Exhibit 10.3.3
SUPERCEDING SECURITY AGREEMENT
This security agreement ("Security Agreement") is entered into by and
between Congoleum Corporation, a Delaware corporation ("Congoleum") and Xxxxxx
X. Xxxxxxxxx, solely in his capacity as the Collateral Trustee (the "Collateral
Trustee") of the Collateral Trust created pursuant to the Collateral Trust
Agreement (referenced to below).
RECITALS
WHEREAS, numerous individuals have asserted asbestos-related bodily
injury claims against Congoleum (each an "Asbestos Claimant" and collectively,
the "Asbestos Claimants"), each alleging exposure to an asbestos-containing
product manufactured, sold, or distributed by Congoleum or for which Congoleum
otherwise may have legal liability (the "Asbestos Claims"), and it is
anticipated that additional asbestos-related bodily injury claims will continue
to be asserted against Congoleum; and
WHEREAS, Congoleum is unable to meet its liability with respect to
the Claims absent prompt payment from its insurers of their obligations under
the Policies, (as defined below); and
WHEREAS, Congoleum and certain Asbestos Claimants, on or about April
10, 2003, executed a settlement agreement, titled Settlement Agreement Between
Congoleum Corporation and Various Asbestos Claimants (as amended, the "Claimant
Agreement"); and
WHEREAS, Congoleum entered into settlement agreements prior to the
Claimant Agreement to resolve certain Asbestos Claims, under which some or all
of the consideration has yet to be paid (the "Pre-Existing Settlement
Agreements"); and
WHEREAS, Congoleum may enter into additional settlement agreements
to resolve certain Asbestos Claims that are scheduled for trial prior to the
commencement of an anticipated chapter 11 reorganization case for Congoleum in
an aggregate amount not to exceed $15,000,000.00 (the "Trial-Listed Settlement
Agreements"); and
WHEREAS, Congoleum, on or about April 10, 2003, executed an
agreement, titled Collateral Trust Agreement (as amended, the "Collateral Trust
Agreement"), establishing a trust ("Collateral Trust") for, among other lawful
purposes not inconsistent with the Claimant Agreement, distributing certain
proceeds of the Policies in accordance with the Collateral Trust Agreement and
the Claimant Agreement; and
WHEREAS, Congoleum anticipates that it will commence a
reorganization case under chapter 11 of the U.S. Bankruptcy Code; and
WHEREAS, Congoleum intends to incorporate the terms of the Claimant
Agreement in a "pre-packaged" plan of reorganization that Congoleum shall seek
to confirm in its anticipated chapter 11 case (assuming the requisite
acceptances are obtained).
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound hereby, Congoleum and Trustee agree as
follows:
AGREEMENT
I. Definitions
A. "Congoleum's Liabilities," whenever used in this Security Agreement,
shall mean First Priority Settlement Amounts (as defined in the Collateral Trust
Agreement), Asbestos Claimant's Secured Claims (as defined in the Claimant
Agreement), the Claims Handling Fee (as defined in the Collateral Trust
Agreement), and Administrative Expenses (as defined in the Collateral Trust
Agreement).
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II. Security Interest
A. To secure the payment of Congoleum's Liabilities, Congoleum hereby
grants to the Collateral Trustee, to the maximum extent possible under
applicable law, a security interest in the following (collectively, the
"Collateral"):
1. All of Congoleum's claims, causes of action and rights, whether
now existing or hereafter arising, liquidated or unliquidated, disputed or
undisputed, fixed or contingent, to receive payment from its insurers or
to have monies expended by its insurers for its benefit to satisfy
Asbestos Claims against it, net of any and all attorneys' fees or other
professional fees and related expenses and disbursements incurred on or
after January 1, 2003 by or on behalf of Congoleum or any Congoleum
successor in connection with pursuit by Congoleum or any Congoleum
successor of Congoleum's insurance coverage ("Congoleum Professional Fees,
Disbursements and Expenses"), pursuant to the comprehensive general
liability insurance policies issued to or on behalf of Congoleum and
identified in Appendix A hereto (the "Policies"), whether by virtue of a
coverage-in-place settlement, a buy-out of coverage, a judgment for
declaratory relief or damages, or otherwise; and
2. Any proceeds, net of any and all Congoleum Professional Fees,
Disbursements and Expenses, actually received by Congoleum or the Trustee
from any of the above (collectively, the "Insurance Proceeds").
