[Congressional Record (Bound Edition), Volume 161 (2015), Part 1]
[Extensions of Remarks]
[Pages 93-97]
[From the U.S. Government Publishing Office, www.gpo.gov]




 PROTECTING EMPLOYEES AND RETIREES IN BUSINESS BANKRUPTCIES ACT OF 2015

                                  _____
                                 

                         HON. JOHN CONYERS, JR.

                              of michigan

                    in the house of representatives

                        Tuesday, January 6, 2015

  Mr. CONYERS. Mr. Speaker, I submit the following.


                                Summary

       Throughout our Nation's history, hardworking American men 
     and women have labored to make our businesses become the most 
     productive and dynamic in the world. Unfortunately, when some 
     of these businesses encounter financial difficulties and seek 
     to reorganize their debts under Chapter 11 of the Bankruptcy 
     Code, these very same workers and retirees are often asked to 
     make major sacrifices through lost job protections, lower 
     wages, and the elimination of hard-won pension and health 
     benefits, while the executives and managers of these business 
     are not required to make comparable sacrifices.
       We must do more to ensure that America's most important 
     resource--workers and retirees--are treated more fairly when 
     these business seek to reorganize their financial affairs 
     under the protection of our bankruptcy laws. The Protecting 
     Employees and Retirees in Business Bankruptcies Act of 2015 
     accomplishes this goal by amending the Bankruptcy Code in 
     several respects. First, it improves recoveries for employees 
     and retirees by: (1) increasing the amount of worker claims 
     entitled to priority payment for unpaid wages and 
     contributions to employee benefit plans up to $20,000; (2) 
     eliminating the difficult to prove restriction in current law 
     that wage and benefit claims must be

[[Page 94]]

     earned within 180 days of the bankruptcy filing in order to 
     be entitled to priority payment; (3) allowing employees to 
     assert claims for losses in certain defined contribution 
     plans when such losses result from employer fraud or breach 
     of fiduciary duty; (4) establishing a new priority 
     administrative expense for workers' severance pay; and (5) 
     clarifying that back pay awards for WARN Act damages are 
     entitled to the same priority as back pay for other legal 
     violations.
       Second, the legislation reduces employees' and retirees' 
     losses by: (1) restricting the conditions under which 
     collective bargaining agreements and commitments to fund 
     retiree pensions and health benefits may be eliminated or 
     adversely affected; (2) preventing companies from singling 
     out non-management retirees for concessions; (3) requiring a 
     court to consider the impact a bidder's offer to purchase a 
     company's assets would have on maintaining existing jobs and 
     preserving retiree pension and health benefits; and (4) 
     clarifying that the principal purpose of Chapter 11 
     bankruptcy is the preservation of jobs to the maximum extent 
     possible
       Third, the bill restricts excessive executive compensation 
     programs by: (1) requiring full disclosure and court approval 
     of executive compensation packages; (2) restricting the 
     payment of bonuses and other forms of incentive compensation 
     to senior officers and others; and (3) ensuring that insiders 
     cannot receive retiree benefits if workers have lost their 
     retirement or health benefits.
       This legislation is identical to H.R. 100, introduced in 
     the 113th Congress, and H.R. 6117, introduced in the 112th 
     Congress. It is supported by the AFL-CIO and many of its 
     largest affiliates, and the United Steelworkers.


               section-by-section explanation of the bill

       Sec. 1. Short Title. Section 1 sets forth the short title 
     of the bill as the ``Protecting Employees and Retirees in 
     Business Bankruptcies Act of 2015.'' It also includes a table 
     of contents for the bill.
       Sec. 2. Findings. Section 2 sets forth various findings in 
     support of this bill.


