To reduce the impact of the trust fund on smaller companies and to expand hardship adjustments.

SA 2754. Mr. KYL (for himself and Mr. Chambliss) proposed an amendment to amendment SA 2746 proposed by Mr. FRIST (for Mr. Specter (for himself and Mr. Leahy)) to the bill S. 852, to create a fair and efficient system to resolve claims of victims for bodily injury caused by asbestos exposure, and for other purposes; as follows:

SEC. 1. PROPORTIONAL PAYMENTS.

(a) At page 171, after line 5, insert new (c) as follows (the subsection references assume that the required renumbering has occurred):

“(c) Limitation.--For any affiliated group, the total payment in any year, including any guaranteed payment surcharge under subsection (m) and any bankruptcy trust guarantee surcharge under section 222(c), shall not exceed the lesser of $16,702,400 or 1.67024 percent of the revenues of the affiliated group for the most recent fiscal year ending on or prior to December 31, 2002, or for the most recent 12-month fiscal year as of the date the limitation is applied, whichever is greater. For purposes of this subsection, the term “affiliated group” shall include any defendant participant that is an ultimate parent. The limitation in this subsection shall not apply to defendant participants in Tier I or to any affiliated group whose revenues for the most recent fiscal year ending on or prior to December 31, 2002, or for the most recent 12-month fiscal year as of the date the limitation applied, whichever is greater, exceeds $1,000,000,000. The revenues of the affiliated group shall be determined in accordance with section 203(a)(2), except for the applicable date. An affiliated group that claims a reduction in its payment in any year shall file with the Administrator, in accordance with procedures prescribed by the Administrator, sufficient information to allow the Administrator to determine the amount of any such reduction in that year. If as a result of the application of the limitation provided in this subsection an affiliated group is exempt from paying all or part of a guaranteed payment surcharge or bankruptcy trust surcharge, then the reduction in the affiliated group's payment obligation due to the limitation in this subsection shall be redistributed in accordance with subsection (m). Nothing in this subsection shall be construed as reducing the minimum aggregate annual payment obligation of defendant participants as provided in section 204(i)(1).”

(b) Renumber subsections following new subsection (c).

(c) Subsequent to renumbering the subsections following new subsection 204(c), make the following cross-reference changes:

At page 142, line 7, replace “204(g)” with “204(h)”

At page 151, line 20, replace “204(i)(6)” with “204(j)(6)”

At page 160, line 21, replace “204(l)” with “204(m)”

At page 167, line 24, replace “204(d)” with “204(e)”

At page 170, lines 21 and 22, replace “(d) and (m)” with “(e) and (n)”

At page 171, line 22, replace “(i)(10)” with “(j)(10)”

At page 172, line 3, replace “(j)” with “(k)”

At page 177, line 12, replace “(j) with “(k)”

At page 178, line 25, replace “(j)(3)” with “(k)(3)”

At page 179, line 2, replace “(k)(1)(A)” with “(1)(1)(A)”

At page 182, line 16, replace “(i) with “(j)”

At page 183, line 6, replace “(i)” with “(j)”

At page 186, lines 7 and 8, replace “(d), (f), (g), and (m)” with “(e), (g), (h) and (n)”

At page 186, line 11, replace “(d) and (m)” with “(e) and “(n)”

At page 186, line 20, replace “(d) and (m)” with “(e) and “(n)”

At page 186, line 23, replace “(l)” with “(m)”

At page 187, line 8, replace “(f)” with “(g)”

At page 196, line 20, replace “(d)” with “(e)”

At page 196, line 22, replace “(m)” with “(n)”

At page 197, line 13, replace “(h)” with “(i)”

At page 198, line 11, replace “(d)” with “(e)”

At page 198, line 16, replace “(h)” with “(i)”

At page 198, line 17, replace “(j)” with “(k)”

At page 198, line 23, replace “(d)” with “(e)”

At page 199, line 10, replace “(h)” with “(i)”

At page 199, line 12, replace “(d) and (m)” with “(e) and (n)”

At page 199, line 20, replace “(k)” with “(l)”

At page 199, line 22, replace “(h)” with “(i)”

At page 200, line 3, replace “(h)” with “(i)”