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B. Congoleum hereby represents and warrants to the Collateral Trustee that
Congoleum has the authority to grant a security interest in the Collateral to
the Collateral Trustee as contemplated by and in a manner consistent with the
terms of the grant of a security interest in the Collateral provided herein.
C. Congoleum shall execute and deliver to the Collateral Trustee
substantially contemporaneous with the execution of this Agreement, and at any
time or times hereafter at the request of the Collateral Trustee, all UCC-1
financing statements and renewal UCC-1 financing statements that the Collateral
Trustee may request, in a form satisfactory to the Collateral Trustee to perfect
and maintain the security interests granted herein by Congoleum to the
Collateral Trustee and in order to consummate fully all of the transactions
contemplated herein and under the Claimant Agreement. Congoleum agrees to
execute and deliver promptly such financing statements and other documents, and
do such other things, as the Collateral Trustee shall reasonably request, to
effectuate the Collateral Trustee's rights hereunder.
D. The security interests that are granted to the Collateral Trustee
hereunder shall constitute at all times prior to payment in full of Congoleum's
Liabilities valid perfected, xxxxxx security interests upon all of the
Collateral described above. This Security Agreement is intended to be and shall
constitute a continuing security agreement for Congoleum's Liabilities.
E. Except with respect to certain Pre-Existing Settlement Agreements and
Trial-Listed Settlement Agreements, Congoleum will not grant or create any
subsequent or additional security interest in, or assign, any of the Collateral
at any time that any of Congoleum's Liabilities are unpaid. Notwithstanding
anything herein to the contrary, this Security Agreement will not prohibit
Congoleum's assignment of any of the Collateral or grant of the security
interest created herein to a trust created pursuant to a plan of reorganization
confirmed in any chapter 11 bankruptcy case commenced on Congoleum's behalf as
long as such plan of reorganization preserves and maintains the rights of the
beneficiaries of the Collateral Trust.
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F. Until all of the Secured Asbestos Claims for all Participating Asbestos
Claimants are paid in full, Congoleum shall evaluate, bring, prosecute,
litigate, defend and settle any claim against its insurers to obtain Insurance
Proceeds. Congoleum shall consult with Xxxxx Xxxxx and Xxxxxx X. Xxxx
(collectively, the "Claimants' Counsel") in order to retain a mutually
acceptable counsel to prosecute any claim against its insurers to obtain
Insurance Proceeds. Congoleum agrees to obtain the consent of Claimants' Counsel
prior to entering into settlement of any claim against its insurers to obtain
Insurance Proceeds, which consent shall not be unreasonably withheld,
conditioned or delayed.
III. LIABILITY OF THE COLLATERAL TRUSTEE
The Collateral Trustee has no obligation to collect any account and shall
not be liable for failure to collect any account or for any act or omission on
the part of the Collateral Trustee or the Collateral Trustee' officers, agents
or employees, except for the Collateral Trustee' own breach of trust committed
in bad faith, or for gross negligence or willful misappropriation.
IV. SUCCESSORS AND ASSIGNS
This Security Agreement and all agreements, instruments and documents
executed and delivered pursuant hereto or to consummate the transactions
contemplated hereunder shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto.
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V. CONSTRUCTION, ENTIRE AGREEMENT, DURATION
A. This Security Agreement was negotiated between the parties hereto at
arm's length, with each party receiving advice from independent legal counsel.
It is the intent of the parties that no part of this Security Agreement be
construed against any particular party because of the identity of the drafter.
B. This Security Agreement constitutes a single integrated written
contract expressing the entire agreement among the parties hereto. This Security
Agreement supersedes any prior understandings and agreements between or among
the parties with respect to the subject matter of the Security Agreement. There
are no representations, agreements, arrangements or understandings between or
among the parties, oral or written, relating to the subject matter of this
Security Agreement that are not fully expressed herein. Any statements, promises
or inducements, whether made by any party or any agents of any party, that are
not contained in this written Agreement shall not be valid or binding. The
failure or invalidation of any provision of this Security Agreement shall not in
any way affect the validity of, or performance of any party pursuant to, any
other provision of this Security Agreement.
