be
disbursed upon Plan Approval and issuance of the 524(g) and
Supplemental Injunctions (as defined in Section 8.2(d)), pursuant
to joint instructions of counsel for the Judgment Creditors whose
judgments amount to at least 80% of the value of all of the
judgments held by all of the Judgment Creditors, or pursuant to
an award of an arbitrator or arbitrators, or order of a court .
In the event of Plan Disapproval, the $50 million with accrued
interest shall be returned to the USF&G Entities.
(b) Claimant Escrow. The USF&G Parties shall pay
$740 million to be paid:
(i) To the 524(g) Trust if Plan Approval has occurred
on or before November 16, 2002, such payment to be made sixty
(60) days after Plan Approval and issuance of the 524(g) and
Supplemental Injunctions; or
(ii) To an escrow for asbestos claimants ("Claimant
Escrow") on January 15, 2003, if Plan Approval has not occurred
by November 16, 2002. The funds in the Claimant Escrow,
including accrued interest thereon, shall be disbursed: (A) to
the 524(g) Trust within sixty (60) days of Plan Approval and
issuance of the 524(g) and Supplemental Injunctions; or (B) to
the USF&G Parties in the event of Plan Disapproval.
(c) Expense and Fee Escrow. No later than ten (10)
days after the Effective Date, the USF&G Parties shall pay $40
million, on account of fees and costs of the Debtors incurred in
connection with the Existing Coverage Litigation and negotiations
and related work leading to this Agreement, into an escrow (the
"Expense and Fee Escrow"). The Debtors shall have no right,
title or interest in these funds. This $40 million payment shall
be in complete satisfaction of the USF&G Parties' obligation to
Debtors' Counsel for fees and expenses other than those set forth
in Section 3.2(a)(i) below. The Expense and Fee Escrow shall be
disbursed as follows:
(i) $30 million, with accrued interest, shall be
disbursed at any time or from time to time, pursuant to joint
instructions by Debtors' Counsel. None of these funds shall be
returned to the USF&G Parties in the event of Plan Disapproval or
otherwise. This payment shall be made in exchange for all of the
promises herein, and is expressly contingent upon, the release
provided by the Debtors' Counsel in Section 7.
(ii) $10 million, with accrued interest, shall be
disbursed: (A) upon or after Plan Approval and issuance of the
524(g) and Supplemental Injunctions, as set forth in Section
3(c)(i) above, or (B) to the USF&G Parties immediately in the
event of Plan Disapproval.
(d) Administrative Fund. No later than ten (10) days
after the Effective Date, the USF&G Parties shall pay $35 million
into an escrow account (the "Administrative Fund"), under the
control of the undersigned Asbestos Plaintiffs' Counsel. The
Administrative Fund shall be disbursed to the Debtors or others,
and after Plan Approval, to the 524(g) Trust, for miscellaneous
fees and expenses, including costs and fees associated with
litigation, either within or outside of the bankruptcy
proceedings contemplated by the Plan. Upon Plan Approval,
amounts in the Administrative Fund shall be disbursed for accrued
but unpaid fees and expenses and any remaining funds shall be
transferred to the 524(g) Trust. Upon Plan Disapproval, amounts
in the Administrative Fund shall be disbursed for accrued but
unpaid fees and expenses and any remaining funds shall be
returned to the USF&G Parties.
3.2 Bankruptcy Related Fees.
(a) In addition to the payments in Section 3.1, the
USF&G Parties shall advance, in the ordinary course as billed:
(i) All Debtors' fees and costs from and
including May 17, 2002, as incurred, in connection with the
handling and defense of asbestos-personal injury claims brought
against any of the Debtors, in connection with the bankruptcy
proceedings and efforts to seek Plan Approval, and the
negotiation of this Agreement and transactions contemplated by
it, including work in connection with preparing the bankruptcy
filing documentation and the bankruptcy cases and any escrows
described herein or escrows or trusts created in connection with
the bankruptcy cases (except for the 524(g) Trust after Plan
Approval).
(ii) All fees, costs and expenses incurred by the
Future Representative, and all other fees and expenses in
connection with the Chapter 11 Cases;
(iii) All costs and expenses incurred from and
including May 17, 2002, by the undersigned Asbestos Plaintiffs'
Counsel (including attorneys' fees and costs of outside counsel
they may retain) in connection with the bankruptcy proceedings
and efforts to seek Plan Approval and the negotiation of this
Agreement and transactions contemplated by it, paid on an ongoing
basis from the Effective Date; plus
(iv) Not later than ten days after the Effective
Date, the USF&G Parties shall pay the Asbestos Plaintiffs'
Counsel fees in the amount of $12.3 million for work leading to
this Agreement, plus costs incurred leading to this Agreement in
a sum not to exceed $150,000.
(b) With respect to all fees payable under Section
3.2(a)(i) through (iii):
(i) Such fees shall be based on an hourly (and
not contingent) basis and shall be at each firm's standard hourly
billing rates charged generally to that firm's clients for
litigation assignments; and
(ii) The firm involved will consult with the USF&G
Parties with regard to charges of counsel to determine whether
any amounts billed are illegitimate or abusive. If, after such
consultation the USF&G Parties believe that certain illegitimate
or abusive charges have not been resolved, they may seek
alternative dispute resolution ("ADR") to determine whether the
specific charges are not reasonable. In addition to any other
remedies they have the USF&G Parties may take a credit against
future bills of the offending counsel to offset any charges found
on ADR to be illegitimate or abusive. The USF&G Parties shall
have reasonable access to information relating to counsels' bills
in order to evaluate potentially illegitimate or abusive charges,
but the USF&G Parties will not delay or (except to take, after an
ADR award, the prospective credit described above) refuse to pay
bills of counsel in full as they become due. Nothing herein,
however, shall require the USF&G Parties to seek ADR with respect
to billing or rate errors and other mistakes relating to the
▇▇▇▇▇▇▇▇ of counsel. This section 3.2(b)(ii) does not apply to
those costs and expenses described in Section 3.2(a)(iii),
provided however, that the parties agree in good faith to meet
and confer to resolve any disputes concerning any fees or
expenses incurred under Section 3.2(a)(iii) that reasonably
appear to the USF&G Parties to be illegitimate or abusive.