At page 200, line 7, replace “(d), (f), (g), and (m)” with “(e), (g), (h) and (n)”

At page 200, line 22, replace “(d), (f), and (g)” with “( e), (g), and (h)”

At page 201, line 5, replace “(i)(9)” with “(j)(9)”

At page 203, line 6, replace “204(i)” with “204(j)”

At page 204, line 23, replace “204(d)” with “204(e)”

At page 205, line 11, replace “(i)(10)” with “(j)(10)”

At page 205, line 16, replace “204(h)” with “204(i)”

At page 248, line 21, replace “204(f)(3)” with “204(g)(3)”

At page 261, line 14, replace “204(i)(10)” with “204(j)(10)”

At page 266, line 14, replace “204(f)” with “204(g)”

At page 289, line 9, replace “204(i)” with “204(j)”

At page 289, line 11, replace “204(d)” with “204(e)”

At page 289, line 12, replace “204(m)” with “204(n)”

At page 289, line 19, replace “204(i)” with “204(j)”

At page 289, line 20, replace “204(d)” with “204(e)”

At page 289, line 21, replace “204(m)” with “204(n)”

At page 289, line 23, replace “204(i)(10)” with “204(j)(10)”

At page 334, line 8, replace “204(f)” with “204(g)”

SEC. 2. HARDSHIP ADJUSTMENTS.

(a) Strike page 172, line 6, through page 173, line 17, and insert the following:

“(2) Financial hardship adjustments.--

(A) In general.--Any defendant participant in any tier may apply for an adjustment under this paragraph at any time during the period in which a payment obligation to the Fund remains outstanding and may qualify for such an adjustment by demonstrating to the satisfaction of the Administrator that the amount of its payment obligation would materially and adversely affect the defendant participant's ability to continue its business and to payor satisfy its debts generally as and when they come due. Such an adjustment shall be in an amount that in the judgment of the Administrator is reasonably necessary to prevent such material and adverse effect on the defendant participant's ability to continue its business and to payor satisfy its debts generally as and when they come due.

(B) Factors to Consider.--In determining whether to make an adjustment under subparagraph (A) and the amount thereof, the Administrator shall consider--

(1) the financial situation of the defendant participant and its affiliated group as shown in historical audited financial statements, including income statement, balance sheet, and statement of cash flow, for the three fiscal years ending immediately prior to the application and projected financial statements for the three fiscal years following the application;

(2) an analysis of capital spending and fixed charge coverage on a historical basis for the three fiscal years immediately preceding a defendant participant's application and for the three fiscal years following the application;

(3) any payments or transfers of property made, or obligations incurred, within the preceding 6 years by the defendant participant to or for the benefit of any insider as defined under section 101 (31) of title 11 of the United States Code or any affiliate as defined under section 101(2) of title 11 of the United States Code;

(4) any prior extraordinary transactions within the preceding 6 years involving the defendant participant, including without limitation payments of extraordinary salaries, bonuses, or dividends;

(5) the defendant participant's ability to satisfy its payment obligations to the Fund by borrowing or financing with equity capital, or through issuance of securities of the defendant participant or its affiliated group to the Fund;

(6) the defendant participant's ability to delay discretionary capital spending; and

(7) any other factor that the Administrator considers relevant.

(C) Term.--A financial hardship adjustment under this paragraph shall have a term of 5 years unless the Administrator determines at the time the adjustment is made that a shorter or longer period is appropriate in the light of the financial condition of the defendant participant and its affiliated group and other relevant factors, provided that a financial hardship adjustment under this paragraph shall terminate automatically in the event that the defendant participant holding the adjustment files a petition under title 11, United States Code.

(D) Renewal.--A defendant participant may renew a hardship adjustment upon expiration by demonstrating that it remains justified. Such renewed hardship adjustments shall have a term of 5 years unless the Administrator determines at the time of the renewed adjustment that a shorter or longer period is appropriate in the light of the financial condition of the defendant participant and its affiliated group and other relevant factors, provided that a renewed financial hardship adjustment under this paragraph shall terminate automatically in the event that the defendant participant holding the adjustment files a petition under title 11, United States Code.

(D) Procedure.--

(1) The Administrator shall prescribe the information to be submitted in applications for adjustments under this paragraph.