        Title I--Improving Recoveries for Employees and Retirees

       Sec. 101. Increased Wage Priority. Bankruptcy Code section 
     507 accords priority in payment status for certain types of 
     claims, i.e., these priority claims must be paid in full in 
     the order of priority before general unsecured claims may be 
     paid. Section 507(a)(4) accords a fourth level priority to an 
     unsecured claim up to $10,000 owed to an individual for 
     wages, salaries, or commissions (including vacation, 
     severance, and sick leave pay) earned within the 180-day 
     period preceding the filing of the bankruptcy case or the 
     date on which the debtor's business ceased, whichever occurs 
     first. Section 101 amends section 507(a)(4) to increase the 
     amount of the priority to $20,000 and eliminate the 180-day 
     reachback limitation.
       Bankruptcy Code section 507(a)(5) accords a fifth level 
     priority for unsecured claims for contributions to an 
     employee benefit plan arising from services rendered within 
     the l80-day period preceding the filing of the bankruptcy 
     case or the date on which the debtor's business ceased 
     (whichever occurs first). The amount of the claim is based on 
     the number of employees covered by the plan multiplied by 
     $10,000, less the aggregate amount paid to such employees 
     pursuant to section 507(a)(4) and the aggregate amount paid 
     by the estate on behalf of such employees to any other 
     employee benefit plan. Section 101 amends Bankruptcy Code 
     section 507(a)(5) to: (1) increase the priority amount to 
     $20,000; (2) eliminate the offset requirements; and (3) 
     eliminate the 180-day limitation.
       Sec. 102. Claim for Stock Value Losses in Defined 
     Contribution Plans. Section 102 amends the Bankruptcy Code's 
     definition of a claim to include a right or interest in 
     equity securities of the debtor (or an affiliate of the 
     debtor) held in a defined contribution plan for the benefit 
     of an individual who is not an insider, senior executive 
     officer or one of the 20 next most highly compensated 
     employees of the debtor (if one or more are not insiders), 
     providing: (1) such securities were attributable to employer 
     contributions by the debtor (or an affiliate of the debtor), 
     or by elective deferrals, together with any earnings thereon; 
     and (2) the employer or plan sponsor who commenced the 
     bankruptcy case either committed fraud with respect to such 
     plan or otherwise breached a duty to the participant that 
     proximately caused the loss of value.
       Sec. 103. Priority for Severance Pay. Bankruptcy Code 
     section 503(b) establishes an administrative expense payment 
     priority for certain types of unsecured claims. Among all 
     types of unsecured claims, administrative expenses are 
     accorded the highest payment priority, i.e., they must be 
     paid in full before priority and general unsecured claims may 
     be paid. Section 103 amends section 503(b) to accord 
     administrative expense priority for severance pay owed to the 
     debtor's employees (other than an insider, other senior 
     management, or a consultant retained to provide services to 
     the debtor) under a plan, program or policy generally 
     applicable to the debtor's employees (but not under an 
     individual contract of employment) or owed pursuant to a 
     collective bargaining agreement for termination or layoff on 
     or after the date the bankruptcy case was filed. Such pay is 
     deemed earned in full upon such termination or layoff.
       Sec. 104. Financial Returns for Employees and Retirees. 
     Bankruptcy Code section 1129(a) specifies various criteria 
     that must be satisfied before a chapter 11 plan of 
     reorganization may be confirmed. Section 104 amends section 
     1129(a) to add a further requirement. The plan must provide 
     for the recovery of damages for the rejection of a collective 
     bargaining agreement or for other financial returns as 
     negotiated by the debtor and the authorized representative 
     under section 1113 to the extent such returns are paid under, 
     rather than outside of a plan.
       Section 104 also replaces Bankruptcy Code section 
     1129(a)(13), which pertains to the payment of retiree 
     benefits under section 1114. As revised, section 1129(a)(13) 
     requires a plan to provide for the continuation after the 
     plan's effective date of the payment of all retiree benefits 
     at the level established under either section 1114(e)(1)(B) 
     or (g) at any time prior to confirmation of the plan, for the 
     duration of the period for which the debtor has obligated 
     itself to provide such benefits. If no modifications are made 
     prior to confirmation of the plan, the plan must provide for 
     the continuation of all retiree benefits maintained or 
     established in whole or in part by the debtor prior to the 
     petition filing date. In addition, the plan must provide for 
     recovery of claims arising from the modification of retiree 
     benefits and other financial returns as negotiated by the 
     debtor and the authorized representative to the extent such 
     returns are paid under, rather than outside of, a plan.
       Sec. 105. Priority for WARN Act Damages. Section 105 amends 
     Bankruptcy Code section 503(b)(1)(A)(ii) to provide 
     administrative expense status to wages and benefits awarded 
     pursuant to a judicial or National Labor Relations Board 
     proceeding as back pay or damages attributable to any period 
     of time occurring after the commencement of the bankruptcy 
     case. This provision applies where the award was made as a 
     result of the debtor's violation of federal or state law, 
     without regard to the time of the occurrence of unlawful 
     conduct on which the award is based or to whether any 
     services were rendered on or after the commencement of the 
     bankruptcy case. It includes an award by a court under 
     section 2901 of title 29 of the United States Code of up to 
     60 days' pay and benefits following a layoff that occurred or 
     commenced at a time when such award period includes a period 
     on or after the commencement of the case, if the court 
     determines that payment of wages and benefits by reason of 
     the operation of this clause will not substantially increase 
     the probability of layoff or termination of current employees 
     or of nonpayment of domestic support obligations during the 
     case under this title.