(c) All amounts advanced (1) under Section 3.2(a)(i)
through (iii), or (2) for fees and expenses of the USF&G Parties
in connection with the USF&G's efforts to obtain Plan Approval to
the extent undertaken in the interest of all of the Parties and
not solely for the benefit of the USF&G Parties that were
requested to be performed by the Asbestos Plaintiffs' Counsel,
shall be reimbursed to the USF&G Parties by the 524(g) Trust,
with interest at the 30-day T ▇▇▇▇ rate accrued from the date of
payment by the USF&G Parties, within fifteen (15) days following
the 524(g) Trust's recovery from any of the Other Insurers of any
amounts, whether by judgment, settlement or otherwise, but in no
event shall such fees exceed the amounts recovered by the Trust.
(d) None of the funds paid pursuant to Section
3.2(a)(i) through (iv) shall be returned to the USF&G Parties in
the event of Plan Disapproval or otherwise except as expressly
provided upon the resolution of an ADR or upon disallowances of
fees by the Court.
3.3 Subject to the Debtors' or Trust's right to use
funds in the Administrative Fund in Debtors' or the Trusts' good-
faith discretion and consistent with the overall purposes of the
Plan, the USF&G Parties shall not be responsible for payment of
fees or costs incurred by the Trust or any other party in
connection with the prosecution of claims against any other
insurer. The USF&G Parties shall not be responsible for any
fees incurred subsequent to Plan Approval except to the extent
such fees are incurred in any remaining bankruptcy proceedings of
the Debtors.
3.4 All payments to be made by, and other obligations
of, the USF&G Parties are joint and several obligations of each
and all of them.
3.5 The Parties acknowledge that under fee agreements,
Debtors' Counsel are entitled to an additional $27 million on the
settlement agreement with the USF&G Parties, which shall be paid,
at the rate of 3% of recoveries upon settlements with or
recoveries from Other Insurers and after reimbursement to the
USF&G Parties under Section 3.2(c), until paid in full, provided
however, that this additional fee shall not be the responsibility
of the USF&G Parties.
4. Release By Debtors.
4.1 In consideration of the promises contained herein
as well as the Release by the USF&G Parties contained in Section
6, the Plan and Confirmation Order shall contain a general
release by the Debtors, on their own behalf and on behalf of any
person or entity claiming by or through the Debtors, in favor of
the USF&G Parties releasing the USF&G Parties and their
subsidiaries, affiliates, predecessors, successors or assigns
(but in no circumstance any Other Insurer against whom Debtors or
the Trust have potential rights of recovery for Asbestos Related
Claims), and their past, present and future directors, officers,
agents and representatives, in full from any and all claims,
demands or obligations whatsoever (including, without limitation,
any obligation for defense costs), past, present or future, known
or unknown, arising out of or relating to the Policies or any of
the USF&G Parties' insuring relationship with any of the Debtors,
whether for insurance coverage, bad faith or other extra-
contractual liability or otherwise allegedly arising out of or
relating to the Policies or any of the USF&G Parties' insuring
relationship with any of the Debtors, provided, however, that the
USF&G Parties shall not be released from indemnity obligations
under the policies identified in Exhibit A in respect of claims
other than Asbestos Related Claims up to total annual limits of
$100,000 per year for the policies referenced in Exhibit A in
effect from 1953-7/60 and $50,000 per year for the policies
referenced in Exhibit A in effect from 1948-1952, for a total
potential obligation of $1,000,000, and in no event shall the
USF&G Parties be responsible for any defense costs arising out of
such policies, such defense costs being released under the
release to be executed pursuant to this Section 4.1. Upon
request of the USF&G Parties on or after Plan Approval, the
Debtors shall execute and deliver to the USF&G Parties a separate
instrument of release containing terms of the foregoing release
provisions contained in the Plan and Confirmation Order.
5. Release by Judgment Creditors.
5.1 After payment of the $110 million portion of the
Judgment Escrow pursuant to Section 3.1(a) above, and upon
disbursement of same as set forth in Section 3.1(a)(i), a
Judgment Creditor receiving such sums shall execute and deliver
to the USF&G Parties a partial satisfaction of judgment to the
extent of amounts received under the Judgment Escrow which
operates as a credit against remaining obligations, if any, of
the USF&G Parties, such that the USF&G Parties shall have a
partial satisfaction of the Judgment Creditors' claims in the
aggregate of $110 million, when all the $110 million has been
disbursed.
6. Release by USF&G.
6.1 In consideration of the promises contained herein
as well as the Release by the Debtors contained in Section 4
above, and effective upon Plan Approval, the USF&G Parties on
their own behalf and on behalf of any person claiming by or
through the USF&G Parties shall execute, and the Plan and
Confirmation Order shall contain, a general release in favor of
the Debtors releasing the Debtors and their subsidiaries,
affiliates, predecessors, successors or assigns, and their
present and future directors, officers, agents and
representations, the Debtors' Counsel and their members, the
Asbestos Plaintiffs, the Asbestos Plaintiffs' Counsel and their
members of and from any and all claims, demands or obligations
whatsoever, past, present or future, known or unknown, for
damages or equitable relief that they may possess against the
releasees, arising out of or relating to the Existing Coverage
Litigation, these proceedings, the obtaining of any judgments
against any of the USF&G Parties, and the USF&G Parties'
relationship with any of the Debtors, the Debtors' Counsel, the
Asbestos Plaintiffs, or the Asbestos Plaintiffs' Counsel.
