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Reorgahized CF&1 for the benefit of the Retirees who elected to participate in the major
<br />medial program oflercd by CF&1 through Equitable until luly 31, 1989.
<br />12. Effective October 31, 1996, Reorganized C'r&1, Equitable, the USWA
<br />end CoMec[icut General Life Insurance Company ('CGLIC') entered into a Settlement
<br />Agreement And Mutual Release (the 'Equitable Settlement Agreement') with respect to the
<br />Fquiuble Adversary Proceeding. The Fquiuble Settlement Agreement provide for
<br />Equitable to pay to Reorganized CF&1 the total sum of 5745,6011 in settlement of
<br />Reorganized CFAI'a claims ageimt Equitable on behalf of the Retirees for the remm of
<br />reserves held by Equiable. In accordance with the terms of the Equitable Settlement
<br />Agreement, oo November 1, 1996 CGLIC, on behalf of Equitable, paid the 5745,600 into nn
<br />escrow account, pending Banlwptcy Court Approval, which Is being sought
<br />contemporaneously herewith.
<br />13. In wnjuaction with the FquiUble Settlement Agreement, on October
<br />31, 1996 Reorgmfzed CFRI and Ne USWA entered into an Alloution Agreement pursuant
<br />to which 5197,797.17 of the 5745,600 to be paid by Equitable to keorganized CF&I, plus
<br />any interest whkh may accme on ouch amount subsequent to the deposit Into escrow on
<br />November 1, 1996, will be paid to Reorganiud CF&1 es partial reimbursement for
<br />enomeys' fees and cosu Incurred by Reorganized CF&I in connection wiN the Equitable
<br />Adversary Proceeding that precipitated the Fquiuble Settlement Agreement and the recovery
<br />from Equitable of 5743,600, together with cosu being Incurred by Reorganized CF&I in
<br />wnnection wiN the proposed distribution of such proceeds. The wiiocetion Agreement is
<br />subject to Bankruptcy Court approval, which Is being sought contcmporenmusly herewith.
<br />14. Assuming Bankruptcy Cairn approval of the Equitable Settlement
<br />Agreement and the Allocation Agreement, Reorganized CF&f will have 5347,8(12.83, plus
<br />interest thereon that earoes after such amount was deposited Into escrow on November 1,
<br />1996, approximately 5360,000 in the aggregate, available to be dis!ributed to the Retirees in
<br />connection with the Equiable Settlement Agreement.
<br />I3. Ib summary, the Reorganized Debtore have the approximate amount of
<br />5663,000 to distribute from Ne Old VEBA to the Retirees end an estimated amount of
<br />approximately 5560,000 to distribute to Retvees, their surviving spouses or heirs
<br />(collectively refereed to herein u 'Beneficiaries') in conjunction with the proceeds from the
<br />Equitable Set0emeot Agreement, assuming Court approval of the Equitable Settlement
<br />Agreement, the Allocation Agreement end cosu enribumble to the administretlon of the Old
<br />VEBA.
<br />16. After wnsulting with the USWA, the Reorganized Debtors retained the
<br />accounting firm of Schneider Downs A Co., Inc. ('Schneider Dowm•), Certified Public
<br />Accoununu, 1133 Penn Avenue, Pituburgh, PA 15222-4203, to conduct a review and
<br />analysis of Retlreei wntrrbutiom to the Old VEBA end payments for major medial
<br />coverage through Equiable and tc prepare a proposed distribution plan with respect to Ne
<br />approximately 5663,000 presently estimated to be available in the Old VEBA and the
<br />approximately 5360,000 presently bald in escrow with respect to the Equitable Settlement
<br />Agreement and Allocation Agreement.
<br />17. Based on iv review end analysis, Schneider Dowm proposed a Retired
<br />Employees' Major Medial Trust Fund (Old VEBA) Surplus Funds Dlstributian Plen together
<br />with a schedule of proposed distributions with respect to the Otd VEBA, Copie of which ere
<br />atuched hereto and inwrporeted herein by reference a, Exhibit 'A', and en Equitable Life
<br />Assurance Refund Distribution Piers together with a schedule of proposed distributions with
<br />respect to the proceeds from the Equitable Settlement, wpiu of which ere attached hereto
<br />and incorporated herein by reference es Exhibit 'B'. The amount listed for each Beneficiary
<br />is an utimate ody and assumes Court approval of the Equitable Settlement Agreement and
<br />the Allocation Agreement. Moreover, the est'unated distributions may be subject to variances
<br />depending upon, among other possibilities, interest eccmal, edjushnenu to individual's
<br />claims based upon obtaining rAreected Infmmation upon which the proposed distributiom ere
<br />made, obuining Information that additional iodividuale ere entitled to participate in the
<br />proposed distribution, end with respect to the distribution from the Old VEBA, the actual
<br />expenses incurred and allowed by the Coun. The proposed distribution could vary by as
<br />much as IS%. If the variance Is determined to be a negative variance from the Retirees'
<br />perspective of greater than IS%, then additional notice will be given to each Beneficiary,
<br />together with en explanation of the variance, and further opportunity for hearing will be
<br />provided.
<br />I8. Some Beneficiariu may not be located or may not negotiate the checks
<br />representing the distribution to them is a timely manner loving uoclelmM funds (the
<br />'Unclaimed Funds'). The Reorganized Debtors and USWA propose that Beneficiariu be
<br />given one hundred eighty (IBG) days from the date of the check representing a distribution to
<br />negotiate the check and that a stop payment be placed on all checks not ao negotiated. The
<br />Reorganized Debtors artd USWA tuMer propose That any Unclaimed Funds be used first to
<br />pay any expenses of distribution in excess of the expenses of disvibutlan Initially approved
<br />and authorized by the Court with respect to the distribution of Old VEBA proceeds with any
<br />excess Unclaimed Funds to 6e paid over to the 'New VEBA' created by paragraph 31 of
<br />Debtors' Coofumed Plen for purposes of providing heslth care benefits for New VEBA
<br />members and their beneficieriu.
<br />19. Based on the foregoing, the Reorganized Debtors and the USWA
<br />believe It is appropriate to enter an order in aid of wnsummetion of Debtors' Confirmed
<br />Plan (i) approving end authorizing distributions pursuant to the proposed Old VEBA
<br />Distribution Plan set forth in Exhibit 'A' and authorizing end approving usual and
<br />reasonable expenses associated therewith, (ii) subject to the approval of the. Equitable
<br />Settlement Agreement end Allocation Agreement, approving the Equimbte Life Assurance
<br />.3. -6-
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