           Title II--Reducing Employees' and Retirees' Losses

       Sec. 201. Rejection of Collective Bargaining Agreements. 
     Bankruptcy Code section 1113 sets forth the requirements by 
     which a collective bargaining agreement may be assumed or 
     rejected. Section 201 amends section 1113 in several 
     respects. First, it amends section 1113(a) to clarify that a 
     chapter 11 debtor may reject a collective bargaining 
     agreement only in accordance with section 1113.
       Second, it amends Bankruptcy Code section 1113(b) to 
     clarify that no provision in title II of the United States 
     Code may be construed to permit a trustee to unilaterally 
     terminate or alter the terms of a collective bargaining 
     agreement absent compliance with section 1113. The provision 
     further specifies that the trustee must timely pay all 
     monetary obligations arising under such agreement and that 
     any payment required to be made pre-confirmation has the 
     status of an allowed administrative expense under Code 
     section 503.
       Third, it amends Bankruptcy Code section 1113(c) to require 
     a trustee, when seeking to modify a collective bargaining 
     agreement, to provide notice of such proposed modification to 
     the labor organization representing the employees covered by 
     the agreement. The trustee must also promptly provide an 
     initial proposal for modification. In addition, the trustee 
     must confer in good faith with the labor organization, at 
     reasonable times and for a reasonable period, given the 
     complexity of the case, in an effort to reach a mutually 
     acceptable modification of the agreement. Each modification 
     proposal must be based on a business plan for the 
     reorganization of the debtor and reflect the most complete 
     and reliable information. As amended, section 1113(c) 
     requires the trustee to provide to the labor organization all 
     information relevant for negotiations. If such disclosure 
     could compromise the debtor's position with respect to its 
     competitors in the industry, the provision authorizes the 
     court to issue a protective order, subject to the needs of 
     the labor organization to evaluate the trustee's proposal and 
     any application to reject the collective bargaining agreement 
     or for interim relief under section 1113.
       In consideration of federal policy encouraging the practice 
     and process of collective bargaining and in recognition of 
     the bargained-for expectations of the employees covered by 
     the agreement, any modification proposed by the trustee must: 
     (1) only be