7. Release by Debtors' Counsel.
7.1 Upon payment of the $40 million Expense and Fee
Escrow pursuant to Section 3.1(c), Debtors' Counsel shall release
any claim to entitlement to legal fees or expenses from the USF&G
Parties other than those set forth in Section 3.2(a)(i).
8. Conditions Precedent.
8.1 Conditions Precedent To The Effective Date. This
Agreement shall become effective and binding upon the date on
which each of the following conditions precedent shall have been
fulfilled:
(a) The Agreement shall have been duly authorized and
executed by and delivered to each of the Parties or by their duly
authorized undersigned counsel.
(b) The Existing Coverage Litigation shall have been
stayed immediately upon the Effective Date as to the claims
against the USF&G Parties or earlier upon agreement of the
Debtors and USF&G Parties, which litigation shall remain stayed
during the pendency of the Chapter 11 Cases. No party shall seek
to lift the automatic stay during the Chapter 11 Cases.
(c) A stipulation in the form of Exhibit B shall have
been executed and filed in the Existing Coverage Litigation.
(d) The Asbestos Plaintiffs' Counsel shall have
agreed, which agreement shall be evidenced by their execution of
this Agreement, that they believe, based upon information
available to them, that they represent at least 75% of known
claimants against the Debtors, and that they will advise their
clients to vote consistent with their professional judgment and,
unless inconsistent with such professional judgment, in a manner
that is consistent the Plan to be filed to effectuate this
Agreement.
8.2 Condition Precedent to Certain Obligations
Arising Upon Plan Approval
The payment provisions under Section 3 other than
Section 3.1(a)(i), 3.1(c)(i), 3.1(d) and 3.2(a), releases
(Sections 4, 5, 6 and 7) and dismissal provision (Section 11) are
made expressly contingent upon the fulfillment of each of the
conditions set forth below (it being recognized and understood
that the payments under Sections 3.1(a)(ii), 3.1(b), and 3.1(c)
shall be made at the times set forth in those sections even
though such payments shall be subject to reimbursement to the
USF&G Parties in the event any of the following conditions are
not fulfilled):
(a) The entry of an order or orders confirming the
Plan and containing the provisions set forth in Sections 4.1,
6.1, 8.2(b), (c) and (d) below and approving this Agreement,
which orders shall be in form and substance satisfactory to the
Parties and which shall have become final (i.e., not subject to
stay or appeal), provided, however, that no party shall object to
any such order on grounds that the Plan does not reflect the
terms agreed to consistent with this Agreement unless such
inconsistency between the Plan and this Agreement materially
adversely affects such Party. The Parties agree that any change
in the Plan with respect to the terms set forth in Sections
8.2(b) or 8.2(c) would materially adversely affect the Debtors.
(b) Except for Asbestos Related Claims, all claims
against the Debtors and all common stock interests in the Debtors
shall be unimpaired, except that the Trust shall acquire a
majority of the stock of Western Asbestos Company, and the Trust
shall obtain the "Option Respecting Shares of MacArthur Company",
the form of which is Exhibit C hereto.
(c) Asbestos Related Claims and future demands shall
be channeled to, and be paid solely from, a trust to be
established pursuant to 11 U.S.C. 524(g) (the "524(g) Trust").
The Trust will be a "qualified settlement fund" within the
meaning of section 468B of the Internal Revenue Code and
regulations issued pursuant to that section. The channeling
injunction shall enjoin any entities from taking any legal action
for the purpose of directly or indirectly collecting, recovering,
or receiving payment or recovery with respect to any Asbestos
Related Claim, against the Debtors, any entity that becomes a
direct or indirect transferee of or successor to any assets of
any of the Debtors (to the extent of liability by reason of such
transfer or succession), any party with a financial interest in
any of the Debtors, or any party that was, is, or becomes
involved in the management of the Debtors or was, is or becomes
an officer, director, agent or employee of any of the Debtors,
provided that nothing in this Section shall be construed to apply
to any claim against any of the Other Insurers.
(d) In addition to the channeling injunction set forth
in Section 8.2(c), the Plan shall provide for the issuance of a
supplemental injunction pursuant to 11 U.S.C. 524(g) and
105(a) in favor of the USF&G Parties and their subsidiaries,
affiliates, predecessors, successors or assigns, and their past,
present and future directors, officers, agents and
representatives, successors and assigns (but in no circumstance
any Other Insurer against whom Debtors or the Trust have
potential rights of recovery for Asbestos Related Claims) (the
"524(g) and Supplemental Injunctions"). The 524(g) and
Supplemental Injunctions shall bar any action or demand against
any of the USF&G Parties and their subsidiaries, affiliates,
predecessors, successors or assigns (but in no circumstance any
Other Insurer against whom Debtors or the Trust have potential
rights of recovery for Asbestos Related Claims), and their
present and future directors, officers, agents and
representatives, for any claims arising out of or relating to the
Policies, including but not limited to any claim under California
Insurance Code 11580 or its subdivisions or related or similar
statues in any jurisdiction or any other claim by any person or
entity for insurance coverage or damages, indemnity,
contribution, defense, equitable relief or otherwise relating to
the Policies, the Existing Coverage Litigation, any Asbestos
Related Claim, or any other matter or claim relating to the
Policies by any party including any direct claim by a third-party
against USF&G arising out of or relating to the Policies or
USF&G's insuring relationship with any of the Debtors including
any claim for "bad faith" or extra-contractual liability,
provided, however that the injunction shall not preclude the
Debtors from enforcing their rights under the policies to the
extent and only to the extent not released pursuant to the
proviso in Section 4.1.
