Exhibit 99.1
SETTLEMENT AGREEMENT AND RELEASE BY AND
BETWEEN CONGOLEUM CORPORATION
AND HARPER
INSURANCE LIMITED, FORMERLY KNOWN AS TUREGUM INSURANCE COMPANY
This
Settlement Agreement and Release (the "Agreement") is made by
and
between (a) each of the following (each, a "Debtor" and,
collectively, the
"Debtors"): Congoleum Corporation, as debtor and
debtor-in-possession
("Congoleum"), Congoleum Sales, Inc., and Congoleum Fiscal, Inc.,
as debtors and
debtors-in-possession; and (b) Harper Insurance Limited, formerly
known as
Turegum Insurance Company ("Harper"). The Debtors and Harper are
referred to
herein in their individual capacity as a "Party" and collectively
as the
"Parties."
RECITALS
WHEREAS,
numerous "Asbestos Claims" (as defined herein) have been
asserted
against Congoleum; and
WHEREAS,
Turegum Insurance Company, the predecessor to Harper,
subscribed
to a 10.5 percent share of Insurance Policy No. UJL0389 issued to
Congoleum for
the policy period April 1, 1977, to January 1, 1980, by Turegum
Insurance
Company and certain other London Market companies (Turegum
Insurance Company's
share of said policy is hereinafter referred to as the "Subject
Policy"); and
WHEREAS,
there is a dispute between the Debtors and Harper (the
successor
to Turegum Insurance Company) regarding their respective rights and
obligations
with respect to insurance coverage under the Subject Policy for
Asbestos Claims
(the "Coverage Dispute"); and
WHEREAS,
Congoleum and Harper are parties to a lawsuit styled Congoleum
Corporation v. ACE American Insurance Company, et al., Docket No.
MID-L-8908-01,
pending in the Superior Court of New Jersey, Law Division,
Middlesex County (the
"Coverage Action"); and
<PAGE>
WHEREAS,
on or about December 31, 2003, the Debtors filed reorganization
case no. 03-51524 (KCF), jointly administered pursuant to chapter
11 of the
United States Bankruptcy Code (the "Chapter 11 Case") in the United
States
Bankruptcy Court for the District of New Jersey (the "Bankruptcy
Court"), and
the Debtors continue to operate their businesses as debtors and
debtors-in-possession; and
WHEREAS,
Congoleum seeks in the Coverage Action actual compensatory and
consequential damages, plus interest thereon, among other relief,
and Harper
denies that it owes any damages as alleged and has defended against
Congoleum's
claims in the Coverage Action; and
WHEREAS,
the Debtors and Harper entered into settlement negotiations to
resolve the Coverage Dispute and to further define their respective
rights and
obligations under the Subject Policy; and
WHEREAS,
subject to the terms of this Agreement, the Debtors and Harper
now wish to enter into an agreement, as set forth below, to settle
and resolve
the Coverage Dispute as between them, to provide for mutual
releases of their
claims under the Subject Policy, to provide for dismissals with
prejudice of the
Coverage Action as between them, to provide for a permanent
withdrawal of all of
Harper's claims, objections and appeals, if any, in the Chapter 11
Case, and to
resolve certain other matters, all as set forth below; and
NOW,
THEREFORE, in consideration of the mutual covenants contained
herein,
and intending to be legally bound hereby, the Parties hereby agree
as follows:
2
<PAGE>
AGREEMENT
I.
DEFINITIONS
A. For
purposes of this Agreement, the following definitions apply to
the
capitalized terms herein wherever those terms appear in this
Agreement,
including the prefatory paragraph, recitals, the sections below and
any
attachments hereto. Capitalized terms in the prefatory paragraph,
recitals, the
sections below and any attachments hereto have the meanings
ascribed to them
therein to the extent they are not otherwise defined in this
Definitions
section. Moreover, each defined term stated in the singular shall
include the
plural, and each defined term stated in the plural shall include
the singular.
The word "include" or "including" means "including but not limited
to."
B.
"Approval Order" means an order of the Bankruptcy Court or the
District
Court exercising its original bankruptcy jurisdiction approving
this Agreement,
which order shall be in the form of Attachment A hereto or such
other order that
is in a form and substance acceptable to the Debtors and
Harper.