C. The effective date of this Security Agreement shall be the date on
which Congoleum and the Collateral Trustee have signed and delivered the
Security Agreement (the "Effective Date"). Except as provided in Section VIII
hereof, this Security Agreement shall have perpetual existence and may not be
enlarged, modified or altered except by a written agreement signed by
representatives of all of the parties hereto.
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VI. NOTICE
A. All notices hereunder shall be in writing and shall be deemed to have
been sufficiently given or served for all purposes (if mailed) three (3)
calendar days after being deposited, postage prepaid, in the United States Mail,
registered or certified mail, or (if delivered by express courier) one (1)
business day after being delivered to such courier, or (if delivered in person
or via facsimile with faxed confirmation) the same day as delivery if delivered
on a business day before 4:30 p.m. EST or EDT (as applicable) or if not so
delivered, on the next succeeding business day, except with respect to notices
issued to the Collateral Trustee, such notices shall be deemed received on the
date actually received by the Collateral Trustee. Notice to the Claimants'
Counsel shall be deemed notice to each Asbestos Claimant. Notices shall be
addressed as follows:
Congoleum:
Xxxxx Xxxxxx
Congoleum Corporation
0000 Xxxxxxxxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxxxx, XX 00000
(000) 000-0000 - Telephone No.
(000) 000-0000 - Facsimile No.
With copies to:
Xxxxx Xxx, Esq.
Xxxxxxx, Xxxxxx & Xxxxxxxx LLP
0000 Xxx Xxxx Xxxxxx
0xx Xxxxx
Xxxxxxxxxx, XX 00000
(000) 000-0000 - Telephone No.
(000) 000-0000 - Facsimile No.
Xxxxxx X. Xxxxxxx, Esq.
Xxxx Xxxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, XX 00000
(000) 000-0000 - Telephone No.
(000) 000-0000 - Xxxxxxxxx Xx.
0
Xxxx Xxxxx, Xxx.
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxx Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx, XX 00000
(000) 000-0000 - Telephone No.
(000) 000-0000 - Facsimile No.
Collateral Trustee:
Xxxxxx Xxxxxxxxx
Xxxxxxxxx Advisors
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
(000) 000-0000
(000) 000-0000
Claimants' Counsel:
Xxxxx Xxxxx, Esq.
Xxxxx & Xxxxxxxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
(000) 000-0000 - Telephone No.
(000) 000-0000 - Facsimile No.
Xxxxxx X. Xxxx, Esq.
00 Xxxxxxxxxx Xxxxxxxxx
X.X. Xxx 0000
Xx. Xxxxxxxx, XX 00000
(000) 000-0000 - Telephone No.
(000) 000-0000 - Facsimile No.
VII. GOVERNING LAW
All disputes concerning the validity, interpretation and application of
the Security Agreement or the Appendix hereto, or any provision thereof, and
disputes concerning issues within the scope of the Security Agreement shall be
determined in accordance with the law of the State of Delaware, excluding any
conflict of law provisions.
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VIII. TERMINATION
The security interests granted herein shall terminate upon the payment of
all of Congoleum's Liabilities. Upon such termination, the Collateral Trustee
will execute all appropriate documents to evidence the termination of the
security interests.
IX. MISCELLANEOUS
A. Each party shall take such steps and shall execute such documents as
reasonably may be necessary or proper to effectuate the purpose and intent of
this Security Agreement.
B. This Security Agreement shall be executed in duplicate originals and
signed by or on behalf of the parties hereto.
C. This Security Agreement may be executed in any number of counterparts.
Each of such counterparts for all purposes shall be deemed to be an original,
and all such counterparts together shall constitute but one and the same
Security Agreement.
IN WITNESS WHEREOF, the parties have caused this Security Agreement
to be duly executed this 11th day of June 2003.
CONGOLEUM CORPORATION
By: /s/ Xxxxxx X. Xxxxx III
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Title: CFO
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COLLATERAL TRUSTEE
By: /s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx
Title: ______________________________________
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