(e) The disclosure statement for the Plan, notice and
solicitation procedures, and voting of Asbestos Related Claims
shall be agreed to by the Parties and no Party shall refuse to
agree to the disclosure statement, notice and solicitation
procedures, and voting of Asbestos Related Claims unless such
Party will be materially and adversely affected by a proposed
provision.
For purposes of the preceding paragraph, the notice or
notices would be deemed to be satisfactory to the USF&G Parties
if such notice or notices:
(1) Contains a clear and unambiguous statement that
the Debtors are seeking confirmation of the Plan, which Plan (x)
contains injunctions against the further prosecution of Asbestos
Related Claims and (y) embodies and implements the releases
contained in Section 4.1 and the 524(g) and Supplemental
Injunctions described in Section 8.2(d) in favor of the USF&G
Parties, advising of the relevant dates for confirmation of the
Plan and the deadline for objections thereto and providing
contact information as to where copies of the disclosure
statement and plan may be obtained free of charge, and
(2) Is (a) mailed by first class mail to all known
plaintiffs with pending or unsatisfied asbestos-related claims or
persons or entities asserting a claim or demand against any of
the Debtors relating to asbestos, and (b) published in (i)
popular news publications in California, Minnesota and any other
state in which asbestos-related claims have been filed against
any of the Debtors within the past five years, and (ii) in the
national edition of the Wall Street Journal or the national
edition of the New York Times.
(f) The Debtors' petitions under Chapter 11 shall be
filed no later than 180 days after the last of the payments under
Sections 3.1(a), (c) and (d) is made into escrow.
(g) If any of the terms in Section 4.1, 6.1, 8.2(b),
(c) or (d) are not approved by the Court, the Parties consent and
agree that the petitions shall be withdrawn and the settlement
rescinded, and monies paid pursuant to Sections 3.1(a)(ii),
(b)(ii), (c)(ii) and, as and to the extent set forth therein,
3.1(d) only, shall be returned to the USF&G Parties.
9. Classification and Treatment of Interests in Plan
and Other Provisions Relating to the Plan.
9.1 In addition to the items set forth in Section 8.2,
the following shall be included within the Plan provisions.
(a) The Debtors' claims against Other Insurers arising
from Asbestos Related Claims shall be assigned to the 524(g)
Trust and shall be prosecuted by the Trust. The USF&G Parties
shall assign to the 524(g) Trust all their rights and claims
against any of the Debtors' Other Insurers arising from Asbestos
Related Claims, including contribution rights arising from
payments for indemnity, attorneys' fees and expenses, or
otherwise, against Other Insurers and the 524(g) Trust shall
prosecute such claims. The Trust, the Debtors and the Asbestos
Plaintiffs, shall use their best efforts to maximize the 524(g)
Trust's recoveries from Other Insurers and shall take no action
that prejudices such recoveries. The 524(g) Trust Agreement
shall contain such terms as are necessary or appropriate to
preserve the Debtors' rights against Other Insurers.
(b) Any monies owed by the Debtors to the Manville
Trust will be paid by the 524(g) Trust.
(c) As a condition to the receipt of payment from the
Trust, individuals holding Asbestos Related Claims will have to
execute and deliver a general release in favor of the USF&G
Parties releasing the USF&G Parties in full from any and all
claims or demands, past, present or future, known or unknown,
arising out of or relating to the Policies or any of the USF&G
Parties' insuring relationship with any of the Debtors, whether
for insurance coverage, bad faith or other extra-contractual
liability or otherwise allegedly arising out of or relating to
the Policies or any of the USF&G Parties' insuring relationship
with any of the Debtors, including but not limited to any claim
under California Insurance Code 11580 or its subdivisions or
related or similar statutes in any jurisdiction.
9.2 The USF&G Parties shall not object to the Debtors'
projections of the number of asbestos-related personal injury
claims. The USF&G Parties shall agree not to object to the
Debtors' total valuation of asbestos-related personal injury
claims against the Debtors, which the Debtors currently value in
excess of $5.0 billion.
9.3 Judgment Creditors may, in addition to amounts
they receive from the escrow described in Section 3.1(a), above,
present a claim to the 524(g) Trust for the full amounts of their
claims. The full amount of claims by Judgment Creditors that
have unsatisfied judgments against any of the Debtors shall be
assigned to the 524(g) Trust. The 524(g) Trust shall pay to the
Judgment Creditors the full amount for such judgments to the
extent permissible under the bankruptcy code. Any remaining
rights of Judgment Creditors shall be assigned to the Trust for
recovery from Other Insurers.
9.4 The Asbestos Related Claims resolution procedure
shall be determined by agreement among the Debtors, Futures
Representative and Asbestos Plaintiffs.
9.5 Upon Plan Approval and issuance of the 524(g) and
Supplemental Injunctions;
(i) the Parties shall execute and deliver the
releases set forth in Sections 4 and 6;
(ii) the Existing Coverage Litigation shall be
voluntarily dismissed with prejudice.
9.6 In the event (1) (A) the Chapter 11 Cases are
dismissed or converted to cases under Chapter 7 of the Bankruptcy
Code; or (B) any of the Parties supports a plan of reorganization
other than the Plan containing the terms set forth in this
Agreement; or (C) Debtors modify the Plan without consent of the
Parties, and (2) the rights of a Party are materially and
adversely affected thereby, then, upon ten (10) days written
notice by such Party to any of the other Parties, this Agreement
shall become null, void, and without effect, provided, however
that all payments made, or due and owing, except those expressly
made reimbursable on Plan Disapproval, will be retained (if
paid), or paid (if due and owing), and Section 14 (No Admissions
and Not Evidentiary), and Sections 17 through 24 shall remain
valid, effective and enforceable and provided, further, however,
that all causes of action arising from breach of this Agreement
by any Party prior to the date of notice of termination under
this Section 9.12 shall be maintained and shall remain actionable
in a court of competent jurisdiction.