C.
"Asbestos Claims" means any and all past, present and future
claims,
demands, actions, suits, proceedings, notices of partial or
total
responsibility, whether presently known or unknown, that seek
compensatory,
punitive or statutory damages, declaratory judgment, injunctive
relief, medical
monitoring, or any other form of relief whatsoever, on account of
alleged bodily
injury, personal injury, fear of future injury, medical monitoring,
mental
injury or anguish, emotional distress, shock, sickness, disease, or
any other
illness or condition, death, property damage, loss of use of
property, or
diminution in the value of property arising from alleged, potential
or actual
exposure of any type or nature whatsoever to asbestos, an
asbestos-containing
product, and/or any other substance, product, matter or material in
any form or
3
<PAGE>
state that contains or is alleged to contain asbestos, either alone
or in
combination with any other substance. The term "Asbestos Claims"
also includes
claims or suits alleging in whole or in part exposure to asbestos
and/or asbes
tos-containing products in addition to any other substance,
chemical, pollutant,
waste, or material of any nature, as well as claims that involve,
in whole or in
part, alleged exposure to asbestos or asbestos-containing products
relating to
or arising out of or from the installation, removal, manufacture,
distribution,
sale, re-sale, existence or presence (whether on premises owned or
controlled by
the Debtors or otherwise) of asbestos or an asbestos-containing
product, either
alone or in combination with any other substance. Notwithstanding
anything to
the contrary herein, the term "Asbestos Claims" does not include
any Claims (as
defined herein) for property damage brought by any governmental
unit, including
the United States of America, under applicable environmental laws
where such
Claims fall outside the scope of the "products" or "completed
operations"
hazards of the Subject Policy (as those terms are defined in the
Subject
Policy).
D. "Claim"
means any of the following: (1) "claim" as that term is defined
in 11 U.S.C. ss. 101(5); (2) "demand" as that term is defined in 11
U.S.C. ss.
524(g)(5); or (3) any claim, whether past, present or future, known
or unknown,
asserted or unasserted, foreseen or unforeseen, fixed or
contingent, or direct
or indirect, and whether in law, equity, admiralty or otherwise,
including any
claim (a) arising out of, related to, or involving asbestos or any
other
substance, product, matter or material in any form or state, any
cumulative or
other injury or damage, any activity, operation, premises, or
exposure or any
alleged bad faith, unfair claim practices, unfair trade practices,
deceptive
trade practices, insurance code violations, fraud,
misrepresentation,
non-disclosure, breach of fiduciary duty, conspiracy, or
extra-contractual or
4
<PAGE>
tort liability; (b) for any form of damages, indemnity or defense
obligations,
insurance premiums (whether retrospectively rated or otherwise),
deductibles,
self-insured retentions, costs, expenses, contribution or
subrogation (except as
specified in Paragraph II.J); or (c) pursuant to or under a
contract, other
agreement, promise, representation or warranty; or (d) pursuant to
any direct
action or statutory or regulatory right of action, assertion of
right,
complaint, cross-complaint, counterclaim, affirmative defense,
writ, demand,
inquiry, request, suit, lawsuit, liability, action, cause of
action,
administrative proceeding, governmental action, order, judgment,
settlement,
lien, loss, cost or expense.
E.
"Claimants' Counsel" means Perry Weitz and Joseph F. Rice in
their
capacity as counsel to the participating asbestos claimants under
that certain
settlement agreement between Congoleum Corporation and various
asbestos
claimants, executed as of April 10, 2003, as amended.
F.
"Confirmation Order" means an order entered by the Bankruptcy Court
in
the Chapter 11 Case confirming the Plan, together with any order of
the District
Court issued pursuant to section 524(g)(3)(A) of the Bankruptcy
Code confirming
or affirming such order, which Plan includes a 524(g)
Injunction.
G.
"Official Committee" means any and all committees appointed in
the
Chapter 11 Case by the Office of the United States Trustee.
H.
"District Court" means the U.S. District Court for the District of
New
Jersey.
I.
"Execution Date" means the earliest date on which this Agreement
is
signed by the Debtors and Harper.