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     proposed as part of a program of workforce and nonworkforce 
     cost savings devised for the debtor's reorganization, 
     including savings in management personnel costs; (2) be 
     limited to modifications designed to achieve a specified 
     aggregate financial contribution for employees covered by the 
     agreement, taking into consideration any labor cost savings 
     negotiated within the 12-month period prior to the filing of 
     the bankruptcy case; (3) be no more than the minimum savings 
     essential to permit the debtor to exit bankruptcy, such that 
     confirmation is not likely to be followed by the liquidation 
     or the need for further financial reorganization of the 
     debtor; and (4) not be disproportionate or overly burden the 
     employees covered by the agreement, either in the amount of 
     the cost savings sought from such employees or the nature of 
     the modifications.
       Fourth, it amends Bankruptcy Code section 1113(d) to 
     provide that if the trustee and the labor organization (after 
     a period of negotiations) do not reach an agreement over 
     mutually satisfactory modifications and further negotiations 
     are not likely to produce mutually satisfactory 
     modifications, the trustee may file a motion seeking 
     rejection of the collective bargaining agreement after notice 
     and a hearing. Absent agreement by the parties, the hearing 
     may not be held earlier than 21 days from when notice of the 
     hearing is provided. Only the debtor and the labor 
     organization may appear and be heard at the hearing. An 
     application for rejection must seek rejection effective upon 
     the entry of an order granting such relief.
       In consideration of federal policy encouraging the practice 
     and process of collective bargaining and in recognition of 
     the bargained-for expectations of the employees covered by 
     the agreement, section 1113(d) (as amended) provides that the 
     court may grant a motion seeking rejection of such agreement 
     only if the court: (1) finds that the trustee has complied 
     with the requirements of section 1113(c); (2) has considered 
     alternative proposals by the labor organization and concluded 
     that such proposals do not meet the requirements of section 
     1113(c)(3)(B); (3) finds that further negotiations regarding 
     the trustee's proposal or an alternative proposal by the 
     labor organization are not likely to produce an agreement; 
     (4) finds that implementation of the trustee's proposal will 
     not: (a) cause a material diminution in the purchasing power 
     of the employees covered by the agreement, (b) adversely 
     affect the debtor's ability to retain an experienced and 
     qualified workforce; or (c) impair the debtor's labor 
     relations such that the ability to achieve a feasible 
     reorganization will be compromised; and (5) concludes, based 
     on clear and convincing evidence, that rejection of the 
     agreement and immediate implementation of the trustee's 
     proposal is essential to permit the debtor's exit from 
     bankruptcy such that confirmation is not likely to be 
     followed by the liquidation or the need for further financial 
     reorganization of the debtor in the short term. If the 
     trustee has implemented a program of incentive pay, bonuses 
     or other financial returns for insiders, senior executive 
     officers, or the 20 next most highly compensated employees or 
     consultants (or such a program was implemented within 180 
     days before the bankruptcy case was filed), the court must 
     presume that the debtor has failed to satisfy the 
     requirements of section 1113(c)(3)(C).
       Subsection (d), as amended, prohibits the court from 
     entering an order rejecting a collective bargaining agreement 
     that would result in modifications to a level lower than that 
     proposed by the trustee in the proposal found by the court to 
     have complied with the requirements of section 1113.
       At any time after an order rejecting a collective 
     bargaining agreement is entered (or mutually satisfactory 
     agreement between the trustee and the labor organization is 
     entered into), the labor organization may apply to the court 
     for an order seeking an increase in the level of wages or 
     benefits or relief from working conditions based on changed 
     circumstances. The court must grant such relief only if the 
     increase or other relief is not inconsistent with the 
     standard set forth in section 1113(d)(2)(E).
       Fifth, section 201 amends Bankruptcy Code section 1113(e) 
     to provide that during the period in which a collective 
     bargaining agreement at issue under this section continues in 
     effect and if either essential to the continuation of the 
     debtor's business or in order to avoid irreparable damage to 
     the estate, the court, after notice and a hearing, may 
     authorize the trustee to implement interim changes in the 
     terms, conditions, wages, benefits, or work rules provided by 
     the collective bargaining agreement. Any hearing under this 
     provision must be scheduled in accordance of the trustee's 
     needs. The implementation of such interim changes will not 
     render the application for rejection moot.
       Sixth, section 201 amends Bankruptcy Code section 1113(f) 
     to provide that the rejection of a collective bargaining 
     agreement constitutes a breach of such agreement and is 
     effective no earlier than the entry of an order granting such 
     relief. Solely for the purpose of determining and allowing a 
     claim arising from rejection of a collective bargaining 
     agreement, such rejection must be treated as a rejection of 