10. Rights And Obligations of Parties in the Event of
Plan Disapproval. In the event of a Plan Disapproval, the
Parties consent and agree that:
(i) The Parties will move to dismiss the Chapter
11 Cases; and
(ii) Amounts paid into escrow pursuant to Sections
3.1(a)(ii), 3.1(b), 3.3(c)(ii), and, as and to the extent set
forth therein, Section 3.1(d) only, shall be returned to the
USF&G Parties;
(iii) All other payments made or due pursuant
to this Agreement shall be retained by or paid to the payees
described therein;
(iv) This Settlement Agreement shall be rescinded
except to the extent any provisions or obligations expressly
survive Plan Disapproval; and
(v) The Existing Coverage Litigation shall
proceed promptly to trial.
11. Stay and Dismissal Of Existing Coverage
Litigation. Upon Plan Approval and issuance of the 524(g) and
Supplemental Injunctions, the Existing Coverage Litigation, which
shall have been stayed pursuant to Section 8.1(b), shall be
voluntarily dismissed with prejudice.
12. Tax Consequences. To the extent that the Debtors
or the Asbestos Plaintiffs determine that tax consequences of any
of the transactions contemplated in this Agreement are
detrimental to them, all Parties agree to make such modifications
as are necessary to remove the detriment without materially
altering the financial terms of this Agreement.
13. Bankruptcy Proceedings By USF&G Parties. If any
of the USF&G Parties shall file any liquidation, conservatorship,
reorganization or rehabilitation proceeding, all other USF&G
Parties shall not seek, and shall oppose, any stay or diminution
of any or all of the obligations under this Agreement of those
USF&G Parties that do not file such a proceeding.
14. No Admissions and Not Evidentiary.
14.1 This Agreement is the result of a compromised
settlement of coverage disputes between the Debtors, the USF&G
Parties and the Asbestos Plaintiffs with regard to the Asbestos
Related Claims and all other claims. The Debtors, the USF&G
Parties and the Asbestos Plaintiffs agree that this Agreement is
not, and shall not be construed as, an admission or concession of
liability, responsibility or wrongdoing by any Party to this
Agreement. The Parties agree that this Agreement does not
constitute, and shall not be construed to reflect, the adoption
of any coverage position by the Parties with respect to Asbestos
Related Claims or otherwise, nor shall it have any bearing upon
or relevance to the interpretation or meaning of the Policies, or
any of the terms, definitions, conditions or exclusions contained
in the Policies or any other policies of insurance.
14.2 All actions taken and statements made by the
Debtors, the USF&G Parties and the Asbestos Plaintiffs, or by
their respective representatives, relating to this Agreement or
participation in this Agreement, including its development and
implementation, shall be without prejudice or value as precedent
beyond the scope of this Agreement, and shall not be used as a
standard by which other matters may be judged.
14.3 The Asbestos Plaintiffs and the Debtors that they
will not seek to introduce evidence, after Plan Disapproval, that
the USF&G Parties agreed to pay or paid the $110 million sum
referred to Section 3.1(a) in support of directly or indirectly
any claim for "bad faith" or extra contractual damages against
any of the USF&G Parties, provided however that this provision
shall not apply in any proceeding in which the USF&G Parties
first refer to the $110 million payment in defense of any claim
for "bad faith" or extra contractual damages.
15. Best Efforts. All parties will use their best
efforts to obtain the outcomes sought by this Agreement.
16. Debtors' Commercial Requests. The USF&G Parties
and the Asbestos Plaintiffs will support all reasonable requests
by the Debtors for Court approval of actions to maintain its
vendor relationships, to obtain adequate credit, to retain its
employees and officers, to maintain its competitive position, and
otherwise to maintain the value of the Debtors through
confirmation of the Plan, and to enable the completion of the
reorganization process as rapidly as feasible.
17. Confidentiality. All matters relating to the
existence, terms, conditions and negotiation of this Agreement
shall be and remain confidential and shall not be disclosed to
anyone other than the Parties hereto and their consultants and
counsel until the Debtors' petition is filed, except that this
Agreement and its terms may be disclosed (a) to the extent such
disclosure is in the opinion of the Party making such disclosure
required by law or appropriate in connection with any legal
proceedings (provided that confidentiality shall be maintained
with respect to any such disclosure in any such legal proceeding)
and in either such circumstance such further disclosures shall be
permissible to the extent necessary to explain or respond to
inquiries concerning the disclosure required by law, (b) by the
Asbestos Plaintiffs to counsel for plaintiffs with active
asbestos cases or judgments on the condition that such counsel
agree to this confidentiality provision, (c) if the Parties
otherwise agree in advance in writing; (d) to any insurer,
reinsurer, auditor or financial institution on the condition that
such insurer, reinsurer, auditor or financial institution has
agreed to this confidentiality provision, (e) to any Other
Insurer or their counsel in connection with claims or potential
claims against such Other Insurer if such Other Insurer agrees to
this confidentiality provision or in the absence of such
agreement upon the consent of the USF&G Parties, (f) by a Party
in any action or proceeding to enforce the terms of the
Agreement, if a protective order or confidentiality agreement is
issued in advance to limit dissemination of the Agreement and its
terms.