J. "Final Order"
means an order or judgment of a court, the
implementation, operation or effect of which has not been stayed
and as to which
the time to appeal, seek review, petition for certiorari, or move
for
reargument, reconsideration or rehearing has expired.
5
<PAGE>
K. "FCR"
means the Futures Representative appointed pursuant to the
Bankruptcy Court's February 18, 2004 Order in the Chapter 11 Case,
solely in his
capacity as such.
L. "524(g)
Injunction" means an injunction in the Chapter 11 Case pursuant
to Section 524(g) of the Bankruptcy Code that permanently enjoins
all Persons
from taking any legal action for the purpose of directly or
indirectly
collecting, recovering, or receiving payment or recovery from the
Harper
Releasees with respect to any Claim that under the Plan is to be
paid in whole
or in part by the Plan Trust (including all Asbestos Claims paid or
to be paid
in whole or in part by the Plan Trust) that arises out of or in
connection with
the Subject Policy.
M. "Harper
Releasees" means (i) Harper and its affiliates, subsidiaries,
predecessors, successors and assigns; and, (ii) each of the
directors, officers,
shareholders, agents and employees of the foregoing, solely in
their capacities
as such.
N.
"Motion" has the meaning ascribed to such term in Paragraph III.A
of
this Agreement.
O.
"Person" means any natural person, corporation, limited
liability
company, syndicate, trust, joint venture, association, company,
partnership,
governmental authority or other entity.
P. "Plan"
means a plan of reorganization proposed by the Debtors in the
Chapter 11 Case.
6
<PAGE>
Q. "Plan
Trust" means the trust created under the Plan that conforms to
the description of a "trust" as set forth in Section
524(g)(2)(B)(i) of the
Bankruptcy Code.
R. "Prior
Payments" has the meaning ascribed to such term in Paragraph
II.E of this Agreement.
S.
"Termination Event" means the occurrence for any reason of any of
the
contingencies set forth in Paragraph III.H below and the subsequent
declaration
of this Agreement as null and void in accordance with Paragraph
III.H below.
T.
"Trigger Date" means the earliest date upon which written notice
is
received by Harper from the Debtors, pursuant to Section V below
(such notice to
be sent by the Debtors within three (3) business days of the
satisfaction of the
all of the following events), stating that all of the following
events have
occurred: (1) the Approval Order is a Final Order; (2) the
Confirmation Order is
a Final Order; and (3) the Plan, which includes the 524(g)
Injunction, is
declared to be effective.
II. PAYMENT BY
HARPER
A. Within
three business days following the Trigger Date, Harper shall
pay
to Congoleum, or as directed in the Plan or the Confirmation Order,
the total
amount of One Million Three Hundred and Seventy-Five Thousand
Dollars, in
immediately available funds ($1,375,000.00) (the "Settlement
Amount").
B. The
Settlement Amount shall be used only to pay Asbestos Claims
and/or
to pay other amounts payable by the Plan Trust pursuant to the
Plan.
C. Time is
of the essence with respect to payment of the Settlement
Amount. The payment of the Settlement Amount shall be made by
Harper no later
than the date when due, without any set-off, counterclaim,
diminution or any
other deduction whatsoever.
7
<PAGE>
D. In the
event that the Settlement Amount is not paid in full when due,
the Settlement Amount shall bear interest from (and including) the
due date in
the manner specified in Section II herein, to (but excluding) the
date the
Settlement Amount plus all interest accrued thereon is actually
paid in full, at
an interest rate equal to the prime rate of Citibank, N.A. in
effect on the date
such payment was due plus three percent (3%), compounded daily.
E. The
Settlement Amount is in addition to any and all amounts paid
prior
to the Execution Date by or on behalf of Harper to or for the
benefit of the
Debtors in connection with Asbestos Claims or otherwise
(collectively, the
"Prior Payments"). From and after the Trigger Date, and unless this
Agreement is
declared null and void pursuant to Paragraph III.H below, any and
all payments
by Harper, including the Prior Payments, if any, shall be deemed
final and
irrevocable payments.