     an executory contract under Bankruptcy Code section 365(g) 
     and shall be allowed or disallowed in accordance with section 
     502(g)(1). Subsection (f), as amended, further provides that 
     no claim for rejection damages may be limited by section 
     502(b)(7). In addition, the provision permits economic self-
     help by a labor organization upon a court order granting 
     rejection of a collective bargaining agreement under either 
     subsection (d) or (e) of section 1113. It further provides 
     that neither title 11 of the United States Code nor other 
     provisions of State or Federal law may be construed to the 
     contrary.
       Seventh, section 201 adds new subsection (g) to require the 
     trustee to provide for the reasonable fees and costs incurred 
     by a labor organization under section 1113, upon request and 
     after notice and a hearing.
       Eighth, section 201 adds new subsection (h) to require the 
     assumption of a collective bargaining agreement to be done in 
     accordance with section 365.
       Sec. 202. Payment of Insurance Benefits to Retired 
     Employees. Bankruptcy Code section 1114 sets out criteria 
     pursuant to which a debtor may modify retiree benefits, among 
     other matters. Retiree benefits include payments to retired 
     employees, their spouses, and dependents for medical, 
     surgical, and hospital care benefits. It also includes 
     benefits in the event of sickness, accident, disability, or 
     death under any plan, fund or program.
       Section 202 amends section 1114 in several respects. First, 
     it amends the provision's definition of ``retiree benefits'' 
     to specify that it applies whether or not the debtor asserts 
     a right to unilaterally modify such benefits under such plan, 
     fund or program.
       Second, it amends Bankruptcy Code section 1114(b)(2), which 
     specifies the rights, powers and duties of a committee of 
     retired employees appointed by the court. As amended, the 
     provision would apply to a labor organization serving as the 
     authorized representative under section 1114(c)(1).
       Third, section 202 replaces Bankruptcy Code section 
     1114(f), which requires a trustee to make a proposal to the 
     authorized representative before seeking modification of 
     retiree benefits. As amended, section 1114(f)(1) specifies 
     that if a trustee seeks to modify retiree benefits, the 
     trustee must provide notice of such proposed modification to 
     the authorized representative as well as promptly provide the 
     initial proposal. In addition, the trustee must thereafter 
     confer in good faith with the labor organization, at 
     reasonable times and for a reasonable period, given the 
     complexity of the case, in attempting to reach a mutually 
     satisfactory modification. Each modification must be based on 
     a business plan for the reorganization of the debtor and 
     reflect the most complete and reliable information available. 
     The trustee must provide the authorized representative all 
     information relevant for the negotiations. If such disclosure 
     could compromise the debtor's position with respect to its 
     competitors in the industry, the court may issue a protective 
     order, subject to the needs of the authorized representative 
     to evaluate the trustee's proposal and an application 
     pursuant to subsection (g) or (h).
       Modifications proposed by the trustee must: (1) only be 
     proposed as part of a program of workforce and nonworkforce 
     cost savings devised for the reorganization of the debtor, 
     including savings in management personnel costs; (2) be 
     limited to modifications designed to achieve a specified 
     aggregate financial contribution for the retiree group 
     represented by the authorized representative (taking into 
     consideration any labor cost savings negotiated within the 
     12-month period prior to the filing of the bankruptcy case 
     with respect to the retiree group); (3) be no more than the 
     minimum savings essential to permit the debtor to exit 
     bankruptcy, such that confirmation is not likely to be 
     followed by the liquidation or the need for further financial 
     reorganization of the debtor; and (4) not be disproportionate 
     or overly burden the retiree group, either in the amount of 
     the cost savings sought from such group or the nature of the 
     modifications.
       Fourth, section 202 amends Bankruptcy Code section 1113(g) 
     to provide that if the trustee and the authorized 
     representative do not reach a mutually satisfactory agreement 
     (after a period of negotiations) and further negotiations are 
     not likely to produce mutually satisfactory modifications, 
     the trustee may file a motion seeking to modify the payment 
     of retiree benefits after notice and a hearing. Absent 
     agreement of the parties, the hearing may not be held earlier 
     than 21 days from when notice of the hearing is provided. 
     Only the debtor and the authorized representative may appear 
     and be heard at the hearing.
       The court may grant a motion to modify the payment of 
     retiree benefits only if the court: (1) finds that the 
     trustee complied with the requirements of section 1114(f); 
     (2) considered any of the authorized representative's 
     alternative proposals and determined that such proposals do 
     not meet the requirements of section 1114(f)(3)(B); (3) finds 
     that further negotiations are not likely to produce a 
     mutually satisfactory agreement; (4) finds that 
     implementation of the trustee's proposal will not cause 
     irreparable harm to the affected retirees; and (5) concludes 
     that, based on clear and convincing evidence, an