18. California Code of Civil Procedure Section 664.6.
The Parties stipulate that the settlement set forth in this
Agreement qualifies as a settlement for purposes of California
Code of Civil Procedure Section 664.6, and upon any default in
performance thereof the court on motion may enter judgment
pursuant to the terms of this Agreement.
19. Jurisdiction. Any action to resolve any disputes
among any of the parties hereto, (whether other persons or
entities are involved or not) arising out of this Agreement,
other than those which are within the exclusive jurisdiction of
the Court, shall be brought and litigated in the Superior Court
of the State of California, Alameda County. No party shall
remove any such action to federal court. This Agreement and all
disputes arising out of it shall be governed by California law.
20. Amendments. No amendment or variations of the
terms or provisions of this Agreement shall be valid unless made
in writing and signed by each of the Parties hereto.
21. Execution. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original,
with the same effect as if the signatures thereto were on the
same instrument.
22. Construction.. Each of the Debtors, the USF&G
Parties and the Asbestos Plaintiffs has participated in the
drafting of this Agreement after having the opportunity to
consult with counsel. It is the intent of the Parties that no
part of this Agreement is to be presumptively construed either in
favor of or against either Party. This Agreement shall not be
construed as an insurance policy.
23. Headings. Section headings contained herein are
for purposes of organization only, and shall not constitute a
part of this Agreement.
24. Correspondence. Any communications or notices to
be provided pursuant to this Agreement shall be addressed and
sent in writing, by registered or certified mail, return receipt
requested, to the attention of the persons identified below (or
as the Parties may subsequently direct in writing):
(1) If to the Debtors, to: Mac ▇▇▇▇▇▇ Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
and to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
Spear Street Tower, ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
and to:
▇▇▇▇▇▇ & ▇▇▇▇, P.A.
Metropolitan Centre
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
(2) If to the USF&G Parties, to: The St. ▇▇▇▇ Companies
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
and to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(3) If to the Asbestos Plaintiffs, to:
▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Kazan, McClain, Edises, Abrams,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & Farrise
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and to:
▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Wartnick Law Firm
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25. Entire Agreement. This Agreement is an integrated
agreement, containing the entire understanding between the Parties
hereoto with respect to the matters addressed herein and, except as set
forth in this Agreement, no representations, warranties or
promises have been made or relied upon by the Parties to this
Agreement. This Agreement shall prevail over prior
communications regarding the matters contained herein.
26. Counterparts. This Agreement may be executed by
the Parties in separate counterparts, each of which when so
executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same
agreement.
IN WITNESS HEREOF, the Parties, by their duly
authorized representatives, affix their signatures hereto on the
date opposite their signature.
ON BEHALF OF THE DEBTORS (as defined herein):
Date: June 1, 2002 By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------ -----------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------
Title: President of Western Asbestos Co.
Director of Western Asbestos Co.
--------------------------------
ON BEHALF OF THE DEBTORS (as defined herein):
Date: June 1, 2002 By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------ ---------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------
Title: Director, Western Asbestos Company
Vice President, Western Asbestos Company
----------------------------------------
ON BEHALF OF THE DEBTORS (as defined herein):
Date: June 3, 2002 By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------ -----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------
Title: President, Western MacArthur Co.
-------------------------------
ON BEHALF OF THE DEBTORS (as defined herein):
Date: June 3, 2002 By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------ -----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------
Title: President, MacArthur Co.
-----------------------
ON BEHALF OF THE USF&G PARTIES (as defined herein):
Date: June 3, 2002 By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------ ----------------------
Name: ▇▇▇▇▇▇▇ ▇. Yessman___
------------------
Title: Executive Vice President
------------------------
ON BEHALF OF THE ASBESTOS PLAINTIFFS (as defined herein):
Date: June 4, 2002 By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------ -----------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------
Title: Director, Kazan, McClain, Edises, Abrams, Fernandez,
▇▇▇▇▇ & Farrise
---------------------------------------------------
Date: June 3, 2002 By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------ -------------------
Name: ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
-----------------
Title: Principal
---------
Date: June 3, 2002 By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------ ---------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------
Title: President, Wartnick Law Firm
----------------------------
Exhibit A
Policy Information
Policy Coverage
Number Period
------ --------
Unknown 1948
CLP 4277 11/1/48-49
CLP 6924 1949-50
Unknown 1950-51
Unknown 1951-52
CLP 7543 1952-53
CLP 16463 1953-54
CLP 22520 7/54-7/55
CLP 28002 7/55-7/56
CLP 33890 7/56-7/57
CLP 40765 7/57-7/58
CLP 43388 7/58-7/59
CLP 50470 7/59-7/60
Exhibit B
[Form of Stipulation]
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (CA Bar No. 043030)
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (CA Bar No. 138926)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (CA Bar No. 154791)
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ Street Tower, ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attorneys for Plaintiffs
Western Mac ▇▇▇▇▇▇ Company and Mac ▇▇▇▇▇▇ Company
SUPERIOR COURT OF CALIFORNIA
IN AND FOR THE COUNTY OF ALAMEDA
WESTERN MAC ▇▇▇▇▇▇ COMPANY, a ) Case No. 721595-7
California corporation, and ) (Consolidated with Case No.