(2) All audited financial information required under this paragraph shall be as reported by the defendant participant in its annual report filed with the Securities and Exchange Commission in accordance with the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). Any defendant participant that does not file reports with the Securities and Exchange Commission or which does not have audited financial statements shall submit financial statements prepared pursuant to generally accepted accounting principles. The chairman, chief executive officer, and chief financial officer of the defendant participant shall certify under penalty of law the completeness and accuracy of the financial statements provided under this sub-paragraph.

(3) The chairman, chief executive officer, and chief financial officer of the defendant participant shall certify that any projected information and analyses submitted to the Administrator were made in good faith and are reasonable and attainable.”

(b) Conforming Changes.

At page 177, line 10, strike “hardship and”

At page 178, lines 19-20, strike “financial hardship adjustments under paragraph (2) and”

At page 178, lines 22-23, strike “--(A).”

At page 179, line 2, insert a period after “(k)(1)(A)” and delete “; or”

At pages 179-181, strike line 10 on page 179 through line 2 on page 181.

At page 181, at line 3: Insert “RULEMAKING AND” before “ADVISORY”

At page 181, line 5: Strike “shall” and insert “may”

At page 181, following line 14, insert: “The Administrator may adopt rules consistent with this Act to make the determination of hardship and inequity adjustments more efficient and predictable.”

At page 197, line 8, strike “HARDSHIP AND”

At page 197, line 15, strike “hardship and”

At page 197, line 19, strike “hardship and”

At page 197, lines 24 and 25, strike “severe financial hardship or”

SEC. 3. STEPDOWNS AND FUNDING HOLIDAYS

(a) At page 205, line 20, strike “The” and insert: “Except as otherwise provided in this paragraph, the”

(b) At page 205, lines 22 through 24 strike: “, except with respect to defendant participants in Tier I, Subtiers 2 and 3, and class action trusts” and insert the following:

“. The reductions under this subsection shall not apply to defendant participants in Tier I, subtiers 2 and 3, and class action trusts. For defendant participants whose payment obligation has been limited under section 204( c) or who have received a financial hardship adjustment under section 204(e)(2), aggregate potential reductions under this subsection shall be calculated on the basis of the defendant participant's tier and subtier without regard to such limitation or adjustment. If the aggregate potential reduction under this subsection exceeds the reduction in the defendant participant's payment obligation due to the limitation under section 204(c) and the financial hardship adjustment under section 204(e)(2), then the defendant participant's payment obligation shall be further reduced by the difference between the potential reduction provided under this subsection and the reductions that the defendant participant has already received due to the application of the limitation provided in section 204( c) and the financial hardship adjustment provided under section 204(e)(2). If the reduction in the defendant participant's payment obligation due to the limitation provided in section 204(c) and the financial hardship adjustment provided under section 204(e)(2) exceeds the amount of the reduction provided in this subsection, then the defendant participant's payment obligation shall not be further reduced under this paragraph.”

(c) At page 207, line 10 through 12, strike the text following “except” in line 10 and insert “as otherwise provided under this paragraph. The reductions or waivers provided under this subsection shall not apply to defendant participants in Tier I, subtiers 2 and 3, and class action trusts. For defendant participants whose payment obligation has been limited under section 204(c) or who have received a financial hardship adjustment under section 204(e)(2), aggregate potential reductions or waivers under this subsection shall be calculated on the basis of the defendant participant's tier and subtier without regard to such limitation or adjustment. If the aggregate potential reductions or waivers under this subsection exceed the reduction in the defendant participant's payment obligation due to the limitation under section 204(c) and the financial hardship adjustment under section 204(e)(2), then the defendant participant's payment obligation shall be further reduced by the difference between the potential reductions or waivers provided under this subsection and the reductions that the defendant participant has already received due to the application of the limitation provided in section 204( c) and the financial hardship adjustment provided under section 204(e)(2). If the reduction in the defendant participant's payment obligation due to the limitation provided in section 204(c) and the financial hardship adjustment provided under section 204(e)(2) exceeds the amount of the reductions or waivers provided in this subsection, then the defendant participant's payment obligation shall not be further reduced under this paragraph.”