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     order granting the trustee's proposal and its immediate 
     implementation is essential to permit the debtor's exit from 
     bankruptcy such that confirmation is not likely to be 
     followed by the liquidation or the need for further financial 
     reorganization of the debtor in the short term.
       If the trustee has implemented a program of incentive pay, 
     bonuses, or other financial returns for insiders, senior 
     executive officers, or the 20 next most highly compensated 
     employees or consultants (or such program was implemented 
     within 180 days before the bankruptcy case was filed), the 
     court must presume that the debtor failed to satisfy the 
     requirements of section 1114(f)(3)(C).
       Fifth, section 202 strikes subsection (k) and makes 
     conforming revisions.
       Sec. 203 Protection of Employee Benefits in a Sale of 
     Assets. Section 203 amends Bankruptcy Code section 363(b), 
     which authorizes a debtor to sell or use property of the 
     estate other than in the ordinary course of business (under 
     certain circumstances), to add a new requirement. New section 
     365(b)(3) requires the court, in approving a sale, to 
     consider the extent to which a bidder's offer: (1) maintains 
     existing jobs; (2) preserves terms and conditions of 
     employment, and (3) assumes or matches pension and retiree 
     benefit obligations in determining whether such offer 
     constitutes the highest or best offer for the property.
       Sec. 204. Claim for Pension Losses. Section 204 adds a new 
     subsection to Bankruptcy Code section 502, which pertains to 
     the allowance of claims and interests. New subsection (1) 
     requires the court to allow a claim by an active or retired 
     participant (or by a labor organization representing such 
     participants) in a defined benefit pension plan terminated 
     under section 4041 or 4042 of the Employee Retirement Income 
     Security Act of 1974 (ERISA) for any shortfall in pension 
     benefits accrued as of the effective date of the pension 
     plan's termination as a result of such termination and 
     limitations upon the payment of benefits imposed pursuant to 
     section 4042 of such Act, notwithstanding any claim asserted 
     and collected by the Pension Benefit Guaranty Corporation 
     with respect to such termination.
       In addition, section 204 adds subsection (m) to Bankruptcy 
     Code section 502 to require a court to allow a claim 
     described in Bankruptcy Code section 101(5)(C) (as amended by 
     this legislation) by an active or retired participant (or a 
     labor union representing such participant) in a defined 
     contribution plan (within the meaning of section 3(34) of 
     ERISA). The amount of such claim must be measured by the 
     market value of the stock at the time of contribution to, or 
     purchase by, the plan and the value as of the commencement of 
     the case.
       Sec. 205. Payments by Secured Lender. Bankruptcy Code 
     section 506(c) authorizes the debtor to recover from property 
     securing an allowed secured claim the reasonable and 
     necessary expenses incurred to preserve or dispose of such 
     property to the extent the secured creditor benefits from 
     such expenditures. Section 205 amends section 506(c) to add a 
     new provision. As amended, section 506(c) deems unpaid wages, 
     accrued vacation, severance or other benefits owed under the 
     debtor's policies and practices or owed pursuant to a 
     collective bargaining agreement, for services rendered on and 
     after commencement of the case to be necessary costs and 
     expenses of preserving or disposing of property securing an 
     allowed secured claim. Such obligations must be recovered 
     even if the trustee has otherwise waived the provisions of 
     section 506(c) pursuant to an agreement with the allowed 
     secured claimant or a successor or predecessor in interest.
       Sec. 206. Preservation of Jobs and Benefits. Section 206 
     adds a statement of purpose to chapter 11 of the Bankruptcy 
     Code specifying that a chapter 11 debtor must have as its 
     principal purpose the reorganization of its business to 
     preserve going concern value to the maximum extent possible 
     through the productive use of its assets and the preservation 
     of jobs that will sustain productive economic activity.
       In addition, section 206 amends Bankruptcy Code section 
     1129(a), which sets out the criteria for confirming a plan, 
     to add a new requirement. New section 1129(a)(17) requires 
     the debtor to demonstrate that the reorganization preserves 
     going concern value to the maximum extent possible through 
     the productive use of the debtor's assets and preserves jobs 
     that sustain productive economic activity.
       Section 206 also amends Bankruptcy Code section 1129(c), 
     which requires the court to consider the preferences of 
     creditors and equity security holders in determining which 
     plan to confirm. Section 1129(c), as amended, instead 
     requires the court to consider the extent to which each plan 
     would preserve going concern value through the productive use 
     of the debtor's assets and the preservation of jobs that 
     sustain productive economic activity. The court must confirm 
     the plan that better serves such interests. It further 
     provides that a plan that incorporates the terms of a 
     settlement with a labor organization shall presumptively 
     constitute the plan that satisfies this provision.
       Sec. 207. Termination of Exclusivity. Bankruptcy Code 
     section 1121, in pertinent part, gives a debtor the exclusive 
     authority to file a plan and obtain acceptances of such plan 
     for stated periods of time, under certain circumstances. 
     Section 207 amends section 1121 to specify that cause for 
     shortening these exclusive periods includes: (1) the filing 
     of a motion pursuant to section 1113 seeking rejection of a 
     collective bargaining agreement, if a plan based upon an 
     alternative proposal by the labor organization is reasonably 
     likely to be confirmed within a reasonable time; or (2) the 
     proposed filing of a plan by a proponent other than the 
     debtor, which incorporates the terms of a settlement with a 
     labor organization, if such plan is reasonably likely to be 
     confirmed within a reasonable time.