MAC ▇▇▇▇▇▇ COMPANY, ) 828101-2)
a Minnesota corportation, )
) STIPULATION AND ORDER RE:
) DETERMINATION OF CERTAIN
Plaintiffs, ) ISSUES AND STAY OF TRIAL
) AGAINST USF&G
vs. )
) [Assigned to Honorable ▇▇▇▇▇▇
UNITED STATES FIDELITY & ) ▇. ▇▇▇▇▇▇]
GUARANTY CO., a Maryland )
corporation, THE ST. ▇▇▇▇ ) Action Filed: August 12,
COMPANIES, INC., a Minnesota ) 1993
corporation, and ST. ▇▇▇▇ FIRE & ) Trial Date: In Trial
MARINE INSURANCE COMPANY, a )
Minnesota corporation, as )
successors to UNITED STATES )
FIDELITY & GUARANTY CO., )
ARGONAUT INSURANCE COMPANY, a )
California corporation, and DOES )
2 through 40, inclusive, )
)
)
WESTERN ASBESTOS COMPANY, )
)
Intervenor. )
)
)
AND RELATED CROSS-ACTIONS. )
)
This stipulation and order (referred to herein as
"Stipulation and Order") is between Western Mac ▇▇▇▇▇▇ Company,
Mac ▇▇▇▇▇▇ Company and Western Asbestos Company (collectively,
"Western") on the one hand, and USF&G, The St. ▇▇▇▇ Companies,
Inc. and St. ▇▇▇▇ Fire and Marine Insurance Company
(collectively, "USF&G") on the other hand.
RECITALS
WHEREAS, Western and USF&G are currently in Phase I of
the trial in this action;
WHEREAS, Western and USF&G intend and have prepared
this Stipulation and Order to determine, as if fully litigated
and finally adjudicated in Phase I with issue preclusive effect,
the matters set forth in Paragraphs 2-10 below.
STIPULATION
Wherefore, in light of the facts and contentions in the
pleadings and discovery, and in light of the evidence introduced
at trial, Western and USF&G hereby stipulate and agree that:
1. The trial of this action will be stayed as to
USF&G.
2. In 1967, Western Asbestos Company assigned its
rights to payment under all of its insurance policies to Mac
▇▇▇▇▇▇ Company, who then transferred those rights to its nominee,
Western Mac ▇▇▇▇▇▇ Company. The parties hereby agree and
stipulate that this 1967 assignment is valid as between Western
Asbestos Company and Mac ▇▇▇▇▇▇ Company.
3. In 1996, MacArthur Company assigned to Western
MacArthur any and all rights it had with respect to Western
Asbestos Company and the insurers of Western Asbestos Company to
the extent Western MacArthur required such rights to pursue
Western Asbestos' insurance coverage. (See Trial Exhibit 946).
The parties hereby agree and stipulate that this 1996 assignment
is valid as between MacArthur Company and Western MacArthur.
4. In 1997, Western Asbestos Company assigned any
remaining rights to payment, if any, under Western Asbestos
Company's insurance policies to Western Mac ▇▇▇▇▇▇ Company. The
parties hereby agree and stipulate that this 1997 assignment is
valid as between Western Asbestos Company and Western Mac ▇▇▇▇▇▇
Company.
5. In 1999, Western Asbestos Company ratified the
prior assignments identified in Paragraphs 2 and 3 above, and
assigned any remaining rights to payment, if any, under Western
Asbestos Company's insurance policies to Western Mac ▇▇▇▇▇▇
Company. This ratification and assignment was made through the
1999 Ratification and Assignment, introduced into evidence as
Trial Exhibit No. 742. The parties hereby agree and stipulate
that this ratification was valid as between Western Asbestos and
Western MacArthur.
6. The parties agree that this Stipulation and Order
does not resolve whether any of the assignments or ratification
referenced in paragraphs 2-5 above is valid and enforceable as
against USF&G by reason of certain policy provisions, and/or by
reason of Western's alleged fraud, sham or collusion. The
parties further agree that nothing in this Stipulation and Order
shall prejudice USF&G's position that at all relevant times it
has been a matter of genuine dispute as to whether each of the
assignments and ratification referenced in paragraphs 2-5 is
valid and enforceable as to either USF&G or as between Western
Asbestos and Western MacArthur (or in the case of the assignment
referenced in paragraph 3, as between MacArthur Company and
Western MacArthur), or Western's position that none of these
issues was a matter of genuine dispute.
7. USF&G issued comprehensive general liability
insurance policies to Western Asbestos Company from 1948 to 1960,
as follows:
Policy Coverage Per person/
Number Period per accident
limits
------- ------- ------------
Unknown 1948 $50,000/$100,000
CLP 4277 11/1/48-49 $100,000/$200,000
CLP 6924 1949-50 $100,000/$200,000
Unknown 1950-51 $100,000/$200,000
Unknown 1951-52 $100,000/$200,000
CLP 7543 1952-53 $100,000/$200,000
CLP 16463 1953-54 $200,000/$300,000
CLP 22520 7/54-7/55 $200,000/$300,000
CLP 28002 7/55-7/56 $200,000/$300,000
CLP 33890 7/56-7/57 $200,000/$300,000
CLP 40765 7/57-7/58 $200,000/$300,000
CLP 43388 7/58-7/59 $200,000/$300,000
CLP 50470 7/59-7/60 $200,000/$300,000
8. The comprehensive liability policies identified in
Paragraph 7 above contained the same or substantially similar
coverage terms, conditions and limitations as USF&G's specimen
comprehensive liability policy, Form No. 1091-A, introduced into
evidence as Trial Exhibit No. 4433.
9. The comprehensive liability policies identified in
Paragraph 7 above provided coverage with respect to property
damage claims up to a total annual aggregate limit, exclusive of
defense fees and expenses, for such property damage claims of
$100,000 per year for the policies referenced in Paragraph 7 in
effect from 1953-7/60 and $50,000 per year for the policies
referenced in Paragraph 7 in effect from 1948-1952.
10. The comprehensive general liability policies
identified in Paragraph 7 above were written on a "caused by
accident," as opposed to an "occurrence," basis. These policies
provided for bodily injury coverage without an aggregate limit
for claims other than "products-completed operations" claims. It
is not hereby determined, as set forth below in Paragraph 13,
whether any bodily injury coverage for products or for completed
operations was provided or excluded and, if such coverage
existed, whether it was subject to an aggregate limit. As
indicated in Paragraph 7, all policies were subject to "per
person" and "per accident" limits.