F. In
entering into this Agreement, Harper has relied upon the fact
that
nothing in this Agreement and nothing in the Plan is intended to
alter, amend or
impair the rights and duties of the Parties in connection with
insurance or
other transactions that are unrelated to Asbestos Claims or the
releases in
Paragraphs IV.A. and IV.B.
G. Harper
shall have the right to allocate the Settlement Amount, or any
portions thereof, solely for their own purposes, in their own books
and records,
to the various types and classifications of claims released by the
Debtors
pursuant to Section IV.A. below; provided, however, that neither
the Debtors nor
the Plan Trust shall be bound by or be deemed to agree with any
such allocation
for any reason or purpose, and that Harper's allocation shall not,
in any way,
limit its obligation to pay the Settlement Amount in full when due
or limit the
Debtors' or the Plan Trust's use or allocation of the Settlement
Amount.
8
<PAGE>
H. Harper
shall not seek reimbursement of any payments that it has made
(including Prior Payments) or is obligated to make under this
Agreement or
otherwise, whether by way of a claim for contribution or
subrogation, or
otherwise, from any Person other than Harper's reinsurers in their
capacity as
such. Each of the Debtors shall use its reasonable best efforts to
obtain from
all insurers with which it settles an agreement similar to that set
forth in the
preceding sentence; provided, however, that notwithstanding
anything to the
contrary herein, the failure of the Debtors to obtain such an
agreement from any
other insurer with which it settles shall not constitute a breach
of this
Agreement. Notwithstanding the foregoing, subject to the effect of
the 524(g)
Injunction, Harper may file a cross-complaint or counterclaim
against any Person
that has first asserted a claim seeking reimbursement for any
payment that it
has paid or is required to pay, whether by way of a claim for
contribution
and/or subrogation or otherwise, against Harper in connection with
any Claims
released pursuant to Paragraph IV.A hereunder; provided, however,
that, to the
extent Harper recovers any amount in respect of such
cross-complaint or
counterclaim from such third party, the proceeds of such recovery
shall be paid
by Harper pursuant to the instruction of the Debtors or the Plan
Trust (as the
case may be), after Harper is reimbursed from such proceeds for its
reasonable
fees, costs and expenses incurred in prosecuting and defending such
claim. For
the avoidance of doubt, any payment of such proceeds pursuant to
the Debtors' or
the Plan Trust's instructions shall not reduce or count towards
Harper's
obligation to pay the Settlement Amount (plus any and all interest
accrued
thereon as provided for herein).
I. Each
Party acknowledges and agrees that the Debtors' rights to the
Settlement Amount derive from and are coextensive with the Debtors'
rights to
the proceeds of the Subject Policy. Each Party agrees that it shall
not take any
action inconsistent with such acknowledgement and agreement.
9
<PAGE>
J. In the
event that any insurer of the Debtors obtains a binding
arbitration award or final judgment against or a settlement with
any of the
Harper Releasees (with the consent of the Debtors prior to the
effective date of
the Plan or with the consent of the Plan Trust following said
effective date,
which consent in either case shall not be unreasonably withheld)
entitling it to
obtain a sum certain from any of the Harper Releasees as a result
of said
insurer's claim for contribution, subrogation, indemnification,
reimbursement or
other similar claim against the Harper Releasees for the Harper
Releasees'
alleged share or equitable share of the defense and/or indemnity of
the Debtors
for any Claims released pursuant to Paragraph IV.A of this
Agreement, the
Debtors or the Plan Trust (as the case may be) shall voluntarily
reduce the
amount of any such final judgment or settlement payment that they
obtained or
may obtain from such other insurer by the amount of such other
insurer's binding
arbitration award or final judgment awarded against or settlement
with the
Harper Releasees in connection with such contribution,
subrogation,
indemnification or other similar claim and shall direct that the
Harper
Releasees shall not be subject to liability for such judgment,
arbitration award
or settlement. Such a reduction in judgment or arbitration award or
settlement
will be accomplished by subtracting from the judgment, arbitration
award or
settlement against the other insurers, the share of the judgment,
arbitration
award or settlement attributable to the Harper Releasees.
III. BANKRUPTCY
OBLIGATIONS
A. The
Debtors shall file, within ten (10) busi