         Title III--Restricting Executive Compensation Programs

       Sec. 301. Executive Compensation Upon Exit From Bankruptcy. 
     Bankruptcy Code section 1129 specifies the criteria for 
     confirmation of a chapter 11 plan. Section 1129(a)(4), for 
     example, requires that certain services, costs and expenses 
     in connection with the case (or in connection with the plan 
     and incident to the case) to have either been approved by the 
     court (or subject to approval by the court) as reasonable. 
     Section 301 amends section 1129(a)(4) to add a requirement 
     that payments or other distributions under the plan to or for 
     the benefit of insiders, senior executive officers, and any 
     of the 20 next most highly compensated employees or 
     consultants providing services to the debtor may not be 
     approved unless: (1) such compensation is subject to review 
     under section 1129(a)(5), or (2) such compensation is 
     included as part of a program of payments or distributions 
     generally applicable to the debtor's employees and only to 
     the extent that the court determines that such payments are 
     not excessive or disproportionate as compared to 
     distributions to the debtor's nonmanagement workforce.
       In addition, section 301 amends section 1129(a)(5), which 
     requires the plan proponent to disclose the identity and 
     affiliations of the debtor's officers and others, such as the 
     identity of any insider who will be employed or retained by 
     the reorganized debtor and such insider's compensation. 
     Section 301 amends section 1129(a)(5) to add a requirement 
     that such compensation must be approved (or subject to 
     approval) by the court in accordance with the following 
     criteria: (1) the compensation is reasonable when compared to 
     that paid to individuals holding comparable positions at 
     comparable companies in the same industry; and (2) the 
     compensation is not disproportionate in light of economic 
     concessions by the debtor's nonmanagement workforce during 
     the case.
       Sec. 302. Limitations on Executive Compensation 
     Enhancements. In general, Bankruptcy Code Section 503(c) 
     prohibits a debtor from making certain payments to an 
     insider, absent certain findings by the court. Section 302 
     amends section 503(c)(1), which prohibits such payments when 
     they are intended to induce the insider to remain with the 
     debtor's business, in several respects. First, it expands the 
     provision so that it applies a debtor's senior executive 
     officer and any of the debtor's 20 next most highly 
     compensated employees or consultants. Second, it clarifies 
     that the provision prohibits the payment of performance or 
     incentive compensation, a bonus of any kind, and other 
     financial returns designed to replace or enhance incentive, 
     stock, or other compensation in effect prior to the 
     commencement of the case. And, third, it specifies that the 
     court's findings must be based on clear and convincing 
     evidence in the record.
       In addition, section 302 also amends Bankruptcy Code 
     section 503(c)(3), which prohibits other transfers made or 
     obligations incurred outside of the debtor's ordinary course 
     of business and not justified by the facts and circumstances 
     of the case, including transfers made and obligations 
     incurred for the benefit of the debtor's officers, managers 
     or consultants hired postpetition. Section 302 replaces 
     section 503(c)(3) with a provision prohibiting other 
     transfers or obligations incurred to or for the benefit of 
     insiders, senior executive officers, managers or consultants 
     providing services to the debtor unless they meet certain 
     criteria. First, the court must find, based on clear and 
     convincing evidence (without deference to the debtor's 
     request for authorization to make such payments), that such 
     payments are essential to the survival of the debtor's 
     business or, in the case of a liquidation, essential to the 
     orderly liquidation of the debtor's business and maximization 
     of the value of the debtor's assets. Second, the services for 
     which compensation is sought must be essential in nature. 
     Third, such payments must be reasonable compared to 
     individuals holding comparable positions at comparable 
     companies in the same industry and not disproportionate in 
     light of economic concessions made by the debtor's 
     nonmanagement workforce during the case.
       Sec. 303. Assumption of Executive Retirement Plans. Section 
     303 amends Bankruptcy Code section 365, which sets forth the 
     criteria pursuant to which executory contracts and unexpired 
     leases may be assumed and rejected, to add two provisions. 
     New subsection (q) provides that no deferred compensation 
     arrangement for the benefit of a debtor's insiders, senior 
     executive officers, or any of the 20 next most highly 
     compensated employees may be assumed if a defined benefit 
     pension