11. This Stipulation and Order determines, as if fully
litigated and finally adjudicated in Phase I with issue
preclusive effect, the matters set forth in Paragraphs 2-10,
except that Western shall not be foreclosed by this Stipulation
and Order from attempting to prove that additional USF&G policies
existed prior to 1948 or after 1960. To ensure that the
Stipulation and Order is given this effect, the parties agree to
cooperate in presenting this Stipulation and Order to the Court
so it can be entered as an Order of the Court. The parties also
agree to do whatever else is necessary, if anything, to give the
Stipulation and Order the final and preclusive effect of the
matters set forth in Paragraphs 2-10.
12. Any matters at issue between Western and USF&G
that are not addressed in Paragraphs 2-10 above remain in
dispute. In particular, matters to be addressed during Phases
IB, II and III of the trial in this action remain in dispute,
including whether the assignments identified in Paragraphs 2-5
above are valid and enforceable against USF&G by reason of
certain insurance policy provisions, and/or by reason of
Western's alleged fraud, sham and collusion.
13. In addition, matters to be addressed during the
remainder of Phase I and Phases IB, II and III of the trial also
include the issue of whether the comprehensive general liability
policies identified in Paragraph 7 above provided or excluded any
"products-completed operations" coverage, or whether such
coverage was subject to an aggregate limit. In addition, it
remains to be determined which party has the burden of proof on
these issues. These matters remaining in dispute may be tried
subsequently, after the stay.
14. This Stipulation and Order shall be binding and
enforceable in any action for insurance coverage, including this
one. Once the facts set forth in this stipulation have been
established in such an action for insurance coverage, the parties
shall not directly or indirectly refer to this Stipulation and
Order, the facts stipulated to, and any negotiations or other
communications of any kind regarding this Stipulation and Order,
in support of any attempt to seek damages for alleged "bad faith"
or other extra-contractual damages or other claims in tort or
otherwise from USF&G, or to defend against such claims, which
shall be tried before a different factfinder than the coverage
action referred to in the first sentence of this paragraph. The
provisions of Evidence Code 1152 as well as Federal Rule of
Evidence 408 and other similar rule or provision shall
specifically apply to such negotiations or communications.
15. This Stipulation and Order shall be considered
jointly drafted and negotiated for purposes of any interpretation
of its provisions.
Dated: June 3, 2002 WHITE & CASE
By
▇▇▇▇▇▇▇ ▇▇▇▇
Attorneys for Defendants
The St. ▇▇▇▇ Companies, Inc. and
St. ▇▇▇▇ Fire & Marine Insurance Company
Dated: June 3, 2002 SEDGWICK, DETERT, ▇▇▇▇▇ & ▇▇▇▇▇▇
By
▇▇▇▇▇ ▇▇▇▇▇
Attorneys for Defendant
USF&G
Dated: June 3, 2002 ▇▇▇▇▇▇ & ▇▇▇▇ P.A.
By
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
▇▇▇▇▇ ▇▇▇▇, Esq.
Attorneys for Plaintiffs Western
Mac ▇▇▇▇▇▇ Company and Mac ▇▇▇▇▇▇ Company
DATED: June 3, 2002 ▇▇▇▇▇▇▇, PHLEGER & ▇▇▇▇▇▇▇▇ LLP
By
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Attorneys for Plaintiffs Western
Mac ▇▇▇▇▇▇ Company and Mac ▇▇▇▇▇▇ Company
Dated: June 3, 2002 ▇▇▇▇▇▇, ▇▇▇▇▇ & REGALIA
By
▇▇▇ ▇▇▇▇▇▇▇
Attorneys for Plaintiff-in-
Intervention Western Asbestos Co.
IT IS SO ORDERED:
Dated: June __, 2002
▇▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Judge, Alameda County Superior Court
Exhibit C
OPTION RESPECTING SHARES OF MAC ▇▇▇▇▇▇ COMPANY
This "Option Respecting Shares Of Mac ▇▇▇▇▇▇ Company"
("Option") is granted to the Mac ▇▇▇▇▇▇ Settlement Trust pursuant
to the Plan of Reorganization under Chapter 11 of the United
States Bankruptcy Code for Mac ▇▇▇▇▇▇ Company, Western Mac ▇▇▇▇▇▇
Company, and Western Asbestos Company. The shareholders
executing this Option collectively own 100% of the only class of
stock issued and outstanding of Mac ▇▇▇▇▇▇ Company, a Minnesota
corporation.
Each of the shareholders executing this Option grants
to the Mac ▇▇▇▇▇▇ Settlement Trust the option to obtain his or
her shares of Mac ▇▇▇▇▇▇ Company on the following conditions:
1. The Option must be exercised one time and for all
the shares of Mac ▇▇▇▇▇▇ Company;
2. The Option must be exercised by written notice
within 30 days of Plan Approval. Notice will be sent by
facsimile to ______________, copies to _______________;
3. The Option prices that The Mac ▇▇▇▇▇▇ Settlement
Trust will pay in cash, which total $33 million, to each of the
undersigned shareholders on exercise of the option is the amount
shown below beside each shareholder's name:
▇▇▇▇ ▇▇▇▇▇▇, ▇▇. $ ____________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ $_____________
▇▇▇ ▇. ▇▇▇▇▇ $ ____________
Profit Sharing $_____________
▇▇▇▇▇▇ ▇▇▇▇▇▇ $_____________
1st Employee $_____________
2nd Employee $_____________
3rd Employee $_____________
4. Payment for the shares will be made
contemporaneously with the notice exercising the option.