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     plan for the debtor's employees has been terminated pursuant 
     to section 4041 or 4042 of ERISA on or after the commencement 
     of the case or within 180 days prior to the commencement of 
     the case.
       New subsection (r) provides that no plan, fund, program, or 
     contract to provide retiree benefits for insiders, senior 
     executive officers, or any of the 20 next most highly 
     compensated employees of the debtor may be assumed if the 
     debtor: (1) has obtained relief under subsection (g) or (h) 
     of section 1114 to impose reductions in retiree benefits; (2) 
     has obtained relief under subsection (d) or (e) of section 
     1113 to impose reductions in the health benefits of the 
     debtor's active employees; or (3) or reduced or eliminated 
     active employee or retiree benefits within 180 days prior to 
     the commencement of the case.
       Sec. 304. Recovery of Executive Compensation. Section 304 
     adds a new provision to the Bankruptcy Code. New section 
     563(a) provides that if a debtor reduces its contractual 
     obligations under a collective bargaining agreement pursuant 
     to section 1113(d), or retiree benefits pursuant to section 
     1114(g), then the court, as part of the order granting such 
     relief, must make certain determinations. The court must 
     determine the percentage of diminution in the value of the 
     obligations as a result of such relief. In making this 
     determination, the court must include any reduction in 
     benefits as a result of the termination pursuant to section 
     4041 or 4042 of ERISA of a defined benefit plan administered 
     by the debtor, or for which the debtor is a contributing 
     employer, effective at any time within 180 days prior to the 
     commencement of the case. The court may not take into 
     consideration pension benefits paid or payable under title IV 
     of ERISA as a result of such termination.
       If a defined benefit pension plan administered by the 
     debtor, or for which the debtor is a contributing employer, 
     is terminated pursuant to section 4041 or 4042 of ERISA, 
     effective at any time within 180 days prior to the 
     commencement of the case, and the debtor has not obtained 
     relief under section 1113(d), or section 1114(g), new section 
     563(b) requires the court, on motion of a party in interest, 
     to determine the percentage in diminution in the value of 
     benefit obligations when compared to the total benefit 
     liabilities prior to such termination. The court may not take 
     into account pension benefits paid or payable pursuant to 
     title IV of ERISA as a result of such termination.
       After such percentage diminution in value is determined, 
     new section 563(c) provides that the estate has a claim for 
     the return of the same percentage of the compensation paid, 
     directly or indirectly (including any transfer to a self-
     settled trust or similar device, or to a nonqualified 
     deferred compensation plan under section 409A(d)(1) of the 
     Internal Revenue Code of 1986) to certain individuals. These 
     individuals include: (1) any officer of the debtor serving as 
     a member of the debtor's board of directors within the year 
     before the filing of the case; and (2) any individual serving 
     as chairman or as lead director of the board of directors at 
     the time when relief under section 1113 or section 1114 is 
     granted, or if no such relief has been granted, then the 
     termination of the defined benefit plan.
       New section 563(d) provides that a trustee or committee 
     appointed pursuant to section 1102 may commence an action to 
     recover such claims. If neither commences such action by the 
     first date set for the confirmation hearing, any party in 
     interest may apply to the court for authority to recover such 
     claims for the benefit of the estate. The costs of recovery 
     must be borne by the estate.
       New section 563(e) prohibits the court from awarding 
     postpetition compensation under section 503(c) or otherwise 
     to any person subject to the provisions of section 563(c) if 
     there is a reasonable likelihood that such compensation is 
     intended to reimburse or replace compensation recovered by 
     the estate pursuant to section 563.
       Sec. 305. Preferential Compensation Transfer. Bankruptcy 
     Code section 547 authorizes preferential transfers to be 
     avoided. Section 305 adds a new subsection to section 547 to 
     permit the avoidance of a transfer to or for the benefit of 
     an insider (including an obligation incurred for the benefit 
     of an insider under an employment contract) made in 
     anticipation of bankruptcy. The provision also permits the 
     avoidance of a transfer made in anticipation of a bankruptcy 
     to a consultant who is formerly an insider and who is 
     retained to provide services to an entity that becomes a 
     debtor (including an obligation under a contract to provide 
     services to such entity or to a debtor) made or incurred 
     within one year before the filing of the bankruptcy case. In 
     addition, new section 547(j) provides that no provision of 
     section 547(c) (specifying certain exceptions to section 547) 
     may be utilized as a defense. Further, section 547(j) permits 
     the trustee or a committee to commence such avoidance action. 
     If neither do so as of the date of the commencement of the 
     confirmation hearing, any party in interest may apply to the 
     court for authority to recover the claims for the benefit of 
     the estate. The costs of recovery must be borne by the 
     estate.


                       Title IV--Other Provisions

       Sec. 401. Union Proof of Claim. Section 401 amends 
     Bankruptcy Code section 501(a) to permit a labor organization 
     (in addition to a creditor or indenture trustee) to file a 
     proof of claim.
       Sec. 402. Exception from Automatic Stay. Section 402 amends 
     Bankruptcy Code section 362(b) to create an additional 
     exception to the automatic stay with respect to the 
     commencement or continuation of a grievance, arbitration or 
     similar dispute resolution proceeding established by a 
     collective bargaining agreement that was or could have been 
     commenced against the debtor before the filing of the 
     bankruptcy case. The exception also applies to the payment or 
     enforcement of awards or settlements of such proceeding.

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